Download Marketing Strategies File

Marketing Strategies
• This section considers the development of
marketing strategies for larger businesses
through a scientific approach to decision
making. It builds upon AS Marketing materials
Understanding Marketing Objectives
Students should be able to:
assess internal and external influences on
marketing objectives
AQA:
• Internal influences on marketing should
include finance, HR, operational issues and
corporate objectives. External influences
should include competitors' actions, market
factors and technological change
Marketing objectives
• Defined as: marketing ‘goals’ that the business
must achieve in order to meet its wider
business objectives
Welcome Marketing Director of
Facebook
• We welcome you today with your fresh, new,
innovative ideas for our social media platform.
• In the next 5 minutes can you present to the
rest of the board your marketing objectives for
Facebook’s future.
LA fitness
• Using business models evaluate their strategy
of moving up market.
• Use financial data to support your views
• Explain the internal and external factors that
might affect the marketing objectives of the
business ( 12 marks)
Marketing objectives
Main ones for most businesses tend to be:
1. Growth in market share
2. Clearer product differentiation
3. Long term brand value to customers
4. Creating and launching new products /
services – ‘Innovation’
Objectives into marketing targets
• Going from big picture into smaller pictures
• Targets are ‘milestones’ on the road to achieving the
objectives
• Targets are usually short and medium term
Limitations on objectives
• There are always barriers to achieving
objectives
• Some internal – e.g. available resources
• Some external – e.g. changing market with
competitor actions
• These may prevent all or some of the
objectives being achieved
External factors
Internal factors
 Marketing & decisions over other objectives
 Finance available
 Skills & ability of workforce
 Capabilities of plant, equipment
• To create an effective marketing strategy you
need to have clear objectives – it will probably
fail without them!
• Objectives are different to strategy
In 2 groups
• Facebook want to expand their user base and as
marketing director you have to help this vision
occur. Mark Zuckerberg has asked you compile a
proposal for the marketing element of this
corporate objective.
• Can you decide what their marketing objectives
would be?
• How are the internal and external factors going to
impact on these marketing objectives?
• Do you have any strategies for achieving these
objectives and over come the internal and
external factors?
Activity
•
•
•
•
Peter has started a self defence class.
He has a marketing budget of £ 100
He has decided to spend £ 80 on leaflets
He is confident that his business will be a
success. Do you agree?
Task for the lesson (Q3)
• Amina believes that a significant marketing
budget would be necessary for her marketing
plan to achieve its objectives.
• To what extent do you agree with this view?
• OPINIONS??
• Relevant answers might include the
following:
• A marketing budget is the amount of money
allocated for the marketing strategy.
Possible themes for application:
•
•
•
•
•
•
•
the business is repositioning itself and needs to create
awareness of its new strategy
it is up against strong competitors, such as the online
retailers and supermarkets
it is targeting the 15–24 year old market (rather than the
25–34 year old market)
there are 300 music stores that will require a new store
format
potential operational issues with the new warehouse and
distribution centre
potential HR issues resulting from the store closures and
centralisation
worsening ROCE and acid test figures.
Possible lines of analysis:
• There are many chains of argument that can be
used. Some examples are:
• competitors have an established reputation and
large marketing budgets
• effective market research is essential
• operational issues could result in inventory and
distribution problems
• HR issues could result in poor customer service
• financial issues could affect the funds available
for the marketing budget.
Points for Evaluation might include:
•
•
•
•
•
a recognition that the budget is only one
element of a successful marketing plan
it is not the size of the budget but how
effectively it is spent
the actual product/service is key
ultimately, it is the reaction of the target
market that will determine whether or not the
marketing plan has achieved its objectives.
Marketing budgets
• A marketing budget is an estimate of
projected costs to market your products or
services. A typical marketing budget will take
into account all marketing costs e.g. marketing
communications, salaries for marketing
managers, cost of office space etc
• Marketing Budget – A marketing budget sets
out the costs and revenues that are allocated
to the marketing department. The marketing
budget will influence the promotional tools
that a business is able to utilise.
Number of companies increasing
marketing budgets hits 13-year high
• Net balance of 12.3% of companies said they
spent more in the third quarter, according to
IPA's Bellwether report
the number of companies increasing
marketing budgets hit a 13-year high
• The report indicates that the UK economy is on
the rise again," said Paul Bainsfair, director
general of the Institute of Practitioners in
Advertising. "This optimism will send a continued
upbeat message to the advertising industry and
the wider economy".
• The report confirms a swell of optimism being felt
across the industry with ITV, the UK's biggest
free-to-air commercial broadcaster, hitting a new
record high share price of 192p
Marketers waste 20% to 30% of their
budgets, says efficiency expert
• on average 20% to 30% of overall marketing
spend is frittered away through overplanning,
overpaying, and non-value-added activities.
The top 25 CPG companies spend about $50
billion annually on global marketing, so their
total marketing waste is roughly $10 billion to
$15 billion
Factors affecting the size of marketing
budgets
the amount of finance available.
• The amount of money and finance that is
available for the whole business will clearly
affect the amount of planned expenditure
within each department. The biggest source of
expenditure within the marketing department
is often the promotional campaigns.
previous years' budgets
• Some businesses will set the forthcoming
year's marketing budget based on last year's
figures, including a small percentage change in
each category.
Based on the budgets of competitors.
• In very competitive industries (such as
supermarkets) the amount spent on
advertising and other promotional campaigns
may be in relation to that spent by your main
rivals.
Based on the sales levels from
previous years.
• It may be the case that a business will use a
set percentage of last year's sales revenue
figure for its budgetary expenditure figure for
the forthcoming year.
the expected size of the product
portfolio this year.
• If a business is planning to expand its product
portfolio this forthcoming year, then the
marketing expenditure budget will probably
need to be set at a significantly higher level to
reflect the extra money spent on the launch
and advertising of the new products
Starter: consider the following adverts.
Explain the use of colour in each.
Analysing Markets
•
•
•
•
•
Explain the reasons for market analysis
Assess the value of market analysis
Analyse market data and trends
Use correlation to analyse markets
Discuss the difficulties in analysing
marketing data.
Analysing Markets
• Reasons for analysing markets should include
gathering evidence for devising a new
strategy, identifying significant patterns in
sales.
• Students should be familiar with moving
averages, test markets and extrapolation as
methods of measuring and forecasting sales.
Students should understand how correlation
can be used in analysing markets.
Analysing Markets and Marketing
• * reasons for, and the value of, market analysis
* methods of analysing trends
* the use of information technology in
analysing markets
* difficulties in analysing marketing data
• marketing is about identifying, anticipating
and satisfying customers needs and
wants.
• this should also fit with the corporate
objectives. To have a good understanding
of customers, firms use primary and
secondary market research, practical
experience and a detailed market analysis.
The size of the market
• can be measured in terms of value- How
much is spent in the market as a whole (by
all companies operating in the market) and
by volume? How many items are sold?
These statistics may be available from the
Office for National Statistics at
www.statistics.gov.uk and are important
because a firm must be sure that the
market is big enough to be worth
competing in.
Growth in the market
• is also important as it gives an indication
of future activity and potential profits. For
example in 2007 www.greencarsite.co.uk
announced that sales of hybrid cars in the
UK had doubled in the previous 12
months, making cleaner cars the fastest
growing sector in the industry, Year-to-date
results for the hybrid market showed an
increase in sales from 3,117 to 6,568 carsor 11%
Is the market divided into
segments
• so that easily identifiable groups of
consumers with similar wants and needs
can be targeted?
• Gathering evidence for devising a new
strategy- It might be that an existing
marketing strategy has to be changed.
This could be because the corporate
objectives have changed as a result of a
takeover or merger, leading to new
marketing objectives. It could also be
because of changes in competition
behaviour, technological developments or
market conditions.
• Identifying patterns in sales: This is a
process where past and current trends are
used as the basis for making predications
about future sales. Businesses try to
identify the underlining trend, whether this
is upwards, downward or constant. This
information can then be used as part of
the strategic decision-making
Selecting Marketing Strategies
•
* low cost versus differentiation
* market penetration
* product development and market
development strategies
•
Diversification
assessing effectiveness of marketing
strategies
Marketing strategies
• This section considers the development of
marketing strategies for larger businesses
through a scientific approach to decision
making. It builds upon AS Marketing materials
Selecting Marketing Strategies
• Marketing strategy is defined as a process
that can allow an organization to concentrate
its resources on the optimal opportunities
with the goals of increasing sales and profits
• Marketing strategy includes all basic and longterm activities in the field of marketing that
deal with the analysis of the strategic initial
situation of a company and the formulation,
evaluation and selection of market-oriented
strategies and therefore contribute to the
goals of the company and its marketing
objectives
What should a marketing strategy
achieve?
• strategy will depend on where you want your business
to go - it forms part of the overall business aims.
• The following are examples of what your overall
business aim might be, and marketing strategies that
you could use to achieve it:
–
–
–
–
–
–
Increase sales
Bring in new customers
Get existing customers to buy more
Introduce a new product or service
Increase market share
Better establish your brand
What should a strategy achieve?
– Improve customer loyalty
– Launch an advertising campaign
– Launch a PR campaign
– Encourage word of mouth
– Increase market share
– Retain existing profitable customers
– Make customers feel more valued
– Offer existing customers exclusive offers
– Ensure business stays fresh and new
How to develop a marketing strategy
• Research. You need to carry out detailed analyses of these
three areas:
• Market analysis: the size of your market, how quickly its
growing, your customers and their spending and lifestyle
habits.
• Competitor analysis: monitor both direct and indirect
competition and how they compare with you on every
aspect of sales and marketing (their customers, their brand,
price, convenience of location, sales channels, and so on).
• Company analysis: your overall business objectives, how
you are going to achieve them, your strengths and
weaknesses and those of your products or services
example
• Customers. Next you need to identify your target
customers, using the information you've gathered from
your research and, if needed, more detailed customer
research. Then you have to:
• Segment them: split your existing and target customers into
groups, according to what they need from your business which will differ. Some will want cost-effectiveness, some
quality, some great customer service, and so on.
• Positioning: how you compare to your competitors for each
of your customer segments - are you the fastest, do you
have the best customer service, are you the third most
popular, and so on.
example
• Product. Now you need to examine your product or service
with the aim of working out how you're going to market it
and outdo competitors, according to its:
• USPs: what it can offer that no other product or business
can.
• Benefits to the customer: From your USPs, draw out what
benefits your product or service offers to the customer.
These may well vary between your various customer
segments. You need to look very closely at what the
customer actually sees: while Starbucks sells coffee, the
benefit to the customer is a place to relax and have a chat
with a friend or a place to sit with a laptop.
A new range of Pies!
• Product
• USP
• Customer benefits
starter
• 1. Who devised the 5 forces model?
• 2. What are the 5 forces?
• 3. Which of the 5 forces has the most impact
on Starbucks, Tesco and Evian?
Ansoff
Market Penetration
• Lesson Objectives
To define market penetration
To understand how market penetration as a
strategy works
To analyse the effectiveness of this strategy.
Market Penetration
• Definition
When a firm increases the sales of its current
products to existing customers or attracts new
customers from its competitors in the market.
Market penetration strategy aims to increase
the sales of current products to existing
customers to entice consumers away from
competing brands.
• The following slides show examples of way
businesses and brands can try and penetrate
the market. Selling the same product to the
same people, but increase their sales revenue
by selling more.
Market Penetration Strategy Involves:
•
Reducing prices to encourage customers to
buy more or entice consumers from other
brands in the market.
Increasing promotional spending to remind
customers about the product range.
Launching a loyalty scheme.
Developing and Implementing
Marketing Plans
learning objectives:
components of marketing plans
assessing internal and external influences on
marketing plans issues in implementing
marketing plans.
• Increasing the activity of the sales force.
Making small changes to the products on
offer, for example a greater range of sizes or
different levels of services.
Giving customers a greater range of buying
options by increasing the places from which
the product can be purchased.
Risk of Strategy
•
This is the lowest risk strategy, because the
business has experience of the market and
should know the characteristics of the
customers very well. However, if the market
is large, assuming that customers share
similar characteristics and will all respond in
the same way, it may be dangerous. The
existence of up-to-date market research will
be invaluable.
LA fitness Analytical exercise 10 mins
• LA Fitness are worried about increased
competition and a decline in sales growth.
• They have asked you to list as many ideas as
possible to develop their product range.
• Identify the one you think will be the most
successful and list the arguments for and
against your idea
Marketing strategies
• Ansoff
• Porter
• Blue Ocean
Blue Ocean
• Blue Ocean Strategy is a business strategy
book first published in 2005 and written by W.
Chan Kim and Renée Mauborgne.
(it is not in the book)
• The model illustrates the best organizational
strategy to generate growth and profits.
• Blue Ocean Strategy suggests that an
organization should create new demand in an
uncontested market space, or a "Blue Ocean",
rather than compete head-to-head with other
suppliers in an existing industry
The metaphor of red and blue oceans
describes the market universe
Red oceans
• represent all the industries in existence today
– the known market space. In the red oceans,
industry boundaries are defined and accepted,
and the competitive rules of the game are
known.
Red Oceans
• Here companies try to outperform their rivals
to grab a greater share of product or service
demand. As the market space gets crowded,
prospects for profits and growth are reduced.
Products become commodities or niche, and
cutthroat competition turns the ocean bloody;
hence, the term red oceans
Red Ocean
•
•
•
•
Compete in existing market space
Beat the competition
Exploit existing demand
Make the value-cost tradeoff (create greater
value to customers at a higher cost or create
reasonable value at a lower cost -
Blue oceans
• are all the industries not in existence today –
the unknown market space, untainted by
competition.
Blue Oceans
• In blue oceans, demand is created rather than
fought over. There is ample opportunity for
growth that is both profitable and rapid. In
blue oceans, competition is irrelevant because
the rules of the game are waiting to be set.
Blue ocean is an analogy to describe the
wider, deeper potential of market space that is
not yet explored
Blue Ocean
•
•
•
•
•
Create uncontested market space
Make the competition irrelevant
Focus on non-customers
Create and capture new demand
Break the value-cost tradeoff (Seek greater
value to customers and low cost
simultaneously)
• There are three tiers of noncustomers that can
be transformed into customers. They differ in
their relative distance from your market. The
first tier of customers minimally buy an
industry’s offering out of necessity. The
second tier of noncustomers refuse to use
your industries offerings. The third tier are
noncustomers who have never thought of
your market’s offerings as an option.
• The cornerstone of Blue Ocean Strategy is
'Value Innovation'. A blue ocean is created
when a company achieves value innovation
that creates value simultaneously for both the
buyer and the company.
• The innovation (in product, service, or
delivery) must raise and create value for the
market, while simultaneously reducing or
eliminating features or services that are less
valued by the current or future market.
• The authors criticize Michael Porter's idea that
successful businesses are either low-cost
providers or niche-players. Instead, they
propose finding value that crosses
conventional market segmentation and
offering value and lower cost.
Some examples of companies that may
have created new market spaces
• Cirque du Soleil: Blending of opera and ballet
with circus format while eliminating star
performer and animals;
• Netjets: fractional jet ownership;
• Southwest Airlines: offering flexibility of bus
travel at the speed of air travel using secondary
airports;
• Curves: redefining market boundaries between
health clubs and home exercise programs for
women;
• Dyson: Cyclonic Vacuum Cleaners.
Criticism
• at the present there are few success stories of companies
that applied their theories in advance. One success story
that does exist is Nintendo, who first applied the Blue
Ocean Strategy to create the Nintendo DS handheld game
system which was the first portable gaming system to offer
dual screen gaming and a touch screen in 2004. In 2006,
Nintendo released the Wii, which redefined how video
games are played by. The 3DS is Nintendo's third endeavour
for its blue ocean strategy. Its first two attempts, the
Nintendo DS and Wii, were wildly successful, becoming
some of the biggest selling platforms in history. Nintendo
revealed their Blue Ocean Strategy during an E3 press
conference during the hype build-up of the Wii.
• Ansoff's matrix should be used to assess
marketing strategies in a national and an
international context. Marketing strategies
should consider the methods, risks and
benefits involved in entering international
markets
Ansoff
The Ansoff Growth matrix
• is a marketing planning tool that helps a business
determine its product and market growth strategy.
• Ansoff’s product/market growth matrix suggests that a
business’ attempts to grow depend on whether it
markets new or existing products in new or existing
markets.
The output from the Ansoff product/market matrix is a
series of suggested growth strategies which set the
direction for the business strategy.
•
•
Opportunity = the matrix provides not only
the opportunity to expand on an existing
market but one can also explore the possibility
to withdraw from the market or find new
markets.
• Risk = each strategy will have a different risk
level. This risk increases proportionally with
the level of change. Diversifying is more risky
than increasing the penetration of a product
on an existing market.
Example
Example orangina
Market penetration is
• where the business focuses on selling existing
products into existing markets.
• Maintain or increase the market share of
current products
• Restructure a mature market by driving out
competitors; Increase usage by existing
customers – for example by introducing
loyalty schemes
A market penetration
• The business is focusing on markets and
products it knows well. It is likely to have good
information on competitors and on customer
needs. It is unlikely, therefore, that this
strategy will require much investment in new
market research.
Market Development
• Lesson Objectives
To understand the concept of market
development
To apply market development to a variety of
real life compnaies that operate and use this
strategy.
To assess and analyse the strengths and
weaknesses of this marketing strategy.
• Definition
Market Development: finding new markets for
existing products either by selling abroad or
by identifying a new segment of the domestic
market.
Market development
a growth strategy where the business seeks to sell its
existing products into new markets.
• New geographical markets; for example exporting the
product to a new country
• New product dimensions or packaging: for example
• New distribution channels (e.g. moving from selling via
retail to selling using e-commerce and mail order)
• Different pricing policies to attract different customers
or create new market segments
Market development
• Market development is a more risky strategy
than market penetration because of the
targeting of new markets.
Product development
• This involves developing new products for
existing markets. Product development
involves thinking about how new products can
meet customer needs more closely and
outperform the products of competitors.
• Definition:
Product Development: offering new and
improved products to existing markets.
Characteristics of Product
Development.
•
Higher risk strategy which involves selling new
products to existing customers.
Note that product development refers to
significantly new product line, not minor
changes to an existing product.
• Strategy looks favourable, because it might
allow the company to utilise excess
production capacity, respond to a new
product launch from a competitor, maintain
the company’s reputation as a product
innovator, exploit new technology or protect
overall market share.
Diversification
• where a business markets new products in
new markets.
• This is an inherently more risk strategy
because the business is moving into markets
in which it has little or no experience.
• A diversification strategy is the most likely
risky option because it involves the firm
moving into new markets with new products,
which may or not be related to existing
products and markets. There is often little
opportunity to use existing expertise or
achieve significant economies of scale in the
short term.
• Related, because it is some form of forward,
backward or horizontal integration- the firm
becomes involved in the activities of its
customers, suppliers or competitors.
Unrelated, the highest risk strategy- because the
business has no experience or detailed
knowledge of the key success factors in the
market, although there is evidence that it can
lead to the fastest growth.
Strategies might include:
•
A new technology developed by the R&D
department of the business or bought from an
inventor- if there is evidence of significant
potential, the risk is reduced.
Buying an existing business in a completely
different market- if the acquisition is
successful, then the risk is reduced.
• http://www.youtube.com/watch?v=Soi3s98CFA&feature=player_embedded
• See 40 years of virgin
Example
Porter: 5 Forces Model