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2016-03-01
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Strategic Marketing Management
Course Outline - 1
� Strategic Marketing vs. Marketing Planning –Introduction
� Mission & Objectives� establishing the corporate mission
� influences on objectives and strategy
� guidelines for establishing objectives and setting goals
� Analysing the Product Portfolio� models of portfolio analysis
� market attractiveness and business position assessment
� criticism of portfolio analysis
2
Course Outline - 2
� Strategic Gap Analysis and Growth&ConsolidationStrategies� types of the strategic gap
� growth strategies
� consolidation strategies
� Allocation Strategies� growth
� fast growth
� selective growth
� aliance
� optimalization
� market position defence
� market exit strategies
3
Course Outline - 3
� Demand Growth Strategies� strategies based on the number of buyers
� strategies based on the level of consumption
� selective demand growth strategies
� Strategies for Market Leaders� position defence
� flanking defence
� preemptive defence
� counteroffensive defence
� mobile defence
� contraction defence
4
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Course Outline - 4
� Strategies for Market-Challengers� frontal attack
� flank attack
� encirclement attack
� bypass attack
� guerilla attack
� Strategies for Market-Followers& Nichers� following closely
� following at a distance
� following selectively
� Strategies for different PLC stages� strategies in the introduction stage
� strategies in the growth stage
� strategies in the maturity stage
� strategies in the decline stage
5
Assignment
� 70% final exam (test with open-endedquestions)
� 30% case study/ies: (written preparation: 2-5 pages; case is to be done in groups: 2-3 persons)
Lesson 1.
Designing Marketing Strategies
Lesson 1.
Designing Marketing Strategies
Outline
� Strategic Marketing vs. Marketing Planning – Introduction
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Strategic Marketingvs.
Marketing Planning.An Introduction
Levels of strategy (1/2)
� Corporate strategy
� Business strategies
� Operational & functional strategies
Levels of strategy (2/2)
Corporatestrategy
Business strategy(SBU 1)
Business strategy(SBU 3)
Functionalstrategies
R&D Operations Marketing HRM Finance
Business strategy(SBU 3)
‘Corporate’ or ‘Marketing’?
Vision
Mission
Corporate Objectives
Corporate Strategy
Marketing Objectives
Marketing Strategy
Marketing Tactics
Operations Objectives
Logistics Objectives
HRM Objectives
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Strategy / Tactics
Strategy Tactics
Importance More importance Less importance
Conducted by Senior managers Junior managers
Timeframe Long term Short term
Frequency Continuous Periodic
Problem Unstructured / unique Structuredhigh risk / low certainty repetitive
Information External, subjective Accounting &futuristic marketing research
Detail Broad Specific
Ease of evaluation Difficult Easy (relative)
Source: Weitz & Wensley,1998
Corporate versus Marketing
Corporate strategy
Concerned with overall, long term organisational direction
Provides the long-term framework for the organisation
Overall orientation needed to match the organisation to its environment
Goals and strategies are evaluated from an overall perspective.
Relevance of goals and strategies is only evident in the long-term
Marketing
Concerned with day-to-day performance and results
Represents only one stage in the organisation’s development
Functional and professional orientation tends to predominate.
Goals are subdivided into specific targets
Relevance of goals and strategies is immediately evident
Corporate Strategic Planning
� defining the corporate mission (vision)
� establishing SBU
� assigning resources to each SBU
� planning new business, downsizing & terminating older businesses
Marketing Planning
Analysis
Planning
Implementation
Control
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Analysis
Analysis
External
Macroenvironment Microenvironment
SWOT
Internal
The Organisation’s Marketing
Environment
Theorganisation
The economy
Socialfactors
Culturalforces
Technology
Political structures
Legalstructures
Demography
Suppliers
Distributors& dealersMarket
demands
CompetitorsCustomers
References
� Armstrong G., P. Kotler: Marketing.Wprowadzenie, Wolters Kluwer, Warszawa2012
� Gilian C., R. Wilson, Strategic MarketingManagement. Planning, impementatiom andcontrol, Butterworth Heinemann, 1999
� Kotler P. Marketing Management. EleventhEd., Prentice-Hall, Englewood Cliffs, 2003
� Porter M., Competitive Advantage, 1998
� Strategic Marketing Management: Planningand Control, BPP Professional Education, 2003
Lesson 2.
Designing Marketing Strategies
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Lesson 2.
Designing Marketing Strategies
Outline
� Mission & Objectives
� establishing the corporate mission
� influences on objectives and strategy
� guidelines for establishing objectives and setting goals
Mission & Objectives
Mission
� describes the organisation’s basicfunction in society
� explains why the company exists
� provides the commercial logic for thecompany
� needs to be converted into everydayperformance
� is a cultural glue that enables theorganisation to function as a unity
Corporate Mission - Fundamental
Questions
� What is our business?
� Who is the customer?
� What is of value to our customer?
� What will our business be?
� What should our business be?
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Infuences on the mission statement
� company’s history
� preferences, values and expectations ofmanagers & owners
� environmental factors
� available resources
� distinctive competences
Workable mission
� brief – easy to understand and remember
� flexible – to accomodate change
� distinctive – to make the firm stand out
Mission or/and vision
� vision gives general sense of direction to the company, is the orientation point thatguides the company
� vision ignores real. practical problems, vision can degenerate to wishful thinking
� mission is about here and now, visionrefers to the future,
� mission is designed to motivate, vision –not!
Objectives
S Specific - descriptive, succinct and provide claritythroughout the organization as to what is to beachieved
M Measurable - clearly state tangible targets that can bemeasured in the future
A Aspirational - challenging but achievable, motivational
R Realistic - based on sound market analysis, financial,human & physical resources should underpin theobjectives
T Timebound - a timescale should be set against theachievment of each objective in order for performancemeasurement to be undertaken
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Objectives hierarchy
Corporate objectives – increase profits
Productionobjectives– cut costs
Personnelobjectives– reduce
headcount
Marketing obejctives – increase revenue
Objectives for the mix
Product(10% of
revenue )
Price(skimming)
Promotion(recall)
Place (coverage)
Marketing Objectives e.g.
� rate of return on investment
� net profits
� cash flow
� total sales revenue
� sales volume
� market share
� consumer awareness
� number of distribution outlets
� average realized price
Eight strategic trade-offs facing firms
(1/2)
� short term profits vs. long term growth
� profit margins vs. competitive position
� direct sales effort vs. marketdevelopment effort
� penetration of existing markets vs. thedevelopment of new markets
Eight strategic trade-offs facing firms
(2/2)
� related vs. non-related newopportunities as a source of long-term growth
� profit vs. non-profit goals
� growth vs. stability
� ‘riskless’ environment vs. high-riskenvironment
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References
� Armstrong G., P. Kotler: Marketing.Wprowadzenie, Wolters Kluwer, Warszawa2012
� Gilian C., R. Wilson, Strategic MarketingManagement. Planning, impementatiom andcontrol, Butterworth Heinemann, 1999
� Kotler P. Marketing Management. EleventhEd., Prentice-Hall, Englewood Cliffs, 2003
� Porter M., Competitive Advantage, 1998
� Strategic Marketing Management: Planningand Control, BPP Professional Education, 2003
Lesson 3 & 4
Designing Marketing Strategies
Lesson 3 & 4
Designing Marketing Strategies
Outline
� Analysing the Product Portfolio
- models of portfolio analysis
- market attractiveness and business
position assessment
- criticism of portfolio analysis
Corporate Strategic Planning
� defining the corporate mission (vision)
-----------------------------------------
� establishing SBU
� assigning resources to each SBU
� planning new business, downsizing & terminating older businesses
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SBU Defining
SBU - Main Characteristics
� SBU is a pasrt of the company that for allintents and purposes has its own distinctproducts, markets and assets
� single business (or collection of relatedbusinesses) that can be planned separatelyfrom the rest of company
� has its own competitors
� has its own manager.......
Analysing the Product Portfolio
Portfolio Evaluation Frameworks
� BCG’s Growth Share Matrix
� GE Multifactor Matrix
� Shell Directional Policy Matrix
-----------------------------------------------------
� Abell & Hammond’s Investment Opportunity Matrix
� Arthur D. Little Strategic Condition Matrix
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BCG’s Growth Share Matrix
(traditional approach)
Market
growth
rate
Relative market share
Stars Question marks
Cash cows Dogs
0 xO,5 x1 x
0 %
10 %
100 %
Taking a Portfolio Approach
� analysis based around evaluating SBU activities
� models help you think strategically about the business and its resources and provide analytical frameworks. But:
� they are over-simplified
� cannot incorporate ‘risk’
� often offer misleading representations of strategic options
� use over generous measures
� assume market leadership = benefit
� ignores competitive strategic factors
time
introduction growth maturity decline
InfantsNeg. Cash flow
BCG Matrix & PLC
Question
marksLow share, high growth, large neg.
Cash flow(
StarsHigh share, high growth,
still needssupport
DogsLow share, Low growth,
+/- Cash flow
DodosLow share, negativegrowth, negative
Cash flow
Cash Cowshigh share, lowgrowth, large
positive Cash flow
War horseshigh share, negativegrowth, positive
Cash flow
Determinants of market attractiveness
� Market factors (eg size, growth)
� Competitors
� Investment factors
� Technological change
� Other PEST factors
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Determinants of business strenght
� Product quality
� Distribution
� Brand reputation
� Production capacity
� Management skill
GE Multifactor Matrix
Invest for growth
Invest selectively for
growth ?Invest
selectively for growth ?
Harvesting
?Harvesting Divest
Competitive position
Strong Average Weak
High
MediumProductattractiveness
Low
Shell Directional Policy Matrix
Disinvest Phasedwithdrawal
Double or quit
Phasedwithdrawal
CustodialGrowth
Try harder
Cash generation
GrowthLeader
Leader
Prospects for sector profitability
Unattractive Average Attractive
Weak
AverageEnterprise’scompetitivecapabilities
Strong
More Pros & Cons of taking a
Portfolio Approach
� BCG at individual SBUs, other matrices look atcompany’c competences in market sectors,without references to individual products
� They ignore opportunities of creativesegmentation or identifying new niches
� They assume market is given rather than can becreated
� Markets can be unattractive because has notbeen analysed sufficiently
� Marketers must come up with relavant data(decide if the industry is attractive or not)
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BCG’s Growth Share Matrix
(practical approach)
Market
attractiveness
Competitive position
Question marks Stars
Dogs Cash cows
100500
0
50
100
References
� Armstrong G., P. Kotler: Marketing.Wprowadzenie, Wolters Kluwer, Warszawa2012
� Gilian C., R. Wilson, Strategic MarketingManagement. Planning, impementatiom andcontrol, Butterworth Heinemann, 1999
� Kotler P. Marketing Management. EleventhEd., Prentice-Hall, Englewood Cliffs, 2003
� Porter M., Competitive Advantage, 1998
� Strategic Marketing Management: Planningand Control, BPP Professional Education, 2003
Lesson 5, 6 & 7.
Strategic Gap Analysis
and
Growth & Consolidation Strategies
Lesson 5, 6 & 7.
Strategic Gap Analysis and Growth &
Consolidation Strategies
Outline
� types of the strategic gap
� growth strategies
� consolidation strategies
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Gap Analysis
� Diagrammatical approach to viewing the difference between:
� Where we are going? (in the currentway)
� Where we want to be? (targets for achievement)
Gap Analysis
Time
Sales
Desired sales
Current portfolio
Diversification growth
Integrative growth
Intensive growth
The planning
gap
Intensive Growth
Ansoff’s Product - Market Matrix
Product
Current New
Current
New
Market
Market penetration strategy
Market development strategy
Product development strategy
Intensive Growth Strategies
� market penetration strategy
� market development strategy
� product development strategy
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Market penetration strategy
� more purchasing and usage form existing customers
� gain customers form competitors
� convert non-users into users
Market penetration tools
� Loyalty programs,
� Commercial claims
� New opportunities to use
� Suggesting additional benefits
� Price cuts
� Distribution intensifying
� Establishing or joining new distributionchannels
Market penetration strategy goals
� to increase market share throughcompetitive pricing, advertising and sales promotion
� To secure dominance of growth markets
� To restructure a mature market by driving out competitors
� To increase usage by exustingcustromers
Market penetration strategy
Advantages:
� Synergy effect (marketing synergy, operating synergy, management synergy)
� Total Cost
� Time needed
Disadvantages:
� Scale of incerase
� Predictibility
� Customer & technology dependance
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Market development strategy
� new market segments
� new distribution chanells
� new geographic areas
Market development tools
� New targeting
� New positioning of the productand/or brand
� Commercial claims
� New distribution channels
� International expansion
� Price adapted to new clients’ requirements
Market development strategy
Advantages:
� Use of existing resources
� Capacity utilization
� Know-how and experience utilization
Disadvantages:
� Level of risk (new customers, new
business context)
� Lack of management knowlegde
Product development strategy
� product modifications via newfeatures
� different quality levels
� ‘new’ product
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Product development strategy
Advantages:
� Forces competitors to innovate
� Creates bariers for new entrants
� Capacity utilization
� More options for customers
� Stronger barganing position towardsdistributors
Product development strategy
Disadvantages:
� Additional costs
� Limitations based on Pareto rule
� Time needed
Integrative Growth Strategies
Factors stimulating the need for
integration:
� Scarce resources
� Increased competition
� Higher customer expectations
� Pressures form strog distributors
� Internationalization of markets
� Changing markets and technologies
� Turbulent and upredictable markets
Source: Hooley, et al. 1998
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Integrative Growth Strategies
� Development beyond the presentproduct market, but still within thesame market system
Integrative Growth Strategies
� Horizontal integration (HMS)
� Vertical integration (VMS)
- backward
- forward
Horizontal integration
S
M
W
R R
W
R
M
W
R R
S
M
W
R
Customers
R R
M
W
R
W
R R
S – supplier, M – manufacturer, W – wholesaler, R - retailer
Horizontal integration
� Refers to development into activitieswhich are competitive or directlycomplimentary to company’s presentactivities
� Horizontal = the same level of marketing system!
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Horizontal integration - advantages
� Acces to competitors clients, distributors, markets, brands….
� Cooperation instead of competition on markets
� Reduction of R&D costs
� Strenghtening barganing power
Horizontal integration - disadvantages
� Corporate culture maladjustment,
� Strategy redefinition
� Schizophrenic corporate identity
Vertical integration
S
M
W
R R
W
R
M
W
R R
S
M
W
R
Customers
R R
M
W
R
W
R R
S – supplier, M – manufacturer, W – wholesaler, R - retailer
Vertical integration
Company becomes its own:
� supplier of raw materials, componentsor services (backward verticalintegration)
� distributor or sales agent (forwardvertical integration)
Vertical = between different levels of MS!
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Vertical integration advantages
� Secure supply of components or rawmaterials with more control
� Reduction of supplier barganing power
� Strenghten the relationships andcontacts of the manufacturer with thefinal consumer of the product
� Raise barriers to entry
� New business opportunities
Vertical integration disadvantages
� Overconcentration (‘more eggs in thesame basket’)
� Inflexible policy, more sensitive to instabilities
� Increases the firm’s dependence on particular aspect of economic demand
� Lack of know-how and experience
� High risk
Diversification Growth Strategies Diversification Growth Strategies
� Development beyond the presentindustry (marketing system)
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Diversification Growth Strategies
� concentric diversification
� horizontal diversification
� conglomerate (lateral) diversification
Concentric diversification
� New client
� New product
� Technological consistency
Concentric diversification - advantages
� Knowledge & experience
� Well established cooperation withsuppliers & distributors
� Increasing potential demand thanks to new customers
� Better adjustment to customerneeds&preferences
Concentric diversification -
disadvantages
� Technological overconcentration
� Level of risk as a consequence of ‘unknown’ customer
� New market reality - newcompetitors
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Horizontal diversification
� The same customer
� Completely new (unrelated) product
Horizontal diversification -
advantages
� Well recognized customer’s needs, wants & preferencess
� High level of customer satisfactionand loyalty
� Can use company’s image and reputation
Horizontal diversification -
disadvantages
� High risk in case of customerunsatisfaction
� Need to invest into new technology or konw-how
� Necessity of establishing newbusiness relations
� Time & costs
Lateral diversification
� New clients
� New products
� Completely unrelated businesses
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Lateral diversification - advantages
� Risk spreading (protects against thefailure of current products& markets)
� Creates additional souces of profits
� Helps escape from present business
� Offer the chance of growth withoutcreating a monopoly
� Exploit under-utilised resources
� Can use company’s image and reputation
Lateral diversification - disadvantages
� Dilution of shareholders’ earnings
� Lack of the common identity and purpose
� Lack of management experience
� Costs & risk & time
Methods of growth
� Organic growth (achived through the
development of internal resources)
� Corporate:
� Acquisition
� Merger
� Joint venture
� Contracual:
� Cooperation
� Licencing
� Franchising
Acqusitions/ mergers
� Acquiring already existing businessesfrom their current owners via thepurchase of a controlling interest inanother company
� Joining of two or more separatecompanies to form a single one
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Acqusitions – advantages (1/2)
� Buy new product range
� Buy a market presence
� Rationalisation of distribution and promotion
� Eliminate competition
� Current market protection
� Higher ulitisation of production facilities
� ‘buy in’ technologies and skills
� Obtaining greater production capacity
Acqusitions – advantages (2/2)
� ‘buy in’ technologies and skills
� Obtaining greater production capacity
� Improve purchasing by buying in bulk
� Safeguard future supplies of raw materials
� Accesing high quality management
� Obtain cach resources
� Obtain tax advantages
� Overcome barriers of entry
Joint-venture
Is a separate business unit created by two or more firms
� Share funding, cut risk, synergies, technology, learning
But also…
� Conficts of interests, disagreementsover profit shares, money invested, management & strategy
Cooperation
� Firms share data, resource and activities to achieve mutuallybeneficial objectives
� Agreements to co-operate on variuos issues, shared research & development, supply chainrationalisation, synergy effects
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Licensing
� A commercial contract whereby thelicenser gives something of value to thelicensee in exchange for certainperformances and payments
� The royalty for:rights to producepatented product, manufacturing konw-how, technical & marketing advice &assistance, right to use brand…
Franchising
� A method of expanding the business onless capital then would otherwise bepossible
� The franchiser offers: name, googwill,systems & business method, supportservices
� The franchisee: provides capital,personal involvement & local marketknowledge, takes risk
Consolidation/limitation strategies
� Deinwestment
� De(z)integration
� Prunning
� Reduction
� Harvesting
References
� Armstrong G., P. Kotler: Marketing.Wprowadzenie, Wolters Kluwer,Warszawa 2012
� Kotler P. Marketing Management.Eleventh Ed., Prentice-Hall, EnglewoodCliffs, 2003
� Strategic Marketing Management:Planning and Control, BPP ProfessionalEducation, 2003
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Case study Lesson 8
Allocation strategies
Allocation strategies
� To assign company’s resources (money!) to each SBU
� To settle objectives for each SBU due to company’s strategic goals in accordance with growth or consolidation strategies
Portfolio Analysis – Allocation
Strategies
Competitive position
Weak Strong
Market Attractiveness
High
Alliance
Fast growth
Growth
Selective growth
Fast growth
Growth
Selective growth
Market position defence
Low
Optimization
Market exit (gradual)
Market exit
Market position defence
Optimization
Selective growth
Growth
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Allocation Strategies - 1Type of strategy Main objectives Investments Growth & Consollidation
Strategies
Fast growth Increase market
share (offensively)
and negative
profitabilty
Increase marketing as
well as R&D investments
Diversification
Intensive growth
Integrative growth
Growth Increase market
share and decrease
of profitability
Increase marketing as
well as R&D investments
Intensive growth
Integrative growth
Selective growth Increase market
share and maintain
profitability
Increase marketing and
R&D investments (for
selected market segments
and products)
Intensive growth
Integrative growth
Alliance Parter for alliance
search and increase
market share
Redused marketing and
R& D investments through
alliance
HMS
Diversification
VMS
Intensive growth
Allocation strategies - 2Type of strategy Main objectives Investments Growth & Consollidation
Strategies
Market position
defence
increase profitability
& maintain market
share
Maintain marketing
investments and limit
R&D investments
Market penetration
Harvesting
Optimization Increase profitability
& reduction of the
market share
Decrease of total
marketing and R&D
investments
Harvesting
Reduction
Pruning
Disintegration
Market exit (gradual) Increase profitability
& considerable
reduction of the
market share (sales)
Decrease of marketing
investments, no R&D
financial support
Reduction
Pruning
Disintegration
Deinvstment
Market exit Withdrawal Minimal marketing and
R&D investments to
maintain the value of the
business
Dezinvestment
Allocation strategies – an example
Competitive position
Weak Strong
Market attractiveness
High
Low
SBU1SBU2
SBU3
SBU4
Market position defenceOptimization
Growth
Selective growth
Lesson 9
Demand GrowthStrategies
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Process of marketing strategy
creation (product level)
Corporate strategy general findings (SBU)
Determinants of
product marketing
strategy
Analysis of the
market situation
Marketing goals
Marketing budget
Marketing strategies
(level of product)
Expanding the total market
Selective demand growth strategies
Strategies based on the company’s competitive position
Strategies for different PLC stages
Analysis of market situation
Analysis of market situation – typical
components
Analysis of market
situation - external
1. customer analysis
2. demand analysis
3. competitors analysis
4. distribution analysis
5. suppliers analysis
6. macroenvironment analysis
Analysis of market
situation - internal
1. former marketing activities analysis
2. company’s market position assesment
3. sales analysis
4. marketing costs analysis
5. profitability analysis
6. marketing effectiveness & efficiency analysis
7.customer satisfaction analysis
Analysis of market
situation - outputs
1. SWOT analysis
2. market segments attractiveness assesment
3.perceptual map
4. PLC assesment
5. sales forecasts
Marketing Objectives
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Marketing Budget
Marketing Budget - dimensions
� Value (total value of financialsupport in a specific period of time)
� Percent of the value of sales (itshows the level of intensity ofmarketing activities)
What costs are included in the
marketing budget?
Marketing
communication
Market research
Distribution
(logistics)
Sales
Product innovations
Additional services
Price discounts
Intermediary margins
Factors influencing the marketing
budget for the product
� Financial position of the company
� Scope of common marketing activities
� Marketing objectives and programs
� Former marketing budgets
� Sales forecasts
� Competitors marketing spendings
� Average expenditure of the industry
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Marketing budget and strategy
for the product High budget:
� Market development
� product differentiation
� Offensive strategies
� First or second phase of the PLC
� Product development
Low budget:
� Cost leader
� Defensive strategies
� Neutral strategies
� Third or fourth phase of the PLC
� Reduction as well as pruning strategy
Process of marketing strategy
creation (product level)
Corporate strategy general findings (SBU)
Determinants of
product marketing
strategy
Analysis of the
market situation
Marketing goals
Marketing budget
Marketing strategies
(level of product)
Expanding the total market
Selective demand growth strategies
Strategies based on the company’s competitive position
Strategies for different PLC stages
Expanding the total market
� All activities and marketing tools which leads to total market expansion
� Typically initiated by market leaders and pretenders
� Effective and efficient in the first and second phase of PLC
Expanding the total market
Expanding
the total market
Expanding the number of customers
Increasing the scale of usage
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Expanding the number of customers
Expanding the number of customers
Awareness
Availability
Ability to Use
Benefit Deficiency
Affordability
Increasing the scale of usage
Increasing the scale of usage
Average usage
/consumption
New opportunities
Increasing the value of the product (and
price)
Faster product replacement
New applications
Sea food and fish consumption in
Poland
� Total market worth 6.6 billion PLN
� Average consumption 12 kg per person in the year, 60% fresh warter fish, 40% salt water,
� Codfish, herring, plaice, trout, salmon, tuna, mackerel
Sea food and fish consumption in
Poland
� Average for UE: 21.4 kg,
� 3.9 kg Romania, 5kg Bulgaria, 6 kgSlovakia, 17kg Germany, 25kg Italy,46kg Norway, 37kg Lithuania, 39kgSpain, 56.9kg Portugal
� As a leading producer suggest differentmarketing activities and tools increasingtotal market.
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Expanding the number of customers
Awareness Additional potential customers would buy the product
if they knew it was available and accurately
understood its benefits
Availability Lack of availability of products that may be in short
supply, or difficult to make available, or lack services
to support their use
Ability to Use These customers lack the knowledge, lack other
resources (electricity), and /or requirement to make
the product or service workable
Benefit Deficiency The key benefits of product or service are not
important (or even unattractive) to a subset of
potential customer.
Affordability The cost of products is too high for some consumers
Expanding the number of customers
Awareness • Collaborative efford of entire industry
• Intensive marketing communication
•Training addressed to customers
Availability • New distribution channels
• Vending machines
• More intensive distribution
• Special events
Ability to Use • training addressed to potential
customers
• simpler products
• additional support
Expanding the number of customers
Benefit
Deficiency
• New positioning
• New RTB
• New marketing communication
Affordability • Cheap, basic versions of the product
• New financing solutions and programs
• Alternative methods of access
Increasing the scale of usage
Increasing the average usage
Encouraging customers to use more of the product at everyopportunity
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Increasing the scale of usage
New opportunities
� use after every meal (chewing gum)
� new opportunities to celebrate (Valentine’s Day)
Increasing the scale of usage
Increasing the value of the product
(as well as the price)
� Product ‘upgrading’
� New additional benefits
Increasing the scale of usage
Faster product replacement
� Shortening of PLC (new versions of the product, product modifications),
� New product offered at lower price,
� Aternative options of financing the purchase (leasing, favorable credit),
� Promotion facused on creating the NEED of using latest, better version of the product
Increasing the scale of usage
New usage of the product
This strategy leads to the new market
creation!
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Selective demand growth strategies
Selective demand growth
strategies
Selective demand growth strategies are creating and sustaining competitive advantage
There are two main strategic options:
� Cost leadership
� Offer differentiation
Cost leadership strategy
� A cost leadership strategy seeks to achieve the position of lowest-cost producer in the industry.
� By producing at the lowest cost, the manufacturer can compete on price with any other producer in the industry.
Cost leadership strategy
� Economy of scale
� Internal focus
� Learning curve effect
� Improving productivity
� Only one firm
� Low margins
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Cost leadership strategy
� Mass marketing� Avoiding niches and small market segments� Product standarization� Limited augmented product� Intensive distribution� Effective logistics� Limited promotional spendings� Low prices
� Standarization of marketing strategies and efforts
Differentiation strategy
� Brand image and reputation� Market segmentation� Targeting� Focus on customers (needs, preferences, etc.)� Product differentiation� Intensive marketing efforts including
marketing communication� Prices higher than avarage� Augmented products� High costs� R&D investments
Lesson 10, 11 &12
Strategies based on the company’s competitive position
The influence of market position on
strategy
� Market leader – has the largest marketshare, it determines the nature, pace andbases of competition, typically is thebenchmark for other companies in theindustry
� Market challengers & followers – firmswith slightly smaller market share can adoptone of two stances.� they may choose to adopt aggressive stance and
attack other firms, including the market leader, togain share are dominance (challengers)
� or adopt less aggressive stance in order to maintainthe status quo (followers).
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The influence of market position on
strategy
� Market nichers – small firms which surviveand prosper by choosing to specialize in partsof the market which are too limited in size andpotential to be of real interest to larger firms;nichers are able to build up specialist marketknowledge and avoid expensive fights withlarger companies
The influence of market position on
strategy
Leaders
Challengers
Nichers Followers
•Expand the market•Protect the current share•Expand share
•Dicsount or cut prices•Cheap goods•Innovative products and distribution•Improve services•Advertise heavily•Proliferate the range•Reduce costs
•Segment carefully•Use R&D cleverely•Challenge conventionalwisdomsGet smart!
Strategies for market leaders
� How best to expand the total market?
� How to protect the organization’s current share of the market?
� How to increase market share?
Market leadership
Guarding theexisting market
Strong market positioning
Development and refinement
of meaninful competitive
advantage
Continuous product and
process innovation
Proactive stance
Heavy advertising
Strong customer and
ditributionrelations
Expansion of thecurrent market
share
Heavy advertising
Improved distribution
Price incentives
New product development
Mergers
Takeovers
Geographic expansion
Distributor expansion
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Marketing strategy and military
analogies
� Offensive warfare – first of all for market challengers
� Defensive warfare – for market leaders guarding the market position
� Neutral strategies – for market nichers and followers
Strategies based on
the company’s competitive position
Offensive strategies
Frontal attack
Flanking attack
Encirlement
attack
Byepass attack
Guerrilla warfare
Defensive strategies
Position defence
Flank position
defence
Mobile defence
Counter-
offensive defence
Pre-emptive
defence
Cantratiction
defence
Strategic
withdrawal
Neutral strategies
Following
Specialization
Defensive warefareStrategy Comment
Position defence Static defence of a current position, retaining current product-market by consolodating resources within existing areas. Exclusive raliance on a position defence effectively means that a business is a sitting target for competition.
Mobile defence A high degree of mobility prevents the attacker’s chances of lacalising defence and accumulating its forces for a decisive battle. A business should seek market development, product development and diversification to create a stronger base.
Pre-emptive defence Attack is the best form of defence. Pre-emptive defence is launched in a segment where an attack is anticipated instead of a move into related or new segments.
Defensive warefare
Strategy Comment
Flanking defence This is used to occupy a position of potential future importance in order to deny that position to the opponent. Leaders need to develop and hold secondary markets to prevent competitors using them as a spring board into the primary market.
Contraction defence Company has little hope of defending itself fully. It concentrates its resources in areas considered to be less vulnerable.
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Defensive warefare
Strategy Comment
Counter-offensive defence This is attacking where one is being attacked. This required immediate response to any competitor entering a segment or initiating new moves. Examples are price wars, where firms try to undercut each other.
Strategic withdrawal May be a last resort, but ‘cutting your losses’ can be the best option in the long run. Management resistance to what it seen as a drastic step is likely to be the biggest barrier.
Position defence (fortress)
� One of the last successful methods of defence
� Relies on the apparent impregnability of a fixed position
� To overcome a position defence the attacker adopts on indirect approach rather than head-on attack that the defender expects
Position defence (fortress)
� Company attempting fortress defencewill find retreating form line after line of fortification into shrinking product markets
� Even a dominant leader cannot afford to maintain static defence, it must continually engage in product improvement, line extensions and product proliferations
Mobile defence
� Rather than becoming preoccupied with the defence of current products and markets firms concentrates upon market broadening and diversification
� Companies cover new territories that might in the future serve as focal points both for offence and defence
� The need for management to define and redefine the business it’s in
� Involves diversification into unrelated industries
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Mobile defence
� Market broadening and market diversification
� To major principles for market broadening:
principle of the objective – clearly defined and realistic objective)
&
principle of mass (focus efforts upon the enemy’s point of weakness)
Pre-emptive defence
� Involves gathering information on potential attacks and then capitalizing upon competitive advantages, striking first
� Two broad forms: the company behaves aggressively or uses psychological warfare by letting it be known how it will behave if a competitors acts in a specific way (FUD marketing – fear uncertainty and despair)
FUD marketing
� Guerilla actions – hitting one competitor here, another there to keep everyone off balance
� Dissuade competitors form attacking (bluff)
� Companies with strong assets may prefere to entice the opponents into expensive and costly attacks that will not pay off in long run
Pre-emptive defence
� Company should never rest even after it has achieved domination
� Should replace products frequently and support them aggressively
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Flanking defence
� Flank is often less protected than other parts of the organization (market)
� Secondary markets shouldn’t be ignored
Contraction defence
� Company has little hope of defending itself fully.
� Opts for withdrawal from segments and geographical areas with higher threat
� It concentrates its resources in areas considered to be less vulnerable.
� Planned contraction – giving up the weaker territories and reassigning forces to stronger territories, to consolidate competitive strenght
Counter-offensive defence
� Market leader needs to respond competitor’s attacks in order to minimize the threat
� This response can take one of three forms:
� Meet the attack head-on
� Attack the attacker’s flank
� Develop a pincer movement in an attempt to cut off attacker’s operational base
Strategic withdrawal
� May be a last resort, but ‘cutting your losses’ can be the best option in the long run.
� Management resistance to what it seen as a drastic step is likely to be the biggest barrier.
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Strategies for market pretenders Basic conditions:
� Challenger must have a sustainableadvantage either in terms of cost ordifferentiation
� Challenger must be able to partly orwholly neutralize the leader’sadvantages, typically by doingalmost as well as the leader whichthe leader does best
Who to attack?
� Attacking the market leader
� Attacking firms of similiar size to itself but which are either under-financed or reactive
� Attacking smaller regional firms
Frontal attack
� Outcome depends on who has thegreater strenght and endurance
� For a pure frontal attack to succeedthe aggresor needs a strenghtadvantage over competitor (at least3:1)
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Frontal attack
� Modified frontal attack can taketwo forms:
� To match the leader’s offer on other
counts and beat it on price (it works when the
leader does not retaliate by cutting price, when competitor
convinces the market that its product is equal to competitot’s
or at a lower price it is a real value)
� To invest heavily in research to achive
lower production costs and then attackscompetitors on a price basis
Flankinng attack
� The strategy of ‘indirect approach’
� The agresor will act as if it will attackthe strong side to tie up the defender’stroops but will launch the real attack atthe side or rear
� Attack on those areas where the leader is geographically weak and in market segments or areas of technology whichhave been neglected
Flankinng attack
� Direct flan attack: geografpical(spotting areas in the country or theworld in which the opponent is not performing at high levels) orsegmental (spotting uncoveredmarket needs not being served by the leaders)
� Higher probability of beingsuccessful than frontal attacks!
Encirclement attack
� An attempt to capture a wide sliceof the enemy’s territory through a ‘blitzkrieg’ attack
� It’s a grand offensive on severalfronts, enemy must protect itsfront, sides and rear simultanously!
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Bypass attack
� The most indirect offensivestrategy.
� It means bypassing the enemy and attacking easier markets to broadenresources base
� Three lines of approach:� Diversification into unrelated products
� Geographical diversification
� Leapfrogging into new technologies
Guerilla attack
� Available also to smallerundercapitalized aggressors.
� Making small attacks on differentterritories of the oponent, with theaim of harassing and demoralizingthe oponent.
� The key is to focus the attack on a narrow territory
Guerilla attack
� Typically short promotional and price attacks in random corners of the larger oponent calculated to gradually weaken the oponent’smarket power.
� A continual stream of minor attackcreates cumulative impact, disorganization and confusion
Neutral strategies
� For market followers� Following closely
� Following at a distance
� Following selectively
Three broad followership strategies:� Cloner
� Imitator
� Adapter
� For market nichers� Specialization
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Following
� Closely – by emulating the leaders in as
many market segments and marketing mix areas as possible
� At a distance – following the leader in
terms of major markets and productinnovations, price level & distribution withmore differentiating factors
� Selectively – to avoid direct competition,
often grows into the future challenger
Broad followership strategies
� Cloner
� Imitator
� Adapter
Cloner
� Is a parasite that lives off theinvestment made by the leader inthe marketing mix (such as inproduct or distribution).
� An extreme version of the cloner iscounterfeiter, who produces fakesof the original.
Imitator
� Copies some elements but differentiates on others
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Adapter
� Takes leader’s products and adaptsor even improves them regardingmarket requirements.
� The adapter may grow to challenge the leader.
Market nicher strategies
� Ideal niche:
� Sufficient size and purchasing power
� Growth potential
� Negligible interest of major competotors
� Firm has skills and resources to serve theniche effectively
� Firm’s godwill can help to defend themarket position in case of major competitorattack
Market nicher strategies
� End-user specialist – specialising in
one type of customer
� Vertical-level specialist – specialising
at one particular point of theproduction/distribution chain
� Customer-size specialist – mostly to
small customers who are neglected by themajors
� Specific-customer specialist – to one
or a few major customers only
Market nicher strategies
� Geographic specialist – selling to one
locality
� Product or service specialist –offerning specialised services not availableform other firms
� Quality/price specialist – operating at
low or high end of the market
� Channel specialist – concentrating on
just one channel of distribuion
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Lesson 13 &14
Strategies for differentPLC stages
The Product Life Cycle
� ALL products have a finite life-cycle and will eventually die
� During this cycle they will move through distinct phases, requiring different strategies to exploit
� Profit potential from each stage will vary� emphasises continual need to review objectives and
strategies
� highlights need for balanced portfolio of products
� keeps focus on short term potential of innovation
sale
ssale
s
sale
ssale
s
timetime
timetime
fashion
scallop
Cycle - recycle
growth-slump-maturity
Common Curves
time
introduction growth maturity decline
profit
Cycle - Profit Relationship
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Introduction Growth Maturity Decline
Sales
Costs
Profit
Competition
Goal
Product
Price
Place
Promotion
Source: Wilson & Gilligan, 2001
low
high
negative
few
creating
product
awarness& trial
basic
low….
selective
heavy spend
rapid increase
average
increasing
increasing
market share
maximization
developing
penetration
intensive
moderate/mass
peaking
low
high
high
profit
maximization
modify
competition
heavy discount
brand differentiation
declining
low
declining
shake-out
expenditure
reduction
phase out weak
reducing
selective
focussed toretain loyalty
Product Life Cycle - Implications Stage ConsiderationsAre we innovatorsor followers?
Market penetrationor Market skimming?
Competitive strategy?
Differentiation
Intensity ofmarketingsupport?
Segment?
Modify?
Enhance?
Rejuvenate?
Kill?
Manage costs
Manage decline / resources
Rejuvenate?
Strategies for introduction phase
� Are we pioneers(innovators) or followers (copyingcompetitors)?
Promotion
intensive weak
Price
high Rapidskimming
strategy
Slow
skimmingstrategy
low Rapidmarket
penetration
Slow market
penetration
How to expand thetotal market?
How to grow selectivedemand?
Innovators - FollowersQuestion Answer Decision
How long is probabale product
category life time?
Long PLC
Short PLC
Follower
Innovator
What is predicted market penetration
level?
Low
High
Follower
Innovator
What are estimated costs of
imitation?
Low
high
Follower
Innovator
What are company’s resources? Big
Small
Follower
Innovator
What are costs of deliverer change? Low
High
Follower
Innovator
How important is a brand as a
purchase decision factor?
Less important
Very important
Follower
Innovator
What is the level of clients education
costs?
High
Low
Follower
Innovator
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Rapid skimming strategy
� Firm charges high price in order to recover as much gross profit per unit as possible
� Intensive promotion to convince themarket of the product’s merits & to accelerate the rate of market penetration
� Reasonable when:� A large part of the market is unaware of the product
� Aware people are eager to get the product & are able to pay for it
� Firm wants to build up brand preference
Slow skimming strategy
� Firm charges high price in order to recover as much gross profit per unit as possible
� Low level of promotion keepsmarketing expenses down
� Reasonable when:� Market is limited in size
� Most of the market id aware of product
� Buyers are willing to pay high price
� Potential competition is not imminent
Rapid penetration strategy
� Promises to bring about the fastestmarket penetration and the largestmarket share
� Resonable when:� Market is large
� Market is unaware of the product
� Most buyers are price sensitive
� There is strong potential competition
� Company’s costs fall with the scale of productionand accumulated manufacturing experience
Slow penetration strategy
� Company believes that market demand is highly price elastic but minimally promotion elastic
� Reasonable when:� The market is large
� The market id highly aware of the product
� The market is price sensitive
� There is some potential competition
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Strategies for growth phase
How to expand thetotal market?
How to grow selectivedemand?
Which strategies based on
the company’s competitive position?
Growth stage strategies
� Improve product quality, add new productfeatures, improve the style of the product
� Add new models
� Enter new market segments
� Enter new distribution channels
� Shifts advertisinig from creating productawarness to bring product conviction and purchase
� Lower price to attract the nest layer of price-sensitive buyers
Strategies for maturity phase
How to expand thetotal market?
How to grow selectivedemand?
Which strategiesbased on
the company’s competitive position?
Market modification
Product modification
Marketing-mixmodification
Market modification
� Convert nonusers
� Enter new market segments
� Win competitors’ customers
� More frequent use
� More usage per occasion
� New and more varied uses
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Product modification – new features
� Bulid a company image of progressiveness and leadership
� Can be adapted quickly, droppedquickly and made optional at littleexpence
� Can win the loyalty of customers
� Can bring free publicity
� Generate sales-force and dictributors’ enthusiasm
Marketing mix modification
� Prices
� Distribution
� Advertising
� Sales promotion
� Personal selling
� Services
Strategies for decline phase
Which strategiesbased on
the company’s competitive position?
Leadership
Niche
Harvesting
Drop decision
Readings
� P. Kotler, Marketing Management. Analysis, Planning, Implementation and Control, Chapter11, p. 318-365
� Strategic Marketing Management: Planning & Control, Professional Education, 2003
� R. M. S. Wilson, C. Gilligan, Strategic Marketing Management: Planning, Implementation and Control, Butterworth Heinemann , Chapter 10, p. 326 - 388
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