Documente Academic
Documente Profesional
Documente Cultură
Imperatives for
Market-Driven
Strategy
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
* Objectives
*
* Pivotal role of market-driven strategy
in designing and implementing
business/marketing strategies
* Links between business/marketing
strategy and corporate strategy
* Challenges in the modern environment
1-3
*
Characteristics of a Market-Driven
*
Strategy
*
Becoming Market-
Orientation
Customer
Value/
Capabilities
Match
1-4
*
* Market-Driven Strategy (1)
*
* Becoming market-oriented
* Customer focus
* Competitor intelligence
* Cross-functional coordination
* Performance implications
1-5
*
* BECOMING MARKET ORIENTED
*
* Customer is the focal point of the organization
* Commitment to continuous creation of superior
customer value
* Superior skills in understanding and satisfying
customers
* Requires involvement and support of the entire
workforce
* Monitor rapidly changing customer needs and
wants
1-6
*
*
*
1-7
*
* Characteristics of Market Orientation
*
Customer Focus
What are the customer’s value requirements?
Competitive Intelligence
Importance of understanding the
competition as well as the customer
Cross-Functional Coordination
Remove the walls between business functions
Performance Consequences
Market orientation leads to
superior organizational performances
1-8
*
* Becoming a Market-Oriented
* Organization
Information
Acquisition
Cross-Functional
Analysis of Information
Shared Diagnosis
and Coordinated
Action
Delivery of
Superior Customer
Value
1-9
*
* Market Orientation
*
Information Acquisition
Gather relevant information on customers,
competition, and markets
Involve all business function
Inter-functional Assessment
Share information and develop
innovative products with
people from different function
Shared diagnosis and action
Deliver superior customer value
1-10
*
* Market-Driven Strategy (2)
*
* Becoming market-oriented
* Customer focus
* Competitor intelligence
* Cross-functional coordination
* Performance implications
* Determining distinctive capabilities
1-11
*
* DISTINCTIVE CAPABILITIES
*
1-12
*
Southwest Airline’s Distinctive Capabilities
*
*
Organizational Processes
Southwest uses a point-to-point route system rather than the hub-and-spoke design
used by many airlines. The airline offers services to 57 cities in 29 states, with an
average trip about 500 miles. The carrier’s value proposition consists of low fares
and limited services (no meals). Nonetheless, major emphasis throughout the
organization is placed on building a loyal customer base. Operating costs are kept
low by using only Boeing 737 aircraft, minimizing the time span from landing to
departure, and developing strong customer loyalty. The company continues to grow
by expanding its point-to-point route network.
Skills and Accumulated Knowledge
The airline has developed impressive skills in operating its business model at very
low cost levels. Accumulated knowledge has guided management in improving the
business design over time.
Coordination of Activities
Coordination of activities across business functions is facilitated by the point-to-
point business model. The high aircraft utilization, simplification of functions, and
limited passenger services enable the airline to manage the activities very efficiently
and to provide on-time point-to-point services offered on a frequent basis.
Assets
Southwest’s key assets are very low operating costs, loyal customer base, and high
employee esprit de corps
1-13
*
* Capabilities
*
Disproportionate
(higher)
contribution to
superior
customer value Compelling
Logic of Distinctive
Capabilities
Provides value to
customers on a more
cost-effective basis
Source: George S. Day, Journal of Marketing, October 1994, p. 38.
1-14
*
* Capabilities
*
Desirable
Capabilities
Difficult to
Duplicate
Source: George S. Day, Journal of Marketing, October 1994, 49.
1-15
*
* Market-Driven Strategy (3)
*
* Becoming market-oriented
* Customer focus
* Competitor intelligence
* Cross-functional coordination
* Performance implications
* Determining distinctive capabilities
* Types of capabilities
1-16
*
* Types of Capabilities
*
Outside-In
Processes
Spanning
Processes
Inside-Out
Processes
1-17
*
* Organization’s Process
*
EXTERNAL INTERNAL
EMPHASIS EMPHASIS
Outside-In Inside-Out
Processes Processes
Spanning Processes
Market sensing Financial management
Customer order
Customer linking fulfillment Cost control
Channel bonding Pricing Technology
development
Technology Purchasing
monitoring Integrated logistics
Customer service
delivery Manufacturing/
transformation
New product/service processes
development
Human resources
Strategy development management
Environment health and
Source: George S. Day, Journal of Marketing, October 1994, 41. safety
1-18
*
* Market-Driven Strategy (4)
*
* Becoming market-oriented
* Customer focus
* Competitor intelligence
* Cross-functional coordination
* Performance implications
* Determining distinctive capabilities
* Types of capabilities
* Creating value for customers
1-19
*
* Matching Customer Value and Distinctive
* Capabilities
Value Requirements
Distinctive
Capabilities
1-20
*
* CREATING VALUE FOR CUSTOMERS
*
Customer Value:
Value for buyers consists of the benefits less
the costs resulting from the purchase of
products.
Superior value: positive net benefits
Creating Value:
“Customer value is the outcome of a process
that begins with a business strategy anchored in
a deep understanding of customer needs.”
Source: C. K. Troy, The Conference Board Inc., 1996, 5.
1-21
*
* Creating Value for Customers
*
Customer
Value
Benefits Costs
1-22
*
* Value Composition
*
Product
Services
Benefits
Employees
Image Value
(gain/loss)
Monetary costs
Costs
Time (sacrifices)
Psychic and
physic costs
1-23
*
* Market-Driven Strategy (5)
*
* Becoming market-driven
* Marketing sensing capabilities
* Customer linking capabilities
* Aligning structure and processes
1-24
*
* Becoming Market Driven
*
Market Sensing
Capabilities
MARKET –
DRIVEN
STRATEGIES
Customer Linking
Capabilities
1-25
*
* Market Driven Initiatives
*
Market Sensing Capabilities
* Effective processes for learning about
markets
* Sensing:
* Collected information needs to be shared
across functions and interpreted to
determine proper actions.
Customer Linking Capabilities
* Create and maintain close customer
relationships
1-26
*
*
*
Aligning Structure and Processes
* Potential change of organizational design
* Improve existing processes
* Process redesign
* Cross-functional coordination and
involvement
* Primary targets for reengineering:
* Sales and marketing, customer relations,
order fulfillment, and distribution
1-27
*
* Corporate, Business and Marketing
* Strategy (1)
* What is corporate strategy?
1-28
*
* CORPORATE STRATEGY
*
Deciding the Scope
and Purpose of
the Business
Business
Objectives
Actions and
Resources for
Achieving
Objectives
1-29
*
* CHARACTERISTICS OF SUCCESSFUL
STRATEGY
*
Unique competitive position for the
company.
Activities tailored to strategy.
Clear trade-offs and choices vis-à-vis
competitors.
Competitive advantage arises from fit
across activities.
Sustainability comes from the activity
system not the parts.
Operational effectiveness a given.
Source: Michael E. Porter, “What Is Strategy,” Harvard Business Review, November-December 1996, 74.
1-30
*
* Corporate, Business and Marketing
* Strategy (2)
* What is corporate strategy?
* Corporate strategy framework
* Deciding corporate vision
* Objectives
* Resources
* Business composition
* Structure, systems and processes
1-31
*
* CORPORATE STRATEGY
* COMPONENTS
1-32
*
* Corporate, Business and Marketing
* Strategy (3)
* Business and marketing strategy
* Business and marketing strategy
relationships
* Strategic marketing
1-33
*
* CORPORATE, BUSINESS AND
* MARKETING STRATEGY
1-34
*
* Corporate, Business and
* Marketing Strategy (4)
* The marketing strategy process
* Markets, segments and customer value
* Markets and competitive space
* Strategic market segmentation
* Strategic customer relationship management
* Capabilities for continuous learning about
markets
1-35
*
* Corporate, Business and Marketing
* Strategy (5)
* Designing market-driven strategies
* Market targeting and strategic positioning
* Strategic relationships
* Innovation and new product strategy
* Market-driven program development
* Strategic brand management
* Value chain strategy
* Pricing strategy
* Promotion strategy
1-36
*
* Corporate, Business and Marketing
* Strategy (6)
* Implementing and managing market-
driven strategy
* Designing market-driven organizations
* Marketing strategy implementation and
control
1-37
*
*
MARKETING STRATEGY PROCESS
*
Markets,
Segments
And Value
Implementing
and Managing Designing
Market-Driven Market-Driven
Strategy Strategies
Market-Driven
Program
Development
1-38
*
* Challenges in the modern
* environment
* Escalating globalization
* Technology diversity and uncertainty
* The Web 2.0
* Ethical behavior and corporate social
responsiveness
1-39
*
* Strategic Marketing Planning
*
* Developing the strategic plan for each
business
* Preparing the marketing plan
* Planning relationships and frequency
* Planning considerations
* Responsibility for preparing plans
* Planning unit
* Preparing the marketing plan
1-40
*
* MARKETING PLAN
* OUTLINE
I. Strategic Situation Summary
Summarize the key points from your situation analysis (market analysis, segments,
industry/competition) in order to recount the major events and provide information to better
understand thestrategies outlined in the marketing plan.
1-41
*
* MARKETING PLAN
* OUTLINE
1-42
*
* IV. Market Mix Strategy for
* Each Market Target
A. Product Strategy
Identify how each product fits the market target. Other issues that may be addressed would
be new product suggestions, adjustments in the mix of existing products, and product
deletion candidates.
B. Price Strategy
The overall pricing strategy (I.e., competitive, premium-priced, etc.) should be identified
along with a cost/benefit analysis if applicable. Identify what role you want price to play, i.e.,
increase share, maintenance, etc.
C. Distribution Strategy
Describe specific distribution strategies for each market target. Issues to be addressed are
intensity of distribution (market coverage), how distribution will be accomplished, and
assistance provided to distributors. The role of the sales force in distribution strategy should
also be considered.
D. Promotion Strategy
Promotion strategy is used to initiate and maintain a flow of communication between the
company and the market target. To assist in developing the communications program, the
attributes or benefits of our product should be identified for each market target. How our
product differs from competition (competitive advantage) should be listed. The sales force’s
responsibilities in fulfilling the market plan must be integrated into the promotion strategy.
Strategies should be listed for (1) personal selling, (2) advertising, (3) sales promotion, and
(4) public relations.
1-43
*
*
*
E. Marketing Research
Describe the market research problem and the kind of
information needed. Include a statement which addresses
why this information is needed. The specific market
research strategies can be written once the above two
steps have been followed.
V. Coordination with Other Business Functions
Indicate other departments/functions that have
responsibilities for implementing the marketing plan.
VI. Sales Forecasts and Budgets
1-44
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, Inc. All rights reserved.
*
* 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
1-47
*
* 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.
1-48
*
* OPPORTUNITIES OUTSIDE THE
* COMPETITIVE BOX
New New
Customers Conventional Value Customers
Propositions
Existing
Customer Base
New
Customer
Base(s)
1-49
*
*
AN ARRAY OF CHALLENGES
*
Disruptive
Innovation
Fast Commoditization
Changing Drivers of Threats
Markets Changes in
Markets
1-50
*
* Markets Impact Strategies
*
* Market changes often require altering
strategies
* Forces of change create both market
opportunities and threats
* Inherent danger in faulty market sensing
1-51
*
* 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
1-52
*
* Matching Needs with Product Benefits
*
* A product – market matches people with
needs to the product benefits that satisfy
those needs
Source: Adapted from Mitchell, Adrian (2004)”Heart of the Matter,” The Marketer, June 12, 14.
1-54
*
* Product – Market Boundaries and Structure
*
* Determining Product-Market Structure
SUPER MICROWAVE
MARKETS OVENS
FAST-FOOD
MARKET
CONVENIENCE TRADITIONAL
STORES RESTAURANTS
1-56
*
* Extent of Market Complexity
*
* Three characteristics of markets:
DESCRIBING
Building How
AND Buyers
Customer
Profiles ANALYZING Make
END-USERS Choices
Environmental
Influences
1-60
*
* 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
1-61
*
* How Buyers Make Choices
*
BUYING DECISION PROCESS:
1. Problem recognition
2. Information search
3. Alternative evaluation
4. Purchase decision
5. Post-purchase behavior
1-62
* Environmental
* Influences
*
1-64
*
* 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
1-65
*
* 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
1-66
*
* 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
1-67
*
* Defining Industry Structure & Characteristics
*
SUPPLIERS
nIndustry Form
nIndustry PRODUCERS
Environment
nCompetitive WHOLESALERS/
Forces DISTRIBUTORS
Value
Added
RETAILERS/DEALERS
Chain
CONSUMER/
ORGANIZATIONAL END
USERS
1-68
*
* Competitive Forces
*
1. Rivalry among existing firms.
Competitor
Current Customer
Capabilities Evaluation Satisfaction
Past
Performance
1-71
*
* MARKET SIZE ESTIMATION
*
Product-Market Forecast Market Potential
Relationships Estimate
(area denotes sales in $’s)
Unrealized
Potential
Company Industry
Sales Sales
Forecast Forecast
1-72
*
* Product-Market Forecast Relationships for
* Industrial Painting Units
500
400
300
200 Company XYZ
Sales Forecast
100
0
2003 2004 2005 2006 2007 2008 2009 2010
1-73
*
* DEVELOPING A STRATEGIC VISION ABOUT
* THE FUTURE
Strategic
Market
Segmentation
*
* Strategic market segmentation (1)
*
* Levels and types of market
segmentation
1-77
*
* Levels and types of market segmentation
*
Vision
Strategic Strategic intent
Segmentation Product benefits
Resource allocation
Alignment
Managerial Planning
Segmentation
Marketing programs
Operational - Advertising
Segmentation - Sales
- Distribution
1-78
*
* Best Buy segmentation strategy
*
* Jill’s - “soccer moms”
* Barry’s - wealthy professionals
* Buzz’s - “tech enthusiasts”
* Ray’s - the family man
* Mr Storefront - the small business customer
* Carrie’s - young, single females
* Helen and Charlie’s - older couples whose
children have left home
1-79
* 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 1-80
*
* Strategic market segmentation (2)
*
* Market-driven strategy and
segmentation
* Market segmentation, value opportunities
and new market space
* Market targeting and strategic positioning
1-81
*
Segmentation and Market-Driven
*
Strategy
* SEGMENTS
VALUE
OPPORTUNITIES
CAPABILITIES/
SEGMENT
MATCH
TARGET(S)
POSITIONING
STRATEGY
1-82
*
* 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
1-83
*
* Market Segmentation Activities and
* Decisions
Market to be
Segmented
Strategic
Analysis Decide How
of Segments to Segment
Finer Form
Segmentation Segments
Strategies
1-84
*
* 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
1-85
*
*
*
Purchase
Behavior
Use
Situation
1-88
*
*
Illustrative Segmentation Variables
*
Consumer Industrial/
Markets Organizational Markets
Characteristics Age, gender, income, Type of industry, size,
of people/ family size, lifecycle geographic location,
organizations stage, geographic corporate culture, stage of
location, development, producer/
lifestyle intermediary
Use situation Occasion, importance of Application, purchasing
purchase, prior Procedure (new task,
experience with product, modified rebuy, straight
user status rebuy
Buyers’ needs/ Brand loyalty status, brand Performance requirements,
preferences preference, benefits sought, brand preferences, desired
quality, proneness to make features, service
a deal requirements
Purchase Size of purchase, Volume, frequency
behavior frequency of purchase of purchase
1-89
*
* 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
1-90
*
* Miller Brewing’s beer brand targets
*
* Miller genuine draft - “mainstream
sophisticates”
* Milwaukee’s Best Light - “hardworking
men”
* Pilsner Urquell - “beer afficionados”
* Miller Icehouse - for “drinking buddies”
1-91
*
* Requirements for Segmentation
*
Identifiable
segments
Response Actionable
differences segments
Segmentation
Requirements
Stability Favorable
over time cost/benefit
1-92
*
Approaches to Segment
*
Identification
*
CUSTOMER
IDENTIFIERS
RESPONSE
OF CUSTOMER
PROFILE
GROUPS
Characteristics
Use Situation
of People and
Organizations
Buyers Needs
and Preferences
Purchase
Behavior and
Loyalty
1-93
*
* Segment Dimensions for Hotel Lodging Services
*
1-94
*
* Illustrative Example: Gasoline Buyers
*
Higher-income, middle-aged men, drive 25-
Road 50000 miles a year… buy premium with a 16% of
Warriors credit card … purchase sandwiches and drinks buyers
from the convenience store… will sometimes
use carwash
Men and women with moderate to
True high incomes, loyal to a brand and
16% of
Blues sometimes a particular station …
buyers
frequently buy premium, pay in cash
Generation Upwardly mobile men and women -
F3 (Fuel, half under 25 years of age -
27% of
Food & Fast) constantly on the go … drive a lot
buyers
snack heavily from the convenience store
Usually housewives who shuttle
Homebodies children around during the day and
21% of
use whatever gas station is based on
buyers
town or on route of travel
GROUP
IV
Inexpensive
1-96
*
* Strategic market segmentation (7)
*
* Finer segmentation strategies
* Logic
* Customized offerings
* Diverse customer base
* Close customer relationships
* Finer segmentation strategies
* Micro-segmentation
* Mass customization
* Variety-seeking strategy
1-97
*
* Strategic market segmentation (8)
*
1-98
*
* Strategic Analysis of Market Segments
*
Customer
Analysis
Financial and Competitor
Market
Analysis
Attractiveness
Positioning
Analysis
1-99
*
* Segmentation “Fit” for Implementation
*
Segment Attractiveness
and Internal Compatibility
Internal Compatibility
High Low
1-100
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 4
STRATEGIC CUSTOMER
RELATIONSHIP
MANAGEMENT
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
* PIVOTAL ROLE OF CUSTOMER
* RELATIONSHIP MANAGEMENT
DEVELOPING A CRM STRATEGY
CRM Levels
CRM Strategy Development
CRM Implementation
VALUE CREATION PROCESS
Customer Value
Value Received by the Organization
CRM and Value Chain Strategy
CRM AND STRATEGIC MARKETING
Implementation
Performance Metrics
Short-Term Versus Long-Term Value
Competitive Differentiation
1-103
*
* CUSTOMER RELATIONSHIP MANAGEMENT
*
CRM is a cross-functional core business
process concerned with achieving
improved shareholder value through the
development of effective relationships
with key customers and customer
segments. CRM Recognizes That
Customers:
*
PERSPECTIVES TOWARD CRM
*
STRATEGIC-
THE ENTIRE
COMPANY
1-106
* 4-5
Source: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & Sons, Inc.), 2006, 39.
1-107
* 4-6
1
Other
Stakeholders
5 CRM 2 Business
Case
STRATEGY
Enterprise
Transformation Plan 4 3 Customer
Strategy
Source: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & sons, Inc.), 2006,
42.
1-108
* 4-7
* IMPLEMENTATION DANGERS
*
Implementing Without Developing a
Customer Strategy
1-109
* 4-8
Successful Value
Exchange
1-110
* 4-9
*
CRM AND VALUE CHAIN STRATEGY
*
The Perfect Customer Experience
“The perfect customer experience, which must be affordable for the
company in the context of the segments in which it operates and its
competition, is a relatively new concept. This concept is now being
embraced in industry by companies such as TNT, Toyota’s Lexus, Oce,
and Guinness Breweries, but it has yet to receive much attention in
the academic literature. Therefore, multi-channel integration is a
critical process in CRM because it represents the point of co-creation
of customer value. However, a company’s ability to execute multi-
channel integration successfully is heavily dependent on the
organization’s ability to gather and deploy customer information, from
all channels and to integrate it with other relevant information.”
Adrian Payne and Pennie Frow, “A Strategic Framework for Customer Relationship Management,” Journal of Marketing (October 2005),
173.
1-112
* 4-11
*
CRM AND STRATEGIC MARKETING
*
CRM STRATEGIC
MARKETING
1-113
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 5
Capabilities for
Learning About
Customers and
Markets
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
* Capabilities for learning about
* customers and markets
* Market-driven strategy, market
sensing and learning processes
* Marketing information and
knowledge resources
* Marketing intelligence and
knowledge management
* Ethical issues in collecting and using
information
1-116
*
* Learning capabilities at P&G
*
* Competitive strength from superior
customer knowledge
* To deliver a customer experience, less
formal research, more one-to-one
communication
* Consumer Village
* Online virtual reality Cave
* Watch people clean baths
* Understand what it is like to live on $50/month
* Social networking sites
1-117
*
* Market Sensing and Learning
* Processes
1-118
*
* Market sensing at Tesco International
*
* Retailer entry to U.S. grocery market,
not with existing format
* Discovering what U.S. consumers
want:
* Senior managers live with U.S. families
* Probe lifestyles of families
* Prototype store
* Developing a new retail format and
targeting the “grocery gap”
1-119
*
* Market sensing processes
*
* Open-minded inquiry processes
* Analyzing competitors’ actions
* Listening to front-line employees
* Searching for latent customer needs
* Scanning the peripherary of the
market
* Encouraging experimentation
1-120
*
* Marketing information and
* knowledge resources
* Scanning processes
* Specific marketing research studies
* Internal and external marketing
information resources
* Relationships with external marketing
research providers
1-121
*
* Screening A New
* Research Supplier
1-123
*
* A Framework for Market Sensing
*
Probability of the Event Occurring
High Medium Low
7
Utopia Field of
6 Dreams
Effect of the
5
Event on the Things to
Company 4 Watch
3
2 Danger Future
Risks
1
1-124
*
* Learning About Markets
*
Objective
Inquiry
Keeping and Synergistic
Gaining Access Information
to Prior Distribution
Learning
Mutually
Informed
Interpretations
Source: George S. Day, Journal of Marketing, October 1994.
1-125
*
* Barriers to market learning
*
* Managers reject new
insights/information
* Rigid organizational structures and
inflexible information systems
* Politics favour the status quo
* Overwhelming pressure of existing
business operations
* Tendency to “active inertia”
1-126
*
* Best Buy’s customer knowledge
* strategy
* Strategy treats customers as individual,
develops solutions for needs and engages
employees to serve them
* New ideas from listening more closely to
customers and employees
* Knowledge shared with manufacturers and
product developers
* Core innovation competency is gathering
and synthesizing customer intelligence
1-127
*
* Customers and design at Xerox
*
* “Customer-led innovation” - “dreaming with
the customer”
* Not just building prototype and getting
feedback
* Focus groups as first step in commercial
printer design
* Changing designs in response to customer
insights
* Investment in understanding what
customers think about the “bright ideas”
1-128
*
* Marketing research project
*
* Defining the problem
* Understanding the limitations of the
research
* Quality of the research
* Costs
* Evaluating and selecting suppliers
* Research methods
1-129
*
* Existing marketing information
* resources
*
* In-company resources
* Open source resources
* Research agency resources
1-130
*
* Creating new marketing information
*
* Observation and ethnographic studies
* Marriott - rethink hotel experience for
“road warriors”
* GE - developing plastic fibers position
* Intel - use of computers by children in
China
* Research surveys
* Internet-based research
1-131
*
*
Problem definition to guide
* marketing research studies
* Online Surveys
* Fast
* Inexpensive
* Limitations in population coverage
* Resistance to excessive Web
communications
* Customer feedback and peer-to-peer Web
communications
* Monitoring customer Web behavior
1-133
*
* Marketing and management
* information systems
1-134
*
* Marketing Decision-Support
* System Components
Database Display
Analysis
Capabilities Models
1-135
*
* Marketing intelligence and
* knowledge management
* Marketing intelligence
* Knowledge management
* Role of the chief knowledge officer
* Leveraging customer knowledge
1-136
*
* Ethical issues in collecting and using
* information
1-137
*
* Neuromarketing
*
* Magnetic resonance imaging (MRI)
* Pictures response of brain to stimuli
* Probing consumer preferences is
controversial
* Invasive
* Privacy issues
* Information sharing
* Insurance companies
* Employers
* Law enforcement
1-138
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 6
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
* MARKET TARGETING STRATEGY
*
CAPABILITIES/
SEGMENT
MATCH
TARGET(S)
POSTIONING
FOR EACH
TARGET
1-143
*
* Identify segments within the
* product-market
TARGETING
AND
POSTIONING
Decide and
implement a Decide which
positioning segment(s) to
strategy for each target
targeted segment
1-144
*
* Market Targeting Alternatives
*
Segments Clearly Defined
Target Target
Selected Multiple
Selective Niche(s) Segments Extensive
Targeting Product Product Targeting
Specialization Variety
1-145
* Factors Influencing Targeting
* Decisions
*
* Stage of product – market maturity
* Extent of diversity in preferences
* Industry structure
* Capabilities and resources
* Opportunities to gain competitive
advantage
1-146
*
* TARGETING IN DIFFERENT MARKET
* ENVIRONMENTS
Emerging
Growing
Mature
Declining
Global
1-147
*
* Emerging Market
*
Buyer Diversity
* Segmentation limited due to similarity of buyers’
preferences
Industry Structure
* Typically small new organizations
* Limited access to resources
Capabilities and Resources
* Unique benefit (differentiation) strategy rather
than low-cost
* First-mover advantage
Targeting Strategy
* Single target or a few broad segments
1-148
*
* Growth Market
*
Buyer Diversity
* Segments should exist
Industry Structure
* Numerous competitors
Capabilities and Resources
* Survival requires aggressive actions by firms that seek large
market positions
* Otherwise select one or a few market segments
Targeting Strategy
* Three possible strategies
1. Extensive market coverage by firms with established
businesses in related markets
2. Selective targeting by firms with diversified product portfolios
3. Very focused targeting strategies by small organizations
serving one or a few market segments.
1-149
*
*
Mature Markets
*
Buyer Diversity
* Segmentation essential for competitive advantage
Industry Structure
* Intense competition for market share
* Emphasis on cost and service, and pressures on profits
Capabilities and Resources
Management’s objectives: cost reduction, selective
targeting, product differentiation
Targeting Strategy
Deciding which segment to serve
Firms pursuing extensive targeting strategies may decide
to exit from certain segments
1-150
*
* Global Markets
*
Global Reach and Standardization
* Identify market segments that span global markets and
serve these needs with global positioning strategies
Local Adaptation
* Consider requirements of domestic buyers
* Buyers’ needs and preferences affected by social, political,
cultural, economic, and language differences
Industry Structure
* Restructuring, acquisitions, mergers, and strategic
alliances altering industries and
competition
Targeting Strategy
* Targeting a single country, regional (multinational)
targeting, or global targeting
1-151
*
*
GLOBAL Successful
FEATURE
* British Retailer
Tesco Enters
Tesco announced plans to open a chain of convenience stores on the U.S. West
Coast in 2007, spending an estimated $453 M. The very successful retailer has four
This initiative is being launched even though the U.S. retail grocery market is
experiencing intense competition, and some chains are cutting back or selling out.
Tesco’s decision to enter the U.S. convenience market is bold and risky. Some
authorities consider the action questionable. However, Tesco has a very impressive
success record in Britain. With its Tesco Express, Tesco Metro, Superstore, and Extra
hypermarkets, the giant retailer has dulled Wal-Mart’s drive to dominate the retail
scene.
Tesco has no brand awareness in the U.S. so building brand identity will be
challenging. Yet the retailer has global buying power, powerful information
technology, and strong supply chain capabilities. The stores will offer groceries,
produce, and private-label ready-to-eat meals. Some observers think Tesco is
planning to compete with Wal-Mart in its home market.
Source: Kerry Capell, “Tesco: California Dreaming?” BusinessWeek, February 27, 2006, 38.
1-152
*
* POSITIONING STRATEGY
*
1-153
*
*
STRATEGIC POSITIONING INITIATIVES
*
POSITIONING CONCEPT
The desired positioning of the
product (brand) by targeted buyers
MARKE
POSITIONING
EFFECTIVENESS T POSITIONING
STRATEGY
How well
management’s
TARGE The combination of
marketing actions
positioning objectives
are achieved for the T used to communicate
the positioning concept
market target to targeted buyers
1-154
*
* How Positioning Works
*
* Objective
* Match the organization’s distinctive capabilities with
the customer value requirements for the market target
(How do we want to be perceived by targeted
buyers?)
* Desired result
* Gain a relevant, distinct, and enduring position by the
targeted buyers that they consider important.
* Actions by the organization
* Design and implement the positioning strategy
(marketing program) for the market target.
1-155
*
* INNOVATION
FEATURE
Spotting Shifts
* in Demand in
and Alma Saldana, a 28-year-old makeupdesigning
It’s 1:30 p.m. on a Monday in the bustling H&M store on Manhattan’s fifth Avenue,
artist from Houston, is stuffing three
tiny vests into her black Y&M shopping bag. That’s on top of blouses, jackets, and
pants. Saldana is in a buying frenzy. This Hennes &
is her first visit to H&M, the Stockholm-
based fashion retailer, and it’s everything she had hoped for. “Somebody told me
Mauritz (H&M)
you find great fashion at a very cheap price, and it’s true!” she exclaims.
1-156
*
*
*
How does it work? H&M designers had included a couple of cropped vests in
their autumn/winter collections. In august, shortly after the vests went on sales,
they started “flying out of the stores,” say Margareta van den Bosch, H&M’s head
of design. H&M’s designers in Stockholm (it has more than 100) spotted the
trend in the company’s worldwide sales reports, published internally every
Monday. About half of them immediately started sketching new styles. As
quickly as designs came off their desks, pattern makers snipped and pinned,
pressing employees into service as live models. At the same time, buyers
ordered fabrics. The designs were zoomed electronically to workers at H&M’s
production offices in Europe and Asia, which then selected manufacturers that
could handle the jobs quickly. In less than two months most H&M stores had 5
to 10 new vest styles in stock.
One of the secrets to H&M’s speed is decisiveness. The people in charge of each
collection can dream up and produce new fashions on their own authority. Only
huge orders require approval from higher ups. “We have a flat organization. We
have a shorter way to a decision,” says Sanna Lindberg, president of H&M
Hennes & Mauritz USA. That makes H&M fashionable in more ways than one.
Source: Steve Hamm, “SPEEDDEMONS,” BusinessWeek, March 27, 2006, 70-71. 1-157
* The Perception or Association that
* Management Wants Buyers to Have
* Concerning the Brand
Symbolic Functional
SELECTING THE
POSITIONING
CONCEPT
Experiential
1-158
*
* DEVELOPING THE POSITIONING
* STRATEGY
1-159
*
* Positioning Issues
*
1. The positioning concept applies to a
specific brand rather than all the
competing brands that compose a
product classification
2. The concept is used to guide positioning
decisions over the life of the brand
3. Multiple concepts are likely to confuse
buyers and may weaken the effectiveness
of positioning actions
1-160
*
*
*
The positioning strategy indicates how (and why) the product mix,
line, or brand is to be positioned for each market target. This strategy
includes:
•The product strategy, indicating how the product(s) will be positioned against the
competition in the product-market.
•The pricing strategy, including the role and positioning of price relative to
competition.
•The advertising and sales promotion strategy and the objectives these promotion
components are expected to achieve.
•The sales force strategy, direct marketing strategy, and the Internet strategy,
indicating how they are used in the positioning strategy.
1-161
*
* DETERMINING POSITIONING
* EFFECTIVENESS
1-162
*
* Customer and
* Competitor Research
Methods for
Determining
Positioning
Effectiveness
1-166
*
*
*
Positioning usually means that an overt decision
is being made to concentrate only on certain
segments. Such an approach requires
commitment and discipline because it’s not easy
to turn your back on potential buyers. Yet, the
effect of generating a distinct, meaningful
position is to focus on the target segments and
not to be constrained by the reaction of other
segments.
1-167
* Illustrative Impacts of Changes in Business
* Strategy on Targeting and Positioning
* Strategies
Changes in Business Market Targeting Impact
Strategy Positioning Impact
Rapid Growth/ Market scope may not change Substantial changes in resource
Retrenchment although targets may be increased allocation, (e.g. advertising
or reduced. expenditures
Changing the Product Mix No change is necessary unless Changes in product strategy, methods of
increase in product scope creates distribution, and promotional strategies
opportunities in new segments. may be necessary.
Changing the Market Targeting is likely to change to include Positioning strategy must be developed
Scope new targets. for each new target.
Repositioning Should not have a major effect on Product, distribution, price, and
targeting strategy. promotion strategies may be affected.
Value Chain Integration Should have no effect on targeting Primary impact on channel, pricing and
strategy. promotion strategies.
Strategic Alliance Targeting strategy may be affected Operating relationships and assignment
based on the nature and scope of the or responsibilities must be established.
alliance.
1-168
*
* Targeting and Positioning
*
Product Strategy
Positioning Strategy
Promotion Distribution
Strategy Strategy
Market
Target
Price Strategy
1-169
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 7
Strategic
Relationships
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
* Strategic relationships at IBM
*
* Collaborative projects across all major parts of
business services
* Funding universities in services science
* Partnership with Sony and Toshiba to produce new
processor
* Computer code shared with Apache open-source
web-server
* IBM programmers work on Linux projects
* Collaborating with customers and competitors to
invent new technologies
* Strategy of openess
1-172
*
* Strategic relationships
*
End-User
Customers Intermediate
Suppliers
Customers
Strategic Internal
Alliances External Partners
Partners
1-173
*
* Strategic Relationships
*
* The rationale for interorganizational
relationships
* Forms of organizational relationships
* Managing interorganizational
relationships
* Global relationships among
organizations
1-174
*
*
The rationale for interorganizational
* relationships
Value-enhancing
opportunities
Rationale for
Skills and Environmental
Forming Strategic
resource complexity
gaps Relationships
Competitive
strategy
1-175
*
* The rationale for interorganizational
* relationships (1)
* Opportunities to enhance value
* Environmental complexity
* Competitive strategy
* Skills and resource gaps
* Technology constraints
* Financial constraints
* Market access
* Information technology
1-176
*
* Collaborations in open-source
* software
* IBM and Sun aggressive supporters of
Linux open-source software
* Technology sharing and partnerships
* Rebuilding the technology
“ecosystem”
* Reducing dependence on Microsoft
1-177
*
* Airline Alliances
*
* Major global alliances
* Oneworld
* Skyteam
* Star Alliance
* Contain 18 of the world’s largest airline
* Account for 60% of total world airline
capacity
* But a history of alliance failures and
desertions
1-178
*
* The rationale for interorganizational
* relationships (2)
* Evaluating the potential for
collaboration
* What is the strategy?
* The costs of collaboration
* Is relationship strategy essential?
* Are good candidates available?
* Do relationships fit our culture?
1-179
*
* Mapping the Path to Market
* Leadership
Market-Oriented
Culture and
Process
Superior
Organizational Relationship Customer
Change Strategies Value
Proposition
Positioning
with Distinctive
Competencies
1-180
*
* Forms of organizational relationships
*
Supplier
relationships
Customer
relationships
1-181
*
* Illustrative interorganizational
* relationships
Strategic Alliance
M M M
Supplier/
Manufacturer
Collaboration M JV
Joint Venture
W
Distribution
Channel
R Relationship
EU
1-182
*
Forms
* of organizational relationships (1)
*
* Supplier relationships
* Strategic suppliers
* Outsourcing
* Intermediate customer relationships
* End-user customer relationships
* Strategic customers
* Dominant customers
* Strategic account management
1-183
*
Forms
* of organizational relationships (2)
*
* Strategic alliances
* Alliance success
* Alliance weaknesses
* Types of alliance
* Requirements for alliance success
* Alliance vulnerabilities
* Joint ventures
* Internal partnering
1-184
*
* CostCo Versus Wal-Mart
*
* CostCo has achieved major position in U.S.
warehouse club business against strong
competitors
* Success based on customer choice and
constant innovation and productivity
improvement
* CostCo compensates employees more
generously than competitors - to motivate
and retain good workers - they get lower
staff turnover and higher productivity
1-185
*
* Managing interorganizational
* relationships (1)
* Objective of the relationship
* New technologies and competencies
* Developing new markets and building
market position
* Market selectivity
* Restructuring and cost reduction
1-186
*
* Managing interorganizational
* relationships (2)
* Relationship management
* Planning
* Trust and self-interest
* Conflicts
* Leadership structure
* Flexibility
* Cultural differences
* Technology transfer
* Learning from partner’s strengths
1-187
*
* Managing interorganizational
* relationships (3)
* Partnering capabilities
* Control, evaluation and review
* Exiting from alliance
* Identify/agree what triggers exit
* Detail rights of each partner to
assets/products
* Design disengagement process
* Communication plan for all involved
parties
1-188
*
Managing Interorganizational relationships
*
* Objective
of the
Relationship
Control and
Evaluation
Relationship
Management
Managing
Inter-Organizational Exiting from
Relationships Alliance
Partnering
Capabilities
1-189
*
* Global relationships among
* organizations
* The Global Integrated Enterprise
* Inter-nation collaborations
* The strategic role of government
* Government interventions
* Competing with state-owned enterprises
* Collaborating with state-owned
enterprises
* Government regulation
1-190
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 8
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
* INNOVATION AND NEW PRODUCT STRATEGY
*
* Innovation as a Customer Driven Process
* New Product Planning
* Idea Generation
* Screening, Evaluating, and Business Analysis
* Product and Process Development
* Marketing Strategy and Market Testing
* Commercialization
* Variation in the Generic New Product
Planning Process
1-193
*
INNOVATION FEATURE
* Managing Google’s Idea Factory
*
As director of consumer Web products Marissa Mayer is a champion of
innovation. She favors new product launches that are early and often.
She joined Google in early 1999 as a programmer when the workforce
totaled 20. By 2007 Google had 5,700 employees with expected sales of
$16 billion.
How Google Innovates
The search leader has earned a reputation as one of the most innovative
companies in the world of technology. A few of the ways Google hatches
new ideas:
FREE (THINKING) TIME
Google gives all engineers one day a week to develop their own pet
projects, no matter how far from the company’s central mission. If
work gets in the way of free days for a few weeks, they accumulate.
Google News came out of this process.
1-194
*
*
* THEAnyone
IDEAS LIST
at Google can post thoughts for new technologies of businesses on
an ideas mailing list, available companywide for input and vetting. But
beware: Newbies who suggest familiar or poorly thought-out ideas can face
an intellectual pummeling.
OPEN OFFICE HOURS
Think back to your professors’ office hours in college. That’s pretty much
what key managers, including Mayer, do two or three times a week, to discuss
new ideas. One success born of this approach was Google’s personalized
home page.
BIG BRAINSTORMS
As it has grown, Google has cut back on brainstorming sessions. Mayer still
has them eight times a year, but limits hers to 100 engineers. Six concepts
are pitched and discussed for 10 minutes each. The goal: to build on the
initial idea with at least one complementary idea per minute.
ACQUIRE GOOD IDEAS
Although Google strongly prefers to develop technology in-house, it has also
been willing to snap up small companies with interesting initiatives. In 2004
it bought Keyhole, including the technology that let Google offer sophisticated
maps with satellite imagery.
Source: “Managing Google’s Idea Factory,” BusinessWeek, October 3, 2005, 88-90. 1-195
*
* FINDING CUSTOMER VALUE OPPORTUNITIES
*
Customer value analysis
Objective is to identify needs for:
1. New products
2. Improvements to existing
products
3. Improvements in production
processes
4. Improvements in supporting
services
1-196
*
*
*
Customer
Expectations
Customer
Satisfaction Gap
OPPORTUNITIES
Actual
(1) New Products
Product (2) Improvements
Performance (3) New and Improved
Processes
1-197
*
*
*
TRANSFORMATIONAL
Break-through innovation
Digital photography
NEW PRODUCT CATEGORY
Dell Printers
Nike Apparel
Golf clubs
LINE EXTENSION
New color/package/style
INCREMENTAL IMPROVEMENTS
Software updates
1-198
*
The Evolution of the Creative Company
*
*
STEP 1
Technology and information become commoditized and globalized.
Suddenly, the advantage of making things “faster, cheaper, better” diminishes, and
profit margins decline.
STEP 2
With commoditization, core advantages can be shipped abroad.
Outsourcing to India, China, and Eastern Europe sends a growing share of
manufacturing and even the Knowledge Economy overseas.
STEP 3
Design Strategy begins to replace Six Sigma as a key organizing
principle. Design plays a key role in product differentiation, decision-making,
and understanding the consumer experience.
Source: Bruce Nussbaum, “How to Build Innovation Companies,” BusinessWeek, August 1, 2005, 62-63.
1-199
*
*
*
STEP 4
Creative innovation becomes the key driver of growth.
Companies master new design thinking and metrics and create
products that address consumers’ unmet, and often unarticulated,
desires.
STEP 5
The successful Creative Corporation emerges, with new
Innovation DNA. Winners build a fast-moving culture that
routinely beats competitors because of a high success rate for
innovation.
1-200
*
* Characteristics of Successful Innovators
*
Creating an
Innovative Culture
1-201
*
* Creating an Innovation Culture
*
Source: Thomas D. Kuczmarski et al., “The Breakthrough Mindset,” Marketing Management, March/April 2003, 43.
1-202
*
* The Innovation Strategy Spells Out Management’s Priorities for
New Product Opportunities
*
1. Set specific New Product Objectives.
2. Communicate the role of New Products
throughout the organization.
3. Define the areas of strategic focus:
Product Scope
Markets
Technologies
4. Include longer term discontinuous projects
in the portfolio along with incremental
projects.
Source: Robert Cooper, “Benchmarking New Product Performance,” European Management Journal, Feb. 1998, 1-7.
1-203
*
* NEW PRODUCT PLANNING PROCESS
*
Customer
Needs
Analysis
Screening
Business
Idea and
Analysis
Generation Evaluation
Marketing Product
Strategy Development
Development
Testing
Commercialization
1-204
*
* Achieving Cross-Functional
* Interaction and Coordination
R&D
Operations Marketing
Finance
1-205
*
Responsibility for New Product
*
Planning
*
* Coordination of new product activities by a high-level
general manager
* Inter-functional coordination by a team of new
product planning representatives
* Creation of a project task force responsible for new
product planning
* Designation of a new products manager to
coordinate planning between departments
* Formation of matrix structure for integration new
product planning with business functions
* Creation of a permanent design center
1-206
*
*
IDEA GENERATION
*
* Idea search: targeted or open-ended?
* How extensive and aggressive?
* What specific sources are best for generating a
regular flow of new product ideas?
* How can new ideas be obtained from
customers?
* Where will responsibility for the new product
ideas search be placed?
* What are potential threats from alternative (or
disruptive) technologies?
1-207
*
*
*
Direct
Alliances/ Search
Technological
Acquisition/
Innovation
Licensing
METHODS
National OF Exploratory
Policy GENERATING Customer
IDEAS Studies
Creative Facilitating
Methods Lead User
Linking
Analysis
Marketing
and Technology
1-208
*
* An Innovation Champion
in Action at GE
*
Beth Comstock calls herself “a little bit of the crazy, wacky one” at corporate
headquarters. And it’s an apt description when you realize she works at General Electric
Co. Comstock, 44, is charged with transforming GE’s culture, famously devoted to
process, engineering, and financial controls, to one that’s more agile and creative.
Chairman and CEO Jeffrey R. Immelt tapped the former communications chief to become
GE’s first-ever chief marketing officer almost three years ago. The job came with a
critical twist: the goal of driving innovation through the company’s 300,000 plus ranks.
“Creativity is still a word we’re wrestling with,” Comstock concedes. “It seems a bit
undisciplined, a bit chaotic for a place like GE.” More comfortable territory is the term
“imaginative problem-solving” – encouraging people to think “what if” – yet always with
the aim of driving growth. One of Comstock’s first moves was to bring in anthropologists
to audit GE’s culture. They came back with praise for GE’s famous work ethic but noted
that employees wanted more “wow” – more discoveries from the company founded by
Thomas Edison.
1-209
*
*
*
Comstock has a role whose importance is spreading throughout Big Business – that of
innovation champion. She began by studying the best practices at companies such as
Procter & Gamble, FedEx, and 3M. She brought in a raft of creativity consultants,
futurists, and design gurus to lead sessions with different operations. Their names were
jolting for GE types: Play, a Richmond (VA.) group that helps execs think differently, and
Jump, based in San Mateo, CA., which researches how people use things. GE is
expanding its army of designers to bring businesses closer to customers. And Comstock
is staging “dreaming sessions” where Immelt, senior execs, and customers debate future
market trends. Comstock concedes some managers view the workshops as a waste of
time. “We have a long way to go,” she says. But for GE, there’s no turning back.
Source: Bruce Hussbaum, “How to Build Creative Companies,” BusinessWeek, August, 2005, 77.
1-210
*
SCREENING, EVALUATING, AND
*
BUSINESS ANALYSIS
*
IDEA GENERATION
SCREENING
(fit/feasibility)
CONCEPT EVALUATION
BUSINESS ANALYSIS
1-211
*
* Business Analysis
*
* Revenue Forecasts
* Cost Estimation
* Profit Projections
* Other Considerations
1-212
*
* PRODUCT AND PROCESS
* DEVELOPMENT
NEW
PRODUCT
CONCEPT
PRODUCT MARKETING
DEVELOPMENT STRATEGY
AND USE DEVELOPMENT
TESTING
MARKET
TESTING
LAUNCH
1-213
*
* Product and Process Development
*
* Development of the new product includes:
* Product design
* Packaging design
* Decisions to make or purchase product components
* Product Development Process:
* Product Specifications
* Industrial Design
* Prototype
* Use Tests
* Process Development
* Collaborative Development
1-214
*
*
*
Identify use
situations
1-215
*
* MARKETING STRATEGY AND MARKET TESTING
*
Marketing Strategy Decisions
* Market Targeting
* Positioning Strategy
Market Testing Options
* Simulated Test Marketing
* Scanner – Based Test Marketing
* Conventional Test Marketing
* Testing Industrial Products
* Selecting Test Sites
* Length of the Test
* External Influences
1-216
*
* Scanner-based Test Marketing
*
Less artificial than simulated testing
1-217
*
* COMMERCIALIZATION
*
The Marketing Plan
* Complete marketing strategy
* Responsibilities for execution
* Cross – functional approach
Monitoring and Control
* Real – time tracking
* Role of the Internet
* Include product performance metrics with performance
targets
1-218
*
* Marketing Strategy
*
Market Target(s)
Marketing
Objectives
Program(s)
1-219
*
* VARIATIONS IN THE GENERIC NEW
* PRODUCT PLANNING
1-220
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 9
Strategic Brand
Management
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
* STRATEGIC BRAND MANAGEMENT
*
Strategic Brand Management
1-223
*
*
* STRATEGIC BRAND MANAGEMENT
1-224
*
*
*
A brand is a name, term, design, symbol, or any
other feature that identifies one seller’s good or
service as distinct from those of other sellers.
*Stephen LVargo and Robert F. Lusch, “Evolving to a New Dominant Logic for Marketing,” Journal of Marketing, January 2004, 1-17. 1-225
*
*
Strategic Role of Brands
*
A strategic brand perspective requires managers to be clear about
what role brands play for the company in creating customer value
and share-holder value.
FOR BUYERS, BRANDS CAN:
• reduce customer search costs by identifying products quickly and
accurately,
• reduce the buyer’s perceived risk by providing an assurance of
quality and consistency (which may then be transferred to new
products),
• reduce the social and psychological risks associated with owning
and using the “wrong” product by providing psychological rewards
for purchasing brands that symbolize status and prestige.
1-226
*
*
*
FOR SELLERS, BRANDS CAN FACILITATE:
* David A. Aaker, Managing Brand Equity, The Free Press, 1991, 15.
**Ibid, 102-120.
1-228
*
*
*
Measuring Brand Equity. Several measures are needed
to capture all relevant aspects of brand equity.**
* loyalty (price premium, satisfaction/loyalty),
* perceived quality/leadership measures (perceived
quality, leadership/popularity),
* associations/differentiation (perceived value, brand
personality, organizational associations),
* awareness (brand awareness), and
* market behavior (market share, price and
distribution indices).
These components provide the basis for developing
operational measures of brand equity.
1-229
*
* Brand Focus
*
Product Line Branding: A brand name on one or more
lines of related product products representing different
product categories e.g. Crest toothpaste, brushes and
floss
Corporate branding: Corporate name to identify
product offering e.g IBM in computers, BMW in
automobiles
Combination branding: Combination of product line and
corporate branding e.g Microsoft Windows (XP, 7,
Vista, 8 etc
Private branding: Retailers with established brand
names contract with producers to manufacture and
place the retailer’s brand name on products sold by
reatilers.
1-230
*
* BRAND LEVERAGING STRATEGY
*
LINE
EXTENSION Minor variants
of a single
product are
BRAND
EXTENSION
Extensions
marketed
of the the
under brand
same
name name
brand to
other 1-231
*
*
LEVERAGING ALTERNATIVES
*
LINE BRAND
EXTENSIO
Horizontal Vertical Another
EXTENSIO
Range Co-
Extension
NS Extension Product
Class
NS
Brand Branding
1-232
*
* BRAND LEVERAGING IN UPSCALE AND VALUE
* MARKETS
Core New
Bran Up-
d Market
New Brand
Core
Down- Bran
Market
* ONE OF THE MOSTd
Brand 1-233
*
* MOVING DOWN IS EASY BUT RISKY
*
Affects perceptions of the brand –perhaps even more
significantly than other brand management options.
We are influenced more by
unfavorable information than by favorable
information.
The brand’s ability to deliver self-expressive benefits
may be reduced.
Potential cannibalization problem.
Potential failure risk.
Problem when the value entry is perceived to be
inconsistent with the quality expected from the
brand.
1-234
*
* MOVING DOWN IS EASY BUT RISKY
*
Affects perceptions of the brand –perhaps even more
significantly than other brand management options.
We are influenced more by
unfavorable information than by favorable
information.
The brand’s ability to deliver self-expressive benefits
may be reduced.
Potential cannibalization problem.
Potential failure risk.
Problem when the value entry is perceived to be
inconsistent with the quality expected from the
brand.
1-235
*
* MOVING A BRAND UP
*
THE DRIVERS
•Enhanced Margins at the
High End
•Energy
THE &DAMAGING
RISKS OF Vitality THE CORE
BRAND
•Enhance Credibility and
•Lacks Credibility
Prestige of
•Lacks Self-Expressive
the Brand 1-236
*
* BRAND EXTENSION DECISIONS
*
Extending into Different
THE
Product Classes
◊Identify product categories for
PROCESS
which the product fits and adds
value.
Determine existing brand
associations and the
brand identity.
◊Identify related product
category opportunities 1-237
*
* SEVEN DEADLY SINS OF BRAND
* MANAGEMENT*
Component co-branding
(Volvo and Michelin)
Same company co-branding
Alliance co-branding
(Delta and American Express)
Ingredient co-branding
1-239
*
* BRAND LEVERAGING EVALUATION
* CRITERIA
Brand Relevance/Differentiation
Capabilities/Perceived Value Match
Market/Segment Opportunity
Cannibalization Risks
Potential for Core Brand Damage
Clarity of Product Offerings
Estimated Financial Performance
Brand Equity Impact
1-240
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 11
PRICING STRATEGY
Strategic Role of Price
Analyzing the Pricing
Situation
Selecting the Pricing
Strategy
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights
*
* Pricing Decisions are
*
Creating Major Challenges
Examples Include:
for Many Companies
Threats to major airlines by discount carriers.
Pressures on drug companies to reduce prices.
Intense price competition on supermarket chains
by Wal-Mart and Costco.
Aggressive discounting by U.S. automobile
producers to retain market share.
Threats to strong brands by counterfeit products.
1-243
*
*
* STRATEGIC ROLE OF PRICE
…requires that we put pricing at the beginning of the
process. For example, a multi-part marketing
strategy usually is required in value-based pricing.
Airlines’ complicated service packages with arcane
restrictions, and their multiple channels of
distribution must support pricing that reflects
different values of the service to different segments.
Without such a strategy, airlines would capture a
much smaller portion of the value they have the
potential to create.
Positioning Strategy
Product Value-Chain
strategy strategy
Pricing
strategy
Promotion
strategy
1-245
*
* Pricing Situations
*
Signal to the
Buyer
Improving Financial
Performance
1-247
*
* Pricing Strategy for New
* and Existing Products
Set Pricing
Objectives
Analyze the
Pricing Situation
Select Pricing
Strategy
Determine Specific
Prices and Policies
1-248
*
*
*
Examples of Pricing
Objectives
Gain market position
Achievefinancial
performance
Product positioning
Stimulate demand
1-249
*
*
* ANALYZING THE PRICING
SITUATION
Customer Price
Sensitivity
Competitors’ Likely
Responses
1-250
*
*
* Customer Price
1. How large is the Sensitivity
product-market in terms of buying
potential?
2. What are the market segments and what market target
strategy is to be used?
3. How sensitive is demand in the segment(s) to
changes in price?
4. How important are nonprice factors, such as features
and performance?
5. What are the estimated sales at different price levels?
1-251
*
* Buyers’ Perceptions of Value Offerings
of Brands A-E
*
Perceived
Value Superior Value Zone
D A
B
E
C
Inferior Value Zone
Perceived Price
1-252
*
*
* Cost Analysis for Pricing
Decisions
• Determine the components
of the cost of the product.
• Estimate how cost varies with
the volume of sales.
• Analyze the cost competitive
advantage of the product.
• Decide how experience in
producing the product affects
costs.
• Estimate how much control
management has over costs.
1-253
*
*
* Competitor Analysis
Which firms represent the most direct
competition
Competitor’s positioning on a relative price
basis
Competitors’ success with their pricing
strategies
Competitors’ probable responses to
alternative price strategies
1-254
*
*
* SELECTING THE PRICING
STRATEGY
How much flexibility
exists?
How to position price
relative to costs?
How visible to make the
price of the product? 1-255
*
*
* Determinants of Pricing
Flexibility
Demand
Pricing
Competition Demand-Cost Gap Objectives
Costs
1-256
*
*
*
Determining Feasible Prices
Price too high; little or
no demand
Price Ceiling
Range of feasible prices
Neutral strategy
(same as competition)
Signaling
Source: Thomas T. Nagle, “Price Competition,” Marketing Management, Vol. 2, No. 1, 38-45.
1-259
*
*
* Illustrative Price
Strategies
Active
strategy
Low- High-
active active
Low strategy strategy High
relative relative
price price
Low- High-
passive passive
strategy strategy
Passive
strategy
1-260
*
* DETERMINING
*
SPECIFIC PRICES AND
POLICIES
Selecting Specific Prices
1-261
*
*
*
Basis of Determining
Specific Prices
Cost Competition
Demand
1-262
*
*
* Establishing Pricing Policy
Policy and Structure
Discounts, allowances, returns, and other
operating guidelines
Pricing Structure
Product mix and line pricing relationships
How individual items in the line are priced
in relation to one another
1-263
*
* Managing Pricing Strategy
*
1. The more that the competitors and customers know about your
pricing, the better off you are. In an information age, it is necessary to
be transparent about prices and the value of a firm’s offerings.
Source: Adapted from Kent B. Monroe, Pricing, 3rd ed. (Burr Ridge, IL.: McGraw-Hill/Irwin, 2003) 624-6.
1-264
*
* Managing Pricing Strategy
*
5. Prices should be set according to customers’ perceptions
of value.
6. Pricing for new products should start as soon as product
development begins.
7. The relevant costs for pricing are the incremental avoidable
costs.
8. A price may be profitable when it provides for incremental
revenues in excess of incremental costs.
9. A central organizing unit should administer the pricing
function. Generally, it is better to avoid letting salespeople
set price, especially without access to profitability
information and specific training in pricing and revenue
management.
10. Pricing management should be viewed as a process and
price setting as a daily management activity, not a once-a-
year activity.
1-265
*
*
*
Special Pricing Situations
Price Segmentation
Price Flexibility
1-266
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 12
Promotion, Advertising,
and Sales Promotion
Strategies
Promotion Strategy
Advertising Strategy
Sales Promotion Strategy
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
*
* PROMOTION
STRATEGY
The Composition of Promotion Strategy
Developing Promotion Strategy
Communications Objectives
Deciding the Role of the Promotion Components
Determining the Promotion Budget
Promotion Component Strategies
Integrating and Implementing the Promotion Strategy
Effectiveness of Promotion Strategy
1-269
*
* Promotion Strategy:
*
1-270
*
*
* Composition of Promotion
Strategy
Interactive/Internet
Marketing
Direct Advertising
Marketing
Promotion
Components
Personal Sales
Selling Promotion
Public
Relations
1-271
*
* U. S. Annual
*
Expenditures (billions)
$200
0
1-272
*
* INTERNET Brand Advertising On-Line Has
* FEATURE Taken Off
SEARCH WORKS
Google and Yahoo! Have demonstrated the power of the Web by using customers’ search
queries to connect them with advertisers.
CUSTOMERS ARE ONLINE
More than half of American households have always-on Net connections. And the Web
reaches millions at the office. The Big Three portals—Yahoo, AOL, and MSN—reach a
combined 50 million a day–-twice the TV audience of a World Series game.
VIDEO ROCKS
The adoption of broadband, which can handle videos, lets advertisers put TV-like ads online.
Longer spots by BMW and Adidas have reached cult status. As demand for video soars,
portals sell choice slots in advance, much like TV’s up-front sales.
FEEDBACK IS INSTANT
Marketers and online publishers have tools to track an ad’s performance in real time allowing
them to make quick adjustments if customers aren’t clicking. This turns the Net into a vast
marketing lab. And as video grows, it becomes a test bed for TV ads.
CUSTOMERS LEAVE TRAILS
It was an empty promise during the dot-com days, but now advertisers have the technology
to follow customers, click by click, and to hit them with relevant ads. The upshot? No wasted
money peddling dog food to cat owners.
Source: Stephen Baker, “The On-Line Ad Surge,” BusinessWeek, November 22, 2004, 79. 1-273
*
* DESIGNING THE PROMOTION
MARKET TARGETING AND POSITIONING
* STRATEGY
STRATEGIES
COMMUNICATION
OBJECTIVES
ROLE OF PROMOTION
COMPONENTS
Advertising Sales Public Personal Direct Marketing Interactive/ Internet
Promotion Relations Selling Marketing
PROMOTION
BUDGET
Coordination
PROMOTION COMPONENT with Product,
STRATEGIES Distribution,
and Price
INTEGRATE AND IMPLEMENT PROMOTION Strategies
COMPONENT STRATEGIES
EVALUATE EFFECTIVENESS OF
PROMOTION STRATEGY
1-274
* Communications
*
* Objectives
Need Recognition
Finding Buyers
Brand Building
Evaluation of Alternatives
Decision to Purchase
Customer Retention
1-275
*
* Deciding the Role of the
* Promotion Components
Expected contribution for each of the
promotion components.
Which communication objective(s) will be
the responsibility of each component?
What part of the budget will go to each
component?
1-276
*
* Factors Guiding the Role
*
Assigned to Each Component
Market Target(s)
Desired Positioning
Role of Promotion in Positioning
Product Characteristics
Stage of Life Cycle
Situation Specific Factors
1-277
*
* Determining the Promotion
*
Budget
Objective and
Task
Follow the
Competition
1-278
*
*
* Budgeting Methods
Features Limitations
Percent of Sales Percent of Sales
Fixed percent of sales, often based on The method is very arbitrary. Budget may
past expenditure patterns. be too high when sales are high and too
low when sales are low.
1-279
*
* Integrating and
*
Implementing Promotion
Strategy
Avoiding fragmentation
Difficulty in evaluating productivity
Differences in priorities
Separate organizational units
Assigning integration responsibility
1-280
*
* Illustrative Factors Affecting
* Promotion
Advertising/ sales
Strategy
Balanced Personal selling
promotion driven driven
1-281
*
*
* Promotion Strategy
Issues
Expense/Response Relationships
Allocation
Impact on Brand Equity
Integration of Promotion Components
Effectiveness of the Strategy
1-282
*
*
* ADVERTISING
STRATEGY
Setting Objectives and Budgeting
Creative Strategy
Media/Scheduling Decisions
Role of the Advertising Agency
Program Implementation and Measuring
Effectiveness
1-283
*
* The Internet is Shifting the Power Position
* to the Customer
* How the Money is Spent is Changing.
* The Amount Spent on Internet Advertising is a Small
Fraction of the Total, but Very Powerful and Growth
is Accelerating.
* Consumers Spend 10 hrs/person/day with Media of
all Kinds—How Much is Media Multi-Tasking?
* Ad Spending Versus Consumers’ Time Allocations.
* Advertising Agency Consolidation and
Reorganization—the Big 4.
* Do Companies Recognize the Revolutionary
Implications of Newly Empowered Consumers?
* The Internet Will be the Most Prominent Medium in
the Lives of the 18-34 Age Group.
Source: The Economist, “Crowned at Last: A Survey of Consumer Power,” April 2, 2005, 1-16.
1-284
*
* Advertising Strategy
*
Target Audience
Advertising
Objectives
Advertising Budget
Creative Strategy
Create awareness
Change attitude(s)
Increase Sales
Generate profits
1-286
* Alternative Levels for
* Setting Advertising
*
Objectives
Increasing Uncertainty
About Impact on
Purchasing Behavior
Type of Objective
• Exposure
• Awareness
• Attitude
Change
• Sales
Budget
Determination
Media/ Creative
Scheduling Strategy
Decisions
1-288
* The Vuitton Machine*
* Inside the world’s biggest, most profitable luxury
* brand
BENCHMARKING VUITTON
Brand 2003 Sales Percent Operating
Billions Change* Margin
Louis Vuitton $3.80 +16% 45.0%
Advertising
(How to communicate
intended positioning to
buyers and others influencing
the purchase.)
Television
Radio
Magazines
Online
Website
Outdoor
1-291
*
*
*
Relative access
to the target
audience
Favorable zone
Unfavorable zone
Relative cost of
reaching the target
group(s)
1-292
*
*
* Advertising Agencies in
Perspective
Fast change has come to the advertising industry.
Huge, integrated agencies face a challenging future.
Do clients want a full-service agency?
The business model is in need of change.
The basis of compensation continues to be debated and altered.
Specialists (e.g. media buying services) are being used.
Importantly, the core of the creative process is the agency.
Several methods are available to evaluate advertising results.
1-293
*
* Role of the Advertising
*
Target Audience Agency
Advertising Objectives
Advertising Budget
Creative Strategy
Advertising
Agency
Advertising Media and
Programming
1-295
*
*
*
Rating
Services
Sales and
Test Expense Analysis
Marketing MEASURING
ADVERTISING
EFFECTIVENESS
Controlled Recall
Tests Tests
1-296
*
*
* SALES PROMOTION
STRATEGY
SALES PROMOTION
1-297
*
* STRATEGY The Realities of Mail-in
FEATURE
* Rebates
* Consumers hate the hassles, companies love unredeemed rebates, and
regulators are investigating the consumer complaints.
* As much as 40% of rebates never get redeemed.
* Some 400 million rebates are offered each year with a total value of $6
billion.
* Unclaimed rebates translate into more than $2 billion of extra revenue for
retailers and their suppliers each year.
* Complex filing rules and long delays discourage consumers.
* Companies emphasize the filing processes are intended to discourage
fraud.
* The largest rebate processor monitors 10,000 addresses suspected of
submitting bogus rebates.
* Rebates offer companies an opportunity to promote small discounts
without marking the products down.
* Rebates have become very popular with computer and consumer-
electronics companies.
1-298
*
*
*
* The value of rebates has also increased.
* Regulators are intensifying their scrutiny of the companies offering
rebates.
* The developing back-lash against rebates is pushing some companies to
halt rebate strategies.
* Others are encouraging online filing.
* Fulfillment houses are revising their processing systems, using computer
technology to validate claims.
* Consumers would like mail-in rebates to go away but want the best price
they can get.
Source: Brian Grow, “The Great Rebate Runaround,” BusinessWeek, December 5, 2005, 34, 36, and 37.
1-299
*
* Sales Promotion Activities
*
and Targets
Activities include trade shows, specialty
advertising, contests, displays, coupons,
recognition programs, and free samples.
SALES
PROMOTION
TARGETS
Consumer Salespeople
Buyers
Business Value Chain
Buyers
1-300
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 13
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
* SALES FORCE STRATEGY
*
1-303
* RELATIONSHIP The Vital Role of
* FEATURE Selling at the Boeing
* Co.
During the 2000s Boeing experienced an intense competitive battle against
Airbus for control of the commercial jetliner market. Airbus was winning the
battle until 2005 when Boeing’s Asia-Pacific jet sales were $26 billion compared
to Airbus’ $9 billion.
Under a new CEO management gave salespeople much more control over selling
strategy compared to previous tight and rigid control by top management.
Boeing lost many sales to Airbus because of top management’s unwillingness to
give competent professionals flexibility in negotiating sales. Salespeople like
Larry Dickenson, Boeing’s top salesman who covers the Asia-Pacific market,
builds on over 18 years of relationships with airlines like Cathay Pacific, Quantas
Airways Ltd., and Singapore Airlines, Ltd., to negotiate winning contracts.
1-304
*
* Sales Force Strategy
Determine the role of the
* sales force in promotion
strategy
The second set of ethical issues arises from the interactions between salespeople
and their customers. These issues only indirectly involve the sales manager
because the manager cannot always directly observe or control the actions of
every member of the sales force. But managers have a responsibility to establish
standards of ethical behavior for their subordinates, communicate them clearly,
and enforce them vigorously.
Source: Mark W. Johnston and Greg W. Marshall, Sales Force Management, 7th ed., Burr Ridge, IL: McGraw-Hill/Irwin, 2003, 21.
1-306
*
* Business and Marketing Strategy
* Influences on Sales Strategy
Business Strategy
Promotion
Strategy Market
Target(s)
SALES Strategy
STRATEGY
Pricing Product
Strategy Strategy
Distribution Strategy
1-307
*
*
*
Escalating customer
Marketing expectations
productivity crisis Intense global
competition
SALES FORCE
CHALLENGES
Mergers and
acquisitions
Blurring of industry
boundaries
Technology
Advances
1-308
*
* Range of Selling Roles
*
Transactional
Selling
Consulting-Type
Relationships
1-309
*
* Defining the Selling Process
* Finding Prospects
Recruiting
Training
Effort Allocation
Organizational Design
Selling Support Activities
1-311
*
* Selecting Sales Channels to End Users
*
1-312
*
* DESIGNING THE SALES ORGANIZATION
*
Organizational Structure
Deployment of Selling
Effort
1-313
*
* Sales Force Deployment
*
* Size of the Sales Force
* Allocation of Selling Effort
Salesperson skills and effort
PLUS
Market potential
Number and location of customers
Intensity of competition
Market (brand) position of the company
1-314
*
* Designing the Sales Organization
*
Customer needs
different
1-316
* Salesforce.com Makes
INTERNET
* FEATURE People More
* Productive
Salesforce.com is an interesting example of a dot-com start-up which has
developed a successful business model supplying customer management software
over the Net for use by salespeople. A key feature of the software is that it is sold
as a service to customers at a monthly charge for each individual user.
Salesforce.com has nearly 450,000 subscribers @ 22,700 companies worldwide.
Salesforce.com illustrates how Internet information technology can enhance the
capabilities and efforts of salespeople. By replacing large up-front software
purchases with monthly service charges, Salesforce.com offers customers a
compelling value opportunity. Since this feature can be duplicated by software
competitors such as Siebel Systems, Oracle, and PeopleSoft, Salesforce.com may
have difficulty sustaining its competitive edge.
CEO Marc Benioff launched a new product initiative in 2005 intended to strengthen
Salesforce.com’s competitive edge. AppExchange is an online market place
enabling software firms and customers to trade and sell applications they develop.
There will be no charge for the eBay like service but Benioff expects to expand
demand for the firm’s software.
Source: Salesforce.com website and “An eBay for Business Software,” BusinessWeek, September 19, 2005, 78-79. 1-317
*
* Sales Force Size Example
* Sales
40
Current level
35
Maximum profit
contribution level
30
25
Gross profit
contribution
20
Selling
15 expense
10 60 70 80 90 100 110
Number of salespeople 1-318
*
*
Managing the Salesforce
*
Performance
Standards
1-321
*
*
Reinventing the Sales Organization
*
Customer
Relationships
SALES MANAGER
Performance Huddles CHALLENGES Sales Structure
Keeping Score
1-322
*
*
INTERNET STRATEGY
*
Strategy Development
Deciding Internet Objectives
E-Commerce Strategy
Value Opportunities and Risks
Measuring Internet Effectiveness
The Future of the Internet
1-323
*
* Internet Strategy Alternatives
*
Promotional
Medium
Communication Tool
Value-Chain Channel
Separate Business
Model
1-324
*
* Deciding Internet Objectives
*
1-325
*
* Designing Internet Strategy
*
1. Customer Groups Targeted
2. Value Proposition
3. Communications Strategy
4. Designing the Website
5. Structure of the Organization
6. Alliance Partners
7. Shareholder Value
8. Tracking Performance
1-326
*
* Measuring Internet Effectiveness
*
Challenging but capabilities are developing.
What should be measured and how?
Major changes are likely through trial and
error.
Alternative measures:
Ad impressions, clicks, unique
visitors, total visits, page impressions
1-327
*
* E-Tailing Finally Hits Its Stride
*
The E-tail Effect
How e-commerce is shaking up the retail landscape:
THE BIG GUNS ARRIVE
After early struggles, online sales at brick-and-mortar giants such as Wal-Mart,
Sears, and Gap are soaring. These chains are also using the Web to test new
products and move into new markets.
NICHES GO NATIONAL
More and more niche players are succeeding by offering variety rivals can’t match.
Luggage seller eBags, for example, is able to stock 12,000 styles, compared with
250 in a typical store.
SEARCH LENDS A HAND
Using Google and similar Websites, consumers can search far and wide for
specialized products – say, stainless-steel farm sinks. That’s creating markets for
lesser known brands and new merchants.
MORE PRICING PRESSURES
Shoppers are increasingly using price-comparison sites such as Shopping.com and
Shopzilla. The result: Ever more cutthroat competition for brick-and-mortar and
online stores alike.
Source: “E-Tailing Finaly Hits Its Stride,“ BusinessWeek, December 20, 2004, 36-37.
1-328
*
* The Future of the Internet
*
1-329
*
* DIRECT MARKETING
*
Kiosk
Catalogs
Shopping
Electronic DIRECT
Direct Mail
Shopping MARKETING
Radio/Magazine/ Telemarketing
Newspaper
Television
1-330
*
* Advantages of Direct Marketing
*
Socio-economic Trends
Time constraints/
convenience
Low Access Costs
Much lower than face-to-face
contact
Data Base Management
Facilitates direct marketing
initiatives
Value
An attractive bundle of value
1-331
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 14
Designing
Market-Driven
Organizations
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
* Designing market-driven organizations
*
* Trends in organization design
* Organizing for market-driven strategy
* Marketing departments
* Structuring marketing resources
* Organizing for global marketing and
global customers
1-334
*
* Designing market-driven organizations
*
* Procter and Gamble
* Global restructuring to improve innovation and
competitiveness
* Global business units for products and market
development units to tackle local market issues
* Change agents appointed to work across
business units
* Virtual innovation teams work through intranet
* Organization design supports clear strategies so
all business disciplines can work together
1-335
*
* Trends in organization design (1)
*
* The New Organization
* Traditional structures
* Centralized, vertical, “command and control”
* Organizational design shifts
* Innovation
* The knowledge-based worker
* Managing culture
* Collaborative working
* Informal networks
* Organizational diversity and external
relationships
1-336
*
* Organization costs
*
* Cadbury Schweppes - world’s largest
confectionery business
* Restructuring at cost of $900 million
* Organizational structure has become too
complex with too many overlaps
* Organizational costs account for 20% of
turnover - compared to 12% at competitors
* Reorganization is central to regaining
competitiveness
1-337
*
* Trends in organization design (2)
*
* Managing organizational processes
* Organizational agility and flexibility
* Zara
* Toyota
* Employee motivation
* “MySpace Generation”
1-338
*
*
*
Alternative Organizational
Traditional
Hierarchy
Structures
Process
Overlay
Functional
Structure
Process
Structure
Functional
Overlay Horizontal
Structure
1-339
*
* Process-based organizational structure
*
Processes that define value
e.g. knowledge management, CRM
Processes that create value
Process e.g. new product development,
Leadership innovation
Processes that deliver value
e.g. logistics, customer service,
value chain relationships
Coordination
mechanisms
to link Specialist resource groups support process
process and Managers e.g. functional departments,
resource business units, external collaborators
leadership Resource Group Leadership
1-340
*
* The Toyota way
*
* Pillar I
* Challenge
* Kaizen - continuous improvement
* Genchi Genbutsu - go and see for
yourself
* Pillar II
* Respect
* Teamwork
* EM2 - Everything Matters Exponentially
1-341
*
* The MySpace Generation
*
* Lives online - social networking sites are a
way of life
* Children of the babyboomers
* Ambitious, demanding and question
everything
* Work/life balance is very important
* Expected to be the highest maintenance
workforce in history and the most high-
performing
* “You raised them, now manage them”
1-342
*
* Organizing for market-driven strategy (1)
*
* Strategic marketing and organization
structure
* Aligning the organization with the market
* Informal lateral integration
* Integrating mechanisms
* Full customer alignment
1-343
*
* Customer-based front-end organization
*
Senior Management
Mediation
from the
center
1-344
*
* Organizing for market-driven strategy (2)
*
* Marketing functions versus marketing processes
* Marketing as cross-functional process
* The challenge of integration
* Marketing’s links to other functions
* Finance/accounting
* Operations
* Sales
* R&D
* Customer service
* Human resource management
* Approaches to achieving effective integration
1-345
*
* Marketing departments
*
* Centralization versus decentralization
* Integration or diffusion
* Contingencies for organizing
* Evaluating organizational designs
1-346
*
Organizing Concepts
*
*
Centralized Formalized
Nonspecialized
BUREAUCRATIC TRANSACTIONAL
Internal External
(hierarchical) (market)
Organization Organization
of Activity of Activity
ORGANIC RELATIONAL
Decentralized
Nonformalized
Specialized
1-347
*
* Structuring marketing resources (1)
*
* Structuring issues
* Functional organizational design
* Product-focused design
* Product/brand management
* Category management
* Venture teams
* New product teams
* Market-focused design
* Matrix design
1-348
*
*
Traditional Marketing Organization Designs
*
Functional
TRADITIONAL Product-
Matrix
DESIGNS Focused
Market-
Focused
1-349
*
* Product-Focused Structure
*
1-350
*
* Marketing Organization Based on a
* Combination of Functions and Products
1-351
*
* Structuring marketing resources (2)
*
* New marketing roles
* New marketing specializations
* Venture marketing organizations
* Partnering with other organizations
* Networked organizations
1-352
*
* New organizational structure for marketing
*
Vice President
of Marketing
Director of Chief
Product Customer
Management Officer
1-353
*
* The Marketing Coalition Company
*
Source: Ravi S Achrol, “Evolution of the Marketing Organization: New Forms for Turbulent
Environments”, Journal of Marketing, October 1991, 88.
1-354
*
* Organizing for global marketing and
* global customers
1-355
*
* Global account management at Microsoft
*
* Single executive/team in charge of single
customer and all global needs
* Restricted to customers by revenue size but
also willingness/ability to partner
* Senior managers encouraged to develop
relationships with senior managers at global
accounts
* Global business managers work across
business units, functions and organizations
1-356
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 15
Marketing Strategy
Implementation
and Control
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
*
* Marketing strategy implementation and
* control
1-359
*
* Marketing strategy implementation and
* control
1-360
*
* The strategic marketing planning process
*
* The marketing plan guides
implementation
* Contents of the marketing plan
* Managing the planning process
1-361
*
* Strategy and planning relationships
*
MARKETING STRATEGY
Annual Annual
Annual Marketing Marketing
Marketing Planning Planning
Planning
Implementation Implementation
Control and Evaluation Control and Evaluation
Revision Revision
1-362
*
* MARKETING PLAN
* OUTLINE
I. Strategic Situation Summary
Summarize the key points from your situation analysis (market
analysis, segments, industry/competition) in order to recount the
major events and provide information to better understand the
strategies outlined in the marketing plan.
II. Market-Targets and Objectives
The market target may be defined demographically (key
characteristics only), geographically, or in social/economic terms. Each market target should
have needs and wants that differ to
some degree from other targets. These differences may be with
respect to types of products purchased, use situation, frequency
of purchase, and other variations that indicate a need to alter the
positioning strategy to fit the needs and wants of each target.
An objective is a quantified goal identifying what is expected
when. It specifies the end results expected. The objectives should
be written for each target market. Objectives should also be
included for the following program components: (1) product,
(2) price, (3) distribution, (4) promotion (salesforce, advertising,
sales promotion, and public relations), and (5) technical services.
1-363
*
* MARKETING PLAN
* OUTLINE
III. Positioning Statements
1-364
*
* IV. Market Mix Strategy for Each
* Market Target
A. Product Strategy
Identify how each product fits the market target. Other issues
that may be addressed would be new product suggestions,
adjustments in the mix of existing products, and product
deletion candidates.
B. Price Strategy
The overall pricing strategy (I.e., competitive, premium-priced,
etc.) should be identified along with a cost/benefit analysis if
applicable. Identify what role you want price to play, i.e.,
increase share, maintenance, etc.
1-365
*
* IV. Market Mix Strategy for Each
* Market Target
C. Distribution Strategy
Describe specific distribution strategies for each market
target. Issues to be addressed are intensity of distribution
(market coverage), how distribution will be accomplished, and
assistance provided to distributors. The role of the sales force
in distribution strategy should also be considered.
D. Promotion Strategy
Promotion strategy is used to initiate and maintain a flow of
communication between the company and the market target.
To assist in developing the communications program, the
attributes or benefits of our product should be identified for
each market target. How our product differs from competition
(competitive advantage) should be listed. The sales force’s
responsibilities in fulfilling the market plan must be integrated
into the promotion strategy. Strategies should be listed for
(1) personal selling, (2) advertising, (3) sales promotion, and
(4) public relations.
1-366
*
*
*
E. Marketing Research
Analytical Techniques
Process Procedures
Dimension Systems
Planning Models
1-368
*
* Implementing the strategic marketing plan
* (1)
* Implementation process
* Structural issues
* Behavioral issues
* Building implementation effectiveness
* Organizational design
* Incentives
* Communications
* Internal marketing
* Comprehensive approach to improving
implementation
1-369
*
* Implementation process
*
Activities to
be implemented
1-370
*
* Improving Implementation
*
Skilled
Implementers
Effective Organizational
Communications Design
Improving
Implementation
Internal Incentives
Marketing
1-371
*
* Internal Marketing
*
Strategy
Plan
Internal External
Marketing Marketing
Program Program
1-372
*
* Comprehensive Approach to Improving
* Implementation
Financial
Measures
BALANCED
Learning
and
SCORECARD Customer
Innovation MANAGEMENT Measures
Measures CONTROL
SYSTEM
Internal
Business
Process
Measures
1-373
*
* Implementing the strategic marketing plan
* (2)
1-374
*
* Strategic marketing evaluation and
* control (1)
1-375
*
* Evaluation Activities
*
Find New
Opportunities
or Avoid
Threats
Solve Keep
Specific Performance
Problems on Target
1-376
* Evaluation and control
*
* Conduct
strategic
marketing
audit
Select performance
criteria and
choose relevant
marketing metrics
Obtain and
analyze
information
Assess
performance and
take necessary
action
1-377
*
* Strategic marketing evaluation and
* control (2)
1-378
*
*
Strategic Marketing Audit
*
1-380
*
* Marketing metrics (A)
*
* Marketing metrics focusing on operations
* Competitive and customer metrics
* Profitability metrics
* Product and portfolio metrics
* Customer profitability metrics
* Sales and channel metrics
* Pricing metrics
* Promotion metrics
* Advertising, media and web metrics
* Financial metrics
1-381
*
* Marketing metrics (B)
*
* Brand equity metrics
* Familiarity
* Penetration
* What they think about the brand
* What they feel
* Loyalty
* Availability
* Innovation metrics
* Strategy
* Culture
* Outcomes
1-382
*
* Marketing metrics (C)
*
* Internal market metrics
* Awareness of corporate goals
* Perceived caliber of employer
* Relative employee satisfaction
* Commitment to corporate goals
* Employee retention
* Perceived resource adequacy
* Appetite for learning
* Freedom to fail
* Customer-brand empathy
* Internal process metrics
* E.g., internal communications
1-383
*
* Marketing performance assessment (2)
*
* Interpreting performance measurement results
* Opportunities and performance gaps
* Problem/opportunity definition
* Interpreting information
* Determining normal and abnormal variability
* Deciding what actions to take
1-384
*
* Global issues for planning,
* implementation and control
1-385