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Formulating Strategic Marketing Programs What are the Benefits of Strategy? Components of Strategy Statement of goals & objectives Selection of strategic alternative(s) Establish general direction of strategy Selection of customer targets Choice of competitor targets Positioning Statement of core strategy Description of supporting marketing mix Description of supporting functional programs Implement strategy Marketing goals & objectives are tied to: Organizational mission What is the organization’s reason for being? What does the firm stand for? What is the basic operating philosophy? Marketing Goals Desired general accomplishments stated in vague terms. Indicate the direction the firm is attempting to move and the set of priorities it will use in evaluating alternatives and making decisions. Should be attainable and realistic. Should be internally consistent. Should be comprehensive and help to clarify the roles of all parties in the organization. Should involve some degree of uncertainty. Goals vs. Tactics To have the largest, best-trained sales force in the industry. Hiring 100 new salespeople. Having the best recognized company in the industry. Doubling the advertising budget. Marketing Objectives Provide specific and quantitative benchmarks that can be used to gauge progress toward the achievement of the marketing goals for which they are developed. Should be attainable with a reasonable degree of effort. Should specify the time frame for their completion. Usually related to sales revenues, market share, profitability, or cash flow Examples of Objectives The marketing department will be responsible for having 40% of customers listing this financial institution as their primary financial institution within one year. The sales department will increase sales 18% during the next 2 years. Strategic Alternatives Three basic strategic directions: Growth (sales or market share) Profitability Cash flow Growth Strategies Market development strategies Attract non-users Enter new markets Attracting non-users Increase willingness to buy Demonstrate benefits of product form Develop new product forms with desired benefits Increasing ability to buy Offer lower prices or credit Provide greater availability Enter new markets Broaden distribution Product-line extension Move into new geographic markets Add channels of distribution Vertical product line extension Horizontal product line extension Expansion through acquisition or diversification Market penetration strategies Increase purchase rate of existing customers Attract competitors’ customers Increasing purchase rate Broaden usage Increase consumption levels Provide examples of additional uses of product Lower prices, special-volume packaging Improve buyers’ perceptions of product benefits Increase rate of replacement Improve benefits, e.g., convenience, lower operating costs, that encourage early replacement Attracting competitors’ customers Head-to-head competition Superior marketing effort Quality, selection, availability, brand name recognition Price-cost leadership Offer comparable quality at lower price Differentiation adding a set of meaningful and valued differences to distinguish the firm’s offering from competitors’ offerings Criteria: important distinctive superior □ preemptive □ affordable □ profitable Differentiation Variables Product Services Personnel Channel Image Form Ordering ease Competence Coverage Symbols Features Delivery Courtesy Expertise Media Performance Installation Credibility Performance Atmosphere Conformance Customer training Reliability Durability Customer consulting Responsiveness Reliability Maintenance & repair Communication Repairability Miscellaneous Style Design Package Events Profitability Strategies Maintain satisfaction Build strong customer relationships Consistent, high quality Effective customer complaint system Encourage repeat business through formal relationships Target best customers Develop complementary products Increase dependence on firm Decrease costs/increase efficiencies Increase price Decrease product offerings/emphasize selling of most profitable products Cash Flow Strategies Harvest market position Systematically increase profit margin by reducing marketing expenses to capitalize on ST performance opportunities; may sometimes be able to increase price, also Divest market position Sell firm Close down operation and sell assets Implications of Product Life Cycle on Marketing Strategy Introduction Stage Objective: Create awareness and product trial Market development Product—offer a basic product Price—charge cost-plus Distribution—selective Communications—target advertising to early adopters and dealers to increase awareness; heavy sales promotion to stimulate trial Growth Stage Objective: Maximize market share Market penetration Product—product extensions, warranties Price—decrease prices to penetrate Distribution—intensive Communications—target advertising to mass market to increase awareness; reduce sales promotions Maturity Stage Objective: Maximize profit while defending market share Product—diversify products and brands Price—match or best competitors’ prices Distribution—more intensive Communications—use advertising to stress brand differences and benefits; increase sales promotions to encourage brand switching Decline Stage Objective: Reduce expenditure and milk the brand; focus on cash flow Product—phase out weak models Price—cut price Distribution—selective; phase out unprofitable outlets Communications—reduce and target hard-core loyals; reduce sales promotions to minimal levels