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Chapter
7
Marketing Strategy
Chapter 7
Selecting and Developing
The Marketing Strategy
Chapter
7
Strategic Characteristics
• The marketing manager evaluates all strategy
options in light of the firm's mission, goals and
objectives, strengths and weaknesses, and
opportunities and threats to craft a marketing
strategy that produces the best overall strategic fit.
• A good fit allows the firm to make the most of the
potential capabilities that the internal and external
environment combination provides.
• The best marketing strategy will be differentially
advantageous, sustainable, timely, feasible, and
affordable.
Chapter
Strategic Fit
7
The Firm
Characteristics of a
Good Marketing Strategy
1) Creates a differential advantage
2) Sustainable over time
Marketing
Strategy
3) Timed to coincide with a
strategic window
4) Feasible given the firm’s skills,
expertise, and level of resources
The Environment
5) Affordable given the firm’s
available financial resources
Chapter
7
Life Cycle: Development Stage
• A firm has no sales revenue during this stage.
• The firm experiences a net cash outflow due to the
expenses of product invention and development.
• Although marketing activities do not typically occur in
this stage, planning efforts at this point can greatly
influence marketing activities in later stages of the life
cycle.
• In creating a new product or product line, a group of
closely related product items is desired because of the
scale economies that are created, along with increased
efficiency in operations and marketing.
• The development stage usually begins with a product
concept and ends with the commercialization of the
product.
Chapter
7
Development: Components of Product
Concept
• An understanding of the specific uses and benefits
that target customers seek in a new product.
• A description of the product, including its potential
uses and benefits.
• The potential for creating a complete product line that
can produce synergies in sales and income and place
the firm in a strong market position.
• An analysis of the feasibility of the product concept,
including such issues as anticipated sales, required
return on investment, time of market introduction,
length of time to repay investment, etc.
Chapter
7
Life Cycle: Introduction Stage
• The introduction stage begins when development is complete
and ends when sales indicate that target customers are widely
accepting the product.
• The marketing strategy devised during the development stage
should be fully implemented during the introduction stage, and
should relate to issues that arose during the SWOT analysis.
• Good promotion and distribution are essential to make
customers aware that the new product is available, how to use
it, and where to purchase it.
• After the product is introduced, the marketing manager should
employ the firm's marketing information system to determine
market share, revenues, store placement/channel support, costs,
and rate of product usage to assess whether the new product is
paying back the firm's investment.
Chapter
7
Introduction: Marketing Strategy Goals
• Attract customers by raising awareness of and interest in the
product through advertising, public relations, and publicity
efforts that stress key product features and benefits.
• Induce customers to try and buy the product through the use
of various sales tools and pricing activities.
• Strengthen or expand channel relationships to gain sufficient
product distribution to make the product accessible for target
consumers/customers.
• Build on the availability and visibility of the product through
trade promotion activities.
• Engage in customer education activities that teach target
market members how to use the new product and convince
them to repurchase the product.
Chapter
7
Life Cycle: Growth Stage
• Sustained sales increases may begin quickly during the
growth stage, and the product's upward sales curve may be
steep.
• Regardless of the length of the growth stage, the firm has two
main priorities:
– To establish a strong market position and defend it from competitors.
– To achieve financial objectives that repay investment and earn enough
to justify a long-term commitment to the product.
• The overall strategy in the growth stage shifts toward
generating repeat purchases and building brand loyalty.
• The growth stage is the most expensive stage for marketing.
• Increasing competition should be expected as the product's
sales growth and emerging profitability encourages other
firms to develop competitive product entries.
Chapter
7
Growth: Pertinent Marketing Strategy
• Utilize the product's perceivable differential advantages in terms of
quality, price, value, etc., to secure market leadership.
• Establish a clear product/brand identity through image-oriented
advertising and personal selling campaigns.
• Create a unique product position, or niche, through the use of
advertising that stresses product features and benefits for target
customers relative to other need solutions/products available to target
market members.
• Maximize availability of the product through extensive trade
promotion activities that capitalize on the product's popularity at this
stage and thereby enhance the firm's ability to deliver profits to key
retailers.
• Find the ideal balance between price and demand and determine a
general estimate of price elasticity.
• Maintain control over product quality to assure customer satisfaction.
Chapter
7
Life Cycle: Maturity Stage
• The maturity stage is the longest in the typical product life
cycle.
• When the relatively fast growth has tapered, there will be
some "shake-out" of the competition that built during the
growth stage.
• As the strategic window of opportunity has all but closed for
the product/market, no more firms will enter the market
unless they have found some product innovation significant
enough to attract large numbers of target customers.
The
window of opportunity often remains open for new product
features and variations.
• In the face of limited or no growth within the product market,
the only way for a firm to gain market share is to steal it from
a competitor.
Chapter
Maturity: Objectives
7
• The marketing manager has three general objectives that
can be pursued during the maturity stage:
– Generate cash flow.
– Hold market share.
– Increase share of customer, which refers to the percentage
of each customer's needs being met by the firm.
• To achieve these objectives, the marketing manager has
at least four general options for strategy selection:
–
–
–
–
Develop a new product image.
Find and attract new users to the product.
Discover new applications and uses for the product.
Apply new technology.
• Holding market share or increasing share of customer
often requires heavy expenditures in marketing,
particularly in promotion.
Chapter
7
Life Cycle: Decline Stage
• A product's sales plateau will not last forever, and
eventually it begins a persistent decline in revenue that
marks the beginning of the decline stage.
• Very popular brands can postpone this stage longer than
weaker brands.
• The decline stage, and the product's life, ends when the
product is terminated.
• The marketing manager has two options during the decline
stage:
– The harvesting approach calls for a gradual reduction in
marketing expenditures, and uses a less resource-intensive
marketing mix.
– The divesting option calls for the total withdrawal of
marketing support from the product or SBU.
Chapter
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Decline: Important Factors to Consider
• The rate of market deterioration—the faster the rate,
the quicker the manager should divest.
• Market segment potential—loyal customer segments
might continue to buy.
• The market position of the product—a leading product
with a good image in a declining industry may be
profitable and generate excess cash by attracting
customers from competitors' abandoned products.
• The firm's price and cost structure—this may remain
strong in the face of declining sales if the firm no
longer has to significantly invest in maintaining the
product.
Chapter
7
Creating a Competitive Advantage: Value
• Value is a customer's subjective evaluation of benefits
relative to costs to determine the worth of a firm's
product relative to the offerings of other firms.
– Customer benefits can include anything that a customer
receives in his or her dealings with the firm.
– Customer costs include anything that the buyer must give
up to obtain the benefits provided by the firm.
• The most obvious cost is the monetary price of the product,
including any sales taxes or additional charges.
• Nonmonetary costs include the time and effort consumers
expend to find and purchase desired products.
• Another nonmonetary cost, risk, can be reduced by offering
good basic warranties, or extended warranties for an
additional charge.
• Opportunity costs are harder for the firm to control.
Chapter
Competing on Customer Value
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Product Quality + Customer Service Quality + Experience-based Quality
Monetary Prices + Nonmonetary Costs
Component
Examples
Benefits
Product Quality
Sony, Mercedes, Macy’s
Customer Service Quality
Nordstrom’s, Cadillac
Experience-based Quality
Disney World, FAO Schwarz
Reduce monetary Prices
Wal-Mart, Benckiser, Geo
Reduce nonmonetary Costs
Amazon.com, Circle K
Costs
Chapter
7
Marketing Strategy for Specialized Products
Product Considerations
• Because of the intangibility of services, it is difficult for
customers to evaluate the product before they actually
use it. This forces customers to place some degree of
trust in the service provider to perform the service
correctly and in the time frame promised or anticipated.
One way companies can address this issue is by
providing satisfaction guarantees to customers.
• Because most services are people-based, they are
susceptible to variations in quality and inconsistency.
– Standardization and service quality are very difficult to
control.
– However, the lack of standardization actually gives service
firms one advantage: Services can be customized to match
the specific needs of any customer.
Chapter
7
Marketing Strategy for Specialized Products
Price Considerations
• Price is a key issue in the marketing mix for services
because it can be used to connote quality in advance
of the purchase experience.
– Determining the costs of producing and delivering a service
is complicated for service providers.
– Part of this complexity is that services often do not have
well-defined units of measure.
• Customers often balk at the high prices of legal,
accounting, or medical services because they have no
way to evaluate the product's worth prior to purchase.
Chapter
7
Marketing Strategy for Specialized Products
Promotion Considerations
• Because a service cannot be directly shown or
displayed, the marketer faces the difficult task of
explaining the service to customers.
• Endorsements from other customers in the target
market who have had a positive experience are
often a key to successful promotion.
Chapter
7
Marketing Strategy for Specialized Products
Distribution Considerations
• It is practically impossible to distribute services in
the traditional sense because customers cannot take
physical possession of a service.
• Distribution systems must be developed to provide
the services in a convenient manner and in locations
where they are expected to be found.
• Service distribution often requires multiple outlets
to increase customer convenience.
• Another way to distribute a service is to separate
production and consumption by creating a tangible
representation of the service.
Chapter
7
B2B vs B2C Marketing - I
• The role of the decision-making unit (DMU)—the individual
or group is/are responsible for making purchasing decisions. In
organizations, the DMU may include three distinct groups of
people—economic buyers, technical buyers, and users—each
of which may have its own agendas and unique needs and
desires in the buying decision.
• The relevance of hard and soft costs. Both consider hard costs
-- monetary price and related costs associated with the purchase
(e.g., shipping and installation). Organizations also consider
soft costs (e.g., downtime, opportunity costs, and human
resource costs) associated with the compatibility of systems in
the buying decision.
Chapter
7
B2B vs B2C Marketing - II
• The existence of reciprocal buying relationships. With
consumer purchases, the opportunity for buying and selling is
usually a one-way street (i.e., the marketer sells and the buyer
buys). Organization buying is more often a two-way street,
with each firm marketing products that the other firm buys.
• In B2B, the buyer and seller are more likely to be dependent on
one another, particularly in client relationship building.
– Traditional transactional marketing focuses on delivering
largely standardized products to a sizable group of customers at
the lowest price possible.
– Client-relationship building is longer term in nature and tends
to focus more on overall goal attainment than simply getting the
lowest possible price.
Chapter
7
Marketing Mix for B2B Marketing
• Change in buyers' and sellers' roles: Both buyers and sellers will need to
move from competitive negotiators trying to drive prices up and down to
true communications specialists.
• Single sourcing: Supplying firms will continue to sell directly to large
customers or move to selling through "systems suppliers" that put together a
set of products from various suppliers to deliver a comprehensive solution to
buyers.
• Decision-making teams: While transactional marketers will continue to
market their products primarily one-on-one (personal selling to a purchasing
agent or user), client-relationship builders employing strategic purchasing
will have teams on both sides of the table representing different perspectives
and areas of expertise that are central to the success of both firms.
• Global sourcing: Increasingly, both buyers and sellers will be scanning the
globe in search of suppliers or buyers that represent the best match with
their specific needs and requirements.
• Advanced earning power though productivity enhancement: The focus must
be to identify any inefficiencies in the buying and selling relationship so that
they can be removed.