Chapter 2 - Developing Marketing Strategies and a Marketing Plan
What is a Marketing Strategy?
marketing strategy: a firm's target market, marketing mix, and method of obtaining a sustainable competitive advantage
sustainable competitive advantage: something the firm can persistently do better than its competitors
not easily copied
wall that the firm has built around its position in a market - wall makes it hard for outside competitors to contact customers inside
There are four macro strategies that focus on aspects of the marketing mix to create and deliver value and to develop sustainable competitive advantages:
- customer excellence: focuses on retaining loyal customers and excellent customer service
- operational excellence: achieved through efficient operations an excellent supply chain and human resource management
- product excellence: having products with high perceived value and effective branding and positioning
- locational excellence: having a good physical location and Internet presence
Customer Excellence
- Achieved when a firm develops value-based strategies for retaining loyal customers and provides outstanding customer service
Retaining Loyal Customers
Sometimes, methods used to maintain a sustainable competitive advantage help attract and maintain loyal customers.
- i.e., strong brand unique merchandise, and superior customer service
Loyal customers are an important method of sustaining an advantage over competitors
- more than simply preferring to purchase from one firm instead of another
- means that customers are reluctant to patronize competitive firms
- View customers with lifetime value perspective rather than a transaction-by-transaction basis
Another method of achieving customer loyalty - create emotional attachment using loyalty programs.
- Customer relationship management (CRM) program
Providing Outstanding Customer Service
- Build sustainable competitive advantage by offering excellent customer service, though consistency in this area can prove difficult
- Although it may take considerable time and effort to build such a reputation for customer service, it can sustain this advantage for a long time because a competitor is hard pressed to develop a comparable reputation
Operational Excellence
Achieved through efficient operations, excellent supply chain management, and strong supplier relationships
All marketers strive for efficient operations to get their customers the merchandise they want, when they want it, in the required quantities, and at a lower delivered cost than that of their competitors.
overnight amazon delivery
Product Excellence
- Occurs by providing products with high perceived value and effective branding and positioning.
- Some firms have difficulty developing a competitive advantage through their merchandise and service offerings, especially if competitors can deliver similar products easily
- Others have been able to maintain their advantage by investing in their brand itself; positioning their product or service using distinctive brand image and having a clear position in the marketplace
Locational Excellence
Particularly important for retailers and service providers.
three most important things in retailing is location, location, location
Competitive advantage on location is sustainable as it is not easily duplicated
Most people will not walk or drive very far when looking to buy a cup of coffee
Multiple Sources of Advantage
- Most cases, a single strategy such as low price or excellent service, is not sufficient to build a sustainable competitive advantage
- Firms require multiple approaches to build a "wall"
Portfolio Analysis
- Management evaluates the firm's various products and businesses - its "portfolio" - and allocates resources according to which products are expected to be the most profitable in the future.
- Typically performed at the strategic business unit (SBU) or product line of the firm, though managers can also use it to analyze brands or individual items.
- strategic business unit (SBU): a division of the firm itself that can be managed and operated somewhat independently from other divisions and may have a different mission or objective
- product lines: groups of associated items, such as those that consumers use together or think of as part of a group of similar products
- market share: percentage of a market accounted for by a specific entity
- relative market share: a measure of the product's strength in a particular market, defined as the sales of the focal product divided by the sale achieved by the largest firm in the industry
- market growth rate: the annual rate of growth of the specific market in which the product competes
BCG Portfolio Analysis Method
One of the most popular portfolio analysis methods, developed by the Boston Consulting Group, requires that firms classify their products into a 2x2 matrix.
Circles represent brands and their sizes are in direct proportion to the brands' annual sales.
Horizontal axis represents the relative market share
Vertical axis is the market growth rate
Each quadrant has been named on the basis of the amount of resources it generates for and requires from the firm
Stars: occurs in high-growth markets and are high market share products.
- often require a heavy resource investment in things such as promotions and new production facilities to fuel their rapid growth
- as market growth slows, stars migrate from heavy users of resources to heavy generators of resources and become cash cows
Cash Cows: low-growth markets but are high market share products
- because already received heavy investment, they have excess resources that can be spun off to those products that need it
Question Marks: appear in high-growth markets but have relatively low market shares; thus often the most managerially intensive products
- required significant resources to maintain and potentially increase their market share
- managers must decide whether to infuse question marks with resources generated by cash cows, so that they can become stars OR phase out the product
Dogs: low-growth markets and have relative low market shares
- although they generate enough resources to sustain themselves, dogs are not destined for "stardom" and should be phased out unless they are needed to complement or boost the sales of another product or for competitive purposes
Although quite useful for conceptualizing the relative performance of products and using this information to allocate resources, it is often difficult to implement in practice
- Difficult to measure both relative market share and industry growth
- Potential self-fulfilling prophecy of placing a product or service into a quadrant
- Whether it is classified as a star or a question mark has profound implications of how it is treated and supported within the firm