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Strategy as a Marketing Concept

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					Marketing Strategy Decisions



    Dr. Debbie Thorne McAlister
Dr. Edward Deming, the quality
guru, was once asked, "How much
did those shoes cost you?"
He replied abruptly, "I do not yet
know, I am still using them and
intend to continue using them for
many more years."
Learning Focus
   Understanding marketing strategy
   Using market segmentation and targeting
   Developing the marketing mix
   Creating differentiation and positioning
Marketing Strategy
What is Strategy?
  Strategy is about seeking advantages in those situations
  where it’s the outcome and not the game that counts
  Must know the laws of “physics” that govern the
  outcomes of particular competition
  Specific knowledge of competitors and the situation are
  needed to produce real strategies
  Creating strategies that win with customers is a skill that
  can be learned
  Ultimately leads to a sustainable competitive advantage
Rules of Competitive Strategy
    Thinking must precede action
    Quantitative knowledge is key, but must be
    provided a qualitative context
    Superiority in the essential competitive
    factors is most important
    Strategy requires the exploitation of unique
    strengths and differentiation
                  Cora Daniels, Fortune, June 9, 2003

“J.C. Penney Dresses Up”
                  Signed an exclusive contract
                  with Bisou Bisou
                  Discovered that its “junior”
                  brands were popular with 44-46,
                  instead of 25-35
                  Centralized buying operation &
                  hired new design team
                  Wants to shed the image of
                  “grandmother taking you to buy
                  clothes when the family had no
                  money”
                  Recently added Nicole Miller
                  fashions
Four Actions Framework: Eliminate-
Reduce-Raise-Create W.C. KimHarvardMauborgne, Blue Press, 2005
                     Strategy,
                               and R.
                                      Business School
                                                      Ocean



                               Reduce
                               Which factors should
                               be reduced well
                               below the industry’s
                               standard?

          Eliminate
                                                      Create
          Which of the
          factors that the          A New             Which factors
                                                      should be created
          industry takes for        Value
          granted should be                           that the industry has
                                    Curve             never offered?
          eliminated?


                               Raise
                               Which factors should
                               be raised well above
                               the industry’s
                               standard?
Eliminate-Reduce-Raise-Create Grid:
Cirque du Soleil
            Eliminate                   Raise

 Star performers           Unique venue
 Animal shows
 Aisle concessions sales
 Multiple show arenas

             Reduce                    Create

 Fun and humor             Theme
 Thrill and danger         Refined environment
                           Multiple productions
                           Artistic music and dance
                                                    W.C. Kim and R. Mauborgne, Blue Ocean
                                                    Strategy, Harvard Business School Press, 2005


New Directions in Strategy

         Red Ocean Strategy - OLD                 Blue Ocean Strategy - NEW



   Compete in existing market space.          Create uncontested market space.


   Beat the competition.                      Make the competition irrelevant.


   Exploit existing demand.                   Create and capture new demand.


   Make the value-cost trade-off.             Break the value-cost trade-off.


   Align the whole system of a firm’s         Align the whole system of a firm’s
   activities with its strategic choices of   activities in pursuit of differentiation
   differentiation or low cost.               and low cost.
Market Segmentation
Market Segmentation and Targeting
    Mass Marketing - all customers in the market
    have similar needs and these needs can be
    reasonable satisfied with one marketing mix; also
    called undifferentiated marketing

    Market Segmentation - customers in total market
    have some differences and need unique marketing
    mixes; use segmentation variables to determine
    unique groups
Bases for Segmenting
Consumer Markets
  Behavioral Segmentation
   – Segments based on actual behavior or product usage
  Demographic Segmentation
   – Segments based on demographic factors (e.g., gender,
     age, income, education, etc.)
  Psychographic Segmentation
   – Segments based on state-of-mind issues (e.g., motives,
     attitudes, opinions, values, lifestyles, interests,
     personality, etc.)
  Geographic Segmentation
   – Segments based on geographic location
   Segmentation of Gasoline Customer Market
Segment          Size      Core Needs                          Usage Behavior       Demographics
                 (%)

Road Warriors    16        Premium Products and Quality        Drive 25,000 to      Higher income,
                           Service                             50,000 miles a       middle-aged
                                                               year; buy premium    men.
                                                               gas, drinks and
                                                               sandwiches.
Generation F3    27        Fast Fuel, Fast Service, and Fast   Constantly on the    Upwardly
                           Food                                go; drive a lot,     mobile men and
                                                               snack heavily, and   women, half
                                                               want fuel and food   under 25.
                                                               fast.
True Blues       16        Branded Products and Reliable       Brand-and station-   Men and women
                           Service                             loyal; buy           with moderate
                                                               premium gas, pay     to high income.
                                                               cash.
Home Bodies      21        Convenience                         Use whatever         Usually
                                                               gasoline is          housewives who
                                                               conveniently         shuttle children
                                                               located.             during day.
Price Shoppers   20        Low Price                           Neither brand nor    Usually on tight
                                                               station loyal.       budget.


                        R. Best, Market-Based Management, 2005.
Culture Segmentation Strategy
    Country of origin (Mexico,
    Puerto Rico, Cuban, etc…)
    Generation and age upon
    arrival
    Use of language(s)
    Current age cohorts
    Population density

 Source: Marketing to American Latinos, The In-culture Approach, Part 2, PMP, 2002
Bases for Segmenting
Business Markets
  Type of Organization
  Organizational Characteristics
  Benefits Sought or Buying Processes
  Personal and Psychological
  Relationship Intensity
Examples: Business Segments
   Penn National Insurance’s commercial
   business focuses on small business
   insurance needs. The firm identified over
   200 segments, so it could extend its reach
   beyond the construction industry.
Mass Marketing Strategy


            Product




   Price          Distribution




           Promotion




     Single                                   All Customers
  Marketing Mix                               in the Market


                           Undifferentiated
King Arthur Flour
    Company has built a premium brand in a
    commodity product category
    Oldest flour company in the US (1790)
    Number three behind Gold Medal and
    Pillsbury in total sales
    Number one in wheat flour and with
    professional bakers & serious hobbyists
       Multisegment Strategy
                    Product



           Price          Distribution



                   Promotion




                    Product



           Price          Distribution



                   Promotion



   Multiple                                      More Than One
Marketing Mixes                                  Market Segment
                                Differentiated
Multisegment Example
Market Concentration Strategy


              Product



     Price          Distribution



             Promotion




      Single
   Marketing Mix
                                           Focused on a Single
                                            Market Segment
                          Differentiated
Niche Marketing Strategy


              Product



     Price          Distribution



             Promotion




                                           Focused on a Small
      Single
                                          Niche Market Segment
   Marketing Mix

                         Differentiated
Customized Marketing Strategy

                     Product



            Price          Distribution



                    Promotion




                     Product



            Price          Distribution


 Unique             Promotion
Marketing                                 Individual
 Mixes                                    Customers
Marketing Mix
Creating the Marketing Mix
            PRODUCT




   PRICE                DISTRIBUTION




            PROMOTION
     Market Share Development Path
Promotion Strategies   Product Strategies Price Strategies   Place Strategies      Service Strategies

                                                                                                               Market
                                                                                                               Share
                                                                                                               Index*
                                                                                 Service                       0.076
                                                                                 Experience
                                                                                 Favorable(0.65)
                                                              Available          Service                       0.041
                                                              and Easy to        Experience Not
                                             Price            Buy(0.57)          Favorable(0.35)
                                             Acceptable(0.63)
                          Like Product
                                                             Not Available or                                  0.089
                                                             Easy to Buy(0.43)
                          Benefits(0.46)     Price Not                                                         0.121
       Aware of                              Acceptable(0.37)
       Product(0.71)      Not Attracted to
                                                                                                               0.383
                          Product(.54)

       Not Aware of
       Product(0.29)
                                                                                                               0.290


                 Share Development Path                            *The Market Share index is derived by       1.000
                                                                   multiplying all terms along a given path.
Goals for Marketing Mix
    Create synergies
    Use resources effectively
    Maintain consistent and
    differentiated image
    Link to specific marketing
    goals and objectives
Avon Products
  $6.2 billion in annual sales
  Among top 100 global brands (Business Week)
  Primarily uses direct selling and internet channels
  Distributes 15 million “core” brochures every two
  weeks
  Introduces new product lines and segmentation
  strategies
  Average customer is 39; household income is
  $42,000; half are employed
Differentiation and Positioning
Differentiation and Positioning
    Find ways to distinguish and differentiate
    the firms and its product from competitors
    Ensure that customers perceive these
    differences so your product is positioned
    accurately in their minds
What is Differentiation?
  ♦   “A firm differentiates itself from its competitors if
      it can be unique at something that is valuable to
      customers”
  ♦   “Differentiation works to provide an advantage
      because in delivering unique benefits valued by
      the market, the firm effectively removes itself
      from the direct competition.
  ♦   “A differentiation strategy is one in which a
      product offering is different from that of one or
      more competitors in a way that is valued by the
      customers”
Sources of Differentiation
    Brand
    Product features and characteristics
    Customer support and services
    Image and reputation
Brand

Name Derivation   “Little fried bits”        “Little bits of gold”     “Little toasted bits”
Year Introduced   1932                       1964                      1981
Demographic       33 to 51 year-old males    Teens, skewing to         Upscale baby boomers
                                             males
Snack Niche       “Hunger Satisfaction”      “Bold and daring          “Social food that brings
                                             snacking”                 people together”
Ad. Expenditure   $360,000                   $17.2 million             $6.7 million
Marketing Theme   One of the firm’s oldest   Doritos advertises        Promoted as a
                  brands, it advertise in    exclusively on tv.        “party”chip, advertises
                  sports magazines such as   Almost a quarter of its   heavily during
                  Sports Illustrated and     first-half budget was     televised sports events,
                  ESPN. Sponsors             spent on MTV and          especially college
                  NASCAR driver Jeff         Comedy Central.           football. Sponsors the
                  Gordon.                                              Fiesta Bowl.
Slogan            Fuel Up With Fritos        Be Bold, Be Daring        Dig In, Kick Back
Brand Valuation   $588 million               $1.1 billion              $981 million

                  Source: “Corn-ering the Market,” Business 2.0, December 2001.
Action Sports Case Study:
Mountain Dew (Pepsi)

Challenges
 Increasing competition from other brands
 using the popularity of action sports.
  –   Powerade
  –   Red Bull
  –   Sprite
  –   Sobe
 Constantly needs to reaffirm its leadership
 position, credibility, and equity in action
 sports.
 Drive sales volume.
         Action Sports
Total Participation + Growth ‟99 – „00

» Snowboarding              7MM +34%
» Skateboarding             11MM +33%
» Surfing                   2MM +21%
» Wakeboarding              3.5MM +25%
» BMX                       4MM +7%
*According to American Sports Data, Snowboarding,
  Skateboarding, and Wakeboarding were the 3 fastest
  growing sports in the US in 2000.
     Traditional Sports
Total Participation + Growth ‟99 – „00

» Baseball         11MM                -10%
» Football^        18MM                -2%
» Basketball       37MM                -5%
» Golf             30MM                +8%
» Soccer           17MM                +9
» *According to the American Sports Data, no
  traditional sport was ranked in the Top 10 for growth
  from ‟99 – ‟00.
^Football includes “touch” and “tackle”.
        Sports Landscape
MALES 12 –17 Were Asked, “Are you a fan of…?”
1. NFL - 84.6%
2. NBA - 76.0
3. College Football- 72.5
4. Major League Baseball - 71.1
5. Snowboarding - 68.2
6. Pro Boxing - 66.8
7. BMX - 64.5
8. College Basketball - 63.0
9. Skateboarding- 61.5
10. Freestyle Motocross- 53.2
*ESPN/Chilton Sports Poll.
Recommendations
 Achieve acceptance from the most critical,
 opinionated, “core” participants to
 influence mainstream consumers and
 drive volume.
 Create a visible but subtle presence for the
 brand.
 Sponsorship of premier alternative sports
 properties and grassroot events.
 Utilize most authentic creative.
 Sponsor respected and high profile
 athletes in: snowboarding, wakeboarding,
 BMX, freestyle skiing, skateboarding and
 freestyle motorcross.
Results
 99% unaided recall as X Games sponsor.
 Among the most recognized brands by
 teens.
 Fastest growing soft drink in 1999.
 Surpassed Diet Coke as the #3 soft drink
 in stores in the US.
 Product Positioning
  Always relative to the competition
  Based on augmented dimensions
  Strategies:
1) strengthen current position
             2) reposition
                             3) reposition the competition


                   "For Love or Money?" Celebrity-driven "I Am What I Am"
Positioning Map Example
Different Positions
                                         Ten Minute Exercise

    Body Shop vs. Avon
    Saturn vs. Mercedes
    Special K vs. Frosted Flakes
    Stouffers vs. Lean Cuisine frozen entrees
Business 2.0’s “Sweet Spot”
Marketing Campaigns - 2003
  Rheingold Beer: Best Brand Relaunch
  Axe Deodorant Bodyspray: Most Innovative –
  “Axe Effect”
  Signs: Most Bang for the Buck

				
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