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NANDA KISHORE SETHURAMANITM NOVEMBER 2011
Introduction to Marketing Strategy
PRODUCT LIFE CYCLE
Product Life Cycle
Product Life Cycle
REV
6
Summar
y of
Summar
y of
Objectives for the dayToday, 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
1-10
1. 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
1-11
ScopeGoals and objectivesResource deploymentsIdentification of sustainable
competitive advantageSynergy
Components of Strategy
Strategic Planning with a Marketing Focus
Strategic marketing planTactical marketing planMarketing plan
1-13
2. What do marketers mean when they say their firms are market oriented?
Discussion Questions
1-14
3. Does having a market orientation make sense? What are the advantages and drawbacks?
Discussion Questions
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?
1-20
4. What must marketing managers understand to engage in effective marketing practice?
Discussion Questions
1-21
5. Which should come first – the customer need or the product idea?
Discussion Questions
1-22
6. Why do some firms lack orientation towards the market?
Discussion Questions
1-23
7. What sort of decisions must marketing managers make to effectively serve customer needs?
Discussion Questions
1-26
8. 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?
Discussion Questions
1-27
9. Are planned results always delivered in most organizations? What else might you want to include?
Discussion Questions
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 controlProfitability controlStrategic 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
1-31
Contents of a Marketing Plan
Executive summaryCurrent situation and trendsPerformance review (for an existing good or service
only)Key issuesObjectivesMarketing strategyAction plansProjected profit-and-loss statementControlsContingency plans
CORPORATE STRATEGY DECISIONS
AND THEIR MARKETING IMPLICATIONS
2-33
1. In defining their strategies, should companies pursue broadly or narrowly defined missions?
2. What are the advantages of each approach?
Discussion Questions
Characteristics of Effective Corporate Mission Statements
34
Broad SpecificFunctionalBased on customer needs
Transportation business
Long-distance transportation for large-volume producers of low-value, low-density products
PhysicalBased on existing products or technology
Railroad business Long-haul, coal carrying railroad
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.
2-35
Ansoff Matrix
Igor Ansoff says there are four strategies for growing a business.
Let’s consider their merits and drawbacks.
2-36
Market penetration strategiesMarket penetration strategies• Increase market share• Increase product usage
Increase frequency of useIncrease quantity usedNew applications
Product development Product development strategiesstrategies
• Product improvements• Product-line extensions• New products for same
market
Market development Market development strategiesstrategies
• Expand markets for existing productsGeographic expansionTarget new segments
Diversification strategiesDiversification strategies• Vertical integration
Forward/backward integration• Diversification into related bus
(concentric diversification)• Diversification into unrelated
businesses (conglomerate diversification)
Current products New products
Cur
rent
mar
kets
New
mar
kets
Alternative Corporate Growth Strategies
2-37
High
Low
Stars
Dogs
Question marks
10 0.1Relative market share
Marketgrowthrate(inconstantdollars)
10%
1
Source: Adapted from Barry Hedley, “Strategy and the Business Portfolio,” Long Range Planning 10 (February 1977).
5
6
9
87Cash cows
4
10 13
12
3
11 12
The BCG Growth Share Matrix
2-38
Gro
wth
rate
(cas
h us
e)
High
Low
Stars
Cash cows Dogs
Questionmarks
High LowRelative market share
Desired direction of business development
CashFlows
Cash Flows Across Businesses in the BCG Portfolio Model
2-39
Bus
ines
s’s
com
petit
ive
posi
tion
High
Low
Medium
Industry attractivenessHigh Medium Low
1 1 2
1 2 3
2 3 3
1 Invest/grow2 Selective investment/ maintain position3 Harvest/divest
The GE Nine-Cell Matrix
2-40
Creatingshareholder
value
Shareholder return• Dividends• Capital gains
Corporateobjective
Sales growth• Operating profit margin
• Income tax rate
Discount rate Debt
Operating
Cash flowfrom
operations
Investment Financing
• Working capital investment
• Fixed capital investment
• Cost of capital
• Value growth duration
Valuationcomponents
Valuedrivers
Managementdecisions
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
Factors Affecting the Creation of Shareholder Value
Marketing Strategy
Should cover the following points.PositioningProduct ManagementPricingDistributionMarketing CommunicationsMarketing Research
Segmentation, Targeting & Positioning
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Segmentation, Targeting, Positioning
7 - 45
Learning Goals
1. Learn the three steps of target marketing, market segmentation, target marketing, and market positioning
2. Understand the major bases for segmenting consumer and business marketing strategy
3. Know how companies identify attractive market segments and choose target marketing strategy
4. Realize how companies position their products for maximum competitive advantage in the marketplace
7 - 46
• 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 - 47
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
48
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
52
53
Linking Market Need to a Marketing Program
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Segmentation Bases
55
Geographic Segmentation
BlankBlank56
57
Demographic Segmentation
1945 1965 1976 1994
Baby Boomers
Generation X
Generation Y
Mature Market
Demographics - Marketing across Generations
Mature MarketMature Market
Generation XGeneration X
Generation YGeneration Y
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Behavioral Segmentation
64
Psychographic Segmentation
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Segmenting International Markets
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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
1. Determine the characteristics of segments in the target market & separate these segments in the market based on these characteristics.
2. Verify the market segments size if adequate enough to support the organization's product.
3. Develop a marketing strategy to target this market.
70
Segmentation, Targeting, Positioning
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Target Market
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Evaluating Segment Attractiveness
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Let’s sell to segments with big eyes and lips
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Factors driving a Target Marketing Strategy
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Selling Ice Cream to EskimosSelling Ice Cream to Eskimos
78
Broad
Target Marketing Strategies
7 - 79
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
80
Segmentation, Targeting, Positioning
7 - 81
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 - 83
Identifying possible competitive advantages
Choosing the right competitive advantage
Choosing a positioning strategy
Differentiation can be based on Products Services Channels People Image
Topics Topics
Choosing a Positioning Strategy
7 - 84
• How many differences to promote? Unique selling proposition Several benefits
• Which differences to promote? Criteria include: Important Distinctive Superior Communicable Preemptive Affordable Profitable
Topics Topics Identifying possible
competitive advantages
Choosing the right competitive advantage
Choosing a positioning strategy
Choosing a Positioning Strategy
7 - 85
• 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
Topics Topics Identifying possible
competitive advantages
Choosing the right competitive advantage
Choosing a positioning strategy
Choosing a Positioning Strategy
7 - 86
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 - 87
Companies must be certain to DELIVER their value propositions.
Positions must be monitored and adapted over time.
Communicating the Positioning
1. Identify Basesfor Segmenting the Market
2. Develop Profilesof Resulting Segments
3. Develop Measuresof Segment Attractiveness
4. Select TargetSegment(s)
5. Develop Positioningfor Each Target Segment
6. Develop MarketingMix for Each Target Segment Market
Positioning
MarketTargeting
Market Segmentation
Market Segmentation Process
END OF DAY 1