Strategic marketing

Here, we’ll introduce a useful framework for thinking competitively to become a leader in your
market (adapted from Market Leadership by Treacy and Wiersema).

Market-driven principles
For the framework to work, we must make some strong assumptions - they must be true and
you must believe in them.
● You must know your markets.
○ This means knowing what your customers want, and knowing how your
competitors will react.
○ Most businesses are very competitive, and thus doing customer-focused
marketing
○ Remember the principle of differentiation - you want to deliver value better than
your rivals.
○ You cannot just guess at your market; you have to know by doing market
research.

● Customers have the final say.

○ They will choose what they want.
○ This makes a strong assumption about consumers’ decision process ­ that they
look at the products/data/attributes, realize they can’t consider everything, and
group things together into three general bundles:
■ operations factors - price, cost, delivery, service, reliability
■ product features or designs - attributes, style, innovation, technology
■ does this meet my needs? is it customized for me?
○ Assumes that customers “score” products in each of these dimensions, then
decide which dimension is most important to them and pick the product that’s the
best in that dimension and “good enough” in the other two.
○ This means you can’t just be “pretty good” in all three dimensions ­ your product
won’t get picked that way.
■ Customers focused on price won’t go with a product with a pretty good
price - they want the one with the best price.
■ Customers who care about how a product meets their needs will go with a
product that does it the best - if it’s satisfactory or good enough in the
other two dimensions.
● Commit to being first in the markets you serve.
○ Be the best at something and good at the other two things
○ What you decide to focus on has implications for your business’ structure, how
resources are prioritized and allocated, hiring, etc.
● Deliver total quality to guarantee customer satisfaction.
One more concept: fair value
● At the right is a value map. The vertical axis represents relative costs to
customer; the horizontal axis represents relative perceived benefits.
○ If you offer more benefits, customers are willing to pay a higher price.
○ If you charge a lower price, customers will expect fewer benefits - as long as
what you offer appears to be fair.
○ If you offer something
inferior and it’s not fair value,
customers won’t buy it and you won’t
make it in the market.
○ Our framework says you have to offer
fair value on two of those bundles, but
offer something better than fair value
on the bundle you’re going to be the
leader on.

● Fair value is not a static concept ­ it changes over time. It’s constantly moving in
response to competitive reaction.
○ Say Apple comes out with the iPad, which has a much better design than
competing products.
○ What happens in the market? Competitors try to copy and mitigate the
advantage.

And now … the framework

● Here we see the three bundles, labeled as operational excellence,
performance superiority and customer intimacy.
○ The crosshatches here
are fair-value lines (which
are not necessarily symmetrical, as drawn here)
● To use this framework:
○ Examine your marketplace and define each dimension based on
product attributes that relate to it in your market.
○ Anticipate where fair value is on each dimension. What are customers’
expectations? Where is the reference point on each of these axis?
■ Sometimes fair value can be seen as the average of what everyone offers
■ Sometimes no one offers fair value.
● airlines - people expect operational excellence (consistent on-time
arrival), and few carriers deliver to that fair value.
■ Sometimes everyone delivers fair value.
● In some markets, people don’t care as much about bells and whistles
because every product delivers what they need.
 ■ This is very tricky and you need market research to determine this.
○ Plot where your company is delivering on each of these axes, relative to fair
value.
○ Plot where your competition is delivering on each of these axes, relative to fair
value.

○ Then you start playing the strategy game - think about long-term strategy,
short-term strategy, and what you should be doing right now to beat the
competition.
■ Your long-term strategy should lead to your being the best at one thing
and good enough on the other two
■ In short term, it may involve getting up to fair value in a dimension you
don’t intend to become the leader in.
○ Once you’ve decided on a leadership strategy, that has implications on
everything your firm does.
■ An operational focus tends to involve a hierarchical strategy with IT as a
priority for resources.
■ Performance superiority firms tend to focus on research and
development, hiring innovative people who are given free rein.
■ Customer intimacy firms focus on market research, customer knowledge
as priority; “yes” culture where customer comes first.