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  1. 1. Strategic Marketing Management Jyostna Jain
  2. 2. Unit 1  Marketing: Nature of Marketing, marketing as an art, science and business discipline, marketing as a value creation process  Strategic decisions: Nature of strategy, the marketing strategy interface, difference between marketing planning and strategic planning  Identifying the market: The five C framework-customer, company, collaborator, competitor, context  The 7 tactics of Marketing mix: Product, service, brand, price ,incentives, communication and distribution  Business Model and Strategic Marketing Planning: Meaning, Role of Business models in marketing management,  Strategies for developing a business models: top-down business model generation, bottom up business model generation, The G-STIC frame work for marketing planning: Goal-Strategy-Tactics-Implementation-control
  3. 3. What is Marketing?  Marketing is a business discipline which is much broader than sales.it involves all aspects of developing the product that is to be sold.
  4. 4. Marketing as Art ,science and business discipline  Marketing as art: Marketing is art because marketing is about creating a demand for your product. Some of that demand is immediate and some of it is in the future.  Marketing as science: Marketing as a science is about looking for patterns in the market and in customer behaviors — within data, but also through more qualitative sources of information, such as conversations with prospects, peers, and third-parties .  Marketing as Business Discipline:Marketing is a business discipline founded in creative ideas applied for profitable growth.
  5. 5. What is Strategy A plan of action designed to achieve a long-term or overall aim.
  6. 6. Strategic planning Marketing planning Concerned with long term ,overall,organizational direction. Concerned with Day-to-day performance and results Provides long term framework for organization Represents only one stage in the organisations development Goals and strategies are evaluated form an overall prespectives Goals are subdivided into specific targets Relevance of goals and strategies is only evident in long term Relevance of goals and strategies is immediately evident.
  7. 7. Five C’s of Marketing
  8. 8. Tactics of Marketing Mix • Product design,product line,product features etc Product • Search,experience and credence( faith) Service • Brand management, tactics Brand • Price signaling,loss leader pricing,everyday low pricing etc Price • Collaborators,employees Incentiives • Information about products and services Communication Distributiion
  9. 9. Business Models  Top –Down business model: This approach typically starts from strategic analysis aimed at identifying target market and creating optimal value proposition for key players in the market. Eg: Apple iPod is designed to address the need for a user friendly device that enables people to carry their favourite music with them.  Bottom –up business model: The development of bottom-up business model starts from R&D process which leads to improvement of a particular product feature and or develops new ones. Eg: iPad was largely driven by already existing technology used by I phone rather than conceived as an entirely new product to address unmet customer need. In the same lines certin medicines which are popularly used for treating hair loss originally were used to treat high blood pressure.
  10. 10. Gstic Framework
  11. 11. Unit 2  Segmentation: Essence of segmentation, Factors to be considered while segmenting, key segmenting principles- relevance, similarity, exclusivity  Identifying Target Customers: Factors to be considered while targeting, targeting strategies-One for all strategy, one for each strategy, Strategic Targeting criteria: target attractiveness, target compatibility Essential strategic assets for target compatibility: business infrastructure, collaborator networks, human capital, intellectual property, strong brands, established customer base, synergistic offerings, access to scarce resources and capital.  Creating Customer Value through Positioning: Role of strategic positioning, strategic positioning options: The quality option, value option, the pioneer, a narrow product focus, target segment focus; strategies for creating superior customer value. Creating Company Value: Understanding Company Value: Monetary, functional and psychological value; strategically managing profits--increasing sales revenue-through volume, optimizing price, lowering costs Creating Collaborator Value:  Meaning of collaborators, collaboration as business process, advantages and drawbacks of collaboration, levels of strategic collaboration: explicit, implicit; alternatives to collaboration: horizontal and vertical integration, managing collaborator relations; gaining collaborator power: offering differentiation; collaborator size, strategic importance, switching costs
  12. 12. Segmentation
  13. 13. Segmenting Principles  Similarity: Customers are grouped as per their similarities and preferences.  Exclusivity:Customers in each segment are also little different from those in other segments with respect to how they react to the competitors offering.  Relevance: It must group customers based on their response to the company’s offerings.  Comprehensiveness: Segment includes all the possible customers in a given market such that each customer is assigned to a segment.
  14. 14. Targeting Targeting is a process of identifying customers, to who the company will offer its product.
  15. 15. Targeting Strategies  One for all strategy: This strategy involves developing the same offering for both the customers. It aims to reach the largest audience possible, and exposure to the product is maximized. In theory, this would directly correlate with a larger number of sales or buy-in to the product. Eg:For example, toothpaste (such as the brand Crest) isn’t made specially for one consumer segment, and it is sold in huge quantities. The manufacturer’s goal is to get more people to select and buy their particular brand over another when they come to the point of purchase. Walk through any supermarket, and you will observe hundreds of grocery products, especially generic items, that are perceived as nearly identical by the consumer and are treated as such by the producer.  One for each: This strategy means developing a separate offering for each customer. The goal is to help the company increase sales and market share across each segment it targets. Eg:Proctor and Gamble, for example, segments some of its markets by gender, and it has separate product offerings and marketing plans for each: Secret-brand deodorant for women, and Rogaine (a treatment for hair loss) for men
  16. 16. Targeting criteria • Monetory value • Strategic value Target Attractiveness • Strategic assets • Resources Target Compatibility
  17. 17. Role of Strategic positioning  Makes entire organization market oriented  Face market changes  Meet expectations of buyers  Promote consumer goodwill and loyalty  Win attention and interest of consumers  Introduce and launch new product successfully
  18. 18. Strategic Positioning options  The quality option: Quality based positioning makes an impression in the minds of the consumer that the product or services will deliver the high quality as promised. Eg: BMW,Apple,Sony,Mercedes.  Value Option: Positioning by value means communicating to the consumers that the product is value for money for the buyer. Eg: Big Bazar,Archies.  The pioneer option: Pioneers are the products which are first ones to reach the hands of customers. Eg: Coca-cola,Levis  A narrow Product focus:This type of strategy focuses on importance on consistency in products. Eg: Head and shoulders anti-dandruff shampoo,Norwegian coffee brand.
  19. 19. Creating Company value Creating company value is a process of mean value derived from the market in which the company creates value first for its customers and collaborators.  Monetory value:is whether the function of the price paid is relatively comparable to perceived worth of a product. This value invites a trade-off between other values and monetary costs.  Fuctional value:is what an offer does; it’s the solution an offer provides to the customer.  Psychological value:is the extent to which a product allows consumers to express themselves or feel better.
  20. 20. Strategies for increasing sales volume  Market growth strategy: It means increasing sales volume by attracting customers which are new to the category.these customers are the ones who are currently not using the companies offering or the competitors offering. Eg: Tata  Steal share strategy:Stealing it from a competitor or competitive product. You need to steal from whatever your target audience is doing now to fulfill a need. Eg: Jio  Market penetration strategy: this strategy involves increasing sales volume by increasing quantity purchased by company’s own customers. Eg:Patanjali
  21. 21. Managing profits by lowering cost  Lowering the cost of goods sold  Lowering R&D cost  Lowering marketing cost
  22. 22. Creating collaborator value  Collaborators are any third parties that work directly with your company to support or assist in the development or execution of a strategy. Some common examples of collaborators include vendors, warehousers, and consultants.  It’s important to know who your collaborators are, not only to understand in which ways your company can extend its business, but because any marketing you do could have an effect on their companies or your relationships with them.  As with your customers, you should strive to create as much value for your collaborators as possible.
  23. 23. Advantages of collaboration  Effectiveness  Cost efficiency  Flexibility  Speed
  24. 24. Disadvantages of collaboration  Loss of control  Loss of competencies  Empowering competition
  25. 25. Levels of collaboration  Explicit collaboration: It is a contractural relationship such as agreement,Joint venture and franchise agreement.it is a formal relationship  Implicit collaboration: In this type of collaboration there are no formal relationships or contractural agreements.
  26. 26. Type Types of integration
  27. 27. Unit 3  Managing Product and Services: factors affecting product and service decisionsperformance, consistency, reliability, durability, compatibility, ease of use, technological design, degree of customization, physical aspects, style, packaging.  Managing New Products: Forecasting new product demand using Primary Data and secondary data: offering specific forecasting, forecasting by analogy, category based forecasting. New product adoption: Understanding new product adoption, factors influencing diffusion of new offering, new product development process, managing risk in new products- market risk and technological risk, Moore’s Model of adoption of new technologies, managing product life cycle at various stages, extending Product lifecycle.  Managing Product Lines: Managing vertical, upscale, downscale, horizontal product-Line Extensions, Managing Product Line Cannibalization, Managing Product lines to gain and defend market position-The Fighting Brand Strategy, The sandwich strategy, The Goodbetter-best strategy  Brand Tactics: Brand: Meaning, brand identity, brand as value creation process brand hierarchy-Individual and umbrella branding, brand extension: vertical and horizontal, brand equity and brand power, measuring brand
  28. 28. Product and service management  Product and service management aims to optimize the value that a company’s products give to their customers.  While designing products and services the goal of a manager should be to increase the benefits to the company and collaborator.
  29. 29. Factors affecting product and service decision  Performance: Mobile phones vary in features,camera functions,water resistance,battery life, etc  Consistency:Mc donalds  Reliability:Dominos promises pizza delivery in 30 minutes  Durability:Everready batteries  Ease of use: Android software  Degree of customization: variety and options
  30. 30. Managing new products  The development of products consists of a process that involves knowledge and several functional areas and presents a high degree of complexity and iteration in its execution.  In business and engineering, new product development (NPD) covers the complete process of bringing a new product to market. A central aspect of NPD is product design, along with various business considerations.  New product development is described broadly as the transformation of a market opportunity into a product available for sale.  The products developed by an organisation provide the means for it to generate income. For many technology- intensive firms their approach is based on exploiting technological innovation in a rapidly changing market.
  31. 31. Forecasting product demand  Market forecast: Estimating sales volume that can be achieved by all the companies in a given market.This type of forecast is required to take decisions regarding entry into the market and exit,resource allocation and evaluate performance of the offering.  Sales forecast:Used to indicate a specific time for achieving sales volume.
  32. 32. Forecasting using Primary data  Primary data forecasting means collecting and analyzing the product adoption process among customers,estimate the offering market size and speed of adoption.  Major primary demand forecasting techniques are expert judgment and customer research forecast.
  33. 33. Forecast using secondary data  Offering specific forecasting: This is based on past data sales of same offering from which the demand is being forecasted.  Forecasting by analogy: This involves forecasting an offerings performance by comparing its customer adoption cycle to a similar product for which data is available.  Category based forecasting: Estimating the degree to which sales in a particular category have captured the total market potential in a particular geographic area based on the total population of that area and average consumption per user nationally. • Brand development index: the degree to which sales of a specific offering have captured the total market potential in a particular market.
  34. 34. New product adoption  A new product adoption can be defined as: “A good, service or idea that is “perceived” by some potential customers as new. It may have been available for some time, but many potential customers have not yet adopted the product nor decided to become a regular user of the product
  35. 35. Factors influencing Diffusion of Oferring  Inherent value of offering  Relative advantage  Transperency  Compatibility  Percived risk
  36. 36. Managing risk in New Product Development  Market risk:Market risk is the uncertainty associated with factors defining the market,and the factors are fice C’s,Customer,Competitors,Company ,Collaborators and context.  Technological risk: current technology might not be able to deliver desired product features,current design might not be compatible with functional requirements and product might not be reliable with proven technology.Time frame is too large for developing the new offering,such that the technology becomes obsolete which increases the market risk as competitors enter into the market with better technology products.
  37. 37. MOORE’S model of Adoption of New technology
  38. 38. Unit 4  Managing Price: Major approaches to strategic pricing-cost based pricing, competitive pricing, demand pricing; Price sensitivity: meaning, psychological pricing, Five psychological pricing effects: reference price effects, price quantity effects, price tier effects, price ending effects, product line effects; Understanding competitive pricing and price wars: factors affecting price wars, Approach for developing a strategic response to competitors price cut, Other pricing strategies-captive pricing, cross price elasticity, deceptive pricing, everyday low pricing, experience curve pricing, loss leader pricing, horizontal price fixing, price signalling  Managing Promotions and incentives: Promotion mix strategy, Factors affecting strategic decisions in promotion mix, Promotion expenditure strategy, Methods to determine promotion expenditure-Breakdown Method, Buildup Method, Push and Pull promotions. Managing incentives as a value creation process, Goals of using customer incentives, Monetary incentives for customers, Non monetary incentives for customers. Collaborator incentives meaning, monetary incentives-slotting allowance, stocking allowance, cooperative advertising allowance, market development allowance, display allowance, spiffs  Managing distribution: Distribution as value creation process, distribution channel design process- Channel structure: Direct, indirect and hybrid channel; channel coordination- common ownership, contractual relationship, implicit channel coordination; channel type, channel coverage, channel exclusivity  Strategic Growth Management: Gaining market position: strategies to gain market position: steal share strategy, market growth strategy, market innovation strategy; Pioneering new markets: Meaning, Types of Pioneers: technology, product,
  39. 39. Managing Price  Price has a direct effect on value a product tries to create in the minds of the customer ,company,collaborator and distributor.  Morever price is a major marketing strategy that gets revenue and profits to the company .  One has to decide a optimal price which will fit in well and earn revenue for the company and which will be accepted by the Market.
  40. 40. Major approaches to Strategic pricing  Cost based pricing:Cost-based pricing involves setting prices based on the costs for producing, distributing and selling the product. Also, the company normally adds a fair rate of return to compensate for its efforts and risks. To begin with, let’s look at some famous examples of companies using cost-based pricing. Firms such as Ryanair and Walmart work to become the low-cost producers in their industries. By constantly reducing costs wherever possible, these companies are able to set lower prices.  Competitive Pricing:It’s a strategy where businesses take competitor prices into account while setting their own prices.  Demand pricing: This type of pricing is based on customers willingness to pay for the benefits offered by the company.  Price Sensitivity:The degree to which sales volume changes to change in price is called price sentivity.Eg: Starbucks might have the most inelastic demand curve in the quick service restaurant industry I.e Starbucks consumer’s buying habits stay about the same when prices go up.
  41. 41.  Psychological Pricing:Psychological pricing is the business practices of setting prices lower than a whole number.  The idea behind psychological pricing is that customers will read the slightly lowered price and treat it lower than the price actually is.  An example of psychological pricing is an item that is priced $3.99 but conveyed by the consumer as 3 dollars and not 4 dollars, treating $3.99 as a lower price than $4.00.
  42. 42. Five most common Psychological Price Effect Reference price effect: To set the price of a given offering,people usually evaluate it related to other prices as reference points
  43. 43.  Price Quantity Effect: People are more sensitive to changes in price than changes in quantity.  Eg: A 10 pack of cheese slice packet sales will decline if price is increased from rs 50 to 60 but if 2 slices are reduced and the price remains same,sales will not fall as much even though value wise the 8 pack will be more expensive.
  44. 44. Price tier effect: People make their own mindsets about prices. An item 990 in the range of 900+ but an item for Rs 1000 will be in the range of thousands.
  45. 45. Pricing ending effects: A customers perception of price is also a function of price ending effect .Price ending in 9 ofeten creates a perception of a discount where as price ending in 0 creates perception of quality.
  46. 46. Price Line Effects: Many a times offerings are as a part of the companies line,their prices can effect demand for these offerings . Eg:Many a times ,restuarants price wine they want to dispose off along with an assortment of products as customers who cannot afford expensive one or are embarrassed to select the cheapest one.
  47. 47. Price War  A price war is when two or more rival companies lower prices of comparable products or services with the goal of stealing customers from their competitors–or gaining market share.  Price wars can come at a great cost since it decreases a company's profit margins in the short-term.  However, if a company gains a sizable increase in market share, it can lead to more profitability in the long-term– particularly if the competition is no longer a viable threat.
  48. 48. Example  The first step, then, is diagnosis. Consider a small commodities supplier that suddenly found that its largest competitor had slashed prices to a level well below the small company’s costs.  One option the smaller company considered was to lower its price in a tit-for-tat move. But that price would have been below the supplier’s marginal cost; it would have suffered debilitating losses.  Fortunately, a few phone calls revealed that its adversary was attempting to drive the supplier out of the local market by underpricing its products locally but maintaining high prices elsewhere.  The supplier correctly diagnosed the pricing move as predatory and elected to do two things.  First, the manager called customers in the competitor’s home market to let them know that the price-cutter was offering special deals in another market.  Second, he called local customers and asked them for their support, pointing out that if the smaller supplier was driven off the market, its customers would be facing a monopolist. The short-term price cuts would turn into long-term price hikes. The supplier identified solutions that eschewed further price cuts and thus averted a price war.
  49. 49. Other Pricing Strategies Captive product pricing is used when the value of main product is very low,but the value of the supporting product ,which is necessary for working the main product is high.
  50. 50.  Cross Price Elasticity: It is the percent change quantity sold of a given offering caused by percent change in price of competitive price. Substitute Goods:Coffee,Tea Complementary goods: Car and Petrol
  51. 51.  Deceptive Pricing: It is the technique by which retailers use misleading means to trap the customers into thinking that they are paying a lower price for the product ,than what they are actually supposed to.  Eg: sale,discount sales with hidden fees, Bait and Switch,Surcharges
  52. 52.  Everyday Low Pricing: DMart follows “Everyday low cost – Everyday low price” model. It has established itself as a lowest-priced retailer network across India. Low price leads to heavy footfall which leads to heavy sales.  High Low Pricing:IT is a pricing strategy that involves setting prices high when a product is first released and decreasing the price later in a series of sales event or item markdowns  Loss leader pricing: The price strategy where the company offers a price even below cost to increase the sales of products or srvices .Loss leader brands or products are sold at very slim margins or at loss with the conscious understanding that other products in the retail outlet will make up for the loss.  Price Signaling: The price signaling strategy occurs when some competitors can produce at two different quality levels.High quality high price,low quality low price.
  53. 53. Promotion Mix The Promotion Mix refers to the blend of several promotional tools used by the business to create, maintain and increase the demand for goods and services.
  54. 54. Factors Affecting Strategic Decisions in Promotion Mix Type of Product Use of Product Complexity of product Purchase Quantity and Frequency Fund available Type of Market Size of Market
  55. 55. Managing Incentives as Value Creation Process
  56. 56. Customer Incentives Monetary Non-Monetory Coupons Premium Rebates Prizes Price Reductions Contests, sweepstakes and games Discounts on volume Loyalty Programs
  57. 57. Collaborator Incentives Monetory collaborator incentives • Slotting Allowance • Stocking allowance • Cooperative advertising allowance • Market development allowance • Display allowance • Spiffs(incentives given directly to salesperson) • Volume discount • Volume Rebate • Off invoice incentive • Inventory financing
  58. 58. Managing Distribution  “If the product is good then even if it is deep inside of forest,customers will come and but if you need a lot of customers then you need to construct a highway.”  Distribution means designing and delivering a company’s product service to the customers
  59. 59. Distribution channel design decisions  Channel Structure  Channel coordination  Channel Type  Channel coverage  Channel exclusivity
  60. 60. Strategic Growth Management Gaining Market Position Pioneering New Markets Steal Share strategy Technology Pioneer Market growth strategy Product Pioneer Market innovation strategy Business model Pioneer Market pioneer
  61. 61. Pioneer Advantages Disadvantages Preference formation Free riding Switching cost Incubment Intertia Resource advantage Market uncertainity Barriers to entry
  62. 62. Defending market position Ignoring the competitor or no action Repositioning the current offering Repositioning to attract new customers