1  

Tools and techniques

Ansoff’s matrix

Its four strategic options, below, for corporate growth, (see above) are briefly explained by Professor McDonald:

Market penetration

1. Of the four strategic options in Ansoff’s Matrix, this is the least risky.

2. Market penetration is about selling more of your existing product portfolio to your existing customers.

3. Do it logically, with analysis, testing and reseach, and you can quickly generate additional sales.

4. Just one of many example strategies might be to: • Offer promotional pricing or penetration pricing or other added value

to customers in your existing channels.

 

  2  

• To cross-sell and up-sell to existing customers.

• And at the same time introduce new sales distribution channels to make the buying process easier.

Market development

Part of Ansoff’s matrix, this strategy is about offering your existing product portfolio to a new market.

This could be, for example, via:

• A new marketing segmentation strategy.

• Focusing investment on niche marketing or micro-marketing.

• New distribution channels which particular segments are more comfortable with (for example, internet banking)

• Targeting outside of your existing geographic areas (international markets)

Product development

Part of Ansoff’s matrix, this strategy is about offering a new product to your existing market.

Selling a modified version of an existing product would also fall into this category (and would be a less risky option than trying to market something completely new)

Diversification

This has the highest risk of the four strategic options in Ansoff’s matrix because you are planning to sell a new product to a new market.

But of course with risk can come great reward, as has demonstrated, for example, by Virgin with their:

• Virgin Megastores, • Virgin Airlines, • Virgin Cola • Virgin Trains • Virgin Media • Virgin Money

 

  3  

• Virgin Mobile • Virgin Holidays

Some of these will be making money, some may not.

When considering your strategy, don’t pursue one approach at the expense of the others. It may be most appropriate to purse two or more strategies at the same time to achieve your objectives.

Boston Matrix The purpose of the BCG matrix is to help you plan your product range development (growth strategy) by suggesting a strategy for its future development.

In particular it helps you identify those products that require investment to maximise profits.

 

  4  

The BCG quadrants

Cash not profits move a product from one box to another.

Your portfolio of brands may therefore be labelled a:

1. Star Modest cash flow

2. Question mark Large negative cash flow

3. Cash cow Large positive cash flow

4. Dog Modest cash flow

 

  5  

To produce your BCG matrix

1. Create a BCG matrix model.

2. Position your brands on the matrix depending on their:

• Market growth rate. This is the annual increase in product sales/customers within a given market.

• Relative market share. This is the product's market share relative to its nearest competitor.

3. Use the size of the brand's bubble/circle to pictorially represent the relative value of sales in the category (also the likely cash flow).

See how balanced your product portfolio is. Too many dogs and you may be heading for negative cash flow (if you aren't there already).

Note that the BCG matrix should not be used in isolation. Ideally use it as part of a toolkit of techniques to deepen your customer understanding, and so better meet your customers’ needs.

Calculations and analytics 1. Analytics 2. Brand equity measurement 3. Conversion rate 4. Cost benefit analysis 5. Cost per contact 6. Customer lifetime value 7. Market profitability 8. Market share 9. Market size 10. Response prediction - promotions 11. Response prediction - direct marketing 12. Sampling ROI 13. Web analytics

 

  6  

DRIP They help consumers to buy, and businesses to sell. An item of marketing communication might have the objective of:

1. Differentiating between competing offerings.

2. Reminding them of the benefits of past purchases, and so encourage repeat purchase.

3. Informing them of the range of options available to them.

4. Persuading existing customers/prospects to buy.

(Use the acronym DRIP to remember these aims).

 

  7  

Forecasting techniques Forecasting is used within marketing planning to try and match your strategy to your best guess of what you think might happen.

You might, for example, want to forecast a growth in demand, competitor budget spend or the response rates of a direct marketing campaign or the total number of redemptions for a sales promotion.

Each will require different techniques, for example:

1. Growth in demand (see demand forecasting). 2. Competitor marketing budget spend (some optional techniques). 3. Forecasting your estimated direct marketing response rates.

Gap analysis This tool is designed to monitor your organisation’s performance against your set objectives and help improve strategic planning and control.

It is commonly an integral part of the marketing audit process.

The 'gap' is the shortfall in 'expected' performance relative to 'required' performance.

 

  8  

Once you've worked out what the gap is, the marketer's role is to develop a strategy that fills or closes the gap.

A simple example of 'closing the gap'

1. Productivity and marketing spend against return on investment is reviewed across the brand portfolio in existing markets.

2. It is decided that three dogs from the brand portfolio will be sold in order to bring in some money and cut their negative cash flow.

3. This income is used to reposition the other dog and turn it into a star.

4. Promotional pricing and new distribution channels are used to increase sales further.

 

  9  

PEST (PESTEL) analysis Factors acting on your business or organisation:

PEST (PESTEL) analysis is one of the tools used in marketing planning.

• Political (and Legal) E.g. how will new telemarketing legislation affect the sales process?

• Economic E.g. should the test campaign area be moved because of recent job redundancies in the county?

• Sociological E.g. how should public concern over the quality of school meals affect our brand promise?

• Technical E.g. how should our media strategy react to the way that social networking is altering brand/customer interaction.

• Environmental E.g. How much are green issues determining customer buying behaviour?

• Legal E.g. What difference will The Gambling Act 2005 have on your use of sales promotion techniques?

 

  10  

Porter’s Five Forces Michael Porter developed his Five Forces Model and introduced it to the world in 1980 in his first book, "Competitive Strategy."

The model provides a basis for companies engaged in strategic planning to consider the critical forces that are impacting it.

These forces include existing competition between suppliers, the threat of new entrants to the market, the bargaining power of buyers, the power of suppliers and the threat of competitive products or services.

By understanding these forces you can make an informed decision about the status/attractiveness of a particular market or segment:

1. The threat of new and potential entrants into your market. 2. How substitute products could take away sales/your market share. 3. The increasing power of buyers. 4. The increasing power of suppliers. 5. The effects of competitor activity.

 

  11  

Porter (1985) argues that an organisation that is looking for competitive advantage should have:

1. Cost leadership. 2. Differentiation. 3. Focus.

The SWOT analysis Introduction

A SWOT analysis is about indentifying internal strengths and weaknesses, and (often most usefully for planning) external threats and opportunities.

Benefits and uses

This sort of analysis is used to:

1. Counter your natural tendency to focus on current problems and fail to anticipate important developments that can have a significant impact on the business.

2. Act as a way to drive your strategy (see this e-marketplace SWOT as a key part of your Digital Strategy)

There are three stages:

1. An internal analysis of your internal environment to uncover the organisation’s/brand's particular: • strengths and • weaknesses.

Review your assets, competences and resources.

2. An external analysis of your external environment to uncover the potential: • threats and • opportunities.

 

  12  

3. Consider visualising and presenting your SWOT on a perceptual map.

This five minute video lecture on SWOT by Erica Olsen explains the above in simple terms.

When to use a SWOT analysis:

1. When you have a very limited amount of time to address a complex strategic situation.

2. When you are examining a particular market segment (i.e. a group of customers with the same or similar needs). Doing a SWOT of a larger group just means that you end up with broad statements and recommendations without much strategic value.

Use the SWOT template in the column opposite.

 

  13  

The Value Chain This tool examines how each activity (not function) within your organisation adds to your customer value proposition.

It was developed by Porter in 1985 to analyse your competitive advantage, and offers a bird's eye view of an organisation, of what it does and the way business activities are organised.

Porter divides these activities into:

1. Primary activities These are directly concerned with the creation or delivery of the product • In-bound logistics • Operations • Outbound logistics • Marketing and sales • Service

 

  14  

2. Support activities • Procurement • Technology development (including research & development) • Human resources management • Infrastructure (systems for planning, finance, payment, etc)

Porter proposes that the better an organisation manages the links between each activity, the more likely a customer will be prepared to pay a price for the resulting product or service.

And if the organisation is able to deliver a product/service for which the customer is willing to pay more than the sum of the cost of all activities in the value chain, that a profit margin results.

Each primary and support activity is a link in the value chain, and each relies on the other to combine to deliver competitive advantage.

Value chain analysis

There are four steps:

1. Analyse the costs of each activity in your value chain. 2. Analyse how your product/service fits into your customer’s value chain. 3. Indentify the cost advantages of your value chain in comparison with

that of your competitors. 4. Identify the added value that you deliver to your customer (e.g. lower

their costs, add value to their service?)