Marketing Strategy. Week 1

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1 Week 1 Marketing Strategy Business has only two basic functions marketing and innovation. Because of this we need to focus on strategic market management, and take into consideration strategic choices. Are you going to make a high end product or a low end product? Who is this product for? Are you focusing on the long term, or the short term? There are so many decisions that you need to make, and for them to be successful they need to be strategic. Decisions include transparent resource allocation, strategic analysis and decision making and you need to provide both horizontal and vertical communication and coordination systems. Product-market investment strategy This looks at how a business can invest money in a way that will make them grow or enter a product market. You can invest only to maintain the existing position, or milk the business by minimizing. Maybe we are happy with who we are and want to keep the position and just grow stronger naturally. Recover as many of the assets as possible by liquidating or divesting the business. Case study Just for Pets Just for Pets is a bit like IGA just for the pet retail market. 65 independent pet retailers that trade under their own names. Despite a $151 million group turnover and 180% fiveyear growth, JFP had just a 2% share of the $7.6 billion pet retail market and faced the burgeoning threat of sector corporatisation. In 2013, Just for Pets (JFP) face take David and Goliath battle for survival. The category s two major corporate players, Petbarn and PETstock, were acquiring smaller retailers, aggressively opening new stores and undercutting prices of long-established independents.

2 Week 1 Every good strategy needs objectives, and the first thing JFP did was to stop store closures. And: Motivate JFP member stores to increase group purchasing behaviour measured through JFP s centralised billing functionality and revenue, Motivate JFP member stores to increase group marketing activity measured by number of stores participating in the various marketing opportunities, and Improve JFP s negotiation power with suppliers measured by better deals and rebates to stores. From these business objectives, what could they do with their marketing to ensure that they reach these goals? Firstly they needed to differentiate JFP member stores from corporate competitors and increase revenue for both the head office and its member stores. JFP needed to look at what their competitive advantage was, and it clearly was that they had superior customer service and their workers understood animals. Their employees were one of their biggest assets. They also found that after the GFC consumers spent more on their pets, but had become more discretionary about vet visits. It suggested a gap in pet health advice. Pet insurance came to life. And from this they developed the Just for Pets Health Centre. They were all about providing help and assistance to pet owners, and giving them that support they needed when they didn t have the knowledge needed. They didn t need to go to the vet, they could just go here. The reason this worked was that it created that relationship between the seller and the consumer, and from the health check the consumers spent money in the shop. Research into the area showed that people they should target was women aged 35 to 64 that are busy outsourcers who care about well-being, are thoughtful and socially minded, and that love to engage in fun brand activities. To reach these women in store locations spanning metro centres to small regional towns around Australia, the campaign needed to include TV and/or cinema, SEM and digital display ads, Facebook advertising and public relations to target news, local newspapers and women s media. Results: they avoided the store closures and for the member stores more and more decided to sign on. Achieved amazing customer satisfaction rates, and grew their customer base. And all this because of a great marketing strategy. The key founder was that the free education. The customers got something for free, but this resulted in the average spend being almost 400$ after the free health check.

3 Strategic Analysis The new marketing approach is to build a brand not a product to sell a lifestyle or a personality, to appeal to emotions. But this requires a far greater understanding of human psychology. It is much harder task than describing the virtues of the product. Strategic market management is a system designed to help management create, change, or retain a business strategy and to create strategic vision. A strategic vision is a projection of a future strategy or sets of strategies. The first step to reach this vision is the external analysis, and then looks internally within the firm. External analysis A successful external analysis needs to be directed and purposeful, because volumes of useless descriptive material can easily be generated. You will identify opportunities, threats, trends, and strategic uncertainties. The ultimate goal is to improve strategic choices - decisions as to where and how to compete. We have to know where to compete and how to compete. Strategic uncertainties is a particular useful concept in conducting this analysis and focus on specific unknown elements that will affect the outcome of strategic decisions. Should we invest in a new product market? is a strategic decision, whereas Will a major firm enter? is a strategic uncertainty. Think about what Apple would do if a big Japanese tech company were to enter the American market and truly challenge them? Step 1 Customer analysis In most situations the most logical step would be to analyse the customers. The analysis can be partitioned into an understanding of how the market segments, an understanding of the customer motivations and an exploration of unmet needs. Segmentation The identification of customer groups that respond differently from other groups to competitive offerings. Thus, a successful segmentation strategy requires the conceptualization, development, and evaluation of a targeted competitive offering. The concept behind a successful segmentation strategy is that within a reduced market space, it is possible to create a dominant position that competitors will be unwilling or unable to attack successfully. How to define: Customer characteristics looks at geographic, the type of organization, the size of firm, lifestyle, sex, age and occupation. For example; age can be used to distinguish cereal for kids versus adults. Or lifestyle can be used to segment car consumers. Jaguar buyers tend to be more adventurous, less conservative than buyers of BMW.

4 Product-Related Approaches looks at user types, usage, benefits sought, price sensitivity, competitor, application and brand loyalty. Think about usage and concert tickets, you will have the season ticket holder, the occasional visitor and the nonuser. And for benefits sought; desert eaters can be segmented into those who are calorieconscious versus those who are more concerned with convenience. Multiple segments or focus strategy? Wal-Mart with their rural geographic focus strategy focused on one segment when they concentrated on cities with populations under 25k in eleven south central states a segment totally neglected by its competition, the larger discount chains. A granulated potato company on the other hand are having multiple segments and different strategies for reaching fast-food chains, hospital and nursing homes and schools and colleges. Customer motivations The next step is to understand why consumers buy products, and what the motivation is behind their purchase. And you need to understand how this differs between segments. Some motivators will help to define strategy, and before making strategic commitment you need to understand where the power fits in the motivation set. The customer motivation analysis: 1. Identify motivators: What elements of the product/service do customers value most? Why are the customers buying the product? 2. Group and structure motivations: What are the customers objectives? What are they really buying? Apart from the tangible product. 3. Assess motivation importance: How do segments differ in their motivation priorities? 4. Assign strategic roles to motivations: What changes are occurring in customer motivation? In customer priorities? Unmet needs A customer need that is not being met by the existing offerings. Represent opportunities (or threats) can be identified by projecting technologies, by accessing lead users, by ethnographic research, and by interacting with customers. You need to find out why some customers are dissatisfied and maybe changing brands or suppliers. What are the unmet needs that customers can identify? Are there some of which consumers are unaware? Do these unmet needs represent leverage points for competitors? Step 2 - Competitor analysis When you identify your competitors and evaluating their strategies to determine their strengths and weaknesses relative to those of your own product or service. With this evaluation, you can establish what makes your product or service unique and therefore what attributes you play up in order to attract your target market. There are two generic approaches to identify competitors. They can be identified by consumer choice (customer based approach) when you look at competitors from the perspective of customers what choices are consumers making? Or by clustering

5 them into strategic groups on the basis of their competitive strategy. In either case, competitors will vary in terms of how intensely they compete. The intensity or degree of competition in a market depends on the moves and counter moves of various firms active in the market. It usually starts with one firm trying to achieve a favourable position by pursuing appropriate strategies. Rival firms respond with counter strategies to protect their interests. Think about how McDonalds launched McCafe to compete with the growing coffee shop market in Australia against competitors such as Gloria Jean/Starbucks. Potential competitors needs to be considered because they can enter the market and affect your strategy. These firms come in addition to your current competitors and might engage in: Market expansion firms coming from other countries or geographic regions Product expansion when a firm expand to new product areas Backward integration think about how Campbell Soup started making their own containers, therefore being a customer threatening the buyer Forward integration Apple is an example of how they started selling their own products in retail stores, showing how suppliers can be a threat Export assets or competencies hard to see, but if a small competitor is potentially being acquired by a larger firm that can fix their weaknesses Retaliatory or defensive strategies firms that are threatened by a potential or actual move into their market might fight back

6 Knowledge of a competitor s strengths and weaknesses provides insight that is key to its ability to pursue various strategies. These can be identifies by considering the characteristics of successful and unsuccessful businesses, key customer motivation, mobility barriers and value-added components. The competitive strength grid arrays competitors or strategic groups on each of the relevant assets and competencies. 1. What businesses have been successful over time? You have to think about what assets or competencies contributed to their success. You will also find what businesses have had chronically low performance. And why is this happening? What assets or competencies do they lack? 2. What are the key customer motivations? What is needed to be preferred over other brands and considered in the top of mind set? You have to think about what is really important for the customer, what are their needs and wants? 3. What assets and competencies represent industry mobility (entry and exit) barriers? Is it easy to entry? You have to think about what you need to do to enter a market. There will be some market (like China) that has really strong rules and barriers to run business. 4. What are the significant value added components in the value chain? Do any provide the potential to generate a competitive advantage? You have to see where you can add value to improve, and where you can keep less focus without loosing market share. Iterative process cycle (IPC) shows that the marketing strategy is strongly linked to our goals and therefore also the analysis. The analysis process involves arriving at a decision or a desired result by repeating rounds of analysis or a cycle of operations. The objective is to bring the desired decision or result closer to discovery with each repetition (iteration). The different data that you will use can come from many ways of segmenting the market. Because there are different ways you can segment a market, there will be

7 different ways of how the segmentation can be used. You will most of the time use data from primary data, customer data and 3 rd party data, and make a combination of all these methods: Nike v Adidas There has always been intense rivalry between these two competitors in the athletic market. In 2005, Adidas bought Reebok to increase its market share and this move increased its presence in the USA by 50%. During the 2010 Soccer World Cup arguably the biggest sporting event on the planet; Adidas was the main sponsor. Nike engaged in ambush marketing with their Write the future ad campaign featuring soccer star Wayne Rooney. In March 2011 Adidas launched biggest marketing effort in company history to try and overtake Nike globally. The value chain The ultimate goal of any business is to provide value to its customers. A business will be profitable if the value it creates is greater than the cost of producing its products or services. From the strategic perspective, your opposition's value chain may be a fruitful area for a diversion or attack.