Strategic Marketing Management

Krishna Kishore SV
COURSE PACK FAMILIARIZATION
CIA 1
Introduction to Strategic Marketing Management.
First things first………
• What is business?
• What is marketing?
• What is included and what’s not included in marketing?
• What do you think you would be doing when you get employed to
work in marketing roles?
 How differently can you..

• Perceive a business problem..

• Understand and analyze a business problem..
• Solve a business problem..
• Sustain the approach of solving the problem and create
long term value..
• Profitably, innovatively & therefore strategically?
Marketing leadership…..
• Customer is the epicentre of all organizational activity
• Customer insight is the new oil. It’s not the data, it’s insights (Eg:
Chair)
• Intangibility of marketing effectiveness
• Relationship between the TMT and functional heads (Eg: Airtel)
• Lost between the dichotomy of attracting capital and harnessing
technology (Eg: Bounce)
• Ever increasing pace of obsolescence and absurdity of value
(Complementary breakfasts in hotels)
 Broad strokes - SMM
• Marketing is not a function
• Marketing needs to make sense to the TMT – Peter Arnell and Tropicana
• Marketing is injecting intelligence to value exchange – Sales
• Marketing needs to present itself as an investment rather than an expense – Stupid stand of some amateur
CEOs to treat marketing as expense.
• Marketing needs to be in the forefront of demystifying the ever elusive valued.
• Definition of consumers rather than make guess work and sell mindlessly – Profiling accuracy
(Salon)/Brahma Brews – Usual Bars
• Marketing needs to assume the role of advising the functions to develop customer/consumer focussed
practices
Why should we understand
marketing as strategy?
 Vital SMM Points
• Most pressing business problems are related to
clients and customers
• Success of a business is largely dependent on how
innovatively products, services, experiences are
created and engaged with customers (Eg Paytm)
• Marketing must enable the entire organization to
visualize future consumers and consumption
pattern
 Problem of Marketing in a snapshot?

• Marketing is not understood for its strategic value

• Customers are not considered while making strategic decisions –
Profitability bias.
• Cross functional relevance of marketing is seldom identified and capitalized
• Marketing professionals present marketing as an expense and not as an
investment
• Marketing is not positioned to lead, steer the way forward for organization
Marketing as Transformational Engine

 Marketing on CEO's agenda

 CEO's Marketing Manifesto
 Cultivating Organizational Respect for the
Customer
 Marketing on CEO's Agenda

 Entire company has to:

 Obsess over creating value for

customer
 Integrate processes that profitably;

Define, create, communicate and

deliver value to its target customers
 Marketing on CEO's Agenda
 Universality of Marketing Activities:
 Everyone in the organization is one way or

the other involved in marketing

 Finance dept. is marketing when it develops

flexible payment options based on customer

segments
 HR dept. is marketing when it involves

frequent flyers to select in-flight crew

 Operations dept. is marketing when product

quality is ensured
 Marketing on CEO's Agenda
 Universality of Marketing Activities:
 Can we then say:
Substantial reductions in the size of the marketing
departments is associated with a higher market
orientation throughout the company?
 NPD requires coordination among marketing,
purchasing, manufacturing and external suppliers
(Eg: Mobile ESPN, Amazon fire phone, Juicero/MS
Surface Tab fails)
 Marketing on CEO's Agenda
 Networked Organization:
 Three mutually reinforcing changes enable more coherent customer
value creation:
 Processes replacing functions (Style of working)

 Teams replacing hierarchies

 Partnerships replacing transactions (VI, HI and Partnering with

customers Eg: Lego, Interoperability (Webex and Zoom)

 Formal leadership resides in the appointed team leader; but,

informally:
 Leadership passes along team members based on expertise or

problem on hand
Marketing on CEO's Agenda
 Marketing in the Networked
Organization:
 Has generally played the role of a specialized
business activity
 Other functions have involved in
transformational changes such as TQM
(Quality and Production), EVA (operations),
M&A (finance) and Balanced Scorecard
(accounting)
 Marketing on CEO's Agenda
 Marketing as a Transformational Engine:
 Move from 4 Ps to strategic, cross-functional and
profit orientation.
 Move from implementation to participate in
company's vision (Eg: Nike sneakers)
 Understanding should go beyond from advertising,
promotion and pricing to technology, purchasing,
manufacturing, costing, finance and valuation.
 Marketing on CEO's Agenda
 Transformational Marketing efforts should
focus on:
 Profitably delivering value to customers (Soft
drinks/Resort/Airlines)
 A high level of marketing expertise

 Cross-functional coordination for successful

implementation
 Achieving Results

 Marketing initiatives, shall have such top- or bottom-line

effect that they excite the CEO
 CEO's Marketing Manifesto
CEOs Marketers
– Sponsor marketing initiatives – Be more strategic
– Be the customer champion – Be more cross-functional
– Be the quality controller – Be more botom-line oriented

1. From market segments to strategic segments

2. From selling products to providing solutions
3. From declining to growing distribution channels
4. From branded bulldozers to global distribution partners
5. From brand acquisitions to brand rationalization
6. From market-driven to market-driving
7. From SBU marketing to corporate marketing
 CEO's Marketing Manifesto
 From Market Segments to Strategic
Segments:
 Requires dedicating unique value networks to serve individual
strategic segments
• Also referred to as Value chain or business systems (Eg: Rent the
runway)
 Creating a network of marketing and non-marketing activities
necessary to create and deliver value to customers
 To identify the position in the value chain to build differentiation
 CEO's Marketing Manifesto
 From Declining (Traditional) to
Growing Distribution Channels:
 Ex: Automobile distribution has remained
same (to a great extent)
 Other products ranging from groceries, home
products, apparels, electronic gadgets are
undergoing distribution changes
 Companies are developing exclusive brands
for specific distribution channels: Levi's, Bata
and many more
 CEO's Marketing Manifesto
 From selling products to providing
solutions:
 IBM’s turnaround strategy
 Integration and customization
 Customer cost, customer risk and customer
revenue
 CEO's Marketing Manifesto
 From Branded Bulldozers to Global
Distribution Partners:
 Traditionally, retailers were local, fragmented and
technologically primitive
• Powerful MNCs behaved like branded bulldozers
forcing retailers to accept unreasonable terms
 Large retailers like Wal-Mart, Tesco, Carrefour,

Metro have established global presence and

redistributed negotiating power in business
 CEO's Marketing Manifesto
 From Branded Bulldozers to Global
Distribution Partners:
 Developing global manufacturer-distributor
partnerships raises issues like:
• Mutual trust
• Managing global retailer demand
• Global account management structure
 Wal-Mart alone accounts for 17% of P&G's

worldwide turnover
 CEO's Marketing Manifesto
 From Branded Acquisition to Brand
Rationalization:
 Acquisition based growth by MNCs brought in
many brands into their portfolio
 While each portfolio contains strong global
brands, a significant number of brands are
weak and local
 Brand rationalization is done to delete
marginal brands without losing sales (HUL -
Reorganization)
 CEO's Marketing Manifesto
 From Market Driven to Market
Driving:
 Innovation agenda has to go beyond product
line extensions i.e., incremental product
innovation
 Generate radical market-driving concepts

• Nintendo Wii
• Nestle's Nespresso
 CEO's Marketing Manifesto
 From SBU Marketing to Corporate
Marketing:
 SBUs resort to short term goal achievements
 Attention is more on profits than
profitability (Tata - Buses and Mahindra –
Revolutionizing truck design)
 Marketers to demonstrate that they can
create value from the corporate center and
partner with CEO, while balancing the local
interests of SBUs.
 Cultivating Organizational
Respect for the Customer
 CEOs leading from the front
– CEOs and top management should lead from front
rather than from top (Empower)
– IKEA chief Kamprad flies economy
– Jack Welch attended one training program every year
– In South West Airlines pilots join the flight crew to clean
up the passenger cabin
 Cultivating Organizational
Respect for the Customer
 Realistic and reliable marketing metrics
– 'What can not be measured can not be managed'
– Bring the 'customer' into the board room through
metrics on:
• Customer satisfaction
• Brand equity
• Customer loyalty
 Cultivating Organizational
Respect for the Customer
 Discovering Consumer Capitalism
– Profits come from a clear view of customers and how to
serve them effectively (Starbucks)
– Consumer capitalism is reinvesting in the business to
continue serving the customers (Chaipoint)
– Customer value is created when entire organization
functions in a coordinated manner
 Strategizing Marketing During Crisis
Article 1: Don’t Cut your Marketing Budget in
Recession - Article
Interpret this image
Cutting salesforce expenses (payroll) during
recession is a right move – Agree/Disagree
During recession ad spending should be reduced significantly – agree/disagree
But that is today’s equivalent of bleeding –
an old-fashioned but once widespread treatment that
actually reduces the patient’s ability to fight disease

- Nirmalya Kumar and Koen Pauwels

What is the right time to launch new products?
Axing new product development projects in
recession is bad move – Agree/Disagree
New products developed in recession and released in expansion are
more successful - Explore the reasons
The best
period to launch a new product is
_______________________
Rank your preferences in spending
• Advertising, Sales promotion, R&D.
Price promotions is a best move during
recession - Agree/disagree
What should be the chain of content flow in
advertisement during recession?
What helped Russian conglomerate in getting more
loyal customers?
Unit 2
Traditional STP and Strategic Segments

“In the 1980s we looked for the customer

in each individual. In the 1990s we must
look for the individual in each customer.”
Conceptualizing strategic segments and using the three Vs model makes marketing more malleable
and able to address important questions such as:
• How does a firm create sustainable differentiation? (Unreplicatable – Flower Vendor -Whatsapp)
• What are the cross-functional implications of serving a particular segment? (Orgn Structure)
• What positive or negative synergies exist in serving combinations of different segments? (Capacity
building)
• Where should the value network be sliced to serve different segments? (Process dissection)
• How unique is our marketing concept? (Takes care of customer and their preferences - Faber)
• What are sources of our differential advantage in terms of competences, processes, and assets?
These are the strategic issues with respect to segmentation and differentiation that are going to
excite CEOs, not the tactical four Ps that marketers traditionally focus on.
• Market Segments: Divided by the Four Ps - Of course, in practice, segmentation is a
messier process
• Market Segmentation
• To uncover the various segments into which customers fall, the segmentation
process identifies variables that will maximize the differences between segments
while simultaneously minimizing the differences within each segment (Color
preferences)
• Mass customization - Dell
Markets must be continuously segmented and re-segmented to arrive at a
scheme that delivers actionable segments
1) Distinctiveness, that is, different segments respond differentially to the
marketing mix. (Water bottle - Mountain biker riders/Train passengers)
(2) Identity, that is, the ability to reasonably profile which customers fall
within which segment. (Parler and FB)
3) Adequate size, so that the development of tailored marketing programs
for individual segments is economically viable for the firm. (Eg: M&M)
• Segmentation variables can be broadly classified into two categories : identifier
and response
• Identifier variables begin by segmenting the market based on who the
customers are, in the hope that the resulting segments behave differently in
response to marketing mix variables. This is called a priori segmentation. Eg:
Segmentation that are based on sex, age, education, and income in consumer
markets, or size of firm, industry, and geographical location in business-to-
business markets
• In contrast, post hoc segmentation starts by using response variables to divide
the market on the basis of how customers behave, and then hopes that the
resulting segments differ enough in terms of customer profiles to enable
identification. Eg: An example would be segmenting telecommunication
customers based on those whose primary concern is price versus those who
are fixated on reliability or service quality
Targeting

• Targeting or target market selection is the process of deciding which

market segments the company should actively pursue to generate
sales. Firms choose between adopting undifferentiated,
differentiated, or concentrated targeting strategies.
• Differentiated: The most famous example is Henry Ford’s alleged 1908 declaration
about the Ford Model T: “You can paint it any color, as long as it is black.” While this
seems like an anathema to the marketing concept, there are conditions under which it
is appropriate. If standardization lowers the cost of delivering the value proposition
to unprecedented levels and opens up the industry to large numbers of new
customers, then an undifferentiated strategy can be powerful.
• Undifferentiated: A differentiated strategy simultaneously targets several market
segments, each with a unique marketing mix. For example, Ford Motor Company today
has a portfolio of brands, including Aston Martin, Ford, Jaguar, Land Rover, Lincoln, and
Volvo(2010), to attack various segments in the automobile market.
• Concentrated: Porsche has historically done with its over-forty, male, college graduate,
with income over $200,000 per annum segment Subsegments are A. TopGuns, B.
Eltists C. Fantasists D. Proud Patrons E. Bon Vivants
Positioning
• Positioning is about developing a unique selling proposition (USP) for the target segment
• Volkswagen in the United States targeted a younger, more educated, more affluent demographic, and an
adventurous, confident psychographic of customers who enjoy driving and even disobey speed limits
• It positioned itself rationally as “affordable and German engineered,” and emotionally as a “different
driving experience more connected to the road and world.” Compared to Nissan, Honda, Mazda, and
Toyota, customers perceive VW to be more drivable, more substantial, more individual, and more
spirited. Compared to BMW, Saab, Mercedes-Benz, and Volvo, VW is more approachable, more likeable,
a better value, and more human.
• The point: Companies must be very specific in terms of their intended positioning or unique selling
proposition if they are to have any hope of being able to stand out among the clutter of choices
confronting customers.
• Eg: Positioning Challenges in Ceiling Fans product category. – LG, Philip Water Purifiers.
Complex Segmentation and Positioning : Midas Style
• Midas offers consumers walk-in service for repairs on brakes, mufflers, and
exhaust pipes. It segments its customers using three identifying variables:
• (1) Age of the car, because the older the car, the more likely the customer
will need Midas.
• (2) Size of the car, since the bigger the car, the higher the value of the sale
and the higher the margin.
• (3) Gender of the driver, since women are more likely to buy additional
services. In response to this segmentation, it changes its marketing mix
based on the customer and the characteristics of his or her car.
Both segments having Same priorities
• Midas discovered two service segments of customers, car lovers and
utilitarians, based on service expectations and needs.
• The car lovers see their car as a prized possession, while the utilitarians
tend to view their car as merely a means to take them from one place to
another.
• Both segments want the same basic value proposition from Midas: fast,
reliable, one-time repair. However, to completely satisfy both segments,
Midas varies the additional services that surround this value proposition.
Experience aspect
• The service personnel interacting with the car lover focus the discussion on the car, offer
opportunities to observe the repair while the car owner is waiting, provide old parts in the
packaging of the new parts to show tangible evidence that the parts have been changed, and
follow up with phone calls every six months to remind the customer that it is time for another
check-up - One word for this experience description
• The utilitarian would consider all of these services to be annoying. Instead, the service personnel
talk to these customers about their lives, offer them a newspaper or a game to play while waiting,
reassure them that the little noise is now gone, and guarantee the car for X number of miles
without the problem recurring - One word for this experience description
Assume that you are Retailer…Start naming your
segments
Assume that you are Kirloskar a power
generator manufacturer……Start naming your
segments
Strategic Segments: Divided by the Three Vs
• Strategic segments are those segments that require distinct value networks, rather than just
changes in the marketing mix. For example, Midas caters to the strategic segment that wants “fast
mechanical repair” in the auto repair business, as opposed to the “guaranteed repair” offered by
factory-authorized car dealers, “specialty repair” offered by the independent workshops, “heavy-
duty accidental repair” performed by body shops, or the “do-it-yourself repair” for the
automobile enthusiast.
• The identification of strategic segments helps the business unit manager determine which value
network to deploy.
• Instead of simply aligning the four Ps, as is the case with market segments, serving different
strategic segments requires the alignment of other functions such as R&D or operations. As a
result, instead of the four Ps, I find it more appropriate to think in terms of the three Vs—valued
customer, value proposition, and value network
Easyjet
• Comparing the Flag Carriers and easyJet on the three Vs highlights the
power of strategic segments.
• EasyJet has seen extraordinary success since November 1995, when it
offered to fly travelers from London to Glasgow for a one-way fare of
£29 with the slogan: “Fly to Scotland for the price of a pair of jeans!”
Under the colorful leadership of its founder Stelios Haji-Ioannou (who
prefers to be addressed by his first name only), easyJet has become a
thorn in the sides of the traditional European Flag Carriers such as
British Airways, Air France, KLM, and Swiss
What was the strength of EasyJet's offering?
Describe the profile of customers who were targeted by EasyJet
offering?
Valued Customer—Who to Serve?

• In contrast to business travelers who pay from other people’s

pockets, easyJet targets those customers who pay from their
own pockets. While these tend to be predominantly leisure
travelers, there are business people such as entrepreneurs and
small business owners who also pay from their own pockets.
 Value Proposition—What to Offer?
• Customers whose bills are paid by their companies, are demanding, both in terms of
services, such as seat comfort and business class, as well as freebies, such as free
newspapers, meals, and frequent flyer miles. More legitimately, they also need seat
selection, travel agents, and a worldwide network to save time, make seamless connections,
and have the flexibility to change flights to accommodate their hectic schedules.
• Four questions developed by Professors Kim and Mauborgne provide a framework for
understanding the creation of easyJet’s value proposition
• Which attributes that our industry takes for granted should be eliminated?
• Which attributes should be reduced to below industry standards?
• Which attributes should be increased to above industry standards?
• Which new attributes should be created that the industry has never offered?
 Value Network—How to Deliver?

• Reinventing the Value Network

• At a more abstract level, there are five cost principles behind the construction of easyJet’s value network:
• 1. Avoid fixed costs whenever possible. For example, there are no secretaries in the organization. Even the CEO,
Ray Webster, must open his own e-mails!
• 2. If there are any fixed costs, make them work harder than the rest of the industry. For example, easyJet planes
are in the air for 11 hours a day, compared with the 6.5-hour average for the industry.
• 3. Eliminate generally accepted variable costs whenever it makes sense, such as travel agents.
• 4. Keep any variable costs to a minimum, such as airport fees.
• 5. Examine whether variable cost factors associated with services can be converted into revenue generators, as
easyJet has done by selling snacks on the plane.
Snapshot
Differentiate Deeply Based on the Value Network

• British Airways may try to offer easyJet’s low fares, but it will never make
a profit doing so. So it launched GO, a low-price subsidiary, to compete
with easyJet and Ryanair. However, when GO was part of British Airways
(BA), the temptation was to constantly seek synergies in the value chain
• Firms need to align the three Vs. When developing the three Vs, a
company should ask:
• (1) To what extent does our marketing concept differ from others in the
industry?
• (2) To what extent do elements of our marketing concept mutually
reinforce each other?
Explore Different Value Network Options for Unique Segments

Nexa / Dealers

Eg: DHL

Mclaren/Ferrari
Analyze the Financial Implications of Serving Segments

Eg: Duracell Vs Eg: Apache Vs

Energizer Atak
 Drive Marketing Innovation Using the Three Vs

• Are there customers who are either unhappy with

all of the industry’s offerings or are not being
served at all? Eg: Policy Bazaar Insurance, Acko
• Can we offer a value proposition that delivers
dramatically higher benefits or lower prices,
compared with others in the industry? Eg: Virgin
Atlantic, Rent the runway
• Can we radically redefine the value network for the
industry with much lower costs? Eg: IKEA
Exploit the
Three Vs–
Related
Growth
Opportunities
 Hospital
allowing lifts
for only
patients from
basements

Grid Defence
Systems

Timber
Transport US
/Canada