Strategic Marketing Part 1

Strategic Marketing Intro: What is strategic marketing?  Behavioral Marketing wears on: - Cognitive approach (what is in the brain of consumer  learn) Affective approach (what is the consumer feeling) Conative approach (what the consumer do) Behavioural marketing: how do customer really behave ? Strategic marketing: how to achieve and sustain competitive advantage ? SM: irreversible / large / long term / achievement / trade-offs • A. How is the marketing strategy of a business influenced by supply side factors ? • Structural characteristics of the industry in which the business competes • Industry growth rate • Entry and exit barriers • Characteristics of the focal business • Competitor’s characteristics • History of past behaviour • The characteristics of the firm : • Distinctive skills and resources • The characteristics of the product offering : • Tangible versus intangible products • B. How is the marketing strategy of a business influenced by demand side factors ? • Characteristics of a business target customers : • AtÝtude, belief, preferences • Number and size • Purchase frequency • Sensitivity and responsiveness to various marketing instruments • History of past behaviour 3 CORNERSTONES: 1. G-STIC FRAMEWORK: goal , strategy, tactics, implementation, control or the G-STIC framework determines succes of a product 2. 3V FRAMEWORK 3. D-C-D FRAMEWORK: designing communicating delivering value (in corresp with 4P model) 7 MARKETING TACTICS FOR CREATING OVP Product, service, brand, incentives, price, communication, distribution = OVP (4P + BIS) A company's goal is to offerings that habe multiple strengths in key attivutes, are at parity on the other important attributes, and have limited, if any, weaknesses in the less important attributes Unlike the value proposition which captures all the benefits and costs of an offering, positioning focuses customers' attention only on the most important aspects of the offering's value proposition. The development of a positioning strategy involves two key questions : – Defining the reference point used to position the offering non comparative: Need based, category based, user based framing comparative – Identifying the primary source of the offering value Differentiation Similarity VALUE MAP PERCEPTUAL MAP   Why do firms behave differently? Why are firms different? If all products/firms are similar, the cheapest one wins (only the leader) Strategic segmentation: divide organization into homogenous segments: technology, customer types Principal Segments Objective Strategic segmentation Global organization Constitute homogenous groups of strategic activities Favor diagnostics; identify opportunities or acitivities to abandon Segment definition Business units: Activities based on the same resources and competences Processes:  Segmenting  Targeting  Positioning STP model Marketing segmentation One business unit Constitute homogenous groups of consumers Choose one or more targets; adapt product to segment needs; adapt the marketing mix to the segments Market segment: Consumers adapting the same behaviors   Segmenting Dividing market in a few segments Analysing and knowing consumers    Targeting Choosing segment(s) Looking on the firm   Positioning Regarding competitors Segmenting is the analyze of the market and divide into different groups 1. Informational Mktg 2. Strategic Mktg (Segmenting/Targeting/Positioning: to realize a competitive advantage) 3. Operational Mktg with the 4P: Price / Product / Promotion (Communication)/ Place (distribution) Do people behave the same way? Do the consumers have the same expectations? You have to start by behavioural marketing, and then you move to strategic marketing. Informational marketing Studies Strategic marketing (Segmenting, targeting, positioning) Operational marketing “4P” “SM concerns the major tools and decision processes involved in planning and controlling marketing” Chernev, A. (2012) – Strategic Marketing Management P. Kotler and B. Dubois – Marketing Management 1. Strategy to define a master plan Strategy: The term strategy comes from the Greeks ‘strategia’ – meaning, generalship – used in reference to manoeuvring troops into position before a battle. In marketing, strategy outlines the master plan of action aimed at achieving the company goal. 2. Strategic decisions in marketing mix Aka tactic, strategy outline a set of activities employed to execute given strategy. In the military, tactics refers to the development of troops during battle from their initial strategic position. In marketing, tactics refers to a specific set of activities – commonly referred as the marketing mix – product, service, brand, price, incentives, communication and distribution. In 4P, ‘promotion’ mine communication. 3. Strategic marketing: The 3V Model When developing its offerings, a company should strive to create value for 3 markets entities: target customers, the company, and its collaborators. Customer value, collaborator value and company value: constitute the 3V framework. Principles of managing value Company value (and competition) Collaborator value  OPV: Optimal Value roposition Customer value Legal People are more sensitive by the price than the effort furnished and time used to manipulate product and back at home. So, a company who purpose service to deliver products at home it’s not really interesting for people. Except for heavy product. So, Time is generally no so important for consumers!      Product life cycle: Birth Growth Maturity Decrease  This product involve 4 strategies for the product:  Innovation  Imitation  Positioning  Abandon      Kind of consumers: Pioneers Early adaptors Early majority Late majority Word Aka Framework Incentive Outlines To involve To outline To strive Troops I. Translate Aussi appelé Pilier Incitation Contours Impliquer Présenter/Exposer les grandes lignes S’efforcer Troupes Creating value for customers 1. The importance of Segmentation and Targeting analyses The STP model The segmentation-targeting-positioning (S-T-P) framework describes the process of selecting the ‘ideal’ customers and developing the offering’s value proposition for theses customers.    Dividing customers into groups with similar behaviours and preferences ( segmentation) Identifying customers segment(s) that the company will serve with its offering (targeting) Defining the key why customers will buy the offering (positioning) A. Segmentation a) Definition Segmentation: consists in dividing customers into groups of persons who share similar behaviours and expectations. The segmentation criteria enable (permet) then to describe them. Segmentation serves two main functions:  First, it optimizes the effectiveness of a company’s actions  Second, it optimizes cost-efÏciency of a company’s actions Indeed, the company optimizes marketing expenditures by grouping customers who are likely to respond in a similar way to the company’s offerings. b) Theoretical basis: Segmentation, Mass marketing and one-to-one marketing Mass marketing: refers to a scenario in which the same product or service is offered to all customers (Ford’s model T). In contrast, in one-to-one marketing, the company’s offering is customized for each individual customer. Mass marketing Segment based mkg One-to-one/Hyper segmentation A larger number of segment results in greater similarity between the customers within each segment. Segmentation 3 (the most specific) is more homogeneous with respect to customer preferences. Hyper Segmentation can be justified only in cases when the underlying differences between these segments are essential to the company’s ability to create customer value. c) Criteria segmentation Effective segmentation should yield (donner/rapporter) segment that are mutually exclusive and collectively exhaustive (when adding the different groups, you represent all the market). Segment should be sufÏciently different that they should not overlap (se chevaucher) (mutually exhaustive) and at the same time, identified segments should include all customers in a market (collectively exhaustive). We use 2 steps:  Value-based segmentation groups customers based on their needs and the benefits they seek from the company’s offerings. Customer needs can involve: Functional factors such as quality, performance, aesthetics, reliability, durability and safety; Monetary factors such as pricing, financing, and promotion preferences Psychological factors such as image and social status.  Profile based segmentation  Geographic: country, region, and postal codes  Psychographic: personality, traits, values and lifestyle  Demographic: age, gender, income  Behavioural: purchase frequency, purchase quantity and price sensitivity Locus (centre) of control: you control what is happened to you. It is an idea share by some people. It is a psychological criteria, which explain the difference of behaviour, especially for the bank sector segmenting. Word Expenditures To overlap B. Targeting Translate Dépenses/Frais Se chevaucher Targeting: process of identifying customers for whom the company will develop and optimize its offering. Targeting involves two distinct activities:  Selecting which customer to serve (referred to as strategic targeting)  Identifying the actionable characteristics describing the customers that the company wishes to serve (referred to as tactical targeting) a) Strategic targeting Identifying which customers to serve and which to ignore The process of targeting is guided by the company’s ability to develop an Optimal Value Proposition by creating an offering that will:  Satisfy a particular customer needs better than the competition  Do so in a way that creates value for the company and its collaborators Targeting supposes to measure the segment attractiveness. Segment attractiveness: reflects the ability of a particular segment to deliver value to the company and its collaborators. It depends on:  Customer needs  Company and collaborator goals Segment compatibility: reflects the ability of the firm to fulfil the need of the targeting customers. It depends on:  Customer needs  Company resources b) Tactical targeting Compared to strategic targeting (which customers serve, which customers ignore), tactical targeting aims to develop an effective and cost efÏcient approach to communicate and deliver the offering’s value to already selected customers. Value design involves defining the product and service aspects of the offering, building its brand, and setÝng its price and incentives. The efÏciency of tactical targeting is determined by the fit between the value-based segment and the readily identifiable targeting segment.     SNIPER targeting is the ideal scenario; the identifiable segment perfectly fits the value-based segment. SHOTGUN targeting is a form of inefÏcient targeting in which the value-based targeting segment is identified too broadly. OVERSEGMENTATION, on the contrary, involves an overly narrow identification The SHOT IN THE DARK approach involves a scenario in which the company communication and distribution efforts are completely misaligned and are directed to a segment that might not include its targeting customers. Strategic segmentation Marketing segmentation Principal Segments Objective Segment definition Global organization To constitute homogenous groups of strategic activities To favour diagnostic Identify opportunities or activities to abandon Business units. Activities based on the same resources and competences One business unit To constitute homogenous groups of consumers To choose one or more target; to adapt product to segment needs. Adapt the marketing mix to the segments Market segment Consumers adopting the same behaviours Word Translate Fulfil Remplir/Satisfaire Fit Concordance/Adaptation Managing products and services to create customer value Boston Consulting Group Matrix * This matrix is working only for volume/ordinary goods Sometimes, customers accept to pay more for a good, because of other reasons MICHAEL PORTER, leadership of cost (for common goods), differentiation 1986: ‘Competitive advantage’ COST LARGE TARGET Cost leadership NARROW TARGET Concentration on cost DIFFERENCIATION Differentiation Concentration on differentiation 2. 2. He was criticizing because of his too strict proposition, in next author point of view. CASE STUDY 1/ Describing the French market Demand: o Quantitative 409 millions euros +5% volume, +1,5% value Volume/Value Difference Volume/Value: - Volume: number of sales - Value: number x price (= turnover) o Qualitative Increasing awareness of importance of oral health Increasing demand Huge increase of mouthwashes Search for more therapeutic side in their products of oral hygiene 2/ Segmenting the market A segment is about a group of buyers (people or companies) in a homogeneous sub-set of the total market that can be selected as a market target to be reached with a distinct marketing mix. Value-based segment: Different function needs (of consumers): - Whiteness - Erosion - Decays Dental sensitiveness Segmentation could be based on the behaviour of consumers (number of teeth washing per week, or day). Describing the groups: At this point what we do depends on which method you have used to segment the market; demographics, atÝtude or usage. If you have used atÝtudes (motivations, needs) and found groups of people with a common need, problem or motivation, then you ‘cross correlate’ these motivational segments against the Demographic and Usage collected to identify any significant correlations. You just need to remember that correlation does not imply causality (ex: old people have often some erosion issues, but it is because they are old). Profile based segmentation: age, gender, income Additional strategic questions Is (are) the segment(s) reachable? Can you reach the segment with your communication? Can you reach the target segment with distribution? Is the segment viable? It is big enough to make money out of? Will the customer be willing to pay enough to justify the additional costs involved by the value created? Do customers recognize the segment? Do distributors or channels recognize the segment? Is the offering distinctive, does it appeal strongly to the target? Word Increasing awareness Sub-set Translate Sensibilisation Sous-ensemble/catégorie Introduction Marketing mix: product, service, brand, price, incentives, communication, and distribution.       Product and service depict the functional characteristics of an offering Brand serves to identify the Company’s offering, differentiate it from the competition, and create value that goes beyond its product and service attributes Price reflects the monetary aspects of the offering; its refers to the amount of money the company charges for an offering’s benefits Incentives (incitation) offer solutions, typically short term, aimed at enhancing the value of the offering by providing additional benefits and/or reducing costs Communication aims to inform target customers about the availability of the offering and highlight its key aspects. Distribution depicts the channels through which the offering is delivered to target customers ‘Quality in a product or service is not what the supplier puts in. It is what the customer gets out and is willing to pay for’ - PETER DRUCKER Product and service management aims to optimize the value that a company’s product and service deliver to target customers and do so in a way that benefits the company and its collaborators. A. Overview There are two types of products; durable and non durable. Durable goods: cars, household appliances, and machineries are consumed other multiple occasions and over and extended period. Non-durable goods: food, disposable items, and cosmetics are typically consumed on a single occasion or over a short period Services are many respects similar to products, with two main exceptions:  Change of ownership and inseparability; unlike products, which typically change ownership during purchase, (from the seller to the buyer), services do not necessarily imply a change in ownership; Instead, the customer acquires the right to use the service within a given time frame.    Unlike products, which can be physically separated from the manufacturer, services are usually delivered and consumed at the same time. Because services are created and delivered at the same time, they are difÏcult standardize, and their quality varies depending on the interaction between the service provider and the customer. The inseparability of creating and delivering value also makes services perishable in the sense that they cannot be inventories – an important consideration in industries such as airlines, hotels and call centers where companies with a fixed service capacity face fluctuating customer demand. B. Product and service management as a value-creation process The 5-C framework o Customers o Company o Collaborators o Competitors o Context  These elements have strategic importance when designing the product and service aspects of offerings. C. Strategic decisions  Performance Products vary in their performance or different attributes. For example, cars vary in engine power, acceleration, comfort, safety, and fuel efÏciency.  Consistency (coherence / harmonisation) Products and services are identical and consistent with specifications. Ex: McDonalds, Starbucks, and Ritz Carlton. A popular approach to managing product consistency is the 6 sigmas method.  Reliability Reliability refers to the probability that the product or service will operate accordingly to its specifications and will not malfunction for the duration of its projected life cycle. ( LaRedoute: 48h/chrono)  Durability The product respects the expected length of the offering’s life cycle. Ex: Duracell  Compatibility Compatibility refers to the degree to which an offering is consistent with certain already existing standards and complementary products. When we talk about compatibility, that include also indirect links with the firm, like the technologic environment. Compatibility can be used strategically by companies to create barriers to entry by ensuring that offerings are uniquely compatible to customers’ existing systems and processes. Product compatibility is also an effective strategy in networked environment, where users are forced to adhere to a certain standard. To illustrate, the popularity of Microsoft OfÏce products is to a great degree of function of the need for compatibility when sharing information. Compatibility is also a key consideration in multipart pricing, when charges a relatively low price for the first part, and higher prices for the complementary parts (ex: razors and blades). In this case, unique (patented) compatibility is essential so that only parts manufactured by the same company can work together (ex: only Gillette manufactured blades will fit Gillette razor).       Ease of use Technological design Degree of customization From mass-production strategy, offering the same product and services to all customers, to segment based customization to a one-to-one customization in which the company’s products and services are customized for each individual customer. Form Product design typically involves decision concerning the physical aspects of the offering such as its size and shape. Design plays an important role in manufacturing, transporting, storing, inventorying, and consuming the product. Style The look and feel is particularly important for products that have a primary hedonic and selfexpressive function, Apple’s aesthetic. Packaging Packaging serves key functions:  Protecting the product during transportation and storage  Physically containing liquid, powder and granular goods, agglomerating small items into larger packages  Preventing tampering, counterfeit, and theft  Providing convenience (confort/utilité) in transportation handling, storing, display, sale, an consumption  Offering information on how to transport store, use and dispose of the product; and promoting the product to potential buyers by providing the reasons to choose it 3. Managing brand to create customer value Introduction “Any fool can put deal, but it takes genius, faith, and perseverance to create a brand” DAVID OGILVY, founder of Ogilvy and Mather advertising agency A. Overview A brand has two key aspects:  Brand identity, which includes identifying characteristics such as name, sign, symbol, character, design and packaging. Brand identity elements should be unique, memorable, likeable and consistent with the other brand elements, and with the meaning of the brand.  Brand meaning reflects a set of mining-related associations in the mind of the buyer. It consists of the brand – related perceptions and beliefs held by the buyers; it reflects buyers ‘understanding of this brand’s value proposition, often referred to as a brand’s promise. B. Branding as a value creation process Branding aims to create what goes beyond the functional benefits of the offering. Mind identity aims to identify the company’s offering and differentiate it from the competition. In contrast, brand meaning aims to create value (for customers, the company and its collaborators) that goes beyond the product and service characteristics of the offering. To achieve this goal, a manager must consider the 5-C framework key factors. C. Brand hierarchy There are two core approaches to managing multiple brands.       Individual branding involves creating a separate brand for each product or product line (Ex: Diageo manages dozens of alcoholic beverage brands including Smirnoff, Ketel One, Tanqueray, Johnnie Walker; J&B José Cuervo, Captain Morgan, Baileys, Hennessy, Guinness, Dom Pérignon) Umbrella branding involves using a single brand for all a company’s products (ex: General Electric, Heinz, Virgin and Costco use a single brand for nearly all on their products) Umbrella branding often involves sub-branding in which the umbrella brand is combined with a lower tier brand (ex: Porsche uses sub-branding for the different offerings in its product-line: Carrera, Cayman, Boxter, Cayenn, Macan) A more subtle form of sub-branding involves using brand names with the same origin (ex: Nescafé, Nesquick, Nestea, Nespresso are used by Nestle to brand different beverages)  Individual brand strategy Pros: it enables to serve diverse customer segments in diverse product categories without the image of the brand Cons: building new brands without the support of an existing brand is costly  Umbrella brand strategy Pros: it leverages the equity of the existing brand; it strengthens the existing brand by increasing its visibility, through different products Cons: A poor performance by any product carrying the brand name can easily hurt the reputation of the parent brand D. Brand dynamic  Brand repositioning  To respond to a change in the customer segment  To reach a new target  To counteract competition  To respond to legal changes  Using the same brand name in a different context  Brand extensions Brand extension refers to the strategy of using the same brand name in a different context, such as different product category or a different price tier. -) For example, Starbucks, which has become synonymous with coffee extended its brand to include ice cream sold in grocery stores.