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

McGraw-Hill/Irwin

Chapter 1

Imperatives for Market-Driven Strategy

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

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Objectives

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Pivotal role of market-driven strategy in designing and implementing business/marketing strategies

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Links between business/marketing strategy and corporate strategy

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Challenges in the modern environment

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* * * Characteristics of a Market-Driven Strategy Becoming Market Orientation Achieving Superior Performance Customer Value/ Capabilities Match Determining Distinctive Capabilities

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Market-Driven Strategy (1)

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Becoming market-oriented

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Customer focus

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Competitor intelligence

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Cross-functional coordination

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Performance implications

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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

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* 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

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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

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Becoming a Market-Oriented Organization

Information Acquisition Cross-Functional Analysis of Information Shared Diagnosis and Coordinated Action Delivery of Superior Customer Value

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* * * 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

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Deliver superior customer value

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Market-Driven Strategy (2)

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Becoming market-oriented

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Customer focus

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Competitor intelligence

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Cross-functional coordination

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Performance implications

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Determining distinctive capabilities

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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.

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* * * Southwest Airline’s Distinctive Capabilities Organizational Processes Southwest uses a point-to-point route system rather than the hub-and-spoke 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

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* * * Disproportionate (higher) contribution to superior customer value

Capabilities

Compelling Logic of Distinctive Capabilities

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

Provides value to customers on a more cost-effective basis

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Capabilities

Desirable Capabilities Applicable to Multiple Competition Situations Difficult to Duplicate

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

Superior to the Competition

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Market-Driven Strategy (3)

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Becoming market-oriented

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Customer focus

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Competitor intelligence

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Cross-functional coordination

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Performance implications

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Determining distinctive capabilities

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Types of capabilities

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* * * Types of Capabilities Outside-In Processes Spanning Processes Inside-Out Processes

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* * * EXTERNAL EMPHASIS

Outside-In Processes

Organization’s Process

    Market sensing Customer linking Channel bonding Technology monitoring Spanning Processes  Customer order fulfillment    Pricing Purchasing Customer service delivery  New product/service development  Strategy development        Source: George S. Day, Journal of Marketing, October 1994, 41.

INTERNAL EMPHASIS

Inside-Out Processes Financial management Cost control Technology development Integrated logistics Manufacturing/ transformation processes Human resources management Environment health and safety 1-18

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Market-Driven Strategy (4)

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Becoming market-oriented

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Customer focus

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Competitor intelligence

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Cross-functional coordination

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Performance implications

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Determining distinctive capabilities

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Types of capabilities

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Creating value for customers

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* * * Matching Customer Value and Distinctive Capabilities Value Requirements Distinctive Capabilities

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* * * 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.

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Creating Value for Customers

Customer Value Benefits Costs

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* * * Product Services Employees Image Monetary costs Time Psychic and physic costs Value Composition Benefits Costs (sacrifices) Value (gain/loss)

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Market-Driven Strategy (5)

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Becoming market-driven

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Marketing sensing capabilities

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Customer linking capabilities

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Aligning structure and processes

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Becoming Market Driven

* Market Sensing Capabilities MARKET – DRIVEN STRATEGIES Customer Linking Capabilities

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* * * 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

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Aligning Structure and Processes * Potential change of organizational design * Improve existing processes * Process redesign * Cross-functional coordination and involvement * Primary targets for reengineering: * Sales and marketing, customer relations, order fulfillment, and distribution 1-27

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Corporate, Business and Marketing Strategy (1)

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What is corporate strategy?

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* * * C ORPORATE S TRATEGY Deciding the Scope and Purpose of the Business Business Objectives Actions and Resources for Achieving Objectives

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* * * CHARACTERISTICS OF SUCCESSFUL STRATEGY

 Unique competitive position for the company.

 Activities tailored to strategy.

 Clear trade-offs and choices vis à-vis competitors.

 Competitive advantage arises from fit across activities.

 Sustainability comes from the activity system not the parts.

 Operational effectiveness a given.

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

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Corporate, Business and Marketing Strategy (2)

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What is corporate strategy?

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Corporate strategy framework

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Deciding corporate vision

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Objectives

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Resources

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Business composition

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Structure, systems and processes

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* * * 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.

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Corporate, Business and Marketing Strategy (3)

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Business and marketing strategy

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Business and marketing strategy relationships

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Strategic marketing

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CORPORATE, BUSINESS AND MARKETING STRATEGY

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Corporate, Business and Marketing Strategy (4)

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The marketing strategy process

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Markets, segments and customer value

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Markets and competitive space

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Strategic market segmentation

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Strategic customer relationship management

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Capabilities for continuous learning about markets

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Corporate, Business and Marketing Strategy (5)

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Designing market-driven strategies

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Market targeting and strategic positioning

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Strategic relationships

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Innovation and new product strategy

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Market-driven program development

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Strategic brand management

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Value chain strategy

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Pricing strategy

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Promotion strategy

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Corporate, Business and Marketing Strategy (6)

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Implementing and managing market driven strategy

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Designing market-driven organizations

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Marketing strategy implementation and control

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* * * M ARKETING S TRATEGY P ROCESS Markets, Segments And Value Implementing and Managing Market-Driven Strategy Designing Market-Driven Strategies Market-Driven Program Development

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Challenges in the modern environment

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Escalating globalization

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Technology diversity and uncertainty

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The Web 2.0

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Ethical behavior and corporate social responsiveness

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Strategic Marketing Planning

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Developing the strategic plan for each business

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Preparing the marketing plan

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Planning relationships and frequency

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Planning considerations

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Responsibility for preparing plans

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Planning unit

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Preparing the marketing plan

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* * * MARKETING PLAN OUTLINE

I.

Strategic Situation Summary

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

II. Market-Targets and Objectives

The market target may be defined demographically (key characteristics only), geographically, or in social/economic terms. Each market target should have needs 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.

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* * * 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.

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IV. Market Mix Strategy for Each Market Target 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.

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.

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.

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

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V.

VI.

VII.

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.

Coordination with Other Business Functions

Indicate other departments/functions that have responsibilities for implementing the marketing plan.

Sales Forecasts and Budgets 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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