Download CHAPTER 2: Marketing Strategy

Chapter 2: Marketing Strategy
Chapter Objectives
After reading this chapter, students should understand:
· The elements of a complete marketing strategy
· Developing a value proposition
· Developing a sustainable competitive advantage
· Positioning products and services
· The product life cycle and how it affects marketing strategies
Chapter Overview
This chapter provides a framework for the development of a marketing strategy, one of
the key functions of a marketing manager’s job.
Chapter Outline and Key Terms
Complete Marketing Strategy
Key Terms
· Marketing strategy
· Customer and competitive targets
· Core strategy
· Value proposition
· Product positioning
· Marketing mix
· Mission statement
The Marketing Strategy Framework (Figure 2.1, page 37)
· Objective—criterion against which success or failure are measured
· Customer targets—specific customers the marketing manager wants to buy the
product or service from
· Competitor targets—the most likely competition for that product or service
· Core strategy—includes the value proposition and product positioning
· Value proposition—most important component of the core strategy.
Summarizes how the product/service is differentiated in the market.
· Product positioning—value proposition is operationalized and represented
to the customer
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· Marketing mix—represents a set of decisions that implements the marketing
strategy. Often referred to as “The 4 P’s:” Price, Product, Place, and
Promotion.) It includes decisions about:
· Price
· Channels of distribution
· Product
· Communications
· Customer relationship management.
· Mission statement—describes in general terms the company’s major business
thrusts, customer orientation, or business philosophy.)
Illustration: Miller Brewing, Inc. (www.millercoors.com)
Miller Brewing and Coors Brewing are now MillerCoors.com
Objectives
Key Terms
· Mission statement
Keys to creating effective objectives
· Objectives should have a quantified performance standard
· Objectives should have a clear time frame
· Objectives should be stated in measurable terms
· Objectives should be ambitious enough to be challenging
Customer and Competitor Targets
Key Terms
· Target market
· Market penetration
· Market development strategy
· Value proposition
· Differentiation
Target market—group of customers or segment on which the marketing manager
has decided to focus a marketing strategy. There are strategic alternatives to
segment a market (Figure 2.2, page 32).
Strategic alternatives include:
· Market penetration strategy
· Targets own customers
· Can also target competitor’s customers
· Market development strategy
· Targets customers in existing targeted segments
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· Targets new segments
Illustrations: Wii (www.nintendo.com/wii)
Grey Poupon
(http://brands.kraftfoods.com/GreyPoupon/mustards/dijon)
The core strategy: the value proposition—customer and competitor targets are
summarized and customer’s reason to buy the product or service rather than the
competitor’s is clearly stated.
The core strategy: differentiation—also called the competitive or differential advantage
· Competitive advantage—the strategic development of some basis on which
customers will choose a firm’s product or service over its competitors’
· Successful basis on which to take such advantage
· Should generate customer value
· Increased value must be perceived by customer
· Advantage should be difficult to imitate
· Three general approaches to developing competitive advantage:
· Cost- or price-based advantage (economies of scale, experience curve)
· Illustrations (page 46)
· IKEA (www.ikea.com)
· Jiffy Lube (www.jiffylube.com)
· The Vanguard Group (www.vanguard.com)
· Walmart (www.walmart.com)
· Quality-based or differentiation advantage
· Illustrations (page 48)
· Anheuser-Busch (www.anheuser-busch.com)
· Marks & Spencer (www.marksandspencer.com)
· PerkinElmer Applied Biosystems (www.perkinelmer.com)
· Oral-B (www.oralb.com)
· Sony Mavica Digital Camera (www.sony.com)
· Snap-on Tools (www.snapon.com)
· Perceived quality or brand-based advantage
· Perceptual map: Based on marketing research from customers.
Measures competing products on a variety of attributes.
(Figure 2.5)
· Brand position: Customers’ perceptions of one brand in
relations to its competitors
· Brand equity: The value of a brand name in communicating
quality or other aspects of a product
· Differential advantage—one of the three components of how a particular
product or service is better than the competition
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The core strategy: Product positioning—takes the competitive advantage and makes it
clear to the customer what the product stands for and how it different from the other
offerings in the product category.
To develop a good positioning decision, the marketer needs to know:
· What dimensions do customers use to evaluate product offerings in the
industry or category?
· How important is each in the decision process?
· How do you and the competition compare?
· What decision processes do the customers use?
Marketing Strategies over the Product Life Cycle
Product Life Cycle (PLC)—the PLC is a conceptual framework of how product or
service strategies can shift with changes in the market. Strategies used in the marketing
mix will vary over time according to stage of the product life cycle (Figure 2.7
demonstrates the S-curve shaped PLC).
PLC may have separate strategies and approaches.
The four discrete stages of the PLC
1. Introductory phase
· Product or service is new
· Sales volume may increase slowly because of lack of marketing or
customer acceptance
2. Growth phase
· Product sales are growing
· Competitors are increasing in number
· Market segmentation begins to be a key issue
3. Maturity phase
· Sales curve has flattened out
· Few new buyers in the market
4. Decline phase
· Product sales are decreasing
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Teaching Tips and Strategies from Barbara S. Faries, MBA
This chapter focuses on the basic principles of marketing strategy and common
components a student will encounter as a professional including the marketing mix,
differentiation and positioning, and the product life cycle.
Key terms and concepts
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The development of a marketing strategy
Customer and competitive targets
Marketing mix and the elements of the marketing mix
Market penetration strategy
Market development strategy
Competitive advantage
Differentiation advantage
Economies of scale
Experience curve
Differentiation
Perceptual map
Brand positioning and brand equity
Positioning/repositioning
Product life cycle and the individual phases (introductory phase, growth
phase, and maturity phase)
Suggestions
NOTE: Two recurring themes in this Instructor’s Manual will be the first two
items
· Link theory to practice
· Engage students to link work experience to the concepts
demonstrated in the text
· Instructors are encouraged to link theory to practice by finding current
examples in the corporate environment that demonstrate the key concepts
above.
· If your class contains those already working in the field, have them describe
how the concepts in theory match those in the actual workplace.
· The basis of marketing strategy is the marketing mix. It is sometimes help to
take one or several companies with which the students are familiar and have
them analyze or quickly list how the companies use the marketing mix.
· As both an undergrad and graduate instructor, I find students often struggle
with the concepts of differentiation, segmentation, targeting, and
positioning. The first and last terms are often confused. It is essential that
some time be spent to establish a clear understanding of these terms. I often
pick companies that the students might be familiar and outline each
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company’s differentiation, segmentation, targeting, and positioning
strategies. Although consumer examples are often top-of-mind, a businessto-business example is critical, as most of the students will more than likely
work in this environment.
· Another key concept for students will be “product life cycle.” Pick both
consumer and business-to-business product/service examples and have the
students discuss where those products/services are in the life cycle. Take a
single product/service and discuss how different strategies are used at
different stages. The different strategies at different stages are often
challenging for the students to grasp so an active exercise to demonstrate
these is often effective.
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Review Questions
1. Using Nintendo’s Wii as an example, discuss the Marketing Strategy
Framework:
· Objective—how will Nintendo judge its success or failure?
· Customer targets—who are the specific customers Wii wants to buy the
product?
· Competitor targets—who are the Wii’s competitors?
· Core strategy—includes the value proposition and product positioning
· Value proposition—what is the Wii’s value proposition? How does the Wii
differentiate itself in the marketplace?
· Product positioning—what is the Wii’s product positioning?
This exercise is designed to have the student think through a current product’s
marketing strategy framework. The instructor is encouraged to conduct student
discussion and keep in mind that different students may have contrary but equally
insightful answers. The classroom discussion and the student’s differing insights will
demonstrate how executives in “real-life situations” may have diverse observations
on the same or similar situation.
2. Discuss the marketing mix and its components. How does the Wii use the
marketing mix?
Have the students work through the Wii’s use of the marketing mix including the
product, place (distribution), pricing, and promotional strategies.
3. What are differentiation, positioning, and targeting (segmentation)? Pick one of
the following companies and describe their differential, positioning, and
targeting strategies: Walmart, IKEA, Anheuser-Busch, Southwest Airlines, or
Apple.
This exercise is designed to assist students in seeing how companies are currently
using these strategies.
4. Describe each stage of the product life cycle. Select a representative product or
service that exemplifies each of the stages.
WD-40 is often an interesting example to use in this exercise since it is produced by a
company that essentially has one product and has “reinvented itself” over time.
(Background articles include: The Wall Street Journal, May 23, 2006. Article
discusses product life cycle management, marketing strategy, branding, and rebranding.)
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The instructor may also choose to use the Wii as an example. Clearly, the product is
currently in a growth phase, but ask the students to envision how Nintendo might
change the strategy in the growth or decline phases? Have the students discuss how
the product may be repositioned to extend product life.
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