Mark 4322 Final - Wallman

First principles of Marketing Strategy

Listen to your customer, win with strength, do your duty, change the rules, weigh the pros and cons

Strategic Transaction

Change the rules for transacting

Rooted in unexpected success

Change the way transactions are constructed

Six questions for marketing yourself:

What are my strengths?

What are my values?

How do I perform?

Where do I belong?

What do I contribute?

What relationship am I responsible for?

What are my strengths? (Example)

Feedback analysis

Duty List

What are my values? (Example)

Decision analysis model

How do I perform? (Example)

Context analysis

What relationships am I responsible for? (Example)

Trust and communication

Feedback analysis

Write down your expectations when you make a decision, compare it to the actual results.

Context analysis

Discovering how you perform, what type of environment you do well in (alone, in a group, observing others).

Value analysis

Discovering your values based on decision modeling

"pros and cons"

Drucker's Five Managerial Questions for Making a Strategy

What is my mission?

Who is my customer?

What does my customer value?

What are the results we seek?

What is my plan?

Components of a Mission Statement

Why do you do what you do?:

What is your purpose?

Who do you serve?

How do you serve them?

Components of a Mission Statement - What is your purpose?

Needs

Components of a Mission Statement - Who do you serve?

Markets

Components of a Mission Statement - How do you serve them?

Technologies

First Three Rules of Marketing Strategy

Niche

Position

Narrow

Segmentation

A group that responds homogeneously to marketing strategy variables. "Who is my customer"?

Positioning

"Why should they transact with me?"

Dimensions of strategy

Creating value, handling imitation and shaping a perimeter.

This is a complicated way of saying that every market or niche of a product has it's own "dimension" involving the value of the product, the competition, and the perimeter of the market itself.

Executives define markets using...

dimensions of strategy (essentially, a niche or market). These dimensions are often in conflict, due to competitors also creating dimensions (competition between niches/markets).

Top two criteria for positioning a dimension

1. Benefits the customer and is relative to consumer decision-making
2. Beats or differs from the competitor.

Two questions on gap analysis

1. Is the gap real?

2. Is there a demand for action?

What is gap analysis?

The difference between the current state and the desired future state. Identifies what needs to be done in a project.

Three policies for making the future:

1. Preventative Care

2. Continuous Improvement

3. Exploiting Success

Preventative Care

Continuously analyze and evaluate assets to only keep what is beneficial for future success (trim the fat).

Must abandon yesterday to free up tomorrow.

Continuous Improvement

Most dependable means for driving change.

Improvement for the customers.

Exploiting Success

Low risk -- Starve the problem, feed the success

Seven Sources of Innovation

1. Unexpected success
2. Incongruity
3. Acquire new knowledge
4. Changing moods/meaning
5. Note unexpected market changes
6. Identify process opportunities
7. Take advantage of demographics

Incongruity

When the way things are differ from the way things ought to be.

Note unexpected market changes

Exploit rapid market expansion.

Take advantage of demographics

Easiest to predict, we have lots of data.

Conditions for valid linear decision model:

Satisfaction
Attributes
Independence
Linearity
Scale
(SAILS)

Satisfaction

Is the decision maker satisfied with the decision suggested by the model?

Attributes

Can you decide without any attribute (points listed)?

Independence

Is there any "double counting"? If so, eliminate it.

Linearity

Is "more" better for a pro? Is "less" better for a con?

Scale

Do all attribute scores add up to 100 (or is there scale invariance)?

Peter Drucker Strategy

Create customers

Drucker's four ways to grow

1) Market Penetration
2) Market Development
3) Product Development
4) Diversification

Market Penetration

existing product, existing market

Market development

existing product, new market

Product development

new product, existing market

Diversification

new product, new market

Brad Gale's Strategy

Create customer value

Drucker's ways to create customers:

a. "Four ways to grow"
b. Strategies that create customers
c. Marketing - today and tomorrow

Gale's ways to create customer value:

a. Create and develop strategies that create customer value
b. Limitations - Causality - Value is hard to measure

Michael Porter's Strategy

Industrial Organization Approach

Porter's Approach to Industrial Organization

Develop and implement strategies that position the firm economically in its environment. E.g. how to reduce costs or add value.

Limitation to Porter's Approach to Industrial Organization

Top down view from industry down to the customer; therefore, not customer focused at all.

Alfred Rappaport's Strategy

Shareholder Value Approach

Rappaport's Shareholder Value Approach

Develop shareholder value

Rappaport's Develop Shareholder Value Approach Limitations

Not customer focused.

Everything is based on cash.

MPQ

Market-perceived quality

Market perceived quality

How does the market rate the quality of your goods or firm?

Which strategy does MPQ go with?

Goes with Gale's Customer Value approach that the customer is sovereign. Companies succeed when they provide superior customer value over their competitors. E.g. Chick-fil-A

PIMS model

Profit Impact of Market Strategies

Profit Impact of Market Strategies

Research that discovered a strong positive relationship between a firm's market share and product quality with its return on investment.

MPP

Market Perceived Price

Market Perceived Price

Generally accepted strategic principle.

Customer Value approach, both financial and customer data are used in evaluating performance.

Five Forces Model

1. Threat of new entrants

2. Threat of substitutes

3. Bargaining power of buyers

4. Bargaining power of suppliers

5. Current rivalry

Threat of new entrants

A measure of the degree to which barriers to entry make it easy or difficult for new companies to get started in an industry.

Threat of New Entrants examples

Undifferentiated products

Government policies not an issue

Brand not well known

Threat of Substitutes

The threat posed to a company when buyers can choose alternatives that provide the same item or service, often at attractive savings.

Threat of Substitutes Examples

Substitute is cheaper than current industry product

Substitute is better or equal in quality to existing product

Low switching costs

Bargaining power of suppliers

A measure of the influence that suppliers of parts, materials, and services to firms in an industry have on the prices of these inputs.

Bargaining Power of Suppliers Example

High supplier switching costs

Few suppliers and many buyers

Few or no substitutes

Bargaining power of buyers

The measure of the influence that customers have on a firm's prices.

Bargaining power of buyers examples

Substitutes are available or plentiful.

Buyer switching costs are low

Buyer is well-educated regarding the product

Competitive Rivalry

The ongoing set of competitive actions and competitive responses that occur among firms as they maneuver for an advantageous market position.

Competitive rivalry examples

The industry's fixed costs are high

If brand loyalty is insignificant

The products within the industry have little to no differentiation

Pmin

Minimum operating profit required to generate value for shareholders.

Shareholder value is the difference between...

after tax operating cash flow and the investment.

Triggers to sales growth

-Changes in volume
-Selling Price
-Sales mix

Sales Mix

The combination of products that make up total sales.

Selling Price

The price paid by the customer for the product.

Sales Volume

The number of items or products or services sold by a business over a period of time.

Triggers to operating profit growth

-Selling Price
-Sales mix
-Scales of economies
-Cost of efficiencies

Economy of Scale

As output increases, long-run average cost decreases.

Cost efficiency

The act of saving money by making a product or performing an activity in a better way.

How to create cash:

1. Change in cash
2. Times the operating spread
3. Times what you keep
4. On a risk-adjusted basis

Strategies to manage change

1. Use technology to advance education

2. Start the conversation about change management early in projects

3. Create and maintain a culture of embracing change

positioning map

Tool that helps marketers place products in a market by graphically illustrating consumers' perceptions of competing products within an industry.

Linear Additive Decision Model Steps:

1) List the pros and cons

2) Assign weights (must add to 100)

3) Add weights

4) Compare pros and cons

5) Evaluate

How is shareholder value created using Rapapport's shareholder value model?

1. Anticipated cash flow of strategy
2. Discounted by the cost of capital

Value Leadership Model Steps and Example

-Product
-Actor A (Consumer)
-Actor A's Value Offered (i.e., $ or loyalty)
-Actor B
-Actor B's value offered (i.e., the utility of transacting with them)

What does the first chart in the value leadership analysis show?

The typical transaction

What does the second chart in the value leadership analysis show?

The transaction innovation that changed the market (or will change the market in the future).

The key to the Eli Lily case in the lecture was...

Partnerships

Switching costs

Fixed costs buyers face when they change suppliers.

What is the Pixar film that stars a Cowboy action figure and a Spaceman action figure getting over their differences?

Toy Story

Which Pixar film stars a clown fish looking for his lost son?

Finding Nemo