Strategic Marketing

Term V Indian Institute of Management Trichy Sep- Dec 2012 Prof Natesan Ramesh Session 2

External & Customer Analysis

What is it? Why is it important in organizations? How does it affect the Strategy &
decision making ?

External Analysis contd

Strategic Decisions
-Where to compete? - How to compete

External Analysis

Identification
-Trends /future events -Threats/Opportunities -Strategic uncertainties

Analysis
-Information-need areas -Scenario Analysis

Strategic Uncertainties

Useful concept It helps develop a series of questions to examine in case of unforeseen events Focuses on unknown elements that will affect the outcome of the strategic decisions Most of the Strategic decision making will be driven by a set of these uncertainties EXAMPLE Strategic Uncertainties Strategic Decisions

1.
2.

Will a competitor lower prices for the trekking shoes

Will Rupee weaken against $

Automate the factory

Hedge currency risk

Strategic Uncertainties

What will be future demand for PCs

Second-level Strategic Uncertainties State of the IT industry Innovation in the PC Industry

Evolution of the PC user market

External Analysis creative thinking

External Analysis provides the opportunity to think creatively and explore various options
As a strategist, one has to look at (A) perspective of the Customer (B) competitor (C ) Market (D) the Environment (E) internal perspective from within the company External analysis requires definition of boundaries The level of Analysis is predicated on the Company and the strategic decisions that are involved Analysis is SCOPE DEPENDENT! Broad focus will lack analytical depth and narrow focus more INSIGHT Analysis needs to be conducted at SEVERAL LEVELS LAYERED analysis ( primary level with depth) vs. Multiple Analysis conducted consecutively.

EXTERNAL ANALYSIS
Companies tend to undertake this as part of their ANNUAL PLANNING & BUDGETING exercise As we discussed in the first session- STRATEGY does not sit in a a VACUUM. It is impacted continuously, even on a day to day basis which prompts managers to take action The external analysis framework /tools are applicable regardless of the circumstance Smart operating managers usually have their eye on changing conditions and are adept in getting a external analysis conducted as needed REMEMBER when something changes in the market, it is important to atleast go and do a quick check of the CHANGE using External Analysis Companies who are in a market share battle typically are constantly reviewing the variables in terms of their marketing. It is important to note that COMPETITORS will and always want to keep presenting customers with compelling reasons to buy!!!!! Additionally CUSTOMER & COMPETITOR ANALYSIS will help further understanding as to whether the Strategies are indeed applicable or what impact on strategies will changing markets require!!!!!!!!!!!!!!!!!

CUSTOMER ANALYSIS
Segmentation
-who are the biggest customers? Who are the most profitable? -who are potentially the most attractive customers? -Do Customers fall into any logical groups based on needs, motivations, or characteristics -How could the market be segmented into groups that would require a unique business strategy?

Customer Motivations
-What elements of the product/service do customers value most? -What are the customers objectives? What are really buying? -How segments differ in their motivation priorities -What changes are occurring in customer motivation? In customer priorities

Customer Analysis contd

Unmet needs
- why are some customers dissatisfied? Why are some changing brands /suppliers? - What are the severity and incidence of consumer problems - What are the unmet needs that customers can identify? Are there some of which consumers are unaware? - Do these unmet needs represent leverage points for competitors or a new business model?

Scope of Customer Analysis

Segmentation Key to developing sustainable competitive advantage Segmentation means the identification of customer groups that respond differently from other groups to competitive offerings Segmentation strategy couples the IDENTIFIED segments with a program to deliver an offering to those segments

Successful segmentation strategy requires - Conceptualization - Development - Evaluation of a targeted competitive offering

Segmentation strategy
Segmentation strategy is judged on 3 dimensions -Can a competitive offering be developed and implemented that will be appealing to the target segment? -Can the appeal of the offering and the subsequent relationship with the target segment be maintained over time despite COMPETITIVE responses -Resulting business from the target segment is it worthwhile? A successful segmentation strategy is one that WITHIN A REDUCED MARKET SPACE it is possible to create a DOMINANT Position that competitors will be unwilling or unable to attack successfully!!!

DEFINITION OF SEGMENTS
Customer characteristics Geographic Type of organization Size of the firm Lifestyle Sex Age Occupation

Product-related approaches to segmentation

User type Usage Benefits sought Price sensitivity Competitor ( user of competitors products) Application Brand Loyalty

Segmentation contd
LOYALTY MATRIX

Low Loyalty Moderate

Loyal

Customer

Medium

High

Highest

NonCustomer

Low to Medium

High

Zero

Segmentation contd Application useful particularly in

Industrial products - idea for products and marketing programs are more likely to come from a deep understanding of how the product is used than by understanding the customer

Segmentation
Two distinct segmentation strategies are
possible - First focuses on SINGLE SEGMENT ( which can be smaller than the market as a whole) - Second MULTIPLE SEGMENTS ( which is expensive and has to be carefully tailored by segment) There can be important synergies between segment offerings

Customer Motivations After segmentation, the next step is

consider their motivations Key questions that need to be answered: - What lies behind their purchase decisions? - How does this differ by segment Some of these motivations can help define Strategy!

Motivations Customer motivations can be quite large

in number Therefore it is useful to group them and prioritize
Group & Structure Assess Motivation Importance

Identify

Assign Strategic role To Motivations

Qualitative Research is a powerful tool to understand Customer motivations. Focus groups, in-depth interviews, customer case studies Or Ethnographic research are ways to do Qual.Research

Change in customer priorities

Important to gain insights to changing
customer priorities Areas like high-tech customer priorities often come from need for help in selecting and installing the right equipment to wanting low performance costs Increasingly customers are proactive in working with the companies/brands in prioritizing their needs

Unmet needs

A customer need that is not being addressed They are strategic opportunities to increase

market share or identify new areas of growth Unmet needs are not always obvious and more difficult to identify but also present opportunity for aggressive pursuit Key is to stretch technology or apply new technologies in order to expose UNMET needs

Unmet needs

Customers are a good source to access and getting to

tell you the UNMET needs Problem Research ( a structured approach) develops a list of potential problems with product/service. These are then prioritized by asking a group of 100-200 respondents to rate each problem as its importance, frequency of occurrence, if a solution exists now! Ethnographic Research a way of directly observing customers in as many contexts as possible. Helps understand what is being done involving the target, but also why it is being done. Ethnographic helps with developing breakthrough innovations ( P&Gs Magic Reach, Sirius portable satellite radio player for future playback, Intels research into cheap PCs to run on truck batteries in 100 degree temperatures etc).