1. Introduction to Marketing Strategy

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    Importance of Marketing

    Marketing is an integral component of any .

    The sole purpose of marketing is therefore,to get more people to buy more of yourproduct, more often, for more money.

    Strategy is Essential for Survival and Success of an Organization

    Importance of Strategy

    Ineffective Effective

    Efficient

    Strategy

    Die(slowly)

    Thrive

    a c

    t i c s

    InefficientDie

    (quickly) Survive

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    Dimensions of StrategySuccessful companies either have a Productivity advantag e or they haveValue advantage or combination of both.

    The productivity advantage gives a lower-cost profile and the valueadvanta e ives the roduct a differential lus over com etition.

    Real UnitCost

    V a

    l u e

    A d v a n

    t a g e

    L o w

    H i g h

    CommodityMarketing

    NicheStrategy

    CostLeadership

    Cost & ValueLeadership

    Cumulative output

    The Experience Curve

    Productivity AdvantageLow High

    Strategic Direction

    CLEARLY DEFINESTARGET CUSTOMERS

    AND THEIR NEEDS

    Characteristics of Strategy

    STRATEGY

    CREATES ACOMPETITIVEADVANTAGE

    INCURS

    ACCEPTABLE

    DERIVEDTO ACHIEVE

    INTERNALLYCONSISTENT

    RISK

    RESOURCE ANDMANAGERIALLY

    SUPPORTABLE

    OBJECTIVES

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    Marketing Strategy

    A process of achieving overall corporate objectives through properidentification of market opportunities and effective deployment of companys marketing assets.

    Marketing Assets are defined as those assets of company that contributedirectly or indirectly to profitable sales, some of these are:

    Brand Name Distribution Network Customer Loyalty

    Supplier Relationship Customer Relationship

    Technology Base

    Strategic Marketing Planning

    ANALYSIS: Where are we now?

    How are we going to get there?

    PLANNING: Where do we want to be?

    IMPLEMENTATION:

    CONTROL: How do we ensure arrival?

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    Strategy Development Process

    Corporate Mission

    What Businesses are we in?What businesses can we be in?What businesses should we be in?

    Marketing Strategy Market Penetration Market Development Product Development Diversification

    Strategic Direction Cost Leadership eren a on Focus

    Market Positioning Segmentation Strategy Marketing Mix Strategy

    Corporate Mission Statement

    A mission statement should:

    be specific to have an impact on every individual in the business be focused on customer need satisfaction reflect the distinctive competence of the business recognize opportunities & threats in competitive environment be realistic and attainable be flexible

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    Strategic Window

    s s

    a r k e t A t t r a c t

    i v e n

    Strategy

    M

    Business Position

    Marketing Assets

    Marketing Knowledge (skills, systems and information) Brands (strong brands often earn premium prices and can

    be enduring cash generators) Customer Loyalty (loyal customers buy more, are cheaper

    to serve, are less price sensitive and refer new customers) Strategic Relationships (channel partners provide access to

    new products and markets)

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    Investment in Marketing Assets

    Whilst accountants do not measure intangible assets, the discrepancybetween market and book values shows that investors do.

    Expenditures to develop marketing assets make sense if the sum of thediscounted cash flow they generate is positive.

    Marketing Assets in Balance SheetAssets Liabilities

    - Land- Buildings- Plant

    - Shares- Loans- Overdrafts

    Assets Liabilities

    - Land- Buildings- Plant

    - Shares- Loans- Overdrafts

    - Vehiclesetc.

    etc.

    Rs. 200 million Rs. 200 million

    - Vehiclesetc.

    etc.

    Rs. 200 million Rs. 1000 million

    Assets LiabilitiesMarketing Assets - an

    - Buildings- Plant- Vehicles- Goodwill

    - Shares- Loans- Overdrafts

    etc.

    Rs. 1000 million Rs. 1000 million

    Distribution Network Customer Loyalty Market Share Supplier Relationship Customer Relationship Technology Base

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    Identifying Opportunities

    MarketAnalysisLong-term trends, size, etc .

    CustomerAnalysis

    CompetitiveAnalysis

    Environmental

    Segments, buying processes, etc .

    Relative strengths & weaknesses, etc .

    Opportunities & treats, etc .Analysis

    Identify Market

    Opportunities

    Asset Base Appraisal

    Market AnalysisSize (Value, Volume): What is the market we serve?

    Growth: Annual growth rate of the market, past history and future.

    Diversity: Is the market served by few or many offerings?Is the market fragmented?

    Channels: What is the upstream and downstream channel of distribution and supply? Where does the relative power lie?What is the strength of buyers and the strength of customers?

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    Customer Analysis

    Segmentation: Most markets are subdivided into smaller sectors based ondifferences between customers, either by their characteristics or by the waythey respond to market stimuli.

    Buyer behaviour: Who are the customers and who are the consumers?What are the important buying criteria? Who makes the decisions? What arethe primary motivations for purchase? What are the principal benefits soughtfrom the product?

    Sensitivity: How does the market react to price, to promotion, to service, toproduct quality etc. This information is necessary to understand the customersensitivity to the individual elements of the marketing mix.

    Competitive AnalysisPotentialEntrants

    Threat of new entrants

    Barriers to entry economies of scale product differentiation capital requirement switching costs access to distribution channels cost disadvantages addition to scale government policy

    Industry Competitors

    Suppliers BuyersBargaining Power Bargaining Power

    Powerful if large proportion of sellers sales large proportion of buyers costs

    undifferentiated products

    Powerful if few suppliers no substitutes

    y experience

    Intense rivalry if: numerous or similar sized competitors slow industry growth rate high fixed costs lack of differentiation diverse nature of competitors high strategic stakes high exit barriers

    SubstitutesThreat of substituteProducts/Services

    low buyer switching costs threat of backward integration sellers product not important to

    quality of buyers product.

    yof supplier group

    supplier groups products aredifferentiated

    threat of forward integration

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    Environmental AnalysisGovernment: The legislative and regulatory framework within whichthe company operates affects most marketing decisions either directly or indirectly.Price controls, quality standards, advertising standards, competition policy willaffect the business.

    Economy: Every business will have linkages with broader macro-economy.Interest rates impact not only costs but customers ability to buy. Exchange ratefluctuations have similar impact. Inflation, unemployment, taxation etc. are partof macroeconomic environment and must be considered while strategy development.

    Society: Consumer movements on ecology, pollution, quality and service issues haveconsiderable impact on the companys business strategy and therefore must notbe ignored.

    Technology: Rapid changes in technology is leading to shorter product life-cyclesand higher risks of failure. It is important to anticipate technology changes

    to suitably modify companys marketing strategy.

    Framework of Marketing-Conceptions

    Nature of the three levels:

    Objectives

    Strategies

    Increasingoperationalmeaning

    Philosophy

    Structure

    MixProcess

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    Marketing ConceptionsConception Level Visual Equivalent

    1. Marketing-Objectives Place : Where do we want to go?

    2. Marketing-Strategies Way : How do we get there?

    3. Marketing-Mix Transport function : What do we have to do?

    Environmental & Company AnalysisAnalysis of Environment

    CompanyAnalysis

    Where are we now?

    Objectives

    Merging

    Crystallization Point

    Where do we want to go?

    Strategies

    Mix

    How do we get there?

    What do we have to do?

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    Marketing Conception Analysis Steps

    1. Situation analysis (internal external)

    2. Future developments the analysis of the company'senvironment

    3. Chance-risk-analysis : end of the strategic analyzingprocess, point of crystallization