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Marketing Strategy Revision Notes Lecture 1 – Marketing Strategy Strategy Definitions
A fundamental pattern of present and planned objectives, resource deployments and interactions of an organisation with markets, competitors and other environmental factors (Kenn 1990)
A pattern in a stream of decisions (Mintzberg)
Features: Conditions of uncertainty, maintaining a position of advantage, successive exploitation of known or emergent possibilities, cycles
Hierarchy of Strategy (3)
Corporate strategy (which industry should we be in?)
Business strategy (what product/service markets should we be in?)
Marketing strategy (target market, consumers, lines, branding etc)
Market Driven v Driving Markets
Market driven: “An orientation that is based on understanding and reacting to the preferences and behaviours of players within a given structure”
Driving markets “Influencing the structure of the market and/or the behaviour of market players in a direction that enhances the competitive position of the company”
Mutually Beneficial Exchanges
Mutual satisfaction of both provider and customer
Provider goals (Survival, financial, social, spiritual, ecological) > Offers of products, services
Customer goals (Solutions, benefits, altruism, well-being) > Responses as purchases, support
Equilibrium between goals
Organisational Stakeholders
Many: customers, distributors, suppliers, employees, managers etc
Marketing and Performance Outcomes
Market oriented culture > Marketing resources (assets, capabilities) >> Market performance (satisfaction, loyalty, share) >>> Financial performance
Role of Marketing in the Organisation
Internal: Identify and communicate customer wants and needs throughout the organisation
Determine the competitive positioning to match the needs of the customers with company capabilities
Direct all resources to deliver customer satisfaction
***Marketing Strategy Process (Figure 1)***
Business purpose > Core strategy (environment, company) > Competitive positioning (market target, comp. adv.) > Implementation (control, organisation) > Marketing mix
Business Purpose
Mission statement helps to clarify objectives of the business, may encourage investment
Provides employees with a greater understanding of the objectives they should be striving for and be committed to
What business are we in? What business do we want to be in?
Strategic Intent: Vision of where the company wants to be
Company Values: Moral, ethical guidelines that must be adhered to
Distinctive Competencies: Must be articulated, clearly stating what differentiates the organisation from similar competitors
Market Definition: Customer targets to serve, wants and needs
Positioning: Unique and distinctive factors
Core Strategy (Envrionment and Organisation)
Statement of company objectives as well as the broad strategies that will be used to achieve them
Requires detail analysis of environment as well as organisation resources
Organisational Resources: (Distinctive resources, core competencies and weaknesses v competitors) > Product portfolio > today, tomorrow, yesterday breadwinners + developments and sleepers, ego and failures) > Balanced portfolio that generates cash today as well as promised to generate future cash
Envrionment (Markets served): Segmentation, opportunities, SWOT
On the basis of the above, the company will look to define the KFS
Core strategy e.g. Market expansion, geographic expansion, share etc
Competitive Positioning (Market targets and comp. adv)
Statement of the market targets (where the company will compete) and differential advantage (how the company will compete)
Developed to achieve the objectives laid down by the core strategy
Market Targets: Select targets most suitable to company’s strengths, while minimizing vulnerability of weaknesses
Choice criteria: Market attractiveness and company’s strengths in serving those markets
Attractiveness Features: Large size, growing, high contribution margins, low rivalry, high entry and low exit barriers, low vulnerability
Strength Features: High market share, fast growth, unique offering, superior quality, good margins, exploitable assets, efficiencies, new tech
Competitive Advantage: Can be created by any of the company strengths or distinctive competencies relative to the competition > When choosing how to create this advantage it must consider the value that it will provide to the customer as well as the imitability of competitors
Cost leadership requires EOS and a higher market share, generally [Risks: Tech change, imitation, differentiation]
Differentiation creates a market based advantage, can charge premium prices [Risks: Cost, imitation]
Simultaneous possible with tech. and large market share (BOSS)
Implementation & Marketing Mix (Control and Organisation)
Marketing Mix: Product, price, promotion, distribution > Synergy
Organisation: Of marketing effort and employees > Functional, product and brand management, skill set
Control: Monitor market (metrics) and financial (ROI, Contribution)
Lecture 2/3 - External Envrionment *Marketing Environment*
Macro: PESTLE
Micro: Customers, suppliers, distributors, competitors, company
Macro - *PESTLE Analysis*
“What are the key drivers and in which direction are they changing?”
Political (National and international governments, tariffs, elections, peace/war, uprising, trade areas)
Economic (Economy, globalisation, IR, inflation, currency, tax, fiscal, cycle, development, confidence)
Socio-cultural (Demography, lifestyle, ethnicity, gender, equality, unemployment, ‘grey market’, ‘youth market’,
increased power, choice, frugality, green)
Technological (Shorter commercialistion time for new inventions, rate of change, Moore’s law, shorter product life cycles, R&D, Internet, mobile, innovative marketing tech and metrics, AI, computer integration)
Legal (Regulation, compliance)
Envrionment (Conscientious consumers, climate change, energy costs, raw materials)
Globalisation of Markets
Farley 1997: Many markets are becoming global in nature, products more available and consumers more aware > Gigantic scale > EoS [Eval: Markets actually becoming more fragmented]
Marketing Strategies for Macro-Environments
Global positioning – focus on core competencies on a global scale Master brand – consistent brand identity that links all parts of business End user focus World class service – as standard Mass customisation – scale economies but still personalization
*Porter’s 5 Forces – Industry Competition*
Rivalry Among Existing Firms - Industry competition is roughly evenly balanced - During periods of low market growth - High exit barriers - High FC - Low product differentiation
Threat of New Entrants - Low entry cost - Ease of using existing / new distribution channels - Low competitive retaliation expected - Low differentiation - Gaps in the market
Threat of Substitutes - Making existing technology redundant - Incremental product improvement
Bargaining Power of Suppliers - More concentrated than buyers - High cost of switching - Suppliers offerings are highly differentiated
Bargaining Power of Buyers - More concentrated than suppliers - Readily available alternative sources of supply - Low switching costs - Internet > Ease of search, choice and comparison
Greater competition when: Little differentiation, low industry growth, high FC, high supplier switching costs, low buyer switching cost, low entry barriers, high exit barriers
Targets of Competitor Analysis
Strategic Group: Who are they key direct competitors?
Industry competition: Who is able and motivated to overcome entry barriers to the strategic group?
New entrants or substitutes: Who is seeking to diversify or implement new skills to capture demand?
Components of Competitor Analysis
Assess competitor’s current and future objectives - What are they trying to achieve? - Why are they trying to achieve it? - Are they satisfied with their achievements? Key: States goals, market assumptions, investments
Assess competitor’s current strategy - What target markets? - What is their strategic focus? - What marketing mix? - How do they organise their marketing? Key: Ad media, messages, new product introduction rates,
recruitment ads, price level, distribution channels
Assess competitor’s resource profile - Marketing culture? - Marketing assets and capabilities? - Production and operation capabilities? - Financial resources? Key: Customer relationship strength, new product success rates, quality of people, product availability, cost of promotion
Predict competitor’s future strategies - What might they do? - What under-utilised resources do they have? - How will they react to our actions? Key: Past strategies, past reactions recent acquisitions, ownership
*Product Life Cycle (PLC) – Figure 2*
Insightful tool into an industry’s competitive environment PLCs follow predictable patterns or phases Market conditions, opportunities and challenges vary over the life cycle Strategies must adapt over the life cycle
Introduction Stage
Product is launched into the market and generally sales are slow to pick up as customers and distribution have to be found and convinced If the product is new to the world it will face little or no competition and the company will face a pioneer advantage Key: How quickly until competitors launch an alternative?
Growth Stage
Rapid increase in sales as product starts to attract new customers and potentially repeat purchases It is at this stage that competitors evaluate product market and profit potential + evaluate potential competitive moves
Maturity Stage
Rate of growth slows down significantly Lasts longer than other stages and is the most challenging one Severe competition, market fragmentation and declining profits due to over-capacity in the industry Search for untapped niches and potential price wars > Weak competition will exist > Remaining companies will have high market share May lead to increased substitutes
Decline Stage
Slow or rapid decline in sakes May be due to better solutions, changing tastes, increased competition domestically or international
*SPACE Analysis*
Strategic Position and Action Evaluation
Extends environmental analysis beyond the consideration of turbulence to look at industry strength and relate this to the competitive advantage and financial strength of the company
The company is rated on each of the four dimension to give a competitive profile
Each quadrant represents a different posture
Competitive Posture: Competitive advantage and an attractive industry [Eval: Company’s financial strength is insufficient to balance the environmental instability it faces > Need to raise more capital]
Aggressive Posture: Significant advantages but are likely to face threats from competition [Eval: Excessive finances may allow acquisitions to occur]
Conservative Posture: Typical for mature markets where the lack of need for investment has generated financial surpluses
[LR vulnerability due to lack of opportunities > Defend existing products]
Defensive Posture: Very vulnerable > Divest and retreat > Only a matter of time
Lecture 4 – Internal Analysis *Consider the relationship*
Assets > Capabilities > Sustainable competitive advantage
Organisational Resource Base
Resource Based View (RBV) >
Dynamic capabilities >>
Marketing assets >>>
Dynamic marketing capabilities >>>
Resource portfolio
Resource Based View of the firm (RBV)
High performance strategy is dependent primarily on historically developed resource endowments (Grant 2005) Resources may be strengths or a weakness Factors owned or controlled Assets, capabilities, processed attributed Capabilities = Synergy between assets
Dynamic Capabilities
Capacity of an organisation to purposefully create, extend or modify its resource base - Firms must change within changing environments - Coordination as well as learning
Marketing Assets
The resource endowments the firm has built or acquired over time Valuable, Rare, Inimitable Non-substitutable (VRIN)
Customer Based Assets - Relationships with customers - Company name > Helps identify product benefits - Reputation > Difficult to build - Brands, country of origin > Major assets - Market domination > Coverage, distribution
Internal Support Assets - Cost advantages (New tech, efficiency, EoS, experience, price) - Information systems (Informed company, customisation) - Technical skills (Tech increases leads to falling costs and rising quality)
- Production expertise (Quality) - Copyrights and patents - Franchises and licenses
Supply Chain Assets - Distribution control > Helps to block competition - Pockets of strength > Concentrating efforts geographically - Distribution uniqueness > Reach target in a novel, unique way - Distribution network and relationships > Ensures availability - Supplier network and relationships > Discounts, preference
Alliance Based Assets - Access to markets - Access to management skills - Shared technology - Exclusivity
Marketing Capabilities
Deploy marketing assets with synergy
Product and service management: Marshaling all resources to deliver customer value, synergy
Distribution and logistics: Timely, efficient, rapid, Internet
Pricing and tendering: Costs, competition, elasticity
Advertising, promotion and selling: MARCOMs
Dynamic Marketing Capabilities
Ability to create new marketing resources or capabilities to identify and respond to change > Sustain competitive advantage
ABSORPTIVE - Market sensing: External environment research, company analysis - Learning: LR competitive advantage, continuous
ADAPTIVE - Targeting/Positioning - CRM > Acquire and retain customers
“Capacity of an organisation to purposefully create, extend or modify ORB”
Marketing Resources as the Foundation for Differentiation
Distinct resources of the company that are resistant to competitor imitation > Sustainable competitive advantage
Key characteristics - Enable superior value for customers - Resistant to duplication - Value can be appropriated by company
Example marketing resources: Brand reputation, customer relationships, distribution networks - Many are intangible in nature - Duplication can be prevented through isolating mechanisms > Complex combination of resources used etc.
3 Value Creating Disciplines – OE, PL & CI
Every business acquires capabilities that enable it to move its products through the value chain
Only a few of these capabilities need to be superior to competition > These are distinctive capabilities that support a value proposition that is valuable to customers and hard for competitors to imitate
Each discipline excels at meeting the distinctive needs of one customer type, each of which requires different resource capabilities
Operational Excellence – Providing middle of the market products at the best price and with the lowest inconvenience (Aldi, McDonalds)
Product Leadership – Offering products that push the boundaries of product and service performance (Intel, Nike) (Market sensing, innovation, experimentation)
Customer Intimacy – Delivering what specific customers want in cultivated relationships > Flexibility, LR CRM, customisation
*The Resource Portfolio* - Figure 3
*Developing and Exploiting Resources* - Figure 4
*Product/Service types in Portfolio* - Figure 5
*Product Life Cycle* - Figure 6 (Covered earlier)
Lecture 5 – SWOT, SCA and Core Strategy SWOT Analysis
Strengths (Int): What are we good at, relative to competitors? - People, expertise range, systems, brand
Weaknesses (Int): What are we bad at, relative to competitors? - Age of firm, culture
Opportunities (Ext): What changes are creating new opp. for us? - Cloud computing, network speed, regulation
Threats (Ext): What emerging dangers must we avoid or counter? - Tax changes, wider offering by competitors
Routes to Competitive Advantage – Figure 7
Towards differentiation (Vertical) > High valued uniqueness
Towards cost leadership (Horizontal) Low relative delivered cost
Differentiation creates a market advantage
Cost leadership creates a financial advantage
Achieve both for SCA
Advantage Creating Resources *VRIN*
Provide value for customers: May be direct (tech, services) or indirect (cost control)
Hard to imitate: Legal, complexity, causal identity (culture, specialist)
Unique to the firm: Distinctive competencies (CRM, Team members)
*Resource Imitability Ladder*
Easy to imitate – unskilled workforce, undifferentiated products Cost to imitate – physical capacity, plant, machinery Difficult to imitate – brand image, reputation, loyalty, motivation Cannot be imitated – copyrights, patens, unique locations
*SPACE Analysis* - Covered earlier
Company Dimensions – financial strength, ROI, leverage, liquidity, capital, cash flow, exit barriers, risk
Industry Dimensions – environmental stability, tech. changes, rate of inflation, demand, price range, entry barriers, comp pressures, PeD
Competitive Advantage – market share, product quality, PLC, loyalty, tech, vertical integration
Industry Strength – growth potential, profit potential, financial stability, tech, resource utilisation, capital intensity, productivity
Generic Business Strategies – ANSOFF – Figure 8
Product / market growth matrix
*Generic Business Strategies – Cost Leadership (Porter 1980)*
EoS – most effective (DoS, optimum scale)
Experience – efficiency through learning
Capacity Utilisation – unit costs, ROI
Linkages – high quality could lead to lower service costs
Integration – forward and backward
Timing – first mover advantages
Policy Choices – product choice
Location – materials, geography, labour
*Generic Business Strategies – Differentiation (Porter 1980)*
Product – packaging, quality, branding, service
Promotional – wider mix of Marcomms, IMC
Brand – positioning, emotional appeal
Distribution – Internet, routes, network, coverage
Pricing – low, premium
Red Ocean v Blue Ocean Strategies
Competing in existing market v Create uncontested market
Beat the competition irrelevant
Exploit existing demand demand
v Create and capture new
Make value cost trade-off
v Break value cost trade-off
Both: “Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost”
v Make the competition
*Generating Strategic Options*
Macro factor > Micro factor > Internal resources > Strategic > Objective
*Evaluation of Strategies – SAFe Criteria*
Suitability – does the proposed strategy address the key opportunities and threats the organisation faces?
Acceptability – does the proposed strategy meet the expectations of the stakeholders?
Feasibility – would the proposed strategy work in practice, do we have the finances, people and resources?
Sustaining Competitive Advantage
Unique and valued products Clear definition of market targets Enhanced customer linkages Established brand and credibility
Lecture 6 – Segmentation, Target Markets and Positioning Positioning Definition
The act of designing the company’s offering and image so that they occupy a meaningful and distinct position in the target customer’s mind
Segmentation Definition
Dividing the market into groups of similar customers
*Segmentation and Positioning Stages*
Market segmentation > Choice of target markets > Positioning
Customer Characteristics
Demographic (gender, age, geographic, subculture) Socio-economic (income, occupation, education, class) Psychographic Census / ACORN
Life cycle
*Segment Criteria*
Need to be: Measurable Adequate size Profit potential Accessible Homogenous within Heterogeneous across ‘Unique in response to market stimuli’
Factors Affecting Market Segment Attractiveness
PESTLE and PORTER
Segment Attractiveness + Organisational Resources
Ideal: Attractive segments that match organisational resources
Evaluating market targets – Current and potential company strengths in serving the segment
Current position: share, exploitable resources, unique offerings
Economic and tech: relative cost, capacity utilisation, tech available
Capability profile: management strength, marketing, forward/backward int.
Basic Positioning Options
Low price - Customers: price sensitive, standard indifferent - Strategic focus: internal efficiency - Resource requirements: effective cost control, internal monitoring
Premium quality - Customers: demanding, discerning, less price sensitive - Strategic focus: quality control, image management
- Resource requirements: market sensing, brand image
Superior service - Customers: service sensitive, less price sensitive - Strategic focus: CRM - Resource requirements: RATER
Innovation - Customers: adventurous, early adopters - Strategic focus: first to market, continuous improvement - Resource requirements: identify gaps, creative, R&D, rapid products
Differentiated - Customers: selected benefit, segments - Strategic focus: segment leadership - Resource requirements: sensing, segmentation, creativity
*Perceptual Positioning Maps* - Figure 9
High up and high right!!! (Just like a normal graph!)
Quality v Personalisation
Quality v Price
“Can be used to illustrate future positioning aims”
Positioning Risks and Errors
Must be credible, believable, consistent and not too broad/narrow
Differentiation Criteria for Basis of Positioning
Important, Distinctive, Pre-emptive, Superior, Communicable, Affordable, Profitable
*The Positioning Statement*
For (target customer) who (needs, opportunity), the (product name) is a (product category) that (statement of USP). Unlike (primary competitors), our product (distinctive differentiation).
Lecture 7 – Competing through: Marketing Mix + Innovation *What is digital marketing?*
The use of digital technologies to create an integrated, targeted and measurable communications mix which helps to acquire and retain customers while building deeper relationships with them
Targeted – bespoke recommendations and choices
Measurable – metrics, click through, heat, ROI, conversions etc
Relationships – continuous communication, feedback, engagement etc
*Digital Marketing Mix*
Product – (Individual, customized, digital) (Innovation, differentiation, augmented, life cycle)
Price – (Dynamic, transparent, flexible) (Production cost, value, competitors, PeD)
Promotion – (Instantaneous, permission-based, interactive)
Place – (Internet, new channels, global, virtual)
>>> Evaluation and performance control The impact of digital marketing on the traditional marketing mix is huge E.g. radical change to prices, dynamic pricing in the aviation industry not possible before the Internet
*Digital Promotional Tools*
Online advertising and Search Engine Marketing (SEM) - Optimisation for search listings, SEO, affiliate marketing
SEM helps distinguish between natural search and optimized search rankings > back links, tags, mentions, adwords
Online video and interactive ads (rich media)
Social media advertising
*Types of Social Media Activity*
Social Community – Internet, sharing, socializing, conversing
Social Publishing – Editorial, commercial, UGC
Social Entertainment – Games, music, art
Social Commerce – CRM, service, retail, human resources
[Eval: one of the most powerful marketing tools but absolutely no control over it]
*Mobile Marketing*
The creation and delivery of MarComm messages through mobile devices
Advantages – cost effective, targeted, personalised, interactive, personal, time-flexible, immediate, measurable, updatable, gateway to other channels
Communications Market
Rapidly changing > Move to mobile and Internet > Less focus on published content and T.V
*5 I’s of Digital Marketing*
Identification (customer specifics)
Individualism (tailored for lifetime purchases)
Interaction (dialogue to learn about customer needs)
Integration (knowledge of customers throughout company)
Integrity (develop trust through non-intrusive marketing)
*Competing Through Innovation*
Pressures and spurs to innovation to ensure survival profit and growth: - Exploit new technology - Intensive competition - New customer targets - Changing needs and tastes - Shorter product life cycles - New assets and capabilities
Changing customer behaviour is the core driver of innovation
‘Not just marginal product changes > Quest to create superior value’ *Can we plan Innovation?*
Innovation can fundamentally and radically change industries (cloud, biotech)
Willingness to cannibalise
Innovation and Marketing Strategy
I) Proactive Cannibalism - Value innovation - Big ideas - Innovation networks - Globalisation
II) Disruptive Innovation - Predicting industry change - New business models - Innovative company - Radical innovation
III) Innovation Strategy - Success and failure - New product planning - Product development process - Speed of innovation - Organising for innovation
IV) New Products
*Willingness to Cannibalise*
Firms must prepare to give up the old and embrace the new Use new tools to solve new problems Firms must cannibalise before there is nothing left of value to cannibalise
Examples of Disruptive Innovations
Amazon (bookstores), E-bay (auction houses)
*Two Types of Disruptive Innovations*
Low End – address over-served customers with a lower cost business model
New Market – compete against non consumption
*Innovators Dilemma*
Continue investing in sustaining innovations (better products in established markets)
- May provide profits now but what about the future? OR
Invest in new, disruptive innovations - May provide future profits, but can we be certain if they will/when?
Characteristics of Innovations that Accelerate Diffusion
Superior value Compatibility with existing processes Low complexity for ease of understanding Divisibility to facilitate trial Communicability
*Roadblocks to Innovation*
Perceptual – difficulty identifying the problem, or info to solve problem
Intellectual - intellectual capabilities are limited
Emotional – freedom of exploring new ideas and communicating them
Environmental – imposed by our immediate social/physical envrionment
Cultural – stuck in tradition
Lecture 8 – Competing through Superior Service + Driving Markets Good-Services Spectrum
Relatively pure product – packaged goods
Hybrid – fast food
Relatively pure service – Education
*3S Model of Customer Service*
Strategy – Part of corporate strategy and competitive positioning. Communicated throughout the organisation, a clear demonstration of the company’s commitment
Staff – Recognition of importance, recruitment, training and empowerment
Systems – Measurement of performance, feedback, support the delivery of info that customers want
‘Must balance the level/quality of service with impact of service on customer outcomes. Therefore avoiding overservicing costs and under-servicing risks.’
SERVQUAL and RATER
*Relationship Marketing Ladder*
Customer Catching (emphasis on winning new customers): - Prospect (marketing to catch prospect) - Customer (repeat buyer, identity) - Client (positive feelings)
Customer Keeping (emphasis on developing and enhancing) - Supporter (loyalty) - Advocate (recommends) - Partner (mutual working)
*Cornerstones of Relationship Marketing*
Sound reasons on both sides for relationship Mutual trust and respect Employee motivation and commitment
*Assessing Customer Satisfaction*
Match customer expectations with customer experiences, the difference is the ‘satisfaction gap’
RATER
Reliability Assurance Tangibles Empathy Responsiveness
*Quality Gap Analysis*
Offer specification – Delivered offer (production gap)
Delivered offer – Customer evaluation of offer (perceptual gap)
Customer evaluation – Customer expectations (satisfaction gap)
Supplier side: Market intelligence gap + Design gap
*Market Driven v Driving Markets*
Market Driven: ‘An orientation that is based on understanding and reacting to the preferences and behaviours of players within a given market structure’
Driving Markets: ‘Influencing the structure of the market and/or the behaviour of market players in a direction that enhances the competitive position of the business
Market Driven (Kohli and Jaworski 1990):
*Intelligence Generation* - Not simply understanding customer’s verbalized needs and preferences but understanding the exogenous factors that influence these needs - Future needs, who are the consumers *Intelligence Dissemination* - Linking different departments - Formal and informal *Responsiveness* - Selecting target markets - Product development to address current/latent needs - Production, distribution and communication to address needs Market Driven (Narver and Slater 1990): *Customer Orientation* - Understanding customer preferences and how they develop over time - Focus on the whole chain of customers *Competitor Orientation* - Existing and potential *Inter-functional Coordination* - Synergy Driving Markets (Jaworski and Kohli 2000): Change the structure Deconstruction - Eliminating players through competitor mergers and acquisitions - Supplier integrations Construction - Building a new modified set of players - Adding complementary products Changing Functions - Virgin example *Modifying Market Behaviour* Directly - Build customer constraints (Ikea), Remove customer constraints (Expedia)
- Build competitor constraints (Regulation up), Remove (Regulation down) Indirectly - Create new customer preferences, Reverse existing preferences - Create new competitor preferences, Reverse existing preferences *Need for a Balanced Approach* (SR market driven) (LR drive markets)