A Strategic Marketing Framework

A Strategic A Strategic Marketing Marketing FrameworkFramework

Chapter TwoChapter Two

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 1-2

Key Learning PointsKey Learning Points

The elements of a complete The elements of a complete marketing strategymarketing strategyDeveloping a value propositionDeveloping a value propositionDeveloping a sustainable Developing a sustainable competitive advantagecompetitive advantagePositioning products and servicesPositioning products and servicesThe product life cycle and how it The product life cycle and how it affects marketing strategiesaffects marketing strategies


Figure 2.1Figure 2.1A Complete Marketing A Complete Marketing

StrategyStrategy


Marketing StrategyMarketing Strategy

Objectives:Objectives: Mission statementsMission statements

Corporate objectivesCorporate objectives

Business unit / divisional Business unit / divisional objectivesobjectives

Objectives geared towards Objectives geared towards increasing profit AND increasing increasing profit AND increasing market share require trade-offs.market share require trade-offs.


ActivityActivity

At which strategic level would you At which strategic level would you expect to find the following expect to find the following objectives:objectives:

Achieve a 2% coupon redemption Achieve a 2% coupon redemption rate for Product X by June 30rate for Product X by June 30thth of this of this yearyearMaximize shareholder wealthMaximize shareholder wealthIncrease market share within the Increase market share within the detergent product category by 1% detergent product category by 1% for the 2011 fiscal yearfor the 2011 fiscal year



Characteristics of well-written Characteristics of well-written objectives:objectives:

Lists a quantified standard of Lists a quantified standard of performance.performance.Designates a clear time frame.Designates a clear time frame.States goal in measurable terms.States goal in measurable terms.Should be challenging but Should be challenging but realistic.realistic.



Customer and competitor Customer and competitor targets:targets:

Which customer group should be Which customer group should be targeted?targeted?

Select a general strategy. Select a general strategy.

Define targeted group in more Define targeted group in more precise terms. precise terms.


Figure 2.2Figure 2.2Strategic AlternativesStrategic Alternatives



Market penetration strategy:Market penetration strategy:Targeting the firm’s own Targeting the firm’s own customers is a high priority.customers is a high priority.Targeting customers of the Targeting customers of the competition is riskier and more competition is riskier and more expensive strategy.expensive strategy.

Common in slow growth Common in slow growth markets.markets.Price promotions are key.Price promotions are key.


DiscussionDiscussion

Pricing promotions Pricing promotions encourage people to encourage people to switch brands, at switch brands, at least temporarily.least temporarily.

Give an example of a Give an example of a pricing promotion pricing promotion that may result in that may result in longer-term longer-term switching behavior, switching behavior, and explain why.and explain why.



Market development strategies:Market development strategies:Targeting new customers in new Targeting new customers in new segments.segments.

Will it require the introduction of new Will it require the introduction of new or modified products?or modified products?

Targeting nonbuying customers in Targeting nonbuying customers in currently served segments.currently served segments.

Is it profitable?Is it profitable?


Discussion QuestionDiscussion Question

Many products have successfully Many products have successfully used packaging innovations, such as used packaging innovations, such as the squeeze container, to appeal to the squeeze container, to appeal to new markets by providing a new markets by providing a functional benefit.functional benefit. 1.What are other examples of packaging

innovations that have been used to attract new users to a brand?

2.Give an example of how a particular product could be modified to attract new users.



Market Development Strategies:Market Development Strategies:Entering Foreign Markets:Entering Foreign Markets:

Requires decisions related to Requires decisions related to The choice of country or countries to The choice of country or countries to enter.enter.

The timing of the entry.The timing of the entry.

How to operate in the chosen countries.How to operate in the chosen countries.

Five factors should be considered when Five factors should be considered when deciding how to enter a foreign market.deciding how to enter a foreign market.


Figure 2.3Figure 2.3Factors Affecting Mode of Factors Affecting Mode of

EntryEntry


Table 2.1Table 2.1Global Purchasing Power Indices (U.S. = Global Purchasing Power Indices (U.S. =

100)100)



The value proposition:The value proposition:Summarizes into a single Summarizes into a single paragraphparagraph

The customer.The customer.

The competitive targets.The competitive targets.

The customer’s reason for The customer’s reason for buying your brand.buying your brand.

Forms the basis for the marketing Forms the basis for the marketing mix.mix.


For (target segment n), the (product/ brand name) is a (product category) that unlike (competitor targets), (statement of primary differentiation).

ForFor men aged 20 men aged 20––29, Thums Up 29, Thums Up is ais a cola cola that unlikethat unlike Coke and Pepsi, has Coke and Pepsi, has Indian heritage, tastes spicier, and Indian heritage, tastes spicier, and tastes just as good warm as it does tastes just as good warm as it does cold.cold.

Model of a Value Model of a Value PropositionProposition


““Competitive advantage – Competitive advantage – the strategic development the strategic development of some basis on which of some basis on which customers will choose a customers will choose a firm’s product or service firm’s product or service over its competitors.”over its competitors.”

- Russell S. Winer



Differentiation:Differentiation:Competitive advantages (CA) Competitive advantages (CA) should have three characteristics:should have three characteristics:

Competitive advantage should Competitive advantage should generate customer value.generate customer value.Increased value must be Increased value must be perceived by the consumer.perceived by the consumer.Competitive advantage should Competitive advantage should be difficult to copy.be difficult to copy.



General Approaches to General Approaches to Creating Creating

Competitive AdvantageCompetitive AdvantageCost-based or price-based Cost-based or price-based advantageadvantage

Quality-based or differentiation Quality-based or differentiation advantageadvantage

Perceived quality or brand-based Perceived quality or brand-based advantageadvantage



Cost- or Price-Based Advantage:Cost- or Price-Based Advantage:Managers choose whether or not Managers choose whether or not to compete on basis of price.to compete on basis of price.Difficult to achieve, but two Difficult to achieve, but two primary methods exist:primary methods exist:

Becoming the largest producer Becoming the largest producer and benefiting from economies and benefiting from economies of scale.of scale.Taking advantage of the Taking advantage of the experience curve.experience curve.


Figure 2.4Figure 2.4Learning Curves for Software and Learning Curves for Software and

HardwareHardware



Cost- or Price-Based Advantage:Cost- or Price-Based Advantage:Firms who are not industry leaders Firms who are not industry leaders or who lack experience can also or who lack experience can also succeed.succeed.Strict cost control and flexible Strict cost control and flexible manufacturing can help to develop manufacturing can help to develop a cost-based advantage.a cost-based advantage.Examples:Examples:

IKEAIKEAJiffy LubeJiffy LubeVanguard GroupVanguard Group



Quality-Based Differentiation:Quality-Based Differentiation:Develops an observable difference Develops an observable difference that is valued by customers.that is valued by customers.

Typically implies higher costs.Typically implies higher costs.

Allows for both higher prices and Allows for both higher prices and higher margins.higher margins.

Differentiation can occur at any Differentiation can occur at any point within the value chain.point within the value chain.


IllustrationIllustration

Sun Sun Microsystems Microsystems differentiates its differentiates its products by products by having its own having its own operating operating system, Solaris. system, Solaris.



Differentiation Opportunities Differentiation Opportunities Within the Value ChainWithin the Value Chain

Inbound Inbound LogisticsLogistics

Operational Operational AdvantagesAdvantages

Outbound Outbound LogisticsLogistics

Marketing & SalesMarketing & Sales

ServicesServices



Perceived Quality or Brand-Based Perceived Quality or Brand-Based Differentiation:Differentiation:

Appropriate when actual differences Appropriate when actual differences are small, hard to achieve, or are small, hard to achieve, or difficult to sustain.difficult to sustain.Marketing mix decisions contribute Marketing mix decisions contribute to brand-based differentiation.to brand-based differentiation.Perceptual maps can help in Perceptual maps can help in understanding consumer understanding consumer perceptions.perceptions.


Figure 2.5Figure 2.5Perceptual Map for Retail Perceptual Map for Retail

BanksBanks


ActivityActivity

What two What two attributes or attributes or dimensions did dimensions did YOU consider YOU consider most important most important when comparing when comparing competing competing Universities? Universities?

Dimension B

Dim

en

sion A


““One of the key ways to define One of the key ways to define a perceptual differential a perceptual differential advantage is through the brand advantage is through the brand name. The value of a brand name. The value of a brand name in communicating quality name in communicating quality or other aspects of the product or other aspects of the product is called is called brand equitybrand equity..””

- Russell S. Winer


IllustrationIllustration

Bayer’s strong brand Bayer’s strong brand name provides name provides differentiation differentiation against generics and against generics and private label (store) private label (store) brands. Strength of brands. Strength of brand name relates brand name relates to which element to which element within the within the value value chainchain??



Core Strategy: PositioningCore Strategy: PositioningA point of differentiation must A point of differentiation must be selected for communication.be selected for communication.Positioning creates a clear Positioning creates a clear image in the mind of the image in the mind of the consumer of what the product consumer of what the product stands for and how it is different stands for and how it is different from competitive offerings.from competitive offerings.



Formulating the positioning strategy Formulating the positioning strategy requires knowledge of:requires knowledge of:

The dimensions used by consumers to The dimensions used by consumers to evaluate products.evaluate products.

The importance of each dimension.The importance of each dimension.

Comparisons of the brand and competition. Comparisons of the brand and competition.

The decision processes used by The decision processes used by consumers.consumers.

Sometimes repositioning is necessary.Sometimes repositioning is necessary.



Marketing Mix:Marketing Mix:Implementation of the marketing Implementation of the marketing mix makes the strategy mix makes the strategy operational.operational.Consistency between strategy Consistency between strategy and the actual implementation is and the actual implementation is critical.critical.


Figure 2.6Figure 2.6Ensuring a Segment-Focused Ensuring a Segment-Focused

StrategyStrategy


DiscussionDiscussion

Dell manufactures products for the manufactures products for the home user segment, small and home user segment, small and medium business market, the public medium business market, the public sector (government, education), and sector (government, education), and for large enterprise.for large enterprise.

In what ways might the core strategy In what ways might the core strategy or marketing mix differ when or marketing mix differ when catering to each segment? Explain.catering to each segment? Explain.


Figure 2.7Figure 2.7The Product Life CycleThe Product Life Cycle


The Product Life Cycle (PLC) sketches the The Product Life Cycle (PLC) sketches the sales history of a product category over sales history of a product category over time.time.

This conceptual tool is best applied to product This conceptual tool is best applied to product categories and not to specific brands. categories and not to specific brands.

Strategy options and the importance of Strategy options and the importance of marketing mix variables vary across each marketing mix variables vary across each stage of the PLC.stage of the PLC.

Not all product categories follow the Not all product categories follow the standard PLC curve.standard PLC curve.

Marketing Strategies Over the Marketing Strategies Over the Product Life CycleProduct Life Cycle


Figure 2.8Figure 2.8VCR Deck Sales to DealersVCR Deck Sales to Dealers



Market size and Market size and growth rate are growth rate are low.low.Product:Product: one brand one brand that pioneered the that pioneered the categorycategorySelling & Selling & advertising:advertising: focuses focuses on generic producton generic product

Pricing:Pricing: penetration or penetration or skimmingskimmingDistribution:Distribution: limited as product limited as product is unprovenis unprovenOften offers a first-Often offers a first-mover advantagemover advantage

Introduction StageIntroduction Stage



Competition Competition grows.grows.

Price pressures Price pressures increase. increase.

Communications Communications stress stress differentiation.differentiation.

Distribution Distribution pressures pressures increase.increase.

Market Market segmentation segmentation becomes becomes necessary.necessary.

Growth StageGrowth Stage


Growth Stage Strategic OptionsGrowth Stage Strategic Options

Fight (maintain)Fight (maintain)

Fight (enhance)Fight (enhance)

Flee (give up Flee (give up market market leadership)leadership)

Exit the marketExit the market

Imitate the leaderImitate the leader

Fortify positionFortify position

Leapfrog the Leapfrog the competitioncompetition

Market Leader:Market Leader: Market Follower:Market Follower:




Few new Few new buyersbuyers

Sophisticated Sophisticated consumersconsumers

Well-defined Well-defined segmentssegments

Differential Differential advantage advantage soughtsought

Maturity StageMaturity Stage


Maturity Stage Strategic OptionsMaturity Stage Strategic Options

Invest enough to Invest enough to maintain positionmaintain position

Harvest cash for Harvest cash for short-termshort-term

Depends, but may:Depends, but may:

Pursue #1Pursue #1

Stay #2.Stay #2.

Exit categoryExit category

Market LeaderMarket Leader Market FollowerMarket Follower



Decline Stage Strategic OptionsDecline Stage Strategic Options


Strategically revive by applying Strategically revive by applying strategies during maturity phase.strategies during maturity phase.Serendipity may revive the Serendipity may revive the category.category.Consciously decide to be the Consciously decide to be the “Last Iceman”.“Last Iceman”.


““There are no mature markets, There are no mature markets, only tired marketers.”only tired marketers.”

- Campbell Soup CEO, David Johnson


Figure 2.9Figure 2.9Beer Market Evolution for Beer Market Evolution for

Selected Countries and RegionsSelected Countries and Regions


Executive SummaryExecutive Summary

Marketing strategies contain many Marketing strategies contain many parts.parts.

Value propositions should be Value propositions should be concise.concise.

Three key methods can lead to Three key methods can lead to differential advantage.differential advantage.

Product positioning is essential.Product positioning is essential.

Strategic alternatives vary with the Strategic alternatives vary with the stage of product life cycle.stage of product life cycle.


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A Strategic Marketing Framework

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