Chapter

7 Marketing Strategy

Chapter 7

Selecting and Developing The Marketing Strategy

Chapter

7 Strategic Characteristics

• The marketing manager evaluates all strategy options in light of the firm's mission, goals and objectives, strengths and weaknesses, and opportunities and threats to craft a marketing strategy that produces the best overall strategic fit.

• A good fit allows the firm to make the most of the potential capabilities that the internal and external environment combination provides.

• The best marketing strategy will be differentially advantageous, sustainable, timely, feasible, and affordable.

Chapter

7 Strategic Fit

The Firm

MarketingStrategy

The Environment

Characteristics of aGood Marketing Strategy

1) Creates a differential advantage

2) Sustainable over time

3) Timed to coincide with a strategic window

4) Feasible given the firm’s skills, expertise, and level of resources

5) Affordable given the firm’s available financial resources

Chapter

7 Life Cycle: Development Stage

• A firm has no sales revenue during this stage.• The firm experiences a net cash outflow due to the

expenses of product invention and development.• Although marketing activities do not typically occur in this

stage, planning efforts at this point can greatly influence marketing activities in later stages of the life cycle.

• In creating a new product or product line, a group of closely related product items is desired because of the scale economies that are created, along with increased efficiency in operations and marketing.

• The development stage usually begins with a product concept and ends with the commercialization of the product.

Chapter

7Development: Components of Product

Concept• An understanding of the specific uses and benefits that target

customers seek in a new product.

• A description of the product, including its potential uses and benefits.

• The potential for creating a complete product line that can produce synergies in sales and income and place the firm in a strong market position.

• An analysis of the feasibility of the product concept, including such issues as anticipated sales, required return on investment, time of market introduction, length of time to repay investment, etc.

Chapter

7 Life Cycle: Introduction Stage

• The introduction stage begins when development is complete and ends when sales indicate that target customers are widely accepting the product.

• The marketing strategy devised during the development stage should be fully implemented during the introduction stage, and should relate to issues that arose during the SWOT analysis.

• Good promotion and distribution are essential to make customers aware that the new product is available, how to use it, and where to purchase it.

• After the product is introduced, the marketing manager should employ the firm's marketing information system to determine market share, revenues, store placement/channel support, costs, and rate of product usage to assess whether the new product is paying back the firm's investment.

Chapter

7 Introduction: Marketing Strategy Goals • Attract customers by raising awareness of and interest in the

product through advertising, public relations, and publicity efforts that stress key product features and benefits.

• Induce customers to try and buy the product through the use of various sales tools and pricing activities.

• Strengthen or expand channel relationships to gain sufficient product distribution to make the product accessible for target consumers/customers.

• Build on the availability and visibility of the product through trade promotion activities.

• Engage in customer education activities that teach target market members how to use the new product and convince them to repurchase the product.

Chapter

7 Life Cycle: Growth Stage

• Sustained sales increases may begin quickly during the growth stage, and the product's upward sales curve may be steep.

• Regardless of the length of the growth stage, the firm has two main priorities:– To establish a strong market position and defend it from competitors.

– To achieve financial objectives that repay investment and earn enough to justify a long-term commitment to the product.

• The overall strategy in the growth stage shifts toward generating repeat purchases and building brand loyalty.

• The growth stage is the most expensive stage for marketing.

• Increasing competition should be expected as the product's sales growth and emerging profitability encourages other firms to develop competitive product entries.

Chapter

7 Growth: Pertinent Marketing Strategy • Utilize the product's perceivable differential advantages in terms of

quality, price, value, etc., to secure market leadership.

• Establish a clear product/brand identity through image-oriented advertising and personal selling campaigns.

• Create a unique product position, or niche, through the use of advertising that stresses product features and benefits for target customers relative to other need solutions/products available to target market members.

• Maximize availability of the product through extensive trade promotion activities that capitalize on the product's popularity at this stage and thereby enhance the firm's ability to deliver profits to key retailers.

• Find the ideal balance between price and demand and determine a general estimate of price elasticity.

• Maintain control over product quality to assure customer satisfaction.

Chapter

7 Life Cycle: Maturity Stage

• The maturity stage is the longest in the typical product life cycle.

• When the relatively fast growth has tapered, there will be some "shake-out" of the competition that built during the growth stage.

• As the strategic window of opportunity has all but closed for the product/market, no more firms will enter the market unless they have found some product innovation significant enough to attract large numbers of target customers. The window of opportunity often remains open for new product features and variations.

• In the face of limited or no growth within the product market, the only way for a firm to gain market share is to steal it from a competitor.

Chapter

7 Maturity: Objectives

• The marketing manager has three general objectives that can be pursued during the maturity stage:– Generate cash flow.– Hold market share.– Increase share of customer, which refers to the percentage

of each customer's needs being met by the firm.• To achieve these objectives, the marketing manager has at

least four general options for strategy selection:– Develop a new product image.– Find and attract new users to the product.– Discover new applications and uses for the product.– Apply new technology.

• Holding market share or increasing share of customer often requires heavy expenditures in marketing, particularly in promotion.

Chapter

7 Life Cycle: Decline Stage

• A product's sales plateau will not last forever, and eventually it begins a persistent decline in revenue that marks the beginning of the decline stage.

• Very popular brands can postpone this stage longer than weaker brands.

• The decline stage, and the product's life, ends when the product is terminated.

• The marketing manager has two options during the decline stage:– The harvesting approach calls for a gradual reduction in

marketing expenditures, and uses a less resource-intensive marketing mix.

– The divesting option calls for the total withdrawal of marketing support from the product or SBU.

Chapter

7 Decline: Important Factors to Consider

• The rate of market deterioration—the faster the rate, the quicker the manager should divest.

• Market segment potential—loyal customer segments might continue to buy.

• The market position of the product—a leading product with a good image in a declining industry may be profitable and generate excess cash by attracting customers from competitors' abandoned products.

• The firm's price and cost structure—this may remain strong in the face of declining sales if the firm no longer has to significantly invest in maintaining the product.

Chapter

7Creating a Competitive Advantage: Value

• Value is a customer's subjective evaluation of benefits relative to costs to determine the worth of a firm's product relative to the offerings of other firms.– Customer benefits can include anything that a customer

receives in his or her dealings with the firm.– Customer costs include anything that the buyer must give up to

obtain the benefits provided by the firm.• The most obvious cost is the monetary price of the product,

including any sales taxes or additional charges.• Nonmonetary costs include the time and effort consumers expend

to find and purchase desired products.• Another nonmonetary cost, risk, can be reduced by offering good

basic warranties, or extended warranties for an additional charge.• Opportunity costs are harder for the firm to control.

Chapter

7 Competing on Customer Value

Product Quality + Customer Service Quality + Experience-based QualityMonetary Prices + Nonmonetary Costs

Component Examples

BenefitsProduct Quality Sony, Mercedes, Macy’s

Customer Service Quality Nordstrom’s, Cadillac

Experience-based Quality Disney World, FAO Schwarz

CostsReduce monetary Prices Wal-Mart, Benckiser, Geo

Reduce nonmonetary Costs Amazon.com, Circle K

Chapter

7

Marketing Strategy for Specialized ProductsProduct Considerations

• Because of the intangibility of services, it is difficult for customers to evaluate the product before they actually use it. This forces customers to place some degree of trust in the service provider to perform the service correctly and in the time frame promised or anticipated. One way companies can address this issue is by providing satisfaction guarantees to customers.

• Because most services are people-based, they are susceptible to variations in quality and inconsistency.– Standardization and service quality are very difficult to control.– However, the lack of standardization actually gives service firms one

advantage: Services can be customized to match the specific needs of any customer.

Chapter

7Marketing Strategy for Specialized Products

Price Considerations

• Price is a key issue in the marketing mix for services because it can be used to connote quality in advance of the purchase experience.

– Determining the costs of producing and delivering a service is complicated for service providers.

– Part of this complexity is that services often do not have well-defined units of measure.

• Customers often balk at the high prices of legal, accounting, or medical services because they have no way to evaluate the product's worth prior to purchase.

Chapter

7Marketing Strategy for Specialized Products

Promotion Considerations

• Because a service cannot be directly shown or displayed, the marketer faces the difficult task of explaining the service to customers.

• Endorsements from other customers in the target market who have had a positive experience are often a key to successful promotion.

Chapter

7Marketing Strategy for Specialized Products

Distribution Considerations

• It is practically impossible to distribute services in the traditional sense because customers cannot take physical possession of a service.

• Distribution systems must be developed to provide the services in a convenient manner and in locations where they are expected to be found.

• Service distribution often requires multiple outlets to increase customer convenience.

• Another way to distribute a service is to separate production and consumption by creating a tangible representation of the service.

Chapter

7B2B vs B2C Marketing - I

• The role of the decision-making unit (DMU)—the individual or group is/are responsible for making purchasing decisions. In organizations, the DMU may include three distinct groups of people—economic buyers, technical buyers, and users—each of which may have its own agendas and unique needs and desires in the buying decision.

• The relevance of hard and soft costs. Both consider hard costs -- monetary price and related costs associated with the purchase (e.g., shipping and installation). Organizations also consider soft costs (e.g., downtime, opportunity costs, and human resource costs) associated with the compatibility of systems in the buying decision.

Chapter

7B2B vs B2C Marketing - II

• The existence of reciprocal buying relationships. With consumer purchases, the opportunity for buying and selling is usually a one-way street (i.e., the marketer sells and the buyer buys). Organization buying is more often a two-way street, with each firm marketing products that the other firm buys.

• In B2B, the buyer and seller are more likely to be dependent on one another, particularly in client relationship building.

– Traditional transactional marketing focuses on delivering largely standardized products to a sizable group of customers at the lowest price possible.

– Client-relationship building is longer term in nature and tends to focus more on overall goal attainment than simply getting the lowest possible price.

Chapter

7Marketing Mix for B2B Marketing

• Change in buyers' and sellers' roles: Both buyers and sellers will need to move from competitive negotiators trying to drive prices up and down to true communications specialists.

• Single sourcing: Supplying firms will continue to sell directly to large customers or move to selling through "systems suppliers" that put together a set of products from various suppliers to deliver a comprehensive solution to buyers.

• Decision-making teams: While transactional marketers will continue to market their products primarily one-on-one (personal selling to a purchasing agent or user), client-relationship builders employing strategic purchasing will have teams on both sides of the table representing different perspectives and areas of expertise that are central to the success of both firms.

• Global sourcing: Increasingly, both buyers and sellers will be scanning the globe in search of suppliers or buyers that represent the best match with their specific needs and requirements.

• Advanced earning power though productivity enhancement: The focus must be to identify any inefficiencies in the buying and selling relationship so that they can be removed.