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Quick Review

Ch.2: Boundary of your business domain

Chs. 3-5: Analysis of Major Stakeholders

Ch. 6: Your prediction about future

Potential and Forecasting

Ch. 7: Strategy (to achieve your objectives)

Target (Competitor & Customer)

Positioning (Value Proposition)

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Key Topics of Ch. 7

Strategy as an Action Plan

Elements of a Product Strategy**

Making Sense of a Strategy Jungle

Research In Progress: Kim and Lim

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A Successful Strategy:

Helps achieve coordinationamong functional

areas of the organization.

Defines how resources are to be allocated.

Leads to a superior market position.

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Elements of a Product Strategy**

1. Statement of the objective(s) the product should attain*

2. Selection [Consideration] of strategic alternative(s)

3. Selection of customer targets

4. Choice of competitor targets

5. Statement of the core strategy*

6. Descr iption of supporting marketing mix.

7. Description of supporting functional programs

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Hierarchy of Objectives

Company mission/vision

Corporate objectives

Corporate strategies

Divisional objectives

Divisional strategies

Product/brand

objectives

Brand strategies

Program objectives

Tactics

Level I

Level 0

Level III

Level II

Level IV

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1. Setting Objectives

1. Characteristics of Good Objectives

1. Quantified standards

2. Challenging

3. Have Milestones

2. Two Major Decisions

1. Which Objective to Pursue?

2. How High it should be?

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2. Consideration of Strategic Alternatives

1. Corporate Objectives

2. Two Major Paths

1. Increasing Sales/Market Share*

1. Market Development Strategy

2. Market Penetration Strategy

2. Increasing Profitability1. Decreasing Inputs

2. Increasing Outputs

* 2X2 matrix on growth strategy

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Strategic Alternatives

Long-termprofits

Growth in

sales or

market share

New segments

Market

development

Convert

nonusers

New product

development

Competitors

customers

Efficiency,

short-run

profits

Reduce

costs

Decrease

inputs

Improve

asset

utilization

Increase

price

Increase

outputs

Improve

sales mix

Existing

customers

Market

penetration

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Criteria for Evaluating Strategic Alternatives

Size/growth of the segment

Opportunities for obtaining competitiveadvantage Know Yourself

Resources available to penetrate the segment

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3. Targeting and Positioning

Choice of Customer Targets: Single or multiple*

Choice of Competitor Targets

Statement of the Core Strategy =ValueProposition*

Economic (cost/price) AdvantageFunctional Advantage

Psychological Advantage

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Ex) Target Segments for Handspring

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3. Targeting and Positioning (contd)

Five Areas of Differentiation

Quality*

Convenience and Service

Status and Image

Branding*

Distribution ChannelsCombination of the Above

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Joint Space for Colas

Diet

Noncola

Fresca

DietPepsi

Tab

Segment

3

Pepsi

RCCola

Segment

2

Nondiet

Cola

Dr

Peppe

r

7-Up

Segment

1

Coke

Diet

Rite

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Positioning Decision Steps

1. Identifying alternative positioning themes

2. Screening alternatives according to whether they

are

meaningful to and believable by customers

feasible given the firm and product resources

competitively sensiblehelpful for meeting the product objective

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Positioning Decision Steps (Contd.)

3. Selecting the position that best satisfies these

criteria

4. Implementing programs consistent with the

product position selected

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Total Product Concept

Generic

product

Expected

product

Augmented

product

Potential

product

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Managing Brand Equity

Reduced marketing

costs

Trade leverage

Attracting new

customersCreate awareness

Reassurance

Time to respond tocompetitive threats

Anchor to which

other associations

can be attached

Familiarity-likingSignal of substance/

commitment

Brand to be

considered

Provides value to

customer by

enhancing

customers:

Interpretation/

processing of

information

Confidence in the

purchase decision

Use satisfaction

Brand loyalty4. Brand

loyalty

Brand loyalty1. Brandawareness

Brand loyaltyBrand equity

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Brand Equity (contd).

Reason-to-buy

Differentiate/position

Price

Channel member

interest

Extensions

Help process/

retrieve information

Reason-to-buy

Create positive

attitude/feelings

Extensions

Provides value to

firm by

enhancing:

Efficiency and

effectiveness of

marketing programs

Brand loyalty

Prices/margins

Brand extensions

Trade leverage

Competitive

advantage

Brand loyalty3. Perceived

quality

Brand loyalty2. Brand

associations

Brand loyaltyBrand equity

Competitive

advantageBrand loyalty

Other

proprietary

brand assets

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3. Targeting and Positioning (contd)

Values Being Sought by Customers (by Rackham)Transactional Sales: Intrinsic Value

Consultative Sales: Extrinsic Value

Enterprise Sales: Strategic Value

Relationship Life Cycle and Strategy

Customer AcquisitionCustomer Retention

Customer Expansion

Customer Deletion*

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Making Sense of A Strategy Jungle

Strategy at different levels

Corporate or Business Level: Porters Generic Strategy

Cost Leadership: Fixed Cost and Variable Cost

Differentiation: Supply side and Demand side Focus: Segmentation and Targeting

Functional Level Strategies:

Relationship Life Cycle-based Strategy

Product Life Cycle-based Strategy:*

First mover advantage vs. Second mover advantage

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Strategy Over the Life Cycle

Ex) Pharmaceutical industry (patent expiration in 20 years)

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4. Supporting Marketing Mix & Programs

Product and Brand Program: Product feature &brand meaning

Pricing Program: price points

Marketing Channels Program: Level, intensity,

and ownership/function

Communication Program: ex) Advertising and

Sales Promotion (Incentives)

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Multiple Effects of Consumer Promotions on Car Sales

by Steve Kim and J. Lim

Consumer promotions Firm performance

Product variable

Product

Quality

- Advertising

-Incentives

Car Sales Change

- Immediate-Total

H1 & H2

H3 & H4

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Effects of Advertising and Incentives on Car Sales

Advertising

Effect

Incentive

Effect

t-test

Immediate

effect

.013 .108 **

Fluctuation

Until

stabilization

.002 -.059 **

Total Effect .014 .049 **

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Effects of Incentives Under Different Quality

Incentive

Effect for

Low quality

Incentive

Effect for

High quality

T-test

Immediate

effect

.102 .116

Fluctuation

Until

stabilization

-.069 -.046

Total Effect .034 .07 **

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Effects of Advertising Under Different Quality

Advertising

Effect for

Low quality

Advertising

Effect for

High quality

T-test

Immediate

effect

.028 -.008 **

Fluctuation

Until

stabilization

.003 .001

Total Effect .031 -.007 **

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Illustration: Handsprings Product Strategy

Objective:To capture 15 percent of the PDA market by the end of year 2

Customer Targets:Price-conscious professionalsNonbusiness professionalsNonprofessionals

PalmSharp

Competitive Targets:

Core Strategy:

Simplicity/convenienceLow priceExpandability (via expansion slot)