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Strategic Marketing

Strategic Marketing 1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market

1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space

3. Strategic Market Segmentation

4. Strategic Customer Relationship Management

5. Capabilities for Learning about Customers and Markets

6. Market Targeting and Strategic Positioning

7. Strategic Relationships

8. Innovation and New Product Strategy

9. Strategic Brand Management

10. Value Chain Strategy

11. Pricing Strategy

12. Promotion, Advertising and Sales Promotion

Strategies

13. Sales Force, Internet, and Direct Marketing Strategies

14. Designing Market-Driven Organizations

15. Marketing Strategy Implementation And Control

Chapter 1

Imperatives for Market-Driven Strategy

McGraw-Hill/Irwin

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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Objectives

• Pivotal role of market-driven strategy in designing and implementing business/marketing strategies

• Links between business/marketing strategy and corporate strategy

• Challenges in the modern environment

Characteristics of a Market-Driven Strategy

Becoming Market- Orientation

of a Market-Driven Strategy Becoming Market- Orientation Achieving Superior Determining Performance
of a Market-Driven Strategy Becoming Market- Orientation Achieving Superior Determining Performance

Achieving Superior

Determining

Performance

Distinctive

Capabilities

Achieving Superior Determining Performance Distinctive Capabilities Customer Value/ Capabilities Match

Customer

Value/

Capabilities

Match

Achieving Superior Determining Performance Distinctive Capabilities Customer Value/ Capabilities Match

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Market-Driven Strategy (1)

• Becoming market-oriented

– Customer focus

– Competitor intelligence

– Cross-functional coordination

– Performance implications

BECOMING MARKET ORIENTED

Customer is the focal point of the organization

Commitment to continuous creation of superior customer value

Superior skills in understanding and satisfying customers

Requires involvement and support of the entire workforce

Monitor rapidly changing customer needs and wants

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Determine the impact of changes on customer satisfaction

Increase the rate of product innovation

Pursue strategies to create competitive advantage

Characteristics of Market Orientation

Customer Focus What are the customer’s value

Competitive Intelligence Importance of understanding the competition as well as the customer Cross-Functional Coordination Remove the walls between business functions Performance Consequences Market orientation leads to superior organizational performances

requirements?

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Becoming a Market-Oriented Organization

Information

Acquisition

a Market-Oriented Organization Information Acquisition Cross-Functional Analysis of Information Shared Diagnosis

Cross-Functional Analysis of Information

Acquisition Cross-Functional Analysis of Information Shared Diagnosis and Coordinated Action Delivery of Superior

Shared Diagnosis and Coordinated Action

Cross-Functional Analysis of Information Shared Diagnosis and Coordinated Action Delivery of Superior Customer Value

Delivery of Superior Customer Value

Market Orientation

Information Acquisition Gather relevant information on customers, competition, and markets Involve all business function Inter-functional Assessment Share information and develop innovative products with people from different function Shared diagnosis and action

Deliver superior customer value

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Market-Driven Strategy (2)

• Becoming market-oriented

– Customer focus

– Competitor intelligence

– Cross-functional coordination

– Performance implications

• Determining distinctive capabilities

DISTINCTIVE CAPABILITIES

“Capabilities are complex bundles of skills and accumulated knowledge, exercised through organizational processes, that enable firms to coordinate activities and make use of their assets.”

George S. Day, Journal of Marketing, October 1994, p.38.

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Southwest Airline’s Distinctive Capabilities

Organizational Processes Southwest uses a point-to-point route system rather than the hub-and-spoke design used by many airlines. The airline offers services to 57 cities in 29 states, with an average trip about 500 miles. The carrier’s value proposition consists of low fares and limited services (no meals). Nonetheless, major emphasis throughout the organization is placed on building a loyal customer base. Operating costs are kept low by using only Boeing 737 aircraft, minimizing the time span from landing to departure, and developing strong customer loyalty. The company continues to grow by expanding its point-to-point route network. Skills and Accumulated Knowledge The airline has developed impressive skills in operating its business model at very low cost levels. Accumulated knowledge has guided management in improving the business design over time. Coordination of Activities Coordination of activities across business functions is facilitated by the point-to-point business model. The high aircraft utilization, simplification of functions, and limited passenger services enable the airline to manage the activities very efficiently and to provide on-time point-to-point services offered on a frequent basis. Assets Southwest’s key assets are very low operating costs, loyal customer base, and high employee esprit de corps

Capabilities

Disproportionate (higher) contribution to superior customer value

Compelling Logic of Distinctive Capabilities
Compelling
Logic of Distinctive
Capabilities
value Compelling Logic of Distinctive Capabilities Provides value to customers on a more cost-effective basis

Provides value to customers on a more cost-effective basis

Source: George S. Day, Journal of Marketing, October 1994, p. 38.

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Capabilities

Desirable

Capabilities

Applicable to

Multiple

Competition

Situations

Capabilities Applicable to Multiple Competition Situations Difficult to Duplicate Source: George S. Day, Journal of

Difficult to

Duplicate

Source: George S. Day, Journal of Marketing, October 1994, 49.

Superior to the Competition

Market-Driven Strategy (3)

• Becoming market-oriented

– Customer focus

– Competitor intelligence

– Cross-functional coordination

– Performance implications

• Determining distinctive capabilities

• Types of capabilities

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Types of Capabilities

Outside-In

Processes

Types of Capabilities Outside-In Processes Spanning Processes Inside-Out Processes

Spanning

Processes

Types of Capabilities Outside-In Processes Spanning Processes Inside-Out Processes

Inside-Out

Processes

Types of Capabilities Outside-In Processes Spanning Processes Inside-Out Processes

EXTERNAL

 

EMPHASIS

 

Outside-In

Processes

  EMPHASIS   Outside-In Processes Organization’s Process INTERNAL   EMPHASIS

Organization’s Process

  Outside-In Processes Organization’s Process INTERNAL   EMPHASIS   Inside-Out
  Outside-In Processes Organization’s Process INTERNAL   EMPHASIS   Inside-Out

INTERNAL

 

EMPHASIS

 

Inside-Out

Processes

         

Market sensing

Customer linking

Channel bonding

Technology

monitoring

Spanning Processes

Cost control

Technology

development

processes

management

Environment health and safety

Source: George S. Day, Journal of Marketing, October 1994, 41.

Financial management

Integrated logistics

Manufacturing/

transformation

Human resources

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Market-Driven Strategy (4)

• Becoming market-oriented

– Customer focus

– Competitor intelligence

– Cross-functional coordination

– Performance implications

• Determining distinctive capabilities

• Types of capabilities

• Creating value for customers

Matching Customer Value and Distinctive Capabilities

Value Requirements Distinctive Capabilities
Value Requirements
Distinctive
Capabilities

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CREATING VALUE FOR CUSTOMERS

Customer Value:

Value for buyers consists of the benefits less the costs resulting from the purchase of products.

Superior value: positive net benefits

Creating Value:

“Customer value is the outcome of a process that begins with a business strategy anchored in a deep understanding of customer needs.”

Source: C. K. Troy, The Conference Board Inc., 1996, 5.

Creating Value for Customers

Benefits

Customer

Value

Creating Value for Customers Benefits Customer Value Costs

Costs

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Value Composition

Product

Services

Employees

Image

Monetary costs

Time

Psychic and

physic costs

Benefits Costs (sacrifices)
Benefits
Costs
(sacrifices)
Value (gain/loss)
Value
(gain/loss)

Market-Driven Strategy (5)

• Becoming market-driven

– Marketing sensing capabilities

– Customer linking capabilities

– Aligning structure and processes

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Becoming Market Driven

Market Sensing Capabilities

MARKET – DRIVEN STRATEGIES
MARKET –
DRIVEN
STRATEGIES

Customer Linking Capabilities

Market Driven Initiatives

Market Sensing Capabilities

Effective processes for learning about markets

Sensing:

Collected information needs to be shared across functions and interpreted to determine proper actions. Customer Linking Capabilities

Create and maintain close customer relationships

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Aligning Structure and Processes

Potential change of organizational design

Improve existing processes

Process redesign

Cross-functional coordination and involvement

Primary targets for reengineering:

Sales and marketing, customer relations, order fulfillment, and distribution

Corporate, Business and Marketing Strategy (1)

• What is corporate strategy?

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CORPORATE STRATEGY

Deciding the Scope and Purpose of the Business

S TRATEGY Deciding the Scope and Purpose of the Business Business Objectives Actions and Resources for

Business

Objectives

TRATEGY Deciding the Scope and Purpose of the Business Business Objectives Actions and Resources for Achieving

Actions and Resources for Achieving Objectives

CHARACTERISTICS OF SUCCESSFUL STRATEGY

Unique competitive position for the company. Activities tailored to strategy. Clear trade-offs and choices vis-à-vis competitors. Competitive advantage arises from fit across activities. Sustainability comes from the activity system not the parts. Operational effectiveness a given.

Source: Michael E. Porter, “What Is Strategy,” Harvard Business Review, November-December 1996, 74.

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Corporate, Business and Marketing Strategy (2)

• What is corporate strategy?

• Corporate strategy framework

– Deciding corporate vision

– Objectives

– Resources

– Business composition

– Structure, systems and processes

CORPORATE STRATEGY COMPONENTS

Management’s long-term vision for the corporation Objectives Assets, skills, and capabilities Businesses in which the corporation competes Structure, systems, and processes Creation of value

Source: David J. Collis and Cynthia A. Montgomery, Corporate Strategy, Chicago: Irwin, 1997, 7-12.

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Corporate, Business and Marketing Strategy (3)

• Business and marketing strategy

– Business and marketing strategy relationships

– Strategic marketing

CORPORATE, BUSINESS AND MARKETING STRATEGY

CORPORATE, BUSINESS AND MARKETING STRATEGY

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Corporate, Business and Marketing Strategy (4)

• The marketing strategy process

– Markets, segments and customer value

• Markets and competitive space

• Strategic market segmentation

• Strategic customer relationship management

• Capabilities for continuous learning about markets

Corporate, Business and Marketing Strategy (5)

– Designing market-driven strategies

• Market targeting and strategic positioning

• Strategic relationships

• Innovation and new product strategy

– Market-driven program development

• Strategic brand management

• Value chain strategy

• Pricing strategy

• Promotion strategy

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Corporate, Business and Marketing Strategy (6)

• Implementing and managing market- driven strategy

– Designing market-driven organizations

– Marketing strategy implementation and control

MARKETING STRATEGY PROCESS

M ARKETING S TRATEGY P ROCESS Implementing and Managing Market-Driven Strategy Markets, Segments And Value

Implementing

and Managing

Market-Driven

Strategy

P ROCESS Implementing and Managing Market-Driven Strategy Markets, Segments And Value Market-Driven Program

Markets,

Segments

And Value

Market-Driven

Program

Development

Strategy Markets, Segments And Value Market-Driven Program Development Designing Market-Driven Strategies

Designing

Market-Driven

Strategies

Strategy Markets, Segments And Value Market-Driven Program Development Designing Market-Driven Strategies

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Challenges in the modern environment

• Escalating globalization

• Technology diversity and uncertainty

• The Web 2.0

• Ethical behavior and corporate social responsiveness

Strategic Marketing Planning

• Developing the strategic plan for each business

– Preparing the marketing plan

• Planning relationships and frequency

• Planning considerations

– Responsibility for preparing plans

– Planning unit

• Preparing the marketing plan

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MARKETING PLAN OUTLINE

I. Strategic Situation Summary

Summarize the key points from your situation analysis (market analysis, segments, industry/competition) in order to recount the major events and provide information to better understand thestrategies outlined in the marketing plan.

II. Market-Targets and Objectives

The market target may be defined demographically (key characteristics only), geographically, or in social/economic terms. Each market target should have needs and wants that differ to some degree from other targets. These differences may be with respect to types of products purchased, use situation, frequency of purchase, and other variations that indicate a need to alter the positioning strategy to fit the needs and wants of each target. An objective is a quantified goal identifying what is expected when. It specifies the end results expected. The objectives should be written for each target market. Objectives should also be included for the following program components: (1) product, (2) price, (3) distribution, (4) promotion (salesforce, advertising, sales promotion, and public relations), and (5) technical services.

MARKETING PLAN OUTLINE

III. Positioning Statements

Write statements that describe how you want each market target to perceive each product relative to competition. State the core concept used to position the product (brand) in the eyes and mind of the targeted buyer. The positioning statement should describe: (1) What criteria or benefits the customer considers when buying a product along with the level of importance, (2) What we offer that differentiates our product from competition, and (3) The limitations of competitive products.

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IV. Market Mix Strategy for Each Market Target

A. Product Strategy

Identify how each product fits the market target. Other issues that may be addressed would be new product suggestions, adjustments in the mix of existing products, and product deletion candidates.

B. Price Strategy

The overall pricing strategy (I.e., competitive, premium-priced, etc.) should be identified along with a cost/benefit analysis if applicable. Identify what role you want price to play, i.e., increase share, maintenance, etc.

C. Distribution Strategy

Describe specific distribution strategies for each market target. Issues to be addressed are intensity of distribution (market coverage), how distribution will be accomplished, and assistance provided to distributors. The role of the sales force in distribution strategy should also be considered.

D. Promotion Strategy

Promotion strategy is used to initiate and maintain a flow of communication between the company and the market target. To assist in develop ing the communications program, the attributes or benefits of our product should be identified for each market target. How our product differs from competition (competitive advantage) should be listed. The sales force’s responsibilities in fulfilling the market plan must be integrated into the promotion strategy. Strategies should be listed for (1) personal selling, (2) advertising, (3) sales promotion, and (4) public relations.

E.

Marketing Research Describe the market research problem and the kind of information needed. Include a statement which addresses why this information is needed. The specific market research strategies can be written once the above two steps have been followed.

V.

Coordination with Other Business Functions Indicate other departments/functions that have responsibilities for implementing the marketing plan.

VI.

Sales Forecasts and Budgets

VII.

Contingency Plans Indicate how your plans should be modified if events should occur that are different from those assumed in the plan.

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Strategic Marketing

Strategic Marketing 1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market

1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space

3. Strategic Market Segmentation

4. Strategic Customer Relationship Management

5. Capabilities for Learning about Customers and Markets

6. Market Targeting and Strategic Positioning

7. Strategic Relationships

8. Innovation and New Product Strategy

9. Strategic Brand Management

10. Value Chain Strategy

11. Pricing Strategy

12. Promotion, Advertising and Sales Promotion

Strategies

13. Sales Force, Internet, and Direct Marketing Strategies

14. Designing Market-Driven Organizations

15. Marketing Strategy Implementation And Control

Chapter 2

Markets and Competitive Space

McGraw-Hill/Irwin

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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MARKETS AND COMPETITIVE SPACE

Markets and Strategies

Defining and Analyzing Product-Markets

Describing and Analyzing End-Users

Analyzing Competition

Market Size Estimation

Developing a Strategic Vision about the Future

MARKETS AND STRATEGIES

The Challenges Markets are increasingly complex, turbulent, and interrelated. Importance of a broad view of the market. Essential to develop a vision about how the market is likely to change in the future.

Continuous Monitoring is Necessary to:

Find promising opportunities Identify shifts in value requirements Understand competitors’ positioning Guide targeting and positioning decisions

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OPPORTUNITIES OUTSIDE THE COMPETITIVE BOX

The Competitive Box

Traditional Competitors

COMPETITIVE BOX The Competitive Box Traditional Competitors Propositions New Types of Competition New Business Models

Propositions

BOX The Competitive Box Traditional Competitors Propositions New Types of Competition New Business Models New New
BOX The Competitive Box Traditional Competitors Propositions New Types of Competition New Business Models New New

New Types of Competition

New

Business

Models

Competitors Propositions New Types of Competition New Business Models New New Existing Customer Base New Customer

New

Competitors Propositions New Types of Competition New Business Models New New Existing Customer Base New Customer
Competitors Propositions New Types of Competition New Business Models New New Existing Customer Base New Customer

New

Competitors Propositions New Types of Competition New Business Models New New Existing Customer Base New Customer

Existing Customer

Base

New Customer

Base(s)

Customers

Conventional Value

Customers

AN ARRAY OF CHALLENGES

Fast Changing

Markets

Disruptive Innovation

Drivers of Changes in Markets
Drivers of Changes
in Markets

Creating New Market Space

Commoditization

Threats

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Markets Impact Strategies

Market changes often require altering strategies

Forces of change create both market opportunities and threats

Inherent danger in faulty market sensing

DEFINING AND ANALYZING PRODUCT-MARKETS Determine the Boundaries and Structure of the Product-Market Form the
DEFINING AND ANALYZING
PRODUCT-MARKETS
Determine the Boundaries and
Structure of the Product-Market
Form the
Product-Market
Describe and
Analyze End-Users
Analyze
Competition
Forecast
Market Size and
Rate of Change

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Matching Needs with Product Benefits

A product – market matches people with needs to the product benefits that satisfy those needs

“A product – market is the set of products judged to be substitutes within those usage situations in which similar patterns of benefits are sought by groups of customers.”*

*Srivastava, et al. (1984) Journal of Marketing, Spring, 32.

INNOVATION FEATURE

Progressive Insurance:

Customer Needs at the Center of Strategy

• In the period 1994 to 2004, Progressive Insurance increased sales from $1.3 billion to $9.5 billion, and ranks high in the Business Week Top 50 U.S. companies for shareholder value creation.

• The company invents new ways of providing services to save customers time, money and irritation, while often lowering costs at the same time.

• Loss adjusters are sent to the road accidents rather than working at head office, and they have the power to write checks on the spot.

• Progressive reduced the time needed to see a damaged automobile from seven days to nine hours.

• Policy holders’ cars are repaired quicker, and the focus on this central customer need has won much automobile insurance business for Progressive.

• These initiatives also enable Progressive to reduce its own costs – the cost of storing a damaged automobile for a day is $28, about the same as the profit from a six-month policy.

Source: Adapted from Mitchell, Adrian (2004)”Heart of the Matter,” The Marketer, June 12, 14.

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Product – Market Boundaries and Structure

Determining Product-Market Structure

1. Start with the generic need satisfied by the product category of interest to management

2. Identify the product categories (types) that can satisfy the generic need

3. Form the specific product – markets within the generic product – market

Illustrative Fast-Food Product-Market Structure

SUPER MICROWAVE MARKETS OVENS FAST-FOOD MARKET CONVENIENCE TRADITIONAL RESTAURANTS STORES
SUPER
MICROWAVE
MARKETS
OVENS
FAST-FOOD
MARKET
CONVENIENCE
TRADITIONAL
RESTAURANTS
STORES

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Extent of Market Complexity

Three characteristics of markets:

1. Functions or uses of the product

2. The enabling technology of the product

3. Customer segments in the product-market

Illustrative Product – Market Structure

Food and beverages for breakfast meal
Food and beverages
for breakfast meal
Cereals
Cereals

Generic Product Class

Product Type

Ready to eat Regular Natural Pre-sweetened Nutritional Life Product 19 Special K
Ready to eat
Regular
Natural
Pre-sweetened
Nutritional
Life
Product 19
Special K

Variant A

Variant B

Brands

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DEFINING AND ANALYZING MARKETS

Define Product-Market Boundaries and Structures

MARKETS Define Product-Market Boundaries and Structures Identify and Describe End-Users Analyze Industry and Value

Identify and Describe End-Users

Boundaries and Structures Identify and Describe End-Users Analyze Industry and Value Added Chain Evaluate Key

Analyze Industry and Value Added Chain

Describe End-Users Analyze Industry and Value Added Chain Evaluate Key Competitors Forecast Market Size and Growth

Evaluate Key Competitors

Describe End-Users Analyze Industry and Value Added Chain Evaluate Key Competitors Forecast Market Size and Growth

Forecast Market Size and Growth Trends

Identifying and Describing Buyers DESCRIBING How Building AND Buyers Customer ANALYZING Make Profiles END-USERS
Identifying and
Describing Buyers
DESCRIBING
How
Building
AND
Buyers
Customer
ANALYZING
Make
Profiles
END-USERS
Choices
Environmental
Influences

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Identifying and Describing End- Users

Illustrative buyer characteristics in consumer markets:

 

Family size, age, income, geographical location, sex, and occupation

Illustrative factors in organizational markets:

 

Type of industry Company size Location

 

How Buyers Make Choices

BUYING DECISION PROCESS:

 

1. Problem recognition

2. Information search

3. Alternative evaluation

4. Purchase decision

5. Post-purchase behavior

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Environmental

Influences

External factors influencing buyers’ needs and wants:

Government, social change, economic shifts, technology etc.

These factors are often non- controllable but can have a major impact on purchasing decisions

Building Customer Profiles

Start with generic product – market

Move next to product- type and variant profiles >> increasingly more specific

Customer profiles guide decision making (e.g. targeting, positioning, market segmentation etc.)

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ANALYZING COMPETITION 1.1. Define the Competitive Arena for the Generic, Specific, and Variant Product Markets
ANALYZING COMPETITION
1.1. Define the Competitive
Arena for the Generic,
Specific, and Variant
Product Markets
PRODUCT-
2. Identify
4. Identify
MARKET
and
and
STRUCTURE
Describe
Evaluate
AND
Key
Potential
MARKET
Competitors
Competitors
SEGMENTS
3. Evaluate
Key
Competitors
Examples of Levels of Competition Baseball cards Bottle Video water Games Fast Food Regular Diet
Examples of Levels of
Competition
Baseball
cards
Bottle
Video
water
Games
Fast
Food
Regular
Diet lemon
colas
Ice
limes
Cream
Beer
Diet-Rite
Cola
Fruit
Diet
flavored
Diet Pepsi
Coke
colas
Wine
Product from
competition:
Lemon
Product category
diet colas
limes
Juices
competition:
soft drinks
Coffee
Generic competition:
beverages
Budget competition:
food & entertainment

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Industry Analysis

Industry size, growth, and composition

Typical marketing practices

Industry changes that are anticipated (e.g. consolidation trends)

Industry strengths and weaknesses

Strategic alliances among competitors

Defining Industry Structure & Characteristics

Industry Form

Industry

Environment

Competitive

Forces

Industry Form Industry Environment Competitive Forces SUPPLIERS PRODUCERS WHOLESALERS/ DISTRIBUTORS

SUPPLIERS

Form Industry Environment Competitive Forces SUPPLIERS PRODUCERS WHOLESALERS/ DISTRIBUTORS RETAILERS/DEALERS
Form Industry Environment Competitive Forces SUPPLIERS PRODUCERS WHOLESALERS/ DISTRIBUTORS RETAILERS/DEALERS

PRODUCERS

Environment Competitive Forces SUPPLIERS PRODUCERS WHOLESALERS/ DISTRIBUTORS RETAILERS/DEALERS CONSUMER/

WHOLESALERS/

DISTRIBUTORS

Forces SUPPLIERS PRODUCERS WHOLESALERS/ DISTRIBUTORS RETAILERS/DEALERS CONSUMER/ ORGANIZATIONAL END USERS Value

RETAILERS/DEALERS

SUPPLIERS PRODUCERS WHOLESALERS/ DISTRIBUTORS RETAILERS/DEALERS CONSUMER/ ORGANIZATIONAL END USERS Value Added Chain

CONSUMER/ ORGANIZATIONAL END USERS

Value

Added

Chain

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Competitive Forces

1. Rivalry among existing firms.

2. Threat of new entrants.

3. Threat of substitute products.

4. Bargaining power of suppliers.

5. Bargaining power of buyers.

Source: Michael E. Porter, Competitive Advantage, Free Press, 1985, 5.

Key Competitor Analysis

Business scope and objectives

Management experience, capabilities, and weaknesses

Market position and trends

Market target(s) and customer base

Marketing program positioning strategy

Financial, technical, and operating capabilities

Key competitive advantages (e.g., access to resources, patents)

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Extent of Market Coverage

Current

Capabilities

Competitor Evaluation
Competitor
Evaluation

Past

Performance

Customer

Satisfaction

MARKET SIZE ESTIMATION

Product-Market Forecast Relationships Market Potential Estimate (area denotes sales in $’s) Unrealized Potential
Product-Market Forecast
Relationships
Market Potential
Estimate
(area denotes sales in $’s)
Unrealized
Potential
Company
Industry
Sales
Sales
Forecast
Forecast

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Product-Market Forecast Relationships for Industrial Painting Units

Sales (in 1000s of units)

900 800 Market 700 Potential 600 Sales Forecast 500 400 300 200 Company XYZ Sales
900
800
Market
700
Potential
600
Sales Forecast
500
400
300
200
Company XYZ
Sales Forecast
100
0
2003
2004
2005
2006
2007
2008
2009
2010

DEVELOPING A STRATEGIC VISION ABOUT THE FUTURE

Industry Boundaries Blurring and Evolving

Competitive Structure and Players Changing

Value Migration Paths

Product Versus Business Design Competition

Firms are Collaborating to Influence Industry Standards

Source: C. K. Prahalad, Journal of Marketing, Aug. 1995, vi.

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Strategic Marketing

Strategic Marketing 1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market

1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space

3. Strategic Market Segmentation

4. Strategic Customer Relationship Management

5. Capabilities for Learning about Customers and Markets

6. Market Targeting and Strategic Positioning

7. Strategic Relationships

8. Innovation and New Product Strategy

9. Strategic Brand Management

10. Value Chain Strategy

11. Pricing Strategy

12. Promotion, Advertising and Sales Promotion

Strategies

13. Sales Force, Internet, and Direct Marketing Strategies

14. Designing Market-Driven Organizations

15. Marketing Strategy Implementation And Control

Chapter 3

Strategic

Market

Segmentation

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Strategic market segmentation

(1)

• Levels and types of market segmentation

Levels and types of market segmentation Vision Strategic intent Strategic Product benefits Segmentation Resource
Levels and types of market
segmentation
Vision
Strategic intent
Strategic
Product benefits
Segmentation
Resource allocation
Alignment
Managerial
Planning
Segmentation
Marketing programs
Operational
- Advertising
Segmentation
- Sales
- Distribution

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Best Buy segmentation strategy

• Jill’s - “soccer moms”

• Barry’s - wealthy professionals

• Buzz’s - “tech enthusiasts”

• Ray’s - the family man

• Mr Storefront - the small business customer

• Carrie’s - young, single females

• Helen and Charlie’s - older couples whose children have left home

From Mass Markets to Micro Markets

OLD

NEW

CONSUMERS

Passively receive

Empowered media users

whatever TV

control and shape content

networks

thanks to TiVo, iPod and

broadcast Internet

ASPIRATIONS

To keep up with

To standout from the

TV CHOICE

the crowd Three networks

crowd Hundreds of channels

MAGAZINES

plus maybe a PBS station Age of the big

plus video on demand

ADS

glossies: Time, Life, Newsweek Everyone hums

Age of the special interest magazine for every age and affinity group Talking to a group of

the Alka-Seltzer one, ads go ever jingle narrower

BRANDS

Rise of the big,

Niche brands, product

ubiquitous brands extensions and mass

from Coca-Cola

customization mean many

to Tide

product variations

Source: Anthony Bianco, “The Vanishing Mass Market”, Business Week, July 12 2004, 58-62

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Strategic market segmentation

(2)

• Market-driven strategy and segmentation

– Market segmentation, value opportunities and new market space – Market targeting and strategic positioning

Segmentation and Market-Driven Strategy

SEGMENTS

Segmentation and Market-Driven Strategy SEGMENTS VALUE OPPORTUNITIES CAPABILITIES/ SEGMENT MATCH TARGET(S) POSITIONING

VALUE

OPPORTUNITIES

and Market-Driven Strategy SEGMENTS VALUE OPPORTUNITIES CAPABILITIES/ SEGMENT MATCH TARGET(S) POSITIONING STRATEGY

CAPABILITIES/

SEGMENT

MATCH

and Market-Driven Strategy SEGMENTS VALUE OPPORTUNITIES CAPABILITIES/ SEGMENT MATCH TARGET(S) POSITIONING STRATEGY

TARGET(S)

and Market-Driven Strategy SEGMENTS VALUE OPPORTUNITIES CAPABILITIES/ SEGMENT MATCH TARGET(S) POSITIONING STRATEGY

POSITIONING

STRATEGY

41

2/9/2012

Strategic market segmentation

(3)

• Market-driven strategy and segmentation

– Market segmentation, value opportunities and new market space – Market targeting and strategic positioning

• Activities and decisions in market segmentation

Market Segmentation Activities and Decisions

Market Segmentation Activities and Decisions Strategic Analysis of Segments Finer Segmentation Strategies Market to be

Strategic Analysis of Segments

Activities and Decisions Strategic Analysis of Segments Finer Segmentation Strategies Market to be Segmented Decide

Finer

Segmentation

Strategies

Market to be Segmented

Strategic Analysis of Segments Finer Segmentation Strategies Market to be Segmented Decide How to Segment Form

Decide How to Segment

Strategic Analysis of Segments Finer Segmentation Strategies Market to be Segmented Decide How to Segment Form
Strategic Analysis of Segments Finer Segmentation Strategies Market to be Segmented Decide How to Segment Form

Form

Segments

42

2/9/2012

Strategic market segmentation

(4)

• Market-driven strategy and segmentation

– Market segmentation, value opportunities and new market space – Market targeting and strategic positioning

• Activities and decisions in market segmentation

• Defining the market to be segmented

Product Variant Segmentation Product Type Segmentation Generic Segmentation

Product Variant Segmentation Product Type Segmentation

Generic Segmentation

43

2/9/2012

Strategic market segmentation (5)

• Identifying market segments

– Segmentation variables

– Characteristics of people and organizations

• Consumer markets

• Organizational markets

• Product use situation segmentation

• Buyers’ needs and preferences

– Consumer needs

– Attitudes

– Perceptions

• Purchase behavior

Segmentation Variables Purchase Behavior Buyers’ Needs/ Preferences Characteristics of People/ Organizations Use
Segmentation Variables
Purchase
Behavior
Buyers’ Needs/
Preferences
Characteristics
of People/
Organizations
Use
Situation

44

2/9/2012

Illustrative Segmentation Variables

 

Consumer

Industrial/ Organizational Markets

Markets

Characteristics

Age, gender, income, family size, lifecycle stage, geographic location, lifestyle

Type of industry, size, geographic location, corporate culture, stage of development, producer/ intermediary

of people/

organizations

Use situation

Occasion, importance of purchase, prior experience with product, user status

Application, purchasing Procedure (new task, modified rebuy, straight rebuy

Buyers’ needs/

Brand loyalty status, brand preference, benefits sought, quality, proneness to make a deal

Performance requirements, brand preferences, desired features, service requirements

preferences

Purchase

Size of purchase, frequency of purchase

Volume, frequency

behavior

of purchase

Strategic market segmentation (6)

• Forming market segments

– Requirements for segmentation

• Response differences

• Identifiable segments

• Actionable segments

• Cost/benefits

• Stability

– Approaches to segment identification

– Customer group identification

– Forming groups based on response differences

45

2/9/2012

Miller Brewing’s beer brand targets

Miller genuine draft - “mainstream sophisticates”

Milwaukee’s Best Light - “hardworking men”

Pilsner Urquell - “beer afficionados”

Miller Icehouse - for “drinking buddies”

Requirements for Segmentation

Response

differences

Identifiable

segments Segmentation Requirements
segments
Segmentation
Requirements

Actionable

segments

Stability

Favorable

over time

cost/benefit

46

2/9/2012

Approaches to Segment Identification

IDENTIFIERS OF CUSTOMER GROUPS

Characteristics of People and Organizations

CUSTOMER

RESPONSEGROUPS Characteristics of People and Organizations CUSTOMER PROFILE Use Situation Buyers Needs and Preferences Purchase

PROFILEof People and Organizations CUSTOMER RESPONSE Use Situation Buyers Needs and Preferences Purchase Behavior

Use Situation

Buyers Needs and Preferences

Purchase Behavior and Loyalty

Segment Dimensions for Hotel Lodging Services

Segment Dimensions for Hotel Lodging Services

47

2/9/2012

Illustrative Example: Gasoline Buyers Road Warriors True Blues Generation F3 (Fuel, Food & Fast) Homebodies
Illustrative Example: Gasoline Buyers
Road
Warriors
True
Blues
Generation
F3 (Fuel,
Food & Fast)
Homebodies
Higher-income, middle-aged men, drive 25-
50000 miles a year… buy premium with a
credit card … purchase sandwiches and drinks
from the convenience store… will sometimes
use carwash
Men and women with moderate to
high incomes, loyal to a brand and
sometimes a particular station …
frequently buy premium, pay in cash
Upwardly mobile men and women -
half under 25 years of age -
constantly on the go … drive a lot
snack heavily from the convenience store
Usually housewives who shuttle
children around during the day and
use whatever gas station is based on
town or on route of travel
16% of
buyers
16% of
buyers
27% of
buyers
21% of
buyers
Price
20% of
Shoppers
Not loyal to brand or station and
rarely buy premium … frequently on
tight budgets.
buyers
Illustrative Consumer Perception Map Expensive GROUP II • Brand A • Brand E • Brand
Illustrative Consumer
Perception Map
Expensive
GROUP
II
• Brand A
• Brand E
• Brand B
GROUP
V
Low
High
GROUP
Quality
Quality
I
GROUP
• Brand C
III
• Brand D
GROUP
IV
Inexpensive

48

2/9/2012

Strategic market segmentation

(7)

• Finer segmentation strategies

– Logic

• Customized offerings

• Diverse customer base

• Close customer relationships

– Finer segmentation strategies

• Micro-segmentation

• Mass customization

• Variety-seeking strategy

Strategic market segmentation

(8)

• Selecting the segmentation strategy

– Deciding how to segment – Strategic analysis of market segments

• Customer analysis

• Competitor analysis

• Positioning analysis

• Estimating segment attractiveness

• Segmentation “fit” and implementation

49

2/9/2012

Strategic Analysis of Market Segments Customer Analysis Financial and Market Attractiveness Competitor Analysis
Strategic Analysis of Market
Segments
Customer
Analysis
Financial and
Market
Attractiveness
Competitor
Analysis
Positioning
Analysis

Segmentation “Fit” for Implementation

Segment Attractiveness and Internal Compatibility

High

Market Segment

Attractiveness

Low

Internal Compatibility

High

Low

Attractive segments that match with company capabilities

Unattractive segments but with match to company capabilities

Attractive segments but with poor match with company capabilities

Unattractive segments that do not match with company capabilities

50

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Strategic Marketing

Strategic Marketing 1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market

1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space

3. Strategic Market Segmentation

4. Strategic Customer Relationship Management

5. Capabilities for Learning about Customers and Markets

6. Market Targeting and Strategic Positioning

7. Strategic Relationships

8. Innovation and New Product Strategy

9. Strategic Brand Management

10. Value Chain Strategy

11. Pricing Strategy

12. Promotion, Advertising and Sales Promotion

Strategies

13. Sales Force, Internet, and Direct Marketing Strategies

14. Designing Market-Driven Organizations

15. Marketing Strategy Implementation And Control

Chapter 3

Strategic

Market

Segmentation

51

2/9/2012

Strategic market segmentation

(1)

• Levels and types of market segmentation

Levels and types of market segmentation Vision Strategic intent Strategic Product benefits Segmentation Resource
Levels and types of market
segmentation
Vision
Strategic intent
Strategic
Product benefits
Segmentation
Resource allocation
Alignment
Managerial
Planning
Segmentation
Marketing programs
Operational
- Advertising
Segmentation
- Sales
- Distribution

52

2/9/2012

Best Buy segmentation strategy

• Jill’s - “soccer moms”

• Barry’s - wealthy professionals

• Buzz’s - “tech enthusiasts”

• Ray’s - the family man

• Mr Storefront - the small business customer

• Carrie’s - young, single females

• Helen and Charlie’s - older couples whose children have left home

From Mass Markets to Micro Markets

OLD

NEW

CONSUMERS

Passively receive

Empowered media users

whatever TV

control and shape content

networks

thanks to TiVo, iPod and

broadcast Internet

ASPIRATIONS

To keep up with

To standout from the

TV CHOICE

the crowd Three networks

crowd Hundreds of channels

MAGAZINES

plus maybe a PBS station Age of the big

plus video on demand

ADS

glossies: Time, Life, Newsweek Everyone hums

Age of the special interest magazine for every age and affinity group Talking to a group of

the Alka-Seltzer one, ads go ever jingle narrower

BRANDS

Rise of the big,

Niche brands, product

ubiquitous brands extensions and mass

from Coca-Cola

customization mean many

to Tide

product variations

Source: Anthony Bianco, “The Vanishing Mass Market”, Business Week, July 12 2004, 58-62

53

2/9/2012

Strategic market segmentation

(2)

• Market-driven strategy and segmentation

– Market segmentation, value opportunities and new market space – Market targeting and strategic positioning

Segmentation and Market-Driven Strategy

SEGMENTS

Segmentation and Market-Driven Strategy SEGMENTS VALUE OPPORTUNITIES CAPABILITIES/ SEGMENT MATCH TARGET(S) POSITIONING

VALUE

OPPORTUNITIES

and Market-Driven Strategy SEGMENTS VALUE OPPORTUNITIES CAPABILITIES/ SEGMENT MATCH TARGET(S) POSITIONING STRATEGY

CAPABILITIES/

SEGMENT

MATCH

and Market-Driven Strategy SEGMENTS VALUE OPPORTUNITIES CAPABILITIES/ SEGMENT MATCH TARGET(S) POSITIONING STRATEGY

TARGET(S)

and Market-Driven Strategy SEGMENTS VALUE OPPORTUNITIES CAPABILITIES/ SEGMENT MATCH TARGET(S) POSITIONING STRATEGY

POSITIONING

STRATEGY

54

2/9/2012

Strategic market segmentation

(3)

• Market-driven strategy and segmentation

– Market segmentation, value opportunities and new market space – Market targeting and strategic positioning

• Activities and decisions in market segmentation

Market Segmentation Activities and Decisions

Market Segmentation Activities and Decisions Strategic Analysis of Segments Finer Segmentation Strategies Market to be

Strategic Analysis of Segments

Activities and Decisions Strategic Analysis of Segments Finer Segmentation Strategies Market to be Segmented Decide

Finer

Segmentation

Strategies

Market to be Segmented

Strategic Analysis of Segments Finer Segmentation Strategies Market to be Segmented Decide How to Segment Form

Decide How to Segment

Strategic Analysis of Segments Finer Segmentation Strategies Market to be Segmented Decide How to Segment Form
Strategic Analysis of Segments Finer Segmentation Strategies Market to be Segmented Decide How to Segment Form

Form

Segments

55

2/9/2012

Strategic market segmentation

(4)

• Market-driven strategy and segmentation

– Market segmentation, value opportunities and new market space – Market targeting and strategic positioning

• Activities and decisions in market segmentation

• Defining the market to be segmented

Product Variant Segmentation Product Type Segmentation Generic Segmentation

Product Variant Segmentation Product Type Segmentation

Generic Segmentation

56

2/9/2012

Strategic market segmentation (5)

• Identifying market segments

– Segmentation variables

– Characteristics of people and organizations

• Consumer markets

• Organizational markets

• Product use situation segmentation

• Buyers’ needs and preferences

– Consumer needs

– Attitudes

– Perceptions

• Purchase behavior

Segmentation Variables Purchase Behavior Buyers’ Needs/ Preferences Characteristics of People/ Organizations Use
Segmentation Variables
Purchase
Behavior
Buyers’ Needs/
Preferences
Characteristics
of People/
Organizations
Use
Situation

57

2/9/2012

Illustrative Segmentation Variables

 

Consumer

Industrial/ Organizational Markets

Markets

Characteristics

Age, gender, income, family size, lifecycle stage, geographic location, lifestyle

Type of industry, size, geographic location, corporate culture, stage of development, producer/ intermediary

of people/

organizations

Use situation

Occasion, importance of purchase, prior experience with product, user status

Application, purchasing Procedure (new task, modified rebuy, straight rebuy

Buyers’ needs/

Brand loyalty status, brand preference, benefits sought, quality, proneness to make a deal

Performance requirements, brand preferences, desired features, service requirements

preferences

Purchase

Size of purchase, frequency of purchase

Volume, frequency

behavior

of purchase

Strategic market segmentation (6)

• Forming market segments

– Requirements for segmentation

• Response differences

• Identifiable segments

• Actionable segments

• Cost/benefits

• Stability

– Approaches to segment identification

– Customer group identification

– Forming groups based on response differences

58

2/9/2012

Miller Brewing’s beer brand targets

Miller genuine draft - “mainstream sophisticates”

Milwaukee’s Best Light - “hardworking men”

Pilsner Urquell - “beer afficionados”

Miller Icehouse - for “drinking buddies”

Requirements for Segmentation

Response

differences

Identifiable

segments Segmentation Requirements
segments
Segmentation
Requirements

Actionable

segments

Stability

Favorable

over time

cost/benefit

59

2/9/2012

Approaches to Segment Identification

IDENTIFIERS OF CUSTOMER GROUPS

Characteristics of People and Organizations

CUSTOMER

RESPONSEGROUPS Characteristics of People and Organizations CUSTOMER PROFILE Use Situation Buyers Needs and Preferences Purchase

PROFILEof People and Organizations CUSTOMER RESPONSE Use Situation Buyers Needs and Preferences Purchase Behavior

Use Situation

Buyers Needs and Preferences

Purchase Behavior and Loyalty

Segment Dimensions for Hotel Lodging Services

Segment Dimensions for Hotel Lodging Services

60

2/9/2012

Illustrative Example: Gasoline Buyers Road Warriors True Blues Generation F3 (Fuel, Food & Fast) Homebodies
Illustrative Example: Gasoline Buyers
Road
Warriors
True
Blues
Generation
F3 (Fuel,
Food & Fast)
Homebodies
Higher-income, middle-aged men, drive 25-
50000 miles a year… buy premium with a
credit card … purchase sandwiches and drinks
from the convenience store… will sometimes
use carwash
Men and women with moderate to
high incomes, loyal to a brand and
sometimes a particular station …
frequently buy premium, pay in cash
Upwardly mobile men and women -
half under 25 years of age -
constantly on the go … drive a lot
snack heavily from the convenience store
Usually housewives who shuttle
children around during the day and
use whatever gas station is based on
town or on route of travel
16% of
buyers
16% of
buyers
27% of
buyers
21% of
buyers
Price
20% of
Shoppers
Not loyal to brand or station and
rarely buy premium … frequently on
tight budgets.
buyers
Illustrative Consumer Perception Map Expensive GROUP II • Brand A • Brand E • Brand
Illustrative Consumer
Perception Map
Expensive
GROUP
II
• Brand A
• Brand E
• Brand B
GROUP
V
Low
High
GROUP
Quality
Quality
I
GROUP
• Brand C
III
• Brand D
GROUP
IV
Inexpensive

61

2/9/2012

Strategic market segmentation

(7)

• Finer segmentation strategies

– Logic

• Customized offerings

• Diverse customer base

• Close customer relationships

– Finer segmentation strategies

• Micro-segmentation

• Mass customization

• Variety-seeking strategy

Strategic market segmentation

(8)

• Selecting the segmentation strategy

– Deciding how to segment – Strategic analysis of market segments

• Customer analysis

• Competitor analysis

• Positioning analysis

• Estimating segment attractiveness

• Segmentation “fit” and implementation

62

2/9/2012

Strategic Analysis of Market Segments Customer Analysis Financial and Market Attractiveness Competitor Analysis
Strategic Analysis of Market
Segments
Customer
Analysis
Financial and
Market
Attractiveness
Competitor
Analysis
Positioning
Analysis

Segmentation “Fit” for Implementation

Segment Attractiveness and Internal Compatibility

High

Market Segment

Attractiveness

Low

Internal Compatibility

High

Low

Attractive segments that match with company capabilities

Unattractive segments but with match to company capabilities

Attractive segments but with poor match with company capabilities

Unattractive segments that do not match with company capabilities

63

2/9/2012

Strategic Marketing

Strategic Marketing 1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market

1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space

3. Strategic Market Segmentation

4. Strategic Customer Relationship Management

5. Capabilities for Learning about Customers and Markets

6. Market Targeting and Strategic Positioning

7. Strategic Relationships

8. Innovation and New Product Strategy

9. Strategic Brand Management

10. Value Chain Strategy

11. Pricing Strategy

12. Promotion, Advertising and Sales Promotion

Strategies

13. Sales Force, Internet, and Direct Marketing Strategies

14. Designing Market-Driven Organizations

15. Marketing Strategy Implementation And Control

CHAPTER 4

STRATEGIC CUSTOMER RELATIONSHIP MANAGEMENT

McGraw-Hill/Irwin

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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PIVOTAL ROLE OF CUSTOMER RELATIONSHIP MANAGEMENT

DEVELOPING A CRM STRATEGY

CRM Levels CRM Strategy Development CRM Implementation

VALUE CREATION PROCESS

Customer Value Value Received by the Organization CRM and Value Chain Strategy

CRM AND STRATEGIC MARKETING

Implementation Performance Metrics Short-Term Versus Long-Term Value Competitive Differentiation

CUSTOMER RELATIONSHIP MANAGEMENT

CRM is a cross-functional core business process concerned with achieving improved shareholder value through the development of effective relationships with key customers and customer segments.

CRM Recognizes That Customers:

Vary in their economic value to the company Differ in their expectations toward the firm

65

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4-3

CUSTOMER LIFETIME VALUE

Customer lifetime value (CLV) calculates past profit produced by the customer for the firm – the sum of all the margins of all the products purchased over time, less the cost of reaching that customer

To this is added a forecast of margins on future purchases (under different assumptions for different customers), discounted back to their present value.

This process provides an estimate of the profitability of a customer during the time span of the relationship.

The CLV calculation is a powerful tool for focusing marketing and promotional efforts where they will be most productive.

4-4

PERSPECTIVES TOWARD CRM STRATEGIC- THE ENTIRE COMPANY REQUIRED THE CUSTOMER MARKETING FUNCTIONS
PERSPECTIVES TOWARD CRM
STRATEGIC-
THE ENTIRE
COMPANY
REQUIRED
THE CUSTOMER
MARKETING
FUNCTIONS

66

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4-5

THE STEPS IN DEVELOPING A CRM STRATEGY

Gain enterprise commitment

IN DEVELOPING A CRM STRATEGY Gain enterprise commitment Build a CRM project team Business needs analysis

Build a CRM project team

STRATEGY Gain enterprise commitment Build a CRM project team Business needs analysis Define the CRM strategy

Business needs analysis

commitment Build a CRM project team Business needs analysis Define the CRM strategy Source: V. Kumar

Define the CRM strategy

Source: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & Sons, Inc.), 2006, 39.

4-6

DEFINE THE CRM STRATEGY

Value

Proposition

1 5 2 Other Stakeholders CRM STRATEGY 4 3 Enterprise Transformation Plan
1
5
2
Other
Stakeholders
CRM
STRATEGY
4
3
Enterprise
Transformation Plan

Business

Case

Customer

Strategy

Source: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & sons, Inc.), 2006,

42.

67

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4-7

IMPLEMENTATION DANGERS

Implementing Without Developing a Customer Strategy

Failing to Initiate Necessary Organizational Change

Allowing Technology to Dominate the CRM Process

Focusing on the Wrong Customers

4-8

VALUE CREATION PROCESS

Value Received by the Customer

Value Received by the Organization

THE VALUE EXCHANGE
THE VALUE EXCHANGE

Successful Value

Exchange

68

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METRICS

FEATURE

4-9

How General Electric Co. Measures Customers’ Experience

Happy (And Not-So-Happy) Customers General Electric is a big user of the “Net Promoter” concept of customer satisfaction, popularized by Fred Reichheld of Bain & Co. Below, questions similar to those on which GE’s Capital Solutions unit asks customers to rate the unit’s performance on a 0 – 10 scale.

• How willing are you to recommend us to a friend or associate?

• How would you rate our ability to meet your needs?

• How would you rate our people?

• How would you rate our processes?

• What is your impression of our market reputation?

• How would you rate the cost of doing business with us?

• How would you rate the overall value of our product or service as being worth what you paid?

Source: Kathryn Kranhold, “Client-Satisfaction Tool Takes Root,” The Wall Street Journal, July 10, 2006, B3.

4-10

CRM AND VALUE CHAIN STRATEGY

The Perfect Customer Experience

“The perfect customer experience, which must be affordable for the company in the context of the segments in which it operates and its competition, is a relatively new concept. This concept is now being embraced in industry by companies such as TNT, Toyota’s Lexus, Oce, and Guinness Breweries, but it has yet to receive much attention in the academic literature. Therefore, multi-channel integration is a critical process in CRM because it represents the point of co-creation of customer value. However, a company’s ability to execute multi- channel integration successfully is heavily dependent on the organization’s ability to gather and deploy customer information, from all channels and to integrate it with other relevant information.”

Adrian Payne and Pennie Frow, “A Strategic Framework for Customer Relationship Management,” Journal of Marketing (October 2005),

173.

69

2/9/2012

4-11

CRM AND STRATEGIC MARKETING STRATEGIC CRM MARKETING
CRM AND STRATEGIC
MARKETING
STRATEGIC
CRM
MARKETING

From the perspective of strategic marketing, there are several reasons why CRM is important and why there should be extensive marketing involvement in decisions about CRM. Importantly, an organizational perspective is needed in guiding the CRM strategy.

Strategic Marketing

Strategic Marketing 1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market

1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space

3. Strategic Market Segmentation

4. Strategic Customer Relationship Management

5. Capabilities for Learning about Customers and Markets

6. Market Targeting and Strategic Positioning

7. Strategic Relationships

8. Innovation and New Product Strategy

9. Strategic Brand Management

10. Value Chain Strategy

11. Pricing Strategy

12. Promotion, Advertising and Sales Promotion

Strategies

13. Sales Force, Internet, and Direct Marketing Strategies

14. Designing Market-Driven Organizations

15. Marketing Strategy Implementation And Control

70

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Chapter 5

Capabilities for Learning About Customers and Markets

McGraw-Hill/Irwin

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Capabilities for learning about customers and markets

• Market-driven strategy, market sensing and learning processes

• Marketing information and knowledge resources

• Marketing intelligence and knowledge management

• Ethical issues in collecting and using information

71

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Learning capabilities at P&G

• Competitive strength from superior customer knowledge

• To deliver a customer experience, less formal research, more one-to-one communication

– Consumer Village

– Online virtual reality Cave

– Watch people clean baths

– Understand what it is like to live on $50/month

– Social networking sites

Market Sensing and Learning Processes

• Market sensing processes

• Learning organization

– Learning and competitive advantage

– Learning about markets

– Barriers to market learning processes

72

2/9/2012

Market sensing at Tesco International

• Retailer entry to U.S. grocery market, not with existing format

• Discovering what U.S. consumers want:

– Senior managers live with U.S. families

– Probe lifestyles of families

– Prototype store

• Developing a new retail format and targeting the “grocery gap”

Market sensing processes

• Open-minded inquiry processes

• Analyzing competitors’ actions

• Listening to front-line employees

• Searching for latent customer needs

• Scanning the peripherary of the market

• Encouraging experimentation

73

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Marketing information and knowledge resources

• Scanning processes

• Specific marketing research studies

• Internal and external marketing information resources

– Relationships with external marketing research providers

Screening A New Research Supplier

1. Client Would you recommend this

supplier?

2. Supplier Do you have sufficient funds for this project?

3. What parts of the project will be subcontracted, and how do you manage subcontractors?

4. May I see your interviewer’s manual and data entry manual?

5. How do you train and supervise interviewers?

74

2/9/2012

Screening A New Research Supplier

6. What percentage of interviews are validated?

7. May I see a typical questionnaire?

8. Who draws your samples?

9. What percentage of your data entry is

verified? 10. Managers - What do you think about

this supplier?

Source: Seymour Sudman and Edward Blair, Marketing Research, A Problem-Solving Approach, Irwin/McGraw-Hill, 1998, 67.

A Framework for Market Sensing

Effect of the Event on the Company

Probability of the Event Occurring

7

6

5

4

3

2

1

High

Medium

Low

 

Field of

Utopia

Dreams

 

Things to

Watch

 

Future

Danger

Risks

* 1=Disaster, 2=Very bad, 3=Bad, 4=Neutral, 5=Good, 6=Very good, 7=Ideal

75

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Learning About Markets

Learning About Markets Keeping and Gaining Access to Prior Learning Objective Inquiry Mutually Informed Interpretations

Keeping and Gaining Access to Prior Learning

About Markets Keeping and Gaining Access to Prior Learning Objective Inquiry Mutually Informed Interpretations

Objective

Inquiry

Mutually

Informed

Interpretations

Learning Objective Inquiry Mutually Informed Interpretations Synergistic Information Distribution Source: George S. Day,

Synergistic

Information

Distribution

Informed Interpretations Synergistic Information Distribution Source: George S. Day, Journal of Marketing , October 1994.

Source: George S. Day, Journal of Marketing, October 1994.

Barriers to market learning

• Managers reject new insights/information

• Rigid organizational structures and inflexible information systems

• Politics favour the status quo

• Overwhelming pressure of existing business operations

• Tendency to “active inertia”

76

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Best Buy’s customer knowledge strategy

• Strategy treats customers as individual, develops solutions for needs and engages employees to serve them

• New ideas from listening more closely to customers and employees

• Knowledge shared with manufacturers and product developers

• Core innovation competency is gathering and synthesizing customer intelligence

Customers and design at Xerox

• “Customer-led innovation” - “dreaming with the customer”

• Not just building prototype and getting feedback

• Focus groups as first step in commercial printer design

• Changing designs in response to customer insights

• Investment in understanding what customers think about the “bright ideas”

77

2/9/2012

 

Marketing research project

Defining the problem

Understanding the limitations of the research

Quality of the research

Costs

Evaluating and selecting suppliers

Research methods

 

Existing marketing information resources

In-company resources

Open source resources

Research agency resources

78

2/9/2012

Creating new marketing information

• Observation and ethnographic studies

– Marriott - rethink hotel experience for “road warriors”

– GE - developing plastic fibers position

– Intel - use of computers by children in China

• Research surveys

• Internet-based research

Problem definition to guide marketing research studies

Research Project and Scope
Research
Project and Scope
Research Objectives Research Questions Planned Outcomes
Research
Objectives
Research
Questions
Planned
Outcomes

Describe the topic for the study and the background.

Set specific goals for the study - why is it being undertaken?

Identify the specific pieces of information required and the questions that need to be asked to obtain that information When completed how should the results be presented for management use?

79

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Impact of the Internet on Marketing Costs and Availability

• Online Surveys

– Fast

– Inexpensive

– Limitations in population coverage

– Resistance to excessive Web communications

• Customer feedback and peer-to-peer Web communications

• Monitoring customer Web behavior

Marketing and management information systems

• Marketing information systems

• Management information systems

• Marketing decision support systems

80

2/9/2012

Marketing Decision-Support System Components

Database

Analysis

Capabilities

Display

Models

Marketing intelligence and knowledge management

• Marketing intelligence

• Knowledge management

• Role of the chief knowledge officer

• Leveraging customer knowledge

81

2/9/2012

Ethical issues in collecting and using information

• Invasion of customer privacy

• Information and ethics

– Information collection

– Research subjects

– Information sharing

Neuromarketing

• Magnetic resonance imaging (MRI)

• Pictures response of brain to stimuli

• Probing consumer preferences is controversial

• Invasive

• Privacy issues

• Information sharing

– Insurance companies

– Employers

– Law enforcement

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Strategic Marketing

Strategic Marketing 1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market

1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space

3. Strategic Market Segmentation

4. Strategic Customer Relationship Management

5. Capabilities for Learning about Customers and Markets

6. Market Targeting and Strategic Positioning

7. Strategic Relationships

8. Innovation and New Product Strategy

9. Strategic Brand Management

10. Value Chain Strategy

11. Pricing Strategy

12. Promotion, Advertising and Sales Promotion

Strategies

13. Sales Force, Internet, and Direct Marketing Strategies

14. Designing Market-Driven Organizations

15. Marketing Strategy Implementation And Control

CHAPTER 6

Market Targeting and Strategic Positioning

Market Targeting Strategy Targeting in Different Market Environments Positioning Strategy Developing the Positioning Strategy Determining Positioning Effectiveness

McGraw-Hill/Irwin

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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MARKET TARGETING STRATEGY

The Marketing Targeting Decision Identities the People or Organizations in a Product-Market Toward Which a Firm Directs Its Positioning Strategy Guided by an understanding of:

•The product-market •Its buyers •Firm’s capabilities resources •Competition

Market Targeting and Strategic Positioning

Core dimensions of market-driven strategy: deciding which buyer’s to target and how to position the firm’s products

Effective targeting and positioning strategies are essential in gaining and sustaining superior performance

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SEGMENTS

SEGMENTS VALUE OPPORTUNITES CAPABILITIES/ SEGMENT MATCH TARGET(S) POSTIONING FOR EACH TARGET

VALUE

OPPORTUNITES

CAPABILITIES/ SEGMENT MATCH
CAPABILITIES/
SEGMENT
MATCH

TARGET(S)

SEGMENTS VALUE OPPORTUNITES CAPABILITIES/ SEGMENT MATCH TARGET(S) POSTIONING FOR EACH TARGET

POSTIONING FOR EACH TARGET

Identify segments within the product-market

Identify segments within the product-market TARGETING AND POSTIONING Decide and implement a positioning strategy for each

TARGETING

AND

POSTIONING

segments within the product-market TARGETING AND POSTIONING Decide and implement a positioning strategy for each

Decide and implement a positioning strategy for each targeted segment

AND POSTIONING Decide and implement a positioning strategy for each targeted segment Decide which segment(s) to

Decide which segment(s) to target

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Market Targeting Alternatives

Selective

Targeting

Segments Clearly Defined Target Target Selected Multiple Niche(s) Segments Product Product Specialization Variety
Segments Clearly Defined
Target
Target
Selected
Multiple
Niche(s)
Segments
Product
Product
Specialization
Variety

Extensive

Targeting

Differentiated But Segments Not Clearly Defined

Factors Influencing Targeting Decisions

Stage of product – market maturity

Extent of diversity in preferences

Industry structure

Capabilities and resources

Opportunities to gain competitive advantage

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TARGETING IN DIFFERENT MARKET ENVIRONMENTS

Emerging

Growing

Mature

Declining

Global

Emerging Market

Buyer Diversity

Segmentation limited due to similarity of buyers’ preferences Industry Structure

Typically small new organizations

Limited access to resources Capabilities and Resources

Unique benefit (differentiation) strategy rather than low-cost

First-mover advantage Targeting Strategy

Single target or a few broad segments

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Growth Market

Buyer Diversity

Segments should exist Industry Structure

Numerous competitors

Capabilities and Resources

Survival requires aggressive actions by firms that seek large market positions

Otherwise select one or a few market segments Targeting Strategy

Three possible strategies

1. Extensive market coverage by firms with established businesses in related markets

2. Selective targeting by firms with diversified product portfolios

3. Very focused targeting strategies by small organizations serving one or a few market segments.

Mature Markets

Buyer Diversity

Segmentation essential for competitive advantage

Industry Structure

Intense competition for market share

Emphasis on cost and service, and pressures on profits

Capabilities and Resources

Management’s objectives: cost reduction, selective targeting, product differentiation

Targeting Strategy

Deciding which segment to serve Firms pursuing extensive targeting strategies may decide to exit from certain segments

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Global Markets

Global Reach and Standardization

– Identify market segments that span global markets and serve these needs with global positioning strategies Local Adaptation

– Consider requirements of domestic buyers

– Buyers’ needs and preferences affected by social, political, cultural, economic, and language differences Industry Structure

– Restructuring, acquisitions, mergers, and strategic alliances altering industries and competition Targeting Strategy

– Targeting a single country, regional (multinational) targeting, or global targeting

GLOBAL

FEATURE

Successful British Retailer Tesco Enters the U.S. Market

Tesco announced plans to open a chain of convenience stores on the U.S. West Coast in 2007, spending an estimated $453 M. The very successful retailer has four types of stores, including the convenience chain, Tesco Express.

This initiative is being launched even though the U.S. retail grocery market is experiencing intense competition, and some chains are cutting back or selling out.

Tesco’s decision to enter the U.S. convenience market is bold and risky. Some authorities consider the action questionable. However, Tesco has a very impressive success record in Britain. With its Tesco Express, Tesco Metro, Superstore, and Extra hypermarkets, the giant retailer has dulled Wal-Mart’s drive to dominate the retail scene.

Tesco has no brand awareness in the U.S. so building brand identity will be challenging. Yet the retailer has global buying power, powerful information technology, and strong supply chain capabilities. The stores will offer groceries, produce, and private-label ready-to-eat meals. Some observers think Tesco is planning to compete with Wal-Mart in its home market.

Source: Kerry Capell, “Tesco: California Dreaming?” BusinessWeek, February 27, 2006, 38.

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POSITIONING STRATEGY

Deciding the desired perception/ association of an organization/ brand by market target buyers…and designing the marketing program to meet (and exceed) buyers’ value requirements.

STRATEGIC POSITIONING INITIATIVES

POSITIONING CONCEPT The desired positioning of the product (brand) by targeted buyers

positioning of the product (brand) by targeted buyers POSITIONING EFFECTIVENESS MARKET TARGET POSITIONING

POSITIONING

EFFECTIVENESS

MARKET TARGET
MARKET
TARGET
by targeted buyers POSITIONING EFFECTIVENESS MARKET TARGET POSITIONING STRATEGY How well management’s positioning

POSITIONING

STRATEGY

How well management’s positioning objectives are achieved for the market target

The combination of marketing actions used to communicate the positioning concept to targeted buyers

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How Positioning Works

Objective

Match the organization’s distinctive capabilities with the customer value requirements for the market target (How do we want to be perceived by targeted buyers?)

Desired result

Gain a relevant, distinct, and enduring position by the targeted buyers that they consider important.

Actions by the organization

Design and implement the positioning strategy (marketing program) for the market target.

INNOVATION

FEATURE

Spotting Shifts in Demand in designing Hennes & Mauritz (H&M) Apparel

It’s 1:30 p.m. on a Monday in the bustling H&M store on Manhattan’s fifth Avenue, and Alma Saldana, a 28-year-old makeup artist from Houston, is stuffing three tiny vests into her black Y&M shopping bag. That’s on top of blouses, jackets, and pants. Saldana is in a buying frenzy. This is her first visit to H&M, the Stockholm- based fashion retailer, and it’s everything she had hoped for. “Somebody told me you find great fashion at a very cheap price, and it’s true!” she exclaims.

Such enthusiasm has made H&M one of the hottest fashion companies around. Central to its success is its ability to spot shifts in demand and respond with lightning speed. While traditional clothing retailers design their wares at least six months ahead of time, H&M can rush items into stores in as little as three weeks. Most of the work is done ahead, too. But when it sees consumers scooping up something like vests, it speeds a slew of new variations into stores within the same season, to the delight of shoppers like Saldana. “Speed is important. You need to have system where you can react in a short lead time with the right products,” says Chief Executive Rolf Eriksen.

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How does it work? H&M designers had included a couple of cropped vests in their autumn/winter collections. In august, shortly after the vests went on sales, they started “flying out of the stores,” say Margareta van den Bosch, H&M’s head of design. H&M’s designers in Stockholm (it has more than 100) spotted the trend in the company’s worldwide sales reports, published internally every Monday. About half of them immediately started sketching new styles. As quickly as designs came off their desks, pattern makers snipped and pinned, pressing employees into service as live models. At the same time, buyers ordered fabrics. The designs were zoomed electronically to workers at H&M’s production offices in Europe and Asia, which then selected manufacturers that could handle the jobs quickly. In less than two months most H&M stores had 5 to 10 new vest styles in stock.

One of the secrets to H&M’s speed is decisiveness. The people in charge of each collection can dream up and produce new fashions on their own authority. Only huge orders require approval from higher ups. “We have a flat organization. We have a shorter way to a decision,” says Sanna Lindberg, president of H&M Hennes & Mauritz USA. That makes H&M fashionable in more ways than one.

Source: Steve Hamm, “SPEEDDEMONS,” BusinessWeek, March 27, 2006, 70-71.

The Perception or Association that Management Wants Buyers to Have Concerning the Brand

Symbolic
Symbolic
Functional
Functional

SELECTING THE POSITIONING CONCEPT

Experiential
Experiential

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DEVELOPING THE POSITIONING STRATEGY

The Positioning Strategy Places the Marketing Program (mix) Components into a Coordinated Set of Actions Designed to Deliver Superior Customer Value

PRODUCT VALUE CHAIN PROMOTION PRICE
PRODUCT
VALUE CHAIN
PROMOTION
PRICE

Positioning Issues

1. The positioning concept applies to a specific brand rather than all the competing brands that compose a product classification

2. The concept is used to guide positioning decisions over the life of the brand

3. Multiple concepts are likely to confuse buyers and may weaken the effectiveness of positioning actions

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The positioning strategy indicates how (and why) the product mix, line, or brand is to be positioned for each market target. This strategy includes:

•The product strategy, indicating how the product(s) will be positioned against the competition in the product-market.

•The value chain (distribution) 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 these promotion components are expected to achieve.

•The sales force strategy, direct marketing strategy, and the Internet strategy, indicating how they are used in the positioning strategy.

DETERMINING POSITIONING EFFECTIVENESS

The marketing offer (product, distribution, price, and promotion) is both distinct and valued in the minds of the customers in the market target.

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Customer and Competitor Research

Methods for Determining Positioning Effectiveness
Methods for
Determining
Positioning
Effectiveness

Analytical

Positioning

Models

Test Marketing

Customer and Competitor Research

Research Studies

Preference Maps

Test Marketing

Generates information about commercial feasibility and marketing program

Provides market (sales forecasts) and effectiveness measures Positioning Models

Incorporates research data into formal models of decision analysis

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Positioning Errors

Under-positioning – customers have only vague ideas about the company and do not perceive anything distinctive about it

Over-positioning – Customers have too narrow an understanding of the company, product, or brand

Confused positioning – Frequent changes and contradictory messages confuse customers

Doubtful positioning – claims made for the product or brand are not regarded as credible

Positioning in Perspective

Positioning is a central part of business strategy

Positioning analysis starts with an understanding of the value proposition for the target segment

Value-driven positioning is the objective

Positioning seeks to differentiate the organization’s offer from the competition

Positioning seeks to create a unique perception in buyers’ minds of the target market segment

Positioning is the unifying dimension of market- driven strategy

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Positioning usually means that an overt decision is being made to concentrate only on certain segments. Such an approach requires commitment and discipline because it’s not easy to turn your back on potential buyers. Yet, the effect of generating a distinct, meaningful position is to focus on the target segments and not to be constrained by the reaction of other segments.

Source: Aaker and Shansby, Business Horizons, May-June 1982, 61.

Illustrative Impacts of Changes in Business Strategy on Targeting and Positioning Strategies

Changes in Business Strategy

Market Targeting Impact

Positioning Impact

Rapid Growth/

Market scope may not change although targets may be increased or reduced.

Substantial changes in resource allocation, (e.g. advertising expenditures

Retrenchment

Changing the Product Mix

No change is necessary unless increase in product scope creates opportunities in new segments.

Changes in product strategy, methods of distribution, and promotional strategies may be necessary.

Changing the Market Scope

Targeting is likely to change to include new targets.

Positioning strategy must be developed for each new target.

Repositioning

Should not have a major effect on targeting strategy.

Product, distribution, price, and promotion strategies may be affected.

Value Chain Integration

Should have no effect on targeting strategy.

Primary impact on channel, pricing and promotion strategies.

Diversification

Strategic Alliance

Targeting strategies must be selected in new business areas.

Targeting strategy may be affected based on the nature and scope of the alliance.

Positioning strategies must be developed (or acquired for the new business areas.

Operating relationships and assignment or responsibilities must be established.

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Targeting and Positioning

Product Strategy

Promotion

Strategy

Positioning Strategy Market Target
Positioning Strategy
Market Target

Price Strategy

Distribution

Strategy

Strategic Marketing

Strategic Marketing 1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market

1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space

3. Strategic Market Segmentation

4. Strategic Customer Relationship Management

5. Capabilities for Learning about Customers and Markets

6. Market Targeting and Strategic Positioning

7. Strategic Relationships

8. Innovation and New Product Strategy

9. Strategic Brand Management

10. Value Chain Strategy

11. Pricing Strategy

12. Promotion, Advertising and Sales Promotion

Strategies

13. Sales Force, Internet, and Direct Marketing Strategies

14. Designing Market-Driven Organizations

15. Marketing Strategy Implementation And Control

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Chapter 7

Strategic

Relationships

McGraw-Hill/Irwin

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Strategic relationships at IBM

• Collaborative projects across all major parts of business services

– Funding universities in services science

– Partnership with Sony and Toshiba to produce new processor

– Computer code shared with Apache open-source web- server

– IBM programmers work on Linux projects

• Collaborating with customers and competitors to invent new technologies

• Strategy of openess

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Strategic relationships End-User Customers Intermediate Suppliers Customers Joint Strategic Competitors Ventures
Strategic relationships
End-User
Customers
Intermediate
Suppliers
Customers
Joint
Strategic
Competitors
Ventures
Relationships
Strategic
Internal
Partners

Alliances

External

Partners

Strategic Relationships

• The rationale for interorganizational relationships

• Forms of organizational relationships

• Managing interorganizational relationships

• Global relationships among organizations

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The rationale for interorganizational relationships

Skills and

resource

gaps

Value-enhancing

opportunities

Skills and resource gaps Value-enhancing opportunities Rationale for Forming Strategic Relationships Competitive
Rationale for Forming Strategic Relationships
Rationale for
Forming Strategic
Relationships
opportunities Rationale for Forming Strategic Relationships Competitive strategy Environmental complexity

Competitive

strategy

Environmental

complexity

The rationale for interorganizational relationships (1)

• Opportunities to enhance value

• Environmental complexity

• Competitive strategy

• Skills and resource gaps

– Technology constraints

– Financial constraints

– Market access

– Information technology

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Collaborations in open-source software

• IBM and Sun aggressive supporters of Linux open-source software

• Technology sharing and partnerships

• Rebuilding the technology “ecosystem”

• Reducing dependence on Microsoft

Airline Alliances

• Major global alliances

Oneworld

– Skyteam

– Star Alliance

• Contain 18 of the world’s largest airline

• Account for 60% of total world airline capacity

• But a history of alliance failures and desertions

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The rationale for interorganizational relationships (2)

• Evaluating the potential for collaboration

– What is the strategy?

– The costs of collaboration

– Is relationship strategy essential?

– Are good candidates available?

– Do relationships fit our culture?

Mapping the Path to Market Leadership

Market-Oriented Culture and Process

Relationship Strategies
Relationship
Strategies
Market-Oriented Culture and Process Relationship Strategies Superior Customer Value Proposition Organizational Change
Market-Oriented Culture and Process Relationship Strategies Superior Customer Value Proposition Organizational Change

Superior

Customer

Value

Proposition

Organizational

Change

Positioning with Distinctive Competencies

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Forms of organizational relationships

Internal

partnerships

Supplier

relationships

Firm
Firm

Customer

relationships

Lateral

partnerships

Illustrative interorganizational relationships

Strategic Alliance

M M
M
M
interorganizational relationships Strategic Alliance M M W R EU M Supplier/ Manufacturer

W

R

EU

M

Supplier/

Supplier/
Supplier/

Manufacturer

Collaboration

M

JV Joint Venture
JV
Joint Venture

Distribution

Channel

Relationship

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Forms of organizational relationships (1)

• Supplier relationships

– Strategic suppliers

– Outsourcing

• Intermediate customer relationships

• End-user customer relationships

• Strategic customers

– Dominant customers

– Strategic account management

Forms of organizational relationships (2)

• Strategic alliances

– Alliance success

– Alliance weaknesses

– Types of alliance

– Requirements for alliance success

– Alliance vulnerabilities

• Joint ventures

• Internal partnering

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CostCo Versus Wal-Mart

• CostCo has achieved major position in U.S. warehouse club business against strong competitors

• Success based on customer choice and constant innovation and productivity improvement