MARKETING STRATEGY DESIGN What is Marketing Strategy?
Ken Kariuki ..to understand what marketing strategy is, let us first define a few terms. What is..? Ask students to say what they think marketing is and what it entails They can use examples of how it happens in different ways What is..? The Chartered Institute of Marketing (CIM): Marketing is the management process that identifies, anticipates and satisfies customer requirements profitably. Students to discuss this definition and share what different organizations do in regards to the same What is..? The American Marketing Association: The previous definition: Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Get students view on this, with detailed examples drawn from the students ..but to reflect the disciplines broader role in society the AMAs new definition is What is..? The American Marketing Association: Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. (Approved July 2013) Students to discuss how marketing is an activity, set of institutions and processes Use examples from the floor What is..? Phillip Kotler : the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs and desires. It defines, measures and quantifies the size of the identified market and the profit potential. It pinpoints which segments the company is capable of serving best and it designs and promotes the appropriate products and services. ..SO What is..? Based on the above definitions arguably it can be said that marketing concept is a process that seeks to grow organizations profits/standing/status/Return on investments by understanding consumers/stakeholders needs/wants, and providing products/services to suit their specific needs. Marketing entails: - Understanding customer/stakeholders needs/wants Developing product/service to satisfy the need/want Promoting the product/service/institution to customers/stakeholders Keeping on improving the product/service/institution according to the customer/stakeholders needs Benefits of Marketing Every product we buy, every store we visit, every media message we receive, every choice we make in our consumer society, has been shaped by the forces of marketing. Benefits of Marketing Marketing has played a key role in many recent business success stories from pharmaceuticals to airlines, sports brands to food and drink, business- to-business companies to small, niche players. Benefits of Marketing cont.
Establish brand recognition: The primary and most important benefit of marketing is brand recognition. Marketing strategies help to imprint a brand in the minds of customers. This ensures that customers seek a particular brand of a product, rather than the brand seeking out its customers. Gain and retain customers: Once a brand has gained its ground and established its customers, marketing enables it to retain its customers. This is essential so that the brand does not lose ground to products that newly come into the market. Benefits of Marketing cont.
Identify real customers: Marketing strategies allow a business to identify potential and actual customers. Instead of trying to force a product or service on unwilling customers, marketing helps to target customers who have the real need. Provide information: Marketing a product is the best way to provide information about it. The salient features of a product or service is what is used to market the product. It is this same information that will attract customers towards the product. Knowing a brand better ensures that customers will come to trust it better. Benefits of Marketing cont.
Establish trust: Repeated and effective marketing ensures that a product remains in the minds of its intended customers. This in the longer run would help in establishing a brand trust, which would make customers choose the product irrespective of competition. Trust is created over a long period of time and marketing is an effective way in establishing it. Encourages referrals: Marketing encourages new customers to seek information about the brand. By making a product seen and heard frequently, a business also increases the chances of word-of-mouth referrals. The chances of suggesting an often-seen product is higher when compared to something that you do not see frequently or are unaware of. ..what examples can you name of companies/ brands that have become really successful due to marketing? Students to share .Do small businesses also engage in Marketing or it is a reserve for established companies?
Class to discuss marketing small or established companies?
chances are the small business is already carrying out more marketing than they think. this is because marketing is often seen by small businesses as equivalent to selling, promotion and advertising. in reality, it covers a much broader range of activities, many of which small businesses do without calling them marketing. they probably make a particular effort to know their customers well. their instincts tell them that getting to know what customers want on an individual basis, and providing it, is what will keep them in business. they know that they need to improve and extend existing products, and sometimes develop new ones. This is marketing ..now that we are clear about what marketing is and its benefits, what is a marketing strategy? ..lets begin by defining strategy Watch presentation and allow discuss in groups (allow 5 minutes) What is strategy? https://www.youtube.com/watch?v=OBgMQkKMKaE) According to Michael Porter: What strategy is not My strategy is to Internationalize My strategy is to Consolidate my industry My strategy is to Increase my R&D budget My strategy is to Outsource more of my production These are steps, that the organization wants to take although good, they are not strategy. What is strategy? What strategy is What unique positioning will we take to be able to achieve our objectives? What is our advantage going to be as we take these steps cumulatively over time? How are we going to be unique? How are we going to have an advantage that can be sustained over time? Strategy is a system of value creation. ..lets now define marketing strategy What is Marketing Strategy?
David Aaker: a process that can allow an organization to concentrate its resources on the optimal opportunities with the goals of increasing sales and achieving a sustainable competitive advantage. What is Marketing Strategy?
Marketing strategy is all about focus and alignment. Focusing on the relationship between customers and value, focusing on how you uniquely fit into it, and aligning the elements of your business to achieve this end sustainably What is Marketing Strategy?
Marketing Strategy is the long term course of action designed to optimize allocation of scarce organizational resources to deliver unique and superior customer experiences that help the organization win in the marketplace. ..what are your take-outs of the different definitionsand what would you say marketing strategy is? Benefits of Marketing Strategy
Its a roadmap that tells you: How to get where you are going What unique way will get you there ..the marketing strategy process SOSTAC Where are we now? Where do we want to be?
SITUATIONAL ANALYSIS OBJECTIVES STRATEGY TACTICS ACTIONS CONTROL How do we monitor performance? How do we get there? Details of tactics, who does what and when? How exactly do we get there? (details of strategy) An Outline of the Strategic Marketing Plan
1. Situational Analysis An overview of the current marketing environment in which the brand finds itself (internally and externally. 2. Marketing Mission defines the scope of the business, what business we are in, and the business we should be in. 3. Marketing Objectives provides targets to guide marketing strategies. They should identify an actual end result to be achieved. An Outline of the Strategic Marketing Plan
4. Strategic Priorities to analyze and decide where the priorities should be, which products/services and markets should receive investments and which should be divested from. This is generally called portfolio analysis. 5. Marketing Strategy centers around three key issue: a) Segmentation, b) Targeting, and c) Positioning. 6. Marketing Mix Strategy Called the 4Ps (Product, Price, Promotion and Place/Distribution) or 7Ps (including - People, Processes, Physical Evidence). An Outline of the Strategic Marketing Plan
7. Action Plan a summary of all marketing initiatives that have been developed after considering each of the different elements of marketing. 8. Budget The budget lays out the sales, expenditures and the profit targets over the period of the plan. It then forms the means of controlling the performance of the business. 9. Measurement & Evaluation (M&E) defines what tools and key performance indicators will be used for measuring the success of the strategy and campaigns that are implemented. ..we start by carrying out the situational analysis Step 1. Situation Analysis What is Situational Analysis?
Situational Analysis is the foundation of a marketing plan. includes a thorough examination of internal and external factors affecting a business/ brand. creates an overview of the organization that will lead to a better understanding of the factors that will influence its future an in-depth review of the current state of a Brands health and its marketing activities. Helps identify major strengths, weaknesses, opportunities and key issues facing the brand/ organization. Managers need to ask four questions:
Where are we now? How did we get here? Where are we heading? What should be done? Managers assess the health of the brand/business they run by asking:
Today, is the organization successful orunsuccessful? How is the organization performing in terms of: Profits - Are sales profit and volumes showing real growth year upon year? Sales and Market share How does it compare on these measures againstits competitors? SITUATIONAL ANALYSIS 1. Pestel Analysis What is PESTEL It is an analysis of the political, economic, social, technological and legal /legislative factors in the external environment of an organization, which can affect its activities and performance Political These are all about how and to what degree a government intervenes in the economy. This can include government policy, political stability or instability, foreign trade policy, tax policy, labour laws, trade restrictions etc. Economic Factors Economic factors have a significant impact on how an organization does business and also how profitable they are. Factors include economic growth, interest rates, exchange rates, inflation, disposable income of consumers and businesses and so on. What is PESTEL Social Factors These factors include population growth, age distribution, health consciousness, career attitudes and so on. These factors are of particular interest as they have a direct effect on how marketers understand customers and what drives them. Technological Factors Technological factors affect marketing and the management thereof in three distinct ways: - New ways of producing goods and services - New ways of distributing goods and services - New ways of communicating with target markets What is PESTEL Environmental Factors They have become important due to the increasing scarcity of raw materials, pollution targets, doing business as an ethical and sustainable company, carbon footprint targets set by governments. These are just some of the issues marketers are facing within this factor. Legal Factors Legal factors include - health and safety, equal opportunities on employment, advertising standards, consumer rights and laws, product labelling and product safety. It is clear that companies need to know what is and what is not legal in order to trade successfully. PESTEL Analysis feeds into the SWOT Analysis SITUATIONAL ANALYSIS 2. SWOT What is a SWOT Analysis? SWOT Analysis
After carrying out PESEL analysis, managers should carefully assess the strengths, weaknesses, opportunities and threats facing their organizations. = SWOT Analysis plays an important role in an effective marketing audit. = evaluates brand/company strengths, weaknesses, opportunities and threats = helps assess your brands/company and develop a strategic plan for each of the brands or whole organization. The SWOT Matrix SWOT Analysis Strengths Weaknesses Opportunities
Positive tangible and intangible internal attributes within the brands /organizationscontrol. Weaknesses Issues within the businesses' control that detract from brands ability to attain the core goal. Opportunities External attractive factors or Opportunities to propel the brand. Threats External factors, beyond the brands control, which could place the brandat risk. SWOT INTERNAL STRENGTHS WEAKNESSES POSITIVE NEGATIVE THREATS
What do we do well? What are our advantages? What relevant resources do we have? WEAKNESSES How can we improve our offerings? What do you do poorly or not at all? Is our communication up to date? Is our marketing budget adequate to help achieve objectives? POSITIVE NEGATIVE OPPORTUNITIES What are the best opportunities in the near future? What are the market trends? What is the best period of the year to offer our services? What is the best segment to attack? THREATS What economic obstacles in the market are we likely to encounter? What new technology do we expect that may render our business/ product obsolete? What new competitive moves are we facing? EXTERNAL SWOT Analysis What are the brands main strengths and how are we leveraging them to gain more acceptance? What are the main strengths ofthe competing brands? What are the brands main weaknesses and can they be eliminated? What are the main weaknesses of the competitor brands and how can we exploit them to expand our market share? What are the main opportunities and how are we taking advantage of them? What arethe main threats and how are we adapting to them? Colgate Palmolive example SITUATIONAL ANALYSIS 3. Porters 5 Forces Porters 5 Forces Porters five forces analysis is a framework to analyze level of competition within an industry and business strategy Came up with five forces that determine the competitive intensity and therefore attractiveness of a market Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven to normal profit. Porters 5 Forces Threat of New Entrants
Threat of substitute products or services Profitable markets that yield high returns will attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry unless this is blocked by established firms. Entry can be raised through The existence of barriers to entry ( patents, rights etc.). The most attractive segment is one in which entry barriers are high and exit barriers are low. Few new firms can enter and non-performing firms can exit easily. Government policy Huge Capital requirements The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives Does your firm know substitutes to its range of products e.g For coke it could be tap water!! Intensity of competitive rivalry For most industries the intensity of competitive rivalry is the major determinant of the competitiveness of the industry How competitive is the industry within which your firm operates? How does your firm counter competition? Porters 5 Forces Bargaining power of customers/buyers
Bargaining power of suppliers This is the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes. Firms can take measures to reduce buyer power, such as implementing a loyalty program. Factors for bargaining power The buyer power is high if the buyer has many alternatives. Degree of dependency upon existing channels of distribution Buyer information availability forces down prices Availability of existing substitute products Buyer price sensitivity This is also known as the market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm when there are few substitutes. If you are manufacturer of biscuits and there is only one firm that sells flour, you have no alternative but to buy it from them. Suppliers may refuse to work with the firm or charge excessively high prices for unique resources or supplies. Porters 5 forces cont Understanding the competitive forces, and their underlying causes, reveals the roots of an industrys current profitability while providing a framework for anticipating and influencing competition and profitability over time. If the forces are intense, as they are in such industries as airlines, textiles, and hotels, almost no company earns attractive returns on investment. If the forces are benign, as they are in industries such as soft drinks, and toiletries, many companies are profitable. Porters 5 Forces example
Competitive Rivalry High within the industry. Starbucks has major competitors like Costa, McDonalds, Caribou Coffee, and Dunkin Donuts and thousands of small local coffee shops and cafes. . Threat of New Entrants low, because the market is highly saturated and substantial amount of financial resources associated with buildings and properties are required in order make market entry. Threat of new Entry Supplier Power high bargaining powerdue to the fact that the demand for coffee is high globally, and coffee beans can only be produced in certain geographical areas. Moreover, the issues associated with African coffee producers being treated unfairly by multinational companies are being resolved with the efforts of various non-government organisations, and this is contributing to the increasing bargaining power of suppliers. Bargaining Power of Suppliers Competitive Rivalry Bargaining Power of Buyers Bargaining Power of Customers Very high because there is minimal switching cost for customers, and there is an abundance of offers available to them. Threat of Substitutes Substantial. Substitutes for Starbucks Coffee include tea, juices, soft drinks, water and energy drinks. Pubs can be highlighted as substitute places for customers to meet someone and spend their time outside of home and work environments. Threat of Substitutes Thank You