Marketing Strategy: Marketing Strategy Business Plan Workshops TL Hill tlhill@temple.edu 215-204-3079


Business plan workshops: Business plan workshops Matching Products and Services with Markets January 25 Competitive Analysis February 1 Financial Analysis: Using Financial Statements for Management February 15 Financial Analysis: Using Ratio Analysis for Management February 22 Strategy & Business Model March 15 Marketing and Sales Strategies March 22 Management & Ownership March 29 Professional Presentations April 27 Tuesdays 4:30 - 6:00


Business plan outlinewww.sbm.temple.edu/IEI/word/planigenttemplateoutline_003.doc : Business plan outline www.sbm.temple.edu/IEI/word/planigenttemplateoutline_003.doc Executive Summary Company Description Including product/service & technology/core knowledge Industry Analysis & Trends Target Market Competition Strategy/Business Model Marketing and Sales Plan Production/Operations Plan Technology Plan Management & Organization Social Responsibility Development & Milestones Financials Including Capital Requirements & Financial Statements Appendix


Business model: What a firm does, and how, to build and capture wealth for stakeholders. Translates strategic position into a business structure and a set of functional strategies. Includes a trajectory of growth: a timeline, milestones, infusions of capital, growing revenues, growing, changing expenses. Business model


Key to Marketing: Key to Marketing Knowing the needs & wants of customers Building a strategy to serve customers


Marketing plan: Marketing plan Detailed plan of to whom you will sell your product, at what price, through which channels, and with the support of what kinds of sales and advertising. Includes a strategy, a mix, ways of measuring success, attention to staffing, and attention to costs. Summarized in the marketing functional strategy section of the business plan.


I. Marketing strategy: I. Marketing strategy Functional strategies are a subset of company strategy Part of building a company is shaping functional strategies to serve the overall strategy But functional strategies also shape company strategy by testing the corporate strategy Marketing strategy is especially important because it ties the company to its customers


Generic marketing strategies: Generic marketing strategies Same as corporate strategies -- but focused on products/services/markets Low Cost/Low Price Product Differentiation Market Segmentation (Focus)


Strategies manipulate forces : Strategies manipulate forces Threat from Substitutes Suppliers’ Power Threat from New Entrants Buyers’ Power Rivalry of Firms Power of other Stakeholders


Low-cost/low-price: Low-cost/low-price Reduce prices to customers by reducing costs of production Two patterns: Lower margins/higher share (Toys ‘R’ Us, Walmart) Lower costs/higher margins (private labels, e*trade) Works by scaring off rivals, driving down supplier power, sometimes increasing barriers to entry


Pitfalls of low-cost strategy: Pitfalls of low-cost strategy Entry of even lower-cost competitors Cost of keeping costs down – especially for small firms Reduced flexibility Finding markets where there is space for a low-cost competitor


Product / service differentiation: Product / service differentiation Differentiate what is sold Branding, quality, innovation, style and image Two common patterns: High margins/low share (Mercedes): focus on status, production efficiencies less important Slightly lower margins but high share (many branded items like Coca-Cola, Nike) Works by reducing rivalry, substitutes & buyer power


Pitfalls of product differentiation: Pitfalls of product differentiation Slide down the cost/quality ladder Jaguar vs Lexis Shifts in what matters Department stores’ vs big box Perils of imitation Sharper Image, Royal Crown colas, fake designer labels, less complete enterprise systems Missing the point Designing the great widget no one wants…Concretec


Pitfalls of product differentiation: Pitfalls of product differentiation Blowing the branding: Alu-Fanny foil wrap (France) Atum Bom tuna (Portugal) Crapsy Fruit cereal (France) Happy End toilet paper (Germany) Mukk yogurt (Italy) Plopp chocolate (Scandinavia) Pschitt lemonade (France) Zit lemonade (Germany)


Market segmentation/focus: Market segmentation/focus Serve a small segment Focus refers to following the whims of an audience, differentiation to focusing on the product/service itself Focused differentiation: Oshkosh emergency trucks, Two-Ten Health, specialty steel, micro breweries Focused low-cost/low-price: AFG specialty glass for microwave doors, Srugo nutsche, Jindal Works by reducing rivalry, reducing substitutes


Pitfalls of market segmentation: Pitfalls of market segmentation Attracting larger competitors Blue Mountain Arts vs. Hallmark Independent record labels Dependence on a single segment Demographic shifts in books AIT and armaments buying


Exercise: Choose an defend a marketing strategy: Exercise: Choose an defend a marketing strategy Low Cost/Low Price Product Differentiation Market Segmentation (Focus) Your own…why?


II. Marketing plan: II. Marketing plan Product – WHAT? Price – HOW MUCH? Placement/distribution – WHERE? Promotion – WHY?


Product / Service: Product / Service Means of delivering benefits to customers Possible ways to provide value: Variety Quality Design Brand Packaging -- sizes, wrapping, labeling Warranties, follow-up services, returns Attention, special knowledge Example: Fred’s Mt Airy Motors


Value proposition: Value proposition Clear statement of benefits that give a customer reason to buy a product or service Starts with precise definition of customer! And their needs Includes: Unique selling points Quantification of the value to the customer of those points Examples Riskforce - CYA


Exercise: Value proposition: Exercise: Value proposition List unique selling point(s) Articulate the benefit referred to by each USP Quantify or otherwise capture the value of each benefit for the client Test, review, refine


Price: Price Price determines and reflects the amount of value customers perceive. Value is a customer’s subjective estimate of a product’s ability to satisfy their needs or desires. Issues: List price (healthcare) Discount policies (books) Terms (printers) Signals sent (Two-Ten)


Pricing strategies: Pricing strategies General pricing strategies Mark-up pricing Competitive pricing Perceived value Psychological pricing Entry pricing strategies Penetration – Low price Skimming – High price


Price setting: A make or break decision: Price setting: A make or break decision Assess demand How sensitive will customers be to price changes? Analyze competition What’s the going price? Will competitors respond to a price cut? Set pricing objectives Target return, market share, long-term profits, quick investment recovery, etc. Cover costs! Including hidden ones. Automsoft, Jindal, Monthly Review


Exercise: Positioning: Exercise: Positioning Qua l i ty Price


Placement/Distribution: Placement/Distribution Ways of reaching customers Channels Direct mail, distributor, retail, value added reseller, cooperatives, vertical Issues/norms: Timing of sales cycle (time of year, length) Expected materials, order forms, support, etc Sales force implications Coverage: Geographic, cultural Fees Logistics


Effective distribution: Effective distribution Complementary, strategic channels Clear objectives for each channel that facilitate measures of success “Increase number of stores carrying our product by 25%” “Keep 90% of our current customers this year” “Increase sales volume to 100 largest accounts by 20%” Budget & timeline Detailed outline of required logistics. Sensitive measures of success, and methods for absorbing and adjusting to data Riverside Farm: Deep Root vs CSA


Sales team: Sales team People Experience, reach Team structure Support structure Sales plan Marketing intelligence Incentives Materials Logistics


Exercise: Placement/ Distribution: Exercise: Placement/ Distribution How will you deliver your product or service to your customers? Channels Sales support Marketing support Logistics Costs Measures of success/feedback loops


Promotion: Promotion “Any form of persuasive communication designed to inform consumers about a product or service and influence them to purchase these goods or services.” Direct selling -- mail, internet, sales representatives Promotions -- try it, you’ll like it Advertising -- direct response, targeted, blanket Public relations -- word of mouth (events), media coverage, editorial content Marketing communications Networking – structural holes


Sales promotions: Sales promotions Coupons & Discounts Free giveaways Key chains, mugs, calendars etc. Trade Shows Samples Contests


Advertising: Advertising Newspapers, magazines, radio, internet, television, yellow pages, direct mail Analyze the strengths & weaknesses of the medium Which medium will target your customers? What is your advertising budget? What is the cost per million (CPM)?


Advertising comparison: Advertising comparison


Publicity: Publicity Articles in newspaper Interview on radio or television Coverable events Newsletters White papers Speaking engagements & white papers Volunteer (boards & local committees) FREE, powerful, hard to control


Marketing communications: Marketing communications Logos Brochures Catalogs Business cards Business plans White papers Annual report


Networking: Networking Chambers of commerce Business associations Trade associations Customer groups Volunteer work


Effective promotions: Effective promotions Clear plan to move recipients Ignorance >> indifference >> awareness >> interest >> comprehension >> conviction >> action Concrete, measurable objectives Stimulate inquiries Encourage trial Encourage repurchase Build traffic Generate word-of-mouth support


Effective promotions: Effective promotions Coordination Complementary pieces Close timing Budget & timeline Detailed outline of required logistics. Clear, sensitive measures of success, and methods for absorbing and adjusting to data


Exercise: Sales & Promotion: Exercise: Sales & Promotion Sketch a sales plan including targets, sales cycle, people needed, support required Sketch a promotional plan to support sales with promotions, advertising, publicity, communications and/or networking Include measures of success List types of costs


III. Marketing mix: III. Marketing mix The right mix of product, price, distribution and promotion... That supports your strategy. Fits your capabilities. Doesn’t break your budget. Shared advertising Public relations Networking


Marketing mix implications: Marketing mix implications Staffing Partners Timing Costs Testing, tracking, measuring


Values-led marketing mix: Values-led marketing mix “ Values-led marketing…promotes products and brands by integrating social benefits into many different aspects of a business enterprise.” - Ben & Jerry’s Product: Organic ingredients purchased from alternative suppliers; creative, recyclable packaging Pricing: Premium with lots of giveaways & donations Placement: Regional, country stores, youth scoop shops Promotion: Music festivals, free samples, advocacy, public relations


Guerilla marketing mixes: Guerilla marketing mixes Often used when a small business “attacks” a larger one Targeted, low-cost strategies that change the rules of the game Examples: Product: Midwifery, punk music – both embedded in movements Price: Free web services (to drive advertising) Promotion: Anita Roddick’s rose petals Place (distribution): Milliner on the web, CD tables, craft shows


Effective marketing strategy: Effective marketing strategy Appropriate mix of product, price, distribution and promotion...that sells benefits to a target market of customers Consistent with company strategy Fits company capabilities Doesn’t break the budget.


Bibliography: Bibliography Verna Allee, “Reconfiguring the Value Network,” The Journal of Business Strategy, 21 (4), PP 36-39. R Boulton, B Libert, S Samek, “A Business Model for the New Economy,” The Journal of Business Strategy, 21 (4), July-August 2000, pp 29-35. Tony DiBennedetto lecture notes, 1998. Jeffrey Dobkin, How to Market a Product for Under $500 Pankaj Ghemawat, Strategy and the Business Landscape (Prentice Hall, 2001). Robert Hamilton, E. Eskin, M. Michael, "Assessing Competitors: The Gap between Strategic Intent and Core Capability", International Journal of Strategic Management-Long Range Planning, Vol. 31, No. 3, pp. 406-417, 1998 TL Hill lecture notes, 1999, 2001. J. D. Hunger & T.L. Wheelan, Essentials of Strategic Management (Prentice Hall, 2001). Philip Kotler, Marketing Management, 9th Edition, (Prentice Hall, 1997). B. Mahadevan, “Business Models for Internet-based E-Commerce,” California Management Review, 42 (4), Summer 2000, pp 55-69. Henry Mintzberg & James Brian Quinn, Readings in the Strategy Process, 3rd Edition (Prentice Hall, 1998). Michael Porter, Competitive Advantage (Free Press, 1985). Michael Porter, “What is Strategy?”, Harvard Business Review, November-December 1996. Pearl Wang-Herrara lecture notes, 2001.