Marketing Management Dawn Iacobucci © 2010 South-Western, a part of Cengage Learning

Marketing Strategy Chapter 14

Marketing Strategy Marketing strategy is the link between corporate goals and operational tactics Specifies a target market and a related marketing mix There are two primary considerations in marketing strategy—Strategic Fit Where are we? Where do we want to go?

Elements of a Firm’s Marketing Program Multimedia Lecture Support Package to Accompany Basic Marketing Lecture Script 2-4

Competitive Advantage Competitive advantage: the firm has a marketing mix that the target market sees as better than a competitor's mix

Marketing Strategies GE’s Strategic Planning Grid Boston Consulting Group Ansoffs Product-Market Expansion Grid Porter Generic Strategies Treacy and Wiersema Positioning Matrix Un-segmented/Segmented Marketing Strategy Product Orientation vs. Market Orientation Strategies to Increase Profitability Basic Strategies

GE’s Strategic Planning Grid A way of organizing business judgments about existing and/or proposed product-market plans—Strategic Fit Business Strengths Dimension Company size, market share Profit margins Technology position Limiting factors (personnel, capital needed, etc.) Industry Attractiveness Dimension Size of market and growth trends Competitive situation Social impact Industry profitability

Planning Grids Help Evaluate Portfolio Opportunities This slide relates to material on pp. 80-81. Indicates place where slide “builds” to include the corresponding point (upon mouse click). Industry Attractiveness High Medium Low High Summary Overview Graphical planning grids help managers summarize the interaction of several key factors identified by the company to be important to successful business ventures. Key Issues General Electric strategic planning grid: positions opportunities according to industry attractiveness and business strength. Industry attractiveness--characteristics such as size, growth, and competitive structure. Discussion Question: What characteristics of an industry would be attractive? Business strength--resources of the organization like people skills, technological position, growth, market share or profitability, among others. Using industry attractiveness and business strength, a manager can show where any opportunity appears on this grid. Opportunities occupying the green area of this matrix are growth opportunities and should be pursued. Such opportunities occur in more attractive industries and better fit with the company’s strengths. Opportunities falling in the red area are ones that the firm should avoid. Such opportunities are perhaps in low growth industries and do not play to the company’s strengths. In the middle, the yellow areas are borderline opportunities that the firm needs to analyze more fully in order to determine if they are worthwhile. A company may be able to develop a marketing strategy that offsets the lack of strength or low attractiveness in an industry. Business Strength Medium No Growth Low Borderline Growth Multimedia Lecture Support Package to Accompany Basic Marketing Lecture Script 3-8

Portfolio Assessment Tool Boston Consulting Group matrix (another extension of strategic fit) Brands or products are classified according to whether each has a: strong or weak market share & slow or growing market Dog: low share, low growth Star: high share, high growth Cash cow: high share, low growth Question mark: low share, high growth

BCG Matrix

BCG Portfolio Analysis Stars: optimize or hold Dogs: minimize or divest Cash cows: milk Question marks: unknown New technologies, uncertain markets, etc. If stars and cash cows are sufficiently profitable, companies can carry dogs and question marks

Discussion Questions Using the BCG Matrix Where would you likely categorize the market leader in the typewriter market? 10 years ago, where would you have likely categorized a small player in the cell phone business? Where would you categorize the market leader in cell phones today?

Ansoff’s Product-Market Expansion Grid

Examples of Different Types of Opportunities Market Penetration Arm & Hammer promotes new uses of its baking soda Market Development Marriott Hotels target families for weekend get-aways to rent rooms filled by business travelers during the week Product Development Microsoft develops a new version of its Windows operating system to appeal to the people who bought an earlier version but now want more features Diversification RJR, the cigarette producer, adds baked goods to its product line to appeal to new customers

Porter’s Generic Strategies Overall Cost Leadership—lowest production and distribution costs to be able to price lower than competitors and to obtain larger market share. Differentiation—uniquely achieving superior performance in an important customer benefit area. Focus—on one or more narrow market segments

Porter Cost leadership—We’re efficient Differentiation—We’re unique Producing goods and services (Wal-mart) Differentiation—We’re unique Distinguish one’s products as unique (Apple) Focused—We do one thing very well Narrower (Café Du Monde makes beignet

Treacy and Wiersema Operational Excellence—We’re smooth and reliable DHL, FedEx, UPS Product Leadership—We’re excellent and special Dupont chemical solutions, HP printers Customer Intimacy—We know our customers very well Amazon.com, Netflix.com

Positioning Matrix High Quality, high price, selective promotion, exclusive distribution 4Seasons, Porsche, BMW Low quality, low price, broad promotion, mass distribution Wal-Mart, Movies, Gap If veer from either, have a good reason

EXTENSIVE DISTRIBUTION ALL POTENTIAL USERS OF A WRITING INSTRUMENT UNSEGMENTED MARKET STRATEGY WITH A SINGLE MARKETING MIX COMMUNITY WRITING COMPANY MARKETING MIX TARGET MARKET LEAD PENCIL 79 CENTS TELEVISION EXTENSIVE DISTRIBUTION ALL POTENTIAL USERS OF A WRITING INSTRUMENT

SEGMENTED MARKETING STRATEGY WITH MULTIPLE MARKETING MIXES TARGET MARKETS FELT-TIP PEN $1.00 CAMPUS NEWSPARER VENDING MACHINES SEGMENT A (STUDENTS) 49 CENTS PERSONAL SELLING DIRECT FROM FACTORY SEGMENT B (PROFESSORS) GOLD INK PEN $50.00 MAGAZINES DEPARTMENT STORES SEGMENT C (EXECUTIVES)

A SEGMENTED MARKETING STRATEGY WITH SINGLE MARKETING MIX TARGET MARKET SEGMENT A (PROFESSORS) FELT-TIP PEN $1.00 CAMPUS NEWSPARER VENDING MACHINES (STUDENTS) SEGMENT C (EXECUTIVES)

Product Orientation vs. Market Orientation Company Product Market Missouri-Pacific Railroad We run a railroad We are a people-and-goods mover Xerox We make copying equipment We improve office productivity Standard Oil We sell gasoline We supply energy Columbia Pictures We make movies We entertain people 2-22

Marketing Metrics Profitability Sales Share Average prices Levels of awareness Penetration in trial Customer satisfaction Employee satisfaction, etc.

How to Increase Profitability

Grow Profit By Increase Volume Grow the market Grow market share Up-selling (more expensive offerings) to current customers Getting current customers to buy more frequently

Grow Profit By Increase Volume (continued) Stealing customers from our competitors Finding another segment Create new products for current/new customers Reduce brand switching of our current customers by enhancing brand equity: Raise our customer satisfaction Adding value through a loyalty program Raise switching cost

Grow Profit By Changing Price Cutting prices to increase volume Raise prices to get greater margins Enhance perceived benefits to customer to make them less price-sensitive Shift our target segment to more upscale buyers

Grow Profit By Decease Variable or Fixed Costs Decrease Variable Costs Try to find less expensive but quality suppliers. Outsource parts of our business that appear to be expensive for us Decrease Fixed Costs Spend less on R & D. Spend less on Advertising Milk the Brand

Basic Strategies Do nothing Do nothing differently Take action Let the brand sink or swim on its own Do nothing differently Maintain business as usual Take action Do something different Marketers have control over STP and 4Ps

Dashboard Indicator of a company’s success Some measures will confirm advantages over competitors Others can serve as a diagnostic in identifying problems

Discussion Question What story does the dashboard tell?

Study Question 1 Apple’s iPod brand has a relatively large share in a growing market, and thus is best classified as a a. cash cow. b. star. c. question mark. d. dog. B

Study Question 2 Innovative Manufacturing Co. is a consumer products company that produces dozens of items ranging from toys to electronics. The company holds many trademarks and patents for the new products it has developed over the years. In the company’s experience, the least likely reason for a new product’s failure would be related to which of the following? a. product is just too new to the customer b. customers don’t have a frame of reference with which to compare these products c. the product is over-priced d. customers do not know how to think about the product, what to look for, what attributes are considered good C

Study Question 3 Which of the following is a dimension on which a company’s performance can be measured? a. sales b. market share c. profit margins d. all are indicators for measurement D

Study Question 4 Bill advises Mary that there are essentially three strategies to achieving goals. Assuming Bill is correct, how would he describe these three strategies? a. do nothing; do nothing different from status quo; do something different b. segment, target, position c. customer satisfaction, customer loyalty, customer retention d. be the leader, be a quick follower, be a follower A

Marketing strategy ultimately is the link between Study Question 5 Marketing strategy ultimately is the link between a. corporate goals and operational tactics. b. leaders and followers. c. offensive and defensive identities. d. stars and dogs. A