Ten crucial questions boards are asking their marketing ... · Yogi Bears Grizzly Bears Andropov Big Bears Uses an extended warranty to give them cover. Won’t do anything themselves,

Ten crucial questions boards are asking their marketing

professionals--- and the answers they should be giving

by Professor Malcolm McDonald

Marketors Think Tank Seminar 1st February 2010

Page 1Page 1

Objectives

• To show how to answer ten crucial questions boards of directors are asking about marketing effectiveness

Page 2

First, some basic concepts

The purpose of strategic marketing planning

The overall purpose of strategic marketing, and its principal focus is the identification and creation of sustainable competitive advantage.

© Professor Malcolm McDonald

Page 4

AssetBase

Define markets& understand

value

Determinevalue

Proposition

Delivervalue

Monitorvalue

Map of the marketing domain

Financial Risk and Return

High

Low

Return

HighLow

1

2

3

RiskAdapted from Keith Ward, Cranfield School of Management

“The customer is simply the fulcrum of the business and everything from production to supply chain, finance, risk management, personnel management and product development all adapt to and converge on the business value proposition that is projected to the customer”.

(The Customer Information Wars, Sean Kelly, Wiley, 2005)

Key elements of world class marketing

1.1. Profound understanding of the market-place

2.2. Creative segmentation and selection

3.3. Powerful differentiation positioning and branding

4.4. Effective marketing planning processes

5.5. Long-term integrated marketing strategies

6.6. Rigorous strategy risk assessment

7.7. Rigorous marketing effectiveness measurement

8.8. Market-driven organisation structures

9.9. Careful recruitment, training and career management

10.10. Total supply chain management

Copyright Professor Malcolm McDonald

Question 1

• Do we know and understand our key target markets?

Market definition and segmentation

Correct market definition is crucial for:

• Share measurement

• Growth measurement

• The specification of target customers

• The recognition of relevant competitors

• The formulation of marketing strategy

Page 10

Some Market Definitions (personal market)Market Need (on-line)

Emergency Cash (‘Rainy Day’) Cash to cover an undesired and unexpectedevent often the loss of/damage to property).

Future Event Planning Schemes to protect and grow money which arefor anticipated and unanticipated cash callingevents (eg. Car replacement/repairs, education,weddings, funerals, health care)

Asset Purchase Cash to buy assets they require (eg. Carpurchase, house purchase, once-in-a -lifetimeholiday).

Welfare Contingency The ability to maintain a desired standard of living(for self and/or dependants) in times of unplannedcessation of salary.

Retirement Income The ability to maintain a desired standard of living(for self and/or dependants once the salarycheques have ceased.

Wealth Care and Building The care and growth of assets (with various risklevels and liquidity levels).

Day-to-Day Money Management Ability to store and readily access cash for day-to-day requirements.

Personal Financial Protection and Currently known as car insurance.Security from Motor Vehicle Incidents

Page 11

Market mapping

N NationalBuilders

N LocalBuilders

N PrivateCompanies

N LocalGovernmentUsers

N DomesticUsers

NContractors

N LocalDistributors

N RegionalDistributors

N NationalDistributors

N OtherRetailers

N Spcist.Retailers

N Detp.Retailers

N Sheds

UK Sales

vol/val %

vol/val %

vol/val %vol/val

%

vol/val%

vol/val%

vol/val %

vol/val %

vol/val % vol/val %

vol/val %

vol/val %

vol/val %

vol/val% vol/

val %

vol/val %

vol/val %

vol/val %

vol/val %N = Number% = Your Share

……including the number of each customer typeincluding the number of each customer type

NB. Sketch out complex junctions separately. Alternatively, build an outline map, applying details at the junctions to be segmented.

Page 12

Radiator Market Map Radiator Manufacturer Distributor Installer Specification Decision

Primary Leverage Point

5455 5455 5455 3400

End User Segment

623

Stelrad227541.7%

1234

183036066

Nil

70.217.311.2Nil

Premier86015.8%

1234

55528026

Nil

21.312.84.3Nil

Supaline60511.1%

1234

12545030

Nil

4.820.55.1Nil

Barlo4808.8%

1234

90270120Nil

3.412.320.7Nil

Warmastyle3005.5%

1234

525540

Nil

Nil11.66.9Nil

Other Imports90517.1%

1234

Nil55630080

Nil25.351.8

100.0

1. NationalMerchants260547.8%

2. LargeIndependents219040.1%

3. SmallIndependents56010.6%

4. Sheds801.4%

5. 1234

295170NilNil

British Gas4658.5%

6. 1234

10651360360Nil

Installer275550.5%

7. 1234

1135540230Nil

Contractor190534.9%

8. 1234

NilNilNil80

Self Installer801.4%

9. 1234

120130NilNil

Direct Works2504.6%

Manufacturer250

1011121314

Nil250NilNilNil

31.3

Local Authority1350

1011121314

NilNil

105050

250

95.450.027.8

Housebuilder350

1011121314

Nil350NilNilNil

43.8

British Gas700

1011121314

50010050

Nil50

19.612.54.5

5.6Contractor200

1011121314

Nil100NilNil100

12.5

11.1Consultant550

1011121314

NilNilNil50

50050.155.6

10. 56789

385201010080

Nil

PrivateExitsting255546.8%

11. 56789

Nil50

750NilNil

Private New80014.7%

12. 56789

50395506Nil150

Public Existing110020.2%

13. 56789

NilNilNilNil100

Public New1001.8%

14. 56789

50300550NilNil

Commercial90016.5%

5455

Distribution SectorShare

Copyright Professor Malcolm McDonald Page 13

Manufacturers

Type BDealer Chain

Type BIndependent

Type CDealer Chain

Type CIndependent

VARs

BuyingConsortia

Retail

DirectResponse

Other

Type AIndependent

Type ADealer Chain

Final Users

Direct Field Sales 5%5%

47%47%

7%7%

0%0%

1%1%

15%15%

7%7%

5%5%

7%7%

4%4%

0%0%

0%0%

CompanyCompany’’s Route to Markets Route to Market

Final Users Route to Market

3%24%

3%

1%

8%

9%

18%

4%

10%

10%

4%

6%

Market map – office equipment

Extracted from the complete map

Question 2

• Do we address real segments in our key target markets?

low high

low

high

Price

Speed


Page 16

Middle Middle Middle

low low low

high high high


Page 17

Personalising segments

Page 18

Global Tech

Koala Bears

Teddy Bears

Polar Bears

Yogi Bears

Grizzly Bears

Andropov BigBears

Uses an extended warranty to give them cover. Won’t do anything themselves, prefer to curl-up and wait for someone to come and fix it.Small offices (in small and big companies). 28% of marketLots of account management and love required from a single preferred supplier. Will pay a premium for training and attention. If multi-site, will require supplier to effectively cover these sites. (Protect me).Larger companies 17% of marketLike Teddy Bears except colder! Will shop around for cheapest service supplier, whoever that may be. Full 3rd-party approach. Train me but don’t expect to be paid. Will review annually (seriously). If multi-site will require supplier to effectively cover these sites.Larger companies 29% of marketA ‘wise’ Teddy or Polar bear working long hours. Will use trained staff to fix if possible. Needs skilled product specialist at end of phone, not a bookings clerk. Wants different service levels to match the criticality of the product to their business process.Large and small companies 11% of marketTrash them! Cheaper to replace than maintain. Besides, they’re so reliable that they are probably obsolete when they bust. Expensive items will be fixed on a pay-as-when basis - if worth it. Won’t pay for training.Not small companies 6% of marketMy business is totally dependent on your products. I know more about yourproducts than you do! You will do as you are told. You will be here now! I willpay for the extra cover but you will ……!Not small or very large companies. 9% of market

Page 19

Listen to how customers talk about category need

Customer ViewAdvice• cutting costs• future technology directionHelp• design & configuration• process engineering• electron commerceRun• international network• disaster recovery

Supplier View

• fast PAD family• multimedia FRADs• PIX firewall

• Solutions• Gigabit Ethernet• solutions

• high performance• LAN support

Page 20

Understand the different category buyers

Businessperfectionist

Radical thinkers

Profit engineer

Save mybudget

Businessgeneral

Save mycareer

Conservativetechnocrat

Technicalidealist

Radicalarchitect

“Reward” “Relief”

Technical

Business

Page 21

Question 3

• Do we know for sure what our sources of differential advantage are in each of the principal segments in our key target markets?

SWOT analysis

• By segment, what value is required by the customer?

• What value are you offering to entice the customer to buy from you

• Avoid SWAGs

© Professor Malcolm McDonaldPage 23

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

WRONG

Strengths• It can create value for the

organisation• It is unique• It is inimitable• It is lastingOpportunities• It is large• It is accessible• It is lasting

Weaknesses• It is meaningful to the

customer• It is unique• It is difficult to fix

Threats• It is significant• It is lasting

Five Key Buying Factors for UK Independent Schools

Note: Admissions Policy & Catchment: qualifying factors

Costs

Convenience

Academic Enhancement

School:Family

Relationship

Fees

Staff image/ qualifications

Exam results, league table position

Classroom facilities (incl ICT)

Class size

Course subjects/ options Facilities

School buildings

HistoryGrounds/landscape

Front of houseSports reputation

ResultsSports

facilities

Art/Music reputation

Results

Art/Music facilities/

equipment

Promotion

Media coverage

Website/internet

Events

Skills-based learning

Life-enriching opportunities

School trips

Guest speakers

Business skills

GCSEs

Student relationship & happiness

Parent relationship

Pastoral care BullyingAcademic support

Student welfare

Parent commun-icationsParent evenings

Transport routes/times

& costs

Boarding options

International Qualifications

Religious/Cultural understanding

Headteacher quality

Brochure

Scholarships & Bursaries

Int’l connections, community links

Social mix

Student successes-

exams, univ, competitions

Social life

development

Academic Factors

• Personality and vision of Head• Exam results• Class size• League table position (compared to regional competitors)• Student academic successes (Oxbridge, major universities, competitions)• Academic planning: A level, IB, pre-U; IGCSE? New subjects?• Flexibility of subject choice• Academic history (results over a number of years)• Quality/knowledge/experience of staff• Facilities for teaching and learning• Learning opportunities outside mainstream subjects (could be vocational skills)• Reporting procedures• Innovations in teaching and learning

Enhancement/Attractiveness Factors

• Facilities– Buildings and grounds– Specialist facilities (floodlit astroturf, ICT centre, theatre)– Development Planning: plans for new/better facilities

• People– Quality of staff (teaching and specialist – ie sports/music coaching)– Quality of staff recruitment– Front of House/customer focus– Understanding/delivery of mission by all staff– Strong alumni association– Active parents’ association

• “Preparation for Life”– Active careers department– Expertise in university entrance support– Work experience, Young Enterprise, Duke of Edinburgh’s Award, Sports Leader’s Award etc

• Community– Links through activities (charity fundraising, visits to elderly, working with handicapped etc)– Hire of facilities (pool, theatre, sports, hall for weddings and parties)– Compliant with Charities Act– Local reputation

• International links and opportunities– Language visits– Trips and expeditions– Other learning opportunities

• Technology– Up-to-date, campus-wide access– Resources online to enhance study

• Environmental– Clear policy and aims– Strong student involvement in campaigns and issues– Clear priority status within School – put into action

Strategic marketing planning exercise – SWOT analysis

12345

You Comp A Comp B Comp C Comp D

Total 100

12345

1. SEGMENT DESCRIPTIONIt should be a specific part of the business and should be very important to the organisation

2. CRITICAL SUCCESSFACTORS

In other words, how do customers choose?

3. WEIGHTING(How importantis each of theseCSFs? Scoreout of 100)

12345

THREATS

5. OPPORTUNITIES / THREATSWhat are the few things outside your direct control that have had, and will have, an impact on this part of your business?

6. KEY ISSUES THAT NEEDTO BE ADDRESSED

What are the really key issues from the SWOT that need to be addressed?

OP

PO

RTU

NIT

IES

4. STRENGTHS / WEAKNESSES ANALYSISHow would your customers score you and each of your main competitors out of 10 on each of the CSFs?Multiply the score by the weight.

Page 29

Question 4

• Do we all agree on the prioritisation of our markets and the segments within each market?

Question 5

• Are the objectives for revenue growth and market share realistic?

Page 32

Setting expectations of performance

P

GC

P

GC

P

GC

P

GCHigh Low

High

Low

Mkt/Segmentattractiveness

Supplier business strength with

customer

high high/medium

medium low

Streamline

Manage for cash

Streamline

Manage for cash

Strategic

Strategic investment

Strategic

Strategic investment

Status

Pro-active maintenance

Status

Pro-active maintenance

Star

Selective investment

Star

Selective investment

-

Market attractiveness evaluation

This form illustrates a quantitative approach to evaluating market attractiveness. Each factor is score multiplied by the percentage weighting and totaled for the overall score. In this example, an overall score of 7 out of 10 places this mark in thehighly attractive category.

1.

2.

3.

4.

5.

6.

Market Size (£ millions)

Volume Growth (Units)

Competitive Intensity

Industry Profitability

Vulnerability

Cyclicality

10£250

10%

Low

> 15%

Low

Low

5£51.250

5.9%

Medium

10.15%

Medium

Medium

0< £50

< 5%

High

< 10%

High

High

Factor Scoring Criteria

Score5

10

6

8

3

2.5

Weighting15

25

10

25

15

10TotalTotal

Ranking0.75

2.5

0.6

2.0

0.9

0.257.07.0

Page 33

Invest/build

?

MaintainManage for

cash

Relative company competitiveness

Portfolio analysis - directional policy matrix (DPM)

High

Low

High Low

Segmentattractiveness

No change

Present position Forecast position in 3 years

NB. Suggested time period -3 years


Question 6

• Are the strategies (including products, services and solutions) consistent with the objectives?

Programme guidelines suggested for different positioning on the directional policy matrix

Maintain or increasedominance

Differentiation - lineexpansion

Lead - Aggressivepricing for share

Aggressivemarketing

Broadendistribution

Tight control - go forscale economies

Expand, invest (organicacquisition, joint venture)

Expand - invest

Upgrade managementin key functional areas

Fund growth

Reduce in process -extend credit

Maintain or slightlymilk for earnings

Prune for less successfuldifferentiate for segments

Stabilise prices / raise

Limit

Hold widedistribution pattern

Emphasise cost reductionviz. variable costs

Maximise capacityutilisation

Focus on specificprojects

Maintain, reward efficiency,tighten organisation

Limit fixed investment

Tighten Credit- reduceaccounts receivableincrease inventory turn

Maintain selectivity-segment

Emphasise productquality

Maintain or raise

Maintain selectively

Segment

Tight control

Increase productivitye.g. specialisation

Invest selectively

Allocate key managers

Invest selectively

Reduce

Forego share for profit

Aggressively prune

Raise

Minimise

Gradually withdrawdistribution

Aggressively reducefixed & variable

Free up capacity

None

Cut back organisation

Minimise & divestopportunistically

Aggressively reduce

Invest selectivelyin share

Differentiation - lineexpansion

Aggressive - price forshare

Aggressivemarketing

Limited coverage

Tight - but not at expenseof entrepreneurship

Invest

Invest

Invest

Fund growth

Invest

Products

Market Share

Price

Distribution

Promotion

Cost Control

R & D

Production

Personnel

Investment

Working Capital

Investfor growth

Maintain marketposition, manage

for earnings SelectiveManagefor cash

Opportunisticdevelopment

Page 36

Activities by medium

Personal contact

Direct mail

Telephone

Advertising

Electronic

Recognisepotential

Initiate dialogue

Exchange information

Negotiate / tailor

Commit

Med

ium

Activity

Page 37

The Sunworshippers

Internet Mobiletelephone

iTV BroadcastTV

• Recognise

Negotiate/tailor

Commit

• Exchange value

Traditional channels

• Exchange potential

• Initiate dialogue

• Exchange information

• Monitor

John and Mary Lively

Internet Mobiletelephone

iTV BroadcastTV

• Recognise

Negotiate/tailor

Commit.

• Exchange value

Traditional channels

• Exchange potential• Initiate dialogue

• Exchange information

• Monitor

Relevant?

The Times 19th Jan 2005

Page 40

Question 7

• Have we assessed dispassionately the risks associated with our strategic marketing plan?

Justifying investment in marketing assets

Whilst accountants do not measure intangible assets, the discrepancy between market and book values shows that investors do. Expenditures to develop marketing assets make sense if the sum of the discounted cash flow they generate is positive.

Balance sheet

Assets Liabilities

- Land- Buildings- Plant- Vehiclesetc.

- Shares- Loans- Overdraftsetc.

£100 million £100 million

© Professor Malcolm McDonald, Cranfield School of Management

Balance sheet

Assets Liabilities



- Land- Buildings- Plant- Vehiclesetc.


Balance sheet

Assets Liabilities


Goodwill £800m


- Land- Buildings- Plant- Vehicles


Asset split across selected economies

Asset split across selected economies48

Asset Breakdown for the top 10 countries by Enterprise Value (US$ millions, 2008)

Brands are key intangibles in most businesses

Brand20%

OtherIntangible

Assets

55%TangibleAssets

25%

Developed Markets

Brands are estimated to represent at least 20% of the intangible value of businesses on the major world stock markets. Brands combine with other tangible and intangible assets to create value

Intangible assets

Brand

Software

Patents

Distribution rights

Tangible assets

Assembled workforce

Business Goodwill

Marketing intangible

Technology intangibles

Customer intangible

Contract intangibles

Illustrative

Source: Brand Finance

Customer relationships

Intangibles

P and G have paid £31 billion for Gillette, but have bought only £4 billion of tangible assets

- Gillette brand £ 4.0 billion- Duracell brand £ 2.5 billion- Oral B £ 2.0 billion- Braun £ 1.5 billion- Retail and supplier network £10.0 billion- Gillette innovative capability £ 7.0 billion

TOTAL £27.0 billion

(David Haigh, Brand Finance, Marketing Magazine, 1st April 2005)

“The information appearing in the majority of boardrooms remains predominantly financial in nature. Without (additional) information on value-creating activities management are typically flying blind – when financials tell them there is a problem management have already missed the optimal point for taking appropriate corrective action”.

PricewaterhouseCoopers – ValueReporting™ Review 2003,Transparency in Corporate Reporting, p.25

Marks & Spencer’s Trends

Base: M&S Customers

5

15

25

35

45

55

65

75

85

95

Service Positive Value for Money Share Price (Indexed)

Nov 95 Sept 99Mar 98

AssetBase


value

Determinevalue

Proposition

Delivervalue

Monitorvalue


Measurement zone where metrics are applied (Levels 2 & 3)

Strategic zonewhere metrics

are defined (Level 1)

Three questions need to be answered

• How does the company plan to generate its predicted future sales and profits?

• Will the marketing strategy on which these plans are based work?

• Will this strategy create shareholder value, given its inherent level of risk?

What is Marketing Due Diligence?

Market Risk Profile

• Product Category Existence

• Segment Existence

• Sales Volumes

• Forecast Growth

• Pricing Assumptions

The marketing strategy has a higher probability of success if the product category is well established

If the target segment is well established

If the sales volumes are well supported by evidence

If the forecast growth is in line with historical trends

If the pricing levels are conservative relative to current pricing levels

Ansoff matrix

MarketPenetration

ProductDevelopment

MarketExtension

Diversification

Present Newincreasing technological newness

increasing market

newness

Present

New

PRODUCTS

MARKETS


Market Share Risk Profile

• Target Market Definition

• Proposition Specification

• SWOT Alignment

• Strategy Uniqueness

• Anticipation of market change

The marketing strategy has a higher probability of success if the target is defined in terms of homogeneous segments and is characterised by utilisable data

If the proposition delivered to each segment is different from that delivered to other segments and addresses the needs which characterised the target segment

If the strengths and weaknesses of the organisation are independently assessed and the choice of target and proposition leverages strengths and minimises weaknesses

If choice of target and proposition is different from that of major competitors

If changes in the external microenvironment and macroenvironment are identified and their implications allowed for

Shareholder Value Risk Profile

• Profit Pool

• Profit Sources

• Competitor Impact

• Internal Gross Margin Assumptions

• Assumptions of Other Costs

The marketing strategy has a higher probability of success if the targeted profit pool is high and growing

If the source of new business is growth in the existing profit pool

If the profit impact on competitors is small and distributed

If the internal gross margin assumptions are conservative relative to current products

If assumptions regarding other costs, including marketing support, are higher than existing costs

Question 8

• Having taken account of the risks referred to above and having adjusted the forecast net free cash flows for each major product for market for each year, have we calculated whether the strategic marketing plan creates or destroys shareholder value?

Valuing Key Market Segments

Background/Facts

•Risk and return are positively correlated, ie. as risk increases, investors require a higher return.•Risk is measured by the volatility in returns, ie. high risk is the likelihood of either making a very good return or losing all your money. This can be described as the quality of returns.•All assets are defined as having future value to the organisation. Hence assetsto be valued include not only tangible assets like plant and machinery, but intangibleassets, such as Key Market Segments.

•The present value of future cash flows is the most acceptable method tovalue assets including key market segments.

•The present value is increased by:- increasing the future cash flows- making the future cash flows ‘happen’ earlier- reducing the risk in these cash flows, ie. improving the certainty of these cash flows,and, hence, reducing the required rate of return.


Suggested Approach•Identify your key market segments. It is helpful if they can be classified on a vertical axis (a kind of

thermometer) according to their attractiveness to your company. ‘Attractiveness’ usually means thepotential of each for growth in your profits over a period of between 3 and 5 years. (See the attached matrix)

•Based on your current experience and planning horizon that you are confident with, make a projection offuture net free cash in-flows from your segments. It is normal to select a period such as 3 or 5 years.

• These calculations will consist of three parts:• revenue forecasts for each year;• cost forecasts for each year;• net free cash flow for each segment for each year.

•Identify the key factors that are likely to either increase or decrease these futurecash flows.

•These factors are likely to be assessed according to the following factors:• the riskiness of the product/market segment relative to its position on the ANSOFF matrix;• the riskiness of the marketing strategies to achieve the revenue and market share;• the riskiness of the forecast profitability (e.g. the cost forecast accuracy ).

• Now recalculate the revenues, costs and net free cash flows for each year, havingadjusted the figures using the risks (probabilities) from the above.

•Ask your accountant to provide you with the overall SBU cost of capital and capital used in the SBU. This will not consist only of tangible assets. Thus, £1,000,000 capital at a required shareholder rate of return of 10% wougive £100,000 as the minimum return necessary.• Deduct the proportional cost of capital from the free cash flow for each segment for each year.• An aggregate positive net present value indicates that you are creating shareholder value – ie.

achieving overall returns greater than the weighted average cost of capital, having takeninto account the risk associated with future cash flows.

Invest/build

?

MaintainManage for

cash

Relative company competitiveness

Portfolio analysis - directional policy matrix (DPM)

High

Low

High Low

Segmentattractiveness

No change

Present position Forecast position in 3 years

NB. Suggested time period -3 years


Question 9

• Have we agreed the measurement of effectiveness metrics we want reported to us and their frequency?

Marketing Measurement

• What needs measuring?• Why does it need measuring?• What is the relative importance of each?• How should they be measured?• What should be the frequency of each?• To whom should the results be reported?• What actions should be taken as a result?

Measuring marketing performance isn’t like measuring factory output – a fact that many non-marketing executives don’t fully gasp.

In the controlled environment of a manufacturing plant, it’s simple to account for what goes in one end and what comes out the other and then determine productivity.

But the output of marketing can be measured only long after it has left the ‘plant’.

HBR, November 2004, McGovern, G., Court, D., Quelch, A. and Crawford, B.

Inter Tech’s 5 year performance

Performance (£million) Base Year 1 2 3 4 5Sales Revenue- Cost of goods sold

£254135

£293152

£318167

£387201

£431224

£454236

Gross Contribution- Manufacturing overhead- Marketing & Sales- Research & Development

£119481822

£141582323

£151632423

£186822625

£207902724

£218952824

Net Profit £16 £22 £26 £37 £50 £55

Return on Sales (%) 6.3% 7.5% 8.2% 9.6% 11.6% 12.1%

AssetsAssets (% of sales)

£14156%

£16255%

£16753%

£19450%

£20548%

£20645%

Return on Assets (%) 11.3% 13.5% 15.6% 19.1% 24.4% 26.7%

Performance (£million) Base Year 1 2 3 4 5

Market Growth 18.3% 23.4% 17.6% 34.4% 24.0% 17.9%

InterTech’s 5 Year Market-Based Performance

Customer Retention (%)New Customers (%)% Dissatisfied Customers

88.2%11.7%13.6%

87.1%12.9%14.3%

85.0%14.9%16.1%

82.2%24.1%17.3%

80.9%22.5%18.9%

80.0%29.2%19.6%

InterTech Sales Growth (%)Market Share(%)

12.8%20.3%

17.4%19.1%

11.2%18.4%

27.1%17.1%

16.5%16.3%

10.9%14.9%

Relative Product QualityRelative Service QualityRelative New Product Sales

+10%+0%+8%

+8%+0%+8%

+5%-20%+7%

+3%-3%+5%

+1%-5%+1%

0%-8%-4%

Why Market Growth Rates Are Important

AssetBase


value

Determinevalue

Proposition

Delivervalue

Monitorvalue





Overall Marketing Metrics Model

product market segment

ms%sales£profit£

corporate rev£

profit£

actions, esp. marketing

metrics on achievement of factor to required level

costs, activity milestones & outputs

Strategy/ achievement

Objectives/results

Plan/action

performanceby product market segment

application of spend

budget funds & time

Resource allocation/ spend

Forecast/profit

corporate performance

turnover, profit & shareholder value

budget

££££

Intention/actuality

Business element

Measure-ment

Lead indicators Lag indicators

Required by customers.Relative to competitors

Market growthCustomer acquisition/ retention/ uptrading/ X-selling/ regained

Product/customer mixChannel performance

Cost to achieveResponsibilities

who

who

who

who

what

what

what

what

Positioning of issues in the model

PFs

HFs

CSFs

AssetBase


value

Determinevalue

Proposition

Delivervalue

Monitorvalue





A

B

C

Projected cash flows from investing in a promotion

DCF and NPV methods implicitly make this comparison

Assumed cash flow resulting from doing nothing

Companies should be making this comparison

More likely cash flow resulting from doing nothing

Note: Most executives compare the cash flow from promotion against the default scenario of doing nothing assuming, incorrectly, that the present health of the company will persist indefinitely if the investment is not made. For a better assessment of the promotion’s value, the comparison should be between the projected discounted cash flow and the more likely scenario of a decline in performance in the absence of promotional investment.

Figure 10

Adapted from Christensen CM et al, ( 2008 )

£ - 7 million + 2 + 2 + 2 + 2 = £-0.6 million

(1+r) (1+r)² (1+r)³ (1+r)4

£ - 1 million + 2 + 2 + 2 + 2 = £5.4 million(1+r) (1+r)² (1+r)³ (1+r)4

Question 10

• Overall, are we happy that the time, effort and expense involved in developing marketing strategies are really worth it?

Conditions determining a strong marketing strategy

• That the marketing strategy defines real target segments.

• That the marketing strategy defines segment-specific value propositions

• That the marketing strategy allocates resources differentially by segment or market

• That the marketing strategy aligns to the market via SWOT

The Contents of a Strategic Marketing Plan (<20 pages)

• Mission or Purpose Statement• Financial Summary

RevenueProfit

t.0 T+1 T+2 T+3

Products

Mar

kets

Existing New

New

Exis

ting

1 2

3 4


Key (revenue and profit growth)

• from productivity• by product for market for existing products from existing markets

• from new products in existing markets• from existing products in new markets• from new products in new markets

Plus a few words of commentary

Market Overview/SummaryMarket definitionMarket map showing vol/rev flows from supplier through to

end user, with major decision points highlightedWhere appropriate, provide a future market mapInclude commentary/conclusions/implications for the companyAt major decision points, include key segments


SWOT Analyses on Key Segments• include pictorial representations of the SWOTs, such as bar charts• highlight major conclusions/issues to be addressed

Portfolio Summaries of the SWOTs• include Directional Policy Matrix (DPM) summaries of:-

- the attractiveness of the segments over the next 3-5 years- the current relative competitive position of your company in

each segment- the planned competitive position of each segment over the

next 3-5 years

Marketing Objectives and Strategies for the next 3-5 years• include objectives (volume, value, market share, profit, as appropriate)for the next 3-5 years for each segment as represented by the plannedposition of each circle on the DPM

• include strategies (the 4XPs) with costs for each objective

Consolidated Budget for the next 3-5 years• this will be a consolidation of all the revenues, costs and profits forthe next 3-5 years and should accord with the financial summaryprovided earlier


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Professor Malcolm McDonaldDavid Hanger

Ian WolterProfessor Bryan Foss

Marketors Think Tank Seminar 1st February 2010

Page 82Page 82

MASTER MARKETOR, VENETIA HOWES

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