Exam 2

Strategic Planning

developing and maintaining a profitable long-term fit between the organization’s goals/capabilities and its changing market opportunities

Strategic Planning Model (4)

• define company mission

• set company objectives/goals

• design business portfolio

• plan marketing and other functional strategies

Mission Statement

• overarching goal/purpose

• how the company wants to positively affect its market or society

• must be market/consumer-oriented, NOT about product/function

• mission is translated into specific plans

Qualities of Good Mission Statements (5)

• market-oriented

• realistic

• specific

• motivating

• illustrative of distinct competencies

Setting Company Goals/Objectives

mission statement leads to detailed supporting objectives for each level of management (must be measurable)

Designing the Business Portfolio

• combination of strategic business units that has the potential of reaching objectives

• deciding which businesses to enter and exit

• deciding how much to invest

Portfolio Analysis

management evaluates and plans for the future of the products and businesses that make up the company

Strategic Business Units (SBUs)

• the businesses that make up the company

• company divisions, product lines, or single products/brands

Classifications of SBUs (BCG Matrix)

• cash cows- low growth, high market share (hold on to)

• stars- high growth, high market share (invest heavily, turn into cows)

• question marks- high growth, low market share (can turn into stars)

• dogs- low growth, low market share (cut loose)

Criticisms of BCG Matrix (3)

• limited number of variables

• ignores interrelationships between businesses

  • Disney movies are dogs

• placement in matrix depends on the definition of market

Product/Expansion Grid

*used to identify growth opportunities

• market penetration = existing products, existing markets

• market development = existing products, new markets

• product development = new products, existing markets

• diversification = new products, new markets

Market Penetration

• making more sales to current customers without changing its original products

• ex: adding new stores in current market areas

Market Development

• identifying and developing new markets for its current products

• ex: expanding into other countries

Product Development

• offering modified/new products to current markets

• ex: Starbucks starts selling Keurig pods

Diversification

• starting up or buying businesses beyond current products/markets

• ex: Starbucks creating Princi Bakery shops (artisan Italian food)

Downsizing

• exiting products, markets, or both to save money

• due to market environment changes, growing to fast, economic downturns

• allows companies to refocus on core offerings/customers

Marketing in Strategic Planning

• provides a guiding philosophy (marketing concept)

• provides critical insights (marketing intelligence)

• facilitates design/execution of market strategies

Internal Value Chain

• interlinked internal departments that carry out value-creating activities to design, produce, market, deliver, and support a firm’s products

• a value chain is only as strong as its weakest link

Value Delivery Network

network composed of the company, suppliers, distributors, and customers who partner with each other to improve the entire system’s performance in delivering customer value

Marketing Strategy

• the marketing logic by which the company aims to create customer value and achieve profitable customer relationships

• company must understand customer needs/wants through customer analysis

Market Segmentation

• dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors

• segments require separate marketing strategies/mixes

• customers within segments have similar needs and respond the same to marketing efforts

Market Targeting

• evaluating each market segment’s attractiveness and selecting one or more segments to serve

• when entering new markets, companies start with one segment, and add more if successful

Nichers

specialize in serving customer segments that major competitors overlook or ignore

Differentiation

providing the firm’s market offering with unique or special characteristics that stand out from competition

Positioning

• arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target customers

• often through taglines

• focuses on competitive advantages and differentiation

Marketing Management Functions (5)

• analysis

• planning

• organization

• implementation

• control

Analysis

• SWOT analysis- strength, weaknesses, opportunities, threats

• strengths and weaknesses = internal

• opportunities and threats = external

Planning

• choosing marketing strategies that help the company attain its strategic objectives

• every business needs a detailed marketing plan (turns strategies into an actual blueprint)

Contents of a Marketing Plan (8)

• executive summary

• current marketing situation

• SWOT analysis

• objectives/issues

• marketing strategy

• implementation plans

• budgets

• controls

Executive Summary

brief summary of the main goals of the plan

Current Marketing Situation Components (4)

• market description- defines market, major segments, customer needs, environmental factors

• product review- shows sales, prices, and margins of major products

• competition review- identifies main competitors and assesses their positions/strategies

• distribution review- evaluates sales trends/other developments in distribution channels

Objectives/Issues

states the marketing objectives of the plan and key issues that could affect them

Implementation Plans

spells out how marketing strategies will be turned into specific action programs that answer what will be done, when, who will do it, and how much it will cost

Budgets

• a projected profit-and-loss statement

• shows expected revenues, costs, and profit

• basis for materials buying, production scheduling, personnel planning, and marketing operations

Controls

• outlines what metrics will monitor progress and allow management to review results

• highlights what products aren’t meeting their goals

• uses measures of return on marketing investments

• tells us what corrective action is needed

Marketing Implementation

• turns marketing plans into actions to accomplish objectives

• both implementation and strategy are critical to success

Marketing Organization (4)

• large companies have large marketing departments led by chief marketing officers (CMO)

• functional organization- a manager for each department (sales, advertising, customer service, etc.)

• geographic organization- people assigned to specific regions

• product management organization- groups people based on firm’s products/brands

• market/customer management organization- groups people based on customer segments

Customer Management

• moving away from managing only product/brand profitability and toward managing customer profitability/equity

• manage customer engagement, experiences, and relationships instead of profits

Marketing Control (4)

• step 1- set specific marketing goals

• step 2- measure performance

• step 3- evaluate gaps between expected and actual performance

• step 4- take corrective action to close gaps

Operating Control

• checking ongoing performance against annual plan and taking corrective action when necessary

• ensures the company achieves sales, profits, and other annual goals

• determines the profitability of products, territories, markets, and channels

Strategic Control

looks at whether basic strategies match opportunities (should be reassessed periodically)

Marketing Return on Investment (ROI)

• the net return from a marketing investment divided by the costs of that investment (measures profits)

• hard to calculate (based on customer value, engagement, satisfaction, and equity, not dollars)

Marketing Dashboards

meaningful sets of strategic marketing performance measures in a single display

Geographic Segmentation

dividing the market into geographical units (nations, regions, states, countries, cities) to localize products

Demographic Segmentation

most popular segmentation that is based on variables like age, lifecycle stage, gender, income, occupation, education, religion, ethnicity, and generation

Age/Life-Cycle Stage

offering different products or using different marketing approaches based on customers’ age and stage of life (age alone doesn’t give the full picture)

Gender Segmentation

• dividing market/customers and customizing offerings based on gender

• gender has become more fluid so this segmentation is less popular

• more brands opt for gender-neutral product lines

Income Segmentation

• dividing a market into different income segments

• depending on tyour product, you will market to high-income or low-income individuals

Psychographic Segmentation

• divides buyers into different segments based on lifestyle/personality

• those in the same demographic can have very different psychographic preferences

Behavioral Segmentation

• divides buyers into segments based on their knowledge, attitudes, uses, or responses to a product

• best starting point for segmentation

• different types: occasions, benefits sought, user status, usage rate, loyalty status

Occasion Segmentation

• segmenting according to occasions when buyers get the idea to buy, make the purchase, or use the purchase

• helps firms build up product usage

• ex: Starbucks advertises PSL in the fall

Benefit Segmentation

• segmenting according to the different benefits customers seek from the product

• looks into different customers’ values and their reasons for buying

User Status

• markets can be segmented into nonusers, ex-users, potential users, first-time users, and regular users

• they want to attract target nonusers, retain regular users, reinvigorate ex-users

Usage Rate

• markets can be segmented into light, medium, and heavy users

• heavy users- small percentage of the market but high percentage of total consumption

Loyalty Status

• buyers can be loyal to brands, stores, and companies

• they can be divided into “degrees” of loyalty (completely loyal, somewhat loyal, or not loyal

• firms should work WITH loyal customers to encourage customer-generated advertising

Segmenting Business Markets

• businesses can also be segmented geographically, demographically, and behaviorally

• involves looking at customer operating characteristics and organizational purchasing approaches

• some companies serve both consumers AND other businesses

Requirements for Successful Segmentation

• measurable- size/purchasing power can be measured

• accessible- segments can be reached effectively

• substantial- segments are large enough to be profitable

• differentiable- segments are distinguishable and respond differently to marketing programs

• actionable- programs can be developed to attract the segments

3 Factors for Evaluating Segments

• size/growth- the largest segment isn’t always the most profitable

• structural attractiveness- avoid competitors, easy entry, substitutes, powerful buyers, powerful suppliers

• company objectives/resources- firms should only enter segments where they can create superior value, beat competitors, and maintain reputation

Target Market

total set of targeted buyers across all segments that a company decides to serve

3 Ways to Target Markets

• undifferentiated marketing

• micromarketing

• differentiated/concentrated marketing

Undifferentiated Marketing

• ignores segment differences and targets the market as a whole

• focuses on common needs of consumers

• appeals to the largest number of buyers with one offering

• not seen as the best strategy

Differentiated Marketing

• designing separate offerings to serve several market segments

• leads to higher production/advertising costs

• requires more research, forecasting, and planning

Concentrated Marketing

• firm goes after a large share of a smaller/specific segment

• firm develops deep knowledge of consumer needs and strong reputation within the niche

• markets more effectively and efficiently

• many nichers become mainstream competitors

Risks of Concentrated Marketing

• it’s risky to put all your energy into one segment in case it goes sour

• niching also limits growth

• larger competitors can enter the niche with more resources

Micromarketing

• tailoring products and marketing programs to suit the tastes of specific individuals and local customer segments

• see the individual in every customer

• includes hyperlocal marketing and individual marketing

Hyperlocal Marketing

• location-based targeting to consumers using digital technologies

• can drive up marketing and manufacturing costs

Individual Marketing

• tailoring products and marketing programs to the needs of individual customers (extreme micro-marketing)

• can also customize customer engagement/interactions

• new technologies are leading to more customization/bespoke goods

Factors for Choosing a Targeting Strategy (5)

• goals and resources

• nature of the product

• product’s life-cycle stage

• market variability

• competitor’s marketing strategies

Socially Responsible Target Marketing

targeted marketing with an emphasis on customers’ well-being

Product Positioning

• the way a product is defined by consumers on important attributes

• the place the product occupies in consumer’s minds relative to competitors

• marketers try and plan their positions to give their products a competitive advantage

Differentiation ad Positioning Steps (3)

• identifying a set of differentiating competitive advantages

• selecting an overall positioning strategy

• communicating and delivering the chosen positioning to the market

Identifying Competitive Advantages

• avoid empty promises

• differentiate at every customer contact point

• can differentiate the product, customer service, packaging, experiences, pricing, channels, people, brand image, logos

Selecting Competitive Advantages

• unique selling proposition- picking one attribute to tout itself as “number 1”

• choosing more than one differentiation might be necessary if competitors have similar attributes

Qualities of Differences to Promote (7)

• important

• distinctive

• superior

• communicable

• preemptive

• affordable

• profitable

Value Proposition

the full mix of benefits on which a brand is differentiated and positioned

Winning Value Propositions (5)

• more-for-more

• more-the-same

• the same for less

• less for much less

• more for less

More-for-More

• providing the most upscale product and charging a higher price for it

• gives prestige to the buyer

• invites imitators who claim the same quality at a lower price (dupes)

• don’t sell well during economic downturns

More for the Same

positioning by offering more for the same price

ex: Target is the “upscale discounter”

More for Less

• doable in the short-run for new companies

• in the long-run, offering more costs more, so prices ultimately raise

The Same for Less

• offering the same for less = offering good deals

• ex: discount stores like Walmart, Costco

Less for Much Less

consumers that can’t afford “the very best” opt for less-than-optimal performance in exchange for a lower price

ex: Aldi

Positioning Statement

statement summarizing company or brand positioning using the form:

“for (target customers) who (unsolved needs) our product is (product description) which provides (key benefits). Unlike (key competing brands) our product (points of difference).”