MT498
MARKETING STRATEGY
LECTURE OUTLINE

Marketing is a dynamic study that is in a constant state of evolution.

Our study of Marketing Management will focus on
the process of analyzing
planning
implementing
and controlling marketing practice

The overiding purpose of these activities is to establish a competitive advantage
via cost leadership for "management firms"
via differentiation for "marketing firms"

Exerpts from GSW Presentation

The Nature of Competition
...to push, not to be just as good, but to be better
Consumers gain from the "one-upsmanship" played by corporations
    Ex: The evolution in public comfort "standards" throughout Europe
    The Carousel of Life - "These are the best of times"

Since Marketing is an active influence on behavior our study will be outcome oriented
Why do we want to avoid perfect competition?
Why is price alone a poor competitive variable?

The Marketing Demand function
assumed objective - increase consumption
assumed objective - decrease demand (Demarketing)
the controllables - 4 P's - endogenous influence
the uncontrollables - exogenous influences

Demand as a "pie size" and "wedge size" model
conditions necessary to increase absolute sales and still fail in your marketing task
conditions necessary to achieve constant/decreasing unit sales and excell in your marketing task
conceptual foundations for the above - basic demand notion, PLC, environmental change

Corporate strategy is driven from the top down
deciding on what business to be in

Maytag Video and Discussion

Corporate Strategic Planning
defining the company mission - examples
setting company goals/objectives
designing the company's portifolio
planning the functional strategies

Strategic Marketing Tools

  • BCG portfolio
    • relative market share - example calculations
    • industry growth rates - examples

  • GE matrix
    • business strengths - weighted attributes example calculations
    • industry attractiveness - weighted attributes example calculations

  • Expansion grid (product-market opportunity analysis see text page 5)
    • penetration strategy
    • product development
    • market development
    • diversification - a finance based approach

  • PIMS

  • Product/promotions grid (within market development)

  • Product/Promotion Matrix (Don't change - Adapt - Develop vs. Don't change - Adapt)
    • Straight extension strategy
    • Product adaptation strategy
    • Communication adaptation strategy
    • Dual adaptation strategy
    • Production invention strategy

  • Product/Service Interaction Matrix (Degree of Differentiation vs. Customer Service Reputation)
    • Low price "knock-offs"
    • Regulated monopolies or naturally homogeneous goods
    • Unique products with patents or other protections
    • Very innovative products with exceptional service

  • Competitive Advantage Matrix (Differentiation vs. Cost Leadership)
    • Competitive advantage
    • Competitive parity
    • Competitive disadvantage

Marketing Audits
an overall assessment of the organization's marketing environment, organizational capabilities, objectives and strategy.

Wharton Video and Exercise

The Strategic Marketing Process and its Relationship to Marketing Management

Feedback loops within the analysis, planning and control sequence

Market Analysis
  • Business definition - each brand's target and unique features
    • Portfolio models
    • Lists of critical factors
    • Segment profiles
  • Situation analysis - where are we now relative to competition on salient consumer dimensions?
    • STOW's analysis
      • Internal vs. external factors
      • Potential sources of strength & the Relative Strengths Analysis
      • Typical marketing weaknessess & the Relative Weakness Analysis
      • Environmental monitoring
      • Threats & opportunities - magnitude of influence
      • Matching strengths with opportunities
    • Segment by brand assignments
    • Perceptual mapping

Market Planning
  • Establish objectives - measurable end results that are desired for each brand
    • $ sales (to include BEP)
    • Market share
    • Profits, ROI, etc.
  • Formulate strategy - unifying principles that connect objectives to tactics
    • Product/Market Opportunity Analysis
    • Competitive Advantage Matrix

Implementation
  • Programming the 4 P's
    • Product/Promotion Matrix
    • Product/Service Interaction Matrix

Control
  • Continous feedback on objective measures provides indications of how program
    performance is progressing.

The Marketing Plan

Normative Marketing Strategies
  • Product Strategies
    • Product line strategies (Full vs. Limited)
    • Strategies over the PLC
    • Differentiation strategies (Spec vs. Postponed (Custom))
    • Vendor strategies within Business-to-Business markets
  • Distribution Strategies
    • Exclusive, Selective and Intensive coverage
    • Integrative strategies (Vertical and Horizontal Market Systems)
    • Merchandising strategies (Inventory turnovers and markups)
    • Locational strategies
      • Trade migration
      • Arterial flows
      • Symbiotic relationships
      • Clutching
      • The allusion of discovery
  • Promotional Strategies
    • Push vs. pull

    Motorcycle Video, Analysis and Discussion

  • Pricing Strategies
    • Skim vs. Penetration
    • Psychological pricing
      • Reference pricing
      • Odd/even pricing
      • Prestige pricing

The Decision Making Process and "DECIDE"

Problem Recognition
  • Proposition: The best solution to a problem that is incorrectly defined is not as
    good as a mediocre solution to a correctly defined problem.
  • Pogo sez "Life represents us with tremendous opportunities that are cleverly disguised as insoluble problems"
  • An illusive task
    • By the time a problem is noticed it may be too late
    • Myopic focus on outcome measures
    • Symptoms rather than causes
    • Rigidity of thought
    • Context free thinking

Importadores Quetzal Practice Case Discussion

Establish Evaluative Criteria

List and Evaluate Alternatives

Choose and Implement Solution

"Evaluating Alternatives" Phase of the Decision Making Process

Requires that the evaluative criteria be established
  • What are the goals of the analysis?
  • Maximize gains, minimize losses, avoid extremes?
  • The rules by which objective comparisons can be made
  • These vary in terms of the quality of available measurements

List alternative courses of action to the stated problem drawing upon available
information that is relevant to that problem

The overall purpose of the analysis is to select from the listed alternatives the one
alternative that is "best" by those accepted criteria.

What do you do when relevant data are missing?

Decision Making as a Process of Resolving Choice Dilemmas

The simple BEP
  • A means of defining "free" choice and by extension defining "forced" choice
  • As a special case of the general class of indifference point calculations
  • Given its derivation (from the profit equation) BEP defined as:
    • Where profit = 0
    • The point of fixed cost recovery
    • FC/(P-VC)....(note the denominator is the contribution margin)
    • The minimum technical requirement for feasibility
      • Fixed profit targets
      • Per unit profit targets
  • Is generally measured in units but can also be calculated in volumes, shares
    or minimum account size (among other measures)
  • Numeric example

BEP Extended to Multiple Product Lines (A weighted average process)
  • Numeric example

Extending the Notion of Indifference to Establish Preferences Ranges for
Multiple Alternatives
  • Non-viable alternatives
  • Redundant points of indifference
  • Numeric examples

Conditions for a Choice Dilemma
  • Multiple viable alternatives
  • Evaluative Criteria
  • Changing ranges of preference

Republic National Bank Practice Case Discussion

Matrices as a Presentation Format for Choice Dilemmas
  • A discreet interval representation of the basic graphic model
  • Columns = "States of Nature" (our uncontrollables)
    • Must be mutally exclusive of one another
    • If not collectively exhaustive,
        at least spanning a wide array of possibilities
  • Rows = "Alternatives" (our controllables)
    • Representation of Marketing Programs
        (complete tactics to address problem)
  • Cells = "Outcomes"
    • Profits
    • Costs
    • Opportunity Losses
  • Shaded cells to depict the "line of preference"
  • Numeric example
  • Matrix extensions to qualitative applications
    • The contingency matrix and environmental monitoring

Moving from a Descriptive to a Decision Format
  • Invoking estimations of likihood (Expected Values)
    • Defined
    • Sources

Limitations of Decision Process as Currently Defined
Assumed independence between revenue and cost

Extensions to situations where demand is dependent on choice alternative
Example with multiple prices
  • Probabilities on demand
  • Expected demand (in units) for specified price and external influence (Economic condition)
  • Graphic presentation
    • Multiple revenue lines with one cost line
    • Plotting expected demands gives curvilinear revenue for each stated external situation
  • Matrix presentation
    • Cell values are expected profits for each price and external condition
    • Computed by placing the expected demands into appropriate profit (quick kill) equations
  • Expected monetary value for each alternative
    • Requires estimates of probabilities on external conditions
    • Computed as a weighted average (sum of probabilities * cells across rows)

Ms-Tique Practice Case Discussion

Expected value of perfect information (EVPI)
  • Expected value of certainty
    • Identification of preference line
    • Viable and non-viable alternatives
    • Computed as sum of probabilities * preferred cells across columns
  • EVPI computed as (expected value of certainty minus expected monetary value of the preferred course of action)

The listings above are to provide structural assistance to your study. They are not intended to be inclusive of every item/topic presented in the lecture period.