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A Strategic
Marketing
Framework
Chapter Two
Key Learning Points
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
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Figure 2.1
A Complete Marketing Strategy
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Marketing Strategy
Objectives:
Mission statements
Corporate objectives
Business unit / divisional objectives
Objectives geared towards
increasing profit AND increasing
market share require trade-offs.
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Activity
At which strategic level would you
expect to find the following
objectives:
Achieve a 2% coupon redemption rate
for Product X by June 30th of this year
Maximize shareholder wealth
Increase market share within the
detergent product category by 1% for
the 2011 fiscal year
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Marketing Strategy
Characteristics of well-written
objectives:
Lists a quantified standard of
performance.
Designates a clear time frame.
States goal in measurable terms.
Should be challenging but realistic.
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Marketing Strategy
Customer and competitor targets:
Which customer group should be
targeted?
Select a general strategy.
Define targeted group in more
precise terms.
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Figure 2.2
Strategic Alternatives
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Marketing Strategy
Market penetration strategy:
Targeting the firm’s own customers is
a high priority.
Targeting customers of the
competition is riskier and more
expensive strategy.
Common in slow growth markets.
Price promotions are key.
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Discussion
Pricing promotions
encourage people to
switch brands, at least
temporarily.
Give an example of a
pricing promotion that
may result in longerterm switching behavior,
and explain why.
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Marketing Strategy
Market development strategies:
Targeting new customers in new segments.
Will it require the introduction of new or
modified products?
Targeting nonbuying customers in currently
served segments.
Is it profitable?
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Discussion Question
Many products have successfully used
packaging innovations, such as the
squeeze container, to appeal to new
markets by providing a functional benefit.
1. What are other examples of packaging
innovations that have been used to attract
new users to a brand?
2. Give an example of how a particular product
could be modified to attract new users.
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Marketing Strategy
Market Development Strategies:
Entering Foreign Markets:
Requires decisions related to
The choice of country or countries to
enter.
The timing of the entry.
How to operate in the chosen countries.
Five factors should be considered when
deciding how to enter a foreign market.
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Figure 2.3
Factors Affecting Mode of Entry
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Table 2.1
Global Purchasing Power Indices (U.S. = 100)
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Marketing Strategy
The value proposition:
Summarizes into a single paragraph
The customer.
The competitive targets.
The customer’s reason for buying
your brand.
Forms the basis for the marketing mix.
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Model of a Value Proposition
For (target segment n), the (product/
brand name) is a (product category)
that unlike (competitor targets),
(statement of primary differentiation).
For men aged 20–29, Thums Up is a cola
that unlike Coke and Pepsi, has Indian
heritage, tastes spicier, and tastes just
as good warm as it does cold.
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“Competitive advantage –
the strategic development
of some basis on which
customers will choose a
firm’s product or service
over its competitors.”
- Russell S. Winer
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Marketing Strategy
Differentiation:
Competitive advantages (CA) should
have three characteristics:
Competitive advantage should
generate customer value.
Increased value must be perceived
by the consumer.
Competitive advantage should be
difficult to copy.
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Marketing Strategy
General Approaches to Creating
Competitive Advantage
Cost-based or price-based advantage
Quality-based or differentiation
advantage
Perceived quality or brand-based
advantage
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Marketing Strategy
Cost- or Price-Based Advantage:
Managers choose whether or not to
compete on basis of price.
Difficult to achieve, but two primary
methods exist:
Becoming the largest producer and
benefiting from economies of scale.
Taking advantage of the experience
curve.
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Figure 2.4
Learning Curves for Software and
Hardware
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Marketing Strategy
Cost- or Price-Based Advantage:
Firms who are not industry leaders or
who lack experience can also succeed.
Strict cost control and flexible
manufacturing can help to develop a
cost-based advantage.
Examples:
IKEA
Jiffy Lube
Vanguard Group
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Marketing Strategy
Quality-Based Differentiation:
Develops an observable difference
that is valued by customers.
Typically implies higher costs.
Allows for both higher prices and
higher margins.
Differentiation can occur at any point
within the value chain.
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Illustration
Sun Microsystems
differentiates its
products by having
its own operating
system, Solaris.
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Marketing Strategy
Differentiation Opportunities
Within the Value Chain
Inbound
Logistics
Operational
Advantages
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Outbound
Logistics
Marketing & Sales
Services
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Marketing Strategy
Perceived Quality or Brand-Based
Differentiation:
Appropriate when actual differences
are small, hard to achieve, or difficult
to sustain.
Marketing mix decisions contribute to
brand-based differentiation.
Perceptual maps can help in
understanding consumer perceptions.
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Figure 2.5
Perceptual Map for Retail Banks
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Activity
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Dimension A
What two
attributes or
dimensions did
YOU consider
most important
when comparing
competing
Universities?
Dimension B
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“One of the key ways to define
a perceptual differential
advantage is through the brand
name. The value of a brand
name in communicating quality
or other aspects of the product
is called brand equity.”
- Russell S. Winer
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Illustration
Bayer’s strong brand
name provides
differentiation against
generics and private
label (store) brands.
Strength of brand
name relates to which
element within the
value chain?
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Marketing Strategy
Core Strategy: Positioning
A point of differentiation must be
selected for communication.
Positioning creates a clear image in
the mind of the consumer of what
the product stands for and how it is
different from competitive offerings.
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Marketing Strategy
Formulating the positioning strategy
requires knowledge of:
The dimensions used by consumers to
evaluate products.
The importance of each dimension.
Comparisons of the brand and competition.
The decision processes used by consumers.
Sometimes repositioning is necessary.
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Marketing Strategy
Marketing Mix:
Implementation of the marketing
mix makes the strategy operational.
Consistency between strategy and the
actual implementation is critical.
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Figure 2.6
Ensuring a Segment-Focused Strategy
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Discussion
Dell manufactures products for the home
user segment, small and medium business
market, the public sector (government,
education), and for large enterprise.
In what ways might the core strategy or
marketing mix differ when catering to
each segment? Explain.
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Figure 2.7
The Product Life Cycle
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Marketing Strategies Over the
Product Life Cycle
The Product Life Cycle (PLC) sketches the
sales history of a product category over time.
This conceptual tool is best applied to product
categories and not to specific brands.
Strategy options and the importance of
marketing mix variables vary across each
stage of the PLC.
Not all product categories follow the standard
PLC curve.
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Figure 2.8
VCR Deck Sales to Dealers
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Marketing Strategies Over the
Product Life Cycle
Introduction Stage
Market size and
growth rate are low.
Product: one brand
that pioneered the
category
Selling & advertising:
focuses on generic
product
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Pricing: penetration
or skimming
Distribution: limited
as product is
unproven
Often offers a firstmover advantage
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Marketing Strategies Over the
Product Life Cycle
Growth Stage
Competition grows.
Price pressures
increase.
Communications
stress
differentiation.
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Distribution
pressures increase.
Market
segmentation
becomes
necessary.
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Marketing Strategies Over the
Product Life Cycle
Growth Stage Strategic Options
Market Leader:
Fight (maintain)
Fight (enhance)
Flee (give up market
leadership)
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Market Follower:
Exit the market
Imitate the leader
Fortify position
Leapfrog the
competition
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Marketing Strategies Over the
Product Life Cycle
Maturity Stage
Few new
buyers
Sophisticated
consumers
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Well-defined
segments
Differential
advantage
sought
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Marketing Strategies Over the
Product Life Cycle
Maturity Stage Strategic Options
Market Leader
Invest enough to
maintain position
Harvest cash for
short-term
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Market Follower
Depends, but may:
Pursue #1
Stay #2.
Exit category
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Marketing Strategies Over the
Product Life Cycle
Decline Stage Strategic Options
Strategically revive by applying
strategies during maturity phase.
Serendipity may revive the category.
Consciously decide to be the “Last
Iceman”.
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“There are no mature markets,
only tired marketers.”
- Campbell Soup CEO,
David Johnson
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Figure 2.9
Beer Market Evolution for Selected
Countries and Regions
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Executive Summary
Marketing strategies contain many parts.
Value propositions should be concise.
Three key methods can lead to
differential advantage.
Product positioning is essential.
Strategic alternatives vary with the stage
of product life cycle.
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