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Lecture notes, lectures 1-12 - lecture slides, textbook, group

activities
Strategic Marketing Management (University of New South Wales)

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Chapter 1: The Changing world of Marketing

Focus of Chapter:
● contextual background to understand the changing marketing world
● changes occurred over years of how marketing is conceptualised and practised
○ forces driving these changes
● new value creation paradigm that revolutionised marketing thought and practice
● impact of the digital revolution on marketing thought and practice

Evolution of marketing practice

● formative years of marketing (late 18th century to 1950s)
● evolution of marketing management school of thought (50s-80s)
● evolution of marketing as an integrated organisational process (late 80s-late 90s)
● digital era (200s to current)

Formative years (18th century - 1950s)

● heart of the philosophy of marketing is notion of market exchange
● Adam smith - systemised economic liberalism and founder of economics
○ suggested market freedom in 1776 book “an inquiry into the nature and causes
of the wealth of nations”
○ invisible hand - self-seeking humans unknowingly and unintentionally are led
by the driving force of self-interest
○ suggested comp. acted as the protective mechanism to regulate an economy
● Exchange theory - human nature is to barter, and exchange one thing for another
○ humans are therefore dependent on one another
● mutual exchange forms social cohesion - Malinowski
● obligatory and interested nature of gifts and other forms of exchange - Mauss
● role of exchange in creation of power relationships - Blau
● social interaction is an exchange of tangible or intangible g/s
○ food, shelter, social approval, sympathy
● Wallace + Wolf - 4 propositions underlying rational choice theory
○ individuals are rational profit maximisers - decisions based on tastes and
preferences
○ the more of something and individual has, the less interested they are in it
○ prices are determined by supply and demand forces - tastes of buyers and
sellers
○ goods are more expensive when sold by a monopolist compared to competition
● Marketing concept - traced back to early economists theories
● see todal point, pg 5 of textbook

Marketing as an academic discipline

● Marketing studied since 1912 - Uni of Berlin
● US Scholars moved to Germany to study
● German historical school developed the idea of rather than just using “positivism” to
emphasise theoretical or conceptual ideas, they used statistical methodology

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○ intellectualised marketing by integrated the exploratory, descriptive, process

orientation to include german idealism of problem-solving objectivity.
● Shaw and Jones - 3 schools of thought on scientific study of marketing
○ marketing functions school - activities performed by distributors regarded
as “marketing”
○ commodities school - concentrated on classifying the characteristics of goods
■ Copland (1924) - 3 classes: convinience, shopping and emergency
goods.
○ institutional school - focused on activities are markeitng middlemen
■ Clark (1922) - ‘channels of distribution”

Early Practice of Marketing

● marketing practices can be dated back to the industrial revolution (1770s) -
Mckendrick, Brewer and Plumb
● Fullerton - pioneers of production were also pioneers of modern marketing
○ cultivated large scale demand, with post 1950s techniques - market
segmentation, prod. differentiation, prestige pricing, style obsolescence,
saturation advertising, direct mail campaigns, reference group appeals,
testimonials etc...
● second half of 1900s → modern marketing practices est.
● use of TMs as a means of branding (1860s)
● Drucker - McCormick (inventor of mechanical harvester) ‘was first man to see
marketing ... as a central function of the business enterprise

Marketing Management school of thought (1950s-80s)

● 1952 GE Company Annual report

“Our philosophy introduces the marketing man at the beginning rather than the end of the
production cycle and would integrate marketing into each phase of the business. Thus
marketing, through its studies and research, will establish for the engineer, the designer and
the manufacturing man what the customer wants in a given product, what price he is willing
to pay, and where and when it is wanted. Marketing would have authority in product
planning, production scheduling and inventory control, as well as in sales distribution and
servicing of the product”

● Drucker labelled this as the “marketing concept”

● argued two purposes of business
○ create a customer
○ be innovative
● 1960 - Theodore Levitt - Marketing Myopia
○ businesses should be defined to satisfy customer needs rather than in terms of
the products it sells.
○ customer needs must be the central focus of an organization's business
definition\
○ used railroad companies as an example

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● Robert Keith - companies were no longer at centre of of the business universe -

customer are.
○ accepted as major contribution despite lack of empirical evidence
● Kotler defines marketing as “human activity directed at satisfying needs and wants
through exchange processes”
● Marketing systems scholars viewed marketing from a systems theory perspective
exploring macro, and micro issues

Marketing as an integrated organisational process (late 1980s to 2000s)

● little empirical evidence supported the argument that adoption of the marketing
concept would improve business performance.
● emergence of digital age has lead to B2C electronic retailing and formation of a virtual
marketspace, different from a physical marketplace
● marketspace - an informational marketplace where g+s are exchanged ‘via computer
interaction where value is extracted from information”
● IT lead to CRM and enterprise resource planning (ERP) technology

Strategy in practice → Swatch, marketed as a reflection of the wearer’s identity, fulfilling

needs of self-esteem and belongingness - a different Swatch for a different day - positioned as
a fun accessory. Positioned themselves as a fun fashion accessory, and sponsored youth-
oriented events and avant-garde musicians, fashion and art. Developed a Swatch members
club to foster brand loyalty.

Impact of driving forces of change on marketing practice and theory

● Total quality management
○ japanese lead the front on quality management
○ TQM - underlying reason for post-ww2 japanese industry transformation
○ TQM is a management philosophy that extends statistical methodologies of
measuring and controlling production quality to provide a company-wide
awareness and focus on all quality issues from supply production to marketing,
selling and distribution of goods and services
○ focus on teamwork led to formation of cross-functional work teams
● Customer service revolution and customer satisfaction measurement
○ Customer service measurement (CSM) became a key focus for all types of orgs.
in 1980s

Tom Peters - Thriving in Chaos:

“The customer, in spirit and in flesh, must pervade the organisation - every system in every
department, every procedure, every measure, every meeting, every decision … Make a
customer-obsessed revolution. Routinely look at the smallest nuance of the tiniest program
through the customer’s eyes - that is, as the customer perceives it, not you. Make champions
of change in support of the customer, not guardians of internal stability, the new corporate
heroes in every function.”

○ typical CSM is a rating of orgs product or service using a 5 point scale

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○ Having very satisfied or satisfied customers was set as a KPI

○ CSM was thought to be a good indicator of repeating customers intentions and
loyalty - not the case in AT&T with high defection rates even when 90%+ said
they were satisfied.
■ initial reaction was to ask “willingness to repurchase/recommend’
○ Kordupleski - thought the key question was asking w if the product/service
was worth the price paid for it
■ lead to the development of customer value added (CVA) measurement
system
● Services Marketing Revolution
○ Nordic School of thought: the processes of services - the simultaneous
consumption and production of a service - is the distinguishing factor between
service and product marketing
○ Gronroos and Gummesson - argue that customer preferences were
influenced by a number of physical resources and systems and by interactions
with employees throughout the organisation, not just the marketing
department
■ suggested marketing should be geared towards facilitating interactions
with customers during consumption rather than focusing on the
exchange process.
● Just-in-time (JIT) inventory management
○ depends on close cooperation between buyer and seller and the sharing of
information
○ buyers carry minimal stock and rely on suppliers to provide virtually immediate
delivery
○ Quick Response (QR) technology underlined the need for close cooperation
between buyer and seller
■ combines JIT and high speed communication technology to maximise
ordering and delivery efficiency
○ How this impacted the business world
■ massive shift in inventory -carrying function from buyer to supplier
■ logistics management became a major concern for senior management
of supplier organisation
■ JIT emphasised need for suppliers to est. and maintain outstanding
customer service as a major means of comp. advantage
■ JIT emphasis on supplier and buyer relationships contributed to the
evolution of new emphasis in marketing - relationship marketing
● Relationship Marketing
○ new way of thinking was for buyers to de-emphasise transaction-based
marketing and to develop long-term relationships with a few, rather than many,
suppliers
○ Loyalty programs and frequent purchaser schemes were an outcome of a
change in focus that existing customers are more important (profitable) than
new ones.
○ Focus on relationships led to criticisms of 4Ps concept marketing mix - doesn’t
take into account the importance of human interaction

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● CRM
○ collecting and accumulating data about customer buying patterns - on an
individual basis
○ ability to develop a learning relationship with customers and means for
differentiating individual customers’ needs and worth to the organisation
○ provides an organisation with an ability to interact with its customers on a one-
to-one basis and to customise its products and services for each individual
● Strategic alliances and networks
○ zaibatsu - formation of a family of enterprises around a single control parent
○ traditional form of line management control is removed, and focus is on the
management of relationships between the various parties rather than
formalised hierarchical mechanisms
● Organisational Culture
○ attention focused on management style and development of an effective
organisational culture - shared meaning and understanding held by members
○ Deshpande and Webber - argued that the marketing concept, by placing the
customer as the centrepiece of strategy and operations, serves to define a
distinct organisational culture
○ Hunt and Morgan - cultural status of marketing concept makes it more
permanent and foundational than strategy selection
● Organisational change
○ ‘leaner and meaner’ organisations - removal of middle management by
downsizing.
○ business process re-engineering (BPR) - reinventing organisations rather
than improving or enhancing them
■ aim to achieve large gains in productivity and organisational
performance by thorough analysis and redesign of workflows and
processes, by which organisations deliver value to their customers
● Strategic planning and strategic management
○ Ansoff’s Corporate Strategy (1965)- starting point for rise of strategic
planning
○ clear delineation between strategy development and implementation
○ strategic business units (SBU) formed
○ 4 stages of strategic planning
■ goal setting, environmental analysis, strategy development, evaluation
of strategic options
● Emphasis on competitive strategies
○ Porter’s highly acclaimed concepts of competitive advantage (generic
strategies), industry analysis (five-forces model) and the value chain were
sig contributions to management thinking during 80/90s
○ value chain concept important in foundations of customer value-based
paradigms
● Corporate social responsibility and stakeholder theory
○ CSR - business has an obligation to protect the interest of society at large

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○ stakeholder theory - stakeholder is ‘any group or individual who can affect or

is affected by the achievement of the organisation’s objectives’ - R. Edward
Freeman
■ stakeholders should be considered collectively, not isolated, as interests
are mutually self supporting
■ divided into primary and secondary stakeholders
● Brand Equity
○ concept that attempts to place the marketplace value of a brand based on its
reputation and goodwill.
○ attention paid to conceptualising and researching how brand equity can be
created and maintained
○ correlation between brand strength and company value
● Customer lifetime value (CLV) and customer equity
○ significance of customer retention quantified by Reichheld and Sasser
(1990) - lead to CLV concept
○ customer equity - growing a business should be framed in the context of
‘getting customers and keeping them so as to grow the value of the customer
base - to its full potential … balancing what is spent on customer acquisition
and customer retention’ Blattberg and Deighton (1996)
○ CLV and customer equity concepts challenge brand equity concept as it
is a “fundamentally product-centred concept”.
○ shift from product-based to customer-based strategy
● Emphasis on measurement and accountability
○ ROI marketing - use of techniques to measure marketing performance and to
facilitate rigorous marketing decision-making processes.
● Market orientation
○ relationship between a market orientation and superior performance
○ Kohli and Jaworski: market oriented organisation exhibits three behavioural
characteristics:
■ organisation-wide generation of market intelligence pertaining to
current and future customer needs
■ the dissemination of that market intelligence to organisational decision
makers and;
■ an organisation-wide responsiveness to that market intelligence
○ to achieve this there are 3 antecedents (see page 21 textbook)
■ senior management factors
■ interdepartmental dynamics
■ organisational systems
○ information processing is a critical component
○ Naver and Slater - model exhibiting 3 behavioural outcomes
■ customer orientation
■ competitor orientation
■ interfunctional coordination
○ both had scales of measurement
○ two approaches to market orientation
■ market-driven approach, driving-market approach

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The digital era (early 2000s to current)

● disruptive innovation - where new business models have evolved to challenge the
traditional structure of many industries.
● internet has moved from an informational “read only source” to an interactive
participatory phase
● customers demand a more intense relationship with brands with numerous points of
contact (touchpoints or moments of influence)
● value creation, communication and delivery - the way organisations can create
value has changed as new business models and frameworks have emerged in the
digital age
○ focus shifted towards the individual from mass consumption
● organisational structure and touchpoint management - deep customer
engagement requires commitment from the entire organisation
● Marketing and media ecosystems - relationships between marketers and their ad
agencies and media companies
● Brand as meaning makers

Strategic marketing week 2

Recap from week 1:
 Different marketing philosophies – evolution of theory and practice
 New developments – globalisation, social networks, mobile marketing, services
 Strategic/tactical – depends on the urgency that you need to do some things – some
are clear, some are not clear
 2 way exchange of ‘value’ – getting something back, not just a monetary exchange
 Fit: balance needs to capability
Strategic marketing: organizational, inter-organizational and environmental phenomena
concerned with (1) the behavior of organizations in the marketplace in their interactions with
consumers, customers, competitors and other external constituencies, in the context of
creation, communication and delivery of products that offer value to customers in exchanges
with organizations”
frameworks are only guides and not rules – may not always factor in everything that is
happening
two types of objectives:
 Financial: performance targets “hard”
 Strategic: standing in the market relative to competitors and future business prospects
“soft”

BCG Product Portfolio Models

 Help organisations to develop long term sustainable advantage
 BCG Growth Share Matrix
 A chart that provides business a guide to analyse the value of its product offerings
 Believes a successful business should have a range of products with different growth
rates and market share

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 The ultimate goal is to make all products a cash generator by looking at the product
information and see how they should invest in it
 Advantages: Provides a framework for allocating resources among different SBUs-
allows to compare different business units at a glance
 Disadvantages: Does not act as a accurate descriptor of the overall industry
attractiveness, high market share is not the only successful factor, little guidance on
how to reach certain points, only uses 2 dimensions: market share and growth rate,
low market share businesses can still be profitable

McKinsey GE Multifactor Portfolio Model

 The GE matrix is a nine-cell portfolio matrix that

measures the strength of a SBU against its industry attractiveness.
 matrix maps out the SBU's position in the industry by determining the value of each
parameter in the criteria and multiplying that value by a weighting factor.
 Industry attractiveness is determined by factors such as market growth rate, market
size, demand variability, industry profitability, industry rivalry, global opportunities
and other macro-environmental factors (PEST).
 the strength of a SBU is influenced by market share, growth in market share, brand
equity, distribution channel access, production capacity and profit margins relative to
competitors.
 Advantages: Improves upon the BCG growth-share matrix (uses generalised axes for
market attractiveness and business unit strength, has 9 cells rather than 4)
Provides a systematic approach for decentralised businesses to where to invest cash
Helps to best prioritise limited resources for the best outcome
Helps managers become more aware on how their businesses perform and identify
steps on how to improve its business portfolio
 Disadvantages: The core competencies of the firm are not represented in the analysis.
- There is a risk of bias as scoring is personal and subjective.
- The GE Matrix offers a broad strategy and does not indicate how best to implement it.

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- Relationship between different business units are not taken into account.
- There are also no rules on how to assign weights and scoring factors and therefore
the end result could be misleading.
- Also, the matrix is 3*3 and therefore is time consuming to compile, this might present
time pressure related issues for companies not being able to make decisions in a timely
manner.

7-S Framework
 as a diagnostic tool to examine the organisational effectiveness; assess and monitor
the changes of an organisation internally
 The 7S includes strategy, structure, systems (hard) and style, staff, skills, shared values
(soft). It is useful for internal capabilities evaluation.
 Top performing companies will have a shared value (superordinate goal) within the
organization which purports as the sense of direction to the other internal elements.
 Each element should be aligned and mutually reinforcing. If there is a change made in
one element, the strategeists of the company should know what other parts should be
realigned for the company to perform well.
 each element serves a competitive advantage by creating an integrated operation
while having a separate functional level.
 Advantages: can be used to identify an organisations strengths and sources of
competitive advantage, or to identify the reasons why an organisation is not operating

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- provides a guide for organisational change.. The interconnectedness among each of

the seven factors suggest that significant progress in one area will be difficult without
working on the others.
1. improves the performance of the company
2. examine the likely effects of future changes in the company
3. aligns departments and processes during a merger or acquisition
4. determine how best to implement a proposed strategy
 Disadvantages: The external environment is not mentioned in McKinseys 7S Model,
although other variables do exist and that only the crucial variables are depicted in the
model.
If a part in the 7S model is changed, then all parts must changed due to the
interrelated nature of the model.

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SWOT Harvard Business School

 SWOT analysis is a tool used by Marketers in determining the Strengths, Weaknesses,
Oppurtunities and Threats of an organization or a potential business decision within
that organization.
 SWOT is a basic model that assesses what an organization can and cannot do aswell as
its potential oppurtunuties or threats.
 SWOT analysis determines what may assist the firm in accomplishing its objectives and
what obstacles must be overcome or minimized to achieve desired results.
 Advantages:
- Little or no cost (anybody who understands the business can perform SWOT analysis)
- Allow company to identify core competencies of business so as to capitalise on
opportunities and deter threats
- Provide a visual overview of the company's current position
- Develop business goals and strategies catered to the company
 Disadvantages:
-SWOT analyses are usually based on qualitiative evaluations rather than rigorous
quantitative comparisons.
-since SWOTs are usually done because they're quick, companies may not spend the
time they need to get accurate and reliable data.
-SWOT assumes that the factors being listed are independent of each-other. However
factors can be linked and more complex than first assumed.
-companies can rely on the SWOT analysis and go no further, assuming that this
analysis is enough. SWOT doesn't identify the actions that the company needs to take
in order to address the weaknesses/threats and better take advantage of their
strengths and opportunities.

Strategic business units SBUs

 An SBU is an independent unit within a parent company that has its own set of
strategies and goals, usually for a particular good, service or line.
 Still reports back to HQ but other than that works quite independently
 Large enough for own divisions of finance, HR etc
 Strategy focus’ with the way the SBU competes within that given industry
 Marketing focus’ on the development of value creation, communication and delivery
strategies.
 Advantages: SBUs enables firms to focus on the means for a business/firm to compete
in a particular industry
• Enable firms to determine value creation strategies to appeal to customer
• Enable firms to discern which markets to compete in
• SBUs form strategic positioning to gain a competitive advantage that is sustainable
to distinguish the firm from competitors
 Disadvantages:

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• Difficulty with contacting higher management

• May cause internal problems due to difficult access to internal and external sources
of funding
• The separation may create unclear situations in management activities
• Structure needs an additional layer of management – increase salary expenses
• Less control of top management
 What are the things you need to be aware of if you are using it when you are making
decisions?
• SBU’s in a company should be complementary to each other, not competing
• Well established management roles and responsibilities
• Division of authority and responsibilities of the managers to reduce friction (no
duplications of functions)

Ansoff's product market model

 provides company managers, executives and marketers a strategic planning tool to
supply a framewoke in attempt to decide strategies for future growth.
 matrix is comprises four growth components that involves
(1) market penetration: company attempts to grow by ultilizing its existing offerings
in exisiting markets throught techniques such as price reduction, increase in
promotion and distribtuion support, acquisition of a rival in the same market or
modest product refinements.
(2) market development: attempts to expand into new markets using its existing
product offerings and can be achieved through techniques such as differentiation of
customer segments, shift target market from households to industrial consumers, and
target new regions of the country
(3) product development: attempts to create innovative product offerings targeted at
its existing markets to gain market share and growth – done through R&D of products
(4) diversification: company attempts to grow by introduction new product offernings
in new markets. This strategy holds most risk because it requires both product and
market development.
 Advantages
1) Very useful in business until strategy process to determine business growth
opportunities
2) Understanding the relationship between market position of products and market
situation allows the company to better develop growth strategies
3) Choosing the suitable product strategy makes sure that the company have the
capability and resources for product growth development (increase profitability and
become more competitive)
 Disadvantages
1) It does not consider other aspects like the SWOT analysis and PESTLE.
2) Does not analyse the strategic path as well as it neglects identifying marketing
options.
3) Does not take into account external forces affecting the firm

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PLC AKA Product Life Cycle

 states that even the best goods and services typically do not last forever as they would
eventually lose appeal and become redundant due to the changes in consumer wants
and needs, and techonological obsolescene.
 The importance of the PLC lies in its ability to allow businesses to manage their cash
flow.
 In the beginning stages of the production, money will be spent on research and
development whereby there would be no sales to cover for such costs.
 Then, when the product is first introduced, the business would incur substanial costs
due to advertising and campaiging for the product in which sales revenue in this
period would be unlikely to cover the costs associated with the introduction.
 The next stage following the introduction is the growth stage, the stage where costs
should start to drop and revenue starts to increase.
 Eventually, the product will enter maturity where it then continue as a cash cow until
it enters the decline stage where sales start to drop and product eventually
terminated. However, not all products go into decline/termination as they could be
renewed, reintroduced, or reinnovated.
 Advantages: PLC provides a solid, reliable and near comprehensive guideline of the
stages of a product's life cycle and how to manage the product in each stage.
Organisations can use the PLC to better understand their products, in terms of how
they are percieved and how they can be managed. It guides companies through the
planning process and allows for proactive product development
 Disadvantages: There are no time-based restrictions on periods within the PLC. -- PLC
is theoretical and thus there is no way to prove a product must die or will die;
products have gone through maturity and back to periods of rapid growth. This is
largely due to PLC not accounting for product re-design -- PLC theory can also cause
marketers to have a focus on individual products rather than looking at the 'bigger
picture': the brand.

Porter’s 5 forces model

 to help companies assess the nature of an industry's competitiveness and develop

corporate strategies accordingly.
 to identify, analyse, and manage external forces in an organisations environment.
 Industry attractiveness is the overall profitability potential of the industry. An
attractive industry will be one where the combined power of the competitive forces will
increase profitability potential. While an unattractive industry will be one where the
collective impact of the forces will drive down profitability potential.
 Advantages: It allows organisations to develop an understanding with respect to
profitability of an industry and hence they are able to determine whether they wish to
enter a specific industry and whether to expand in an existing industry.

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 Disadvantages: only to be used at a topline level - the generic nature of the forces
means that this can only be used for an entire business level and cannot be used for a
market level.
This model assumes that buyers, competitors, and suppliers are unrelated and do not
interact and collude

Macroenvironment e.g.
PESTLE
 These five factors are
driving forces of change
and are uncontrollable.
 The main purpose of
conducting a macro
environment analysis is to
contemplate the
organisation's future and
to determine the
opportunities and threats
that each external
environment factor is likely to create over the period of the strategic time horizon.
 There are five main remote environmental forces impacting on the planning unit: the
economic,sociocultural, political-legal, technoglogical and the natural environment.
 Economy: the most common oversight in analysis of the economy is to overlook the
impact of the economy on the lives of individuals comprising the planning units target
markets. The major economic indicators to consider are gross domestic product , the
local and the global business cycle trends, the inflationary or deflationary trends,
monetary policy, interest rates, exchange rates and unemployment figures.
 Sociocultral factors: these are concerned with people and behaviour. The main
objectives of this is to determine the singficance of population and sociological changes
on the nature of the planning units customers and their purchase behaviour.
 Political Legal Factors: determine if there is any proposed legislation or other
regulatory processes that are likely to impact on the industry of the organisation
within the strategic timeframe.
 Technological factors: technology is ubiquitous as it impacts just about every facet of
our social and business life. Focal point is to consider the impact that technolgoical
change may bring to each stage of the value chain.
 Natural Environment (Ecological Factors): this can impact on the availaibility and
quality of supply , energy supply and cost and government policies concerning such
factors as pollution and recycling.

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 Advantages: allows the company to understand the realities of the environment that
they operate (or will operate) in. This allows the organsiation to be in a better position
to analyse any potential challenges or threats, opportunities, restrictions and
incentives that it may potentially or does currently face. It also enables the
organsiation to spot new opportunities and exploit them effectively.
 Disadvantages: factors considered during analysis are quite dynamicand they can
change at a really fast rate. It is thus difficult to predict how and why they may affect
the company in the future. Secondly, the simpeleness of the presentation of a macro
analysis such as PESTLE can mean that the factors are not critically examined, thus
oversimplifying the information that is used for decision making. The next
disadvantage is that the process must be conducted regularly to be effective

5 C’s of strategic analysis

 Situation analysis is the study of the current market or industry in which an
organisation wants to launch a new product in order to allow the organisation to
study and understand the market conditions such as number of competitors, market
shares, cost of production and profit ratios. This is done by analysing the '5C's' which
are:
1. Context (What cultural, technological and legal factors limit what is possible?) eg.
Political and regulatory environment
2. Customer needs (What needs do we seek to satisfy?) eg. Market size and growth,
market segments, retail channels, consumer information sources, trends
3. Competitors (Who competes with us in meeting those needs?) eg. actual and
potential, direct or indirect, products, positioning, market share, strengths and
weaknesses
4. Collaborators (Who should we enlist to help us and how do we motivate them?)
eg. distributors, suppliers and alliances
5. Company skills (What special competence do we possess to meet customer
needs?) eg. product lines, brand and product image, technology, experiences,
capabilities, culture
 Advantages
o Distribution of consumer needs/preferences provides important input into
segmentation and targeting decisions
o Allows managers to understand their own business, customers, competitors and
forces that affect business
o - Analyses direct and indirect product benefits to assess which attributes are
important to consumer

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 Disadvantages
o Doesn't necessarily apply to future scenarios; has a short term applicable life
expectancy
o - the 5C's would need to be repeated again for each strategy that is created as
the information needs to be specific in order to be useful
o time consuming

Miles and Snow competitor typology

 Market-orientated organisations focus on customers & competitors.
 Therefore, a critical part of the strategic marketing management process is analysing
relevant competitors (both current and potential) and trying to understand their
marketing strategies in order to gain perspectives on how these organisations utilise
them to sustain a competitve advantage.
 Analyses of these aspects will allow strategists to comprehend how their competitors'
think and consequently anticipate their possible future movements.
 Miles and Snow identified four main groups of competitors (prospector, defender,
analyser, reactor) based on their market preferences (whether their focus is more on
customer acquisition or customer retention), product preferences (innovative or
stable) and responsivity characteristics.
 Prospector: 'first mover' in launching new products, prefers blue ocean strategy, and
responds rapidly to opportunities.
 Defender: attempts to maintain secure positioning through stable products/services
and have a limited range of products/services.
 Analyser: fewer and slower product-market changes than prospectors, maintenance
of a stable & limited line of products/services, competes with lower cost or higher
quality offering.
 Reactor: lacks well-defined competitive strategy, prefers to focus on established
product/service offerings, not aggressive in marketing, and are dictated by
environmental pressures.

Chapter 2: Strategic thinking and strategic decision making

 SBU- Strategic business units- freestanding business within a larger organisation
meeting the following criteria
 Unique business mission
 Independent of other SBUs
 Techniques to assist in the formulation of strategic recommendations: PLC theory,
product portfolio models (BCG model and GE/McKinsey matrix), Ansoffs product-
market and strategic gap analysis
 Four problems with strategic planning
1. Rational process of strategy formation –
2. The organisational structure – used to be top down planning – the people at the
top were lacking in business experience and were remote and detached from the
day to day activities.

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3. Conceptual foundations – techniques used for strategic planning such as

experience curve, product life cycle theory and portfolio planning were based on
oversimplified concepts and did not take into account technological innovations
or price increases
4. Creative thinking – criticism that strategic planning did not promote strategic
thinking

Decision making for the organisation hierarchical levels

 Corporate level:
o The main strategy emphasis is on building and maintaining a portfolio of high
performing businesses
o Strategic role is assess the current and future attractiveness of existing markets
that the SBUs are in
 SBU level
o Primarily concerned with the way the business unit competes in its chosen
industry
o Emphasis is the development of strategies concerning product market positions
and establishment of competitive advantages
o Strategic plans include business missions, performance objectives (e.g. ROI) and
strategies to achieve thos objectives
 Functional level
o Marketers role is the implement these decisions and to manage relationships
with customers, suppliers and resellers

Paradigms of management
1. Porters competitive forces concept
 Based on the notion that the structure of an industry is largely dictated by the
competitive rules
 Extended to include blue ocean strategy
 Extended to focus on creating a new market space rather than develop
competitive advantages
2. Strategic conflict approach
 Based on game theory
 Instead of accepting market defined rules of the game as in the competitive
forces approach a competitor should seek to rewrite the rules based on its own
particular strengths
3. Resourced based view
 Views organisations that have superior systems and structures as able to
achieve lower cost structures than their competitors. E.g. through economies of
scale, supply chain efficiency, or by producing superior quality products
4. Dynamic capabilities
 Dynamic Refers to the capacity of the organisation to renew competencies that
are required to compete successfully
 Capabilities emphasises the key role of strategic management in adapting,
integration internal and external organisation skills and resources

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 Organisations competing in rapidly changing business environments

Principles of developing strategy

1. Distinction between planning and strategy needs to be made
 Strategy is therefore the starting point of planning
 Strategy development is long term and future oriented process
2. Process of strategy development, implementation, evaluation and control need to be
clearly integrated
3. Strategic decisions need to be made and need to be ongoing and flexible
4. Need to chose a strategic approach that is appropriate for the business environment
5. Strategic thinking is a creative process
6. Strategic thinking is top down process as well as bottom up
7. Strategic management process should be considered in terms of being a framework
that provides guidelines for strategists to consider
8. Strategic thinking invariably involves consideration of market related issues –
marketing plays a key role in strategy planning and management processes
9. Marketing operates at 3 levels in the organisation – corporate, SBU, functional

Processes in developing marketing strategy

4 Different ways in which marketing strategy can be developed
1. As part of a broader formal strategy planning or strategic management process that
culmintates in the preparation of a strategy planning document which may be
produced in either a comprehensive or abbreviated form
2. As part of a broader set of strategy deliberations that are made outside of a formal
strategy planning process culminating in a number of recommendations, which may be
articulated in a paper or report
3. As a separate strategic marketing plan that may be presented in a comprehensive
format or abbreviated format
4. As a paper or report containing marketing strategy recommendations

The process
 Mission and values
o The starting point, this is the core purpose of the organisation and core values
and this informs each stage of the planning process
o A well prepared mission provides the strategic scope for strategists
o Vison statement may be included as part of mission or be separate – includes
managments view of the futuristic world the organisation will compete in and
how it should compete
o Business definition and scope – a more precise statemtn that specifies the
nature and parameters of the market the SBU competes in and the products it
competes with
 Strategic analysis
o Purpose of this stage is to review the current situation facing the organisation
and arrive at assumptions about the future situation.

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o Two main areas are conducting a situation analysis and preparing a summary
of this work in the form of a problems and oppurtunities statement
o Ongoing process of collection, analysing and dissemination information as it
becomes available
 Strategic development
o Involves high level business and marketing decision making.
o Broken down int strategic thinking and decision making.
o Strategic thinking combines both top down and bottom up inputs, and both left
brain (intuitive creative) and right brain (rational thinking) processes
o The outcome of strategic thinking is the generation of strategy alternatives that
need to be evaluated and selected in the decision making phase
o The outcome of this process is the development of 3 high end marketing
objectives; product-market strategies, segmenation and targeting and
positioning strategies
 Strategy implementation
o This is a process of transforming strategy recommendations into reality.
o Effective and efficient execution of strategy is a crucial part of the strategic
marketing management process
o Requires proper resources, structure, organisational culture, processes, systems,
policies and procedures
 Strategy evaluation and control
o Determine what is to be evaluated and how it is to be evaluated, who is to
supply the information and when it is to be evaluated
o Objective is to provide a mechanism for tracking the strategies articulated in
the marketing strategy document to ensure that long term objectives will be
achieved
o Includes a triggering system to provide an early warning when performance
starts to wander off track

Chapter 3

Choosing the right strategic strategy

 Classical strategy- if the industry is predictable but cant be changed- organisations

competing in a stable market
 Adaptive strategy- if the industry is unpredictable (because of global competition) and
cant be changed
 Shaping strategy- if the industry is unpredictable but it can be changed- new and high
growth industry
 Visionary strategy- if the industry is predictable and can be changed- when creating a
new market

Mission statement

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 Defines the fundamental, unique purpose of an organisation that sets it apart from its
competitors
 Reflects management vision of what the organisation is trying to do and should
compete now in the future
 It consists of core values and core purposes
 P&G mission statement focuses on product excellence

Business definition and scope

 Business definition and scope statement operationalizes the organisations mission
statement to make it a more precise form to specify nature and parameters of the
market
 Critical step because it determines the nature of the markets the business competes in
and the nature of the competition
 The way a business is defined determines the scope of that business in terms of strategy
– what it will cover and not cover
1. Specification of the organisations mission statement – to ensure that everyone involved
in the strategy development process has a clear understanding
2. Market definition – objective is to define the in terms of the existing market segment
that the organisation targets
3. Product definition – involves listing the product categories to be targeted and the
organisations products that compete in each of these product categories
4. Competitor – involves identification of competitive products/brands competing in the
organisations product categories
5. Scope – involves 2 key decisions
a. Strategic timeframe/planning cycle
b. Geographic domain of the intended strategy – strategy should be developed for
a specific market context – e.g. a country or region

Determination of critical success factors

 Critical success factors also described as key success factors are the skills and resources
that exert the most leverage on positional advantage and future performance
 CSF are the skills and resources that do the most to either lower costs or create
superior customer value
 Tasks can be undertaken through executive judgement or analytical approaches
 Most useful decision making tool is porters value chain model
 5 primary chains of activity that are common or generic to all organisations: inbound
logistics, operations, outbound logistics, marketing and sales, and service
 he also identified 4 support activities – procurement,, HRM, technology development
and infrastructure
 marketing related CSF include factors such as brand image, uniqueness of product,
quality of product and distribution coverage including all of the customers touch
points


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Recovering market segmentation – Yankelovich & Meer

 59% of companies executed a major market segmentation initiative in the past 2 years
but only 14% derived any real benefit.
 To get more from segmentation Y&M suggested several tactics
o Identify a strategic decision that would benefit from information about
different customer segments
o Determine which customers drive profits
o Analyse actual and potential purchasing behaviour
o Segment in ways that make sense to senior management
o Revise segmentation as market conditions change
o
 Traditional demographic traits are no longer enough to serve as basis for marketing
strategy

 Non-demographic traits such as values, tastes, and preferences were more likely to
influence consumers’ purchases

 Even though campaigns built on psychographics may be good at moving viewers

emotionally, it does not lead to commercial activity

 Those tend to be purchase history, product loyalty and propensity to trade up

 E.g. Miller lite catfight campaign – made impression on young males but did not
increase sales of the product – sales did increase far more when the campaign focused
on how it has fewer carbs that

 Need to gather relevant data to construct meaningful market segments and to analyse
emerging social, economical and tech trends

 Psychographic segmentations can be used to create advertising that will influence

consumers to think warmly about a particular brand. But they’re not as well suited for
other purposes

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 What is the strategy

 Which customers drive profits

o Rank customers profitability

 What are customers doing

o Conduct research to find out what different customers want so that the
company can implement those changes

 Will it make sense to senior management

o Management need to grasp the strategies and the strategies will not be
accepted or applied

 Segmentation also depends on the product – The gravity of the commitment is

important

 Shallow end of the spectrum – customers seeking products and services that will save
them time, money and effort – toiletries, snacks – measure price sensitivity, habits,
impulsiveness

 Middle of the spectrum – big ticket items – cars, electronics – test how concerned
customers are with quality, design, complexity and status

 Deepest end of spectrum – emotional investment is high, core values are engaged –
health care – the values are in conflict with market values

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
Week 3: Chapter 4

Strategy Development Process

 Creative process not a rational and orderly process

 Central point of the model is strategic thinking
 Ideas generated from top down and bottom up sources are thrown into the strategic
thinking mix
 Outcome of process to generate a strategic alternatives
 Form the basis of the development of high-level marketing strategies
 3 main areas: strategic thinking and decision making, the development of high level
marketing strategies and the customer value creation mix

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Mission and strategic intent

 Everyone involved in development process needs to know organisations current
mission statement and strategic intent
 Shouldn’t just be accepted needs to be critically analysed

Strategic analysis
 Situation analysis and the accompanying problems and opportuties statement provide
strategists with a view of how the external environment operates and the capabilities
to compete in the environment
 First stage to analyse situation
 Strategist need to become experts at identifying potential game changing disruptive
innovations

Corporate strategies
 Developed at the highest level of the organisation
 Designed to create and deliver sustainable long term value for the organisations
stakeholders
 To build and maintain a portfolio of high performing businesses
 Best corporate strategies is the one that form multi business companies to make clear
choices about their portfolios and the allocation of their resources
 Creating shared value: achieved by companies adopting strategies such as redefining
productivity in the value chain
 *Challenges: creation of value for the organisations stakeholders as opposed to just for
shareholders has increasingly become a major concern for senior management-csv was
created because of this

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Strategic business unit strategies

 Level of strategy is concerned with the way in which the business unit competes in its
chosen industry
 How is it going to compete (customer value creation strategies) and where it is to
compete (product markets)- this is reffered to as positioning strategies- done to
achieve sustainable competitive advantage
 Strategic positioning involves broad-based decisions about how the business unit is to
be positioning within the industry in which it competes
 Key factors that strategists need to consider in determining the organisations strategic
position *
1. Nature of the existing markets the organisation competes in and potential new
markets
2. Competitive position of the organisation in the marketplace
3. Organisations source of advantage
4. Organisations culture

Intelligent opportunism
 Creative ideas can come from anywhere and at anytime
 It represents the development of emergent strategies that arise over time and are
developed outside of formal strategic planning process
 Represents ideas generated within and outside of formal strategic planning process

Strategic development
 2 phases in strategic development stage: strategic thinking and decision making
 strategic thinking: finding ways for the firm to create value for its chosen customers-
uses right and left brain- rational and creative
 two facets involved in strategic thinking process: generation and evaluation of creative
ideas and identification of key issues

high level marketing strategies *

 outcome of strategic development phase of the work is the determination of 5
interrelated high-level marketing strategies
 strategic positioning – how organisation is to compete and where
 marketing objectives- organisations long-term financial objectives provide a
logical starting point for setting marketing objectives eg ROI, ROA
 product-market strategies
o address the where aspect
o product-market matrix

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o market penetration: main objective to increase or maintain market share

o market development: achieved by entering new markets
o incremental innovation: new products through product line extensions or
modification to existing products
o radical innovation: innovation/strategies that are radically different
 segmentation, targeting and positioning strategies –
o segmentation and targeting focus on identification and targeting of
submarkets of customers
o positioning- finding a unique selling proposition
 customer value creation mix
o sources of value or the activities that need to be conducted for the
organisation to create, communicate and deliver superior customer
value

Find three differing examples of “mission statements e.g. services, fast moving goods company (FMCG)
and a raw materials company (e.g. a mining company). What is common? Where do they differ?

P&G mission statement: , We will provide branded products and services of superior quality and value
that improve the lives of the world’s consumers, now and for generations to come. As a result,
consumers will reward us with leadership sales, profit and value creation, allowing our people, our
shareholders and the communities in which we live and work to prosper.

Jetstar’s mission is to offer all day, every day low fares to enable more people to fly to more places,
more often.

BHP Billiton: Our purpose is to create long-term shareholder value through the discovery, acquisition,
development and marketing of natural resources.
How do the various tools listed in the appendix link together e.g. have a time element? Provide

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guidance for business level or marketing level decisions (Hint make a table, describe main elements
and add the plusses and minuses identified by the Wk 2 Googlsheets exercise).
 Product life cycle-
 introduction, growth, maturity and decline,
 competitive turbulence between growth and maturity
 useful for providing guidelines for the development of marketing objectives and
strategies
 product portfolio models
 product portfolio management used to diversify organisations to make
decisions concerning the allocation of corporate resources to their various SBUs
 used to evaluate strategic positions
 Boston Consulting Group growth/share matrix
 The General Electric/McKinsey model- believe that BCG overlooked important
factors that determine market attractiveness and business strength
 Concept of competitive advantage – the positioning school
 Cost leadership- employed at market wide level or at a market niche level-
needs to be addressed at the business unit level- need to become the low-cost
producer in the industry
 Differentiation- employed at a market wide level or at a market niche level-
differentiating a product or service from the competitors products or service-
need to identify the needs of customers believe to be important eg through
product form, brand image
 Blue ocean strategy
 Red ocean: all known industries competing today in a known market space
 Blue ocean is the unknown market space- industries not in existence today-
need to create blue oceans- created by organization pursuing differentiation
and low cost
 Financial performance models
 To determine future earnings

Ashwin & Hirst (2015)- Abstract, Introduction, Findings (p. 356, 357

 It has investigated how the concept has continued to develop over time, and highlights
that both behavioural and cultural components continue to play a major role in
discussions.
 Market orientation is a broad concept
Li & Liu (2014)- Abstract, Introduction, Literature review, Discussion and Conclusions
 with the ongoing global financial crisis, climate change and other worldwide problems,
enterprises find that to obtain and maintain competitive advantage is increasingly
difficult, only temporary advantages are possible
 Among the researches to define and explain dynamic capabilities, scholars decompose
dynamic capabilities from different views, such as content and process perspectives,
ontology and epistemology perspec- tives and so on to unveil the rich and
multidimensional contents, however most scholars deconstruct dynamic capabilities
from the process perspective

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 3P framework – processes, positions and paths- argues that the competitive advantage
of firms lie with their managerial and organizational processes, shaped by their
specific asset position, and the paths available to them. – only focuses on what firms
do rather then why they are doing so
 Barreto (2010) explains dynamic capabilities from four dimensions, that is, the
propensity to sense opportunities and threats, to make timely decisions, to make
market-oriented decisions and to change its resource base.
 Although the definition of Barreto (2010) overcomes some important limitations of
current definitions about dynamic capability such as vague, confusing, tautological,
there is still room for improve- ment. First, this definition applies well to perfect
market-oriented economy, but not necessarily to transition economies. Eg chinese like
economy cant make market oriented decisions due to local government resource
allocation
 Dynamic capabilities: a dynamic capability is the firms' potential to systematically
solve problems, formed by its propensity to sense opportunities and threats, to make
timely decisions, and to implement strategic decisions and changes efficiently to ensure
the right direction.
 decomposes dynamic capabilities into three dimensions from the process perspective,
namely,
o strategic sense-making capacity, - process to develop cognitive maps,
to sense and interpret the stimuli or change in the reference frameworks
to effectively search for and analyze information from internal and
external environment
o timely decision-making capacity - process to quickly formulate,
evaluate and choose strategic orientations to timely adjust with envi-
ronmental changes – create information systems to help
o change implementation capacity - bility to execute and coordinate
strategic decision and corporate change, which involves a variety of
managerial and organizational processes
 easier to get a series of short term advantages rather then a sustainable advantage
 A slight advantage in sense-making can transform into a powerful strategic advantage
of an organization
 Firms with strong sense-making capacity may take a more active search and
interpretation to get more information and better understanding of the environment
they face, which ensure faster response to competitor initiatives, better understanding
of customer needs, more creativity in new product development and ultimately, a
competitive advantage.
 With the help of change implementa- tion capacities, firms can renew current
strategies and resource bases to adapt to new environment
 hyper-competitive environment, resources are difficult to obtain, hence, efficiently
sensing, making timely necessary adjustments and implementing dynamically with
environmental change is the only way for firms to get series of short-term advantages.
 in the less fierce environment where resources are easy to get, firms can implement
former strategies and deploy resources freely to match environmental change so that
relatively weak dynamic capabilities can obtain long-term competitive advantages.

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 In China, because of the inadequate market and legal support, dysfunctional

competitive behavior of firms is widespread, the definition and di- mensions of
dynamic capabilities are not quite the same as Western countries.
 suggests that Western-generated theories may not be fully applicable to societies with
vastly different socioeconomic conditions
 finding shows that dynamic capabilities enable firms to be sensitive to opportunities
and threats, seize possible chances and implement change as necessary to enhance
environmental adaptability and ultimately, achieve compet- itive advantage

lecture notes: high level decision making

mission statements

 guiding overall path of the organisation to achieve

 a share sense of direction
 relevance
 achievement amongst employees
 positive image of the firm
 ethics (concerned with the development of social standards by which actions can be
judged) and social values shape the mission
 need to direct organisation, avoid unethical behaviour, maintain organisational
relationship

components of corporate strategy

 overall scope, mission and intent

 company goals and objectives
 source of competitive advantage
 development strategy for future growth
 sources of synergy

SBU
 eg GE has healthcare, oil & gas, power & water, transportation etc
 what might you do: strengthen perceived competitive advantage
 move near competitor or away
 use “better” product attributes
 communicate benefits
 fit into niche

Questions managers need to ask – 4 c’s – RBV

 what are my Company resources

 Context- what is stage in lifecycle
 Customers – how viable is the overall market

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 Competitors- what are they doing

 Portfolio models developed to manage SBUs however can also be used at the product
domain level
 Concept of competitive advantage
 Porter
 Blue ocean
 Resource based view (RBV)
 Dynamic capability
 Financial performance model- value based planning

Gaining a competitive advantage

 Sustainable competitive advantage at a corporate level is based on: “resources that
other firms do not have, that take a long time to develop and that are hard to acquire”

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 Many such unique resources are marketing related: “firm must employ its resources to
that customers will purchase from it instead of competitors”

 A marketer is both a left brain and a right brain- they stay on the tracks as well as hop
off the tracks and imagine (vomit)

What is a competitive advantage

 Offering a product/service that has distinctive advantages over competing
products/services
 At the corporate level a competitive advantage aims to have resources that other firms
do not have, that take a long time to develop and that are hard to acquire
 The ability to succeed against the five basic competitive forces; threat of new entrance,
bargaining powers of buyers, rivalry between existing competitors, threat of substitute
products and bargaining powers of suppliers. This determines the ultimate profit
potential.
 Porter’s concept of ‘generic competitive strategies’ – ways a company can obtain a
competitive advantage. These strategies can be used to determine whether to confront
or avoid competitors.
o Cost Leadership
 Cost Leadership
 Cost Focus
o Differentiation
 Differentiation Leadership
 Differentiation Focus
o Stuck in the middle

Difference between market orientation and marketing concept

 difference between the two is the scope of the terms.
 Market orientation focuses on continuously collecting information about market needs
and competitors capabilities and sharing this information across departments and
using it to create customer value
 Planning and coordinating all business activities to satisfy customer needs
 More appropriate at CEO or SBU level and isn’t necessarily focused on the customer
 More focused on numbers
 Marketing concept is a tool that exists on a more functional level that focuses on
consumer needs
 Most effective means to attain and sustain a competitive advantage
 All about the customer = CUSTOMER IS KING!
 Not normally used by the CEO

How might a CEO view this differently to a marketing manager

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 A marketing manager is both more likely to efficiently interpret customer feedback

through market orientation and in a better position to utilize the data given.
 A market orientation may be better for a CEO as its more of an framework of a
company and its often more determinate of a company’s ontology, rather than an in-
depth direct interaction with customer.

Dynamic Capability
 A firms ability to evaluate its environment in order to sense opportunities and threats,
so that it can quickly make problem solving decisions that will help it to implement
responsive strategy.
 Environmental dynamism: The ongoing innovations and developments within a firms
industry, as well as the unpredictable and ever changing needs and wants of its
customers.
 Environmental dynamism positively affects dynamic capabilities.
 Dynamic capabilities positively influences competitive advantage (regardless of
whether the environment is stable or changing)


Difference between market orientation and stakeholder theory

• Stakeholder theory:
– addresses “who” and “what” really counts
– Focuses on stakeholders
– Contrasts with shareholder view

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• Market orientation
– Focuses on customer needs and desires
– Ability of competitors to satisfy
– Integrate

Week 4: Textbook Chapters 5 and Appendix Ch.5 & Ch.6

Chapter 5: Segmentation, Targeting and Positioning Strategies (STP)

High level marketing strategies

 STP focuses on the identification of submarkets of customers within the total market,
targeting specific market segments and differentiation the organizations product
offering from its competitors through positioning
 This then flows on to the development of customer value creation, communication and
delivery strategies – customer value creation mix
 End result is recommendations of marketing strategies to put in place over a strategic
timeframe

Segmentation

 Strategy based on positioning of markets into segments of potential customers who

have similar characteristics and similar needs and thus likely to have similar
purchasing behavior
 Need to discover what customer values and segment from there
 Can develop a customized marketing strategy for each segment

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 Differentiated marketing strategy: organisations pursuing a market-wide multi-

segment competitive strategy-created a customized marketing strategy for each
segment
 Concentrated marketing strategy: organisations pursuing a focus (market-niche)
competitive strategy- directed towards one segment
 Marketing organisations moving towards micromarketing (very narrow) or one-to-
one marketing (customer has power to customize the product offering)- highly
individualized and personal
 One-to-one marketing also known as mass customization
 Undifferentiated marketing: one marketing strategy is developed to service the
entire market- done because segment marketing is expensive
 Helps understand needs, wanted and customer preferences and patterns of purchase
while also identify emerging needs and wants
 Ways to divide different market segments
 Consumer markets
o Segment based on the 4 W’s
 Who the customers are
 What they buy
 Where they buy
 Why they buy
o Analysis of who the customer is
 Demographic segmentation: age, gender, marital status
 Socioeconomic segmentation: demographic data and social indicators
eg social class and education
 Segmentation by stage of life: gen Y, baby boomers
 Lifestyle segmentation: way people live eg Yuppies, Dinks
 Psychographic segmentation* : combination of psychological and
lifestyle –goals people seek in life eg happiness
 VALS – Classification of psychographic profiling - eight distinct
types—or mindsets—using a specific set of psychological traits
and key demographics that drive consumer behavior- Values,
Attitudes and Lifestyle

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 Roy Morgan Value Segments- an Australian example of

psychograhic research - innovative system of market
segmentation that goes beyond demographics and
psychographics to explore the values, mindsets and attitudes that
motivate consumer behaviour.- goes even further finds out
customers leisure activities and preferred brands- 10
psychographic segments
o Analysis of what and where they buy
 Product category segmentation: convenience, specialty, impulse
 Brand segmentation: eg people who buy BMW as target market
 Product user segementation: heavy, medium, light user or non-product
user
 Rate of new product adopters: innovators, early adopters, early
majority, late majority and laggards
 Price point segmentation: premium price, value-for-money or cheap
goods
 Behavioural targeting: used by online marketers through web analytics
to segment visitors to particular sites be they keywords they use and
sites they visit
 Geographic segmentation: city, urban, rural
 Sensitivity to marketing activity: eg price conscious buyers- respond to
promotions

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 E-market segmentation: individuals online behaviour eg surfers and

bargainers
o Analysis of why they buy
 Benefit segmentation: perceived benefits derived from purchasing or
using product eg functional (useful) or psychological benefits (status)
 Value segmentation: builds on and extends benefit segmentation- assess
the benefits relative to the cost
 Business markets
o Geographic segmentation
o Customer type: based on industry type, industry technology used, industry life
cycle stage, company size
o Benefit segmentation and value segmentation
o Other behavioural bases- segmented by personal characteristics eg awareness
of product category and readiness to adopt
 can identify appropriate market segment based on
 Normative segmentation: determine buyer similarities
 Priori segmentation: popular approach – when strategists have knowledge of
the market to predetermine segmentation variables
 Post hoc segmentation: using primary researcg to determine attitudes,
perceptions, benefits and product usage
 Data mining: explores customer data to determine purchase patterns and
relationships that can form
Targeting:

 Done after segments are identifies

 Criteria based on similarity of customer needs, segment size and profitability based on
a forecast of future sales, growth potential, accessibility through marketing channels,
responsiveness, barriers to entry

Positioning:

 Brand positioning: marketing organisation attempt to create a favourable, strong and

unique brand position in the minds of customers
 Emphasis unique and distinctive characteristics to differentiate brand from
competitors
 Brand image: rational appeals eg product features
 Brand personality: emotional and psychological appeals- human brand characteristics
eg sincerity, sophistication and ruggedness
 Unique selling proposition: have a unique propsotions that is strong and explain the
reason they should buy the product
 Brand community: group of consumers organised around a lifestyle, activities and
ethos of a brand eg Harley Davidson
 Brand identity: physical characteristics eg brand name and logo

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Branding Decisions:

 Individual brand name: eg Unilever has a product portfolio where they each have their
own brand eg rexona
 Umbrella branding: marketings products under the same family brand name eg
Kellogs- cost-effective for product line extension
 Brand positioning strategy steps
1. Brand audit- determine current level of brand knowledge- consists of brand
awareness (recall and recognition) and brand image
2. Brand strategy- find the position that matches the target markets ideal
attributes for the product category- done through focus groups and perceptual
mapping
3. Evaluate the brand positioning strategy – evaluate strength such as clarity,
commitment, responsiveness, relevance, differentiation

Customer value creation mix

 Last stage of high-level marketing strategies based on STP decisions

 Customer value creation and delivery strategies flow on from the segmentation, target
and brand positioning
 Customer value mix strategies are big picture strategies comprising broad strategic
directions
 Need to have a deep understanding of the customer value proposition
 Branding needs consistency- important that changes to positioning are made on a long
term basis in response to changing customer values, customs and behaviour patterns
that evolve

Appendix to chapter 5

 Used by market researchers to help marketing strategist analyse and evaluate

alternative market segmentation and product positioning strategies
 Perceptual maps
 Maps of consumer perceptions of a market or product category
 Two ways of constructing a perceptual map
o Attribute rating method
 Respondents presented with the list of attributes and rate each brand
on attribute
 Developed by this technique provides a means of identifying market
segments- individuals classified into different markets segments based
on similiarities they have concerning product and brand perceptions
 Limited by its emphasis on rational decision making when perceptions
are formed based on rational, emotional and experiential
considerations
o Overall similarity method
Difference between this and attribute rating method is data input

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Attributes are not specified and respondents are required to simply

assess the degree of similiarity between pairs of competitive brands eg
brand a compared to brand b
 Conjoint analysis
 Concept: individuals make overall judgements about brands or products by
considering 2 or more attributes conjointly- respondents evaluate brand
preferences by considering bundles of attributes that are joined together
 Provides researcher with a means of generating quantitative measures of
relative importance of attribute levels
 Helps to develop brand positioning strategies
 Neuromarketing
 Major thinking part of human activity takes place at the subconscious level
operating below the level of controlled awareness
 Pepsi and coke blind test

Chapter 6: The customer value creation mix

What do customers value?

 Value proposition is closely related to the concept of brand positioning
 Value proposition focuses on specific drivers of value sought by those target customers
 Customer Value Perception (CVP): consumers overall assessment of the utility of a
product based on the perception of what is received and what is given- notion of trade-
off between perception of benefits and cost eg installation, maintenance
 Types of customer value that can be created
 Functional/instrumental value – product has correct, accurate features,
usefulness and performance capabilities – organisations pursuing this strategy
focus on product innovation and product leadership
 Experiential/hedonistic value- extent product creates appropriate customer
emotions (eg pleasure ;) and enjoyment), feelings, experience and sensory-
focus on customer relationships and service quality
 Symbolic/expressive value – extent customers attach or associate
psychological meanings to a product based on social meaning and self
expression – focus on brand image/brand equity and customer equity
 Cost/sacrifice value – extent customers seek to maximise or realise the
benefits derived from a product while seeking to minimise costs and other
sacrifices – focus on operational excellence and value chain efficiencies
 Values influence the choice customers make concerning
1. Product category decisions
2. Brand decisions
 Prototype is a detailed description of an individual customer who is considered to
represent others in the prototype category

Customer Value Creation Mix

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 Processes involved in developing strategies that are designed to create, communicate

and deliver customer value
 To develop an understanding of customers currently value and what they are likely to
value in the future
 After developing dimensions that are important for the organisation targeted
customers next step is to determine how well/poorly the organisation performed in
delivering those values and then they can refine existing value creation,
communication and delivery strategies or make new ones
 Strategies designed to create value – product management strategies
 Difference between service and goods is intangibility
 Product management is important for marketers for physical goods and
services
 Decisions revolve around the following product portfolio consideration
o Existing products: how well do existing products deliver value to targeted
customers- what changes need to be made
o New products: what can be added to meet existing and emerging needs
o Branding and brand positioning: how will the products be branded eg
individually or product line
o Consideration of pricing strategies eg product line pricing, price skimming,
sale promotion techniques
 Penetration and skimming price strategies: related to new-product
introductions
 Penetration strategy: done by cost leaders to encourage fast product
adoption – low price
 Strategies designed to communicate value – brand management and integrated
marketing communication strategies
 IMC play an important role in the creation of brand meanings
 Brand meaning created through organisation via its business and marketing
activities, the broad culture include media influence and the customer
 IMC informs, persuades and remind customers
 With social media now need to engage and build relationships
 Need to do a brand audit to find things out
 Strategies designed to deliver value- customer engagement strategies and distribution
strategies
 Customers and potential customers engage with organisations and with other
customer through increasing variety of touchpoints- these form impressions
 Development of an effective customer engagement strategy is a major
challenge
 Needs to first map out the touchpoints ranging from pre-purchase to post-
purchase then need to establish customers needs and expectations for each
touchpoint, the establish how consistent the organisation is in creating,
communicating and delivering value in comparison to competitors
 Finding the best touchpoints from focus groups and surveys
 CMO’s should concentrate on creating a customer engagement ecosystem
consisting of the me marketing department activities, activies performed inside

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the organisation but outside of the marketing department and activities

performed by a network of external partners

Recovering market segmentation – Yankelovich & Meer

 59% of companies executed a major market segmentation initiative in the past 2 years
but only 14% derived any real benefit.
 To get more from segmentation Y&M suggested several tactics
o Identify a strategic decision that would benefit from information about
different customer segments
o Determine which customers drive profits
o Analyse actual and potential purchasing behaviour
o Segment in ways that make sense to senior management
o Revise segmentation as market conditions change

 Traditional demographic traits are no longer enough to serve as basis for marketing
strategy

 Non-demographic traits such as values, tastes, and preferences were more likely to
influence consumers’ purchases

 Even though campaigns built on psychographics may be good at moving viewers

emotionally, it does not lead to commercial activity

 Those tend to be purchase history, product loyalty and propensity to trade up

 E.g. Miller lite catfight campaign – made impression on young males but did not
increase sales of the product – sales did increase far more when the campaign focused
on how it has fewer carbs that

 Need to gather relevant data to construct meaningful market segments and to analyse
emerging social, economical and tech trends

 Psychographic segmentations can be used to create advertising that will influence

consumers to think warmly about a particular brand. But they’re not as well suited for
other purposes

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 What is the strategy

 Which customers drive profits

o Rank customers profitability

 What are customers doing

o Conduct research to find out what different customers want so that the
company can implement those changes

 Will it make sense to senior management

o Management need to grasp the strategies and the strategies will not be
accepted or applied

 Segmentation also depends on the product – The gravity of the commitment is

important

 Shallow end of the spectrum – customers seeking products and services that will save
them time, money and effort – toiletries, snacks – measure price sensitivity, habits,
impulsiveness

 Middle of the spectrum – big ticket items – cars, electronics – test how concerned
customers are with quality, design, complexity and status

 Deepest end of spectrum – emotional investment is high, core values are engaged –
health care – the values are in conflict with market values

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Lecture Notes: STDP and customer value

 Segmentation, Targeting, (Differentiation) and Positioning**

Why is segmentation so important?

 Market heterogeneous
 Infrastructure differs
 Geography differs- every country has a different layout and culture
 Market life cycles

Market Segmentation
 A process
 A market is divided into distinct subsets of customers
 With similar needs and characteristics
 Respond in similar ways to product offerings and marketing programs

Target Markets
 Identify segments
 Evaluate the relative attractiveness (to the organisation $) of the segments
 Given the firms mission and
 Capabilities (capacity to meet need now or with some investment)
 Determine what each segment wants

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 Choose what segment it will serve

Conceptual Links
 Segmentation: Knowledge of the market
 Target: knowledge of the ability to meet market need – targeting is internal
 Determining the segment size and potential
 Differentiation: finding a meaningful difference to competitors
 Positioning: in the minds of consumers
Will never ask what are 7 steps

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Positioning ^ 3rd stage

When might segmentation not be a good idea?

 market homogeneous in response to marketing possibilities

 segments not economically viable (too new, too much competition)

 no / poor capability to tailor to segment need e.g. small company

 segments exist but too difficult to access

 segment groupings change frequently

Why segment?

 Better use of resources eg opportunity to gain a competitive advantage

 Focus planning – help evaluate resources needed- puts boundaires in place and stops
you from getting overwhelmed
 Closer match of offer to need
 Find something new

Three common targeting strategies

 Most successful entrepreneurs target narrowly defined market segments

 But not necessarily the best strategy, particularly for established firms

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 Niche-market
 Used to serve segments seeking specialised benefits
 Designed to avoid direct competition with larger firms
 Mass-market
 Objective: capture sufficient volume to gain economies of scale and a cost
advantage
 Approach: design separate products and marketing programs for differing
segments
 Requires substantial resources including production capacity and good mass-
marketing capabilities
 Growth-market
 Often target one or more fast growth segments
 Often favoured by smaller competitors to avoid direct confrontation
 Requires strong R&D and marketing capabilities

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What is positioning?
 Place a brand or product occupies in customers mind relative to their needs
 Refers to competing products or brands
 Comprises both competitive and customer need consideration
 Positioning is basically concerned with differentiation- standing out

Physical and perceptual positioning (product level)

 Physical positioning
Based on a set of objective physical characteristics
Does not provide a complete picture
 Perceptual positioning
More complex- include product presentation, past experiences and opinion of others

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Guiding development of marketing strategy

 Two common approaches that reflect unique selling proposition of the product
1. Positioning statement
Identifies the target market
States unique benefits of the product
2. Value proposition
Similar to positioning statement
Includes information about pricing relative to competitors

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 These should be short and succinct

 Need to know the 4 major customer values!

The customer value creation mix

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 strategies designed to create value – product management strategies - product

portfolio decisions and pricing decisions
 strategies designed to communicate value – brand management and IMC strategies –
brand positioning and integrated marketing communication strategies
 strategies designed to deliver value – customer engagement and distribution strategies
– strategies reach and engage customers across the range of internal and external
customer touchpoints and strategies concerning distribution length and intensity

Chapter 7 – Market Penetration strategies

 Market penetration strategies are strategies for existing products in existing markets
 Designed to win and retain customers as they enter the market during the various post
introductory phases on market evolution

Product-Market Strategies
 Ansoffs matrix as the product-market framework
 Quadrant 1 – Existing products, existing markets – Market Penetration
o Increase primary demand (demand for product category as a whole) and
secondary demand (demand for organisations products or brands)
o Designed to stimulate market growth during introductory and growth stages of
market evolution and win the greatest share of customers entering the market
(innovators, early adopters, early majority)
o Increase product usage of existing customers
o Win customers from competitors
 Quadrant 2 – Existing products, New markets – Market Developments
o Designed to expand the total market served by a product - including entry into
new geographic markets, new market segments and new marketing channels
designed to reach unserved customers
 Quadrant 3 – New Products, Existing markets – Incremental innovations
o Strategies based on the introduction of a new product line or a modified
product within the existing product line – including revisions, improvements
and cost reductions
 Quadrant 4 – New Products, New Markets – Radical Innovation
o Strategies used by a market pioneer In the development of new-to-the-world
products to create a new or blue ocean market, or by a market
challenger/follower in the development of a new product in a market that is
new to them
o Market challenger may follow strategy based on innovative innovation
(significantly different from competitors) or product adaptation
(modifiying/improving the products of others)
 The first quadrant focuses on the now of strategy, the other 3 focus on the tomorrow.

Strategies for the various stages of market evolution

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Strategies for growth markets

 Growth market categorised as stage of rapid sales growth

 Begins when uncertainty about new to the world products starts to fade and early
majority consumers take over – potential customers are becoming more knowlegable
 Structure of industry starts to take shape and distribution channels are developed
 Depending on market competition prices may fall or rise

Strategies for market leaders

 Market leader begins to battle with later entrants
 Develop a shapping strategy where the goal is to build an ecosystem along the value
chain and establish industry standards and business practises
 Achieved through lobbying, marketing and entering egreements with suppliers and
distributers
 Based on short term or continuous planning cycles until longer term strategy planning
horizens can be established
 Goal for the market leader is is to build or maintain market share in absolute terms,
however in competitive envrionemt may not be realistic
 More realistic maintain relative market share and leadership
o Maintain existing customers
o Win the largest share of new entrants to the market
 Market leader can also consider developing strategies designed to increase primary
demand for the product category as a whole

Strategies for market challengers

 First stategy is to win the largest share of new customers as they enter the market
 Second is to win customers from the market leader and other competitors for repeat
purchases
 Can achieve this through leapfrog strategy (superior offering), frontal attack (target
market leader with lower prices or superior product attributes), Flanking attack
(targeting new and uncontested market segment) or for a small competitor, a guerrilla
attack (market-niche strategy based on either cost leadership or differentiation)

Strategies for markets undergoing competitive turbulence

 This is the stage where sales continue to grow but the rate of growth is declining
 Market characterised by overcapacity, intensified competition resulting in price wars
 Red ocean stage – existing markets, known products, competitors and strategies
 Strategy is often fought on low prices and quality. Weaker competition exits the market
or is taken over by successful competitors
 Superior quality may not be enough to create competitive advantage when product
differentiation becomes less important – need to create superior customer
service/brand equity

Strategies for mature markets

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 This is when sales for the total maket peak but the rate of growth starts to decline
significantly
 Fewer first time buyers enter the market (late majority)
 The market competition increasingly relies on repeat purchases to maintan their sales
 Bruce Henderson (BCG) rule of three and 4 – a stable competitive industry ever has
more than 3 significant competitors with market share ratios of approximately 4:2:1
 Strategic options include market acusition strategies (converting non users or
targeting new or underdeveloped market segments or geographical markets,
increasing product usage, developing new uses for the product or new ways to use the
product and customer retention
 Preferable approach is to create a blue ocean and focus on searching for untapped
markets

Strategies for declining markets

 Characterised by decreasing sales as the competitive products are superseded either by
new technology, alternative product forms or changing customer values, tastes and
preferences
 Where exit barriers are low some companies will choose to exit
 2 strategic options
o Profitable survivor strategy – appropriate for market leader or a relatively
strong competitor where the decline is expected to be slow over a long period of
time. profitable survivor is able to increase market share at a relatively low cost
as other competitors start to exit the marker. The objective is to achieve a
dominant market position where the company can achieve high product
margins over the rest of the products life
o To achieve this, must encourage other competitors to exit the market through a
price war, new line extension to take advantage of and remaining profitable
niches, taking over weaker competition’s accounts and taking over/purchasing
the competitor
o Harvesting Strategy – involves decreasing marketing and other operational
costs and allowing the allowing the brands to continue on their own stream
relying on the purchases of loyal customers.
o involves improving marketing and sales efficiencies and using a more selective
form of distribution

The customer value creation mix

 Product management (value creation)
 During intro stage it is important not to confuse or overwhelm prospective customers
by offering a large variety of products
 Keep it simple
 Market growth is where new and improved products begin hitting the market and
competition intensifies
 Alternatives for modifying the existing product
o Product enhancement – enhance the attributes which are important

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o Reduction – reducing one or more attributes which are less important for
target customers
o Eliminate – remove attributes that have no value
o Create – introduce new attributes or features which would be valued by target
customers
 Brand management and customer engagement (communication and delivery of value)
 The brand is the focal point of providing value to the organisation’s customers and to
the organisation itself
 Customers co-create perceptions of value based on the interactions they have with the
brand, the influence of other individuals and broader cultural systems including the
mass media
 The aim of communication is to inform, inspire, engage, persuade, reinforce and
remind
 In the early stages of market evolution, the role of informing, inspiring and persuading
is emphasised.
 Inform through a range of marketing activities
 Inspire – brand building – advertising is most effective
 Engage – brand meanings are informed by the customers interactions – social media is
good way of engaging with customers
 As more customers take up the brand the role of reinforcement and reminding become
more important - loyalty programs, adverting and social media

Chapter 8: Market Development Strategies

Geographic expansion

 Strategy to extend an organisations market coverage domestically and internationally

 Domestic market expansion: pursued mainly by small-medium sized enterprises
seeking growth opportunities beyond their local market territories
 Achievement of scale efficiencies provides a means for enhancing the survival
prospects for a small business
 Eg Zara expanded domestically before going international
 International market expansion: can just be taking one or two products
international
 Done to take advantage of an opportunity that has arisen or alternatively to test the
waters for later
 More complex level of interntational market development, an organisation may decide
to enter into a licensing arrangement or a joint venture with a local organisation, a
franchising agreement, or going in it alone
 For many organisations entering a market in a developed economy has lost its appeal
due to ageing population, a slowdown in economic growth and intensified global
competiton have created a red ocean market in developed countries ----now shifted
towards emerging markets
 Attractiveness of emerging markets has shifted because

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 Demographic shifts eg rapid growth of middle classes

 Increasing ease of access to emerging markets made possible by the Internet,
enabling all types of organisation to reduce cost of conducting business
overseas
 Foreign-market opportunity analysis: decision-making process to expand overseas or
can use Arnold and Quelch model for estimating market demand in emerging markets
(used when information sources are unreliable)
 Need to identify what are fast growing markets, market trends and external
environment factors and then need to investigate specific issues relating to the
development of market entry strategies such as investigate market size for product
category
 Broader market entry aspects need to be considered – can use McKinseys six critical
success factors for market entry (mentioned below*)---- strategists should take an
external view of the situation by drawing on the experiences of other organisations
that have successfully or unsuccessfully entered the foreign markets

*predictors of success in market entry

1. Size of entry relative to minimum efficient scale- organisations closer to industry
minimum efficient scale are more likely to succeed
2. Relatedness of the market entered – more closely related that an organisations product
or service is to the current market offerings, more likely to succeed
3. Complementary assets – eg marketing and distribution are often more important then
core assets
4. Order of entry – first entrants have advantage at beginning but can lose out to more
experienced later entrants
5. Industry life cycle – market entry during intro or growth stages is more likely to
succeed then entering in or near shake-out
6. Degree of technological innovation – markets where there is a high level of technical
innovation it is difficult for a new entrant to compete against established incumbents-
better for new entrant to focus on small niche that was ignored by the dominant
players in the market

New market segments

 New customer segments always comes about because of the changing nature of
customer buying behaviour
 Middle ground under pressure in many mores as they fill like they are stuck in the
middle between no frills and luxury
 Need to develop a deep understanding of their customer needs and behaviour at the
intersection of segments, channels and product categories
 Need to assess the current and future attractiveness of the emerging segments and
decide whether to enter the market – if yes need to develop customer value creation
mix strategies
 Sustaining innovation: incremental year by year product or service improvements or
the development of a breakthrough new product for an existing market- making the

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platform better in ways the customers already value- new product development
strategies (new products for existing markets)
 Disruptive innovation: lead to the creation of an entirely new market through the
introduction of a new kind of product or service- not designed to be as good or better
then existing but are designed to be simpler, more convenient and less expensive-
appeal to non-customers of the existing product category eg late majority or laggards-
these competitors are usually new entrants to the market
 improvement style begins and eventually disruptive innovation meeds the needs of the
normal market and then start to take away market share from competitors
 main competitors need to stay one step ahead so need to create a new organisational
structure within existing corporate boundaries in which the new processes, values and
capabilities can be developed – can increase product line with intro of modified new
product or by developing new applications or uses for their existing products eg
finding other uses for baking soda

New marketing channels

 marketing channel: set of activities and processes involved in the transfer of title and
the movement of goods and services from the point of production to the point of
consumption
 in digital age marketing channels involve online and offline activities
 offline channel: range from direct customer to supplier transactions to those involving
complex multi-level structure of intermediaries eg through wholesalers
 online activities: those that are informational, transactional and provide a platform
for managing customer relationships
 a decision to target a new market segment might initiate the need to select a new
channel
 for all organisations in B2C and B2B, the use of digital channels has become
increasingly important- so need to know the steps involved in the customer decision
journey and the touchpoints that occur

conclusion
 market development strategies include entry to new market, new marketing channels
and established and emerging foreign markets
 each strategies have a different range of complexity and level of decision making eg
entering into a new market segment is less complex then entering an emerging foreign
market

Week 5: Lecture Notes

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Strategy- 2 life cycles

 predicting the future

 product category life cycle – the market
 product life cycle – within the organisation

Strategies for growth markets

 strategies for market leaders

 build or maintain market share
 to retain existing customers
 to win the largest share of new customers entering the market
 strategies for market challengers
 two broad strategic options:
1) to win the largest share of new customers as they enter the market and
2) to win customers away from the market leader

Opportunities in growth markets

 growth markets are attractive because of the following:

 gaining share is easier
 share gains are worth more
 price competition is likely to be less intense
 early entry may be necessary to keep pace with technology
 growth market is relatively easy – there is room for all
 what is not easy is ensuring that everything is in place to tackle maturity (slow down
in new customers, more competitors, greater product options available etc)

Pioneer strategy – Market leader

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Potential sources of competitive advantage

 First choice of market segments and positions
 Defining the rules of the game
 Distribution advantages
 Economies of scale and experience
 High switching costs for early adopters
 Possibility of positive network effects possibility of pre-empting scarce resources

Marketing objectives for share leaders

 Maintaining/improving satisfaction and loyalty

 Encouraging/simplifying repeat purchase

 Reducing attractiveness of switching

 Head-to-head positioning against competitive or potential offerings

 Differentiated positioning against competitive or potential offerings

Follower strategy – market challenger

 In many cases a follower ends up there by default (beaten to market)

 Possible advantages of being a follower include the ability to take advantage of:
 Pioneer’s positioning mistakes
 Pioneer’s product mistakes
 Pioneer’s marketing mistakes
 Lastest technology
 Pioneer’s limited resources

Strategies of competitive turbulence

 A market characterised by
 Industry over-capacity
 Intensified competition
 Price wars
 Competitors without a clear competitive advantage struggle to survive
 The winners are those who have created a differentiated competitive advantage
 Note there are other factors in creating turbulence- not just competitors
Strategies for mutual markets
 Markets with a significant decline in the rate of growth
 Few first time buyers enter the market – late majority
 The rule of ‘threes and fours’ typifies this market
 Strategic options include

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 Customers acquisition (converting non-users, targeting new or undeveloped

market segments or new geographical markets)
 Product strategies: increasing product usage, developing new users for the
product or new ways to use the product
 Customer retention

Strategies for declining markets

 Profitable survivor strategy
 Strategies for a market leader to gain market share by encouraging weak
competitors to exit the market by
1) Starting a price war
2) Line extension to take over profitable niches
3) Taking over a weaker competitor’s accounts
 Harvesting strategy
 Decreasing marketing and other operational costs, improving marketing and
sales efficiencies and using a more selective form of distribution

Marketing development
 New geographic markets
 New market segments
 New marketing channels

Objectives market development

 Defend a current market-share position
 Establish a foothold in a future new market
 Exploit technology in a new way
 Capitalise on distribution strengths
 Provide a cash generator
 Use excess or off-season capacity

Geographic Expansion
 • Domestic market expansion
o Local  national
 International market expansion
o Exporting
o Licensing agreement
o Joint venture
o Mergers and acquisition (M&A) strategy
o Wholly owned subsidiary

New Market Segments

 Market fragmentation - proliferation of new customer segments
 Danger of becoming stuck-in-the-middle between low-frills and high-end competitors
(see Porter)
 Potential of disruptive innovation in low-end market segments.

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Five Strategic Choices for Growth Markets

 Five strategies that a market leader / challenger may employ (singly or in
combination)
 Market leader (they may also use some of challenger tactics)

1. Fortress defence e.g. Barriers to entry high – such a tying up the distribution channel
2. Flanker defence e.g. covering niche markets
 Challenger
1. Flanker attack e.g. into small underserved niche
2. Confrontation / frontal e.g. Aldi; Costco
3. Encirclement e.g. developing new segments - geographic market
expansion
4. Leapfrog e.g. develop a better offering
5. Guerilla attack e.g. cost leadership or differentiations
(communications for example)

5 Strategies for Followers in Growth Markets

 There are five general ways that a challenger may use (singly or in combination) to
secure growth in market share
1. Frontal attack
2. Leapfrog
3. Flank attack
4. Encirclement
5. Guerrilla

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 Diffusion of innovations is a theory that seeks to explain how, why and at what rate
new ideas and technology spread through cultures diffusion is the process by which an
innovation is communicated through certain channels over time among the
participants in a social system. four main elements influence the spread of a new idea:
the innovation itself, communication channels, time, and a social system.

Week 6: Chapter 11: Managing the strategic marketing process (focus on strategy
implementation and strategy evaluation and control )

Resource allocation
 marketing expenditure is often one of the largest expenditures for many organisations
 resource allocation is a two-part process

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1. first part concerns high-level decisions regarding the total size of the budget
and managing the innovation portfolio (allocation of resources concerning the
enhancement of core offering, market development and radical and
incremental innovation)
 strategic gap analysis is useful to highlight the differences between what
the organisation needs to achieve top-line revenue and what is likely to
achieve if the current strategies are continued
2. second part is to drill down to the strategic role of marketing- the allocation of
resources to enable high-level marketing strategies to be executed eg how much
money should be spent over the strategic timeframe
 these questions come under marketing accountability and measurement
 development of marketing accountability and measurement model has
proven to be a major challenge for marketing industry
 the focus on marketing has concerned the measurement of intermediate
outcomes eg an increase in brand awareness or attributed to a particular
marketing action
 these measurements address functional or tactical aspects of marketing
and stop short of providing a link between the intermediate outcomes and
financial results

 to provide a link: can measure changes in the organisations customer

equity (lifetime revenue of customers less their acquisition and retention
costs)
 Customer lifetime value model
 Links marketing actions to customer equity and financial return
 Provides a means for making what-if evaluations of marketing return on
investments based on high-level criteria that can be used to trade of
marketing strategies
 Model views marketing as investment LOL
 Investments should reflect broad, higher-level resource allocations
 Provides a means to determine the return on each of the key strategic
investments or drivers of customer equity and to determine which of this
investments yields the greatest return
 Improvement in customer perceptions then results in increased customer
attraction and retention that leads to increased CLV and customer equity
 Increase in customer equity minus the cost of marketing investment equals
the final computation of return on marketing investment

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 Link that connect the drivers to customer perceptions (2 and 3 step In model)
is based on data obtained from a customer ratings survey by rating perceived
performance of the brand
 Model provides strategists with a basis of analysing, measuring and
projecting ROI outcomes from alternative marketing expenditures

Implementation
 After gaining approval the next stage is to translate the proposed marketing strategies
into actionable or operational marketing plans such as an annual marketing plan or
brand/product plan etc
 These plans are developed within the context of the organisations annual budgeting
cycles and spell out who is to do what by when
 Implementation is a time of high strategy failure- what to do to address this issue of
restructuring organisations marketing activities
1. organisation-wide coordination- must go over all areas of enterprises
2. clearly defined roles and responsibilities
3. core marketing activities- use a hub-and-spoke structure- CMO situated in
the hub of a wheel with managers/directors of functions create the rim of
the wheel
4. a marketing ecosystem- what marketing decisions are performed in-house
and by partner organisation
5. appointment of a chief experience officer – eg the CMO or someone who
performs this type of activity: think, feel and do

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6. marketing operations management: should appoint a marketing operations

director to take charge of implementing marketing strategies and
managing day-to-day marketing operations
 need to develop a structure that aligns with the organisations overall customer value
creation strategy

Evaluation and control of performance

 task is to determine what is to be evaluated, how it is to be evaluated (internal or
external data), who is to supply the data and when is it to be evaluated
 objective to provide a mechanism for tracking the strategies articulated in the
marketing strategy document to ensure that the long-term objectives will be achieved
 leading indicators: provide clues as to future marketing performance- metrics that
signal this and mainly concerned with measurements of effectiveness (measurements
of out outputs to the objectives of an organisation) – measured in terms of hard data-
they are the inputs to the CLV return on the marketing investment model
 lagging indicators: measurements of past performance- after the event metrics –
provides information on how well the organisation has performed in the past- mainly
concerned with issues of efficiency (concerning profitability and ROI)
 effectiveness if the foundation of success, efficiency is the minimum condition for
survival after success has been achieved
 consideration of how each metric is to be measured involves decisions concerning
methodology- can include quantitative and qualitative data
 marketing dashboard: a graphic display of key performance metrics and underlying
short and long term performance driver that are provided for the organisations
personnel on the desktop or phone- can be created internally or externally- it provides
a summarised view of marketing information that can be used for planning,
budgeting and monitoring purposes

a marketing control system

 benchmarking- identification of an appropriate standard
 2 types: comparative (based on a comparison with competitor performance,
industry averages) and ideal (established on what is thought to be
perfection)
 standards should be set within the context of external environment
 corrective action
 performance measurement reveals problems that have occurred in long and
short term strategy implementation
 next step is to develop why these problems have occurred
 two causes of marketing-strategy implementation problems: unsatisfactory
marketing effort (focus on ways to improve performance)and changes in the
external environment such as a shift in the economy, competitive activity
(may call for modification)
 3 types of control systems:

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o after- the-fact control system: measures performance at the end of the

planning period- problem doesn’t address what might happen during
the planning period
o steering-control system: reactive system that provides for the detection
of problems and the implementation of corrective action during the
planning period
o adaptive-control system: proactive system where management
anticipates changes that have taken place or are occurring in the
environment and modifies objectives and strategies

strategic fit between marketing strategy and implementation

 important evaluation of performance is to determine whether the organisation has
been able to effectively implement its chosen strategies
 success: implementation was excellent and the strategy was appropriate (terms of fit
with market and competitive environment)
 rescue or ruin: implementation was excellent but inappropriate strategy- can readjust
but could make it worse
 trouble: implementation was poor but appropriate strategy performance
 failure: implementation was poor and the strategy was inappropriate

marketing performance as part of a holistic management system

 effective organisational performance measurement needs to be considered in the
context of being part of an integrated marketing process
 the balanced scorecard provides a comprehensive framework that translates a
companys strategic objectives into a coherent set of performance measures
 forces managers to focus on a handful of measures that are most critical to
organisations success

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 provides answers to how do our customers see us (customer perspective), what must
we excel at (internal perspective), can we continue to improve and create value
(innovation and learning perspective), how do we look to our shareholders (financial
perspective)
 customer perspective most important
 customer performance issues include lead time (measurement of time it takes for the
organisation to deliver the product from time order is received), quality (or product
and on-time deliver), performance of service (how service create value for customers)
 more then just a tool for performance measurement- it’s a centrepiece of the
organisations strategy management system to oversee all of the management
processes with strategy

reading:
 Innovation initiatives frequently fail. The problem is rooted in the lack of an innovation
strategy
 A strategy is a commitment to a set of coherent, mutually reinforcing policies or
behaviours aimed at achieving a specific competitive goal.
 Good strategies promote alignment among diverse groups within an organisation,
clarify objecitives and priorities ans help focus efforts around them.
 Companies regularly define their overall business strategy (their scope and
positioning) and specify how various business functions will support it.
 Firms rarely have strategies that align their innovation efforts with their business
strategies
 Unless innovation induces potential customers to pay more, saves them money, or
provides some larger societal benefit like improved health or cleaner water, it is not
creating value.

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 Can also create vale by making something easier, more comvientenct, cheaper more
durable etc. – important to choose what kind of value the innovation will create and
then sticking to that is critical
 Value creating innovations attract imitators as soon as they attract customers and
intellectual property alone is not enough to block these rivals
 As imitators enter the market they create price pressures that can reduce the value
that can reduce the value of the original innovation
 Also if suppliers and distributors are dominant they may have barganining power to
capture a lot of the value from the innovation e.g. intel
 Routine innovation builds on a company’s existing technological compentences and fits
with its existing business model and hence its customer base – e.g. iphone upgrades
 Disruptive innavation – new business model but not neccesaarily a technological
breakthrough – challenges/disrupts the business models of other companies
 Radical innoavation – purely technological. Heavy investment in R&D, funded by a few
high margin products
 Architectural innovation – combines technological and business model disruptions –
e.g. digital photography – these are the most difficult to pursue


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 A company’s innovation strategy should specify how the different types of innovation
fit into the business strategy and the resources that should be allocated to each.
 In much of the writing on innovation today, radical, disruptive, and architectural
innovations are viewed as the keys to growth, and routine innovation is denigrated as
myopic at best and suicidal at worst.
 In reality the vast majority of profits are created through routine innovation
 Routine innovation is where companies play to their strengths and take advantage of
them
 4 essential task in creating and implementing innovation strategy
o answer “how are we expecting innovation to create value for the customers and
for our company?” and explain that to the organization
o create a high-level plan for al- locating resources to the different kinds of
innovation.
o Managing trade offs – need to make choices that are best for the company
o The final challenge facing senior leadership is recognizing that innovation
strategies must evolve. Any strategy represents a hypothesis that is tested
against the unfolding realities of markets, technologies, regulations, and
competitors.

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Lecture notes: extra notes on new product and innovation

strategic role of new product type ^^

Objectives of new product and market development

• Maintain position as a product innovator
• Defend a current market-share position
• Establish a foothold in a future new market
• Exploit technology in a new way
• Capitalise on distribution strengths

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• Provide a cash generator

• Use excess or off-season capacity

Marketing Strategy Elements Pursued by Successful Pioneers, Fast Followers, and Late Entrants

Strategies for new-to-the-world innovations first mover advantage

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The process dimension

iteration- continually refining- going in circles

myopia totally missing the mark

Chapter 7 – Market Penetration strategies

 Market penetration strategies are strategies for existing products in existing markets
 Designed to win and retain customers as they enter the market during the various post
introductory phases on market evolution

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Product-Market Strategies
 Ansoffs matrix as the product-market framework
 Quadrant 1 – Existing products, existing markets – Market Penetration
o Increase primary demand (demand for product category as a whole) and
secondary demand (demand for organisations products or brands)
o Designed to stimulate market growth during introductory and growth stages of
market evolution and win the greatest share of customers entering the market
(innovators, early adopters, early majority)
o Increase product usage of existing customers
o Win customers from competitors
 Quadrant 2 – Existing products, New markets – Market Developments
o Designed to expand the total market served by a product - including entry into
new geographic markets, new market segments and new marketing channels
designed to reach unserved customers
 Quadrant 3 – New Products, Existing markets – Incremental innovations
o Strategies based on the introduction of a new product line or a modified
product within the existing product line – including revisions, improvements
and cost reductions
 Quadrant 4 – New Products, New Markets – Radical Innovation
o Strategies used by a market pioneer In the development of new-to-the-world
products to create a new or blue ocean market, or by a market
challenger/follower in the development of a new product in a market that is
new to them
o Market challenger may follow strategy based on innovative innovation
(significantly different from competitors) or product adaptation
(modifiying/improving the products of others)
 The first quadrant focuses on the now of strategy, the other 3 focus on the tomorrow.

Strategies for the various stages of market evolution

Strategies for growth markets

 Growth market categorised as stage of rapid sales growth

 Begins when uncertainty about new to the world products starts to fade and early
majority consumers take over – potential customers are becoming more knowlegable
 Structure of industry starts to take shape and distribution channels are developed
 Depending on market competition prices may fall or rise

Strategies for market leaders

 Market leader begins to battle with later entrants
 Develop a shapping strategy where the goal is to build an ecosystem along the value
chain and establish industry standards and business practises

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 Achieved through lobbying, marketing and entering egreements with suppliers and
distributers
 Based on short term or continuous planning cycles until longer term strategy planning
horizens can be established
 Goal for the market leader is is to build or maintain market share in absolute terms,
however in competitive envrionemt may not be realistic
 More realistic maintain relative market share and leadership
o Maintain existing customers
o Win the largest share of new entrants to the market
 Market leader can also consider developing strategies designed to increase primary
demand for the product category as a whole

Strategies for market challengers

 First stategy is to win the largest share of new customers as they enter the market
 Second is to win customers from the market leader and other competitors for repeat
purchases
 Can achieve this through leapfrog strategy (superior offering), frontal attack (target
market leader with lower prices or superior product attributes), Flanking attack
(targeting new and uncontested market segment) or for a small competitor, a guerrilla
attack (market-niche strategy based on either cost leadership or differentiation)

Strategies for markets undergoing competitive turbulence

 This is the stage where sales continue to grow but the rate of growth is declining
 Market characterised by overcapacity, intensified competition resulting in price wars
 Red ocean stage – existing markets, known products, competitors and strategies
 Strategy is often fought on low prices and quality. Weaker competition exits the market
or is taken over by successful competitors
 Superior quality may not be enough to create competitive advantage when product
differentiation becomes less important – need to create superior customer
service/brand equity

Strategies for mature markets

 This is when sales for the total maket peak but the rate of growth starts to decline
significantly
 Fewer first time buyers enter the market (late majority)
 The market competition increasingly relies on repeat purchases to maintan their sales
 Bruce Henderson (BCG) rule of three and 4 – a stable competitive industry ever has
more than 3 significant competitors with market share ratios of approximately 4:2:1
 Strategic options include market acusition strategies (converting non users or
targeting new or underdeveloped market segments or geographical markets,
increasing product usage, developing new uses for the product or new ways to use the
product and customer retention
 Preferable approach is to create a blue ocean and focus on searching for untapped
markets

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Strategies for declining markets

 Characterised by decreasing sales as the competitive products are superseded either by
new technology, alternative product forms or changing customer values, tastes and
preferences
 Where exit barriers are low some companies will choose to exit
 2 strategic options
o Profitable survivor strategy – appropriate for market leader or a relatively
strong competitor where the decline is expected to be slow over a long period of
time. profitable survivor is able to increase market share at a relatively low cost
as other competitors start to exit the marker. The objective is to achieve a
dominant market position where the company can achieve high product
margins over the rest of the products life
o To achieve this, must encourage other competitors to exit the market through a
price war, new line extension to take advantage of and remaining profitable
niches, taking over weaker competition’s accounts and taking over/purchasing
the competitor
o Harvesting Strategy – involves decreasing marketing and other operational
costs and allowing the allowing the brands to continue on their own stream
relying on the purchases of loyal customers.
o involves improving marketing and sales efficiencies and using a more selective
form of distribution

The customer value creation mix

 Product management (value creation)
 During intro stage it is important not to confuse or overwhelm prospective customers
by offering a large variety of products
 Keep it simple
 Market growth is where new and improved products begin hitting the market and
competition intensifies
 Alternatives for modifying the existing product
o Product enhancement – enhance the attributes which are important
o Reduction – reducing one or more attributes which are less important for
target customers
o Eliminate – remove attributes that have no value
o Create – introduce new attributes or features which would be valued by target
customers
 Brand management and customer engagement (communication and delivery of value)
 The brand is the focal point of providing value to the organisation’s customers and to
the organisation itself
 Customers co-create perceptions of value based on the interactions they have with the
brand, the influence of other individuals and broader cultural systems including the
mass media
 The aim of communication is to inform, inspire, engage, persuade, reinforce and
remind

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 In the early stages of market evolution, the role of informing, inspiring and persuading
is emphasised.
 Inform through a range of marketing activities
 Inspire – brand building – advertising is most effective
 Engage – brand meanings are informed by the customers interactions – social media is
good way of engaging with customers
 As more customers take up the brand the role of reinforcement and reminding become
more important - loyalty programs, adverting and social media

Market Development Strategies

Geographic expansion

 Strategy to extend an organisations market coverage domestically and internationally

 Domestic market expansion: pursued mainly by small-medium sized enterprises
seeking growth opportunities beyond their local market territories
 Achievement of scale efficiencies provides a means for enhancing the survival
prospects for a small business
 Eg Zara expanded domestically before going international
 International market expansion: can just be taking one or two products
international
 Done to take advantage of an opportunity that has arisen or alternatively to test the
waters for later
 More complex level of interntational market development, an organisation may decide
to enter into a licensing arrangement or a joint venture with a local organisation, a
franchising agreement, or going in it alone
 For many organisations entering a market in a developed economy has lost its appeal
due to ageing population, a slowdown in economic growth and intensified global
competiton have created a red ocean market in developed countries ----now shifted
towards emerging markets
 Attractiveness of emerging markets has shifted because
 Demographic shifts eg rapid growth of middle classes
 Increasing ease of access to emerging markets made possible by the Internet,
enabling all types of organisation to reduce cost of conducting business
overseas
 Foreign-market opportunity analysis: decision-making process to expand overseas or
can use Arnold and Quelch model for estimating market demand in emerging markets
(used when information sources are unreliable)
 Need to identify what are fast growing markets, market trends and external
environment factors and then need to investigate specific issues relating to the
development of market entry strategies such as investigate market size for product
category
 Broader market entry aspects need to be considered – can use McKinseys six critical
success factors for market entry (mentioned below*)---- strategists should take an

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external view of the situation by drawing on the experiences of other organisations

that have successfully or unsuccessfully entered the foreign markets

*predictors of success in market entry

7. Size of entry relative to minimum efficient scale- organisations closer to industry
minimum efficient scale are more likely to succeed
8. Relatedness of the market entered – more closely related that an organisations product
or service is to the current market offerings, more likely to succeed
9. Complementary assets – eg marketing and distribution are often more important then
core assets
10. Order of entry – first entrants have advantage at beginning but can lose out to more
experienced later entrants
11. Industry life cycle – market entry during intro or growth stages is more likely to
succeed then entering in or near shake-out
12. Degree of technological innovation – markets where there is a high level of technical
innovation it is difficult for a new entrant to compete against established incumbents-
better for new entrant to focus on small niche that was ignored by the dominant
players in the market

New market segments

 New customer segments always comes about because of the changing nature of
customer buying behaviour
 Middle ground under pressure in many mores as they fill like they are stuck in the
middle between no frills and luxury
 Need to develop a deep understanding of their customer needs and behaviour at the
intersection of segments, channels and product categories
 Need to assess the current and future attractiveness of the emerging segments and
decide whether to enter the market – if yes need to develop customer value creation
mix strategies
 Sustaining innovation: incremental year by year product or service improvements or
the development of a breakthrough new product for an existing market- making the
platform better in ways the customers already value- new product development
strategies (new products for existing markets)
 Disruptive innovation: lead to the creation of an entirely new market through the
introduction of a new kind of product or service- not designed to be as good or better
then existing but are designed to be simpler, more convenient and less expensive-
appeal to non-customers of the existing product category eg late majority or laggards-
these competitors are usually new entrants to the market
 improvement style begins and eventually disruptive innovation meeds the needs of the
normal market and then start to take away market share from competitors
 main competitors need to stay one step ahead so need to create a new organisational
structure within existing corporate boundaries in which the new processes, values and
capabilities can be developed – can increase product line with intro of modified new
product or by developing new applications or uses for their existing products eg
finding other uses for baking soda

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New marketing channels

 marketing channel: set of activities and processes involved in the transfer of title and
the movement of goods and services from the point of production to the point of
consumption
 in digital age marketing channels involve online and offline activities
 offline channel: range from direct customer to supplier transactions to those involving
complex multi-level structure of intermediaries eg through wholesalers
 online activities: those that are informational, transactional and provide a platform
for managing customer relationships
 a decision to target a new market segment might initiate the need to select a new
channel
 for all organisations in B2C and B2B, the use of digital channels has become
increasingly important- so need to know the steps involved in the customer decision
journey and the touchpoints that occur

conclusion
 market development strategies include entry to new market, new marketing channels
and established and emerging foreign markets
 each strategies have a different range of complexity and level of decision making eg
entering into a new market segment is less complex then entering an emerging foreign
market

Week 6: Chapter 11: Managing the strategic marketing process (focus on strategy
implementation and strategy evaluation and control )

Resource allocation
 marketing expenditure is often one of the largest expenditures for many organisations
 resource allocation is a two-part process
3. first part concerns high-level decisions regarding the total size of the budget
and managing the innovation portfolio (allocation of resources concerning the
enhancement of core offering, market development and radical and
incremental innovation)
 strategic gap analysis is useful to highlight the differences between what
the organisation needs to achieve top-line revenue and what is likely to
achieve if the current strategies are continued
4. second part is to drill down to the strategic role of marketing- the allocation of
resources to enable high-level marketing strategies to be executed eg how much
money should be spent over the strategic timeframe
 these questions come under marketing accountability and measurement
 development of marketing accountability and measurement model has
proven to be a major challenge for marketing industry
 the focus on marketing has concerned the measurement of intermediate
outcomes eg an increase in brand awareness or attributed to a particular
marketing action

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 these measurements address functional or tactical aspects of marketing

and stop short of providing a link between the intermediate outcomes and
financial results

 to provide a link: can measure changes in the organisations customer

equity (lifetime revenue of customers less their acquisition and retention
costs)
 Customer lifetime value model
 Links marketing actions to customer equity and financial return
 Provides a means for making what-if evaluations of marketing return on
investments based on high-level criteria that can be used to trade of
marketing strategies
 Model views marketing as investment LOL
 Investments should reflect broad, higher-level resource allocations
 Provides a means to determine the return on each of the key strategic
investments or drivers of customer equity and to determine which of this
investments yields the greatest return
 Improvement in customer perceptions then results in increased customer
attraction and retention that leads to increased CLV and customer equity
 Increase in customer equity minus the cost of marketing investment equals
the final computation of return on marketing investment
 Link that connect the drivers to customer perceptions (2 and 3 step In model)
is based on data obtained from a customer ratings survey by rating perceived
performance of the brand
 Model provides strategists with a basis of analysing, measuring and
projecting ROI outcomes from alternative marketing expenditures

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Implementation
 After gaining approval the next stage is to translate the proposed marketing strategies
into actionable or operational marketing plans such as an annual marketing plan or
brand/product plan etc
 These plans are developed within the context of the organisations annual budgeting
cycles and spell out who is to do what by when
 Implementation is a time of high strategy failure- what to do to address this issue of
restructuring organisations marketing activities
7. organisation-wide coordination- must go over all areas of enterprises
8. clearly defined roles and responsibilities
9. core marketing activities- use a hub-and-spoke structure- CMO situated in
the hub of a wheel with managers/directors of functions create the rim of
the wheel
10. a marketing ecosystem- what marketing decisions are performed in-house
and by partner organisation
11. appointment of a chief experience officer – eg the CMO or someone who
performs this type of activity: think, feel and do
12. marketing operations management: should appoint a marketing operations
director to take charge of implementing marketing strategies and
managing day-to-day marketing operations
 need to develop a structure that aligns with the organisations overall customer value
creation strategy

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Evaluation and control of performance

 task is to determine what is to be evaluated, how it is to be evaluated (internal or
external data), who is to supply the data and when is it to be evaluated
 objective to provide a mechanism for tracking the strategies articulated in the
marketing strategy document to ensure that the long-term objectives will be achieved
 leading indicators: provide clues as to future marketing performance- metrics that
signal this and mainly concerned with measurements of effectiveness (measurements
of out outputs to the objectives of an organisation) – measured in terms of hard data-
they are the inputs to the CLV return on the marketing investment model
 lagging indicators: measurements of past performance- after the event metrics –
provides information on how well the organisation has performed in the past- mainly
concerned with issues of efficiency (concerning profitability and ROI)
 effectiveness if the foundation of success, efficiency is the minimum condition for
survival after success has been achieved
 consideration of how each metric is to be measured involves decisions concerning
methodology

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