Chapter 5: Capabilities for Learning about Customers and Markets

CAPABILITIES FOR LEARNING ABOUT CUSTOMERS & MARKETS

 Market oriented companies displayed superiority in understanding customer, markets, and competitors.
‘‘Every discussion of market orientation emphasizes the ability of the firm to learn about the customers,
competitors and channel members in order to continually sense and act on events and trends in present and
prospective market’’

 Industry-based research by the business performance management Forum suggest that companies fail to
respond to fast changing markets because they are unable to understand to what their customer wants.

Market-Driven Strategy, Market Sensing, And Learning Process

Market Driven Strategy- Is the ability to learn from customers. Market-Driven Firms are characterized by their
ability to sense and respond to events and trends in their markets.
Market Sensing- Is a key capability of the market-driven organization, concerned with the ability of organizations
to continuously learn about their market, and acts as an antecedent to market orientation.
Market Orientation- is both a culture and a process of information acquisition, broad information dissemination,
and shared diagnosis and coordinated action.

Market Sensing Processes

 There are many approaches used by market driven companies to understand the opportunities and threats
emerging in their markets, and to predict how customers will react to the changes in their marketing strategy.
They include:
 Building Open Minded Inquiry Process- market driven organizations show an openness to studying
change and to avoid complacency.
 Analyzing Competitors’ actions- detailed attention to rivals’ tactics and strategies to develop
understanding of their plans and capabilities.
 Listening to frontline employees- motivating the involvement of staff who are in contact with the
customers in building understanding of change and new opportunities and threats.
 Searching for latent customer needs-finding unserved needs through dialogues, observation and
engagement with the customers.
 Scanning periphery of the market- actively looking for new opportunities in the market.
 Encouraging experimentation- building culture and process around continuous curiosity and new ideas.

Learning Organizations
 Learning organization are guided by a shared vision that focuses the energies of organizational members on
creating superior value for customers. These organizations continuously acquire, process and disseminate
throughout the organization knowledge about markets, products, technologies and business processes.
Learning and Competitive Advantage
 The advantage gained from learning is that the organization is able to quickly and effectively respond to
opportunities and threats and to satisfy customers’ needs with new products and improved services.
 Learning capabilities and skills central to business agility.

Learning About markets

 Objective inquiry- one danger to be avoided is not exploring new views about markets and competition,
because they are not taken seriously.
 Information distribution for synergy- the widespread distribution of information within the organization
can leverage the value of information by cutting across business function to share information to customer,
channels of distribution, suppliers and competitors.
 Mutually informed interpretations- the mental method of the market guides manager’s interpretations of
information. The intent is to reach shared vision about the market and about the impact that new information
has on this vision.
 Accessible memory- this part of the learning process emphasizes the importance of keeping and gaining
access to prior learning.

Barriers to Market Learning Process

 In some situations learning process may be ineffective. If managers do not accept or understand the value of
new information and insights from the marketplace. They are likely to maintain existing perspectives and
reject new ones.
 The development of effective market driven strategy is closely related to market sensing capabilities and
market learning process.
Marketing Information and Knowledge Resources
 Some marketing information resources development activity is concerned with creating processes for
continuous scanning of markets for rapid noting of significant trends, event and changes.
 Chapter 5: Capabilities for Learning about Customers and Markets

Scanning Processes
 Some information resource development is concerned with building process for continuous monitoring of
customers and markets to quickly identify and explain changes, new trends and important events to which
executive should respond.

Organizing scanning effectively as a component of market sensing and learning may involve a number of initiatives or
approaches:
 Making existing functional groups responsible for scanning-though with the risk they will focus only on
familiar, not he periphery.
 Create ad hoc issue groups- identify important questions to address and assign them to task force
 A high-level lookout- IBM has the facility called the “crow’s nest”. a team scanning specific topics at the
periphery of the organization an sharing insights with the top management.
 New initiatives- Shell created its Game Changer Program in 1996, to encourage managers to envision and
test new opportunities beyond the core business
 Investing in startups- modest investment which may build a clear view of emerging technologies and
markets.
 Outsource –use consultant for fresh perspectives on the business to be incorporated in strategic decision
making.
Specific Marketing Research Studies
Marketing research- the systematic gathering, recording, processing and analyzing of marketing data which when
interpreted will help the marketing executives to uncover opportunities and to reduce risk in decision making.
Strategies for obtaining marketing research information includes:
 Collecting existing information
 Using standardized research services
 Conducting special research studies
Internal and External Marketing Information Resources
 Marketing information resources exist internal to the company, as well as being collected from external
sources.
 Internal information resources- is the system of the firm that affects the extent and ease of the collection
of existing information.
 External information resources- include open source resources (freely available data on the internet or in
print sources) information services and specific studies undertaken by marketing research agencies.

Problem Definition to guide Marketing Research Studies

re
Research Research Research Planned
Project & Objectives Questions Outcomes
Scope

In deciding whether to undertake a special marketing study and when interpreting the results, several conditions are
important:
 Defining the problem- research should be conducted to help define the research problem and determine the
objective of the project.
 Understanding the limitation of the research-most studies are unable to do everything that the user
wishes to accomplish. Priorities for the information that is needed should be indicated.
 Quality of the research- there are many challenges to obtaining sound research results. The available
evidence indicates that some studies are not well designed and implemented and many misleading results.
 Cost- customized research studies are frequently expensive.
 Evaluating and Selecting suppliers- when selecting marketing research supplier, it is useful to talk to prior
clients to determine their satisfaction with the research firm.
 Research methods- it is important that the research problem to be addressed indicates the appropriateness
of different research methods.
Existing Marketing Information Sources
 In company resources- This is essential for the strategic mission of the firm, as well as for efficient
utilization of assets
 Open source resources- a wide variety of information resources exist in the form of published information
which can be accessed freely or t low cost. Frequently these resources can be accessed online.
 Chapter 5: Capabilities for Learning about Customers and Markets

 Research agency resources- a wide variety of marketing information is available for purchased on special
publications and on a subscription basis. A key advantage to the standard information in these resources is
that the cost of collection and analysis are shared by users.

Creating New Marketing Information

 Observation and Ethnographic Studies- studies involving observation include, for examples, counting
customer traffic flows in a retail store, measuring for waiting time for service in a shop, or the reaction of
exhibitions visitor to display stands.
 Ethnography- Is a social science based in anthropology, and its used in marketing studies is based on the
richer information and insights can be generated by immersion in consumer’s life.
 Researcher surveys- research surveys are initiated in response to problems or special information needs. It
includes:

 Market segmentation
 New product concept test
 Product use test
 Brand name research
 Advertising recall test

 Internet based research- new and speedy ways in conducting studies using electronic questionnaires, email
questionnaires, and electronic panels.

CHAPTER 6: MARKET TARGETING AND STRATEGIC POSITIONING

Market Targeting Strategy

The market targeting decision identifies the people or organization in a product market toward which an organization
directs its positioning strategy initiatives.

Selecting one or more promising market targets is a very demanding marketing challenge.
Targeting and Positioning consist of:
1. Identifying and analyzing the segments in a product market.
2. Deciding which segments to target.
3. Designing and implementing a positioning strategy for each target.

Targeting Alternatives
The targeting decision determines which customer groups the organization will serve. Specific marketing effort is
directed toward each target and the management decides to serve.

Market targeting approaches fall into two categories:

1. Segment targeting when segments are clearly defined.
2. Targeting based on product differentiation.

Factors Influencing Targeting Decisions

Segments clearly defined

Target selected niche(s) Target multiple Segment

Selective Targeting Extensive Targeting

Product specialization Product variety

Management need to decide if it will target a single segment, selectively target few segments, or target all most of
the segments in the product-market. Several factors may influence the choice of targeting strategy:
 Chapter 5: Capabilities for Learning about Customers and Markets

 Stage of product market maturity

 Extent in diversity in buyer value requirement
 Industry structure
 The firm’s capabilities and resources
 Opportunities for gaining competitive advantage

Targeting in Different Market Environments

 Emerging – product markets that are newly formed are characterized as emerging, and are created by
factors such as new technology, the changing needs of buyers, and the identification by unmet needs by
suppliers.
 Growing – these markets are experiencing rapid growth.
 Mature – these product-markets are shifting from growth to maturity as indicated by the product life cycle of
the products.
 Declining –a declining product market is actually fading away instead of experiencing a temporary decline or
cyclical changes.

Emerging Markets
 Knowledge about an emerging market is very limited. The number of competitors initially consist of first
market entrant and one or two other firms.
There are two types of emerging markets:
1. A totally new product market
2. A new product technology entering an existing product market

Buyer diversity- the similarity of buyer’s preferences in the emerging market often limits segmentation efforts. It
may be possible to identify new broad segments.

Product market structure- new enterprises are more likely to enter a new product market than are large, well
established companies.

Capabilities and resources- a firm entering an existing market with a new product is more likely to achieve a
competitive edge by offering buyers unique benefits rather than lower prices for equivalent benefits.

Targeting strategy- targeting in an emerging market is likely to focus in preference or use situation that correspond
by the value proposition offered by the new product.

Growth markets
 During the growth stage the market environment moves from highly uncertain to moderately uncertain.
Further change in market is likely, but there are level of awareness about the forces that influence the size
and composition of the product market.

Product market structure-we often assumed that high growth markets are very attractive and that early entry
offers important competitive advantage.

Capabilities and resources- the firms competing in growth markets are like to follow one of these strategies:
1. Pursuit of market leadership strategy
2. Follow very selective targeting and positioning strategies

Targeting strategy- a selective targeting strategy is feasible when buyer needs are differentiated or when are
product are differentiated.
There are least three possible targeting strategies in growth markets:
1. Extensive market coverage by firms with established businesses in related markets.
2. Selective targeting by firms with diversified product portfolios.
3. Very focused targeting strategies by small organizations by serving one or few market segments.

Mature markets

Buyer diversity- segmentation is often essential at the maturity stage of the life cycle. The product market is clearly
defines indicating the buyers preference and competitive structure.

The maturity of the product-market may reduce attractiveness to the companies serving the markets, so a
market driven organization may benefit from:
 Chapter 5: Capabilities for Learning about Customers and Markets

1. Scanning the external environment for new opportunities that are consistent with the organization’s
skills and resources (core competencies)
2. Identifying potential disruptive technology threats to the current technologies for meeting customer
needs.
3. Identifying opportunities within specific segments for new and improve products.

Product market structure- mature product markets typically experience intense competition for market share,
emphasis on cost reduction, continuing needs for new products, international competition, tight profit margin and
increase in sole and importance of value chain strategies.

Capabilities and resources- depending on the firm’s position in the mature market, management objectives may be
cost reduction, selective targeting of product differentiation.

Targeting-both targeting and positioning may change in moving front the groth to maturity stages of the product
market. Targeting may be altered to reflect changes in priorities among market targets.

Global Markets
Understanding global market is important regardless of where an organization decides to compete, since domestic
markets often attracts international competitors

 Global Integration- this strategy considered the extent to which standardized product and other strategy
elements can be designed to compete in global basis.
 Local Responsiveness- while local responsiveness is a relevant issue, the central consideration is how to
segment global markets.
 Targeting – strategies for competing in international market range from targeting a single country, regional
targeting or targeting on a global basis

Positioning Strategy
 Positioning may focus on an entire company, a mix of products, a specific line of products or particular brand,
although positioning is often centered on brand.

Positioning concept
How management wants buyers in the
Market target to position the product
(Brand)

MARKET

TARGET
Positioning Effectiveness Positioning Strategy

How well management positioning The combination of marketing action

objectives are achieved for the market used to communicate the positioning
target. concept to the targeted buyers.

Positioning Strategy- is the combination of market program mix strategies used to portray the positioning desired
by the management to the targeted buyers.

Positioning Effectiveness- considers how well management’s positioning objectives are being achieved in the
market target.

Selecting Positioning Concept

 Chapter 5: Capabilities for Learning about Customers and Markets

 Positioning concepts- the positioning concept should be link to buyer’s value requirements. The focus of the
concept may be functional, symbolic or experimental.
 Functional concept- applies for the product that solves consumption related problems from
externally-generated consumption needs.
 Symbolic positioning- relates to the buyer’s internally generated needs for self enhancement, role
position, group membership, or ego identification.
 Experimental concept- is used to position products that provide sensory pleasure, variety and or
cognitive stimulation.

Three aspects of positioning concepts selection are important.

1. The positioning concept applies to specific brand than all of the competing brand in a product
classification
2. The concept is used to guide positioning decisions over the life of the brand, recognizing the brand’s
specific position may change over time.
3. If two or more positioning concept, for example, functional and experimental, are used to guide the
positioning strategy, the multiple concepts are likely to confuse buyers and perhaps weakens the
effectiveness of positioning action.

The positioning decision

 In deciding how to position a brand, it is useful to study the positioning of the competing brands using
attributes that are important to existing and potential buyers of the competing brands.

Developing the Positioning Strategy

 The positioning strategy integrates the market program(mix) components into coordinated set of initiative
designed to achieve the firm’s positioning objectives.
 Selecting the positioning strategy may be guided by a combination of management judgement and
experience, analysis of prior to activities and results, trial and field research.

Scope of Positioning Strategy

 The positioning strategy is usually centered on a single brand or a line of related products for a specific market
target

Market Program Decisions

 Product strategy
 Value chain strategy
 Pricing strategy
 Promotion strategy
 Competitive advantage

Positioning Strategy Overview

Product/Brand Strategy

Sales force/internet/ Value Chain Strategy

Direct Strategy

Marketing
Program
Positioning
Strategy
Advertising/Sales Pricing Strategy
Promotion Strategy
 Chapter 5: Capabilities for Learning about Customers and Markets

The positioning concept is the core focus for designing an integrated strategy, which indicates how the
product mix, line, or brand is to be positioned for each market target.

The strategy includes:

 The product strategy including how the product/brand will be positioned against the competition in the market
target.
 Value chain strategy to be used.
 The pricing strategy, including the role and positioning of price relative to competition.
 The advertising and sales promotion strategy and the objectives of which these promotion components are
expected to achieve.
 The sales force strategy, direct marketing strategy, and the internet strategy, indicating how they are used in
positioning strategy.

Designing the Positioning Strategy- it is necessary to determine the major strategy guidelines for each marketing
program component.

Cross-Functional Relationships-responsibilities for the positioning strategy components are often assigned to
various functional units within a company or a business unit.

Determining Positioning Effectiveness

 Estimating how the market target will respond to a proposed marketing program, and, after implementation,
determining program effectiveness are essential in selecting and managing positioning strategies.

Determining Positioning Effectiveness

Customer and Competitor Research

Methods for
Assessing
Positioning
Effectiveness

Analytical
Positioning Test
Techniques Marketing

Customer and Competitor Research-Research and study provides customer and competitor information which may
be helpful in designing positioning strategy results.

Test Marketing-test marketing generates information about the commercial feasibility of a promissing new product
or about new positioning strategies for new products.

Analytical Positioning Techniques-obtaning information about customers and prospect, analyzing it, and then
developing strategies based on theinformation coupled with management judgement.

Determining Positioning Effectiveness

 Information is needed as to wether the strategy yields the results which expected concerning sales, market
share, profit contribution, growth rates, customer satisfaction.

Faulty positioning can subvert a company’s marketing strategy. Positioning errors include:
 Chapter 5: Capabilities for Learning about Customers and Markets

 Underpositioning- when customers has only vague ideas about the company and its products and do not
perceive distinctive about them.
 Overpositioning- when customer have to narrow an understanding of the company product or brand.
 Confused positioning- when frequent changes and contradictory messages confuse customer regarding
the positioning of the brand
 Doubtful positioning-when the claims for the product or brand are not regarded as credible by the
customers.