Chapter 2 developing marketing strategies and plans

Chapter 2
DEVELOPING MARKETING
STRATEGIES AND PLANS

Customer Perceived Value
 Customer perceived value (CPV) is the
difference between the prospective
customer's evaluation of all the benefits and
all the costs of an offering relative to
perceived alternatives.
 Key Elements of cost
 Monetary Cost
 Energy Cost
 Time
 Psychic Cost (costs of added stress)

Stage 1: Choose The Value …….
 Customer Segmentation
 according to their likely
behavior and potential
profitability
 Customer Profiling
 A Competitive economy is
causing decline in customer
loyalty and increasing
customer turnover >>
eroding profit margins
 key to understanding your
customers

 Market
Selection/Focus
 tailors marketing mix for
one or more segments
 contrasts with mass
marketing
 two factors to consider….
 attractiveness of
segment
 suitability of market
segments to the firm

 Market
Selection/Focus
(Attractiveness of Segment)
 size of the segment
 growth rate of the
segment
 competition in the
segment
 brand loyalty
 required market share to
break even
 expected profit margins

 Market
Selection/Focus
(suitability of market segments to
the firm)
 whether the firm can offer
superior value to customers
 the impact of serving the
segment on the firm’s image
 access to distribution channel
The better the firm fit to a market
segment, and the more attractive the
market segment, the greater the
profit potential to the firm.

 Value Positioning
 Value positioning is the
process whereby management
decides how the business is
positioned relative to
competitors and the market
segments it aims to penetrate.

Stage 2: Provide the Value…….
 Product development
 Service development
 Pricing
 Sourcing/Making
 Distributing

 Product development
 Idea Generation
 Idea Screening and
evaluations
 Business Analysis
 Prototype development
 Test marketing

 Service development
 Service is..
 the prompt delivery of
the product
 a customized user or
service manual
 knowledgeable, cost-
effective maintenance,
repair, or replacement.
 dealer support.

 Pricing
 A well chosen price should
do three things
 achieve the financial
goals of the company (e.g.
profitability)
 fit the realities of the
marketplace (will customers
buy at that price?)
 support a product's
positioning and be
consistent with the other
variables in the marketing
mix

 Sourcing/Making
 Decide whether to source
or make.
 Distributing
 Channel members
 Warehousing
 Market Coverage
 Location

Stage 3: Communicate the Value…
 Sales Force
 Size of Sales Force.
 Sales force management
systems

 Sales Promotion
(Objectives)
 increase consumer
demand
 Build product awareness
 Counter seasonal
decline

 Advertising
 Covert advertising (product
placement)
 Television commercials
 Infomercials (DRTV)
 Radio
 Newspaper
 Internet

Value Chain
 Value Chain is defined as
a chain of activities that a firm operating in a
specific industry performs in order to deliver
something valuable (product or service)
to its customers.

Value Chain
 This model defines an organization as:
“synthesis of activities performed to
design, produce, market, deliver,
and support its products.”

Value Chain cont…
 Activities divided into
 Primary Activities
 Activities involved in the physical creation of the product and
its sale and transfer to the buyer as well as after sales
assistance.
 Inbound Logistics, Operations, Outbound Logistics, Marketing
and Sales, Services
 Certain activities are vital for specific industry. For Example:
 Distributor: Inbound and Outbound Logistics
 Service Firm: Operations
 Bank Engaged in Corporate Lending: Marketing and Sales
 Manufacturer of Heavy Machinery: Operations and Services

Value Chain cont…
 Secondary Activities - activities that support primary
activities and each other.
 Procurement – function of purchasing inputs used in the
firm’s value chain such as raw materials, supplies,
machinery, laboratory equipment, office, equipment, building,
meals and lodging, strategic consultancy.
 Technology Development – activities that improve the
product and the process such as know-how, procedures,
preparing documents, transporting goods as well as
technology embodied in products themselves.

 Human Resource Management – consist of activities involved in
recruiting, hiring, training, development, and compensation. Key for
competitive advantage in many firms such as advertising, consultancy,
accounting etc.
 Firm Infrastructure - consist of a number of activities including
management, planning, finance, accounting, legal, government affairs,
and quality management.
Value Chain cont…

Value Chain cont…
 Linkage - crucial for corporate success. The linkages are flows
of information, goods and services, as well as systems and
processes for adjusting activities. In the result, the linkages are
about seamless cooperation and information flow between the
value chain activities.

Margin - depends upon the ability of the firm to manage the
linkage among the activities.

Core Competence
 Core competencies are capabilities that
serve as a source of competitive advantage
for a firm over its rivals.
 Core competencies lead to the development
of core products. Core products are not
directly sold to end users; rather, they are
used to build a larger number of end-user
products.

Core Competence cont...
 Firms used to own and control business
 Today firms outsource less critical resources for better quality
and low cost
 Focus on core business activities.
 Rooted in the ability to integrate and coordinate activities
 Not necessarily an expensive undertaking
 Gained mostly but not exclusively through technology – reliable
process, close relationship with customers/suppliers,
understanding culture etc.

Characteristics of Core Competencies
 Source of competitive advantage
 Application in a wide array of markets
 Difficult for competitors to imitate

Benefits of Core Competencies
 Form the basis for launching new businesses
 Bonds business units into a coherent portfolio
 Transcend the traditional brand market share to
core product share

Corporate and Division
Strategic Planning

Corporate and Division Strategic Planning
 STRATEGIC PLANNING is an organization's
process of defining its long term strategy, or
direction, and making decisions on allocating
its resources to pursue this strategy.
 In doing so, the organization tries to achieve
its mission.

Corporate and Division Strategic Planning…
Four Planning Activities
1. Define the Corporate Mission
2. Establish Strategic Business Unit
3. Assigning Resources to each SBU
4. Assessing Growth Opportunities

Corporate Mission
 What is our business?
 Who is the customer?
 What is of value/benefit to the customer?
 What will our business be?
 What is our business’s philosophy?

Examples of Mission Statements
1. Ford: “We are a global family with a proud heritage,
passionately committed to providing personal mobility for
people around the world. We anticipate consumer need and
deliver outstanding products and services that improve people's
lives”
2. Proctor & Gamble “We will provide branded products and
services of superior quality and value that improve the lives of
the world's consumers. As a result, consumers will reward us
with leadership sales, profit, and value creation, allowing our
people, our shareholders, and the communities in which we live
and work to prosper”

Establish SBUs and Assign Resources
An SBU has three characteristics
1. It is a single business or collection of businesses that can be
planned separately from the rest of the company
2. It has its own set of competitors
3. It has a manager who is responsible for strategic planning and
profit performances and who controls most of the factors
affecting profit.

Assessing Growth
Opportunities

Intensive Growth
Market Penetration
 Aim
 Increase share of the current market (segment) with current
products
 Secure dominance in growth market
 Restructure a mature market by driving out competition
 Achieved through slightly adjusting the marketing mix – decrease
price, better quality, increasing the number of salespersons, increasing
advertising, offering extensive sales promotion items, or increasing
publicity efforts.

Intensive Growth
How Market Penetration is Achieved?
 Increase usage by existing customers
 Attract customers away from rivals
 Devise and encourage new applications
 Encourage non buyers to buy

Intensive Growth
Use Market Penetration When…
 the market is not saturated
 market shares of the major competitors is declining while the
total share is increasing
 increased volumes lead to economies of scale
 historical relationship between dollar promotion expenditure and
dollar sales has been positive

Intensive Growth
Market Development
 Selling the same product to different markets
OR
 Entering new markets or segments with same products
 Entering overseas markets
 Will require major changes into marketing strategy
 New distribution channels
 Different pricing policy
 New promotional strategy

Intensive Growth
Use Market Development When…
 channels of distribution are available or could be built
 an organization has a strong marketing department
 new untapped and unsaturated markets exists
 firm has excess capacity

Intensive Growth
Product Development
 Developing new products for existing markets
 Entails large research and development expenditure
 New products come in the form of
 New products to replace current products
 New innovative products
 New products to complement existing products

Intensive Growth
Use Product Development When…
 Organization has successful products in the maturity stage
 Competes in an industry characterized by rapid technological
development
 Organization has strong R&D department

Integrative Growth
Forward Integration
 Gaining ownership or increased control over distributors
or retailers
Use Forward Integration When….
 Present distributors are expensive, unreliable, or
incapable of meeting firm’s needs.
 Have the capital and Human Resource
 Distributors are few in number
 When distributor’s margins are very high.
 Company can gain a competitive advantage

Integrative Growth
Backward Integration
 Seeking ownership or increased control over
firm’s suppliers.
Use Backward Integration When….
 A firm’s suppliers are expensive or unreliable.
 Number of suppliers is small and number of
competitors is large
 Company can gain a competitive advantage

Integrative Growth
Horizontal Integration
 Seeking ownership of firm’s competitors
 M&As
Use Horizontal Integration When….
 Firm can gain monopolistic characteristics
 Organization competes in a growing industry
 When competitors are faltering due to lack of
managerial expertise or a resource that your
firm has.

Diversification
Diversification
 New products sold to new markets
 In the past, pursued to diversify the risk of failure
 Today on a retreat
 Famous examples
 General Electric
 Viacom
 Samsung

Diversification
 Concentric Diversification
 results in new product lines or services that have
technological and/or marketing synergies with
existing product lines
 For example; Dell Computers, News Corporation.

Diversification
 Conglomerate Diversification
 New unrelated products for new wide array of markets
 For example; Nishat Group, GE, Hashoo Group, Dewan Group.
Nishat Group Hashoo Group Dewan Group
1 Nishat Mills
2 D.G. Khan Cement
3 MCB Bank Limited
4 Adamjee Insurance
5 Nishat Power Limited
6 Pakgen Power Limited
7 Nishat Chunian Limited
8 Nishat Hotels and
Properties Limited
9 Nishat Dairy
1 Hotels and resorts
2 Tours and travels
3 Information technology
4 Oil and gas
5 Minerals
6 Pharmaceuticals
7 Ceramics
8 Investments
9 Trading companies
10 Welfare
1 Automobile
manufacturing
2 Polyester staple fibre
manufacturing
3 Sugar manufacturing
4 Textile manufacturing
5 Cement manufacturing
6 Petroleum

1. Intensive Growth
Ansoff’s Product/Market Expansion Grid

Ansoff’s Product/Market Matrix Cont...
 Developed in 1957 by Igor Ansoff
 A framework for identifying corporate growth opportunities
 Two dimensions determine the scope of options – product
and market
 Four Generic Strategies
 Market Penetration (existing products, existing markets)
 Market Development (existing products, new markets)
 Product Development (new products, existing markets)
 Diversification (new products, new markets)

Ansoff Matrix and Risk

Ansoff Matrix and Risk
 Market Penetration – Little Risk Involved
 Product Development – Moderate Risk
 Market Development – High Risk
 Diversification – Extreme Risk

Chapter 2 developing marketing strategies and plans

More Related Content

What's hot

Viewers also liked

Similar to Chapter 2 developing marketing strategies and plans

Recently uploaded

Chapter 2 developing marketing strategies and plans