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Strategic Marketing

Dr Paul FifieldVisiting Professor


Dr Paul Fifield• Paul advises companies on Market Strategy and has

written widely on the subject. • He has 25 years’ experience in strategic consulting

with previous clients in: Agri Chemicals, Aviation, Banking, Brewing, Business Services, Computing and Software, Construction, Distribution, Domestic Appliances, Economic Development, Education, Housing, Hotels and Catering, Insurance, Leisure & Tourism, Online gaming, Public Sector, Publishing, Retailing, Telecommunications, Utilities, Web services and others.

• He holds a degree in Business Studies as well as an MBA and a PhD in Marketing Strategy, both from Cranfield University.

• Paul teaches on a number of MBA programmes and is currently Visiting Professor at the University of Southampton and the College des Ingénieurs in Paris. He is President of the CIM Southern Region and a Fellow of the Royal Society for the encouragement of Arts, Manufacturers and Commerce (FRSA).


Agenda

DAY 1 STRATEGY1.1 What is Strategy?1.2 The critical importance of Customers1.3 What business?1.4 What is the Objective?1.5 What is the Strategy?

DAY 2 MARKETING2.1 Product2.2 Price2.3 Place2.4 Promotion


The Approach


2 days of THINKING


Dealing with strategy & marketing

A ‘Puzzle’ ..has a correct ‘Answer’

A ‘Problem’ ..has more than one ‘Solution’


Agenda




Strategy Terminology

• The OBJECTIVE(S)– The goal or aim to which ALL activities in the organisation are

directed– An objective always begins with the word ‘TO’– Objectives do NOT change in the short term

• The STRATEGY– The ONE route which is both NECESSARY and SUFFICIENT to

ACHIEVE the objective– A strategy always begins with the word ‘BY’– Strategy is not changed in the short term

• The TACTICS– The short term actions required to implement the strategy– Manoeuvres on the field of battle– Tactics do change in the short term


Filling the ‘strategy gap’

0 +1 +2 +3 +4 +5 +6 +7

The Gap

€


STRATEGY FORMULATION

ineffective effective

effective Die quickly Thrive

ineffective Die slowly Survive

STR

ATEG

YIM

PLE M

ENT A

TIO

N

Strategy and Implementation


Planning

1. Strategic:• Three to Five years depending on the nature of the

business.

2. Tactical:• One year to 18 months.

3. Programmes:• Rolling quarterly with quarterly and annual milestones and

reporting.


First, agree the Financial Hurdles

Our financial hurdles are:

1. ……………………………2. ……………………………3. ……………………………4. ……………………………

Every organisation has one or more ‘financial imperatives’ that it must satisfy to remain in business. These are not the same as objectives. These ‘hurdles’ just need to be seen, measured and jumped. They should NOT guide the destiny of the organisation


Then, set the business objective

1. What is our Business Objective?

What do we want/need to achieve in this business? How is it measured? By when? How will we know when we have achieved it? If we achieve it, will it satisfy the Financial Hurdles?


SMART Objective(s)

All objectives must be SMART:


Objectives

What is our Business Objective?

What do we want/need to achieve in this business?

How is it measured?

By when?

How will we know when we have achieved it?

OBJECTIVE:

• Begins with “To…….”

• One is better than many

• Must be ‘SMART’

• Different from Financial Targets*

*“Too many organisations confuse ‘purpose’ with ‘measures of success” RSA


Agenda




Must be both ‘NECESSARY’ and ‘SUFFICIENT’ to achieve the objective

Business Strategies

What is our Business Strategy?

How do we achieve the agreed objective?

What are the alternatives?

Can it be done?

Can we do it?

STRATEGY:

• Begins with “By…….”

• Not short term

• Not ‘straws in the wind’

• Not changed every Friday

• Not another word for important tactics >


The Generic Strategies

Stuck inThe Middle

Cost Leadership Differentiation

Focus

[Source: Porter 1983]


Red Ocean – Blue Ocean (Kim & Mauborgne)


Strategy is rarely linear

Time1 2 3 4 5 6 7 8 ……………..……….. x

AToday

B Vision/Objective

Market Strategy

Sales/Profit/Market share/other objective TheMarket

Environment


Agenda




23

Henry Ford

“It is not the employer who pays the wages. Employers only handle the money. It is the customer who pays the wages.”

Henry Ford 1863-1947 American industrialist and pioneer of the

assembly-line production method,


Levitt on Customers

“Customers just need to get things done. When people find themselves needing to get a job done, they essentially hire products to do that job for them”

Theodore Levitt (1925-2006), American economist and professor at Harvard Business

School. Editor of the Harvard Business Review


We know that customers are Selfish

WIIfm• What’s• In• It• For

•Me Me Me Me Me Me Me?


Consumer Behaviour models

The Process

Cultural

Cultural beliefs& values

Lifestyles, etc

Sociological

Social class structureFamily/group influence

Life-CycleOpinion leadership, etc

Economic

PriceDelivery

Payment termsSales, services, etc

Individual Psychological FactorsLevel of knowledge & awareness

Personal (emotional) characteristicsMotivations, Attitudes, etc

Buying Proposition

Product or Service[Chisnall]


DECISION-MAKER INFLUENCER

USER BUYER

GATE-KEEPER SPECIFIER FINANCIER

CUSTOMER

The B2B Decision Making Unit (DMU)


Value competition

Key Questions:1 What Business? 2 Who is the Customer? 3 What is the Value Proposition?

PRICEPRICE

VALUEVALUEQUALITYQUALITY

Quality: • A relative term. • Refers to the degree of superiority of an offering. • Reflected in experiential characteristics such as image/style & recognition.•Difficult to continuously improve over time.

Quality: • A relative term. • Refers to the degree of superiority of an offering. • Reflected in experiential characteristics such as image/style & recognition.•Difficult to continuously improve over time.

Value: • Enhanced by increasing quality or reducing costs • Some retail offers value by reducing non-monetary costs and increasing monetary prices. • Different markets & segments see different “good” value.

Value: • Enhanced by increasing quality or reducing costs • Some retail offers value by reducing non-monetary costs and increasing monetary prices. • Different markets & segments see different “good” value.

Price: The customer’s only tangible measure of quality. Pricing strategies position the value and quality of the offering in the customer’s mind.Price: The customer’s only tangible measure of quality. Pricing strategies position the value and quality of the offering in the customer’s mind.


From Commodities to Experiences

The Commodity(harvested & traded)

The Good(ground, packaged,sold)

The Service(brewed in a regular cafe)

The Experience(enjoyed in a 5 star restaurant)

1–2¢

5–25¢

50¢

$2-5

Customer Perceived Value increases….


30

Laura Ashley

“We don't want to push our ideas on to customers, we simply want to make what they want”

Laura Ashley CBE, (1925 – 1985),

Welsh designer


Agenda




What business?....

“Product led” Company “Market led”Big Boys’ ToysMotor Cycles

WatchesElectric MotorsRailroads Electronics Cars Watches Beer CosmeticsPubsCoffee ShopsLeather/LuggageEncyclopedias

Harley DavidsonSwatch

B&DAmtrak

SonyJaguarRolex

A BuschRevlon

Bass Taverns Starbucks

Louis VuittonBritannica

1. Are we in?2. Should we be in?


HD and their business definition

x


What business?

“Product led” Company “Market led”

Our Product? Our Company Our Business

Big Boys’ ToysFashion AccessoriesDIYTransportEntertainment StatusJewelryFriendship“Hope”EntertainmentThe Third PlaceThe Art of TravelingParental guilt

Motor CyclesWatchesElectric MotorsRailroads Electronics Cars Watches Beer CosmeticsPubsCoffee ShopsLeather/LuggageEncyclopedias

Harley DavidsonSwatch

B&DAmtrak

SonyJaguarRolex

A BuschRevlon

Bass Taverns Starbucks

Louis VuittonBritannica


What business are we in?Our business is key to our plans, it:

1 Is defined by the customer

2 Focuses the organisation on needs satisfied

3 Establishes directions for growth

4 Establishes boundaries for effort

5 Determines real competitors

6 Establishes the markets to be served

- Would our customers understand our business?

- What needs should we be satisfying?

- Where should we be investing for the future?

- What should we do more of/stop doing?

- Who are we really competing with?

- What is our core target market?


What businesses for Sony & Apple?


Case Task

1. What business do you think your company should be in?

2. Who are your target Customers?


Agenda




Case Task

2. What objective or vision will you set for your company?

• Remember these must be ‘SMART’


Agenda




Case Task

4. What strategy will you use for your company to achieve the objective or vision you have set?


Agenda




What is ‘Marketing’?

• "Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering and exchanging products of value with others“

Philip Kotler• “The process of planning and executing the conception, pricing,

promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives” AMA

• The act or process of buying and selling in a market. The commercial functions involved in transferring goods from producer to consumer. Answers.com

• The point of Marketing is to make Selling unnecessary” Drucker• “Marketing is the management process responsible for

identifying, anticipating and satisfying customer requirements profitably.” CIM(UK)

VisionLong TermFinancialObjective Mission

Leadership

ShareholderValue

OtherStakeholders’requirements

Personal values of key implementers

Customer and market

orientation

ExternalFocus

Strengths and Weaknesses

Resource/Performance Audit

Competitiveopportunities

Competitoranalysis

EnvironmentAudit

OpportunitiesAnd Threats

Structuralopportunities

Industryanalysis

The BusinessObjective

The BusinessStrategy

The MarketingObjective

CompetitiveStrategy

SustainableCompetitiveAdvantage

The Customer

The Marketing Plans, Programmes & Implementation

ProductPolicy

PricePolicy

Place(distribution)

PolicyPromotion

Policy

FinanceObjective/Strategy

H. Resource Objective/Strategy

OperationsObjective/Strategy

ITObjective/Strategy

SCORPIO ©

(Mar

keti n

g S

trat

e gy)

(Feedback & Control)

(Feedback & Control)

Customer

Retention

The

Customer

OrganisationStructure &

Culture

Industryor

Market

Offerings

Positioning& Branding

Segmentation& Targeting

© Fifield 2007


Product Planning THE

MARKETINGMIX

Branding

Pricing

Advertising

The Marketing mix (Neil Borden)

Distribution channels

Personal Selling

Promotions

Packaging

Display

Servicing Physical Handling

Fact finding &

Analysis


Product

THEMARKETING

MIX

Place

Price

Promotion

The Marketing mix (4P’s)


Product

THEMARKETING

MIX

Place

Price

Promotion


People

Process PhysicalEvidence


Product

THEMARKETING

MIX

Place

Price

Promotion


People

Process PhysicalEvidence

Personal InterestsPrivacy

PublicCommentary

Personal(Social

Networks)


CustomerNeeds & Wants

THEMARKETING

MIX

Convenience

Cost (to the user)

Communication

The Marketing mix (4C’s)


Product

THEMARKETING

MIX

Place

Price

Promotion


Position


Product

THEMARKETING

MIX

Place

Price

Promotion

The Marketing mix (make-your-ownP’s)

P

P P


ProductQuality SizesFeatures ServicesOptions ReturnsStyle WarrantiesBrand PackagingDifferentiation THE

MARKETINGMIXPlace

Channels CoverageLocations InventoryTransport PartnersRoutes-to-marketSupply ChainIntermediaries

PriceList price DiscountsAllowances RatesCredit ChangesCommunications Opportunity CostPayment period

PromotionMessage MediaAbove/Below-the-lineAdvertising DirectPublicity PRPersonal Selling WOMPromotion Internet



Agenda





MARKETINGMIXPlace






Products and/or markets?

• Product features

• Product sales

• Technical excellence

• Product service

• Rational solutions

• Product profitability

• Customer needs/wants

• Customer satisfactions

• Customer expectations

• Customer service

• Emotional solutions

• Customer and/or segment profitability

‘PUSH’ ‘PULL’ Strategy Strategy

The Great

Debate:


Product 1

“I don't sell cosmetics, I sell hope” Charles Revson

“What our customer wants is a pile of rubble, not dynamite!” Alfred Nobel

“Customers buy holes, not drills” T Levitt


Levitt on the product

“A product is what a product does”

Theodore Levitt (1925-2006), American economist and professor at Harvard Business

School. Editor of the Harvard Business Review


Features or Benefits?

Are you selling a 6mm drill Or a 6mm hole?

Caterpillar:We have a bigger digger!

Komatsu:Did the earth move for you?


What-it-is or What-it-does?

Are you selling a 6mm drill Or a 6mm hole?

A Telephone? Or Identity?


The Service Product

“A service is any activity or benefit that one party can offerto another that is essentially intangible and does not resultin the ownership of anything. Its production may or maynot be tied to a physical product” [Kotler]

Characteristics of services:

1 Intangibility2 Inseparability3 Heterogeneity4 Perishability5 Ownership


– A service is..

Government

LegalEducationalHealthMilitaryEmploymentCreditCommunicationsTransportationInformationservices, etc

Private Non-Profit

Art & Music GroupsLeisure FacilitiesCharitiesChurchesFoundationsColleges, etc

Business &Professional

AirlinesBankingInsuranceHotelsManagementconsultantsSolicitorsArchitectsAdvertising AgenciesMarket Research, etc


The Augmented Product Concept

TangibleBenefits or‘Knowhow’

Additional Benefits

Emotional Benefits

eg. functions

eg. service

eg. trust, prestige

The Support Services component

The Core component

The Packaging component


The Product/Service Life Cycle

Introduction Growth Maturity Decline

Supply;• Can’t make

enough• Little formal

infrastructure• Higher costs

Demand:• Innovators• Early adopters• Higher Price• Higher Risk• Little awareness• ‘New’

• Growing availability

• Growing Competition

Demand:• Growing

awareness • Reducing Prices • Early majority• Emerging

standard design

• No new buyers• Repeat purchase• Can get boring• Best marketing?• Customer focus• Market Segmentation

(S) critical• Consolidation• Fewer BIG players• More NICHE players• Can last a looong time

• Failing demand• Falling profits

or debts• Fewer

customers• Death, or• Rejuvenation• Possible re-

positioning

“Consolidation”

The ‘Chasm’

Sales to Marketing!


Case Task

5. What Product policy does your strategy require?


Agenda





MARKETINGMIXPlace






An important word about Price

In any developed market, 90% of customers would prefer to buy on non-price reasons and pay some level of premium price for perceived additional value

10% will always buy the cheapest – because they don’t care about the category

In an undeveloped market, a proportion of customers will prefer to pay premium price for additional value

Still, 10% will always buy the cheapest

A proportion appears to want the cheapest but have latent needs that have not yet been identified and exploited

67


Approaches to Pricing

1. ‘Cost Plus’ pricing Cost informs the price

2. ‘Market’ pricing Customers inform price Cost informs the profit available

Why is this important????????????

PRICE IS THE ONLY SOURCE OF REVENUE IN

THE MARKETING MIX!


The Pricing

Decision Box

Objectives Fit with restof portfolio Support from

rest of mix

Costs

Legislation

Substitutes

Bench-Marking

Perceptionof value

Competitiveretaliation

Pricing decisions

Product Mix Pricing• Product line pricing: price banding• Follow-on products• Blocking products• Bundled and option pricing• Pricing corridors


Why industrial (B2B) companies lose customers

DevelopNew

Relationships

CompanyIndifference

95

14

31

68%

Death Relocation LowerPrice

ProductDissatisfaction

Perc

enta

ge o

f los

t cus

tom

ers 80

60

40

20


Pricing Tactics?

SalesRevenue

This is the business, how would you double the profit?

1. You could increase sales by 25% & hold fixed costs steady

2. Hold your sales steady and lower your material costs by 12.5%

3. Increase your prices by 5% holding costs and sales volume

£4m(materials)

£10m +£2m(labour) £3.5m £0.5m =£6m

£12.5m £5m+£2.5m £3.5m £1m

£10m £3.5m+£2m £3.5m £1m

£10.5m £4m+£2m £3.5m £1m

Direct costs, materials, production. labour

Fixed costs, overheads, distribution, sales Net profit

(Source: Winkler)


Understanding Profit Drivers

Sales Volume(Units)

1 million

Price €100

Revenues

Variable costper unit = €60

Sales Volume1 million

Variable Cost Fixed Cost€30 million

Cost

Profit

=

What is the profit impact if each of the 4 levers improves by 10%?


Understanding Profit Drivers (2)An increase in price has a greater impact on profit than an increase

in volume or decrease in costs.

Profit Driver Profit ProfitOld New Old New % Change

10% improvein:

Variable costper item

Sales Volume

Fixed costs

Price

€60 €54

€1m €1.1m

€30m €27m

€100 €110

€10 €16 60%

€10 €14 40%

€10 €13 30%

€10 €20 100%


Role of price

• What clients of “Engineering, Procurement & Construction” (EPC) want (2006)

1 Employees are knowledgeable & experienced in our industry2 Provide quality engineering appropriate to our needs3 Meeting schedule commitments4 Meeting cost expectations & commitments5 Deliver value for the money6 Providing schedules that meet our needs7 Provide quality fabrication and construction that meets our needs8 Being able to perform the work wherever we need it done9 Pricing for services & technologies10

Having local employees with knowledge of local customs/regulations


The race to the bottom

Marketing should not be about:

• Selling as much as possible• Building market share – at

any cost• Chasing any sales revenue

available• Cutting the price to stay in

the “race”

• Unless you want to kill the company


Case Task

6. What Pricing policy does your strategy require?


Agenda





MARKETINGMIXPlace






The distribution channel is ...

"The route along which a product and its title (ie the rights of

ownership) flow from production to consumption"


Channel Configurations

Originating manufacturer/Service provider

Direct

Distributor

OEM

VAR

OEM

Wholesaler

Retailer

Agent

Sub Contractor

Specialist

Prime Contractor

Post Phone Online F2F

DirectMail

End Buyer/User


Why use intermediaries?

• Specialisation• Division of labour• Provide assortment by gathering supplies together from

number of manufacturers - “honest broking”• Breaking bulk so as to meet scale of need of customers -

and buying in bulk on behalf of customers• Reduce “contactual costs”• Geographical proximity and local knowledge• Adding value (eg customisation, service, installation)• Theoretically cash received quicker up the chain• Running “interference” - for their customers and their

suppliers


Reducing “contactual costs” or channel geometry

4 Manufacturers contact4 retailers directly

No. of contacts = 4 x 4 = 16

W

RRRR

M M M MM M M M

R R R R

No. of contacts = 4 + 4 = 8

4 Manufacturers distribute through a wholesaler


Increasing Retailer concentration

W

RRRR

M M M M M M M M

R R R

RRRR RRRR RRRR


"Let's say I have a new product. Sainsbury and Tesco have over 50% of the London market: London is so important that, if they won't accept my product, it simply isn't worth launching."

- Major Food Manufacturer

"I account for 25% of your business. You account for less that 5% of mine. Let's talk terms."

- Retail Buyer to Major Household Products Manufacturer

Battle for control


Who ‘owns’ the customer owns the margins

Producer

Intermediary

Brand Franchise!

InformationCommunication

‘Push’(sales)

Consumer/ End User

‘Pull’(marketing)

= Margin


Case Task

7. What Place/Distribution policy does your strategy require?


Agenda





MARKETINGMIXPlace






Which half ?

"I know that half my advertising budget is wasted, but I’m

not sure which half."

William Hesketh Lever, 1st Viscount Leverhulme (1851 –1925) was an

English Industrialist, philanthropist and colonialist. He established a soap

manufacturing company called Lever Brothers (now part of Unilever) with his

brother James


Value or Volume?2006 data (UK):• Number of messages seen per day = +/-3500

– = 4/minute in a waking day

“EyeContact” glasses:• 90 minute London shopping trip• 250 messages recorded

– 100 brands– 70 formats

• Prompted recall =– Customer interested

• Unprompted recall =

130

1


The Future of Advertising?

A recent paper titled "The Future of Advertising is Now" by Christopher Vollmer et al, attempts to solve Lord Leverhulme’s dilemma, at least for the automobile industry. Clearly, his lordship’s assessment remains remarkably accurate, as this chart from the paper shows.


Promotion can affect….

1.Attention

2.Interest

3.Desire

4.Action

http://www.amazon.com/exec/obidos/ASIN/0789301350/theringofthen-20


Promotional objectivesPromotion may be used to achieve the following:

1. To build awareness and interest in the service or product and the service organisation

2. To differentiate the product/service offer and the organisation from competitors

3. To communicate and portray the benefits of the products/services available

4. To build and maintain the overall image and reputation of the providing organisation

5. To persuade customers to buy or use the product/service

Promotion, on

its own, cannot

sell


Promotion by objectives

1 Promotional objectives2 The target audience3 The message4 The media: advertising

sales promotionpublicitypersonal sellingpublic relations

5 Budgets6 Testing and Control


The promotional mix

Newspapers and MagazinesTrade and Professional PressTelevision and RadioCinema

----------------------------------------------------------ExhibitionsDirect MailPublic RelationsPoint of SaleDigital/InternetPackagingSales PromotionPersonal SellingCompany ImageThe Service ProductPricingWord of Mouth

In services, personal selling may be indistinguishable from service delivery

Indirect

“The Line” separates the mass media from

the more targeted


The fundamental proposition

The4

Questions

1Who is the one

person you want to talk to?

2What is the one thing

you want to say to them?

3Why should they

believe you?

4How do you want them to feel as a

result?


Case Task1. What business do you think your

company should be in?2. Who are your target Customers?3. What objective or vision will you set

for your company?4. What strategy will you use for your

company to achieve the objective or vision you have set?

5. What Product policy does your strategy require?

6. What Pricing policy does your strategy require?

7. What Place/Distribution policy does your strategy require?

8. What Promotional policy does your strategy require?


Reading List1. “Principles of Marketing: European Edition” - Kotler, Saunders &

Armstrong, FT Prentice Hall 20042. “Mercator : Théorie et pratique du marketing”, Lendrevie, Levy &

Lindon 20063. “Marketing Strategy” 3rd Edition - P Fifield, Elsevier 20074. “Marketing Strategy Masterclass” – P Fifield, Elsevier 20085. “Collected Essays in Marketing Strategy” P Fifield, Fifield, 20066. “The Marketing Imagination” - T Levitt, Free Press, 19987. “Market-led Strategic Change” – N Piercy, Butterworth Heinemann, 20028. “Marketing Briefs” – S Dibb & L Simkin, Butterworth Heinemann 20049. “Marketing Plans” – M MacDonald, Butterworth Heinemann 200210. “Marketing Management and Strategy ” – P Doyle, FT Prentice Hall,

200611. “Marketing Research: An Applied Approach” – D Birks & N Malhotra, FT

Prentice Hall 200512. “Essentials of Marketing Research” - T Proctor, FT Prentice Hall, 200313. “International Marketing” – V Terpstra, South Western College Pub, 200114. “Marketing across cultures” - JC Usenier & J Lee, FT Prentice Hall 2005


Strategic Marketing

strategic marketing - universität stuttgart · strategic marketing dr paul fifield ... revlon bass...

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