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MARKETING STRATEGY PROCESS“Marketing Strategy”
By
Walker Mullins Boyd Larreche
UNDERSTANDING MARKETING STRATEGY
OPPORTUNITY ANALYSIS
FORMULATING MARKETING STRATEGIES
IMPLEMENTATION AND CONTROL
MARKETING STRATEGY PROCESS
1
2
3
4
WHERE ARE WE NOW ?Environmental Analysis: Market information and intelligence
WHERE DO WE WANT TO BE ?Strategic marketing decisions and choicesSegmentation, targeting and positioning strategiesRelationship strategies
HOW WILL WE GET THERE ?Product innovation and development strategiesBranding strategiesPricing and distribution strategiesMarketing communication strategies
DID WE GET THERE ?Strategy implementation and control
UNDERSTANDING MARKETING STRATEGY
1. Marketing perspective in successful Corporate, Business and Marketing strategies
2. Corporate strategy decisions and their marketing implications
3. Business strategies and their marketing implications
1. Identifying attractive markets
2. Industry analysis & competitive advantage
3. Measuring market opportunities
4. Targeting attractive market segments
5. Differentiation and positioning
OPPORTUNITY ANALYSIS
FORMULATING MARKETING STRATEGIES
1. Marketing strategy for new markets
2. Strategies for growth markets
3. Strategies for maturing and declining markets
4. Marketing strategies for new economy
IMPLEMENTATION AND CONTROL
1. Organising and planning for effective implementation
2. Measuring and delivering marketing performance
UNDERSTANDING MARKETING STRATEGY
WHAT IS STRATEGY ?
A strategy is a fundamental pattern of
……. present and planned objectives
……. resource deployments
…….. Interaction of an organization with :
( A ) Markets
( B ) Competitors
(C ) Other Environmental factors
Strategy specifies :
WHAT Objectives to be accomplished
WHERE On which industries and product markets to focus
HOW
Which resources and activities to allocate to each product market to meet environmental opportunities and threats and gain competitive advantage
IDENTIFICATION OF
SUSTAINABLE COMPETETIVE ADVANTAGE
RESOURCE DEPLOYMENTS
SCOPEGOALS
&OBJECTIVES
SYNERGY
1 2
3
4
5COMPONENTS
OFMARKETINGSTRATEGY
SCOPE
Refers to the breadth of its
strategic domain
--- Number & types of industries
--- Product lines
--- Market segments
REFLECTS MANAGEMENT’S VIEWS OF THE FIRM’S PURPOSE OR MISSION
GOALS&
OBJECTIVES
Desired level of achievements
--- Volume growth
--- Profit contribution
--- Return on investments
OVER SPECIFIC TIME PERIODS FOR EACH BUSINESS/PRODUCT-MARKETS/ORGANIZATION AS A
WHOLE
RESOURCE DEPLOYMENTS
Involves deciding on how resources are to be obtained and allocated
--- Across business
--- Product-markets
--- Functional departments
--- Activities within each business or product-market
IDENTIFICATION OF SUSTAINABLE COMPETITIVE ADVANTAGE
A specification of how the firm will compete in each
business and product-market within its domain
--- Examine market opportunities in each business/product-markets
--- Firm’s distinctive competencies /strengths relative to competitors
SYNERGY
Synergy enables the total performance of the related
businesses to be greater than it would otherwise be
Synergy exists when the firm’s business, product-markets, resource deployments, and
competencies complement and reinforce each other
Indirect approach
Speed
Unbalancing competition
Alternate objectives
ConcentrationSTRATEGY
STRATEGY PRINCIPLES
Speed
Through
Use of technology
Efficient organization
Organizational flexibility
1. Reduce reporting levels, increase the pace of communication
2. Encourage ideas, flexibility and initiatives for identifying and taking advantage of new opportunities
3. Use cross-functional strategy teams that tap any cultural diversity that exists in your firm, thereby benefitting from multiple perspectives
Indirect approach
Helps
Concentrate on market opportunity with competitive advantage built around product ,price, promotion and distribution
Helps
To position product or service through customer relationship and enhancing competitive position
1. Search for emerging, neglected, or poorly served market segments through competitive analysis and fill product gaps 2. Identify competitive advantage centred on price, product, distribution and promotion 3. Use movement, speed and alternative objectives to disorient your competitor 4. Move towards market expansion, once you have gained a point of entry.
Concentration
Has two uses
Directing resources towards a market segment or target
group
Focus your strengths against the weakness of your
competitor
1. Determine the weakness of competitor through Competitive analysis
2. Determiner you unique competencies or natural strengths through Internal Analysis
Alternate objectives
Essential for business
Helps Concentration
Permits flexibility
Confuses competitors
Alternate objectives helps in forcing the competing company to make mistakes through : Inaction Distraction False moves
Misinterpretation
Unbalancing competition
Is caused through
Speed
Indirect Approach Concentration
Alternative objectives
Which produce, psychological and physical unbalancing effects on competitors
OPPORTUNITY ANALYSIS
OPPORTUNITY ANALYSIS
Identifying attractive markets
Industry analysis and competitive advantage
Measuring market opportunities
Targeting attractive market segments
Differentiation and positioning
Identifying attracive markets
MACRO TREND ANALYSIS A Framework For Assessing Market Attractiveness
Demographic environment
Socio-cultural environment
Economic environment
Political/Legal environment
Technological environment
Demographic environment
Family structure
Aging Geographic distribution
Ethnic composition
Implications for market attractiveness
Rapid Economic Devl. : Boon for capital goods manufacturersAging Population : Senior citizens home conveniences Demographic Trends : Development of special products and programmes Real state boom
Socio-cultural environment
Values Attribute Behaviour
Implications for market attractiveness
Changes in consumer : Natural foods, exercise equipment tastes & behaviour ,sports beverages, low-fat food products and men’s apparel
Political/Legal environment
Regulations Risks
Confiscation ( seizure without compensation )
Expropriation ( seizure with some compensation)
Domestication (Transfer of ownership to host country)
Regulatory environment reflect a country’s
economic maturity and political philosophy
Presents a firm with strategic opportunities as well as threats
GOVERNMENT REGULATION
Relate to
Foods and drugs as well as price products promotion and distribution
May favour companies producing a variety of items for several countries
May require firms …. To make costly design changes …. To substantially retool …. To add new quality control systems
Safety Health and Environmental standards
GOVERNMENT DEREGULATION
Removes
Protection of inefficienciesBarriers to entry of competitors
Leads to actions such as
… Improving pricing capabilities… Finding different ways to differentiate their services… Conserve capital to maintain flexibility… Increase their marketing skills
Economic environment
Implication for market attractiveness
FORMULATING MARKETING STRATEGIES
FORMULATING MARKETING STRATEGIES
STRATEGIES FOR NEW MARKET ENTRY
STRATEGIES FOR GROWTH MARKETS
STRATEGIES FOR MATURE & DECLINING MARKETS
STRATEGIES FOR NEW ECONOMY
STRATEGIES FOR NEW MARKET ENTRY
There are six categories of new products based on their degree of newness as perceived by both… the company and the target customers. These categories are discussed below in the diagram which also indicates the percentage of new entries falling in each category . Notice that only ten percent of all new product introductions fell into the category of new-to-the-world category.
HOW NEW IS NEW ?
High
Low
HighLow
New
nes
s to
th
e co
mp
any
Newness to the market
20%
10%
7%
11%
26%26%
Repositioning
Revisions/ improvements to existing products
Cost reductions
Additions to existing product lines
new-to-the-world products
New product lines
Categories of New Products Defined According to Their Degree of Newness to the Company and Customers in the Target Market
HOW NEW IS NEW ?
New to the world products
True innovations that are new to the firm and create an entirely new market (10 percent)
MIXER GRINDER
HOW NEW IS NEW ?
New products lines
A product category that is new for the company introducing it, but not new to the customers in the target markets because of the existence of one or more competitive brands new market (20 percent)
ADDITION TO EXISTING LINES
New items that supplement a firm’s established products. These may be moderately new to both the firm and the customers. They serve to expand the market segments (26 percent)
FAIR AND HANDSOME
IMPROVEMENTS IN OR REVISION OF EXISTING PRODUCTS
Items providing improved performance or greater perceived value brought to replace existing products (26 percent)
REPOSITIONINGS
Existing products that are targeted at new applications and new market segments (7percent)
Cadbury’s chocolate
COST REDUCTIONS
Product modifications providing similar performance at lower cost (11percent)
Strategic Objectives of New product and Market Development
Defend the market position
Pre-empt market segment
Maintain position as product innovator
Exploit technology in a new way
Capitalize on distribution strengths
Provide a cash generator
Use of excess off-season capacity
EX
TE
RN
AL
LY
DR
IVE
N
INT
ER
NA
LL
Y D
RIV
EN
10% 30%20% 40% 50%
Establish foothold in new market
OBJECTIVE NEW ENTRYMaintain position New to the world products; improvements or as product innovator to the existing products
Defend a current market Improvements or revisions to existing share position products; additions to existing products; cost reductions
Establish foothold in the New- to- the world products; addition to market; Pre-empt market existing product line; repositioning segment
Exploit technology in a New-to-the-world products; new product new way line; additions to or revision of existing product line
Capitalize on distribution New-to-the-world products; new product strengths line; additions to or revision of existing product line
Provide a cash generator Additions or revisions of existing product line ; repositioning; cost reductions
Use of excess off-season New-to-the-world product; new product line
Types of New Market Entries Appropriate for different Strategic Objectives
STRATEGIES FOR GROWTH MARKETS
SHARE GROWTH STRATEGIES FOR MARKET LEADERS
Marketing objectives of share leaders
(1)Retain its current customers
(2)Stimulate selective demand among later adopters
Ensuring that those customers remain brand loyal when making repeat or replacement purchases. This is particularly critical for firms in consumer non-durables, service, industrial materials and components industries.
To ensure that it captures a large share of the continuing growth in industry sales.
(3)Stimulate primary demand
To help speed up overall market growth. This is particularly important in product markets where the adoption process is slow because of the technical complexity of the new product.
Marketing actions and strategies to achieve share maintenance objectives
--- Maintaining/improving satisfaction or loyalty--- Encouraging/simplifying repeat purchase--- Reducing attractiveness of switching
Retaining current customers
--- Head to head positioning against competitive offerings or potential offerings --- Differentiated positioning against competitive offerings or potential offerings
Stimulate selective demand among later adopters
The five activities suggested above can be grouped into strategies aimed at maintaining its leading share position : DEFENSE STRATEGY, FLANKER STRATEGY, CONFRONTATION STRATEGY, CONTRACTION OR WITHDRAWAL STRATEGY
ALSO REFER TO PPT ON “MARKET SITUATION STRATEGIES”
Fo
rtre
ss o
r P
osi
tio
n D
efen
se S
trat
egy Actions to
improve customer satisfaction and loyalty
Actions to encourage and simplify repeat purchases
One of the most crucial actions a leader must take to ensure that customers continue buying its products is to maximize its availability. To do this the firm must invest in :
--- plant and equipment to expand capacity in advance of demand--- systems to control inventory and logistics to provide a steady for flow of goods through the distribution system--- Build strong customer relationships to win over them
The leader should take steps to improve not only the physical product but customer’s perception of it as well .The advertising and sales promotion emphasis should shift from stimulating primary demand to building selective demand for the company’s brand. It should emphasize the brands superior features and benefits. It should encourage repeat purchases among existing customers.
Flanker Strategy
A competitor with sufficient resources and competencies can develop a differentiated product offering to appeal to the segment where the leader is weak and thereby capture a substantial share of the overall market To defend against this kind of attack, a leader might develop a second brand ( a flanker or fighting brand) to compete directly against the challenger’s offering.E.g. This was Toyota’s rationale for introducing its Lexus brand of luxury automobiles offering IBM lost 20 market share points in mid 1980s.A flanker brand can also be a lower quality product to appeal to a low-price segment brand to protect the leader’s primary brand from direct price competition.E.g. Pillsbury's premium quality Hungry Jack brand holds a major share of the refrigerated biscuit dough market. In an attempt to attract the price sensitive consumers, Pillsbury introduced Ballard, a low priced flanker brand
Confrontation Strategy
The competitor may choose to attack the leader head to head and attempts to steal customers in leader’s main target market. E.g. IBM lost 20 market share points in mid 1980s to competitors such as Compaq whose machines cost the same but offered performance levels that were better . Later IBM’s share of PC market eroded further as companies such as Dell, and Gateway introduced more convenient and efficient Internet ordering In such situation, the leader may not have a choice but to confront the competitive threat directly through --- pricing strategy--- promotion strategy--- re-establishing the competitive edge.
Market expansion Strategy
1. Defends its relative market share by expanding into anumber of market segments. This strategy’s primaryobjective is to capture a large share of new customergroups who may prefer something different from thefirm’s initial offering , protecting the firm from futurecompetitive threats from a number of directions
2. Develop line extensions, new brands or even alternative
product forms utilizing similar technology to appeal tomultiple market segmentsE.g. Nike captures and has sustained a leading share by
developing a series of line extensions offering technical , design and style features tailored to the preference of enthusiasts in nearly every sport.
3. Retain the basic product but vary the other elements of the marketing programme to make it more attractive to specific users.; specialized sales force, sales promotion efforts
Contraction or strategic withdrawal strategy
In highly fragmented markets, a leader may be unable to defend itself adequately in all segments. The firm may then have to abandon its efforts in some segments to focus on areas where it enjoys grater relative advantage or that have the greatest potential for growthE.g. IBM made an early attempt to capture the low end of the personal computers with the introduction of the PC Jr. But the firm eventually abandoned the effort to concentrate on the more lucrative commercial and education segments.
SHARE GROWTH STRATEGIES FOR FOLLOWERS
Marketing objectives of followers
(1)Displace the leader
(2)Attain share growth
Seek to displace the leader or become a powerful competitor within the total market.
This is particularly critical for firms in consumer non-durables, service, industrial materials and components industries.
Their major objective is to attain share growth , and the size of the increased relative share such challenger seek is usually substantial
Marketing actions and strategies to achieve share growth
--- Head to head positioning against competitor’s offering in the primary target market--- Technological differentiation from target competitors offering in its primary target market
Capture repeat/replacement purchases from current customers of the leader or other target competitors
--- Head to head positioning against target competitors in established market segments --- Differentiated positioning focused on untapped or underdeveloped segments
Stimulate selective demand among later adopters
ALSO REFER TO PPT ON “MARKET SITUATION STRATEGIES”
The five activities suggested above can be grouped into strategies aimed at maintaining its leading share position : FRONTAL ATTACK, LEAPFROG STRATEGY, FLANKING ATTACK, ENCICLEMENT ATTACK, AND GUERILLA ATTACK
Deciding whom to attack
Attack the market-share leader within the primary target marketThis typically involves either a frontal assault or an attempt to leapfrog the leader through the development of superior technology or product design. The challenger/follower can confront the leader through a series of guerilla attacks.
Attack another follower who has an established position within a major segmentThis usually involves a frontal assault , but it may be easier for the challenger to gain a sustainable competitive advantage .
Attack one or more smaller competitors who have only limited resourcesBy focusing on several small regional competitors one at a time, a challenger can sometimes achieve major gains without inviting retaliation from stronger firms.
Avoid direct attacks on any established competitorHere the challenger hits the competitors in fragmented markets in which the leaders or competitors are not currently satisfying one or more segments. This usually involves either a flanking strategy or encirclement strategy, with the challenger developing differentiated product offerings targeted at one large or several smaller segments in which no competitor currently holds a strong position.
Describing the attacks
Frontal Attack Strategy
When the market for a product category is relatively homogenous, with few untapped segments, and at least one well established competitor, a follower wanting to capture an increased market share may have little choice but to tackle a major competitor head on.
To successfully implement a frontal attack, a challenger should seek one or more ways to achieve a sustainable competitive advantage over the target competitor.
Such an advantage is usually based on attaining lower cost or differentiated positioning.
E.G. Indigo had a cost advantage over Kingfisher and other Airlines, so it could lure away the customers from its competitors by offering lower fares.
Or the challenger can maintain the same price as the competitor but engage in more extensive promotion.
Describing the attacks
Leapfrog Strategy
When the market for a product category is relatively homogenous, with few untapped segments, and at least one well established competitor, a follower wanting to capture an increased market share may have little choice but to tackle a major competitor head on.
To successfully implement a frontal attack, a challenger should seek one or more ways to achieve a sustainable competitive advantage over the target competitor.
Such an advantage is usually based on attaining lower cost or differentiated positioning.
E.G. Indigo had a cost advantage over Kingfisher and other Airlines, so it could lure away the customers from its competitors by offering lower fares.
Or the challenger can maintain the same price as the competitor but engage in more extensive promotion.
Describing the attacks
Flank & Encirclement Strategies
Flank AttackThis usually involves developing product features or services tailored to the needs and preferences of the targeted customers, together with appropriate promotional and pricing policies to quickly build selective demand.A flank strategy is appropriates when the market can be broken into two or more large segments, when the leader and/or major competitors hold a strong position in the primary segment, and no existing brand fully satisfies the needs of customers in at least one other segment.E.g. Japanese car manufacturers penetrated the US car market by focusing on low price segments where US car manufacturers’ were limited. EncirclementAn encirclement involves targeting several smaller untapped or underdeveloped segments in the market simultaneously. The idea is to surround the leader’s brands with a variety of offerings aimed at several peripheral segments. This strategy usually involves developing a varied line of products with features tailored to the needs of different segments.
E.G. Rather tan compete with Coke and Pepsi in the soft drink market, Cadbury-Schweppes offers a wide variety of flavors such as cream soda, root beer, and ginger ale--- almost anything but Cola to appeal to small groups of customers with unique tastes.
Describing the attacks
Guerilla Attack
When well established competitors already cover all major segments of the market, and the challenger’s resources are relatively limited, the challenger may be reduced to making a series of surprise raids against its more established competitors.
A challenger can choose from a variety of means for carrying out guerilla attacks. These include 1. Sales promotion efforts. E.g. Coupon drops and merchandising deals 2. Short term price reductions through are a particularly favoured guerilla attack in consumer goods markets.
3. Carefully targeted direct mail, public relations, or internet marketing campaigns.
4. Legal action against the leader over a range of activities can effectively slow down the leader’s expansionist tendencies.
STRATEGIES FOR MATURE & DECLINING MARKETS
CHALLENGES IN MATURE MARKETS
--- Market growth stagnates, total volume stabilizes
--- Replacement purchase rather than first time buyers account for the vast majority of the volume
--- The primary marketing objective of all competitors in mature markets is simply to hold their existing customers
--- To sustain a meaningful competitive advantage that will help ensure the continued satisfaction and loyalty of the customers
--- To achieve and sustain a lower delivered cost
Thus a share leader in a mature industry might build on a cost or product differentiation advantage and pursue a marketing strategy aimed at increasing volume by promoting new uses for an old product or by encouraging current customers to buy and use the product more often
MARKETING STRATEGIES FOR MATURE MARKETS
Marketing Strategies For Mature Markets
Strategies for maintaining current market shareThe most obvious strategy for share leaders is simply to continue to strengthen their position through a fortress defense. This strategy involves two sets of marketing actions :
(a)Those aimed at improving customer satisfaction and loyalty--- Actions for improving the quality of firms offering and for reducing costs suggest ways to increase customer satisfaction and loyalty.
(b) Those intended to encourage and simplify repeat purchasing--- Improvements in service quality, such as just-in-time delivery arrangements or computerized reordering system, can help repeat purchases.
Since markets often become more fragmented as they grow and mature, share leaders may also have to expand their product lines ,or add one or more flanker brands to protect their position against competitive inroads.
Small competitors can also earn substantial profits in a mature market. They should focus on strategies that avoid prolonged direct confrontation with large share leaders.
A niche strategy can be particularly effective when the target segment is too small to appeal to larger competitors or when the smaller firm can establish a strong differential advantage or brand preference in the segment.
Marketing Strategies For Mature Markets
Strategies for extending volume growthIncreased penetration strategy :Convert current nonusers in the target segment into users by :--- enhancing product’s value by adding features, benefits or service--- enhancing product’s value by including in it the design of integrated system--- stimulate additional primary demand through promotional efforts stressing new features and benefitsExtended use strategyIncrease frequency of use among current users by :--- move storage of product closer to the point of end use by offering additional package size or designs--- encourage larger volume purchases by offering discounts or consumer promotions--- reminder advertising stressing basic product attributes for a variety of usage occasionsEncourage a wider variety of uses among current users--- develop line extensions suitable for additional uses or applications--- develop and promote new uses, applications or recopies for the basic product. --- encourage new uses through sales promotionMarket expansion strategy Develop differentiated positioning focused on untapped or underdeveloped segments.--- develop differentiated flanker brand or product line with unique features--- develop multiple extensions or brand offerings--- consider producing for private labels---design advertising, personal selling campaigns that address specific interests and concerns of potential customers--- enter global markets where product category is in an earlier stage of its life cycle
CHALLENGES IN DECLINING MARKETS
Technological advances, changing customer demographics, tastes, or lifestyles and development of substitutes result in declining demand for most product forms and brands
As products start to decline, managers face the critical question of whether divest or liquidate the business. The challenge is to :
--- Produce substantial sales and profits in a declining
MARKETING STRATEGIES FOR DECLINING MARKETS
Marketing Strategies For Declining Markets
HarvestingStrategyMaximize short term cash flow; maintain or increase margins even at the expense of market share decline.
--- eliminate R & D expenditure and capital investments related to business--- reduce marketing and sales budgets--- seek ways to reduce production costs--- raise price if necessary to maintain margins
Maintenance StrategyMaintain market share for the short term, even at the expense of margins.
--- design service programmes to reduce perceived risks of trial/or solve the unique problems faced by potential customers--- continue product and process R & D in short term aimed at improving product quality--- continue maintenance level of advertising and sales promotion targeted at current users--- continue trade promotions at levels sufficient to avoid any reduction ion distribution coverage--- focus sales efforts on attaining repeat purchases from current users--- lower prices if necessary to maintain share, even at the expense of reduced margins
Marketing Strategies For Declining Markets
Proftable Survivor StrategyIncrease share of the declining market; encourage weaker competitors to exit.
--- signal competitors that firm intends to remain in the industry and pursue an increased share by maintaining or increasing advertising, sales promotion and sales force efforts--- consider introducing line extensions to appeal to remaining demand segments--- low prices if necessary to increase share, even at the expense of short term margins---consider agreements to produce replacement parts or private labels for smaller competitors considering getting out of production
Niche StrategyStrengthen the share position in one or a few segments with potential for continued profits.
---continued product and process R & D aimed at product improvements or modifications that will appeal to target segments---consider producing for private labels in order to maintain volume and hold down unit costs--- focus advertising, sales promotion and personal selling campaigns on customers in target segments; stress appeals of greatest importance to those customers---maintain distribution channels appropriate for reaching target segment; seek unique channel arrangements to more effectively reach customers in target segments---design service programmes that address unique concerns/problems of customers in the target segments