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Strategic Marketing

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
Chapter 1

Imperatives for
Market-Driven
Strategy

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
* Objectives
*
* Pivotal role of market-driven strategy
in designing and implementing
business/marketing strategies
* Links between business/marketing
strategy and corporate strategy
* Challenges in the modern environment

1-3
*
Characteristics of a Market-Driven
*
Strategy
*
Becoming Market-
Orientation

Achieving Superior Determining


Performance Distinctive
Capabilities

Customer
Value/
Capabilities
Match
1-4
*
* Market-Driven Strategy (1)
*
* Becoming market-oriented
* Customer focus
* Competitor intelligence
* Cross-functional coordination
* Performance implications

1-5
*
* BECOMING MARKET ORIENTED
*
* Customer is the focal point of the organization
* Commitment to continuous creation of superior
customer value
* Superior skills in understanding and satisfying
customers
* Requires involvement and support of the entire
workforce
* Monitor rapidly changing customer needs and
wants

1-6
*
*
*

* Determine the impact of changes on


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

1-7
*
* 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 to
superior organizational performances

1-8
*
* Becoming a Market-Oriented
* Organization
Information
Acquisition

Cross-Functional
Analysis of Information

Shared Diagnosis
and Coordinated
Action
Delivery of
Superior Customer
Value
1-9
*
* Market Orientation
*
 Information Acquisition
 Gather relevant information on customers,
competition, and markets
 Involve all business function
 Inter-functional Assessment
 Share information and develop
innovative products with
people from different function
 Shared diagnosis and action
 Deliver superior customer value
1-10
*
* Market-Driven Strategy (2)
*
* Becoming market-oriented
* Customer focus
* Competitor intelligence
* Cross-functional coordination
* Performance implications
* Determining distinctive capabilities

1-11
*
* DISTINCTIVE CAPABILITIES
*

“Capabilities are complex


bundles of skills and
accumulated knowledge,
exercised through
organizational processes, that
enable firms to coordinate
activities and make use of
their assets.”
George S. Day, Journal of Marketing, October 1994, p.38.

1-12
*
Southwest Airline’s Distinctive Capabilities
*
*
Organizational Processes
Southwest uses a point-to-point route system rather than the hub-and-spoke design
used by many airlines. The airline offers services to 57 cities in 29 states, with an
average trip about 500 miles. The carrier’s value proposition consists of low fares
and limited services (no meals). Nonetheless, major emphasis throughout the
organization is placed on building a loyal customer base. Operating costs are kept
low by using only Boeing 737 aircraft, minimizing the time span from landing to
departure, and developing strong customer loyalty. The company continues to grow
by expanding its point-to-point route network.
Skills and Accumulated Knowledge
The airline has developed impressive skills in operating its business model at very
low cost levels. Accumulated knowledge has guided management in improving the
business 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, and
limited passenger services enable the airline to manage the activities very efficiently
and 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
1-13
*
* Capabilities
*
Disproportionate
(higher)
contribution to
superior
customer value Compelling
Logic of Distinctive
Capabilities

Provides value to
customers on a more
cost-effective basis
Source: George S. Day, Journal of Marketing, October 1994, p. 38.
1-14
*
* Capabilities
*
Desirable
Capabilities

Applicable to Superior to the


Multiple Competition
Competition
Situations

Difficult to
Duplicate
Source: George S. Day, Journal of Marketing, October 1994, 49.
1-15
*
* Market-Driven Strategy (3)
*
* Becoming market-oriented
* Customer focus
* Competitor intelligence
* Cross-functional coordination
* Performance implications
* Determining distinctive capabilities
* Types of capabilities

1-16
*
* Types of Capabilities
*
Outside-In
Processes

Spanning
Processes

Inside-Out
Processes

1-17
*
* Organization’s Process
*
EXTERNAL INTERNAL
EMPHASIS EMPHASIS
Outside-In Inside-Out
Processes Processes
Spanning Processes
 Market sensing  Financial management
 Customer order
 Customer linking fulfillment  Cost control
 Channel bonding  Pricing  Technology
development
 Technology  Purchasing
monitoring  Integrated logistics
 Customer service
delivery  Manufacturing/
transformation
 New product/service processes
development
 Human resources
 Strategy development management
 Environment health and
Source: George S. Day, Journal of Marketing, October 1994, 41. safety
1-18
*
* Market-Driven Strategy (4)
*
* Becoming market-oriented
* Customer focus
* Competitor intelligence
* Cross-functional coordination
* Performance implications
* Determining distinctive capabilities
* Types of capabilities
* Creating value for customers
1-19
*
* Matching Customer Value and Distinctive
* Capabilities

Value Requirements

Distinctive
Capabilities

1-20
*
* CREATING VALUE FOR CUSTOMERS
*
Customer Value:
 Value for buyers consists of the benefits less
the costs resulting from the purchase of
products.
 Superior value: positive net benefits

Creating Value:
“Customer value is the outcome of a process
that begins with a business strategy anchored in
a deep understanding of customer needs.”
Source: C. K. Troy, The Conference Board Inc., 1996, 5.
1-21
*
* Creating Value for Customers
*
Customer
Value

Benefits Costs
1-22
*
* Value Composition
*
Product

Services
Benefits
Employees

Image Value
(gain/loss)
Monetary costs
Costs
Time (sacrifices)
Psychic and
physic costs

1-23
*
* Market-Driven Strategy (5)
*
* Becoming market-driven
* Marketing sensing capabilities
* Customer linking capabilities
* Aligning structure and processes

1-24
*
* Becoming Market Driven
*
Market Sensing
Capabilities

MARKET –
DRIVEN
STRATEGIES

Customer Linking
Capabilities
1-25
*
* Market Driven Initiatives
*
Market Sensing Capabilities
* Effective processes for learning about
markets
* Sensing:
* Collected information needs to be shared
across functions and interpreted to
determine proper actions.
Customer Linking Capabilities
* Create and maintain close customer
relationships
1-26
*
*
*
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

1-27
*
* Corporate, Business and Marketing
* Strategy (1)
* What is corporate strategy?

1-28
*
* CORPORATE STRATEGY
*
Deciding the Scope
and Purpose of
the Business

Business
Objectives

Actions and
Resources for
Achieving
Objectives

1-29
*
* 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 activity
system not the parts.
 Operational effectiveness a given.
Source: Michael E. Porter, “What Is Strategy,” Harvard Business Review, November-December 1996, 74.

1-30
*
* Corporate, Business and Marketing
* Strategy (2)
* What is corporate strategy?
* Corporate strategy framework
* Deciding corporate vision
* Objectives
* Resources
* Business composition
* Structure, systems and processes

1-31
*
* CORPORATE STRATEGY
* COMPONENTS

Management’s long-term vision for the


corporation
Objectives
Assets, skills, and capabilities
Businesses in which the corporation
competes
Structure, systems, and processes
Creation of value
Source: David J. Collis and Cynthia A. Montgomery, Corporate Strategy, Chicago: Irwin, 1997, 7-12.

1-32
*
* Corporate, Business and Marketing
* Strategy (3)
* Business and marketing strategy
* Business and marketing strategy
relationships
* Strategic marketing

1-33
*
* CORPORATE, BUSINESS AND
* MARKETING STRATEGY

1-34
*
* 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 about
markets

1-35
*
* Corporate, Business and Marketing
* 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

1-36
*
* Corporate, Business and Marketing
* Strategy (6)
* Implementing and managing market-
driven strategy
* Designing market-driven organizations
* Marketing strategy implementation and
control

1-37
*
*
MARKETING STRATEGY PROCESS
*
Markets,
Segments
And Value
Implementing
and Managing Designing
Market-Driven Market-Driven
Strategy Strategies

Market-Driven
Program
Development

1-38
*
* Challenges in the modern
* environment

* Escalating globalization
* Technology diversity and uncertainty
* The Web 2.0
* Ethical behavior and corporate social
responsiveness

1-39
*
* 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

1-40
*
* 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 and
wants that differ to some degree from other targets. These differences may be with
respect 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 of
each target. An objective is a quantified goal identifying what is expected when. It specifies
the 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.

1-41
*
* MARKETING PLAN
* OUTLINE

III. Positioning Statements

Write statements that describe how you want each market


target to perceive each product relative to competition. State the
core concept used to position the product (brand) in the eyes and
mind of the targeted buyer. The positioning statement should
describe: (1) What criteria or benefits the customer considers when
buying a product along with the level of importance, (2) What we
offer that differentiates our product from competition, and (3) The
limitations of competitive products.

1-42
*
* IV. Market Mix Strategy for
* Each Market Target
A. Product Strategy
Identify how each product fits the market target. Other issues that may be addressed would
be 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 are
intensity of distribution (market coverage), how distribution will be accomplished, and
assistance provided to distributors. The role of the sales force in distribution strategy should
also 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, the
attributes or benefits of our product should be identified for each market target. How our
product differs from competition (competitive advantage) should be listed. The sales force’s
responsibilities 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.
1-43
*
*
*

E. Marketing Research
Describe the market research problem and the kind of
information needed. Include a statement which addresses
why this information is needed. The specific market
research strategies can be written once the above two
steps have been followed.
V. Coordination with Other Business Functions
Indicate other departments/functions that have
responsibilities for implementing the marketing plan.
VI. Sales Forecasts and Budgets

VII. Contingency Plans


Indicate how your plans should be modified if events
should occur that are different from those assumed
in the plan.

1-44
Strategic Marketing
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 Plans Lose Favor
Slump Showed Bosses Value of Flexibility, Quick Decisions
*
By JOANN S. LUBLIN and DANA MATTIOLI

During the recession, as business forecasts based on seemingly


plausible swings in sales smacked up against reality,
executives discovered that strategic planning doesn't always
work.
Some business leaders came away convinced that the new
priority was to be able to shift course on the fly. Office Depot
Inc., for example, began updating its annual budget every
month, starting in early 2009. Other companies started to
factor more extreme scenarios into their thinking. A few even
set up "situation rooms,'' where staffers glued to computer
screens monitored developments affecting sales and
finances.

46 1-46
*
* Coke Bottle Is Part Plant
But It Feels and Functions Like a Regular Plastic Container
*
By CHRIS HERRING

Coca-Cola Co., under fire from environmentalists for using plastic bottles,
has introduced a new packaging material made partly from plants. The
container has "the same weight, the same feel, the same chemistry,
and functions exactly the same way" as a regular plastic bottle, a Coke
spokeswoman says.
Coke isn't the only beverage concern trying to reduce its carbon
footprint. Rival PepsiCo Inc. has introduced a compostable bag made
from plants for its SunChips snacks. But Coke is the world's biggest
drink maker, and Coke Chairman and Chief Executive Muhtar Kent
calls the new container, which uses material derived from sugar cane,
"the first generation of the bottle of the future."
Coke touted its "plantbottle" at the Climate Change Summit in
Copenhagen last month, and it plans another push next month at the
Winter Olympics in Vancouver, where all the sodas and water it
provides will be packaged in the plantbottle. "Preliminary research"
shows the new container leaves a smaller carbon footprint than

47
regular plastic bottles, Coke says.
1-47
Chapter 2

Markets and
Competitive
Space

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
* MARKETS AND STRATEGIES
*
The Challenges ―
Markets are increasingly complex, turbulent, and interrelated.
Importance of a broad view of the market.
Essential to develop a vision about how the market is likely to
change in the future.

Continuous Monitoring is Necessary to:


Find promising opportunities
Identify shifts in value requirements
Understand competitors’ positioning
Guide targeting and positioning
decisions

1-49
*
* OPPORTUNITIES OUTSIDE THE
* COMPETITIVE BOX

The Competitive Box

New Types of Traditional New


Competition Competitors Business
Models

New New
Customers Conventional Value Customers
Propositions

Existing
Customer Base

New
Customer
Base(s)
1-50
*
* Markets Impact Strategies
*
* Market changes often require altering
strategies
* Forces of change create both market
opportunities and threats
* Inherent danger in faulty market sensing

1-51
*
* DEFINING AND ANALYZING
* PRODUCT-MARKETS
Determine the Boundaries and
Structure of the Product-Market

Form the
Product-Market

Describe and
Analyze End-Users

Analyze
Competition
Forecast
Market Size and
Rate of Change
1-52
*
* Matching Needs with Product Benefits
*
* A product – market matches people with
needs to the product benefits that satisfy
those needs

“A product – market is the set of products


judged to be substitutes within those usage
situations in which similar patterns of
benefits are sought by groups of
customers.”*
*Srivastava, et al. (1984) Journal of Marketing, Spring, 32.
1-53
*
* INNOVATION FEATURE
*
Progressive Insurance:
Customer Needs at the Center of Strategy
* In the period 1994 to 2004, Progressive Insurance increased sales from $1.3 billion
to $9.5 billion, and ranks high in the Business Week Top 50 U.S. companies for
shareholder value creation.
* The company invents new ways of providing services to save customers time,
money and irritation, while often lowering costs at the same time.
* Loss adjusters are sent to the road accidents rather than working at head office,
and they have the power to write checks on the spot.
* Progressive reduced the time needed to see a damaged automobile from seven
days to nine hours.
* Policy holders’ cars are repaired quicker, and the focus on this central customer
need has won much automobile insurance business for Progressive.
* These initiatives also enable Progressive to reduce its own costs – the cost of
storing a damaged automobile for a day is $28, about the same as the profit from a
six-month policy.

Source: Adapted from Mitchell, Adrian (2004)”Heart of the Matter,” The Marketer, June 12, 14.
1-54
*
* Product – Market Boundaries and Structure
*
* Determining Product-Market Structure

1. Start with the generic need satisfied by


the product category of interest to
management
2. Identify the product categories (types) that
can satisfy the generic need
3. Form the specific product – markets within
the generic product – market
1-55
*
* Illustrative Fast-Food
* Product-Market Structure

SUPER MICROWAVE
MARKETS OVENS
FAST-FOOD
MARKET

CONVENIENCE TRADITIONAL
STORES RESTAURANTS

1-56
*
* Extent of Market Complexity
*
* Three characteristics of markets:

* 1. Functions or uses of the product

* 2. The enabling technology of the


product

* 3. Customer segments in the product-


market
1-57
*
* Illustrative Product – Market Structure
*
Food and beverages •Generic Product
for breakfast meal Class

Cereals •Product Type

Ready to eat •Variant A


Regular
Natural •Variant B
Nutritional Pre-sweetened

Life Product 19 Special K •Brands


1-58
*
* Identifying and Describing End-Users
*
* Illustrative buyer characteristics in consumer
markets:
 Family size, age, income, geographical
location, sex, and occupation
* Illustrative factors in organizational markets:
 Type of industry
 Company size
 Location
 Type of products
1-59
*
* How Buyers Make Choices
*
 BUYING DECISION PROCESS:

1. Problem recognition

2. Information search

3. Alternative evaluation

4. Purchase decision

5. Post-purchase behavior

1-60
* Environmental
* Influences
*

* External factors influencing buyers’


needs and wants:
 Government, social change,
economic shifts, technology etc.
* These factors are often non-
controllable but can have a major
impact on purchasing decisions
1-61
*
* Building Customer Profiles
*
* Start with generic product – market

* Move next to product- type and variant


profiles >> increasingly more
specific

* Customer profiles guide decision


making (e.g. targeting, positioning,
market segmentation etc.)

1-62
*
* ANALYZING COMPETITION
*
1. Define the Competitive
Arena for the Generic,
Specific, and Variant
Product Markets

PRODUCT- 2. Identify
4. Identify MARKET
and and
STRUCTURE Describe
Evaluate
AND Key
Potential
MARKET Competitors
Competitors
SEGMENTS

3. Evaluate
Key
Competitors
1-63
*
* Examples of Levels of Competition
* Baseball
cards

Bottle Video
Fast water Games
Food Regular
colas Diet lemon Ice
Beer limes Cream
Diet-Rite
Cola
Fruit
flavored Diet
Diet Pepsi
colas Coke Wine
Product from
competition: Lemon
Product category
diet colas limes
Juices competition:
soft drinks
Coffee
Generic competition:
beverages
Budget competition:
food & entertainment

1-64
*
* Key Competitor Analysis
*
* Business scope and objectives
* Management experience, capabilities,
and weaknesses
* Market position and trends
* Market target(s) and customer base
* Marketing program positioning strategy
* Financial, technical, and operating
capabilities
* Key competitive advantages (e.g.,
access to resources, patents)
1-65
*
*
*
Extent of
Market Coverage

Competitor
Current Customer
Capabilities Evaluation Satisfaction

Past
Performance

1-66
*
* MARKET SIZE ESTIMATION
*
Product-Market Forecast Market Potential
Relationships Estimate
(area denotes sales in $’s)

Unrealized
Potential

Company Industry
Sales Sales
Forecast Forecast
1-67
*
* Product-Market Forecast Relationships for
* Industrial Painting Units

Sales (in 1000s


of units)
900
800
Market
700 Potential
600 Sales Forecast

500
400
300
200 Company XYZ
Sales Forecast
100
0
2003 2004 2005 2006 2007 2008 2009 2010
1-68
*
* DEVELOPING A STRATEGIC VISION ABOUT
* THE FUTURE

 Industry Boundaries Blurring and Evolving

 Competitive Structure and Players Changing

 Value Migration Paths

 Product Versus Business Design


Competition

 Firms are Collaborating to Influence Industry


Standards
Source: C. K. Prahalad, Journal of Marketing, Aug. 1995, vi.
1-69
Strategic Marketing
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
Chapter 3

Strategic
Market
Segmentation
*
* Strategic market segmentation (1)
*
* Levels and types of market
segmentation

1-72
*
* Levels and types of market segmentation
*
Vision
Strategic Strategic intent
Segmentation Product benefits
Resource allocation
Alignment
Managerial
Planning
Segmentation
Marketing programs
Operational - Advertising
Segmentation - Sales
- Distribution

1-73
*
* Best Buy segmentation strategy
*
* Jill’s - “soccer moms”
* Barry’s - wealthy professionals
* Buzz’s - “tech enthusiasts”
* Ray’s - the family man
* Mr Storefront - the small business customer
* Carrie’s - young, single females
* Helen and Charlie’s - older couples whose
children have left home
* Gov. Palin’s “_________________” moms
1-74
* From Mass Markets to Micro Markets
* OLD NEW
* CONSUMERS Passively receive Empowered media users
whatever TV control and shape content
networks thanks to TiVo, iPod and
broadcast Internet
ASPIRATIONS To keep up with To standout from the
the crowd crowd
TV CHOICE Three networks Hundreds of channels
plus maybe a plus video on demand
PBS station
MAGAZINES Age of the big Age of the special interest
glossies: Time, magazine for every age
Life, Newsweek and affinity group
ADS Everyone hums Talking to a group of
the Alka-Seltzer one, ads go ever
jingle narrower
BRANDS Rise of the big, Niche brands, product
ubiquitous brands extensions and mass
from Coca-Cola customization mean many
to Tide product variations
Source: Anthony Bianco, “The Vanishing Mass Market”, Business Week, July 12 2004, 58-62 1-75
*
* Strategic market segmentation (2)
*
* Market-driven strategy and
segmentation
* Market segmentation, value opportunities
and new market space
* Market targeting and strategic positioning

1-76
*
Segmentation and Market-Driven
*
Strategy
* SEGMENTS

VALUE
OPPORTUNITIES

CAPABILITIES/
SEGMENT
MATCH

TARGET(S)

POSITIONING
STRATEGY 1-77
*
* Strategic market segmentation (3)
*
* Market-driven strategy and
segmentation
* Market segmentation, value opportunities
and new market space
* Market targeting and strategic positioning
* Activities and decisions in market
segmentation

1-78
*
* Market Segmentation Activities and
* Decisions
Market to be
Segmented
Strategic
Analysis Decide How
of Segments to Segment

Finer Form
Segmentation Segments
Strategies
1-79
*
* Strategic market segmentation (4)
*
* Market-driven strategy and
segmentation
* Market segmentation, value opportunities
and new market space
* Market targeting and strategic positioning
* Activities and decisions in market
segmentation
* Defining the market to be segmented

1-80
*
* Strategic market segmentation (5)
*
* Identifying market segments
* Segmentation variables
* Characteristics of people and organizations
* Consumer markets
* Organizational markets
* Product use situation segmentation
* Buyers’ needs and preferences
* Consumer needs
* Attitudes
* Perceptions
* Purchase behavior
1-81
*
Segmentation Variables
*
*

Purchase
Behavior

Buyers’ Needs/ Characteristics


Preferences of People/
Organizations

Use
Situation

1-82
*
*
Illustrative Segmentation Variables
*
Consumer Industrial/
Markets Organizational Markets
Characteristics Age, gender, income, Type of industry, size,
of people/ family size, lifecycle geographic location,
organizations stage, geographic corporate culture, stage of
location, development, producer/
lifestyle intermediary
Use situation Occasion, importance of Application, purchasing
purchase, prior Procedure (new task,
experience with product, modified rebuy, straight
user status rebuy
Buyers’ needs/ Brand loyalty status, brand Performance requirements,
preferences preference, benefits sought, brand preferences, desired
quality, proneness to make features, service
a deal requirements
Purchase Size of purchase, Volume, frequency
behavior frequency of purchase of purchase

1-83
*
* Strategic market segmentation (6)
*
* Forming market segments
* Requirements for segmentation
* Response differences
* Identifiable segments
* Actionable segments
* Cost/benefits
* Stability
* Approaches to segment identification
* Customer group identification
* Forming groups based on response differences

1-84
*
* Miller Brewing’s beer brand targets
*
* Miller Genuine Draft - “mainstream
sophisticates”
* Milwaukee’s Best Light - “hardworking
men”
* Pilsner Urquell - “beer afficionados”
* Miller Icehouse - for “drinking buddies”

1-85
*
* Requirements for Segmentation
*
Identifiable
segments
Response Actionable
differences segments
Segmentation
Requirements

Stability Favorable
over time cost/benefit

1-86
*
Approaches to Segment
*
Identification
*
CUSTOMER
IDENTIFIERS
RESPONSE
OF CUSTOMER
PROFILE


GROUPS

Characteristics

Use Situation

of People and
Organizations

Buyers Needs
and Preferences


Purchase
Behavior and
Loyalty
1-87
*
* Segment Dimensions for Hotel Lodging Services
*

1-88
*
* Illustrative Example: Gasoline Buyers
*
Higher-income, middle-aged men, drive 25-
Road 50000 miles a year… buy premium with a 16% of
Warriors credit card … purchase sandwiches and drinks buyers
from the convenience store… will sometimes
use carwash
Men and women with moderate to
True high incomes, loyal to a brand and
16% of
Blues sometimes a particular station …
buyers
frequently buy premium, pay in cash
Generation Upwardly mobile men and women -
F3 (Fuel, half under 25 years of age -
27% of
Food & Fast) constantly on the go … drive a lot
buyers
snack heavily from the convenience store
Usually housewives who shuttle
Homebodies children around during the day and
21% of
use whatever gas station is based on
buyers
town or on route of travel

Price Not loyal to brand or station and 20% of


Shoppers rarely buy premium … frequently on buyers
tight budgets.
1-89
*
* Strategic market segmentation (8)
*

* Selecting the segmentation strategy


* Deciding how to segment
* Strategic analysis of market segments
* Customer analysis
* Competitor analysis
* Positioning analysis
* Estimating segment attractiveness
* Segmentation “fit” and implementation

1-90
*
* Strategic Analysis of Market Segments
*

Customer
Analysis
Financial and Competitor
Market
Attractiveness Analysis

Positioning
Analysis
1-91
*
* Segmentation “Fit” for Implementation
*
gment Attractiveness
d Internal Compatibility
Internal Compatibility
High Low

Attractive segments Attractive segments


High that match with but with poor match
company with company
capabilities capabilities
Market Segment
Attractiveness
Unattractive segments Unattractive segments
Low but with match to that do not match with
company company capabilities
capabilities

1-92
Strategic Marketing
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
Chapter 3

Strategic
Market
Segmentation
*
* Strategic market segmentation (1)
*
* Levels and types of market
segmentation

1-95
*
* Levels and types of market segmentation
*
Vision
Strategic Strategic intent
Segmentation Product benefits
Resource allocation
Alignment
Managerial Planning
Segmentation
Marketing programs
Operational - Advertising
Segmentation - Sales
- Distribution

1-96
*
* Best Buy segmentation strategy
*
* Jill’s - “soccer moms”
* Barry’s - wealthy professionals
* Buzz’s - “tech enthusiasts”
* Ray’s - the family man
* Mr Storefront - the small business customer
* Carrie’s - young, single females
* Helen and Charlie’s - older couples whose
children have left home

1-97
* From Mass Markets to Micro Markets
* OLD NEW
* CONSUMERS Passively receive Empowered media users
whatever TV control and shape content
networks thanks to TiVo, iPod and
broadcast Internet
ASPIRATIONS To keep up with To standout from the
the crowd crowd
TV CHOICE Three networks Hundreds of channels
plus maybe a plus video on demand
PBS station
MAGAZINES Age of the big Age of the special interest
glossies: Time, magazine for every age
Life, Newsweek and affinity group
ADS Everyone hums Talking to a group of
the Alka-Seltzer one, ads go ever
jingle narrower
BRANDS Rise of the big, Niche brands, product
ubiquitous brands extensions and mass
from Coca-Cola customization mean many
to Tide product variations
Source: Anthony Bianco, “The Vanishing Mass Market”, Business Week, July 12 2004, 58-62 1-98
*
* Strategic market segmentation (2)
*
* Market-driven strategy and
segmentation
* Market segmentation, value opportunities
and new market space
* Market targeting and strategic positioning

1-99
*
Segmentation and Market-Driven
*
Strategy
* SEGMENTS

VALUE
OPPORTUNITIES

CAPABILITIES/
SEGMENT
MATCH

TARGET(S)

POSITIONING
STRATEGY
1-100
*
* Strategic market segmentation (3)
*
* Market-driven strategy and
segmentation
* Market segmentation, value opportunities
and new market space
* Market targeting and strategic positioning
* Activities and decisions in market
segmentation

1-101
*
* Market Segmentation Activities and
* Decisions
Market to be
Segmented
Strategic
Analysis Decide How
of Segments to Segment

Finer Form
Segmentation Segments
Strategies
1-102
*
* Strategic market segmentation (4)
*
* Market-driven strategy and
segmentation
* Market segmentation, value opportunities
and new market space
* Market targeting and strategic positioning
* Activities and decisions in market
segmentation
* Defining the market to be segmented

1-103
*
*
*

Product Variant Segmentation


Product Type Segmentation
Generic Segmentation
1-104
*
* Strategic market segmentation (5)
*
* Identifying market segments
* Segmentation variables
* Characteristics of people and organizations
* Consumer markets
* Organizational markets
* Product use situation segmentation
* Buyers’ needs and preferences
* Consumer needs
* Attitudes
* Perceptions
* Purchase behavior
1-105
*
Segmentation Variables
*
*

Purchase
Behavior

Buyers’ Needs/ Characteristics


Preferences of People/
Organizations

Use
Situation

1-106
*
*
Illustrative Segmentation Variables
*
Consumer Industrial/
Markets Organizational Markets
Characteristics Age, gender, income, Type of industry, size,
of people/ family size, lifecycle geographic location,
organizations stage, geographic corporate culture, stage of
location, development, producer/
lifestyle intermediary
Use situation Occasion, importance of Application, purchasing
purchase, prior Procedure (new task,
experience with product, modified rebuy, straight
user status rebuy
Buyers’ needs/ Brand loyalty status, brand Performance requirements,
preferences preference, benefits sought, brand preferences, desired
quality, proneness to make features, service
a deal requirements
Purchase Size of purchase, Volume, frequency
behavior frequency of purchase of purchase

1-107
*
* Strategic market segmentation (6)
*
* Forming market segments
* Requirements for segmentation
* Response differences
* Identifiable segments
* Actionable segments
* Cost/benefits
* Stability
* Approaches to segment identification
* Customer group identification
* Forming groups based on response differences

1-108
*
* Miller Brewing’s beer brand targets
*
* Miller genuine draft - “mainstream
sophisticates”
* Milwaukee’s Best Light - “hardworking
men”
* Pilsner Urquell - “beer afficionados”
* Miller Icehouse - for “drinking buddies”

1-109
*
* Requirements for Segmentation
*
Identifiable
segments
Response Actionable
differences segments
Segmentation
Requirements

Stability Favorable
over time cost/benefit

1-110
*
Approaches to Segment
*
Identification
*
CUSTOMER
IDENTIFIERS
RESPONSE
OF CUSTOMER
PROFILE


GROUPS

Characteristics

Use Situation

of People and


Organizations
Buyers Needs
and Preferences


Purchase
Behavior and
Loyalty
1-111
*
* Segment Dimensions for Hotel Lodging Services
*

1-112
*
* Illustrative Example: Gasoline Buyers
*
Higher-income, middle-aged men, drive 25-
Road 50000 miles a year… buy premium with a 16% of
Warriors credit card … purchase sandwiches and drinks buyers
from the convenience store… will sometimes
use carwash
Men and women with moderate to
True high incomes, loyal to a brand and
16% of
Blues sometimes a particular station …
buyers
frequently buy premium, pay in cash
Generation Upwardly mobile men and women -
F3 (Fuel, half under 25 years of age -
27% of
Food & Fast) constantly on the go … drive a lot
buyers
snack heavily from the convenience store
Usually housewives who shuttle
Homebodies children around during the day and
21% of
use whatever gas station is based on
buyers
town or on route of travel

Price Not loyal to brand or station and 20% of


Shoppers rarely buy premium … frequently on buyers
tight budgets.
1-113
*
* Illustrative Consumer Perception
* Map
Expensive
GROUP
• Brand E II • Brand A
• Brand B
GROUP
V High
Low GROUP
Quality I Quality
GROUP
• Brand C
• Brand D
III

GROUP
IV
Inexpensive
1-114
*
* Strategic market segmentation (7)
*
* Finer segmentation strategies
* Logic
* Customized offerings
* Diverse customer base
* Close customer relationships
* Finer segmentation strategies
* Micro-segmentation
* Mass customization
* Variety-seeking strategy

1-115
*
* Strategic market segmentation (8)
*

* Selecting the segmentation strategy


* Deciding how to segment
* Strategic analysis of market segments
* Customer analysis
* Competitor analysis
* Positioning analysis
* Estimating segment attractiveness
* Segmentation “fit” and implementation

1-116
*
* Strategic Analysis of Market Segments
*

Customer
Analysis
Financial and Competitor
Market
Analysis
Attractiveness

Positioning
Analysis
1-117
*
* Segmentation “Fit” for Implementation
*
Segment Attractiveness
and Internal Compatibility
Internal Compatibility
High Low

Attractive segments Attractive segments


High that match with but with poor match
company with company
capabilities capabilities
Market Segment
Attractiveness
Unattractive segments Unattractive segments
Low but with match to that do not match with
company company capabilities
capabilities

1-118
CHAPTER 4

STRATEGIC CUSTOMER
RELATIONSHIP
MANAGEMENT

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
*
* PIVOTAL ROLE OF CUSTOMER RELATIONSHIP MANAGEMENT
DEVELOPING A CRM STRATEGY
 CRM Levels
 CRM Strategy Development
 CRM Implementation
VALUE CREATION PROCESS
 Customer Value
 Value Received by the Organization
 CRM and Value Chain Strategy
CRM AND STRATEGIC MARKETING
 Implementation
 Performance Metrics
 Short-Term Versus Long-Term Value
 Competitive Differentiation
1-120
*
*
* CUSTOMER RELATIONSHIP MANAGEMENT
 CRM is a cross-functional core business
process concerned with achieving
improved shareholder value through the
development of effective relationships
with key customers and customer
segments. CRM Recognizes That
Customers:

 Vary in their economic value


to the company
 Differ in their expectations
toward the firm
1-121
* 4-3

*
* CUSTOMER LIFETIME VALUE
Customer lifetime value (CLV) calculates past profit
produced by the customer for the firm – the sum
of all the margins of all the products purchased
over time, less the cost of reaching that customer
 To this is added a forecast of margins on
future purchases (under different assumptions
for different customers), discounted back to
their present value.
 This process provides an estimate of the
profitability of a customer during the time
span of the relationship.
 The CLV calculation is a powerful tool for
focusing marketing and promotional efforts
where they will be most productive.
1-122
* 4-4

*
* PERSPECTIVES TOWARD CRM

STRATEGIC-
THE ENTIRE
COMPANY

REQUIRED THE CUSTOMER


MARKETING
FUNCTIONS

1-123
* 4-5

*
* THE STEPS IN DEVELOPING A CRM STRATEGY

Gain enterprise commitment

Build a CRM project team

Business needs analysis

Define the CRM strategy

Source: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & Sons, Inc.), 2006, 39.

1-124
* 4-6

*
* DEFINE THE CRM STRATEGY
Value
Proposition

1
Other
Stakeholders
5 CRM 2 Business
Case
STRATEGY

Enterprise
Transformation Plan 4 3 Customer
Strategy

Source: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & sons, Inc.), 2006,
42.

1-125
* 4-7

*
* IMPLEMENTATION DANGERS
 Implementing Without Developing a
Customer Strategy

 Failing to Initiate Necessary


Organizational Change

 Allowing Technology to Dominate the


CRM Process

 Focusing on the Wrong Customers

1-126
* 4-8

*
* VALUE CREATION PROCESS
Value Received by Value Received by the
the Customer Organization

THE VALUE EXCHANGE

Successful Value
Exchange

1-127
* 4-9

* METRICS
* FEATURE
How General Electric Co. Measures Customers’
Experience

Happy (And Not-So-Happy)


Customers
General Electric is a big
• How willing are you to user of
the “Net Promoter”
recommend us to concept of
a friend or
customer satisfaction,
associate?
popularized by Fred Reichheld
of•Bain
How&would you rate
Co. Below, our
questions
ability to meet your needs?
Source: Kathryn Kranhold, “Client-Satisfaction Tool Takes Root,” The Wall Street Journal, July 10, 2006, B3. 1-128
* 4-10

*
* CRM AND VALUE CHAIN STRATEGY
The Perfect Customer Experience
“The perfect customer experience, which must be affordable for the
company in the context of the segments in which it operates and its
competition, is a relatively new concept. This concept is now being
embraced in industry by companies such as TNT, Toyota’s Lexus, Oce,
and Guinness Breweries, but it has yet to receive much attention in
the academic literature. Therefore, multi-channel integration is a
critical process in CRM because it represents the point of co-creation
of customer value. However, a company’s ability to execute multi-
channel integration successfully is heavily dependent on the
organization’s ability to gather and deploy customer information, from
all channels and to integrate it with other relevant information.”

Adrian Payne and Pennie Frow, “A Strategic Framework for Customer Relationship Management,” Journal of Marketing (October 2005),
173.

1-129
* 4-11

*
* CRM AND STRATEGIC MARKETING

CRM STRATEGIC
MARKETING

From the perspective of strategic marketing, there are several


reasons why CRM is important and why there should be extensive
marketing involvement in decisions about CRM. Importantly, an
organizational perspective is needed in guiding the CRM strategy.

1-130
Chapter 5

Capabilities for Learning


About Customers and
Markets

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
*
* Capabilities for learning about customers and markets

* Market-driven strategy, market sensing and


learning processes
* Marketing information and knowledge resources
* Marketing intelligence and knowledge
management
* Ethical issues in collecting and using information

1-132
*
*
* Learning capabilities at P&G

* Competitive strength from superior customer


knowledge
* To deliver a customer experience, less formal
research, more one-to-one communication
* Consumer Village
* Online virtual reality Cave
* Watch people clean baths
* Understand what it is like to live on $50/month
* Social networking sites

1-133
*
*
* Market Sensing and Learning Processes

* Market sensing processes


* Learning organization
* Learning and competitive advantage
* Learning about markets
* Barriers to market learning processes

1-134
*
*
* Market sensing at Tesco International

* Retailer entry to U.S. grocery market, not


with existing format
* Discovering what U.S. consumers want:
* Senior managers live with U.S. families
* Probe lifestyles of families
* Prototype store
* Developing a new retail format and targeting
the “grocery gap”

1-135
*
*
* Market sensing processes
* Open-minded inquiry processes
* Analyzing competitors’ actions
* Listening to front-line employees
* Searching for latent customer needs
* Scanning the peripherary of the market
* Encouraging experimentation

1-136
*
*
* Marketing information and knowledge resources

* Scanning processes
* Specific marketing research studies
* Internal and external marketing information
resources
* Relationships with external marketing research
providers

1-137
*
*
* Screening A New Research Supplier

1. Client  Would you recommend this


supplier?
2. Supplier  Do you have sufficient funds for
this project?
3. What parts of the project will be
subcontracted, and how do you manage
subcontractors?
4. May I see your interviewer’s manual and data
entry manual?
5. How do you train and supervise
interviewers?
1-138
*
*
* Screening A New Research Supplier

6. What percentage of interviews are


validated?
7. May I see a typical questionnaire?
8. Who draws your samples?
9. What percentage of your data entry is
verified?
10. Managers - What do you think about
this supplier?
Source: Seymour Sudman and Edward Blair,
Marketing Research, A Problem-Solving Approach, Irwin/McGraw-Hill, 1998, 67.

1-139
*
*
* A Framework for Market Sensing
Probability of the Event Occurring
High Medium Low
7
Utopia Field of
6 Dreams
Effect of the
5
Event on the Things to
Company 4 Watch
3
2 Danger Future
Risks
1

* 1=Disaster, 2=Very bad, 3=Bad, 4=Neutral, 5=Good, 6=Very good, 7=Ideal

1-140
*
*
* Learning About Markets
Objective
Inquiry
Keeping and Synergistic
Gaining Access Information
to Prior Distribution
Learning
Mutually
Informed
Interpretations
Source: George S. Day, Journal of Marketing, October 1994.

1-141
*
*
* Barriers to market learning

* Managers reject new


insights/information
* Rigid organizational structures and
inflexible information systems
* Politics favour the status quo
* Overwhelming pressure of existing
business operations
* Tendency to “active inertia”
1-142
*
*
* Best Buy’s customer knowledge strategy

* Strategy treats customers as individual,


develops solutions for needs and engages
employees to serve them
* New ideas from listening more closely to
customers and employees
* Knowledge shared with manufacturers and
product developers
* Core innovation competency is gathering
and synthesizing customer intelligence

1-143
*
*
* Customers and design at Xerox
* “Customer-led innovation” - “dreaming with
the customer”
* Not just building prototype and getting
feedback
* Focus groups as first step in commercial
printer design
* Changing designs in response to customer
insights
* Investment in understanding what
customers think about the “bright ideas”

1-144
*
*
* Marketing research project
* Defining the problem
* Understanding the limitations of the
research
* Quality of the research
* Costs
* Evaluating and selecting suppliers
* Research methods

1-145
*
*
* Existing marketing information resources

*
* In-company resources
* Open source resources
* Research agency resources

1-146
*
*
* Creating new marketing information
* Observation and ethnographic studies
* Marriott - rethink hotel experience for
“road warriors”
* GE - developing plastic fibers position
* Intel - use of computers by children in
China
* Research surveys
* Internet-based research

1-147
*
*
* Problem definition to guide marketing research studies

Research Describe the topic


Project and Scope for the study and
the background.

Research Set specific goals for


Objectives the study - why is it
being undertaken?

Identify the specific


Research pieces of information
Questions required and the
questions that need
to be asked to obtain
that information
Planned When completed how
Outcomes should the results be
presented for management
use?
1-148
*
*
* Impact of the Internet on Marketing Costs and Availability

* Online Surveys
* Fast
* Inexpensive
* Limitations in population coverage
* Resistance to excessive Web
communications
* Customer feedback and peer-to-peer Web
communications
* Monitoring customer Web behavior

1-149
*
*
* Marketing and management information systems

* Marketing information systems


* Management information systems
* Marketing decision support systems

1-150
*
*
Marketing Decision-Support System Components
*

Database Display

Analysis
Capabilities Models

1-151
*
*
* Marketing intelligence and knowledge management

* Marketing intelligence
* Knowledge management
* Role of the chief knowledge officer
* Leveraging customer knowledge

1-152
*
*
* Ethical issues in collecting and using information

* Invasion of customer privacy


* Information and ethics
* Information collection
* Research subjects
* Information sharing

1-153
*
*
* Neuromarketing

* Magnetic resonance imaging (MRI)


* Pictures response of brain to stimuli
* Probing consumer preferences is
controversial
* Invasive
* Privacy issues
* Information sharing
* Insurance companies
* Employers
* Law enforcement
1-154
CHAPTER 6
Market Targeting and Strategic
Positioning

Market Targeting Strategy


Targeting in Different Market Environments
Positioning Strategy
Developing the Positioning Strategy
Determining Positioning Effectiveness

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

The Marketing Targeting


Decision Identities the People
or Organizations in a Product-
Market Toward Which a Firm
Directs Its Positioning Strategy
Guided by an understanding of:
1-156
*
*
* Market Targeting and Strategic Positioning

* Core dimensions of market-driven


strategy: deciding which buyer’s to
target and how to position the firm’s
products

* Effective targeting and positioning


strategies are essential in gaining and
sustaining superior performance
1-157
*
*
*
SEGMENTS
VALUE
OPPORTUNITES
CAPABILITIES/
SEGMENT
MATCH
TARGET(S)
POSTIONING
FOR EACH1-158
*
* Identify segments within
*
the product-market
TARGETING
AND
POSTIONING
Decide and
implement a Decide which
positioning segment(s) to
strategy for each target
targeted segment

1-159
*
*
* Market Targeting Alternatives
Segments Clearly Defined

Target Target
Selected Multiple
Selective Niche(s) Segments Extensive
Targeting Product Product Targeting
Specialization Variety

Differentiated But Segments


Not Clearly Defined

1-160
*
*
* Factors Influencing Targeting Decisions
* Stage of product – market maturity
* Extent of diversity in preferences
* Industry structure
* Capabilities and resources
* Opportunities to gain competitive
advantage

1-161
*
*
* TARGETING IN DIFFERENT MARKET ENVIRONMENTS

 Emerging

 Growing
 Mature
 Declining
 Global

1-162
*
*
* Emerging Market
Buyer Diversity
* Segmentation limited due to similarity of buyers’
preferences
Industry Structure
* Typically small new organizations
* Limited access to resources
Capabilities and Resources
* Unique benefit (differentiation) strategy rather
than low-cost
* First-mover advantage
Targeting Strategy
* Single target or a few broad segments

1-163
*
*
* Growth Market
Buyer Diversity
* Segments should exist
Industry Structure
* Numerous competitors
Capabilities and Resources
* Survival requires aggressive actions by firms that seek large
market positions
* Otherwise select one or a few market segments
Targeting Strategy
* Three possible strategies
1. Extensive market coverage by firms with established
businesses in related markets
2. Selective targeting by firms with diversified product portfolios
3. Very focused targeting strategies by small organizations
serving one or a few market segments.
1-164
*
*
* Mature Markets
Buyer Diversity
* Segmentation essential for competitive advantage
Industry Structure
* Intense competition for market share
* Emphasis on cost and service, and pressures on profits
Capabilities and Resources
 Management’s objectives: cost reduction, selective
targeting, product differentiation
Targeting Strategy
 Deciding which segment to serve
 Firms pursuing extensive targeting strategies may decide
to exit from certain segments
1-165
*
*
* Global Markets
Global Reach and Standardization
* Identify market segments that span global markets and
serve these needs with global positioning strategies
Local Adaptation
* Consider requirements of domestic buyers
* Buyers’ needs and preferences affected by social, political,
cultural, economic, and language differences
Industry Structure
* Restructuring, acquisitions, mergers, and strategic
alliances altering industries and
competition
Targeting Strategy
* Targeting a single country, regional (multinational)
targeting, or global targeting
1-166
*
* GLOBAL Successful British Retailer Tesco Enters
* FEATURE the U.S. Market
Tesco announced plans to open a chain of convenience stores on the U.S. West
Coast in 2007, spending an estimated $453 M. The very successful retailer has four
types of stores, including the convenience chain, Tesco Express.

This initiative is being launched even though the U.S. retail grocery market is
experiencing intense competition, and some chains are cutting back or selling out.

Tesco’s decision to enter the U.S. convenience market is bold and risky. Some
authorities consider the action questionable. However, Tesco has a very impressive
success record in Britain. With its Tesco Express, Tesco Metro, Superstore, and Extra
hypermarkets, the giant retailer has dulled Wal-Mart’s drive to dominate the retail
scene.

Tesco has no brand awareness in the U.S. so building brand identity will be
challenging. Yet the retailer has global buying power, powerful information
technology, and strong supply chain capabilities. The stores will offer groceries,
produce, and private-label ready-to-eat meals. Some observers think Tesco is
planning to compete with Wal-Mart in its home market.
Source: Kerry Capell, “Tesco: California Dreaming?” BusinessWeek, February 27, 2006, 38.
1-167
*
*
* POSITIONING STRATEGY

Deciding the desired perception/


association of an organization/ brand by
market target buyers…and designing the
marketing program to meet (and exceed)
buyers’ value requirements.

1-168
*
*
* STRATEGIC POSITIONING INITIATIVES
POSITIONING CONCEPT
The desired positioning of the
product (brand) by targeted buyers

MARKE
POSITIONING
EFFECTIVENESS T POSITIONING
STRATEGY
How well
management’s
TARGE The combination of
marketing actions
positioning objectives
are achieved for the T used to communicate
the positioning concept
market target to targeted buyers

1-169
*
*
* How Positioning Works
* Objective
* Match the organization’s distinctive capabilities with
the customer value requirements for the market target
(How do we want to be perceived by targeted
buyers?)
* Desired result
* Gain a relevant, distinct, and enduring position by the
targeted buyers that they consider important.
* Actions by the organization
* Design and implement the positioning strategy
(marketing program) for the market target.
1-170
*
*
* INNOVATION
Spotting Shifts in Demand in designing
Hennes & Mauritz (H&M) Apparel
FEATURE
It’s 1:30 p.m. on a Monday in the bustling H&M store on Manhattan’s fifth Avenue,
and Alma Saldana, a 28-year-old makeup artist from Houston, is stuffing three
tiny vests into her black Y&M shopping bag. That’s on top of blouses, jackets, and
pants. Saldana is in a buying frenzy. This is her first visit to H&M, the Stockholm-
based fashion retailer, and it’s everything she had hoped for. “Somebody told me
you find great fashion at a very cheap price, and it’s true!” she exclaims.

Such enthusiasm has made H&M one of the hottest fashion companies around.
Central to its success is its ability to spot shifts in demand and respond with
lightning speed. While traditional clothing retailers design their wares at least six
months ahead of time, H&M can rush items into stores in as little as three weeks.
Most of the work is done ahead, too. But when it sees consumers scooping up
something like vests, it speeds a slew of new variations into stores within the
same season, to the delight of shoppers like Saldana. “Speed is important. You
need to have system where you can react in a short lead time with the right
products,” says Chief Executive Rolf Eriksen.

1-171
*
*
*
How does it work? H&M designers had included a couple of cropped vests in
their autumn/winter collections. In august, shortly after the vests went on sales,
they started “flying out of the stores,” say Margareta van den Bosch, H&M’s head
of design. H&M’s designers in Stockholm (it has more than 100) spotted the
trend in the company’s worldwide sales reports, published internally every
Monday. About half of them immediately started sketching new styles. As
quickly as designs came off their desks, pattern makers snipped and pinned,
pressing employees into service as live models. At the same time, buyers
ordered fabrics. The designs were zoomed electronically to workers at H&M’s
production offices in Europe and Asia, which then selected manufacturers that
could handle the jobs quickly. In less than two months most H&M stores had 5
to 10 new vest styles in stock.
One of the secrets to H&M’s speed is decisiveness. The people in charge of each
collection can dream up and produce new fashions on their own authority. Only
huge orders require approval from higher ups. “We have a flat organization. We
have a shorter way to a decision,” says Sanna Lindberg, president of H&M
Hennes & Mauritz USA. That makes H&M fashionable in more ways than one.
Source: Steve Hamm, “SPEEDDEMONS,” BusinessWeek, March 27, 2006, 70-71. 1-172
*
*
The Perception or Association that Management Wants Buyers
* to Have Concerning the Brand

Symbolic Functional
SELECTING THE
POSITIONING
CONCEPT
Experiential

1-173
*
*
* DEVELOPING THE POSITIONING STRATEGY

The Positioning Strategy Places the


Marketing Program (mix)
Components into a Coordinated
Set of Actions Designed to
Deliver Superior Customer
Value
PRODUCT
VALUE CHAIN
PROMOTION
PRICE

1-174
*
*
* Positioning Issues
1. The positioning concept applies to a
specific brand rather than all the
competing brands that compose a
product classification
2. The concept is used to guide positioning
decisions over the life of the brand
3. Multiple concepts are likely to confuse
buyers and may weaken the effectiveness
of positioning actions

1-175
*
*
*
The positioning strategy indicates how (and why) the product mix,
line, or brand is to be positioned for each market target. This strategy
includes:
•The product strategy, indicating how the product(s) will be positioned against the
competition in the product-market.

•The value chain (distribution) strategy to be used.

•The pricing strategy, including the role and positioning of price relative to
competition.

•The advertising and sales promotion strategy and the objectives these promotion
components are expected to achieve.

•The sales force strategy, direct marketing strategy, and the Internet strategy,
indicating how they are used in the positioning strategy.

1-176
*
*
* DETERMINING POSITIONING EFFECTIVENESS

The marketing offer (product,


distribution, price, and promotion) is
both distinct and valued in the minds
of the customers in the market target.

1-177
*
*
* Customer and Competitor Research

Methods for
Determining
Positioning
Effectiveness

Analytical Test Marketing


Positioning
Models
1-178
*
*
*
Customer and Competitor Research
* Research Studies
* Preference Maps
Test Marketing
* Generates information about commercial feasibility
and marketing program
* Provides market (sales forecasts) and effectiveness
measures
Positioning Models
* Incorporates research data into formal models of
decision analysis
1-179
*
*
* Positioning Errors
* Under-positioning – customers have only
vague ideas about the company and do
not perceive anything distinctive about it
* Over-positioning – Customers have too
narrow an understanding of the company,
product, or brand
* Confused positioning – Frequent changes
and contradictory messages confuse
customers
* Doubtful positioning – claims made for the
product or brand are not regarded as
credible
1-180
*
*
* Positioning in Perspective

* Positioning is a central part of business strategy


* Positioning analysis starts with an understanding of the
value proposition for the target segment
* Value-driven positioning is the objective
* Positioning seeks to differentiate the organization’s offer
from the competition
* Positioning seeks to create a unique perception in
buyers’ minds of the target market segment
* Positioning is the unifying dimension of market-driven
strategy

1-181
*
*
*
Positioning usually means that an overt decision
is being made to concentrate only on certain
segments. Such an approach requires
commitment and discipline because it’s not easy
to turn your back on potential buyers. Yet, the
effect of generating a distinct, meaningful
position is to focus on the target segments and
not to be constrained by the reaction of other
segments.

Source: Aaker and Shansby, Business Horizons, May-June 1982, 61.

1-182
*
*
Illustrative Impacts of Changes in Business Strategy on Targeting and
* Positioning Strategies
Changes in Business Market Targeting Impact
Strategy Positioning Impact
Rapid Growth/ Market scope may not change Substantial changes in resource
Retrenchment although targets may be increased allocation, (e.g. advertising
or reduced. expenditures

Changing the Product Mix No change is necessary unless Changes in product strategy, methods of
increase in product scope creates distribution, and promotional strategies
opportunities in new segments. may be necessary.

Changing the Market Targeting is likely to change to include Positioning strategy must be developed
Scope new targets. for each new target.

Repositioning Should not have a major effect on Product, distribution, price, and
targeting strategy. promotion strategies may be affected.

Value Chain Integration Should have no effect on targeting Primary impact on channel, pricing and
strategy. promotion strategies.

Diversification Targeting strategies must be selected in Positioning strategies must be developed


new business areas. (or acquired for the new business areas.

Strategic Alliance Targeting strategy may be affected Operating relationships and assignment
based on the nature and scope of the or responsibilities must be established.
alliance.
1-183
*
*
* Targeting and Positioning
Product Strategy

Positioning Strategy

Promotion Distribution
Strategy Strategy
Market
Target
Price Strategy

1-184
Chapter 7

Strategic
Relationships

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
*
* Strategic relationships at IBM
* Collaborative projects across all major parts of
business services
* Funding universities in services science
* Partnership with Sony and Toshiba to produce new
processor
* Computer code shared with Apache open-source
web-server
* IBM programmers work on Linux projects
* Collaborating with customers and competitors to
invent new technologies
* Strategy of openess
1-186
*
*
* Strategic relationships
End-User
Customers Intermediate
Suppliers
Customers

Joint Strategic Competitors


Ventures Relationships

Strategic Internal
Alliances External Partners
Partners

1-187
*
*
* Strategic Relationships
* The rationale for interorganizational
relationships
* Forms of organizational relationships
* Managing interorganizational
relationships
* Global relationships among
organizations

1-188
*
*
* The rationale for interorganizational relationships

Value-enhancing
opportunities

Rationale for
Skills and Environmental
Forming Strategic
resource complexity
gaps Relationships

Competitive
strategy

1-189
*
*
*The rationale for interorganizational relationships (1)
* Opportunities to enhance value
* Environmental complexity
* Competitive strategy
* Skills and resource gaps
* Technology constraints
* Financial constraints
* Market access
* Information technology

1-190
*
*
* Collaborations in open-source software
* IBM and Sun aggressive supporters of
Linux open-source software
* Technology sharing and partnerships
* Rebuilding the technology
“ecosystem”
* Reducing dependence on Microsoft

1-191
*
*
* Airline Alliances
* Major global alliances
* Oneworld
* Skyteam
* Star Alliance
* Contain 18 of the world’s largest airline
* Account for 60% of total world airline
capacity
* But a history of alliance failures and
desertions
1-192
*
*
*The rationale for interorganizational relationships (2)
* Evaluating the potential for
collaboration
* What is the strategy?
* The costs of collaboration
* Is relationship strategy essential?
* Are good candidates available?
* Do relationships fit our culture?

1-193
*
*
* Mapping the Path to Market Leadership

Market-Oriented
Culture and
Process

Superior
Organizational Relationship Customer
Change Strategies Value
Proposition

Positioning
with Distinctive
Competencies

1-194
*
*
* Forms of organizational relationships
Supplier
relationships

Internal Firm Lateral


partnerships partnerships

Customer
relationships

1-195
*
*
* Illustrative interorganizational relationships
Strategic Alliance

M M M
Supplier/
Manufacturer
Collaboration M JV
Joint Venture
W
Distribution
Channel
R Relationship

EU
1-196
*
*
* Forms of organizational relationships (1)

* Supplier relationships
* Strategic suppliers
* Outsourcing
* Intermediate customer relationships
* End-user customer relationships
* Strategic customers
* Dominant customers
* Strategic account management
1-197
*
*
* Forms of organizational relationships (2)

* Strategic alliances
* Alliance success
* Alliance weaknesses
* Types of alliance
* Requirements for alliance success
* Alliance vulnerabilities
* Joint ventures
* Internal partnering

1-198
*
*
* CostCo Versus Wal-Mart

* CostCo has achieved major position in U.S.


warehouse club business against strong
competitors
* Success based on customer choice and
constant innovation and productivity
improvement
* CostCo compensates employees more
generously than competitors - to motivate
and retain good workers - they get lower
staff turnover and higher productivity

1-199
*
*
* Managing interorganizational relationships (1)

* Objective of the relationship


* New technologies and competencies
* Developing new markets and building
market position
* Market selectivity
* Restructuring and cost reduction

1-200
*
*
* Managing interorganizational relationships (2)

* Relationship management
* Planning
* Trust and self-interest
* Conflicts
* Leadership structure
* Flexibility
* Cultural differences
* Technology transfer
* Learning from partner’s strengths
1-201
*
*
* Managing interorganizational relationships (3)

* Partnering capabilities
* Control, evaluation and review
* Exiting from alliance
* Identify/agree what triggers exit
* Detail rights of each partner to
assets/products
* Design disengagement process
* Communication plan for all involved
parties
1-202
*
* Managing Interorganizational relationships
* Objective
of the
Relationship
Control and
Evaluation
Relationship
Management
Managing
Inter-Organizational Exiting from
Relationships Alliance
Partnering
Capabilities

1-203
*
*
* Global relationships among organizations

* The Global Integrated Enterprise


* Inter-nation collaborations
* The strategic role of government
* Government interventions
* Competing with state-owned enterprises
* Collaborating with state-owned
enterprises
* Government regulation

1-204
CHAPTER 8
Innovation and New Product
Strategy
The Innovation Mandate

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
*
* INNOVATION AND NEW PRODUCT STRATEGY
* Innovation as a Customer Driven Process
* New Product Planning
* Idea Generation
* Screening, Evaluating, and Business Analysis
* Product and Process Development
* Marketing Strategy and Market Testing
* Commercialization
* Variation in the Generic New Product
Planning Process
1-206
*
*
INNOVATION FEATURE
* Managing Google’s Idea Factory
As director of consumer Web products Marissa Mayer is a champion of
innovation. She favors new product launches that are early and often.
She joined Google in early 1999 as a programmer when the workforce
totaled 20. By 2007 Google had 5,700 employees with expected sales of
$16 billion.
How Google Innovates
The search leader has earned a reputation as one of the most innovative
companies in the world of technology. A few of the ways Google hatches
new ideas:
 FREE (THINKING) TIME
Google gives all engineers one day a week to develop their own pet
projects, no matter how far from the company’s central mission. If
work gets in the way of free days for a few weeks, they accumulate.
Google News came out of this process.
1-207
*
*
*  THEAnyone
IDEAS LIST
at Google can post thoughts for new technologies of businesses on
an ideas mailing list, available companywide for input and vetting. But
beware: Newbies who suggest familiar or poorly thought-out ideas can face
an intellectual pummeling.
 OPEN OFFICE HOURS
Think back to your professors’ office hours in college. That’s pretty much
what key managers, including Mayer, do two or three times a week, to discuss
new ideas. One success born of this approach was Google’s personalized
home page.
 BIG BRAINSTORMS
As it has grown, Google has cut back on brainstorming sessions. Mayer still
has them eight times a year, but limits hers to 100 engineers. Six concepts
are pitched and discussed for 10 minutes each. The goal: to build on the
initial idea with at least one complementary idea per minute.
 ACQUIRE GOOD IDEAS
Although Google strongly prefers to develop technology in-house, it has also
been willing to snap up small companies with interesting initiatives. In 2004
it bought Keyhole, including the technology that let Google offer sophisticated
maps with satellite imagery.
Source: “Managing Google’s Idea Factory,” BusinessWeek, October 3, 2005, 88-90. 1-208
*
*
* FINDING CUSTOMER VALUE OPPORTUNITIES
Customer value analysis
Objective is to identify needs for:

1. New products
2. Improvements to existing
products
3. Improvements in production
processes
4. Improvements in supporting
services
1-209
*
*
*
Customer
Expectations
Customer
Satisfaction Gap
OPPORTUNITIES
Actual
(1) New Products
Product (2) Improvements
Performance (3) New and Improved
Processes

1-210
*
*
*
TRANSFORMATIONAL
Break-through innovation
Digital photography
NEW PRODUCT CATEGORY

Dell Printers

Nike Apparel
Golf clubs
LINE EXTENSION
New color/package/style
INCREMENTAL IMPROVEMENTS
Software updates
1-211
*
*
* The Evolution of the Creative Company

STEP 1
Technology and information become commoditized and globalized.
Suddenly, the advantage of making things “faster, cheaper, better” diminishes, and
profit margins decline.

STEP 2
With commoditization, core advantages can be shipped abroad.
Outsourcing to India, China, and Eastern Europe sends a growing share of
manufacturing and even the Knowledge Economy overseas.

STEP 3
Design Strategy begins to replace Six Sigma as a key organizing
principle. Design plays a key role in product differentiation, decision-making,
and understanding the consumer experience.

Source: Bruce Nussbaum, “How to Build Innovation Companies,” BusinessWeek, August 1, 2005, 62-63.
1-212
*
*
*
STEP 4
Creative innovation becomes the key driver of growth.
Companies master new design thinking and metrics and create
products that address consumers’ unmet, and often unarticulated,
desires.

STEP 5
The successful Creative Corporation emerges, with new
Innovation DNA. Winners build a fast-moving culture that
routinely beats competitors because of a high success rate for
innovation.

1-213
*
*
* Characteristics of Successful Innovators
Creating an
Innovative Culture

Leveraging STRATEGIC Selecting the


Capabilities Right
INITIATIVES Innovation
Strategy

Making Resource Developing and


Commitments Implementing Effective
New Product Processes

1-214
*
*
* Creating an Innovation Culture

 Innovation Workshop for top executives to


develop an innovation plan.
 Innovation Statement highlighting objectives
and senior management’s role and responsibilities.
 Training programs for employees and
managers.
 Communicate the priority of innovation.
 Speakers to expose employees to innovation
authorities.

Source: Thomas D. Kuczmarski et al., “The Breakthrough Mindset,” Marketing Management, March/April 2003, 43.

1-215
*
*
* The Innovation Strategy Spells Out Management’s Priorities for
New Product Opportunities
1. Set specific New Product Objectives.
2. Communicate the role of New Products
throughout the organization.
3. Define the areas of strategic focus:
Product Scope
Markets
Technologies
4. Include longer term discontinuous projects
in the portfolio along with incremental
projects.

Source: Robert Cooper, “Benchmarking New Product Performance,” European Management Journal, Feb. 1998, 1-7.
1-216
*
*
* NEW PRODUCT PLANNING PROCESS
Customer
Needs
Analysis
Screening
Business
Idea and
Analysis
Generation Evaluation

Marketing Product
Strategy Development
Development

Testing

Commercialization
1-217
*
*
*Achieving Cross-Functional Interaction and Coordination

R&D

Operations Marketing

Finance

1-218
*
*
* Responsibility for New Product Planning
* Coordination of new product activities by a high-level
general manager
* Inter-functional coordination by a team of new
product planning representatives
* Creation of a project task force responsible for new
product planning
* Designation of a new products manager to
coordinate planning between departments
* Formation of matrix structure for integration new
product planning with business functions
* Creation of a permanent design center

1-219
*
*
* IDEA GENERATION
* Idea search: targeted or open-ended?
* How extensive and aggressive?
* What specific sources are best for generating a
regular flow of new product ideas?
* How can new ideas be obtained from
customers?
* Where will responsibility for the new product
ideas search be placed?
* What are potential threats from alternative (or
disruptive) technologies?
1-220
*
*
*
Direct
Alliances/ Search
Technological
Acquisition/
Innovation
Licensing
METHODS
National OF Exploratory
Policy GENERATING Customer
IDEAS Studies

Creative Facilitating
Methods Lead User
Linking
Analysis
Marketing
and Technology

1-221
*
*
* An Innovation Champion in Action at GE
Beth Comstock calls herself “a little bit of the crazy, wacky one” at corporate
headquarters. And it’s an apt description when you realize she works at General Electric
Co. Comstock, 44, is charged with transforming GE’s culture, famously devoted to
process, engineering, and financial controls, to one that’s more agile and creative.
Chairman and CEO Jeffrey R. Immelt tapped the former communications chief to become
GE’s first-ever chief marketing officer almost three years ago. The job came with a
critical twist: the goal of driving innovation through the company’s 300,000 plus ranks.

“Creativity is still a word we’re wrestling with,” Comstock concedes. “It seems a bit
undisciplined, a bit chaotic for a place like GE.” More comfortable territory is the term
“imaginative problem-solving” – encouraging people to think “what if” – yet always with
the aim of driving growth. One of Comstock’s first moves was to bring in anthropologists
to audit GE’s culture. They came back with praise for GE’s famous work ethic but noted
that employees wanted more “wow” – more discoveries from the company founded by
Thomas Edison.

1-222
*
*
*
Comstock has a role whose importance is spreading throughout Big Business – that of
innovation champion. She began by studying the best practices at companies such as
Procter & Gamble, FedEx, and 3M. She brought in a raft of creativity consultants,
futurists, and design gurus to lead sessions with different operations. Their names were
jolting for GE types: Play, a Richmond (VA.) group that helps execs think differently, and
Jump, based in San Mateo, CA., which researches how people use things. GE is
expanding its army of designers to bring businesses closer to customers. And Comstock
is staging “dreaming sessions” where Immelt, senior execs, and customers debate future
market trends. Comstock concedes some managers view the workshops as a waste of
time. “We have a long way to go,” she says. But for GE, there’s no turning back.

Source: Bruce Hussbaum, “How to Build Creative Companies,” BusinessWeek, August, 2005, 77.

1-223
*
*
* SCREENING, EVALUATING, AND BUSINESS ANALYSIS

IDEA GENERATION

SCREENING
(fit/feasibility)

CONCEPT EVALUATION

BUSINESS ANALYSIS
1-224
*
*
* Business Analysis
* Revenue Forecasts

* Preliminary Marketing Plan

* Cost Estimation

* Profit Projections

* Other Considerations
1-225
*
*
* PRODUCT AND PROCESS DEVELOPMENT

NEW
PRODUCT
CONCEPT

PRODUCT MARKETING
DEVELOPMENT STRATEGY
AND USE DEVELOPMENT
TESTING
MARKET
TESTING

LAUNCH
1-226
*
*
* Product and Process Development
* Development of the new product includes:
* Product design
* Packaging design
* Decisions to make or purchase product components
* Product Development Process:
* Product Specifications
* Industrial Design
* Prototype
* Use Tests
* Process Development
* Collaborative Development

1-227
*
*
*

Does it have the


required attributes?

Verify PURPOSE OF Ideas for


claims USE TESTS improvements

Identify use
situations

1-228
*
*
* MARKETING STRATEGY AND MARKET TESTING
 Marketing Strategy Decisions
* Market Targeting
* Positioning Strategy
 Market Testing Options
* Simulated Test Marketing
* Scanner – Based Test Marketing
* Conventional Test Marketing
* Testing Industrial Products
* Selecting Test Sites
* Length of the Test
* External Influences
1-229
*
*
* Scanner-based Test Marketing
Less artificial than simulated testing

Costs less than full-scale market test

Test is controlled by using IRI’s 2300 panel


members in each test city

Cable TV enables use of controlled ad testing

Tests take about 12 months

1-230
*
*
* COMMERCIALIZATION
The Marketing Plan
* Complete marketing strategy
* Responsibilities for execution
* Cross – functional approach
Monitoring and Control
* Real – time tracking
* Role of the Internet
* Include product performance metrics with performance
targets
1-231
*
*
* Marketing Strategy

Market Target(s)

Marketing
Objectives
Program(s)

1-232
*
*
*VARIATIONS IN THE GENERIC NEW PRODUCT PLANNING

* Technology Push Processes


* Platform Products
* Process – Intensive Products
* Customized Products

1-233
Chapter 9

Strategic Brand
Management

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
*
* STRATEGIC BRAND MANAGEMENT
 Strategic Brand Management

 Strategic Brand Analysis

 Brand Equity Measurement and Management

 Brand Identity Strategy

 Managing Brand Strategy

 Managing the Brand Portfolio

 Brand Leveraging Strategy

1-235
*
*
* STRATEGIC BRAND MANAGEMENT

A product is anything that is potentially


valued by a target market for the benefits
or satisfaction it provides, including
objects, services, organizations, places,
people, and ideas

1-236
*
*
*
A brand is a name, term, design, symbol, or any
other feature that identifies one seller’s good or
service as distinct from those of other sellers.

American Marketing
Association
A compelling logic has been proposed that the
distinction between goods and services should be
replaced by a view that services are the dominant
perspective in the 21st century, consisting of both
*Stephen LVargo and Robert F. Lusch, “Evolving to a New Dominant Logic for Marketing,” Journal of Marketing, January 2004, 1-17. 1-237
*
*
* Strategic Role of Brands
A strategic brand perspective requires managers to be clear about what role
brands play for the company in creating customer value and share-holder value.
FOR BUYERS, BRANDS CAN:
• reduce customer search costs by
identifying products quickly and
accurately,
• reduce the buyer’s perceived risk by
providing an assurance of quality and
consistency (which may then be
transferred to new products),
• reduce the social and psychological
risks associated with owning and using
the “wrong” product by providing
psychological rewards for purchasing
brands that symbolize status and
prestige.
1-238
*
*
*
FOR SELLERS, BRANDS CAN FACILITATE:

• repeat purchases that enhance the company’s financial performance


because the brand enables the customer to identify and re-identify the
product compared to alternatives,
• the introduction of new products, because the customer is familiar with the
brand from previous buying experience,
• promotional effectiveness by providing a point of focus,
• premium pricing by creating a basic level of differentiation compared to
competitors,
• market segmentation by communicating a coherent message to the target
audience, telling them for whom the brand is intended and for whom it is
not,
• brand loyalty, of particular importance in product categories where loyal
buying is an important feature of buying behavior.
Source: Marketing Science Institute Report No. 97-422, 1997
1-239
*
*
* Brand Management Challenges*
Internal and external forces
create hurdles
Intense Price for product
and Other Competitive Pressures brand
managers
Fragmentation ofin their
Markets brand building
and Media

initiatives:
Complex Brand Strategies and Relationships

Bias Against Innovation

Pressure to Invest Elsewhere

Short-Term Pressures

*David A. Aaker, Building Strong Brands, 1996, 26-35. 1-240


*
*
* Responsibility for Managing Products
Product/Brand Management
 Planning, managing, and coordinating the
strategy for a specific product or brand
Product Group/Marketing Management
 Product director, group manager, or
marketing manager
Product Portfolio Management
 Chief executive at SBU
 Team of top executives
1-241
*
*
* Strategic Brand Management
Brand Identity Strategy
BRAND
EQUITY
Identity Implementation
MANAGEMENT

Brand Strategy Over


Time
STRATEGIC
BRAND
ANALYSIS Managing the Brand
Portfolio

Leveraging the Brand

1-242
*
*
* GLOBA Recharging Sony’s Strategy Brand
Management

L
Sir Howard Stringer, a Welsh-born American citizen, was appointed CEO of Sony, the
troubled Japanese electronics giant in 2005. Sony’s past strategic brand management

FEATU
initiatives had failed to close the digital gap between software/services/content/
devices. During the CEO’s first year several cost reduction and portfolio initiatives

RE
were implemented to launch the turnaround strategy: The Aibo, a beloved robotic pet,
was put to sleep. They shut down the Qualia line of boutique electronics that included
a $4,000 digital camera and a $13,000 70-inch television. They eliminated 5,700 jobs
and closed nine factories, including one in south Wales. (He took some flak back home
for that). They have sold $705 million worth of assets. You probably don’t know that
Sony owned a chain of 1,221 cosmetics salons and the 18 Japanese outlets of the
Maxim’s de Paris restaurant chain. They’re gone. Gone, too, is a group of salary-men
in their 60s, 70s, and 80s who, after retiring from senior management positions, were
given the title of “advisor,” a tradition established by Sony’s founders. “That was very
symbolic,” says Hideki (Dick) Komivama, a Sony executive and key ally of Stringer’s.
The 45 advisors each had a secretary, a car and driver, and worst of all, the ability to
gum up decision-making and second-guess people doing real jobs. No more.
Source: Marc Gunther, “The Welshman, the Walkman, and the Salary Men,” Fortune, June 12, 2006, 72.
1-243
*
*
* STRATEGIC BRAND ANALYSIS
Analyses Product Product Line Portfolio of
Product Lines

□ Market and
Customer

□ Competition

□ Brand(s)

1-244
*
*
* Tracking Brand Performance
Performance
Objectives

Select Method(s) for


Evaluation

Identify Problem
Products

Decide How to
Resolve the
Problem
1-245
*
*
*
Product life cycle
Financial analysis Product
analysis Analyzing Brandperformance
Performance analysis
Brand
Research
Standardized positioning
studies
information analysis
1-246
*
*
* Product Life Cycle Analysis
Relevant issues in PLC analysis include:

* Determining the length and rate of change of the PLC


* Identifying the current PLC stage and selecting the
product strategy that corresponds to that stage
* Anticipating threats and finding opportunities for altering
and extending the PLC

1-247
*
*
*
* Product Performance Analysis
 Management’s performance criteria
 Strengths and weaknesses relative to portfolio

* Brand Positioning Analysis


 Perceptual maps for brand comparison
 Buyer preferences

* Other Product Analysis Methods


 Information Services
 Research studies
 Financial analysis

1-248
*
*
* BRAND EQUITY
Company/Customer Value
of Brand Name and
Symbol of
a Product

Determined by the
brand’s set of
assets (and liabilities)

1-249
*
*
* Brand Equity

Effective strategic brand


management requires that we
understand brand equity and
evaluate its impact when making
brand management decisions:
“Brand equity is a set of
brand assets
* David A. Aaker, Managing Brand Equity, The Free Press, 1991, 15.
**Ibid, 102-120.

1-250
*
*
*
Measuring Brand Equity. Several measures are needed
to capture all relevant aspects of brand equity.**
* loyalty (price premium, satisfaction/loyalty),
* perceived quality/leadership measures (perceived
quality, leadership/popularity),
* associations/differentiation (perceived value, brand
personality, organizational associations),
* awareness (brand awareness), and
* market behavior (market share, price and
distribution indices).
These components provide the basis for developing
operational measures of brand equity.

1-251
*
*
* BRAND IDENTITY STRATEGY

Brand identity is a unique set


of brand associations that
the brand strategist aspires
to create or maintain. These
associationsProduct
represent what
Organization
the brand stands
Person
for and
imply a promise
Symbol to customers
* David A. Aaker, Building Strong Brands, 1996, 68. 1-252
*
*
*
Specific
Product
Private Line
Branding of
Products
BRAND FOCUS

Combination Corporate
Branding Branding
1-253
*
*
* MANAGING BRAND STRATEGY

Proactive efforts
should be devoted to
managing each brand
over time.

1-254
*
*
* Strategies for Improving Product Performance

Product
Cost Alter
improvement
reduction
Product linemarketing
Add Eliminate
Strategy strategy
new specific
product(s) product(s)

1-255
*
*
* MANAGING THE BRAND PORTFOLIO
Leverage
Commonalities to
Generate Synergy

Allocate Reduce
Resources Brand
BRAND PORTFOLIO Identity
OBJECTIVES Damage

Facilitate Change Achieve Clarity


and Adaptation of Product
Offerings

Source: David A. Aaker, Building Strong Brands, New York: The Free Press, 1996, 241-242.

1-256
*
*
* Strategies for Brand Strength
 Brand-Building Strategies
* Developing the brand identification strategy
* Coordinate identity across the organization
 Brand Revitalization
* Find new uses for mature brands
* Add products related to heritage
 Strategic Brand Vulnerabilities
* Brand equity can be negative
* Retailer private brands compete with manufacturer brands
* Major shifts in consumer tastes
* Competitive actions
* Unexpected events

1-257
*
*
* Product Mix Modifications
Motivation for changing the product mix:
* Increase the growth rate of the business
* Offer a more complete range of products
to wholesalers and retailers
* Gain marketing strength and economies
in distribution, advertising, and personal
selling
* Leverage an existing brand position
* Avoid dependence on one product line or
category
1-258
*
*
*STRATEG Limited Brands Shifts its Focus from
Apparel to Accessories

Y
 Ten years ago apparel represented 70% of Limited’s sales.

FEATURE
By 2005 70% of sales were from skin-care
products, cosmetics, and lingerie
 Clothes are increasingly out of fashion—after declines for 3 years, U.S. apparel
sales increased only 4% in 2004 to $172.8 billion.
 Apparel $ sales declines are due to discount pricing and households spending
more on electronics, home improvement, and spa services.
 Limited is trying to make itself over as a high-end Procter & Gamble.
 Victoria’s Secret is adding hair and cosmetics lines to its beauty business (has 3
of the top 10 selling fragrances in the U.S.).

Sources: Limited Brands 2005 Annual Report; Value Line; and Amy Merrick, “For Limited Brands Clothes Become the Accessories,” The Wall
Street Journal, March 8, 2005, A1 and A14.

1-259
*
*
*
 One new product is “Tutti Dolci” (all sweets), food inspired scents-lotion
and lip gloss in fragrances like lemon meringue, angel-food cake, and
chocolate fondue.
 Victoria’s Secret has also accelerated new product development.
 From 2003 through 2005 Intimate Brands (lingerie and beauty products)
accounted for all the corporation’s operating income.
 Limited is also partnering with other companies to sell its brands and
develop new products.
 Limited has three business groups:
• Beauty and Personal Care
• Lingerie
• Apparel
 Apparel is a continuing challenge with 2004 operating margins @ 1.4%
compared to over 19% for Bath & Body Works and Victoria’s Secret.
 Limited has about 3700 stores. 2005 sales were nearly $9.7 billion with
net profits at $51 million.

1-260
*
*
* BRAND LEVERAGING STRATEGY
LINE
EXTENSION Minor variants
of a single
product are
BRAND
EXTENSION
Extensions
marketed
of the the
under brand
same
name name
brand to
other 1-261
*
*
* LEVERAGING ALTERNATIVES

LINE BRAND
EXTENSIO
Horizontal Vertical Another
EXTENSIO
Range Co-
Extension
NS Extension Product
Class
NS
Brand Branding

Up from Down from


Core Core
Brand Brand

1-262
*
*
* BRAND LEVERAGING IN UPSCALE AND VALUE MARKETS
Vertical Brand Extensions*

Core New
Bran Up-
d Market
New Brand
Core
Down- Bran
Market
* ONE OF THE MOSTd
Brand 1-263
*
*
* MOVING DOWN IS EASY BUT RISKY
 Affects perceptions of the brand –perhaps even more
significantly than other brand management options.
We are influenced more by
unfavorable information than by favorable
information.
 The brand’s ability to deliver self-expressive benefits
may be reduced.
 Potential cannibalization problem.
 Potential failure risk.
 Problem when the value entry is perceived to be
inconsistent with the quality expected from the
brand.
1-264
*
*
* MOVING A BRAND UP
THE DRIVERS
•Enhanced Margins at the
High End
•Energy
THE &DAMAGING
RISKS OF Vitality THE CORE
BRAND
•Enhance Credibility and
•Lacks Credibility
Prestige of
•Lacks Self-Expressive
the Brand 1-265
*
*
* BRAND EXTENSION DECISIONS
Extending into Different
THE
Product Classes
◊Identify product categories for
PROCESS
which the product fits and adds
value.
Determine existing brand
associations and the
brand identity.
◊Identify related product
category opportunities 1-266
*
*
* CO-BRANDING
Co-branding (dual branding) involves two or more established
brands making a joint offer of their product brands —

The participant’s brand names


are identified on the good or
service.

Several different forms –

Component co-branding
(Volvo and Michelin)
Same company co-branding
Alliance co-branding
(Delta and American Express)
Ingredient co-branding
1-267
*
*
* BRAND LEVERAGING EVALUATION CRITERIA
Brand Relevance/Differentiation
Capabilities/Perceived Value Match
Market/Segment Opportunity
Cannibalization Risks
Potential for Core Brand Damage
Clarity of Product Offerings
Estimated Financial Performance
Brand Equity Impact
1-268
*
*
*
SEVEN DEADLY SINS OF
Failure to fully understand the meaning of the
BRAND MANAGEMENT*
brand.
Failure to live up to the brand promise.
Failure to adequately support the brand.
Failure to be patient with the brand.
Failure to adequately control the brand.
Failure to properly balance consistency and
change with the brand.
Failure to understand the complexity of brand
equity measurement and management.
*Kevin Lane Keller, Strategic Brand Management, Prentice Hall, 2003, 736. 1-269
Chapter 10

Value Chain
Strategy

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

* Strategic role of value chain


* Channel strategy
* Managing the channel
* International channels

1-271
*
*
* Dell’s dilemma
* Business built around powerful direct
business model
* Direct model poor fit with customer
preferences in new target markets and weak
on service
* Dell is braodening business model
* Targeting computer re-sellers
* Global retail strategy (including Wal-Mart, Dell-
branded stores, kiosks in malls)
* Redesigning value chain is critical strategic
move

1-272
*
*
* Strategic role of value chain (1)
Distribution functions
* Buying and selling
* Assembly
* Transportation
* Financing
* Processing and storage
* Advertising and sales promotion
* Pricing
* Reduction of risk
* Personal selling
* Communications
* Servicing and repairs
1-273
*
*
* Value chain structures - consumer products
Consumer Products

Producers

Supply Chains

Sales
Agents

Direct Wholesalers Wholesalers


Channel

Retailers Retailers Retailers

Consumers

1-274
*
*
* Value chain structures - organizational products
Organizational Products

Producers

Supply Chains

Sales Sales
Agents Agents

Direct Distributors Distributors Distributors


Channel

Re-sellers

Organizational Customers

1-275
*
*
* Strategic role of value chain (2)
* Channels for services
* Direct distribution by manufacturers
* Buyer considerations
* Competitive considerations
* Product characteristics
* Financial and control considerations

1-276
*
*
* Factors Favoring Distribution by Manufacturer
Profit margins Opportunity for
adequate to support competitive
Rapidly changing
distribution advantage
market environment
organization
Complete line Early stages of
of products Distribution product life cycle
by the
manufacturer
Purchases are Complex product
large and application
infrequent
Extensive
Small number of
purchasing
geographically Supporting
process
concentrated services are
buyers required
1-277
*
*
* Branded manufacturers enter retail
* Nespresso (Nestle) “coffee boutiques” to
establish lifestyle brand
* Heineken branded beer bars in airports and
retail
* Strategic logic is to avoid control of third-
party retailers over brand
* Move from selling “A product in a box” to
offering a superior service experience for
the brand

1-278
*
*
* Channel strategy (1)
* Types of channel
* Conventional channel
* Vertical marketing systems
* Ownership VMS
* Contractual VMS
* Administered VMS
* Relationship VMS
* Horizontal marketing systems
* Digital channels
* Product digitization
* Channel digitization
1-279
*
*
* Channel strategy selection

1. Type of distribution channel

Conventional Vertical marketing system Horizontal


marketing system
Administered/
Ownership Contractual Relationship

2. Intensity of distribution

Intensive Selective Exclusive

3. Channel configuration

1-280
*
*
* Channel strategy (2)
* Distribution intensity
* Intensive
* Exclusive
* Selective
* Channel configuration
* End-user considerations
* Product characteristics
* Manufacturer's capabilities and resources
* Required functions
* Availability and skills of intermediaries

1-281
*
*
* Channel strategy (3)
* Channel maps
* Selecting the channel strategy
* Market access
* Value-added competencies
* Financial considerations
* Flexibility and control considerations
* Channel strategy evaluation

1-282
*
*
* Illustrative channel map for heating units

Production = Consumption =
100,000 units Direct sales = 10,000 units
100,000 units
Commercial
Construction Construction
84,000 units Independent 42,000 units 75,000 units Companies
Distributors Sub-
Contractors (85,000 units)
42,000 units 7,000
Production Small 40,000 units
Of Central Hardware units
Heating Retailers 2,000
Boilers units
Large
5,000 units 5,000 units
Hardware Domestic
Retailers Customers
Direct sales = 1,000 units (15,000 units)

1-283
*
*
* Channel strategy (4)
* Changing channel strategy
* Channel strategy modification
* Channel migration
* Channel audit

1-284
*
*
* Illustrative Channel Strategy Evaluation
Evaluation Manufacturer’s Company
Criteria Representatives Salesforce

Market access Rapid 1 to 3 year


development

Value-added competencies Medium High

Sales forecast (2 years) $20 million $30 million

Forecast accuracy High Medium to low

Estimated costs $2 million* $3.6 million**

Selling Expense (cost/sales) 10% 12%

Flexibility Good Limited

Control Limited Good

* Includes 8% commission plus management time for recruiting and training


representatives.

** Includes $150,000 for 10 salespeople, plus management time.

1-285
*
*
* Managing the Channel (1)
* Channel leadership
* Management structure and systems
* Physical distribution management
* Supply chain strategy
* The impact of supply chain management
on marketing
* E-procurement

1-286
*
*
* Efficient Consumer Response
 Traditional channel problems
* Forward buying and diverting
* Excessive inventories
* Damages and unsaleable goods
* Complex deals and deductions
* Too many promotions and coupons
* Too many new products
 Efficient Consumer Response
* Category management
* “Value” pricing replaces promotions
* Continuous replenishment and cross-docking
* Electronic data interchange
* New performance measures
* New organizational processes and structures
* Internet-based network for supplier-buyer trading
1-287
*
*
* Lean Supply Chain Elements
1. Definition of Value

2. Identification of Value Streams and


Removal of Muda (Waste)

3. Organizing Around Flow, Instead


of “Batch and Queue”

4. Responding to Pull Through


the Supply Chain

5. The Pursuit of Perfection

1-288
*
*
* Marketing/supply chain relationship
* Focus on real drivers of customer
value not just technical
* Do not create inflexibility and inability
to respond to change
* Protect brands and competitive
strength over short-term cost savings
* Do not confuse supply chain strategy
with competitive advantage

1-289
*
*
* Managing the channel (2)
* Channel relationships
* Degree of collaboration
* Commitment and trust among channel members
* Power and dependence
* Channel globalization
* Multichanneling
* Conflict resolution
* Channel performance
* Legal and ethical considerations

1-290
*
*
* Channel metrics
Performance Possible Measures Applicable Product and
Objective Channel Level

PRODUCT AVAILABILITY

Coverage of relevant Percent of effective Consumer products at


retailers distribution retail level

In-store positioning Percent of shelf Consumer products at


facings or display retail level
space gained
by product,
weighted by store
importance

Coverage of Frequency of sales Industrial products;


geographic markets calls by customer consumer goods at
type; average wholesale level
delivery time

1-291
*
*
* Channel metrics

Performance Possible Measures Applicable Product and


Objective Channel Level

PROMOTIONAL EFFORT

Effective point-of- Percent of stores Consumer products


purchase (POP) using special at retail level
promotion displays and POP
materials, weighted
by importance of store

Effective personal Percent of Industrial products;


selling support salespeople’s time consumer durables at all
devoted to product; channel levels; consumer
number of salespeople convenience goods at
receiving training on wholesale level
product’s characteristics
and applications

1-292
*
*
* Channel metrics
Performance Possible Measures Applicable Product and
Objective Channel Level

CUSTOMER SERVICE

Installation, Number of service Industrial products,


training and technicians receiving particularly those involving
repair technical training; high technology; consumer
monitoring of durables at retail level
customer complaints

MARKET INFORM,ATION

Monitoring sales Quality and All levels of


trends, inventory timeliness of distribution
levels, competitors’ information
actions obtained

COST-EFFECTIVENESS

Cost of channel Middleman margins All levels of


Functions relative and marketing costs distrbution
To sales volume as percent of sales
1-293
*
*
* Value chain ethics
* Retailers’ Global Social Compliance
Program
* Growing “green consumer” pressure
* B2B suppliers increasingly mandated
to meet customer’s values in
employment practices, environmental
standards, ethical behavior

1-294
*
*
* International channels
* Examining international distribution
patterns
* Factors affecting global channel
selection
* Global issues regarding multichannel
strategies

1-295
*
*
* International Channel of Distribution Alternatives
Home country Foreign country
The foreign marketer or
producer sells to or through

Domestic Open Exporter Importer Foreign Foreign Foreign


producer or distribution agent or retailer consumer
marketer sells via domestic merchant
to or through wholesale wholesalers
middlemen

Export management company


or company
sales force

Source: Philip R. Cateora, International Marketing, 7th ed., Homewood, Ill.: Richard D. Irwin, Inc., 1990, 572. 1-296
CHAPTER 11

PRICING STRATEGY
 Strategic Role of Price
 Analyzing the Pricing Situation
 Selecting the Pricing Strategy
 Determining Specific Prices and Policies

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


*
*
* Pricing Decisions are Creating Major Challenges for
Many Companies
Examples Include:
 Threats to major airlines by discount carriers.
 Pressures on drug companies to reduce prices.
 Intense price competition on supermarket chains
by Wal-Mart and Costco.
 Aggressive discounting by U.S. automobile
producers to retain market share.
 Threats to strong brands by counterfeit products.

1-298
*
*
*
STRATEGIC ROLE OF PRICE
…requires that we put pricing at the beginning of the
process. For example, a multi-part marketing
strategy usually is required in value-based pricing.
Airlines’ complicated service packages with arcane
restrictions, and their multiple channels of
distribution must support pricing that reflects
different values of the service to different segments.
Without such a strategy, airlines would capture a
much smaller portion of the value they have the
potential to create.

T. Nagle, Marketing News, 11/9/98, 4. 1-299


*
*
* Price in the Positioning Strategy
Target
market and
objectives

Positioning Strategy
Product Value-Chain
strategy strategy

Pricing
strategy

Promotion
strategy

1-300
*
*
* Pricing Situations
 New product pricing
 Life cycle pricing
 Changing positioning
strategy
 Countering competitive
threats 1-301
*
*
* Various Roles of Pricing
Signal to the
Buyer

Marketing Program Instrument of


Considerations Competition

Improving Financial
Performance

1-302
*
*
* Pricing Strategy for New and Existing Products
Set Pricing
Objectives

Analyze the
Pricing Situation

Select Pricing
Strategy

Determine Specific
Prices and Policies

1-303
*
*
*
Examples of Pricing
Objectives
 Gain market position
 Achievefinancial
performance
 Product positioning
 Stimulate demand
1-304
*
*
*
ANALYZING THE PRICING
SITUATION
Customer Price
Sensitivity

Pricing Analyzing the


Pricing Situation Product
Objectives Costs

Competitors’ Likely
Responses

1-305
*
*
*
1.
Customer Price
How large is the product-market in terms of buying
potential? Sensitivity
2. What are the market segments and what market target
strategy is to be used?
3. How sensitive is demand in the segment(s) to
changes in price?
4. How important are nonprice factors, such as features
and performance?
5. What are the estimated sales at different price levels?

1-306
*
*
* Buyers’ Perceptions of Value Offerings of Brands A-E

Perceived
Value Superior Value Zone
D A
B
E

C
Inferior Value Zone
Perceived Price

1-307
*
*
*
Cost Analysis for Pricing
• Determine the components
Decisions
of the cost of the product.
• Estimate how cost varies with
the volume of sales.
• Analyze the cost competitive
advantage of the product.
• Decide how experience in
producing the product affects
costs.
• Estimate how much control
management has over costs.
1-308
*
*
* Competitor Analysis
 Which firms represent the most direct
competition
 Competitor’s positioning on a relative price
basis
 Competitors’ success with their pricing
strategies
 Competitors’ probable responses to
alternative price strategies

1-309
*
*
*
SELECTING THE PRICING
STRATEGY
 How much flexibility
exists?
 How to position price
relative to costs?
 How visible to make the
price of the product? 1-310
*
*
*
Determinants of Pricing
Flexibility
Demand

Pricing
Competition Demand-Cost Gap Objectives

Costs

1-311
*
*
*
Determining Feasible Prices
Price too high; little or
no demand

Price Ceiling
Range of feasible prices

 Nature of demand in target market


 Business and marketing strategy
 Product differentiation
 Competitors’ prices
 Prices of substitutes
 Product costs
Price Floor

Price too low; no profit possible


1-312
*
*
* Above
Competition
Skim strategy

Neutral strategy
(same as competition)

Below Penetration strategy


Competition
1-313
*
*
*
Diplomacy rather than
force

Select competitive Competitive Target


segments
confrontations Pricing Issues instead of
volume

Signaling

Source: Thomas T. Nagle, “Price Competition,” Marketing Management, Vol. 2, No. 1, 38-45.

1-314
*
*
*
Illustrative
Active
Price
Strategies
strategy

Low- High-
active active
Low strategy strategy High
relative relative
price price
Low- High-
passive passive
strategy strategy

Passive
strategy
1-315
*
*
* DETERMINING SPECIFIC PRICES AND POLICIES

 Selecting Specific Prices


 Policies to Manage Pricing
Strategy
 Special Pricing Issues

1-316
*
*
*

Basis of Determining
Specific Prices

Cost Competition
Demand

1-317
*
*
* Establishing Pricing Policy and Structure
Policy
Discounts, allowances, returns, and other
operating guidelines
Pricing Structure
Product mix and line pricing relationships
How individual items in the line are priced
in relation to one another

1-318
*
*
* Managing Pricing Strategy
1. The more that the competitors and customers know about your
pricing, the better off you are. In an information age, it is necessary to
be transparent about prices and the value of a firm’s offerings.

2. In highly competitive markets, the focus should be on those market


segments that provide opportunities to gain competitive advantage.
Such a focus leads to a value-oriented pricing approach.

3. Pricing decisions should be made within the context of an overall


marketing strategy that is embedded within a business or corporate
strategy.

4. Successful pricing decisions are profit oriented, not sales volume or


market share oriented.

Source: Adapted from Kent B. Monroe, Pricing, 3rd ed. (Burr Ridge, IL.: McGraw-Hill/Irwin, 2003) 624-6.
1-319
*
*
* Managing Pricing Strategy
5. Prices should be set according to customers’ perceptions
of value.
6. Pricing for new products should start as soon as product
development begins.
7. The relevant costs for pricing are the incremental avoidable
costs.
8. A price may be profitable when it provides for incremental
revenues in excess of incremental costs.
9. A central organizing unit should administer the pricing
function. Generally, it is better to avoid letting salespeople
set price, especially without access to profitability
information and specific training in pricing and revenue
management.
10. Pricing management should be viewed as a process and
price setting as a daily management activity, not a once-a-
year activity.

1-320
*
*
* Special Pricing Situations
Price Segmentation

Value Chain (Distribution Channel) Pricing

Price Flexibility

Product Life Cycle Pricing

1-321
CHAPTER 12

Promotion, Advertising,
and Sales Promotion
Promotion Strategy
Strategies
Advertising Strategy
Sales Promotion Strategy
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
*
* PROMOTION STRATEGY
 The Composition of Promotion Strategy
 Developing Promotion Strategy
 Communications Objectives
 Deciding the Role of the Promotion Components
 Determining the Promotion Budget
 Promotion Component Strategies
 Integrating and Implementing the Promotion Strategy
 Effectiveness of Promotion Strategy

1-323
*
*
* Promotion Strategy:

planning, implementing, and


controlling an organization’s
communications to its customers
And other target audiences.

1-324
*
*
*
Composition of Promotion
Strategy
Interactive/Internet
Marketing

Direct Advertising
Marketing
Promotion
Components
Personal Sales
Selling Promotion

Public
Relations
1-325
*
*
* U. S. Annual Expenditures (billions)

$600 Sales Promotion


Personal Selling
$400
Advertising

$200
0
1-326
*
* INTERNET
* FEATURE Brand Advertising On-Line Has Taken Off
SEARCH WORKS
Google and Yahoo! Have demonstrated the power of the Web by using customers’ search
queries to connect them with advertisers.
CUSTOMERS ARE ONLINE
More than half of American households have always-on Net connections. And the Web
reaches millions at the office. The Big Three portals—Yahoo, AOL, and MSN—reach a
combined 50 million a day–-twice the TV audience of a World Series game.
VIDEO ROCKS
The adoption of broadband, which can handle videos, lets advertisers put TV-like ads online.
Longer spots by BMW and Adidas have reached cult status. As demand for video soars,
portals sell choice slots in advance, much like TV’s up-front sales.
FEEDBACK IS INSTANT
Marketers and online publishers have tools to track an ad’s performance in real time allowing
them to make quick adjustments if customers aren’t clicking. This turns the Net into a vast
marketing lab. And as video grows, it becomes a test bed for TV ads.
CUSTOMERS LEAVE TRAILS
It was an empty promise during the dot-com days, but now advertisers have the technology
to follow customers, click by click, and to hit them with relevant ads. The upshot? No wasted
money peddling dog food to cat owners.

Source: Stephen Baker, “The On-Line Ad Surge,” BusinessWeek, November 22, 2004, 79. 1-327
*
* DESIGNING THE PROMOTION STRATEGY
* MARKET TARGETING AND POSITIONING
STRATEGIES

COMMUNICATION
OBJECTIVES

ROLE OF PROMOTION
COMPONENTS
Advertising Sales Public Personal Direct Marketing Interactive/ Internet
Promotion Relations Selling Marketing
PROMOTION
BUDGET
Coordination
PROMOTION COMPONENT with Product,
STRATEGIES Distribution,
and Price
Strategies
INTEGRATE AND IMPLEMENT PROMOTION COMPONENT
STRATEGIES

EVALUATE EFFECTIVENESS OF
PROMOTION STRATEGY

1-328
*
*
* Illustrative Communications Objectives
 Need Recognition

 Finding Buyers

 Brand Building

 Evaluation of Alternatives

 Decision to Purchase

 Customer Retention
1-329
*
*
* Deciding the Role of the Promotion Components

 Expected contribution for each of the


promotion components.
 Which communication objective(s) will be
the responsibility of each component?
 What part of the budget will go to each
component?

1-330
*
*
* Factors Guiding the Role Assigned to Each Component

 Market Target(s)
 Desired Positioning
 Role of Promotion in Positioning
 Product Characteristics
 Stage of Life Cycle
 Situation Specific Factors

1-331
*
*
* Determining the Promotion Budget

Objective and
Task

All You Can Budgeting Percent of Sales


Afford Approaches

Follow the
Competition

1-332
*
*
* Budgeting Methods
Features Limitations
Percent of Sales Percent of Sales
 Fixed percent of sales, often based on  The method is very arbitrary. Budget may
past expenditure patterns. be too high when sales are high and too
low when sales are low.

Comparative Parity Comparative Parity


 Budget is based largely  Differences in marketing strategy may
upon what competition is doing. require different budget levels.

Objective and Task Objective and Task


 Set objectives and then determine  The major issue in using this method is
tasks (and costs) necessary to meet deciding the right objectives so
the objectives. measurement of results is important.

1-333
*
*
* Integrating and Implementing Promotion Strategy

Avoiding fragmentation
Difficulty in evaluating productivity
Differences in priorities
Separate organizational units
Assigning integration responsibility

1-334
*
*
* Illustrative Factors Affecting Promotion Strategy
Advertising/ sales Balanced Personal selling
promotion driven driven

Number and dispersion of buyers


Large Small

Buyers’ information needs


Low High
Size and importance of purchase
Small Large
Distribution
Channel Direct
Product Complexity
Low High
Post-purchase contact required
No Yes

1-335
*
*
* Promotion Strategy Issues
 Expense/Response Relationships
 Allocation
 Impact on Brand Equity
 Integration of Promotion Components
 Effectiveness of the Strategy

1-336
*
*
* ADVERTISING STRATEGY

 Setting Objectives and Budgeting


 Creative Strategy
 Media/Scheduling Decisions
 Role of the Advertising Agency
 Program Implementation and Measuring
Effectiveness

1-337
*
*
* The Internet is Shifting the Power Position to the Customer
* How the Money is Spent is Changing.
* The Amount Spent on Internet Advertising is a Small
Fraction of the Total, but Very Powerful and Growth
is Accelerating.
* Consumers Spend 10 hrs/person/day with Media of
all Kinds—How Much is Media Multi-Tasking?
* Ad Spending Versus Consumers’ Time Allocations.
* Advertising Agency Consolidation and
Reorganization—the Big 4.
* Do Companies Recognize the Revolutionary
Implications of Newly Empowered Consumers?
* The Internet Will be the Most Prominent Medium in
the Lives of the 18-34 Age Group.
Source: The Economist, “Crowned at Last: A Survey of Consumer Power,” April 2, 2005, 1-16.
1-338
*
*
* Advertising Strategy
Target Audience

Advertising
Objectives

Advertising Budget

Creative Strategy

Advertising Media and


Programming Schedules

Evaluate the Effectiveness of the


Strategy
1-339
*
*
* Advertising Objectives
Expose communication to target
audience

Create awareness

Change attitude(s)

Increase Sales

Generate profits

1-340
*
*
* Alternative Levels for Setting Advertising Objectives
Increasing Uncertainty
About Impact on
Purchasing Behavior

Type of Objective

• Exposure

• Awareness

• Attitude
Change

• Sales

Increasing Difficulty • Profit


of Measurement
1-341
*
*
* Budget Determination

OBJECTIVE AND TASK METHOD HAS THE MOST


SUPPORT

Budget
Determination

Media/ Creative
Scheduling Strategy
Decisions
1-342
*
*
* The Vuitton Machine*
Inside the world’s biggest, most profitable luxury brand
BENCHMARKING VUITTON
Brand 2003 Sales Percent Operating
Billions Change* Margin
Louis Vuitton $3.80 +16% 45.0%

Prada 1.95 0.0 13.0


Gucci** 1.85 -1.0 27.0

Hermès 1.57 +7.7 25.4


Coach 1.20 +34.0 29.9
*At constant rate of exchange **Gucci division of Gucci Group Data: Company reports. BW

Vuitton increased advertising 20% in 2003—spends only 5%


of revenues on advertising—about half the industry average

*BusinessWeek, March 22, 2004, 98-102.


1-343
*
*
* CREATIVE STRATEGY
The creative strategy is guided by the market target and the positioning strategy.

Product Distribution Price Promotion

Advertising
(How to communicate
intended positioning to
buyers and others influencing
the purchase.)

Provide a unifying concept that


Creative Strategy
binds together the various parts of
the advertising campaign.
1-344
*
*
* Media/Scheduling Decision

 Television
 Radio
 Magazines
 Online
 Website
 Outdoor

1-345
*
*
*
Relative access
to the target
audience
Favorable zone

Unfavorable zone

Relative cost of
reaching the target
group(s)
1-346
*
*
* Advertising Agencies in Perspective

 Fast change has come to the advertising industry.


 Huge, integrated agencies face a challenging future.
 Do clients want a full-service agency?
 The business model is in need of change.
 The basis of compensation continues to be debated and altered.
 Specialists (e.g. media buying services) are being used.
 Importantly, the core of the creative process is the agency.
 Several methods are available to evaluate advertising results.

1-347
*
*
* Role of the Advertising Agency
Target Audience

Advertising Objectives

Advertising Budget

Creative Strategy
Advertising
Agency
Advertising Media and
Programming

Evaluate the Effectiveness of the


Strategy
1-348
*
*
* Advertising Strategy Implementation and Effectiveness

Decide how to measure effectiveness before


implementing the strategy.
Assign responsibility for tracking performance.
Assessing the quality of advertising is important.
Exposure to advertising is not a very sensitive
measure of effectiveness.
Several methods are available to evaluate
advertising results.

1-349
*
*
*
Rating
Services
Sales and
Test Expense Analysis
Marketing MEASURING
ADVERTISING
EFFECTIVENESS

Controlled Recall
Tests Tests

1-350
*
*
* SALES PROMOTION STRATEGY

SALES PROMOTION

consists of various incentives, mostly short


term, intended to stimulate quicker and/or
greater purchase of particular goods/services
by consumers or the trade.

1-351
*
*
STRATEGY
* The Realities of Mail-in Rebates
FEATURE
* Consumers hate the hassles, companies love unredeemed rebates, and
regulators are investigating the consumer complaints.
* As much as 40% of rebates never get redeemed.
* Some 400 million rebates are offered each year with a total value of $6
billion.
* Unclaimed rebates translate into more than $2 billion of extra revenue for
retailers and their suppliers each year.
* Complex filing rules and long delays discourage consumers.
* Companies emphasize the filing processes are intended to discourage
fraud.
* The largest rebate processor monitors 10,000 addresses suspected of
submitting bogus rebates.
* Rebates offer companies an opportunity to promote small discounts
without marking the products down.
* Rebates have become very popular with computer and consumer-
electronics companies.
1-352
*
*
*
* The value of rebates has also increased.
* Regulators are intensifying their scrutiny of the companies offering
rebates.
* The developing back-lash against rebates is pushing some companies to
halt rebate strategies.
* Others are encouraging online filing.
* Fulfillment houses are revising their processing systems, using computer
technology to validate claims.
* Consumers would like mail-in rebates to go away but want the best price
they can get.

Source: Brian Grow, “The Great Rebate Runaround,” BusinessWeek, December 5, 2005, 34, 36, and 37.

1-353
*
*
* Sales Promotion Activities and Targets
Activities include trade shows, specialty
advertising, contests, displays, coupons,
recognition programs, and free samples.
SALES
PROMOTION
TARGETS
Consumer Salespeople
Buyers
Business Value Chain
Buyers

1-354
CHAPTER 13

SALES FORCE, INTERNET, AND DIRECT


MARKETING STRATEGIES

 Sales Force Strategy


 Internet Strategy
 Direct Marketing Strategies

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

A company’s sales force strategy determines


how the organization will use the personal
selling function to maintain contact with
customers and develop the relationships that
management wants in order to achieve
marketing and promotion objectives.

1-356
*
* RELATIONSHIP
* FEATURE: The Vital Role of Selling at the Boeing Co.
During the 2000s Boeing experienced an intense competitive battle against
Airbus for control of the commercial jetliner market. Airbus was winning the
battle until 2005 when Boeing’s Asia-Pacific jet sales were $26 billion compared
to Airbus’ $9 billion.

Under a new CEO management gave salespeople much more control over selling
strategy compared to previous tight and rigid control by top management.
Boeing lost many sales to Airbus because of top management’s unwillingness to
give competent professionals flexibility in negotiating sales. Salespeople like
Larry Dickenson, Boeing’s top salesman who covers the Asia-Pacific market,
builds on over 18 years of relationships with airlines like Cathay Pacific, Quantas
Airways Ltd., and Singapore Airlines, Ltd., to negotiate winning contracts.

Importantly, Dickenson carefully plans and executes each sales campaign,


overseeing every detail in the process that may span several years. The
strategy is a combination of attractive pricing, financing, and leasing
arrangements in combinations with training and service packages.
Source: Stanley Holmes, “Boeing’s Jet Propellant,” BusinessWeek, December 26, 2005, 40.

1-357
*
* Determine the role of the Sales Force Strategy
* sales force in promotion
strategy

Define the selling process (how


selling will be accomplished)

Decide if and how alternative sales


channels will be utilized

Design the sales organization

Recruit, train, and manage salespeople

Evaluate performance and make


adjustments where necessary
1-358
*
*
* Challenges in Selling and Sales Management

Two sets of ethical dilemmas are of particular concern to sales managers. The
first set is embedded in the manager’s dealings with the salespeople. Ethical
issues involved in relationships between a sales manager and the sales force
include such things as fairness and equal treatment of all social groups in hiring
and promotion, respect for the individual in supervisory practices and training
programs, and fairness and integrity in the design of sales territories, assignment
of quotas, and determination of compensation and incentive rewards. Ethical
issues pervade nearly all aspects of sales force management.

The second set of ethical issues arises from the interactions between salespeople
and their customers. These issues only indirectly involve the sales manager
because the manager cannot always directly observe or control the actions of
every member of the sales force. But managers have a responsibility to establish
standards of ethical behavior for their subordinates, communicate them clearly,
and enforce them vigorously.

Source: Mark W. Johnston and Greg W. Marshall, Sales Force Management, 7th ed., Burr Ridge, IL: McGraw-Hill/Irwin, 2003, 21.
1-359
*
*
* Business and Marketing Strategy Influences on Sales
Strategy

Business Strategy
Promotion
Strategy Market
Target(s)
SALES Strategy
STRATEGY
Pricing Product
Strategy Strategy

Distribution Strategy

1-360
*
*
*
Escalating customer
Marketing expectations
productivity crisis Intense global
competition

SALES FORCE
CHALLENGES
Mergers and
acquisitions
Blurring of industry
boundaries
Technology
Advances
1-361
*
*
* Range of Selling Roles
Transactional
Selling

Consulting-Type
Relationships

1-362
*
* Defining the Selling Process
* Finding Prospects

Opening the Relationship

Qualifying the Prospect

Presenting the Sales Message

Closing the Sale

Source: Mark W. Johnston and Greg W. Marshall, Sales Force Management,


Servicing the
McGraw-Hill/Irwin, 2003, 51-56.
Account 1-363
*
*
* The Selling Process Guides
 Recruiting
 Training
 Effort Allocation
 Organizational Design
 Selling Support Activities

1-364
*
*
* Selecting Sales Channels to End Users

 Major Account Management


 Field Sales Force
 Telemarketing
 Electronic/Mail Contact

1-365
*
*
* DESIGNING THE SALES ORGANIZATION

Organizational Structure

Deployment of Selling
Effort

1-366
*
*
* Sales Force Deployment
* Size of the Sales Force
* Allocation of Selling Effort
Salesperson skills and effort
PLUS
Market potential
Number and location of customers
Intensity of competition
Market (brand) position of the company

1-367
*
*
* Designing the Sales Organization
Customer needs
different

Market-Driven design Product/ Market-Driven


design
Simple Complex
product range of
offering products
Geography-Driven Product-
design Driven design
Customer needs
similar
1-368
*
*
* Selecting an Organizational Design
* What is the selling job?
* How much customer/product specialization is
necessary?
* Role of value chain (channel) relationships?
* How many sales management levels (hierarchy versus
process)?
* Will sales teams be used?
* Sales channels in addition to the field sales force?
* Are there any sales structure danger signals (high costs,
turnover, large sales variations across territory?

1-369
*
* INTERNET
* FEATURE: Salesforce.com Makes People More Productive
Salesforce.com is an interesting example of a dot-com start-up which has
developed a successful business model supplying customer management software
over the Net for use by salespeople. A key feature of the software is that it is sold
as a service to customers at a monthly charge for each individual user.
Salesforce.com has nearly 450,000 subscribers @ 22,700 companies worldwide.
Salesforce.com illustrates how Internet information technology can enhance the
capabilities and efforts of salespeople. By replacing large up-front software
purchases with monthly service charges, Salesforce.com offers customers a
compelling value opportunity. Since this feature can be duplicated by software
competitors such as Siebel Systems, Oracle, and PeopleSoft, Salesforce.com may
have difficulty sustaining its competitive edge.

CEO Marc Benioff launched a new product initiative in 2005 intended to strengthen
Salesforce.com’s competitive edge. AppExchange is an online market place
enabling software firms and customers to trade and sell applications they develop.
There will be no charge for the eBay like service but Benioff expects to expand
demand for the firm’s software.
Source: Salesforce.com website and “An eBay for Business Software,” BusinessWeek, September 19, 2005, 78-79. 1-370
*
*
* Sales Force Size Example
40 Sales

Current level
35
Maximum profit
contribution level
30

25
Gross profit
contribution

20

Selling
15 expense

10 60 70 80 90 100 110
Number of salespeople 1-371
*
*
* Managing the Salesforce

 Finding and Selecting Salespeople


 Training/Development
 Management Control
Monitoring
Directing
Evaluating
Rewarding
1-372
*
*
STRATEGY
* FEATURE:
Wyeth Reorganizes the Sales Force to Improve Productivity

 Wyeth’s changes in the sales organization are


driven by concerns of physicians about duplicated
sales coverage and the need to improve salesforce
productivity.
 The prior approach of multiple salespeople calling on
doctors to market the same drugs is being changed.
 Out of Wyeth’s salesforce of 5000, about half call on
primary-care doctors. As many as 750 nay be cut or
reassigned.
 The selling strategy is to reduce the frequency of
sales calls, while making each more worthwhile.
 Initiatives include assigning each salesforce
responsibility for more drugs, reducing sales calls on
the doctors who write the fewest prescriptions, and
utilizing a part-time sales force for coverage of
selected accounts, and use of Internet-based
seminars.
Source: Scott Hensley, “Wyeth to Revamp, Cut Its Sales Force,” The Wall Street Journal, June 20, 2005, A3, A6.
1-373
*
*
* Sales Force Evaluation and Control

Performance
Measures

Focus on Management Control


and/or Outcomes?

Performance
Standards

1-374
*
*
* Reinventing the Sales Organization

Customer
Relationships

SALES MANAGER
Performance Huddles CHALLENGES Sales Structure

Keeping Score

1-375
*
*
* INTERNET STRATEGY

 Strategy Development
 Deciding Internet Objectives
 E-Commerce Strategy
 Value Opportunities and Risks
 Measuring Internet Effectiveness
 The Future of the Internet

1-376
*
*
* Internet Strategy Alternatives

Promotional
Medium

Communication Tool

Value-Chain Channel

Separate Business
Model
1-377
*
*
* Deciding Internet Objectives

 Creating Awareness and Interest


 Information Dissemination
 Obtaining Research Information
 Brand Building
 Improving Customer Service

1-378
*
*
* Designing Internet Strategy
1. Customer Groups Targeted
2. Value Proposition
3. Communications Strategy
4. Designing the Website
5. Structure of the Organization
6. Alliance Partners
7. Shareholder Value
8. Tracking Performance
1-379
*
*
* Measuring Internet Effectiveness
Challenging but capabilities are developing.
What should be measured and how?
Major changes are likely through trial and
error.
Alternative measures:
Ad impressions, clicks, unique
visitors, total visits, page impressions

1-380
*
*
* E-Tailing Finally Hits Its Stride
The E-tail Effect
How e-commerce is shaking up the retail landscape:
THE BIG GUNS ARRIVE
After early struggles, online sales at brick-and-mortar giants such as Wal-Mart,
Sears, and Gap are soaring. These chains are also using the Web to test new
products and move into new markets.
NICHES GO NATIONAL
More and more niche players are succeeding by offering variety rivals can’t match.
Luggage seller eBags, for example, is able to stock 12,000 styles, compared with
250 in a typical store.
SEARCH LENDS A HAND
Using Google and similar Websites, consumers can search far and wide for
specialized products – say, stainless-steel farm sinks. That’s creating markets for
lesser known brands and new merchants.
MORE PRICING PRESSURES
Shoppers are increasingly using price-comparison sites such as Shopping.com and
Shopzilla. The result: Ever more cutthroat competition for brick-and-mortar and
online stores alike.
Source: “E-Tailing Finaly Hits Its Stride,“ BusinessWeek, December 20, 2004, 36-37.
1-381
*
*
* The Future of the Internet

Revolutionary for certain


industries and incremental for
others.

1-382
*
*
* DIRECT MARKETING

Kiosk
Catalogs
Shopping

Electronic DIRECT
Direct Mail
Shopping MARKETING

Radio/Magazine/ Telemarketing
Newspaper
Television

1-383
*
*
* Advantages of Direct Marketing
 Socio-economic Trends
Time constraints/
convenience
 Low Access Costs
Much lower than face-to-face
contact
 Data Base Management
Facilitates direct marketing
initiatives
 Value
An attractive bundle of value
1-384
Chapter 14

Designing
Market-Driven
Organizations

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
*
* Designing market-driven organizations
* Trends in organization design
* Organizing for market-driven strategy
* Marketing departments
* Structuring marketing resources
* Organizing for global marketing and
global customers

1-386
*
*
* Designing market-driven organizations
* Procter and Gamble
* Global restructuring to improve innovation and
competitiveness
* Global business units for products and market
development units to tackle local market issues
* Change agents appointed to work across
business units
* Virtual innovation teams work through intranet
* Organization design supports clear strategies so
all business disciplines can work together

1-387
*
*
* Trends in organization design (1)
* The New Organization
* Traditional structures
* Centralized, vertical, “command and control”
* Organizational design shifts
* Innovation
* The knowledge-based worker
* Managing culture
* Collaborative working
* Informal networks
* Organizational diversity and external
relationships
1-388
*
*
* Organization costs
* Cadbury Schweppes - world’s largest
confectionery business
* Restructuring at cost of $900 million
* Organizational structure has become too
complex with too many overlaps
* Organizational costs account for 20% of
turnover - compared to 12% at competitors
* Reorganization is central to regaining
competitiveness

1-389
*
*
* Trends in organization design (2)
* Managing organizational processes
* Organizational agility and flexibility
* Zara
* Toyota
* Employee motivation
* “MySpace Generation”

1-390
*
*
* Alternative Organizational
Traditional
Hierarchy
Structures
Process
Overlay
Functional
Structure

Process
Structure
Functional
Overlay Horizontal
Structure

1-391
*
*
* Process-based organizational structure
Processes that define value
e.g. knowledge management, CRM
Processes that create value
Process e.g. new product development,
Leadership innovation
Processes that deliver value
e.g. logistics, customer service,
value chain relationships
Coordination
mechanisms
to link Specialist resource groups support process
process and Managers e.g. functional departments,
resource business units, external collaborators
leadership Resource Group Leadership

1-392
*
*
* The Toyota way
* Pillar I
* Challenge
* Kaizen - continuous improvement
* Genchi Genbutsu - go and see for
yourself
* Pillar II
* Respect
* Teamwork
* EM2 - Everything Matters Exponentially
1-393
*
*
* The MySpace Generation
* Lives online - social networking sites are a
way of life
* Children of the babyboomers
* Ambitious, demanding and question
everything
* Work/life balance is very important
* Expected to be the highest maintenance
workforce in history and the most high-
performing
* “You raised them, now manage them”
1-394
*
*
* Organizing for market-driven strategy (1)
* Strategic marketing and organization
structure
* Aligning the organization with the market
* Informal lateral integration
* Integrating mechanisms
* Full customer alignment

1-395
*
*
* Customer-based front-end organization
Senior Management

Mediation
from the
center

Shared planning and metrics Customer-based


Back-end Units
Internal linkages Front-end Units

Product customers Solutions customers

1-396
*
*
* Organizing for market-driven strategy (2)
* Marketing functions versus marketing processes
* Marketing as cross-functional process
* The challenge of integration
* Marketing’s links to other functions
* Finance/accounting
* Operations
* Sales
* R&D
* Customer service
* Human resource management
* Approaches to achieving effective integration

1-397
*
*
* Marketing departments
* Centralization versus decentralization
* Integration or diffusion
* Contingencies for organizing
* Evaluating organizational designs

1-398
*
*
* Organizing Concepts
Centralized Formalized
Nonspecialized

BUREAUCRATIC TRANSACTIONAL

Internal External
(hierarchical) (market)
Organization Organization
of Activity of Activity
ORGANIC RELATIONAL

Decentralized
Nonformalized
Specialized
1-399
*
*
* Structuring marketing resources (1)
* Structuring issues
* Functional organizational design
* Product-focused design
* Product/brand management
* Category management
* Venture teams
* New product teams
* Market-focused design
* Matrix design

1-400
*
*
* Traditional Marketing Organization Designs

Functional

TRADITIONAL Product-
Matrix
DESIGNS Focused

Market-
Focused

1-401
*
*
* Product-Focused Structure

1-402
*
*
* Marketing Organization Based on a Combination of Functions and
Products

1-403
*
*
* Structuring marketing resources (2)
* New marketing roles
* New marketing specializations
* Venture marketing organizations
* Partnering with other organizations
* Networked organizations

1-404
*
*
* New organizational structure for marketing
Vice President
of Marketing

Director of Chief
Product Customer
Management Officer

Customer Customer Marketing


Service Database Research

1-405
*
*
* The Marketing Coalition Company

Source: Ravi S Achrol, “Evolution of the Marketing Organization: New Forms for Turbulent
Environments”, Journal of Marketing, October 1991, 88.
1-406
*
*
* Organizing for global marketing and global customers

* Organizing for global marketing strategies


* Business functions
* Organizational issues
* Coordination and communication
* Organizing for global customers
* The growth in global retailers
* Global account management structures

1-407
*
*
* Global account management at Microsoft
* Single executive/team in charge of single
customer and all global needs
* Restricted to customers by revenue size but
also willingness/ability to partner
* Senior managers encouraged to develop
relationships with senior managers at global
accounts
* Global business managers work across
business units, functions and organizations

1-408
Chapter 15

Marketing Strategy
Implementation
and Control

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
*
* Marketing strategy implementation and control

* The strategic marketing planning process


* Implementing the strategic marketing plan
* Strategic marketing evaluation and control
* Marketing performance measurement
* Global issues for planning, implementation
and control

1-410
*
*
* Marketing strategy implementation and control

* Fiat - strategic turnaround in auto industry


* Debts, losses, market share falling,
reputation for low quality, diversification
* Recovery strategy of radical restructuring,
dismantling management and bureaucracy
* Marketing, operations and R&D overhauled -
small car focus
* Range of strategic relationships established

1-411
*
*
* The strategic marketing planning process
* The marketing plan guides
implementation
* Contents of the marketing plan
* Managing the planning process

1-412
*
*
* Strategy and planning relationships

MARKETING STRATEGY

Annual Annual
Annual Marketing Marketing
Marketing Planning Planning
Planning

Implementation Implementation
Control and Evaluation Control and Evaluation
Revision Revision

1-413
*
*
* 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 the
strategies 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 and wants that differ to
some degree from other targets. These differences may be with
respect 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 of each target.
An objective is a quantified goal identifying what is expected
when. It specifies the 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.

1-414
*
*
* MARKETING PLAN OUTLINE
III. Positioning Statements

Write statements that describe how you want each market


target to perceive each product relative to competition. State the
core concept used to position the product (brand) in the eyes and
mind of the targeted buyer. The positioning statement should
describe: (1) What criteria or benefits the customer considers when
buying a product along with the level of importance, (2) What we
offer that differentiates our product from competition, and (3) The
limitations of competitive products.

1-415
*
*
* IV. Market Mix Strategy for Each Market Target

A. Product Strategy
Identify how each product fits the market target. Other issues
that may be addressed would be 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.

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*
*
* IV. Market Mix Strategy for Each Market Target

C. Distribution Strategy
Describe specific distribution strategies for each market
target. Issues to be addressed are intensity of distribution
(market coverage), how distribution will be accomplished, and
assistance provided to distributors. The role of the sales force
in distribution strategy should also 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, the
attributes or benefits of our product should be identified for
each market target. How our product differs from competition
(competitive advantage) should be listed. The sales force’s
responsibilities 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.

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*
*
*
E. Marketing Research

Describe the market research problem and the kind of


information needed. Include a statement which addresses
why this information is needed. The specific market
research strategies can be written once the above two
steps have been followed.

V. Coordination with Other Business Functions

Indicate other departments/functions that have


responsibilities for implementing the marketing plan.

VI. Sales Forecasts and Budgets

VII. Contingency Plans

Indicate how your plans should be modified if events


should occur that are different from those assumed
in the plan.
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*
*
* Dimensions of Planning Process

Analytical Techniques
Process Procedures
Dimension Systems
Planning Models

Marketing Behavioral Managerial Process


Planning Process perceptions
Consistency
Process Dimension Participation
Strategic
assumptions
Organizational Structure
Process Information
Dimension Culture

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*
*
* Implementing the strategic marketing plan (1)

* Implementation process
* Structural issues
* Behavioral issues
* Building implementation effectiveness
* Organizational design
* Incentives
* Communications
* Internal marketing
* Comprehensive approach to improving
implementation

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*
*
* Implementation process
Activities to
be implemented

Responsibility for How implementation


implementation IMPLEMENTATION will be done
PROCESS

Time and location


of implementation

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*
*
* Improving Implementation
Skilled
Implementers

Effective Organizational
Communications Design
Improving
Implementation

Internal Incentives
Marketing

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*
*
* Internal Marketing
Strategy

Plan

Internal External
Marketing Marketing
Program Program

Internal Marketing External Marketing


Program: Program
Targeted at key Targeted at key
groups in the customers, segments
company, alliance and niches, and other
partner companies, external influencers
and other influencers

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*
*
* Comprehensive Approach to Improving Implementation
Financial
Measures

BALANCED
Learning
and
SCORECARD Customer
Innovation MANAGEMENT Measures
Measures CONTROL
SYSTEM

Internal
Business
Process
Measures
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*
*
* Implementing the strategic marketing plan (2)

* Internal strategy-organization fit


* Organizational stretch
* The role of external organization

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*
*
* Strategic marketing evaluation and control (1)

* Customer relationship management


* Overview of control and evaluation activities
* Find new opportunities/avoid threats
* Keep performance in line with
expectations
* Solve specific problems

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*
*
* Evaluation Activities

Find New
Opportunities
or Avoid
Threats
Solve Keep
Specific Performance
Problems on Target

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*
* Evaluation and control
* Conduct
strategic
marketing
audit

Select performance
criteria and
choose relevant
marketing metrics

Obtain and
analyze
information

Assess
performance and
take necessary
action
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*
*
* Strategic marketing evaluation and control (2)
* The strategic marketing audit
* Results provide basis for selecting
performance criteria to assess actual
performance against lans

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*
*
* Strategic Marketing Audit

Corporate Mission and Objectives

Business Composition and Strategies

Marketing Strategy (for each planning


unit)

Marketing Program Activities

Implementation and Management


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*
*
* Marketing performance assessment (1)
* The importance of marketing metrics
* The use of marketing metrics
* Types of marketing metrics
* Selecting relevant metrics
* Designing a management dashboard

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*
*
* Marketing metrics (A)
* Marketing metrics focusing on operations
* Competitive and customer metrics
* Profitability metrics
* Product and portfolio metrics
* Customer profitability metrics
* Sales and channel metrics
* Pricing metrics
* Promotion metrics
* Advertising, media and web metrics
* Financial metrics

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*
*
* Marketing metrics (B)
* Brand equity metrics
* Familiarity
* Penetration
* What they think about the brand
* What they feel
* Loyalty
* Availability
* Innovation metrics
* Strategy
* Culture
* Outcomes
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*
*
* Marketing metrics (C)
* Internal market metrics
* Awareness of corporate goals
* Perceived caliber of employer
* Relative employee satisfaction
* Commitment to corporate goals
* Employee retention
* Perceived resource adequacy
* Appetite for learning
* Freedom to fail
* Customer-brand empathy
* Internal process metrics
* E.g., internal communications
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*
*
* Marketing performance assessment (2)
* Interpreting performance measurement results
* Opportunities and performance gaps
* Problem/opportunity definition
* Interpreting information
* Determining normal and abnormal variability
* Deciding what actions to take

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*
*
* Global issues for planning, implementation and control

* Global marketing planning


* Additional complexity
* Simplifying assumptions
* Limited information availability
* Accommodate international strategy variability
* Implementation globally
* Importance of relationships between domestic
and international executives
* Performance measurement and control globally
* International markets may require different
metrics

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