1. A Brief History of
Marketing Strategy
James E. Coleman
CPA, CFP®, PhD

2. What this course is about:
 Address 3 common expectations of
employers of recent MBA’s
 Ability to work/manage teams
 Ability to evaluate and solve problems
 Ability to communicate solutions persuasively
 Learn basic tools and techniques for
analyzing markets & industries
 Understand how to apply the marketing
strategy development process across various
settings

3. Marketing Strategy Development Process:
The Search for Opportunities
External Market Environment
FOUR P’s
FOUR
C
‘s
(Context)

4. 3rd edition
Provides Marketing Strategy
Development Practice

5. Overview
 You take over marketing management
responsibilities for your firm.
 Must satisfy customers to sell product and earn profits
 Focus is on marketing strategy planning.
 Requires integration of all strategy decisions.
 Requires attention to competitive environment.
 Considers short term and long term perspectives.
 Features ongoing, rapid feedback.

6. The Process
Analysis of market situation/opportunities
Planning and budgeting
Make marketing plan DECISIONS!!!
Submit plan decisions
The marketing game! simulation
Company reports returned to firms
Next
Decision
period

7. Industry Environment
 Market growth
 Traditional PLC applies, but subsidiary to strategy
 Technological environment
 No major innovations expected
 Yearly revision cycle
 Competitive environment
 Type of competition depends on firms’ decisions

8. Six Key Product-Market Segments
Harried
Assistants
Concerned
Parents
Home
Users
High-tech
Managers
Modern
Students Professional
Creators
Segments have different needs, preferences,
situations, sizes, growth rates.

9. Past Sales By Market Segment
25000
20000
15000
10000
5000
0
0 1 2 3
Year
Assist ant s
Managers
St udent s
Home
Creat ors
Parent s
For Voice Recognition Device

10. Distribution Channels
Firm 1 Firm 2 Firm 3
Harried
Assistants
Firm 4
Concerned
Parents
Home
Users
High-tech
Managers
Modern
Students Professional
Creators
Channel 1
Traditional
Dealers
Channel 2
Discount
Dealers
Firms reach customers
through full-service
dealers and
Internet/mail-order
discount dealers.
Different segments
have different shopping
preferences.

11. Product 1: Voice Recognition Device (VRD)
Key
Product
Features
Number of Special Commands (5-20)
Error Protection (1-10)
Ability to Customize (1-10)

12. R&D for Product Modifications: Computing Costs
Feature (Product 1) Cost to Decrease Cost to Increase
Special Commands (5-20) $0 $8,000*(change)2
Error Protection (1-10) $0 $5,000*(change)2
Ease of Learning (1-10) $3,000*change $3,000*(change)2
Product 2 R&D costs follow the same pattern as Product 1 (shown above)
Example
Feature
Last
period’s
product
This
period’s
product Change Cost to Change
Special Commands 6 8 +2 $8,000*2*2=$32,000
Error Protection 4 3 -1 $0
Ease of Learning 3 5 +2 $3,000*2*2=$12,000
Total modification costs: $44,000
Note: R&D for product changes is more expensive
if you have to make big changes in a short period of time…

13. Product 2: Digital Vocal Communicator (DVC)
Key
Product
Features
Number of Tasks (1-10)
Similarity of Commands (1-10)
Ease of Learning (1-10)
Level 3
Not necessarily cannibalistic of Product 1,
but additional sales support is needed.

14. Types of Advertising
 Pioneering
 Best for expanding market demand early in PLC
 Direct competitive
 Best for stimulating current sales (reduced carryover)
 Indirect competitive
 Best for building brand awareness & improves carryover
 Reminder
 Improves ad effectiveness if brand awareness is high
 Corporate (Institutional)
 Creates ‘halo’ effect for the other product (not useful for
single product situations)

15. Marketing Responsibilities (Level 3)
2 PRODUCTs Features (and R&D for product modifications)
PRICE Wholesale price may differ in each channel
and for each product
PLACE Distribution intensity by channel, product
PROMOTION
-Advertising $ Spending for each product
Type for each product
-Personal selling Number of sales reps in each channel
Percent non-selling time in each channel
Commission rate
-Sales promotion $ Spending per channel, product
CUSTOMER SERVICE $ Spending
MARKET RESEARCH 7 reports may be purchased
Demand forecast/
production order Number of units for each product

16. Production Economies of Scale
102
Cost
99
96
Unit 93
Base 90
87
of 84
Percent 81
78
75
72
Cumulative Units Produced 0 100,000 200,000 300,000 400,000 500,000
Unit production costs will decline as cumulative production
increases, but this is not reflected in the pro forma estimates

17. Response Functions and Marketing Spending
Sales
Marketing Spending
Threshold
Level
Saturation
Level
Spending too little may have little effect, but
spending too much just increases costs
and reduces profit.

18. Marketing Budget Items (Level 2 and 3)
 R&D product modification costs
 Sales force salaries and severance pay
 NOT commissions (which come out of profits)
 Advertising expense
 Customer service expense
 Sales Promotion Expense
 Market research reports expense
BUDGET FOR FIRST PERIOD: $984k
Use it or lose it!

19. Discretionary Budget
$1,500,000
 If you overspend your regular budget it is
automatically deducted from this amount.
 “When it’s gone, it’s gone.”
 If you overspend after it’s gone, it comes out
of your advertising budget.
 Unspent money carries to future periods and
earns interest.

20. Computing Prices
Computing Retail Prices from Wholesale Prices:
Expected Retail Price = Wholesale price/(1-% Markup)
Example: Wholesale price = $105
Channel 1 Retail Price = ($105/(1-.50)) = $210
Channel 2 Retail Price = ($105)/(1-.35) = $161.54
Computing Wholesale Prices from Desired Retail Prices:
Wholesale Price = Retail Price * (1 - % Markup)
Example: Desired Retail Price = $190
Channel 1 Wholesale Price = $190*(1-.50) = $95.00
Channel 2 Wholesale Price = $190*(1-.35) = $123.50

21. Retail Prices Charged Final Consumers
The retail price set by a dealer depends on:
 The wholesale price in the dealer’s channel.
 The customary markup used in the channel.
 The portion of any sales promotion “deals” that the
dealer passes along to consumers as a price
reduction.

22. A “Good” Wholesale Price
 Should cover the unit cost of the product
(given its features).
 Should result in a retail price that will appeal
to target consumers.
 Should result in a profit margin that will
contribute to other expenses and profit.

23. Competitor Analysis
 Review posted reports of industry results.
 Analyze past strategies & likely changes.
 Evaluate positioning and target segments.
1 2 3 4
X
? X
X
?
?
X
Firms
1
2
3
4
5
6
Segments

24. Industry Sales Report (Free)
Brand Unit Sales Share (units) $ Sales (retail)
Firm 1 25,151 .250 $4,292,964
Firm 2 25,151 .250 $4,292,964
Firm 3 25,151 .250 $4,292,964
Firm 4 25,151 .250 $4,292,964
Total 100,604 $17,171,854
Channel Unit Sales Dollars Sales
1 56,296 $10,696.240
2 44,308 $6,475,614

25. Product Features and Prices Report (Free)
Brand
of
VRD
Firm 1
Firm 2
Firm 3
Firm 4
Special
commands
8888
Error
protect-ion
3333
3333 Retail
Ease
of
learning
price
channel
1
$190.00
$190.00
$190.00
$190.00
Retail
price
channel
2
$146.15
$146.15
$146.15
$146.15

26. Market Activity Report (Free)
Adv. Dollars
Adv. Type
Sales Promotion
Channel 1
Channel 2
No. Sales Reps
Channel 1
Channel 2
Commission
Customer Service
Firm 1
$250,000
$0
$0
10
10
5%
$92,500
Firm 2
$250,000
$0
$0
10
10
5%
$92,500
Firm 3
$250,000
$0
$0
10
10
5%
$92,500
Firm 4
$250,000
$0
$0
10
10
5%
$92,500

27. Additional Market Research Reports (NOT Free)
 1. Market share by segment (all brands)
 2. Market share by channel (all brands)
 3. Consumer preference study
 4. Marketing effectiveness report
 5. Sales by segment by channel (own brand)
 6. Consumer shopping habits study
 7. Product positioning report
Note: separate reports are available for each product,
Except for the consumer shopping habits study

28. Market Share by Segment Report ($15,000)
Brand
Firm 1
Firm 2
Firm 3
Firm 4
Total
Sales
(units)
1
0.250
0.250
0.250
0.250
20,028
2
0.250
0.250
0.250
0.250
15,084
3
0.250
0.250
0.250
0.250
25,104
4
0.250
0.250
0.250
0.250
10,240
5
0.250
0.250
0.250
0.250
22,056
6
0.250
0.250
0.250
0.250
8,092
Segment
Who’s selling to whom?
Who’s buying what?
What is each firm achieving?
Which segments are buying?

29. Market Share by Channel Report ($12,000)
Brand
Firm 1
Firm 2
Firm 3
Firm 4
Total Sales
(units)
Channel 1
0.250
0.250
0.250
0.250
56,296
What’s selling where?
Who’s buying what?
Channel 2
0.250
0.250
0.250
0.250
44,308

30. Consumer Preference Study ($30,000)
Segment
Students
Home
Assistants
Creators
Managers
Parents
Special
Commands
10-13
7-10
10-13
12-15
13-16
5-8
Error
Protection
2-4
2-4
6-8
2-4
6-8
2-4
Ease of
Learning
1-3
6-8
6-8
4-6
2-4
7-9
Price
Range
low
low
high
high
high
low
What kind of product would a segment prefer?
What reference price seems typical for the segment?
How are segments similar and different?

31. Marketing Effectiveness Report
($25,000 or $30,000 for both prod.)
Brand Awareness
Customer Service
Consumer Group Rating
Industry Average Rating
Channel 1:
Sales Rep Workload
Dealer Satisfaction
Channel Strength
(“Push”)
Channel 2:
Sales Rep Workload
Dealer Satisfaction
Channel Strength
(“Push”)
Index
0.550
100%
100%
100%
1.00
.500
100%
1.00
.500
Competitors
with lower
Index
0
00
00
Competitors
with equal or
higher Index
3
33
33

32. Detailed Sales Analysis ($15,000)
Firm
Channel 1
Channel 2
1
896
5,269
2
1,109
3,337
3
5,602
1,396
4
1,808
1,196
5
4,363
1,865
6
1,086
1,074
Segment
Unit sales by segment and channel
Are you reaching your target?

33. Customer Shopping Habits ($7,000)
Segment
Students
Home
Assistants
Creators
Managers
Parents
Percent of Shopping
in Channel 1
?
?
?
?
?
?
Percent of Shopping
in Channel 2
?
?
?
?
?
?
Who shops where?
How do shopping patterns match distribution focus?

34. Product Positioning Report ($30,000)
Brand
Firm 1
Firm 2
Firm 3
Firm 4
1
????
2
????
3
???
?
4
????
5
????
6
????
Segment
Which brands are closest to which segments?
Which segments have no close brands?

35. Submitting Marketing Plans
 Submitting marketing plans decisions
 Submit your decision plan files via email
no later than the due date and time per class calendar.
 Each firm has a distinct industry and firm
identification (e.g., A1, B3, etc.)
 Need to keep it straight!
 Passwords and the TMGPlan software
 Remember password used to create Plan
 It is case sensitive (upper and lower case make a difference)
 Best to stick to one password!

36. Recommendations
 Analyze the reports as you would analyze a
case.
 Make intentional changes.
 Find a balance in marketing research
spending.
 Be integrative--think carefully about how each
decision impacts each of the others.
 Have some fun!