Download 1.2. Why use a marketing strategy?

STRATEGIC
MARKETING
PROF. M.LECOCQ
DUYSENS NATACHA
ICHEC MASTER 1
2015-2016
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TABLE DES MATIÈRES
1.1. How marketing helps to create value and attain business results? ....................................... 6
1.2. Why use a marketing strategy? ............................................................................................ 6
2.1. Company strategy & strategic planning ................................................................................ 9
2.1.1. What is a company strategy? ........................................................................................................ 9
2.1.2. Every strategy relies on a competitive advantage. ....................................................................... 9
2.1.3. 3 characteristics of company strategy........................................................................................... 9
2.1.4. 3 levels of a company strategy ...................................................................................................... 9
Company strategy and strategic planning ........................................................................................ 10
2.1.5. 2 types of strategies according to M. Porter ............................................................................... 11
2.2. The Planning process: 4 step-process ................................................................................. 12
2.2.1. Defining the corporate mission ............................................................................................... 12
2.2.2. Market analysis: ...................................................................................................................... 14
2.2.3. Goal formulation ..................................................................................................................... 14
2.2.4. Assigning resources to each SBU ............................................................................................. 14
3.1 External & Internal analysis ................................................................................................. 15
3.1.1 EXTERNAL ANALYSIS ..................................................................................................................... 16
Company ............................................................................................................................................ 16
Suppliers ............................................................................................................................................ 16
Intermediaries ................................................................................................................................... 17
Competitors ....................................................................................................................................... 17
Publics ................................................................................................................................................ 17
Customers .......................................................................................................................................... 18
Demographic environment ................................................................................................................ 19
Economic environment ...................................................................................................................... 20
Natural environment ......................................................................................................................... 20
Technological environment ............................................................................................................... 21
Political and social environment........................................................................................................ 21
Cultural environment......................................................................................................................... 22
Conclusion: Responding to the Marketing Environment ................................................................... 22
3.1.2. INTERNAL ANALYSIS (MIS) ........................................................................................................... 22
3.2 Interpretation of the results ................................................................................................ 23
3.2.1 SWOT ............................................................................................................................................ 23
Opportunities ..................................................................................................................................... 25
Threats............................................................................................................................................... 25
Strenghts/Weaknesses ...................................................................................................................... 25
Opportunities and Threats – Matrix .................................................................................................. 26
Examples............................................................................................................................................ 26
3.2.2 BCG matrix .................................................................................................................................... 28
1. Stars ............................................................................................................................................... 29
2. Cash Cows ...................................................................................................................................... 29
3. Question Marks ............................................................................................................................. 29
4. Dogs ............................................................................................................................................... 29
The circles in the matrix (size in euros) .............................................................................................. 30
3.2.3 The GE grid ................................................................................................................................... 30
Alternatives and next steps ............................................................................................................... 31
Potential issues with Matrix approaches .......................................................................................... 31
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3.2.4 Porter’s 5 forces model ................................................................................................................ 31
3. Threat of potential entrants .......................................................................................................... 32
4. Threat of substitution .................................................................................................................... 32
5. Bargaining power of buyers .......................................................................................................... 33
Conclusion.......................................................................................................................................... 33
4.1 Developing competitive strategies ...................................................................................... 34
4.1.1. Concept definitions ..................................................................................................................... 34
Competitive advantage ..................................................................................................................... 34
Competitor analysis ........................................................................................................................... 34
Competitive marketing strategies ..................................................................................................... 35
Market leader .................................................................................................................................... 35
Market challenger ............................................................................................................................. 35
Market follower ................................................................................................................................. 35
Market nicher .................................................................................................................................... 35
4.1.2. Competitive strategies ................................................................................................................ 36
4.1.3. Market leader strategies ............................................................................................................. 36
Expanding Total Demand .................................................................................................................. 37
Protecting Market Share ................................................................................................................... 37
Expanding Market Share ................................................................................................................... 37
4.1.4. Market challenger strategies....................................................................................................... 38
4.1.5. Market follower strategies .......................................................................................................... 38
4.1.6. Market nicher strategies ............................................................................................................. 39
4.1.7. Developing strategies for growth ................................................................................................ 39
Product/Market growth matrix ......................................................................................................... 40
4.1.8. Blue ocean strategy (Chan Kim) .................................................................................................. 40
Ex: With the creation of Viagra, Pfizer created a blue ocean in lifestyle drugs by going beyond
the boundaries of the pharmaceutical industry at the time. Viagra shifted the focus from the
pharmaceutical industry’s largely functional orientation, medical treatment, to lifestyle
enhancement, an emotional orientation. ................................................................................ 41
4.2 The goal formulation ........................................................................................................... 41
For an MBO system to work, the unit’s objectives must meet four criteria: ..................................... 41
5.1 Introduction ........................................................................................................................ 43
5.1.1 The STP trio .................................................................................................................................. 44
5.1.2 Définitions .................................................................................................................................... 44
5.1.3 Segmentation ............................................................................................................................... 45
Bases for Segmenting Consumer Markets......................................................................................... 45
5.2 Geographic segmentation ................................................................................................... 45
5.3 Demographic segmentation ................................................................................................ 46
5.3.1 Age and Life-Cycle Stage .............................................................................................................. 46
5.3.2 Gender .......................................................................................................................................... 46
5.3.3 Income .......................................................................................................................................... 47
5.4 Psychographic segmentation ............................................................................................... 47
5.4.1 VALS .............................................................................................................................................. 48
5.5 Behavioral segmentation ..................................................................................................... 48
5.6 Occasion segmentation ....................................................................................................... 48
5.7 Benefit segmentation .......................................................................................................... 48
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5.8 Using Multiple Segmentation Bases .................................................................................... 49
5.9 Requirements for Effective Segmentation ........................................................................... 49
5.10 Segmenting Business Markets (bonus!) ............................................................................. 49
5.11 Summary ........................................................................................................................... 50
6.1 Targeting ............................................................................................................................. 51
6.1.1 Evaluating Market Segments........................................................................................................ 51
6.1.2 Selecting Market Segments .......................................................................................................... 52
Undifferentiated (mass) Marketing................................................................................................... 53
Differentiated (segmented) Marketing ............................................................................................. 53
Concentrated (niche) Marketing ....................................................................................................... 54
Micro Marketing ................................................................................................................................ 54
6.2 Summary ............................................................................................................................. 55
7.1 Brand................................................................................................................................... 57
7.1.1 The role of brands ........................................................................................................................ 57
7.1.2 Value of brands ............................................................................................................................ 57
7.1.3 Brand equity ................................................................................................................................. 58
7.1.4 The scope of branding .................................................................................................................. 58
7.1.5 BrandZ Example ............................................................................................................................ 58
7.1.6 Creating a brand equity ................................................................................................................ 59
7.2 Differentiation and positioning ............................................................................................ 59
7.2.1 Benefits of brand positioning and differentiation........................................................................ 60
7.2.2 Identifying optimal points-of-difference and points-of-parity ..................................................... 60
a) Points of difference........................................................................................................................ 60
b) Points of parity .............................................................................................................................. 60
7.2.3 Choosing a differentiation and positioning .................................................................................. 61
7.3 Edeka on Xmas .................................................................................................................... 63
7.4 Sample questions class of Dec 14th on positioning: ............................................................ 63
7.5 Summary ............................................................................................................................. 63
8.1 Marketing Plan .................................................................................................................... 64
8.2 Sections of a marketing plan ........................................................................................................... 65
Executive summary............................................................................................................................ 65
Situation analysis............................................................................................................................... 65
Marketing strategy ............................................................................................................................ 65
Financial projections .......................................................................................................................... 66
Implementation controls ................................................................................................................... 66
9.1 Measuring marketing productivity....................................................................................... 67
9.2 KPI’s & measurement .......................................................................................................... 67
9.2.1 Marketing metrics ........................................................................................................................ 67
9.2.2 Key performance indicators ......................................................................................................... 67
9.2.3 Marketing dashboards ................................................................................................................. 68
9.2.4 Marketing scorecards ................................................................................................................... 69
9.2.5 Marketing metrics ........................................................................................................................ 69
9.2.6 Key performance indicators & measures ..................................................................................... 70
9.2.7 Marketing ROI .............................................................................................................................. 70
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9.3 Sample questions class of Dec 14th on KPI’s and measurement: ......................................... 71
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1. Introduction
The fundamental goal of marketing strategy is to achieve a sustainable competitive advantage. The
company must decide which Customers it will serve (Segmentation and Targeting) and how to serve
them (differentiation and positioning).
Strategy by Porter:
- Competitive strategy is about being different. It means deliberately choosing a different set of
activities to deliver a unique mix of value.
- Strategy is about competitive position, about differentiating yourself in the eyes of the customer,
about adding value through a mix of activities different from those used by competitors.
- It is a combination of the ends (goals) for which the firm is striving and the means (policies) by
which it is seeking to get there.
- Strategy is both plan and position. (It should be noted that Porter writes about competitive
strategy, not about strategy in general.)
1.1. How marketing helps to create value and attain business results?
Marketing strategy intends to answer how marketing helps to create value and achieve business
results.
1.2. Why use a marketing strategy?
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It encourages systematic thinking
Can help to anticipate changes and respond quicker to changes
Forces the company to sharpen its objectives
It leads to better coordination of company’s efforts
Provides better standards for control
The goal of the marketing strategy is to achieve a stainable competitive advantage. The company
must decide which customers will serve (segmentation, target), and how to serve them.
Business does not stop while you design your marketing strategy. The end of the world is the end of
the month. Short term tends to win every time. We don’t have time; we are too busy, too small,
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marketing strategy is not for starter companies, but neither for mature companies. Most of the time
the world doesn’t stop, there is a lot of pressure for short term goal to achieve for instance.
You do not design your strategy in isolation. In any given market, there are many different actors of
different size, strength and agility.
Too often, marketers focus on budget and other resources. The first question is about what you
intend to do to create value? Many times people say they don’t have enough budgets but strategy
comes first, budget after.
It is about direction; don’t try to rush it too much. Environment of very high technology, company
can be addressed to it intelligence. The essence of strategy is choosing what not to do. Some
executives want to be all things to everybody. Ex: GM USA.
There is a constant debate about what is the most important, design or execution, Both are VERY
IMPORTANT and interrelated. “Doing things right” (implementation) is as important as“Doing the
right thing” (strategy).
The marketing strategy is the marketing logic by which the business hopes to achieve its marketing
and business objectives. It is the fundamental goal achieving a sustainable competitive advantage.
Marketing strategy includes the analysis of the strategic initial situation of a company and the
formulation, evaluation and selection of market-oriented choices to contribute to the goals of the
company. The company decides which Customers it will serve (Segmentation and Targeting) and how
(differentiation and positioning).
Elevator pitch: introduce yourself in 10 seconds. He is introducing the course in 10 seconds, the
definition of marketing strategy.
Create, communicate, and deliver the value to a target market and profit. Creating value = product
management, communicate value= brand management, deliver value=customer management. P&G
makes Pringles, how do you print …? Open technology, open innovation, brand management means
packaging, brand is a promise, inspires everything we do, way we act, its emotional, emotions.
Creating an emotional relationship is important. Customer management is changed, we have data
customers, reach them by emails, this customer management deals with them, but we want to meet
them, get their help in creating products, want to co create, radical change in marketing.
2. From company strategy to marketing
strategy
Summary of Kotler video
CREATING VALUE - The task of any business is to deliver customer value at a profit. In a
hypercompetitive economy with increasingly informed buyers faced with abundant choices, a
company can win only by developing the value delivery process and choosing, providing, and
communicating superior value.
We can divide the value creation and delivery sequence into three phases. First, choosing the value
represents the “homework” marketing must do before any product exists. Marketers must segment
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the market, select the appropriate target, and develop the offering’s value positioning. The formula
“segmentation, targeting, positioning (STP)” is the essence of strategic marketing. The second phase
is providing the value. Marketing must determine 4P’s. The task in the third phase is communicating
the value by utilizing the sales force, adv….to promote the product.
Before developing a MS, we need a full understanding of company’s reasons to be in business,
corporate mission, and corporate objectives.
Marketing STRATEGY requires vertical alignment with senior management and horizontal alignment
with other departments, so everyone understands, appreciates, and supports the marketing effort.
Marketing is no longer the responsibility of a single department—it is a company-wide undertaking
that drives the company’s vision, mission, and strategic planning. It succeeds only when all
departments work together to achieve company goals: when engineering designs the right products,
finance provides the right funding, purchasing buys the right materials, production makes the right
products, and finance measures profitability in the right ways.
This harmony can only truly work, when management clearly communicates a vision of how the
company’s will operate and how marketing orientation and philosophy serve customers.
EXAMPLE AIRLINE: best CX….for RY,….fleet, cabin crew, pricing, on-board service, on boarding
efficiency…contradicts RY bus. If we are mkt director of rayanair, goal provide best customer
experience, contradicts the essence of business model because the goal is to fly the cheapest way
possible.
Marketing Strategy is derived from the business strategy
How can marketing help to attain the objectives of the business strategy? Marketing can be part of
it, help design it
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Influencing and nurturing Corporate objectives and then aligning to them
Combining marketing goals into a multi-year plan and a yearly tactical plan detailing specific
actions
Focus on offering the right products and services, based on customer insights and market
research
Utilize the marketing mix to achieve the company’s ambition, enabling the creation of value
(market share, revenue, more customers, price premium,…)
1st question: Is there a good Marketing Strategy?
No one strategy is best for all companies. It depends on situation, opportunities, objectives and
resources.
Situation: (bruxelles ailines) best business class, can be successful, after financial crisis, in 2008 this
company lost 90% in business class, the chief says that the employees with the cheapest fly of the
day, recreate a premium economy class (b-flex now flex & fast ) that will be acceptable to buyer, still
provide with number of advantages (lowest price of the day), or design a new business class for best
CX.
Opportunities: ex: An electric car in Norway=>Nissan is very successful in Norway.
Objectives: example: penetration or geographical expansion? Hertz could increase share in EU or go
to China
Resources: example:
TECHNOLOGICAL: ex. Fiat, question is do you have the technology is it available? Fiat Chrysler to
launch a luxury brand
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FINANCIAL: launching a new automobile brand in the US (Renault, peugeot, alfa)
HUMAN: eg If Land Rover wanted to enter the motorcycle business. SONACA small aircraft: yes
2.1. Company strategy & strategic planning
2.1.1. What is a company strategy?
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“Une stratégie est la définition d’orientations claires et réalistes d’un ensemble d’actions
pour atteindre à moyen et long terme un but face à des adversaires désignés”.
The overall scope and direction of a corporation and the way in which its various business
operations work together to achieve specific goals.
2.1.2. Every strategy relies on a competitive advantage.
The nature of the competitive advantage determines the company strategy: It is a consumer
relevant, strong and long lasting competency that has the potential to improve your position on the
market and generate superior margins and profits.
EXAMPLES:
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TECHNOLOGY / R&D: e.g. MERCEDES ENGINEERING
COST STRUCTURE: e.g. aldi, rayanair, have put in place a model that enable to have cheaper
prices
ACCESS TO RESOURCES: e.g. company belonging to a large PE
SPECIFIC EXPERTISE: e.g. CARREFOUR/DFC SUPPLY CHAIN
REPUTATION / CREDIBILITY: e.g. NESTLE FOOD SAFETY. 1 brand
QUALITY: TOYOTA
PEOPLE: GOOGLE ENGINEERS OR LOUIS VUITTON DESIGNERS, many companies believe that
the quality of their people is their best advantage/shot
CCL: your strategy has a higher chance to succeed if based on a Competitive Advantage => the
company can be successful if they take advantage on a specific existent strength.
Counter examples: Gillette. Manual shaving business. But electric razor? Less expertise or credibility
2.1.3. 3 characteristics of company strategy
1) IT IS A VISION: it is how we see ourselves in the market, our role, what we want to bring, how we
want to make a difference?
2) IT IS DEVELOPED AND IMPLEMENT AGAINST A COMPETITOR: not in isolation (IN THE WIDE
SENSE. E.G. TAX LEGISLATION – automotive sector, taxes on gas or on engine size, displacement
and power) OR CLIMATE CHANGE
3) IT IS LONG TERM ORIENTED (>< 4P’S STRATEGY AND MARKETING PLAN). You only adjust, adapt
or change your strategy when appropriate, when market conditions have changes, when no
longer appropriate
2.1.4. 3 levels of a company strategy
1) GROUP / CORPORATE LEVEL: Corporate headquarters are responsible for designing a corporate
strategic plan to guide the whole enterprise; it makes decisions on priorities and the amount of
resources to allocate to each division, as well as on which businesses to start, grow, consolidate,
milk or eliminate (e.g. AXA pension savings) (all markets, all SBU, all Brands, the one usually
approved by shareholders for growth, Return on capital, shareholder value). E.g. AXA
(Auto/Home, saving,health).
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2) STRATEGIC BUSINESS UNIT LEVEL (SBU): Large companies can manage quite different businesses,
each requiring its own strategy.) (food / non food, e.g Unilever or L’Oreal: consumer FMCG,
professionals/hairdressers, luxury, pharmacy OTC, The body shop retail). Autonomous ><
Independent, Disney (movies, TV, parks, cruises, merchandise)
At one time, General Electric classified its businesses into 49 (SBUs). An SBU has three
characteristics:
1. It is a single business, or a collection of related businesses, that can be planned separately
from the rest of the company.
2. It has its own set of competitors.
3. It has a manager responsible for strategic planning and profit performance, who controls most
of the factors affecting profit.
3) FUNCTION or COE (centre of excellence) (R&D, engineering, geographical, financial, marketing).
E.g. R&D.: hybrids Toyota, electrical vehicles Renault Nissan)
Examples: Unilever: full divisions and non-full division, investor’s strategy is completely different, has
2 headquarters, food business in Rotterdam, another is in London.
L’oréal: some products are called mass market products=one division, others are made for
hairdressers=another division, there are some that are only selling to pharmacies.
Body shop retailer was acquired by L’Oreal, the same designers, producers at the same time.
Disneyland: movie, attractions, etc.
Company strategy and strategic planning
Corporate headquarters are responsible for designing a corporate strategic plan to guide the whole
enterprise; it makes decisions on the amount of resources to allocate to each division, as well as on
which businesses to start or eliminate. Each division establishes a plan covering the allocation of
funds to each business unit within the division. Each business unit develops a strategic plan to carry
that business unit into a profitable future. Finally, each product level (product line, brand) develops a
marketing plan for achieving its objectives.
The Central Role of Strategic Planning: To ensure they select and execute the right activities,
marketers must give priority to strategic planning in three key areas:
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managing a company’s businesses as an investment portfolio,
assessing each business’s strength by considering the market’s growth rate and the company’s
position and fit in that market, and
establishing a strategy. The company must develop a game plan for achieving each business’s
long-run objectives.
Most large companies consist of four organizational levels: (1) corporate, (2) division, (3) business
unit, and (4) product.
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2.1.5. 2 types of strategies according to M. Porter
1) Overall cost leadership/ Cost advantage: Firms work to achieve the lowest production and
distribution costs so they can under price competitors and win market share. They need less skill
in marketing. The problem is that other firms will usually compete with still-lower costs and hurt
the firm that rested its whole future on cost. (RY & Easyjet, evolution of Kia/Huyndai from one to
the other/ Dacia).
2) Differentiation/ Value perception: The business concentrates on achieving superior performance
in an important customer benefit area valued by a large part of the market. The firm seeking
quality leadership, service leadership, design leadership, innovation leadership.
Example: IBM: The turnaround of IBM under Louis V. Gerstner's leadership is considered to be one of
the
most
remarkable
turnarounds
in
corporate
history.
Gerstner transformed IBM from a hardware vendor to a complete IT solutions provider.
Why Most Company Strategic Plans Fail?
There are many reasons most plans fail. Here are those top four, from least to most important:
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4. Belief that a budget is a plan. When planning is approached as a budgeting exercise, there
can be a tendency to fill in the numbers on a spreadsheet based on a mindset that says, the
people are in place, other costs are givens, the work is what it is, so here’s the number for next
year. High-performing companies budget, too, of course, but they use the planning process to
give them something more: a springboard for identifying and evaluating new opportunities,
considering new strategies, and discussing objectives that may at first seem unattainable. The
planning process also should be expected to identify people, processes, and programs that no
longer serve the enterprise or are inefficient. It requires trust first, planning second, and
budgeting third.
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3. Reluctance to address big issues. In the excitement of using the planning session to articulate
a vision, agree on priorities, and develop a road map for success, leaders too often fail to spend
time reaching agreement on the current situation. To achieve the objectives you and your team
say you want, you must talk about all the obstacles to high performance. Alignment does not
mean absence of conflict. Just the opposite. Authentic alignment is achieved only when conflict is
encouraged, options for resolving that conflict are weighed, and a solution is reached that all
leaders support. Debate is healthy, though argument is not. And for healthy conflict to occur,
leaders must trust one another. When trust is present, you and your team can focus on fixing
problems, replicating successes, and carving up sacred cows.
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2. Getting too complicated. The thicker the plan, the more likely your failure. Keep your plan
simple and short. Don’t write a plan with dozens of pages. Rather, spend your time gaining
commitment among your leadership team on what must be accomplished and how your
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objectives will be met. Invest the time you save in planning on execution, because executing the
plan will take everything you’ve got. Developed a one-page template to help leaders convert
their ideas into the priorities they must address as their organizations migrate from Point A to
Point B. What they put there is not the final plan, but it forces them to first agree on what
matters most.
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1. Failing to hold one another accountable. Leaders should delay holding a planning session
until they and their organizations are truly ready to embrace change. Planning equals change,
and in the plan that’s developed, each leader must commit to changing by doing more of the
things that result in success and fewer of the things that don’t. At the midpoint of a planning
session, I ask the participants to break into small groups and return in 20 minutes with answers
to this question: “What will be our response to underperformance?” In high-performing
organizations, accountability is not just top-down, it’s bottom-up and side-to-side.
2.2. The Planning process: 4 step-process
2.2.1. Defining the corporate mission
What are we in business for? What sort of business are we in (Aldi vs Colruyt vs Delhaize vs Rob)
A mission should be (4 elements):
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Realistic (e.g. SAS should not want to be the W’s biggest airline
Specific (not do everything for everybody) and not « stuck in the middle)
Based on distinctive competencies
Motivating (not make more profit. E.g. Greenpeace « to ensure the ability of the Earth to
nurture life in all its diversity »
In some companies it starts with a vision before mission.
Vision
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Outlines what the organization wants to be
How it wants the world in which it operates to be (an "idealized" view of the world)
Long term view on the future
Inspirational: to motivate both potential shareholders and employees
Used to the external world to let them know what your company aspires
Mission
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Defines the fundamental purpose of an organization
Description of why it exists and what it does to achieve its vision
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Used to the external world to let them know what you are aiming at
Defining the Corporate Mission: An organization exists to accomplish something: to make cars, lend
money, provide a night’s lodging.
It is for the long term even if over time, the mission may change, to take advantage of new
opportunities or respond to new market conditions. E.g. Amazon.com changed its mission from being
the world’s largest online bookstore to aspiring to become the world’s largest online store
To define its mission, a company should address Peter Drucker’s classic questions: What is our
business? What should our business be? What is of value to our customers? These simple questions
can be the most difficult a company has to answer. Successful companies continuously raise them
and answer them.
Organizations develop mission statements to share with managers, employees, and (in many cases)
customers. A clear, thoughtful mission statement provides a shared sense of purpose, direction, and
opportunity.
Mission statements are at their best when they reflect an almost “impossible dream” that provides
direction for the next 10 to 20 years. Fred Smith dreamed to deliver mail anywhere in the United
States before 10:30 AM the next day, so he created FedEx.
Good mission statements have five major characteristics
1. They focus on a limited number of goals. The statement “We want to produce the highest quality
products, offer the best service, and achieve the widest distribution, at the lowest prices” claim is too
much.
2. They are aligned with company’s values. They narrow the range of discretions so employees act
consistently on important issues.
3. They define the major competitive spheres within which the company will operate.
Some companies operate in only one industry; some only in a set of related industries; some only in
industrial goods, consumer goods, or services; and some in any industry.
Ex: Caterpillar focuses on the industrial market: Products and applications. Firms define the range of
products they will supply. Competence. The firm identifies the range of core competencies it will
master and leverage. Market segment. The type of market or customers a company will serve
Aston Martin makes only high-performance sports cars.
4. They take a long-term view. Should change the mission only when it ceases to be relevant.
5. They are as short, memorable, and meaningful as possible. Marketing consultant Guy.
Kawasaki advocates developing three- to four-word corporate mantras rather than mission
statements, like “Enriching Women’s Lives”.
Considering company culture
 Values are beliefs that are shared among the stakeholders of an organization
 Values are the guiding principles that dictate behaviour and action to support the company
mission.
 Values can have an external and/or internal reach
Strategic planning happens within the context of the organization.
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A company’s organization consists of its structures, policies, and corporate culture, all of which can
become dysfunctional in a rapidly changing business environment. Managers can change structures
and policies. But, the company’s culture is very hard to change.
What exactly is a corporate culture? Some define it as “the shared experiences, stories, beliefs, and
norms that characterize an organization. “Walk into any company and the first thing that strikes you
is the corporate culture—the way people dress, talk to one another, and greet customers.”
Example: if Mercedes wanted to launch a low cost automotive brand, it could face cultural challenges
Examples
Mission P&G: To provide branded products and services of superior quality and value that improve
the lives of the world’s consumers.
Nike: We sell athletic shoes and apparel. Customer: We bring inspiration and innovation to every
athlete* in the world. (*If you have a body, you are an athlete.)
DHL: vision: Remain the Postal Service provider for Germany; Become the Logistics Company for the
World. Mission:
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We want to make our customers, employees and investors more successful.
We always demonstrate respect without compromising on results.
We simplify our Customers’ lives.
We want to make a positive contribution to our world.
Pfizer: Vision: Pfizer will strive to achieve and sustain its leading place as the world's premier
research-based pharmaceutical company. The company's continuing success benefits patients,
customers, shareholders, business partners, families and the communities in which they operate all
around the world. Mission: We will become the world's most valued company to patients,
customers, colleagues, investors, business partners, and the communities where we work and live.
BMW: Mission: To become most successful premium manufacturer in the car industry. Even the
other brands of BMW group are aligned (MINI and RR).
Google: Mission: “To organize the world’s information and make it universally accessible and useful.”
Apple: Mission: Apple is committed to bringing the best personal computing experience to students,
educators, creative professionals and consumers around the world through its innovative hardware,
software and Internet offerings.
2.2.2. Market analysis:
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Internal and external analysis
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SWOT analysis & other tools
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Assessing growth opportunities
2.2.3. Goal formulation
2.2.4. Assigning resources to each SBU
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3. Market analysis
Also called the strategic audit. You are future decision makers and your decisions will impact
company’s performance (market share, revenue, profit, Customer satisfaction, employee
satisfaction). Your goal is to make well educated decision to maximize chances of success. To do this,
need to understand environment (continuous process), adapt, assess opportunities and minimize
threats. Marketers have two advantages for the task: disciplined methods for collecting information,
and time spent interacting with customers and observing competitors and other outside groups.
Companies with superior information can choose their markets better, develop better offerings, and
execute better marketing planning.
Making marketing decisions in a fast-changing world is both an art and a science. To provide context,
insight, and inspiration for marketing decision making, companies must possess comprehensive, upto-date information about macro trends, as well as about micro effects particular to their business.
Holistic marketers recognize that the marketing environment is constantly presenting new
opportunities and threats, and they understand the importance of continuously monitoring,
forecasting, and adapting to that environment.
Importance of market analysis



Decision making based on robust and reliable data to avoid subjective interpretation,
mistakes and failure
Data collection, analysis and interpretation
Look at current and future situation
The major responsibility for identifying significant marketplace changes falls to the company’s
marketers. Marketers have two advantages for the task: disciplined methods for collecting
information, and time spent interacting with customers and observing competitors and other outside
groups. Some firms have marketing information systems that provide rich detail about buyer wants,
preferences, and behaviour. Companies with superior information can choose their markets better,
develop better offerings, and execute better marketing planning. Every firm must organize and
distribute a continuous flow of information to its managers.
3.1 External & Internal analysis
Internal elements define the company’s current and future DNA (competences, resources, business
strategy).
External elements define the market’s reality and estimate its needs, potential and (future)
tendencies.
=> There is reciprocal influence and creating perspective between internal and external elements.
Marketing environment: The actors and forces outside marketing that affect marketing
management’s ability to build and maintain successful relationships with target customers. The
marketing environment consists of a microenvironment and a macro environment.


Micro environment: The actors close to the company that affect its ability to serve its
customers— the company, suppliers, marketing intermediaries, customer markets,
competitors, and publics
Macro environment: The larger societal forces that affect the microenvironment—
demographic, economic, natural, technological, political, and cultural forces.
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Companies constantly watch and adapt to the changing environment.
More than any other group in the company, marketers must be environmental trend trackers and
opportunity seekers. Although every manager in an organization should watch the outside
environment, marketers have two special aptitudes. They have disciplined methods—marketing
research and marketing intelligence—for collecting information about the marketing environment.
They also spend more time in customer and competitor environments. By carefully studying the
environment, marketers can adapt their strategies to meet new marketplace challenges and
opportunities.
3.1.1 EXTERNAL ANALYSIS
Marketing management’s job is to build relationships with customers by creating customer value and
satisfaction. However, marketing managers cannot do this alone. Marketing success requires
building relationships with other company departments, suppliers, marketing intermediaries,
competitors, various publics, and customers, which combine to make up the company’s value
delivery network.
Micro environment
Company
In designing marketing plans, marketing management takes other company groups into account—
groups such as top management, finance, research and development (R&D), purchasing, operations,
and accounting. All of these interrelated groups form the internal environment.
Top management sets the company’s mission, objectives, broad strategies, and policies. Marketing
managers make decisions within the strategies and plans made by top management.
As already said, marketing managers must work closely with other company departments. Other
departments have an impact on the marketing department’s plans and actions. Marketers must work
in harmony with other company departments to create customer value and relationships. E.g. Aldi’s
marketers can’t promise low prices unless its operations / purchasing dept. delivers low costs. E.g. SN
service with a smile if Cabin crew / operations is not trained/selected on empathy.
Suppliers
Suppliers form an important link in the company’s overall customer value delivery network. They
provide the resources needed by the company to produce its goods and services.
Supplier problems can seriously affect marketing. Marketing managers must watch supply availability
and costs. Supply shortages or delays, labour strikes, and other events can cost sales in the short run
and damage customer satisfaction in the long run. Rising supply costs may force price increases that
can harm the company’s sales volume. (e.g. JIT auto industry).
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Most marketers today treat their suppliers as partners in creating and delivering customer value. For
example, Toyota knows the importance of building close relationships with its suppliers. In fact, it
even includes the phrase achieve supplier satisfaction in its mission statement. E.g.: active
suspension, seat comfort, improved fuel economy.
Intermediaries
Firms that help the company to promote, sell, and distribute its goods to final buyers.
Like suppliers, marketing intermediaries form an important component of the company’s overall
value delivery network. In its search to create satisfying customer relationships, the company must
do more than just optimize its own performance. It must partner effectively with marketing
intermediaries to optimize the performance of the entire system.
They include resellers, physical distribution firms, marketing services agencies, and financial
intermediaries.
Resellers are distribution channel firms that help the company find customers or make sales to them.
These include wholesalers and retailers who buy and resell merchandise. Selecting and partnering
with resellers is not easy. No longer do manufacturers have many small, independent resellers from
which to choose. They now face large and growing reseller organizations, such as Carrefour. These
organizations frequently have enough power to dictate terms or even shut smaller manufacturers
out of large markets.
Physical distribution firms help the company stock and move goods to their destinations.
Marketing services agencies are the marketing research firms, advertising agencies, media firms, and
marketing-consulting firms that help the company target and promote its products to the right
markets.
Financial intermediaries include banks, credit companies, insurance companies, and other
businesses that help finance transactions or insure against the risks associated with the buying and
selling of goods.
EXAMPLES: Lexus dealer network, Coca-cola hospitality retail network (Mc Donald’s, Subway or
Carrefour). Examples: www.CokeSolutions.com, Unilever ice cream at Disney, Walibi, Credit cards
distributed through banks, Web intermediaries (hotels/airlines and car rental brokers), amazon.
Competitors
To be successful, a company must provide greater customer value and satisfaction than its
competitors do. Thus, marketers must do more than simply adapt to the needs of target consumers.
They also must gain strategic advantage by positioning their offerings strongly against competitors’
offerings in the minds of consumers.
No single competitive marketing strategy is best for all companies. Each firm should consider its own
size and industry position compared to those of its competitors. Large firms with dominant positions
in an industry can use certain strategies that smaller firms cannot afford. But being large is not
enough. There are winning strategies for large firms, but there are also losing ones. And small firms
can develop strategies that give them better rates of return than large firms enjoy.
Publics
Any group that has an actual or potential interest in or impact on an organization’s ability to achieve
its objectives.
The company’s marketing environment also includes various publics.
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7 types of publics:
• Financial publics. This group influences the company’s ability to obtain funds. Banks, investment
analysts, and stockholders are the major financial publics.
• Media publics. This group carries news, features, and editorial opinion. It includes newspapers,
magazines, television stations, and blogs and other Internet media.
• Government publics. Management must take government developments into account.
• Citizen-action publics. A company’s marketing decisions may be questioned by consumer
organizations, environmental groups, minority groups, and others.
• Local publics. This group includes neighbourhood residents and community organizations.
General public. A company needs to be concerned about the general public’s attitude toward its
products and activities. The public’s image of the company affects its buying.
• Internal publics. This group includes workers, managers, volunteers, and the board of directors.
When employees feel good about the companies they work for, this positive attitude spills over to
the external
EXAMPLES: financial, media, government, consumer organizations, environmental groups, minority
groups (religious, languages, GLBT). E.g. Abercrombie statement on XXL (banks, media, general
public, citizen action).
Customers
The company might target any or all five types of customer markets:





Consumer markets consist of individuals and households that buy goods and services for
personal consumption.
Business markets buy goods and services for further processing or use in their production
processes.
Reseller markets buy goods and services to resell at a profit.
Government markets consist of government agencies that buy goods and services to
produce public services or transfer the goods and services to others who need them.
International markets consist of these buyers in other countries, including consumers,
producers, resellers, and governments.
Each market type has special characteristics that call for careful study by the seller.
Macro environment
The larger societal forces that affect the microenvironment—demographic, economic, natural,
technological, political, and cultural forces.
The company and all of the other actors operate in a larger macro environment of forces that shape
opportunities and pose potential threats to the company. Figure shows the six major forces in the
company’s macro environment.
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Demographic environment
The demographic environment is of major interest to marketers because it involves people, and
people make up markets.
Example: China’s youth born after 1980—called the “Me generation”. Starbucks – indulgence
China’s one-child rule created a generation of people who have been pampered by parents and
grandparents and have the means to make indulgent purchases. Instead of believing in traditional
Chinese collective goals, these young people embrace individuality. “Their view of this world is very
different,” says the president of Starbucks Greater China. “They have never gone through the
hardships of our generation.” Starbucks is in sync with that, he says, given its customized drinks,
personalized service, and original music compilations. “In the U.S., most of Starbucks’ business is
takeaway,” says one analyst. “It is the opposite in China. Young people go to Starbucks as a
destination and spend time there. They like to be seen as chic and cosmopolitan.”
The Changing Age Structure of the Population



The baby boomers: The post–World War II who were born between 1946 and 1964. The
maturing boomers are rethinking the purpose and value of their work, responsibilities, and
relationships. After years of prosperity, free spending, and saving little, the Great Recession hit
many baby boomers hard, especially the preretirement boomers. A sharp decline in stock prices
and home values (US) ate into their retirement prospects. Today’s baby boomers account for
about 25 percent of the U.S. population but hold 75 percent of the nation’s financial assets and
account for about 50 percent of total consumer spending. EX: financial services. As they reach
their peak earning and spending years, the boomers will continue to constitute a lucrative market
for financial services, new housing and home remodelling, travel and entertainment, eating out,
health and fitness product.
Generation X: born between 1965 and 1976. Although they seek success, they are less
materialistic; they prize experience. For many of the Gen Xers who are parents, family comes
first—both children and their aging parents—and career second. They tend to research products
before they consider a purchase, prefer quality to quantity, and tend to be less receptive to overt
marketing.
Millennials: also called Generation Y, born between 1977 and 2000. One thing that all the
Millennials have in common is their utter fluency and comfort with digital technology. They don’t
just embrace technology; it’s a way of life. However, rather than having mass marketing
messages pushed at them, they prefer to seek out information and engage in two-way brand
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conversations. Thus, reaching these message-saturated consumers effectively requires creative
marketing approaches. Product example: Cyber security insurance.
Other consideration in structure of the Population



The Changing Family structure
A Better-Educated, More White-Collar
Increasing Diversity : racial, non native speakers, religion, sexual preferences
Economic environment


Economic factors that affect consumer purchasing power and spending patterns
Marketers must pay close attention to major trends and consumer spending patterns both across
and within their world markets. E.g.:
 Changes in Consumer Spending
Since 2008 crisis, buyers are looking for greater value in the things that they do buy. In turn,
value marketing has become the watchword for many marketers. Marketers in all industries
are looking for ways to offer today’s more financially cautious buyers greater value—just the
right combination of product quality and good service at a fair price
 Income distribution
Changes in major economic variables, such as income, cost of living, interest rates, and savings and
borrowing patterns have a large impact on the marketplace. Companies watch these variables by
using economic forecasting. Businesses do not have to be wiped out by an economic downturn or
caught short in a boom. With adequate warning, they can take advantage of changes in the economic
environment. E.g. interest rates: new car registration and home buying
Marketers should pay attention to income distribution as well as income levels. Over the past several
decades, the rich have grown richer, the middle class has shrunk, and the poor have remained poor.
The top 5 percent of American earners get more than 21 percent of the country’s adjusted gross
income, and the top 20 percent of earners capture 49 percent of all income. In contrast, the bottom
40 percent of American earners get just 13 percent of the total income. This distribution of income
has created a tiered market. Many companies—such as LVMH—aggressively target the affluent.
Others—such as Pound Land or Primark target those with more modest means. In fact, Pound land
stores in the UK are now the fastest-growing retailers in the UK. Still other companies tailor their
marketing offers across a range of markets, from the affluent to the less affluent.
Natural environment
The natural environment involves the natural resources that are needed as inputs by marketers.
Marketers should be aware of several trends in the natural environment.

The first involves growing shortages of raw materials. Air and water may seem to be infinite
resources, but some groups see long-run dangers. Air pollution chokes many of the world’s
large cities, and water shortages are already a big problem in some parts of the US and the
world. By 2030, more than one in three of the world’s population will not have enough water
to drink. Renewable resources, such as forests and food, also have to be used wisely. (e.g. Las
Vegas is importing water from Northern States!). Firms making products that require these
scarce resources face large cost increases, even if the materials remain available.
E.g. Impact on marketeers and NPD: packaging, recycling, full production impact
E.g. dishwasher reasons to buy: from the 80’ and today/tomorrow, tulips from Africa

A second environmental trend is increased pollution. Industry will almost always damage the
quality of the natural environment. Consider the disposal of chemical wastes; the dangerous
mercury levels in the ocean; the quantity of chemical pollutants in the soil and food supply;
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and the littering of the environment with non biodegradable bottles, plastics, and other
packaging materials. Influence of environmental groups will grow.
E.g. recent case of VW group for diesel engines.
Concern for the natural environment has spawned the so-called green movement. Today,
enlightened companies go beyond what government regulations dictate. They are developing
strategies and practices that support environmental sustainability—an effort to create a world
economy that the planet can support indefinitely. They are responding to consumer demands with
more environmentally responsible products. e.g. Colruyt solar energy, first with no bags, frozen food
in fully sealed fridges.
Technological environment
Technological environment: forces that create new technologies, creating new product and market
opportunities. The technological environment is perhaps the most dramatic force now shaping our
destiny. Technology has released such wonders as antibiotics, robotic surgery, miniaturized
electronics, smartphones, and the Internet.
New technologies can offer exciting opportunities for marketers:



Example: from owning car to rent a car to car sharing… (blabla car)
RFID technology – less need for brick & mortar /agencies (Autolib in Paris)
Example: combination of on-line retailer (amazon) + overnight international delivery
(UPS/Fedex)
Political and social environment
Increasing Legislation: Legislation affecting business around the world has increased steadily over the
years. States has many laws covering issues such as competition, fair trade practices, environmental
protection, product safety, truth in advertising, consumer privacy, packaging and labeling, pricing,
and other important areas. The European Commission has been active in establishing a new
framework of laws covering competitive behaviour, product standards, product liability, and
commercial transactions for the nations of the European Union.
Example: Child protection act: bans the sale of hazardous toys and articles; sets standards for child
resistant packaging. 3 goals:



to protect companies from each other from unfair competition
protect consumers from unfair business practices
protect the interests of society against bad business behaviour
Marketing decisions are strongly affected by developments in the political environment. The political
environment consists of laws, government agencies, and pressure groups that influence or limit
various organizations and individuals in a given society.
Legislation Regulating Business
Even the most liberal advocates of free-market economies agree that the system works best with at
least some regulation. Well-conceived regulation can encourage competition and ensure fair markets
for goods and services. Thus, governments develop public policy to guide commerce—sets of laws
and regulations that limit business for the good of society as a whole. Almost every marketing activity
is subject to a wide range of laws and regulations.
Opportunities for marketers: E.g. right2repair EU, company cars taxation UK, pricing transparency –
EU.
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New laws and their enforcement will continue to increase. Business executives must watch these
developments when planning their products and marketing programs. Marketers need to know
about the major laws protecting competition, consumers, and society. They need to understand
these laws at the local, state, national, and international levels.
Increased Emphasis on Ethics and Socially Responsible Actions
Examples: Internet technology can be ahead of legislation, in particular in terms of privacy.
The boom in Internet marketing has created a new set of social and ethical issues. Critics worry most
about online privacy issues. There has been an explosion in the amount of personal digital data
available. Users, themselves, supply some of it. They voluntarily place highly private information on
social-networking sites, such as Facebook or LinkedIn, that are easily searched by anyone with a
computer or a smartphone. Example: DATA PROVIDED WHEN RENTING A CAR or info available to
credit card companies
=> The duty of a future executive: Uncompromised integrity.
Cultural environment
Cultural environment: forces that affect society’s basic values, perceptions, preferences, and
behaviours. Cultural factors strongly affect how people think and how they consume. So marketers
are keenly interested in the cultural environment.
The major cultural values of a society are expressed in people’s views of themselves and others, as
well as in their views of organizations, society, nature, and the universe.
We need to identify shifts in Secondary Cultural Values. Although core values are fairly persistent,
cultural swings do take place. Consider the impact of popular music groups, movie personalities, and
other celebrities on young people’s hairstyling and clothing norms. Marketers want to predict
cultural shifts to spot new opportunities or threats. The major cultural values of a society are
expressed in people’s views of themselves and others, as well as in their views of organizations,
society, nature, and the universe. Religion (e.g..Hallal business), Cocconing 2.0 (home made meals,
big screen TV, simple pleasures of life/back to nature (e.g. electric bikes), health conscience, work life
balance (e.g. sports clubs basic fit).
Conclusion: Responding to the Marketing Environment
“There are three kinds of companies: those who make things happen, those who watch things
happen, and those who wonder what’s happened.”



Many companies view the marketing environment as an uncontrollable element to which they
must react and adapt. They passively accept the marketing environment and do not try to change
it. Others analyze environmental forces and design strategies that will help the company avoid
the threats and take advantage of the opportunities the environment provides
Marketing management cannot always control environmental forces. In many cases, it must
settle for simply watching and reacting to the environment. For example, a company would have
little success trying to influence geographic population shifts, the economic environment, or
major cultural values.
But whenever possible, smart marketing managers will take a proactive rather than reactive
approach to the environment.
3.1.2. INTERNAL ANALYSIS (MIS)
A marketing information system (MIS) consists of people, equipment, and procedures to gather, sort,
analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision
makers.
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It relies on internal company records, marketing intelligence activities, and marketing research. MIS
is a set of procedures and sources that managers use to obtain everyday information about
developments in the marketing environment. The internal records system supplies results data, but
the marketing intelligence system supplies happenings data. Marketing managers collect marketing
intelligence in a variety of different ways, such as by reading trade publications, talking to customers,
suppliers, and distributors, monitoring social media on the Internet; and meeting with other
company managers.
Examples on how to collect info for your intelligence system (See MP)








Train and motivate the sales force to spot and report new developments
Motivate distributors, retailers, and other intermediaries to pass along important intelligence
Hire external experts to collect intelligence
Network internally and externally
Set up a customer advisory panel
Take advantage of government-related data resources
Purchase information from outside research firms
Collecting Marketing Intelligence on the Internet, including forums, blogs, Customer reviews
site, complaints sites
Questions following the session of 13th October
1. List the 6 key elements of the micro environment
2. Explain importance of Intermediaries in the value delivery chain
3. List the 6 major forces of the macro environment
4. Can the political environment be an opportunity?
3.2 Interpretation of the results
3.2.1 SWOT
SWOT analysis is a structured planning method used to evaluate and interpret all data gathered in
the market analysis process. It’s a way of monitoring the external and internal marketing
environment. SWOT analysis is a distillation of the findings of the internal and external audits, which
draws attention to the critical organizational strengths and weaknesses and the opportunities and
threats facing the company. It’s one thing to find attractive opportunities, and other to be able to
take advantage of them. Each business needs to evaluate its internal strengths and weaknesses.
Diagnosis of the current and the prospective:


Internal elements = Strengths – Weaknesses
External elements = Opportunities – Threats
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



Strengths include internal capabilities, resources, and positive situational factors that may help
the company serve its customers and achieve its objectives.
Weaknesses include internal limitations and negative situational factors that may interfere with
the company’s performance.
Opportunities are favorable factors or trends in the external environment that the company may
be able to exploit to its advantage.
Threats are unfavorable external factors or trends that may present challenges to performance.
The goal is to match the company’s strengths to attractive opportunities in the environment, while
eliminating or overcoming the weaknesses and minimizing the threats. Marketing analysis provides
inputs to each of the other marketing management functions.
Strenghts:
characteristics of the
company or product
that give it an
advantage over others
Weaknesses:
characteristics
that
place the company or
product
at
a
disadvantage relative
to others
Threats:
Opportunities:
elements
that
company or product
could exploit to its
advantage
elements
in
the
environment
that
could cause trouble
for the company or
the product
Core Competencies
Traditionally, companies owned and controlled most of the resources that entered their businesses—
labor power, materials, machines, information, and energy—but many today outsource less-critical
resources if they can obtain better quality or lower cost. The key is to own and nurture the resources
and competencies that make up the essence of the business. Many textile, chemical, and
computer/electronic product firms do not manufacture their own products because offshore
manufacturers are more competent in this task. Instead, they focus on product design and
development and marketing, their core competencies.
A core competency has three characteristics:
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(1) It is a source of competitive advantage and makes a significant contribution to perceived
customer benefits.
2) It has applications in a wide variety of markets.
(3) It is difficult for competitors to imitate
Competitive advantage ultimately derives from how well the company has fitted its core
competencies and distinctive capabilities into tightly interlocking “activity systems.”
e.g. Competitors find it hard to imitate Southwest Airlines and IKEA because they are unable to copy
their activity systems.
Opportunities
A business unit must monitor key microenvironment forces and significant microenvironment factors
that affect its ability to earn profits. It should set up a marketing intelligence system to track trends
and important developments and any related opportunities and threats. Good marketing is the art of
finding, developing, and profiting from these opportunities.
A marketing opportunity is an area of buyer need and interest that a company has a high probability
of profitably satisfying. There are three main sources of market opportunities.
The first is to offer something that is in short supply. This requires little marketing talent, as the
need is fairly obvious. The second is to supply an existing product or service in a new or superior
way. How? The problem detection method asks consumers for their suggestions, the ideal method
has them imagine an ideal version of the product or service, and the consumption chain method asks
them to chart their steps in acquiring, using, and disposing of a product. This last method often leads
to a totally new product or service.
Marketers need to be good at spotting opportunities. A few examples:






A company may benefit from introducing hybrid products or services: phones with Global
Positioning Systems (GPS).
A company may make a buying process more convenient or efficient: book search for the
lowest price with a few clicks.
A company can customize a product or service: Timberland allows customers to choose
colors for different sections of their boots
A company can introduce a new capability: Consumers can create and edit digital “iMovies”
with the iMac and upload them on YouTube to share with friends around the world.
A company may be able to deliver a product or service faster: FedEx discovered a way to
deliver mail and packages quicker than the Post Office
A company may be able to offer a product at a much lower price: Pharmaceutical firms have
created generic versions of brand-name drugs
Threats
A threat is a challenge posed by an unfavourable trend or development that, in the absence of
defensive marketing action, would lead to lower sales or profit. To deal with them, the company
needs contingency plans.
Strenghts/Weaknesses
Business can evaluate their own strengths and weaknesses by using a form like the one shown in
“Marketing meme: Checklist for Performing Strengths/ Weaknesses Analysis.”
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Clearly, the business doesn’t have to correct all its weaknesses, nor should it exploit all its strengths.
The big question is whether it should limit itself to those opportunities for which it possesses the
required strengths, or consider those that might require it to find or develop new strengths.
Opportunities and Threats – Matrix
To evaluate opportunities, companies can use market opportunity analysis (MOA) to ask questions
like:





Can we articulate the benefits convincingly to a defined target market(s)?
Can we locate the target market(s) and reach them cost-effectively?
Does our company possess or have access to the critical capabilities and resources we need to
deliver the customer benefits?
Can we deliver the benefits better than any actual or potential competitors?
Will the financial rate of return meet or exceed our required threshold for investment?
In the opportunity matrix (a), the best marketing opportunities facing appear in the upper-left cell
(#1). The opportunities in the lower-right cell (#4) are too minor to consider. The opportunities in the
upper-right cell (#2) and the lower-left cell (#3) are worth monitoring in the event that any improve
in attractiveness and potential.
An environmental threat is a challenge posed by an unfavorable trend or development that, in the
absence of defensive marketing action, would lead to lower sales or profit.
Not all threats call for the same attention or concerns. The manager should assess the likelihood of
each threat and the potential damage each could cause. Check the most probable and harmful
threats and prepare plan in advance to meet them.
Examples
Air France
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3.2.2 BCG matrix
The BCG matrix, or Boston or growth-share matrix, analyzes product lines in search of growth
opportunities. It is an essential part of portfolio analysis:

Portfolio analysis: The process by which management evaluates the products and businesses
that make up the company.
A major activity in strategic planning is business portfolio analysis, whereby management
evaluates the products and businesses that make up the company. The company will want to put
strong resources into its more profitable businesses and phase down or drop its weaker ones.
Management’s first step is to identify the key businesses that make up the company, called
strategic business units (SBUs). An SBU can be a company division, a product line within a
division, or sometimes a single product or brand. The company next assesses the attractiveness
of its various SBUs and decides how much support each deserves. When designing a business
portfolio, it’s a good idea to add and support products and businesses that fit closely with the
firm’s core philosophy and competencies.
The purpose of strategic planning is to find ways in which the company can best use its strengths
to take advantage of attractive opportunities in the environment. So most standard portfolio
analysis methods evaluate SBUs on two important dimensions: the attractiveness of the SBU’s
market or industry and the strength of the SBU’s position in that market or industry.

Growth-share matrix: A portfolio-planning method that evaluates a company’s SBUs in terms of
its market growth rate and relative market share.
The
Consulting
Approach.
Boston
Group
A company classifies all its SBUs according to the growth-share matrix. On the vertical axis, market
growth rate provides a measure of market attractiveness. On the horizontal axis, relative market
share serves as a measure of company strength in the market. The growth-share matrix defines four
types of SBUs:
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1. Stars
Stars are high-growth, high-share businesses or products. They often need heavy investments to
finance their rapid growth. Eventually their growth will slow down, and they will turn into cash cows.
Stock markets love stars.
The business units or products that have the best market share and generate the most cash are
considered stars. Monopolies and first-to-market products are frequently termed stars. However,
because of their high growth rate, stars also consume large amounts of cash. This generally results in
the same amount of money coming in that is going out. Stars can eventually become cash cows if
they sustain their success until a time when the market growth rate declines. Companies are advised
to invest in stars.
2. Cash Cows
Cash cows are low-growth, high-share businesses or products. These established and successful SBUs
need less investment to hold their market share. Thus, they produce a lot of the cash that the
company uses to pay its bills and support other SBUs that need investment.
Cash cows are the leaders in the marketplace and generate more cash than they consume. These are
business units or products that have a high market share, but low growth prospects. Cash cows
provide the cash required to turn question marks into market leaders, to cover the administrative
costs of the company, to fund research and development, to service the corporate debt, and to pay
dividends to shareholders. Companies are advised to invest in cash cows to maintain the current
level of productivity, or to "milk" the gains passively.
3. Question Marks
Question marks are low-share business units in high-growth markets. They require a lot of cash to
hold their share, let alone increase it. Management has to think hard about which question marks it
should try to build into stars and which should be phased out.
These parts of a business have high growth prospects but a low market share. They are consuming a
lot of cash but are bringing little in return. In the end, question marks, also known as problem
children, lose money. However, since these business units are growing rapidly, they do have the
potential to turn into stars. Companies are advised to invest in question marks if the product has
potential for growth, or to sell if it does not.
4. Dogs
Dogs are low-growth, low-share businesses and products. They may generate enough cash to
maintain themselves but do not promise to be large sources of cash.
Also known as pets, dogs are units or products that have both a low market share and a low growth
rate. They frequently break even, neither earning nor consuming a great deal of cash. Dogs are
generally considered cash traps because businesses have money tied up in them, even though they
are bringing back basically nothing in return. These business units are prime candidates for
divestiture.
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The circles in the matrix (size in euros)
The 10 circles in the growth-share matrix represent the company’s 10 current SBUs. The company
has two stars, two cash cows, three question marks, and three dogs. The areas of the circles are
proportional to the SBU’s dollar sales. This company is in fair shape, although not in good shape. It
wants to invest in the more promising question marks to make them stars and maintain the stars so
that they will become cash cows as their markets mature. Fortunately, it has two good-sized cash
cows. Income from these cash cows will help finance the company’s question marks, stars, and dogs.
The company should take some decisive action concerning its dogs and its question marks.
Once it has classified its SBUs, the company must determine what role each will play in the future. It
can pursue one of four strategies for each SBU. It can invest more in the business unit to build its
share. Or it can invest just enough to hold the SBU’s share at the current level.
It can harvest the SBU, milking its short-term cash flow regardless of the long-term effect. Finally, it
can divest the SBU by selling it or phasing it out and using the resources elsewhere. As time passes,
SBUs change their positions in the growth-share matrix. Many SBUs start out as question marks and
move into the star category if they succeed. They later become cash cows as market growth falls and
then finally die off or turn into dogs toward the end of their life cycle. The company needs to add
new products and units continuously so that some of them will become stars and, eventually, cash
cows that will help finance other SBUs.
3.2.3 The GE grid
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Alternatives and next steps
As BCG matrix has been criticized for implying that every company will identify products in each
quadrant and that there is or should be steady movement of products among the quadrants as they
progress in their life cycles, we can use the GE matrix instead. BCG is not predictive.
The GE/McKinsey Matrix measures products according to business-unit strength and industry
attractiveness rather than market share, the complexity of which may be outside the control of an
individual company.
Potential issues with Matrix approaches


The BCG and other formal methods revolutionized strategic planning. However, such centralized
approaches have limitations: They can be difficult, time-consuming, and costly to implement.
Management may find it difficult to define SBUs and measure market share and growth. In
addition, these approaches focus on classifying current businesses but provide little advice for
future planning.
Because of such problems, many companies have dropped formal matrix methods in favour of
more customized approaches that better suit their specific situations. Moreover, unlike former
strategic-planning efforts that rested mostly in the hands of senior managers at company
headquarters, today’s strategic planning has been decentralized. Increasingly, companies are
placing responsibility for strategic planning in the hands of cross-functional teams of divisional
managers who are close to their markets.
3.2.4 Porter’s 5 forces model
5F model aims at:


Mapping the crucial competitive forces
Defining the global competition intensity
=> Model is used to identify whether new products, services or businesses can be profitable
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1. Bargaining power of suppliers
Here you assess how easy it is for suppliers to drive up prices.




Number of suppliers
Uniqueness of product/service
Their strength/control
Switching cost
=> The less suppliers, the fewer choice you have, the more powerful your suppliers are
(dependence).
2. Rivalry among existing firms
What is important here is the number and capability of your competitors.



Number of competitors
Capability of competitors
Often equally attractive products
=> Try to do what no-one else can (Unique positioning)
3. Threat of potential entrants
Power is also affected by the ability of people to enter your market.





Required time/money to enter
Economies of scale
Key technologies
Operating costs
Barriers
=> A strong and durable position allows you to preserve a favourable position.
4. Threat of substitution
This is affected by the ability of your customers to find a different way of doing what you do.
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

Copy of the process / product
Can weaken your position
5. Bargaining power of buyers
Ask yourself how easy it is for buyers to drive prices down.



Number of buyers
Importance
Switching costs
=> The number of buyers defines the underlying buyer – seller relationship.
Conclusion





Take your time to analyze, but don’t get stuck in figures.
Marketing is a constant changing environment.
You’ll never be able to master everything.
Listen to your clients, but also trust your intuition.
Competition is important, but being yourself is even more.
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4. The goal(s) formulation
CREATING VALUE - The task of any business is to deliver customer value at a profit. In a
hypercompetitive economy with increasingly informed buyers faced with abundant choices, a
company can win only by fine tuning the value delivery process and choosing, providing, and
communicating superior value. To gain competitive advantage, companies must use this
understanding to design marketing offers that deliver more value than the offers of competitors
seeking to win the same customers.
4.1 Developing competitive strategies
•
•
•
Beyond evaluating current businesses, designing the business portfolio involves finding
businesses and products the company should consider in the future
Companies need growth if they are to compete more effectively, satisfy their stakeholders, and
attract top talent
At the same time, a firm must be careful not to make growth itself an objective. The company’s
objective must be to manage “profitable growth.”
4.1.1. Concept definitions
Competitive advantage
An advantage over competitors gained by offering consumers greater value than competitors do.
Building profitable customer relationships and gaining competitive advantage requires delivering
more value and satisfaction to target customers than competitors do.
Customers will see competitive advantages as customer advantages, giving the company an edge
over its competitors.
Competitive marketing strategies—how companies analyse their competitors and develop
successful, customer value-based strategies for building and maintaining profitable customer
relationships.
The first step is competitor analysis, the process of identifying, assessing, and selecting key
competitors. The second step is developing competitive marketing strategies that strongly position
the company against competitors and give it the greatest possible competitive advantage.
Competitor analysis
The process of identifying key competitors; assessing their objectives, strategies, strengths and
weaknesses, and reaction patterns; and selecting which competitors to attack or avoid.
Identify competitors
•
E.g. Eurostar? Ritz-Carlton? Coke? Avis?
Assessing Competitors
•
•
•
•
•
Determining Competitors’ Objectives
Assessing Competitors’ Strengths and Weaknesses
Estimating Competitors’ Reactions
Selecting Competitors to Attack and Avoid
Finding Uncontested Market Spaces
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Examples: Eurostar – plane, Eurotunnel, cars, boats, buses; Ritz-Carlton – luxury cruises; Coke – cold
drinks, caffeinated drinks; Hertz - Uber, taxi, public transport, car sharing.
Creating competitive advantage begins with a thorough understanding of competitors’ strategies.
But before a company can analyze its competitors, it must first identify
Determining Competitors’ Objectives
Each competitor has a mix of objectives. The company wants to know the relative importance that a
competitor places on current profitability, market share growth, cash flow, technological leadership,
service leadership. Next, the company wants to know: What will our competitors do? A competitor’s
objectives, strategies, and strengths and weaknesses go a long way toward explaining its likely
actions.
Competitive marketing strategies
Strategies that strongly position the company against competitors and give the company the
strongest possible strategic advantage.
Market leader
The firm in an industry with the largest market share.
Market challenger
A runner-up firm that is fighting hard to increase its market share in an industry.
Market follower
A runner-up firm that wants to hold its share in an industry without rocking the boat.
Market nicher
A firm that serves small segments that the other firms in an industry overlook or ignore.
Firms competing in a given target market, at any point in time, differ in their objectives and
resources. Some firms are large; others are small. Some have many resources; others are strapped
for funds. Some are mature and established; others new and fresh. Some strive for rapid market
share growth; others for long-term profits. And these firms occupy different competitive positions in
the target market.
Remember, however, that these classifications often do not apply to a whole company but only to its
position in a specific industry. Large companies such as GE, Microsoft, P&G, or Disney might be
leaders in some markets and nichers in others. For example, P&G leads in many segments, such as
laundry detergents and shampoo. But it challenges Unilever in hand soaps and Kimberly-Clark in
facial tissues. Such companies often use different strategies for different business units or products,
depending on the competitive situations of each.
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4.1.2. Competitive strategies
Having identified and evaluated its major competitors, the company now must design broad
competitive marketing strategies by which it can gain competitive advantage through superior
customer value. But what broad marketing strategies might the company use? Which ones are best
for a particular company or for the company’s different divisions and products?
Approaches to Marketing Strategy
No one strategy is best for all companies. Each company must determine what makes the most sense
given its position in the industry and its objectives, opportunities, and resources. Even within a
company, different strategies may be required for different businesses or products.
The bottom line is that there are many approaches to developing effective competitive marketing
strategy. There will be a constant tension between the formulated side of marketing and the creative
side. It is easier to learn the formulated side of marketing, which has occupied most of our attention
in this book. But we have also seen how marketing creativity and passion in the strategies of many of
the companies studied—whether small or large, new or mature—have helped to build and maintain
success in the marketplace. With this in mind, we now look at the broad competitive marketing
strategies companies can use.
4.1.3. Market leader strategies
Most industries contain an acknowledged market leader. The leader has the largest market share and
usually leads the other firms in price changes, new-product introductions, distribution coverage, and
promotion spending. Competitors focus on the leader as a company to challenge, imitate, or avoid.
Some of the best-known market leaders are Carrefour, (retailing), McDonald’s (fast food), Coca-Cola
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(beverages), Microsoft (software), Nike (athletic footwear and apparel), and Google (Internet search
services).
A leader’s life is not easy. It must maintain a constant watch. Other firms keep challenging its
strengths or trying to take advantage of its weaknesses. To remain number one, leading firms can
take any of three actions. First, they can try to expand total demand. Second, they can protect their
current market share through defensive and offensive actions. Third, they can try to expand their
market share further, even if market size remains constant.
Expanding Total Demand
The leading firm normally gains the most when the total market expands. Market leaders can expand
the market by developing new users, new uses, and more usage of its products
•
They usually can find new users or untapped market segments (weight watchers for men)
•
Discovering and promoting new uses for the product (maredsous sauces)
•
Encourage more usage by convincing people to use the product more often or use more per
occasion (Royco soup).
Protecting Market Share
What can the market leader do to protect its position?
•
Always fulfill its value promise
•
Keep strong relationships with valued customers
•
Prevent or fix weaknesses that provide opportunities for competitors
•
“plug holes” so that competitors do not jump in
While trying to expand total market size, the leading firm also must protect its current business
against competitors’ attacks. Walmart must constantly guard against Target; Caterpillar against
Komatsu; and McDonald’s against Burger King. But the best defence is a good offense, and the best
response is continuous innovation.
The market leader refuses to be content with the way things are and leads the industry in new
products, customer services, distribution effectiveness, promotion, and cost cutting. It keeps
increasing its competitive effectiveness and value to customers. And when attacked by challengers,
the market leader reacts decisively. E.g. Hertz, Starbucks, Accor Hotels, L’Oreal, Coke, Google, Nike.
Expanding Market Share
•
In some markets, a small market share increase can mean significant revenue increase (e.g. in
carbonated soft drinks, 1% increase in market share is worth $739 million)
•
Many companies pursue expanded market shares to improve profitability (economies of scale)
•
Increased market share will not automatically improve profitability
Market leaders also can grow by increasing their market shares further. In many markets, small
market share increases mean very large sales increases. For example, in the U.S. digital camera
market, a 1 percent increase in market share is worth $66 million; in carbonated soft drinks, $739
million! 13 Studies have shown that, on average, profitability rises with increasing market share.
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There are many high-share companies with low profitability and many low-share companies with
high profitability. The cost of buying higher market share may far exceed the returns. (e.g. VW vs
Porsche)
Higher shares tend to produce higher profits only when unit costs fall with increased market share or
when the company offers a superior-quality product and charges a premium price that more than
covers the cost of offering higher quality.
4.1.4. Market challenger strategies




Imitate and improve on the ideas pioneering leader (e.g. Minivans)
Avoid the leader and target smaller players (e.g. beer market)
Full frontal attack (e.g. Pepsi)
Indirect attack (e.g. Red Bull)
Firms that are second, third, or lower in an industry are sometimes quite large, such as PepsiCo. They
can challenge the market leader and other competitors in an aggressive bid for more market share. A
market challenger must first define which competitors to challenge and its strategic objective. The
challenger can attack the market leader, a high-risk but potentially high-gain strategy. Its goal might
be to take over market leadership. Or the challenger’s objective may simply be to wrest more market
share. In fact, challengers often become market leaders by imitating and improving on the ideas of
pioneering processors. For example, Chrysler invented the modern minivan and led in that market
for more than a decade. However, then-followers Honda and Toyota improved on the concept and
now dominate the minivan market.
How can the market challenger best attack the chosen competitor and achieve its strategic
objectives? It may launch a full frontal attack, matching the competitor’s product, advertising, price,
and distribution efforts. It attacks the competitor’s strengths rather than its weaknesses. The
outcome depends on who has the greater strength and endurance. PepsiCo challenges Coca-Cola in
this way. Red Bull, by contrast, tackled the leaders indirectly. It entered the soft drink market with a
niche product: a carbonate energy drink retailing at about twice what you would pay for a Coke. It
started by selling Red Bull through unconventional outlets not dominated by the market leaders,
such as bars and nightclubs, After gaining a loyal following, Red Bull used the pull of high margins to
elbow its way into supermarkets.
4.1.5. Market follower strategies
Not all runner-up companies want to challenge the market leader. The leader never takes challenges
lightly. If the challenger’s lure is lower prices, improved service, or additional product features, the
market leader can quickly match these to defuse the attack. The leader probably has more staying
power in an all-out battle for customers.
Many firms prefer to follow rather than challenge the market leader. A follower can gain many
advantages. The market leader often bears the huge expenses of developing new products and
markets, expanding distribution, and educating the market.
By contrast, as with challengers, the market follower can learn from the market leader’s experience.
It can copy or improve on the leader’s products and programs, usually with much less investment.
Although the follower will probably not overtake the leader, it often can be as profitable. E.g. Fast
food in France – Subway; Domino’s pizza
The follower can:
1) Learn from leader’s success and failure
2) Copy or improve on the leader’s products
3) Compete with less risks and investments
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4.1.6. Market nicher strategies
The key idea in niching is specialization
1) Serve segments of market that are small but profitable
2) Serve specific Customer needs or specific end users better than anyone
Instead of pursuing the whole market or even large segments, these firms target subsegments.
Nichers are often smaller firms with limited resources. But smaller divisions of larger firms also may
pursue niching strategies. Firms with low shares of the total market can be highly successful and
profitable through smart niching.
Why is niching profitable? The main reason is that the market nicher ends up knowing the target
customer group so well that it meets their needs better than other firms that casually sell to that
niche. As a result, the nicher can charge a substantial markup over costs because of the added value.
Whereas the mass marketer achieves high volume, the nicher achieves high margins. Nichers try to
find one or more market niches that are safe and profitable. An ideal market niche is big enough to
be profitable and has growth potential. It is one that the firm can serve effectively. Most importantly,
the niche is of little interest to major competitors. And the firm can build the skills and customer
goodwill to defend itself against a major competitor as the niche grows and becomes more attractive
Niching carries some major risks. For example, the market niche may dry up, or it might grow to the
point that it attracts larger competitors. That is why many companies practice multiple niching.
4.1.7. Developing strategies for growth
Marketing needs to identify, evaluate, and select market opportunities and establish strategies for
capturing them. One useful device for identifying growth opportunities is the product/market
expansion grid: A portfolio-planning tool for identifying company growth opportunities through
market penetration, market development, product development, or diversification.
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Product/Market growth matrix
Market penetration Company growth by increasing sales of current products to current market
segments without changing the product.
Market development Company growth by identifying and developing new market segments for
current company products.
Product development Company growth by offering modified or new products to current market
segments.
Diversification Company growth through starting up or acquiring businesses outside the company’s
current products and markets.
Companies must not only develop strategies for growing their business portfolios but also strategies
for downsizing them. There are many reasons that a firm might want to abandon products or
markets. The firm may have grown too fast or entered areas where it lacks experience.
This can occur when a company introduces new products that do not offer superior customer value.
The market environment might change, making some products or markets less profitable. For
example, in difficult economic times, many firms prune out weaker, less profitable products and
markets to focus their more limited resources on the strongest ones.
Finally, some products or business units simply age and die. When a firm finds brands or businesses
that are unprofitable or that no longer fit its overall strategy, it must carefully prune, harvest, or
divest them. Weak businesses usually require a disproportionate amount of management attention.
Managers should focus on promising growth opportunities, not fritter away energy trying to salvage
fading ones.
4.1.8. Blue ocean strategy (Chan Kim)
Red Ocean is competing head-on results in overcrowded industries (the strategy isn’t likely to create
profitable growth in the future).

Red oceans applicable to all the existing industries today – the known market space. In the
red oceans, industry boundaries are defined and accepted, and the competitive rules of the
game are known. 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.
Leading companies will succeed not by battling competitors but by creating “blue oceans” of
uncontested market space. Also called value innovation, 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.
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
Blue oceans, in contrast, denote all the industries not in existence today – the unknown
market space, untainted by competition. In blue oceans, demand is created rather than
fought over. There is ample opportunity for growth that is both profitable and rapid.
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.
Ex: With the creation of Viagra, Pfizer created a blue ocean in lifestyle
drugs by going beyond the boundaries of the pharmaceutical industry
at the time. Viagra shifted the focus from the pharmaceutical
industry’s largely functional orientation, medical treatment, to
lifestyle enhancement, an emotional orientation.
4.2 The goal formulation
Once the company has performed a SWOT analysis, it can proceed to
goal formulation, developing specific goals for the planning period.
Goals are objectives that are specific with respect to magnitude and
time. Most business units pursue a mix of objectives, including
profitability, sales growth, market share improvement, risk
containment, innovation, and reputation. The business unit sets these
objectives and then manages by objectives (MBO).
For an MBO system to work, the unit’s objectives must meet four
criteria:
1. They must be arranged hierarchically, from most to least important.
The business unit’s key objective for the period may be to increase the rate of return on investment.
Managers can increase profit by increasing revenue and reducing expenses. They can grow revenue,
in turn, by increasing market share and prices.
2. Objectives should be quantitative whenever possible. The objective “to increase the return on
investment (ROI)” is better stated as the goal “to increase ROI to 15 percent within two years.”
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3. Goals should be realistic. They should arise from an analysis of the business unit’s opportunities
and strengths, not from wishful thinking.
4. Objectives must be consistent. It’s not possible to maximize sales and profits simultaneously.
Other important trade-offs include short-term profit versus long-term growth, deep penetration of
existing markets versus development of new markets, profit goals versus nonprofit goals, and high
growth versus low risk. Each choice calls for a different marketing strategy. Many believe adopting
the goal of strong market share growth may mean foregoing strong short-term profits. Volkswagen
has 15 times the annual revenue of Porsche—but Porsche’s profit margins are seven times bigger
than Volkswagen’s.
Questions:
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
What is the ultimate goal of the SWOT?
Ideally, a strength should be “relative”. Explain
In the BCG, CFO’s tend to love cash cows. Why?
List 4 potential strategies derived from the BCG. Explain one of them.
What is the main difference between the BCG and GE matrix?
In porter’s 5 forces model, explain “threat of potential entrants”.
What are 3 key market leader strategies? Explain one
Can a market nicer be profitable? Explain
Define the red ocean and blue ocean strategies
Briefly describe the 5 key elements of goal setting
What are the key mistakes in setting goals?
Assigning Resources to each SBU: Will be covered in marketing plan chapter
Even a great marketing strategy can be sabotaged by poor implementation. If the unit has decided to
attain technological leadership, it must strengthen its R&D department, gather technological
intelligence, develop leading-edge products, train its technical sales force, and communicate its
technological leadership. Once they have formulated marketing programs, marketers must estimate
their costs.
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5. Segmentation
Market segmentation addresses the first simple sounding
marketing question: Which customers will we serve?
Selecting Customers to Serve
The company must first decide whom it will serve. It does this by dividing the market into segments
of customers (market segmentation) and selecting which segments it will go after (target marketing).
Some people think of marketing management as finding as many customers as possible and
increasing demand. But marketing managers know that they cannot serve all customers in every way.
By trying to serve all customers, they may not serve any customers well. Instead, the company wants
to select only customers that it can serve well and profitably.
Ultimately, marketing managers must decide which customers they want to target and on level,
timing, and nature of their demand.
5.1 Introduction
There’s no such thing as a bad customer. Right? And the more
customers, the merrier. Makes sense, right? After all, more
customers mean more money in the till. As it turns out,
however, that’s often not so. These days, many marketers are
discovering a new truth: Some customers can be way, way
wrong for the company—as in unprofitable.
And trying to serve any and all customers can mean serving
none of them well. Instead, companies need to make certain
that they are serving the right customers and serving them in the right way. They need to decide who
their best potential customers are—and who they aren’t.
Companies today recognize that they cannot appeal to all buyers in the marketplace—or at least not
to all buyers in the same way. Buyers are too numerous, widely scattered, and varied in their needs
and buying practices. Moreover, the companies themselves vary widely in their abilities to serve
different segments of the market. Companies must identify the parts of the market that it can serve
best and most profitably. It must design customer-driven marketing strategies that build the right
relationships with the right customers.
Thus, most companies have moved away from mass marketing and toward target marketing:
identifying market segments, selecting one or more of them, and developing products and marketing
programs tailored to each. Instead of scattering their marketing efforts (the “shotgun” approach),
firms are focusing on the buyers who have greater interest in the values they create best (the “rifle”
approach).
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5.1.1 The STP trio
To compete more effectively, many companies are now embracing
target marketing. Instead of scattering their marketing efforts, they’re
focusing on those consumers they have the greatest chance of
satisfying. Effective target marketing requires that marketers:
1. Identify and profile distinct groups of buyers who differ in their
needs and wants (market segmentation).
2. Select one or more market segments to enter (market targeting).
3. For each target segment, establish and communicate the distinctive
benefit(s) of the company’s market offering (market positioning).
Buyers in any market differ in their wants, resources, locations, buying attitudes, and buying
practices. Through market segmentation, companies divide large, heterogeneous markets into
smaller segments that can be reached more efficiently and effectively with products and services
that match their unique needs.
5.1.2 Définitions
Market segmentation : Dividing a market into smaller segments with distinct needs, characteristics,
or behavior that might require separate marketing strategies or mixes. The company identifies
different ways to segment the market and develops profiles of the resulting market segments.
Market targeting (targeting) : The process of evaluating each market segment’s attractiveness and
selectingone or more segments to enter. In the final two steps, the company decides on a value
proposition—how it will create value for target customers.
Differentiation : Differentiating the market offering to create superior customer value.
Positioning : Arranging for a market offering to occupy a clear, distinctive, and desirable place
relative to competing products in the minds of target consumers. We discuss each of these steps in
turn.
In concept, marketing boils down to two questions:
(1) Which customers will we serve? And
(2) How will we serve them?
The difficult part is coming up with good answers to these simple-sounding yet difficult questions.
The goal is to create more value for the customers we serve than competitors do.
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5.1.3 Segmentation
What are the different levels of market segmentation?
2. How can a company divide a market into segments?
3. What are the requirements for effective segmentation?
4. How should business markets be segmented?
5. How to choose the most attractive target markets?
Bases for Segmenting Consumer Markets
Market segmentation divides a market into well-defined slices. A market segment consists of a group
of customers who share a similar set of needs and wants. The marketer’s task is to identify the
appropriate number and nature of market segments and decide which one(s) to target.
We use two broad groups of variables to segment consumer markets.
Some researchers try to define segments by looking at descriptive characteristics: geographic,
demographic, and psychographic.
Other researchers try to define segments by looking at behavioral considerations, such as consumer
responses to benefits, usage or brands.
The researcher then sees whether different characteristics are associated with each consumerresponse segment. For example, do people who want “quality” rather than “low price” in an
automobile differ in their geographic, demographic, and psychographic makeup?
Regardless of which type of segmentation scheme we use, the key is adjusting the marketing
program to recognize customer differences. The major segmentation variables—geographic,
demographic, psychographic, and behavioral segmentation
There is no single way to segment a market. A marketer has to try different segmentation
variables, alone and in combination, to find the best way to view market structure.
5.2 Geographic segmentation
Dividing a market into different geographical units, such as nations, states, regions, counties,
cities, or even neighborhoods.
A company may decide to operate in one or a few geographical areas or operate in all areas
but pay attention to geographical differences in needs and wants.
Many companies today are localizing their products, advertising, promotion, and sales efforts
to fit the needs of individual regions, cities, and even neighborhoods.
Some examples:
1. Climate: e.g; A company that sells both rain gear and summer wear
2. Population Density: e.g. High-density cities create a higher demand for products, like readyto-eat meals.
3. Cultural Preferences: The fast food giant McDonald's serves beer in their German outlets.
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5.3 Demographic segmentation
Dividing the market into segments based on variables such as age, gender, family size, family
life cycle, income, occupation, education, religion, race, generation, and nationality.
Demographic factors are the most popular bases for segmenting customer groups. One
reason is that consumer needs, wants, and usage rates often vary closely with demographic
variables.
Another is that demographic variables are easier to measure than most other types of
variables. Even when marketers first define segments using other bases, such as benefits
sought or behavior, they must know a segment’s demographic characteristics to assess the
size of the target market and reach it efficiently.
Note: main base for media planning and media buying agencies
5.3.1 Age and Life-Cycle Stage
Consumer needs and wants change with age. Some companies use age and life-cycle
segmentation, offering different products or using different marketing approaches for
different age and life-cycle groups.
Other companies focus on the specific age of life-stage groups.
For example, although consumers in all age segments love Disney cruises, Disney Cruise Lines
focuses primarily on families with children. Most of its destinations and shipboard activities
are designed with parents and their children in mind
Marketers must be careful to guard against stereotypes when using age and life-cycle
segmentation. Although some 80-year-olds fit the stereotypes, others play tennis.
Similarly, whereas some 40-year-old couples are sending their children off to college, others
are just beginning new families. Thus, age is often a poor predictor of a person’s life cycle,
health, work or family status, needs, and buying power. Companies marketing to mature
consumers usually employ positive images and appeals. For example, one Carnival Cruise
Lines ad for its Fun Ships features an older boomer and child riding waterslides, stating “fun
has no age limit.”
Also grand parents can take their grand kids on a Disney cruise
5.3.2 Gender
Gender segmentation has long been used in clothing, cosmetics, toiletries, and magazines.
More recently, many mostly women’s cosmetics makers have begun marketing men’s lines.
For example, Nivea markets Nivea for Men, a product line for men ranging from its 3-in-1
Active3 body wash, shampoo, and shaving cream combination to a revitalizing eye cream.
According to a Nivea marketer, Active3 appeals to the male mind-set of, “I wanted to be fast,
convenient, and economical. ” It’s “What Men Want.”
Some traditionally more male-oriented markets, such as the automobile industry, are
beginning to recognize gender segmentation and changing the way they design and sell cars.
Women shop differently for cars than men; they are more interested in environmental
impact, care more about interior than exterior styling, and view safety in terms of features
that help drivers survive an accident rather than help avoid one. (active saftety vs. passive
safety: brakes vs. airbags)
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5.3.3 Income
Income. The marketers of products and services such as automobiles, clothing, cosmetics,
financial services, and travel have long used income segmentation.
Many companies target affluent consumers with luxury goods and convenience services. For
example, luxury hotels provide special packages to attract affluent travelers.
The Four Seasons Miami recently offered a Five Diamond package that included a two-carat
Graff diamond eternity band and a stay in the presidential suite with a bottle of 1990 Dom
Pérignon champagne, caviar for two, and an 80-minute in-suite couples massage using a
lotion infused with real ground diamonds. The price tag: “From $50,000….
The recent troubled economy has provided challenges for marketers targeting all income
groups.
Consumers at all income levels—including affluent consumers—are cutting back on their
spending and seeking greater value from their purchases. In many cases, luxury marketers
targeting high-income consumers have been hardest hit.
Even consumers who can still afford to buy luxuries appear to be pushing the pause button.
“The wealthy still have the wealth, [but] it’s the image you project in a bad economy of
driving a nice car when your friends or colleagues may be losing their businesses.”
Income segmentation is a long-standing practice in such categories as automobiles, clothing,
cosmetics, financial services, and travel.
However, income does not always predict the best customers for a given product.
Blue-collar workers were among the first purchasers of flat screen television sets; it was
cheaper for them to buy these sets than to go to movies and restaurants.
Also, some lower income groups still buy premium or luxury products / accessories as status
products (LVMH bags , Sunglasses, phones,….
And high income can shop at ALDI…
5.4 Psychographic segmentation
Dividing a market into different
segments based on social class,
lifestyle, or personality characteristics.
People in the same demographic group
can have very different psychographic
characteristics.
The products people buy reflect their
lifestyles.
As a result, marketers often segment
their markets by consumer lifestyles
and base their marketing strategies on
lifestyle appeals.
Marketers also use personality variables
to segment markets.
For example, cruise lines target adventure seekers. Royal Caribbean appeals to high-energy
couples and families by providing hundreds of activities.
By contrast, the Regent Seven Seas Cruise Line targets more serene and cerebral
adventurers, mature couples seeking a more elegant ambiance and exotic destinations, such
as the Orient.
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Psychographics is the science of using psychology and demographics to better understand
consumers.
In psychographic segmentation, buyers are divided into different groups on the basis of
psychological/personality traits, lifestyle, or values. People within the same demographic
group can exhibit very different psychographic profiles.
One of the most popular commercially available classification systems based on
psychographic measurements is Strategic Business Insight’s (SBI) VALS™ framework.VALS,
signifying values and lifestyles, classifies U.S. adults into eight primary groups based on
responses to a questionnaire featuring 4 demographic and 35 attitudinal questions
5.4.1 VALS
The main dimensions of the VALS segmentation framework are consumer motivation (the
horizontal dimension) and consumer resources (the vertical dimension). Consumers are
inspired by one of three primary motivations: ideals, achievement, and self-expression.
Those primarily motivated by ideals are guided by knowledge and principles. Those
motivated by achievement look for products and services that demonstrate success to their
peers. Consumers whose motivation is self-expression desire social or physical activity,
variety, and risk. Personality traits such as energy, self-confidence, intellectualism, novelty
seeking, innovativeness, impulsiveness, leadership, and vanity—in conjunction with key
demographics—determine an individual’s resources. Different levels of resources enhance or
constrain a person’s expression of his or her primary motivation.
5.5 Behavioral segmentation
Dividing a market into segments based on consumer knowledge, attitudes, uses, or responses to a
product.
5.6 Occasion segmentation
Dividing the market into segments according to occasions when buyers get the idea to buy, actually
make their purchase, or use the purchased item.
Occasions mark a time of day, week, month, year, or other well-defined temporal aspects of a
consumer’s life. We can distinguish buyers according to the occasions when they develop a need,
purchase a product, or use a product. For example, air travel is triggered by occasions related to
business, vacation, or family. Occasion segmentation can help expand product usage.
Occasion segmentation can help firms build up product usage. Some holidays, such as Mother’s Day
and Father’s Day, were originally promoted partly to increase the sale of candy, flowers, cards, and
other gifts. And many marketers prepare special offers and ads for holiday occasions. For example,
M&Ms runs ads throughout the year but prepares special ads and packaging for holidays and events
such as Christmas, Easter,
5.7 Benefit segmentation
Dividing the market into segments according to the different benefits that consumers seek from the
product.
Benefit segmentation requires finding the major benefits people look for in a product class, the kinds
of people who look for each benefit, and the major brands that deliver each benefit.
Champion athletic wear segments its markets according to benefits that different consumers seek
from their activewear. For example, “Fit and Polish” consumers seek a balance between function and
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style—they exercise for results but want to look good doing it. “Serious Sports Competitors” exercise
heavily and live in and love their activewear—they seek performance and function. By contrast,
“Value-Seeking Moms” have low sports interest and low activewear involvement—they buy for the
family and seek durability and value. Thus, each segment seeks a different mix of benefits. Champion
must target the benefit segment or segments that it can serve best and most profitably, using
appeals that match each segment’s benefit preferences.
5.8 Using Multiple Segmentation Bases
Marketers rarely limit their segmentation analysis to only one or a few variables only. Rather, they
often use multiple segmentation bases in an effort to identify smaller, better-defined target groups.
Thus, a bank may not only identify a group of wealthy, retired adults but also, within that group,
distinguish several segments based on their current income, assets, savings and risk preferences,
housing, and lifestyles.
Several business information services provide multivariable segmentation systems that merge
geographic, demographic, lifestyle, and behavioral data to help companies segment their markets
5.9 Requirements for Effective Segmentation
Measurable: The size, purchasing power, and profiles of the segments can be measured. Certain
segmentation variables are difficult to measure. For example, there are approximately 30.5 million
left handed people in the United States. Yet few products are targeted toward this left-handed
segment. The major problem may be that the segment is hard to identify and measure.
Accessible: The market segments can be effectively reached and served. Unless a specific group lives
or shops at certain places and is exposed to certain media, its members might be difficult to reach.
Substantial: The market segments are large or profitable enough to serve. A segment should be the
largest possible homogeneous group worth pursuing with a tailored marketing program. It would not
pay, for example, for an automobile manufacturer to develop cars especially for people whose height
is greater than seven feet.
Differentiable: The segments are conceptually distinguishable and respond differently to different
marketing mix elements and programs. If men and women respond similarly to marketing efforts for
soft drinks, they do not constitute separate segments.
Actionable: Effective programs can be designed for attracting and serving the segments.
For example, although one small airline identified seven market segments, its staff was too small to
develop separate marketing programs for each segment.
5.10 Segmenting Business Markets (bonus!)
Consumer and business marketers use many of the same variables to segment their markets.
Business buyers can be segmented geographically, demographically (industry, company size), or by
benefits sought, user status, usage rate, and loyalty status. Yet, business marketers also use some
additional variables, such as customer operating characteristics, purchasing approaches, situational
factors, and personal characteristics.
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5.11 Summary
1. Target marketing includes three activities: market segmentation, market targeting, and market
positioning. Market segments are large, identifiable groups within a market.
2. Two bases for segmenting consumer markets are consumer characteristics and consumer
responses. The major segmentation variables for consumer markets are geographic, demographic,
psychographic, and behavioral. Marketers use them singly or in combination.
3. Business marketers use all these variables along with operating variables, purchasing approaches,
and situational factors.
4. To be useful, market segments must be measurable, substantial, accessible, differentiable, and
actionable.
5. We can target markets at four main levels: mass, multiple segments, single (or niche) segment,
and individuals.
6. A mass market targeting approach is adopted only by the biggest companies. Many companies
target multiple segments defined in various ways such as various demographic groups who seek the
same product benefit.
7. A niche is a more narrowly defined group. Globalization and the Internet have made niche
marketing more feasible to many.
8. More companies now practice individual and mass customization. The future is likely to see more
individual consumers take the initiative in designing products an
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6. Targeting
TARGET MARKET – A set of buyers sharing common needs or characteristics that the company
decides to serve.
Definitions
Market targeting (targeting) : The process of evaluating each market segment’s attractiveness and
selecting one or more segments to enter.
Undifferentiated (mass) marketing : A market-coverage strategy in which a firm decides to ignore
market segment differences and go after the whole market with one offer.
Differentiated (segmented) marketing : A market-coverage strategy in which a firm decides to target
several market segments and designs separate offers for each.
Concentrated (niche) marketing :A market-coverage strategy in which a firm goes after a large share
of one or a few segments or niches
Micromarketing : Tailoring products and marketing programs to the needs and wants of specific
individuals and local customer segments; It includes local marketing and individual marketing
Local marketing : Tailoring brands and promotions to the needs and wants of local customers
segments—cities, neighbourhoods, and even specific stores.
Individual marketing : Tailoring products and marketing programs to the needs and preferences
ofindividual customers—also called one-to-one marketing, customized marketing, and markets-ofone marketing.
6.1 Targeting
Market segmentation reveals the firm’s market segment opportunities. The firm now has to evaluate
the various segments and decide how many and which segments it can serve best.
6.1.1 Evaluating Market Segments
Market segmentation divides a market into well-defined slices. A market segment consists of a group
of customers who share a similar set of needs and wants.
The marketer’s task is to identify the appropriate number and nature of market segments and decide
which one(s) to target
In evaluating different market segments, a firm must look at three factors: segment size and growth,
segment structural attractiveness, and company objectives and resources. The company must first
collect and analyze data on current segment sales, growth rates, and the expected profitability for
various segments. It will be interested in segments that have the right size and growth
characteristics.
But “right size and growth” is a relative matter. The largest, fastest-growing segments are not always
the most attractive ones for every company. Smaller companies may lack the skills and resources
needed to serve larger segments. Or they may find these segments too competitive. Such companies
may target segments that are smaller and less attractive, in an absolute sense, but that are
potentially more profitable for them. The company also needs to examine major structural factors
that affect long-run segment attractiveness (see Porter’s five forces model).
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Even if a segment has the right size and growth and is structurally attractive, the company must
consider its own objectives and resources. Some attractive segments can be dismissed quickly
because they do not mesh with the company’s long-run objectives. Or the company may lack the
skills and resources needed to succeed in an attractive segment.
6.1.2 Selecting Market Segments
After evaluating different segments, the company must decide which and how many segments it will
target. A target market consists of a set of buyers who share common needs or characteristics that
the company decides to serve. Market targeting can be carried out at several different levels. Figure
7.2 shows that companies can target very broadly (undifferentiated marketing), very narrowly
(micromarketing), or somewhere in between (differentiated or concentrated marketing).
Companies need to consider many factors when choosing a market-targeting strategy.
Which strategy is best depends on the company’s resources. The best strategy also depends on the
degree of product variability. Undifferentiated marketing is more suited for uniform products, such
as grapefruit or steel. Products that can vary in design, such as cameras and cars, are more suited to
differentiation or concentration. The product’s life-cycle stage also must be considered. When a firm
introduces a new product, it may be practical to launch one version only, and undifferentiated
marketing or concentrated marketing may make the most sense. In the mature stage of the product
life cycle, however, differentiated marketing often makes more sense.
Another factor is market variability. If most buyers have the same tastes, buy the same amounts,
and react the same way to marketing efforts, undifferentiated marketing is appropriate.
Finally, competitors’ marketing strategies are important. When competitors use differentiated or
concentrated marketing, undifferentiated marketing can be suicidal. Conversely, when competitors
use undifferentiated marketing, a firm can gain an advantage by using differentiated or concentrated
marketing, focusing on the needs of buyers in specific segments.
In evaluating different market segments, the firm must look at two factors: the segment’s overall
attractiveness and the company’s objectives and resources. Does it have characteristics that make it
generally attractive, such as size, growth, profitability, scale economies, and low risk? Does investing
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in the segment make sense given the firm’s objectives, competencies, and resources? Some
attractive segments may not fit with the company’s long-run objectives, or the company may lack
one or more necessary competencies to offer superior value.
Marketers have a range or continuum of possible levels of segmentation that can guide their target
market decisions. As Figure above shows, at one end is a mass market of essentially one segment; at
the other are individuals or segments of one person. Between lie multiple segments and single
segments. We describe each of the four approaches next.
Undifferentiated (mass) Marketing
In undifferentiated or mass marketing, the firm ignores segment differences and goes after the
whole market with one offer. It designs a marketing program for a product with a superior image
that can be sold to the broadest number of buyers via mass distribution and mass communications.
Undifferentiated marketing is appropriate when all consumers have roughly the same preferences
and the market shows no natural segments. Henry Ford epitomized this strategy when he offered the
Model-T Ford in one color, black.
The argument for mass marketing is that it creates the largest potential market, which leads to the
lowest costs, which in turn can lead to lower prices or higher margins. The narrow product line keeps
down the costs of research and development, production, inventory, transportation, marketing
research, advertising, and product management. The undifferentiated communication program also
reduces costs. However, many critics point to the increasing splintering of the market, and the
proliferation of marketing channels and communication, which make it difficult and increasingly
expensive to reach a mass audience.
Most modern marketers have strong doubts about this strategy. Difficulties arise in developing a
product or brand that will satisfy all consumers.
Moreover, mass marketers often have trouble competing with more-focused firms that do a better
job of satisfying the needs of specific segments and niches.
Benefit: huge economy of scales
Go to market cost a lot because we use mass media which are really expensives
Differentiated (segmented) Marketing
Using a differentiated marketing (or segmented marketing) strategy, a firm decides to target several
market segments and designs separate offers for each.
When different groups of consumers have different needs and wants, marketers can define multiple
segments. The company can often better design, price, disclose, and deliver the product or service
and also fine-tune the marketing program and activities to better reflect competitors’ marketing.
Indifferentiated marketing, the firm sells different products to all the different segments of the
market
e.g: VF Corporation offers a full set of more than thirty premium lifestyle brands, which “fit the lives of
consumers the world over” in well-defined segments. VF is the nation’s number-one jeans maker, with
brands such as Lee, Riders, Rustler, and Wrangler. But jeans are not the only focus for VF. The
company’s brands are carefully separated into five major segments—Jeanswear, Imagewear
(workwear), Outdoor, Sportswear, and Contemporary Brands. The North Face, part of the Outdoor
unit, offers top-of-the-line gear and apparel for diehard outdoor enthusiasts, especially those who
prefer cold weather activities. From the Sportswear unit, Nautica focuses on people who enjoy highend casual apparel inspired by sailing and the sea. …
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But differentiated marketing also increases the costs of doing business. A firm usually finds it more
expensive to develop and produce, say, 10 units of 10 different products than 100 units of a single
product. Developing separate marketing plans for the separate segments requires extra marketing
research, forecasting, sales analysis, promotion planning, and channel management. And trying to
reach different market segments with different advertising campaigns increases promotion costs.
Thus, the company must weigh increased sales against increased costs when deciding on a
differentiated marketing strategy.
Concentrated (niche) Marketing
Concentrated (niche) marketing: A market-coverage strategy in which a firm goes after a large share
of one or a few segments or niches. Instead of going after a small share of a large market, a firm goes
after a large share of one or a few smaller segments.
Through concentrated marketing, the firm achieves a strong market position because of its greater
knowledge of consumer needs in the niches it serves and the special reputation it acquires. It can
market more effectively by fine-tuning its products, prices, and programs to the needs of carefully
defined segments. It can also market more efficiently, targeting its products or services, channels,
and communications programs toward only consumers that it can serve best and most profitably.
Whereas segments are fairly large and normally attract several competitors, niches are smaller and
may attract only one or a few competitors. Niching lets smaller companies focus their limited
resources on serving niches that may be unimportant to or overlooked by larger competitors
What does an attractive niche look like? Customers have a distinct set of needs; they will pay a
premium to the firm that best satisfies them; the niche is fairly small but has size, profit, and growth
potential and is unlikely to attract many competitors; and the niche gains certain economies through
specialization.
Micro Marketing
Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of
specific individuals and locations.
Rather than seeing a customer in every individual, micro-marketers see the individual in every
customer. Micromarketing includes local marketing and individual marketing
INDIVIDUAL MARKETING: The ultimate level of segmentation leads to “segments of one,”
“customized marketing,” or “one-to-one marketing.” Today, customers are taking more individual
initiative in determining what and how to buy. They log onto the Internet; look up information and
evaluations of product or service offerings; conduct dialogue with suppliers, users, and product
critics; and in many cases design the product they want.
Examples
Local marketing involves tailoring brands and promotions to the needs and wants of local customer
groups—cities, neighborhoods, and even specific stores
Geo-fencing is a feature in a software program that uses the global positioning system (GPS) or radio
frequency identification (RFID) to define geographical boundaries. A geofence is a virtual barrier
Geofencing is the use of the Global Positioning System (GPS) satellite network and/or local radiofrequency identifiers (such as Wi-Fi nodes or Bluetooth beacons) to create virtual boundaries around
a location. The geofence is then paired with a hardware/software application that responds to the
boundary in some fashion as dictated by the parameters of the program.
Example: HERTZ message in airport arrival halls for last minute rental at the counter
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Local marketing has some drawbacks. It can drive up manufacturing and marketing costs by reducing
the economies of scale. It can also create logistics problems as companies try to meet the varied
requirements of different regional and local markets
Mass Customization
Individual Marketing. In the extreme, micromarketing becomes individual marketing— tailoring
products and marketing programs to the needs and preferences of individual customers. Individual
marketing has also been labeled one-to-one marketing, mass customization, and markets-of-one
marketing.
Mass customization is the process through which firms interact one-to-one with masses of customers
to design products and services tailor-made to individual needs.
Dell, HP, and Apple create custom-configured computers.
Visitors to Nike’s Nike ID Web site can personalize their sneakers by choosing from hundreds of
colors.
Target Message
If you watch an ad on a video screen in a mall, health club, or grocery store, there is a growing
chance that the ad is also watching you. Small cameras can now be embedded in or around the
screen, tracking who looks at the screen and for how long. With surprising accuracy, the system can
determine the viewer’s gender, approximate age range, and, in some cases, ethnicity—and change
the ads accordingly. That could mean razor ads for men, cosmetics ads for women, and videogame
ads for teens. Or a video screen might show a motorcycle ad for a group of men but switch to a
minivan ad when women and children join them. “This is proactive merchandising,” says a media
executive. “You’re targeting people with smart ads.”
Retargeting example
Example: Sojern is a provider of a data-driven traveler marketing platform that utilizes programmatic
buying and machine learning technology.[ Sojern partners with travel companies including
airlines, On-line travel agencies, hotels, and rental car companies to collect (non-personally
identifiable) traveler profiles. The company utilizes this data to target travelers and deliver marketing
messages across media channels
The Sojern Traveler Platform uses data collected by the platform to target audiences and provide
access to Customer touch-points Specifically the company offers solutions in such areas as display
advertising & mobile video, and re-targeting Sojern uses data on traveler behavior in addition to
targeting algorithms and programmatic bidding to provide these solutions.
6.2 Summary
1. Target marketing includes three activities: market segmentation, market targeting, and
positioning. Market segments are large, identifiable groups within a market.
2. Two bases for segmenting consumer markets are consumer characteristics and consumer
responses.
The major segmentation variables for consumer markets are geographic, demographic,
psychographic, and behavioral. Marketers use them singly or in combination.
3. Business marketers use all these variables along with operating variables, purchasing approaches,
and situational factors.
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4. To be useful, market segments must be measurable, substantial, accessible, differentiable, and
actionable.
5. We can target markets at four main levels: mass, multiple segments, single (or niche) segment,
and individuals.
6. A mass market targeting approach is adopted only by the biggest companies. Many companies
target multiple segments defined in various ways such as various demographic groups who seek the
same product benefit.
7. A niche is a more narrowly defined group. Globalization and the Internet have made niche
marketing more feasible to many.
8. More companies now practice individual and mass customization. The future is likely to see more
individual consumers take the initiative in designing products and brands.
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7. Positioning
7.1 Brand
One of the most valuable intangible assets of a firm is its brands, and it is incumbent on marketing
to properly manage their value. Building a strong brand is both an art and a science. It requires
careful planning, a deep long-term commitment, and creatively designed and executed marketing. A
strong brand commands intense consumer loyalty—at its heart is a great product or service. Perhaps
the most distinctive skill of professional marketers is their ability to create, maintain, enhance, and
protect brands. Established brands such as Mercedes, Sony, and Nike have commanded a price
premium and created deep customer loyalty through the years.
We can define a brand as “a name, term, sign, symbol, or design, or a combination of them, intended
to identify the goods or services of one seller or group of sellers and to differentiate them from those
of competitors.” A brand is thus a product or service whose dimensions differentiate it in some way
from other products or services designed to satisfy the same need. These differences may be
functional, rational, or tangible—related to product performance of the brand. They may also be
more symbolic, emotional, or intangible—related to what the brand represents or means in a more
abstract sense.
7.1.1 The role of brands
Brands identify the source or maker of a product and allow consumers—either individuals or
organizations—to assign responsibility for its performance to a particular manufacturer.
Consumers may evaluate the identical product differently depending on how it is branded. They
learn about brands through past experiences with the product and its marketing program, finding out
which brands satisfy their needs and which do not. As consumers’ lives become more complicated,
rushed, and time-starved, a brand’s ability to simplify decision making and reduce risk becomes
invaluable.
A credible brand signals a certain level of quality so that satisfied buyers can easily choose the
product again. Brand loyalty provides predictability and security of demand for the firm, and it
creates barriers to entry that make it difficult for other firms to enter the market.
One research study that provoked much debate about the effects of marketing on children showed
that kids felt identical McDonald’s food items— even carrots, milk, and apple juice—tasted better
when wrapped in McDonald’s familiar packaging than in unmarked wrappers
7.1.2 Value of brands
To firms, brands represent enormously valuable pieces of legal property that can influence consumer
behavior, be bought and sold, and provide their owner the security of sustained future revenues.
Companies have paid dearly for brands in mergers or acquisitions, often justifying the price premium
on the basis of the extra profits expected and the difficulty and expense of creating similar brands
from scratch.
Wall Street believes strong brands result in better earnings and profit performance for firms, which,
in turn, create greater value for shareholders.
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7.1.3 Brand equity
Is the added value on products and services. It may be reflected in the way consumers think, feel,
and act with respect to the brand, as well as in the prices, market share, and profitability the brand
commands
7.1.4 The scope of branding
Marketers can apply branding virtually anywhere a consumer has a choice. It’s possible to brand a
physical good, a medication (viagra), a service (British Airways), a hospital, an insurance, a retail
store, a person, a place (country of Spain), an organization (U2), a school, or an idea (e.g. political
party),….
Gaz: you don’t see the product, you can’t taste it but the brand has a value
Potential benefits of strong brand equity : If you drink Spa, i twill be hard to Evian to have you in its
consumers.
7.1.5 BrandZ Example
BRANDZ Marketing research consultants Millward Brown and WPP have developed the BrandZ
model of brand strength, at the heart of which is the BrandDynamics pyramid. According to this
model, brand building follows a series of steps. For any one brand, each person interviewed is
assigned to one level of the pyramid depending on their responses to a set of questions. The
BrandDynamics Pyramid shows the number of consumers who have reached each level.
• Presence. Active familiarity based on past trial or knowledge of brand
• Relevance. Relevance to consumer’s needs, in the consideration set
• Performance. Belief that it delivers right product performance and is on the consumer’s short-list
• Advantage. Belief that the brand has an emotional or rational advantage over other brands in the
category
• Bonding. Rational and emotional attachment to the brand to the exclusion of most other brands
“Bonded” consumers at the top of the pyramid build stronger relationships with and spend more on
the brand than those at lower levels.
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7.1.6 Creating a brand equity
Customer-based brand equity is thus the differential effect brand knowledge has on consumer
response to the marketing of that brand.
A brand has positive customer-based brand equity when consumers react more favorably to a
product and the way it is marketed when the brand is identified, than when it is not identified.
A brand has negative customer-based brand equity if consumers react less favorably to marketing
activity for the brand under the same circumstances.
If no differences occur, the brand name product is essentially a commodity, and competition will
probably be based on price.
7.2 Differentiation and positioning
Beyond deciding which segments of the market it will target, the company must decide on a value
proposition—how it will create differentiated value for targeted segments and what positions it
wants to occupy in those segments.
A product’s position is the way the product is defined by consumers on important attributes—the
place the product occupies in consumers’ minds relative to competing products. Products are made
in factories, but brands happen in the minds of consumers.
Consumers are overloaded with information about products and services. They cannot reevaluate
products every time they make a buying decision. To simplify the buying process, consumers
organize products, services, and companies into categories and “position” them in their minds. A
product’s position is the complex set of perceptions, impressions, and feelings that consumers have
for the product compared with competing products.
Consumers position products with or without the help of marketers. But marketers do not want to
leave their products’ positions to chance. They must plan positions that will give their products the
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greatest advantage in selected target markets, and they must design marketing mixes to create these
planned positions.
7.2.1 Benefits of brand positioning and differentiation
What the brand can do for you?
Positioning is the act of designing a company’s offering and image to occupy a distinctive place in the
minds of the target market.
A company discovers different needs and groups in the marketplace, targets those it can satisfy in a
superior way, and then positions its offerings so the target market recognizes the company’s
distinctive benefits.
The goal is to locate the brand in the minds of consumers to maximize the potential benefit to the
firm.
A good brand positioning helps guide marketing strategy by clarifying the brand’s essence, identifying
the goals, and showing how it does so in a unique way.
Everyone in the organization should understand the brand positioning and use it as context for
making decisions.
7.2.2 Identifying optimal points-of-difference and points-of-parity
a) Points of difference
Points-of-difference (PODs) are attributes or benefits that consumers strongly associate with a
brand, positively evaluate, and believe they could not find to the same extent with a competitive
brand
Three criteria determine whether a brand association can truly function as a point-of-difference:
Desirable to consumer. Consumers must see the brand association as personally relevant to them.
The Westin hotel Singapore advertised that it was the world’s tallest hotel, but a hotel’s height might
not important to tourists. Consumers must be given a compelling reason to believe why the brand
can deliver the desired benefit, such as NIVEA Wrinkle Control Crème with Q10 co-enzyme
Deliverable by the company. The company must have the internal resources and commitment to
feasibly and profitably create and maintain the brand association in the minds of consumers. The
product design and marketing offering must support the desired association. The ideal brand
association is preemptive, defensible, and difficult to attack.
Differentiating from competitors. Consumers must see the brand association as distinctive and
superior to relevant competitors. The brand must demonstrate clear superiority on an attribute or
benefit for it to function as a true point-of-difference.
b) Points of parity
Point of parity are attribute or benefit associations that are not necessarily unique to the brand but
may in fact be shared with other brands.
Category points-of-parity are attributes or benefits that consumers view as essential to a legitimate
and credible offering within a certain product or service category. In other words, they represent
necessary—but not sufficient—conditions for brand choice. Consumers might not consider a travel
agency truly a travel agency unless it is able to make air and hotel reservations, and offer various
payment options. Category points-of parity may change over time due to technological advances,
legal developments, or consumer trends, but to use a golfing analogy, they are the “greens fees”
necessary to play the marketing game. Sometimes called “hygiene factors”
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7.2.3 Choosing a differentiation and positioning
Some firms find it easy to choose a differentiation and positioning strategy. For example, a firm well
known for quality in certain segments will go for this position in a new segment if there are enough
buyers seeking quality. But in many cases, two or more firms will go after the same position. Then
each will have to find other ways to set itself apart. Each firm must differentiate its offer by building a
unique bundle of benefits that appeals to a substantial group within the segment.
Above all else, a brand’s positioning must serve the needs and preferences of well defined target
markets. For example, although Boss and Burberry both offer high quality clothing, they offer very
different product assortments and store atmospheres. Yet each succeeds because it creates just the
right value proposition for its unique mix of customers.
The differentiation and positioning task consists of three steps:
1. Identifying a set of differentiating competitive advantages on which to build a position
To build profitable relationships with target customers, marketers must understand customer needs
better than competitors do and deliver more customer value. To the extent that a company can
differentiate and position itself as providing superior customer value, it gains competitive advantage.
But solid positions cannot be built on empty promises. If a company positions its product as offering
the best quality and service, it must actually differentiate the product so that it delivers the promised
quality and service. Companies must do much more than simply shout out their positions with
slogans and taglines
To find points of differentiation, marketers must think through the customer’s entire experience with
the company’s product or service.
It can differentiate along the lines of product, services, channels, people, or image.
1. Product differentiation (e.g. Bose)
2. Service differentiation (e.g. British Airways)
3. Channel differentiation (e.g. Amazon)
4. People differentiation (e.g. Disney)
Through product differentiation, brands can be differentiated on features, performance, or style and
design.
2. Choosing the right competitive advantages
Suppose a company is fortunate enough to discover several potential differentiations that provide
competitive advantages. It now must choose the ones on which it will build its positioning strategy. It
must decide which differences to promote.
Many marketers think that companies should aggressively promote only one benefit to the target
market. Advertising executives usually say a company should develop a unique selling proposition
(USP) for each brand and stick to it. Each brand should pick an attribute and tout itself as “number
one” on that attribute.
Other marketers think that companies should position themselves on more than one differentiator.
This may be necessary if two or more firms are claiming to be best on the same attribute. Today, in a
time when the mass market is fragmenting into many small segments, companies and brands are
trying to broaden their positioning strategies to appeal to more segments.
• Important: The difference delivers a highly valued benefit to target buyers.
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• Distinctive: Competitors do not offer the difference, or the company can offer it in a more
distinctive way.
• Superior: The difference is superior to other ways that customers might obtain the same benefit.
• Communicable: The difference is communicable and visible to buyers.
• Preemptive: Competitors cannot easily copy the difference.
• Affordable: Buyers can afford to pay for the difference.
• Profitable: The company can introduce the difference profitably.
3. Selecting an overall positioning strategy
The full positioning of a brand is called the
brand’s value proposition—the full mix of
benefits on which a brand is differentiated
and positioned. It is the answer to the
Customer’s question “Why should I buy your
brand?”
Volvo’s value proposition hinges on safety but
also includes reliability and roominess, all for
a price that is higher than average but seems
fair for this mix of benefits.
Figure shows examples of possible value
propositions on which a company might
position its products.
In the figure, the five green cells represent
winning value propositions— differentiation
and positioning that gives the company
competitive advantage. The red cells, however, represent losing value propositions. The center
yellow cell represents at best a marginal proposition.
Examples
•
More for more
E.g. Miele, Audi, Bose, Omega, Starbucks, Apple,…
•
More for the same
E.g. Kia, Lexus
•
Same for less
E.g. Colruyt, Ikea
•
Less for much less
E.g. Hotel F1, Dacia
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7.3 Edeka on Xmas
A Christmas television advert by a German supermarket chain has been described as "more
heartbreaking" than the one put out by John Lewis after being subtitled for English-speaking
audiences.
Its powerful theme of elderly loneliness strikes a similar chord to John Lewis' acclaimed 'Man On The
Moon' advert released earlier this month. But the Edeka advert goes one step further, and some
users are claiming it has overtaken the British store's crown in the stakes for the most powerful ad
yet.
An old man features as the centrepiece of the unfolding drama during the two-minute-clip, and as
years go by the Granddad graces the table on his own, dressed up and eating all alone.
"I just wanted to call and let you know that we can’t make it for Christmas this year," the daughter’s
message plays on his answerphone as the granddad is seen proudly putting up his daughter’s family
Christmas card on the mantlepiece.
"We’ll try again next year. It’ll work out, I promise. Merry Christmas Daddy," the message concludes.
The same small voice is heard crying "See you soon. Merry Christmas Grandpa!" before the phone
cuts out. He then can be seen sat at his Christmas table alone as the years pass by, his family having
not visited his house. Fast forward several months and his daughter, plus her various brothers, all
receive news of their father's death. The offspring, visibly full of regret, return to their family home
to pay their respects, and tearfully embrace each other outside.
But when they enter the property, the old man, who is still alive, walks into the dining room and says,
"How else could I have brought you all together?"
His relatives are stunned, but fight off the tears to break out into wide smiles and they all end up
eating together. The whole ordeal was just too much for some social media users who flocked to
Twitter to react to the sad advert:
7.4 Sample questions class of Dec 14th on positioning:
1.What are the initial three steps to define a positioning?
2. What are key criteria to select the right competitive advantages?
7.5 Summary
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8. Marketing plan
8.1 Marketing Plan
A marketing plan is a written document that summarizes what the marketer has learned about the
marketplace and indicates how the firm plans to reach its marketing objectives. It contains tactical
guidelines for the marketing programs and financial allocations over the planning period. A
marketing plan is one of the most important outputs of the marketing process. It provides direction
and focus for a brand, product, or company.
Working within the plans set by the levels above them, Product / Brand managers come up with a
marketing plan for individual products, lines, brands, channels, or customer groups. Each product
level, whether product line or brand must develop a marketing plan for achieving its goals
E.g. Unilever global,to Dove Belgium
More limited in scope than a business plan, the marketing plan documents how the organization will
achieve its strategic objectives through specific marketing strategies and tactics, with the customer
as the starting point. It is also linked to the plans of other departments. Marketing plans are
becoming more customer- and competitor-oriented, better reasoned, and more realistic. They draw
more inputs from all the functional areas and are team-developed. Planning is becoming a
continuous process to respond to rapidly changing market conditions
Although the exact length and layout varies from company to company, most marketing plans cover
one year in anywhere from 5 to 50 pages. Smaller businesses may create shorter or less formal
marketing plans, whereas corporations generally require highly structured documents. To guide
implementation effectively, every part of the plan must be described in considerable detail.
Sometimes a company will post its marketing plan on an internal Web site so everyone can consult
specific sections and collaborate on changes.
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8.2 Sections of a marketing plan
Executive summary
Presents a brief summary of the main goals and recommendations of the plan for management
review, helping top management find the plan’s major points quickly. A table of contents should
follow the executive summary.
Situation analysis
CURRENT MARKET SITUATION
Describes the target market and a company’s position, including information about the market,
product performance, competition, & distribution:
• A market description that defines the market and major segments and then reviews customer
needs and factors in the marketing environment that may affect customer purchasing.
• A product review that shows sales, prices, and gross margins of the major products in the product
line.
• A review of competition that identifies major competitors and assesses their market positions and
strategies
• A review of distribution sales trends and other developments in major distribution channels.
THREATS AND OPPORTUNITIES ANALYSIS
Assesses major threats and opportunities that the product might face, helping management to
anticipate important positive or negative developments that might have an impact on the firm and
its strategies.
OBJECTIVES AND ISSUES
States the marketing objectives that the company would like to attain during the plan’s term and
discusses key issues that will affect their attainment. For example, if the goal is to achieve a 15
percent market share, this section looks at how this goal might be achieved.
Marketing strategy
Outlines the broad marketing logic by which the business unit hopes to create customer value and
relationships and the specifics of target markets, positioning, and marketing expenditure levels. How
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will the company create value for customers in order to capture value from customers in return? This
section also outlines specific strategies for each marketing mix element and explains how each
responds to the threats, opportunities, and critical issues spelled out earlier in the plan.
ACTION PLAN AND KEY INITIATIVES
Spells out how marketing strategies will be turned into specific action programs that answer the
following
Questions:
-
What will be done?
-
When will it be done?
-
Who will do it?
-
How much will it cost?
Financial projections
BUDGET AND SUPPORT/ ENABLERS
Details a supporting marketing budget that is essentially a projected profit-and-loss statement. It
shows expected revenues and expected costs of production, distribution, and marketing. The
difference is the projected profit. Once approved by higher management, the budget becomes the
basis for materials buying, production scheduling, personnel planning, and marketing operations.
Implementation controls
KPI’s, CONTROL AND EXPECTED ROI
Outlines the control that will be used to monitor progress and
allow higher management to review implementation results and
spot products that are not meeting their goals. It includes
measures of return on marketing investment.
Marketing Control
Because many surprises occur during the implementation of marketing plans, marketers must
practice constant marketing control—evaluating the results of marketing strategies and plans and
taking corrective action to ensure that the objectives are attained. Marketing control involves four
steps. Management first sets specific marketing goals. It then measures its performance in the
marketplace and evaluates the causes of any differences between expected and actual performance.
Finally, management takes corrective action to close the gaps between goals and performance. This
may require changing the action programs or even changing the goals.
Its purpose is to ensure that the company achieves the sales, profits, and other goals set out in its
annual plan.
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9. KPI’s & measurement
9.1 Measuring marketing productivity
Marketers are facing increased pressure to provide clear, quantifiable evidence to senior
management as to how their marketing expenditures help the firm to achieve its goals and financial
objectives.
Although we can easily quantify marketing expenses and investments as inputs in the short run, the
resulting outputs such as broader brand awareness, enhanced brand image, greater customer
loyalty, and improved new product prospects may take months or sometimes years to manifest
themselves.
Moreover, a whole host of internal changes within the organization and external changes in the
marketing environment may coincide with the marketing expenditures, making it hard to isolate the
effects of any particular marketing activity.
9.2 KPI’s & measurement
Still, measuring and managing return on marketing is a key necessity for Marketing managers.
They must ensure that their marketing funds are being well spent.
In the past, many marketers spent freely on big, expensive marketing programs, often without
thinking carefully about the financial returns on their spending.
But all that has changed rapidly. “Marketing accountability”—measuring and managing return on
marketing investments—has now become an important part of strategic marketing decision making.
9.2.1 Marketing metrics
•
Marketing metrics is a set of measures that helps quantify, compare, and interpret the
marketing performance
•
Marketing control is measuring and evaluating the results of marketing strategies & plans
and taking corrective actions to ensure that the objectives are achieved. Marketing control
involves four steps. Management first sets specific marketing goals. It then measures its
performance in the marketplace and evaluates the causes of any differences between
expected and actual performance. Finally, management takes corrective action to close the
gaps between goals and performance. This may require changing the action programs or
even changing the goals.
•
Marketing ROI is the net return from a marketing investment divided by the costs of the
marketing investment.
9.2.2 Key performance indicators
A key performance indicator or KPI is a type of performance measurement. It is used to evaluate its
success, or to evaluate the success of a particular activity in which it is engaged, and this periodically
to follow up the evolution.
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Not great in number is the most important one. Small number of KPI is a key.
9.2.3 Marketing dashboards
Marketing dashboards are like the instrument panel in a car or plane, visually displaying real time
indicators to ensure proper functioning.
Management can assemble a summary set of relevant internal and external measures in a marketing
dashboard for synthesis and interpretation.
They are only as good as the information on which they’re based, but sophisticated visualization
tools are helping bring data alive to improve understanding and analysis.
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9.2.4 Marketing scorecards
A customer-performance scorecard records how well the company is doing year after year on
customer-based measures.
A stakeholder-performance scorecard tracks the satisfaction of various constituencies who have a
critical interest in and impact on the company’s performance: employees, suppliers, banks,
distributors, retailers, and stockholders.
9.2.5 Marketing metrics
Ambler says firms must give priority to measuring and reporting marketing performance through
marketing metrics. He believes they can split evaluation into two parts:
(1) short-term results
and (2) changes in brand equity. Short-term results often reflect profit-and-loss concerns as shown
by sales turnover, shareholder value, or some combination of the two.
Brand-equity measures could include customer awareness, attitudes, and behaviors; market share;
relative price premium; number of complaints; distribution and availability; total number of
customers; perceived quality, and loyalty and retention.
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9.2.6 Key performance indicators & measures
Every campaign you run, should have a ‘ROI’ or Return on investment. It is a quantified way to
analyze, improve and predict the return on marketing spending on the basis of objective
measurements or metrics. Based on this, decisions are made for future marketing activities,
conclusions are drawn about past activities and corrections are made to ongoing actions or
campaigns
9.2.7 Marketing ROI
Beyond measuring return on marketing investment in terms of standard performance measures such
as sales or market share, many companies are using customer relationship measures, such as
customer satisfaction, retention, and equity.
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MARKETING METRICS – Reporting process
London Business School’s Tim Ambler suggests that if firms think they are already measuring
marketing performance adequately, they should ask themselves five questions:
1. Do you routinely research consumer behavior (retention, acquisition, usage) and why consumers
behave that way (awareness, satisfaction, perceived quality)?
2. Do you routinely report the results of this research to the board in a format integrated with
financial marketing metrics?
3. In those reports, do you compare the results with the levels previously forecasted in the business
plans?
4. Do you also compare them with the levels achieved by your key competitor using the same
indicators?
5. Do you adjust short-term performance according to the change in your marketing-based asset(s)?
9.3 Sample questions class of Dec 14th on KPI’s and measurement:
1. When choosing your set of KPI’s, what are the characteristics of winning KPI’s?
2. What is a marketing dashboard?
3. Exercise: Which company is doing better overall and with respect to marketing? Explain
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