skript strategic sales and marketing ws 2012
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Strategic Sales andMarketing
Bachelor Degree, Major Seminar
Prof. Dr. Ralf Schlottmann
Winter Semester 2012 /13
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1 Introduction
1.1 Trends in the strategic behavior of industrial firms1.2 Dimensions of market oriented strategies1.3 Strategic Planning Process1.4 SWOT analysis as starting point
2 Definit ion of Sales and Marketing Targets
2.1 Role of Sales and Marketing in the Planning Process2.2 Structuring targets2.3 Sales and Marketing Targets2.4 Case Study
3 Developing Market Strategies
3.1 Growth Strategies
3.2 Positioning Strategies3.3 Market Targeting3.4 Spatial Strategies3.5 Strategic Combinations and competitive strategies3.6 Case Study
Table of contents (I)
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4 Sales Partner Strategies 4.1 Sales channel strategy4.2 Cooperation models with sales partners4.3 Case Study
5 Analysis tools for strategic planning
5.1 Key Performance Indicators5.2 Gap Analysis5.3 Portfolio Analysis5.3 Case Study
Table of contents (II)
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Reference List
Becker , J .: Marketing-Konzeption, 9. Auflage, München 2009
Homburg, Ch.; Schäfer , H.; Schneider , J .: Sales Excellence, 7. Auflage, Wiesbaden 2012
Kotler , P.; Keller , K.L.: Marketing Management, 14th edition, London 2012
Kotler , P. ; Keller , K.L.; Bliemel, F.: Marketing Management, 12. Auflage, München 2007
Meffert, H.; Burman, C.; Kirchgeorg, M.: Marketing, 11. Auflage, Wiesbaden 2012
Winkelmann, P.: Vertriebskonzeption und Vertriebssteuerung, 5. Auflage, München 2012
Table of contents (II) / Reference list
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Internationalisation
• Limits of growth in the home country• Opening up new markets• Customers are pursuing internationalisation strategies too
Changing retail formats
• New sales channels such as E-commerce emerge
• Significant changes in the retail structure require sales strategies, in particularsales channel strategies
1 Introduction1.1 Trends in the strategic behavior of industrial firms
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Figure 1-1: Trend in retail landscape
Source: based on Handelsmonitor
5
4
3
2
1
C h n a
g ei n
t h ef u
t ur e
1 2 3 4 5
Relevance today
Specialised shops
Discounters
Supermarkets
Warehouses
Corner Shops
(Tanta-Emma Läden)
Second-Hand
Airport / Railway
Electronic Shopping
Factory Outl
et
Delivery services Fan Shops
AgriculturalDirectsales
Convenience StoresPetrol stations
Urban Entertainment Center
Shopping tourism
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Extreme posit ions in working together with retail channels
• Industry and retail find new forms of cooperation or• Both fight for marketing leadership in the retail channels
Bigger and bigger and faster and faster vs. highly specific
• Firms are forced to give themselves their own profile• Options:
Serving mass markets (bigger and faster) Working on niches (very specific segments)
Diversi fication vs. Concentration on the core businesses / Streamlining of
business units
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1 Introduction
Main functions in sales and marketing
… Sales ... Marketing
Product Manager
Brand Manager
Market ResearchManager
CommunicationManager
Head of sales (forregion, sales channel,product line,….)
Key Account Manager
Sales Representative
Sales Support
Trade Marketing manager
Customer relationship manager
E-Business manager
1.1 Trends in the strategic behavior of industrial firms
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„Whichproducts shall
be offeredmainly?“
Product focus
„On whichcustomers dowe want to
focus?“
Customerfocus
Dimensions of a market oriented strategies
„How doesthe companywant to act inthe market?“
Building up
and extendingcompetitiveadvantages
Source: based on Steffenhagen, H., Marketing – Eine Einführung, 6. Aufl., Stutt gart, Berlin, Kö ln 2008, p. 78
1 Introduction1.2 Dimensions of market oriented strategies
Figure 1-2: Dimensions of market oriented strategies
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These three dimensions can be divided into two parts:
1. Which shall be the company’s markets (strategic business units)?2. How do we want to work on these markets (competitive advantages of the
company)?
ad 1) Definit ion of the company’s markets
First of all a company has to define
Product Portfolio: on which product segments will the companyconcentrate?
Customer Portfolio: which customer segments shall be targeted?
see figures 1-3
These are then aggregated to Strategic Business Units (SBU)
SBUs should be defined on several dimensions, see figures 1-4 and 1-5
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Totalsubwaymunici-palservices
Customer Segments
Airtraffic
HousesFlats Powerplants
Industrialplants
commer-cialbuildings
fairs/stadiums
Shopsdepartm.stores
Securing goods
Fire brigade
Video control
Consulting
Reception
Admission control
In-house-offices
Fire alarm
Total
P r o d u c t S e g m e n t s
Figure 1-3: Planning company portfolio, example security market
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Potential demand of the customers
Target group-orientedtechnology
Potential Needs
Scope forproblem-solving
Technologies
Potential
customer groups
Source: based on Kotler, P., Keller, K.L., Bliemel, F., Marketing -Management, 12. Aufl., München 2007, p 95
Figure 1-4: Framework to define strategic business units
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Establishing contacts(e.g. Address services)
News
Practical business material
Further education
Specialized education
General education
Entertainment
Potential Needs
Print media
Acoustic
media
Audio & visualmedia
Interactive mediaof the telecom-munication
Usable
technologies
Privatehousehold
Household-overlappinggroups(e.g. clubs)
Privatebusinesses
Publiceducationsystem
Publicadministration
Potential
customer
segments
Source : based on Kotler, P., Keller, K.L., Bliemel, F., Marketing-Management, 12. Aufl ., München 2007, p. 95
Figure 1-5: Defining the business – example publishing market
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ad 2) How do we want to work on these markets / what are the competitive
advantages of the business?
Issues to be adressed:- How do we want to behave towards competition and other market participants?- How do we want them to perceive us?
⇒ The objective is to create competitive advantages!
If a company wants to be more successful than the competitors in selected product andcustomer segments, it has to perform in one or more ways the competitors cannot or will notmatch
Sources of competitive advantage can result either from internal capabilities which enable itto compete successfully or goodwill in customer’s perspective
see figure 1-6
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Competiti ve Advantages/ Disadvantages
can be caused by...
... strengths / weaknessesfrom the customer’s point of
view
... strengths / weaknessesconcerning capabilities/
preconditions
Source: Steffenhagen, H., Marketing – Eine Einfüh rung, 6. Aufl., Stutt gart, Berlin, Kö ln 2008, p. 91
We have (not) got internalcapabilities / preconditionswhich enable us to competesuccessfully
Customers (don‘t) relatecertain performance criteriaabove average to us, whichare important to theirsupplier-preferences
Figure 1-6: Sources of competitive advantage
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Demands to strengths from customer’s point of view
1. Importanti.e. they must refer to a criteria which is important for the customers
2. Perceived,
i.e. the advantage must be perceived by the customer as such
3. Durable
i.e. the advantage can not be caught up by competition easily
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Evaluation of
company
Competitor
1
Competitor
2
Importance
Quality of connection /Network
Price / Tarif and offer
Mobile phones
Mobile Internet
CRM / Service
Invoice / Billing
Importance: from 1 = not important to 10 = very importantEvaluation: from 1 = very bad to 10 = very good
Figure 1-7: Evaluation of the competitive position of a company, example mobile operator
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Mobile phones
Billing / Invoice
CRM / Service
Quality of connection/network
R e l a t i v e I m p o r t a n c
e
Relative Performance +- -
+
Ideal positioning
Figure 1-8: Example of competitive position of a mobile operator
Mobile Internet
Price / Tarif and offer
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Relevance of factors for company success
Decisive are the strengths / weaknesses as the customers see and value them (externalview)
but: strengths only results in sustainable success, if they are based on internal abilities /preconditions
⇒ The strengths regarding the abilities / requirements are at leastas decisive as the external view due to a lasting success
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Systematic marketing-planning is not very popular and has to manage several
resistances at the beginning because…
.. the current processes seem to be convenient for some managers because they areresponsible for their success and they expect the same for the future... intuition and decisions “off-the-cuff“ have been obviously successful... Lack of pressure to change: „Things are doing fine” (enough?)... systematic procedure takes a lot of time and effort
Nevertheless a marketing-plan and a marketing-concept are very common in manyfirms, especially in bigger ones.
And
Marketing decisions are so complex that it is impossible to make them in a well-
founded way without an underlying system!
1 Introduction1.3 Strategic Planning Process
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Marketing Concept: Conclusive plan which is geared to certain direction parameters
(objectives) and which summarizes the fundamental room for maneuver (strategy) andthe necessary operative actions (instruments)
Systematic strategic planning of the individual SBUs ideally follows a defined planningprocess
see figure 1-9
Structure of lectures is based on this:
Chapter 1.4: SWOT analysis as starting point
Chapter 2: Sales and Marketing targetsChapter 3/4: Sales and Marketing Strategies
Chapter 5: Tools for selecting strategies
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Levels of the Concept:
1st level
2nd level
3rd level
Fundamental Questions:
Where do want to go to?
How do we get there?
What do weneed to employfor this?
Marketing Targets (= Determination about
the “wishful places”)
Marketing Strategies (= Fixing the „Route“)
Marketing Mix
(= Selecting the “Vehicles”)
Source: Becker, J.: Marketing-Konzeption, 9. Auflage, München, 2009, p. 4
1 Introduction1.3 Strategic Planning Process
Figure 1-9: Elements of a Marketing Concept
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Externalenvironment(opportunity &threat analysis)
InternalEnvironment(strengths/weaknesses
analysis)
Feedback +control
Implemen-tation
Programformulation
Strategyformulation
Goalformulation
BusinessMission
Source: Kotler, P. / Keller K.L.: Marketing-Management, 14th edition, London 2012, p. 70
1 Introduction1.3 Strategic Planning Process
Figure 1-10: Strategic Planning Process
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Identification and evaluation of Opportunities and Threats of the marketenvironment (external view)
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1 Introduction1.4 SWOT analysis as a starting point
Determining Strengths and Weaknesses of the company (internal view)
Bringing together internal and external view in a portfolio
Deduction of strategic options
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Source: Porter 1999, p. 50
Threat of
potential entrants
Power of buyers
Threat of
substitutes
Power of suppl iers Rivalry
Figure 1-11: Five Forces Model by Porter
1 Introduction1.4 SWOT analysis as a starting point
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majorstrength
Majorweakness
minorweakness
neutralminorstrength
HI LOWMED
MarketingCompany reputationMarket shareCustomer satisfactionProduct quality
Service qualityInnovation effectivenessPricing effectiveness …
FinanceCash flowROI …
OrganizationVisionary, leadershipdedicated employees …
Manufacturing
Economies of scaleAbility to produce on timeCapacity …
Source: based on Kotler, P. / Keller K.L.: Marketing-Management, 14th edition, London 2012, p. 74
Figure 1-12: Strengths and weaknesses profile
1 Introduction
IMPORTANCEEVALUATION
1.4 SWOT analysis as a starting point
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Strenghts
Weaknesses
Opportunities ThreatsInternal
factors
External
factors
• Do we have thestrengths to use thechances coming up inthe market?
• Which opportunitiesdo we miss due to ourweaknesses?
• Do we have thestrengths to managethe upcoming threats?
• Which risks do we facedue to ourweaknesses?
Figure 1-13: SWOT analysis
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Figure 2-1: Different roles of marketing and sales
Typical constellations of divis ion of competences between marketingand sales
1: Marketing asservice department
of Sales
47%
Leading strategicand operative role
Marketing Services
2: equal weightbetween Marketing
and Sales
33%
Responsible forprices and sales
Responsible forproduct management
and advertising
3: Sales asexecuting
department of Marketing
20%
Account manager
Leading strategicand operative role
Share
Role of Sales
Role of
Marketing
Source: based on Homburg / Jensen / Klarmann 2005, p. 6
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Definition “ target” : intended result of one’s own actions
Essential to the realization of every marketing-concept is a market-oriented planning of the
targets
Fortarget structuring
there needs to be considered
1. Spectrum of targets
2. Relations between targets
3. Order of targets
see figures 2-2, 2-3, 2-4
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Figure 2-2: Spectrum of company targets
Market performance • Product quality• Service quality• Product range
competence
Market posit ion • Revenue• Market Share• New markets
Profitability • Profit• Margin• Return on equity
Financial • Creditworthiness• Liquidity• Capital structure
Power and prestige • Independence• Image• Political influence• Societal influence
Social• Employee satisfaction• Income and social
security• Social integration
Environmental protection • Reduction of emissions• Reduction of use of
natural resources• Recycling quotas
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Figure 2-3: Relations between targets
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p.21
a) Complementary relation
O1
O2 b) Competing relation
O1
O2
c) Indifferent relation
O1
O2
O1
O2
bzw.
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Business
Mission
Corporate-
Policies & Practices
Corporate Identity
Superior targets of the company
Targets for functional areas
(Marketing and Sales)
Intermediate targets (business units)
Sub targets (Marketing-Mix)
Superior
targets
Operativetargets
Means-end-
relationship
Increasing
concretion
of thetargets
Increasing quantity of targets
Figure 2-4: Target Pyramid
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Business Mission
→ specifies business purpose / gives a frame for maneuver
„A corporate mission is a long term vision of what the business is or is striving to become. The
basic issue is: What is our business and what should it be?“
„Starting point“ of each company and marketing-planning process, sense giving function for the company and description of the corporate current situation
Basic questions:
What are we? Why do we exist? What do we stand for? In what do we believe?
http://www.pg.com/en_UK/company/purpose-and-people.shtml
http://www.bmweducation.co.uk/coFacts/view.asp?docID=26
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Corporate Policies / Practices and Corporate Identity
refers to commitment vs. societal-, economic and competitive order and also to basicbehaviour towards employees, customers, suppliers, capital owners, competitors and public
moral concept of the company
Examples:
http://www.pg.com/en_UK/company/purpose-people/purpose-values-and-principles.shtml http://www.unilever.de/ueberuns/grundsaetze/?WT.LHNAV=Grunds%C3%A4tze
→ Distinction between corporate policies / practices and corporate identity is quite difficult tofind in the real world. In fact, in many cases the sum of corporate policies / practices makesup the corporate identity.
Superior targets of the company
→ In today’s markets an avowal of long-term profit is matter of course for the companies
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Figure 2-5: Operationalisation of targets
Operationalising targets
determining…
reference to
timingkind of target
reference to
product
segment
reference to
target group
extent o f
target
What do I want toachieve?
Content of thedesirable results
see 2.2
With which product,which product lines?
Referring to a certainbrand or product line
the company offers
To whom, Inwhich groups of customers do Iwant to achievethis?
How much do I want toachieve?
Aspiration level withrespect to value or
volumeOptions:
- fix figures, hencelimited extent of target
- min. or max. target
Until when shallthe target bereached?
In which period
shall the target bereached?
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1. Targets concerning the position within the market (market share/distribution)
a. Market Share targets
For the right evaluation of the own market position it is necessary to determine the marketshare in terms of quantity and value
customersrelevantof number Total
100customersof Numbersharefield
marketin thevendorsallof volumesalestotal
100volumesalesscompany' quantityof in termssharemarket
marketin thevendorsallof turnovertotal
100turnoverscompany' valueof in termssharemarket
•
=
•
=
•
=
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b. Distribution targets
Standard for the product’s market penetration (ubiquity)
These data are evaluated regularly by panel interviews
Panel: Survey that is done regularly with a stable group of economic units e.g.companies, retailers etc. with the same topic
Study objective: Investigating changes in the market or in behavior patterns
productsof classthesellwhichretailersallof turnover Total100brand/productasellwhichretailerstheof Turnover levelondistributiWeighted
productsof classthesellwhichretailersof number Total
100brand/productasellwhichretailersof Number levelondistributiNumeric
•=
•=
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Figure 2-6: Relation between the development of the distribution and the market share
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p.68
49/81 49/77 56/85 53/84 53/84 57/8886/98 83/97 83/97 85/97 89/99 88/9820/44 21/44 19/46 17/49 18/47 17/46
11/46 11/44 11/46 11/50 12/46 13/525/24 5/28 5/20 5/19 8/32 8/36
26 29 25 29 28 3049 46 50 43 45 4412 12 12 13 13 10
5 5 4 9 6 62 2 1 1 2 2
Brand ABrand BBrand C
Brand DBrand E
Market Share in %
Brand ABrand BBrand C
Brand DBrand E
Periods**
J /F M/A M/J J /A S/O N/DDistr. num./gew. * in %.
* Distribution numeric / weighted** J /F: J anuary / February ….
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Figure 2-7: Example for an Asymmetrical Market and Sales Volume Profile
Source Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p. 69
%Share of the
total market
%Market share
Market Structure Sales Structure of Company Y
51015202530
Ø market share (17 %)
Explanations:Relation market A to G is 1:6Relation market share A to G is 12:1
10 20 30 40 50 60 70
Market share below average
Regional / sectoralsubmarkets
A
B
C
D
E
F
G
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2. Price Position targets
attempt to fix a specific price positioning
Most of the product-markets can be linked up with one of these price classes:
- high-priced class (Premium-brand)
- consumer price class (classical branded article)
- low-priced class (no frills products)
see figure 2-8
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Figure 2-8: Market Levels and Price Classes of Beverage Industry incl. Market Shares (volume)
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p. 72
Market Levels
Market Shares
Price classes
(in €)
Uppermarket
Mediummarket
Lowermarket
15,75 and more
13,75 – 15,74
Up to 13,74
20 %
55 %
25 %
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Every company that wants to pursue a clear marketing strategy has to focus on one marketlevel it wants to occupy
⇒ Fundamental standard for the orientation of the firm’s marketing strategy
⇒ Central Orientation for the whole use of the marketing mix as well
3. Brand Positioning (Image and brand awareness)
Image: related to how customers see either a product or a company, i.e. product image andcompany image
Particularly in saturated markets a strong brand position and image is a key success factor,especially to reach a price premium
Brand awareness: is fundamental for a strong image⇒ brand awareness influences the allocation of certain features to a brand
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Correlation between awareness and image:
The following chain of impacts is supposed to be true:
Brand awareness ⇒ Brand sympathy ⇒ Brand usage
Four typical situations for the status of a brand are possible:
see figure 2-9
see figure 2-10
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Figure 2-9: Four Typical Situations for the Status of a Brand
Source: based on Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p. 78
Situation A: Balanced gradation
awareness
sympathy
usage
awareness
sympathy
usage
Situation B: Low sympathy backlog
awareness
sympathy
usage
Situation C: Low user-rate relating to thesympathy potential
awareness
sympathy
usage
Situation D: Low rate of sympathizers andusers relating to theawareness potential
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Figure 2-10: Differentiated brand status of selected brands
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p. 79
BrandsE D C B A
Values in %
100
90
8070
60
50
40
30
20
10
0
Being aware
Sympathizers
User
Brands
ABCDE
Being aware
9387664341
Sympathizer
4232281615
User
362217108
A,B =classical brands like 4711, ToscaC,D,E =modern (“life-style”) brands like J anine D., My Melody, Inspiré
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4. Purchasing range and -intensity
purchasing range: To how many % of the relevant target group do you really get in touch?
⇒ number of buyers per segment
purchasing intensity: Quantity per purchase?
Example (food-submarket):
see figure 2-11
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Figure 2-11: Purchasing Range and Intensity for Two Competing Brands in a Grocer’s shop
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p. 80
Brands
A
B
Purchasing Range
(in % of all panel-households)Purchasing intensity
(quantity/week)
83
46
250 g
625 g
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5. Customer Satisfaction
Customer satisfaction is an important key target as …... Usually only satisfied customers become regular customers... Caring for regular customers is more effective than acquiring new customers
Representative surveys prove this: Results of the „ Technical Assistance Research
Program“ (TARP):
Satisfied customers talk about their experiences to 3 people, unsatisfied to 9-10 (inaverage)
96% of the unsatisfied customers don’t complain to the company what means thatthere are 26 unsatisfied customers per complaint
Customers who complain about the product/service are more willing to stay loyal
Up to 70% of the customers who complained purchase the company’s productagain if the complaint was solved
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Figure 2-12: Consumer in a market for two brands over different phases
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p. 80
Brand B
100 %
40 %
Know
brand30 % have
tried brand
70 % have
not tried
brand
60 %
don‘t
know brand
80 % are
satisfied
20 % are not
satisfied
Brand A
100 %
40 %
have nottried brand
20 %
don‘t
know
brand
20 % are
satisfied
80 %
know
brand
60 %
have
tried
brand
80 % are
not
satisfied
Totalmarket
Awareness FirstBuyer
Satisfaction Totalmarket
Awareness FirstBuyer
Satisfaction
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Customer Satisfaction Survey of the „Deutsche Marketing-Vereinigung e.V.“ :
Regular surveys (since 1992 in Germany) about customer satisfaction:
see figure 2-13
http://www.servicebarometer.de/presse.html
Derived actions from these kind of results about customer satisfaction:- CRM Systems / customer retention programs- extensive customer complaint systems
Aggregat ion of these marketing object ives in a market ing mission statement:
The discussed target figures are fundamental targets of marketing and sales They are not the result of a single marketing instrument but of the whole marketing mix
see figure 2-14
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Figure 2-13: Relation Between Total Satisfaction and Reselection (Example Retail Banking)
Source: Kundenmonitor Deutschland 2001 (www.servicebarometer.de/kundenmonitor2001)
100 %
80 %
60%
40 %
20 %
0 %
1997
23%
77%
92%
22%
55%
6%
17%
6%
2% 100 %
80 %
60%
40 %
20 %
0 %
2001
78%
42%
12%
37%
16%
21%
72%
18%
4%
Probably /
definitely yes
possibly
probably/definitely not
Disappointed
customers (8%) (unsatis-fied and little
satisfied)
Satisfied
customers
(37%)(satisfied)
Convinced
customers
( 55%)(highly
satisfied)
Question:
Would youselect yourbank again?
Disappointed
customers (7%) (unsatis-fied and little
satisfied)
Satisfied
customers
(39%)(satisfied)
Convinced
customers
( 54%)(highly
satisfied)
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3 Market ing strategies
There are plenty of ways of taking marketing measures to reach the targets. But: Which arethe right ones?
⇒ Necessity to find a steering mechanism that helps choosing the right measures andinstruments and to ensure that these (operative) instruments are used towards targetachievement
Def. strategy (in general): It’s an aid to channel business decisions respectively the use of resources in the company (like guide rails on motorway)
Differentiation of strategy and tactics (instruments): see figure 3-1
Def. marketing strategy: Decision about the company’s planned market presence andpositioning
One way to structure the various kinds of strategic options: see figure 3-2
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Strategy = basic predisposition
Characteristics:- determines the structure- real choice- mid-/long-term planning- lag effects- hard to correct
Decision making process:- complex, badly structured surrounding for
decision making- today's fundamental decisions are made
for tomorrow- comprehensive thought necessary
(looking at the complete company)- macro-view, more qualitative
Tactics = current dispositions
Characteristics:- determines the actual process- routine decisions (habitual behavior)- Short term planning- immediate effects- correction possible without considerable
problems
Decision making process:- clear, easily structured decision- today’s decisions are made to solve
today’s problems- thinking is focused on particular
functions within the company- micro-view, more quantitative
Fundamental orientation:
Being effective: „Doing the right things“
Fundamental orientation:
Being efficient: „Doing the things right“
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p. 143
3 Marketing-Strategies
Figure 3-1: Differences between Strategy and Tactics
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Growth Strategies:
Positioning Strategies
Market Targeting:
Spatial Strategies:
Four strategy levels Types of strategic decision Basic strategic options
Kind of product/ market-combinations
way of influencing the market
Way and level of distinguished
market targeting
Decision about the market- /sales area
current or new products incurrent or new markets
quality- or price-orientedcompetition
mass-marketing or market
segmentation
national or internationalsales strategy
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p. 148
3 Marketing-Strategies
Figure 3-2: Marketing Strategies
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Growth Strategies
Which products shall be offered to what kind of customer segments?
see figure 3-4
Every company has to take a decision about the occupation of these fields
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Product
segments
Market
segmentsCurrent markets New markets
Currentproducts
Newproducts
Market-developmentstrategy
Product-developmentstrategy
Strategy of diversification
Market-penetrationstrategy
Figure 3-3: Ansoff’s Product-Market Expansion Grid
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, p. 148
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Market-penetration strategy
Goal: Increasing sales respectively market share with current products in current marketsand by that improving the proceeds and profit
Basis for this are two effects caused by a rising market share:
falling costs per unit (learning curve!) Growing influence on pricing (according to the price stability and –level) in the
market
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Market-development strategy
Goal: Develop new markets for current products by breaking up market limits
Strategy that is mainly based on a penetration strategy
Options to implement the market-development strategy:
see figure 3-4
Typical for both market-penetration and market-development strategy:
Both contribute mainly to realize a higher production volume Possibility to realize cost savings (Economies of Scale)
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Figure 3-4: Implementation of a Market-Development Strategy
1. Opening up addi tional markets(geographical-expansion strategy)– Filling gaps in the sales market
– Straightening of a incoherent sales market
2. Enter ing adjacent markets (= new uses for the current product)– Extension of the product usage (example Lindt: beneath the classical suitability as present
increasing meaning of the suitability to consume the pralines by oneself)– Creating new uses (e.g.: extension of the use of Penaten care products for kids towards the
care of sensitive skin of adults)– Creating new application areas (e.g. by special services and/or guarantees for existing
products and by that opening up new e.g. demanding target-groups)
3. Opening up new sub markets (= new consumers who differ from the current ones regardingcertain characteristics)
– Creating products for specific customers e.g. by suitable differentiation of the products(example: Lady Protector made by Wilkinson for wet shaving for women)
– Bringing customer-specific distribution channels into play (Example: “neighborhood-shops”for not yet served smaller customers and cash & carry markets for not yet served keyaccounts)
– Advertisements in consumer-specific media (possibly connected with a specific kind of address by means of “psychological” product differentiation)
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p. 152 f.
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Product-development strategy
Goal: Developing new products of potential interest to its current markets/ customers
(1) Systematic innovation policy
fundamental strategic decision: Which degree of innovation does the company aim at?
Genuine innovations:
→ Products, that originally didn't exist at all e.g. new technologies
Adapted products:
→ new products that are built upon existing products or services
Me-too products:→ imitated products, that differ more in terms of packaging and not in substantial
characteristics
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(2) Product-range-policy
Fundamental strategic decisions:• width of the program• depth of the program
see figure 3-5
Every company has to decide on a certain width and depth of its product range1 Specialist strategy (narrow and deep) vs.
2 Generalist strategy (wide and flat)
New development concerning the program-policy:→ Bundling of products to sell a whole system.
Level of intensity of these systems:• Combined products• System covers one part of the program• System covers the whole program• Hard-, software and service system
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Figure 3-5: Differentiation Generalist vs. Specialist
A1
A2
A3
new
B1
B2
B3
C1
C2
D
B4
A =filled chocolate
B =chocolate
C =chocolate barsD =other sweets
Generalist
Specialist
Width of the program ( = number of different types)
D e p t h o f t h e p r o g r a m
( =
n u m b e r o f d i f f e r e n
t s o r t s )
3.1 Growth Strategies
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p. 160
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Diversif ication Strategy
Goal: Enlargement of the company’s strategic room to – from the company’s point of view – new products and new customers / markets by breaking out of thetraditional branches into neighboring or far away fields.
Diversification: Result of product-development on the one hand and market-development
see figure 3-6
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new marketnew
applications
Figure 3-6: Stages on the way to diversification
Product-development
M a r k e t - d e v e l o p m
e n t
no changesimproved
technology
adaptationno changes
more intensive
treatment
new technology
improvedproduct
replacement
enlargement of the product range
new market-segmentation
newmarketing
technology
market
diversification
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p. 165
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Kind of diversif ication strategies concerning the level of risk-spread:
1. Horizontal diversificationNew products which are connected with current product lines and furthermore have synergieswith these lines, e.g. by…
... employing the same (raw) materials or similar technologies
... using existing distribution channels
... supplying similar submarkets
2. Vertical diversificationEnlargement of the company’s value chain through...
forward integration: acquiring wholesalers or retailers to control the distributionchannels
backward integration: acquiring suppliers to control the raw material sources
Goals: - independence from other market participants- hope of increasing profits
3. Diversificat ion growthSeeking new businesses that do not have any relationship to current products, markets,technologies etc.
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What about success / failures of the strategies in practice?
Horizontal diversification: Most common (> 50% of all diversification strategies)
Reasons for failures: Assumption, that the potential customers of the new products aresimilar to the current customers, what sometimes proves to be wrong
⇒ calculated synergies don’t materialize
Vertical diversification: Clearly lower importance
Diversification growth: cycles of growing and falling importance
Examples of typical Conglomerateshttp://www.ge.com/de/ourbusiness/index.html http://www.siemens.de/ueberuns/portfolio/Seiten/home.aspx
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Implementation of diversification strategies
• Organic growth: Own research & development, own sales chains etc.→ Especially realized in case of horizontal diversificationReason: Similarity of products (e.g. production process)
• Know-how-buying: License agreements
• Buying products: Selling merchandises
• Joint-ventures: cooperation agreements
• Acquisitions: Participation / mergers → Typical for conglomerate diversification
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Figure 3-7: Example of a Horizontal Diversification: Nestlé
Basics of Nestlé’s corporate policy:• Goal: Strengthening and developing the existing business• Besides: Double strategy: organic growth and acquisitions to strengthen the
current market position and to open up new markets
„We consider acquisitions especially if it’s possible to…
…round the current market position or product lines
…enter new interesting food businesses…improve the geographic balance of our global business.“
Important acquisitions of Nestlé:Carnation, USA (food)Herta, Germany (meat and sausages)Rowntree, GB (sweets)Buitoni, Italy (pasta)
Perrier , France (mineral water) Alpo Petfood, USA (animal food)Finitalgel, Italy (ice cream)...⇒Systematic policy of acquisitions which is more common in cases of conglomerate diversification
3.1 Growth Strategies
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3.2 Positioning Strategies
Two mechanisms of influencing the market, set up on the market layers:
1. Price competit ion:Price as low as possible as the main instrument for steering the market
Typical for markets of “basic-needs-products”
⇒ Overall cost leadership (concept for discounter)
2. Quality competition:
Stress on other instruments than price Typical for markets where products offer an additional use beneath the basic one so thatthe price competition is outweighted by the quality competition
The aim is to achieve a brand preference in the customers’ mind
⇒ Preference strategy (High-price strategy, brand concept)
see figure 3-8
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Figure 3-8: Impact of the Positioning Strategies on the ROI
Return oninvestment
Preferencestrategy(profit oriented/qualitative growth)
Neither-nor-strategy
Overall costleadership(turnover oriented/quantitative growth)
3.2 Positioning Strategies
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, p.358
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This fact is reinforced by the development of the polarization of the markets, i.e. by the
change in the market layers structure
see figure 3-9see figure 3-10
Preference strategy
Goal: Building up qualitative preferences, which justify high prices from the customersPoint of view.
Brands as objects, the preferences are focused on
“Branding is a major issue in product strategy. As Russell Hanlin, the CEO of Sunkist
Growers, observed: “An orange is an orange … is an orange. Unless … that orange
happens to be Sunkist, a name 80% of customers know and trust.”
Well-known brands command a price premium
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Figure 3-9: Fundamental Changes in the Market Structure
Upper
market
Mediummarket
Lowermarket
Lost-of-the-middle-
phenomenon
Starting point:Classical structure
(„Onion“)
=Lower
market is the
biggest
Result:New market structure
(„Bell“)
= Middle marketis the biggest
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, p.359
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Figure 3-10: Polarisation of markets
Source: GfK 20 000er Haushaltspanel Consumer Scan, in: Horizont 10/2009, p. 4
Market share development in %(Base: 100 Produc t groups; average price ≥ price market leader)
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Rising importance of the upper market layer:
see figure 3-11
Background: In several markets a high-tech standard and a fast adjustment of technologies and functions on a high level can be observed.
⇒
Building up preferences for brands enables the firms to mark off their own productsfrom others by using each non-price marketing-instruments
Precondition for the development of preferences:
→ Attitudes
⇒ Not only dependent on objective product characteristics but especially on thecustomers’ subjective perception
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Figure 3-11: Increasing polarisation, example beer market
Source: GfK-Consumer Scan 2005
18 18 19 22 24 25 30
3933 31 24 21 22
23
4349 50 54 55 53
47
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2001 2002 2003 2004 2005 2006
Premium-beers* (>10,00 €)
Consumption beers(7,00 to 9,99 €)
Price entry beers (<6,99 €)
Purchasing volume in % (20 bott les 0,5 l returnable box)
Ø - price in €9,32 9,55 9,53 9,57 9,23 9,01
* brands:Beck‘s, Bitburger, Hasseröder,König, Krombacher, J ever,Radeberger, Veltins, Warsteiner,Wernesgrüner
9,56
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Figure 3-12: Share of Premium Brands in the Chocolate Market
Source: GfK-Consumer Scan 2005
Strong Brands Are Able to Achieve a Price Premium
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Question: How do brands work?
Identification function: make it possible to generate some more transparency in thegreat variety of products and articles and to emphasize the differences
Retention function: make the products recognizable to support the brand loyality
⇒ Orientation within a complex range of goods:
consumers assume that they purchase a reliable product with a constant qualityby buying a branded article
Broad distribution or uniform price loose their importance price argument loses its importance
Retailers as trouble-maker:
brands are mostly marketed aggressively i.e. by means of the price retailers undermine the brand image because the brands get involved in an
aggressive discount price competition
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Way out: Creating “ Must-Have Brands” (brand personalities), which are essential forthe retailers with typical characteristics
Distribution level > 60% Awareness > 70% market share > 30%
Impact of brands on preferences:
see figure 3-13
Types of brands
1) Individual name: Single-brand concept
2) Family name: product-line / range-brand-concept
3) Corporate name
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Figure 3-13: Example of a quality evaluation of two brands
Source: Freter, H., Marketing, München 2004, S. 60, siehe auch http://www.marktforschung-mit-neuromarketing.de
51%44%
5%
0%
20%
40%
60%
80%
Pepsi Coke no preference
23%
65%
12%
0%
20%
40%
60%
80%
Pepsi Coke indifferent
Blind test Test with offering of
brandPreference
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Preference
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1) Individual name
Each product of a company has its own brand name The company’s name remains in the background and is regularly not familiar to the customers
Goal: Creating a clear and unmistakable brand personality
2) Family name
a brand is selected for a certain product group / linea specific philosophy encircles all products
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3) Corporate name
the company’s products are sold under a uniform brandthe brand’s message: The company and its competence as well as sympathy and the trustinto this firm
Especially suitable if…... the product range is to large and heterogeneous
... the target groups are similar
... the product segments are heavily dependent on the fashion (e.g. Boss)
In practice many companies use combinations
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Changing brand strategies over time
starting point is usually an individual or corporate brandtwo strategic directions which both lead to a family-name-concept:
(1) Brand evolution
Basic idea: It’s getting harder to build up new brands in saturated markets (highinvestments, short marketing periods)
using strong individual brands with a strong image for new activities strong individual brands are transformed into family brands to enter new markets
faster and more efficiently
see figure 3-14
Principle: New products are arranged in groups around a well-tried core brand like satellites
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Figure 3-14: Brand evolution example Nivea
Nivea Creme
Nivea –
body
cleaning
Nivea –
personal
hygiene
Nivea
For Men
Nivea
Baby(Baby-
care)
Nivea-hair
care
Source: http://www.nivea.de/Unser-Unternehmen/beiersdorf/Die-NIVEA-Geschichte
Nivea –
Deo
Nivea
Visage
(facialcleaning)
Nivea –
Make-Up
Nivea
Sun(sun
protection)
Nivea
Soft(moisturising
creme)
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(2) Restructur ing a brand
leading a corporate brand back towards a group of family brandsneed to restructure can become necessary if a firm diversifies strongly over time anddeparts too far from the core business
see figure 3-15
Goal
strengthening credibility and competence establishing craps for specific business units which ease product innovations and
their market penetration
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Figure 3-15: Restructuring a Corporate Brand to a Group of Family Brands (here: Melitta)
Splitting Melitta’s activities into strategic business- and market units
Kaffee-Genuss
Melitta
CoffeeFilter paper
Coffee makerCoffee filter
brand
Frische undGeschmack
(Melitta)/
Toppits
Foils to keepfood fresh, tofreeze and to
roast and bakeit
brand
PraktischeSauberkeit
Swirl
Vacuumcleaner bags,Garbage bags,Odour filters
brand
BessereWohnumwelt
Aclimat
Air cleaners,Air moisteners
brand
Tee-Genuss
Cilia
Tea filters, Tea filtersystems
brand
Source: www.melitta.de
Tafelwasser-Bedarf
Aqamore
Watermachines &accessoires
brand
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3 const itutional characteristics of a branded artic le (characteristics which are crucial forthe brand’s success)
Quality management
consistent quality management as the heart of the preference strategy
Image and a Unique Selling Proposition (USP)benefits, which are conveyed in its positioning to its target customersideal situation: unique selling proposition
⇒ special importance of advertising and promotion activities
Ubiquityhighest possible distribution grade of a brand in the market as critical success factor
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Overall Cost Leadership
“The business works hard to achieve the lowest production and distribution costs so that itcan price lower than its competitors and win a large market share. Firms pursuing thisstrategy must be good at engineering, purchasing, manufacturing and physical distribution.
They need less skill in marketing.”
⇒ low prices as main marketing instrument
Strategy: firms target price-oriented buyers
German Consumers are rather price- than brand-oriented
see figure 3-16
Example: Discounters in the food retailing industry
see figures 3-17, 3-18
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Figure 3-16: Branded articles vs. Price sensitivity
Source: UGW – POS-Marketing Report 2003/2004
Product group Favourite brand Brand on offer Favourite
product
No answer
Body care
Sweets
Non alcoholi c beverages
Alcoholic beverages
Washing powder
Joghurt
Cheese
Deep-frozen food
Detergents
Salty snacks
Average
32 % 37 % 18 % 13 %
32 % 42 % 23 % 3 %
32 % 36 % 18 % 14 %
30 % 10 %28 %32 %
26 % 46 % 22 % 6 %
25 % 45 % 25 % 5 %
21 % 33 % 29 % 17 %
20 % 33 % 37 % 10 %
17 % 38 % 26 % 19 %
28 % 37,6 % 24,2 % 10,2 %
5 %45 % 34 % 16 %
g g
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Figure 3-17: Market shares in food retailing (1)
Source: Information Resources GmbH 2009
6,3 7,99,3 10,9 11,6 12,3 13 13,7 14,2 14,4 14,1 14,3 14,2 13,82
3 33 3 4 4 4 4 4 4 4 4 4
76,8 72,2 69,3 63,3 61,1 58,6 56,2 53,5 50,7 48,145,5 42,9 40,7 38,6
0
10
20
30
40
50
60
70
80
90
1993 1995 1997 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Food retailingwi thout Aldi
Aldi
Drugstores incl.
Schlecker
85.582.9 79.7
77.574.5 72.9
Number of POS in 1.000
76.1
71.068.8
66.563.7
61.459.1
56.7
g g
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Figure 3-18: Market Shares in Food Retailing (2)
5,2 6,3 7,0 8,4 9 9,7 10,4 10,6 10,8 10,9 11,3 12 12,5 12,8
13,3 14,7 16,4 16,9 17,119,6 22,0 24,6 25,7 26,1 25,8 27,4 27,0 28,8
102,5102,1 99,5 100,5 99,8 99,8 101,1 99,5 100,2 99,6 99,5
100,8 104,7110,0
0
15
30
45
60
75
90
105
120
135
150
1993 1995 1997 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Food retaili ngwithout Aldi
Aldi
Drugstores incl.Schlecker
Revenue Billion Euros
Source: Information Resources GmbH 2009
g g
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Figure 3-19: Advanced Model of the Basic Positioning of Business Units and Brands
Advantage in Performance
Advantage in price
Basic use plus
value added
Basic use
Upper-right field
Lower-left field
„Bermuda-triangle“(=dangerous position“between the chairs”)
Branded article/ Premium brand(Manufacturer brand)
Branded article,possibly second-brand(Manufacturer brand)
„Premium brand“ of the retailers
Possibly manufacturer’sthird brand
Private brandedmerchandiseNo-names /Generics
Discounter brand
Source: Becker, J.: Marketing Konzeption, 7. Auflage, München, 2002, S.227
g g
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Brand strategies for the overall-cost-leadership:
(1)Private branded merchandiseRetailers as the owners of the brands, who are responsible for the quality
Goals
retailers (especially national ones) try to take the initiative and to arrange the marketby themselves so that these companies are not only the manufacturers’ distributors.
attracting price buyers reaching a certain independence of the manufacturer brands Increase of the customer’s loyalty
see figure 3-20
Compared to manufacturer brands, ubiquity is partially missing, but they possess featureswhich are similar to those of manufacturers brands
⇒ placed between preference-strategy and overall-cost-leadership, cheaper alternative tobranded articles
Usually retailers don’t have own production facilities at their disposal but shift their productionto other industrial undertakings.
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Figure 3-20: Relevance of private branded merchandise objectives
Source: GfK
2,5
2,96
4,18
4,28
4,38
4,55
1 2 3 4 5
Covering gaps inproduct range
Improvement o f negotiation position vs.
Manufacturer
Support Companyimage
Margin improvement
Customer retention
Profiling
Very low… low… average… high… very high…
… relevance
n =43
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(2)Discounter Brand
Lowest prices in the market
Typical characteristics:
concentration on pure price competition, lowest distribution costs all other kind of marketing instruments like shop-design, presentation of the goods
etc. are minimized to protect the extremely favorable cost-situation Concentrating on a limited product range with a high turnover rate Small profit margin but due to the large sales volume sufficient yields
⇒ Caused by the high quantities discounters are able to win manufacturers which canproduce a minimum quality for the cheapest possible price
Brand policies of the discounters: Own brands Me-too respectively fantasy-brands of the discounters’ suppliers Goods without any brand name Branded articles
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Differences in prices between the dealer brands (rough indication):
• private branded merchandise compared to branded articles: ./. 20 – 30%• Discounter brands compared to branded articles: ./. 40 – 50%• Generics compared to branded articles: ./. 30 – 40%
(3)Generics
Especially convenience goods that means goods with a high rate of merchandise turnover andLow marketing, inventory and handling costs
Typical characteristics:
a. in the beginning
• no name• uniform and simple white packaging which was covered just by the product name (e.g.
Die Weißen vonRewe)
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b. Over time:• Usage of other colours for the packaging (e.g. yellow) because the white one did not
distinguish the product range from other competitors• After that first pretty pictures on the white packaging• In parts the strict no-name-character was broken from the beginning by using a brand
name (e.g. A&P of Tengelmann)
⇒ No clear position between private branded merchandise on the one hand and generics onthe other
Geographical extension of retailer branding:
see figures 3-21, 3-22
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Figure 3-21: Market shares of retail brands in Europe
Source: Metro-Handelslexikon 2010/11, p. 061
Market Shares of Retailer brands in European Food RetailingRevenue Share in %
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Figure 3-22: The Lead of UK Retailers in the Development of House Brands
Source: Clarke, R., Davies, S., Dobson, P., Waterson, M.: Buyer Power and Competition in European Food Retailing, Edward Elgar Publishing 2002
Shares of retail brands
of English retailers
Sainsbury
(55%)
Tesco
(46%) Asda
(32%)
Marks & Spencers
(100%)
Argyll
(38%)
•“Sainsbury’s own brand ranges stand for greatquality at fair prices; a powerful propositionthat drives product innovation and quality.”
•They began with the basic own brand(‘Sainsbury’s’) and then proceeded to trade up;today: ‘Organics’ with over 700 lines, ‘Be Good
to Yourself’, ‘Taste the Difference’ with 850lines, ‘J ust Cook’, ‘Basics’ with 400 lines, ‘BlueParrot Café’ with 55 lines and ‘freefrom’
•Each of Sainsbury’s own brand products fallinto one of three price layers
•The product range becomes more lucrative
and profitable
•Many retail companies will introduce 800-1000new product lines each year
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Conclusion
Up to now
Preference strategy seen as a typical strategy for manufacturers Overall-cost-leadership seen as a typical strategy of retailers (at least in the
consumer goods industry)
but
Polarization of the market leads to an increase of the market volume in the upper andlower market segment
a. Price-strategic working firms strive for the upper-right field, among other reasonsdue to price wars
b. preference-strategic operating firms strive for the lower-left field
⇒ Combined strategy, not a pure strategy concept anymore
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ad a. Retailers str iving for the preference strategy
Attempt to place private merchandise brands which resemble branded articles
Trading-up: Dealer brands are improved concerning their product-, packaging- and brandquality up to classical advertising so that they become premium brands of the retailers.
ad b. Manufacturers striving for the overall-cost-leadership
Attempt of the manufacturers to offer products – with the help of third-brands etc.- which aresimilar to dealer brands (regarding the price) to profit from the attractive market volume inthis market area
Alternat ives Especially designed brands for price-buyer with an own price-performance-ratio Trading-down: originally branded goods were devalued regarding the product’s
performance and by that they became also cheaper.
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Goals
Covering an interesting market volume
Protecting the preference brands against the aggressive pricing by the retailers
Precondition for a combined strategy:
Multi-brand concept with …
… a specific image for each brand… specific price-performance ratios in their special market segments… different marketing and sales channels
see figure 3-23, 3-24
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Figure 3-23: VW Multi-Brand Concept
Source: Backhaus, K., Schneider, H., Strategisches Marketing, Stuttgart 2007, p. 33,
http://www.volkswagenag.com/vwag/vwcorp/content/de/brands_and_products.html
Brands of VW (private vehicles)*
* additionally: commercial vehicle brands VW and Scania
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Distribution
ServiceProviders
(e.g. debitel)
Shops Tele-
marketingE-
Commerce Retail*
Private Customers
New channels,e.g. Aldi
Mobile Operator
Figure 3-24: Multichannel Sales System for multi brand concept
Direct Sales
Business
Customers
Service Provider
Channels
* Further differentiation in free retailers, contract retailers and E-Commerce retailers
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…
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3.3 Market Targeting
Decision, how many and which market segments shall be targeted
1) To what extent does the firm distinguish the market that it wants to operate in?
Mass market strategy:Offering standardised products which satisfy average needs of average customers.
Market segmentation strategy:Identifying special groups of customers who get a special product and marketing mix.
2) Should the company work on the total market or just on some parts of the total market?
Total market covering:
The firm covers the whole market
Partial market covering:
The firm targets selected market segments
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Figure 3-25: The four general strategic options for targeting a market
Mass market strategy:
Market segmentation strategy:
• with complete market coverage
• with partial market coverage
• with complete market coverage
• with partial market coverage
e.g. Nivea universal cream
e.g. Atrix hand cream
e.g. several Lauder -care
products: Estée Lauder,
Clinique, Aramis,
Prescriptives, Origins
e.g. Vichy-care system
Source: based on Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S. 240
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Mass Market Strategy
a) Mass market strategy with a complete coverage of the market
Principle: The seller engages in the mass production, mass distribution and mass promotionof one product for all buyers (no distinction between different customer segments with differentneeds)
Strategy aims at creating the largest potential market Positive impact on production costs (lowest costs) and possibly lower prices or
higher margins
Examples: Henry Ford offered the Model-T-Ford “in any color, as long as it is black”. Coca Cola sold only one kind of Coke in a 6.5-ounce bottle.
Market: Basic market only minus these buyers, who can not be taken into consideration forthis product
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b) Mass market strategy with a partial coverage of the market
Principle: Mass markets which are defined more narrowly compared to the mass market withtotal coverage of the market
⇒ Including characteristics that consider general differences in the customers’ needs.
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Market segmentation strategy
Means to identify and distinguish these market segments are the segmentation criteria
see Figure 3-26
a) Market segmentation strategy wi th a complete coverage of the market
→ Every segment is covered by the company, but with different brands
b) Market segmentation strategy with a partial coverage of the market
→ The firm only targets a single or few market segments
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Figure 3-26: Segmentation Criteria for Consumer Goods Markets
Demographiccriteria
Social-economic
criteria
Psychographic
criteria
Behaviourial
criteria
• Age
• Gender • Life stage
• Residence• ...
• Size of the household
• Income / purchasing power
• Social classes (school education, job)
• Possessory aspects• ...
• Personality (sincere, rebellious …)
• Knowledge
• Motives / sought-after benefits
• Atti tudes
• Buyer-readiness-stage
• ...
• Quantity and frequency of purchasing
• Usage rate
• Selection o f the stores
• Communication behavior
• ...
Source: based on Steffenhagen, H. Marketing - Eine Einführung, 6. Aufl., Stuttgart 2008, S. 42
„Lifestyle“
Segmentation
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Conclusion
Market segmentation has gained more and more importance within the last decades.
Nonetheless: There are both arguments for mass marketing and for market segmentation.
see Figure 3-27
Advantages and disadvantages of both strategic options:
see Figure 3-28
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Figure 3-27: Factors favouring a Process of Standardisation or Differentiation
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S.289
• Standard products
• Mass distribution channels
• Urbanisation
• Modern communication techniques
• Increasing mobility
Factors favoring standardisation (strategic tendency: mass marketing)
Factors favoring di fferentiation (strategic tendency: market segmentation)
• Satisfaction of basic needs
• Increasing individuality of the people
• Increasing knowledge and education
• Creativity in production and consumption
• Increasing purchasing power
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Disadvantages
Figure 3-28: Advantages and Disadvantages of Mass Market and Segmentation Strategy
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S. 290
Segmentation strategy
(“sniper concept” )•Necessity of demand analysis (to be able to
fulfill the specific needs of the target groups)•Gaining above-average scope for raising
prices•Good possibilities for steering the
submarkets•Opportunity to replace the price competition
largely by a quality competition
Overall
assessment
General
assessment
Advantages
Mass market strategy
(“shotgun concept”)
•Higher marketing expenditures•Possibly giving up mass production
(and by that the cost advantages)•Partly limited stability of market segments•Large demand for marketing know-how
(resp. appropriate marketing organisation)
•Cost advantages due to massproduction
•Covering the whole basic market(taking advantage of the wholepotential)
•Marketing mix which is simplified,standardised and less expensive
•Simplified marketing organisation
•Depending on the marketcharacteristics it is not possible to fulfilall customer needs
•Limited scope for changing prices(“monopolistic” range is fairly small)
•Limited opportunities to steer the
market systematically•Danger of price competition in mass
markets
Profitability due to the price competitiondepends mainly on a low cost position
Profitability due to above average prices
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What does the suitabili ty of a segmentation strategy depend on?
1. Existence of segment-specific product expectation / a preference structure
see Figure 3-29
2. Cost-benefit analysis
Are the buyers willing to bear the additional costs caused by the segmentation, e.g.special product, distribution and communication measures?
Do we lose our „economy of scales“ effect in the back office due to the segmentation(necessity of separate product management and market information systems)?
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Figure 3-29: Basic Market-Preference Patterns in the Ice-Cream Market
C r e
a m i n e s s
C r e
a m i n e s s
C r e
a m i n e s s
Sweetness Sweetness Sweetness
(a) Homogeneouspreferences
(b) Diffusedpreferences
(c) Clusteredpreferences
Source: based on Kotler, P., Keller, K.L., Bliemel, F., Marketing-Management, 12. Aufl., München 2007, S. 364
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Outlook
Caused by the change in the field of communication technology, a third strategic alternativehas emerged in today’s market: The One-to-One Marketing
Past:
Almost complete orientation towards the mass market
Focus on a product in an anonymous market
Task of the mass marketing: Reaching the planned sales volume to achieve thecalculated decline of costs.
Besides: Dividing the market according to target groups
Problem: The proliferation of advertising media and distribution channels (“informationoverload”) is making it difficult and increasingly expensive to reach a mass audience.
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Way out:
Developing a Customer Relationship Management
see Figure 3-30
Further development: One-to-one concept of an individual customer marketing (articulated byPeppers/Rogers 1993 for the first time)
idea of a „mom-and-pop store“, where the owner personally knows the customers and theirneeds and is able to put cross-selling into action with success
see Figure 3-31; 3-32
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Value management for the customer
Value management from the customer (customerevaluation)
Integration of all communication and sales channelsBringing together Marketing, Sales, Service and
Administration
Customer oriented behaviour of all employees
Increase of customer value
Existing customers preferred to new customers
Permanent analysis, evaluation and optimisation of processes
CRM
Figure 3-30: Elements of CRM
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Figure 3-31: Development of Strategic Patterns
Source: Weinberg, J., One-to-One-Marketing, in: Manschwetus, U., Rumler, A. (Hrsg.), Strategisches Internetmarketing,Wiesbaden 2002, S. 247
Individualisation 100 %
G e n e r a l i s a t i o n
100 % Undifferentiated
mass marketing
Differentiated
mass marketing
Segment-oriented
marketing
Niche-oriented
marketing
One-to-one marketing
The strategic marketing trend
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Figure 3-32: From Mass Marketing to One-to-One-Marketing
Source: Kauffels, F.-J., E-Business, 2. Aufl., Bonn 2001, S. 76
Mass marketing One-to-one marketing
•Product-manager, who sells a product to asmany customers as possible (share of market)in a certain period of time
•Attempt to generate a constant stream of newcustomers
•Cost-saving one-way communication:Reaching the largest possible group of addressees with the help of non-selectiveadvertising via radio or TV
•Customer manager who sells as manyproducts as possible to one customer (share of customer) in a certain period of time)
•Attempt to generate a constant stream of newbusinesses with current customers
•Two-way communication by interacting withcustomers and individual customer-care
Objective:
Winning and keeping loyal customers with the help of individual contacts and treatment⇒ Paradigm change from “more customers for my products” to “more products for my customers”
(“share of customer” instead of “market share”)
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Problem:
Enormous costs to implement this one-to-one approach using classic marketing
⇒ Only the progress in the information and communication technology enabled the practicalimplementation of the one-to-one-marketing concept
⇒ The cost structure for the new media is determined by fixed costs, which leads to areduction of the marginal unit costs with an increasing quantity of customers!
Background information on mass customisation:
http://store.nike.com/index.jsp?cp=EUNS_KW_NS09_DE_Google_B&country=DE⟨ _locale=de_DE&l=shop,nikeid
http://www.spreadshirt.net/de/DE/T-Shirt-gestalten/Selbst-gestalten-59
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3.4 Spatial strategies
Decision about the firm’s market and sales areas
Strategic question about the territory, geo-political decision
(1) Domestic Marketing by covering
… local markets… regional markets… multi-regional markets… national markets
(2) Supranational Marketing by covering
… multi-national markets… international markets… global markets
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(1) Domestic Marketing
Starting point for the geographic growth for most of the companies is a local market within itsconfines (small and medium-sized enterprises)
Further development snowball-effect type growth, i.e. passive (automatic) and not in a reallystrategic manner
The basic strategic options of the domestic marketing
a) Concentric /circular widening of the territory
• Existing territory is strengthened, systematically added by building rings• concentric area extension is often combined with a regionally different product- andprogram-mix
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b) Selective area extension
Objective: Creating a sales area which is as closed as possible concerning the marketingpolicy with the help of a multi-stage procedure
Implementation: Own concepts to open up the markets, co-operations / cooperative solutions,licensing, franchising
c) Area extension step-by-step like independent islands
• Special case of the selective area extension• Selection of only a few areas• These islands constitute the starting point for a potential further development in a
concentric way of area extension
Conclusion: today there is a trend towards a national coverage of the market
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(2) Supranational Marketing
Reaches far beyond a simple sales-area-aspectMore structuring, long-term binding effect for the whole business
General stages of supranational marketing
see Figure 3-34
Implementation of the internationalisation
Entry strategies into foreign markets, also called “implantation strategies”
see Figure 3-33
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Figure 3-33: General stages of supranational marketing
Global
strategy
International
strategy
Multi-national
strategy→ The companies include several
neighbouring foreign markets intotheir marketing and sales concepts(e.g. Germany neighbouringEuropean countries)
→ Often: experimental strategy toselect experiences in foreign
countries, avoiding highinvestments in foreign countries→ Export with a minimum of risks
Two options:• Indirect export: The company
operates via independentintermediates (e.g. domestic-basedexport merchants)
• Direct export: The companyhandles their own exports (e.g. byforeign-based distributors oragents)
→ Ethnocentric approach
→ Mainly connected with thefoundation of independent salessubsidiaries or productionfacilities abroad
→ Branch is usually run bymanagers from the foreigncountry
→ Marketing plan is done on thespot, adaptation strategy for themarketing mix
→ Subsidiaries get a certain scopeof decision-making so that theycan orientate their strategytowards the specificcharacteristics of the market and
by that appear as quasi-nationalcompanies
→ Polycentric approach
→ Smooth transition to next stage
→ Operating on a worldwide level→ Large quantity of branches and
subsidiaries abroad→ Large share of foreign production→ International procurement of capital→ Worldwide recruiting of the top
management→
Headquarters as holding withguideline competence→ Marketing is as standardised as
possible and orientates towardscountry- respectively multi-cross-regional target groups
⇒ Geocentric approach
Typical:Multi-national standardisation of marketing mix
Requirement:Homogeneous structure of needs,e.g. computers, cars, planes
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Figure 3-34: Implementation stages of supranational marketing
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S.324
100%
100%
Capital and
management
from the
headquarters
Capital and management
from the foreign country
Export
Franchising
Licensing
Joint Venture
Foreign-based
assembly
Manufacturing
facilities
Subsidiary
Direct investments
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Export via
japanese
importer
Sales and
Service
company
Manufacturing
facility
60s
Manufacturer of innovativeproducts such as industrial
laser-systems
stepwiseInternationalisation sincethe early 60s
Direct and indirect sales
Investment in 2009: morethan € 14 m US$
from 2009from 1977
Figure 3-35: Example of internationalisation: Trumpf in J apan
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Evaluation of foreign markets
Evaluation according to various criteria:
see Figure 3-36
Conclusion with respect to spatial strategies
Home-country-focused firms are usually not able to cover just a local or regionalmarket but are forced to cover the whole national market
International companies are usually not able to remain on the level of export-
orientation
The level and the speed of expansion are dependent on the venturesomeness of thecompany and of the management board
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Figure 3-36: Sequential Evaluation of Foreign Markets
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S. 475
29
72
22
attractive
countries
11
150 countries
121 count ries
49 countries
27 countries
16
Pre-selection- political situation- legal restrictions
Pre-selection- Population
- Gross national product
22 countries with alow potential- demand for
living space- economic basis
Evaluation of the…- market potential- market size- technical level
- number of regulations- availability of resources
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3.5 Strategic Combinations and Competiti ve Strategies
So far: Isolated view of different types of strategies on four diverse strategic levels
But: Successful strategic concepts are rarely the result of a strategic decision on just one levelbut commonly the result of a strategy-bundling on various levels
(1) Vertical strategic combinations
see Figure 3-37
For your strategic decisions it is useful to include the profiles of the most important competitorsinto the process of decision making.
Objective: Deduction of strategic options for the own company
But: Freedom for the combination of strategies is only given in parts. Some strategy-typeshave to be combined with certain other ones to achieve the best possible effect
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Figure 3-37: Strategy Profiles of your own Business Compared with an Important Competitor
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S. 356
Strategic levels
1.Growth
Strategies
2.Positioning
Strategies
3. Market
Targeting
4. Spatial
Strategies
Strategic options
Own business Main competitor
Marketpenetrationstrategy
Marketdevelopmentstrategy
Productdevelopmentstrategy
Diversificationstrategy
Preferencestrategy
Overall costleadership
Segmentation strategy(complete) (partial)
Localstrategy
Regionalstrategy
Nationalstrategy
Multina-tionalstrategy
Interna-tionalstrategy
Globalstrategy
Multi-regionalstrategy
Mass market strategy(complete) (partial)
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(2) Horizontal strategic combinations
Bundling of strategies on a horizontal level were already illustrated above, e.g.:
Alphabetical strategy paths (growth strategies)
Combination of preference strategy and overall-cost leadership with the help of amulti-brand concept (positioning strategies)
Combination of mass-market- and segmentation strategy by a multi-brand-conceptas well (market targeting)
Reasons:
very often caused by stagnating or slowly growing markets Market polarisation
see Figure 3-38
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Figure 3-38: Classical Multi-Zone Marketing and Limits of the Multi-Level Marketing
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S. 360
brand B (new)*
brand A
Trading
up
lowermarket
uppermarket
medium
marketbrand A
possiblemarketcoverage
Classical market struc ture(“onion”)
Newer market structure(“bell”)
As long as the medium market isthe biggest one the pointed out
market coverage may be enough!(multi-zone marketing)
As soon as the lower market becomesthe biggest one there is a need to
participate in the lower market.(multi-level marketing)
* Implementation if necessary also byproduction of trade- or generic goods
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Competitive Strategies
Competitive strategies can’t be seen as independent strategic concepts; they make use of general strategic action patterns; it’s about the way of dealing with competitors, i.e. about thestrategic style
Basic patterns of competitive strategies
Two dimensions to differentiate the basic patterns:
(1) Level of „ standing out“ of the competition regarding marketing and technology
→ Innovative versus imitative
(2) Time of taking marketing measures
→ Avoiding competition (reactive) versus facing the competition (active)
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Figure 3-39: Types of Competitive Behaviour
Source: Meffert, H.: Marketing-Management, 1. Auflage, Wiesbaden, 1994, S. 157
Facing
competition
Imitative
Conflict
Dimensions of
behaviour Innovative
Avoid ingcompetition Evasion Adaptation
Cooperation
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Evasion strategies
→
Attempt to avoid the higher competitive pressure by partially differing from thecompetitor’s measures
Adaptation st rategies
→ Aligning the own behaviour with the competitor’s one
Cooperation strategies
→ Explicit or implicit agreement concerning certain business practices
Conflict s trategies
→ The company’s target is to gain market shares by an innovative behaviour. In the mostaggressive way it is the objective to weaken the competitor as much as possible oreven to put him out of business
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Figure 3-40: Combination of Strategic Key Factors to Gain a Competitive Advantage
Approach compared with industry standard1
worse
higher
smaller
later
Key factors
Competitor profiles: company A company B
1 Standard might be the market leader or the top five companies –depending on the numbers of competitors
2 aspired product-/ service quality and ability to solve problems3 planned pricing4 planned market area5 planned strategic timing
1.Performance2
2.Price3
3.Area4
4.Time5
better
lower
larger
earlier
same
same
same
same
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Figure 3-41: Influencing Factors Concerning the Market-Entry Timing
Timing of the
market-entry:
• Pioneer
• Early adopter
• Late adopter
Corporate factors
F a c t o r s o f t h e s a l e s m a r k e t
P r o
d u c t
f a c t or s
Technological factors
• basic strategic behaviour
• venturesomeness
• company size• marketattractiveness
• market resistancedue toconsumers’ needs
• competitive marketpressure
• innovation level
• complexity
• dynamics of the technologicalprogress
• complexity of the technology
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Three fundamental strategies for the market-entry strategy:
(1) Pioneer-strategy / First Entry → The pioneer is always and definitely the first one in the market, i.e. he initiates the
introduction stage of a product
(2) Strategy of the early-adopters → Market-entry shortly after the pioneer→ Early adopter developed the product and the marketing-concept almost parallel to the
pioneer (possibly on purpose to learn from the pioneer’s experience)
(3) Strategy of the late adopters
→ Enters the market relatively late (after the end of the introduction in the product lifecycle)
→
Need to imitate regarding technology or marketing (often necessary to enter themarket with a low-price-strategy)→ Possible reasons
• avoiding high risk of market entry• lagging behind the technological product development
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Figure 4 1: Relevant decisions to set up the sales channel strategy
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Selection of sales channels
Decision for type of sales
partner
Decisionregardingnumber of
sales partners
Decisions inthe context of multichannel-
sales
Figure 4-1: Relevant decisions to set up the sales channel strategy
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Figure 4 2: Direct and indirect sales channels
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Sales Channel
Direct
Personal sales
POS at customer
POS at supplier
Changing POS, e.g.fair
Impersonalsales
Telefonesales
E-Commerce
Mail orderbusiness
…
Indirect
Sales agents,e.g. sales
repre-sentatives
Authoriseddealers,
e.g.franchisepartners
Free
dealers
retailers
wholesalers
Figure 4-2: Direct and indirect sales channels
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Figure 4 3: Type of sales partners
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Type of sales
partner
Domesticcommerce
One-level
Retail
Wholesale
Multi-level
Cooperation
Concentration
Foreigncommerce
Importbusiness
Exportbusiness
Source: based on Meffert 2012, p. 552
Figure 4-3: Type of sales partners
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Manufacturer
Customers
Drug-stores
doctors
Delivery /
Invoice
Example Pharmaceutical
Industry
Manufacturer
Customers
Sanitary and
building retailer
Building comp./
plumber
Delivery /
Invoice
Need
development
Need
development
Example Sanitary products
architects
Figure 4-4: Examples for market structures and involved parties
Need
development
Need
development
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Figure 4-5: Examples for market structures and involved parties
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Cement industry Pharmaceutical industry
Front Market
(customers / sales)Building material retailer pharmacies
Back Market(Processing / Usage)
Construction companies Doctors, hospitals
Consulting Market
(intermediariess)Architects, planning offices Health insurances, legislation
User Market(End-user)
Private households, industry…
patients
Source: based on Ackerschott, 2001, p. 194
Figure 4-5: Examples for market structures and involved parties
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Figure 4-6: Number of sales partners
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Universal
Sales
Selective Sales Concentrated Sales
Concept
Sales via allpossible kindsof salespartners
Limitation of kind and number of sales partners to one or only a fewcategories
Consideration of those partnerswhich fulfill defined criteria (e.g.
certain consulting and servicelevels
Conscious selection of individual partners within acategory fulfilling highdemands (among other withrespect to location, productrange etc.)
Extreme case: exclusive sales
Goal
Strongpresence
Increase of
brandawareness
Trying to achieve brand beingmore sought after
High motivation andqualification of sales partnersImplementation of ademanding marketing concept
Marketing
Strategy
Mass marketstrategy
Market segmentation strategy(partial coverage aimed at)
Market segmentation strategy(partial coverage aimed at)
Figure 4-6: Number of sales partners
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A company uses a Multichannel Sales System, if the products are sold at least via two,usually more, sales channels
Examples for multichannel sales systems − Insurance companies with own sales force, E-commerce offer, independent broker
and telefone sales− Mobile operators such as T-Mobile und E-Plus− Companies such as Nike and Adidas selling through own shops, retail chains,
Factory Outlet Centers, E-Commerce, …− …
Important decisions in the context of multichannel systems Shall the products be sold via several sales channels? Under which circumstances does it make sense to open new channels such as
discounters or E-Commerce? How shall the coordination of the sales channels be done?
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Figure 4-7: Options for implementing E-Commerce in the sales system
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Source: Becker 2000, p. 93
E-Commerce in existing
value chains
Support for existing
sales system
Innovative services for
endcustomers / sales
parter, extension of
delivery service
Building up new value
chains
New business field
New and innovative offers in E-
Commerce
Additional sales channel
Setting up a new sales
channel for the existing
company products
Figure 4 7: Options for implementing E Commerce in the sales system
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Figure 4-8: Use of channels in a multichannel sales system, example consumer electronics
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Source: based on Ehrlich/Erbenich/Kirchgeorg 2010, p. 68
MP 3 Player
TV Sets
Laptops / Notebooks
Which information channels have you used to inform yourself about consumer electronic products on offer (in
% of asked participants)
before purchase at purchase
Figure 4 8: Use of channels in a multichannel sales system, example consumer electronics
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Figure 4-9: Clear allocation of functions to sales channels in a multichannel sales system
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Source: based on Kotler, Bliemel, Keller, Marketing Management 2007, p. 887
Functions of sales management
customers
Openingsales
opportu-nities
Evaluationof salesopportu-
nities
SalesPreparation
Sale Services Accountmanagementafter sales
Key Account
ManagementClassical
Direct Sales
Large accounts
Telemarketing Medium sized accounts
Retail
Sales
Representatives Small and potential customers
Value adding
reseller
Figure 4 9: Clear allocation of functions to sales channels in a multichannel sales system
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Figure 4-10: Factors influencing sales channel structure
4.1 Sales Channel Strategy4 Sales Partner Strategies
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Factorsinfluencing
sales channelstructure
Productcharacteristics
Competitivesituation
Customerpreferences
ressources
Strenth of sales partners
and conflictsituations
Possibilities forcustomerretention
Strategy
Figure 4 10: Factors influencing sales channel structure
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Figure 4-11: Strength of sales partners and conflict situation
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Causes of conflict in a sales channel system are to lead back to differences in therelation between manufacturer and retailer regarding …
Objectives Roles Power Communication
gu e S e g o saes pa e s a d co c s ua o
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Figure 4-12: Basic Strategies in the cooperation of manufacturers to retailers
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Active in the
response to
marketing activities
of the retailers
Active in the design
of the sales channels
Cooperation(acquisition of power)
Behavior of
manufacturer
Passive in the design
of the sales channels
Passive in the
response to
marketing activities
of the retailers
Alignment
(acceptance of power)Conflict
(power struggle)
Avoidance(avoid power struggle)
g g p
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Figure 4-13: Vertical integration
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Own retail chain
Concession
Factory Outlets
Shop in Shop
Franchise
Vertical integration
of the sales channel
Manufacturer Retailer
Own productideas
Long termcontractualbonding of supplier
Acquisition of a supplier
Source: based on Bos ton Consulti ng Group / Markenverband (2005)
g g
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Figure 4-14: Key Account Management as organisational basis for cooperation
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Key Account Management
Who are the Key Accounts?
Large customers by revenue/ sales volume
Customers of high strategicrelevance, e.g. referencecustomers
Selected sales partners
Tasks
Systematic acquisition of key accounts
Development of customerspecific marketing-conceptsand actions
Cross section function:
Steering all activities of acompany towards the keyaccounts
…
Objectives
Long term customerretention through exploring
common success potentialsand from this ensuring costreductions
Short term securing salestargets such as sales /revenue
…
g y g g p
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Figure 4-15: Strategic options for Key Accounts
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II. Cross
Selling
Source: Belz / Senn 1995, p. 48
I n t e g r a t i o n a n d s y n e r g y p o t e n t i a l
o f m a n u f a c t u r e r s
Integration and synergy potential of
Key account
highlow
l o w
h i g
h
IV. Strategic
Alliance
I. Early
warning
III.
Partnership
g g p y
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Figure 4-16: Trends in Key Account Management
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Multfifunctional teams substitute „KAM as lone
warrior“
Setting up strategic account relationships
Building value-enhancing partnerships
Outsourcing of KAM
Europe-wide and globally active Key Account
Manager
Environmental
changes such asInternationalisation
of customers,
increasing product
complexity etc.
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Figure 4-17: Success factors in sales partner management
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Success factors in sales partner management
1. Attractive businessmodel
a. Contractual sales
system as framework
b. Rights and duties of themanufacturer
c. Rights and duties of thesales partner
d. Pricing and terms of sale
2. Support in the operativebusiness
Decision for push- or pull
approach
Support for marketing
Motivation of sales agents
Information systems
3. Cooperationmanagement
Efficient Consumer
Response (ECR)
Supply ChainManagement (SCM)
Category Management(CM)
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Efficient Consumer Response (ECR) involves cooperative partnerships between teh
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Efficient Consumer Response (ECR) involves cooperative partnerships between tehmanufacturer and retailer in logistics and marketing with the objective to serve customerneeds better than in isolation
Through this short term optimisations can be done as well as build up long term
competitive advantages
For this a very intense cooperation and communication between the parties is necessaryto steer and optimise product- and information flows.
Example:http://www.markenartikel-magazin.de/no_cache/events/artikel/details/1003291-ecr-award-an-unternehmen-und-persoenlichkeiten-verliehen/
See figure 4-18
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Figure 4-18: Cooperation areas of ECR (Efficient Consumer Response)
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Cooperation in Logis tics
(Supply Chain Management)
Cooperation in Marketing
(Category Management)
Efficient Administ ration Efficient compos ition of assortment
Reduction of paperexchange
Avoiding multiplegatherings
Using EDIAssortment
composition per
shop
Assortmentcomposition
considering all
manufacturers
Optimisation of price and sales
space
Efficient operative logisti cs Efficient Promotion
Standardisedpackaging
Efficientconsignment
Cross DockingSales promotions
per shop
J oint evaluationof sales
promotion
Reduction of price promotions
Efficient stock replenishment Efficient Product Introduction
Vendor managedinventory / Co-
managed inventory
Automation of order transactions
Vendor ManagedInventory
J oint productdevelopment
Cooperativeproduct andmarket tests
Cooperativeproduct
introduction
Source: Homburg / Schäfer / Schneider 2012, p. 340
Efficient Consumer Response
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Figure 4-19: Main targets of ECR (Efficient Consumer Response)
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Efficient administration
Efficient operative logistics
Efficient stock replenishment
Efficient promotion
Efficient composition of assortment
Efficient product introduction
high
s t r a t e g i c
Source ECR Study by Coca-Cola, quoted by Frey 1997, p. 172
o p e r a t i v e
C o o p e r a t i o n
Complexitylittle
Category
Mgt.
Supply
Chain
Mgt.
Increase revenue andprofit, realisation of newgrowth potentialsthrough more efficientmarketing
Improvement of thecost structure of theproduct- andinformation flows alongthe value chaingthrough eliminating nonvalue adding processes
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Supply Chain Management (SCM) is a computer-based steering of material, information
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Supply Chain Management (SCM) is a computer based steering of material, informationand capital flows along the entire value chain from gaining raw material to the end customerwith the objective to integrate processes
The task of SCM is the optimisation of the delivery chainbeyond the own company
SCM is characterised through different principles
New technologies such as Radio Frequency Identification (RFID) lead to a continuousincrease ot the relevance of SCM
See figure 4-20
See figure 4-21
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Figure 4-20: Structure and task of SCM
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Supply Chain Management
Purchasing and supplier-management Sales and Order Processing
Manufacturer of
end-customer products
Sales
intermed.
Sales
agent
End-
customer
Supplier
Supplier
Supplier
Supplier of supplier
Supplier of supplier
Flow of information
Flow of materials
Flow of financials
Source: Meffert et al., 2012, p. 580
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Figure 4-21: Principles of SCM
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Source: Corsten/Gabriel 2002, p.10
•What are customer needs?
•Visualise value chain•Determination of critical activities•Adjustment of strategy
Positioning
•Adjustment of product and process acchitecture•Buildung product modules•Late set up of variants•Standardisation of interfaces
Postponement
•Exchange of information and data• Integration of IT-Systems•Convergence of logistics, IT and Operations Research•Use of Internet technology
Planning
•Synchronisation of value chain steps• Integration of suppliers•Optimising replenishment• J ust in time principles
Pull Principle
• Intensive communication•Cooperation with suppliers of systems•Building confidence•Search for „global optimum“
Partnering
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Example: Efficient Replenishment through using RFID technology at Gerry Weber
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EAN-basedprocesses, hencepersonal inventorytaking
Many mistakes ininventorymaintenance, due totheft etc.
Complex securing of products throughhard-tags
Customer satisfactionthrough better productpresence, revenue increaseby 7,5% through reduction of out of stock situations
Reduction of wrongdeliveries by 80%
Increase of share of secured
products to 100%
Reduction of effort inlogistics / goods received by75%
Equipment of 25mio. clothes withsewed RFID chips
164
p p g g gy y
Inefficiencies ResultsUse of SCM
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Category Management (CM) is a joint process of retailer and manufacturer, where product
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g y g ( ) j p pgroups are managed as strategic business units to increase customer benefit and throughthis business results
Analogue to a product manager a Category Manager plans and coordinates the productgroup / category
Targets and tasks of Category Management
See figure 4-22
See figure 4-23
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Figure 4-22: Targets of Category Management
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Qualitative targets Quanti tative targets
• Composition of assortment for differenttarget groups and different types of salespartners
• Image improvement with respect tocustomer orientation, performance
competence, pricing credibility etc.• Exploring new customer segments• Using potentials resulting from
combination effects• Increase of customer loyalty• Developing profiles in retail competition• Pricing with high value added
• Early discovery of trends
• Increase of profitability (contributionmargin, revenue, revenue rate)
• Reduction of capital lockup, profitmaximisation through revenue and profitincrease
• Revenue increase through avoidance of out-of-stock situations• Increase of expenditure intensity of
customers• Reduction of cost-intensive promotions• Cost optimisation of product launches
Source: based on Seifert, 2004, p. 152: L ingenfelder / Kahler 2004, p. 124
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Figure 4-23: Functions of Category Management
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Source: Henric Hahne: Category Management. Interface zum Handel, in: Absatzwirtschaft, Nr. 3, 1997, p. 74.
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Example: efficient composition of assortment
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Products which
are important forthe target groupare not available
Optimisation of assortmentthrough composition of product groups acc. Tocustomer buying behaviour
Analysis of consumer paneldata etc.
Reduction of brandswithin a category
Customer satisfactionthrough good product
presentation and productavailability
Stock turnover increases
POS spacedesignedaccording to
targets of retaileror manufacturer,not on the basisof customerrequirements
Optimisation of shelf-idealposition of products on thebasis of customer behaviour
(e.g. video observation) Internal criteria such as
contribution margin areconsidered with secondpriority
168
p p
Inefficiencies ResultsUse of CM
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Strong organisations, which aim at
expanding the ECR concept (ECR
USA and ECR Europe)
Strong expansion in some
industries such as food and
consumer goods with traceablesuccess
Focus of the implementation lies on
shelf-optimisation and Supply Chain
Management
Only few applications in certain industries such
as consumer goods and specialised dealer
Less focus on marketing aspects of ECR
Main challenges
− Building internal preconditions such as theinvolvement of further departments, but
also soft factors such as motivation,
attitude
− Cultural fit with partner
− Critical mass required due to high
investments in IT systems
− Disclosure of dat with the risk of data
misuse
− Inbuilt conflict potential between industry
and retailers
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Achievements but
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5 Analysis Tools for Market-Oriented Strategic Planning
5 Tools for Strategic Planning5.1 Key Performance indicators
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Various methods for evaluating strategies, tools for analysing and selecting actual strategies
5.1 Key Performance Indicators
Starting point for each kind of strategic decision: see Chapter 1.4
Breakdown of the strategic situation regarding two aspects of analysis:
(1) Analysing the company
(2) Analysing the external environment
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(1) Analysing the company
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(1) Analysing the company
Key issues to be analysed in the context of the
sales strategy
Do the sales channels behave according tostrategy?
Do they fulfill their sales expectations?
Do they fulfil quality expectations?
Do incentive- and coordination-mechanisms work?
Which costs and earnings contributions are therefrom the different sales channels?
see figure 5-1
Implications for the sales
strategy and -management
Can management of the individual sales
channels beimproved?
Is a strategy changerequired to change thesales channel
strategy?
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Figure 5-1: Stepwise contribution margin calculation of sales channels of a mobile operator
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Sales channel
1
Sales channel
2
Sales channel
3
Sales Channel
4Contribution Margin I m € 338 788 421 207
per Ø customer and month € 13 18 21 30
Customer acquisition costs m € 73 174 88 59
per new customer € 156 236 234 207
customer retention costs m € 41 81 27 10
per Ø customer monthly € 2 2 1 1
Contribution Margin II m € 224 534 307 138
cots of marketing etc. m € 3 64 62 12
per Ø customer monthly € 0,1 1 3 2
Contribution Margin III M € 221 469 244 126
per Ø customer monthly € 8 11 12 19
Payback months 14 16 14 8
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(2) Analysing the external environment
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Additional key figures to be analysed for the SWOT-analysis according to chapter 1-4:
• Market potential• Market volume• Sales volume• Market shares
see Figure 5-2 see Figure 5-3
For strategic planning not only the current situation is essential, but the key performanceindicators have to be projected into the future
⇒ Forecasting methods
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Figure 5-2: Relation Between Market Potential, Market Volume and Sales Volume
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Market potential
Market Volume
Sales volume of
company A to F
A
BC
D
E
F
Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S. 396
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Figure 5-3: Different Growth Potentials in Sub Segments of the Cosmetics Market
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Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S. 397
growth
potential
growth
potential
Not completely exploited market –Large potential e.g. cosmetics for men
The market is largely exhausted,the growth potential is small, e.g.cosmetics for women
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There is a large variety of methods which can be differentiated along two dimensions…
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1. ... according to the type of variable
Development forecasts
Variables that are to be forecasted are regarded as independent or exogenous, i.e. theycannot be influenced by the company
Impact forecasts
Variables that are to be forecasted depend on variables that can be influenced by the company(generally marketing instruments are regarded as independent variables)
2. ... according to the use of statistical methods
quantitative methods:
Data is predicted based on data from the past and using statistical methods
qualitative methods (heuris tic methods):Use of expert knowledge for prediction, trust in intuitive-subjective elements
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Figure 5-4: Use of forecasting methods in marketing (survey results)
(3)(1) (2)
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Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S. 408
(3)
Frequency of use
(if used at all)(A) Statistical-mathematical methods:1. Extrapolat ion of t rends
2. Moving average3. Regression analysis
4. Exponent ial smoothing
5. Simulation approaches
6. Input-output forecasting
(B) More subjective methods:1. Estimate by sales force2. Estimate by management (technical and
business)
3. Forecasts based on customer surveys
4. Forecasts based on product tests
5. Analogy method (e.g. historical
or geographical analogy)
6. Extrapolation of test market results7. Group estimates (Delphi method)
(1)
Use in % of
334 companies
(2)
Assessment of
reliability
Characteristics
Forecasting methods
73.767.735.932.915.914.4
hhmmss
ddbdgd
87.785.9
81.7
50.0
46.7
37.715.9
db
d
d
b
dd
hh
h
m
h
ms
Assessment of rel iabil ity: b =particularly good, d =average, g =poor (determined by a combination of ratings and percentages of averageforecast-actual deviations)Frequency of use: h =frequently, m =sometimes, s =rarely (clustering on the basis of averages)
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5.2 Gap analysis
5 Tools for Strategic Planning5.2 Gap analysis
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Principle: the planned development of a key figure (e.g. profit or turnover) is confronted withthe expected results at the time of the planning date
Gap analysis can be differentiated according to...
...old and new products to take the product life cycle into consideration
...strategic and operative gap
see Figure 5-5
Ansoff́ s Product-Market Expansion Grid might be an obvious solution to close the gap
see Figure 5-6
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Figure 5-5: Gap analysis (strategic and operative gap)
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Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S. 415
Turnover / Profit
Time
Strategic
planning gap
Operative
gap
Target line
new business
Adjusted currentbusiness
current business
Planning date
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Figure 5-6: Using Ansoff’s Product-Market expansion grid to close the gap
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Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S. 416
Turnover / Profit
Time
Expected development(development line)
diversification strategy
produc t-development strategy
market-development strategy
market-penetration strategy
without implementing
any further actions
Planning date
Originally plannedfigures (target line)
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5.3 Portfolio analysis
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Basis:Financial considerations about the composition of a securities portfolio in order to reach thebest mixture of investments regarding risk and return
Goal Choosing the best product program regarding the future development of return
⇒ Mixture of strategic business units that yield and consume financial resources
⇒ Consideration of interdependencies between business units
Principle:Integrating in a two-dimensional matrix a ...
• business component (strengths / weaknesses of the relevant business units) andan
• environmental component (opportunities / threats within the relevant
environmental structure)
⇒ The strategic business units of a company are shown to derive norm strategies on thisbasis
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Steps:
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(1) Dividing company into strategic business units (SBU)
The SBU is a single business or bundle of related businesses that can be planned separatelyfrom the rest of the company
It clearly differs from other product-market combinations (internal homogeneity, externalheterogeneity) regarding…
... customer needs (need of quality, price and service)... its own set of competitors (structure of competition)
... structure of costs
It has it’s own management that is responsible for strategic planning and profit performance.Furthermore, the management is able to reinvest a certain share of the profit on its own.
It is possible to establish and take advantage of a competitive advantage for each product-market combination.
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(2) Definit ion of the key success factors
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Which key figures are originally responsible for the success of a company?
⇒ PIMS project (Profit Impact of Marketing Strategies) of the Strategic Planning
Institute, Cambridge / Mass.
Up to now it is the most comprehensive examination of the correlation between the company’s
strategic variables and the achievement of corporate goals
Subject: Examination of correlations between 37 strategic key factors (e.g. marketing budgetetc.) as independent variables and especially profitability and cash flow as dependentvariables
Basis: about 450 companies with more than 3000 SBUs within each line of business
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Result: market share is the central factor that strongly correlates with profitability and cashflow
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flow
What is the reason for the high importance of market share for profitability?
• …• …
• The learning curve
The average costs per unit related to the product’s value adding process (without materialcosts) fall about 20 to 30 % after its accumulated production volume doubles
see Figure 5-7
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Figure 5-7: The learning curve
C t i E it
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Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S. 423
Costs in Euro per unit
Cumulative output (experience)
1 2 4 8 16 321
2
4
8
6
10
In case of a 20%
drop in costs
In case of a 30%
drop in costs
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The concept of the experience curve is background for the particular importance of two keyfactors:
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factors:
Market share: The company, that achieves a higher market share, benefits from theexperiences the company succeeds with higher volumes of production and sales, leading tofalling costs
⇒ Highly compressed factor for the company / internal component
Market growth: ...
⇒ Highly compressed factor for the environment / external component
Two concepts of portfo lio analysis:
(1) Growth-Share-Matrix of the Boston Consulting Group (BCG matrix)
(2) General-Electric-Model of McKinsey
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(1) Growth-Share-Matrix of the Boston Consulting Group
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The two dimensions of this portfolio matrix are:
• relative market share:
• market growth: average annual growth rate in %
Furthermore:
• Turnover
On this basis: Plotting the SBUs in this matrix, which is subdivided into four cells
see Figure 5-8
SBU‘s market share
market share of the largest competitor
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Figure 5-8: Growth-Share-Matrix of the Boston Consulting Group
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Source: based on Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S. 425
M a r k e t g r o w t h r a t e ( i n % )
Relative market sharehighlow
l o w
h i g h
QuestionMarks
Stars
Poor Dogs Cash Cows
0 1.0... ...
0%
?
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The main results to derive from this kind of portfolio are:
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Understanding that different SBUs with different conditions according to competition anddifferent growth rates have to be managed differently
⇒Each SBU must, according to its strategic position, either yield or receive financial resources
⇒Each SBU must be arranged in a balanced company portfolio
The SBU’s position in the four cells indicates a different type of business and recommendedstrategy (norm-strategy):
see Figure 5-9, 5-10
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Figure 5-9: Characteristics of the BCG Matrix and its Norm Strategies (incl. Product-Life-Cycle)
I Question Marks II Stars
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Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S. 427
I. Question Marks
Characteristics:SBU has to spent a lot of money to keep up withthe fast-growing market; Cash-Flow is clearlynegative
PLC: Introduction
Norm strategy:Either raise the market share considerably if the
prospect is good otherwise divest or just harvest
Characteristics:
SBU that has a large relative market share in amarket with a slowed growth rate; produces a lotof cash which enables the company to support
other SBUs.PLC: Maturity
Norm strategy:
Hold the market share or harvest
Characteristics :
SBU has a weak market share in a low-growthmarket. The cash flow might be negative orbalanced on a low level.
PLC: Decline
Norm strategy:
Cut the market share / divest
Characteristics:SBU as the leader in a fast growing marketearns a lot of money; to keep up with the marketand to fight off attacks it has to spend substantialfunds; Cash-Flow might be balanced
PLC: Growth
Norm strategy:Hold or increase market share
(expansion strategy)
II. Stars
III. Cash CowsIV. Poor Dogs
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Figure 5-10: Product Life Cycle and the Course of Cash-Flow in the BCG matrix
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Source: Hinterhuber, H. H.: Strategische Unternehmensführung, Bd. 1, 6. Auflage, Berlin-New-York, 1996 S. 163
Product Life Cycle
Direction of cash flow (the cash flow caused by the withdrawal was not taken into consideration)
10
M a r k e
t g r o w t h r a t e i n %
I
II
IIIIV
I n v e s t m e n t
C o n t r i b u t i o n
m a r g i n
0 0.5 1.0 2.0 4.0
Relative market share = Market share of the companyMarket share of the strongest competitor
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(2) General-Electr ic Model of McKinsey
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The portfolio is put up by two dimensions:
• Market attractiveness• Relative competitive advantages / business strengths
Main difference to BCG matrix: To measure the two dimensions strategic planners must identify the factors underlying each
dimension and find a way to measure them and combine them in an index (multifactor matrix)
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Market Attractiveness is determined by:
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• Overall market size and annual market growth rate
• Market quality• Energy and raw material supply• Environmental requirements (determined by degree of governmental intervention,
environmental protection regulations, …)
Relative competitive advantages are determined by:
• Relative market position, determined by market share, company image, type of competitiveadvantages etc.
• Relative productive capacity, determined by production profitability, condition of productionfacilities, number and location of production facilities etc.
• Relative R&D potential, determined by product portfolio, product quality, rate of innovationetc.
• Relative qualification of management and employees
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Determining the values for each business: Scoring model
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see Figure 5-11
Based on both indicators: Construct a matrix of nine cells
Depending on the SBUs’ position von der Position in the matrix: norm strategies
see Figure 5-12, 5-13
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Figure 5-11: Scoring model (Hydraulic Pumps Market)
Weight Score (1-5) Weighted sco re
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Market
Att ractiveness
Own competitive
advantage
Overall market size
Annual market growth rate
Historical profit margin
Competitive intensity
Technological requirements
Inflationary vulnerability
Energy requirements
Environmental impact
Social-political-legal
Market share
Share growth
Product quality
Brand reputation
Distribution network
Promotional effectiveness
Productive capacity
Productive efficiency
Unit costs
Material supplies
R&D performance
Managerial personnel
0.20
0.20
0.15
0.15
0.15
0.05
0.05
0.05
Must be acceptable
1.00
Weight0.10
0.15
0.10
0.10
0.05
0.05
0.05
0.05
0.15
0.05
0.10
0.05
1.00
4
5
4
2
4
3
2
3
Score (1-5)4
2
4
5
4
3
3
2
3
5
3
4
0.80
1.00
0.60
0.30
0.60
0.15
0.10
0.15
3.70
Weighted score0.40
0.30
0.40
0.50
0.20
0.15
0.15
0.10
0.45
0.25
0.30
0.20
3.40
Source: based on Kotler, P., Keller, K.L., Bliemel, F., Marketing-Management, 12. Aufl., München 2007, S. 101 f.
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Figure 5-12: Market Attractiveness-Competitive-Position Portfolio Matrix (McKinsey)
Value added
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Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S.434
M a r k e t A t t r a c t i v e n e s s
Relative competitive advantage
highmediumlow
high
medium
low
C o n s u m p t i o n o f r e s o u r c e s
33 67 100
33
67
100
0
Investment andgrowth strategies
Selectivestrategies
Harvesting ordisinvestingstrategies
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Figure 5-13: Norm strategies of McKinsey Matrix (1/2)
Objective Holding or strengthening the competitive advantages
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Source: Sander, M., Marketing-Management, Stuttgart 2004, S. 314
Investment
and
growth
strategies
j
Selective
strategies
Actions
Cash-flow:
g g g p g
Technical and marketing-related efforts must aim at eliminatingweaknesses, at consolidating or strengthening the market position andpreventing competitors from entering the market segments
Negative in the short run, positive in the medium or long term
Meaning: SBU contribute to future profit and growth and require large investments
Objective: Growth or profit
Actions SBUs require large investments with uncertain economic outcome andmight contribute to future growth of the company
A:Offens ive
strategiesCompany must build on competitive advantages (e.g. increasing therelative market share, lowering unit costs, increasing differentiation)
Cash-flow: Negative in short and medium term, positive in the long run
Meaning: Company has to select the most promising of these SBU to ensurefuture profit potential
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Figure 5-14: Norm strategies of McKinsey Matrix (2/2)
B: Transition Consolidating investment/growth strategy or a harvesting/disinvesting strategy
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Selective
strategies
Harvesting or
disinvesting
Actions: Cost cutting efforts, product differentiation, improvement of customerservices, pricing policy etc.
strategies
g /g gy g/ g gyto maximise the cashflow by economisation and without using up too many
resources
Cash-flow: Positive in the short and medium term
Meaning: SBU contribute to company’s current profit and require little investment tosustain relative competitive advantages
C: Defensive
strategiesCompany must hold relative competitive advantage and prevent competitorsfrom entering this market segment
Objective:
Act ions:
Maximise cashflow, minimise loss
Use of complete cost cutting potential and synergies in production and sales
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