Value-based marketing strategy

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Value-based marketing strategy
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New marketing meets old marketingNew marketing
wins
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Agenda

• Problems with traditional strategic marketing
  planning process
• Products, brands and innovation
• Price and value
• Distribution channels and value chains
• Marketing communications
• The new marketing challenge
• Marketing is strategy

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Problems with traditional strategic marketing
planning process
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Ten steps of the strategic marketing planning
process (McDonald 2007)
1 Mission
Phase One Goal Setting
2 Corporate Objectives
3 Marketing Audit
4 Market overview
Phase Two Situation Review
5 SWOT analysis
6 Assumptions
7 Marketing objectives and strategies
Phase Three Strategy Formulation
8 Estimate expected results and identify
alternative plans and mixes
9 Budget
Phase Four Resource allocation and Monitoring
Measurement and review
10 First year detailed implementation programme
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PLANNING PROCESS

• 4 MAIN STAGES -
• A. ANALYSIS data driven/market-place/company
  position within it/relative to competition
• B. OBJECTIVES link to corporate strategy/
  use SMART technique
• C. STRATEGY consistent with corporate
  strategy/general direction which will deliver the
  objectives
• D. TACTICS the detailed action plans
  underpinning the strategy

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Strategic Marketing Planning process

• Requires one year to complete all stages
• Needs hard data from detailed and in-depth
  analysis of market before company can make
  decisions
• Undertaken by marketers/strategists without
  involvement of other people in organisation

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Strategic Marketing Planning process

• Requires one year to complete all stages
• Nope not necessarily
• Needs hard data from detailed and in-depth
  analysis of market before company can make
  decisions
• Should be ongoing
• Undertaken by marketers/strategists without
  involvement of other people in organisation
• insane

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Problems with strategic planning process

• Based on ideas of Planning School
• Machine assumption
• produce each of the component parts as specified,
  assemble them according to the blueprint, and the
  end product (strategy) will result!
• Often reduced to a numbers game of performance
  control that had little to do with strategy

Source Mintzberg et al (1998) Strategy safari,
Hemel Hempstead, Prentice hall
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Fallacies of Strategic Planning

• Predetermination
• Organisation must be able to predict the course
  of its environment, to control it, or simply to
  assume its stability
• Impossible to predict discontinuities (e.g.
  technological breakthroughs or price increases)
• Requires stability during strategy making

Source Mintzberg et al (1998) Strategy safari,
Hemel Hempstead, Prentice hall
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Fallacies of Strategic Planning

• Detachment
• It is through administrative systems that
  planning and policy are made possible, because
  the systems capture knowledge about the task
  true management by exception, and true policy
  directions are now possible, because management
  is no longer wholly immersed in the details of
  the task itself.
• Effective strategists .. immerse themselves in
  daily detail while being able to abstract the
  strategic messages

Source Mintzberg et al (1998) Strategy safari,
Hemel Hempstead, Prentice hall
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Fallacies of Strategic Planning

• Failure of formalisation
• Failure of
• forecasting to predict discontinuities
• institutionalisation to provide innovation
• Hard data to substitute for soft
• Fixed schedules to respond to dynamic factors

Source Mintzberg et al (1998) Strategy safari,
Hemel Hempstead, Prentice hall
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Problem

• Companies dont have time to wait for plan to be
  developed
• Rejected marketing and strategy (strategy
  departments closed in 1980s)
• Customers not accept being dictated to by
  companies and changed relationship Customer is
  King

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Old marketing has not kept up

• Old marketing is about marketing programmes
• structured/planned around traditional model
• operations/tactical
• New marketing is concerned with the underlying
  process of going to market and strategic choices

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The new marketing challenge

• Confronting revolution in markets
• Identifying renewal opportunities
• Developing new ways of doing business/new
  business models or reinvention

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The new marketing challenge

• Is it real?
• Are markets revolutionised (since when?)
• The need for renewal is it new?
• Is reinvention/revolution necessary or
  irresponsible?
• Or is this a message for incompetent 2nd raters?
• How did your firm get where it is?
• What are its problems and opportunities?

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Market revolution drives renewal and reinvention
RENEWAL Coping/ adaptation mechanisms
Disruptive pressures on existing business models
REVOLUTION Radical market and customer change/tren
ds
Value-creating opportunities for new business
models
REINVENTION Designing new ways of doing business
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Marketing is strategy
the fate of marketing hinges on elevating the
role of marketing executives from promotions-
focused tacticians to customer-focused leaders of
transformational initiatives that are strategic,
cross-functional and bottom-line
oriented Nirmalya Kumar, 2004
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Marketing is strategy
the fate of marketing hinges on elevating the
role of marketing executives from promotions-
focused tacticians to customer-focused leaders of
(transformational) initiatives that are
strategic, cross-functional and bottom-line
oriented Nirmalya Kumar, 2004
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Value-based marketing strategy
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Agenda

• Brand marketing
• Relationship marketing
• Value-driven strategy
• The search for customer value

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Three themes in marketing

• Branding
• Relationship marketing
• Value

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Brand marketing

• Branding is central to conventional marketing
  thinking brand the product/service, company,
  person, country, etc.
• Brands bring important benefits to customers
  (reduced search time) and companies (brand equity
  or value)

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Brand marketing

• Branding can transform markets
• Cool brands often win
• BUT brands do not make you unbeatable
• Coca-Cola
• Levi-Strauss
• Marlboro

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Coca-cola

• Most valuable brand in world
• 1999 had 50 market share of world soft drinks
  market
• Problem world fell out of love with carbonated
  soft drinks
• Tried to keep up with fragmenting soft drinks
  market
• Introduced bottled water, flavoured water,
  juice-based drinks, flavoured iced tea and coffee
  drinks and energy drinks
• Use local brands
• Products not always branded with Coca-cola name
• Lost market share to Pepsi

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Dazani

• UK customers assume bottled water from natural
  sources ie springs
• Coca- Cola purified water from tap water in
  London
• Origin came to light when a complaint was made to
  the British Food Standards Agency over Coke's use
  of the word "pure" in its Dasani marketing -
  implies that tap water is 'impure'.
• Like Nestle, McDonald's and Cadbury Schweppes,
  Coke makes a gratifying target for journalists,
  in that all those companies trade heavily on
  their brand.
• Source Guardian March 4, 2004

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Brand marketing

• Issues that go wrong with branding
• blind branding
• private brand competition
• brands which are liabilities
• counterfeit brands
• wrong brand trajectory, e.g., Stella Artois wife
  beater

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Brand marketing

• Strategic brand management is the priority not
  creativity
• Does the brand create customer value and how?

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Relationship marketing

• Customer relationship provides the basis for
  market segmentation
• Contrast the relationship the customer wants
  (long-term vs short-term) with the closeness
  wanted in the supplier relationship (close vs
  distant)

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Value-driven strategy

• Value has become the central focus of strategy
  (because there is no choice)
• The key issue is now value innovation (in the
  customers terms)
• But value does not have a single meaning
• e.g., operational excellence vs. customer
  intimacy vs. product leadership (Treacy and
  Wiersema, 1995)

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Treacy and Wiersema- Value Disciplines

• Operational Excellence
• Providing customers with reliable products or
  services at competitive prices and delivered with
  minimal difficulty or inconvenience
• Customer intimacy
• Segmenting and targeting markets precisely and
  then tailoring offerings to match exactly the
  demands of those niches
• Companies combine detailed customer knowledge
  with operational flexibility can respond
  quickly to almost any need and creates customer
  loyalty
• Product Leadership
• Offering leading-edge products and services that
  enhance the customers use or application of the
  product
• Make rivals goods obsolete

Source Treacy, M. and Wiersema, F., 1993,
Customer Intimacy and Other Value Disciplines
Harvard Business Review January- February
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Choice of strategic value pathway
Operational excellence Product leadership Customer intimacy
Strategic value pathway (value proposition) Best total cost Best product Best total solution
Golden rule Variety kills efficiency Cannibalising your success with breakthroughs Solve the clients broader problem
Core processes End-to-end product delivery Invention Commercialization Market exploitation Client acquisition development Solution development
Improvement levers Process redesign Continuous improvement Product technology RD cycle time Problem experience Service customization
Major improvement challenges Shift to new asset base Jump to new technology Total change in solution paradigm
Source Barnes et al (2009) Creating and
Delivering your Value Proposition, Kogan Page p 46
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The search for customer value

• The danger of making assumptions
• we know what our customers want
• bung in some customer service
• just make it cheaper
• or, perhaps, take customer value seriously?

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The search for customer value

• Value as rational cost/benefit analysis
• Value migration
• value migrates from one attribute feature to
  another
• different people buy different value
• Customer value is complex, multi-dimensional,
  unstable and idiosyncratic, but it is what matters