Strategic Marketing

1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space
3. Strategic Market Segmentation
4. Strategic Customer Relationship Management
5. Capabilities for Learning about Customers and Markets
6. Market Targeting and Strategic Positioning
7. Strategic Relationships
8. Innovation and New Product Strategy
9. Strategic Brand Management
10. Value Chain Strategy
11. Pricing Strategy
12. Promotion, Advertising and Sales Promotion
Strategies
13. Sales Force, Internet, and Direct Marketing Strategies
14. Designing Market-Driven Organizations
15. Marketing Strategy Implementation And Control
Strategic Plans Lose Favor
Slump Showed Bosses Value of Flexibility, Quick Decisions

By JOANN S. LUBLIN and DANA MATTIOLI

During the recession, as business forecasts based on seemingly

plausible swings in sales smacked up against reality,
executives discovered that strategic planning doesn't always
work.
Some business leaders came away convinced that the new
priority was to be able to shift course on the fly. Office Depot
Inc., for example, began updating its annual budget every
month, starting in early 2009. Other companies started to
factor more extreme scenarios into their thinking. A few even
set up "situation rooms,'' where staffers glued to computer
screens monitored developments affecting sales and
finances.

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Coke Bottle Is Part Plant
But It Feels and Functions Like a Regular Plastic Container

By CHRIS HERRING

Coca-Cola Co., under fire from environmentalists for using plastic bottles, has
introduced a new packaging material made partly from plants. The container
has "the same weight, the same feel, the same chemistry, and functions
exactly the same way" as a regular plastic bottle, a Coke spokeswoman says.
Coke isn't the only beverage concern trying to reduce its carbon footprint. Rival
PepsiCo Inc. has introduced a compostable bag made from plants for its
SunChips snacks. But Coke is the world's biggest drink maker, and Coke
Chairman and Chief Executive Muhtar Kent calls the new container, which
uses material derived from sugar cane, "the first generation of the bottle of the
future."
Coke touted its "plantbottle" at the Climate Change Summit in Copenhagen last
month, and it plans another push next month at the Winter Olympics in
Vancouver, where all the sodas and water it provides will be packaged in the
plantbottle. "Preliminary research" shows the new container leaves a smaller
carbon footprint than regular plastic bottles, Coke says.

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 Chapter 2

Markets and
Competitive
Space

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

The Challenges ―
Markets are increasingly complex, turbulent, and interrelated.
Importance of a broad view of the market.
Essential to develop a vision about how the market is likely to
change in the future.

Continuous Monitoring is Necessary to:

Find promising opportunities
Identify shifts in value requirements
Understand competitors’ positioning
Guide targeting and positioning
decisions

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 OPPORTUNITIES OUTSIDE THE
COMPETITIVE BOX

The Competitive Box

New Types of Traditional New

Competition Competitors Business
Models

New New
Customers Conventional Value Customers
Propositions

Existing Customer
Base

New Customer
Base(s)

2-6
 Markets Impact Strategies

* Market changes often require altering

strategies
* Forces of change create both market
opportunities and threats
* Inherent danger in faulty market sensing

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 DEFINING AND ANALYZING
PRODUCT-MARKETS
Determine the Boundaries and
Structure of the Product-Market

Form the
Product-Market

Describe and

Analyze End-
Analyze
Users Competition

Forecast
Market Size and
Rate of Change
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 Matching Needs with Product Benefits

* A product – market matches people with

needs to the product benefits that satisfy
those needs

“A product – market is the set of products

judged to be substitutes within those usage
situations in which similar patterns of
benefits are sought by groups of
customers.”*
*Srivastava, et al. (1984) Journal of Marketing, Spring, 32.
2-9
 INNOVATION FEATURE
Progressive Insurance:
Customer Needs at the Center of Strategy
* In the period 1994 to 2004, Progressive Insurance increased sales from $1.3 billion
to $9.5 billion, and ranks high in the Business Week Top 50 U.S. companies for
shareholder value creation.
* The company invents new ways of providing services to save customers time,
money and irritation, while often lowering costs at the same time.
* Loss adjusters are sent to the road accidents rather than working at head office,
and they have the power to write checks on the spot.
* Progressive reduced the time needed to see a damaged automobile from seven
days to nine hours.
* Policy holders’ cars are repaired quicker, and the focus on this central customer
need has won much automobile insurance business for Progressive.
* These initiatives also enable Progressive to reduce its own costs – the cost of
storing a damaged automobile for a day is $28, about the same as the profit from a
six-month policy.

Source: Adapted from Mitchell, Adrian (2004)”Heart of the Matter,” The Marketer, June 12, 14.
2-10
 Product – Market Boundaries and Structure

* Determining Product-Market Structure

1. Start with the generic need satisfied by

the product category of interest to
management
2. Identify the product categories (types) that
can satisfy the generic need
3. Form the specific product – markets within
the generic product – market
2-11
 Illustrative Fast-Food
Product-Market Structure

SUPER MICROWAVE
MARKETS OVENS
FAST-FOOD
MARKET

CONVENIENCE TRADITIONAL
STORES RESTAURANTS

2-12
 Extent of Market Complexity

* Three characteristics of markets:

* 1. Functions or uses of the product

* 2. The enabling technology of the product

* 3. Customer segments in the product-

market

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 Illustrative Product – Market Structure

Food and beverages •Generic Product

for breakfast meal Class

Cereals •Product Type

Ready to eat •Variant A

Regular
Natural •Variant B
Nutritional Pre-sweetened

Life Product 19 Special K •Brands

2-14
 Identifying and Describing End-Users

* Illustrative buyer characteristics in consumer

markets:
 Family size, age, income, geographical
location, sex, and occupation
* Illustrative factors in organizational markets:
 Type of industry
 Company size
 Location
 Type of products
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 How Buyers Make Choices

 BUYING DECISION PROCESS:

1. Problem recognition

2. Information search

3. Alternative evaluation

4. Purchase decision

5. Post-purchase behavior
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 Environmental
Influences

* External factors influencing buyers’

needs and wants:
 Government, social change, economic
shifts, technology etc.
* These factors are often non-controllable
but can have a major impact on
purchasing decisions

2-17
 Building Customer Profiles

* Start with generic product – market

* Move next to product- type and variant

profiles >> increasingly more
specific

* Customer profiles guide decision

making (e.g. targeting, positioning,
market segmentation etc.)

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 ANALYZING COMPETITION
1. Define the Competitive
Arena for the Generic,
Specific, and Variant
Product Markets

PRODUCT- 2. Identify
4. Identify MARKET
and and
STRUCTURE Describe
Evaluate
AND Key
Potential
MARKET Competitors
Competitors
SEGMENTS

3. Evaluate
Key
Competitors
2-19
 Examples of Levels of Competition
Baseball
cards

Bottle Video
Fast water Games
Food Regular
colas Diet lemon Ice
Beer limes Cream
Diet-Rite
Cola
Fruit
flavored Diet
Diet Pepsi
colas Coke Wine
Product from
competition: Lemon
Product category diet colas limes
Juices competition:
soft drinks
Coffee
Generic competition:
beverages
Budget competition:
food & entertainment

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 Key Competitor Analysis

* Business scope and objectives

* Management experience, capabilities, and
weaknesses
* Market position and trends
* Market target(s) and customer base
* Marketing program positioning strategy
* Financial, technical, and operating capabilities
* Key competitive advantages (e.g., access to
resources, patents)

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 Extent of
Market Coverage

Competitor
Current Customer
Capabilities Evaluation Satisfaction

Past
Performance

2-22
 MARKET SIZE ESTIMATION

Product-Market Forecast Market Potential

Relationships Estimate
(area denotes sales in $’s)

Unrealized
Potential

Company Industry
Sales Sales
Forecast Forecast
2-23
 Product-Market Forecast Relationships for
Industrial Painting Units

Sales (in 1000s

of units)
900
800
Market
700 Potential
600 Sales Forecast

500
400
300
200 Company XYZ
Sales Forecast
100
0
2003 2004 2005 2006 2007 2008 2009 2010
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DEVELOPING A STRATEGIC VISION ABOUT
THE FUTURE

 Industry Boundaries Blurring and Evolving

 Competitive Structure and Players Changing

 Value Migration Paths

 Product Versus Business Design

Competition

 Firms are Collaborating to Influence Industry

Standards
Source: C. K. Prahalad, Journal of Marketing, Aug. 1995, vi.
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Strategic Marketing

1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space
3. Strategic Market Segmentation
4. Strategic Customer Relationship Management
5. Capabilities for Learning about Customers and Markets
6. Market Targeting and Strategic Positioning
7. Strategic Relationships
8. Innovation and New Product Strategy
9. Strategic Brand Management
10. Value Chain Strategy
11. Pricing Strategy
12. Promotion, Advertising and Sales Promotion
Strategies
13. Sales Force, Internet, and Direct Marketing Strategies
14. Designing Market-Driven Organizations
15. Marketing Strategy Implementation And Control
 Chapter 3

Strategic
Market
Segmentation
 Strategic market segmentation (1)

* Levels and types of market

segmentation

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Levels and types of market segmentation

Vision
Strategic Strategic intent
Segmentation Product benefits
Resource allocation
Alignment
Managerial Planning
Segmentation
Marketing programs
Operational - Advertising
Segmentation - Sales
- Distribution

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 Best Buy segmentation strategy

* Jill’s - “soccer moms”

* Barry’s - wealthy professionals
* Buzz’s - “tech enthusiasts”
* Ray’s - the family man
* Mr Storefront - the small business customer
* Carrie’s - young, single females
* Helen and Charlie’s - older couples whose
children have left home
* Gov. Palin’s “_________________” moms

2-30
 From Mass Markets to Micro Markets
OLD NEW

CONSUMERS Passively receive Empowered media users

whatever TV control and shape content
networks thanks to TiVo, iPod and
broadcast Internet
ASPIRATIONS To keep up with To standout from the
the crowd crowd
TV CHOICE Three networks Hundreds of channels
plus maybe a plus video on demand
PBS station
MAGAZINES Age of the big Age of the special interest
glossies: Time, magazine for every age
Life, Newsweek and affinity group
ADS Everyone hums Talking to a group of
the Alka-Seltzer one, ads go ever
jingle narrower
BRANDS Rise of the big, Niche brands, product
ubiquitous brands extensions and mass
from Coca-Cola customization mean many
to Tide product variations
Source: Anthony Bianco, “The Vanishing Mass Market”, Business Week, July 12 2004, 58-62 2-31
 Strategic market segmentation (2)

* Market-driven strategy and

segmentation
* Market segmentation, value opportunities
and new market space
* Market targeting and strategic positioning

2-32
 Segmentation and Market-Driven
Strategy
SEGMENTS

VALUE
OPPORTUNITIES

CAPABILITIES/
SEGMENT
MATCH

TARGET(S)

POSITIONING
STRATEGY 2-33
 Strategic market segmentation (3)

* Market-driven strategy and

segmentation
* Market segmentation, value opportunities
and new market space
* Market targeting and strategic positioning
* Activities and decisions in market
segmentation

2-34
Market Segmentation Activities and
Decisions
Market to be
Segmented
Strategic
Analysis Decide How
of Segments to Segment

Finer Form
Segmentation Segments
Strategies
2-35
 Strategic market segmentation (4)

* Market-driven strategy and

segmentation
* Market segmentation, value opportunities
and new market space
* Market targeting and strategic positioning
* Activities and decisions in market
segmentation
* Defining the market to be segmented

2-36
 Strategic market segmentation (5)

* Identifying market segments

* Segmentation variables
* Characteristics of people and organizations
* Consumer markets
* Organizational markets
* Product use situation segmentation
* Buyers’ needs and preferences
* Consumer needs
* Attitudes
* Perceptions
* Purchase behavior

2-37
 Segmentation Variables

Purchase
Behavior

Buyers’ Needs/ Characteristics

Preferences of People/
Organizations

Use
Situation

2-38
 Illustrative Segmentation Variables
Consumer Industrial/
Markets Organizational Markets
Characteristics Age, gender, income, Type of industry, size,
of people/ family size, lifecycle geographic location,
organizations stage, geographic corporate culture, stage of
location, development, producer/
lifestyle intermediary
Use situation Occasion, importance of Application, purchasing
purchase, prior Procedure (new task,
experience with product, modified rebuy, straight
user status rebuy
Buyers’ needs/ Brand loyalty status, brand Performance requirements,
preferences preference, benefits sought, brand preferences, desired
quality, proneness to make features, service
a deal requirements
Purchase Size of purchase, Volume, frequency
behavior frequency of purchase of purchase

2-39
 Strategic market segmentation (6)

* Forming market segments

* Requirements for segmentation
* Response differences
* Identifiable segments
* Actionable segments
* Cost/benefits
* Stability
* Approaches to segment identification
* Customer group identification
* Forming groups based on response differences

2-40
 Miller Brewing’s beer brand targets

* Miller Genuine Draft - “mainstream

sophisticates”
* Milwaukee’s Best Light - “hardworking
men”
* Pilsner Urquell - “beer afficionados”
* Miller Icehouse - for “drinking buddies”

2-41
 Requirements for Segmentation

Identifiable
segments
Response Actionable
differences segments
Segmentation
Requirements

Stability Favorable
over time cost/benefit

2-42
 Approaches to Segment
Identification
CUSTOMER
IDENTIFIERS
RESPONSE
OF CUSTOMER
PROFILE
GROUPS

 Characteristics
 Use Situation

of People and
Organizations

 Buyers Needs
and Preferences

2-43
Segment Dimensions for Hotel Lodging Services

2-44
 Illustrative Example: Gasoline Buyers

Higher-income, middle-aged men, drive 25-

Road 50000 miles a year… buy premium with a 16% of
Warriors credit card … purchase sandwiches and drinks buyers
from the convenience store… will sometimes
use carwash
Men and women with moderate to
True high incomes, loyal to a brand and
Blues 16% of
sometimes a particular station …
buyers
frequently buy premium, pay in cash
Generation Upwardly mobile men and women -
F3 (Fuel, half under 25 years of age -
27% of
Food & Fast) constantly on the go … drive a lot
buyers
snack heavily from the convenience store
Usually housewives who shuttle
Homebodies children around during the day and
21% of
use whatever gas station is based on
buyers
town or on route of travel

Price Not loyal to brand or station and 20% of

Shoppers rarely buy premium … frequently on buyers
tight budgets.
2-45
Strategic market segmentation (8)

* Selecting the segmentation strategy

* Deciding how to segment
* Strategic analysis of market segments
* Customer analysis
* Competitor analysis
* Positioning analysis
* Estimating segment attractiveness
* Segmentation “fit” and implementation

2-46
Strategic Analysis of Market Segments

Customer
Analysis
Financial and Competitor
Market
Analysis
Attractiveness

Positioning
Analysis
2-47
 Segmentation “Fit” for Implementation

Segment Attractiveness
and Internal Compatibility
Internal Compatibility
High Low

Attractive segments Attractive segments

High that match with but with poor match
company with company
capabilities capabilities
Market Segment
Attractiveness
Unattractive segments Unattractive segments
Low but with match to that do not match with
company company capabilities
capabilities

2-48