How to create successful strategies

Linking corporate marketing to your models of Strategic Management

Stephen Bibby SCi

Steve Bibby 2013 stephen.bibby@structuralchange.co.uk

We will cover..

• Marketing – what is it (surprising how many people get it confused with selling)

• What tools help us be good corporate marketeers ? – lots of tools

• Linking Marketing to corporate strategy

• Implementation

Recap - Strategy is …

Strategy is the direction and scope of an

organisation over the long term, which achieves

advantage in a changing environment through its

configuration of resources and competences with

the aim of fulfilling stakeholder expectations.

Johnson and Scholes 2006 p 9

Key Principles Marketing is…

• Marketing is the process used to determine

what products or services may be of interest to

customers, and the strategy to use in sales,

communications and business development

Holy grail of marketing...

1. knowing the needs and wants of target markets

2. exceeding the customers desired satisfactions

3. anticipate the needs and wants

and satisfy these more effectively than competitors

Sales strategy is different…. Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development

Marketing toolbox - 4 p’s (E J McCarthy 1960)

1. PRODUCT

The business has to produce a product that people want to buy. They have to decide which ‘market segment’ they are

aiming at – age, income, geographical location etc. They then have to differentiate their product so that it is slightly

different from what is on offer at present so that people can be persuaded to ‘give them a try’.

2. PROMOTION

Customers have to be made aware of the product. The two main considerations are target market and cost. A new

business will not be able to afford to advertise on national television, for instance and would not wish to because its

market will be local to start with. Leaflets, billboards, advertisements in local newspapers, Yellow Pages and ‘word of

mouth’ would be more appropriate.

3. PRICE

The price must be high enough to cover costs and make a profit but low enough to attract customers. There are a number

of possible pricing strategies. The most commonly used are:

PENETRATION PRICING – charging a low price, possibly not quite covering costs, to gain a position in the market. This

is quite popular with new businesses trying to get a ‘toehold’.

CREAMING – the opposite to penetration pricing, this involves charging a deliberately high price to persuade people that

the product is of high quality. Luxury car makers often use this strategy

COST PLUS PRICING – this is the most common form of pricing. Costs are totalled and a margin is added on for profit to

make the total price.

4. PLACE

The business must have a location that it can afford, and that is convenient and suitable for customers and any supplier.

Marketing Toolbox - Product Life Cycle

Typical Product Life Cycle 4 Phases 1. Introduction 2. Growth 3. Maturity 4. Decline

Marketing Toolbox – Boston Matrix Dogs: Low Market Share/Low Market Growth In these areas, your market presence is weak, so it's going to take a lot of hard work to get noticed. Cash Cows: High Market Share/Low Market Growth well-established, so it's easier to get attention and exploit new opportunities. However it's only worth expending a certain amount of effort, because the market isn't growing, and your opportunities are limited.

Stars: High Market Share/High Market Growth Here you're well-established, and growth is exciting! There should be some strong opportunities here, and you should work hard to realize them. Question Marks (Problem Child): Low Market Share/High Market Growth These are the opportunities no one knows what to do with. They aren't generating much revenue right now because you don't have a large market share. But, they are in high growth markets so the potential to make money is there.

Understanding Market Share and Market Growth

Market Segmentation Understanding different customer needs

Market segmentation increases the effectiveness of marketing spend, compared with what you'd achieve by marketing to the entire target market in the same way…

Market segments must always be distinct from each other Basis for segmentation means that the individuals within each group have similar need Market segments should also be: Accessible – Can you reach the segment through cost effective and practical communication and distribution channels? Measurable – Can you estimate the segment's size so that you can allocate marketing spend accordingly? Substantial – Is it large and long-lasting enough to justify its own marketing activity? Viable – Can people within the segment afford your product, and will they see clear and desirable advantages compared with other products and services?

Market segmentation – 4 bases

There are four common bases for segmenting your market: 1. Geographical – By country, or region.

2. Demographic – By age, gender, occupation, and so on.

3. Psychographic – By lifestyle, values, interests, and so on.

4. Behavioral – What you use the product for, brand loyalty, the

benefit you're looking for from the product, and so on.

Marketing Toolbox - Prioritisation (Ansoff matrix) Product/Market Expansion Grid

Existing markets New markets

Existing Products A - Market penetration More of the same

B - Market development Existing product into new markets

New products C - Product development New products into existing markets

D - Diversification New products into new markets

Why Use ? – screen options and make choices

Brand Pyramid Corporate goal is to get as many of your customers as possible to the higher levels of the pyramid.

Level 1: Presence aware of your brand, but little else. Level 2: Relevance customers start to think about whether the brand meets their wants and needs. It's here that they begin comparing the cost of your products with respect to the value these provide. Level 3: Performance customers begin comparing the brand with others, to see whether it delivers on its potential.

Level 4: Advantage At this level, customers have determined that there is a distinct advantage to using the brand, compared with others. They're also beginning to associate the brand with their emotions and with their sense of self. Level 5: Bonding Here, customers have established a bond with the brand. They've determined that cost, advantage, and performance are all at levels that they're happy with.

Corporate Social Responsibility (CSR)

3 Main elements Charitable giving – Many Corporates have a sense of moral and social responsibility, Although this is basically philanthropy, you can help develop your company's image by carefully selecting who receives your gifts.

Community investment – Many organizations also see the advantage of developing local communities in ways that can bring real returns to the business. For example, a telecommunications provider might want to sponsor Internet access in schools. In practice, they're helping to create the right long-term social conditions for the business to succeed by improving their reputation among consumers and as an employer of choice in the area.

Commercial initiatives – Carefully selected commercial initiatives can be very good for business, making a significant contribution to the bottom line. One possibility is working with a reputable charity - For example, a "Main Street" optician chain might support an initiative to improve eye care in the developing world. The idea of this "cause-related marketing" technique is to promote your brand and your reputation as a socially responsible company, with whom consumers will want to be associated.

Linking marketing to strategy

Porters Diamond Shaping Strategy and marketing to reflect National strengths and weaknesses

For organizations to deploy their resources effectively, they need to understand how global competition is likely to play out. An important part of this is understanding how the business conditions in one country differ from those in another country.

Competitive Advantage of Nations (1998)

Analyzing the areas of strength and weakness that can give a country, or industry within a country, a competitive advantage or disadvantage. • Factor Conditions (people, raw materials, land) • Demand Conditions (give advantage where you therefore export, high hoe demand

breeds advantage and anticipating trends by responding to savvy home consumers) • Firm (or organization) Strategy, Structure, and Rivalry (matching industries to

conditions such as small firms in Italy; matching investment appetites to firms) • Related and Supporting Industries (basis of cost and innovation levels)

Porters Diamond – how to use it Helps understand how these factors affect your organization, or yourself. Is there a long term future.. Identify the factor conditions that apply to the industry and country you work in. If your industry is successful internationally, what factors give the country an advantage over others? If it is struggling, why? Think about people, raw materials, capital, land, educational levels and technological expertise. What are the characteristics of the demand conditions in the country. Are domestic buyers discerning and demanding in the market or industry? Are there aspects of demand that are specific to that wouldn't apply anywhere else? And how do these compare with the situation in the countries that most successfully compete with it? Analyze the national approach to organization structure and the levels of competitive rivalry in your country. Is this what the industry needs? What are the related and supporting industries in like? Does the industry rely on imports, or benefit from high quality or low cost (or both) suppliers?

Porter – Generic Strategies Begin with the end in

mind.. Step 1: For each generic strategy, carry out a SWOT Analysis of your strengths and weaknesses, and the opportunities and threats you would face, if you adopted that strategy. Having done this, it may be clear that your organization is unlikely to be able to make a success of some of the generic strategies. Step 2: Use Five Forces Analysis to understand the nature of the industry you are in.

Step 3: Compare the SWOT Analyses of the viable strategic options with the results of your Five Forces analysis. For each strategic option, ask yourself how you could use that strategy to: Reduce or manage supplier power. Reduce or manage buyer/customer power. Come out on top of the competitive rivalry. Reduce or eliminate the threat of substitution. Reduce or eliminate the threat of new entry. Select the generic strategy that gives you the strongest set of options.

Developing the strategy Stage 1: Analyzing Your Context and Environment In this first stage, you ensure that you fully understand yourself and your environment. Analyze Your Organization look at your Core Competencies . Analyze Your Environment PEST Analysis , Porter's Diamond , and Porter's Five Forces are great starting points for analyzing your environment. Analyze Your Customers and Stakeholders look at your market in detail. Answer key questions such as "How is our market segmented ?", "What subpopulations can we reach cost-effectively?" and "What is our optimal Marketing Mix ?" Analyze Your Competitors USP Analysis helps you identify ways in which you can compete effectively.

Strategy development… Stage 2: Identifying Strategic Options Brainstorm Options Use creativity tools like Brainstorming , Reverse Brainstorming to explore projects that you could run to develop competitive advantage. Stage 3: Evaluating and Selecting Strategic Options Evaluate Options By this stage, you've probably identified a range of good projects that you could run. Start by evaluating each option in the light of the contextual factors you identified in Stage 1. - Choose the Best Way Forward

Implementing Strategy - It's no good developing a strategy if you don't implement it successfully,

and this is where many people go astray. - VMOST Analysis and the Balanced Scorecard can bridge the gap (Vision,

Mission, Objectives, Strategy, Tactics)

Porters 5 Forces - use the tool to understand your situation, look at each of these forces one-by-one Brainstorm the relevant factors for your market or situation, and then check against the factors listed for the force in the diagram mark the key factors on the diagram, and summarize the size and scale of the force on the diagram. An easy way of doing this is to use, for example, a single "+" sign for a force moderately in your favor, or "--" for a force strongly against you

Porters Diamond – an example

Buying a farm !!

Creating value - Porters value chain

The value that's created and captured by a company is the profit margin: Value Created and Captured – Cost of Creating that Value = Margin

Step 1 – Identify subactivities for each primary activity. For each primary activity, determine which specific subactivities create value Step 2 – Identify subactivities for each support activity. Step 3 – Identify links. Step 4 – Look for Opportunities to Increase Value.

Mintzberg 5Ps (1987) 1. Strategy as a Plan Planning is something that many managers are happy with, and it's something that comes naturally to us. As such, this is the default, automatic approach that we adopt - brainstorming options and planning how to deliver them. PEST Analysis , SWOT Analysis and Brainstorming help think about and identify opportunities; The problem with planning, however, is that it's not enough on its own. This is where the other four Ps come into play. 2. Strategy as Ploy Mintzberg says that getting the better of competitors, by plotting to disrupt, dissuade, discourage, or otherwise influence them, can be part of a strategy. This is where strategy can be a ploy, as well as a plan. For example, a grocery chain might threaten to expand a store, so that a competitor doesn't move into the same area; 3. Strategy as Pattern Strategic plans and ploys are both deliberate exercises. Sometimes, however, strategy emerges from past organizational behavior. Rather than being an intentional choice, a consistent and successful way of doing business can develop into a strategy. Tools such as USP Analysis and Core Competence Analysis can help you with this. A related tool, VRIO Analysis (Value; Rarity; Imitability; Organisational), can help you explore resources and assets (rather than patterns) that you should focus on when thinking about strategy. 4. Strategy as Position "Position" is another way to define strategy - that is, how you decide to position yourself in the marketplace. When you think about strategic position, it helps to understand the organization's "bigger picture" in relation to external factors. To do this, use PEST Analysis , Porter's Diamond , and Porter's Five Forces to analyze your environment 5. Strategy as Perspective The choices an organization makes about its strategy rely heavily on its culture - just as patterns of behavior can emerge as strategy, patterns of thinking will shape an organization's perspective, and the things that it is able to do well.

Implementing your marketing strategy

Question 1 – "why" – refers to your organization's values, mission, and vision. Question 2 – "what" – covers objectives and goals. Question 3 – "how" – refers the actions needed to realize these goals. Question 4 – "who" – refers to the people, systems and tools which deliver these.

Roadmap

Time

People

Processes

Communications

Aim

Summary

• Marketing – what is it (surprising how many people get it confused with selling)

• What tools help us be good corporate marketeers ?

• Linking Marketing to corporate strategy

• Implementation

Marketing Toolbox - Product Diffusion Curve

Innovators: Members of this group include in-the-know consumers who are willing to take a risk on a new product. Innovators represent the first 2.5% of people to adopt a new product. Early Adopters: gauge the response of the Innovators before rushing in purchasing a new product. They'll probably be educated and somewhat product savvy. Early Adopters represent about 13.5% of the total consumer population. Early Majority: more cautious and prefer to avoid the risk associated with purchasing an unproven product. Accept a product only after it has been approved by members of the Early Adopters group. The Early Majority represents 34% of consumers.

Late Majority: more skeptical. They are late to jump on board and do so only after a new product becomes mainstream. The Late Majority represents about 34% of consumers. Laggards: Members of this group are more than simply sceptical. In fact, they generally do not accept a new product until more traditional alternatives no longer are available. Laggards represent about 16% of consumers.

Customer Satisfaction

Adds Customer Value Destroys Customer Value

Give you a testimonial

Good news story

Repeat business

Recommendation

Good customer service

Staff feel ‘good’ about

Complain (inc to others)

Wouldn’t want reported

Embarrass you

Customer expectations vs

delivered

Staff ‘cringe’

Actions

• For A – list customers you have now, sell more, monitor contacts and seek new deal targets

• For B – list new clients who want what you have now, produce materials, contact

• For C – list potential clients, contact names and key information about them

• For D – Frame commercial offer, identify new clients and route to market

Exercise – for your product fill in your current methods by product type

Increasing awareness Repeat business new

PR Advertising Direct marketing

Promotion Personal selling

A – existing product, sell more

B – new clients existing product

C – new products to existing clients

D – new product to new clients

1= all the time

2 = sometimes

3 = never

Exercise – now try to fill in your future methods by product type – how might you do things differently ?

Increasing awareness Repeat business new

PR Advertising Direct marketing

Promotion Personal selling

A – existing product, sell more

B – new clients existing product

C – new products to existing clients

D – new product to new clients

1= all the time

2 = sometimes

3 = never

What information are you collecting on your customers ?

If you asked your customers the 3 things you could do

to improve your service what would they say ?

How satisfied are they with your service ?

Is the service better or worse than your competitors ?

If you are using indirect or distributors – how can

we find out ?

What information are you collecting on your competitors ?

If you could listen in on your competitors planning to

steal your market what 3 things would they be saying ?

Are they making any money ?

Are they losing or gaining market

share ?

Are you being ‘blindsided’ by a new technology ?

Are they targeting your distributor contracts ?

The sales process

Price – given or reached ?

Discounts – accepted or hard won ?

Negotiation Techniques – do you use them ?

Value added service – what is added that exceeds

expectations

What is the documented sales process in Arbil?

Does it look like this ? :

- Discovery

- Establishing value

- Competitive strategy

- Political strategy

- Implementation plan

Establish value Value Statement

Based on industry, market and

Client research

+

Meaningful

+

Curiosity compelling

=

A reason to receive me as a value-add

Professional

Enabling me

Get the right meetings focused on

The right issues

Value proposition

Based on results oriented dialogue

With the client

+

Measurable

+

Business specific and

Financially compelling

=

A logical business reason to do

Business with my company

Enabling me to

Offer superior business solutions

Value Application

Based on an individuals professional and personal agendas

+

Memorable

+

Personally compelling

=

A personal reason to give my offering favoured status

Enabling me to

Gain advantage over my competitors

Corp

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Pe

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Differentiation Analysis

Maintain Attack

Defend Explore

Your

strengths

Your

weaknesses

Competitors

Strengths Competitors

Weaknesses

End

Stephen.Bibby@structuralchange.co.uk