1. 1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market Segmentation 4. Strategic Customer Relationship Management 5. Capabilities for Learning about Customers and Markets 6. Market Targeting and Strategic Positioning 7. Strategic Relationships 8. Innovation and New Product Strategy 9. Strategic Brand Management 10. Value Chain Strategy 11. Pricing Strategy 12. Promotion, Advertising and Sales Promotion Strategies 13. Sales Force, Internet, and Direct Marketing Strategies 14. Designing Market-Driven Organizations 15. Marketing Strategy Implementation And Control Strategic Marketing

2. Imperatives for Market-Driven Strategy Chapter 1 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

3. ****** 1-3 Objectives *Pivotal role of market-driven strategy in designing and implementing business/marketing strategies *Links between business/marketing strategy and corporate strategy *Challenges in the modern environment

4. ****** 1-4 Achieving Superior Performance Determining Distinctive Capabilities Customer Value/ Capabilities Match Becoming Market- Orientation Characteristics of a Market-Driven Strategy

5. ****** 1-5 Market-Driven Strategy (1) *Becoming market-oriented *Customer focus *Competitor intelligence *Cross-functional coordination *Performance implications

6. ****** 1-6 BECOMING MARKET ORIENTED *Customer is the focal point of the organization *Commitment to continuous creation of superior customer value *Superior skills in understanding and satisfying customers *Requires involvement and support of the entire workforce *Monitor rapidly changing customer needs and wants

7. ****** 1-7 *Determine the impact of changes on customer satisfaction *Increase the rate of product innovation *Pursue strategies to create competitive advantage

8. ****** 1-8 Characteristics of Market Orientation  Customer Focus What are the customer’s value requirements?  Competitive Intelligence Importance of understanding the competition as well as the customer  Cross-Functional Coordination Remove the walls between business functions  Performance Consequences Market orientation leads to superior organizational performances

9. ****** 1-9 Information Acquisition Cross-Functional Analysis of Information Shared Diagnosis and Coordinated Action Delivery of Superior Customer Value Becoming a Market-Oriented Organization

10. ****** 1-10 Market Orientation  Information Acquisition  Gather relevant information on customers, competition, and markets  Involve all business function  Inter-functional Assessment  Share information and develop innovative products with people from different function  Shared diagnosis and action  Deliver superior customer value

11. ****** 1-11 Market-Driven Strategy (2) *Becoming market-oriented *Customer focus *Competitor intelligence *Cross-functional coordination *Performance implications *Determining distinctive capabilities

12. ****** 1-12 DISTINCTIVE CAPABILITIES “Capabilities are complex bundles of skills and accumulated knowledge, exercised through organizational processes, that enable firms to coordinate activities and make use of their assets.” George S. Day, Journal of Marketing, October 1994, p.38.

13. ****** 1-13 Southwest Airline’s Distinctive Capabilities Organizational Processes Southwest uses a point-to-point route system rather than the hub-and-spoke design used by many airlines. The airline offers services to 57 cities in 29 states, with an average trip about 500 miles. The carrier’s value proposition consists of low fares and limited services (no meals). Nonetheless, major emphasis throughout the organization is placed on building a loyal customer base. Operating costs are kept low by using only Boeing 737 aircraft, minimizing the time span from landing to departure, and developing strong customer loyalty. The company continues to grow by expanding its point-to-point route network. Skills and Accumulated Knowledge The airline has developed impressive skills in operating its business model at very low cost levels. Accumulated knowledge has guided management in improving the business design over time. Coordination of Activities Coordination of activities across business functions is facilitated by the point-to- point business model. The high aircraft utilization, simplification of functions, and limited passenger services enable the airline to manage the activities very efficiently and to provide on-time point-to-point services offered on a frequent basis. Assets Southwest’s key assets are very low operating costs, loyal customer base, and high employee esprit de corps

14. ****** 1-14 Compelling Logic of Distinctive Capabilities Disproportionate (higher) contribution to superior customer value Provides value to customers on a more cost-effective basis Capabilities Source: George S. Day, Journal of Marketing, October 1994, p. 38.

15. ****** 1-15 Capabilities Desirable Capabilities Desirable Capabilities Applicable to Multiple Competition Situations Difficult to Duplicate Superior to the Competition Source: George S. Day, Journal of Marketing, October 1994, 49.

16. ****** 1-16 Market-Driven Strategy (3) *Becoming market-oriented *Customer focus *Competitor intelligence *Cross-functional coordination *Performance implications *Determining distinctive capabilities *Types of capabilities

17. ****** 1-17 Types of Capabilities Outside-In Processes Inside-Out Processes Spanning Processes

18. ****** 1-18 Organization’s Process Source: George S. Day, Journal of Marketing, October 1994, 41. Spanning Processes Outside-In Processes Inside-Out Processes EXTERNAL EMPHASIS INTERNAL EMPHASIS  Market sensing  Customer linking  Channel bonding  Technology monitoring  Customer order fulfillment  Pricing  Purchasing  Customer service delivery  New product/service development  Strategy development  Financial management  Cost control  Technology development  Integrated logistics  Manufacturing/ transformation processes  Human resources management  Environment health and safety

19. ****** 1-19 Market-Driven Strategy (4) *Becoming market-oriented *Customer focus *Competitor intelligence *Cross-functional coordination *Performance implications *Determining distinctive capabilities *Types of capabilities *Creating value for customers

20. ****** 1-20 Value Requirements Distinctive Capabilities Matching Customer Value and Distinctive Capabilities

21. ****** 1-21 CREATING VALUE FOR CUSTOMERS Customer Value:  Value for buyers consists of the benefits less the costs resulting from the purchase of products.  Superior value: positive net benefits Creating Value:  “Customer value is the outcome of a process that begins with a business strategy anchored in a deep understanding of customer needs.” Source: C. K. Troy, The Conference Board Inc., 1996, 5.

22. ****** 1-22 Creating Value for Customers Benefits Costs Customer Value

23. ****** 1-23 Value Composition Monetary costs Time Psychic and physic costs Product Services Employees Image Benefits Costs (sacrifices) Value (gain/loss)

24. ****** 1-24 Market-Driven Strategy (5) *Becoming market-driven *Marketing sensing capabilities *Customer linking capabilities *Aligning structure and processes

25. ****** 1-25 Becoming Market Driven MARKET – DRIVEN STRATEGIES Market Sensing Capabilities Customer Linking Capabilities

26. ****** 1-26 Market Driven Initiatives Market Sensing Capabilities *Effective processes for learning about markets *Sensing: *Collected information needs to be shared across functions and interpreted to determine proper actions. Customer Linking Capabilities *Create and maintain close customer relationships

27. ****** 1-27 Aligning Structure and Processes *Potential change of organizational design *Improve existing processes *Process redesign *Cross-functional coordination and involvement *Primary targets for reengineering: *Sales and marketing, customer relations, order fulfillment, and distribution

28. ****** 1-28 Corporate, Business and Marketing Strategy (1) *What is corporate strategy?

29. ****** 1-29 C ORPORATE S TRATEGY Deciding the Scope and Purpose of the Business Business Objectives Actions and Resources for Achieving Objectives

30. ****** 1-30 CHARACTERISTICS OF SUCCESSFUL STRATEGY  Unique competitive position for the company.  Activities tailored to strategy.  Clear trade-offs and choices vis-à-vis competitors.  Competitive advantage arises from fit across activities.  Sustainability comes from the activity system not the parts.  Operational effectiveness a given. Source: Michael E. Porter, “What Is Strategy,” Harvard Business Review, November-December 1996, 74.

31. ****** 1-31 Corporate, Business and Marketing Strategy (2) *What is corporate strategy? *Corporate strategy framework *Deciding corporate vision *Objectives *Resources *Business composition *Structure, systems and processes

32. ****** 1-32 CORPORATE STRATEGY COMPONENTS  Management’s long-term vision for the corporation  Objectives  Assets, skills, and capabilities  Businesses in which the corporation competes  Structure, systems, and processes  Creation of value Source: David J. Collis and Cynthia A. Montgomery, Corporate Strategy, Chicago: Irwin, 1997, 7-12.

33. ****** 1-33 Corporate, Business and Marketing Strategy (3) *Business and marketing strategy *Business and marketing strategy relationships *Strategic marketing

34. ****** 1-34 CORPORATE, BUSINESS AND MARKETING STRATEGY

35. ****** 1-35 Corporate, Business and Marketing Strategy (4) *The marketing strategy process *Markets, segments and customer value *Markets and competitive space *Strategic market segmentation *Strategic customer relationship management *Capabilities for continuous learning about markets

36. ****** 1-36 Corporate, Business and Marketing Strategy (5) *Designing market-driven strategies *Market targeting and strategic positioning *Strategic relationships *Innovation and new product strategy *Market-driven program development *Strategic brand management *Value chain strategy *Pricing strategy *Promotion strategy

37. ****** 1-37 Corporate, Business and Marketing Strategy (6) *Implementing and managing market- driven strategy *Designing market-driven organizations *Marketing strategy implementation and control

38. ****** 1-38 M ARKETING S TRATEGY P ROCESS Markets, Segments And Value Market-Driven Program Development Implementing and Managing Market-Driven Strategy Designing Market-Driven Strategies

39. ****** 1-39 Challenges in the modern environment *Escalating globalization *Technology diversity and uncertainty *The Web 2.0 *Ethical behavior and corporate social responsiveness

40. ****** 1-40 Strategic Marketing Planning *Developing the strategic plan for each business *Preparing the marketing plan *Planning relationships and frequency *Planning considerations *Responsibility for preparing plans *Planning unit *Preparing the marketing plan

41. ****** 1-41 MARKETING PLAN OUTLINE I. Strategic Situation Summary Summarize the key points from your situation analysis (market analysis, segments, industry/competition) in order to recount the major events and provide information to better understand thestrategies outlined in the marketing plan. II. Market-Targets and Objectives The market target may be defined demographically (key characteristics only), geographically, or in social/economic terms. Each market target should have needs and wants that differ to some degree from other targets. These differences may be with The market target may be defined demographically (key characteristics only), geographically, or in social/economic terms. Each market target should have needs and wants that differ to some degree from other targets. These differences may be with respect to types of products purchased, use situation, frequency of purchase, and other variations that indicate a need to alter the positioning strategy to fit the needs and wants of each target. An objective is a quantified goal identifying what is expected when. It specifies the end results expected. The objectives should be written for each target market. Objectives should also be included for the following program components: (1) product, respect to types of products purchased, use situation, frequency of purchase, and other variations that indicate a need to alter the positioning strategy to fit the needs and wants of each target. An objective is a quantified goal identifying what is expected when. It specifies the end results expected. The objectives should be written for each target market. Objectives should also be included for the following program components: (1) product, (2) price, (3) distribution, (4) promotion (salesforce, advertising, sales promotion, and public relations), and (5) technical services. (2) price, (3) distribution, (4) promotion (salesforce, advertising, sales promotion, and public relations), and (5) technical services.

42. ****** 1-42 III. Positioning Statements Write statements that describe how you want each market target to perceive each product relative to competition. State the target to perceive each product relative to competition. State the core concept used to position the product (brand) in the eyes and core concept used to position the product (brand) in the eyes and mind of the targeted buyer. The positioning statement should mind of the targeted buyer. The positioning statement should describe: (1) What criteria or benefits the customer considers when describe: (1) What criteria or benefits the customer considers when buying a product along with the level of importance, (2) What we buying a product along with the level of importance, (2) What we offer that differentiates our product from competition, and (3) The offer that differentiates our product from competition, and (3) The limitations of competitive products. limitations of competitive products. MARKETING PLAN OUTLINE

43. ****** 1-43 A.Product Strategy Identify how each product fits the market target. Other issues that may be addressed would be new product suggestions, adjustments in the mix of existing products, and product deletion candidates. B.Price Strategy The overall pricing strategy (I.e., competitive, premium-priced, etc.) should be identified along with a cost/benefit analysis if applicable. Identify what role you want price to play, i.e., increase share, maintenance, etc. C.Distribution Strategy Describe specific distribution strategies for each market target. Issues to be addressed are intensity of distribution (market coverage), how distribution will be accomplished, and assistance provided to distributors. The role of the sales force in distribution strategy should also be considered. D.Promotion Strategy Promotion strategy is used to initiate and maintain a flow of communication between the company and the market target. To assist in developing the communications program, the attributes or benefits of our product should be identified for each market target. How our product differs from competition (competitive advantage) should be listed. The sales force’s responsibilities in fulfilling the market plan must be integrated into the promotion strategy. Strategies should be listed for (1) personal selling, (2) advertising, (3) sales promotion, and (4) public relations. IV. Market Mix Strategy for Each Market Target

44. ****** 1-44 E.Marketing Research Describe the market research problem and the kind of information needed. Include a statement which addresses why this information is needed. The specific market research strategies can be written once the above two steps have been followed. V.Coordination with Other Business Functions Indicate other departments/functions that have responsibilities for implementing the marketing plan. VI.Sales Forecasts and Budgets VII.Contingency Plans Indicate how your plans should be modified if events should occur that are different from those assumed in the plan.