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Functional strategies – Marketing

Geoff Leese November 2006, revised July 2007,

August 2008, August 2009

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Introduction

Functional strategies Business orientation The marketing concept and approach The marketing mix Strategy differentiation Positioning Strategies

Product/Price/Place (Distribution)/Promotion Other topics

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Functional Strategies

Corporate strategy

FinanceStrategy(week 7)

Marketing Strategy(week 7)

HRMStrategy(week 8)

ManufacturingStrategy(week6)

Top level or SBUstrategy

Examples of functional strategies:• depends on level of SBU• depends on type of business• depends on organisation

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Business orientations (1)

Production orientation Demand exceeds supply Needs good production engineering/financial

control Any colour you like as long as its black…..

Product orientation Focus on customer perceptions of “quality” Needs innovative R&D

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Business orientations(2)

Sales orientation Finding customers for /sales teams

Marketing orientation Focuses on customer needs Needs well developed marketing research

teams and flexible production/delivery methods

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The marketing concept

Evaluate market opportunities before production

Assess potential demand Canvass customer priorities and desires Assess pricing strategy Produce and supply goods/services

meeting customer expectations

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The marketing mix (four Ps) Product

Intrinsic or perceived properties of product or service

Price Pricing strategies

Place Delivery of goods/services

Promotion Advertising, merchandising, PR

Seven P model includes also Packaging, Positioning, Peoplewww.entrepreneur.com/marketing/article70824.html

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Example marketing strategies

New products for existing markets New markets for existing products New products for new markets Existing products in existing markets

Improve penetration Improve market share

Added value

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Market segmentation

Breakdown of a market into segments based on Demographics

– Age– Wealth– Geography– Social class

Behaviour– Lifestyle– Attitudes– Interests– Opinions and beliefs

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Strategy differentiationUndifferentiated

Strategy

Market segment

Market segment

Market segment

Strategy

Strategy

StrategyStrategy

Market segment

Market segment

Market segment

ConcentratedMarket segment

Market segment

Market segment

Differentiated

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Positioning

How a product or service is perceived by consumers in comparison to it’s competitors

Issues Scope Market leadership/market following? Substitution? Multi-national positioning?

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Product strategies

Product choice Product development New product lines Extend existing lines

Rationalisation Standardisation Branding

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The product life cycle

Introduction Create product awareness and loyalty –

advertising important Few competitors – technical difficulties

possible Costs are high, often losses are experienced Early adopters attracted by novelty

Growth Competition appears Mainstream consumer adoption Widen appeal, build loyalty

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The product life cycle

Maturity Competition intensifies Stabilise market share – enter new markets Extra promotion, price cutting, widen

distribution systems, add value Decline

Consumer tastes change/substitution/obsolescence

Sales and profits fall Manage for profit Discontinuation or divestment

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The BCG Matrix

For strategies used for each category seehttp://www.quickmba.com/strategy/matrix/bcg/

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Pricing strategies Penetration pricing

Low price, aggressive advertising Target pricing

Based on estimated demand/profit targets Skimming

High price, premium version of established products

Product life cycle pricing Varies according to stage in life cycle

Loss leading Selling at less than cost- attracts custom

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Pricing strategies Price discrimination

Same product, different markets, different prices

Marginal cost pricing Based on ACTUAL cost of supply

Limit pricing Low prices to discourage new entry into market

Variable (stayout) pricing Prices increase when demand is high

Customary pricing Price stays the same, contents reduced

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Distribution strategies

Producer

Producer

Producer

Direct

Consumer

Consumer

Consumer

Short chain

Long chain

Wholesaler

Retailer

Retailer

(could be agents too!)

(single intermediary)

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Choice of distribution method Intensity

No of outlets in each area Cost of channel Level of control possible/desirable Improvement/worsening of brand image Geographical coverage Reliability of intermediaries

Product presentation Continuity of supply Pre sales info/after sales service

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Promotion strategies

Advertising Objectives Strategy Choice of medium

Direct marketing Sales promotion

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Other topics

Pan-company marketing Marketing as a strategy driver across the firm

Internal marketing Marketing driving HR strategy

– Recruitment– Training– Promotion– “Internal customers”

Relationship marketing Establishment of long-term trading relationships with

customers

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Summary

Functional strategies Business orientation The marketing concept and approach The marketing mix Strategy differentiation Positioning Strategies

Product/Price/Place (Distribution)/Promotion Other topics

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Further reading

Bennett chapter 9 Butel et al Unit 4 All about Marketing - follow the link! An alternative - follow the link!