Marketing StrategyMKT306 Module

(Handout 4)

DEVELOPING MARKETING STRATEGIES IIS.W.O.T

VALUE CHAINSEGMENTATION, TARGETING, POSITIONING (S.T.P)

MARKETING MIX – 4’Ps STRATEGY

SWOT Analysis

SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and Threats. SWOT analysis is an important tool for auditing the overall strategic position of a business and its environment.

SWOT is commonly used as part of strategic planning and looks at:- Internal strengths- Internal weaknesses- Opportunities in the external environment- Threats in the external environment

SWOT DISCOVERY

• What the business does better than the competition• What competitors do better than the business• Whether the business is making the most of the

opportunities available• How a business should respond to changes in its external

environment

USING SWOT ANALYSIS

• SWOT analysis is an analytical technique to support strategic decisions - the key words are match and convert

SWOT: MATCH & CONVERT

Weakness

• Outdated technology

• Skills gap

• Overdependence on a single product

• Poor quality • High fixed costs

Possible Response

→Acquire competitor with leading technology

→Invest in training & more effective recruitment

→Diversify the product portfolio by entering new markets

→Invest in quality assurance →Examine potential for

outsourcing or offshoring

VALUE CHAIN ANALYSIS

• Value Chain Analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business. Porter suggested that the activities of a business could be grouped under two headings: (1) Primary Activities - those that are directly concerned with creating and delivering a product (e.g. component assembly); and (2) Support Activities, which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities.

• Value Chain Analysis is one way of identifying which activities are best undertaken by a business and which are best provided by others ("out sourced").

Primary Value Chain Activities • Inbound logistics - all those activities concerned with

receiving and storing externally sourced materials• Operations - the manufacture of products and services - the

way in which resource inputs (e.g. materials) are converted to outputs (e.g. products)

• Outbound logistics - all those activities associated with getting finished goods and services to buyers

• Marketing and sales - essentially an information activity - informing buyers and consumers about products and services (benefits, use, price etc.)

• Service - all those activities associated with maintaining product performance after the product has been sold

Support Value Chain Activities • Procurement - this concerns how resources are acquired for a

business (e.g. sourcing and negotiating with materials suppliers)

• Human Resource Management - those activities concerned with recruiting, developing, motivating and rewarding the workforce of a business

• Technology Development - activities concerned with managing information processing and the development and protection of "knowledge" in a business

• Infrastructure - concerned with a wide range of support systems and functions such as finance, planning, quality control and general senior management

Steps in Value Chain Analysis

(1) Break down a market/organisation into its key activities under each of the major headings in the model

(2) Assess the potential for adding value via cost advantage or differentiation, or identify current activities where a business appears to be at a competitive disadvantage

(3) Determine strategies built around focusing on activities where competitive advantage can be sustained

SEGMENTATION, TARGETING, POSITIONING (S.T.P)

Market Segmentation : Defined

• "Process of defining and sub-dividing a large homogenous market into clearly identifiable segments having similar needs, wants, or demand characteristics".

• A successful market strategy strives to understand different segments and its different needs; works on the exhibited common wants; and responds immediately.

Market Segmentation Strategies• Behavioral Segmentation: the customer's needs and

subsequent reaction to those needs or toward the purchase of intended products and/or services.

• Demographic Segmentation: variables like age, gender, education, income, size of the family, occupation, socioeconomic status, culture and religion, language and nationality are taken into account.

• Psychographic Segmentation: lifestyles and values, and how they translate into consumption or purchases of products of services

• Geographical Segmentation: dividing people (markets) into different geographical locations e.g. by country, state, or neighborhood, climate, size of a place etc.

Targeting Strategy

• Once a firm has successfully identified the segments within a market, the next step is to target these segments with products that closely match the needs of the customers within that segment.

• Two important factors to consider:- attractiveness (size, growth, competition) and - the fit (suitability) between the segment and the firm’s

objectives, resources and capabilities.

Targeting Strategies

• Single segment strategy (Concentrated/Niche) - a strategy of choice for smaller companies with limited resources.

• Selective specialization (Differentiated) – different marketing mixes are offered to different segments. The products itself may or may not vary but the promotional message or distribution channels vary.

• Product specialization – specialized in a particular product and tailors it to different market segments.

• Market specialization – specializes in serving a particular market segment and offers that segment an array of different products

• Full (Mass) market coverage (Undifferentiated) – the attempts to serve the entire market by means of either a mass market strategy in which a single undifferentiated marketing mix is offered to the entire market, or by a differentiated strategy in which a separate marketing mix is offered to each segment.

Positioning Strategy

• Positioning is the process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization.

Product Positioning Strategy

• Re-positioning involves changing the identity of a product, relative to the identity of competing products, in the collective minds of the target market.

• De-positioning involves attempting to change the identity of competing products, relative to the identity of your own product, in the collective minds of the target market.

Positioning Approaches?

Specific product features Benefits, problem solution, or needs Specific usage occasions User category Against another “product” “Product class” dissociation

Competitive Positioning

Competitive positioning is about defining how you’ll “differentiate” your offering and create value for your market. It’s about carving out a spot in the competitive landscape and focusing your company to deliver on that strategy. A good strategy includes:

• Market profile: size, competitors, stage of growth• Customer segments: groups of prospects with similar wants &

needs• Competitive analysis: strengths, weaknesses, opportunities and

threats in the landscape• Positioning strategy: how you’ll position your offering to focus on

opportunities in the market• Value proposition: the type of value you’ll deliver to the market

Narrowing down to focused strategy with quantitative and qualitative screening criteria

External Market EnvironmentTechnological, Political and Legal Cultural and Social Economic

Customers Needs &

Segmenting Dimensions

Company Objectives &

Resources

Competitors: Current &

Prospective

Overview Marketing Strategy: Segmentation, Targeting and Positioning

S.W.O.T.

Segmentation& TargetingSegmentation& Targeting

Differentiation& PositioningDifferentiation& Positioning

Target Market

MARKETING MIX 4P’S STRATEGY

Product Strategy

• Product Positioning Strategy• Product Repositioning Strategy• Product Scope strategy• Product Design strategy• New Product Strategy

Product Positioning Strategy

• Placing a brand in that part of the market where it will have a favorable reception compared with competing brands.

• Requirements:- successful management of a single brand requires positioning the brand in the market so that it can stand competition from the toughest rival and maintaining its unique position by creating the aura of a distinctive product.- successful management of multiple brands requires careful positioning in the market so that multiple brands do not compete with nor cannibalize each other.

Product Re-Positioning Strategy

• Reviewing the current positioning of the product and its marketing mix and seeking a new position for it that seems more appropriate.Requirements:- if this strategy is directed toward existing customers repositioning is sought through promotion of more varied uses of the product.- if the business units wants to reach new users, this strategy requires that the product be presented with a different twist to the people who have not been favorably inclined toward it. In doing so, care should be taken to see that in the process of enticing new customers, current ones are not alienated. - if this strategy aims at presenting new uses of the product it requires searching for latent uses of the product, if any. Although all products may not have latent uses, there are products that may be used for purposes that may be used for purposes not originally intended.

Product Scope Strategy

• The product scope strategy deals with the perspectives of the product mix of a company. The company may adopt a single-product strategy, a multiple-product strategy, or a system-of-products strategy.

Requirements:- single product, company must stay up-to-date on the product and even become the technology leader to avoid absolescence- multiple products, must complement one another in a portfolio of products- system of products, company must have a close understanding of customer needs and uses of the products

Product Design Strategy

• The product design strategy deals with the degree of standardization of a product.

• The company has a choice among the following strategic options: standard product, customized product, and standard product with modifications.

• Objectives of: (a) Standard product – to increase economies of scale of the company (b) Customized product – to compete against mass producers of standardized products through product-design flexibility (c) Standard product with modifications – to combine the benefits of the two previous strategies

New Product Strategy

• A set of operations that introduces:(a) within the business a product new to its previous line of products (b) on the market, a product that provides a new type of satisfaction

• Three alternatives emerge from the above:produce improvement/modification, product imitation and product innovation.

Requirements of New Product Strategy

• A new product strategy is difficult to implement if a new product development system does not exist within a company

• Five components of this system should be assessed:- corporate aspirations toward new products- organizational openness to creativity- environmental favor toward creativity- screening method for new ideas, and- evaluation process

Promotion Strategy

• Promotion Mix Strategy• Media Selection Strategy• Advertising Copy Strategy

Promotion Mix Strategy

• Determination of a judicious mix of different types of promotion.

• Requirements:(a) Product factors : i) nature of the product ii) durable versus non durable iii)perceived risk iv) typical purchase amount(b) Market factors : i) position in the life cycle ii) market share iii) industry concentration iv) intensity of competition v) demand perspectives(c) Customers factors: i) household versus business customers ii) number of customers iii) concentration of customers

Media Selection Strategy

• Choosing the channels (newspapers, magazines, television, radio, outdoor advertising, transit advertising, and direct mail) through which messages concerning a product /service are transmitted to the targets.

• Requirements:(a) Relate media selection objectives to product/market objectives(b) Media chosen should have a unique way of promoting the business(c) Media should be measure-minded not only in frequency, in timing, an in reaching the target audience but also in evaluating the quality of the audience(d) Base media selection on factual not artificial grounds(e) Media plan should be optimistic in that it takes advantage of the lessons learned from experience(f) Seek information on customer profiles and audience characteristics.

Advertising Copy Strategy

• Designing the content of an advertisement• Objective: To transmit a particular product/service message to a

particular target• Requirements:

(a) Eliminate “noise” for a clear transmission of message(b) Consider importance of : source credibility, balance of argument, message repetition, rational versus emotional appeals, humour appeals, presentation of model’s eyes in pictorial ads, comparison advertising

Distribution Strategy

• Distribution Scope Strategy• Multiple Channel Strategy

Distribution Scope Strategy

• Establishing the scope of distribution, that is, the target customers

• Choices are Exclusive distribution ( one retailer is granted sole rights in serving a given area). Intensive distribution (a product is made available at all possible retail outlets), and Selective distribution ( many but not all retail outlets in a given area distribute a product).

• Requirements: Assessment of customer buying habits, gross margin’s/turnover rate, capability of dealer to provide service, capability of dealer to carry full product line, product styling

Multiple Channel Strategy

• Employing two or more different channels for distribution of goods and services

• Multiple-channel distribution is of two basic types: complementary (each channel handles a different non-competing product or market segment) and competitive (two different and competing channels sell the same product).

Multiple Channel Strategy

• Requirements: (a) Market segmentation (b) Cost/benefit analysis

• User of complementary channels prompted by (a) geographic considerations (b) volume of business (c) need to distribute non-competing items (d) saturation of traditional distribution channels

• Use of competitive channels can be a response to environmental changes

Pricing Strategy

• Pricing Strategies for New Products• Pricing Strategies for Established Products• Price Flexibility• Price Leadership Strategy

1. Pricing for New Products• Skimming Pricing Strategy:

- Setting a relatively high price during the initial stage of a product’s life.- Objectives : (a) to serve customers who are not price conscious while the market is at the upper end of the demand curve and competition has not yet entered the market (b) to recover a significant portion of promotional and research and development costs through a high margin- Requirements: (a) heavy promotional expenditure to introduce product, educate consumers, and induce early buying (b) relatively inelastic demand at the upper end of the demand curve (c) lack of direct competition and substitutes.

• Penetration Pricing Strategy:- Setting a relatively low price during the initial stages of a product’s life.- Objective: to discourage competition from entering the market by quickly taking a large market share and by gaining a cost advantage through realizing economies of scale- Requirements: (a) product must appeal to a market large enough to support the cost advantage (b) demand must be highly elastic in order for the firm to guard its cost advantage

2. Pricing for Established Products

• Maintaining the Price• Reducing the Price • Increasing the Price

Maintaining the Price

• Objectives: (a) to maintain position in the marketplace (i.e. market share, profitability, etc..) (b) to enhance public image

• Requirements: (a) firm’s served market is not significantly affected by changes in the environment (b) uncertainty exists concerning the need for or result of a price change (c) firm’s public image could be enhanced by responding to government requests or public opinion to maintain price.

Reducing the Price

• Objectives: (a) to act defensively and cut price to meet the competition (b) to act offensively and attempt to beat the competition (c) to respond to a customer need created by a change in the environment

• Requirements: (a) firm must be financially and competitively strong to fight in a price war if that becomes necessary (b) must have a good understanding of the demand function of its product

Increasing the Price

• Objectives: (a) to maintain profitability during an inflationary period (b) to take advantage of product differences, real or perceived (c) to segment the current served market

• Requirements: (a) relatively low price elasticity but relatively high elasticity with respect to some other factor such as quality or distribution, (c) reinforcement from other ingredients of the marketing mix

3. Pricing Flexibility Strategy

• One Price Strategy• Flexible Pricing Strategy

One Price Strategy

• Charging the same price to all customers under similar conditions and for the same quantities

• Objectives: (a) to simplify pricing decisions (b) to maintain goodwill among customers

• Requirements: (a) detailed analysis of the firm’s position and cost structure as compared with the rest of the industry (b) information concerning the cost variability of offering the same price to everyone

• Knowledge of the economies of scale available to the firm• Information on competitive prices; information on the price that

customers are ready to pay

Flexible Pricing Strategy

• Changing different prices to different customers for the same product and quantity

• Objectives: (a) to maximize short-term profits and build traffic by allowing upward and downward adjustments in price depending on competitive conditions and how much the customer is willing to pay for the product.

• Requirements: (a) have the information needed to implement the strategy (b) usually this strategy is implemented in one of four ways – by market, by product, by timing, and by technology

• Other requirements include: (a) a customer-value analysis of the product (b) an emphasis on profit margin rather than just volume, and (c) a record of competitive reactions to price moves in the past

4. Price Leadership Strategy

• This strategy is used by the leading firm in an industry in making major pricing moves, which are followed by other firms in the industry

• Objective: to gain control of pricing decisions within an industry in order to support the leading firm’s own marketing strategy (i.e. create barriers to entry, increase profit margin , etc…)

• Requirements: (a) oligopolistic situation (b) an industry in which all firms are affected by the same price variables (i.e. cost, competition, demand) (c) an industry in which all firms have common pricing objectives