strategic marketing 9edi.chapter 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

Imperatives forMarket-Driven

Strategy

Chapter 1Chapter 1

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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ObjectivesObjectives

* Pivotal role of market-driven strategy Pivotal role of market-driven strategy in designing and implementing in designing and implementing business/marketing strategiesbusiness/marketing strategies

* Links between business/marketing Links between business/marketing strategy and corporate strategystrategy and corporate strategy

* Challenges in the modern environmentChallenges in the modern environment

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Achieving SuperiorPerformance

DeterminingDistinctive

Capabilities

CustomerValue/

CapabilitiesMatch

Becoming Market-Orientation

Characteristics of a Market-Driven Characteristics of a Market-Driven StrategyStrategy

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Market-Driven Strategy (1)Market-Driven Strategy (1)

* Becoming market-orientedBecoming market-oriented*Customer focusCustomer focus

*Competitor intelligenceCompetitor intelligence

*Cross-functional coordinationCross-functional coordination

*Performance implicationsPerformance implications

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BECOMING MARKET ORIENTEDBECOMING MARKET ORIENTED

* Customer is the focal point of the organizationCustomer is the focal point of the organization

* Commitment to continuous creation of superior Commitment to continuous creation of superior customer valuecustomer value

* Superior skills in understanding and satisfying Superior skills in understanding and satisfying customerscustomers

* Requires involvement and support of the entire Requires involvement and support of the entire workforceworkforce

* Monitor rapidly changing customer needs and Monitor rapidly changing customer needs and wantswants

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* Determine the impact of changes on Determine the impact of changes on customer satisfactioncustomer satisfaction

* Increase the rate of product innovationIncrease the rate of product innovation

* Pursue strategies to create competitive Pursue strategies to create competitive advantageadvantage

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Characteristics of Market OrientationCharacteristics of Market Orientation

Customer FocusCustomer FocusWhat are the customer’s value What are the customer’s value requirements? requirements?

Competitive IntelligenceCompetitive IntelligenceImportance of understanding the Importance of understanding the competition as well as the customercompetition as well as the customer

Cross-Functional CoordinationCross-Functional CoordinationRemove the walls between business functionsRemove the walls between business functions

Performance ConsequencesPerformance ConsequencesMarket orientation leads toMarket orientation leads tosuperior organizational performancessuperior organizational performances

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Information Acquisition

Cross-Functional Analysis of Information

Shared Diagnosis and Coordinated Action

Delivery of Superior Customer Value

Becoming a Market-Oriented Organization

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Market OrientationMarket Orientation

Information AcquisitionInformation Acquisition Gather relevant information on customers, Gather relevant information on customers,

competition, and marketscompetition, and markets Involve all business functionInvolve 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

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* Determining distinctive capabilitiesDetermining distinctive capabilities

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DISTINCTIVE CAPABILITIESDISTINCTIVE CAPABILITIES

““Capabilities are complex bundles Capabilities are complex bundles of skills and accumulated of skills and accumulated knowledge, exercised through knowledge, exercised through organizational processes, that organizational processes, that enable firms to coordinate enable firms to coordinate activities and make use of their activities and make use of their assets.”assets.”

George S. Day, Journal of Marketing, October 1994, p.38.

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Southwest Airline’s Distinctive CapabilitiesSouthwest Airline’s Distinctive Capabilities

Organizational ProcessesOrganizational ProcessesSouthwest uses a point-to-point route system rather than the hub-and-spoke design 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 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 average trip about 500 miles. The carrier’s value proposition consists of low fares and limited services (no meals). Nonetheless, major emphasis throughout the and limited services (no meals). Nonetheless, major emphasis throughout the organization is placed on building a loyal customer base. Operating costs are kept 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 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 departure, and developing strong customer loyalty. The company continues to grow by expanding its point-to-point route network.by expanding its point-to-point route network.

Skills and Accumulated KnowledgeSkills and Accumulated KnowledgeThe airline has developed impressive skills in operating its business model at very The airline has developed impressive skills in operating its business model at very low cost levels. Accumulated knowledge has guided management in improving the low cost levels. Accumulated knowledge has guided management in improving the business design over time.business design over time.

Coordination of ActivitiesCoordination of ActivitiesCoordination of activities across business functions is facilitated by the point-to-point Coordination of activities across business functions is facilitated by the point-to-point business model. The high aircraft utilization, simplification of functions, and limited business model. The high aircraft utilization, simplification of functions, and limited passenger services enable the airline to manage the activities very efficiently and to 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.provide on-time point-to-point services offered on a frequent basis.

AssetsAssetsSouthwest’s key assets are very low operating costs, loyal customer base, and high Southwest’s key assets are very low operating costs, loyal customer base, and high employee esprit de corpsemployee esprit de corps

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CompellingLogic of Distinctive

Capabilities

Disproportionate (higher)contribution to superiorcustomer value

Provides value tocustomers on a morecost-effective basis

Capabilities

Source: George S. Day, Journal of Marketing, October 1994, p. 38.

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CapabilitiesCapabilities

DesirableCapabilitiesDesirable

Capabilities

Applicable to Multiple

Competition Situations

Difficult toDuplicate

Superior to the Competition

Source: George S. Day, Journal of Marketing, October 1994, 49.

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* Types of capabilitiesTypes of capabilities

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Types of CapabilitiesTypes of Capabilities

Outside-InProcesses

Inside-OutProcesses

SpanningProcesses

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Organization’s ProcessOrganization’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

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* Types of capabilitiesTypes of capabilities

* Creating value for customersCreating value for customers

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Value Requirements

Distinctive Capabilities

Matching Customer Value and Distinctive Matching Customer Value and Distinctive CapabilitiesCapabilities

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CREATING VALUE FOR CUSTOMERSCREATING VALUE FOR CUSTOMERS

Customer Value:Customer Value: Value for buyers consists of the benefits less Value for buyers consists of the benefits less

the costs resulting from the purchase of the costs resulting from the purchase of products.products. Superior value: positive net benefitsSuperior 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.

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Creating Value for CustomersCreating Value for Customers

Benefits Costs

CustomerValue

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Value CompositionValue Composition

Monetary costs

Time

Psychic and physic costs

Product

Services

Employees

Image

Benefits

Costs(sacrifices)

Value(gain/loss)

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* Becoming market-drivenBecoming market-driven*Marketing sensing capabilitiesMarketing sensing capabilities

*Customer linking capabilitiesCustomer linking capabilities

*Aligning structure and processesAligning structure and processes

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Becoming Market DrivenBecoming Market Driven

MARKET – DRIVEN

STRATEGIES

Market Sensing Capabilities

Customer LinkingCapabilities

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Market Driven InitiativesMarket Driven Initiatives

Market Sensing CapabilitiesMarket Sensing Capabilities

*Effective processes for learning about Effective processes for learning about marketsmarkets

*Sensing: Sensing: *Collected information needs to be shared Collected information needs to be shared

across functions and interpreted to across functions and interpreted to determine proper actions. determine proper actions.

Customer Linking CapabilitiesCustomer Linking Capabilities

*Create and maintain close customer Create and maintain close customer relationshipsrelationships

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Aligning Structure and ProcessesAligning Structure and Processes*Potential change of organizational designPotential change of organizational design

* Improve existing processesImprove existing processes* Process redesignProcess redesign

*Cross-functional coordination and Cross-functional coordination and involvementinvolvement

*Primary targets for reengineering:Primary targets for reengineering:* Sales and marketing, customer relations, Sales and marketing, customer relations,

order fulfillment, and distribution order fulfillment, and distribution

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Corporate, Business and Marketing Corporate, Business and Marketing Strategy (1)Strategy (1)

* What is corporate strategy?What is corporate strategy?

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CORPORATE STRATEGY

Deciding the Scopeand Purpose ofthe Business

Business Objectives

Actions and Resources for Achieving Objectives

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CHARACTERISTICS OF SUCCESSFUL CHARACTERISTICS OF SUCCESSFUL STRATEGYSTRATEGY

Unique competitive position for the Unique competitive position for the company.company.

Activities tailored to strategy.Activities tailored to strategy.Clear trade-offs and choices vis-à-vis Clear trade-offs and choices vis-à-vis

competitors.competitors.Competitive advantage arises from fit Competitive advantage arises from fit

across activities.across activities.Sustainability comes from the activity Sustainability comes from the activity

system not the parts.system not the parts.Operational effectiveness a given.Operational effectiveness a given.

Source: Michael E. Porter, “What Is Strategy,” Harvard Business Review, November-December 1996, 74.

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* What is corporate strategy?What is corporate strategy?

* Corporate strategy frameworkCorporate strategy framework*Deciding corporate visionDeciding corporate vision

*ObjectivesObjectives

*ResourcesResources

*Business compositionBusiness composition

*Structure, systems and processesStructure, systems and processes

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CORPORATE STRATEGYCORPORATE STRATEGYCOMPONENTSCOMPONENTS

Management’s long-term vision for the Management’s long-term vision for the corporationcorporation

ObjectivesObjectivesAssets, skills, and capabilitiesAssets, skills, and capabilitiesBusinesses in which the corporation Businesses in which the corporation

competescompetesStructure, systems, and processesStructure, systems, and processesCreation of valueCreation of value

Source: David J. Collis and Cynthia A. Montgomery, Corporate Strategy, Chicago: Irwin, 1997, 7-12.

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* Business and marketing strategyBusiness and marketing strategy*Business and marketing strategy Business and marketing strategy

relationshipsrelationships

*Strategic marketingStrategic marketing

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CORPORATE, BUSINESS AND CORPORATE, BUSINESS AND MARKETING STRATEGYMARKETING STRATEGY

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Corporate, Business and Corporate, Business and Marketing Strategy (4)Marketing Strategy (4)

* The marketing strategy processThe marketing strategy process*Markets, segments and customer valueMarkets, segments and customer value

* Markets and competitive spaceMarkets and competitive space* Strategic market segmentationStrategic market segmentation* Strategic customer relationship managementStrategic customer relationship management* Capabilities for continuous learning about Capabilities for continuous learning about

marketsmarkets

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*Designing market-driven strategiesDesigning market-driven strategies* Market targeting and strategic positioningMarket targeting and strategic positioning* Strategic relationshipsStrategic relationships* Innovation and new product strategyInnovation and new product strategy

*Market-driven program developmentMarket-driven program development* Strategic brand managementStrategic brand management* Value chain strategyValue chain strategy* Pricing strategyPricing strategy* Promotion strategyPromotion strategy

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* Implementing and managing market-Implementing and managing market-driven strategydriven strategy*Designing market-driven organizationsDesigning market-driven organizations

*Marketing strategy implementation and Marketing strategy implementation and controlcontrol

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MARKETING STRATEGY PROCESS

Markets,SegmentsAnd Value

Market-DrivenProgram

Development

Implementingand ManagingMarket-Driven

Strategy

DesigningMarket-Driven

Strategies

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Challenges in the modern Challenges in the modern environmentenvironment

* Escalating globalizationEscalating globalization

* Technology diversity and uncertaintyTechnology diversity and uncertainty

* The Web 2.0The Web 2.0

* Ethical behavior and corporate social Ethical behavior and corporate social responsivenessresponsiveness

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Strategic Marketing PlanningStrategic Marketing Planning

* Developing the strategic plan for each Developing the strategic plan for each businessbusiness*Preparing the marketing planPreparing the marketing plan

* Planning relationships and frequencyPlanning relationships and frequency* Planning considerationsPlanning considerations

* Responsibility for preparing plansResponsibility for preparing plans

* Planning unitPlanning unit

* Preparing the marketing planPreparing the marketing plan

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MARKETING PLANMARKETING PLANOUTLINEOUTLINE

I.I. Strategic Situation SummaryStrategic Situation Summary

Summarize the key points from your situation analysis (market analysis, segments, 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 industry/competition) in order to recount the major events and provide information to better

understand thestrategies outlined in the marketing plan.understand thestrategies outlined in the marketing plan.

II. II. Market-Targets and ObjectivesMarket-Targets and Objectives

The market target may be defined demographically (key characteristics only), The market target may be defined demographically (key characteristics only), geographically, or in social/economic terms. Each market target should have needs and 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 withwants 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 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 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 each target. An objective is a quantified goal identifying whatwhat is expected is expected whenwhen. It specifies . It specifies

the end results expected. The objectives should be written for each target market. 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, Objectives should also be included for the following program components: (1) product,

(2) price, (3) distribution, (4) promotion (salesforce, advertising, sales promotion, and (2) price, (3) distribution, (4) promotion (salesforce, advertising, sales promotion, and public relations), and (5) technical services.public relations), and (5) technical services.

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III. III. Positioning StatementsPositioning Statements

Write statements that describe how you want each marketWrite statements that describe how you want each market target to perceive each product relative to competition. State thetarget to perceive each product relative to competition. State the core concept used to position the product (brand) in the eyes andcore concept used to position the product (brand) in the eyes and

mind of the targeted buyer. The positioning statement shouldmind of the targeted buyer. The positioning statement should describe: (1) What criteria or benefits the customer considers whendescribe: (1) What criteria or benefits the customer considers when

buying a product along with the level of importance, (2) What webuying a product along with the level of importance, (2) What we offer that differentiates our product from competition, and (3) Theoffer that differentiates our product from competition, and (3) The

limitations of competitive products.limitations of competitive products.

MARKETING PLANMARKETING PLANOUTLINEOUTLINE

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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 productdeletion candidates.

B. Price StrategyThe 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 StrategyDescribe specific distribution strategies for each market target. Issues to be addressed are intensity of distribution (market coverage), how distribution will be accomplished, andassistance provided to distributors. The role of the sales force in distribution strategy should also be considered.

D. Promotion StrategyPromotion 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, theattributes 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’sresponsibilities 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

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E. Marketing ResearchDescribe the market research problem and the kind of information needed. Include a statement which addresseswhy this information is needed. The specific marketresearch strategies can be written once the above twosteps have been followed.

V. Coordination with Other Business FunctionsIndicate other departments/functions that haveresponsibilities for implementing the marketing plan.

VI. Sales Forecasts and Budgets

VII. Contingency PlansIndicate how your plans should be modified if eventsshould occur that are different from those assumedin the plan.

strategic marketing 9edi.chapter 1

Business

market oriented

market targeting

marketdriven strategy2

marketdriven organizations15

strategic market segmentation4

pivotal role of market

superior customer value

customer focuswhat