Market Based Management
description
Transcript of Market Based Management
Market Based Management...
100 Slides
Generic product
Expected product
Augmented product
Potential product
Core benefit
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Key Words...Customer Value – Shareholder Value – Market-based-
Strategies – Market Potential – Value Creation – Economic Benefits – Market Segmentation – Targeting
– Competitive Advantage – Industry Analysis – Prisoners Dilemma – Switch Cost – Pricing – Skimming
– Penetration – Channel Management – Push-Pull – Portfolio Analysis – Life Cycle Analysis – Market
Performance – Sales Forecast – Four P’s – Competitor Analysis – Transaction Marketing – Consumer
Behavior – Mass Customization – Cluster Theory – Value Chain – Marketing Information – Brand
Management – AIDA – Marketing Plan – SWOT – New Age Pricing – Producer/Customer Gap – Mass
Production
How to Underwhelm Customers and Shareholders
Poor Understanding of Customers and Competition
Poor Understanding of Customers and Competition
High Cost of Customer Retention and Acquisition
High Cost of Customer Retention and Acquisition
Sporadic Business Unit Profit
Sporadic Business Unit Profit
Market Share Instability
Market Share Instability
Accounting Maneuvers Drive Financial Results
Accounting Maneuvers Drive Financial Results
Excessive Customer Turnover
Excessive Customer Turnover
Me-TooCustomer Value
Me-TooCustomer Value
Pressure for Short-Run Results
Pressure for Short-Run Results
Unfocused Competitive Position
Unfocused Competitive Position
Stagnant Shareholder Value
Stagnant Shareholder Value
Marketing Knowledge and Market Orientation
Bottom HighMiddle
Marketing Knowledge
Mar
ket O
rien
tati
on S
core
(0-
100)
60
90
100
70
50
80
Business Profitability
Customer Retention
Marketing Knowledge
Market Orientation
Fundamental Market-Based Strategiesand Profitable Growth
Strategies to Grow Market
Demand
Strategies to Grow Market
Demand
Net Marketing Contribution
Market Demand
Market ShareRevenue per
CustomerVariable Cost per Customer
Strategies to Increase
Market Share
Strategies to Increase
Market Share
Strategies to Grow Customer Purchases
Strategies to Grow Customer Purchases
Strategies to Increase Marketing Efficiency
Strategies to Increase Marketing Efficiency
Strategies to Enter or Exit
Markets
Strategies to Enter or Exit
Markets
Strategies to Lower Variable Cost per
Customer
Strategies to Lower Variable Cost per
Customer
Marketing Expenses
= X -X -
Sales-Based vs. Market-BasedOrganizational Structure
Mining Marketing Unit
Mining Marketing Unit
Construction Marketing Unit
Construction Marketing Unit
End-User Market
Mining
End-User Market
Mining
Mining Dealers
Mining Dealers
Market-Based Structure
Earthmoving Equipment Division
Earthmoving Equipment Division
Direct Sales
Direct Sales
Construction Dealers
Construction Dealers
End-User Market
Construction
End-User Market
Construction
Earthmoving Equipment Division
Earthmoving Equipment Division
Sales-Based Structure
Sales OrganizationSales Organization
Dealer Sales
Dealer Sales
Mining Dealers
Mining Dealers
End-User Market
Mining and Construction
End-User Market
Mining and Construction
Maximum Market Potential andCurrent Market Demand
Maximum Number of Potential Customers
Developed Market
Current Market Demand
Current Market Demand
Not AffordableNot Affordable
Lack BenefitsLack Benefits
Unable to UseUnable to Use
Not AvailableNot Available
Not AwareNot Aware
Untapped Market
Opportunity
Customer Adoption and Market Development
Market Development
Gap
Late MajorityEarly
MajorityEarly Adopters LaggardsInnovators
Early Market Mainstream Market
Full Market Development100
%
60%
80%
20%
40%
0%
Economic Benefits and Value Creation
Amazon.com lowers purchase price with the on-line purchase of books.
Usage CostsUsage Costs
Maintenance
Costs
Maintenance
Costs
Ownership
Costs
Ownership
Costs
Disposal CostsDisposal Costs
Price PaidPrice Paid
Acquisition
Costs
Acquisition
Costs
American Hospital Supply reduces a hospital’s cost with a computerized customer order program.
Sealed Air reduces labor cost in packaging with AirCap.
Saturn lowers the cost of repair and insurance through module product design.
GE Capital works with customers to create affordable ownership.
Rohm-Haas’s Kathon MWX cuts cost of disposal of machine fluid waste in half.
Tot
al C
ost
of P
urc
has
e
Fundamental Forces That Shape Differencesin Customer Needs
Consumer Market Customer Needs
Consumer Market Customer Needs
Demographic ForcesDemographic Forces Usage BehaviorsUsage Behaviors
- Quantity- Time of Use- Personal- Social- Frequency of Use
- Age- Income- Marital Status- Education- Occupation
Lifestyle ForcesLifestyle Forces
- Attitudes- Values- Activities- Interests- Political View
Fundamental Forces That Drive Differencesin Business-to-Business Customer Needs
Business-to-Business Customer Needs
Business-to-Business Customer Needs
Firmographic ForcesFirmographic Forces Usage BehaviorsUsage Behaviors
- Application- Quantity- Time of Purchase- Frequency of Purchase- Users
- Number of Employees- Sales Volume- Number of Locations- Years in Business- Financial Situation
Business CultureBusiness Culture
- Business Sophistication- Growth Orientation- Innovativeness- Technology- Decision Making
Market Segmentationof the Small Business Market
Growth-Oriented EntrepreneursCore Business Need Ways to invest and grow
Firmographics Medium size More sophisticated Higher in education Ongoing financial plan
Purchase Behavior Products that enhance productivity High revenue per customer Willing to buy value-added solutions
Value Proposition
Solutions that help you grow your business
Cost-Focused SustainersCore Business Need Ways to continue and save
Firmographics Small in sales / employees Less sophisticated Lower in education Limited or no financial plan
Purchase Behavior Products that lower cost Low revenue per customer Confused by value-added
solutions
Value Proposition
Solutions that saves your business money
Growth-Oriented Cost-
Focused
Forces That Shape Segment Attractiveness
Segment AttractivenessSegment Attractiveness
Market GrowthMarket Growth Market AccessMarket AccessCompetitive IntensityCompetitive Intensity
- Customer Familiarity- Channel Access- Company Fit
- Market Size- Growth Rate- Market Potential
- Number Of Companies- Ease of Entry- Substitutes
Segmentation Hierarchy: Mass Market toMass Customization Strategies
Mass Market
Approach
Small Segment Strategy
Large Segment Strategy
Adjacent Segment Strategy
Niche Segment Strategy
Multi-segment Strategy
Mass Customization
Strategy
Segment ASegment A
Segment CSegment C
Segment A1Segment A1
Segment A3Segment A3
Segment A5Segment A5
Segment A2Segment A2
Segment B1Segment B1
Segment A4Segment A4
Segment B2Segment B2
Segment B3Segment B3
Segment C1Segment C1
Segment C2Segment C2Segment C2
Segment C2
Segment ASegment A
Segment BSegment B
Segment CSegment C
Segment ASegment A
Segment BSegment B
Competitive Forces That Shape Competitive Position and Profitability
Competitive Position and Profitability
Competitive Position and Profitability
Industry ForcesIndustry Forces Competitive AdvantageCompetitive AdvantageCompetitor Benchmarking
Competitor Benchmarking
- Cost Advantage- Quality Advantage- Marketing Advantage
- Market Entry/Exit- Buyer/Supplier Power- Substitutes/Rivalry
- Competitor Intelligence- Competitor Analysis- Competitive Benchmarking
Industry Analysis: Industry Forces andProfit Potential
Industry ForcesBarriers to EntryBarriers to ExitBuyer PowerSupplier PowerSubstitutesCompetitive Rivalry
UnfavorableLowHighHighHigh
ManyIntense
FavorableHighLowLowLowNoneNone
The more favorable the forces that shape a market’s competitive environment, the greater a business’s profit potential
Competitive Environment
Competitive Environment
More favorable competitive environmentLess favorable competitive environment
Unfavorable
Pro
fit
Pot
enti
al
Favorable
Performance Impact of Price Rivalry and Prisoner‘s Dilemma
Hold Price Cut Price 5%
Hold Price
Cut Price 5%
Market Share = 10%Volume = 1 million unitsPrice = $100 per unitMargin = $40 per unitTotal Cont. = $40 million
Market Share = 12%Volume = 1.2 million unitsPrice = $95 per unitMargin = $35 per unitTotal Cont. = $42 million
Market Share = 10%Volume = 1 million unitsPrice = $95 per unitMargin = $35 per unitTotal Cont. = $35 million
Market Share = 8%Volume = 800’000 unitsPrice = $100 per unitMargin = $40 per unitTotal Cont. = $32 million
Business’s Marketing Strategy
Competitor’s Marketing Strategy
Major Sources of Competitive Advantage
Competitive AdvantageCompetitive Advantage
Cost AdvantageCost Advantage Marketing AdvantageMarketing AdvantageDifferentiation Advantage
Differentiation Advantage
- Distribution- Sales Effort- Brand Awareness
- Variable Costs- Marketing Expenses- Operating Expenses
- Product Differentiation- Service Quality- Brand Reputation
Ignition Switch Cost Advantage Due to Scale and Scope Effects
Scale Effect
Cos
t p
er U
nit
Production Capacity
C1 C2
Cos
t p
er U
nit
Scope Effect
Auto-mobiles
Product Breadth
PumpsSnow Blowers
Lawn-mowers
Motor-cycles
Product-Price Position, Marketing Effort,and Market Share
Market ShareMarket Share Marketing Effort
Marketing Effort
Product Position
Product Position
Sales Force
Product BreadthPrice Physical
DistributionProduct
Differentiation
Retailing & Merchandising
Customer Support
New Products
Service Quality
Brand Image
Media Advertising
Sales Promotion
= X
Core Elements ofProduct Management Strategy
Product Management Strategies
Product Management Strategies
Product Positioning and Differentiation
Product Positioning and Differentiation
New Product Development
New Product Development
Product Line Positioning and
Extension Strategies
Product Line Positioning and
Extension Strategies
- New Product Sales- New Product Innovation- Development Process
- Low Price/Cost of Purchase- Product Differentiation- Service/Brand
- Product Line Positioning- Product Line Extensions- Product Bundling
Differentiation and Customer Value I
Product Differentiation
Product BenefitsProduct Benefits
Service BenefitsService Benefits
Brand BenefitsBrand
Benefits
Total Benefits
Total Cost
Customer Value
PricePrice
Nonprice Costs
Nonprice Costs
Service Differentiation
Product BenefitsProduct Benefits
Service BenefitsService Benefits
Brand BenefitsBrand
Benefits
Total Benefits
Total Cost
Customer Value
PricePrice
Nonprice Costs
Nonprice Costs
Brand Differentiation
Product BenefitsProduct Benefits
Service BenefitsService Benefits
Brand BenefitsBrand
Benefits
Total Benefits
Total Cost
Customer Value
PricePrice
Nonprice Costs
Nonprice Costs
Differentiation and Customer Value II
Product BenefitsProduct Benefits
Service BenefitsService Benefits
Brand BenefitsBrand
Benefits
Total Benefits Derived from Product Position
Total Cost of Obtaining These Benefits
Brand Differentiation
Service Differentiation
Product Differentiation
Customer Value
PricePrice
Transaction Costs
Transaction Costs
Low-Price Position
Lower Transaction
Costs
Pricing Differentiation and Customer Value
Customers•Need / Benefits•Price Sensitivity•Demand / Growth
Customers•Need / Benefits•Price Sensitivity•Demand / Growth
Positioning•Market Share•Differentiation•Cost / Supply
Positioning•Market Share•Differentiation•Cost / Supply
Competitors•Number / Entry•Positioning•Objectives
Competitors•Number / Entry•Positioning•Objectives
Impacts•Customer Value•Market Share•Profitability
Impacts•Customer Value•Market Share•Profitability
Market Situation
Market-Based Pricing•Economic Value Pricing•Perceived Value Pricing•Segment Pricing
Market-Based Pricing•Economic Value Pricing•Perceived Value Pricing•Segment Pricing
Cost-Based Pricing•Commodity Pricing•Cost Leader Pricing•Competitive Bid Pricing
Cost-Based Pricing•Commodity Pricing•Cost Leader Pricing•Competitive Bid Pricing
Market-Based Value Pricing
Perceived Value vs. Costs
Product BenefitsProduct Benefits
Service BenefitsService Benefits
Brand BenefitsBrand
Benefits
Relative Benefits
Relative Cost
Perceived Value
PricePrice
Nonprice Costs
Nonprice Costs
Per
cep
tion
Total Cost of Ownership
Competitor’s Product
Business’s Product
Economic Value
PricePrice
Cos
t
UseUse
MaintenanceMaintenance
AcquisitionAcquisitionAcquisitionAcquisition
PricePrice
MaintenanceMaintenance
UseUse
Price Elasticity and Performance
Price Elasticity
Price Elasticity
Unit Volume
Decrease
Unit Contribution
Increase
Sales Revenue
Increase
Unit Margin
Increase
DecreaseIncrease Decrease Decrease
Decrease
Decrease
Decrease
Increase Increase
Increase
No change No changeNo change
Inc/Dec*
Inc/Dec*
Maximum
Inelastic (<-1)
Elastic (>-1)
Unity (=-1) Hold Price
Raise Price
Lower Price
Raise Price
Lower Price
* The total contribution could increase or decrease, depending on the level of elasticity and unit margin.
Skim Pricing
Favorable ConditionsConsiderable Differentiation
Quality-Sensitive Customers
Sustainable Advantage
Few Competitors
Few Substitutes
Difficult Competitor Entry
Skim Pricing
Time
Dol
lars
per
Un
it
Price
Cost
Penetration Pricing
Favorable ConditionsNo/Limited Differentiation
Price-Sensitive Customers
No Sustainable Advantage
Many Competitors
Many Substitutes
Easy Competitor Entry
Penetration Pricing
Time
Dol
lars
per
Un
it
Price
Cost
Break-Even Volume for a Given Price Strategy
Total Revenue
Total Costs
Fixed Expenses*
* Fixed Expenses = Marketing Expenses and Other Direct Expenses
$ M
illi
ons
15
30
35
20
10
25
5
050 150100
Break-Even Volume(90,000)
200
Units Sold (‘000)
Profit Loss
Alternative Channel Systems
•Direct Channel Systems: Provide alternative direct channel and sales systems that require the business to retain ownership (title) of products sold and responsibility for delivery to customers and value-added functions desired by customers.
•Indirect Channel Systems: Provide varying degrees of sales and value-added functions while taking ownership and responsibility for delivery to target customers or other intermediaries.
•Mixed Channel Systems: Provide direct sales contact and technical support while the actual purchase is made at a channel intermediary who has taken title (ownership) of the products being sold.
Alternative Channel SystemsAlternative Channel Systems
DirectChannel Systems
DirectChannel Systems
IndirectChannel Systems
IndirectChannel Systems
MixedChannel System
MixedChannel System
Channel IntermediariesChannel Intermediaries
Target Market CustomersTarget Market Customers
Alternative Customer Channel Systems
ManufacturersManufacturers
DirectChannel Systems
DirectChannel Systems
IndirectChannel Systems
IndirectChannel Systems
Reps/AgentsReps/Agents
Customer MarketsCustomer Markets
Tele- marketing
Tele- marketing
Direct Marketing
Direct Marketing
Direct Sales
Direct Sales
On-Line MarketingOn-Line
MarketingReps/
AgentsReps/
Agents
RetailersRetailers
WholesalersWholesalers
Message Reinforcement Strategies
1
Gro
ss R
atin
g P
oint
s
50
200
250
100
0
150
Pulsing
5 9 13 17 21 25 29
Weeks
Ad
Aw
aren
ess
1
20%
80%
100%
40%
0%
60%
5 9 13 17 21 25 29
Weeks
1
Gro
ss R
atin
g P
oint
s
50
200
250
100
0
150
Heavy-Up
5 9 13 17 21 25 29
Weeks
Ad
Aw
aren
ess
1
20%
80%
100%
40%
0%
60%
5 9 13 17 21 25 29
Weeks
Push-Pull Communicationsand Customer Response
Communications MixAdvertising
Sales PromotionsCatalogs
Direct MarketingTelemarketing
Electronic MarketingPublic Relations
Customer ResponseCustomer Response
CustomerPush
CustomerPush
CustomerPull
CustomerPull
Customer Loyalty
• Commitment• Search Effectiveness
Customer Loyalty
• Commitment• Search Effectiveness
Customer Preference
•Awareness•Attraction
Customer Preference
•Awareness•Attraction
Customer Push CommunicationsCustomer Push
CommunicationsCustomer Pull
CommunicationsCustomer Pull
Communications
Distributor Push
•Merchandising•Marketing Effort
Distributor Push
•Merchandising•Marketing Effort
Market Coverage
•Availability•Stockouts
Market Coverage
•Availability•Stockouts
Strategic Market Planning Process
Business PerformanceBusiness Performance Competitive AdvantageCompetitive AdvantageMarket AttractivenessMarket Attractiveness
- Differentiation- Cost- Marketing
- Share Position- Sales Growth- Profitability
- Market Forces- Competitive Intensity- Market Access
Portfolio Analysis and Strategic Market Plan
Portfolio Analysis and Strategic Market Plan
Tactical Marketing Strategy and Performance
Plan
Tactical Marketing Strategy and Performance
Plan
Factors That Shape Market Attractiveness
Market AttractivenessMarket Attractiveness
Market ForcesMarket Forces Market AccessMarket AccessCompetitive IntensityCompetitive Intensity
- Customer Familiarity- Channel Access- Sales Requirements- Company Fit
- Market Size- Growth Rate- Buyer Power- Customer Loyalty
- Number of Competitors - Price Rivalry- Ease of Entry- Substitutes
Portfolio Analysis and Strategic Market Plans
Protect Invest to protect or hold a competitive advantage. Businesses often fail to invest in hold strategies, and the result is an erosion of competitive advantage.
Grow Invest to improve or grow competitive advantage. In an underdeveloped or emerging market, this can also mean to invest in order to grow the market, and hence, its attractiveness.
Focus Selectively narrow market focus to profitable segments or niches within a segment in order to capture profits while limiting the resources committed to this market.
Harvest Adjust prices and marketing expenses to gradually exit the market while attempting to maximize profits during this gradual exit.
Entry Invest to enter an attractive market to establish a desired competitive advantage. This strategy could also require investment to accelerate the growth of a new or underdeveloped market.
Divest Quick divestment from a market. When there are no short-term profits to be gained with a harvest strategy, an immediate exit strategy is appropriate.
Very Attractive
Mar
ket
Att
ract
iven
ess
Very Unattractive
Offensive (Entry)
Very StrongVery WeakCompetitive Advantage
Offensive (Grow)
Defensive (Divest or Harvest)
Defensive (Protect)
Defensive (Protect or Harvest)
Defensive (Divest or Harvest)
Offensive(Grow)
Defensive(Protect / Harvest)
Offensive(Grow)
Defensive(Protect / Focus)
Offensive(Grow)
Defensive(Protect / Focus)
Offensive(Grow)
Defensive(Protect)
Offensive and Defensive Strategic Market Plans
Business Performance Share Position Sales Revenue Growth Profit Performance
Business Performance Share Position Sales Revenue Growth Profit Performance
Offensive Strategic Market PlansOffensive Strategic Market Plans Defensive Strategic Market PlansDefensive Strategic Market Plans
- Penetrate or Grow Existing Markets- Enter or Develop New Markets
- Protect or Reduce Focus within Existing Markets
- Harvest or Divest Existing Markets
Product Life Cycle andOffensive and Defensive Marketing Strategies
Sal
es R
even
ue
Early Growth
Declining Market
Emerging Market
Late Growth
Mature Market
Maturing Market
Rapid Growth
Offensive
Offensive
Offensive
Offensive/ Defensive
Offensive/ Defensive
Defensive
Defensive
Offensive Strategic Market Plans
OffensiveStrategic Market Plans
OffensiveStrategic Market Plans
Market Penetration StrategiesMarket Penetration Strategies New Market Entry StrategiesNew Market Entry Strategies
- Related New Market Entry- Diversified New Market Entry- Enter New Emerging Market- Develop New Market Potential
- Grow Market Share- Grow Customer Purchases- Enter New Market Segment- Grow Market Demand
Defensive Strategic Market Plans
- Harvest Price Strategy- Harvest Resource Strategy- Divest Market Position
DefensiveStrategic Market Plans
DefensiveStrategic Market Plans
Protect Market PositionProtect Market Position Exit Market PositionExit Market Position
- Protect Market Share- Build Customer Retention- Reduced Focus
Portfolio Positions andDefensive Strategic Market Plans
Very Attractive
Mar
ket
Att
ract
iven
ess
Very Unattractive
Very StrongVery WeakCompetitive Advantage
Harvest or Divest
Protect
Protect or Harvest
Harvest or Divest
Protect or Harvest
Protect or Focus
Protect or Focus
Protect
Major Components of a Situation Analysis
Situation AnalysisSituation Analysis
Market Demand
Market Demand
Market Demand
Market Demand
Market Demand
Market Demand
Market Demand
Market Demand
Market Demand
Market Demand
- Size and Growth- Potential- Environment
- End Users- Intermediaries- Nonconsumers
- Market Share- Price / Quality- Cost / Value
- Structure- Gap Analysis- Substitutes
- Sales- Customer
satisfaction- Margins/Profit
A Customer-Based Model of Net Profits
Market Demand
(Customers)
Market Demand
(Customers)
Market Share (Percent)
Market Share (Percent)
Revenue per Customer
Revenue per Customer
Variable Cost per CustomerVariable Cost per Customer
Marketing Expenses
Marketing Expenses
Operating ExpensesOperating Expenses
Net Profits (before taxes)
Net Profits (before taxes)
Margin per Customer
Margin per Customer
Customer Volume
Customer Volume
Total Contribution
Total Contribution
Net Marketing Contribution
Net Marketing Contribution
A Customer-Based Model of Return on Assets
Accounts ReceivableAccounts
Receivable
InventoryInventory
CashCash
Plant and EquipmentPlant and
Equipment
Return on Assets
Return on Assets
Fixed ExpensesFixed Expenses
Current AssetsCurrent Assets
Total AssetsTotal Assets
Market Demand (Customers)
Market Demand (Customers)
Market Share (Percent)
Market Share (Percent)
Revenue per Customer
Revenue per Customer
Variable Cost per CustomerVariable Cost per Customer
Marketing Expenses
Marketing Expenses
Operating Expenses
Operating Expenses
Net Profits(before taxes)Net Profits
(before taxes)
Margin per Customer
Margin per Customer
Customer Volume
Customer Volume
Total Contribution
Total Contribution
Net Marketing Contribution
Net Marketing Contribution
Market, Operational and Profit Performance
Market Performance Profit PerformanceOperational Performance
=X
Market Metrics
•Market Share
•Customer Satisfaction
•Customer Retention
•Product Awareness
•Service Quality
Market Metrics
•Market Share
•Customer Satisfaction
•Customer Retention
•Product Awareness
•Service Quality
Operational Merits
• Margin (% of sales)
• Overhead (% of sales)
• Inventory Turnover
• Accts. Rec. (days outstanding)
• Capacity Utilization
Operational Merits
• Margin (% of sales)
• Overhead (% of sales)
• Inventory Turnover
• Accts. Rec. (days outstanding)
• Capacity Utilization
Profitability Merits
•Return on Assets
•Return on Equity
•Earnings per Share
•Economic Value Added
•Price-Earnings Ratio
Profitability Merits
•Return on Assets
•Return on Equity
•Earnings per Share
•Economic Value Added
•Price-Earnings Ratio
GE / McKinsey Multifactor Portfolio Matrix
INDUSTRY ATTRACTIVENESS
BU
SIN
ES
S S
TR
EN
GT
H
InvestManage
Selectively for Earnings
Invest
Invest
Manage Selectively
for Earnings
Manage Selectively
for Earnings
Harvest or Divest
Harvest or Divest
Harvest or Divest
Market Potential, Sales Potential,and Sales Forecast
Market Potential
Sales Forecast
Total Population
Sales Potential
The R&D Effort Portfolio
MARKET OPPORTUNITY
SELECTIVE EMPHASIS
LIMITED SUPPORT
HEAVY EMPHASIS
HEAVY EMPHASIS
HEAVY EMPHASIS
LIMITED SUPPORT
LIMITED SUPPORT
SELECTIVE EMPHASIS
SELECTIVE EMPHASIS
LOW HIGHMODERATE
MA
RK
ET
OP
PO
RT
UN
ITY
LO
WH
IGH
MO
DE
RA
TE
When to Use a Penetration or Skimming Strategy for Pricing New Products
Penetration Strategy
Level of Desire in Market
High
Skimming Strategy
Distinctive
Not Important
Low
Not Easy
Similar
Important
Easy
FastGradual
Importance of Price to Market
Ease of Duplicating Product
Distinctiveness from Competitive Products
Return on Investment Objective
Dimension
Strategy Decision AreasOrganized by the Four Ps
ProductProduct
•Physical good•Service•Features•Quality level•Accessories•Installation•Instructions•Warranty•Product lines•Packaging•Branding
•Physical good•Service•Features•Quality level•Accessories•Installation•Instructions•Warranty•Product lines•Packaging•Branding
PlacePlace
• Objectives• Channel type• Market exposure• Kinds of
middlemen• Kinds and
locations of stores• How to handle
transporting and storing
• Service levels• Recruiting
middleman• Managing
channels
• Objectives• Channel type• Market exposure• Kinds of middlemen
• Kinds and locations of stores
• How to handle transporting and storing
• Service levels• Recruiting middleman
• Managing channels
PromotionPromotion
• Objectives• Promotion blend• Sales people, Kind, Number Selection, Training, Motivation
• Advertising Targets, Kinds of ads, Copy thrust, Prepared by whom
• Sales promotion• Publicity
• Objectives• Promotion blend• Sales people, Kind, Number Selection, Training, Motivation
• Advertising Targets, Kinds of ads, Copy thrust, Prepared by whom
• Sales promotion• Publicity
PricePrice
• Objectives• Flexibility• Level over product life cycle
• Geographic terms• Discounts• Allowances
• Objectives• Flexibility• Level over
product life cycle• Geographic terms• Discounts• Allowances
Strategy Planning for Product
PricePrice
BrandBrand
Type of brandIndividual or family
Manufacturer or dealer
Type of brandIndividual or family
Manufacturer or dealer
ProductProduct
Physical good / serviceFeatures
Quality levelAccessoriesInstallationInstructionsWarranty
Product line
Physical good / serviceFeatures
Quality levelAccessoriesInstallationInstructionsWarranty
Product line
Product ideaProduct idea
PlacePlace PromotionPromotion
Target marketTarget market
PackagePackage
ProtectionPromotion(or both)
ProtectionPromotion(or both)
Product Classes
Consumer products
Consumer products
Convenience productsConvenience products
Unsought productsUnsought products
Specialty productsSpecialty products
Shopping productsShopping products
StaplesImpulse productsEmergency products
HomogeneousHeterogeneous
New unsoughtRegularly unsought
ProductsProducts
Professional servicesProfessional services
ComponentsComponents
Raw materialsRaw materials
AccessoriesAccessories
SuppliesSupplies
InstallationsInstallations
Industrial products
Industrial products
StaplesImpulse productsEmergency products
Farm productsNatural products
Component partsComponent materials
New-Product Development Process
Idea generation
Idea generation
ScreeningScreening
Rough ROI estimateRough ROI estimate
Idea evaluationIdea evaluation
Concept testingRough ROI verificationConcept testingRough ROI verification
DevelopmentDevelopment
R&DBuild modelTest in marketROI estimateRevise product
R&DBuild modelTest in marketROI estimateRevise product
Idea evaluationIdea evaluation
Finalize productFinalize marketing planFinal ROI estimateStart production and
marketing plan
Finalize productFinalize marketing planFinal ROI estimateStart production and
marketing plan
International Marketing Opportunities
ProductProduct
Pro
mot
ion
Pro
mot
ion
Same Adaptation New
Ad
apta
tion
Sam
e
Basically same needs, but different incomes and / or applications (street vendor with low-cost hamburgers)
Basically same needs, but different incomes and / or applications (street vendor with low-cost hamburgers)
Different needs and different incomes and / or applications (hand-powered washing machines)
Different needs and different incomes and / or applications (hand-powered washing machines)
Basically same needs and use conditions (McDonald’s strategy with beer in Germany)
Basically same needs and use conditions (McDonald’s strategy with beer in Germany)
Different needs and use conditions (clothing)
Different needs and use conditions (clothing)
Same needs and use conditions (McDonald’s usual strategy)
Same needs and use conditions (McDonald’s usual strategy)
Different needs but same use conditions (bicycles)
Different needs but same use conditions (bicycles)
Customer and Competitor Orientations
Self-centeredMinor
Market-driven
Customer-oriented
Competitor-centered
Competitor emphasis
Competitor emphasis
Major
Minor Major
Efficiency vs. Effectiveness
ThriveEfficient
Die quicklySurvive
Die slowly
Strategic management
Operational management
Inefficient
Effective Ineffective
1
43
2
Approaches to Competitor Analysis
Desk Research
Databases
Market Research
Internal Information
Industry Mapping
Building Competitive Advantage
Critical Success Factors
Special Competitor
Studies
Value Chain Analysis
Industry Analysis
Competitor Profiling
Benchmarking
Developing the Organization‘s Core Competences
Cor
e C
ompe
tenc
es
Existing New
Markets
Exi
stin
gN
ew
Extending the base
What core competences do we need to be developed so that the organization’s current position is best protected and/or extended?
Uncharted waters
What core competences need to be developed in order to compete in the new and developing markets which offer the greatest future potential?
Good housekeeping
How can better use be made of the organization’s current core competences?
Moving into new areas
What new products or services can be developed by rethinking or reallocating the existing core competences?
The Nine Price / Quality Strategies
Cheap-value strategy
Low
Price
Product quality
High
1
4
32
98
6
7
5
Premium strategy
Overcharging strategy
Exploitative strategy
Middle-of-the- road strategy
Above average value strategy
High-value strategy
Superb value strategy
Out-of-step strategy
Medium
Low HighMedium
Relationship Between Service Levels and Costs
$
Total costs
Transportation, order processing
and inventory carrying costs
Level of customer service
Cost of lost sales
Cos
t
0100%
Setting Customer Service Levels
$
Revenue from service
Distribution costs
Service level
Incr
ease
in c
osts
, sal
es
reve
nu
e or
pro
fit
0
99
Profit curve
Maximum profit
contribution
93 %
Marketing Excellence Framework
Marketing Strategy
Marketing Strategy
Sup
ply
Cha
inS
uppl
y C
hain
BrandingBranding
Quality Strategy
Quality Strategy
Customer Development
Customer Development
Product Innovation
Product Innovation
Man
ufac
turi
ngM
anuf
actu
ring
Business Performance
Business Performance
Consequences of Strategic and Tactical Implementation
Mar
ket
ing
imp
lem
enta
tion
Appropriate Inappropriate
Strategy / tactic
Pro
ofE
xcel
lent
SuccessPossible short-
term success – but ultimately failure
Trouble orfailure
Failure
The Transition to RM
Emphasis on all six market domains
Transaction marketing
Relationship marketing
Emphasis on customer market
domain
Functionally based marketing
Cross-functionally based marketing
The RM Multiple Markets Model
Customer Markets
Supplier & Alliance Markets
Internal Markets
Referral Markets
Influencer Markets
Recruitment Markets
Types of Consumer Buyer Behavior
Complex buyer behaviourMany
Habitual buyer
behaviour
Dissonance-reducing buyer
behaviour
Variety-seeking buyer
behaviour
Involvement
Differences between brands
Few
Appropriate Pricing Strategies
Op
por
tun
ity
for
valu
e en
han
cem
ent
Low
High Skimming strategy
Price leadership
‘Follow my leader’
Penetration strategy
Low High
Opportunity for cost reduction
The Expanded Marketing Mix
Product
Price
People
Processes
Place
Promotion
Customer Service
The Paradigm of Mass Production as a Dynamic System of Reinforcing Factors
New Products
Mass Production Processes
Low-Cost, Consistent Quality, Standardized Products
Homogeneous MarketStable Demand
Long Product Life Cycles
Long Product Development Cycles
R
The New Paradigm of Mass Customization as a Dynamic System Feedback Loop
New Products
Mass Customization Processes
Low-Cost, High Quality, Customized Products
Heterogeneous MarketsDemand Fragmentation
Short Product Life Cycles
Short Product Development Cycles
R
Product Technology Process Technology
R R
Six Types of Modularity for the Mass Customization of Products and Services
Component – Sharing Modularity Component-Swapping Modularity
Cut-to-Fit Modularity Mix Modularity
Bus Modularity Sectional Modularity
Product-Process Change Matrix
PRODUCT CHANGE
MASS CUSTOMIZATION INVENTION
CONTINUOUS IMPROVEMENT
MASS PRODUCTION
PROCESS CHANGE
STABLE DYNAMIC
ST
AB
LE
DY
NA
MIC
Product-Process Change Matrix:The Mass Production Axis
PROCESS CHANGE
STABLE
PRODUCT CHANGE
DYNAMIC
ST
AB
LE
DY
NA
MIC MASS
CUSTOMIZATIONINVENTION
CONTINUOUS IMPROVEMENT
MASS PRODUCTION
Mass-Customized Products: Stable Processes Producing Dynamic Flow of Products
PRODUCT 1 VOLUMES
TIME
PROCESS CAPABILITIES
PRODUCT VOLUMES
PRODUCT 3 VOLUMESPRODUCT 2
VOLUMES
PROCESS CAPABILITIES
Mass-Customized Products:Shortening Process Life Cycles
PROCESS 1 CAPABILITIE
S
TIME
PRODUCT VOLUMES
PROCESS 3 CAPABILITIE
SPROCESS 2
CAPABILITIES
ENTERPRISE
ENTERPRISE CAPABILITIES
AND RESOURCES
PROCESS CAPABILITIES
PRODUCT N VOLUMES
Product-Process Change Matrix:Virtual Enterprise Flow
MASS CUSTOMIZATION
INVENTION
CONTINUOUS IMPROVEMENT
MASS PRODUCTION
PROCESS CHANGE
STABLE
PRODUCT CHANGE
DYNAMIC
ST
AB
LE
DY
NA
MIC
Four Stages of National Competitive Development
FACTOR DRIVEN
INVESTMENT DRIVEN
INNOVATION DRIVEN
WEALTH DRIVEN
• Existing basic factors
• Abundant, cheap and unqualified labour
• Low investments
• Building general factors
• Cheap and qualified labour
• Heavy basic investments
• Building advanced factors
• Costly and highly qualified labour
• Productivity and innovation investments
• Acquired advantages
• Stagnant rate of innovation
DECLINE?
Relaunched
by the stimulation of innovation
Cluster Theory
Factor (Input) Conditions
Context for Firm
Strategy and Rivalry
Related and Supporting Industries
• Presence of capable, locally-based suppliers
• Presence of competitive related industries
• A local context that encourages appropriate forms of investment and sustained upgrading
• Vigorous competition among locally-based rivals
• Factor quality
• Factor specialization
Demand Conditions
• Sophisticated and demanding local customer(s)
• Customer needs that anticipate those elsewhere
• Unusual local demand in specialized segments that can be served globally
– natural resources– human resources– capital resources
– physical infrastructure– information infrastructure
– scientific and technological infrastructure
•Factor (input) quantity and cost
Management of Industrial Customer‘s Portfolios I
For a continuous supply case
Existing customer Prospect
Structural Attractiveness
Structural Attractiveness
Customers to be kept without over investing
Customers justifying an overinvestment
Customers to be kept with minimum investment
Customers to be examined in a selective way
Prospects to be cultivated with tenacity while expecting an opening
“hot” prospects justifying a strong investment
Prospects not to be worked on intensively
“hot” prospects justifying only a limited investment
Development possibilities Penetration possibilities
Management of Industrial Customer‘s Portfolios II
Case of discontinued supply
Structural Attractiveness
To follow up on a major customer if the deal is not too unfavourable
Major opportunity justifying a major investment
To decline and not to be followed To grasp an excellent deal if the customer is acceptable
Transaction attractiveness
The Marketing Exchange Process I
Middlemen-Wholesalers-Retailers
Many individual
Suppliers (heterogeneous supply)
Perform universal marketing functions of buying, selling, transporting, storing, marketing, information, standardization and grading, financing, and risk taking
To overcome discrepancies of quantity and assortment, and to overcome separation of space, time, information, values and ownership
To create form, time, place, and possession utility and direct the flow of need – satisfying goods and services
Too many individual
Customers (heterogeneous demand)
Facilitators
-Ad agencies-Marketing research firms-Product testing labs-Public warehouses-Transportation specialists-Financial institutions
The Marketing Exchange Process II
Raw materials
End user
Components
Finished product
Retailer
Wholesaler
Upstream exchange
Supplier
Customer
Downstream exchange
The Producer – Customer GapSpecialization and division of labour result in heterogeneous supply capabilitiesPRODUCTION SECTOR
Heterogeneous demand for form, time, place, possession utility to satisfy needs /wantsCONSUMPTION SECTOR
ScatteredMany locations
CUSTOMERS
Consumption usually not at time of production (exception: services)
Don’t know what is available from whom, where, when, what price
Value goods and services in terms of economic utility and ability to pay
Want to consume goods which they don’t own
Prefer to buy and consume in small quantities
Purchase a broad assortment
ClusteredFew locations
PRODUCERS
Time required to bring goods to market
Don’t know who needs what, where, when, what price
Value goods and services in terms of costs and competitive prices
Hold title to goods which they don’t consume
Prefer to produce and sell in large quantities
Produce a narrow assortment
SPACE
OWNERSHIP
TIME
VALUES
QUANTITY
ASSORTMENT
INFORMATIONMarketing needed to overcome
gaps
The Value Chain
Value chain of a computer manufacturer
Component suppliers
Computer manufacturer Retail outlets
End users: Individuals, Companies
Component Purchasing R & D MarketingManufac-
turingProduct Design
Make or buy?
Make or Buy
Advantages of Making
• Low costs• Better quality• Unique characteristics• Better time management• Control of proprietary
information• Etc…
Risks tied to Outsourcing
• Size, power of producer• Technical capacity of buyer• Number of transactions
involved• Etc...
Low
Low
High
High
Buy
Partnership
Make
Weak control needed
Moderate control needed
Strong control needed
Market Structure: Actual / Potential Market
Potential market (100%)
Accessible market (80%)
Qualified market (50%)
Serviced market (20%)
Total population (100%)
Actual market (2%)
Potential market (100%)
Market Segmentation Strategies
a) Product variety: no segmentation
Need Analysis
Program A
Program B
Program C
Program for Segment B
Program for Segment A
Program for Segment B
Need Analysis
Need Analysis
Program for Segment C
MARKETFIRM
FIRM
FIRM
c) Multi-segment marketing
b) Concentrated marketing
Segment B
Segment C
Segment A
Segment C
Segment B
Segment A
Factors Affecting the Choice of Target Markets
Needs / wants of
end-users
Market size / structure
Decision-maker
preferences and
corporate culture
Resources / capabilities of the firm
Firm / brand market
share, sales projections
Competitive activity
Political pressures
and lobbying
Production / marketing,
scale economies
Choice of target
markets
The Use of Marketing Information I
Marketing Information System
Environment
Target marketsDistribution channels
CompetitorsPeople
Macro-environment
Marketing Manager
AnalysisPlanningExecution
Control
Data Information
Accounting system
Market studies and research
system
Marketing models system
Accounting system
M. I. S. / M. D. S. S.
The Use of Marketing Information II
Evolution of information needs
Product orientation
Customer orientation
1960
Personalized target communication
Mass media advertising
General information
Specific information
Customized marketing
Mass marketing
Customer equity
1970
1980
1990
The Use of Marketing Information III
The Marketing Information Value Chain
Data collection and transmission
Customer filesDiary panelsPOS scanner
Data management
Data interpretation = Information
Marketing-related models
Decision Support Systems E.I.S.
DB2OracleDB3Paradox
Promoter, ADCAD
Conjoint (choice)
MDS (position)
Expert systems:SalespartnerCoverstory
Collect Organise Describe Represent Explain
Recommend
Approaches to the Study of Customer Behavior
HOMO ECONOMICUS
Rationality: revenue determines consumption level price determines consumption allocation
Unlimited needs: utility and satisfaction maximization
Perfect knowledge of needs and of products to satisfy them
Deterministic choice
Product functionality
Objective
Subjective
Product symbolism
Degree of involvement
Imperfect knowledge, stochastic choice
Limited needs: satisfiers
Irrational action: needs / wants / hopes, dreams,…
Feelings, emotions / unconscious motivations
HOMO PSYCHOLOGICUS
Group Influence on Buyer Appraisalof Product and Brand
Group influence on product category
Group influence on
product brand
Strong Weak
Strong
Weak
automobiles
cigarettes
beer,wine
clothes
furniture
watches
cellular phones
instant coffee
color TV
detergent
canned food
garbage bags
Attitude Based Decision Process:AIDA (Attention, Interest, Desire, Action)
Awareness, perception
Preference, choice
Post-purchase reaction (cognitive dissonance)
Desire
Action
Desire
Action
Attention
Interest
Attention
Interest
Purchase
Yes / No
Purchase
Yes / No
Cognitive
Affective
Conative
The 6 – Step Marketing Plan
1
2
3
budget allocation: product promotion price distribution
4
5
6
Action plan
Forecasts
Control
quantify: costs sales profits market share
organization structuremeasurement toolscheck frequency=> Corrective actions
firmmarketindustrycompetitionenvironment
Situation (SWOT)
Objectives
Strategy
salesmarket sharemarket expansionleadershipsatisfaction
segment – targetprice / qualityproduct positioningdifferentiationdiversification
Marketing Plan
Marketing Plan
SWOT Analysis I
• Market share• Key account share• Growth rate• Supply diversity• Influence• On market• Purchasing / selling
deadline• New products cycles• Negotiation power - firm suppliers - customers
STRENGTHS / WEAKNESSES
Firm, Organization
STRENGTHS / WEAKNESSES
Firm, Organization
OPPORTUNITIES / THREATS
Environment, Market, Industry
OPPORTUNITIES / THREATS
Environment, Market, Industry
• Market size• Key account size• Annual growth rate• Market diversity• Price sensitivity• Seasonality• Cycles• Negotiation power - suppliers - consumers
• Competitor types• Concentration level• Intrants / extrants• Market share evolution• Vertical / horizontal integration• Technology substitution
• Firm competitivity - Product, service - Profitability, H.R., …• Segments invested in• Firm’s integration level• High-tech vulnerability
MARKET
COMPETITION
SWOT Analysis II
• Firm margins• Economies of scale• Barriers• Production capacity level
STRENGTHS / WEAKNESSES
Firm, Organization
STRENGTHS / WEAKNESSES
Firm, Organization
OPPORTUNITIES / THREATS
Environment, Market, Industry
OPPORTUNITIES / THREATS
Environment, Market, Industry
FINANCE / BUSINESS
TECHNOLOGY
SOCIO - POLITICAL• Reactivity / Flexibility level• Adaptability• Agressiveness• Working relationships
• Attitudes / Social trends• Laws and regulations• Pressure groups• Trade union activities
• Adaptability to change• Expertise / Know-How• Patent ownership• Production technology
• Maturity / volatility• Complexity• Differentiation• Patents and copyrights• Production technology
• Global benefits• Economies of scale• Barriers• Production capacity level
Sources of Market Uncertainty
What needs might
be met by the new
technology?
Market Uncertainty
How large is the
potential
market?
How will needs
change in the
future?
How fast will the
innovation
spread?
Will the market
adopt industry
standards?
Sources of Technological Uncertainty
Will the new
product function
as promised?
Technological Uncertainty
Will new
technology make
ours obsolete?
Will the delivery
timetable be met?
Will there be side
effects of the
product or
service?
Will the vendor
give high-quality
service?
A Taxonomy of Marketing Situations Based on Technological and Market Uncertainty
Better Mousetrap Marketing
High-Fashion Marketing
Low-Tech Marketing
High-Tech Marketing
Market Uncertainty
Technological Uncertainty
High
Low
Low High
New Age Pricing
Average Unit Customer Value
Amount of Pricing Discretion
Average Unit Cost
$
Unit Volume
Performance – Based Pricing
P-BP provides more customer value through:
1. Goal alignment
2. Overpay Insurance
3. Clearer information on customer needs & objectives.
Customer Value
CostP-BP provides lower vendor cost through:
1. Goal alignment
2. Under payment insurance
3. Less wasted effort for things the customer doesn’t value.
With Performance – Based Pricing
Without Performance – Based Pricing
Cost
Customer Value
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