Workshop on Marketing Strategy Raj Echambadi

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Workshop on Marketing StrategyRaj Echambadi
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What is Marketing?

• Decisions involved in creating and keeping
  customers.
• Marketing is about manipulation of economic,
  social, and moral incentives to provide value to
  the consumers and to achieve optimal goals for
  the firm.
• Successful marketing strategies lead to customer
  satisfaction and consequently, firm
  profitability.
• Satisfaction is a disconfirming process gt
  (Performance Expectations). The notion of
  value.

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Effective marketing strategies rest on three
foundations
Markets
How will we create value?
Technologies
Do we have the organizational capabilities neces
sary to sustain it?
How can we capture this value in the face of
competition?
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A Market is...
(1) people or organizations with (2) needs
or wants, and with (3) the ability and (4)
the willingness to buy. A group of people
that lacks any one of these characteristics is
not a market.
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Types of Markets?

• Organizational or Business-to-Business
  Market

For resale or for use in process
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Levels of Strategy

• Corporate Level
• Business Unit Level
• SBUs - a subgroup of a single business or
  collection of related businesses
• Functional Level
• Marketing

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What is STRATEGY?

• A campaign to win in a competitive situation,
  taking into account your resources, your
  competitions resources and the nature of the
  battlefield to obtain a sustainable competitive
  advantage.

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• if you dont know where you are going,
  all roads will take you there!
• Strategy provides the directions!

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What is Strategy?

• Strategy rests on unique activities.
• It means deliberately choosing a different set of
  activities OR choosing to perform activities
  differently than rivals do to deliver a unique
  mix of value to the target market.

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The Essence of Strategy!

• A company can outperform rivals ONLY if it can
  preserve a difference. Sustainable advantage
  arises only out of a unique position.
• A sustainable position requires tradeoffs.
• What does Southwest Airlines do?

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Example Southwest Airlines

• If you get your passengers to their destinations
  when they want to get there, on time, at the
  lowest possible fares, and make darn sure they
  have a good time doing it, people will fly your
  airline.

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The Notion of Fit
No connections
No transfers
Limited Passenger Amenities
Point-to-Point flights
Frequent Departures
Limited use of travel agents
Standard fleets
15 min. turnaround
Automatic Ticketing machines
Flexible Union contracts
Low prices
Lean and productive crew
High aircraft utilization
High employee compensation
Emply. Stock ownership
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Porter's initial response strategies

• Cost leadership strategy comparable value at
  lower cost
• Differentiation strategy greater value at
  higher realized prices.

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THE BIG IDEA Strategy is all about focus You
cannot both be an IMAGE LEADER A Penny Pinching
COST LEADER
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STAR
10 Strategy 90 Implementation
0 Implementation 100 Strategy
B.S. Professor
100 Implementation 0 Strategy
Middle Management
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Back to Marketing Strategy!
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What is Marketing Strategy?

• Marketing is a consumer-satisfying process. Needs
  vs. Wants. Multi-layered needs.
• Products are bought, not sold.

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What is Marketing Strategy?

• Marketing Strategy has two major components
• Segmenting markets, selecting a target market and
  positioning a product (STP)
• Marketing mix variables 4Ps

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Marketing Myopia

• Happens when marketers become product-focused
  (wants-focused) and not customer-focused (needs
  focused).
• To avoid myopia, ask yourself what business are
  these firms in? Example of milkshakes.

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From Ted Levitts (1959) Classic Paper

• The railroads are in trouble today not because
  that need was filled by others (cars, trucks,
  airplanes, and even telephones) but because it
  was not filled by the railroads themselves. They
  let others take customers away from them because
  they assumed themselves to be in the railroad
  business rather than in the transportation
  business. The reason they defined their industry
  incorrectly was that they were railroad oriented
  instead of transportation oriented they were
  product oriented instead of customer oriented.

Remember markets evolve, consumers change. Define
your business with an eye towards the future.
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Types of Competition
Customer point of view is critical for the right
positioning.
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Target Market

• Group of people toward whom the firm decides to
  direct its marketing efforts

TargetMarket
Bottled Water!
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• Fashion accessory to the stars

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Role of Market Segmentation

• Market Segmentation division of the total
  market into smaller, relatively homogeneous
  groups.
• Why? LOGIC.
• To cater to specific customer Needs create
  customer value

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No Market Segmentation
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Segmented by Gender
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Segmented by Age
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Segmenting Consumer Markets

• Geographic Segmentation Dividing an overall
  market into homogeneous groups on the basis of
  their locations

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Segmenting Consumer Markets

• Demographic segmentation dividing consumer
  groups according to characteristics such as
  gender, age, income, ethnicity, occupation,
  education, household size, and stage in the
  family life cycle.

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JaguarTargeting High-Income Groups
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education
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Psychographic Segmentation

• Psychographic Segmentation dividing a
  population into groups that have similar
  psychological characteristics, values, and
  lifestyles.
• Lifestyle peoples decisions about how to live
  their daily lives, including family, job, social,
  and consumer activities
• AIO Statements statements in a psychographic
  survey, choices reflect a respondents
  activities, interests, and opinions

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EclipseSegmenting by Benefits Sought
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Business Marketing Segmentation
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Effective Segmentation
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Imagine!

• Texas has only oil and Idaho has only potatoes.
  Texans need potatoes and Idahoans need oil.
• Market making costs include
• Communication costs
• Transaction costs pertaining to rates credits
• Transportation costs storage costs

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The Marketing Mix
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Is Marketing for products only?
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• What is targeting?
• Choosing one or more segments for which to design
  your marketing operations

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Undifferentiated Strategy
1. Identify the Appropriate Targeting Strategy
Single Marketing Mix
Organization
Target Market
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Differentiated Strategy aka Multisegment Strategy
Marketing Mix 1
Marketing Mix 2
Organization
Target Market
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Concentrated or Niche Strategy
Single Marketing Mix
Organization
Target Market
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Product Positioning

• Positioning starts with a product. Positioning is
  not what you do to a product. Positioning is
  what you do to the mind of the prospect. That
  is, you position the product in the mind of the
  prospect.
• Al Ries and Jack Trout (1981)
• The way the product is defined by consumers on
  important attributes!

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Product Positioning using perceptual maps
Socially Beneficial
Larry King
Oprah Winfrey
Regis and Kathy Lee
Not Intellectual
Intellectual
Not Socially Beneficial
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Product Positioning using perceptual maps
Socially Beneficial
Larry King
Oprah Winfrey
Regis and Kathy Lee
Not Intellectual
Intellectual
Not Socially Beneficial
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Product Positioning using perceptual maps
Socially Beneficial
Larry King
Oprah Winfrey
Regis and Kathy Lee
Rosie ODonnell
Not Intellectual
Intellectual
Not Socially Beneficial
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Product Positioning using perceptual maps
High moisturizing
Zest
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Tone
4
Lever 2000
2
Dove
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Market Segment
Safeguard
Coast
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Lux
Nondeodorant
Deodorant
3
1
Dial
Lifebuoy
Lava
Individual Brand
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Low moisturizing
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Product Positioning using perceptual maps
High moisturizing
Zest
7
Tone
4
Lever 2000
2
Dove
5
Safeguard
Coast
8
Lux
Nondeodorant
Deodorant
3
1
Dial
Lifebuoy
Lava
6
Low moisturizing
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Product Positioning using perceptual maps
High moisturizing
Zest
7
Tone
4
Lever 2000
2
Dove
5
Safeguard
Coast
8
Lux
Nondeodorant
Deodorant
3
1
Dial
Lifebuoy
Lava
6
Low moisturizing
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Product Positioning using perceptual maps
High moisturizing
Zest
7
Tone
4
Lever 2000
2
Dove
5
Safeguard
Coast
8
Lux
Nondeodorant
Deodorant
3
1
Dial
Lifebuoy
Lava
6
Low moisturizing
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Product Positioning using perceptual maps
High moisturizing
Zest
7
Tone
4
Lever 2000
2
Dove
5
Safeguard
Coast
8
Lux
Nondeodorant
Deodorant
3
1
Dial
6
Lifebuoy
Lava
Low moisturizing
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Positioning is determined by the firms resources
and capabilities in conjunction with the needs of
the market!
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The new world of Marketing...5Cs framework!

• Consumer Centered
• Competition New Rules, New Ways
• Company Resources, Capabilities
• Collaborations Alliances Collaborations
• Context New markets, New technologies

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Schematic of the Marketing Process
Based on Robert Dolans Note on Strategy, HBR
Press
Product
Place
Promotion
Price
PROFITS
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Whats a Product?

• Good
• Service

Search Experience Credence
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Product-Service Continuum
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Levels of Total Product
3. Augmented Product Additional services
benefits (unexpected)
Product is a complex bundle of benefits
Installation
Packaging
Style
Brand name
Delivery credit
After- sale service
Core good or service
Design
1. Core product What the consumer is really
buying
Warranty
2. Actual Product
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My Definition of Brand

• To me, a brand is a promise that exists in
  consumers minds.

Basic
Grocery stores
Prestige
Coffee
Grab and go
At home
Treat
Stimulation
Quality
Self-time
Out of home
Good to the last drop
Sitting down
Relaxing
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A BRAND is a PROMISE!
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The BRAND Called YOU
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The Brand Called You

• You're every bit as much a brand as Nike,
  Champion or Starbucks.
• On average, you will make about 4.2 million over
  your lifetime.
• That makes you a multi-million dollar brand.

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What does it take to become the CEO of ME Inc.?

• What is it that that makes ME different from the
  others? Feature-benefit model" that YOU offer?
• What do YOU do that adds remarkable, measurable,
  distinguished, distinctive value?

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Establish your own micro equivalent of the Nike
swoosh or Reebok. Be a BRAND!!!!
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You cant build a good brand if you cant see
yourself as others see you!
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Come to terms with your OWN power.
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Pricing

• Perceived value, Price COGS

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Scenario 1

• You are lying on the beach on a hot day. All you
  have to drink is ice water. For the past hour,
  you have been thinking about how much you would
  enjoy a nice cold bottle of your favorite beer.
  A friend gets up to make a phone call and offers
  to bring back a bottle of your favorite beer from
  the only nearby place where beer is sold a
  small, run down-grocery store. He says that the
  beer might be expensive and asks how much you are
  willing to spend. He says he will not buy the
  beer if it costs more than the price you state.
  What price do you tell your friend?

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Scenario 2

• You are lying on the beach on a hot day. All you
  have to drink is ice water. For the past hour,
  you have been thinking about how much you would
  enjoy a nice cold bottle of your favorite beer.
  A friend gets up to make a phone call and offers
  to bring back a bottle of your favorite beer from
  the only nearby place where beer is sold a
  fancy resort hotel. He says that the beer might
  be expensive and asks how much you are willing to
  spend. He says he will not buy the beer if it
  costs more than the price you state. What price
  do you tell your friend?

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Scenario 3

• You set off to buy a Sony Walkman at what you
  believe to be the cheapest store in the area.
  Upon arriving, you find that the Walkman you want
  costs 29, a price consistent with your prior
  expectations. As you are about to make the
  purchase, a reliable friend tells you that the
  very same Walkman is selling for 10 less at a
  store approximately 10 minutes away. Do you go
  to the other store to buy the Walkman?

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Scenario 4

• You set off to buy a Sony Camcorder at what you
  believe to be the cheapest store in the area.
  Upon arriving, you find that the Camcorder you
  want costs 495, a price consistent with your
  prior expectations. As you are about to make the
  purchase, a reliable friend tells you that the
  very same Walkman is selling for 10 less at a
  store approximately 10 minutes away. Do you go
  to the other store to buy the Camcorder?

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Update 1

• Willingness to pay is impacted by relative
  incentives.

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Scenario 5

• Your favorite sports team has made the playoffs.
  Its first-round playoff series is a best-of-seven
  series with Games 1,2,5, and 7 played on your
  teams home field. General admission tickets had
  been price at 20 during the regular season. The
  team decided to raise general admission prices to
  40 for these four playoff games. Is this price
  increase fair or unfair?

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Scenario 6

• Your favorite sports team has made the playoffs.
  Its first-round playoff series is a best-of-seven
  series with Games 1,2,5, and 7 played on your
  teams home field. General admission tickets had
  been price at 20 during the regular season.
  General admission tickets were also priced at 20
  for Games 1 and 2 of the playoffs. After Game 2,
  the team decided to raise prices to 40 for Games
  5 and 7. Is this price increase fair or unfair?

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Update 2

• Willingness to pay is impacted by salient
  reference prices.

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Scenario 7

• A grocery store has no peanut butter in stock,
  but is about to received a new shipment. Prior
  to delivery, the owner finds out that the
  wholesale price of peanut butter has increased
  20 and will affect this new shipment. The owner
  decides to increase the price of the new peanut
  butter by 20. Is this retailers actions fair
  or unfair?

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Scenario 8

• A grocery store has one week supply of peanut
  butter in stock, and is due to receive a new
  shipment. Prior to delivery, the owner finds out
  that the wholesale price of peanut butter has
  increased 20 and will affect the new shipment.
  The owner decides to immediately increase the
  shelf price on his current stock of peanut
  butter by 20. Is this retailers actions fair
  or unfair?

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Update 3

• Willingness to pay is impacted by perceptions of
  COGS.

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Scenario 9

• In 1996, baseballs Seattle Mariners made it to
  the American League playoffs. During the season,
  general admission to a Mariners game cost 15.
  For the playoffs, the Mariners raised the price
  of general admission tickets to 20. Is this
  fair or unfair?

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Scenario 10

• A hardware store had been selling snow shovels
  for 15. The morning after a large snowstorm,
  the store raises the price of its snow shovels to
  20. Is this fair or unfair?

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Update 4

• Perceptions of fairness varies across product
  categories.

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Strategy?