Strategic Marketing Management | The Framework ISBN: 978-1-936572-59-5 January 2019 Copyright © 2019 by Alexander Chernev Author website: Chernev.com Supplemental materials: MarketingToolbox.com Published by Cerebellum Press | Chicago, IL | USA

Marketing as a Business Discipline Chapter 1 Marketing as a Business Discipline

Figure 1. Making Decisions Using a Framework Abstraction Application Trial and error Typical problem Specific solution Typical solution Specific problem

Marketing Strategy and Tactics Chapter 2 Marketing Strategy and Tactics

Figure 1. Identifying the Target Market: The 5-C Framework Company Competitors Collaborators Customers Context

Figure 2. Defining the Value Exchange Company Value Value Customers Value Collaborators Value Value Value Competitors Context

Figure 3. The 3-V Market Value Principle Customer value Collaborator value Company value OVP The Optimal Value Proposition

Figure 4. Marketing Tactics: The Seven Attributes Defining the Market Offering Customer value Collaborator value Company value OVP Strategy Tactics Product Service Brand Communication Distribution Price Incentives Market Offering

Figure 5. Marketing Tactics as a Process of Designing, Communicating and Delivering Value Designing value Product Service Brand Value Price Incentives Communication Distribution Communicating value Delivering value

Figure 6. Marketing Tactics: Company Actions and Customer Impact Communicating value Delivering Designing Awareness of the offering Availability of the offering Attractiveness of the offering Company actions Customer impact

Figure 7. The Market Value Map Target Market Market Offering Customers Product What customer need does the company aim to fulfill? Who are the customers with this need? What are the key features of the company’s product? Collaborators What other entities will work with the company to fulfill the identified customer need? Service What are the key features of the company’s service? Company What are the company’s resources that will enable it to fulfill the identified customer need? Brand What are the key features of the offering’s brand? Competition What other offerings aim to fulfill the same need of the same target customers? Price Context What is the offering’s price? What are the sociocultural, technological, regulatory, economic, and physical aspects of the environment? Incentives Value Proposition What incentives does the offering provide? Customer Value What value does the offering create for target customers? Communication How will target customers and collaborators become aware of the company’s offering? Collaborator Value What value does the offering create for the company’s collaborators? Distribution Company Value How will the offering be delivered to target customers and collaborators? What value does the offering create for the company? Strategy Tactics

Figure 8. The 4-P Framework Product Value Promotion Price Place

Figure 9. The Four Ps and the Marketing Mix Product Value Product Service Brand Communication Distribution Price Incentives Price Promotion Place

Figure 10. The Five Forces of Competition New entrants Competitors Suppliers Buyers Substitutes

Chapter 3 The Marketing Plan

Figure 1. The G-STIC Framework for Marketing Management Goal Strategy Business model Tactics Implementation Control

Figure 2. The G-STIC Action-Planning Flowchart The ultimate criterion for success Goal Focus Benchmarks The value created in the target market Strategy Target market Value proposition The specifics of the market offering Tactics Product Service Brand Price Incentives Communication Distribution The logistics of creating the offering Implementation Development Deployment Monitoring goal progress Control Performance Environment

Figure 3. Market Goals and Objectives Customer objectives Collaborator objectives Company goal Company objectives Competitor objectives Context objectives

Figure 4. The Marketing Plan What are the key aspects of the markets in which the company competes? What are the company’s history, culture, resources, offerings, and ongoing activities? What is the key performance metric the company aims to achieve with the offering? How will the company evaluate the progress toward its goal? How is the company offering being developed? Who are the target customers, competitors, and collaborators? What are the company’s resources and context? Company Tactics Goal What are the criteria (temporal and quantitative) for reaching the goal? Benchmarks Target market Strategy What value does the offering create for target customers, collaborators, and company stakeholders? Value proposition Development Implementation What processes will be used to bring the offering to market? Deployment Performance Control How will the company monitor the environment to identify new opportunities and threats? Environment Market offering What are the product, service, brand, price, incentives, communication, and distribution aspects of the offering? Executive Summary Exhibits Situation Overview Market Focus What are the key aspects of the company’s marketing plan? What are the details/evidence supporting the company’s action plan? G-STIC Action Plan

Figure 5. The SWOT Framework for Assessing a Company’s Market Position Favorable factors Unfavorable factors Internal factors Strengths Weaknesses Company analysis External factors Opportunities Threats Market analysis

Identifying Target Customers Chapter 4 Identifying Target Customers

Figure 1. Segment-Based Targeting Customers whose needs the company aims to fulfill (target market) Targeting All potential customers (entire market)

Figure 2. Strategic Targeting: Key Principles Target Compatibility Target Attractiveness Company resources Customer needs Customer resources Company goals Customer value Company value

Figure 3. The Resource Advantage Principle Unutilized company resources Company resources The company’s ideal customers Competitive wasteland Unmet customer needs Customer needs Competitor resources Intense competition

Figure 4. Customer Profile and Customer Needs Need-based targeting Profile-based targeting Identifiable customer needs

Figure 5. Linking Customer Value and Profile Needs Customer value Resources Strategic targeting Target customers Customer identification Demographics Psychographics Customer profile Geolocation Behavior Tactical targeting

Figure 6. Tactical Targeting: Effectiveness Value-based segment Profile-based segment “Sniper” targeting (optimal) “Slice-of-the-pie” targeting (too narrow) “Shot-in-the-dark” targeting (off base)

Figure 7. Tactical Targeting: Cost-Efficiency Value-based segment Profile-based segment “Sniper” targeting (optimal) “Shotgun” targeting (too broad)

Figure 8. Strategic and Tactical Segmentation Facilitates the Process of Identifying Target Customers All potential customers (entire market) Strategic targeting (value-based) Strategic segmentation Channel A Channel B Channel C Tactical targeting (profile-based) Tactical segmentation

Figure 9. Common Segmentation Errors A. Irrelevant B. Heterogeneous C. Not exhaustive

Developing a Customer Value Proposition Chapter 5 Developing a Customer Value Proposition

Figure 1. Value as a Function of Customer Needs and Offering Attributes Customer value Customer needs Company offering

Figure 2. Dimensions of Customer Value Functional value Customer value Psychological value Monetary value

Figure 3. The Customer Value Proposition Company offering Reason to choose Alternative options Value Value Customer needs

Figure 4. Competitive Value Map Competitive disadvantage Competitive advantage Attribute 1 Customer value Attribute 2 Attribute 3 Attribute 4 Attribute 5 Attribute importance Competitive parity Competitive offering Company offering

Figure 5. Customer Value Proposition and Positioning Primary benefit(s) Positioning Value proposition Secondary benefit(s) Trivial benefits Costs

Psychological benefits Figure 6. Positioning Strategies Based on their Ability to Create a Sustainable Competitive Advantage Psychological benefits Positioning Functional benefits Sustainable competitive advantage Monetary benefits

Creating Company Value Chapter 6 Creating Company Value

Figure 1. Dimensions of Company Value Monetary value Company value Strategic value

Figure 2. The Key Profit Drivers Sales volume Unit price Revenues Profit Variable costs Fixed costs Costs

Figure 3. Strategies for Growing Sales Volume New to the category Market-growth strategy New customers Competitors’ customers Steal-share strategy Sales volume Current customers Market-penetration strategy

Figure 4. Managing Profits by Lowering Costs COGS R&D costs Marketing costs Other costs Costs

Figure 5. The Profit Impact of Strategic Offerings Company value Profit Profit Offering A Offering B Offering C Strategic value Strategic value

Figure 6. Economic Value Analysis Monetary value Company value Monetizing strategic value Strategic value

Figure 7. Analyzing the Total Cost of a Company’s Offering in a Competitive Context Price Durability Reliability Warranty Service Difference in strategic value Price Durability Reliability Warranty Service Strategic value Purchase price Difference in monetary value Company offering Competitive offering

Figure 8. Creating Market Value through Collaboration B2B B2C Company Collaborator Customer Value Value Value

Figure 10. Calculating Trade Margins Manufacturer cost: $3 Selling price to the wholesaler: $10 Margin: $7 Margin (% of selling price): $7/$10 = 70% Manufacturer Purchase price from the manufacturer: $10 Selling price to the retailer: $15 Margin: $5 Margin (% of selling price): $5/$15 = 33% Wholesaler Purchase price from the wholesaler: $15 Selling price to the customer: $20 Margin: $5 Margin (% of selling price): $5/$20 = 25% Retailer Customer Purchase price: $20

Figure 11. Break-Even of a Fixed Cost Investment Costs Revenues Revenues Profit Break-even point Total costs Fixed costs Loss Volume

Chapter 7 Managing Products

Figure 1. Product Management as a Value-Creation Process Customer value Collaborator value Company value OVP Product Service Brand Communication Distribution Price Incentives Market Offering

Figure 2. Product Attributes and Customer Benefits Attribute A Benefit A Functional benefits Attribute B Benefit B Attribute C Benefit C Psychological benefits Product Attribute D Benefit D Attribute E Benefit E Monetary benefits Attribute F Benefit F Product attributes Customer needs

Figure 3. Managing the Product Lifecycle Financial performance Revenues Profits Time Introduction Growth Maturity Decline

Figure 4. Extending Product Lifestyle through Innovation Sales Third generation Second generation First generation Time

Chapter 8 Managing Services

Figure 1. Service Management as a Value-Creation Process Customer value Collaborator value Company value OVP Product Service Brand Communication Distribution Price Incentives Market Offering

Figure 2. Creating Market Value Through Superior Customer Service Employee selection, training and motivation Employee competence and satisfaction Superior service delivery Company profits Customer loyalty Customer value

Figure 3. Managing Employee Performance Recruit Motivate Empower Control Train Inform Company culture Service delivery

Figure 4. Building a Service-Oriented Company Culture Management beliefs Company policies Employee selection Norms of behavior Teamwork Service quality

Chapter 9 Managing Brands

Figure 1. Branding as a Value-Creation Process Customer value Collaborator value Company value OVP Product Service Brand Communication Distribution Price Incentives Market Offering

Figure 2. Brand Association Maps of Starbucks and Apple Great taste Nearby Coffee My drink Self-identity Fast Friendly My place Home Workplace Great service Energy Indulgence My ritual Consistent experience Convenient Morning Starbucks iPad Mac iPod Connectivity iPhone Innovative Easy to use Stylish Different Sleek design Microsoft Easy to learn Creative iTunes Tablet Music on the go Entertainment Apple

Single-brand strategy Figure 3. Single-Brand, Cobranding, and Multi-Brand Portfolio Strategies Single parent brand New sub-brand Endorsed new brand Independent new brand Single-brand strategy Multi-brand strategy Cobranding

Figure 4. Vertical Brand Extensions Price Upscale extension Price tier A Price tier B Core offering Downscale extension Price tier C Benefits

Figure 5. Horizontal Brand Extensions Price Extension A Core offering Extension B Benefits Category A Category B Category C

Figure 8. Brand Power, and Brand Equity Branding activities Brand image Customer value Customer behavior Company value Brand power Brand equity

Chapter 10 Managing Price

Figure 1. Pricing as a Value-Creation Process Customer value Collaborator value Company value OVP Product Service Brand Communication Distribution Price Incentives Market Offering

Figure 2. The Price Elasticity of Demand $15 $10 Inelastic demand Elastic demand 20 25 50 Quantity

Figure 3. Penetration, Skim, and Loss-Leader Pricing Range of unprofitable prices Range of profitable prices Skim pricing Penetration pricing Loss-leader pricing Customer willingness to pay

Figure 4. Competitive Price–Benefit Map Value-equivalence line Offering A Offering B Offering D Offering E Offering C Benefits

Chapter 11 Managing Incentives

Figure 1. Managing Incentives as a Value-Creation Process Customer value Collaborator value Company value OVP Product Service Brand Communication Distribution Price Incentives Market Offering

Figure 2. Incentive Types

Figure 3. Push and Pull Promotions Manufacturer Manufacturer Communication Incentives Demand Demand Retailer Retailer Communication Incentives Communication Incentives Demand Demand Customers Customers Push promotions Pull promotions

Managing Communication Chapter 12 Managing Communication

Figure 1. Communication as a Value-Creation Process Customer value Collaborator value Company value OVP Product Service Brand Communication Distribution Price Incentives Market Offering

Figure 2. The G-STIC Framework for Managing Communication Marketing Strategy Marketing plan Target market Value proposition Goal Focus Benchmarks Strategy Audience Message Tactics Communication campaign Media Creative Implementation Development Deployment Control Performance Environment

Managing Distribution Chapter 13 Managing Distribution

Figure 1. Distribution as a Value-Creation Process Customer value Collaborator value Company value OVP Market Offering Product Service Brand Price Incentives Communication Distribution

Figure 2. Distribution Channel Structure Wholesaler Retailer Customers Company Direct channel Indirect channels Hybrid channel

Gaining and Defending Market Position Chapter 14 Gaining and Defending Market Position

Figure 1. Steal-Share Strategy Current users New users

Figure 2. Market-Growth Strategy Current users New users

Figure 3. Market-Growth Strategy for a Superior Offering Current users New users

Figure 4. Market-Penetration Strategy Current users New users

Figure 5. Market-Creation Strategy Current market New market

Figure 6. Defensive Marketing Strategies Price Benefits Stay the course Move upscale Increase benefits Reduce price Move downscale Launch value offering Launch premium offering Source: Stephen Hoch (1996), “How Should National Brands Think about Private Labels?” Sloan Management Review, 37 (2), 89–102

Figure 7. The Adoption Funnel Awareness Attractiveness Affordability Availability Purchase

Figure 8. Identifying Adoption Gaps Awareness gap Attractiveness gap Affordability gap Availability gap Purchase gap All target customers Aware of the offering’s existence Perceive the offering to be attractive Perceive the offering to be affordable Have access to the offering Purchase the offering

Figure 9. The Usage Funnel Satisfaction Usage frequency Usage quantity Repurchase

Figure 10. Identifying Usage Gaps Satisfaction gap Usage-frequency gap Usage-quantity gap Repurchase gap Purchased the offering Satisfied with the offering Use the offering frequently Use large quantity per occasion Repurchase the offering

Chapter 15 Managing New Products

Figure 1. The Stage-Gate Framework for Developing New Offerings Idea generation Concept development Business model design Offering development Commercial deployment Gate 1 Idea validation Gate 2 Concept validation Gate 3 Business model validation Gate 4 Offering validation

Figure 2. Top-Down (Market-Driven) Idea Generation Market opportunity Problem in search of an invention Top-down idea discovery Invention

Figure 3. Bottom-Up (Invention-Driven) Idea Generation Market opportunity Invention in search of a problem Bottom-up idea discovery Invention

Figure 4. The Validated-Learning Approach Observe the market Generate an idea Build a prototype Test the prototype Build the offering Learn from the outcome

Figure 5. The Key Components of a Business Model of a New Offering Target market Market offering Customers Product Collaborators Service Company Brand Competitors Context Price Value proposition Incentives Customer Value Communication Collaborator Value Distribution Company Value

Figure 6. The Path of Least Resistance Customers with an unmet need (all target customers) Path of least resistance Customers who recognize the unmet need as a problem that needs solving Customers who actively seek a solution to the problem

Figure 7. The Path of Least Resistance Path of least resources Customers with an unmet need (all target customers) Customers who can be informed about the offering in a cost-efficient manner Customers to whom the offering can be delivered in a cost-efficient manner

Figure 8. The Product-Market Growth Framework Product development Market penetration Diversification Market development New products Current products New customers Current customers

Managing Product Lines Chapter 16 Managing Product Lines

Figure 1. Product Portfolio and Product Lines Product line X Product line Y Product A Product B Product C Product D Product E

Figure 2. Product Platforms and Product Lines Customer benefits Product A Product B Product C Product D Company processes Product platform X Product platform Y

Figure 3. Network Product Platforms Company product line Product A Product B Product C Product D Product platform X Product platform Y Product E Product F Product G Product H Competitor product line

Figure 4. Vertical Product-Line Extensions Price Upscale offering Core offering Downscale offering Benefits

Figure 5. Horizontal Product-Line Extensions Price Benefits Core offering Offering A Offering B

Figure 6. Product-Line Cannibalization Competitive offerings Current offering Competitive offerings Current offering New offering Competitive offerings New offering Current offering Cannibalized sales A. Single offering B. Two offerings without cannibalization C. Two offerings with cannibalization

Figure 7. The Fighting-Brand Strategy Time Price Quality Incumbent brand Fighting brand Low-price competitors

Figure 8. The Sandwich Strategy Time Price Quality Incumbent brand Fighting brand Low-price competitors Premium brand

Figure 9. The Good-Better-Best Strategy Price Quality Incumbent brand Good Low-price competitors Best Better Time

Figure 10. Break-Even Rate of Cannibalization Sales volume of the incumbent offering unaffected by the new offering Sales volume of the incumbent offering cannibalized by the new offering Competitive offerings Sales volume of the new offering gained from the competitive offerings

Segmentation and Targeting Workbook Appendix A Segmentation and Targeting Workbook

Figure 1. Identifying Target Customers Define the key value drivers Segment the market Strategic targeting Assess segment attractiveness Assess segment compatibility Select strategically viable segment(s) Define the segment profile Tactical targeting Assess tactical viability of segment(s) Select target segment(s)

Figure 2. The Targeting Matrix

Figure 3. Customer Value Analysis Workbook (Two Segments)

Figure 4. Customer Value Analysis Workbook (Three Segments)

Figure 5. Compatibility Analysis Workbook (Tradesman Segment)

Figure 6. The Targeting Matrix: Black & Decker

The Business Model Workbook Appendix B The Business Model Workbook

Figure 1. The Market Value Map What are the key features of the company’s product? What are the key features of the company’s service? What are the key features of the offering’s brand? What is the offering’s price? What incentives does the offering provide? How will target customers and collaborators become aware of the company’s offering? How will the offering be delivered to target customers and collaborators? Market Offering Product Service Brand Price Incentives Communication Distribution What customer need does the company aim to fulfill? Who are the customers with this need? What other entities will work with the company to fulfill the identified customer need? What are the company’s resources that will enable it to fulfill the identified customer need? What other offerings aim to fulfill the same need of the same target customers? What are the sociocultural, technological, regulatory, economic, and physical aspects of the environment? Target Market Collaborators Customers Company Competition Context What value does the offering create for target customers? What value does the offering create for the company’s collaborators? What value does the offering create for the company? Value Proposition Collaborator Value Customer Value Company Value

Figure 2. The Customer Value Map What are the features of the product that the company offers to target customers? What are the features of the service that the company offers to target customers? What are the features of the offering’s brand? What is the offering’s price for target customers? What incentives does the offering provide to target customers? How will target customers become aware of the company’s offering? How will the offering be delivered to target customers? Customer Offering Product Service Brand Price Incentives Communication Distribution What value does the offering create for target customers? Why would they choose this offering? Customer Value Reason to choose What customer need does the company aim to fulfill? Who are the customers with this need? Target Customers Customer need Customer profile What other offerings aim to fulfill the same customer need? What value do these offerings create for target customers? What are the key aspects of the competitive offerings? Competition Key competitors Value proposition Offering attributes

Figure 3. The Collaborator Value Map What are the features of the product that the company offers to collaborators? What are the features of the service that the company offers to collaborators? What are the features of the offering’s brand? What is the offering’s price for collaborators? What incentives does the offering provide to collaborators? How will collaborators become aware of the company’s offering? How will the offering be delivered to collaborators? Collaborator Offering Product Service Brand Price Incentives Communication Distribution What value does the offering create for collaborators? Why would they partner with the company? Collaborator Value Reason to choose Which entities will partner with the company to create value for target customers? What goals do collaborators pursue by partnering with the company? Collaborators Collaborator profile Collaborator goals What other offerings aim to fulfill the same collaborator goals? What value do these offerings create for collaborators? What are the key aspects of the competitive offerings? Competition Key competitors Value proposition Offering attributes

Figure 4. The Company Value Map What are the features of the product that the company offers to target customers and collaborators? What are the features of the service that the company offers to target customers and collaborators? What are the features of the offering’s brand? What is the offering’s price for target customers and collaborators ? What incentives does the offering provide to target customers and collaborators? How will target customers and collaborators become aware of the company’s offering? How will the offering be delivered to target customers and collaborators? Company Offering Product Service Brand Price Incentives Communication Distribution What value does the offering create for target customers? Why would customers choose this offering? Company Value Reason to choose What entity is managing the offering? What are its key resources? What goal does the company aim to fulfill with this offering? Company Company profile Company goals What alternative options can fulfill the same company goal? What value do these options create for the company? What are the key aspects of the alternative options? Alternative Options Key alternatives Value proposition Option attributes