Skript Strategic Sales and Marketing WS 2012

Strategic Sales and Marketing
Bachelor Degree, Major Seminar Prof. Dr. Ralf Schlottmann

Winter Semester 2012 /13
Table of contents (I)
Introduction 1.1 Trends in the strategic behavior of industrial firms 1.2 Dimensions of market oriented strategies 1.3 Strategic Planning Process 1.4 SWOT analysis as starting point Definition of Sales and Marketing Targets 2.1 Role of Sales and Marketing in the Planning Process 2.2 Structuring targets 2.3 Sales and Marketing Targets 2.4 Case Study Developing Market Strategies 3.1 Growth Strategies 3.2 Positioning Strategies 3.3 Market Targeting 3.4 Spatial Strategies 3.5 Strategic Combinations and competitive strategies 3.6 Case Study
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Table of contents (II)
Sales Partner Strategies 4.1 Sales channel strategy 4.2 Cooperation models with sales partners 4.3 Case Study
Analysis tools for strategic planning 5.1 Key Performance Indicators 5.2 Gap Analysis 5.3 Portfolio Analysis 5.3 Case Study
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Table of contents (II) / Reference list
Reference List
Becker, J.: Marketing-Konzeption, 9. Auflage, Mnchen 2009 Homburg, Ch.; Schfer, H.; Schneider, J.: Sales Excellence, 7. Auflage, Wiesbaden 2012 Kotler, P.; Keller, K.L.: Marketing Management, 14th edition, London 2012 Kotler, P. ; Keller, K.L.; Bliemel, F.: Marketing Management, 12. Auflage, Mnchen 2007 Meffert, H.; Burman, C.; Kirchgeorg, M.: Marketing, 11. Auflage, Wiesbaden 2012 Winkelmann, P.: Vertriebskonzeption und Vertriebssteuerung, 5. Auflage, Mnchen 2012
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1 Introduction
1.1 Trends in the strategic behavior of industrial firms
Internationalisation Limits of growth in the home country Opening up new markets Customers are pursuing internationalisation strategies too
Changing retail formats New sales channels such as E-commerce emerge Significant changes in the retail structure require sales strategies, in particular sales channel strategies
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Figure 1-1: Trend in retail landscape

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Source: based on Handelsmonitor
Chnage in the future

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Airport / Railway Electronic Shopping Factory Outlet
Specialised shops Urban Entertainment Center Petrol stations Discounters Convenience Stores Shopping tourism Agricultural Directsales Supermarkets
Delivery services Fan Shops Second-Hand 2 Corner Shops

(Tanta-Emma Lden)
Warehouses
1 1 2 3 4 5
Relevance today
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1 Introduction
Extreme positions in working together with retail channels Industry and retail find new forms of cooperation or Both fight for marketing leadership in the retail channels
Bigger and bigger and faster and faster vs. highly specific Firms are forced to give themselves their own profile Options: Serving mass markets (bigger and faster) Working on niches (very specific segments)
Diversification vs. Concentration on the core businesses / Streamlining of business units
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Main functions in sales and marketing
Sales Head of sales (for region, sales channel, product line,.) Key Account Manager Sales Representative Sales Support
... Marketing Product Manager Brand Manager Market Research Manager Communication Manager
Trade Marketing manager Customer relationship manager E-Business manager

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1 Introduction
1.2 Dimensions of market oriented strategies
Figure 1-2: Dimensions of market oriented strategies
Dimensions of a market oriented strategies
On which customers do we want to focus?
Which products shall be offered mainly?
How does the company want to act in the market? Building up and extending competitive advantages
Customer focus
Product focus
Source: based on Steffenhagen, H., Marketing Eine Einfhrung, 6. Aufl., Stuttgart, Berlin, Kln 2008, p. 78
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These three dimensions can be divided into two parts: 1. Which shall be the companys markets (strategic business units)? 2. How do we want to work on these markets (competitive advantages of the company)?
ad 1) Definition of the companys markets First of all a company has to define Product Portfolio: on which product segments will the company concentrate? Customer Portfolio: which customer segments shall be targeted? see figures 1-3
These are then aggregated to Strategic Business Units (SBU) SBUs should be defined on several dimensions, see figures 1-4 and 1-5
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1 Introduction
Figure 1-3: Planning company portfolio, example security market
Customer Segments
Flats subway Power Houses commer- Industrial Shops munici- fairs/ stadiums plants cial plants departm. pal buildings stores services Air traffic
Total
Securing goods Admission control Video control Product Segments WS 2012/13 Fire alarm Fire brigade In-house-offices Reception Consulting Total
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1 Introduction
Figure 1-4: Framework to define strategic business units

Potential Needs
Scope for problem-solving
Potential demand of the customers
Potential customer groups Target group-oriented technology Technologies
Source: based on Kotler, P., Keller, K.L., Bliemel, F., Marketing-Management, 12. Aufl., Mnchen 2007, p 95
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1 Introduction
Figure 1-5: Defining the business example publishing market

Potential Needs
Establishing contacts (e.g. Address services) News Practical business material Further education Specialized education General education Entertainment Private household Householdoverlapping groups (e.g. clubs) Private businesses Public education system Public administration
Print media Acoustic media Audio & visual media Interactive media of the telecommunication
Potential customer segments
Usable technologies
Source : based on Kotler, P., Keller, K.L., Bliemel, F., Marketing-Management, 12. Aufl., Mnchen 2007, p. 95
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1 Introduction
ad 2) How do we want to work on these markets / what are the competitive advantages of the business? Issues to be adressed: - How do we want to behave towards competition and other market participants? - How do we want them to perceive us? The objective is to create competitive advantages!
If a company wants to be more successful than the competitors in selected product and customer segments, it has to perform in one or more ways the competitors cannot or will not match Sources of competitive advantage can result either from internal capabilities which enable it to compete successfully or goodwill in customers perspective see figure 1-6
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1 Introduction
Figure 1-6: Sources of competitive advantage
Competitive Advantages/ Disadvantages can be caused by...
... strengths / weaknesses from the customers point of view
... strengths / weaknesses concerning capabilities/ preconditions
Customers (dont) relate certain performance criteria above average to us, which are important to their supplier-preferences
We have (not) got internal capabilities / preconditions which enable us to compete successfully
Source: Steffenhagen, H., Marketing Eine Einfhrung, 6. Aufl., Stuttgart, Berlin, Kln 2008, p. 91
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1 Introduction
Demands to strengths from customers point of view
1. Important i.e. they must refer to a criteria which is important for the customers
2. Perceived, i.e. the advantage must be perceived by the customer as such
3. Durable i.e. the advantage can not be caught up by competition easily
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1 Introduction
Figure 1-7: Evaluation of the competitive position of a company, example mobile operator
Importance: Evaluation: from 1 = not important from 1 = very bad to 10 = very important to 10 = very good
Importance Quality of connection / Network Price / Tarif and offer Mobile phones Mobile Internet CRM / Service Invoice / Billing
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Evaluation of company
Competitor 1
Competitor 2
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1 Introduction
Figure 1-8: Example of competitive position of a mobile operator

Quality of connection/network Price / Tarif and offer +
Relative Importance
Mobile phones Mobile Internet
CRM / Service Billing / Invoice

Ideal positioning
Relative Performance
+
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Relevance of factors for company success
Decisive are the strengths / weaknesses as the customers see and value them (external view) but: strengths only results in sustainable success, if they are based on internal abilities / preconditions The strengths regarding the abilities / requirements are at least as decisive as the external view due to a lasting success
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1 Introduction
1.3 Strategic Planning Process
Systematic marketing-planning is not very popular and has to manage several resistances at the beginning because .. the current processes seem to be convenient for some managers because they are responsible for their success and they expect the same for the future ... intuition and decisions off-the-cuff have been obviously successful ... Lack of pressure to change: Things are doing fine (enough?) ... systematic procedure takes a lot of time and effort
Nevertheless a marketing-plan and a marketing-concept are very common in many firms, especially in bigger ones.
And Marketing decisions are so complex that it is impossible to make them in a wellfounded way without an underlying system!
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1 Introduction
Marketing Concept: Conclusive plan which is geared to certain direction parameters (objectives) and which summarizes the fundamental room for maneuver (strategy) and the necessary operative actions (instruments)
Systematic strategic planning of the individual SBUs ideally follows a defined planning process see figure 1-9
Structure of lectures is based on this: Chapter 1.4: Chapter 2: Chapter 3/4: Chapter 5: SWOT analysis as starting point Sales and Marketing targets Sales and Marketing Strategies Tools for selecting strategies
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1 Introduction
Figure 1-9: Elements of a Marketing Concept
Levels of the Concept:
Fundamental Questions:
1st level Marketing Targets (= Determination about the wishful places) 2nd level Marketing Strategies (= Fixing the Route)
Where do want to go to?
How do we get there?
3rd level
Marketing Mix (= Selecting the Vehicles)
What do we need to employ for this?
Source: Becker, J.: Marketing-Konzeption, 9. Auflage, Mnchen, 2009, p. 4
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1 Introduction
Figure 1-10: Strategic Planning Process
External environment (opportunity & threat analysis)
Business Mission
Goal formulation
Strategy formulation
Program formulation
Implementation
Feedback + control
Internal Environment (strengths/ weaknesses analysis)
Source:
Kotler, P. / Keller K.L.: Marketing-Management, 14th edition, London 2012, p. 70
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1 Introduction
1.4 SWOT analysis as a starting point
Identification and evaluation of Opportunities and Threats of the market environment (external view)
Determining Strengths and Weaknesses of the company (internal view)
Bringing together internal and external view in a portfolio
Deduction of strategic options

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1 Introduction
Figure 1-11: Five Forces Model by Porter Threat of potential entrants
Power of suppliers
Rivalry
Power of buyers
Threat of substitutes
Source: Porter 1999, p. 50
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1 Introduction
Figure 1-12: Strengths and weaknesses profile

EVALUATION major strength Marketing Company reputation Market share Customer satisfaction Product quality Service quality Innovation effectiveness Pricing effectiveness Finance Cash flow ROI Manufacturing Economies of scale Ability to produce on time Capacity Organization Visionary, leadership dedicated employees
Source: based on Kotler, P. / Keller K.L.: Marketing-Management, 14th edition, London 2012, p. 74
IMPORTANCE minor Major HI weakness weakness MED LOW
minor strength
neutral
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1 Introduction
Figure 1-13: SWOT analysis External factors
Internal factors
Opportunities
Threats
Strenghts
Do we have the strengths to use the chances coming up in the market?
Do we have the strengths to manage the upcoming threats?
Weaknesses
Which opportunities do we miss due to our weaknesses?
Which risks do we face due to our weaknesses?
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2 Sales and Marketing Targets

2.1 Role of Sales and Marketing in the Planning Process
Figure 2-1: Different roles of marketing and sales Typical constellations of division of competences between marketing and sales 1: Marketing as service department of Sales 47% Leading strategic and operative role 2: equal weight between Marketing and Sales 33% Responsible for prices and sales 3: Sales as executing department of Marketing 20% Account manager
Share Role of Sales
Role of Marketing
Marketing Services
Responsible for product management and advertising
Leading strategic and operative role
Source: based on Homburg / Jensen / Klarmann 2005, p. 6
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2.2 Structuring of targets
Definition target:
intended result of ones own actions
Essential to the realization of every marketing-concept is a market-oriented planning of the targets
For target structuring there needs to be considered 1. Spectrum of targets 2. Relations between targets 3. Order of targets see figures 2-2, 2-3, 2-4
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Figure 2-2: Spectrum of company targets Market performance Product quality Service quality Product range competence Financial Creditworthiness Liquidity Capital structure Environmental protection Reduction of emissions Reduction of use of natural resources Recycling quotas
Market position Revenue Market Share New markets
Power and prestige Independence Image Political influence Societal influence
Social Employee satisfaction Income and social security Social integration
Profitability Profit Margin Return on equity

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Figure 2-3: Relations between targets

O1 O1
O2
O2
a) Complementary relation
O1 O1
b) Competing relation
bzw.
O2
O2
c) Indifferent relation
Source: Becker, J.: Marketing Konzeption, 9. Auflage, Mnchen, 2009, p.21
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Figure 2-4: Target Pyramid
Means-endrelationship Increasing concretion of the targets
Business Mission CorporatePolicies & Practices Corporate Identity Superior targets of the company Targets for functional areas (Marketing and Sales) Intermediate targets (business units) Sub targets (Marketing-Mix) Increasing quantity of targets
Superior targets
Operative targets
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Business Mission
specifies business purpose / gives a frame for maneuver
A corporate mission is a long term vision of what the business is or is striving to become. The basic issue is: What is our business and what should it be? Starting point of each company and marketing-planning process, sense giving function for the company and description of the corporate current situation Basic questions:
What are we? Why do we exist? What do we stand for? In what do we believe?
http://www.pg.com/en_UK/company/purpose-and-people.shtml http://www.bmweducation.co.uk/coFacts/view.asp?docID=26

Corporate Policies / Practices and Corporate Identity refers to commitment vs. societal-, economic and competitive order and also to basic behaviour towards employees, customers, suppliers, capital owners, competitors and public moral concept of the company Examples: http://www.pg.com/en_UK/company/purpose-people/purpose-values-and-principles.shtml http://www.unilever.de/ueberuns/grundsaetze/?WT.LHNAV=Grunds%C3%A4tze
Distinction between corporate policies / practices and corporate identity is quite difficult to
find in the real world. In fact, in many cases the sum of corporate policies / practices makes up the corporate identity.
Superior targets of the company In todays markets an avowal of long-term profit is matter of course for the companies
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Figure 2-5: Operationalisation of targets

Operationalising targets determining
kind of target
reference to product segment
reference to target group
extent of target
reference to timing
What do I want to achieve? Content of the desirable results see 2.2
With which product, which product lines? Referring to a certain brand or product line the company offers
To whom, In which groups of customers do I want to achieve this?
How much do I want to Until when shall the target be achieve? reached? Aspiration level with respect to value or In which period volume shall the target be reached? Options: - fix figures, hence limited extent of target - min. or max. target
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2.3 Sales and Marketing Targets
1. Targets concerning the position within the market (market share/distribution)
a.
Market Share targets
company's turnover 100 total turnover of all vendors in the market company's sales volume 100 market share in terms of quantity = total sales volume of all vendors in the market Number of customers 100 field share = Total number of relevant customers market share in terms of value =
For the right evaluation of the own market position it is necessary to determine the market share in terms of quantity and value
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b. Distribution targets Standard for the products market penetration (ubiquity)

Numeric distribution level = Number of retailers which sell a product / brand 100 Total number of retailers which sell the class of products Turnover of the retailers which sell a product / brand 100 Total turnover of all retailers which sell the class of products
Weighted distribution level =
These data are evaluated regularly by panel interviews Panel: Survey that is done regularly with a stable group of economic units e.g. companies, retailers etc. with the same topic Study objective: Investigating changes in the market or in behavior patterns
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Figure 2-6: Relation between the development of the distribution and the market share
Periods** Distr. num./gew. * in %. Brand A Brand B Brand C Brand D Brand E Market Share in % Brand A Brand B Brand C Brand D Brand E
* Distribution numeric / weighted ** J/F: January / February .
Source: Becker, J.: Marketing Konzeption, 9. Auflage, Mnchen, 2009, p.68
J/F 49/81 86/98 20/44 11/46 5/24
M/A 49/77 83/97 21/44 11/44 5/28
M/J 56/85 83/97 19/46 11/46 5/20
J/A 53/84 85/97 17/49 11/50 5/19
S/O 53/84 89/99 18/47 12/46 8/32
N/D 57/88 88/98 17/46 13/52 8/36
26 49 12 5 2
29 46 12 5 2
25 50 12 4 1
29 43 13 9 1
28 45 13 6 2
30 44 10 6 2
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Figure 2-7: Example for an Asymmetrical Market and Sales Volume Profile
Market Structure Regional / sectoral submarkets A B C D E F G Market share below average Explanations: Relation market A to G is 1:6 Relation market share A to G is 12:1 Sales Structure of Company Y
market share (17 %)
%
Share of the total market Source
%
Market share
35
30
25
20
15
10
10
20
30
40
50
60
70
Becker, J.: Marketing Konzeption, 9. Auflage, Mnchen, 2009, p. 69
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2. Price Position targets
attempt to fix a specific price positioning Most of the product-markets can be linked up with one of these price classes: high-priced class (Premium-brand) consumer price class (classical branded article) low-priced class (no frills products)
see figure 2-8
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Figure 2-8: Market Levels and Price Classes of Beverage Industry incl. Market Shares (volume)
Market Shares Market Levels Price classes (in )
Upper market
20 %
15,75 and more
Medium market
55 %
13,75 15,74
Lower market
25 %
Up to 13,74
Source:
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Every company that wants to pursue a clear marketing strategy has to focus on one market level it wants to occupy Fundamental standard for the orientation of the firms marketing strategy Central Orientation for the whole use of the marketing mix as well
3. Brand Positioning (Image and brand awareness) Image: related to how customers see either a product or a company, i.e. product image and company image Particularly in saturated markets a strong brand position and image is a key success factor, especially to reach a price premium
Brand awareness: is fundamental for a strong image brand awareness influences the allocation of certain features to a brand

Correlation between awareness and image:
The following chain of impacts is supposed to be true: Brand awareness Brand sympathy Brand usage
Four typical situations for the status of a brand are possible: see figure 2-9 see figure 2-10
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Figure 2-9: Four Typical Situations for the Status of a Brand

Situation A: Balanced gradation Situation B: Low sympathy backlog
awareness sympathy usage
Situation C: Low user-rate relating to the sympathy potential
Situation D: Low rate of sympathizers and users relating to the awareness potential awareness sympathy

Source: based on Becker, J.: Marketing Konzeption, 9. Auflage, Mnchen, 2009, p. 78
usage
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Figure 2-10: Differentiated brand status of selected brands

Brands A B C D E User 36 22 17 10 8 Sympathizer 42 32 28 16 15 Being aware 93 87 66 43 41
Values in % 100 90 80 70 60 50 40 30 20 10 0 E A,B C,D,E

Source:
Being aware
Sympathizers User
Brands
= classical brands like 4711, Tosca = modern (life-style) brands like Janine D., My Melody, Inspir
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4. Purchasing range and -intensity
purchasing range: To how many % of the relevant target group do you really get in touch? number of buyers per segment
purchasing intensity: Quantity per purchase?
Example (food-submarket): see figure 2-11
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Figure 2-11: Purchasing Range and Intensity for Two Competing Brands in a Grocers shop
Brands
Purchasing Range (in % of all panel-households)
Purchasing intensity (quantity/week)
A B
83 46
250 g 625 g
Source:
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5. Customer Satisfaction Customer satisfaction is an important key target as ... Usually only satisfied customers become regular customers ... Caring for regular customers is more effective than acquiring new customers
Representative surveys prove this: Results of the Technical Assistance Research Program (TARP): Satisfied customers talk about their experiences to 3 people, unsatisfied to 9-10 (in average) 96% of the unsatisfied customers dont complain to the company what means that there are 26 unsatisfied customers per complaint Customers who complain about the product/service are more willing to stay loyal Up to 70% of the customers who complained purchase the companys product again if the complaint was solved

Figure 2-12: Consumer in a market for two brands over different phases
Brand A 20 % dont know brand 40 % have not tried brand 100 % 80 % know brand 60 % have tried brand 80 % are not satisfied 20 % are satisfied Total market
Source:
Brand B
60 % dont know brand
100 % 70 % have not tried brand
40 % Know brand
20 % are not satisfied
30 % have 80 % are tried brand satisfied Total market Awareness First Buyer Satisfaction
Awareness
First Buyer
Satisfaction
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Customer Satisfaction Survey of the Deutsche Marketing-Vereinigung e.V.: Regular surveys (since 1992 in Germany) about customer satisfaction: see figure 2-13
http://www.servicebarometer.de/presse.html Derived actions from these kind of results about customer satisfaction: - CRM Systems / customer retention programs - extensive customer complaint systems
Aggregation of these marketing objectives in a marketing mission statement: The discussed target figures are fundamental targets of marketing and sales They are not the result of a single marketing instrument but of the whole marketing mix
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see figure 2-14


Figure 2-13: Relation Between Total Satisfaction and Reselection (Example Retail Banking)
1997 100 % 6% 17% 80 % 55% 72% 60% 92% 40 % 22% 20 % 23% 12% 0%
Disappointed customers (8%) (unsatisfied and little satisfied) Satisfied customers (37%) (satisfied) Convinced customers ( 55%) (highly satisfied)
2% 6%
2001 100 % 21% 80 %
4%
Question:
18% Would you select your bank again?
60%
37%
probably/ definitely not
77%
40 %
78%
possibly
20 %
16%
42%
Probably / definitely yes
0%
Disappointed customers (7%) (unsatisfied and little satisfied) Satisfied customers (39%) (satisfied) Convinced customers ( 54%) (highly satisfied)
Source:
Kundenmonitor Deutschland 2001 (www.servicebarometer.de/kundenmonitor2001)
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3 Marketing-Strategies
3 Marketing strategies
There are plenty of ways of taking marketing measures to reach the targets. But: Which are the right ones? Necessity to find a steering mechanism that helps choosing the right measures and instruments and to ensure that these (operative) instruments are used towards target achievement Def. strategy (in general): Its an aid to channel business decisions respectively the use of resources in the company (like guide rails on motorway) Differentiation of strategy and tactics (instruments): see figure 3-1 Def. marketing strategy: Decision about the companys planned market presence and positioning One way to structure the various kinds of strategic options: see figure 3-2
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Figure 3-1: Differences between Strategy and Tactics
Strategy = basic predisposition Characteristics: - determines the structure - real choice - mid-/long-term planning - lag effects - hard to correct Tactics = current dispositions Characteristics: - determines the actual process - routine decisions (habitual behavior) - Short term planning - immediate effects - correction possible without considerable problems
Decision making process: Decision making process: - complex, badly structured surrounding for - clear, easily structured decision decision making - todays decisions are made to solve - today's fundamental decisions are made todays problems for tomorrow - thinking is focused on particular - comprehensive thought necessary functions within the company (looking at the complete company) - micro-view, more quantitative - macro-view, more qualitative Fundamental orientation: Being effective: Doing the right things
Source:
Fundamental orientation: Being efficient: Doing the things right
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Figure 3-2: Marketing Strategies
Four strategy levels
Types of strategic decision
Basic strategic options
Growth Strategies:
Kind of product/ marketcombinations
current or new products in current or new markets
Positioning Strategies
way of influencing the market
quality- or price-oriented competition
Market Targeting:
Way and level of distinguished market targeting
mass-marketing or market segmentation
Spatial Strategies:
Decision about the market- / sales area
national or international sales strategy
Source:
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3.1 Growth Strategies
Growth Strategies
Which products shall be offered to what kind of customer segments?
see figure 3-4
Every company has to take a decision about the occupation of these fields
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Figure 3-3: Ansoffs Product-Market Expansion Grid

Market segments Product segments
Current markets
New markets
Current products
Market-penetration strategy
Market-development strategy
New products
Product-development strategy
Strategy of diversification
Source:
Becker, J.: Marketing Konzeption, 9. Auflage, Mnchen 2009, p. 148
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Market-penetration strategy Goal: Increasing sales respectively market share with current products in current markets and by that improving the proceeds and profit
Basis for this are two effects caused by a rising market share: falling costs per unit (learning curve!) Growing influence on pricing (according to the price stability and level) in the market
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Market-development strategy
Goal: Develop new markets for current products by breaking up market limits Strategy that is mainly based on a penetration strategy
Options to implement the market-development strategy: see figure 3-4
Typical for both market-penetration and market-development strategy: Both contribute mainly to realize a higher production volume Possibility to realize cost savings (Economies of Scale)
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Figure 3-4: Implementation of a Market-Development Strategy

1. Opening up additional markets (geographical-expansion strategy) Filling gaps in the sales market Straightening of a incoherent sales market Entering adjacent markets (= new uses for the current product) Extension of the product usage (example Lindt: beneath the classical suitability as present increasing meaning of the suitability to consume the pralines by oneself) Creating new uses (e.g.: extension of the use of Penaten care products for kids towards the care of sensitive skin of adults) Creating new application areas (e.g. by special services and/or guarantees for existing products and by that opening up new e.g. demanding target-groups) Opening up new sub markets (= new consumers who differ from the current ones regarding certain characteristics) Creating products for specific customers e.g. by suitable differentiation of the products (example: Lady Protector made by Wilkinson for wet shaving for women) Bringing customer-specific distribution channels into play (Example: neighborhood-shops for not yet served smaller customers and cash & carry markets for not yet served key accounts) Advertisements in consumer-specific media (possibly connected with a specific kind of address by means of psychological product differentiation)
Becker, J.: Marketing Konzeption, 9. Auflage, Mnchen, 2009, p. 152 f.
2.
3.
Source:
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Product-development strategy Goal: Developing new products of potential interest to its current markets/ customers
(1) Systematic innovation policy fundamental strategic decision: Which degree of innovation does the company aim at? Genuine innovations: Products, that originally didn't exist at all e.g. new technologies Adapted products: new products that are built upon existing products or services Me-too products: imitated products, that differ more in terms of packaging and not in substantial characteristics
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(2) Product-range-policy Fundamental strategic decisions: width of the program depth of the program see figure 3-5
Every company has to decide on a certain width and depth of its product range 1 Specialist strategy (narrow and deep) vs. 2 Generalist strategy (wide and flat) New development concerning the program-policy: Bundling of products to sell a whole system. Level of intensity of these systems: Combined products System covers one part of the program System covers the whole program Hard-, software and service system
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Figure 3-5: Differentiation Generalist vs. Specialist

Width of the program ( = number of different types)
( = number of different sorts)
A1
B1
C1
A = filled chocolate B = chocolate C = chocolate bars
Depth of the program
A2
B2
C2
D = other sweets
A3 new
B3
Generalist Specialist
B4
Source:
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Diversification Strategy Goal: Enlargement of the companys strategic room to from the companys point of view new products and new customers / markets by breaking out of the traditional branches into neighboring or far away fields.
Diversification: Result of product-development on the one hand and market-development see figure 3-6
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Figure 3-6: Stages on the way to diversification

Product-development technology no changes market Market-development improved technology new technology
no changes
adaptation
replacement
more intensive treatment
new marketing
improved product
enlargement of the product range
new market
new applications
new marketsegmentation
diversification
Source:
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Kind of diversification strategies concerning the level of risk-spread: 1. Horizontal diversification New products which are connected with current product lines and furthermore have synergies with these lines, e.g. by ... employing the same (raw) materials or similar technologies ... using existing distribution channels ... supplying similar submarkets 2. Vertical diversification Enlargement of the companys value chain through... forward integration: acquiring wholesalers or retailers to control the distribution channels backward integration: acquiring suppliers to control the raw material sources Goals: - independence from other market participants - hope of increasing profits 3. Diversification growth Seeking new businesses that do not have any relationship to current products, markets, technologies etc.
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What about success / failures of the strategies in practice?
Horizontal diversification: Most common (> 50% of all diversification strategies) Reasons for failures: Assumption, that the potential customers of the new products are similar to the current customers, what sometimes proves to be wrong calculated synergies dont materialize
Vertical diversification: Clearly lower importance
Diversification growth: cycles of growing and falling importance Examples of typical Conglomerates http://www.ge.com/de/ourbusiness/index.html http://www.siemens.de/ueberuns/portfolio/Seiten/home.aspx
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Implementation of diversification strategies
Organic growth:
Own research & development, own sales chains etc. Especially realized in case of horizontal diversification Reason: Similarity of products (e.g. production process)
Know-how-buying:
License agreements
Buying products:
Selling merchandises
Joint-ventures:
cooperation agreements Participation / mergers Typical for conglomerate diversification
Acquisitions:
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Figure 3-7: Example of a Horizontal Diversification: Nestl

Basics of Nestls corporate policy: Goal: Strengthening and developing the existing business Besides: Double strategy: organic growth and acquisitions to strengthen the current market position and to open up new markets We consider acquisitions especially if its possible to round the current market position or product lines enter new interesting food businesses improve the geographic balance of our global business. Important acquisitions of Nestl: Carnation, USA (food) Herta, Germany (meat and sausages) Rowntree, GB (sweets) Buitoni, Italy (pasta) Perrier, France (mineral water) Alpo Petfood, USA (animal food) Finitalgel, Italy (ice cream) ... Systematic policy of acquisitions which is more common in cases of conglomerate diversification
Source: based on Becker, J.: Marketing Konzeption, 9. Auflage, Mnchen 2009, p.173
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3.2 Positioning Strategies
3.2 Positioning Strategies Two mechanisms of influencing the market, set up on the market layers: 1. Price competition: Price as low as possible as the main instrument for steering the market Typical for markets of basic-needs-products Overall cost leadership (concept for discounter)
2. Quality competition: Stress on other instruments than price Typical for markets where products offer an additional use beneath the basic one so that the price competition is outweighted by the quality competition The aim is to achieve a brand preference in the customers mind Preference strategy (High-price strategy, brand concept) see figure 3-8
Figure 3-8: Impact of the Positioning Strategies on the ROI

Return on investment
Preference strategy (profit oriented/ qualitative growth)

Source:
Neither-norstrategy
Overall cost leadership (turnover oriented/ quantitative growth) 70
Becker, J.: Marketing Konzeption, 9. Auflage, Mnchen 2009, p.358
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This fact is reinforced by the development of the polarization of the markets, i.e. by the change in the market layers structure see figure 3-9 see figure 3-10
Preference strategy Goal: Building up qualitative preferences, which justify high prices from the customers Point of view. Brands as objects, the preferences are focused on Branding is a major issue in product strategy. As Russell Hanlin, the CEO of Sunkist Growers, observed: An orange is an orange is an orange. Unless that orange happens to be Sunkist, a name 80% of customers know and trust. Well-known brands command a price premium
Figure 3-9: Fundamental Changes in the Market Structure
Starting point: Classical structure (Onion)
Result: New market structure (Bell)
Upper market Medium market Lower market = Middle market is the biggest = Lower market is the biggest Lost-of-themiddlephenomenon
Source:
Becker, J.: Marketing Konzeption, 9. Auflage, Mnchen 2009, p.359
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Figure 3-10: Polarisation of markets

(Base: 100 Product groups; average price price market leader)
Market share development in %
Source:
GfK 20 000er Haushaltspanel Consumer Scan, in: Horizont 10/2009, p. 4
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Rising importance of the upper market layer: see figure 3-11
Background: In several markets a high-tech standard and a fast adjustment of technologies and functions on a high level can be observed. Building up preferences for brands enables the firms to mark off their own products from others by using each non-price marketing-instruments Precondition for the development of preferences: Attitudes Not only dependent on objective product characteristics but especially on the customers subjective perception
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Figure 3-11: Increasing polarisation, example beer market

Purchasing volume in % (20 bottles 0,5 l returnable box)
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2000 9,32
Source:
43
49
50
54
55
53
47
Premium-beers* (> 10,00 )
39
23 33 31 24 21 22
Consumption beers (7,00 to 9,99 ) Price entry beers (< 6,99 )
18
18
2001 9,56
19
2002 9,55
22
2003 9,53
24
2004 9,57
25
30
* brands: Becks, Bitburger, Hasserder, Knig, Krombacher, Jever, Radeberger, Veltins, Warsteiner, Wernesgrner
2005 9,23
2006 9,01
- price in
GfK-Consumer Scan 2005
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Figure 3-12: Share of Premium Brands in the Chocolate Market

Strong Brands Are Able to Achieve a Price Premium
Source:
GfK-Consumer Scan 2005
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Question: How do brands work? Identification function: make it possible to generate some more transparency in the great variety of products and articles and to emphasize the differences Retention function: make the products recognizable to support the brand loyality Orientation within a complex range of goods: consumers assume that they purchase a reliable product with a constant quality by buying a branded article Broad distribution or uniform price loose their importance price argument loses its importance
Retailers as trouble-maker: brands are mostly marketed aggressively i.e. by means of the price retailers undermine the brand image because the brands get involved in an aggressive discount price competition
Way out: Creating Must-Have Brands (brand personalities), which are essential for the retailers with typical characteristics Distribution level > 60% Awareness > 70% market share > 30%
Impact of brands on preferences: see figure 3-13
Types of brands 1) Individual name: Single-brand concept 2) Family name: product-line / range-brand-concept 3) Corporate name
Figure 3-13: Example of a quality evaluation of two brands
Blind test
Preference Preference
Test with offering of brand
80% 60% 40% 20% 0% Pepsi Coke no preference 51% 44% 5%
80% 60% 40% 65% 20% 23% 0% Pepsi Coke indifferent 12%
Source:
Freter, H., Marketing, Mnchen 2004, S. 60, siehe auch http://www.marktforschung-mit-neuromarketing.de
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1) Individual name Each product of a company has its own brand name The companys name remains in the background and is regularly not familiar to the customers Goal: Creating a clear and unmistakable brand personality
2)
Family name
a brand is selected for a certain product group / line a specific philosophy encircles all products
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3) Corporate name the companys products are sold under a uniform brand the brands message: The company and its competence as well as sympathy and the trust into this firm Especially suitable if ... the product range is to large and heterogeneous ... the target groups are similar ... the product segments are heavily dependent on the fashion (e.g. Boss)
In practice many companies use combinations
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Changing brand strategies over time starting point is usually an individual or corporate brand two strategic directions which both lead to a family-name-concept:
(1) Brand evolution Basic idea: Its getting harder to build up new brands in saturated markets (high investments, short marketing periods) using strong individual brands with a strong image for new activities strong individual brands are transformed into family brands to enter new markets faster and more efficiently see figure 3-14
Principle: New products are arranged in groups around a well-tried core brand like satellites
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Figure 3-14: Brand evolution example Nivea

Nivea Soft
(moisturising creme)
Nivea Sun Nivea Baby

(Babycare) (sun protection)
Nivea Make-Up Nivea personal hygiene
Nivea Creme Nivea For Men Nivea Visage

(facial cleaning)
Nivea body cleaning Niveahair care Nivea Deo
Source:
http://www.nivea.de/Unser-Unternehmen/beiersdorf/Die-NIVEA-Geschichte
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(2) Restructuring a brand leading a corporate brand back towards a group of family brands need to restructure can become necessary if a firm diversifies strongly over time and departs too far from the core business Goal strengthening credibility and competence establishing craps for specific business units which ease product innovations and their market penetration see figure 3-15
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Figure 3-15: Restructuring a Corporate Brand to a Group of Family Brands (here: Melitta)
Splitting Melittas activities into strategic business- and market units
KaffeeGenuss Coffee Filter paper Coffee maker Coffee filter
Frische und Geschmack Foils to keep food fresh, to freeze and to roast and bake it brand
Praktische Sauberkeit Vacuum cleaner bags, Garbage bags, Odour filters
Bessere Wohnumwelt Air cleaners, Air moisteners
TeeGenuss Tea filters, Tea filter systems
TafelwasserBedarf Water machines & accessoires
brand
brand
brand
brand
brand
Melitta
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(Melitta)/ Toppits
Swirl
Aclimat
Cilia
Aqamore
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3 constitutional characteristics of a branded article (characteristics which are crucial for the brands success)
Quality management consistent quality management as the heart of the preference strategy
Image and a Unique Selling Proposition (USP) benefits, which are conveyed in its positioning to its target customers ideal situation: unique selling proposition special importance of advertising and promotion activities Ubiquity highest possible distribution grade of a brand in the market as critical success factor
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Overall Cost Leadership The business works hard to achieve the lowest production and distribution costs so that it can price lower than its competitors and win a large market share. Firms pursuing this strategy must be good at engineering, purchasing, manufacturing and physical distribution. They need less skill in marketing. low prices as main marketing instrument
Strategy: firms target price-oriented buyers
German Consumers are rather price- than brand-oriented see figure 3-16 Example: Discounters in the food retailing industry see figures 3-17, 3-18
Figure 3-16: Branded articles vs. Price sensitivity

Product group Body care Sweets Non alcoholic beverages Alcoholic beverages Washing powder Joghurt Cheese Deep-frozen food Detergents Salty snacks Average
Source: UGW POS-Marketing Report 2003/2004
Favourite brand 45 % 32 % 32 % 32 % 30 % 26 % 25 % 21 % 20 % 17 % 28 %
Brand on offer 34 % 37 % 42 % 36 % 32 % 46 % 45 % 33 % 33 % 38 % 37,6 %
Favourite product 16 % 18 % 23 % 18 % 28 % 22 % 25 % 29 % 37 % 26 % 24,2 %
No answer 5% 13 % 3% 14 % 10 % 6% 5% 17 % 10 % 19 % 10,2 %
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Figure 3-17: Market shares in food retailing (1)

Number of POS in 1.000
82.9 79.7 77.5 76.1 74.5 72.9
90 80 70 60 50 40 30 20 10 0
85.5
71.0
68.8
66.5 63.7 61.4 59.1 56.7
76,8 72,2
69,3
63,3
61,1
Food retailing without Aldi

58,6 56,2 53,5 50,7 48,1 45,5 42,9 40,7 38,6
Aldi
Drugstores incl. Schlecker

3 7,9 3 9,3 3 3 4 12,3 4 13 4 13,7 4 14,2 4 14,4 4 14,1 4 14,3 4 14,2 4 13,8
2 6,3
10,9 11,6
1993 1995 1997 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Information Resources GmbH 2009
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Figure 3-18: Market Shares in Food Retailing (2)

Revenue Billion Euros
150 135 120 105 90 75 60 45 30 15 0
5,2
13,3 14,7 16,4 16,9 17,1 19,6 22,0 24,6 25,7 26,1 25,8 27,4 27,0 28,8
99,8 99,5 100,5 102,1 102,5
99,5 100,2 99,6 99,8 101,1
99,5
100,8 104,7
110,0
Food retailing without Aldi Aldi
Drugstores incl. Schlecker
6,3
7,0
8,4
9,7
10,4
10,6
10,8
10,9
11,3
12
12,5
12,8
Source:
Information Resources GmbH 2009
1993 1995 1997 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
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Figure 3-19: Advanced Model of the Basic Positioning of Business Units and Brands
Advantage in Performance
Upper-right field Branded article/ Premium brand (Manufacturer brand)
Branded article, possibly second-brand (Manufacturer brand) Premium brand of the retailers
Basic use
Possibly manufacturers third brand
Bermuda-triangle (= dangerous position between the chairs)
Basic use plus value added
No-names / Generics Discounter brand Lower-left field

Source:
Private branded merchandise
Becker, J.: Marketing Konzeption, 7. Auflage, Mnchen, 2002, S.227
Advantage in price
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Brand strategies for the overall-cost-leadership: (1)Private branded merchandise Retailers as the owners of the brands, who are responsible for the quality Goals retailers (especially national ones) try to take the initiative and to arrange the market by themselves so that these companies are not only the manufacturers distributors. attracting price buyers reaching a certain independence of the manufacturer brands Increase of the customers loyalty see figure 3-20 Compared to manufacturer brands, ubiquity is partially missing, but they possess features which are similar to those of manufacturers brands placed between preference-strategy and overall-cost-leadership, cheaper alternative to branded articles Usually retailers dont have own production facilities at their disposal but shift their production to other industrial undertakings.
Figure 3-20: Relevance of private branded merchandise objectives
Profiling
4,55
Customer retention
4,38
Margin improvement Support Company image Improvement of negotiation position vs. Manufacturer Covering gaps in product range 1
n = 43
Source: GfK Very low
4,28
4,18
2,96
2,5 2
low
3
average relevance
4
high
5
very high
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(2)Discounter Brand Lowest prices in the market Typical characteristics: concentration on pure price competition, lowest distribution costs all other kind of marketing instruments like shop-design, presentation of the goods etc. are minimized to protect the extremely favorable cost-situation Concentrating on a limited product range with a high turnover rate Small profit margin but due to the large sales volume sufficient yields Caused by the high quantities discounters are able to win manufacturers which can produce a minimum quality for the cheapest possible price Brand policies of the discounters: Own brands Me-too respectively fantasy-brands of the discounters suppliers Goods without any brand name Branded articles
Differences in prices between the dealer brands (rough indication): private branded merchandise compared to branded articles: ./. 20 30% Discounter brands compared to branded articles: ./. 40 50% Generics compared to branded articles: ./. 30 40%
(3)Generics Especially convenience goods that means goods with a high rate of merchandise turnover and Low marketing, inventory and handling costs Typical characteristics: a. in the beginning no name uniform and simple white packaging which was covered just by the product name (e.g. Die Weien von Rewe)
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b. Over time: Usage of other colours for the packaging (e.g. yellow) because the white one did not distinguish the product range from other competitors After that first pretty pictures on the white packaging In parts the strict no-name-character was broken from the beginning by using a brand name (e.g. A&P of Tengelmann) No clear position between private branded merchandise on the one hand and generics on the other
Geographical extension of retailer branding: see figures 3-21, 3-22
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Figure 3-21: Market shares of retail brands in Europe

Market Shares of Retailer brands in European Food Retailing
Revenue Share in %
Source:
Metro-Handelslexikon 2010/11, p. 061
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Figure 3-22: The Lead of UK Retailers in the Development of House Brands

Sainsburys own brand ranges stand for great quality at fair prices; a powerful proposition that drives product innovation and quality. They began with the basic own brand (Sainsburys) and then proceeded to trade up; today: Organics with over 700 lines, Be Good to Yourself, Taste the Difference with 850 lines, Just Cook, Basics with 400 lines, Blue Parrot Caf with 55 lines and freefrom Tesco (46%) Each of Sainsburys own brand products fall into one of three price layers The product range becomes more lucrative and profitable Many retail companies will introduce 800-1000 new product lines each year
Shares of retail brands of English retailers
Sainsbury (55%)
Asda (32%)
Argyll (38%)
Marks & Spencers (100%)
Source:
Clarke, R., Davies, S., Dobson, P., Waterson, M.: Buyer Power and Competition in European Food Retailing, Edward Elgar Publishing 2002
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Conclusion Up to now Preference strategy seen as a typical strategy for manufacturers Overall-cost-leadership seen as a typical strategy of retailers (at least in the consumer goods industry) but Polarization of the market leads to an increase of the market volume in the upper and lower market segment a. Price-strategic working firms strive for the upper-right field, among other reasons due to price wars b. preference-strategic operating firms strive for the lower-left field Combined strategy, not a pure strategy concept anymore
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ad a. Retailers striving for the preference strategy Attempt to place private merchandise brands which resemble branded articles Trading-up: Dealer brands are improved concerning their product-, packaging- and brand quality up to classical advertising so that they become premium brands of the retailers.
ad b. Manufacturers striving for the overall-cost-leadership Attempt of the manufacturers to offer products with the help of third-brands etc.- which are similar to dealer brands (regarding the price) to profit from the attractive market volume in this market area Alternatives Especially designed brands for price-buyer with an own price-performance-ratio Trading-down: originally branded goods were devalued regarding the products performance and by that they became also cheaper.
Goals Covering an interesting market volume Protecting the preference brands against the aggressive pricing by the retailers
Precondition for a combined strategy: Multi-brand concept with a specific image for each brand specific price-performance ratios in their special market segments different marketing and sales channels see figure 3-23, 3-24
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Figure 3-23: VW Multi-Brand Concept

Brands of VW (private vehicles)*
* additionally: commercial vehicle brands VW and Scania

Source: Backhaus, K., Schneider, H., Strategisches Marketing, Stuttgart 2007, p. 33, http://www.volkswagenag.com/vwag/vwcorp/content/de/brands_and_products.html
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Figure 3-24: Multichannel Sales System for multi brand concept

Mobile Operator
Distribution
Direct Sales New channels, e.g. Aldi Shops TeleEmarketing Commerce Retail*
Service Providers (e.g. debitel) Service Provider Channels
Business Customers
Private Customers
* Further differentiation in free retailers, contract retailers and E-Commerce retailers
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3.3 Market Targeting
3.3 Market Targeting Decision, how many and which market segments shall be targeted 1) To what extent does the firm distinguish the market that it wants to operate in?
Mass market strategy:

Offering standardised products which satisfy average needs of average customers.
Market segmentation strategy:

Identifying special groups of customers who get a special product and marketing mix. 2) Should the company work on the total market or just on some parts of the total market?
Total market covering:

The firm covers the whole market
Partial market covering:

The firm targets selected market segments see Figure 3-25
Figure 3-25: The four general strategic options for targeting a market Mass market strategy: with complete market coverage e.g. Nivea universal cream
with partial market coverage
e.g. Atrix hand cream
Market segmentation strategy: with complete market coverage
e.g. several Lauder-care products: Este Lauder, Clinique, Aramis, Prescriptives, Origins e.g. Vichy-care system
with partial market coverage
Source: based on Becker, J.: Marketing Konzeption, 9. Auflage, Mnchen 2009, S. 240
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Mass Market Strategy a) Mass market strategy with a complete coverage of the market
Principle: The seller engages in the mass production, mass distribution and mass promotion of one product for all buyers (no distinction between different customer segments with different needs)
Strategy aims at creating the largest potential market Positive impact on production costs (lowest costs) and possibly lower prices or higher margins
Examples: Henry Ford offered the Model-T-Ford in any color, as long as it is black. Coca Cola sold only one kind of Coke in a 6.5-ounce bottle. Market: Basic market only minus these buyers, who can not be taken into consideration for this product
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b)
Mass market strategy with a partial coverage of the market
Principle: Mass markets which are defined more narrowly compared to the mass market with total coverage of the market Including characteristics that consider general differences in the customers needs.
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Market segmentation strategy
Means to identify and distinguish these market segments are the segmentation criteria see Figure 3-26
a)
Market segmentation strategy with a complete coverage of the market Every segment is covered by the company, but with different brands
b)
Market segmentation strategy with a partial coverage of the market The firm only targets a single or few market segments
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Figure 3-26: Segmentation Criteria for Consumer Goods Markets

Demographic criteria
Age Gender Life stage Residence ... Size of the household Income / purchasing power Social classes (school education, job) Possessory aspects ... Personality (sincere, rebellious ) Knowledge Motives / sought-after benefits Attitudes Buyer-readiness-stage ... Quantity and frequency of purchasing Usage rate Selection of the stores Communication behavior ...
Social-economic criteria
Psychographic criteria
Lifestyle Segmentation
Behaviourial criteria
Source: based on Steffenhagen, H. Marketing - Eine Einfhrung, 6. Aufl., Stuttgart 2008, S. 42
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Conclusion Market segmentation has gained more and more importance within the last decades. Nonetheless: There are both arguments for mass marketing and for market segmentation. see Figure 3-27 Advantages and disadvantages of both strategic options: see Figure 3-28
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Figure 3-27: Factors favouring a Process of Standardisation or Differentiation
Factors favoring standardisation (strategic tendency: mass marketing) Standard products Mass distribution channels Urbanisation Modern communication techniques Increasing mobility
Factors favoring differentiation (strategic tendency: market segmentation)
Satisfaction of basic needs Increasing individuality of the people Increasing knowledge and education Creativity in production and consumption Increasing purchasing power
Source: Becker, J.: Marketing Konzeption, 9. Auflage, Mnchen 2009, S.289
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Figure 3-28: Advantages and Disadvantages of Mass Market and Segmentation Strategy
General assessment Mass market strategy (shotgun concept)
Cost advantages due to mass production Covering the whole basic market (taking advantage of the whole potential) Marketing mix which is simplified, standardised and less expensive Simplified marketing organisation
Segmentation strategy (sniper concept)

Necessity of demand analysis (to be able to fulfill the specific needs of the target groups) Gaining above-average scope for raising prices Good possibilities for steering the submarkets Opportunity to replace the price competition largely by a quality competition
Advantages
Depending on the market characteristics it is not possible to fulfil all customer needs Limited scope for changing prices Disadvantages (monopolistic range is fairly small) Limited opportunities to steer the market systematically Danger of price competition in mass markets
Higher marketing expenditures Possibly giving up mass production (and by that the cost advantages) Partly limited stability of market segments Large demand for marketing know-how (resp. appropriate marketing organisation)
Overall assessment
Profitability due to the price competition depends mainly on a low cost position
Profitability due to above average prices
Source: Becker, J.: Marketing Konzeption, 9. Auflage, Mnchen 2009, S. 290
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What does the suitability of a segmentation strategy depend on?
1. Existence of segment-specific product expectation / a preference structure see Figure 3-29
2. Cost-benefit analysis Are the buyers willing to bear the additional costs caused by the segmentation, e.g. special product, distribution and communication measures? Do we lose our economy of scales effect in the back office due to the segmentation (necessity of separate product management and market information systems)?
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Figure 3-29: Basic Market-Preference Patterns in the Ice-Cream Market
Creaminess
Sweetness
Creaminess
Sweetness
Creaminess
Sweetness
(a) Homogeneous preferences
(b) Diffused preferences
(c) Clustered preferences
Source: based on Kotler, P., Keller, K.L., Bliemel, F., Marketing-Management, 12. Aufl., Mnchen 2007, S. 364
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Outlook Caused by the change in the field of communication technology, a third strategic alternative has emerged in todays market: The One-to-One Marketing Past: Almost complete orientation towards the mass market
Focus on a product in an anonymous market Task of the mass marketing: Reaching the planned sales volume to achieve the
calculated decline of costs.
Besides: Dividing the market according to target groups

Problem: The proliferation of advertising media and distribution channels (information overload) is making it difficult and increasingly expensive to reach a mass audience.
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Way out:
Developing a Customer Relationship Management see Figure 3-30
Further development: One-to-one concept of an individual customer marketing (articulated by Peppers/Rogers 1993 for the first time)
idea of a mom-and-pop store, where the owner personally knows the customers and their needs and is able to put cross-selling into action with success see Figure 3-31; 3-32
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Figure 3-30: Elements of CRM
CRM Value management for the customer Value management from the customer (customer evaluation) Integration of all communication and sales channels Bringing together Marketing, Sales, Service and Administration Customer oriented behaviour of all employees Increase of customer value Existing customers preferred to new customers Permanent analysis, evaluation and optimisation of processes
Figure 3-31: Development of Strategic Patterns

The strategic marketing trend
100 % Undifferentiated mass marketing Differentiated mass marketing Generalisation Segment-oriented marketing Niche-oriented marketing
One-to-one marketing
Individualisation
100 %
Source: Weinberg, J., One-to-One-Marketing, in: Manschwetus, U., Rumler, A. (Hrsg.), Strategisches Internetmarketing,Wiesbaden 2002, S. 247
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Figure 3-32: From Mass Marketing to One-to-One-Marketing

Objective: Winning and keeping loyal customers with the help of individual contacts and treatment Paradigm change from more customers for my products to more products for my customers (share of customer instead of market share)
Mass marketing Product-manager, who sells a product to as many customers as possible (share of market) in a certain period of time Attempt to generate a constant stream of new customers Cost-saving one-way communication: Reaching the largest possible group of addressees with the help of non-selective advertising via radio or TV
Source: Kauffels, F.-J., E-Business, 2. Aufl., Bonn 2001, S. 76
One-to-one marketing Customer manager who sells as many products as possible to one customer (share of customer) in a certain period of time) Attempt to generate a constant stream of new businesses with current customers Two-way communication by interacting with customers and individual customer-care
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Problem: Enormous costs to implement this one-to-one approach using classic marketing
Only the progress in the information and communication technology enabled the practical
implementation of the one-to-one-marketing concept
The cost structure for the new media is determined by fixed costs, which leads to a
reduction of the marginal unit costs with an increasing quantity of customers!
Background information on mass customisation:

http://store.nike.com/index.jsp?cp=EUNS_KW_NS09_DE_Google_B&country=DE_locale=de_DE&l=shop,nikeid http://www.spreadshirt.net/de/DE/T-Shirt-gestalten/Selbst-gestalten-59
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3.4 Spatial strategies
3.4 Spatial strategies Decision about the firms market and sales areas Strategic question about the territory, geo-political decision
(1)
Domestic Marketing by covering local markets regional markets multi-regional markets national markets
(2)
Supranational Marketing by covering multi-national markets international markets global markets
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(1) Domestic Marketing Starting point for the geographic growth for most of the companies is a local market within its confines (small and medium-sized enterprises) Further development snowball-effect type growth, i.e. passive (automatic) and not in a really strategic manner
The basic strategic options of the domestic marketing
a)
Concentric /circular widening of the territory
Existing territory is strengthened, systematically added by building rings concentric area extension is often combined with a regionally different product- and
program-mix
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b)
Selective area extension
Objective: Creating a sales area which is as closed as possible concerning the marketing policy with the help of a multi-stage procedure Implementation: Own concepts to open up the markets, co-operations / cooperative solutions, licensing, franchising
c)
Area extension step-by-step like independent islands
Special case of the selective area extension Selection of only a few areas These islands constitute the starting point for a potential further development in a
concentric way of area extension
Conclusion: today there is a trend towards a national coverage of the market
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(2) Supranational Marketing Reaches far beyond a simple sales-area-aspect More structuring, long-term binding effect for the whole business
General stages of supranational marketing see Figure 3-34
Implementation of the internationalisation Entry strategies into foreign markets, also called implantation strategies see Figure 3-33
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Figure 3-33: General stages of supranational marketing

Multi-national strategy
The companies include several neighbouring foreign markets into their marketing and sales concepts (e.g. Germany neighbouring European countries) Often: experimental strategy to select experiences in foreign countries, avoiding high investments in foreign countries Export with a minimum of risks Two options: Indirect export: The company operates via independent intermediates (e.g. domestic-based export merchants) Direct export: The company handles their own exports (e.g. by foreign-based distributors or agents) Ethnocentric approach WS 2012/13
International strategy
Mainly connected with the foundation of independent sales subsidiaries or production facilities abroad Branch is usually run by managers from the foreign country Marketing plan is done on the spot, adaptation strategy for the marketing mix Subsidiaries get a certain scope of decision-making so that they can orientate their strategy towards the specific characteristics of the market and by that appear as quasi-national companies Polycentric approach Smooth transition to next stage
Global strategy
Operating on a worldwide level Large quantity of branches and subsidiaries abroad Large share of foreign production International procurement of capital Worldwide recruiting of the top management Headquarters as holding with guideline competence Marketing is as standardised as possible and orientates towards country- respectively multi-crossregional target groups Geocentric approach Typical: Multi-national standardisation of marketing mix Requirement: Homogeneous structure of needs, e.g. computers, cars, planes 125
Figure 3-34: Implementation stages of supranational marketing

100%
Capital and management from the headquarters
Export
Licensing
Franchising
Joint Venture Foreign-based assembly Direct investments Manufacturing facilities Subsidiary 100%
Capital and management from the foreign country

126
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Figure 3-35: Example of internationalisation: Trumpf in Japan
60s
from 1977
from 2009 Manufacturing facility
Manufacturer of innovative products such as industrial laser-systems stepwise Internationalisation since the early 60s Direct and indirect sales Investment in 2009: more than 14 m US$
Sales and Service company Export via japanese importer

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Evaluation of foreign markets
Evaluation according to various criteria: see Figure 3-36
Conclusion with respect to spatial strategies Home-country-focused firms are usually not able to cover just a local or regional market but are forced to cover the whole national market International companies are usually not able to remain on the level of exportorientation The level and the speed of expansion are dependent on the venturesomeness of the company and of the management board
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Figure 3-36: Sequential Evaluation of Foreign Markets

150 countries
Pre-selection - political situation - legal restrictions
29
121 countries
Pre-selection - Population - Gross national product
72
22 countries with a low potential - demand for living space - economic basis
49 countries 22
27 countries 11
Evaluation of the - market potential - market size - technical level - number of regulations - availability of resources
16 attractive countries
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3.5 Strategic Combinations and Competitive Strategies
So far: Isolated view of different types of strategies on four diverse strategic levels But: Successful strategic concepts are rarely the result of a strategic decision on just one level but commonly the result of a strategy-bundling on various levels
(1) Vertical strategic combinations see Figure 3-37 For your strategic decisions it is useful to include the profiles of the most important competitors into the process of decision making. Objective: Deduction of strategic options for the own company But: Freedom for the combination of strategies is only given in parts. Some strategy-types have to be combined with certain other ones to achieve the best possible effect
Figure 3-37: Strategy Profiles of your own Business Compared with an Important Competitor
Strategic levels
Market penetration strategy
Strategic options
Market development strategy Product development strategy Diversification strategy
1. Growth Strategies
2. Positioning Strategies
Preference strategy
Overall cost leadership
3. Market Targeting
Mass market strategy (complete) (partial)
Segmentation strategy (complete) (partial)
4. Spatial Strategies
Local strategy
Regional strategy
Multiregional strategy
National strategy
Multinational strategy
International strategy
Global strategy
Own business
Main competitor
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3.5 Strategic Combinations and Competitive Strategies (2) Horizontal strategic combinations
Bundling of strategies on a horizontal level were already illustrated above, e.g.: Alphabetical strategy paths (growth strategies) Combination of preference strategy and overall-cost leadership with the help of a multi-brand concept (positioning strategies) Combination of mass-market- and segmentation strategy by a multi-brand-concept as well (market targeting)
Reasons: very often caused by stagnating or slowly growing markets Market polarisation see Figure 3-38
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Figure 3-38: Classical Multi-Zone Marketing and Limits of the Multi-Level Marketing
Classical market structure (onion)
Newer market structure (bell) upper market
brand A medium market brand A possible market coverage Trading up brand B (new)*
lower market
As long as the medium market is the biggest one the pointed out market coverage may be enough! (multi-zone marketing)
As soon as the lower market becomes the biggest one there is a need to participate in the lower market. (multi-level marketing)
* Implementation if necessary also by production of trade- or generic goods
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Competitive Strategies Competitive strategies cant be seen as independent strategic concepts; they make use of general strategic action patterns; its about the way of dealing with competitors, i.e. about the strategic style
Basic patterns of competitive strategies Two dimensions to differentiate the basic patterns: (1) Level of standing out of the competition regarding marketing and technology
Innovative versus imitative

(2) Time of taking marketing measures
Avoiding competition (reactive) versus facing the competition (active)

Figure 3-39: Types of Competitive Behaviour
Dimensions of behaviour
Innovative
Imitative
Avoiding competition
Evasion
Adaptation
Facing competition
Conflict
Cooperation
Source: Meffert, H.: Marketing-Management, 1. Auflage, Wiesbaden, 1994, S. 157
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Evasion strategies Attempt to avoid the higher competitive pressure by partially differing from the
competitors measures
Adaptation strategies Aligning the own behaviour with the competitors one Cooperation strategies Explicit or implicit agreement concerning certain business practices Conflict strategies The companys target is to gain market shares by an innovative behaviour. In the most
aggressive way it is the objective to weaken the competitor as much as possible or even to put him out of business
Figure 3-40: Combination of Strategic Key Factors to Gain a Competitive Advantage

Key factors 1.Performance2 Approach compared with industry standard1 better same worse
2.Price3
lower
same
higher
3.Area4
larger
same
smaller
4.Time5 Competitor profiles:

1
earlier company A
same
later company B
Standard might be the market leader or the top five companies depending on the numbers of competitors 2 aspired product-/ service quality and ability to solve problems 3 planned pricing 4 planned market area 5 planned strategic timing WS 2012/13 Strategic Sales and Marketing 137
Figure 3-41: Influencing Factors Concerning the Market-Entry Timing

Corporate factors basic strategic behaviour Factors of the sales market venturesomeness market attractiveness market resistance due to consumers needs company size Timing of the market-entry: Pioneer Early adopter Late adopter innovation level complexity Product factors
competitive market dynamics of the technological pressure progress complexity of the technology Technological factors
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Three fundamental strategies for the market-entry strategy:
(1) Pioneer-strategy / First Entry The pioneer is always and definitely the first one in the market, i.e. he initiates the introduction stage of a product (2) Strategy of the early-adopters Market-entry shortly after the pioneer Early adopter developed the product and the marketing-concept almost parallel to the pioneer (possibly on purpose to learn from the pioneers experience) (3) Strategy of the late adopters Enters the market relatively late (after the end of the introduction in the product life cycle) Need to imitate regarding technology or marketing (often necessary to enter the market with a low-price-strategy) Possible reasons avoiding high risk of market entry lagging behind the technological product development
4 Sales Partner Strategies

4.1 Sales Channel Strategy
Figure 4-1: Relevant decisions to set up the sales channel strategy
Selection of sales channels
Decision for type of sales partner
Decision regarding number of sales partners
Decisions in the context of multichannelsales
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Figure 4-2: Direct and indirect sales channels

Sales Channel
Direct
Indirect Authorised dealers, e.g. franchise partners
Personal sales
Impersonal sales Telefone sales ECommerce Mail order business
Sales agents, e.g. sales representatives
Free dealers
POS at customer
retailers
POS at supplier Changing POS, e.g. fair
wholesalers
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Figure 4-3: Type of sales partners Type of sales partner
Domestic commerce
Foreign commerce
One-level
Multi-level
Retail
Cooperation
Import business Export business
Wholesale
Concentration
Source: based on Meffert 2012, p. 552
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Figure 4-4: Examples for market structures and involved parties

Example Pharmaceutical Industry Manufacturer Delivery / Invoice Drug-stores Need development doctors Need development Customers Need development Example Sanitary products
Manufacturer Delivery / Invoice Sanitary and Need development building retailer architects Building comp./ plumber
Customers
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Figure 4-5: Examples for market structures and involved parties
Cement industry Front Market (customers / sales) Back Market (Processing / Usage) Consulting Market (intermediariess) User Market (End-user) Building material retailer
Pharmaceutical industry pharmacies
Construction companies
Doctors, hospitals
Architects, planning offices Private households, industry
Health insurances, legislation
patients
Source: based on Ackerschott, 2001, p. 194
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Figure 4-6: Number of sales partners Universal Sales

Sales via all possible kinds of sales partners
Selective Sales
Limitation of kind and number of sales partners to one or only a few categories Consideration of those partners which fulfill defined criteria (e.g. certain consulting and service levels
Concentrated Sales
Conscious selection of individual partners within a category fulfilling high demands (among other with respect to location, product range etc.) Extreme case: exclusive sales High motivation and qualification of sales partners Implementation of a demanding marketing concept
Concept
Strong presence
Trying to achieve brand being more sought after
Goal
Increase of brand awareness Mass market strategy Market segmentation strategy (partial coverage aimed at)
Marketing Strategy
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A company uses a Multichannel Sales System, if the products are sold at least via two, usually more, sales channels
Examples for multichannel sales systems Insurance companies with own sales force, E-commerce offer, independent broker and telefone sales Mobile operators such as T-Mobile und E-Plus Companies such as Nike and Adidas selling through own shops, retail chains, Factory Outlet Centers, E-Commerce,
Important decisions in the context of multichannel systems Shall the products be sold via several sales channels? Under which circumstances does it make sense to open new channels such as discounters or E-Commerce? How shall the coordination of the sales channels be done?
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Figure 4-7: Options for implementing E-Commerce in the sales system
E-Commerce in existing value chains
Building up new value chains
Support for existing sales system

Innovative services for endcustomers / sales parter, extension of delivery service
Additional sales channel

Setting up a new sales channel for the existing company products
New business field
New and innovative offers in ECommerce
Source: Becker 2000, p. 93
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Figure 4-8: Use of channels in a multichannel sales system, example consumer electronics
Which information channels have you used to inform yourself about consumer electronic products on offer (in % of asked participants) before purchase at purchase
MP 3 Player TV Sets Laptops / Notebooks
Source: based on Ehrlich/Erbenich/Kirchgeorg 2010, p. 68
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Figure 4-9: Clear allocation of functions to sales channels in a multichannel sales system
Functions of sales management Opening sales opportunities Key Account Management Classical Direct Sales Telemarketing Retail Sales Representatives Value adding reseller
Source: based on Kotler, Bliemel, Keller, Marketing Management 2007, p. 887
Evaluation of sales opportunities
Sales Preparation
Sale
Services
Account management after sales
Large accounts customers Medium sized accounts
Small and potential customers
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Figure 4-10: Factors influencing sales channel structure
Product characteristics Strategy Competitive situation
Possibilities for customer retention
Factors influencing sales channel structure
Customer preferences
Strenth of sales partners and conflict situations

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Figure 4-11: Strength of sales partners and conflict situation
Causes of conflict in a sales channel system are to lead back to differences in the relation between manufacturer and retailer regarding
Objectives
Roles
Power
Communication
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Figure 4-12: Basic Strategies in the cooperation of manufacturers to retailers
Behavior of manufacturer
Passive in the design Active in the design of the sales channels of the sales channels
Passive in the response to marketing activities of the retailers
Alignment (acceptance of power)
Conflict (power struggle)
Active in the response to marketing activities of the retailers
Cooperation (acquisition of power)
Avoidance (avoid power struggle)
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Figure 4-13: Vertical integration Vertical integration of the sales channel Franchise Own retail chain Concession Factory Outlets Shop in Shop Own product ideas Long term contractual bonding of supplier Acquisition of a supplier
Manufacturer
Source: based on Boston Consulting Group / Markenverband (2005)
Retailer
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4.2 Cooperation models with sales partners
Figure 4-14: Key Account Management as organisational basis for cooperation Key Account Management Who are the Key Accounts? Large customers by revenue / sales volume Customers of high strategic relevance, e.g. reference customers Selected sales partners Tasks Systematic acquisition of key accounts Development of customer specific marketing-concepts and actions Cross section function: Steering all activities of a company towards the key accounts
Objectives Long term customer retention through exploring common success potentials and from this ensuring cost reductions Short term securing sales targets such as sales / revenue

Figure 4-15: Strategic options for Key Accounts

high
Integration and synergy potential of manufacturers
II. Cross Selling
IV. Strategic Alliance
I. Early warning
low
III. Partnership
low
Source: Belz / Senn 1995, p. 48
Integration and synergy potential of Key account

high
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Figure 4-16: Trends in Key Account Management
Multfifunctional teams substitute KAM as lone warrior
Setting up strategic account relationships Environmental changes such as Internationalisation of customers, increasing product complexity etc.
Building value-enhancing partnerships
Outsourcing of KAM
Europe-wide and globally active Key Account Manager


Figure 4-17: Success factors in sales partner management Success factors in sales partner management 1. Attractive business model a. Contractual sales system as framework b. Rights and duties of the manufacturer c. Rights and duties of the sales partner d. Pricing and terms of sale
2. Support in the operative business Decision for push- or pull approach Support for marketing Motivation of sales agents Information systems
3. Cooperation management Efficient Consumer Response (ECR) Supply Chain Management (SCM) Category Management (CM)

Efficient Consumer Response (ECR) involves cooperative partnerships between teh manufacturer and retailer in logistics and marketing with the objective to serve customer needs better than in isolation
Through this short term optimisations can be done as well as build up long term competitive advantages
For this a very intense cooperation and communication between the parties is necessary to steer and optimise product- and information flows.
See figure 4-18 Example: http://www.markenartikel-magazin.de/no_cache/events/artikel/details/1003291-ecr-award-anunternehmen-und-persoenlichkeiten-verliehen/
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Figure 4-18: Cooperation areas of ECR (Efficient Consumer Response)

Efficient Consumer Response Cooperation in Logistics (Supply Chain Management)
Efficient Administration Reduction of paper exchange Avoiding multiple gatherings
Cooperation in Marketing (Category Management)

Efficient composition of assortment Assortment composition per shop Assortment composition considering all manufacturers Efficient Promotion Sales promotions per shop Joint evaluation of sales promotion Reduction of price promotions Optimisation of price and sales space
Using EDI
Efficient operative logistics Standardised packaging Efficient consignment
Cross Docking
Efficient stock replenishment Vendor managed inventory / Comanaged inventory
Efficient Product Introduction Cooperative product and market tests Cooperative product introduction
Automation of order transactions
Vendor Managed Inventory
Joint product development
Source: Homburg / Schfer / Schneider 2012, p. 340
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Figure 4-19: Main targets of ECR (Efficient Consumer Response)
strategic
Category Mgt.
Efficient product introduction Efficient composition of assortment
Cooperation
Increase revenue and profit, realisation of new growth potentials through more efficient marketing
Efficient promotion Efficient stock replenishment Efficient operative logistics Efficient administration little Complexity
operative
Supply Chain Mgt.
Improvement of the cost structure of the product- and information flows along the value chaing through eliminating non value adding processes
high
160
Source ECR Study by Coca-Cola, quoted by Frey 1997, p. 172
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Supply Chain Management (SCM) is a computer-based steering of material, information and capital flows along the entire value chain from gaining raw material to the end customer with the objective to integrate processes
The task of SCM is the optimisation of the delivery chain beyond the own company See figure 4-20
SCM is characterised through different principles See figure 4-21
New technologies such as Radio Frequency Identification (RFID) lead to a continuous increase ot the relevance of SCM
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Figure 4-20: Structure and task of SCM Supply Chain Management

Purchasing and supplier-management Sales and Order Processing
Supplier of supplier Supplier of supplier
Supplier Manufacturer of end-customer products Sales intermed. Sales agent Endcustomer
Supplier
Supplier
Flow of information Flow of materials Flow of financials

Source: Meffert et al., 2012, p. 580
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Figure 4-21: Principles of SCM Positioning

What are customer needs? Visualise value chain Determination of critical activities Adjustment of strategy Adjustment of product and process acchitecture Buildung product modules Late set up of variants Standardisation of interfaces Exchange of information and data Integration of IT-Systems Convergence of logistics, IT and Operations Research Use of Internet technology Synchronisation of value chain steps Integration of suppliers Optimising replenishment Just in time principles Intensive communication Cooperation with suppliers of systems Building confidence Search for global optimum
Postponement
Planning
Pull Principle
Partnering
Source: Corsten/Gabriel 2002, p.10
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Example: Efficient Replenishment through using RFID technology at Gerry Weber
Inefficiencies EAN-based processes, hence personal inventory taking Many mistakes in inventory maintenance, due to theft etc. Complex securing of products through hard-tags
Use of SCM Equipment of 25 mio. clothes with sewed RFID chips
Results Customer satisfaction through better product presence, revenue increase by 7,5% through reduction of out of stock situations Reduction of wrong deliveries by 80% Increase of share of secured products to 100% Reduction of effort in logistics / goods received by 75%
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Category Management (CM) is a joint process of retailer and manufacturer, where product groups are managed as strategic business units to increase customer benefit and through this business results
Analogue to a product manager a Category Manager plans and coordinates the product group / category
Targets and tasks of Category Management
See figure 4-22 See figure 4-23
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Figure 4-22: Targets of Category Management Qualitative targets Composition of assortment for different target groups and different types of sales partners Image improvement with respect to customer orientation, performance competence, pricing credibility etc. Exploring new customer segments Using potentials resulting from combination effects Increase of customer loyalty Developing profiles in retail competition Pricing with high value added Early discovery of trends Quantitative targets Increase of profitability (contribution margin, revenue, revenue rate) Reduction of capital lockup, profit maximisation through revenue and profit increase Revenue increase through avoidance of out-of-stock situations Increase of expenditure intensity of customers Reduction of cost-intensive promotions Cost optimisation of product launches
Source: based on Seifert, 2004, p. 152: Lingenfelder / Kahler 2004, p. 124
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Figure 4-23: Functions of Category Management
Source: Henric Hahne: Category Management. Interface zum Handel, in: Absatzwirtschaft, Nr. 3, 1997, p. 74.
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Example: efficient composition of assortment
Inefficiencies Products which are important for the target group are not available
Use of CM
Results
POS space designed according to targets of retailer or manufacturer, not on the basis of customer requirements
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Optimisation of assortment Reduction of brands through composition of within a category product groups acc. To Customer satisfaction customer buying behaviour through good product Analysis of consumer panel presentation and product availability data etc. Stock turnover increases Optimisation of shelf-ideal position of products on the basis of customer behaviour (e.g. video observation) Internal criteria such as contribution margin are considered with second priority

Achievements Strong organisations, which aim at expanding the ECR concept (ECR USA and ECR Europe) Strong expansion in some industries such as food and consumer goods with traceable success Focus of the implementation lies on shelf-optimisation and Supply Chain Management
but Only few applications in certain industries such as consumer goods and specialised dealer Less focus on marketing aspects of ECR Main challenges Building internal preconditions such as the involvement of further departments, but also soft factors such as motivation, attitude Cultural fit with partner Critical mass required due to high investments in IT systems Disclosure of dat with the risk of data misuse Inbuilt conflict potential between industry and retailers
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5 Tools for Strategic Planning

5.1 Key Performance indicators
5 Analysis Tools for Market-Oriented Strategic Planning
Various methods for evaluating strategies, tools for analysing and selecting actual strategies
5.1
Key Performance Indicators
Starting point for each kind of strategic decision: see Chapter 1.4 Breakdown of the strategic situation regarding two aspects of analysis: (1) Analysing the company (2) Analysing the external environment
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(1) Analysing the company
Key issues to be analysed in the context of the sales strategy
Implications for the sales strategy and -management
Do the sales channels behave according to strategy? Do they fulfill their sales expectations? Do they fulfil quality expectations? Do incentive- and coordination-mechanisms work? Which costs and earnings contributions are there from the different sales channels? see figure 5-1
Can management of the individual sales channels be improved? Is a strategy change required to change the sales channel strategy?
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Figure 5-1: Stepwise contribution margin calculation of sales channels of a mobile operator
Sales channel 1 Contribution Margin I per customer and month Customer acquisition costs per new customer customer retention costs per customer monthly Contribution Margin II cots of marketing etc. per customer monthly Contribution Margin III per customer monthly Payback
m 338 13
Sales channel 2
788 18
Sales channel 3
421 21
Sales Channel 4
207 30
m m m m M months
73 156 41 2 224 3 0,1 221 8 14
174 236 81 2 534 64 1 469 11 16
88 234 27 1 307 62 3 244 12 14
59 207 10 1 138 12 2 126 19 8
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(2) Analysing the external environment
Additional key figures to be analysed for the SWOT-analysis according to chapter 1-4:
Market potential Market volume Sales volume Market shares
see Figure 5-2 see Figure 5-3
For strategic planning not only the current situation is essential, but the key performance indicators have to be projected into the future Forecasting methods
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Figure 5-2: Relation Between Market Potential, Market Volume and Sales Volume
Market potential Market Volume F A E D Sales volume of company A to F
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Figure 5-3: Different Growth Potentials in Sub Segments of the Cosmetics Market
growth potential growth potential
Not completely exploited market Large potential e.g. cosmetics for men
The market is largely exhausted, the growth potential is small, e.g. cosmetics for women
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There is a large variety of methods which can be differentiated along two dimensions 1. ... according to the type of variable Development forecasts Variables that are to be forecasted are regarded as independent or exogenous, i.e. they cannot be influenced by the company Impact forecasts Variables that are to be forecasted depend on variables that can be influenced by the company (generally marketing instruments are regarded as independent variables)
2. ... according to the use of statistical methods quantitative methods: Data is predicted based on data from the past and using statistical methods qualitative methods (heuristic methods): Use of expert knowledge for prediction, trust in intuitive-subjective elements

Figure 5-4: Use of forecasting methods in marketing (survey results)

Characteristics Forecasting methods (A) Statistical-mathematical methods:
1. 2. 3. 4. 5. 6. Extrapolation of trends Moving average Regression analysis Exponential smoothing Simulation approaches Input-output forecasting 73.7 67.7 35.9 32.9 15.9 14.4 d d b d g d h h m m s s
(1) Use in % of 334 companies
(2) Assessment of reliability
(3) Frequency of use (if used at all)
(B) More subjective methods:

1. 2. 3. 4. 5. 6. 7. Estimate by sales force Estimate by management (technical and business) Forecasts based on customer surveys Forecasts based on product tests Analogy method (e.g. historical or geographical analogy) Extrapolation of test market results Group estimates (Delphi method) 87.7 85.9 81.7 50.0 46.7 37.7 15.9 d b d d b d d h h h m h m s
Assessment of reliability: b = particularly good, d = average, g = poor (determined by a combination of ratings and percentages of average forecast-actual deviations) Frequency of use: h = frequently, m = sometimes, s = rarely (clustering on the basis of averages) Source: Becker, J.: Marketing Konzeption, 9. Auflage, Mnchen 2009, S. 408
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5.2 Gap analysis
5.2 Gap analysis
Principle: the planned development of a key figure (e.g. profit or turnover) is confronted with the expected results at the time of the planning date
Gap analysis can be differentiated according to... ... old and new products to take the product life cycle into consideration ... strategic and operative gap see Figure 5-5
Ansoffs Product-Market Expansion Grid might be an obvious solution to close the gap see Figure 5-6
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5.2 Gap analysis
Figure 5-5: Gap analysis (strategic and operative gap)

Turnover / Profit
Target line
new business
Strategic planning gap
Adjusted current business current business
Operative gap
Time
Planning date
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5.3 Portfolio analysis
Figure 5-6: Using Ansoffs Product-Market expansion grid to close the gap
Turnover / Profit
Originally planned figures (target line)
diversification strategy product-development strategy market-development strategy market-penetration strategy
Expected development (development line)
without implementing any further actions
Time
Planning date
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5.2 Gap analysis
5.3
Portfolio analysis
Basis: Financial considerations about the composition of a securities portfolio in order to reach the best mixture of investments regarding risk and return Goal Choosing the best product program regarding the future development of return Mixture of strategic business units that yield and consume financial resources Consideration of interdependencies between business units Principle: Integrating in a two-dimensional matrix a ... business component (strengths / weaknesses of the relevant business units) and an environmental component (opportunities / threats within the relevant environmental structure) The strategic business units of a company are shown to derive norm strategies on this basis

Steps: (1) Dividing company into strategic business units (SBU) The SBU is a single business or bundle of related businesses that can be planned separately from the rest of the company It clearly differs from other product-market combinations (internal homogeneity, external heterogeneity) regarding ... customer needs (need of quality, price and service) ... its own set of competitors (structure of competition) ... structure of costs It has its own management that is responsible for strategic planning and profit performance. Furthermore, the management is able to reinvest a certain share of the profit on its own. It is possible to establish and take advantage of a competitive advantage for each productmarket combination.
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(2) Definition of the key success factors
Which key figures are originally responsible for the success of a company? PIMS project (Profit Impact of Marketing Strategies) of the Strategic Planning Institute, Cambridge / Mass. Up to now it is the most comprehensive examination of the correlation between the companys strategic variables and the achievement of corporate goals
Subject: Examination of correlations between 37 strategic key factors (e.g. marketing budget etc.) as independent variables and especially profitability and cash flow as dependent variables
Basis:
about 450 companies with more than 3000 SBUs within each line of business
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Result: market share is the central factor that strongly correlates with profitability and cash flow What is the reason for the high importance of market share for profitability?
The learning curve

The average costs per unit related to the products value adding process (without material costs) fall about 20 to 30 % after its accumulated production volume doubles see Figure 5-7
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Figure 5-7: The learning curve

Costs in Euro per unit
10 8 6 In case of a 20% drop in costs
In case of a 30% drop in costs
1 1 2 4 8 16 32
Cumulative output (experience)

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The concept of the experience curve is background for the particular importance of two key factors: Market share: The company, that achieves a higher market share, benefits from the experiences the company succeeds with higher volumes of production and sales, leading to falling costs Highly compressed factor for the company / internal component Market growth: ...
Highly compressed factor for the environment / external component
Two concepts of portfolio analysis: (1) Growth-Share-Matrix of the Boston Consulting Group (BCG matrix) (2) General-Electric-Model of McKinsey
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(1) Growth-Share-Matrix of the Boston Consulting Group The two dimensions of this portfolio matrix are:
SBUs market share market share of the largest competitor
relative market share:
market growth: average annual growth rate in %

Furthermore: Turnover
On this basis: Plotting the SBUs in this matrix, which is subdivided into four cells see Figure 5-8
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Figure 5-8: Growth-Share-Matrix of the Boston Consulting Group
high
Market growth rate (in %)
?
Question Marks Stars
0%
Poor Dogs
low
Cash Cows
...
1.0
...
low
Relative market share

high
Source: based on Becker, J.: Marketing Konzeption, 9. Auflage, Mnchen 2009, S. 425
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The main results to derive from this kind of portfolio are:
Understanding that different SBUs with different conditions according to competition and different growth rates have to be managed differently Each SBU must, according to its strategic position, either yield or receive financial resources Each SBU must be arranged in a balanced company portfolio The SBUs position in the four cells indicates a different type of business and recommended strategy (norm-strategy): see Figure 5-9, 5-10
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Figure 5-9: Characteristics of the BCG Matrix and its Norm Strategies (incl. Product-Life-Cycle)
I. Question Marks
Characteristics: SBU has to spent a lot of money to keep up with the fast-growing market; Cash-Flow is clearly negative PLC: Introduction Norm strategy: Either raise the market share considerably if the prospect is good otherwise divest or just harvest
II. Stars
Characteristics: SBU as the leader in a fast growing market earns a lot of money; to keep up with the market and to fight off attacks it has to spend substantial funds; Cash-Flow might be balanced PLC: Growth Norm strategy: Hold or increase market share (expansion strategy)
IV. Poor Dogs

Characteristics : SBU has a weak market share in a low-growth market. The cash flow might be negative or balanced on a low level. PLC: Decline Norm strategy: Cut the market share / divest
III. Cash Cows

Characteristics: SBU that has a large relative market share in a market with a slowed growth rate; produces a lot of cash which enables the company to support other SBUs. PLC: Maturity Norm strategy: Hold the market share or harvest
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Figure 5-10: Product Life Cycle and the Course of Cash-Flow in the BCG matrix
Market growth rate in %
Contribution margin
Investment I
II
10
IV
III
0.5
1.0
2.0
4.0
Relative market share =
Market share of the company Market share of the strongest competitor
Product Life Cycle Direction of cash flow (the cash flow caused by the withdrawal was not taken into consideration) Source: Hinterhuber, H. H.: Strategische Unternehmensfhrung, Bd. 1, 6. Auflage, Berlin-New-York, 1996 S. 163
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(2) General-Electric Model of McKinsey The portfolio is put up by two dimensions:
Market attractiveness Relative competitive advantages / business strengths

Main difference to BCG matrix: To measure the two dimensions strategic planners must identify the factors underlying each dimension and find a way to measure them and combine them in an index (multifactor matrix)
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Market Attractiveness is determined by:
Overall market size and annual market growth rate Market quality Energy and raw material supply Environmental requirements (determined by degree of governmental intervention, environmental protection regulations, )
Relative competitive advantages are determined by:
Relative market position, determined by market share, company image, type of competitive
advantages etc. Relative productive capacity, determined by production profitability, condition of production facilities, number and location of production facilities etc. Relative R&D potential, determined by product portfolio, product quality, rate of innovation etc. Relative qualification of management and employees
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Determining the values for each business: Scoring model see Figure 5-11
Based on both indicators: Construct a matrix of nine cells
Depending on the SBUs position von der Position in the matrix: norm strategies see Figure 5-12, 5-13
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Figure 5-11: Scoring model (Hydraulic Pumps Market)

Overall market size Annual market growth rate Historical profit margin Competitive intensity Technological requirements Inflationary vulnerability Energy requirements Environmental impact Social-political-legal Weight 0.20 0.20 0.15 0.15 0.15 0.05 0.05 0.05 Must be acceptable 1.00 Weight 0.10 0.15 0.10 0.10 0.05 0.05 0.05 0.05 0.15 0.05 0.10 0.05 1.00 Source: based on Kotler, P., Keller, K.L., Bliemel, F., Marketing-Management, 12. Aufl., Mnchen 2007, S. 101 f. Score (1-5) 4 5 4 2 4 3 2 3 Weighted score 0.80 1.00 0.60 0.30 0.60 0.15 0.10 0.15 3.70 Score (1-5) 4 2 4 5 4 3 3 2 3 5 3 4 Weighted score 0.40 0.30 0.40 0.50 0.20 0.15 0.15 0.10 0.45 0.25 0.30 0.20 3.40
Market Attractiveness
Own competitive advantage
Market share Share growth Product quality Brand reputation Distribution network Promotional effectiveness Productive capacity Productive efficiency Unit costs Material supplies R&D performance Managerial personnel
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Figure 5-12: Market Attractiveness-Competitive-Position Portfolio Matrix (McKinsey)

Value added Consumption of resources Market Attractiveness 100
high
67
Investment and growth strategies Selective strategies Harvesting or disinvesting strategies
medium
33
low
low
33
medium
67
high
100
Relative competitive advantage

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Figure 5-13: Norm strategies of McKinsey Matrix (1/2)

Objective Actions Investment and growth strategies Cash-flow: Meaning: Objective: A:Offensive strategies Holding or strengthening the competitive advantages Technical and marketing-related efforts must aim at eliminating weaknesses, at consolidating or strengthening the market position and preventing competitors from entering the market segments
Negative in the short run, positive in the medium or long term SBU contribute to future profit and growth and require large investments Growth or profit Company must build on competitive advantages (e.g. increasing the relative market share, lowering unit costs, increasing differentiation)
Selective strategies
Actions
SBUs require large investments with uncertain economic outcome and might contribute to future growth of the company Negative in short and medium term, positive in the long run Company has to select the most promising of these SBU to ensure future profit potential
Cash-flow: Meaning:
Source: Sander, M., Marketing-Management, Stuttgart 2004, S. 314
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Figure 5-14: Norm strategies of McKinsey Matrix (2/2)

B: Transition strategies Consolidating investment/growth strategy or a harvesting/disinvesting strategy to maximise the cashflow by economisation and without using up too many resources Company must hold relative competitive advantage and prevent competitors from entering this market segment Cost cutting efforts, product differentiation, improvement of customer services, pricing policy etc. Positive in the short and medium term SBU contribute to companys current profit and require little investment to sustain relative competitive advantages
C: Defensive strategies Selective strategies Actions: Cash-flow: Meaning:
Objective: Harvesting or disinvesting strategies Actions: Cash-flow: Meaning:
Maximise cashflow, minimise loss Use of complete cost cutting potential and synergies in production and sales Positive in short run, negative in medium and long term SBU can contribute to current profit and do not require any substantial additional investments; instead these SBU are candidates for disinvestment
Source: Sander, M., Marketing-Management, Stuttgart 2004, S. 314
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Strategic Sales and Marketing

Bachelor Degree, Major Seminar Prof. Dr. Ralf Schlottmann

Table of contents (I)

Table of contents (II)

Strategic Sales and Marketing

Table of contents (II) / Reference list

Strategic Sales and Marketing

Strategic Sales and Marketing

Figure 1-1: Trend in retail landscape

Source: based on Handelsmonitor

Chnage in the future

Airport / Railway Electronic Shopping Factory Outlet

Delivery services Fan Shops Second-Hand 2 Corner Shops

Diversification vs. Concentration on the core businesses / Streamlining of business units

Strategic Sales and Marketing

Main functions in sales and marketing

Trade Marketing manager Customer relationship manager E-Business manager

Figure 1-2: Dimensions of market oriented strategies

Dimensions of a market oriented strategies

On which customers do we want to focus?

Which products shall be offered mainly?

Strategic Sales and Marketing

Figure 1-3: Planning company portfolio, example security market

Strategic Sales and Marketing

Figure 1-4: Framework to define strategic business units

Scope for problem-solving

Potential demand of the customers

Potential customer groups Target group-oriented technology Technologies

Strategic Sales and Marketing

Figure 1-5: Defining the business example publishing market

Potential customer segments

Strategic Sales and Marketing

Strategic Sales and Marketing

Figure 1-6: Sources of competitive advantage

Competitive Advantages/ Disadvantages can be caused by...

... strengths / weaknesses from the customers point of view

... strengths / weaknesses concerning capabilities/ preconditions

Strategic Sales and Marketing

Demands to strengths from customers point of view

2. Perceived, i.e. the advantage must be perceived by the customer as such

3. Durable i.e. the advantage can not be caught up by competition easily

Strategic Sales and Marketing

Strategic Sales and Marketing

Figure 1-8: Example of competitive position of a mobile operator

Mobile phones Mobile Internet

CRM / Service Billing / Invoice

Relevance of factors for company success

Strategic Sales and Marketing

Strategic Sales and Marketing

Strategic Sales and Marketing

Figure 1-9: Elements of a Marketing Concept

Levels of the Concept:

Where do want to go to?

How do we get there?

Marketing Mix (= Selecting the Vehicles)

What do we need to employ for this?

Source: Becker, J.: Marketing-Konzeption, 9. Auflage, Mnchen, 2009, p. 4

Strategic Sales and Marketing

Figure 1-10: Strategic Planning Process

External environment (opportunity & threat analysis)

Internal Environment (strengths/ weaknesses analysis)

Kotler, P. / Keller K.L.: Marketing-Management, 14th edition, London 2012, p. 70

Strategic Sales and Marketing