Developing a Marketing Strategy and Marketing Plan Marketing Target Strategy Market Marketing Mix Marketing Plan = + + Environment Time-Related = Details and Budget Marketing
Marketing Strategy A planned course of action for securing the desired response from a carefully defined market. • Marketing strategy includes: • 1. Carefully selected customers • 2. Clearly defined objectives • 3. A uniquely differentiated product • 4. Distribution, pricing, and promotional policies consistent with the above. • Marketing strategy focuses on: • Markets to be served • Products to be offered
The Focusing Framework(Whiteley and Hessan 1996) STOP (or find a new customer segment that values your capability) GO This is it! Do everything possible to enhance your competitive advantage What you do well STOP Proceed with Partners What you do not do well Customer segment Customer segment does not value does value
Marketing Plan Outline 1. Industry Attractiveness Analysis: An assessment of the industry and environmental factors affecting the product/service. 2. Competitor Analysis: An assessment of the competitors activities and predictions future competitor product strategies. Situation Analyses 3. Company Analysis: An assessment of the organization’s strengths, weaknesses, constraints, and ultimately responsive strategies, either exploiting strengths or correcting or compensating for weaknesses. 4. Customer Analysis: An examination of the basic aspects of consumer behavior in terms of who they are and why and how they buy. 5. Market Potential, Forecasting, and Budget: A forward-looking activity that helps the entrepreneur determine appropriate strategic objectives. Strategy 6. Marketing Strategy: The plan for achieving the organization’s objectives by developing a sustainable competitive advantage through the markets entered and the marketing mix used to serve them.
Entrepreneur’s Marketing Toolkit Industry Attractiveness Analysis Competitor Analysis Company Analysis Identify Opportunities Customer Analysis Marketing Strategy Market Potential and Forecasting Know the Numbers Have a Vision and Competitive Angle Customer Analysis Company Analysis Customer Analysis Customer Analysis Reach Your Customers Target Your Customers Marketing Strategy Company Analysis Communicate with Your Customers Customer Analysis Company Analysis Marketing Strategy
Environment/Industry The Strategic Triangle Customer Value Value Company Competition Cost Source: Ohmae
Industry Analysis • Begin with understanding the industry • Determine the attractiveness of an industry to current • and potential participants • Understand both the structure and dynamics of the • industry • Focus attention on significant forces (e.g. Porter’s Five Forces Model) • Watch for industry change • Companies can change their destiny • Companies can destroy their industry
Potential Entrants (Threat of Mobility) Suppliers (Supplier power) Industry Competitors (Segment rivalry) Buyers (Buyer power) Substitutes (Threats of substitutes) Five Forces Determining Industry Structural Attractiveness Porter (1980)
Bases for Industry Analysis Competitive Factors Market Factors Environmental Factors • Size • Growth • Stage in life cycle • Cyclicity • Seasonality • Marketing mix • Profits • Financial ratios • Concentration • Power of buyers • Power of suppliers • Rivalry • Threat of substitutes • Capacity utilization • Entries and exits • Technology • Economic • Social • Political • Regulatory
The Strategic Triangle Customer Value Value Company Competition Cost Source: Ohmae
Competitor Analysis Induce your competitors not to invest in those products, markets and services where you expect to invest the most … that is the fundamental rule of strategy. Bruce Henderson, Founder of BCG Chase customers, not competitors. Rhoads, Swenson, Whitlark
Identifying Levels of Competition Ice cream Tea Beer Regular colas Juices Diet-Rite cola Product Form Wine Diet Pepsi Diet lemon limes Video rentals Product Category Diet Coke Fruit Flavored colas Lemon limes Fast food Coffee Bottled water Generic Competition Baseball cards Budget Competition
Competitor Analysis Competitor ACompetitor BCompetitor C • Objectives • Strategies • Target Markets • Differential Advantage • Product/Service • Price • Promotion • Distribution • Capabilities • Conceive and design • Produce/deliver service • Market • Finance • Manage • Expected Future Strategies
Potential Competitors • Market expansion • Product expansion • Backward integration • Forward integration
The Strategic Triangle Customer Value Value True marketing starts…with the customer…It asks, “What does the customer want to buy?” It does not say, “This is what our product or service does.” It says, “These are the satisfactions the customer looks for, values, and needs.” Peter Drucker Source: Ohmae
Customer Analysis There is only one boss--the customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.--Sam Walton Listen to the whispers and you won’t have to hear the screams. --Cherokee saying • People are not all the same--Person Variability • People make choices depending on the situation--Situational variability
Customer Profile Segment 1 2 3 1. Who they are: - purchaser -user 2. What they buy: - amount - brand, features -usage situation 3. Where they buy. 4. When they buy. 5. How they choose: - consumer behavior 6. Why they select a product (customer value): - functional - service -image 7. Will they buy it (again)? - satisfaction - intention 8. Sensitivity to marketing mix: - product, price, place, promotion
Product value Service value Total customer value Personnel value Image value Customer delivered value Monetary cost Total customer cost Time cost Energy cost Psychic cost
Consumer Behavior is a Process not a Purchase • Discrepancy between actual • and desired state. Why and how • consumers get interested. Problem recognition Information search • Sources: personal, commercial, public, • experiential What drives the purchase behavior? Evaluation of alternatives • Compensatory Attitude Models • Value Analysis Where When How Purchase Delight = P > E Satisfaction = P = E Dissatisfaction = P < E Post-purchase evaluation or Cognitive Dissonance
Laddering: a Means-End Theory in-depth probing approach which attempts to uncover the link between product attributes, personal outcomes (consequences), and values that serve to structure the components of the cognitive and emotionalnetwork in a consumer's mind. Buying From the Heart Not the Mind Values Consequences Attributes Person and situation are critical to understanding consumer choice.
Secretaries’ Summary Hierarchical Value Map for Overnight Mail Peace of mind Values Self-esteem In control Accomplishment Avoid taking responsibility for someone else’s error Makes more money Consequences Get Promoted Avoid looking Bad Less Worry Makes me look Good Reliable Attributes
Three Product Levels Augmented product Basic product Core benefit
How To Identify Opportunities Find the Pain
*Remember, when consumers buy a new product, they take a risk. New products must have an obvious relative advantage to overcome risk. Consumers see relative advantage when a product alleviates pain and/or creates pleasure. Extant research suggests that alleviating pain is the most powerful element in creating relative advantage. Characteristics of Product Successes • Relative advantage* • Compatible with existing consumption patterns • Ease-of-Trial—trial sampling, divisibility (try small samples) • Observable—easily seen and understood • Simplicity of use
Knowing aWinning Business Idea When You See One 1. The buyer utility map Indicates the likelihood that a customer will be attracted to the new idea 2. The price corridor of the mass Identifies what price will unlock the greatest number of customers 3. The business model guide Offers a framework for figuring out whether and how a company Can profitably deliver the new idea at the targeted price Kim and Mauborgne, HBR, September-October 2000
The Buyer Utility Map The Six Stages of the Buyer Experience Cycle Purchase Delivery Use Supplements Maintenance Disposal Customer productivity Simplicity Convenience The Six Utility Levers Risk Fun and image Environmental friendliness Kim and Mauborgne, HBR, September-October 2000
The Buyer’s Experience Cycle Purchase Delivery Use Supplements Maintenance Disposal How long does it take to find the product you need? Is the place of purchase attrac- tive and access- ible? How secure is the transaction environment? How rapidly can you make a purchase? Does the product require training or expert assistance? Is the product easy to store when not in use? How effective are the product’s features and functions? Does the product require external maintenance? How easy is it to maintain and upgrade the product? How long does it take to get the product delivered? How difficult is it to unpack and install the new product? Do you need other products and services to make this product work? If so, how costly are they? Does use of the product create waste items? How easy is it to dispose of the product? Kim and Mauborgne, HBR, September-October 2000
The Buyer Utility Map The Six Stages of the Buyer Experience Cycle Purchase Delivery Use Supplements Maintenance Disposal Customer productivity PHILIPS Simplicity Convenience The Six Utility Levers Risk Fun and image Environmental friendliness Kim and Mauborgne, HBR, September-October 2000
The Price Corridor of the Mass Three product types Different form and function, same objective Different form same function Same form High degree of legal and resource protection Difficult to imitate High Upper-level pricing Some degree of legal and resource protection Relatively easy to imitate Mid-level pricing Price Low degree of legal and resource protection Easy to imitate Lower-level pricing Low Size of circle indicates the relative market volume of alternatives Price corridor of the mass Kim and Mauborgne, HBR, September-October 2000
The Business Model Guide What is the cost target? Who can we partner with? • Is your cost target set by the strategic price? • Can the product’s raw materials be replaced by • unconventional, less expensive ones? • Did you significantly eliminate, reduce, and • outsource high-cost, low-value-added activities • in your value chain? • Can you reduce costs by digitizing assets or • activities? • What capabilities do you need to achieve the • value proposition, and which ones do you lack? • Which companies have those missing capabilities? • Based on cost, quality, and speed, should you • acquire those companies or partner with them? Which price model should we use? • Is your industry’s pricing model a barrier to • your business idea’s success? • What pricing model—direct selling, leasing, • time-share, slice-share, or equity payment— • would create a greater profit pool? Kim and Mauborgne, HBR, September-October 2000
The Strategic Triangle Customer Segment Value Value Company Competition Cost Source: Ohmae
Market Segmentation The process of grouping customers into relatively homogeneous sets such that customers within a segment are similar to one another in the way they respond to marketing effort directed at them.
Market Segmentation Market Targeting Market Positioning 1. Identify segmentation variables and segment the market 2. Develop profiles of resulting segments 3. Evaluate attractiveness of each segment 4. Select the target segment(s) 5. Identify possible positioning concepts for each target segment 6. Select, develop, and communicate the chosen positioning concept Steps in Market Segmentation, Targeting,and Positioning
Bases for Segmenting Consumer Markets • Geographic • Region, City or Metro Size, Density, Climate • Demographic • Age, Gender, Family Size and Life Cycle, Race, Occupation, Income • Psychographic • Lifestyle or Personality • Behavioral • Benefits, Usage Situations
Geographic Segmentation Variable Typical Breakdown Region Pacific, Mountain, West North Central, West South Central, East North Central, East South Central, South Atlantic, Middle Atlantic, New England City or Metro Under 5,000; 5,000-20,000; 20,001-50,000; Size 50,001-100,000; 100,001-250,000; 250,001-500,000; 500,001-1,000,000;1,000,001-4,000,000 over 4,000,000 Density Urban, suburban, rural Climate Northern, southern
Demographic Segmentation Variable Typical Breakdown Age Under 6, 6-11, 12-19, 20-34, 35-49, 50-64, 65+ Gender Male, female Family size 1-2, 3-4, 5+ Family life Young, single; young, married, no children; young, married, youngest child under six; cycle young, married, oldest child over six; older, married, with children; older, married, no children under 18; older, single; other Income Under $10,000; $10,001-$15,000; $15,001-$20,000; $20,001-$30,000; $30,001-$50,000; $50,001-$100,000; over $100,000 Occupation Professional and technical; managers, officials, and proprietors; clerical, sales; craftspeople; farmers; laborers; retired; students; housewives; unemployed Education Grade school or less; some high school; high school; some college; college graduate; graduate degree Religion Catholic, Protestant, Jewish, Muslim, Hindu, other Race White, black, Asian, Hispanic Nationality American, British, French, German, Italian, Japanese
Psychographic Segmentation Variable Typical Breakdown Lifestyle Activities, interests, opinions Personality Compulsive, gregarious, authoritarian, ambitious Values Sense of belonging, excitement, warm relationships with others, self-fulfillment, security, being well respected, fun and enjoyment of life, self-respect, sense of accomplishment
Behavioral Segmentation Variable Typical Breakdown Usage situation Regular occasion, special occasion Benefits Quality, service, economy, speed User status Nonuser, ex-user, potential user, first-time user, regular user Usage rate Light user, medium user, heavy user Loyalty status None, medium, strong, absolute Readiness stage Unaware, aware, informed, interested, desirous, intending to buy Attitude toward Enthusiastic, positive, indifferent, product negative, hostile
Major Segmentation Variables for Business Markets Demographic • Industry • Company size • Location Operating Variables • Technology • User/nonuser status • Customer capabilities Purchasing Approaches • Purchasing-function organization • Power structure • Nature of existing relationship • General purchasing policies • Purchasing criteria Situational Factors • Urgency • Specific application • Size of order Personal Characteristics • Buyer-seller similarity • Attitudes toward risk • Loyalty
The Diffusion Process • Describes how potential customers learn about new products, try them, and • adopt or reject them. • Rogers (1962) categorized adopters on the basis of relative time of adoption of • the innovation based on individual differences. People differ markedly in their • readiness to try new products.
Technology Adoption Suppose General Motors makes an electric car, and Ford and Chrysler follow. Let’s assume the cars work like any other, except they are quieter and better for the environment. Now the question is: When are you going to buy one? • “Not until hell freezes over” Laggard • “When I have seen electric cars prove themselves and • when there are enough service stations on the road.” Early Majority Late Majority • “Not until most people have made the switch and it becomes really • inconvenient to drive a gasoline car.” Innovator/ Early Adopters • “I want to be first on the block with an electric car.”
34% Late majority 34% Early majority 13 1/2% Early adopters 16% Laggards Adopter Categorization of the Basis of Relative Time of Adoption of Innovations Deliberate, adopt before the average person, but are not leaders. Skeptical, adopt after the majority of people have tried it. Opinion leaders, adopt new ideas early but carefully. Tradition bound, suspicious of change. Venturesome, willing to try new ideas at some risk. 2 1/2% Innovators Time of adoption innovations
Person/Situation Segmentation Step 1: Use observational studies, focus group interviews, and secondary data to discover whether different usage situations exist and whether they are determinant, in the sense that they appear to affect the importance of various product characteristics. Step 2: Identify benefits and perceptions by usage situation as well as by individual difference characteristics. Step 3: Construct a person/situation segmentation matrix. The rows are the major usage situations and the columns are the groups of users identified by a single characteristic or combination of characteristics. Step 4: Profile each nonempty cell. State the major benefits sought, important product attributes, and unique market behavior for each nonempty cell of the matrix. (Some types of people will never consume the product in certain situations.) Step 5: Rank the cells in the matrix in terms of potential sales volume.
Person/Situation Segmentation Step 6: Position your competitors’ offerings within the matrix. The person/situation segments they currently serve can be determined by the product feature they promote and other marketing strategies. Step 7: Position your offering within the matrix on the same criteria. Step 8: Assess how well your current offering and marketing strategy meet the needs of the segment compared to the competitions’ offering. Step 9: Identify market opportunities based on segment size, needs, and competitive advantage.
Person by Situation Segmentation 1. Profile segments 2. Rank segments Person 3. Identify competitors 4. Identify company’s position Benefits sought 3 Important attributes Competitor B Behaviors Competitor A Situation 2 Company Company 1 Competitor C
Person by Situation Segmentation: Family Dining Segments Person Married with kids, $35,000 Married with kids, $25,000+ Female $25,000 or less Female, 22-44 Married with kids • Cabin Fever • Reduce loneliness • Less bored blue • Get out of the house • Mom’s Night Off • Reward, rejuvenate • An extravagance Special trip, Eat at restaurant Eat at restaurant, 3+ people, Under $4/person • On the Way Home • Quick and easy • Convenient • Kid’s feel special • Kid’s Treat • Make kids happy • Kids won’t • embarrass me Situation Family dinner, Eat at home, Under $5/person • Family Meal • Reward everyone • Easy to get • Food kids like Family dinner, Eat at home, $3/person • Good Price-Value • Save money • Stay home, don’t cook • Discount prices Source: Pizza Hut
The Strategic Triangle Customer Value Value Company Competition Cost Source: Ohmae
Company Analysis We have met the enemy and he is us. --Pogo Self-conceit may lead to self-destruction. --Aesop (“The Frog and the Ox”) The fish is the last to know if it swims in water. --Chinese Proverb
Company Analysis • 1. Identify the organization’s • skills, • competencies, • abilities, • strengths, • weaknesses, • constraints 2. Develop responsive strategies, either exploiting strengths or correcting or compensating for weaknesses.
Company Analysis Your Company • Objectives • Strategies • Target Markets • Differential Advantage • Product/Service • Price • Promotion • Distribution • Capabilities • Conceive and design • Produce/deliver service • Market • Finance • Manage • Expected Future Strategies