The document discusses strategic marketing and strategic planning. It provides information on defining an organization's strategy, conducting a situation analysis including a SWOT analysis, and generating strategies. Specifically, it outlines the importance of strategic planning in clarifying objectives and strategies. It also describes analyzing internal strengths and weaknesses as well as external opportunities and threats through a SWOT analysis. Finally, it discusses matching strengths to opportunities and converting weaknesses to strengths in order to generate effective strategies.

1. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”Jun.-Prof. Dr. Paul Marx | Universität Siegen
WIRTSCHAFTSWISSENSCHAFTEN
WIRTSCHAFTSINFORMATIK | WIRTSCHAFTSRECHT
Juniorprofessur für Betriebswirtschaftslehre, insb. Marketing
Jun.-Prof. Dr. Paul Marx | Universität Siegen
MARKETING
PRINCIPLES OF
1
LECTURE. THEME 2: STRATEGIC MARKETING
SUMMER SEMESTER 2014
JUN.-PROF. DR. PAUL MARX

2. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 2
4.Strategic Marketing
contents
- Marketing as a strategic concept
- Interrelation of a firm’s goals, strategies and marketing
instruments
- Methods of situation analysis as a basis for strategic planning
- Important strategic areas and strategic alternatives

3. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 3
What is Strategy?

4. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
TIME HORIZON OF CORPORATE PLANNING
4
outlines major factors and forces that will affect the organization in the
coming years; includes long-term goals, essential marketing strategies,
and resources needed
long-term
planning
defines a plan for the company’s sustainable development in
a constantly changing environment by capturing opportunities;
states the company's overall purpose and mission
strategic
planning
short-term planning; describes the current situation; formulates corporate
objectives, strategy for the current year, planned actions, budgets, and
control instruments
annual
planning
company’scurrentbusiness

5. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
STRATEGY
5
A Latent Construct
!
!
!
“A marketing strategy can be characterized
as a conditional, long-term, global plan of
action to achieve the business and
marketing goals.”
Heribert Meffert, 1986
!
!
!
!
!
Marketing Strategy

6. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 6
time
performance
initial situation
aim

7. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
self-understanding
of managers and
employees
vs.
meaning and
orientation crises
NEED FOR STRATEGIC PLANNING
7
Strategic Planning
promotes systematic thinking
forces the management
to clarify and specify their
objectives and strategies
improves internal coordination,
i.e., setting, communicating,
and monitoring performance
targets
helps to predict changes
and quickly react to them
complexity of the
business environment
vs.
controllability issues
environmental
dynamics
vs.
flexibility issues

8. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
THE PLANNING PROCESS
8
Analyse
Plan Implement Monitor
develop
a strategic plan
!
!
develop
a marketing plan
execute the plan
measure outcomes
!
compare
results with plan
!
make corrections
feedback
3 42
1

9. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
COMPONENTS OF A STRATEGIC PLAN
9
!
mission statement
strategic goals
strategic situation analysis (strategy audit)
SWOT-analysis
(Strengths, Weaknesses, Opportunities, Threats )
product life cycle analysis
portfolio analysis
goals and strategies
strategies of market development
segmentation and targeting
positioning
Strategic Plan

10. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 10
Corporate Objectives

11. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
HIERARCHY OF CORPORATE OBJECTIVES
11
Mission
Source: based on Becker, J.: Marketing-Konzeption, 6. Aufl., München 1998, S. 28

12. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
Requirements
realistic yet visionary
company-specific
based on the company’s
unique capabilities and/or
field of expertise
motivating and inspiring
MISSION = A COMPANY’S PURPOSE
12
!
… is a statement of the organization’s purpose
What is our business?
Who is the customer?
What do consumers value?
What should our business be?
!
!
!
!
!
Mission Statement
Source: Kotler, P., G. Armstrong, (2014),p. 63

13. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 13

14. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
MARKET-ORIENTED MISSION STATEMENTS
14
Company Product-Oriented Definition Market-Oriented Definition
Facebook We are an online social network
We connect people around the world and help them share
important moments
Google We are the world’s best search engine
Google’s mission is to organize the world’s information
and make it universally accessible and useful
NASA We explore outer space
We reach for new heights and reveal the unknown so that
what we do and learn will benefit all humankind
Revlon We make cosmetics
We sell lifestyle and self-expression; success and status;
memories, hopes, and dreams
Ritz-Carlton
Hotels & Resorts
We rent rooms
We create the Ritz-Carlton experience - a memorable stay
that far exceeds guest’s already high expectations
Walmart We run discount stores
We deliver low price every day and give ordinary folks
the chance to buy the same things as rich people.
“Save Money. Live better.”
more sound examples at: www.missionstatements.com/fortune_500_mission_statements.html
Source: Kotler, P., G. Armstrong, (2014),p.64

15. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
HIERARCHY OF CORPORATE OBJECTIVES
15
Unit Objectives
(e.g. Advertising, a Store)
Functional Objectives
(e.g. Marketing, Sales)
Corporate Objectives
Mission
means-endrelationship
morespecificobjectives
Source: based on Becker, J.: Marketing-Konzeption, 6. Aufl., München 1998, S. 28

16. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
DEFINING STRATEGIC CORPORATE OBJECTIVES
16
!
translation of the mission statement into measurable
strategic objectives, e.g.
monetary
desired sales or profit level
rates of growth
value of the business or dividends paid
…
non-monetary
leading the industry (e.g., w.r.t. innovation)
quality of customer service
diversity of products or services offered
…
provide the focus for setting more detailed objectives
for the main functional activities of the business.
!
!
creating a hierarchy of objectives based on the mission statement
subsequently narrowing the level of detail (from broadly defined
corporate objectives to more definite functional goals to very specific
unit targets)
Corporate Objectives
Source: Kotler, P., G. Armstrong, V. Wong und J. Saunders (2011), p. 160
Example:
producer of fertilizers
Mission:
increase productivity in agriculture
Corporate Objectives:
development of fertilizers that
enable higher yields;
increase profits
Marketing Objectives:
increase market share to 15%
during the next 2 years

17. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
SPECULATIVE
CASE
17
Corporate Objectives:
build profitable customer relationships by developing
foods “superior in quality, taste, nutrition,
and convenience”
more investments in research
improve profits
Marketing Objectives:
increase sales
improve the company’s share of domestic
and international markets by XX%
broaden product lines
increase product availability and promotion
in the existing markets
!
Functional Objectives:
increase advertising reach by YY%
increase PR activity
!
Unit Objectives:
organize XX public events
produce YY publications
Source: Kotler, P., G. Armstrong, (2014),p.65

18. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
CORPORATE OBJECTIVES: BASIC CATEGORIES
18
Market Position
e.g.
turnover
market share
market leadership
development of new markets
…
Finances
e.g.
credit rating & reliability
liquidity
level of self-financing
structure of capital
…
Profitability
e.g.
profit
return on sales (ROS)
return on equity (ROE)
return on investments (ROI)
return on assets (ROA)
…
Non-economic and
Goodwill-related Goals
e.g.
independence
customer loyalty
image
political and social influence
…
Environmental
Protection
e.g.
reduction of environmental
impact
reduction of resource use
creation of conditions for
environmental restoration
…
Social and
Employee-related Goals
e.g.
job satisfaction
income and social security
social integration
personal development
…
Source: based on Becker (2001): „Marketing Konzeption“, S. 16f.
economic goals
psychologic goals

19. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
SUMMARY
19
A Latent Construct
!
!
An organization’s strategy that combines all of
its marketing goals into one comprehensive
plan.
!
A good strategy should be drawn from market
research and focus on the right product mix in
order to achieve the maximum profit potential
and sustain the business.
!
The marketing strategy is the foundation for a
marketing plan.
!
!
!
!
Marketing Strategy

20. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 20
Managerial Toolbox:
Situation Analysis

21. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
STRATEGIC SITUATION ANALYSIS
21
!
… is the starting point of strategy development
… is the survey of the current business
environment (“inventory-taking”)
the more accurate the “inventory-taking” the,
the more specific and precise strategic
objectives can be developed and formulated
!
consists of:
External Analysis: survey of the company’s
macro-economic environment
Internal Analysis: examination of the
company itself; refers to the entire value
chain
Strategy Audit

22. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
GENERAL FRAMEWORK OF THE STRATEGIC SITUATION ANALYSIS
22
1. potential analysis 2. competitive analysis
4. market and customer analysis 5. environmental analysis
6. Opportunities and Threats analysis
3. Strengths and Weaknesses analysis
7. feedback
SWOT
internalanalysisexternalanalysis

23. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
FIELDS OF THE SITUATION ANALYSIS
23
Source: based on Hansen/Hennig-Thurau/Schrader (2001): Produktpolitik, 3. ed., Stuttgart.
macro-environment
micro-environment
political and legal
factors
Situation in the Company
i.a. history and culture
competencies
resources
service structure
market relation
economic
factors
ecological
factors
socio-cultural
factors
technological
factors
consumers employee
retail

24. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
SWOT
24
!
… is a structured planing method to evaluate the
Strengths, Weaknesses, Opportunities, and
Threats of an enterprise
!
derives the key strengths and weaknesses of a
company from the information generated
within the strategy audit
reduces the vast amounts of information to
a few critical success factors
!
!
!
!
SWOT analysis

25. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 25
e.g.
economic environment
demographic changes
market trends
new technologies
Opportunities
e.g.
competitor activities
power of retail
demographic changes
political and legal issues
Threats
ExternalKeyFactors
macroenvironment
Strengths and Weaknesses
Internal Key Factors
resources and capabilities
refer to the company’s entire value chain
always in relation to to the competition, and to the opportunities and threats

26. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
KEY FACTORS OF SWOT ANALYSIS
26
Source:Benkenstein(2002):„StrategischesMarketing,S.36,(supplemented)
Factor Points of Reference Important Objects of Measurement
Market
money market (product class) development, growth, elasticity
industry (product group) state of development, saturation, allocation of market shares, complementary
products
submarket (product) structure of needs and preferences, degree of substitution, easiness to copy/
counterfeit, product strength
Market
Participants
producers market position, product and program orientation, product spectrum
competitors competitive strength, degree of differentiation, program strength
middlemen performance, assortment structure, market coverage
sales assistants performance
consumer needs (utilitarian), purchasing power, attitudes
Instruments
product mix product and program strength, supply-side/product flexibility
communication mix brand recognition, media fit, advertising strategy
pricing policy price level, price control instruments, discount structure
distribution market coverage, distribution density, stock availability, benefits
Environment
nature climate, infrastructure
economy economic variables, market conditions (crises vs. boom), growth
society social norms, lifestyles
technology science, technical progress
politics and law legal norms, political institutions

27. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
RESOURCE PROFILING
A TECHNIQUE FOR ANALYSIS OF STRENGTHS AND WEAKNESSES
27
Quelle:Benkenstein(2002):„StrategischesMarketing,S.40,
Untersuchte strategische Geschäftseinheit
Stärkste Konkurrenzunternehmung
Critical Resources
(performance potentials)
Evaluation Comments
poor average good
product line X
marketing concept
financial situation
R&D state
production
resources and energy supply
location
cost situation
quality of management
management system
productivity potentials
market share
SBU in question
strongest competitor

28. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 28
Managerial Toolbox:
Situation Analysis: SWOT

29. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
external
factors
internal
factors
29
!
Strengths
customer orientation in project work
attractive price-performance ratio
internal structures
internal trainings for professional
development
use of the rationalization potential
!
Weaknesses
# of projects is too low
customer contact management
marketing & communication policy
too narrow internal focus
weak knowledge base system
lack of transparency in knowledge
management
!
Opportunities
follow-up projects
focus on core competencies
presence in professional networks
connection to institutions
former employees = potential customers
financial incentives for project acquisition
!
Threats
lack of market proximity
lack of senior layer
lack of knowledge extraction from
completed projects
internal over-regulation
current economic situation
EXAMPLE: SWOT ANALYSIS FOR A CONSULTING FIRM
positive negative
T
WS
O
example by Dr. Andreas Rusnjak

30. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
GENERATION OF STRATEGIES
30
Matching and
Converting
Matching:
search for competitive
advantages through “matching”
strengths to opportunities
Converting:
search for strategies to
“convert” weaknesses into
strengths and threats into
opportunities
(e.g. find new markets)
Generation of
Strategies
How can we exploit and
capitalize on our strengths?
How can we overcome our
weaknesses?
How can we benefit from the
opportunities?
How can we mitigate the
threats?

31. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 31
ST strategies
use strengths to avoid
threats
O T
S
W
WT strategies
minimize weaknesses
and avoid threats
GENERATION OF STRATEGIES
WO strategies
overcome weaknesses
by taking advantage of
opportunities
SO strategies
use strengths to take
advantage of
opportunities

32. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 32
!
follow-up projects
focus on core competencies
presence in professional
networks
former employees = potential
customers
!
!
lack of market proximity
internal over-regulation
current economic situation
!
customer orientation in project
work
attractive price-performance
ratio
internal trainings for
professional development
purposely sell the advantages of
project work
communicate our qualification in
professional networks
use price-performance ratio to
sell projects to alumni
more consultant activities at
contractors’ sites
targeted acquisition through
communication of our high
qualifications
!
!
# of projects is too low
customer contact management
marketing & communication
policy
communicate the broadness of
our competences and services
foster relationships to alumni
care of existing customers
foster the knowledge transfer in
professional networks
deplete the internal bureaucracy
empower employees to make
decisions
EXAMPLE: SWOT ANALYSIS FOR A CONSULTING FIRM
T
W
S
O
S-0
W-0
S-T
W-T
example by Dr. Andreas Rusnjak

33. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
EXAMPLE: SWOT ANALYSIS FOR VOLKSWAGEN
33
Source: based on Widmann (2007)
Opprotunities Threats
superior perception of our brand provides an
opportunity for expanding our product
program (width and depth) and so to seize
new segments
high integration of dealer network offers
potentials to further increase efficiency
good market position in Brasilia, Argentina,
China, und South Afrika facilitates the
development of neighbor markets (esp. Asia)
superior brand image of VW threatened by
other bands of the corporation (e.g. Skoda)
competitors catch up on safety and technical
expertise
the strong mass brand positioning threatens to
evolve into the “stuck in the middle“ position
currently mediocre consumer loyalty can be improved by
increasing customer satisfaction
improvement of price-performance ratio and revenue can
be achieved esp. through using corporate scale effects
strengthening the currently unsatisfactory market position
in North America
increase market shares in major markets and improve the
world market coverage
possibility to improve the currently underdeveloped niche
markets though new products (e.g. New Beetle)
too strong focus on Germany and Europe under
the conditions of growing competitive pressure
and falling prices in these markets
too high dependence on A segment (Golf) while
facing intensified attacks from european
competition
WeaknessesStrengths

34. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
WARNING
34
“[...] people who use SWOT might conclude that
they have done an adequate job of planning
and ignore such sensible things as defining the
firm’s objectives or calculating ROI for alternate
strategies”
J.S. Armstrong (2004)

35. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 35
Managerial Toolbox:
Product Life Cycle Analysis

36. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 36
PRODUCT LIFE CYCLE
evolutionary model of growth and decay of products
time
revenue
marginal
revenue profit
costs
introduction growth maturity / saturation decline

37. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 37
Zeit
Absatz
marginal
revenue
Gewinn
Kosten
Wachs-
tums-
phase
Reifenphase Rückgangs-
phase
costs
revenue
loss
PRODUCT LIFE CYCLE
evolutionary model of growth and decay of products
introduction

38. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 38
Zeit
Absatz
Gewinn
Kosten
Reifenphase Rückgangs-
phase
costs
revenue
profit
PRODUCT LIFE CYCLE
evolutionary model of growth and decay of products
introduction growth
marginal
revenue

39. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 39
Zeit
Gewinn
Rückgangs-
phase
PRODUCT LIFE CYCLE
evolutionary model of growth and decay of products
introduction growth maturity / saturation
revenue
marginal
revenue
profit
costs

40. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 40
PRODUCT LIFE CYCLE
evolutionary model of growth and decay of products
time
revenue
marginal
revenue profit
costs
introduction growth maturity / saturation decline

41. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
PRODUCT LIFE CYCLE : “TEMPORAL PITFALL”
41
1
2
3
4
5
6
7
1978
0
1980 1982 1984 1986 1988 1990 1992 1994
#ofyears
average life time
of products (PL)
average time of product
development (PD)
PD> PL
success factor
“TIME”
“Temporal pitfall” = shorter
product life cycles and longer
development times
products often become
obsolete before they can
amortize the investments into
their development
Build up market entry barriers!
= increase market entry costs
for competitors and/or decrease
their sales potentials
Quelle: Bullinger (1989), S. 16

42. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 42
20
40
60
80
100
0
Mio €
Jahr
95
Quelle: Simon (1989), S. 78
opportunity costs of a market entry delay
for a market with a sales potential of $ 60 million per year
revenue loss
during
10 years
Build up market entry barriers!
increase market entry costs for competitors and/or decrease their sales potentials
PRODUCT LIFE CYCLE : “TEMPORAL PITFALL”

43. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 43
Managerial Toolbox:
Portfolio Analysis

44. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
PRODUKTPORTFOLIOANALYSE
(A.K.A. BOSTON CONSULTING GROUP MATRIX, BCDG MATRIX, GROWTH-SHARE MATRIX; FOCUS: CASH-FLOW)
44
low high
lowhigh
relative market share
marketgrowth,%
1
growth
maturitysaturation
introduction
cash flow need
cash flow release
Criticism
lack of consideration of product
substitutes
for new products, market growth and
relative market share are difficult to
predict
usually there is only one supplier with a
market share greater than 1 ->
monopolization of markets if “poor
dogs” are to be eliminated
not suitable for niche products, since
market growth = business unit growth
only two factors are responsible for
success of strategic business units
(SBU): risk and can flow
investordivest?
hold/investhold/”milk”
divest/eliminate
Source: based on Homburg/Krohmer 2009; Zentes/Swoboda 2001; Kreikebaum 1997.

45. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
MCKINSEY / GE MATRIX
(A.K.A. BUSINESS ASSESSMENT ARRAY, MULTI FACTORIAL ANALYSIS; FOCUS: RETURN ON INVESTMENT)
45
0 low medium high33 67 100
lowmediumhigh
33
67
100
relative competitive strengths
marketattractiveness
creation of value
consumptionofresources
Market Attractiveness
= external dimension, cannot be influenced
market growth rate
market size
market quality/stability
competitive intensity / rivalry
supply with energy and raw materials
environmental situation
!
Relative Competitive Strengths
= internal and external factors that can be
influenced
relative market share/position
profitability
risks
image
rel. production potentials
rel. R&D potentials
!
A
B
C
D
E
F
G
Source: based on Hinterhuber (1996), p.149, p.172, Benkenstein (2002), pp. 78-84
invest & grow
harvest / divest
se
le
c
tiv
e
stra
te
g
ie
s
offensive strategy
defensive strategy
transitional
strategy
release of funds
freezing of funds
!
!
Advantages
consideration of qualitative success factors
Disadvantages
non-transparency due to scoring
(aggregation of point values), hence
tendency to the middle field

46. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
VALUE OF PORTFOLIO ANALYSIS FOR STRATEGIC MARKETING PLANING
46
provides no detailed instructions
but rather recommendations in form of global strategic directions;
focused on the use of the released funds and organization of the business unit structure
high communication value, high clarity, manageability,
→ widespread adoption in the practice

47. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
SITUATION ANALYSIS: PROS-AND-CONS
47
Advantages Disadvantages
uncovers key strategic directions
!
structures strategically relevant
market factors
helps to identify
„strategic windows“
key requirements of the market
strategic discontinuity
easy to comprehend and
communicate
subjective judgements
lack of quantitative backup
lack of comparability over time

48. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 48
Strategies of Market Development

49. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
STAIRWAY OF STRATEGIC DECISIONS ON MARKET DEVELOPMENT
49
market definition
market segmentation
market targeting
market positioning
1. define
the relevant market
2. identify bases for
segmenting the market
3. develop profiles of
resulting segments
4. develop criteria of
segment attractiveness
5. select the target
segment(s)
6. develop positioning for
each target segment
7. develop marketing mix
for each target segment

50. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
STAIRWAY OF STRATEGIC DECISIONS ON MARKET DEVELOPMENT
50
market definition
market segmentation
market targeting
market positioning
1. define
the relevant market
2. identify bases for
segmenting the market
3. develop profiles of
resulting segments
4. develop criteria of
segment attractiveness
5. select the target
segment(s)
6. develop positioning for
each target segment
7. develop marketing mix
for each target segment
decide on
methods of market
development
decide on
the degree of
differentiation and
market coverage
decide on
markets
and products

51. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
STAIRWAY OF STRATEGIC DECISIONS ON MARKET DEVELOPMENT
51
market definition
market segmentation
market targeting
market positioning
1. define
the relevant market
2. identify bases for
segmenting the market
3. develop profiles of
resulting segments
4. develop criteria of
segment attractiveness
5. select the target
segment(s)
6. develop positioning for
each target segment
7. develop marketing mix
for each target segment
decide on
methods of market
development
decide on
the degree of
differentiation and
market coverage
decide on
markets
and products

52. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
product
Welche Art von Leistungen werden im Markt
angeboten?
geography
Ist der Markt lokal, regional, national oder
international begrenzt?
time Ist der Markt zeitlich begrenzt?
RELEVANT MARKET
52
Market structuring
Defining the relevant market
from a provider’s perspective
!
Defining the Relevant Market
Defining groups of substitute product and/or potential
competitors
Reducing heterogeneity of possible relevant exchange processes
between customers and providers
The definition of the the relevant market should
account for these dimensions:

53. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
GENERIC GROWTH STRATEGIES
(“ANSOFF’S PRODUCT-MARKET GROWTH MATRIX”)
53
existing newexistingnew
markets
products
market penetration product development
market development diversification
increasing risk
increasingrisk

54. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
STAIRWAY OF STRATEGIC DECISIONS ON MARKET DEVELOPMENT
54
market definition
market segmentation
market targeting
market positioning
1. define
the relevant market
2. identify bases for
segmenting the market
3. develop profiles of
resulting segments
4. develop criteria of
segment attractiveness
5. select the target
segment(s)
6. develop positioning for
each target segment
7. develop marketing mix
for each target segment
decide on
methods of market
development
decide on
the degree of
differentiation and
market coverage
decide on
markets
and products

55. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
ALTERNATIVE MARKET SEGMENTATION STRATEGIES
55
market approach is...
uniform
segment-specific
customized
mass marketing market segmentation niche marketing

56. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
THE CONCEPT OF MARKET SEGMENTATION
56
is classification of customers into homogenous
groups that allow development of efficient product
differentiation strategies to exploit these segments
!
Market segmentation is the basis of differentiated
marketing
market segmentation refers to splitting the relevant
market into
internally homogeneous and
externally heterogeneous
groups of customers
Market Segmentation
externally
heterogeneous
internally
homogeneous

57. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
MARKET SEGMENTATION VS. DEFINITION OF THE RELEVANT MARKET
57
Definition of the Relevant Market
defines groups of substitute goods and (potential)
competitors
reduces the heterogeneity of possible exchange
processes between the company and its customers
!
Market Segmentation
discovers groups of similar consumers to address
them with segment-specific marketing mix
reduces the remaining heterogeneity
!
heterogeneous customer requirements
different characteristics of products and/or services are
important to different customers
focusing on a specific segment facilitates development
and exhausting of competitive advantages
inter
heterogeneity
intra
homogeneity

58. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
SEGMENTATION CRITERIA
58
“… segments need not to be physical entities that naturally occur in the
marketplace, but are defined by researchers and managers to improve
their ability to best serve their customers.
!
[…] Market segmentation is a theoretical marketing concept involving
artificial groupings of consumers constructed to help managers design
and target their strategies.
!
Therefore, the identification of market segments and their elements is
highly dependent on the bases (variables or criteria) and methods used to
define them.“
!
Wedel & Kamakura (2000)

59. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
Identifiability
It must be possible to measure
Substantiality
It must be large enough to earn profit
SEGMENTATIONCRITERIA
59
Accessibility
It is possible to reach potential customers
via the organization's promotion and distribution channel
Stability
It must be stable enough that it does not vanish after some time
Responsiveness
It responds consistently to a given market stimulus
Actionability
It is useful in deciding on the marketing mix
sixsegmentationcriteriadeterminingtheeffectivenessandprofitabilityofmarketingstrategies

60. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
General Product-specific
Observable
Cultural, geographic,
demographic, and socio-
economic variables
User status, usage,
frequency, store loyalty
and patronage,
situations
Unobservable
Psychographic, values,
personality and life-style
Psychographics,
benefits, perceptions,
elasticities, attributes,
preferences, intention
CLASSIFICATION OF SEGMENTATION BASES
60
Source : Wedel/Kamakura 2000

61. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
EVALUATION OF SEGMENTATION BASES
61
Identifi-
ability
Substan-
tiality
Acces-
sibility
Stability
Action-
ability
Respon-
siveness
1. General, observable ++ ++ ++ ++ – –
2. Specific, observable
Purchase + ++ – + – +
Usage + ++ + + – +
3. General, unobservable
Personality ± – ± ± – –
Life style ± – ± ± – –
Psychographics ± – ± ± – –
4. Specific, unobservable
Psychographics ± + – – ++ ±
Perceptions ± + – – + –
Benefits + + – + ++ ++
Intentions + + – ± – ++
Source : Wedel/Kamakura 2000

62. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
BENEFIT SEGMENTATION
62
„…The Benefits people seek in products are the basic reasons for the
heterogeneity in their choice behavior, and benefits are thus the most
relevant basis for segmentation.”
Haley 1968
!
!
„… Benefits are preferred segmentation basis for general understanding
of a market and for making decisions about positioning, new product
concepts, advertising, and distribution because of their actionability.“
Wind 1978

63. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
BENEFIT SEGMENTATION PARADOX
63
When segmenting on the basis of the benefits consumers want from a particular product/service
category, an analyst should make a clear distinction between basis variables that are important in
separating the total sample into homogenous segments and those that are important because they
are the benefits or features that the respondents in each segment want most. It is too easy to assume
that these are the same. Sometimes they are, but often they are not. The “drivers” may not vary
among different segments, i.e., may have no discriminant power at all, e.g., price, quality, etc.

64. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
DILEMMA OF MARKET SEGMENTATION
64
a single segmentation base can never meet all the
segmentation criteria!
!
incremental segmentation required:
start with actionable bases
(usually benefits and/or psychographics)
proceed with identifiable (measurable) bases
(usually demographics)
!
!
The Segmentation Dilemma

65. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
EXAMPLE: PURPOSE-OF-TRIP / BENEFIT SEGMENTATION OF DEUTSCHE BAHN
65
1. homogeneity in terms of purchase-relevant attributes
(expected utility: What is the most important criterion for the selection of transport options?)
2. homogeneity in terms of socio-economic characteristics
(insights regarding accessibility of target groups for media and sales)
private
travelers
business
travelers
price sensitive time savers comfort oriented

66. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
EXAMPLE: SEGMENTATION OF A HOTEL CHAIN
66

67. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
EXAMPLE: SINUS-MILIEUS
67

68. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
STAIRWAY OF STRATEGIC DECISIONS ON MARKET DEVELOPMENT
68
market definition
market segmentation
market targeting
market positioning
1. define
the relevant market
2. identify bases for
segmenting the market
3. develop profiles of
resulting segments
4. develop criteria of
segment attractiveness
5. select the target
segment(s)
6. develop positioning for
each target segment
7. develop marketing mix
for each target segment
decide on
methods of market
development
decide on
the degree of
differentiation and
market coverage
decide on
markets
and products

69. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
TARGETING
69
clearly defined
segments
vaguely defined
segments
selektive
targeting
extensive
targeting
target
niches
target
multiple
segments
product
specialization
product
differentiation

70. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 70

71. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
STAIRWAY OF STRATEGIC DECISIONS ON MARKET DEVELOPMENT
71
market definition
market segmentation
market targeting
market positioning
1. define
the relevant market
2. identify bases for
segmenting the market
3. develop profiles of
resulting segments
4. develop criteria of
segment attractiveness
5. select the target
segment(s)
6. develop positioning for
each target segment
7. develop marketing mix
for each target segment
decide on
methods of market
development
decide on
the degree of
differentiation and
market coverage
decide on
markets
and products

72. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
ALTERNATIVE MARKET DEVELOPMENT STRATEGIES
72
Quelle : Becker, J. : Marketing-Konzeption, 6.Aufl., München 1998, S. 179ff.
Price-Volume
Strategy
Brand Preference
Strategy
refers to a clear positioning of
the product in the market:
hight quality / high price
strategic lever: consistent
performance/benefit advantage
through high-quality product/
service
requires specific labeling of the
product (branding)
one-sided focus on (aggressive)
price competition
usually requires cost leadership
in the market
aims to one-dimensional
customer preferences

73. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
ALTERNATIVE MARKET DEVELOPMENT STRATEGIES
73
Quelle : Becker, J. : Marketing-Konzeption, 6.Aufl., München 1998, S. 179ff.
Price-Volume
Strategy
one-sided focus on (aggressive)
price competition
usually requires cost leadership
in the market
aims to one-dimensional
customer preferences

74. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 74

75. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 75
Quelle : www.aldi-nord.de

76. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
ALTERNATIVE MARKET DEVELOPMENT STRATEGIES
76
Quelle : Becker, J. : Marketing-Konzeption, 6.Aufl., München 1998, S. 179ff.
Price-Volume
Strategy
Brand Preference
Strategy
refers to a clear positioning of
the product in the market:
hight quality / high price
strategic lever: consistent
performance/benefit advantage
through high-quality product/
service
requires specific labeling of the
product (branding)
one-sided focus on (aggressive)
price competition
usually requires cost leadership
in the market
aims to o
customer preferences

77. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 77
Quelle : www.modshair.de

78. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 78
Quelle : www.rewe-feine-welt.de

79. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
POSITIONING
79
… refers to the problem of differentiating one’s own product/
service/brand from other competing entries in the
marketplace
… is the process by which a company tries to create a distinct
image or identity in the minds of their prospective market for
its product, service, brand, or organization.
It does so by aligning all the company’s marketing efforts on
the preference structures of potential customers (and under
consideration of competition).
!
!
!
The aim of positioning is to design the company’s offering so
that the perceived product attributes correspond to the
attributes wanted/expected by a customer
Positioning

80. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
CASE: DIET PEPSI VS. DIET COKE
80
blind test
“open” test
vs

81. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
ELEMENTS OF POSITIONING MODEL
81
shows the location (position) of competing products/
brands/companies in some kind of “virtual space” that
purports to represent the way consumers perceive or
evaluate an entire product/service category.
attribute space perceived by consumers
(= “relevant market“)
!
the consumers’ perception of the company’s and
competitors’ products
!
ideal points (preferences) of consumers
Perceptual Positioning Map
ideal position

82. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
EXAMPLE: PERCEPTUAL POSITIONING MAP FOR DIFFERENT BEER BRANDS IN THE US MARKET
82

83. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
POSITIONING: USP (UNIQUE SELLING PROPOSITION)
83
!
USP refers to emphasizing a product’s
benefit that differentiates the product
from competing offerings
!
in perceptual positioning maps products
with USP stand out as isolated points
Unique Selling Proposition

84. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
USP EXAMPLES
84
Company USP
Domino's Pizza
You get fresh, hot pizza delivered to your door in 30 minutes
or less - or it's free
FedEx
When your package absolutely, positively has to get there
overnight
Head & Shoulders You get rid of dandruff
M&M's Melts in your mouth, not in your hand
Metropolitan Life Get Met. It Pays
Southwest Airlines We are the low-fare airline

85. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
IDEAL POINT MODEL OF POSITIONING
85
“The company‘s marketing offer and image should be both distinct and valued in
the minds of the customers in the target market.“
Kotler 1994
PS-Zahl
Komfort
A
B
I
dAB
dIA
dIB
near to the ideal point
aloof from competition

86. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
PERCEPTUAL POSITIONING MAPS
86
Intensity of Competitive Rivalry
The nearer the brands, the more similar are they in the perception of consumers, i.e., the
more intense and more direct is the competition
Relatively strong
rivalry
Equal distance =>
equal intensity of
competitive rivalry
Relatively weak rivalry

87. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
PERCEPTUAL POSITIONING MAPS
87
Perception of brands along different product attributes
The further the brand from the origin and the nearer it is to a certain vector, the more
pronounced is the corresponding attribute in this brand
The most popular
beer with men
The least popular
beer with men

88. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
PERCEPTUAL POSITIONING MAPS
88
Relationship between attributes
The smaller the angle, the higher is the pairwise correlation
Beers popular among
men tend to be heavy
Equal popularity among men;
Strong difference among women
Equal popularity
among women;
Strong difference
among men
Right angle =>
popularity among
men says absolutely
nothing about
popularity among
women

89. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
PERCEPTUAL POSITIONING MAPS
89
Length of an attribute vector depicts its differentiation degree
The longer the vector, the stronger differentiates it between the beers
Consumers can
differentiate between
the beers along the
dimension “popular
with men” better
than along the
dimension “good
value”
Popularwithmen
Goodvalue

90. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
PERCEPTUAL POSITIONING MAPS
90
Axes differentiate the strongest
Axes are virtual vectors that differentiate the strongest. Their labeling derives from the
adjacent attribute vectors.
Point in one
direction;
correlate both
numeric and w.r.t.
content
}}

91. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
PERCEPTUAL POSITIONING MAPS
91
Curious but typical case
40 foodstuffs: subjectively perceived vs. objectively present qualities

92. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
PERCEPTUAL POSITIONING MAP AND SEGMENTATION
92
Segment
B
Segment
A
Segment
C
Segment C’s
preferences are not
satisfied -> open
market opportunity
Combination of Positioning with Segmentation

93. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
POSITIONING: EFFECTIVENESS AND DANGERS
93
under positioning
consumers have only vague ideas about the company and/or its products;
failure to present a strong central benefit or reason to buy the product
confused positioning
!
frequently changing and contradicting messages that confuse consumers
doubtful positioning
consumer view the statements regarding products/brand/company as not credible;
claiming a benefit that customers doubt that the product can actually deliver
over positioning
consumers have too narrow conceptions of the company/product/brand;
product concept is too special

94. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
under positioning
consumers have only vague ideas about the company and/or its products;
failure to present a strong central benefit or reason to buy the product
POSITIONING: EFFECTIVENESS AND DANGERS
94

95. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
POSITIONIERUNG: EFFEKTIVITÄT UND GEFAHREN
95

96. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
over positioning
consumers have too narrow conceptions of the company/product/brand;
product concept is too special
POSITIONING: EFFECTIVENESS AND DANGERS
96

97. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
POSITIONIERUNG: EFFEKTIVITÄT UND GEFAHREN
97

98. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
POSITIONIERUNG: EFFEKTIVITÄT UND GEFAHREN
98

99. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 99

100. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing” 100

101. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
confused positioning
!
frequently changing and contradicting messages that confuse consumers
POSITIONING: EFFECTIVENESS AND DANGERS
101

102. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
EXAMPLE: CAMEL
102

103. Jun.-Prof. Dr. Paul Marx | University of Siegen “Principles of Marketing”
doubtful positioning
consumer view the statements regarding products/brand/company as not credible;
claiming a benefit that customers doubt that the product can actually deliver
POSITIONING: EFFECTIVENESS AND DANGERS
103