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.

2-2

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.

2-3

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

2-5

OPPORTUNITIES OUTSIDE THE

COMPETITIVE BOX
The Competitive Box
New Types of
Competition

New
Customers

Traditional Competitors

Conventional Value
Propositions

New
Business
Models
New
Customers

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

2-7

DEFINING AND ANALYZING

PRODUCT-MARKETS
Determine the Boundaries and
Structure of the Product-Market

Form the
Product-Market
Describe and
Analyze End-Users
Analyze
Competition
Forecast
Market Size and
Rate of Change
2-8

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
MARKETS

MICROWAVE
OVENS

FAST-FOOD
MARKET
CONVENIENCE
STORES

TRADITIONAL
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 productmarket
2-13

Illustrative Product Market Structure

Food and beverages
for breakfast meal

Generic Product
Class
Product Type

Cereals

Variant A

Ready to eat
Regular

Natural
Nutritional

Life

Product 19

Pre-sweetened

Special K

Variant B

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
2-15

How Buyers Make Choices

BUYING DECISION PROCESS:

1. Problem recognition
2. Information search

3. Alternative evaluation
4. Purchase decision
5. Post-purchase behavior
2-16

Environmental
Influences

External factors influencing buyers

needs and wants:
Government, social change,
economic shifts, technology etc.
* These factors are often noncontrollable 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.)
2-18

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

4. Identify
and
Evaluate
Potential
Competitors

PRODUCTMARKET
STRUCTURE
AND
MARKET
SEGMENTS

2. Identify
and
Describe
Key
Competitors

3. Evaluate
Key
Competitors
2-19

Examples of Levels of Competition

Baseball
cards
Bottle
water

Fast
Food

Regular
colas

Beer

Video
Games
Diet lemon
limes

Ice
Cream

Diet-Rite
Cola
Fruit
flavored
colas

Diet
Coke

Diet Pepsi
Wine

Product from
competition:
Product category diet colas
competition:
Juices
soft drinks

Lemon
limes

Coffee

Budget competition:
food & entertainment

Generic competition:
beverages

2-20

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)
2-21

Extent of
Market Coverage

Current
Capabilities

Competitor
Evaluation

Customer
Satisfaction

Past
Performance
2-22

MARKET SIZE ESTIMATION

Product-Market Forecast
Relationships

Market Potential
Estimate

(area denotes sales in $s)

Unrealized
Potential

Company
Sales
Forecast

Industry
Sales
Forecast

2-23

Product-Market Forecast Relationships for

Industrial Painting Units
Sales (in 1000s
of units)
900
800
700
600
500
400
300
200
100
0
2003
2004

Market
Potential
Sales Forecast

Company XYZ
Sales Forecast

2005

2006

2007

2008

2009

2010
2-24

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.
2-25

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

2-28

Levels and types of market segmentation

Strategic
Segmentation

Vision
Strategic intent
Product benefits
Managerial
Segmentation

Resource allocation
Alignment
Planning

Operational
Segmentation

Marketing programs
- Advertising
- Sales
- Distribution

2-29

Best Buy segmentation strategy

Jills - soccer moms
Barrys - wealthy professionals
Buzzs - tech enthusiasts
Rays - the family man
Mr Storefront - the small business customer
Carries - young, single females
Helen and Charlies - older couples whose
children have left home
* Gov. Palins _________________ 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
of Segments
Finer
Segmentation
Strategies

Decide How
to Segment

Form
Segments
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
Characteristics
of People/
Organizations

Buyers Needs/
Preferences

Use
Situation
2-38

Illustrative Segmentation Variables

Characteristics
of people/
organizations

Consumer
Markets
Age, gender, income,
family size, lifecycle
stage, geographic
location,
lifestyle

Use situation

Occasion, importance of
purchase, prior
experience with product,
user status

Buyers needs/
preferences

Brand loyalty status, brand

preference, benefits sought,
quality, proneness to make
a deal

Purchase
behavior

Size of purchase,
frequency of purchase

Industrial/
Organizational Markets
Type of industry, size,
geographic location,
corporate culture, stage of
development, producer/
intermediary
Application, purchasing
Procedure (new task,
modified rebuy, straight
rebuy
Performance requirements,
brand preferences, desired
features, service
requirements
Volume, frequency
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 Brewings beer brand targets

* Miller Genuine Draft - mainstream
sophisticates
* Milwaukees Best Light - hardworking
men
* Pilsner Urquell - beer afficionados
* Miller Icehouse - for drinking buddies

2-41

Requirements for Segmentation

Identifiable
segments
Response
differences

Segmentation
Requirements

Stability
over time

Actionable
segments

Favorable
cost/benefit

2-42

Approaches to Segment
Identification
IDENTIFIERS
OF CUSTOMER
GROUPS

Characteristics
of People and
Organizations

CUSTOMER
RESPONSE
PROFILE

Use Situation

Buyers Needs
and Preferences

Purchase
Behavior and
Loyalty
2-43

Segment Dimensions for Hotel Lodging Services

2-44

Illustrative Example: Gasoline Buyers

Road
Warriors

True
Blues
Generation
F3 (Fuel,
Food & Fast)

Homebodies

Price
Shoppers

Higher-income, middle-aged men, drive 2550000 miles a year buy premium with a
credit card purchase sandwiches and drinks
from the convenience store will sometimes
use carwash
Men and women with moderate to
high incomes, loyal to a brand and
sometimes a particular station
frequently buy premium, pay in cash
Upwardly mobile men and women half under 25 years of age constantly on the go drive a lot
snack heavily from the convenience store
Usually housewives who shuttle
children around during the day and
use whatever gas station is based on
town or on route of travel
Not loyal to brand or station and
rarely buy premium frequently on
tight budgets.

16% of
buyers

16% of
buyers

27% of
buyers

21% of
buyers
20% of
buyers
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
Market
Attractiveness

Competitor
Analysis

Positioning
Analysis
2-47

Segmentation Fit for Implementation

Segment Attractiveness
and Internal Compatibility
Internal Compatibility
High

High

Market Segment
Attractiveness
Low

Low

Attractive segments
that match with
company
capabilities

Attractive segments
but with poor match
with company
capabilities

Unattractive segments
but with match to
company
capabilities

Unattractive segments
that do not match with
company capabilities

2-48