marketing strategy process

MARKETING STRATEGY PROCESS“Marketing Strategy”

By

Walker Mullins Boyd Larreche

UNDERSTANDING MARKETING STRATEGY

OPPORTUNITY ANALYSIS

FORMULATING MARKETING STRATEGIES

IMPLEMENTATION AND CONTROL

MARKETING STRATEGY PROCESS

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2

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WHERE ARE WE NOW ?Environmental Analysis: Market information and intelligence

WHERE DO WE WANT TO BE ?Strategic marketing decisions and choicesSegmentation, targeting and positioning strategiesRelationship strategies

HOW WILL WE GET THERE ?Product innovation and development strategiesBranding strategiesPricing and distribution strategiesMarketing communication strategies

DID WE GET THERE ?Strategy implementation and control


1. Marketing perspective in successful Corporate, Business and Marketing strategies

2. Corporate strategy decisions and their marketing implications

3. Business strategies and their marketing implications

1. Identifying attractive markets

2. Industry analysis & competitive advantage

3. Measuring market opportunities

4. Targeting attractive market segments

5. Differentiation and positioning



1. Marketing strategy for new markets

2. Strategies for growth markets

3. Strategies for maturing and declining markets

4. Marketing strategies for new economy

IMPLEMENTATION AND CONTROL

1. Organising and planning for effective implementation

2. Measuring and delivering marketing performance

WHAT IS STRATEGY ?

A strategy is a fundamental pattern of

……. present and planned objectives

……. resource deployments

…….. Interaction of an organization with :

( A ) Markets

( B ) Competitors

(C ) Other Environmental factors

Strategy specifies :

WHAT Objectives to be accomplished

WHERE On which industries and product markets to focus

HOW

Which resources and activities to allocate to each product market to meet environmental opportunities and threats and gain competitive advantage

IDENTIFICATION OF

SUSTAINABLE COMPETETIVE ADVANTAGE

RESOURCE DEPLOYMENTS

SCOPEGOALS

&OBJECTIVES

SYNERGY

1 2

3

4

5COMPONENTS

OFMARKETINGSTRATEGY

SCOPE

Refers to the breadth of its

strategic domain

--- Number & types of industries

--- Product lines

--- Market segments

REFLECTS MANAGEMENT’S VIEWS OF THE FIRM’S PURPOSE OR MISSION

GOALS&

OBJECTIVES

Desired level of achievements

--- Volume growth

--- Profit contribution

--- Return on investments

OVER SPECIFIC TIME PERIODS FOR EACH BUSINESS/PRODUCT-MARKETS/ORGANIZATION AS A

WHOLE

RESOURCE DEPLOYMENTS

Involves deciding on how resources are to be obtained and allocated

--- Across business

--- Product-markets

--- Functional departments

--- Activities within each business or product-market

IDENTIFICATION OF SUSTAINABLE COMPETITIVE ADVANTAGE

A specification of how the firm will compete in each

business and product-market within its domain

--- Examine market opportunities in each business/product-markets

--- Firm’s distinctive competencies /strengths relative to competitors

SYNERGY

Synergy enables the total performance of the related

businesses to be greater than it would otherwise be

Synergy exists when the firm’s business, product-markets, resource deployments, and

competencies complement and reinforce each other

Indirect approach

Speed

Unbalancing competition

Alternate objectives

ConcentrationSTRATEGY

STRATEGY PRINCIPLES

Speed

Through

Use of technology

Efficient organization

Organizational flexibility

1. Reduce reporting levels, increase the pace of communication

2. Encourage ideas, flexibility and initiatives for identifying and taking advantage of new opportunities

3. Use cross-functional strategy teams that tap any cultural diversity that exists in your firm, thereby benefitting from multiple perspectives

Indirect approach

Helps

Concentrate on market opportunity with competitive advantage built around product ,price, promotion and distribution

Helps

To position product or service through customer relationship and enhancing competitive position

1. Search for emerging, neglected, or poorly served market segments through competitive analysis and fill product gaps 2. Identify competitive advantage centred on price, product, distribution and promotion 3. Use movement, speed and alternative objectives to disorient your competitor 4. Move towards market expansion, once you have gained a point of entry.

Concentration

Has two uses

Directing resources towards a market segment or target

group

Focus your strengths against the weakness of your

competitor

1. Determine the weakness of competitor through Competitive analysis

2. Determiner you unique competencies or natural strengths through Internal Analysis

Alternate objectives

Essential for business

Helps Concentration

Permits flexibility

Confuses competitors

Alternate objectives helps in forcing the competing company to make mistakes through : Inaction Distraction False moves

Misinterpretation

Unbalancing competition

Is caused through

Speed

Indirect Approach Concentration

Alternative objectives

Which produce, psychological and physical unbalancing effects on competitors


Identifying attractive markets

Industry analysis and competitive advantage

Measuring market opportunities

Targeting attractive market segments

Differentiation and positioning

Identifying attracive markets

MACRO TREND ANALYSIS A Framework For Assessing Market Attractiveness

Demographic environment

Socio-cultural environment

Economic environment

Political/Legal environment

Technological environment

Demographic environment

Family structure

Aging Geographic distribution

Ethnic composition

Implications for market attractiveness

Rapid Economic Devl. : Boon for capital goods manufacturersAging Population : Senior citizens home conveniences Demographic Trends : Development of special products and programmes Real state boom

Socio-cultural environment

Values Attribute Behaviour

Implications for market attractiveness

Changes in consumer : Natural foods, exercise equipment tastes & behaviour ,sports beverages, low-fat food products and men’s apparel

Political/Legal environment

Regulations Risks

Confiscation ( seizure without compensation )

Expropriation ( seizure with some compensation)

Domestication (Transfer of ownership to host country)

Regulatory environment reflect a country’s

economic maturity and political philosophy

Presents a firm with strategic opportunities as well as threats

GOVERNMENT REGULATION

Relate to

Foods and drugs as well as price products promotion and distribution

May favour companies producing a variety of items for several countries

May require firms …. To make costly design changes …. To substantially retool …. To add new quality control systems

Safety Health and Environmental standards

GOVERNMENT DEREGULATION

Removes

Protection of inefficienciesBarriers to entry of competitors

Leads to actions such as

… Improving pricing capabilities… Finding different ways to differentiate their services… Conserve capital to maintain flexibility… Increase their marketing skills

Economic environment

Implication for market attractiveness


STRATEGIES FOR NEW MARKET ENTRY

STRATEGIES FOR GROWTH MARKETS

STRATEGIES FOR MATURE & DECLINING MARKETS

STRATEGIES FOR NEW ECONOMY

STRATEGIES FOR NEW MARKET ENTRY

There are six categories of new products based on their degree of newness as perceived by both… the company and the target customers. These categories are discussed below in the diagram which also indicates the percentage of new entries falling in each category . Notice that only ten percent of all new product introductions fell into the category of new-to-the-world category.

HOW NEW IS NEW ?

High

Low

HighLow

New

nes

s to

th

e co

mp

any

Newness to the market

20%

10%

7%

11%

26%26%

Repositioning

Revisions/ improvements to existing products

Cost reductions

Additions to existing product lines

new-to-the-world products

New product lines

Categories of New Products Defined According to Their Degree of Newness to the Company and Customers in the Target Market

HOW NEW IS NEW ?

New to the world products

True innovations that are new to the firm and create an entirely new market (10 percent)

MIXER GRINDER

HOW NEW IS NEW ?

New products lines

A product category that is new for the company introducing it, but not new to the customers in the target markets because of the existence of one or more competitive brands new market (20 percent)

ADDITION TO EXISTING LINES

New items that supplement a firm’s established products. These may be moderately new to both the firm and the customers. They serve to expand the market segments (26 percent)

FAIR AND HANDSOME

IMPROVEMENTS IN OR REVISION OF EXISTING PRODUCTS

Items providing improved performance or greater perceived value brought to replace existing products (26 percent)

REPOSITIONINGS

Existing products that are targeted at new applications and new market segments (7percent)

Cadbury’s chocolate

COST REDUCTIONS

Product modifications providing similar performance at lower cost (11percent)

Strategic Objectives of New product and Market Development

Defend the market position

Pre-empt market segment

Maintain position as product innovator

Exploit technology in a new way

Capitalize on distribution strengths

Provide a cash generator

Use of excess off-season capacity

EX

TE

RN

AL

LY

DR

IVE

N

INT

ER

NA

LL

Y D

RIV

EN

10% 30%20% 40% 50%

Establish foothold in new market

OBJECTIVE NEW ENTRYMaintain position New to the world products; improvements or as product innovator to the existing products

Defend a current market Improvements or revisions to existing share position products; additions to existing products; cost reductions

Establish foothold in the New- to- the world products; addition to market; Pre-empt market existing product line; repositioning segment

Exploit technology in a New-to-the-world products; new product new way line; additions to or revision of existing product line

Capitalize on distribution New-to-the-world products; new product strengths line; additions to or revision of existing product line

Provide a cash generator Additions or revisions of existing product line ; repositioning; cost reductions

Use of excess off-season New-to-the-world product; new product line

Types of New Market Entries Appropriate for different Strategic Objectives

STRATEGIES FOR GROWTH MARKETS

SHARE GROWTH STRATEGIES FOR MARKET LEADERS

Marketing objectives of share leaders

(1)Retain its current customers

(2)Stimulate selective demand among later adopters

Ensuring that those customers remain brand loyal when making repeat or replacement purchases. This is particularly critical for firms in consumer non-durables, service, industrial materials and components industries.

To ensure that it captures a large share of the continuing growth in industry sales.

(3)Stimulate primary demand

To help speed up overall market growth. This is particularly important in product markets where the adoption process is slow because of the technical complexity of the new product.

Marketing actions and strategies to achieve share maintenance objectives

--- Maintaining/improving satisfaction or loyalty--- Encouraging/simplifying repeat purchase--- Reducing attractiveness of switching

Retaining current customers

--- Head to head positioning against competitive offerings or potential offerings --- Differentiated positioning against competitive offerings or potential offerings

Stimulate selective demand among later adopters

The five activities suggested above can be grouped into strategies aimed at maintaining its leading share position : DEFENSE STRATEGY, FLANKER STRATEGY, CONFRONTATION STRATEGY, CONTRACTION OR WITHDRAWAL STRATEGY

ALSO REFER TO PPT ON “MARKET SITUATION STRATEGIES”

Fo

rtre

ss o

r P

osi

tio

n D

efen

se S

trat

egy Actions to

improve customer satisfaction and loyalty

Actions to encourage and simplify repeat purchases

One of the most crucial actions a leader must take to ensure that customers continue buying its products is to maximize its availability. To do this the firm must invest in :

--- plant and equipment to expand capacity in advance of demand--- systems to control inventory and logistics to provide a steady for flow of goods through the distribution system--- Build strong customer relationships to win over them

The leader should take steps to improve not only the physical product but customer’s perception of it as well .The advertising and sales promotion emphasis should shift from stimulating primary demand to building selective demand for the company’s brand. It should emphasize the brands superior features and benefits. It should encourage repeat purchases among existing customers.

Flanker Strategy

A competitor with sufficient resources and competencies can develop a differentiated product offering to appeal to the segment where the leader is weak and thereby capture a substantial share of the overall market To defend against this kind of attack, a leader might develop a second brand ( a flanker or fighting brand) to compete directly against the challenger’s offering.E.g. This was Toyota’s rationale for introducing its Lexus brand of luxury automobiles offering IBM lost 20 market share points in mid 1980s.A flanker brand can also be a lower quality product to appeal to a low-price segment brand to protect the leader’s primary brand from direct price competition.E.g. Pillsbury's premium quality Hungry Jack brand holds a major share of the refrigerated biscuit dough market. In an attempt to attract the price sensitive consumers, Pillsbury introduced Ballard, a low priced flanker brand

Confrontation Strategy

The competitor may choose to attack the leader head to head and attempts to steal customers in leader’s main target market. E.g. IBM lost 20 market share points in mid 1980s to competitors such as Compaq whose machines cost the same but offered performance levels that were better . Later IBM’s share of PC market eroded further as companies such as Dell, and Gateway introduced more convenient and efficient Internet ordering In such situation, the leader may not have a choice but to confront the competitive threat directly through --- pricing strategy--- promotion strategy--- re-establishing the competitive edge.

Market expansion Strategy

1. Defends its relative market share by expanding into anumber of market segments. This strategy’s primaryobjective is to capture a large share of new customergroups who may prefer something different from thefirm’s initial offering , protecting the firm from futurecompetitive threats from a number of directions

2. Develop line extensions, new brands or even alternative

product forms utilizing similar technology to appeal tomultiple market segmentsE.g. Nike captures and has sustained a leading share by

developing a series of line extensions offering technical , design and style features tailored to the preference of enthusiasts in nearly every sport.

3. Retain the basic product but vary the other elements of the marketing programme to make it more attractive to specific users.; specialized sales force, sales promotion efforts

Contraction or strategic withdrawal strategy

In highly fragmented markets, a leader may be unable to defend itself adequately in all segments. The firm may then have to abandon its efforts in some segments to focus on areas where it enjoys grater relative advantage or that have the greatest potential for growthE.g. IBM made an early attempt to capture the low end of the personal computers with the introduction of the PC Jr. But the firm eventually abandoned the effort to concentrate on the more lucrative commercial and education segments.

SHARE GROWTH STRATEGIES FOR FOLLOWERS

Marketing objectives of followers

(1)Displace the leader

(2)Attain share growth

Seek to displace the leader or become a powerful competitor within the total market.

This is particularly critical for firms in consumer non-durables, service, industrial materials and components industries.

Their major objective is to attain share growth , and the size of the increased relative share such challenger seek is usually substantial

Marketing actions and strategies to achieve share growth

--- Head to head positioning against competitor’s offering in the primary target market--- Technological differentiation from target competitors offering in its primary target market

Capture repeat/replacement purchases from current customers of the leader or other target competitors

--- Head to head positioning against target competitors in established market segments --- Differentiated positioning focused on untapped or underdeveloped segments

Stimulate selective demand among later adopters

ALSO REFER TO PPT ON “MARKET SITUATION STRATEGIES”

The five activities suggested above can be grouped into strategies aimed at maintaining its leading share position : FRONTAL ATTACK, LEAPFROG STRATEGY, FLANKING ATTACK, ENCICLEMENT ATTACK, AND GUERILLA ATTACK

Deciding whom to attack

Attack the market-share leader within the primary target marketThis typically involves either a frontal assault or an attempt to leapfrog the leader through the development of superior technology or product design. The challenger/follower can confront the leader through a series of guerilla attacks.

Attack another follower who has an established position within a major segmentThis usually involves a frontal assault , but it may be easier for the challenger to gain a sustainable competitive advantage .

Attack one or more smaller competitors who have only limited resourcesBy focusing on several small regional competitors one at a time, a challenger can sometimes achieve major gains without inviting retaliation from stronger firms.

Avoid direct attacks on any established competitorHere the challenger hits the competitors in fragmented markets in which the leaders or competitors are not currently satisfying one or more segments. This usually involves either a flanking strategy or encirclement strategy, with the challenger developing differentiated product offerings targeted at one large or several smaller segments in which no competitor currently holds a strong position.

Describing the attacks

Frontal Attack Strategy

When the market for a product category is relatively homogenous, with few untapped segments, and at least one well established competitor, a follower wanting to capture an increased market share may have little choice but to tackle a major competitor head on.

To successfully implement a frontal attack, a challenger should seek one or more ways to achieve a sustainable competitive advantage over the target competitor.

Such an advantage is usually based on attaining lower cost or differentiated positioning.

E.G. Indigo had a cost advantage over Kingfisher and other Airlines, so it could lure away the customers from its competitors by offering lower fares.

Or the challenger can maintain the same price as the competitor but engage in more extensive promotion.


Leapfrog Strategy

When the market for a product category is relatively homogenous, with few untapped segments, and at least one well established competitor, a follower wanting to capture an increased market share may have little choice but to tackle a major competitor head on.

To successfully implement a frontal attack, a challenger should seek one or more ways to achieve a sustainable competitive advantage over the target competitor.

Such an advantage is usually based on attaining lower cost or differentiated positioning.

E.G. Indigo had a cost advantage over Kingfisher and other Airlines, so it could lure away the customers from its competitors by offering lower fares.

Or the challenger can maintain the same price as the competitor but engage in more extensive promotion.


Flank & Encirclement Strategies

Flank AttackThis usually involves developing product features or services tailored to the needs and preferences of the targeted customers, together with appropriate promotional and pricing policies to quickly build selective demand.A flank strategy is appropriates when the market can be broken into two or more large segments, when the leader and/or major competitors hold a strong position in the primary segment, and no existing brand fully satisfies the needs of customers in at least one other segment.E.g. Japanese car manufacturers penetrated the US car market by focusing on low price segments where US car manufacturers’ were limited. EncirclementAn encirclement involves targeting several smaller untapped or underdeveloped segments in the market simultaneously. The idea is to surround the leader’s brands with a variety of offerings aimed at several peripheral segments. This strategy usually involves developing a varied line of products with features tailored to the needs of different segments.

E.G. Rather tan compete with Coke and Pepsi in the soft drink market, Cadbury-Schweppes offers a wide variety of flavors such as cream soda, root beer, and ginger ale--- almost anything but Cola to appeal to small groups of customers with unique tastes.


Guerilla Attack

When well established competitors already cover all major segments of the market, and the challenger’s resources are relatively limited, the challenger may be reduced to making a series of surprise raids against its more established competitors.

A challenger can choose from a variety of means for carrying out guerilla attacks. These include 1. Sales promotion efforts. E.g. Coupon drops and merchandising deals 2. Short term price reductions through are a particularly favoured guerilla attack in consumer goods markets.

3. Carefully targeted direct mail, public relations, or internet marketing campaigns.

4. Legal action against the leader over a range of activities can effectively slow down the leader’s expansionist tendencies.

STRATEGIES FOR MATURE & DECLINING MARKETS

CHALLENGES IN MATURE MARKETS

--- Market growth stagnates, total volume stabilizes

--- Replacement purchase rather than first time buyers account for the vast majority of the volume

--- The primary marketing objective of all competitors in mature markets is simply to hold their existing customers

--- To sustain a meaningful competitive advantage that will help ensure the continued satisfaction and loyalty of the customers

--- To achieve and sustain a lower delivered cost

Thus a share leader in a mature industry might build on a cost or product differentiation advantage and pursue a marketing strategy aimed at increasing volume by promoting new uses for an old product or by encouraging current customers to buy and use the product more often

MARKETING STRATEGIES FOR MATURE MARKETS

Marketing Strategies For Mature Markets

Strategies for maintaining current market shareThe most obvious strategy for share leaders is simply to continue to strengthen their position through a fortress defense. This strategy involves two sets of marketing actions :

(a)Those aimed at improving customer satisfaction and loyalty--- Actions for improving the quality of firms offering and for reducing costs suggest ways to increase customer satisfaction and loyalty.

(b) Those intended to encourage and simplify repeat purchasing--- Improvements in service quality, such as just-in-time delivery arrangements or computerized reordering system, can help repeat purchases.

Since markets often become more fragmented as they grow and mature, share leaders may also have to expand their product lines ,or add one or more flanker brands to protect their position against competitive inroads.

Small competitors can also earn substantial profits in a mature market. They should focus on strategies that avoid prolonged direct confrontation with large share leaders.

A niche strategy can be particularly effective when the target segment is too small to appeal to larger competitors or when the smaller firm can establish a strong differential advantage or brand preference in the segment.

Marketing Strategies For Mature Markets

Strategies for extending volume growthIncreased penetration strategy :Convert current nonusers in the target segment into users by :--- enhancing product’s value by adding features, benefits or service--- enhancing product’s value by including in it the design of integrated system--- stimulate additional primary demand through promotional efforts stressing new features and benefitsExtended use strategyIncrease frequency of use among current users by :--- move storage of product closer to the point of end use by offering additional package size or designs--- encourage larger volume purchases by offering discounts or consumer promotions--- reminder advertising stressing basic product attributes for a variety of usage occasionsEncourage a wider variety of uses among current users--- develop line extensions suitable for additional uses or applications--- develop and promote new uses, applications or recopies for the basic product. --- encourage new uses through sales promotionMarket expansion strategy Develop differentiated positioning focused on untapped or underdeveloped segments.--- develop differentiated flanker brand or product line with unique features--- develop multiple extensions or brand offerings--- consider producing for private labels---design advertising, personal selling campaigns that address specific interests and concerns of potential customers--- enter global markets where product category is in an earlier stage of its life cycle

CHALLENGES IN DECLINING MARKETS

Technological advances, changing customer demographics, tastes, or lifestyles and development of substitutes result in declining demand for most product forms and brands

As products start to decline, managers face the critical question of whether divest or liquidate the business. The challenge is to :

--- Produce substantial sales and profits in a declining

MARKETING STRATEGIES FOR DECLINING MARKETS

Marketing Strategies For Declining Markets

HarvestingStrategyMaximize short term cash flow; maintain or increase margins even at the expense of market share decline.

--- eliminate R & D expenditure and capital investments related to business--- reduce marketing and sales budgets--- seek ways to reduce production costs--- raise price if necessary to maintain margins

Maintenance StrategyMaintain market share for the short term, even at the expense of margins.

--- design service programmes to reduce perceived risks of trial/or solve the unique problems faced by potential customers--- continue product and process R & D in short term aimed at improving product quality--- continue maintenance level of advertising and sales promotion targeted at current users--- continue trade promotions at levels sufficient to avoid any reduction ion distribution coverage--- focus sales efforts on attaining repeat purchases from current users--- lower prices if necessary to maintain share, even at the expense of reduced margins

Marketing Strategies For Declining Markets

Proftable Survivor StrategyIncrease share of the declining market; encourage weaker competitors to exit.

--- signal competitors that firm intends to remain in the industry and pursue an increased share by maintaining or increasing advertising, sales promotion and sales force efforts--- consider introducing line extensions to appeal to remaining demand segments--- low prices if necessary to increase share, even at the expense of short term margins---consider agreements to produce replacement parts or private labels for smaller competitors considering getting out of production

Niche StrategyStrengthen the share position in one or a few segments with potential for continued profits.

---continued product and process R & D aimed at product improvements or modifications that will appeal to target segments---consider producing for private labels in order to maintain volume and hold down unit costs--- focus advertising, sales promotion and personal selling campaigns on customers in target segments; stress appeals of greatest importance to those customers---maintain distribution channels appropriate for reaching target segment; seek unique channel arrangements to more effectively reach customers in target segments---design service programmes that address unique concerns/problems of customers in the target segments