chapter 2 developing marketing strategies and plans

Chapter 2

DEVELOPING MARKETING STRATEGIES AND PLANS

Marketing & Customer Value

Customer Perceived Value

Customer perceived value (CPV) is the difference between the prospective customer's evaluation of all the benefits and all the costs of an offering relative to perceived alternatives.

Key Elements of cost Monetary Cost Energy Cost Time Psychic Cost (costs of added stress)

The Value Delivery Process

Stage 1: Choose The Value …….

Customer Segmentation according to their likely

behavior and potential profitability

Customer Profiling A Competitive economy is

causing decline in customer loyalty and increasing customer turnover >> eroding profit margins

key to understanding your customers


Market Selection/Focus tailors marketing mix for

one or more segments contrasts with mass

marketing two factors to consider….

attractiveness of segment

suitability of market segments to the firm


Market Selection/Focus (Attractiveness of Segment) size of the segment growth rate of the

segment competition in the

segment brand loyalty required market share to

break even expected profit margins


Market Selection/Focus (suitability of market segments to the firm) whether the firm can offer

superior value to customers the impact of serving the

segment on the firm’s image access to distribution channel

The better the firm fit to a market segment, and the more attractive the market segment, the greater the profit potential to the firm.


Value Positioning Value positioning is the

process whereby management decides how the business is positioned relative to competitors and the market segments it aims to penetrate.

Stage 2: Provide the Value…….

Product development Service development Pricing Sourcing/Making Distributing


Product development Idea Generation Idea Screening and

evaluations Business Analysis Prototype development Test marketing


Service development Service is..

the prompt delivery of the product

a customized user or service manual

knowledgeable, cost-effective maintenance, repair, or replacement.

dealer support.


Pricing A well chosen price should

do three things achieve the financial

goals of the company (e.g. profitability)

fit the realities of the marketplace (will customers buy at that price?)

support a product's positioning and be consistent with the other variables in the marketing mix


Sourcing/Making Decide whether to source

or make. Distributing

Channel members Warehousing Market Coverage Location

Stage 3: Communicate the Value…

Sales Force Size of Sales Force. Sales force management

systems


Sales Promotion(Objectives) increase consumer

demand Build product awareness Counter seasonal

decline


Advertising Covert advertising (product

placement) Television commercials Infomercials (DRTV) Radio Newspaper Internet

Value Chain

Value Chain

Value Chain is defined as

a chain of activities that a firm operating in a specific industry performs in order to deliver

something valuable (product or service) to its customers.

Value Chain This model defines an organization as:

“synthesis of activities performed todesign, produce, market, deliver,

and support its products.”

Value Chain cont…

Value Chain cont… Activities divided into

Primary Activities Activities involved in the physical creation of the product and

its sale and transfer to the buyer as well as after sales assistance.

Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales, Services

Certain activities are vital for specific industry. For Example: Distributor: Inbound and Outbound Logistics Service Firm: Operations Bank Engaged in Corporate Lending: Marketing and Sales Manufacturer of Heavy Machinery: Operations and Services

Value Chain cont…

Secondary Activities - activities that support primary activities and each other. Procurement – function of purchasing inputs used in the

firm’s value chain such as raw materials, supplies, machinery, laboratory equipment, office, equipment, building, meals and lodging, strategic consultancy.

Technology Development – activities that improve the product and the process such as know-how, procedures, preparing documents, transporting goods as well as technology embodied in products themselves.

Human Resource Management – consist of activities involved in recruiting, hiring, training, development, and compensation. Key for competitive advantage in many firms such as advertising, consultancy, accounting etc.

Firm Infrastructure - consist of a number of activities including management, planning, finance, accounting, legal, government affairs, and quality management.

Value Chain cont…

Value Chain cont… Linkage - crucial for corporate success. The linkages are flows

of information, goods and services, as well as systems and processes for adjusting activities. In the result, the linkages are about seamless cooperation and information flow between the value chain activities.

Margin - depends upon the ability of the firm to manage the linkage among the activities.

Core Competency

Core Competence Core competencies are capabilities that

serve as a source of competitive advantage for a firm over its rivals.

Core competencies lead to the development of core products. Core products are not directly sold to end users; rather, they are used to build a larger number of end-user products.

Core Competence cont... Firms used to own and control business Today firms outsource less critical resources for better quality

and low cost Focus on core business activities. Rooted in the ability to integrate and coordinate activities Not necessarily an expensive undertaking Gained mostly but not exclusively through technology – reliable

process, close relationship with customers/suppliers, understanding culture etc.

Core Competence cont...Characteristics of Core Competencies Source of competitive advantage Application in a wide array of markets Difficult for competitors to imitate

Core Competence cont...

Core Competence cont...Benefits of Core Competencies Form the basis for launching new businesses Bonds business units into a coherent portfolio Transcend the traditional brand market share to

core product share

Corporate and Division Strategic Planning

Corporate and Division Strategic Planning STRATEGIC PLANNING is an organization's

process of defining its long term strategy, or direction, and making decisions on allocating its resources to pursue this strategy.

In doing so, the organization tries to achieve its mission.

Corporate and Division Strategic Planning…

Four Planning Activities1. Define the Corporate Mission2. Establish Strategic Business Unit3. Assigning Resources to each SBU4. Assessing Growth Opportunities

Corporate and Division Strategic Planning…Corporate Mission What is our business? Who is the customer? What is of value/benefit to the customer? What will our business be? What is our business’s philosophy?

Corporate and Division Strategic Planning…Examples of Mission Statements

1. Ford: “We are a global family with a proud heritage, passionately committed to providing personal mobility for people around the world. We anticipate consumer need and deliver outstanding products and services that improve people's lives”

2. Proctor & Gamble “We will provide branded products and services of superior quality and value that improve the lives of the world's consumers. As a result, consumers will reward us with leadership sales, profit, and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper”

Corporate and Division Strategic Planning…Establish SBUs and Assign ResourcesAn SBU has three characteristics

1. It is a single business or collection of businesses that can be planned separately from the rest of the company

2. It has its own set of competitors

3. It has a manager who is responsible for strategic planning and profit performances and who controls most of the factors affecting profit.

Assessing Growth Opportunities

Corporate and Division Strategic Planning…

Intensive GrowthMarket Penetration Aim

Increase share of the current market (segment) with current products

Secure dominance in growth market Restructure a mature market by driving out competition

Achieved through slightly adjusting the marketing mix – decrease price, better quality, increasing the number of salespersons, increasing advertising, offering extensive sales promotion items, or increasing publicity efforts.

Intensive GrowthHow Market Penetration is Achieved? Increase usage by existing customers Attract customers away from rivals Devise and encourage new applications Encourage non buyers to buy

Intensive GrowthUse Market Penetration When… the market is not saturated market shares of the major competitors is declining while the

total share is increasing increased volumes lead to economies of scale historical relationship between dollar promotion expenditure and

dollar sales has been positive

Intensive GrowthMarket Development Selling the same product to different markets

OR Entering new markets or segments with same products Entering overseas markets Will require major changes into marketing strategy

New distribution channels Different pricing policy New promotional strategy

Intensive GrowthUse Market Development When… channels of distribution are available or could be built an organization has a strong marketing department new untapped and unsaturated markets exists firm has excess capacity

Intensive GrowthProduct Development Developing new products for existing markets Entails large research and development expenditure New products come in the form of

New products to replace current products New innovative products New products to complement existing products

Intensive GrowthUse Product Development When… Organization has successful products in the maturity stage Competes in an industry characterized by rapid technological

development Organization has strong R&D department

Integrative GrowthForward Integration

Gaining ownership or increased control over distributors or retailers

Use Forward Integration When…. Present distributors are expensive, unreliable, or

incapable of meeting firm’s needs. Have the capital and Human Resource Distributors are few in number When distributor’s margins are very high. Company can gain a competitive advantage

Integrative Growth

Backward Integration Seeking ownership or increased control over

firm’s suppliers.

Use Backward Integration When…. A firm’s suppliers are expensive or unreliable. Number of suppliers is small and number of

competitors is large Company can gain a competitive advantage

Integrative GrowthHorizontal Integration

Seeking ownership of firm’s competitors M&As

Use Horizontal Integration When…. Firm can gain monopolistic characteristics Organization competes in a growing industry When competitors are faltering due to lack of

managerial expertise or a resource that your firm has.

DiversificationDiversification New products sold to new markets In the past, pursued to diversify the risk of failure Today on a retreat Famous examples

General Electric Viacom Samsung

Diversification

Concentric Diversification results in new product lines or services that have

technological and/or marketing synergies with existing product lines

For example; Dell Computers, News Corporation.

Diversification Conglomerate Diversification

New unrelated products for new wide array of markets For example; Nishat Group, GE, Hashoo Group, Dewan Group.

Nishat Group Hashoo Group Dewan Group1 Nishat Mills2 D.G. Khan Cement3 MCB Bank Limited4 Adamjee Insurance5 Nishat Power Limited6 Pakgen Power Limited7 Nishat Chunian Limited8 Nishat Hotels and Properties Limited9 Nishat Dairy

1 Hotels and resorts2 Tours and travels3 Information technology4 Oil and gas5 Minerals6 Pharmaceuticals7 Ceramics8 Investments9 Trading companies10 Welfare

1 Automobile manufacturing2 Polyester staple fibre manufacturing3 Sugar manufacturing4 Textile manufacturing5 Cement manufacturing6 Petroleum

1. Intensive Growth

Ansoff’s Product/Market Expansion Grid

Ansoff’s Product/Market Matrix Cont...

Developed in 1957 by Igor Ansoff A framework for identifying corporate growth opportunities Two dimensions determine the scope of options – product

and market Four Generic Strategies

Market Penetration (existing products, existing markets) Market Development (existing products, new markets) Product Development (new products, existing markets) Diversification (new products, new markets)

Ansoff’s Product/Market Matrix Cont...

Ansoff Matrix and Risk

Ansoff’s Product/Market Matrix Cont...Ansoff Matrix and Risk Market Penetration – Little Risk Involved Product Development – Moderate Risk Market Development – High Risk Diversification – Extreme Risk