Strategic Marketing

2 Year full time PGDM

Session 6

Area – Marketing
Credits - 4
Sessions 10, 11 & 12
 Quiz Time
• The first phase of the value creation and • Individual Web pages or clusters of pages that
delivery sequence is ________ the value that function as supplements to a primary site are
________.
represents the "homework" marketing must
do before any product exists. • A) search engine optimization
• A) choosing • B) pay-per-click ads
• B) providing • C) delighters
• • D) microsites
C) communicating
• • E) touch points
D) considering
• Answer: D
• E) acquiring
• Paid media includes company-generated
• Answer: A
advertising, publicity, and other promotional
• The fulfillment management process includes efforts.
all the activities in ________.
• Answer: TRUE
• A) gathering and acting upon information about
• Apple hosts a large number of ________,
the market
which become customers' primary source of
• B) researching, developing, and launching new
product information after warranties expire
high-quality offerings quickly and within budget
and are organized by product lines and type of
standards
user (consumer or professional).
• C) defining target markets and prospecting for
• A) niche networks
new customers
• • B) social networks
D) building deeper understanding, relationships,
and offerings to individual customers • C) microblogs
• E) receiving and approving orders, shipping the • D) blogs
goods on time, and collecting payment • E) online communities
• Answer: E • Answer: E
 Want another dose ?
• The ________ defines which other brands a brand
competes with and therefore which brands should
be the focus of competitive analysis.
• A) consumer profitability analysis
• B) competitor indexing
• C) service blueprint
• D) competitive frame of reference
• E) cluster analysis
• Answer: D
• When Coca-Cola focused on developing its soft
drink business but missed seeing the market for
coffee bars and fresh-fruit-juice bars that eventually
impinged on its soft-drink business, it was suffering
from ________ because it defined competition in
traditional category and industry terms.
• A) factor elimination
• B) marketing myopia
• C) factor reduction
• D) category points-of-parity
• E) reliance on product description
• Answer: B
• Customers usually have a lower price threshold
below which prices signal inferior or unacceptable
quality, as well as an upper price threshold above
which prices are prohibitive and the product
appears not worth the money.
• Answer: TRUE
• Points-of-________ are product associations that
are not necessarily unique to the brand but may in
fact be shared with other brands.
• A) parity
• B) difference
• C) inflection
• D) presence
• E) divergence
• Answer: A
• A company has developed the prototype of a
mobile phone that it plans to launch in the next
few months. The phone comes equipped with the
most advanced technological features. As part of
its test marketing efforts, the company allows
customers to examine and use the prototype and
also gathers feedback regarding product features
and price. The results of this test marketing effort
show that customers are willing to pay at least
$500, considering the phone's various features. As
such, the company has discovered customers'
________.
• A) last paid price
• B) expected future price
• C) lower-bound price
• D) upper-bound price
• E) typical price
• Answer: C
 How are we progressing?
Session Topic Sugg. readings * Sugg. readings
Number Chapters ( RB) Chapters ( SJ)

1. Introduction and overview of marketing strategy   2

2. Customer focus and profits 1,2  
3. Environment and the company   6,3
4. Strategic objectives and marketing plans 13 8
5. Portfolio analysis and Strategic Market planning 10 7,10
6. Strategic options 11,12 9
7. Market potential, demand and share 3 13
8. Customer experience and value creation 4 5
9. Market segmentation strategies 5 5
10. Understanding competition   4
11. Competitive position and advantage 6  
12. Product positioning strategies 7 14
13. Pricing strategies 8 15
14. Distribution strategies   16
15. Promotion and Communication strategies 9 17
16. Strategy implementation and challenges 14 11
17. Simulation workshop TBA
18.
19. Simulation workshop TBA
20.
 Session 06
Strategic Options

Reading Reference
Roger Best – Chapter: 11 & 12
S. Jain – Chapter: 9
 Preamble to forming a strategy
• It is now clearly understood that the Marketing
strategies are the culmination or the sum of the
strategies of individual SBUs of any firm.
• SBUs, as you all aware, is the collection of products
having homogenous customer base and market
• Bringing product/market strategies within a
framework of business unit strategy formulation
emphasizes the importance of inputs from both the
top down and the bottom up.
• As a matter of fact, it can be said that strategic
decisions in a diversified company are best made at
three different levels:
– jointly by product/market managers and the SBU manager
when questions of implementation are involved
– jointly by the CEO and the SBU manager when formulation
of strategy is the concern,
– and by the CEO when the mission of the business is at issue.
 Hierarchy of Strategic Choice and Decisions

STRATEGIC DECISION A THE CORPORATE LEVEL

1. Developing Mission Statement
2. Directional strategy
3. Resource Allocation

STRATEGIC DECISION A THE S.B.U. LEVEL

1. Choosing Generic strategy ( Strategy Orientation)
2. Cost Leadership Strategy
3. Differentiation strategy
4. Focus : Cost and Differentiation

STRATEGIC DECISION A THE FUNCTIONAL LEVEL

1. Product /Range to offer
2. Market Segment to Target
3. Market Position tactics
 Way Forward in Strategy formation
1. Start with the present business.
2. Predict what the momentum of the business will be over
the planning period if no significant changes are made in
the policies or methods of operation.
3. The prediction should be based on historical performance.
4. Forecast what will happen to the environment over the
planning period. This forecast will include overall marketing
environment and product/market environment.
5. Modify the prediction in Step 1 in light of forecasted shifts
in the environment in Step 2.
6. Stop if predicted performance is fully satisfactory vis-à-vis
objectives. Continue if the prediction is not fully satisfying.
7. Appraise the significant strengths and weaknesses of the
business in comparison with those of important
competitors.
8. This appraisal should include any factors that may become
important both in marketing (market, product, price,
promotion, and distribution) and in other functional areas
(finance, research and development, costs, organization,
morale, reputation, management depth, etc.).
9. Evaluate the differences between your marketing strategies
and those of your major competitors.
10. Undertake an analysis to discover some variation in
marketing strategy that would produce a more favorable
relationship in your competitive posture in the future.
• Evaluate the proposed alternate strategy in terms of possible
risks, competitive response, and potential payout.
• Stop if the alternate strategy appears satisfactory in terms of
objectives.
•  
• Broaden the definition of the present business and repeat
Steps 7, 8, and 9 if there is still a gap between the objective
and the alternative strategy. Here, redefining the business
means looking at other products that can be supplied to
– market that is known and understood. Sometimes this means
supplying exist-ing products to a different market. It may also mean
applying technical or finan-cial abilities to new products and new
markets simultaneously.
• The process of broadening the definition of the business to
provide a wider horizon can be continued until one of the
following occurs:
•  
– The knowledge of the new area becomes so thin that a choice of
the sector to be studied is determined by intuition or by obviously
inadequate judgment.
– The cost of studying the new area becomes prohibitively expensive
because of lack of related experience.
– It becomes clear that the prospects of finding a competitive
opportunity are remote.
•  
• Lower the objectives if the existing business is not
satisfactory and if broadening the definition of the business
offers unsatisfactory prospects.
 Key Tasks

• Information Analysis
Step 1

• Strategy Formation
Step 2

• Implementation
Step 3
 Evolving a strategy
Tasks Analyze
Measuring the Momentum Essentially develop the ability to predict future state of affairs
1. Modeling Techniques
2. Simulation
3. Forecasting methods

Gap Analysis • It is often found that Forecasts are based out of past history
• Momentum should be examined and adjusted with
reference to environmental assumptions.
• The industry,
• The market,
• Competitive environment

Filling the Gap Gap filling amounts to re-formulation of Product / Market Strategy

Issue Assessment Evaluate the business’s competitive standing in view of present and
expected market conditions

Competitive Position A critical analysis of the Product Vis-à-vis Competitor’s products in

all aspects including cost, price, margins, performance, customer
satisfaction levels , vulnerability
 Evolving a strategy ( contd…)
Tasks
Profit Economics Analysis
Analysis of Key variables
Strategy Selection
Devise implementation plan
Review and correction
Plan B
Analyze
A critical view of current Costs and future anticipated costs (keeping
in view the environmental factors)
A clear understanding of trends in Competitive pricing and above all
the willingness of the customers to pay more or less as the times go
by..
Key factors may vary from industry to industry ( for example, the
airline industry the main key variable is Occupancy ratio)
The firm must also assess their own strengths and weaknesses in
the key variable.
Criticality of the key variable vis-à-vis the competition ( for example
aisle space and leg space may be a key variable in an airline )
After analyzing alternative strategies, the firm needs to close in on
one of the best and appropriate strategies
EXHIBIT 9-2
Distinguishing Aspects of Different Core
Marketing Strategies
Core Strategy
Managerial Operational Product Customer
Attributes Excellence Leadership Intimacy

Strategic Sharpen distribution Nurture ideas, Provide solutions and

Direction systems and provide translate them into help customers run
no-hassle service products, and market their businesses
them skillfully

Organizational Has strong, central Acts in an ad hoc, Pushes empower-

Arrangement authority and a organic, loosely knit, ment close to
finite level of and ever-changing customer contact
empowerment way

Systems Maintain standard Reward individuals’ Measure the cost of

Support operating procedures innovative capacity providing service and
and new product of maintaining cus-
success tomer loyalty

Corporate Acts predictably and Experiments and Is flexible and thinks

Culture believes “one size thinks “out-of-the- “have it your way”
fits all” box”
 Strategic Marketing Plans
Offensive Strategies

Strategies Marketing Plan

Invest to Grow Invest Marketing Resources to grow the market share
Improve Position Invest to improve and / or strengthen competitive
position in the market
New Market Entry Invest to enter new attractive markets or develop new
market products

Defensive Strategies

Strategies Marketing Plan

Protect Position Invest to protect market share and retain competitive
advantage
Optimize Position Optimize Price-Volume and Marketing Resources to
maximize Profits
Monetize Manage Market position for maximum cash flow with
minimum marketing resources
Harvest / Divest Manage the Product for maximum short run cash flow
or minimum losses
 Market Growth – Defensive and Offensive Strategies

Defensive

Offensive
Strategic Focus
Managing Profits
M Investing to protect
A position
R
Offensive
K
E
T Strategic Focus
Investing for
Growth and Position
D
e Offensive
M
A
N
D

Emerging Early Rapid Late Maturing Mature Declining

Markets Growth Growth Growth Market Market market
 Apple – Product Life Cycle Portfolio – Year 2000
Portfolio Sales Percent
Mac $6.6 b 83%
Others $1.4b 17%
Total 8.0 b 100%

M
A
R
K
E
T

S
A Apple
L I Mac
E
S

T I M E
 Apple – Product Life Cycle Portfolio – Year 2005

Portfolio Sales Percent

Mac $6.3 b 45%
I Pod $4.5b 33%
Music 0.9 b 6%
Other 2.2 b 14 %
M Total 13.9 100%
A
R
K Apple
E I Mac
T

S
I pod
A
L Music
E
S

T I M E
 Apple – Product Life Cycle Portfolio – Year 2010
Portfolio Sales Percent
Mac $17.5 b 26%
I Pod $8.2 b 13 %
Music 5.0b 7%
I Phone 25.2 b 39%
Apple
I pad 5.0 b 8
I Mac
Others 4.3 b 7%
Total 65.2 b 100%
M
A I pod
R
K
E Music
T

S
A I Phone
L
E
S
I pad

T I M E
 Offensive Strategy
• An offensive marketing strategy seeks to
attack the market by targeting the
weaknesses of the competition and
emphasizing the company's strengths in
comparison.
• Offensive marketing does not seek to
challenge an industry leader's strengths since
that would only play to the leader's defensive
marketing capabilities.
• This strategy attacks the industry leader
where the company is at its most vulnerable.
• focused attack hammers home the
company's product message to consumers
and casts doubt on the industry leader's
weakest areas
• In recent times, offensive strategy has been
effectively adopted by Xiaomi mi and
Reliance Jio in India
 When do we adopt offensive strategies ?

OFFENSIVE STRATEGIES
CORE STRATEGY 2 CORE STRATEGY 3
CORE STRATEGY 1
Invest to Improve Invest to Enter new
Invest to grow Sales Competitive position Markets
STRATEGIC OBJECTIVES STRATEGIC OBJECTIVES STRATEGIC OBJECTIVES
Grow in existing Markets Improve Margins Diversity Growth

1. Enter related new

1.Grow Market Share 1. Improve Customer Loyalty Markets
2. Grow Revenue per and Retention 2. Enter un-related new
Customer 2. Improve differentiation markets
advantage
3. Enter New Market 3. Enter new emerging
Segment 3. Lower Cost / Improve markets
productivity
4. Expand market Demand 4. Build Marketing Advantage 4. Develop new markets
 1.1 Grow Market Share
• Share Development index =
• Market Share %
--------------------------
Market Potential Index %

• Market Potential index – Factors ( example )

– Product Awareness = 0.90
– Product Preference = 0.50
– Purchase Intentions = 0.80
– Product Availability = 0.80
– Rate = 0.70
• Then : 0.90x0.50x0.80x0.80x0.70 = 20%
• If the market share is 8% then the Share Development
Index =
• 8% /20% = 40
• In order to grow this index a company has to identify the
above factors and improve one after another.
• For example : Product preference is only 0.50 which clearly
indicates the need for improvement in this area to develop
the overall index
 1.2 Grow Revenue per Customer
• The second important strategy in
aggression mode is achieving
higher per customer revenue.
( example Amazon and Amazon
Prime)
• This could be achieved in many
ways:
– Adding associated products / services
– Offering new products in associated
categories
• Example Honda: Car, Motorcycles,
Lawn Mowers, Outboard boat
engines, All terrain vehicles
 1.3 Enter New market Segments
• The third but critical strategy is to enter
newer segments within your own
product range
• Most of the established brands find this
easier to adapt
• For example Intel Corporation entered
into three segments primarily based on
price in the processor market
• Though the capacity, speed and
features were different at different
price segments, they were well suited
for different markets.
– Celeron
– Pentium
– Xeon
 1.4 Expand Market Demand
• The fourth strategy is to find ways and means to
expand market demand in general
• Although Sony and Samsung battle each other
for the market share, their common offensive
strategy is to grow the market demand. The
worldwide market for flat panel TV has
increased from 30 million to 217 million in 2011
while the market potential is say 350 million
• The simplest way to udnerstadn the potential
for market demand is to apply the formula
• Market demand /Market Potential
• Applying the formula:
• 217/350x100 = 62 which means there is a
possibility of expanding the market by another
38%
• In the recent times, Smart TVs have a similar
scope to increase market demand
2.1 Improve Customer Loyalty and Retention
• An investment to improve the
competition position would be the
best strategy to pursue in situations
where a business is in an attractive
market but has a weak or average
competitive position.
• This can be typically observed in the
Telcom companies where offensive
marketing techniques are applied to
ensure retention of loyal customers.
• For example : Amazon Prime
customers provides free and
preferred shipping (within 24 hrs)
 2.2 Improve differentiation advantage
• In order to project your product
having a distinctive
differentiation advantage,
offensive marketing tactics can
be adopted.
• One feature of the product could
be highlighted as distinctive over
and above the normal features
offered by competition.
• Sensodyne, Colgate, Patanjali
( uses traditional ash to wash
dishes)
 2.3 Lowering costs and Increasing Productivity

• A classic case where Sony

started to source from China
( instead of Japan) shows their
endeavor to lower costs and
increase profitability
2.4 Building Marketing advantage
• Though the company’s direct marketing was
effective, Nautilus, a US brand of fitness
equipment, shifted to
– Retail Market
– On-line
– Retailing through Costco and Sports Authority
• It also entered into cardiovascular
equipment marketing with a stronger
emphasis
 3.1 Entering related new markets
• Coca Cola entering to Energy
drinks, fruit juices, mineral water,
sports drinks etc. , even though
they commanded a huge market
share in carbonated drinks
3.2 Entering Unrelated new markets
• Sony again, ventured
successfully into un-related
markets including Media,
Computers and Mobile
phones.
 3.3 Entering Emerging Markets
• Though riskier, this strategy can enable to achieve
leadership position.
• High Tech products have rapidly emerging markets
and relatively shorter product / market life cycles.
• Having pioneered in a new emerging market, a
leader is dominant, sets a standard and competition
follows.
3.2 Developing new markets
• Apple, though one of the leading brands in the
world, could not develop markets in Asia, Africa
where more than 50% of their world market resides.
• However, it is restrained by its cost and other
reasons. Perhaps, Apple doesn’t want to develop
these markets as a conscious decision.
• An example of developing new markets could be
Under Armour which is giving a head on competition
to Adidas / Nike in sportswear
 Adopting Strategy at the right time for better N.M.C.

• Businesses, especially highly ambitious and aggressive businesses often pursue multiple
offensive strategies as explained below
AREA OF PERFORMANCE MARKET PENETRATION MARKET DEV.
STR ATEGY STRATEGY
Base year In 5 years Base Year In 5 Years

Market Demand 600,000 600,000 20000 200000

Market Share 15% 20% 80% 50%
Market Growth Rate 3% 3% 58% 58%
Target Volume 90,000 120,000 16,000 100,000
Revenue Per Customer $ 450 $ 450 $950 $450
Total Revenue in Millions $40.5 $54.0 $15.2 $45.0
Total variable cost per customer $250 $250 $650 $200
Total variable Cost ( Millions ) $22.5 $30.0 $10.4 $20.0
Gross Profit in Millions $18.0 $24.0 $4.8 $25.0

Market & Sales Expenses $7.0 $10.0 $6.0 $12.0

Net Marketing Contribution $11.0 $14.0 $ -1.2 $13.0

 Defensive Strategy
• A defensive marketing strategy is
largely reactive to the competition or
perceived occurrences in the market
• A defensive strategy seeks to counter
product claims made by the
competition or to stem the tide of a
perceived competitor advantage.
• The reactionary marketing steps
taken by Airtel/Vodafone as well as
Samsung /Sony mobile phones could
be seen as an example in the recent
times in India.
• A company may also seek to
introduce products into the market
that are better than its existing
offerings as part of a defensive
marketing strategy.
 When do we adopt Defensive strategies ?

DEFENSIVE STRATEGIES

CORE STRATEGY 1 CORE STRATEGY2 CORE STRATEGY 3

Protect Position Optimize position Monetize, Harvest and Divest
STRATEGIC OBJECTIVES STRATEGIC OBJECTIVES STRATEGIC OBJECTIVES
Maximize Profits Maximize Cash flow
Maintain Profit

1. Manage for cash flow

1.Protect Market share
1. Maximize NMC 2. Harvest / Divest for Cash
2. Build Customer 2. Reduce Market Focus flow
Retention
 D 1.1. Protect Market Share
• All the market share leaders must exert
greater marketing efforts to protect their high
share positions as their markets continue to
experience rapid growth.
• Invest to protect market share
• This could also be towards maintaining a niche
position or follower position
D 1.2 Build Customer Retention
• One of the secrets of increasing NMC
is to ensure customer retention, which
is relatively low cost effort compared to
acquiring new customers. Common
Example :
• Also, the retention and growth of each Airtel /
customer would yield additional Vodafone after
introduction of
results, whether the business is a major Reliance Jio.
market leader, follower or even a niche
 D 2.1. Optimize Position
• Product markets in late growth and mature stages of their
product life cycles need to be managed to optimize
marketing profits.
• Because sales are slowing, the investment in Marketing
expenses should also be reduced.
• It is a simple combination of sustaining volumes, margins
and controlling expenses
• The NMC can thus, be optimized is focus on Margin volume
rather than price volume
D 2.2 Reduce Market focus
• The main purpose of reduce-
market-focus is to become more
efficient.
Common
• Higher profitability can be achieved Example :
by trimming market share, focus on Airtel /
Vodafone after
narrower and more selective choice introduction of
of target customers Reliance Jio.
 D 3.1. Manage for Cash Flow
• In many mature markets, demand can be expected to
remain strong for many years.
• Businesses can monetize and extract maximum cash
flow in the short run from the market
• With little or no advertisement, cash flow can be
increased by reducing prices.
• Once the cash flow is not possible, then the firm may
choose to shift to harvest, divest option
D 3.2 Harvest, Divest for Cash flow
• Portfolio positions that warrant a defensive
strategy to exit from a market can lead to
Harvesting market strategy ( slow exit)
• A divest strategy can be adopted once harvesting
is not possible and the firm is losing cash flow.
• Divest is a quick sell off without hanging around
losing further money
• Sometimes, divest tactics may not be feasible. The
long term commitments, contractual obligations
may have to be addressed before exiting.
End of this session 6
have a break …