marketing strategy
TRANSCRIPT
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CHAPTER -1
INTRODUCTION
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1.1 What is strategy?
"Strategy is the direction and scope of an organization over the long-term: which
achieves advantage for the organization through its configuration of resources
within a challenging environment, to meet the needs of markets and to fulfill
stakeholder expectations".
Strategy is about:
• Where is the business trying to get to in the long-term (direction)
• Which markets should a business compete in and what kinds of activities are
involved in such markets? (markets; scope)
• How can the business perform better than the competition in those markets?
(Advantage)?
• What resources (skills, assets, finance, relationships, technical competence,
facilities) are required in order to be able to compete? (Resources)?
• What external, environmental factors affect the businesses' ability to
compete? (Environment)?
• What are the values and expectations of those who have power in and
around the business? (stakeholders)
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Strategy at Different Levels of a Business
Strategies exist at several levels in any organization - ranging from the overall
business (or group of businesses) through to individuals working in it.
Corporate Strategy - is concerned with the overall purpose and scope of the
business to meet stakeholder expectations. This is a crucial level since it is
heavily influenced by investors in the business and acts to guide strategic
decision-making throughout the business. Corporate strategy is often stated
explicitly in a "mission statement".
Business Unit Strategy - is concerned more with how a business competes
successfully in a particular market. It concerns strategic decisions about
choice of products, meeting needs of customers, gaining advantage over
competitors, exploiting or creating new opportunities etc.
Operational Strategy - is concerned with how each part of the business is
organized to deliver the corporate and business-unit level strategic direction.
Operational strategy therefore focuses on issues of resources, processes,
people etc.
Strategy is the process of planning & executing various maneuvers or actions in
an attempt to reach a goal. Strategy is often associated with business,
politics,& military planning, but individuals can also strategized towards
achieving their career, health . Strategy is essentially akin to planning but
implies a maximization of resources with logical thinking, intelligence
(acquired knowledge) & leverage.
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Strategy is differentiated from tactics in that tactics are micro strategies that
contribute to large goal. Opening a successful business would fall under
strategy achieving financing or an important client would be considered tactics
towards strategy.
7P’s 7C’s
Product Customer value
Promotion Communication
Price Cost
Place Convenience
People Capable
Process Convergent
Physical Evidence Conductive
Issues for marketing strategy
• Product
What product do customers use now?
What benefits does consumer want from the product?
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• Promotions
What promotions appeals would influence consumer to purchase & use of our
product?
What advertising claims would be effective for our product?
• Pricing
How important is price to the consumer in various target markets?
What effect will a price change have on purchase behavior?
• Place
Where do consumers buy this product?
Would a different distribution system change consumer purchasing behavior?
• People
What type of people is desired by the consumer to deliver the service? Would
differentiation by people help in gaining competitive advantage?
• Process
Would different procedure, mechanism, routine, and helps in satisfying the
customer needs?
• Physical Evidence
Can we have different physical evidence?
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1.2 Marketing Strategy
Achieving objectives requires the marketer engage in marketing decision-
making which indicates where resources (e.g., marketing funds) will be directed.
However, before spending begins on individual marketing decisions (e.g., where to
advertise) the marketer needs to establish a general plan of action that summarizes
what will be done to reach the stated objectives.
Tactical Programs – Marketing strategy sets the stage for specific actions that will
take place. Marketing tactics are the day-to-day actions that marketers undertake
and involve the major marketing decision areas. As would be expected, this is the
key area of the Marketing Plan since it explains exactly what will be done to reach
the organization’s objectives.
Marketing Budget – Carrying out marketing tactics almost always means that
money must be spent. The marketing budget lays out the spending requirements
needed to carry out marketing tactics. While the marketing department may request
a certain level of funding they feel is required, in the end it is upper-management
that will have final say on how much financial support will be offered.
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Types of Marketing Strategy:
One of the most important concepts of the marketing planning process is the
need to develop a cohesive marketing strategy that guides tactical programs for the
marketing decision areas.
In marketing there are two levels to strategy formulation:
1. General Marketing Strategies
2. Decision Area Strategies.
General Marketing Strategies:
These set the direction for all marketing efforts by describing, in general terms,
how marketing will achieve its objectives.
There are many different General Marketing Strategies, though most can be
viewed as falling into one of the following categories:
Market Expansion :
This strategy looks to grow overall sales in one of two ways:
Grow Sales with Existing Products – With this approach the marketer seeks
to actively increase the overall sales of products the company currently
markets. This can be accomplished by: 1) getting existing customers to buy
more; 2) getting potential customers to buy (i.e., those who have yet to buy);
or 3) selling current products in new markets.
Grow Sales with New Products – With this approach the marketer seeks to
achieve objectives through the introduction of new products. This can be
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accomplished by: 1) introducing updated versions or refinements to existing
products; 2) introducing products that are extensions of current products; or
3) introducing new products not previously marketed.
• Market Share Growth – This strategy looks to increase the marketer’s
overall percentage or share of market. In many cases this can only be
accomplished by taking sales away from competitors. Consequently, this
strategy often relies on aggressive marketing tactics.
• Niche Market – This strategy looks to obtain a commanding position within
a certain segment of the overall market. Usually the niche market is much
smaller in terms of total customers and sales volume than the overall market.
Ideally this strategy looks to have the product viewed as being different from
companies targeting the larger market.
• Status Quo – This strategy looks to maintain the marketer’s current position
in the market, such as maintaining the same level of market share.
• Market Exit – This strategy looks to remove the product from the
organization’s product mix. This can be accomplished by: 1) selling the
product to another organization, or 2) eliminating the product.
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Decision Area Strategies:
• These are used to achieve the General Marketing Strategies by guiding the
decisions within important marketing areas (product, pricing, distribution,
promotion, target marketing).
• For example, a General Marketing Strategy that centers on entering a new
market with new products may be supported by Decision Area Strategies
that include:
• Target Market Strategy – employ segmenting techniques
• Product Strategy – develop new product line
• Pricing Strategy – create price programs that offer lower pricing versus
competitors
• Distribution Strategy – use methods to gain access to important distribution
partners that service the target market
• Promotion Strategy – create a plan that can quickly build awareness of the
product
• Achieving the Decision Area Strategies is accomplished through the
development of detailed Tactical Programs for each area.
For instance, to meet the Pricing Strategy that lowers cost versus competitors’
products, the marketer may employ such tactics as: quantity discounts, trade-in
allowances or sales volume incentives to distributors.
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1.3 Segmentation, Targeting, Positioning Differentiation
Segmentation: grouping consumers by some criteria
Targeting: choosing which group(s) to sell to
Positioning: select the marketing mix most appropriate for the target
segment(s)
Segmentation:
• Grouping consumers by some criteria, such that those within a group will
respond similarly to a marketing action and those in a different group will
respond differently.
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Potential segmentation variables:
• Sex
• Age
• race
• Income
• educational level
• marital status
• No of children
• introvert / extrovert z
• usage history
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Which segment –
• Mass market,
• Multiple segments,
• Single segment
Mass market – high volumes low margins goods-example – confectionery, clothing
• Multiple segment- appealing to wider range of groups example – 4x4
vehicles, towns, country, gender, lifestyle, social class
• Single segment – often a specialized product, example – machinery,
exclusive goods
MARKET SEGMENTATION STRATEGY:
• The need for market segmentation
• Marketers understand they cannot do all things to all people ,all the time .
Buyers & markets are too complex & diverse for one simple marketing formula
to adequately address the needs of all.
• Target market – identifying market segment that are bite size chunks that
organization can manage
• Market segmentation - identifying markets with common traits
• Market targeting - process of evaluation of selected segmentation & then
deciding which market segment to operate within.
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• Market Positioning – process whereby market positions the product to
occupy a clear & distinctive position relative to other competing brands.
• Market segmentation - markets are composed of buyers & they differ in
wants, resources, locations, & buying patterns.
• Market segmentation is process that marketer use to divide the market in to
smaller segments' that can be efficiently addressed.
Six stages in market segmentation, targeting, positioning-
• Identify for segmenting the market
• Develop profiles of resulting segment
• Develop measure of segment attractiveness
• Select the target segment
• Develop position for each target segment
• Develop marketing mix for each target segment
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Market Segmentation:
• With a large country
• Many different types of people
it is too difficult to create a product that will satisfy everybody, that is why we
focus on a segment of the total market
• Market Segmentation-def
• Grouping people according to their similarity related to a particular product
category”
4 commonly used bases for Segmentation
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• Geographic location - based upon where people live (historically a popular
way of dividing markets)
• Demographic - based upon age, gender and income level (very often used)
• Psychographic / lifestyles - based on people’s opinions, interests, lifestyles
eg, people who like hard rock music probably prefer beer to wine
• Benefits - based on the different expectation that customers have about what
a product/service can do for them
eg. People who want to but “lite” food cause ti will help them lose weight.
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Positioning Strategy:
• A Positioning Strategy results in the image you want to draw in the mind of
your customers, the picture you want him/her to visualize of you what you
offer, in relation to the market situation, and any competition you may
have".
• While designing your positioning strategy you will be faced with three
main options:
• Positioning your product against your competitors, " Our prices are half of
that you may find else where for similar products"
• Emphasizing a distinctive unique benefit "the only book keeping system that
instantly calculates your taxes"
• Affiliating your product with something the customer knows and values "the
same archiving system used by the library of university "
A positioning statement should have:
• Your customer: The type of customer you target.
• The benefits: What you can do for your customers.
• The method: How you do it.
• The USP: Why you do it better than the competitors. (As you may know,
USP stands for "unique selling proposition".)
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You will need to write down the following
• Our product offers the following benefits: ---------------
• To the following customers (your target market_: ----------
• Our product is better than the competitors in the following manner: -----------
-----
• We can prove our product is the best because (evidence, differences,
testimonials..etc) --------------------
• Your positioning statement reflects what you need to communicate about a
specific product, and to whom, so you will always hit the right button,
communicating the right message to the right customer at the right time.
• Every marketing program should cover only one product, hence must not
reflect more than one clearly stated positioning strategy, So:
• 1 product = 1 marketing program = 1 positioning statement.
Generally, there are six basic strategies for product positioning:
• By attribute or benefit- This is the most frequently used positioning strategy.
For toothpaste, it might be the mint taste or tartar control.
• By use or application- The users of Apple computers can design and use
graphics more easily than with Windows or UNIX. Apple positions its
computers based on how the computer will be used.
• By user- Face book is a social networking site used exclusively by college
students. Face book is too cool for MySpace and serves a smaller, more
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sophisticated cohort. Only college students may participate with their
campus e-mail IDs.
• By product or service class- Margarine competes as an alternative to butter.
Margarine is positioned as a lower cost and healthier alternative to butter,
while butter provides better taste and wholesome ingredients.
• By competitor- BMW and Mercedes often compare themselves to each other
segmenting the market to just the crème de la crème of the automobile
market. Ford and Chevy need not apply.
• By price or quality- Jewelers sell diamonds.
• Positioning is what the customer believes and not what the provider wants
them to believe. Positioning can change due to the counter measures taken
at the competition.
• Managing your product positioning requires that you know your customer
and that you understand your competition; generally, this is the job of market
research not just what the entrepreneur thinks is true.
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1.4 MARKET SITUATION STRATEGY
What is market dominance?
• Market dominance is a measure of the strength of a brand , product, service
or firm, relative to competitive offerings.
• There is often a geographic element to the competitive landscape. In
defining market dominance, you must see to what extent a product , brand,
or firm controls a product category in a given geographic area.
Market Dominance Strategies:
• These calculations of market dominance yield quantitative metrics, but
most business strategists categorize market dominance strategies in
qualitative terms.
• Typically there are four types of market dominance strategies that a marketer
will consider:
• There are -market leader, market challenger, market follower, and market
nicher.
MARKET DOMINANCE STRATEGIES :
• Market Leader
• Market Challenger
• Market Follower
• Market Nicher
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Defense Strategy :
• A market leader should generally adopt a defense strategy
• Six commonly used defense strategies
– Position Defense
– Mobile Defense
– Flanking Defense
– Contraction Defense
– Pre-emptive Defense
– Counter-Offensive
– Defense
Some of the options open to a market challenger are:
• Price discounts or price cutting
• Line extensions
• Introduce new products
• Reduce product quality
• Increase product quality
• Improve service
• Change distribution
• Cost reductions
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• Intensify promotional activity
Market Challenger Strategies :
The market challengers’ strategic objective is to gain market share and to
become the leader eventually
How?
• By attacking the market leader
• By attacking other firms of the same size
• By attacking smaller firms
Types of Attack Strategies:
• Frontal attack
• Flank attack
• Encirclement attack
• Bypass attack
• Guerrilla attack
PORTER’S
FIVE FORCES MODEL
• A framework for the industry analysis and business strategy
• The Porter's 5 Forces tool is a simple but powerful tool for understanding
where power lies in a business situation. This is useful, because it helps you
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understand both the strength of your current competitive position, and the
strength of a position you're looking to move into.
The five forces come from Porter's famous framework and are:
• Power of Buyers
• Power of Suppliers
• Threat of substitutes
• Barriers to entry
• Competitors
• It uses concepts developed in Industrial Organization Economics to derive
five forces which determine the competitive intensity and therefore
attractiveness of a market. Attractiveness in this context refers to the overall
industry profitability.
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• An "unattractive" industry is one where the combination of forces acts to
drive down overall profitability. A very unattractive industry would be one
approaching "pure competition".
• Porter referred to these forces as the micro environment, to contrast it with
the more general term macro environment. They consist of those forces
close to a company that affect its ability to serve its customers and make a
profit. A change in any of the forces normally requires a company to re-
assess the marketplace. The overall industry attractiveness does not imply
that every firm in the industry will return the same profitability.
• Firms are able to apply their core competence s, business model or network
to achieve a profit above the industry average. A clear example of this is the
airline industry. As an industry, profitability is low and yet individual
companies, by applying unique business models have been able to make a
return in excess of the industry average.
• Porter's five forces include three forces from 'horizontal' competition: threat
of substitute products, the threat of established rivals, and the threat of new
entrants; and two forces from 'vertical' competition: the bargaining power of
suppliers, bargaining power of customers.
• Firms that compete in a single industry should develop, at a minimum, one
five forces analysis for its industry.
• Porter makes clear that for diversified companies, the first fundamental issue
in corporate strategy is the selection of industries (lines of business) in
which the company should compete; and each line of business should
develop its own, industry-specific, five forces analysis.
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• The idea is that change in your market is likely to come as the basis of one
of these five areas. For instance, buyers may distort the market by forcing
prices down, or by deciding to take build products in-house.
• In considering how these "forces" act on your markets, you get a picture of
issues such as channel conflict, threats from vertical integration, the impact
of regulatory change or the advent of new technology. You can also take a
view as to how you are or can affect the competitive situation for your own
benefit, rather than statically accepting the status quo
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1.5 Sustainable Competitive Advantage, Porter’s Generic Strategy
What is Competitive advantage?
“When two or more firms compete within the same market, one firms possesses a
competitive advantage over its rivals when it earns a persistently higher rate of
profit (or has the potential to earn a persistently higher rate of profit)”
Competitive Advantage – Definition
• A competitive advantage is an advantage over competitors gained by
offering consumers greater value, either by means of lower prices or by
providing greater benefits and service that justifies higher prices.
• An advantage that a firm has over its competitors, allowing it to generate
greater sales or margins and/or retains more customers than its competition.
• There can be many types of competitive advantages including the
firm's cost structure, product offerings, distribution network and customer
support.
• Competitive advantage comes from performing better than competitors
• Sustainable competitive advantage comes from performing better than
competitors for a long time
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Competitive Advantage Examples
• Focus on a narrow market niche
– eBay – Online auctions
– McAfee – Virus protection auctions
• Develop expertise, resource strengths, and capabilities not easily imitated by
rivals
– FedEx – Next-day delivery of small packages
– Walt Disney – Theme park management and family entertainment
– Toyota – Sophisticated production system
• Strive to be the industry’s low-cost provider
– Wal-Mart
• Outcompete rivals on a key differentiating feature
– Johnson & Johnson – Reliability in baby products
– Harley-Davidson – King-of-the-road styling
– Rolex – Top-of-the-line prestige
– Mercedes-Benz – Engineering design and performance
– Amazon.com – Wide selection and convenience
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There are two main types of competitive advantages:
• Comparative advantage and
• Differential advantage.
Sustainable Competitive Advantage:
• However, we said the primary objective of business-level strategy was to
create sources of sustainable competitive advantage (SCA).
• How do we know SCA when we see it? What is it? When is it considered
“sustainable”?
• To produce SCA, the capability must:
1. Produce value
2. Be rare
3. Imperfectly imitable, i.e. not be easily imitated or substituted
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4. Be exploitable by the organization
Competencies vs. Core Competencies vs. Distinctive Competencies
• A competency is an internal capability that a company performs better
than other internal capabilities.
• A core competency is a well-performed internal capability that is central,
not peripheral, to a company’s strategy, competitiveness, and
profitability.
• A distinctive competence is a competitively valuable capability that a
company performs better than its rivals.
Examples: Distinctive Competencies
• Toyota, Honda, Nissan
– Low-cost, high-quality manufacturing capability and short design-to-
market cycles
• Intel
– Ability to design and manufacture ever more powerful
microprocessors for PCs
• Motorola
– Defect-free manufacture (six-sigma quality) of cell phones
• SCA is an element (or combination of elements) of the business strategy that
provides a meaningful advantage over both existing and future competitors.
• An SCA needs to be meaningful, sustainable and substantial.
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• An SCA needs to be supported and enhanced over time.
• The assets and competencies of an organization represent the most
sustainable element of a business strategy, because these are usually difficult
to copy or counter.
• An SCA should be visible to customers and provide or enhance a value
proposition.
• The key is to link an SCA with the positioning of a business.
• A solid value proposition can fail if a key ingredient is missing (e.g.,
Pringles).
Sustainable Competitive Advantages vs. Key Success Factors
• A KSF is an asset or competence needed to compete, whereas, an SCA is an
asset or competence that is the basis for a continuing advantage.
• An SCA is analogous to a Point of Differentiation (POD), whereas a KSF
can be analogous to either a Point of Parity (POP) or a POD.
Frameworks for Sustainable Competitive Advantage
• Knowledge-based strategy
• Generic strategy
• Hybrid strategy
• Core competence/distinctive capability/resource based strategy
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Knowledge-based Strategy
Porter’s Generic Strategy Framework:
• Porter’s generic strategy is based on answering 2 questions:
– Should strategy be differentiation or cost leadership?
– Should the scope of strategy be broad or narrow?
Generic Strategy
• According to Porter, competitive advantage, and thus higher profits will
result either from:
• Differentiation of products and selling them at a premium price, OR
• Producing products at a lower price than competitors
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• In association with choosing differentiation or cost leadership, the
organization must decide between:
• Targeting the whole market with the chosen strategy, OR
• Targeting a specific segment of the market
PORTER’S GENERIC STRATEGIES
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1.6 PORTFOLIO ANALYSIS
What is a portfolio?
• A business portfolio is the collection of Strategic Business Units that
together form a corporation.
• The optimal business portfolio is one that fits perfectly to the company's
strengths and helps to exploit the most attractive industries or markets.
What is Business Portfolio Analysis?
Business portfolio analysis is an enterprise strategy development tool based
primarily on the market share of your business and the growth of market in which
your business exists
Most Popular Business Portfolio Tools
Three most popular business portfolio tools are -
• The BCG Growth -Share Matrix ,
• The GE Multifactor Portfolio Matrix,.
• The GE Multifactor Portfolio Matrix was deliberately designed by General
Electric Company (GE) and McKinsey and Company to be more complete
that the BCG Growth-Share Matrix.
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Portfolio Analysis
Definition
• Analyzing elements of a firm’s product mix to determine the optimum
allocation of its resources.
• Two most common measures used in a portfolio analysis are market growth
rate and relative market share.
The BCG matrix
It is a chart that had been created by Bruce Henderson for the Boston Consulting
Group in 1970 to help corporations with analyzing their business units or product
lines .
This helps the company allocate resources and is used as an analytical tool in
• Brand marketing,
• Product management
• Strategic management and
• Portfolio analysis
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1.7 New Product Strategy –Innovation, Market Entry, Product Line Extension
Introduction
• Product (or service) is the main element of the marketing mix
• Therefore, need to determine the Product Strategies before deciding on the
remaining marketing mix
Product Hierarchy
• Need
• Product family
• Product class
• Product Line
• Product type
• Brand
• Item
7-Levels of Product Hierarchy
• Product need—to satisfy a need e.g. feet protection
• Product class—a family of products having similar function e.g. all shoes
• Product line—a group of products with closely related functions e.g. sports
shoes
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• Product type—products within a line having similar form e.g. foot ball shoes
• Brand—a name representing a product or line e.g. Nike
• Item (Stock Keeping Unit)—a unit item e.g. one pair of Nike football shoe
What is product?
• A product can be defined as a collection of physical, service and symbolic
attributes which yield satisfaction or benefits to a user or buyer.
• A product is a combination of physical attributes say, size and shape; and
subjective attributes say image or "quality".
Product-Mix Decisions
Decisions on the product mix (the number of product lines and items in each
line) that the company may offer:
• A single product
– Most firms started off as a single-product company
• Multiple products
– e.g. Creative Technology markets sound cards as well as MP3 players
• A systems of products
e.g. Nikon sells camera, lenses, filters & other options
New Product Strategy:
• New products are critical to survival
• New-product development (NPD) is essential for companies seeking growth
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– It should be an on-going, well organized NPD process having top-
management support
• What is a new product?
– From a firm's perspective, a new product is a product that it is
unfamiliar in any way
Product Innovation:
• Product innovation means different things to different people.
• A modified version of an existing product range
• A new model in the existing product range
• A new product outside the existing range but in a similar field of technology
A totally new product in a new field of technology
Promotional
Strategy
Key Factors to Consider
• Promotion strategy should be developed to
• Reach your target market
• Meet your goals and objectives
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Tailor Promotion Strategy to:
• Specific Objective:
• To provide information about the product/service
• To stimulate demand
• To differentiate product/ service or build brand image
• To counter competitors
• To respond to news
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1.8 BRAND STRATEGY
Definitions of Brand Strategy:
• A plan for the systematic development of a brand to enable it to meet its
agreed objectives.
• The strategy should be rooted in the brand's vision and driven by the
principles of differentiation and sustained consumer appeal.
• The true brand is the sum total of the perceptions of all the constituencies
which contribute to revenues and profits.
BRAND VISION
• A clean articulation of strategic, financial & brand goals that management
has created for the brand.
• A first step to strategic success as to where the brand can & cannot go.
• Provides a vision that forces management to articulate what they want the
brand to do for the organization over the next five years, relative to brand
value, revenue & profit contributions.
“FORMULATION OF MARKETING STRATEGIES TO IMPROVE MARKET SHARE OF LG MICROWAVE OVENS”
November 10, 2010 Page 39
BRAND’S POSITIONING IS
• The place in the consumer’s mind that you want your brand to own –the
benefit you want them to think of when they think of your brand.
• A strong position means the brand has a unique, credible, sustainable, &
valued place in the customer’s mind.
• Good positioning gives you the direction required to focus the organization
& focused your strategic moves.
• A good positioning is a single idea to be communicated to your customers.
• It revolves around a benefit that helps your product or service stand apart
from the competition.
• Disney- family fun entertainment
• Wall – Mart – low price & good value
• McDonalds – food & fun
“FORMULATION OF MARKETING STRATEGIES TO IMPROVE MARKET SHARE OF LG MICROWAVE OVENS”
November 10, 2010 Page 40
1.9PRICING STRATEGY
Pricing is one of the 4 Ps of the marketing mix. The other three aspects are
product, promotion, and place. It is also a key variable in microeconomic price
allocation theory. Price is the only revenue generating element amongst the 4ps,
the rest being cost centers.
Definitions:
• Pricing is the process of determining what a company will receive in
exchange for its products. Pricing factors are manufacturing cost, market
place, competition, market condition, Quality of product.
• The effective price is the price the company receives after accounting for
discounts, promotions, and other incentives.
• Promotional pricing refers to an instance where pricing is the key element
of the marketing mix.
Pricing Process:
1. Set Pricing Objectives
2. Analyze demand
3. Draw conclusions from competitive intelligence
4. Select pricing strategy appropriate to the political, social, legal and
economical environment
5. Determine specific prices.