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Marketing Strategy Review: Planning Process & Analysis
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Marketing Strategy Review and the Marketing Process Learning Objectives . Understand the steps of the marketing planning process 1 2. Be able to use various techniques to analyze a business’s situation 3. Be able to work through the marketing planning process of a company What is Marketing? ● Producers, manufacturer suppliers, retailers, brands, firms provide value to consumers, people, businesses, and the other way round. ○ Value - product, time savings, solutions, emotions, experiences, services ● The activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large Demographic ● Age ● Gender ● Race/Ethnicity ● Education ● Occupation Psychographic ● Lifestyle ● Attitudes ● Likes/Dislikes ● Culture The Marketing Planning Process ● Broadly the Marketing Plan is an analytical framework that features three general elements ○ Situational analysis ○ Strategy Decisions ○ Action Plan 1. Situational Analysis ● Where are we now? Who are we playing with (competition)? Who are we marketing to (customers)? ● When assessing the situation, you want to think of the internal environment and external environment ● Market -The market is a set of consumers, individuals,or businesses that express wants and needs by buying products, services or even ideas. ● Demand- The quantity of a good or service that is being bought or consumed in a given market ○ This is the total market size ○ Express in quantity (e.g., 100 units a month) ○ Express in dollars (e.g., “the demand of the floppy disk market is $14 a year”) ○ What are you selling compared to the total market size? ■ This is your Market Share (your sales÷market size) ○ How is the market size changing (the growth?) ● Competitors ○ Substitute competition: ■ Who offers products that satisfy the same need that you product satisfies? ■ For example, Planes and Trains are drastically different, but they satisfy the same need (get from Point A to Point B). ○ Direct competition: ■ Who offers the same products as you? Internal Environment: ● Strengths ○ Access to resources or competencies that others do not have and that can help you succeed. ○ These are commonly referred to as “competitive advantages” ● Weaknesses ○ What do you possess or are lacking that hinder your ability to succeed BCG Matrix - what do we sell? How are they doing? ● A good analysis tool to use to lay out your offerings, your competitors, the state of the market, and the demand. ● Depending on where your products sit on the graph in this analysis can help you determine the areas that need help, have potential, or need to be dropped and abandoned completely Relative Market Share arket M Growth Rate Low High High Dilemmas Stars Low Dogs Cash Cows *You want your product category to be in Stars/Cash Cows enchmarking: Comparing how you are doing in these areas compared to others or compared to B yourself year over year. 1) Determine Relative Market Share: D o ivide your total sales of your product with the sales of the highest (or next highest) competitor. o For example, imagine one of the products your brand sells is Winter Jackets with sales of $3 Million. Imagine your biggest competitor has sales of $50 Million. Your relative market share would be 3/50 = .06 o Imagine, however, your brand also sells a line of boots with sales of $60 Million. And your biggest competitor has sales of $20 Million (therefore you are the market leader in this category). Your relative market share is 60/20 = 3. o Do this for each of your products that you offer. 2) Determine Market Growth Rate o t hrough research you assess how the overall market for that product category is growing. Is it going up? Down? By how much? 3) Plot Graph o F or each product category, plot where your offering in each product category sits with Relative Market Share on the X-Axis and Market Growth on the Y-axis. ● High Relative Market Share and High Market Growth = Star ● High Relative Market Share and Low Market Growth = Cash Cows ● Low Relative Market Share and High Market Growth = Dilemmas ● Low Relative Market Share and Low Market Growth = Dogs Value Chain and Benchmarking Analysis - A n in depth look at each component of your companies processes and departments that are meant to add value to your end product offering. - Examine each area to determine which parts are crucial in contributing value (Strengths) and which are taking from the end value (Weaknesses) - Benchmarking ● Comparing how you are doing in these areas compared to others or compared to yourself year over year. - Areas where you are doing much better than your competitors and difficult for them to replicate themselves are sources of strengths - Areas that you are doing worse than you competitors and you cannot easily replicate your competitors in that domain are areas of weaknesses. External Environment: Issues and information that impact everyone, not just you or your company. ● ● Changes and trends in demographics, culture, economic, legal, political, technological, environmental, etc. ● Opportunities Which of these changes can possiblytake advantage of? ● Threats Which of these changes might harm you? PESTEL/STEEPLE analysis: ● A macroenvironmental analysis ○ Think about: WHAT IS THE TREND? ● SocioCultural - consumer trends and changes ○ Consumer trends and changes ○ Demographic changes ○ Changes in consumer interests, perceptions of what is good or bad, ○ Anything that involves changes to people in the population that could impact your business ● Technological - innovation and tech trends ○ Any changes to technology that could impact your business ○ Advances in new technologies ○ Trends that if they continue to go in the same direction can have a drastic impact on your business ● Economical - taxes, interest rates, employment trend ○ Changes and trends to the economic situation of an area that you are conducting or are interested in conducting business ○ Taxation trends, market trends, employment trends ● Ecological - resource availability, waste, impact, climate ○ Environmental/Climate trends that could impact your business ○ Resource availability ○ Waste and disposal trends ○ Climate change ● Political - policies, regulations, stabilitiy, safety ○ Any political trends that can and may impact your business ○ Policy changes, regulation trends ○ Political stability and safety in regions where you are, or may, conduct business ● Legal - legal trends, union changes, consumer protection ○ Any legal trends and changes that may impact your business ○ Shifting Union regulations and rules Evolving consumer protection measures ○ ● Ethical - bribery, client confidentiality, transparency trends ○ Trends related to what used to be moral or immoral when conducting business and now they are switching. ○ Example, bribery used to be common and still is very common in some countries, acceptation of this changes over time ○ Consumer transparency trends (e.g., consumers may want to know more or less about your process and if it is ethical or not) ○ Client privacy and confidentiality trends * *The key objective of a STEEPLE analysis is to identify the trend (changes over time in a certain direction) and analyze how it could impact your business positively or negatively if that trend continues. Porter’s 5 Forces ● A microenvironmental analysis used to assess the attractiveness and competitive situation of a current market or industry ● In doing so, you can also identify possible opportunities and threats to your market/industry Types of markets/industries - M onopoly / No Competition: is where there is a single supplier who has control over price, quality and supply - Oligopoly: is a market dominated by a few suppliers that require very large investments in equipment or technology - Perfect Competition: is when many suppliers sell essentially the same product - Monopolistic Competition: has many suppliers with a variety of product, each of which has a small market share Rivalry Among Existing Firms - H ow many competitors are there? - How is the market divided? - Are customers loyal, or easily swayed? - How strong are the competitors’ brands? - How diverse are the products? - What are the barriers to exit? - Are there capacity issues? Threats of Substitutes - W hat are possible substitute products? - Are there switching costs? - What is the threat that people will actually seek out those substitutes? Threat of New Entrants - W hat barriers exist for new firms to enter the market? - What are the entry costs for a new firm? - How likely is it that new entrants will choose to enter the market? Bargaining Power of Supplies - H ow many suppliers are there? How is their market share divided? - Are the supplied resources themselves substitutable or distinctive? - Are there resources involved that are unique/restricted? - Are the suppliers organized? - How much power is held by suppliers? argaining Power of B Customers/Buyers - A re the consumers diverse?, Numerous?, Educated? - Is the product instrumental or a luxury? - Do consumers have other options? - How much power is held by the consumer? - What opportunities and threats do we focus on? - You can classify the various trends and possibilities into categories of their likelihood of happening and the impact it would have on your company if it did happen. Clearly, you should focus on the trends that will very likely happen and have a high impact on your company, while ignoring the ones that have a low probability of happening and will have little impact on your company. SWOT Analysis: ● After your internal and external analysis, you identify which aspects of your business are strengths, which are weaknesses. You also identify which market forces and trends are considered opportunities and threats. You then summarize all of these into a Swot Table. 2. Strategic Decisions Red vs. Blue Ocean Strategy: ● Red oceans = all markets/industries in existence today ○ About trying to outperform competitors and grab as much of the market share as possible. ● Blue oceans = all of the market spaces not in existence yet ○ Demand is created, not fought over ○ They either create new industries where none previously existed (e.g., eBay’s online auction site) or stretched the boundaries of an existing industry (e.g., Cirque de Soleil) ○ Go back to when you were a kid: what industries exist today that did not when you were a child? ■ Streaming online content started in 2006 (Amazon first, Netflix a year later) Porter’s 3 Generic Strategies: ● Cost Leadership Strategy ○ Cost leadership: having the lowest per-unit (i.e., average) cost among rivals in highly competitive industries or having lowest cost among a few rivals where each firm enjoys pricing power and high profits. ○ Cost leadership is a defendable strategy because: ■ It defends the firm against powerful buyers. Buyers can drive price down only to the level of the next most efficient producer. ■ It defends against powerful suppliers. Cost leadership provides flexibility to absorb an increase in input costs, whereas competitors may not have this flexibility. ■ The factors that lead to cost leadership also provide entry barriers in many instances. Economies of scale require potential rivals to enter the industry with substantial capacity to produce, and this means the cost of entry may be prohibitive to many potential competitors. ○ Achieving a low-cost position usually requires the following resources and skills: ■ Large up-front capital investment in new technology, which hopefully leads to large market share in the long-run, but may lead to losses in the short-run. ■ Continued capital investment to maintain cost advantage through economies of scale and market share. ■ Process innovation – developing cheaper ways to produce existing products. ■ Intensive monitoring of labor, where workers frequently have an incentive-based pay structure (i.e., a contract which includes some combination of a fixed-wage plus piece-rate pay). ■ Tight control of overhead. ● Differentiation Strategy ○ Differentiating the product offering of a firm means creating something that is perceived industry wide as being unique. ○ There are several approaches to differentiation: ■ Different design ■ Brand image ■ Number of features New technology ■ ○ Differentiation is a defendable strategy for earning above average returns because: ■ It insulates a firm from competitive rivalry by creating brand loyalty; it lowers the price elasticity of demand by making customers less sensitive to price changes in your products. ■ Uniqueness, almost by definition, creates barriers and reduces substitutes. This leads to higher margins, which reduces the need for a low-cost advantage. ■ Higher margins give the firm room to deal with powerful suppliers. ■ Differentiation also mitigates buyer power since buyers now have fewer alternatives. ○ Achieving a successful strategy of differentiation usually requires the following: ■ Exclusivity, which unfortunately also precludes market share and low-cost advantage. ■ Strong marketing skills. ■ Product innovation as opposed to process innovation ■ Applied R&D. ■ Customer support. ■ Less emphasis on incentive-based pay structure. ● Focus or Niche Strategy ○ Focusing on a particular buyer group, product segment, or geographical market. ○ Whereas low cost and differentiation are aimed at achieving their objectives industry wide, the focus or niche strategy is built on serving a particular target (customer, product, or location) very well ○ Note, however, that a focus strategy means achieving either a low-cost advantage or differentiation in a narrow part of the market. For reasons discussed above, this creates a defendable position within that part of the market. Miles & Snow Aggressiveness Strategies: ● Prospector Strategy ○ A highly innovative firm that is constantly seeking out new markets and new opportunities and is oriented toward growth and risk taking. ● Defender Strategy ○ Focuses on protecting its current markets, maintaining stable growth, and serving its current customers. ● Analyzer Strategy ○ Maintains market share and seeks to be innovative, although usually not as innovative as an organization that uses a prospector strategy. Most large companies fall into the third category, because they want both to protect their base of operations and to create new market opportunities. ● Reactor Strategy ○ No consistent strategic approach; it drifts with environmental events, reacting to but failing to anticipate or influence those events. Not surprisingly, these organizations usually do not perform as well as organizations that implement prospector, defender, or analyzer strategies. 3. Action Plan (Marketing Mix Tactical Decisions) ● Once you have established that strategy you would like to follow, you need to realize that strategy by positioning yourself in the market as the company with that strategy. ● This is done by carefully crafting your Marketing Mix (your 4Ps) to efficiently and effectively communicate that strategy and image to your desired consumers. ● Marketing Mix: ○ Product: ■ what creates the value for the customer. ■ This can be a traditional tangible good, or an intangible service, and everything in between ● ○ Price: ■ how much do you charge for that value ○ Place: ■ how you deliver that value ○ Promotion: ■ how you communicate the value to the consumer ● Marketing Mix (2.0): ○ When it comes to traditional services marketing, there is a suggested Three Additional “Ps” of marketing. Making the total 7 instead of 4. These additional Ps are: ■ People ● human actors who influence the service experience and perceptions ● These can be the other consumers who impact your experience. This especially occurs when other consumers are part of the value exchange process. ● For example, ○ going to a concert other consumers will be there and they may impact your experience ○ Playing video games online against other users ○ Using social media with other consumers ■ Physical Evidence ● any tangible components related to the delivery of the service; gives insight to customers about the service ● Typically applied to Services, it is any peripheral physical evidence that may signal to the customer about the true value of the product. Like inflating expectations in your promotions/ads, but then not delivering. If you promise a certain level of product, you must deliver. ■ Process ● all of the steps involved in delivering the actual service (value) to the customer ● What does the customer have to go through to realize the full value of the offering? ● For example ○ I am recently moving back to Ontario from Quebec, and I need to get a new license. The process they make you go through is insane. You must go to a Drive Test Centre (where there are not many in the city) and you need to wait in line for 4 hours to then just show them that you have a Quebec license and them to take your picture. They can do this, and put their “customers” through this painful process because they are the only game in town and everyone needs one. Because of this monopoly power, they can put customers through horrible processes and not be concerned, because the customer has no other choice.
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