1.

Overview of Marketing Strategy and the Strategic Marketing Process

Marketing strategy is about the big picture:

 Moving in the right direction

 Setting appropriate objectives
 Competing for the right customers (and avoiding those that should be avoided)
 Developing the right skills, resources and capabilities for success

A marketing strategy may refer to a process or to its outcome. The process is all about formulating,
implementing and maintaining a marketing strategy. A comprehensive marketing strategy specifies the:
who, when, where, why, what and how of the business:

 Who the firm will serve (customers and segments)

 When the firm will serve them (the occasion targeted)
 Where (the geographic market)
 What (the needs the firm will meet)
 How the firm will serve the customers and needs (resources and distinctive competences)
 Why the firm will do these things (business model that specifies how long-term revenues will
exceed cots by a reasonable ROR)

All of these questions can define a customer-driven strategy and can be summarized as 3 high-level
decisions:

 Target segments (who, when, where, what)

 Competitive advantage (how, why)
 Singularity (being different than the competition in an aspect that some segment of customers
will value)

Strategic marketing is the creation and maintenance of a market-oriented strategy, focusing the
organization on the customers and the needs it meets (who and what). A sound strategy must reduce to
meeting some specific needs of some specific customers better than the competition within profitable
relationships.

One way to distinguish generic marketing strategies is by competitive advantage and competitive scope.
Competitive advantages can be broadly characterized as either some form of differentiation or as cost
leadership.

Competitive scope includes segment scope (the breadth of customers and customer needs served) and
the extent to which value-creating activities are performed by the firm itself versus being outsourced
(degree of forwards and backward integration). It can vary from mass marketing to niche or focused
strategies.

Competitive advantage and competitive scope correspond with target segments and competitive
advantages.
Value= Relative performance/relative price. There are 3 potential strategies: high price/high
performance (premium); low price/high performance (high-customer value) and low price/low
performance (economy) and one unsustainable: high price/lower quality.

Growth strategies- expanding sales based on their relationship with existing company offerings and
existing markets:

Market penetration- more of existing products to existing customers

Product development- new products to existing customers

Market development- existing products to new markets

Diversification- new products, new markets

It’s all about adjacencies and core competencies- identify new markets and new products for which the
firm that use existing core strengths into growth => thus it is about how transferable are the firm’s
strengths.

Strategic decision- decision made today that impacts the ability to compete at some point in the future.
They are of 2 types: the ones we know are strategic and the ones we recognize later and are ad-hoc.

The Strategic Marketing Analysis and Planning process:

1. Situation Assessment
2. Strategy Formation
3. Implementation (positioning and Marketing Mix)
4. Documentation, Assessment and Adjustment

2. Situation Assessment: External Environment

Situation assessment= monitoring the environment (external forces) while also scrutinizing the company
itself (internal factors), including core competencies, resources and strategic directions. Understanding
these and anticipating future events, trends and conditions is critical to creating and advancing effective
strategies.

Situation assessment can be further organized into the 4 Cs: Customers, Competitors, Context,
Company.
External assessment also includes the analysis of the dynamics of a specific industry and understand
some prominent laws of marketing (fixed patterns observed across situations and across time in the
marketplace such as changes in the market as it evolves, the cost benefits of economies of scale or the
profitability advantage of the market share)

Before assessing the situation, it is necessary to first specify exactly what situation should be assessed,
in what market the firm participates, who are the competitors and customers and how the market is
critical to all marketing activities. If we define too broadly, we risk losing focus and if we define too
narrowly we risk missing opportunities.

Budget competition- money spent on cars could be spent on a number of other things.

Market definition have usually been supply-side, based on the industry or product (automobiles), but
they are limiting and may obscure potential competitors and substitutes. The second approach to this is
demand-side from the customers’ perspective (what customers, the product meets and who else could
meet the same needs as a competitor or alternative product).

The scope of market definition should be flexible to the purpose:

 Sometimes it’s ok to ask Who our customers and competitors are today
 Sometimes a broader view is needed: Who is likely to buy our existing offering, but is currently
not?
 For long-term planning and growth: Where can we find long-term growth and profitability?
What needs do (or could) our strengths meet? What technologies could enhance our strengths?

Competitive intelligence questions:

PEST analysis- macro level business environment

Customer-direct customer (B2B, distributors or retailers) and the ultimate customer or consumer of a
product).
Organizing Customer Focused Research:

Marketing research- issue-focused research that is directly and deliberately linked with specific
marketing decisions and problems. CRM falls under into umbrella.

Trends- broad-based changes in the marketplace that occur over time and are grounded on changes in
values, lifestyles or technology and accessible to the majority of the market. Monitoring the
environment for trends can be quantitative and include econometric and statistical methods of
forecasting or data mining (analyzing large data bases).

Customer insight- penetrating, discerning understanding of customer needs, the ways in which
customers might derive value from products => can be the key to unlocking new opportunities and
finding new markets.

Customer assessment- deep dives to understand the customer perspective and to identify unmet and
unrecognized needs, usually done through interviews.

Industry analysis: five forces that together influence industry profitability

Product lifecycle: S-shape (disruptive technologies can cause unexpected, sharp declines). Stages: birth,
growth, maturity, decline.

Most major strategic gains and losses occur in the growth phase (Share gains where all competitors are
growing can be achieved without significant competitive reaction; in mature market it results in price
competitions and lower cost is an advantage)

Cost leverage can be achieved by both scale (volume and time) and experience (moving down the
experience curve faster).

Market share effects/share leverage: firms with higher market share tend to be more profitable, and
market share will correlate with advantages of scale.

Marketing strategy involves developing an effective marketing mix for a given marketplace reality and
then adapting that mix to changes in those environmental forces. Really good marketing strategy is
anticipation in changes of the environment
 3. Situation Assessment: The Company

Marketing strategy is about matching external opportunities with internal strengths and competitive
advantages.

User guidance statements: missions and visions

Vision statements- the desired future state of the organization

Mission- establishes purpose and values that shape their vision

Mission/vision- clarify the firm’s identity and purpose and should include at least four elements: core
purpose of the company; core values of the company; visionary goal; vivid description of the envisioned
future (specification of goals). Mission and vision should clarify what the organization is, why it exists
what its values are, how it does business and what it intends to become.

Goals- long-term and general, specified in mission and vision

Objectives- short-term and specific, related to marketing plans and specific marketing mixes

User guidance statements: CSR (taking actions that further some social good beyond the interest of the
firm and what is required by law)

Marketing strategies should be anchored in overarching corporate strategies which are tied to and
intended to advance corporate-level missions and visions.

Doing well by doing good- acting in a socially and environmentally responsible way may also enhance
profitability. Ex: fair treatment of workers (hiring best talent, higher retention, increasing employee
productivity) attention to the community and society and producing greed products.

Stakeholder theory- firms will benefit by taking into account the interest of a broader array of
stakeholders

Triple bottom line: Planet, People, Profit (three pillars) => firms should generate financial statements
and also produce environmental and social impact statements
Assessing past and current strategy factors: review of ongoing financial and operating performance;
review of data from marketing information systems; understanding the firm’s existing competitive
advantages and disadvantages vis-à-vis competitors

Establishing preliminary objectives and targets allows a company to:

 Focus and organize efforts,

 Direct day-to day activities
 Motivate people
 Provide a basis for assessment and control

SMART objectives (specific, measurable, achievable, relevant, timely)

Two types of objectives are useful in developing marketing strategies: market-related (market share,
sales volume, customer awareness, customer behaviors such as satisfaction, accounts and distribution
such as B2B customers) and financial objectives (profit, cost of marketing, inventory and logistics).

Identifying strategic gaps or planning gaps

The bigger the gap, the more strategic change is needed.

Closing the gap

Retailers for example are already as forward integrated as possible. If there is a sales gap, we can use
the growth strategies (market penetration, product development, market development, diversification
or forward integration). If there is a profitability gap, we can use generic strategies like (increasing the
yield, reducing costs, backward integration, reducing investment intensity, selectivity and focus):
Integrating situation assessment

Situation assessment- should be wide-ranging and descriptive, but also analytical (assess, integrate and
organize vast and potentially overwhelming data into organized information)

Ways and steps to do it:

 Relevance test- focus on the substantive and important, meaningful information

 Scenario analysis: brings together situation assessment and plans for future uncertainties as it
considers multiple factors evolving to shape possible futures or scenarios.

4. Strategy Formation

Strategy formation is the heart of the strategic marketing process. The overwhelming objective is to
meet some specific needs of some specific customers better than the competition within enduring,
profitable relationships. There are 4 sub steps:
 Identifying competitive advantage (what the firm does or could do better than the competition
at a profit)
 Segmenting the market (the important differences across customers with regards to their needs
and their responses to the marketing mix; how attractive are the various segments)
 Targeting (which specific customers will be served utilizing which specific competitive
advantage; how well do segments match with the firm’s competitive advantages)
 Positioning (what is the unique position in the marketplace that the firm will claim? How will the
firm do it? Positioning is the implementation of the strategy (targeting) into specific tactics (the
marketing mix)

Identifying competitive advantages (core competencies or sustainable competitive advantages is

what the company is better at). Resources or capabilities have to be valuable, rare, inimitable and
transferable to other markets or products to be competitive advantage. The value chain offers a
useful framework for identifying competitive advantages => generic value chain framework by
McKinsey six activities that need to be carried out: technology development, product design,
manufacturing, marketing, distribution and service.

Segmenting the Market: identify segments of customers that are similar to each other and different
from the rest of the market with regard to needs, wants and responses to the marketing mix
(product, price, service, advertisements and distribution). Substantial differences that others have
overlooked- customer insight. The purpose of segmentation is to capture the strategic advantage of
meeting differing needs with tailored mixes. Two variables to be considered:

 Segmentation bases- differing customer needs

 Segment descriptors- observable variables that correlate with differences in
needs/wants/benefits sought and allow the segment to be identified and targeted like
demographics, geographics, psychographics (lifestyle), behavioral (usage rate, loyalty, stage
in the buying process). For b2b we can have firm demographics (size, ownership), behaviors
(purchasing history) and B2B psychographics (buy centers, bidding)
Segmentation scope- the size and number of the segments to be targeted

Differentiated marketing- developing individual marketing programs for different individual target
segments (can create superior value and demand price premium; can still achieve economies of scope
across products). It can be:

 Selected specialization- one or a few single segments

 Segment specialization- serve several needs of one segment and develops many products for it
 Product specialization- focus on one product then market to all market segments
 Full market coverage- address all market segments and develop all products the segments
wants.

Segmentation dynamics- segment preferences change and segments can split or merge

Targeting- matching the firm’s competitive advantage with attractive market opportunities. Positioning,
the construction of the brand and deployment of a unique marketing mix flows from and is determined
by targeting. Its objective is to identify segments that will value offerings built on the firm’s strengths.
Two frameworks to help identify attractive markets to target:

 SWOT- summarizes the juncture of external analyses and internal analyses. It is prescriptive,
used to identify strategic actions to achieve desired end.
 Strength/attractiveness matrices such as the BCG Growth/Share matrix or GE/McKinsey
Portfolio Panning Grid. They are effective for targeting segments with strengths. Segments are
assessed with regards to their general attractiveness, the strengths of the firm against the
segment’s particular needs and dynamics (How likely or well suited the firm is to succeed in this
segment regardless of how attractive it it?)

Targeting discipline- know who the firm is not targeting; target drift= lose focus on the target segment in
favor of broader or alternative segments; straddle or squat between segments= serve two segments
with the exact marketing mix which isn’t exactly right for anyone

Positioning- the deployment of the entire marketing mix (products, people, prices, place/distribution
and promotion) to claim a unique, valued and defensible position in the marketplace. A brand’s position
resides in the consumer’s mindset. The mix is the sum of tactics that can be used to influence
consumer’s perception of the offering’s position. The purpose is to own a valued place in customer’s
perception.

5. Implementation
 starts with the understanding of the product of brand’s position in the marketplace- the
desired positioning in customers’ perceptions is the strategy at the implementation
level.
 Marketing research should lie at the heart of the marketing program and guide all of the
tactical elements of the marketing mix. Table 5.1 again. All marketing research is focused on
the customer. It includes:

 broad, inductive and exploratory customer assessment which is part of situation

assessment
 issue or decision specific research that (1) describes markets, segments and customers;
(2) guides strategies, programs and tactics and/or (3) evaluates strategies, programs
and tactics

Questions for Marketing Research:

Two types of errors:

 Type 1- finding confirmatory results for hypotheses that are not true (false positives)
 Type 2- rejecting hypotheses that are in fact true (false negative)
 Type 3- getting the right answers for the wrong questions

Carefully framing the right question, maybe even framing the final report first is vital to effective and
efficient marketing research. There are 3 broad categories of questions that marketing research can
address:

 Market questions (demand forecasting; What is the size of the market; need identification and
segmentation)
 Mix/Program Questions (What is the best product, message, channel or price)
 Assessment and Adjustment Questions (Market share- how are we doing compared to
competition; performance: how do our customers feel about us)
Types of marketing research designs:

 Exploratory (less unstructured research tends to discover deeper understandings and to

generate specific issues for future research). Customer assessment fits here.
 Descriptive (to characterize markets, segments and even specific customers with regards to size,
attitudes and preferences, behaviors, needs)
 Causal (intended to link variables such as differences in price or advertising to outcomes such as
sales)

Brands- the customers’ shorthand for its product’s position and benefits. They are represented by
names, logos, spokespeople and other customers/consumers, packaging and colors and imagery. It
can have great economic value and it embodies the firm’s goodwill with customers.

Positioning statements- summary documentation of what the brand is meant to be, what needs it is
meant to serve and for which specific customers on what specific occasions. For positioning
strategies to be clear, actionable and enduring they should be documented in positioning
statements. They are statements of how the strategy should come together in the perceptions of
the customers. It usually includes the brand/product to be positioned; the market (the frame of
reference); the target segments and target needs and at least one point of difference or brand
promise together with the reason to believe which supports these points of difference.

Marketing mix (5Ps)- meant to memorably summarize the entire range of actions that a marketing
organization can direct at customers to fulfill their needs.
Product layers:

 Core product (essential need-fulfilling elements)

 Expected and augmented products (essential need fulfilling elements augmented by the
peripheral accessories, warranties, service)
  The potential product and the factors capable of generation WOW responses from customers,
leading to satisfaction, loyalty and positive word of mouth

Commodization- attributes of the product that once were new and unexpected become expected and
all products offer them; often leads to price competition

Product lines- assortment of products offered by the same business unit. Strategies related to them:

 Price lining- offering a product for different segments based on preferred price/quality points
 Line/brand extensions- building on the strength of the existing products to add alternatives to
the line of brand, including trading up or trading down
 Product platforms- common architectures or technologies underlying multiple products in a
product line. They contribute to economies of scope

Product portfolio- categorize SBUs in regard to their strength or competitive position and the
attractiveness of the markets they serve. BCG Matrix (stars, cash cows, question marks, dogs)

An alternative to the BCG matrix is the GE/McKinsey Portfolio Planning Grid

New product development- requires keen focus on anticipating customer needs and even discovering
latent needs. Booz, Allen, Hamilton model with 7 basic activities required for successful new product
development point the need for cross-functional and external input as well as an innovation culture.
Important considerations are time-to-market and foresight.
Product innovation-innovation can be seen as shifting the value frontier, thus towards greater value for
the same prince or the same value for a lower price. Do not always entail high technology, but rather
identifying latent needs or seeing customer needs differently than they had been understood before and
drawing together existing technologies to meet them.

 Innovations can be discontinuous (radical, changing the way customers consume and meet the
target need), dynamically continuous (noticeable, but negligible changes to consumption
behaviors) to continuous (incremental, improving on existing products with no impact or very
low impact on consumption patterns and behaviors)
 Relative advantage (how much better the innovation is in meeting the same needs),
observability (how easily can others see the innovation in use) and compatibility with existing
lifestyle and consumption patterns accelerate diffusion. Risk (of hurting someone, financial or
social risk) and cost will slow diffusion. (characteristics of the innovation predict diffusion speed)
 Innovators, early adopters, early and late majorities, laggards (customers segmented on
propensity to adopt an innovation)

Promotions/Communication Strategies: traditionally advertising and personal selling were dominant;

advertising helps create awareness and remind large audiences about the product or brand. Focus on
advertising is a pull strategy (develops demand at the level of the customer and the demand drives the
sales); death of mass- fragmentation of media that used to reach mass audiences like TV, radio,
magazines=> almost impossible to reach masses, but easier to target communication; internet and word
of mouth are now very important (some companies organize word of mouth programs)

People- personal selling and service provision. It is usually the most effective means of communicating
large amounts of information and closing the deal, but the price is high and ability to reach mass
markets limited. A communication strategy emphasizing personal selling is a push strategy (develops
demand at the immediate next level of the distribution system and pushes demand). Modern personal
selling has 2 steps: determine and articulate the customer’s real problem and present the product as a
partial or complete solution to that problem.

Place/Distribution strategies- involves several categories of decisions, including selecting, motivating

and controlling channel members. They should be based on market-oriented considerations:

 Where, how and when do customers shop for the product?

 What level of support do customers need for the product?
 What level of control does the distribution require to ensure quality and to satisfy customer
needs?
 How do different means of distribution relate and how might they conflict?

These change across the product lifecycle. Early customers may need more information and training,
later less hand-holding, but respond to peripheral services and are price conscious.

Distribution channel can add value for both marketer and consumer by performing at least 3 types of
functions:

 Transactional (buying, selling, holding inventory and assuming inventory risks such as
obsolescence)
 Logistical (shipping, breaking bulk, assorting)
  Facilitating (information gathering and conveyance, including giving info to customers and info
about customers to marketer). Less necessary due to internet enabling customers to get info.

Pricing strategies: linked by the product life-cycle. Early, demand is driven by the value of the innovation
(skimming, charging a relatively high price to profit from newness), but that can dampen demand.
Alternative to skimming is lower penetration price intended to increase volume. (especially when
customers are sticky and tend to stick with original brand or economies of scale can be achieved). Later
in the product lifecycle pricing is increasingly competitive.

Profits- the strategy can either have emphasis on short-term or long-term profitability. Revenue growth
can come at the expense of profit growth if we are engaging in growth for growth like cancer cells.
Therefore, targeting the right customers is at least as important as simple growth and requires
understanding of cost-volume profit logic.

Basic economic logic- profits are the outcome of a logical combination of the components of revenue
and costs. The cost-volume profit logic highlights the unit-level contribution margin (the contribution of
each individual sale toward covering fixed expenses)

Breakeven analysis: the point in sales growth where revenues cover all expenses. Important in
evaluating feasibility of an endeavor, marketing plan or strategy. Fixed costs (the overhead and
expenses that the firm commits to across a time period and that do no go up with each unit sold).
 the quantity that we have to sell to cover expenses.

6. Planning, Assessment and Adjustment

Strategic and tactical decisions should be documented in a marketing plan. A solid marketing plan
translates the strategy into specific tactics, catalogues the risks and establishes forecasts, budgets and
measurable objectives for the marketing effort. Strategic marketing plans pose and answer 3 questions:

 Where are we now? (situation assessment)

 Where do we want to go?
 How do we get there?

The marketing plan is essential to realizing all of marketing strategy’s benefits such as considering the
broad perspective, strengthening a market orientation and aligning the many disparate tactics. It
compels through analysis, clarifies and documents assumptions and records decisions. It helps the
marketing manager prioritize issues, goals and activities. It is the way a marketing manager gains
support for her or his brand or product and claims resources.

Generic marketing plan outline:

It should have a detailed situation assessment (four Cs), marketing strategy (target segments, needs and
competitive advantage, marketing mix, positioning, various tactics to be used, forecast of market share
and sales, costs of planned activities and also risk forecasts and contingencies) and a detailed
implementation plan.

Managing risk- evaluate risks and choose which risk to accept and which to avoid. One way to do it is the
Impact/Likelihood Matrix

Forecasts, objectives and budgets are interdependent and must be done concurrently and interactively.
The aim is to optimize the budget and the commitment of resources to maximize expected (forecast)
and desired outcomes (objectives)

Budgets- convert planned actions and forecasts into planned, budgeted expenditures. A budget specifies
the money to be spent by area of the 5 mix elements and allocates scarce financial resources across
activities. It has 4 defining inputs:

 Timeframe (quarter and annual, with assessment happening more often)

 Allocations (can be done as a percentage of past sales/profits or as a function of objectives and
aspirations; this allocation sets a basic limit on budget expenditures)
 Forecasts (expected outcomes of marketing actions and other factors such as market growth
and the marketing actions such as the elements of the mix are based in part on these forecasts)
 Objectives (should be realistic and consider budget constraints)

Specific objectives- preliminary objectives are developed based on the corporate mission, vision and on
the strategy and more specific objectives are ties to detailed metrics and outcomes are developed
interactively with forecasts and budgets. Objectives should be SMART and assessed on an ongoing basis
and within timeframes that guide appropriate behaviors and facilitate timely adjustment to
performance and changes in the environment. There are 3 sorts of objectives: sales, customer and
financial or profit objectives.

Assessment and adjustment- facilitated by specificity, measurability/quantification and time-specific

nature of the plan. Recognizing variation from forecasts, objectives and budgets is a crucial input to
assessment. The variables that should be assessed on an ongoing basis include financial, operation and
market or consumer related outcomes and the various metrics can be considered in the firm, business-
unit, product and account level.

Market/Customer related metrics- CRM systems collect on an ongoing basis data about customers and
their responses to the firm’s marketing mix. The data is used to tailor the firm’s offering and
communication towards profitable customers and to evaluate and adjust ongoing efforts. The metrics
include: customer satisfaction, profitability, loyalty and intention-to-recommend and secret-shopper
reports.

The single item “How likely is it that you would recommend the product to a friend” was found to be the
most predictive of future behaviors and at the firm level of future growth and profitability.

Loyalty based marketing: targeting profitable loyal customers can lead to dramatic improvements in
profitability. Longer-term customers spread acquisition costs across more purchases and continue to
provide base profits while increasing their purchases, costing less to serve, referring other customers to
the products and even paying a price premium. Firing unprofitable, fickle customers improves results.
Once a strategy is established and its implementation begun, those parameters must be monitored, thus
beginning anew the situation assessment and strategy formation stages. Assessment and adjustment
feeds back into the gap analyses of all of the earlier steps in strategic marketing analysis and planning-
situation assessment, strategy formation and implementation via positioning and the marketing mix.

Information about a company such as what kind of strategies( Romanian market), how they succeeded,
how they positioned the brand, how they segmented, the products they have, how they targeted,
strategies they are using and what new they should implement to increase their market share.