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 2

Markets and
Competitive
Space

McGraw-Hill/Irwin Copyright 2009 by The McGraw-Hill Companies,

MARKETS AND COMPETITIVE SPACE

Markets and Strategies

Defining and Analyzing Product-Markets
Describing and Analyzing End-Users
Analyzing Competition
Market Size Estimation
Developing a Strategic Vision about the
Future

2-3
 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

2-4
 OPPORTUNITIES OUTSIDE THE
COMPETITIVE BOX

The Competitive Box

New Types of Traditional Competitors New

Competition Business
Models

New New
Customers Conventional Value Customers
Propositions

Existing Customer
Base

New Customer
Base(s)

2-5
 AN ARRAY OF CHALLENGES
Disruptive Innovation

Fast Changing Commoditization

Markets Drivers of Changes Threats
in Markets

Creating New Market Space

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-
Analyze
Users 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 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
2-13
 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
DEFINING AND ANALYZING MARKETS

Define Product-Market Boundaries and Structures

Identify and Describe End-Users

Analyze Industry and Value Added Chain

Evaluate Key Competitors

Forecast Market Size

and Growth Trends
2-15
 Identifying and
Describing Buyers

DESCRIBING
Building How
AND Buyers
Customer
Profiles ANALYZING Make
END-USERS Choices

Environmental
Influences
2-16
 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
2-17
 How Buyers Make Choices

BUYING DECISION PROCESS:

1. Problem recognition

2. Information search

3. Alternative evaluation

4. Purchase decision

5. Post-purchase behavior 2-18

 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

2-19
 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
2-21
 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

2-22
 Industry Analysis

* Industry size, growth, and composition

* Typical marketing practices
* Industry changes that are anticipated (e.g.
consolidation trends)
* Industry strengths and weaknesses
* Strategic alliances among competitors

2-23
 Defining Industry Structure &
Characteristics

SUPPLIERS
Industry Form
Industry PRODUCERS
Environment
Competitive WHOLESALERS/
Forces DISTRIBUTORS
Value
Added
RETAILERS/DEALERS
Chain

CONSUMER/
ORGANIZATIONAL END
USERS
2-24
 Competitive Forces

1. Rivalry among existing firms.

2. Threat of new entrants.
3. Threat of substitute products.
4. Bargaining power of suppliers.
5. Bargaining power of buyers.
Source: Michael E. Porter, Competitive Advantage, Free Press, 1985, 5.
2-25
 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)

2-26
 Extent of
Market Coverage

Competitor
Current Customer
Capabilities Evaluation Satisfaction

Past
Performance

2-27
 MARKET SIZE ESTIMATION

Product-Market Forecast Market Potential

Relationships Estimate
(area denotes sales in $s)

Unrealized
Potential

Company Industry
Sales Sales
Forecast Forecast
2-28
 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
2-29
 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.
2-30