1 Marketing strategy - ramaswamy

Marketing strategy : 

Marketing strategy

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Strategy Decisions Usually Determine Success and Failure Low price, dependability, good ads, unconventional channels Stiff competition arose New product refinements The Importance of Marketing Strategy Planning

Meaning and significance of marketing strategy : 

Meaning and significance of marketing strategy Marketing strategy realises the marketing objectives Specifies the position the unit will seek in the industry and how it will compete therein It is Marketing strategy that realises the unit’s income and profits .

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i) Marketing strategy realises the marketing objectives Marketing strategy is the complete and unbeatable plan, designed specifically for attaining the marketing objectives of the firm/business unit. The marketing objectives indicate what the firm wants to achieve; the marketing strategy provides the design for achieving them

Example : 

Example Singer India – Sewing Machine division Objective: annual income level of Rs.500 crore by 2003 A compound growth rate of 15 percent per annum in sales for next four years Profits of around 20 percent on sales every year

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Marketing strategy Focus on higher value added sewing machines In product mix, to concentrate on decorative stitching machine like the Fashion Maker To launch models that can offer upto 160 decorative stitches. Low-tech, traditional markets will be earmarked for rural markets. Overall, the high-tech line consisting of decorative stitching machines should account for 60-70 percent of the total expected sales.

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ii) Specifies the position the unit will seek in the industry and how it will compete therein what position does the unit seek in its industry? GE finance What market segments to serve? And what product offers to make? ICICI The growth path: Market penetration? Market development? Or product development? Maruti – penetration, then product development Microsoft – product development Who are the competitors? Whom to compete, Whom to avoid? Ford decided not to compete with Maruthi (small car space) but to compete with GM ( semi-luxury segment ) On what differentiation strength to compete? FACT – distribution strength On what competitive advantage will the fight be based? Videocon based on integrated manufacturing facilities What are the resources? P& G’s entry into detergent market with Ariel in 1990 (surf – market leader and Nirma – challenger). Whom to compete, whom to avoid? Ariel was competing against Surf (premium segment) and avoided to compete with Nirma (lower end segment) Competes on the strength of product attributes and promotion Attributes of Ariel: New enzyme based, activated whitening system, superior technology, high priced Promotion: Aggressive promotion, made losses in the first two years – HLL responded with surf ultra describing it as a ‘total detergent system’., claimed it has two enzymes. P& G intensifies its marketing. But with all these efforts Ariel would only manage 5-6 % market share after 7 long years

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A large metropolitan university has an established summer-school program that offers a wide variety of classes to its current students. To expand enrollment, the school started promoting its summer school to students who live in the area and are home for the summer, even though they attend other universities during the regular school year. This effort is an example of: market penetration. market development. product development. diversification. a breakthrough opportunity. Checking your knowledge

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Coffee so good You just can’t wait.

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An electronics superstore sends a special coupon to its current customers offering them a special discount for purchases made during an upcoming week that occurs during a traditionally slow sales period. This is an example of: market penetration. market development. product development. diversification. a breakthrough opportunity Checking your knowledge

Product development : 

Product development

Microsoft surface : 

Microsoft surface

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iii) It is Marketing strategy that realises the unit’s income and profits What are the target markets? What type of customers to be approached? At what price to sell? What level of advertising and sales promotion to be undertaken?

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Example: HLL – To achieve a sales income of Rs.15000 crore by 2008 3 SBU’s – soaps and Detergents, food and Beverages, Personal care together have to achieve this Soaps and Detergents accounts for 70% business and so the target from this SBU is also 70% (Rs.10,500 crore by 2008) Soaps and Detergents SBU has four product lines: Bathing soaps, Washing soaps, detergent powder, detergent cakes How much contribution to expect from each product line? In bathing soaps, how much contribution to expect from Lifebuoy brand? – for ex: 1500 crore . Marketing strategies have to be framed to achieve this revenue

Formulating the Marketing Strategy : 

Formulating the Marketing Strategy i) Selecting the target markets ii) Positioning the offer iii) Assembling the marketing mix

i) Selecting the Target market : 

i) Selecting the Target market Fundamental to market strategy formulation Target market selection boils down to deciding - what parts of the market are we going to serve? - what parts of the market we choose not to serve? - what is the logic of selecting a particular segment?

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Production-oriented manager sees everyone as basically similar and practices “mass marketing” Marketing-oriented manager sees everyone as different and practices “target marketing” Selecting a Marketing-Oriented Strategy Is Target Marketing

ii) Positioning the offer : 

ii) Positioning the offer Does the firm want to lodge the product as the most distinctive offer in the market? Or does it want to lodge as latest? Or the most competitive offer in the market? Or as the value-maximiser for the consumer? Is the firm seeking leader position with its product offer?

Example : 

Example Soft drink 7 up which is No.3 next to pepsi and coke positioned itself as un-cola thereby capturing mindspace among people looking for alternative to cola drinks If a firm is first to introduce a product, then it should reinforce that fact. For ex.cola’s ‘the real thing’ says that others are only imitations and that cola is the market leader. Yamaha Bike – the rugged personality

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Raymonds – the complete man Mc.Donalds in India: ‘Mc. Donalds mein hai kuch baat’ – a place for the entire family to enjoy now it is positioned as ‘To aaj Mc.Donalds ho jaaye’

iii) Assembling the marketing mix : 

iii) Assembling the marketing mix It means assembling 4 P’s of the marketing mix in the best possible combination Mix has to be worked out for every brand Weightage has to be decided for each P Ex.Asian paints emphasis is on place Marketing mix has to take its cue from customers/markets Marketing mix cannot be static Marketing mix is the visible part of marketing strategy

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Developing Marketing Mixes for Target Markets

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Examples of Channels of Distribution Charles Schwab Toyota Sara Lee Nestle Wholesaler Wholesaler Retailer Consumer Wholesaler Retailer Retailer The Place Element of the Marketing Mix

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Personal Selling Advertising Publicity The Promotion Element of the Marketing Mix

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Pricing Objectives Legal Environment Cost and Demand The Price Element of the Marketing Mix

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Understanding the Target Market Leads to Good Strategies! All Four Ps Contribute to the Whole

Categories of Marketing Strategies : 

Categories of Marketing Strategies Two broad categories Price oriented strategies Differentiation oriented strategies

i) Price oriented strategies : 

i) Price oriented strategies Price route requires cost leadership Strive for cost leadership right from the start Example – Nirma (Low cost washing powder) HLL – surf – used differentiation strategy - later had to follow Nirma – introduced Wheel in low cost segment

ii) Differentiation based strategy : 

ii) Differentiation based strategy Products can be differentiated based on multitude of attributes Anything can be differentiated Ex: Eureka Forbes – Home Selling Citibank – personalised services Differentiation helps a firm to move away from competition Firm should possess relevant competitive advantage to resort to competition

MARKETING PLANNING- Strategic Planning : 

MARKETING PLANNING- Strategic Planning

3 areas of strategic planning : 

3 areas of strategic planning Corporate/ division business unit product levels

Corporate and Division Strategic Planning : 

Corporate and Division Strategic Planning Planning activities include: i) Defining the Corporate Mission ii) Establishing Strategic Business Units (SBUs), iii) Assigning Resources to SBUs iv) Planning New Businesses, Downsizing Older Businesses

a) Corporate Mission : 

a) Corporate Mission A good mission statement should have the following features * Focus on limited number of goals * Stress major policies and values * Define major competitive spheres

b) Strategic Business Units share three characteristics: : 

b) Strategic Business Units share three characteristics: * Single business or collection of businesses which can be managed separately * Has own set of competitors * Has manager responsible for strategic planning and profits

c) How Resources are allocated to SBU? : 

c) How Resources are allocated to SBU? SBUs are treated as investment portfolios. Resources are allocated by: i) The BCG Growth-Share Matrix ii) The General Electric Market- Attractiveness Model iii) Ansoff matrix

BCG Growth share matrix : 

BCG Growth share matrix The Boston Consulting Group Matrix: Using this model, a business unit can be classified according to two factors—market share relative to competitors and industry growth A company should have a balance of SBUs with a mix of stars, cash cows, and ???

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Stars Cash cows Dogs Question marks High Low High Low COMPANY’S MARKET SHARE INDUSTRY GROWTH RATE

i) BCG Model : 

i) BCG Model

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Cash cows are units with high market share in a slow-growing industry. These units typically generate cash in excess of the amount of cash needed to maintain the business. They are regarded as boring, in a "mature" market, and every corporation would be thrilled to own as many as possible. They are to be "milked" continuously with as little investment as possible, since such investment would be wasted in an industry with low growth. Dogs, or more charitably called pets, are units with low market share in a mature, slow-growing industry. These units typically "break even", generating barely enough cash to maintain the business's market share. Though owning a break-even unit provides the social benefit of providing jobs and possible synergies that assist other business units, from an accounting point of view such a unit is worthless, not generating cash for the company. They depress a profitable company's return on assets ratio, used by many investors to judge how well a company is being managed. Dogs, it is thought, should be sold off.

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Question marks (also known as problem child) are growing rapidly and thus consume large amounts of cash, but because they have low market shares they do not generate much cash. The result is a large net cash consumption. A question mark has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share. Stars are units with a high market share in a fast-growing industry. The hope is that stars become the next cash cows. Sustaining the business unit's market leadership may require extra cash, but this is worthwhile if that's what it takes for the unit to remain a leader. When growth slows, stars become cash cows if they have been able to maintain their category leadership, or they move from brief stardom to dogdom.

GE/McKinsey Matrix : 

GE/McKinsey Matrix In consulting engagements with General Electric in the 1970's, McKinsey & Company developed a nine-cell portfolio matrix as a tool for screening GE's large portfolio of strategic business units (SBU). This business screen became known as the GE/McKinsey Matrix and is shown below:

ii) GE model : 

ii) GE model Strong Medium Weak Firm’s Business Strength High Medium Low Market Attractiveness

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The GE matrix however, attempts to improve upon the BCG matrix in the following two ways: The GE matrix generalizes the axes as "Industry Attractiveness" and "Business Unit Strength" whereas the BCG matrix uses the market growth rate as a proxy for industry attractiveness and relative market share as a proxy for the strength of the business unit. The GE matrix has nine cells vs. four cells in the BCG matrix.

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Industry Attractiveness The vertical axis of the GE / McKinsey matrix is industry attractiveness, which is determined by factors such as the following: Market growth rate Market size Demand variability Industry profitability Industry rivalry Global opportunities Macroenvironmental factors (PEST)

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Business Unit Strength The horizontal axis of the GE / McKinsey matrix is the strength of the business unit. Some factors that can be used to determine business unit strength include: Market share Growth in market share Brand equity Distribution channel access Production capacity Profit margins relative to competitors The business unit strength index can be calculated by multiplying the estimated value of each factor by the factor's weighting, as done for industry attractiveness.

Ansoff Matric : 

Ansoff Matric Product Market Growth Matrix Growth requires examination of products and markets to determine what needs changing Options: Market penetration: Market development: Product development: Diversification:

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PRESENT PRODUCTS PRESENTMARKETS NEW PRODUCTS NEWMARKETS Market penetration Market development Product development Diversification The product-market growth matrix depicts the options available in considering markets and products. Product Market Growth Matrix

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Market Development Here, you’re targeting new markets, or new areas of the market. You’re trying to sell more of the same things to different people. Here you might: Target different geographical markets at home or abroad Use different sales channels, such as online or direct sales if you are currently selling through the trade Target different groups of people, perhaps different age groups, genders or demographic profiles from your normal customers.

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Market Penetration With this approach, you’re trying to sell more of the same things to the same people. Here you might: Advertise, to encourage more people within your existing market to choose your product, or to use more of it Introduce a loyalty scheme Launch price or other special offer promotions Increase your sales force activities, or Buy a competitor company (particularly in mature markets)

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Product Development Here, you’re selling more things to the same people. Here you might: Extend your product by producing different variants, or packaging existing products it in new ways Develop related products or services (for example, a domestic plumbing company might add a tiling service – after all, if they’re plumbing in a new kitchen, most likely tiling will be needed!) In a service industry, increase your time to market, customer service levels, or quality.

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Diversification This strategy is risky: There’s often little scope for using existing expertise or achieving economies of scale, because you are trying to sell completely different products or services to different customers Its main advantage is that, should one business suffer from adverse circumstances, the other is unlikely to be affected.

iii) Ansoff matrix : 

iii) Ansoff matrix Product Market Growth Matrix Growth requires examination of products and markets to determine what needs changing Options: Market penetration: Market development: Product development: Diversification:

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PRESENT PRODUCTS PRESENTMARKETS NEW PRODUCTS NEWMARKETS Market penetration Market development Product development Diversification The product-market growth matrix depicts the options available in considering markets and products. Product Market Growth Matrix