Strategic Marketing Management: An Overview

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Strategic Marketing Management An Overview
MAR 4803 - MARKETING MANAGEMENT Dr. Jaishankar
Ganesh
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Principles to Compete Successfully

• Know yourself
• -- Concept of Core Competence
• Know your Products/Services
• -- What purpose (benefits) does your
  product/service serve (provide)?
• Know Your Customers
• Know Your Competition
• Know your Surroundings

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The 5 Immutable Laws of Marketing

• Marketing is not a battle of products its a
  battle of perceptions
• Its better to be first in the mind than be
  first in the marketplace.
• Own a word in the prospects mind.
• The law of exclusivity
• The law of candor

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Steps in theMarketing Process
Analyzing market opportunities
Develop marketing strategies
Plan a marketing program
Manage the marketing effort
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The Four Ps
The Four Cs
Marketing Mix
Conven- ience
Customer Solution
Customer Cost
Communication
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Strategic Planning

• Definition
• The process of developing and maintaining a
  strategic fit between the organizations goals
  and capabilities and its changing marketing
  environment.

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Internal Environments

• I. Strategic Planning
• Corporate Level
• Business Unit Level
• SBUs
• Functional Level
• Marketing

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Strategic Market Management

• Internal Analysis
• Evaluation of assets, skills, and resources -
  SWOT analysis
• Business/Product portfolio analysis
• Determining strategic alternatives

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External Analysis

• Environmental Analysis
• Customer/Buyer Analysis
• Industry Structure Analysis
• Competitive Analysis

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Internal Analysis
The Boston Consulting Group Matrix
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Business Growth Rate
Relative Competitive Position/Market Share
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Basic Product Portfolio Strategies

• Build
• Expand marketing effort to increase market
  share, particularly question marks.
• Hold
• Preserve existing market share, especially
  strong cash cows.
• Harvest
• Increase short-term cash flow, especially weak
  cash cows.
• Divest
• Sell or liquidate product, appropriate for
  dogs.

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Generic Competitive Strategies

• Cost Leadership (Low-cost Position)
• Differentiation (brand loyalty)
• Focus (Niche)

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Growth Strategies

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Ansoffs Product-Market Expansion Grid
Strategic Growth Matrix
Product Development/Expansion
Market Penetration
New Markets Old Markets
Market Development/Expansion
Diversification
Old Products New Products
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Integrative Diversification Growth Strategies

• Backward Integration
• Firm seeking control of supply system
• Forward Integration
• Firm seeking control of distribution system
• Horizontal Integration
• Firm seeking control of some competition
• Diversification
• Concentric Diversification Presence of
  Technology or Marketing Synergies
• Horizontal Diversification Customer/Market
  Synergy
• Conglomerate Diversification - Firm expands
  outside present system

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External Analysis The Consumer

• Markets
• People
• Ability to buy
• Willingness to buy

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Contrasting Consumer Markets and Industrial
Markets

• Consumer Industrial
• Many buyers Few buyers
• Small purchases Large purchases
• Direct demand Derived demand
• Geographically Geographically
• dispersed concentrated

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Consumer Buying Process
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Influences on the Buying Process

• Marketing
• Mix
• Buying
• Process
• Psychological Sociocultural
• Influences Influences

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Consumer Buying Situations

• Habitual Decision Making
• Little searching time
• Low cost
• Frequently purchased product
• Limited Decision Making
• Some searching time
• Seeking additional information about brands
• Familiar with product classes

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• Complex Decision Making
• Extensive searching time
• Unfamiliar with product classes
• Unfamiliar with brands

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Four Types of Buying Behavior
Variety- seeking behavior
Complex buying behavior
Dissonance- reducing buying behavior
Habitual buying behavior
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Industrial Buying Process
Problem recognition
Need recognition
General need description
Product specification
Info search and eval.
Supplier search
Proposal solicitation
Purchase
Supplier selection
Order routine specification
Post Purchase
Performance review
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Business Buying Situations
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Industrial Buying Situations

• Straight Rebuy
• Routine purchase
• Little information needed
• Purchases generally made from approved list
• Modified Rebuy
• Modifications are necessary
• More information is needed
• Several individuals may be involved
• New Task
• Complex purchase
• May be buying for first time
• Many individuals may be involved

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Segmentation, Targeting Product Positioning

• Market Segmentation
• Dividing the market into distinct groups of
  buyers with different needs, characteristics
  and/or behavior
• Market Targeting
• Evaluating each market segments
  attractiveness and selecting one or more market
  segments to enter
• Product Positioning
• Planning for the product to occupy a clear,
  distinctive, and desirable place relative to
  competing products in the mind of target customers

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Patterns of Market Segmentation
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Market Segmentation

• Aggregation
• Homogeneous within, heterogeneous between
• Differential Responsiveness
• Product Differentiation
• Consumers perceive product as different from
  competition
• Create differences within a product line

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Market-Segmentation Procedure

• Survey
• Motivations
• Attitudes
• Behavior

• Analysis
• Factors
• Clusters

• Profiling

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Bases for Segmenting Consumer Markets
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Bases for Segmenting Consumer Markets
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Effective Segmentation
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Target Marketing

• Evaluating Market Segments
• segments size and growth
• segment structural attractiveness
• company objectives and resources
• Selecting Market Segments

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Target Market Strategy

• Mass/Undifferentiated Marketing
• Treats the market as a whole
• Design a program that appeals to broadest number
  of buyers
• Differentiated/Multiple Segments
• Develops multiple segments
• Design programs for each segment
• Concentrated or Niche Marketing
• Concentrate on one segment
• Designs program for that segment
• Customized Marketing

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Selecting and Entering Market Segments
P Product M Market
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Selecting and Entering Market Segments
P Product M Market
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Product Positioning

• Positioning starts with a product. A Piece of
  merchandise, a service, a company, an
  institution, or even a person... But positioning
  is not what you do to a product. Positioning is
  what you do to the mind of the prospect. That
  is, you position the product in the mind of the
  prospect.
• -- Al Ries and Jack
  Trout (1981)

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Product Positioning

• Product Attributes
• Benefits
• Against a Competitor
• Away from Competitors
• Combination

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A Comparison of U.S. and Mexican Ads for Speed
Stick Brand Deodorants
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Comparison of Perceptions of U.S. v.s. Mexican
Males
IDEAL VECTOR (Mex)

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External Analysis Industry Structure the
Importance of Competition

• Strategy cannot be formulated in vacuum.
• Competition determines the appropriateness of a
  firms strategic actions, and hence, is at the
  core of the success or failure of firms.

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Competitive Strategy Competitive Advantage

• Competitive strategy is the search for a
  favorable competitive position in an industry.
• Competitive advantage grows out of value a firm
  is able to create for its customers that exceeds
  the firms cost of creating it and is greater
  than the value created by competitive offerings.

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Competitors and Competition

• Sometimes a company may be unaware of all its
  competitors.
• Disintermediation is displacement of traditional
  intermediaries.
• E-commerce gains a greater percentage of consumer
  and industry business.
• Industry is a group of firms that offers a
  product that is a close substitute for the other.

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Industry Structure Analysis

• The essence of formulating a CS is relating the
  firm to its environment
• The key aspect of a firms environment is the
  industry in which it competes
• Environmental forces affect all firms in a given
  industry -- the key to competitive success lies
  in the differing abilities of firms to deal with
  them.

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Industry Structure Analysis The five competitive
forces
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Forces Driving Industry Competition

• Bargaining power of the buyer
• BP of the seller
• Threat of new entrants
• Threat of substitutes
• Rivalry among existing firms

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Barriers to Entry

• Economies of scale
• Product differentiation
• Capital requirements
• Switching costs
• Access to distribution channels
• Other advantages
• Patents
• Government subsidies

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Barriers and Profitability
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Number of Sellers and Differentiation
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Continuum of competition
Number of sellers
Many
One
BASIS OFCOMPARISON
PURECOMPETITION
MONOPOLISTICCOMPETITION
OLIGOPOLY
MONOPOLY

• Number ofsellers
• Productdifferences
• Importance ofmarket mix

• Large numberof sellers
• Similar products
• Distribution isimportant

• Large numberof sellers
• Unique butsubstitutable
• Pricing isimportant

• A few largecompetitors
• Similarproducts
• Promotion iskey to achieveperceivedproductdiff
  erences

• Singleproducer
• Unique andunsubstitutable
• Unimportant

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Levels of Competition
Share of the Mind
Share of the Wallet
Generic Competition
Product Category
Product Form
Direct to Indirect
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Defining the Competitive Set

• Levels of Marketing Competition
• Product Form based competition Diet Colas
• Product Category based competition Soft Drinks
• Generic or need-based perspective - Beverages
• Rivalry or Budget-based competition Food,
  Entertainment, etc.

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Defining the Competitive Set

• Identifying Competitors
• SIC categories
• Substitutability
• Managerial Judgment
• Customer Purchase based measures
• Brand Switching Data
• Cross-Elasticity of Demand
• Customer Judgment based measures

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Competitor Reaction Patterns
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Hypothetical Market Structure Strategies
Market nicher
Market leader
Market challenger
Market follower
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Expand Market Defend Market Share Expand Market
Share
Attack leader Status quo
Imitate
Specialize
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Defense Strategies
(2) Flank
(3) Preemptive defense (4) Counter-offense
(6) Contraction
(1) Position
(5) Mobile
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Attack Strategies
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Specific Attack Strategies

• Price-discount
• Cheaper goods
• Prestige goods
• Product proliferation
• Product innovation
• Improved services
• Distribution innovation
• Manufacturing cost reduction
• Intensive advertising promotion

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Market Follower Strategies

• Counterfeiter
• Cloner
• Imitator
• Adapter

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Nichemanship

• End-user specialist
• Vertical-level specialist
• Customer-size specialist
• Specific-customer specialist
• Geographic specialist
• Product or product-line specialist
• Product-feature specialist
• Job-shop specialist
• Quality-price specialist
• Service specialist
• Channel specialist

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Balance Customer andCompetitor Orientations
Competition
Customer

• See opportunities
• Long-run profit
• Emerging needs groups

• Fighter orientation
• Alert
• Exploit weaknesses
• - Too reactive

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Customer Value

• Customers estimate which offer will deliver the
  most value.
• They then form an expectation of value and act
  upon it.
• Customer delivered value total customer value
  minus total customer cost.

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Determinants of Customer Delivered Value
Total customer value
Customer delivered value
Total customer cost
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Value Price Ratio

• What is a value-price ratio?
• Total Customer Value/Total Customer Cost

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Customer Satisfaction

• Satisfaction feelings of pleasure or
  disappointment resulting from comparing a
  products perceived performance in relation to
  expectations.
• Satisfaction is a function of perceived
  performance and expectations.
• Why are companies so intent upon satisfying the
  customer?

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Satisfied Customers

• Remain loyal longer
• Buy more (new products and upgrades)
• Spread favorable word-of-mouth
• Exhibit more brand loyalty (less price sensitive)
• Offer feedback
• Reduce transaction costs

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Customer Development
Suspects
Partners
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Delivering Value The Value Chain
Firm infrastructure
Human resource management
Technology development
Procurement
Ser- vice
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Delivering Value - Core Business Processes
New-product rationalization
Inventory management
Customer acquisition and retention
Order-to-remittance
Customer service
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Levi Strauss Value-Delivery Network
Sears (Retail)
Competition is between networks, not companies.
The winner is the company with the better network.
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Customer Acquisition Vs. Customer Retention

• Customer Churn the big nemesis
• An Example
• 4 sales calls _at_ 300 per call to acquire
• Cost of Acquisition - 1,200
• Revenue generated by customer - 5000/year
• Customer Loyalty 2 years
• Total Revenues 10,000
• _at_ 10 profit margin
• Customer Lifetime Value 1,000

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Importance of Retention

• An Example
• Customer Base 64,000
• Revenue Generated per Customer 40,000/yr.
• Defection Rate 5
• Loss in Revenue due to Defection
• (64000.05)40,000 128 million
• _at_10 Profit Margin 12.8 million in lost
  profits every year

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Five Levels of Customer Relationships in Marketing

• Basic Marketing Simply sell the Product
• Reactive Marketing Encouraging Customers to
  offer questions, comments or complaints
• Accountable Marketing Following up after sales
  to check whether product met expectations and to
  ask for improvements or suggestions
• Proactive Marketing Contacting Customers
  periodically with suggestions about improved
  product uses and info. On new products/services.
• Partnership Marketing Working continuously with
  customers to find ways to perform better.

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Levels of Relationship Marketing
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Customer/Product Profitability Analysis