Chap001 [Compatibility Mode]

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1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space

3. Strategic Market Segmentation

4. Strategic Customer Relationship Management

5. Capabilities for Learning about Customers and Markets

6. Market Targeting and Strategic Positioning

7. Strategic Relationships

8. Innovation and New Product Strategy

9. Strategic Brand Management

10. Value Chain Strategy

11. Pricing Strategy

12. Promotion, Advertising and Sales Promotion

Strategies

13. Sales Force, Internet, and Direct Marketing Strategies

14. Designing Market-Driven Organizations

15. Marketing Strategy Implementation And Control

Strategic Marketing



Imperatives for

Market-DrivenStrategy

Chapter 1

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.



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Objectives

* Pivotal role of market-driven strategyin designing and implementingbusiness/marketing strategies

* Links between business/marketingstrategy and corporate strategy

* Challenges in the modern environment



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Achieving SuperiorPerformance

DeterminingDistinctiveCapabilities

CustomerValue/

Capabilities

Match

Becoming Market-

Orientation

Characteristics of a Market-Driven

Strategy



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Market-Driven Strategy (1)

* Becoming market-oriented

* Customer focus

* Competitor intelligence

* Cross-functional coordination* Performance implications



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BECOMING MARKET ORIENTED

* Customer is the focal point of the organization

* Commitment to continuous creation of superiorcustomer value

* Superior skills in understanding and satisfyingcustomers

* Requires involvement and support of the entireworkforce

* Monitor rapidly changing customer needs andwants



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* Determine the impact of changes oncustomer satisfaction

* Increase the rate of product innovation* Pursue strategies to create competitive

advantage

BECOMING MARKET ORIENTED



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Characteristics of Market Orientation

Customer Focus

What are the customer’s value requirements? Competitive Intelligence

Importance of understanding the

competition as well as the customer

Cross-Functional Coordination

Remove the walls between business functions

Performance Consequences

Market orientation leads tosuperior organizational performances



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Information

Acquisition

Cross-FunctionalAnalysis of Information

Shared Diagnosisand CoordinatedAction

Delivery ofSuperior Customer

Value

Becoming a Market-OrientedOrganization



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* Customer focus



* Determining distinctive capabilities



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DISTINCTIVE CAPABILITIES

“Capabilities are complexbundles of skills andaccumulated knowledge,

exercised throughorganizational processes, that

enable firms to coordinateactivities and make use oftheir assets.”

George S. Day, Journal of Marketing, October 1994, p.38.



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Southwest Airline’s Distinctive Capabilities

Organizational Processes

Southwest uses a point-to-point route system rather than the hub-and-spoke designused by many airlines. The airline offers services to 57 cities in 29 states, with anaverage trip about 500 miles. The carrier’s value proposition consists of low faresand limited services (no meals). Nonetheless, major emphasis throughout theorganization is placed on building a loyal customer base. Operating costs are keptlow by using only Boeing 737 aircraft, minimizing the time span from landing todeparture, and developing strong customer loyalty. The company continues to growby expanding its point-to-point route network.

Skills and Accumulated Knowledge

The airline has developed impressive skills in operating its business model at verylow cost levels. Accumulated knowledge has guided management in improving thebusiness design over time.

Coordination of Activities

Coordination of activities across business functions is facilitated by the point-to-point business model. The high aircraft utilization, simplification of functions, andlimited passenger services enable the airline to manage the activities very efficientlyand to provide on-time point-to-point services offered on a frequent basis.

Assets

Southwest’s key assets are very low operating costs, loyal customer base, and high

employee esprit de corps



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CompellingLogic of Distinctive

Capabilities

Disproportionate

(higher)contribution tosuperiorcustomer value

Provides value tocustomers on a morecost-effective basis

Capabilities

Source: George S. Day, Journal of Marketing, October 1994, p. 38.



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Capabilities

DesirableCapabilities

Applicable toMultiple

Competition

Situations

Difficult toDuplicate

Superior to theCompetition

Source: George S. Day, Journal of Marketing, October 1994, 49.



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* Customer focus




* Types of capabilities



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Types of Capabilities

Outside-In

Processes

Inside-OutProcesses

Spanning

Processes



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Organization’s Process

Source: George S. Day, Journal of Marketing, October 1994, 41.

Spanning Processes

Outside-InProcesses

Inside-OutProcesses

EXTERNALEMPHASIS

INTERNALEMPHASIS

Market sensing

Customer linking Channel bonding

Technologymonitoring

Customer order

fulfillment Pricing

Purchasing

Customer servicedelivery

New product/servicedevelopment

Strategy development

Financial management

Cost control

Technologydevelopment

Integrated logistics

Manufacturing/

transformationprocesses

Human resourcesmanagement

Environment health and

safety



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* Customer focus




* Types of capabilities

* Creating value for customers



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Value Requirements

Distinctive

Capabilities

Matching Customer Value and DistinctiveCapabilities



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CREATING VALUE FOR CUSTOMERS

Customer Value:

Value for buyers consists of the benefits lessthe costs resulting from the purchase ofproducts.

Superior value: positive net benefits

Creating Value:

“Customer value is the outcome of a processthat begins with a business strategy anchored in

a deep understanding of customer needs.”

Source: C. K. Troy, The Conference Board Inc., 1996, 5.



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Creating Value for Customers

Benefits Costs

Customer

Value



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Value Composition

Monetary costs

Time

Psychic andphysic costs

Product

Services

Employees

Image

Benefits

Costs(sacrifices)

Value(gain/loss)



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* Becoming market-driven

* Marketing sensing capabilities

* Customer linking capabilities

* Aligning structure and processes



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Becoming Market Driven

MARKET –

DRIVENSTRATEGIES

Market SensingCapabilities

Customer LinkingCapabilities



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Market Driven Initiatives

Market Sensing Capabilities

* Effective processes for learning aboutmarkets

* Sensing:

* Collected information needs to be sharedacross functions and interpreted todetermine proper actions.

Customer Linking Capabilities

* Create and maintain close customer

relationships



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Aligning Structure and Processes

* Potential change of organizational design

* Improve existing processes

* Process redesign* Cross-functional coordination and

involvement

* Primary targets for reengineering:* Sales and marketing, customer relations,

order fulfillment, and distribution



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Corporate, Business and MarketingStrategy (1)

* What is corporate strategy?



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CORPORATE STRATEGY

Deciding the Scope

and Purpose ofthe Business

Business

Objectives

Actions and

Resources forAchieving

Objectives



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CHARACTERISTICS OF SUCCESSFUL

STRATEGY

Unique competitive position for the

company.Activities tailored to strategy.

Clear trade-offs and choices vis-à-vis

competitors.Competitive advantage arises from fit

across activities.

Sustainability comes from the activitysystem not the parts.

Operational effectiveness a given.Source: Michael E. Porter, “What Is Strategy,” Harvard Business Review, November-December 1996, 74.



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Corporate, Business and Marketing

Strategy (2)

* What is corporate strategy?

* Corporate strategy framework

* Deciding corporate vision

* Objectives* Resources

* Business composition

* Structure, systems and processes



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CORPORATE STRATEGYCOMPONENTS

Management’s long-term vision for thecorporation

Objectives

Assets, skills, and capabilitiesBusinesses in which the corporation

competes

Structure, systems, and processes

Creation of valueSource: David J. Collis and Cynthia A. Montgomery, Corporate Strategy, Chicago: Irwin, 1997, 7-12.

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Strategy (3)

* Business and marketing strategy

* Business and marketing strategyrelationships

* Strategic marketing

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CORPORATE, BUSINESS AND

MARKETING STRATEGY

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Corporate, Business and

Marketing Strategy (4)

* The marketing strategy process

* Markets, segments and customer value

* Markets and competitive space

* Strategic market segmentation

* Strategic customer relationship management

* Capabilities for continuous learning aboutmarkets

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Strategy (5)

* Designing market-driven strategies

* Market targeting and strategic positioning

* Strategic relationships

* Innovation and new product strategy

* Market-driven program development* Strategic brand management

* Value chain strategy

* Pricing strategy

* Promotion strategy

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Strategy (6)

* Implementing and managing market-

driven strategy

* Designing market-driven organizations

* Marketing strategy implementation andcontrol

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MARKETING STRATEGY PROCESS

Markets,Segments

And Value

Market-Driven

ProgramDevelopment

Implementingand Managing

Market-DrivenStrategy

DesigningMarket-Driven

Strategies

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Challenges in the modern

environment

* Escalating globalization* Technology diversity and uncertainty

* Ethical behavior and corporate socialresponsiveness

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Strategic Marketing Planning

* Developing the strategic plan for each

business

* Preparing the marketing plan

* Planning relationships and frequency

* Planning considerations

* Responsibility for preparing plans

* Planning unit

* Preparing the marketing plan

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MARKETING PLAN

OUTLINE

I. Strategic Situation Summary

Summarize the key points from your situation analysis (market analysis, segments,industry/competition) in order to recount the major events and provide information to better

understand thestrategies outlined in the marketing plan.

II. Market-Targets and Objectives

The market target may be defined demographically (key characteristics only),

geographically, or in social/economic terms. Each market target should have needs andwants that differ to some degree from other targets. These differences may be withrespect to types of products purchased, use situation, frequency of purchase, and other

variations that indicate a need to alter the positioning strategy to fit the needs and wants ofeach target. An objective is a quantified goal identifying what is expected when. It specifiesthe end results expected. The objectives should be written for each target market.

Objectives should also be included for the following program components: (1) product,(2) price, (3) distribution, (4) promotion (salesforce, advertising, sales promotion, and

public relations), and (5) technical services.

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III. Positioning Statements

Write statements that describe how you want each market

target to perceive each product relative to competition. State thecore concept used to position the product (brand) in the eyes and

mind of the targeted buyer. The positioning statement shoulddescribe: (1) What criteria or benefits the customer considers when

buying a product along with the level of importance, (2) What weoffer that differentiates our product from competition, and (3) The

limitations of competitive products.

MARKETING PLAN

OUTLINE

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A. Product Strategy

Identify how each product fits the market target. Other issues that may be addressed wouldbe new product suggestions, adjustments in the mix of existing products, and product

deletion candidates.B. Price Strategy

The overall pricing strategy (I.e., competitive, premium-priced, etc.) should be identified

along with a cost/benefit analysis if applicable. Identify what role you want price to play, i.e.,increase share, maintenance, etc.

C. Distribution Strategy

Describe specific distribution strategies for each market target. Issues to be addressed areintensity of distribution (market coverage), how distribution will be accomplished, andassistance provided to distributors. The role of the sales force in distribution strategy shouldalso be considered.

D. Promotion Strategy Promotion strategy is used to initiate and maintain a flow of communication between the

company and the market target. To assist in developing the communications program, theattributes or benefits of our product should be identified for each market target. How ourproduct differs from competition (competitive advantage) should be listed. The sales force’sresponsibilities in fulfilling the market plan must be integrated into the promotion strategy.Strategies should be listed for (1) personal selling, (2) advertising, (3) sales promotion, and(4) public relations.

IV. Market M ix Strategy for

Each Market Target

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E. Marketing Research

Describe the market research problem and the kind ofinformation needed. Include a statement which addresseswhy this information is needed. The specific marketresearch strategies can be written once the above twosteps have been followed.

V. Coordination with Other Business Functions Indicate other departments/functions that haveresponsibilities for implementing the marketing plan.

VI. Sales Forecasts and Budgets

VII. Contingency Plans

Indicate how your plans should be modified if eventsshould occur that are different from those assumedin the plan.

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