Marketing Strategy 3.0

Product

Pricing

STPD

Branding

IMC Promotion

Competitive Strategies Place Environment

Strategic Frameworks Marketing Strategies

Dr Amit Rangnekar www.dramitrangnekar.com

[email protected]

Marketing Strategy 3.0 (MBA Notes)- Dr Amit Rangnekar

2

Check out these Notes and Case Studies at www.dramitrangnekar.com Marketing Strategy – Mumbai University / NMIMS University Assessment -100 marks Course Content 1. 2. 3. 4.

Marketing strategy - Overview Pillars of Marketing - STPD strategies Market situation strategy - Leaders, challengers, followers, nichers Competition analysis - Porter's 5 forces model for competitive environment, Benchmarking exercise, understanding competitive moves and postures 5. Sustainable competitive advantage - Porter's generic strategies 6. Portfolio models - BCG and GE McKinsey matrix 7. New product strategies - Innovation, Market entry, Product line extension 8. Communications strategy - Managing communications mix for products, brands 9. Advertising using and sales promotion strategy - campaigns 10. Brand building - FMCG, Consumer durables & Services cases 11. Distribution strategy- Designing of channel systems, Managing multichannel systems 12. Pricing strategy- Value pricing, Optimisation of pricing 13. Marketing Planning - Introduction, growth and mature markets. Pruning of products; Reference material Books

1. 2. 3. 4. 5. 6. 7.

Strategic Market Management 3e David Aaker Strategic Marketing (West & Ford) Mktg Mgt (Kotler, Keller, Koshy, Jha 13e) Market driven strategy (George Day) Marketing as Strategy (Nirmalya Kumar) Marketing Strategy (Ferrell 4e/ Walker 2e), Marketing Strategy - Boyd. Walker and Larreche

Notes

www.dramitrangnekar.com

Cases

Library, Harvard, ICFAI, Praxis, Business- Today / India / World, CIM

Daily

ET, Brand Equity, Hindu-Business Line, Business Std- Strategist,

Websites

www.dramitrangnekar.com , Knowledge@Wharton, Insead, Brands Asia, Mckinsey Quarterly, Economist, Forbes, Business Week, Harvard Business School / Review, www.cim.co.uk , www.knowthis.com , www.marketingpower.com, www.etstrategicmarketing.com, www.brandrepublic.com


[email protected]


3

Table of Contents No

Subject

Topics/s

Cases from

1

Strategy Overview,

Environment, Industry,

Faze 3, McDonald

Marketing Plan

Competitors, Customers

India launch

2

Marketing Strategy

STPD

Moov, Bisleri

3

Strategy

Porters Generic, Specific

Frameworks

strategies, BCG Matrix, GE-

Pg 5

12 18

McKinsey Matrix, Ansoff Matrix, Value Chain Model 4

Competitive

Leader, challengers, followers,

Auto Industry,

Strategies

nichers

Thai Beer

5

Product

Development, mix, range

Tata Nano

26

6

Integrated

Promotion, Advertising

Taj Hotels,

33

Marketing

22

Cadbury

Communication 7

8

Brand Management

Distribution

Identity, Image, Positioning,

Chic Shampoo,

Portfolio extensions

Harley Davidson

Channel length

Dabbawallas,

37

43

Flipkart 9

Pricing

Approaches, strategies

10

Immersive Reading

Competitive strategies

Pricing strategies

45 48

Notes adapted through readings, cases and notes from- Harvard Business School/ Review, Ivey, Stanford, Kellogg, MIT Sloan, LBS, Insead, Wharton, Emory; publications by Porter, Kotler, Keller, Kapferer, Nirmalya Kumar & Mckinsey; Economic Times, Indian and international business magazines, and the internet. Garnished with my own experience, insights & knowledge.


[email protected]


4

About the Author Dr Amit Rangnekar, MBA (Marketing) and PhD (Business Strategy) from NMIMS, Mumbai, has over 2 decades of progressively responsible pharma industry experience with Centaur Pharmaceuticals. In 2006 Dr Rangnekar was awarded a 10 nation scholarship to Europe by the Government of Denmark to complete his doctoral research. His co-authored book "Cases in Indian Management" was launched in Mumbai, Dubai and London in 2008. Embarking onto teaching as a hobby in 2003, Dr Rangnekar is a visiting faculty at Mumbai's leading B-Schools. His repertoire of insightful notes and compelling case studies have added value to over 7,500 MBA students. He shares his thoughts and knowledge with a global audience through his immensely popular website and blog, which have together clocked over 800,000 hits. Dr Rangnekar has presented on various business case studies on marketing, branding and business strategy, at B-schools and corporates across India and Europe. He has been a part of global leadership programmes of numerous Fortune 100 companies in Europe and Asia. He is an external guide for two PhD research scholars. Co-ordinates Email [email protected] , [email protected]

Visit www.dramitrangnekar.com … the homepage for MBA students worldwide

Home

    

What's New

MBA Notes

Case Study PPTs

Knowledge

Publications

Contact Me

Concise class notes on marketing, branding and strategic management Researched Case studies in power point presentation (ppt) Tips on PhD, Pharma and deliverables Various publications of the author Insights into pharmaceutical industry


[email protected]


5

1 Marketing Strategy Overview Situation analysis External factors

Internal factors

Consumers

Resources

Competitors

Capabilities

Environment

Skills

SWOT Analysis- assess the internal / external environment a firm operates in Strengths (Internal) USP's, capabilities, competitive advantage, resources, experience, knowledge, data, financials, marketing, reach, communication, service, legacy innovation, location, geography, price, value, IT quality, accreditations, processes, systems, culture, values, behaviour, management, reputation, Opportunities (External) Market / business / NPD, NMD, industry phase and potential, competitor vulnerabilities, global influences, demographics or lifestyle trends, technology, innovation, niches, verticals / horizontals, geographies, new contracts, research, partnerships, distribution, volumes, production, economies, season, influences

Weaknesses (Internal) Proposition, capabilities gaps, presence, strength, reputation, reach, financials, vulnerabilities, timescales, deadlines, pressures, supply chain, morale, attrition, commitment, leadership, processes & systems, management, Threats (External) PEST, competitive intentions, market demand, contracts and partners, sustaining capacities, finances & capabilities, obstacles, insurmountable weaknesses, industry cycles, seasonality

Strategic fit- effective match and management of environmental opportunities and threats with organisational strengths and weaknesses Strategic Groups- Set of firms with similar strategic dimensions & using similar strategies. Intra strategic group firm competition greater than inter. More heterogeneity in performance of firms within strategic groups. Eg Cars, PC, Airlines, segmented by sensitivity to price, quality, technology & service


[email protected]


6

The Environment

The external business environment PESTLE analysis Political Environmental, legislative, regulatory, policy, stability, initiative, lobbies, war and conflict, pressure groups, unions

Sociocultural Demographics, lifestyles, social mobility, educational levels, Attitudes, opinions, beliefs, buyer behaviour, ethnic & religious factors

Legal Legislative structures, anti-trust laws, trade policies, employment legislation, exit laws, foreign trade regulations

Economic Economy, global trends, taxes, levies, FDI, interest, inflation, unemployment, GDP, Stocks, forex, climate, market, trade cycles, industry specific factors

Technological Competing & emerging technologies, R&D, costs and capacities, PLC, solutions, innovation, information, communication, IPR, licensing, disruption

Environmental Sustainability, green issues, energy, natural factors

Industry Environment Analysis/ industry attractiveness (Porter’s 5 Forces model)


[email protected]


7

1) Threat of New Entrants: Entry Barriers  Economies of scale- Marginal efficiency improvement, as firm incrementally increases in size  Product differentiation- Unique products, Customer loyalty, competitive prices  Capital requirements- Physical facilities, Inventories, Marketing activities, capital  Switching Costs-One-time costs customers incur when buying from different suppliers. Costs-new equipment, retraining employees  Access to Distribution Channels- Stocking or shelf space, price breaks  Cost Disadvantages- No- scale, proprietary technology, access to raw materials, markets  Government policy- Licensing and permit requirements, deregulation of industries Expected retaliation- Responses by existing competitors may depend on a firm’s present stake in the industry (available business options) 2) Bargaining Power of Suppliers (increases when):  Suppliers are large and few in number  Suitable substitute products are not available  Individual buyers are not large customers of suppliers and there are many of them  Suppliers’ goods are critical to buyers’ marketplace success  Suppliers’ products create high switching costs.  Suppliers pose a threat to integrate forward into buyers’ industry 3) Bargaining Power of Buyers (increases when):  Buyers are large and few in number  Buyers purchase a large portion of an industry’s total output  Buyers’ purchases are a significant portion of a supplier’s annual revenues  Buyers can switch to another product without incurring high switching costs  Buyers pose threat to integrate backward into the sellers’ industry 4) Threat of Substitute Products (increases when):  Buyers face few switching costs  The substitute product’s price is lower  Substitute product’s quality & performance >= existing product  Differentiated industry products, valued by customers, reduce this threat 5) Intensity of Rivalry among Competitors (increases when):  There are numerous or equally balanced competitors  Industry growth slows or declines  There are high fixed costs or high storage costs  There is a lack of differentiation opportunities or low switching costs  When the strategic stakes are high  When high exit barriers prevent competitors from leaving the industry www.dramitrangnekar.com

[email protected]


8

Analysing Industry  Structure- Consolidated (Auto, Telecom)/ fragmented (Restaurants, Laundry)  Competition- Monopoly (Railways, Gillette, Amul) / duopoly (Pepsi-Coke, BoeingAirbus)/ oligopoly (Pharma, Steel, Auto, Telecom)  Market structure- Leader, challenger, followers, nicher (LCFN)  Lines- Broad (Electronics, Auto)/ narrow (Steel, Telecom, Hotels) Analysing Competition  Satisfy same / similar needs- Segments served  Direct / indirect - Eg Coke- direct Pepsi, indirect Bottled water, juice, beer  What products do they offer? Brands, categories dependence?  What channels do they use? What pricing strategies have they pursued?  Their management and financial resources?  What are their objectives? What are their core competencies?  What alliances are they pursuing, and for what purpose?  Their success in the marketplace? Share of market /voice /mind /heart? Competition Category

Beverages

Need fulfilled Brand Competitors

Product Competitors

Generic Competitors

Basic requirement

Market products similar Compete in same class, Market different products customer features, but features, benefits to solve same problem, benefits & price & price differ in satisfy same basic need

Refreshment

Coke, Pepsi Thums Up

Tea, Nimbu Pani Mineral water

Regular water

Dairy Milk, 5Star Celebrations

Mithai, Namkeens Ice creams, Fruits

Aniseed/Saunf Candy, Sugar

Chocolates Dessert/ snack Films

Entertainment PVR Fame Adlabs

Single screen Drama theatre

TV, Shopping Reading, Internet

Cars

Transportation Maruti, Hyundai, Tata

Small/Big cars, SUVs

Taxi, Auto, BEST, train, Walk

Analysing customers     

Who are the customers, segments What do they buy, where do they buy, when do they buy, how frequently do they buy How do they choose, how do they use, why do they prefer a product How do they respond to marketing programs Long term value of customers


[email protected]


9

Strategy 1. Directing action towards desire outcome 2. A plan of action to gain a competitive advantage over rivals 3. Deliberately choose different set of activities to deliver a unique mix of value- Porter Marketing  Entire business from the point of view of the customer- Drucker  Identify, create, manage demand to provide value to a customer for a profit -Kotler  The right product, in the right place, at the right time, at the right price.-Adcock  Concept- Satisfaction of customer & their needs, focus of business activities. IBM  Philosophy- Owned by everyone from within the organization Marketing strategy answers 2 questions  Why should our customers buy our product  Which customer needs do our products fulfill more effectively than competitors  Nokia not the 1st mover but No.1 by giving customers what they desired  Sony & Apple don’t rely on MR, create new categories through innovation  Google search effective due to a simple, uncluttered & efficient approach  Differentiation by- price, reach, delivery, design, service, technology, etc but it should be valuable & meaningful to customers. Eg Hybrid cars, solar mobiles How marketing strategy relates to corporate and business level strategies Corporate level Business/es to be in Set strategic corporate goals, Business level Gain competitive advantage SBU goals, develop broad strategy Functional level Attain marketing goals Marketing strategy implementation Product level Implement tactics Marketing mix How marketing relates to strategy  Business activities align with business strategy- achieve corporate objectives  Marketing- firm’s link to customers & competitors, shapes strategy  Eg Amul’s corporate goal- to be ‘world’s largest food brand’  Marketing plans & tactics (global availability, effective communication, value price, products & service to delight customers) should evolve around that goal.  Amul can augment with new brands, segments & categories with business potential where Amul can deliver on its capabilities.


[email protected]


10

Marketing strategy defines  The target segment- size, demographics, psychographics  How should the product be positioned to appeal to the market- primary benefit  How should the product be branded Product potential- sales, market share, profit estimates Ferrari’s marketing strategy  Target (Luxury sports car)  Position to appeal to that market (Speed, design, performance)  Branding- identify and differentiate product from competitors (Prancing Horse logo, formula 1,brand communication) Illustration- PC market Strategic marketing environment  Launch- 1970s, small segment- technologists & mathematicians  Apple improved, simplified use, software widened use  1980s- IBM further widened use, sales growth exponential, new competitors  Desktops at work & home, replacements, peripherals  1990s- Internet but PC maturity, customer & price resistance, declining profits  2000- Commoditisation, shakeout, HP- M&A Compaq, IBM sold PC biz- Lenovo  Faster processors, flatter screens, converged PCs and all in one printers, laptops Marketing Plan- “Plan your work, and work your plan”  A campaign that aims to fulfill a company’s market strategy  What will the company do in NPL and supporting older ones  Timing of its sales and promotional activities, pricing intentions & distribution efforts  How will the plan be controlled and the results measured. Executive summary Table of contents Situation analysis Focused assessment of the market opportunity Financial goals Marketing goals Summary of the company’s marketing strategy

Objectives and implementation plan Data, environment, SWOT, gaps Statement of target market segments Customer and needs assessment Competitive challenges to firm & products Incremental revenue improvements Expected profits Unit sales or market share Identify target market Product position, distribution & pricing Specific actions to achieve goals- sales force, customer rebates, national ad campaign, direct mail etc

Monthly marketing budget Monthly sales forecast (units & value) Periodic plans- monitor, review & action www.dramitrangnekar.com

[email protected]


11

Implementing the plan via the Marketing Mix • Identify target customer segments • Address customers through marketing mix- 4Ps (Refer section on marketing mix ) • Best plans, resources, skills and effective implementation- no guarantee of success as • Lower demand, technology, new launches by competitors, high inputs and promotion Controlling Plan Implementation (HBS)

Marketing Plan Summary


[email protected]


12

2 Marketing Strategy STPD- (Segmentation, Targeting, Positioning, Differentiation) Concept Short definition Example Moov Identify different needs & Where to compete Pain segment Segmentation Targeting Positioning Differentiation

groups in the market Target markets it can satisfy in a superior way Occupy distinct place in customer’s mind Communicate valuable & meaningful differences

Which product for which market

Back pain segment within the pain segment

Locating brand in customer’s mind How to compete

Relief from back aches “Aah se aha tak” Lamitube, non staining, effective in back pain

Segmentation • Where to compete • Divide market into distinct groups with distinct needs, characteristics, or behaviors • Basis- competence, resources, potential (Features, service, convenience, quality) Evaluate segment attractiveness  Segment size and growth, own objectives and resources  Structural Attractiveness- Level of competition, substitutes, buyers/supplier power Requirements for effective segmentation  Measurable- Size, purchasing power, and profile of segment  Accessible- Can be reached and served  Substantial- Large and profitable enough to serve  Differentiable- Respond differently  Actionable- Effective programs can be developed Principles of market segmentation (Palmer & Miller 2004, Industrial Mktg Mgt, 33(8), pp 779-85) Market segments (Size, access, differentiated) Who buys- Customer characteristics What is bought, why- Customer behaviour Hard

Soft

Demo/geographic AEGIS

Psychographic VALS

Objective

Subjective

Behavioural Usage

Benefits

Price sensitivity, promo response, loyalty, repeats

Perceptions, preference trade-offs

Segmentation matrix- Taj Hotels Segments Luxury Premium Luxury Premium Mid-market Budget

Full service Hotels Palaces Taj Hotels & Palaces Vivanta by Taj Gateway


Features Spas Resorts Taj Exotica

Wildlife lodges

Self service

Taj Safaris

Ginger

[email protected]


13

Types of segmentation 4 types- geographic, demographic, psychographic, behavioural- ideal is to integrate, mix

Demographic

Geographic

Factors (examples) Country, area, region, climate

• • • • • •

Behavioural

Psychographic

• • • • • • • • • • • • • •

Age (Hospitals, cycles, , toys) Education Income (Garments, car, soaps) Sex (Perfumes, hospital) Religion, nationality Marital status, family size, family life cycle, generation, ocupation Social class- middle/lower/ upper Benefits sought (costs, service, quality) Lifestyle, VALS (Values, attitudes, lifestyle) Personality, culture, social, religion AIO- what interests them, view Activities- Work, Hobby, Shopping Interests- Family, fashion, food Opinions- Self, PEST Occasions Personality based Benefit segmentation Attitude (+ve/-ve, hostile) Convenience (EMI, Home Delivery) Readiness (Informed, interested, aware)

Example • Coke-Chota-Rural, Bada –Urban • Sweaters in HP, Kashmir • McDonalds menu adaptation in India • Honda City- different models globally • ITC Ashirwad atta diferrent blends NEWS • India food habits- North wheat, South rice • LIC, Hinduja hospital • Schools • Toyota- Lexus, Camry, Corolla • Gillette • Beef/Pork, Halal, Kosher foods • Mature 1945+, Baby boomers 1965+, Generation X 1976+, Generation Y 1994+ • DINK, ORCHID, YUP, WHOP • Nano, Taj, Titan, Nokia • Clubs, Art, Wine Harley Davidson owners • Woodlands-rugged/extrovert • Niche magazines - food, fashion, car, electronics, CRM

• • • • • •

• • • •

Greeting cards, tour operators, weddings Blackberry addicts Maggi convenience, Maruti service, value User (1st time, regular) Usage (light, heavy consumption) Loyalty (HML, switchers) Titan- edge for formal, fastrack for casual, Raga for ethnic; Bisleri pack sizes By occasions, product usage, benefits sought, brand loyalty OccasionsUser Status - Non-Users Vs Current Users (Credit Cards, bikes) Usage Rate- Heavy Users Vs. Light Users (beers)

Exercise 1. Outline a segmentation matrix for mobiles (users v features) 2. Sports Shoes Market (Exercise) Which segments should Nike, Adidas & Reebok target


[email protected]


14

Targeting    •

Which product for which market Measure segment attractiveness, select target segments Set of buyers sharing common needs or characteristics that a company decides to serve Targeting factors- resources, competence, degree of product variability, PLC stage, competitors’ strategies

Targeting choices (Derek F Abell, 1980)

Targeting strategy Strategy What it means Mass marketing Target marketing mix towards the entire market, not specific to any segment Differentiated Target different marketing marketing mixes (segmented) towards different segments Market concentration

Niche Marketing

Example

Illustration

Amul Butter, Parle G, Coke

UB group whisky, Cadbury chocolates, HUL

Concentrating mix on any one segment of the market

Ferrariluxury sports cars, Nirma economy detergents, Big Bazaar Target small Travel agents market segment focused only with specific, on Shirdi, HP, specialized Nepal marketing mix Sports shops, Florists


[email protected]


15

Positioning  Locate brand in the customer’s mind  Design firm’s offering & image to occupy distinct place in target customer’s mind  Represent a distinctive big idea in the mind of the target market Positioning types  Attribute-Longevity-Since 1904  Benefit- Sea view, service, speed  Use-ICICI- Fast A/c opening  User-Louis Philipe-Upper crust  Category- Big small car-Indica  Quality-Benz-Future of the automobile Positioning strategies Single Double Triple Multiple- same product to various segments with intact central positioning

Positioning anomalies  Under-Fridge-PUF  Over- Casio start @ Rs 500, perceived expensive earlier  Confused- Top Ramen Noodles-‘Smooth’  Doubtful- Tall promises-Teak plantations, Ponzi schemes  Value-Budget Hotels, Maruti

Camry-Touch Perfection Tavera-Comfortable family car Liquidity, safety, returns-MFs A chocolate-based health drink- Central positioning- nutrition, Active people- Energy, Elderly- Dietary supplement, Pregnant ladiesessential supplement, Kids- Growth & nutrition, Executives- revitalize

Crafting the brand positioning Positioning requires determining a competitive frame of reference, which defines associations that consumers use to evaluate directly/ broadly competing brands, as under: Frame of reference Identify target market Understand consumer behavior Nature of competition Points-of-parity (POP)

What it means

Points-of-difference (POD)

Associations, attributes, benefits consumers associate, positively evaluate & believe they cannot find to the same extent with others Consistency, legacy, trust, reputation

Which brand for which market Considerations in choosing brandsattitudes, preferences Intensity, dominance, PLC, differentiation Associations consumers view essential to be credible, common category traits, conditions necessary but not sufficient for brand choice

Reason to believe (RTB)

Example iPad Enthusiasts, innovators Price insensitive, musthave, advocacy, CE/ technology firms Midway Laptop/mobile, touch screen, phone, net, 1GB ram, handy Apple, apps, design, gaming

Innovation, performance iPad positioning should include POD+ RTB


[email protected]


Design

32GB

Safari

Apple

Face Time

Apps

5MP Cam

Gaming

Weight

iPod

16

iOS

HD Video

Exercise- POPs & PODs for Apple i-Phone 4s Exercise- How Should Maruti position itself with respect to the Tata Nano?

Perceptual mapping  Brands 'mapped' together on 'positioning map', compared across parameters  Identify weak/strong/absent competitive positions  Price v range for Mumbai super stores, distinguish by competitive offerings  Gaps regarded as opportunities for positioning/repositioning/launch Price ShoppersStop BigBazaar

LifeStyle High Low

Runwal Crossroad Globus

Giants Range ApnaBazar

Akbarallys

High

Low

Exercise: Walmart’s India entry strategy based on above perceptual map Positions that firms have successfully claimed in India Beauty Premium Thanda Generic Delivery Service Fast food

Lux

Range Bose, Benz Youth Coke Fever Cadbury/Xerox Innovation Dabbawallas Macho Maruti Performance VadaPav, Udipi Salesmen


Croma, Titan Pepsi, Nike Crocin Apple, Intel Enfield Nokia, Titan EurekaForbes

Reach Kids Economy Value Tourism Search Headache

ITC, HUL, GSK McDonalds Big Bazaar Maruti, Flipkart Goa, Kerala, Google Saridon/Anacin

[email protected]


17

HUL- Axe and Rexona, (both HUL), operate in the same segment- deos. Rexona targets working population, positioned against body odour, Axe targets youth, positioned on seduction. Both contain a similar formula, target the same segment, but use completely different communication strategies, do not cannibalise. P&G Positioning: distinct positions, even in same segments (Aaker & Joakimsthaler) Brand Segment Position Head & Shoulders Pert Plus Pantene Ariel Tide Cheer Bold

Shampoos Shampoos Shampoos Detergent Detergent Detergent Detergent

Anti-Dandruff Conditioner + shampoo Healthy + shiny hair High Tech Detergent Tough cleaning All-temperature cleaning Fabric softener

Differentiation  How to compete (STP undertaken to help differentiate)  Add meaningful & valuable differences to distinguish offering from competitor’s  Differentiation Criteria- important, distinct, superior, preemptive, affordable  By form / features- Coke bottle shape, Heinz thick ketchup, iPhone 4s- Siri  Differentiated on why customers buy- perception of PQRSTUV, usage and experience  Brands differentiate on irrelevant features/benefits- many mobile phones features hardly used, newer management book editions- bigger & costlier, not always better  Identify tangible differences -conscious, rational benefits like PQRSTUV-, Performance (Titan), Quality (Apple), Rate (Big Bazaar), Range (Cadbury), Service (Maruti), Technology (Intel), Utility (Swiss knife), Value (Titan), Convenience (Maggi)  Intangible Benefits - emotional, sub-conscious benefits a brand owns- Status (Benz, BMW), Prestige (Mont Blanc, Rolex)- most important leverage for brand dominance, unique (Sony, Apple), sustainable benefits (Amul, Toyota low cost) Differential variables Brand Performance, features, form, conformance, reliability, style, design, quality Service Delivery, ease of ordering & installation, customer training People Competence, credibility, reliability, responsiveness, communication Channel Coverage, expertise, cost effectiveness, performance Image Symbol, colour, slogan, ambience, atmosphere Exercise- i-phone 4s  Key success factor? STPD?  Where is iphone vulnerable? Economical competitors, imitators, technology  What should it watch out for? Changing preferences, value, new trends www.dramitrangnekar.com

[email protected]


18

Key improvement areas? Price, promotion, features, customer service

3 Strategic frameworks Various business level strategic frameworks to gain competitive advantage Framework Purpose 1 Ansoff Product-market growth matrix Product-market growth strategies 2 BCG Growth Share Matrix Market growth-relative market helps in portfolio 3

GE Matrix/ Business Screen

4

Porter Value Chain analysis

5

Porter Generic business strategies 6 Kellogg Specific business strategies 7 Mckinsey 7S model

planning, recommending strategy Analyse current portfolio, determine businesses to invest/protect/harvest/divest/ Understand value generating parts of the operations to create competitive advantage Generic sources of competitive advantage Strategies to gain competitive advantage Successful strategy implementation

1 Ansoff’s product-market growth matrix (HI Ansoff 1957) Offers product-market growth strategies that set the direction for the business strategy Existing product Market penetration Increase share of customer spending Increase MS, use, frequency, quantity Non-users to users Maruti- Rural India penetration Titan- Sonata Apple- iPod/iPhone variants

• • • • • •

Product modification, new features Different quality levels New products, line extensions Maruti- Ritz, Swift Titan-Edge, Automatic Apple- iPad

Market development

New market

• New markets • New distribution channels • New geographical areas • Maruti- Exports • Titan- Exports • Apple- Emerging markets

Diversification • • • • • • •

Build Buy- M&A Ally- JV Integration, Diversification Maruti- Driving schools Titan- Fastrack, Eye+ Apple- Retail, TV

2 BCG Matrix- Growth Share Matrix Matrix, 25% 1968 (Tata SBU, Parle Biscuits)  Link market growth and relative market share to determine prospects for various SBU/ brands. Helps to plan portfolio, recommend strategy 10%  Question Mark -Low share of high growth market, consume resources, generate littleweigh risk/rewards 0%  Stars- Leaders, high share of high growth

Relative Market Share Star

3 5

1

?

2

6 7

8 Dog

Cash Cow 10x


Question mark

4

Market Growth

Existing market

• • • • • •

New product Product development

1x

0.1x

[email protected]

Marketing Strategy 3.0 (MBA Notes)- Dr Amit Rangnekar    

19

market, high promotion costs, generate high income, invest Cash cows- Leader, high share of low growth market, generate cash, low investment, ex-stars, economies, profits, fund others, milk Dogs-Low share of low growth market, no cash generation, consume cash, rid, divest Portfolio balance critical, reduce dogs, milk cash cows build stars Limitations- Profitability, trends, environment, SBU sensitivities not considered

3 GE Matrix/Growth Share Matrix/Business Screen Helps analyse portfolio, determine which businesses should receive more/less Medium Weak Strong investment and which should be divested. 4

High

Market Attrac tiveness

 Market Attractiveness v Business 3 strengths  Optimal business portfolio to fit firm Medium strengths, exploit attractive 2 industries/markets Low  Circle is SBU, Circle size= industry/ market 1 size, pie size = SBU market share 4 3 2 1 Business Strength  Arrows= growth of SBU/industry Harvest/Divest Selec tivity/Earnings Invest/Grow  SBU's to invest, build, harvest, divest?  Forecast for N3-5Y- strategy, competition, PLC, technology, policy, incorporate in length & direction of arrows Strategies for SBU in various quadrants Business strength (Resources, competencies, brands, MS, customer loyalty, cost structures, distribution, access to finances, raw material, technology, innovation)

Market attractiveness (Market size, growth, profitability, pricing freedom, rivalry, risks v returns, differentiation, segments, channels)

High

Medium

Low

Strong

Invest

Invest

Protect

Medium

Invest

Protect

Harvest

Weak

Protect

Harvest

Divest

Implementation of portfolio analysis  Identify drivers important to overall strategy, assign relative importance weights  Score SBU's each driver, Multiply weights times scores for each SBU, Interpret results Market Attractiveness: size, growth, profits, potential, differentiation rivalry Business Strength: Assets, competence, brands, MS, growth, loyalty, margin, technology / innovation, distribution, capacity, financial resources, cost structure  GE Matrix v BCG- 3*3 grid, allows more sophistication, broader  Limitations- Core competencies not represented, SBU Interactions not considered Exercise- For a diversified conglomerate, outline SBU strategies by plotting GE matrix


[email protected]


20

4 Value Chain analysis (Porter) Template that allows firm to understand parts of its operations that create value (margin) & those that do not. Analyse specific inter-related activities through which firm can create competitive advantage.  Understand cost position  Benchmark activities against competitors to match/ improve efficiencies, or outsource  Facilitate implementation of a chosen business-level strategy  Primary activities- goal is to create competitive advantage  Support activities- facilitate or support primary activities to create competitive advantage 5 Generic Business Strategies- Porter Sources of competitive advantage-Cost leadership, Differentiation, Focus Competitive Advantage- A sustainable competitive advantage gained by offering customers greater value and benefits through better PQRSTUV & people Overall cost leadership

Differentiation

Broad

Cost focus

Differentiation focus

Narrow

Competitive scope

Competitive advantage

Cost Leadership  Cost leader low price- competitive advantage lowest cost, ‘no frills’- Amul  Low cost not always low price- Toyotahigh quality, lower costs, better margins

Low Cost High Cost Differentiation  Intense Competition, brand clutter - 25000 pharma firms, 4 cars in 1983, 400 2011  Spoilt for choice- 4 car models 1983, 14 in 1993, 83 in 2003, 400+ in 2012  Select 1/more vacant differentiated needs, position firm to meet criteria-Domino’s  Differentiators- PQRSTUV, design, delivery, reach, delight  Competitive advantage in a broad range of market / industry segments  Differentiated goods/services satisfying needs- sustainable competitive advantage  Specific targeting, price insentive, value focus- high prices & margins- Apple, Intel  Innovation and improvement important  Competitive advantage with additional costs, but increased revenue will offset

Differentiation Focus or Niche strategy  Specialise within just 1/ more small market segments with different customer needs  Competitors target broader customers group, existing brands not meeting demand  Tour Operators- Nepal or HP or South only, Glaxo- Pharmaceuticals www.dramitrangnekar.com

[email protected]


21

 Niche- Specialization by narrow segment / market / industry, but small, specialist niches disappear in long term- often used by smaller firms- Florist, Sports shop  Cost focus – Difficult to achieve if industry depends on economies of scale- telecom  Eg Country Level -Strategic Differentiation China Hard InfrastructurePorts,Roads,Power, Mfrg Factory of the World Government support

India Soft InfrastructureSoftware, ITES, Auto, Biotech Back End Entrepreneurship

6 Specific Business Strategies (Kellogg) Strategies employed by firms to gain competitive advantage Exercise: Identify specific strategies of SBU in a conglomerate / brands in a portfolio Grow larger Downsize Diversify into new markets Dominate a niche Outsource production process Integrate production process Be cost leader even if quality is sacrificed Be quality leader even if costs increase Drive rivals from the market Co-operate with rivals Innovate Imitate

GE, RIL, Pfizer Avon, Sara Lee, Tata’s in 1990s, Merck 1996 Walmart, Amul, Pepsi Ferrari, Dabbawallas IKEA, Nike, Airtel Armani, Tiffany, D&G Nano, Kia BMW, Samsung, 4 Seasons Microsoft, Essel Propack Sony, BMS, Pfizer Apple, Intel Nokia, Indian pharma industry

7 Mckinsey 7-S Framework- Successful strategy implementation if all 7 elements present  Strategy, Structure, Systems-hardware, others software  Shared values- What firm stands for, shared beliefs & attitudes  Strategy- Operational Plans to reach identified goals. Environment, competition, customers  Structure-How the SBUs relate to each other  System-Procedures, processesfinancial/hr/mktg/mis  Staff- Able people, well trained  Style- Common way of thinking & behaving eg smiles


[email protected]


22

4 Competitive Strategies Identify competitive position wrt self, role played by market leader, challenger, follower, nicher, plan and implement strategies to gain competitive advantage, attain objectives. Sustainable competitive advantage (SCA)  Competitive advantage is necessary to compete, but sustainable competitive advantage helps consistently command above average returns  Understanding competitive position helps erect barriers against competition  Eg SCA Singapore Airlines (SIA)- best in-flight service, others improved service, SIA added modern fleet, improved- ground service, in-cabin entertainment, comfort levels  SCA Amul- procures 97L litres milk daily from 27L farmers. Strong backward linkage and scale gives Amul cost leadership in milk processing which ensures low penetrative prices, infeasible for competitors to match. Amul leverages its milk proficiencies to related areas- spray, butter, cheese, ice cream, dahi, etc.  SCA Apple- transforms industries with innovative convergence products, closed ecosystem and design, command premium price Competitive strategies- used by firms to gain advantage over competition  Market dominance- Leader(Nokia), challenger(Samsung), follower (Sony), nicher (HTC)  Innovation strategies – Based on NPD, technology & business innovation. Three types: Pioneers, Close followers and Late followers  Growth strategies – Organic and Inorganic, Integration (Horizontal & vertical), Diversification or conglomeration, M&A, Alliances, Strategic acquisitions.  Warfare based- Offensive, defensive, flanking, guerilla Competitive Strategies Typologies Market dominance strategies- Leader based on player’s dominance / share Challenger of the industry Follower Counterfeiter Cloner Imitator Adaptor Nicher Innovation strategies Pioneers Ascertain firms rate of NPD, business Late followers innovation, cutting edge technology Close followers Intensive growth strategy Market penetration Ansoff’s Growth MatrixNew market Devt existing and new- products v New product Devt markets. Eg Maruti Diversification www.dramitrangnekar.com

Examples Nokia Samsung, Apple Sony, LG Fake mobiles Karbon, Lemon Nokia, Micromax LG, Sony HTC, Blackberry Apple, Intel Nokia HTC Maruti in rural India Maruti SE Asia exports Swift, SX4, Ritz Driving schools, financials [email protected]


23

Marketing Warfare strategies  Combination (defensive + offensive) strategies- to protect/ grow/ attack  Key- leadership, motivation, intelligence gathering, strategies, logistics, and communications (Defensive, Offensive, Flanking, Guerilla) Strategy Defensive Warfare (Market Leader) Offensive Warfare (# 2/3 with resources to challenge leader)

Action Block strong competitive moves. Consolidate, NPL, reach, brand building, grow the market Attack leader’s weakness, narrower the better. Skilled used of resources

Illustrations Apple, HUL, Amul

Flanking Warfare (# 4-6 with resources to pursue flanking in that market segment)

Open new uncontested area, near leader’s position, tactical surprise key, persevere. Leader may also flank. Ability to create, maintain separate category critical

Toyota- Lexus, Intel-Celeron, Rolex-Tudor, HULWheel

Guerilla Warfare (Small players with low resources

Hit and run strategy. Identify small segment that can be defended, agility key.

Bean bags, Ghari

Moov, Maruti, Hero Honda

Market dominance – Measure of the strength of a brand, service or firm relative to competitive offerings, expressed in MS, reach and number of players. Monopoly, duopoly, oligopoly, fragmentation, consolidation, concentration. Market Leader’s strategies:  Expand market by- new users, new uses, more usage  Protect MS by- adopting defense strategies  Strategy depends on- is it worth fighting for, competence, defensive strength, choices Strategy

What it means Growth strategy

New users

New segments

New uses More usage

More occasions to use Increase frequency/ quantum Defense strategy Create fortress defense, least successful Broaden market, diversify, redefine business, competitive focus Secondary markets (flanks) vulnerable, prone to attack Divest vulnerable segments,

Position Defense Mobile Defense Flanking Defense Contraction


Example Moov Housewife to physically active adults Back pain to all pain 1 finger to ‘Moov ki maalish’ Nokia created too many segments to defend, lost in major segments Google search to You tube, android, chrome Intel Pentium + Celeron, Toyota Lexus, HUL Wheel v Nirma 1990s Tata divested pharma, oil,

[email protected]

Marketing Strategy 3.0 (MBA Notes)- Dr Amit Rangnekar Defense Pre-emptive Defense CounterOffensive Defense

contract, redirect resources to defendable ones Attack before attack, intent retaliatory, proliferation Respond to competitors’ head-on attack, identify weakness and launch counter attack

24

soap to focus on steel, motors, IT, hotels Nokia, Cadbury, Titan- in every segment HUL STING op to counter Nirma

Market challenger’s strategies Market challenger- strong, not dominant but follows an aggressive strategy to gain MS  Attack- market leader, major players, smaller vulnerable firms  NPL, price discounts / reduction, line extensions, intense promotions  Improve service and distribution, cost reductions Strategy Frontal attack

Flank attack

Encirclement attack Bypass attack

Guerrilla attack

What it means

Example

Success difficult unless sufficient resources, staying power or clear distinctive advantage(s) Attack leaders weak points/ blind spots/ flanks, for challenger with inferior resources Attack the enemy on many fronts at the same time, for challenger with superior resources Diversifying into uncontested space, unrelated products or markets neglected by the leader,

Samsung Galaxy v iPhone/ iPad

Launch small, intermittent hit-andrun attacks to harass and destabilize the leader

Nirma detergent @ Rs 3/kg attacked HUL Surf Rs 13/kg

VW India entry with full range, Samsung ITC Pasta entry before Maggi, Kinetic Honda, Tata Nano in low cost car segment Local airlines- strategic promos to attack national carriers

Follower strategies Follower- strong, not dominant, content to stay there, safe, low risk player  No head-on battle with market leader, develop parallel strategies  Plays on accepted norms in best practices, R&D, risks and costs- low failure rates  “Innovative Imitation”- as profitable as a product innovation strategy” T Levitt HBR  Create distinct advantages—tweak, location, services, EMI, Design- Hyundai  Product innovation—Sony, Product-imitation- Nokia


[email protected]

Marketing Strategy 3.0 (MBA Notes)- Dr Amit Rangnekar Strategy What it means Counterfeiter (illegal) Pass off as original Cloner Similar improvised products Imitator Adapter

25

Example Duplicates MB pens, Rolex IBM PC, iPhone clones Nokia No 1 without innovation Car makers- imitate design elements of each other

Nicher strategies Nicher- Specialise in small profitable sub segments (niches), not served by/ unattractive to larger firms- Belkin, Transcend- IT accessories, Tour operators- Shirdi/Nepal, Florists  Profit margins emphasized rather than revenue or market share  Competitive advantage gained through effectiveness rather than efficiency  Successes- High value added industries/ market high margin high end products  Nichers create niches, expand and protect them- Mobiles, Moov  Nike constantly created new niches--cycling, walking, hiking, cheerleading, etc Niche specialist End user Vertical level Customer size Specific customer Geographic Product / product line Product feature Job-shop Quality-price Service Channel


Firm specialization Serve one type of end use customer Vertical level of production-distribution value chain Focus on selling to small, medium or large customers Limit selling to one/few customers Limit selling to locality, region, area Carry/ produce only one product/ product line Produce certain product types/ features Customise products for individual customers Focus on high/low quality ends Offer one/ more service/s not available from competition Serves only one channel of distribution

[email protected]


26

Marketing strategies (Auto industry perspective) Competitive strategies Market dominance (Competition based) Leader Maruti Challenger Hyundai, Tata Follower GM, VW, Toyota, Nicher Ford Innovation (NPD, NDS, Tech) Pioneers Maruti, Santro Close followers Hyundai, Tata, GM Late followers VW, Toyota, Ford Growth strategies Organic Inorganic Integration Diversification

Vertical Horizontal Related Unrelated

M&A Strategic M&A Strategic alliances Warfare strategies Warfare Defensive (Leader) Offensive (# 2/3) Flanking (# 4-6/leader) Guerilla (Small player)

Maruti Tata-JLR/Daewoo, MM-Ssangyong, VW, BMW M&M Tata, M&M, VW Maruti- True value, finance; M&M- Kinetic, Reva Hyundai- Aerospace, M&M-IT, Holidays MM-Ssangyong, VW, BMW Tata- JLR, Tata- Daewoo trucks Tata-Fiat, GM-SAIC, Fiat diesel engines

Strategy Block competitive moves Exploit leader’s weakness Uncontested space Hit and run strategy

Illustrations Maruti- NPL, range, reach, brand Hyundai compact-mid size range Kizashi, Eon, Vento, Brio

Defensive / Offensive Marketing war Strategies Pre-emptive strike

Attack before attacked

Maruti- Full range and reach

Position Defense

Erect fortifications

Maruti- Sensitive price points, NPL

Mobile defense

Change positions swiftly

Psychographic segmentation

Counter-offensive

Attack attacker

Drop prices, promotion, cost leader

Strategic withdrawal

Retreat and regroup

Withdraw Esteem, Baleno, Zen, NPL

Flank positioning

Strengthen flanks

Maruti in premium

Deterrence

Keep competitors out

Maruti- small cars, penetration, reach

Frontal Attack

Confront head-on

Hyundai / Tata compacts v Maruti

Encirclement

Envelop rivals position

VW with full range, M&M in SUV

Leapfrog

Don’t confront, bypass

Tata Nano new segment

Flanking Guerilla

Play in unimportant areas Low resources, hit & run

Toyota / GM / VW/ Ford economy


[email protected]


27

5 Product “We lead the public with new products than ask them what products they want. They don’t know what’s possible, but we do. So instead of doing a lot of market research, we try to create a market for a product by educating them” (Akio Morita, Sony)  Product- offered to satisfy a want or need- features, quality, services mix and price.  Product differentiation- Choice of form, features, performance quality, conformance quality, durability, reliability, repairability, and style. PQRSTUV  Services differentiation- Ordering ease, delivery installation, customer training, customer consulting, maintenance and repair  Convenience items purchased frequently, immediately, with minimum effort.  Capital goods last long and are purchased infrequently by consumers.  Commodities- where physical differentiation is difficult Exercise- 3 brands performing at exceptional levels despite intense competition Product Strategy-Coordinate product mix/lines, brands, packaging & labeling- decisions Product Levels: The Customer Value Hierarchy To plan market offering, marketer considers 5 product levels that encompass the augmentations & transformations the product ultimately undergoes. Each level adds more customer value, the 5 levels constitute a customer value hierarchy. Product Levels Core Basic

What it means

Marketers Job

Hotel Customer

ITC Hotels

Product bought Benefits

Provide benefits Turn benefit to product

Expected

Attributes & conditions

BudgetFortune 5-StarWelcome

Augmented

Exceed expectations

Potential

New ways to satisfy/differentiate

Minimum buyer expectations, price, convenience, locationimportant (EM) Augmented benefits become expected benefits, competitors step inimportant (developed markets) Anticipate & innovate

Place to sleep Bed, bath, closet Clean bed & toilets, peace Satellite TV, Tea machine, Internet

Super deluxe ITC

Customised service

Welcom Heritage Palaces, forts

Exercise- Select 1 convenience & 1 capital good, compare & contrast consumers value hierarchy.


[email protected]


28

Product Mix - HUL Portfolio- Consumer Product-Mix Width  Product line- group of brands closely related by functions & benefits- Dell PC, Nokia mobiles  Product mix- total set of brands marketed by a firm, may contain product lines  Width- product mix lines - HP PCs, Laptops, Printers within home & business segments  HUL 11 lines (Personal wash, laundry, skin care…….)  Length- total number of items in the mix- 25, average length is 25/11 = 2  Depth- Variants of each product in the line- Lux has 4 fragrances and 2 sizes, so 8  Deciding which product lines to grow, maintain, harvest, and divest?

Axe Rexona

Lakme

BB Lipton

Bru

Kissan Knorr Annapurna

Ice cream

Pepsodent Close Up

Foods

Sunsilk Natural Clinic

Coffee

Fair & lovely Ponds

Tea

Oral care

Surf Exc el Rin Wh eel

Colour cosmetics

Hair care

Lux Lifebuoy Liril Hamam Breeze Dove Pears Rexona

Deodorants

Skin care

Length

Laundry

Product line

Foods

Personal wash

Home & Personal care

Kwality Walls

Product line strategy  Upgrade customers - Maruti 800, Alto, Zen , Wagon R  Cross-sell- HP printers, PC & Laptops, Godrej- Washing machine, TV, fridge, microwave, AC  Line-stretch- popular(Titan), mass(Sonata), premium(Xylys), youth (Fastrack), ethnic (Raga)  Line fill- Maruti variants AX, LX, VX; I-Pod- nano, shuffle, classic, 80/40/20/8/4gb  Line prune- Reduce unwanted / unprofitable- Maruti Gypsy Packaging and labeling- The 5th P, part of product strategy Packaging- 3 levels: Primary, Secondary, Shipper, Insert  Promotional value- packaging is buyer’s 1st product encounter- can turn on or off  Functional components- protection in transportation & storage, usage, convenience, ease of use, storage, convey usage information & instructions  Aesthetic components- Design, size, shape, material, color, text, graphics- harmonize


[email protected]


29

Labeling- Identifying product or brand, grading, describing the product, adhering to regulatory requirements, promote through attractive graphics. Warranties & Guarantees- Expected product performance level by manufacturer, reduces buyer’s perceived risk, if not so well-known product has superior quality. New Product Development (NPD)  NPD- risky unless based on market segmentation and understanding of customers  NPD is first and then you figure out how to market, it usually leads to disaster  Challenge- similar products, effective substitutes, choice, high promotion New Products Types – Breakthrough or incrementally altered products Breakthrough Incremental  New to the world performance features  Huge advances in performance  Dramatic cost reduction

Higher risk Infrequent Costlier Targets new /existing markets

 Improvement in existing product  Derivative of existing platform  Exploits existing forms / technology

Lower risk More frequent Less costly Targets existing/ adjacent markets Marketer’s responsibility

 Envision market  Create demand  Educate market

 Listen to existing market  Accommodate current demand

Change basis of industry competition: • Electric lighting, antibiotics, microwave, credit card, transistor, heart pacemaker, hip and knee replacements, GPS

Intel’s Pentium IV computer chip- incremental improvement over Pentium III as they share same fundamental technology  Incorporated design improvements that enhanced chip performance  Windows, MS Office, Play station

Exercise: Course of NPD in your industry over L10Y- what changed the basis of competition, what were the real breakthroughs, which were only incremental? What are the new technologies / products lined up, how will they affect your company and competitors when launched, in terms of sales and profitability? Identifying new product opportunities

Unexplored Opportunities


Exercise: For an industry of your choice, identify the unexplored opportunities in every quadrant, and identify the players who operate in each quadrant.

[email protected]


30

New product development (NPD) Stages  Idea generation- Employees, Sales force, Trade, Competitors, Customers  Idea screening- Feasible, Workable, Practical  Concept development and testing- Feedback from target audience  Marketing strategy- Mix (4Ps), STPD, Targets, Projections, Geographies  Product development- Final touches & Mfrg  Test Marketing- Geography or Segment  Commercialisation- National / Global launch Why new product development (NPD)  Changing customer needs – Diet Coke, Saffola  New Segment Entry- Maruti SX4  Changing market needs- Scooters to Bikes  Own successes- Brand / line extensions- Maggi  Competitive Successes- Krackjack- 50:50, Marie  New Capabilities- UB Group  New Concepts- Suzuki Swift, Tata Ace / 1L Car  New technology- I-Pod, I-Phone, TV  Product lifecycle- MS Office, Play Station 1,2,3  Portfolio / Business realignment- Reliance Mobile  Environmental changes- Music downloads

Source: Harvard Business Review


[email protected]


31

Product decisions Design: As the USP- ipod, iphone,ipad Quality: Consistent with other elements of the marketing mix. Bose speakers Pricing: A premium pricing strategy should reflect quality or value. Benz Features: Additional features to enhance benefit offered to target market? Nokia Branding: Power of instant sales, trust, quality, reliability, loyalty base, differentiation Brand value of Microsoft > GDP of Pakistan. Does your perception change for Nike sneakers with/ without the swoosh or nike logo? Cannibalisation- Breakthrough and incremental innovations may cannibalize some part of the existing business. Eg Honda Civic hybrid-power vehicle, attracted eco-friendly or fuel economy (or both) buyers, who may have otherwise purchased Honda Civic, Accord or City. Moov sachets may tap the traveler segment and entice trial but may cannibalise Moov economy pack Wisest to move forward with new-product ideas & accept cannibalisation, else competitors will. Extending Product Lines into New Segments Once successful, companies extend their product lines to create derivative (incremental) products that address adjacent markets. Power of the brand name reduces the risk of these product-line extensions (but may devalue the brand). Horizontal product-line extensions seek to appeal to different customer tastes (Coke, Diet Coke, Vanilla Coke) while Vertical lines aim to offer a product for every pocket or for different levels of need (Ms Office Home/Professional Edition). In most cases horizontal and vertical extensions are based on incremental development. Eg Vertical- GM product-line concept pioneer- Aimed to satisfy buyers in every economic stage of life, with Chevrolet brand for the first-time buyer of modest meansand moving progressively upscale with Pontiac, Buick, Oldsmobile, and Cadillac. Buyers would trade up to fancier and more expensive GM brands with growing affluence. Horizontal- Each GM division extended horizontally with Chevrolet-trucks, vans, SUVs. Product platform- Key to success (HBS) Product platform (Meyer & Lehnerd) is “a set of subsystems & interfaces that form a common structure from which a stream of derivative products can be efficiently developed and produced.” Robust platforms help in incremental or derivative products for specific market segments at reasonable cost.


[email protected]


32

Apple iPod- vertical & horizontal product-line extensions to control meaningful segments with unique products before rivals can gain traction. Swatch- successful product family based on a common platform- simple, inexpensive to manufacture, and capable of supporting endless external variations. Product platforms based on design elegance and manufacturability give companies low-cost opportunities to customize products for different market segments. The platform of common elements can merged with unique elements to create a product for a particular market segment. Black & Decker in the early 1970s, created a platform of electric motor and controls on which it based dozens of consumer power tools: electric drills, sanders, saws, grinders etc. This gave B&D cost leadership, reduced complexity in operations, cut inventories, helped them take on cheaper variants and gained leadership. Technology lifecycleNew products are launched at short intervals to tide over technological obsolescence eg Nokia mobiles have short lifecycles so multiple models are launches in similar segments in short timer frames Product Scope Strategy

Product Design Strategy

New Product Strategy

 Perspectives of product mix single-product  multiple products  system-of-products strategy

 Degree of standardization  standard product  customized product  modified standard product

 NPL to previous line/ new use/s/rs  improve/modify product  Pproduct imitation  product innovation.

 Single product: product development focus, avoid obsolescence, be technology leader  Multiple products: complement brand portfolio System of products: closely understand customer needs & product uses

 Standard product: increase economies of scale  Customized product: compete against mass producers of standardized products through product-design flexibility  Standard product with modifications: combine benefits of 2 strategies above

 Key corporate aspirations toward NPL  organizational openness to creativity  environmental favour toward creativity  screening method for new ideas  evaluation process


[email protected]


33

6 Integrated Marketing Communication (Promotion)   

Promotion= Marketing communication Objective- communication activities to ensure customers know your offerings, have favorable impression of them, and buy- sale, trial, awareness, remind, reassure Retention Levels -Reading10%, Listening20%, Audio-Visual70%; Sight, Sound, Motion effective. Integrate individual promotion mix components for effective communication

Promo Tools / Mix (SPPASM DT) Sales Promotion Contests Coupons Low finance

Personal Selling Presentation Samples Demo

PR

Advtg

Inserts Press kit Seminars

Advts Hoardings Banners

Sponsor ship Events Period Theme

MLM

Direct

Network, Residual Income Commission

Database Mailers, CRM Catalogue

Trade Fair/Expo Demos Brochures Tech-Info

 Personal Selling- (Car, Insurance)- Effective but expensive way to manage personal customer relationships (Medical Rep)  Sales Promotion –(Akai / Aiwa/ Sansui)- Incentive to buy, ensures trial, D2C through trade BOGOF, Coupons, Discounts, Contests, Trial  Public Relations (PR)- (Political parties / Top Companies/ IPO)- Subtle inserts used in image building, firefighting - impact if managed well, long term economy  Direct (Credit card / insurance company mailers)- Targeted communication- database update, response, multiple use-2% response. Contest mailers, EMI, transfer of credit, catalogues, CRM  Trade Fairs and Exhibitions (Print / Auto / Pharma / IT Expo)-Trade, product display / demonstration / awareness / trial, recent decline due to Internet  Advertising- ‘Paid for’ communication, Difficult to measure ad impact (Amul bylines excellent, sales impact?), Helps develop attitudes /create awareness/ communicate message, elicit response  Type of Ads- FRESHEN-Fear, Rational, Emotional, Social, Humour, Ethical, Negative  Media-Print- Newspapers/ magazines/ journals (local, national, trade, speciality) / pamplets  Electronic- TV/ radio Virtual- Internet, mobiles Outdoor–Hoardings/ Banners/ Kiosks/Transport (Bus, Train, Taxi, Vans) Captive – Theatres, Train compartments, Cable TV  Sponsorship- Organisation pays to associate with an event/cause-Sahara- Indian Cricket /Hockey/ Olympics. Event attributes associate with sponsor-Pepsi:Youth, Sahara:Patriotism  Multi-Level Marketing (HerbalLife, Amway)- Network, Residual Income, Flexi-timings, Initiators earn maximum, financial schemes -suspect  Promotion Mix Strategy- ICICI


[email protected]


34

Promotional Spend Methods- (Half my ad-spend’s wasted, which half? Wanamaker)  Affordable –Amount decided on supposed affordability, ignores promo needs  % of Sales- Anticipated sales, not by opportunities, promo-spend varies, % basis arbitrary  Competitive parity- Share of voice, Assumes competitive spend-collective industry wisdom- debatable, Own opportunities/strengths/reputation not considered- IIPM highest print spender  Objectives & Task Method- Define objectives/tasks, allocate spend, difficult to implement Pull v/s Push: Push (Sales force + Trade promotion), Pull (Advertising +Consumer promotion) - traditionally HLL-Push and P&G-Pull strategy worldwide Integrated Marketing Communication (IMC) Strategic process to produce a consistent brand message at each customer touch point. Use multiple communication modes to foster awareness of product / services by informing people about features and benefits, and moving them to make a purchase. Challenges are:  Communication clutter (Urban Indian adult exposed to 1000 messages daily)  Creating awareness in targeted customers  Producing consistent brand message at each consumer touch point  Bringing them to the point of interest and confidence  Making them reach for their wallets to make a purchase The Marketing communication process (AKIPIS): To influence customer to make a purchase. Eg Proposed Mumbai-Ahmedabad express train will cover 500 km in 3 hours. 1. Create awareness: People will rarely buy a product/ service they are not aware of. Critical to communicate service with the targeted customer (print media). 2. Provide knowledge: Inform product/ service features, what it does. Describe train amenities & schedule: comfortable seating, wi-fi, food, laptops & mobiles charging outlets, adjustable lights, convenient morning and evening schedules. 3. Create favourable impression: People buy benefits not features- things that solve a nagging problem /help save money /provide value. Communicate key benefits- city centre to city centre comfortable travel, allows them to work productively in the trip. 4. Attain a preferred position in the customer’s mind: Customers thinking- express provides value, no airport hassles/ cramped seats/ security checks/ delays- preferred. 5. Create a purchase intention: If earlier steps are targeted and communicated well, the prospect will consider this alternative the next time. 6. Make the sale: Prospect travels by the express, becomes a customer. Alternatively, use market research to classify targeted customers as Unaware of product


[email protected]


35

Above the line (ATL) & Below the line (BTL) communication Metaphorical, horizontal line drawn by ad planners, to differentiate ATL (mainstream media- Cinema, outdoor, press, radio, TV) that allow agency commission and and those that don’t- BTL (Sales promotion, direct mail, expo, packaging, PoS material, PR, merchandise, sponsorship) Advertising Copy Strategy • Design ad content to transmit clear product message to target by eliminating "noise" • Credible source, balance of argument, message appeal - rational, emotional, humour • Celebrity, model, expert, animation, text to picturise ads Cost per thousand (CPT)  Cost of ad to reach 1000 people in a particular target group, common audience base  TV- normalized at 10/30 seconds, Print- 60/100cc, similarly for radio, digital, OOH  Help effectively rate/value/compare across/within media, transparent  Top end car maker mulls 1 ad in mainline daily v 6 months campaign in a car magazine  Daily CPT- Rs 800-1000, Magazine Rs1600; Wastage- daily 80%, magazine 0%  100% CPT premium worth in magazine, but hidden with 6000 Rs/cc & Rs 1.5L/page  Media owners to monetize low rating programmes (0.2 TRP), buy audiences not ratings  Shift towards, price to value, newspapers rate card sanctity v TV channels opportunism Challenge: Optimal marketing resource allocation, communication vehicles to cover all consumer touch points systematically and consistently. (Communication vehicles- Dolan, IMC, HBS 2000)


[email protected]


36

Selecting right communication vehicle:-Customers at various stages of purchasing process, essential to use IMC. Eg Silky hair due to shampoo effectively conveyed on TV ad than print ad, but air travel schedules better conveyed through print ad. For highly targeted audience, product should convey technical information, or explain usage, then personal selling or internet are best. If marketing premium specialised product with limited appeal, direct database marketing may be the best and avoid waste. The 6Ms Market:

Mission

Message

Media

Money

Measurement

The customertrade/consumer, target communication accordingly

Communication objectiveawareness, positioning, purchase

Communication to Consumers- features & benefits Trade- margins, terms, coverage

Which, how many media vehicles to use, plan, schedule

Budget

How do you measure the impact

Advertising v Public Relations (http://advertising.about.com/od/careersource/a/10advpr.htm) Concept Advertising Public Relations 1 Paid Space or Free Coverage

Ad space is paid for, we know exactly when ad will be on air / published

2 Creative Control Vs. No Control 3 Shelf Life

Creative control on ad content, surely gets published Can repeat ads as long as budget allows. Longer shelf life than press release Guarded response to an ad Blatant Awareness, trial, sales

4 Consumers 5 Creativity 6 Objective

Intent is free publicity for company- news conferences, press releases, free media exposure for company and its products/services No control over how and when media presents your information, not obliged to publish Press release maybe published once only A third-party article can create credibility Subtle Image building, fire fighting

Exercise: Select a brand, outline the IMC strategy across the 6Ms. Which media mix would you choose, why? How will you schedule the media, how long will the campaign run? What are the goals and objectives of your campaign, how will you measure them?


[email protected]


37

7 Brand  “Promise” Harish Bijoor, “Strategic Asset” Nirmalya Kumar - Accenture- Accent on the future, Viagra-Vitality of Niagara  Collection of associations or perceptions about a product, service, or firm  Brand= Functional, Economic & Emotional Value Propositions- Deepak Jain  Branding – Endows the product with the power of a brand  "Buildings age & dilapidate, machines wear out, people die, but brands live on”Aaker • “A name, term, sign, symbol or design, or a combination, intended to identify goods / services and to differentiate them from those of competitors” Kotler • “A mixture of tangible and intangible attributes symbolised in a trademark, which, if properly managed, creates influence and generates value” Interbrand  US Brand leaders in the 1930s- J&J, Heinz, Colgate, Disney, Coke- leaders even today  Brands command premium, high margins, better availability & wide customer loyalty  Brand value- created by augmenting a core product with distinctive values to distinguish it from the competition.  Products deliver series of core benefits to consumers (Watches- time) but consumers pay a premium for added value which enables a brand to differentiate itself from the competition. This helps a customer choose or prefer the brand. Mercedes, Sony. Company’s brand decision making: To Brand or Not to Brand? Commodity- Basic product, difficult to physically differentiate in minds of consumers


[email protected]


Customer’s brand decision making (Buying a Shirt upto Rs 1000) Brands Unknown Manzoni, Pedroni, Zegna,

38

Known

Louis Phillipe, Van Heusen, Arrow, Color Plus, Peter England, Dockers, Charagh Din, Oxemberg, Indian Terrain, Zodiac, Austin Reed, Allen Solly, JohnPlayer, Armani, M&S, Wills LS, Park Avenue,

Acceptable Louis Phillipe, Van Heusen, Arrow, Austin Reed, JohnPlayer,

Unacceptable

Indifferent

Overlooked

Cambridge, Peter England, Oxemberg

Allen Solly, CD, Dockers, Indian Terrain

Armani, M&S, Wills, Zodiac, Color Plus, Arrow

Purchased Not Purchased Van Heusen

Louis Phillipe, Arrow, Austin Reed, JohnPlayer

Exercise: Create a customer’s brand decision making model and a company’s brand decision making model for accompany and a category, similar to the illustrations above Brand Ladder (How does a brand get into the customer’s mind) Promise- Value proposition offered to customers, choice  Affinity- Belief in the brand, brand differentials evident  Brand BondingPerceived as delivering on promise  Loyalty- Positive differential effect driving customer brand preference over identical competitive brands, willing to pay more /wait/go places if unavailable  Brand Equity- Financial value to firm, includes sum total of factors besides sales  Promotional strategies revolve around brand purchase stages


[email protected]


39

Brand Positioning (Refer page 15 under STPD for crafting the positioning)  Brand Positioning- Design firm’s offer & image to occupy distinct place in the customer’s mind  Brand identity- how company aims to identify or position itself/product  Brand Image- how customer perceives the brand.  Brand credibility- how well brand delivers on its promise MoovBackaches  Positioning = combining internal (brand identity+ image) + outward brand expressions (guarantees, service, performance & packaging) Branding strategy Key components of a branding strategy are brand extensions and brand portfolios through individual names, blanket family names, separate family names for all products, corporate name combined with individual product names Branding Levels Product branding (P&G- concept of product management pioneers- Tide)  Stand alone product with own brand name & resources, focus, company absent  Unique value, personality, identity, positioning, sustainable competitive advantage  Rationale- product should stand on its own  Brand performance evaluation, value, resource allocation possible  If brand flops, does not affect company name (Tanishq watches vis-à-vis Titan)  Expensive, as advertising & promotion costs cannot be shared Corporate branding (Umbrella/ monolithic branding- Nokia, Sony LCD TV/Cameras)  Corporate name is the brand, products as alpha numerics, no distinctive brand  Product derives strength of corporate brand values & positioning, saves promo spend  Builds corporate brand strength & financial value -Service / Hi-Tech industries  "I have always believed that the company name is the life of an enterprise. It carries responsibility and guarantees the quality of the product..." Akio Morita, Sony House or endorsement branding  Corporate name placed alongside product brand name- Cadbury’s Dairy Milk  Allows brand identity/positioning, strength from corporate brand values, economies in advertising/ promotion, prominence to corporate brand can vary, product failure can damage parental brand  Helps NPL, otherwise difficult in mature markets sans credible corporate endorsement


[email protected]


40

Brand Extension

Old

Old

New

Line extension

Category extension

New SKU, features, flavours, Use successful & established brand names to promo economies- Mirinda introduce new product or enter new or existing lime, Rasna mango, Pepsi 1.5L areas - Gillette Sensor, Junior Horlicks. Sub brand

New

Brand name

Product category

New brand

Combine existing + new brand Entering new segment or category with a new (Gillette Sensor Excel, Ford Ikon brand, or even to flank competitor (Maruti Flair, Kellogg Frosties K) Ritz, Tata Nano, Nokia N97)

If executed properly, brand extensions broaden & clarify brand meaning (Google, Airtel). If executed improperly or straying from central brand proposition, they dilute or confuse brand meaning (Coke). Brand extensions increase sales by new segment entry (Moov N&S) but may weaken the brand core or even cannibalise sales (Moov Sachets).  Multi Branding: Introduce more brands in same segment/category. Kellogg’s Cereals/Frosties/ Crispies; Titan-Fastrack, Raga, Edge, Nebula, Regalia, Xylys  Ingredient branding- Create equity for materials, components, parts contained within other brands- Intel inside, Dolby theatre system, Nirlep Tawa with Teflon coating  Parent brand- Existing brand which gives birth to a brand extension- Gillette, Tata  Family brand- When the parent brand is already associated with multiple products through brand extensions. Cadbury 5 Star, Fruit & Nut  Umbrella brand- All brands in portfolio carry corporate name- Amul- Butter, Cheese Brand extensions categories:  Line extension- parent brand used for new product to target new market segment within product category served by the parent brand – Maggi Noodle SKUs, Lux fragrances  Category extension- parent brand used to enter a different product category from that currently served by parent brand- Kingfisher Airlines, Amul Ice creams or even Saffola- leveraging the cardiac friendly theme.  Brand line- All products- original, line & category extensions, sold under a particular brand- Godrej, Videocon, Heinz  Brand mix (or brand assortment)- set of all brand lines that a particular seller makes available to buyers – HUL- Close-up, Pepsodent


[email protected]


41

 Branded variant- brand lines supplied to specific retailers / distribution channelsPharma franchisee  Licensed product- where brand name is licensed to other manufacturers who actually make the product-Disney Co-branding (Hutch-Britannia, Citibank-Club Mahindra, ICICI-HP, Coke-McDonalds)  2 brands of different companies together in the same campaign / communication  Why: complimentary customer base/ segment, value-add, promotional cost-saving  Key - brand / customer fit, symbiosis, brand personality/values, SoM, SoV  Avoid- brand devaluation, brand eclipse in promotion Brand Portfolio- Set of all brands/lines a firm offers to buyers in a particular category.  Multiple brands increase shelf presence, attract variety seeking consumers, help new market entry & yield economies of scale in advertising, sales & distribution  Portfolio maximises brand equity & market coverage, minimises brand overlap  Differentiation appeals to a sizeable segment, justify marketing and production costs  Critical- Portfolio monitoring & pruning of weak and unprofitable brands  Maruti- 800, Alto, A-Star, Estilo, Wagon-R, Ritz, Swift, Desire, etc & their variants Brands roles in a brand portfolio:  Flankers- Fighter brands are positioned wrt competitor brands so that major & profitable flagship brands retain desired positioning. Fighter brands are neither so attractive as to cannibalise own brands nor cheaply designed to reflect poorly on the brand portfolio. Celeron and Intel, Toyota & Lexus, I Pod range- nano, shuffle etc  Cash Cows- Brands are retained as they manage to hold on to a sufficient number of customers & maintain their profitability with virtually no marketing support. Parle G  Low-End Entry-Level- Role of a relatively low-price brand in the portfolio often to attract customers to the brand franchise. Gucci accessories, Sony Vaio lower end  High-End Prestige- Role of a relatively high-priced brand in the brand family often is to add prestige and credibility to the entire portfolio. Mont Blanc Pens Brand Personality

 Created by applying human personality traits & characteristics to a brand to appeal to a consumer's mind. Like human relationships, as brands grow, emotional dimension


[email protected]


     

42

dominates. Consumers attracted easily to brand values like dependability (LIC), trust (Tata), honesty (Peter England), reliability (Titan), safety (Volvo), fun (Disney) Define audience, needs /wants /likes, build consumer personality profile, create brand personality to match- ensures greater willingness to buy / deeper brand loyalty – Levis Profiling approach reinforces self-concept of consumers/ aspirations-Niche brands Brand identity- add personality, set of values, perceptions and brand aspirations… all the pieces converging. Swoosh replacing the brand name, Nike Brand image- Sum total of consumer perceptions, firms fit perceptions to communication- Swatch- Trendy, Nokia- Value Corporate identity- Visual aspects/image of firm's presence-eg logo, collaterals-Tata Brand repositioning- customer preferences change- Petrol pumps, typical to vibrant

Brand Equity • The differential in the customer’s mind which leads to preferring Brand A over B • Brand worth/value- Levis Jeans sans logo or Nike sneakers without the swoosh? • Nurtured and built over years through sustained performance and promotion to a loyal customer base by providing value- Parle-G, Mangola, Microsoft , Apple • Key factors- Quality, Awareness, Associations, Assets, Loyalty Brand Salience • Brand’s ability to be recalled (come to mind) by customers in a purchase situation • Propensity of a brand to be thought of or noticed in buying situations (Coburn) • Print ads more effective than TV. If print ads added to TV, then increase in brand salience, enhanced memorability of communication & strengthening of brand values. People multi task while watching TV but are not distracted while reading - INS 2004 • Advertising helps change consumer attitudes toward brand & influences market share by increasing brand salience, with limited impact on brand image (Lisette 1998) Customer loyalty ladder Intent- Convert sale into long term customer relationship Surveys- Retain customers, attracting new customers costs 6 times more  Suspect- Potential customer, exposed to your communication  Prospect- Potential customer, interested in your promotion  Customers- Purchasers of your product / service  Clients- Those who return to re/purchase  Advocates- Convinced/happy customers who promote brand to others Exercise: Illustrate customer brand decision making, mental map, frame of reference with POP/POD, to craft the position, economic, emotional and functional value propositions and execute the brand identity


[email protected]


43

8 Distribution (Place) Place (Distribution/ channel/ intermediary)  Set of institutions performing activities to move product from production to consumption-Bucklin  Retail store, distributor network, e-commerce web site or a direct mail catalogue  Functions- Order Processing, Warehousing, Inventory, Transportation, Collections  Ensures- Availability, visibility (Dikhta hai voh bikta hai), movement, feedback  Width- Trade coverage, Reach- Customer coverage, Depth- Brand coverage  Growing impact of convergence- internet, mobile, retail revolution  Critical- offer product where and when customers want  Companies use many channels to connect/ transact business with customers. Eg Books use many paths to reach customers without causing conflicts between channels.  Eg Amazon.com made books & other items conveniently available to customers on the net 24/7, book-buyers did not have Source- Dolan, HBS, 2000 to visit bookstores or browse through hundreds of books. Amazon offered convenience, faster alternative, greater selection and reviews  Eg Dell’s strategic decision to sell PCs directly to customers by skipping trade channels allowed Dell to- capture customer information missed in other forms of distribution, make customers configure own PC, reduce costs by made-to-order manufacturing, make product available 24/7- key differentiating factors in a product class where competing products are very similar. Channel Intermediaries 1-Level

2-Level

3-Level

4-Level

5-Level

Manufacturer

Manufacturer

Manufacturer

Manufacturer

Manufacturer

C&F

C&F

Stockist

Stockist Retailer

Retailer

Retailer

Consumer

Consumer

Consumer

Consumer

Consumer

Industrial, IT

IT Hardware

Retail /Malls

Garments

Pharma /FMCG


[email protected]


44

 Distributors (C&F)- Bulk to smaller packs, handle major area, supply to stockists  Wholesalers (Stockists)- Resell to retailers, storage, coverage essential  Others- Commission agents, co-operatives, indentors (imports), agents (magazines)  Retailers- Strong customer influence, consumption/ purchase pattern insight, service  Speciality (Sports), supermarket (Big Bazaar), convenience (Kirana), factory outlets, warehouses, direct sellers (Encyclopedia), vending machine (Tea), co-operatives (Apna Bazar, Grahak Peths, Societies), chain stores (Monginis)  Internet (Services)- Channel margins and inventory costs major savings- passed on, hence economical, death of distance, geographically disperse market, niche products reach wider audience, low entry barriers, display variety & functionality, interactive, cash on delivery, popular – Flipkart, Infibeam-Books, Electronics, travel, tourism  3rd Party Logistics ( AirFreight, GATI)- Tremendous scope Channel Decisions  How to effectively reach target segment  Exclusive distribution (sole rights)  Intensive distribution (all retail outlets)  Selective distribution (key outlets )  Direct or indirect channels / Single or multiple channels  Length of channel  Types of intermediaries / Number of intermediaries at each level  Which intermediaries? Avoid intrachannel conflict- Nike  Use 2/+ different distribution channels  Complementary (each channel handles non-competing product/ segment)  Competitive (2 different and competing channels sell the same product) Exercise: X company uses which ‘place’ in its marketing plans? Are these effective in satisfying customers and generating sales and profits, or could new channels be added? Price and distribution strategies Player/s Market Leader

Market Challenger Market Follower Market Niche

Strategy  Distribution in place  Price main weapon  Premium price  Variety of options  Focus on flanks  Direct or indirect attack  ‘Cloning’  Set lower prices  Stay with markets  Add niches  Premium price  Selective distribution


Example  Pepsi  Chic shampoo, Nirma  Apple  Nokia  Samsung- touch, smart phones  Micromax- cheap smart phones  Sony- smart phones  Karbon, Lemon smart phones  Blackberry  HTC  Vertu

[email protected]


45

9 Price          

Fit between crucial financial component- cost & marketing component -value Price is what a buyer must give up in exchange for a product or service Money charged for a product / service, perishable advantage, unless cost leader Only revenue generating part of the mix, flexible tactic Customers interested in value product provides, not costs Price decisions- price point, list price, discounts, payment period, etc Commodities differentiated by price, quality, brand commands premium Objectives: sales, profits, MS, ROI, competitive position, demand, costs, survival Center-stage in marketing wars, Inter-firm rivalry-Mobile Industry Prices- rate, commission, fee, tuition, rent, premium, fare, salary, toll, interest, retainer, wage, tax etc

Pricing Approaches Based on

Strategies

Examples

Characteristics

Cost

Cost plus (markup)

Retail

Margins known, prices can be high

Break even

Pharma, FMCG

Large volumes

Going rate

Banks, petrol,

Wide choice, no differentiation, competition- price/service/ reach-

Sealed bids

Tenders

Competitive

Pepsi, Coke

Cartelling

Tyre, Mobile

Penetration pricing

Parle G, Amul

Low entry price, attract, switch, MS, increase later, markets with little differentiation, price elastic demand

Price skimming

High end consumer electronics

Price insensitive innovators, early adopters,reduce prices with competitors entry

Loss leader

Factory outlets, Biannual Price perceived < cost price, attract new/ brand xp seeking customers, sales at malls

Competitor

Customer willing to pay

cross sell, up sell, bulk buyers

Predatory pricing

Dominant FMCG, Retail Prices < rival costs, out of business

Psychological pricing

Bata, Mobile service

Perceived Value

Lifestyle, Clubs, Luxury

Auctions

EBay

Value

Buffett, McDonalds


Rs 100< 99 perception, break

[email protected]


46

Pricing Strategies  Penetration- HQLP- NPL, Entry, Attract, Ensure trial- Amul  Premium- HQHP-Sustainable advantage- Bose Speakers, Benz  Economy- Functionality & Value-, Nirma, Supermarkets-own brand  Skimming- LQHP-Significant advantage, unsustainable-Reliance Mobile  Rip-Off- Medium quality, very high price - Pricey Hotels/ Restaurants  1,5,9-coexist in same market till buyers insist on quality, price, value  2,3,6- ways to attack 1,5,9 as 2 = HQMP, 3=HQLP,6=MQLP  4,7,8 overpricing wrt quality-customers feel ‘taken’, bad oral publicity, avoid Pricing Strategy Matrix Quality (Quality is only indicative)

Price High

Medium

Low

High

1-Premium

2-HighValue

3-Penetration

Medium

4-Over-charging

5-Medium Value

6-Good Value

Low

7-RipOff / Skimming

8 False Economy

9-Economy

Prestige pricing- Create perception of quality /exclusivity in consumers minds by setting high price. Many consumers judge quality by price, reasonable price connotes acceptable quality, exorbitant price adds an aura of excellence & exclusivity. Packaging & advertising reinforce this perception. Cosmetics, Clubs, High end mobiles. Bait & Hook pricing- Initial low price but high price for replacement or peripheralsGillette & Print cartridges. Generic replacement possible so disruptive innovation can win, or warn customers of void warranties if replacement used. Exercise- Using the Pricing Strategy Matrix 1. Identify pricing strategies of a firm with a large brand portfolio 2. Pricing strategy of competitors within a product category / industry Other Pricing Strategies  Psychological- Bata, Mobile Airtime Tariffs  Geographical- Medicines / Electronics across countries or Urban/Rural-Electronics  Promotional –Extensive usage, if successful-copied, if unsuccessful-financial drain  Loss Leader- Factory outlets  Special Discounts / Rebates - BOGOF, % Off, Sale  Financing- EMIs, Low interest rates  Warranties/ AMCs- Extended warranties, TVs-Onida 4 year warranty, Free AMC  Psychological Discounting- Prices slashed 399 to 199, Baazee  Old for New- New for Old at discounts- Exchange offers-Van Heusen, TVs  Value –Superstores-Big Bazaar  Price point-Cadburys-Re1 toRs 500, Nokia, Maruti


[email protected]

Marketing Strategy 3.0 (MBA Notes)- Dr Amit Rangnekar Maruti pricing strategy (hypothetical prices for illustration) Prices in lakhs 2.5 3 3.5 4 4.5 5 5.5 6 Alto LX LXI VX AX AStar LX LXI VX AX Estilo LX LXI VX AX Wagon R LX LXI VX AX Ritz LX LXI VX AX Swift LX LXI VX Desire LX LXI

6.5

7

AX VX

AX

7.5

47

8

8.5

Plan to buy a car costing around Rs 4 lakhs, you may look at a range between Rs 3-5 lakhs. Maruti offers 6 models and 17 variants in this range, covers all sensitive price points, offers wide range. Customer ends up buying higher model/ its lower version Discriminatory- Same brand/service, 2 prices  Customer segment- Student discounts  Product form- Ketchup-100gm-20, 250gm-45, 500gm-75  Image- Taj- Palace (Premium), Resorts (Lifestyle), Hotels (Business), Indione (Budget)  Location-Theatres-Stall-50, Balcony-75, Dress Circle-100, Stadium-Pavilion, stands  Time- Seasonal-Cheaper/costlier during season, happy hours, bakeries-25% off after 8 Product Mix-Profitable brands take care of others in the portfolio  Product line- All segments full range- Maruti- Rs 2-8 Lacs at every 25000 interval  Optional feature pricing-Ford Ikon-Insurance+ Deck+ Central Lock + Auto Cop free  Captive product- Cameras / Razors cheaper but consumables –Film / Blades costly  2-Part- Esselworld- admission + rides, Airtime + SMS/VMS/STD  By-product- Lubricants with petrol  Product bundling- Season tickets, Time share Internet- Cheapest-No layers, Transaction cost for buyer/seller minimum, auctions, bargains, visibility Other ways to ‘increase’ prices without increasing price Revise discount structure

Premium for urgent orders

Change minimum order size or shipper

Interest on overdue outstandings / penalty clause

Charge for delivery/ services/ installation

Produce less of low margin models


[email protected]


48

10 Immersive Reading on Competitive Strategies Of market leader, followers, nichers and challengers Marketing strategyIntegrates an organization's marketing goals and policies into a cohesive marketing plan to achieve marketing objectives. Dynamic and interactive. Eg economy pricing to attract consumers, establish relationship, move products up the value chain Market-Leader Strategies  Market leader has largest market share in but to remain dominant, the leader looks for ways to expand total market demand, and to increase its share  Many industries have 1 major player Micro3 soft (software) & McDonald's (fast food), who has large market share, usually leads in price changes, NPL, reach and promotional intensity  But competitive product innovations can hurt the leader- Samsung colour phones and Sony camera phones hurt Motorola  Leader may spend conservatively while challenger spends liberally- Aircel, or may misjudge competition and get left behind- HMT, Air India  Dominant firm may look old-fashioned against newer, peppier rivals- Samsung v Sony 1 Find ways to expand total market demand  Moov as the market leader is looking at new ways to increase use, users and usage  Started by focusing on back pain when others focused on general pain, targeted the middle class Indian house wife who influences the family and is the decision maker  Moov focused on the physically active adults in the family and launched different packs and extensions to penetrate every social strata (more users), now they are targeting various pain segments (more uses) and advocating ‘moov ki maalish’so that 10 fingers are used instead of 1 finger tip (more usage)  Moov introduced different price points (economy pack and sachet) to entice trials in newer segments & geographies, thus increased quantity and frequency of consumption  Moov introduced Neck & Shoulder, to targeting new generation who are afflicted with these problems as they are heavy users of desk tops and laptops. 2 Protect current market share through good defensive and offensive actions  Nokia India controls over 40% of the handsets markets and constantly defends against formidable rivals through continuous incremental innovation by launching new offerings, increasing reach, occupying sensitive price points, offering the widest range, and delivering value in their products.  In the lower and medium markets Nokia has covered every sub-segment and flank and defends aggressively


[email protected]


49

 Considering Nokia’s solid base, competitors are focused and strong in niches where Nokia is not big, like PDA (HTC), entertainment (Sony), mail (Blackberry) and high end (IPhone) phones which have high profits, price insensitivity but lower volumes.  Nokia is introducing models in these segments as its loyal customers trade up  Nokia enjoys a cost advantage due to sheer volumes of making 10 lakh phones daily globally, and its prices reflect the value that customers see in Nokia  Nokia is the global leader as it is No. 1 in China and India which are high growth, high volume markets. Defending Market Share Dominant firm uses 6 defense strategies

1. Position defense Build superior brand power, make brand almost impregnable. Samsung and LG have invested heavily in promotion but captured more of Motorola’s and Sony’s share than Nokia’s 2. Flank defense Intel opened up a new flank by introducing Celeron to take on cheaper Taiwanese competition and AMDat 30% higher prices, and also increased the price of next gen chips like core 2 duo to create a new category, thereby protecting both fronts and increasing their customer base. Pepsi takes Coke head on in India through advertisements but Coke uses Thums Up ads to take on Pepsi. 3. Preemptive defense Maruti wants to introduce a stripped down version of its 800 model so as to take on Tata’s Nano. Before IPhone entered India officially, many IPhone killers were already in the market, other competitors spread canards that Nano plant is depriving farmers of their land and that Nano would pollute India. 4. Counteroffensive defense


[email protected]


50

When attacked, most leaders counterattack, either by invading the attacker's main market or by using its economic or political clout. Toyota is a cost leader as compared to GM in the US and enjoys a clear 20% cost advantage per car which it uses to gain clear price advantage. Before the launch of Britannia Butter in the Indian market, Amul gave a bonus offer scheme of 1free pack on purchase of 10 packs of half kg Amul Butter. This ensured that all the refrigerator shelves of all 6 lakhs retailers across India having cold storage facilities were mysteriously full thus depriving Britannia of crucial shelf space. 5. Mobile defense Amul has leveraged its milk supply proficiencies to diversify into milk related segments where it has a distinct cost advantage which it turns into a price advantage. It leverages its cold chain leadership to ensure stocking of Amul butter, cheese, milk and ice creams into retailer refrigerators. 6. Contraction defense Most leading pharma companies diversified into related and unrelated areas in the 1960s and 1970s, but when pharma remained most profitable in the 1990s as compared to the other industries, they divested to remain focused on pharma. Pfizer divested consumer and foods business, GSK divested consumer business, Novartis hived off its chemicals business, Merck divested its medical insurance business, and Roche divested its vitamins business. This planned contraction helped concentrate mass at pivotal pharma positions. Pepsi divested Yum foods (Pizza Hut, Taco Bell and Burger King) to focus on beverages. Expanding Market Share  Companies gain share by outperforming competitors in areas: new-product activity, relative product quality, and marketing expenditures- Nokia  Companies resorting to deeper price cuts than competition typically do not achieve significant gains, as rivals meet the price cuts and others offer other values to ensure that buyers do not switch. Koutons Other Competitive Strategies Firms that are not market leaders in an industry are still quite significant (Vodafone, Hyundai) and can attack the leader and other competitors in an aggressive bid for further market share (market challengers) or follow the leader (market followers). Market-Challenger Strategies  Challenger attacks the leader and other rivals in an aggressive bid for more share, choosing from 5 types of general attack and then selecting specific attack strategies  Market challenger must define its strategic objective- say increase market share, and then decide whom to attack  Taking the leader on can be risky but highly beneficial, targeting underperforming firms of similar size with aging products could be less risky but with lower pay offs, and taking on local and regional firms may not lead to higher share www.dramitrangnekar.com

[email protected]


51

 Given clear opponents & objectives, 5 general market-challenger attack options are: 1. Frontal attack-Match opponent's 4Ps. Pepsi v Coke 2. Flank attack  Flank attacks favoured by smaller challenger s with fewer resources and more likely to succeed than frontal attacks, could also be by . Nirma v HUL  Challenger attacks rivals weaker geographies or areas where rival is underperforming. Britannia butter in East India.  Or flank to serve uncovered market needs, Japanese carmakers focus on small fuelefficient cars in the US. Strategic Choices for Challengers in Growth Markets

3. Encirclement attack Manoeuver to capture a wide slice of the enemy's territory through a "blitz"-launching a grand offensive on several fronts- Aircel launch 4. Bypass attack Indirect strategy to bypass enemy and attack easier markets to broaden resource base. Involves diversifying into unrelated products or diversifying into new geographies or leapfrogging into new technologies to supplant existing brands. Pepsi bought Tropicana & Quaker Oats (Gatorade) to bypass Coca-Cola, IPhone bypassed other mobile phones . 5. Guerilla warfare Smaller challenger using small, intermittent attacks using conventional and unconventional means of attack, like selective price cuts, intense promotional campaigns without risking the higher cost and provocation of a frontal attack. Bean bags phone number painted on under construction buildings, www.dramitrangnekar.com

[email protected]


52

Market-Follower Strategies  Follower is a runner-up firm willing to maintain its market share and not rock the boat; it can play the role of counterfeiter, doner, imitator, or adapter. Product imitation can be as profitable as strategy of product innovation, where the leader invests in developing the new product, distributing it, and educating the marketall of which may result in market leadership. But a brand like Moov can improve on the leader’s brand (Iodex) and make high profits as it had not borne any of the innovation and development costs. In larger industries (steel, chemicals) where few opportunities exist for product, service and image differentiation, but there is price sensitivity, most firms make similar offers to buyers, usually by copying the leader. Normally follower may not always be a rewarding path.  Counteifeiter- duplicating leader's product and package, selling it on the black market – Rolex, Mont Blanc duplicates  Cloner-Emulating leader's products, name, and packaging with slight variationsVicks, Vaseline clones  Imitator- introduces brands similar to leaders by copying some of the things but maintaining differentiation of packaging, advertising, pricing- Branded generic drugs  Adapter- adapting or improving upon leader's products, Moov introduced non messy creams scoring over Iodex Market-Nicher Strategies  Market nicher specializes in small segments not served by larger firms A nicher or a market niche leader could be an alternative to being a follower in a large market. But niches can weaken/expand, so smaller firms avoid competing with larger firms by occupying small but profitable markets of little or no interest to larger firms. Eg Logitech specialized in computer mouse niche, expanded to peripherals- headsets, keyboards and Webcams. Dabbawallas niched into home cooked meal delivery but sustained as their rates deter others (couriers/logistics) from expanding into this space.

Company and Competitor focus Company focused Pushes boundaries Leader Stays within boundaries Nicher

Competition focused Challenger Follower

Customer and Competitor Orientations Competitor centered company Customer focused firm  Focus on competitor activities(reach, prices, new services)  Formulate competitive reactions


 Focus on customer development (market growth 4%, qualitysensitive segment  @ 8%; deal-prone customer segment grows fast, but such

[email protected]

Marketing Strategy 3.0 (MBA Notes)- Dr Amit Rangnekar (increase ad/promo spends, price cuts)  Alert firm, market focused

Market Scope Strategy Single Market Strategy

Market Entry Strategy First In Strategy Enter market before others    

 

Willing + able to take risks Technological competence Strive to stay ahead Heavy promotion Create primary demand Carefully evaluate strengths

customers not loyal  Reach & satisfy quality segment, avoid price cuts  Identify opportunities, target customer & emerging needs better wrt resources & goals

Multi Market Strategy

Concentrate efforts on single segment Serve market wholeheartedly despite initial difficulties Avoid competition with established firms

53

Total Market Strategy

Serve several distinct markets Careful selection of segments to serve Avoid confrontation with firms serving entire market.

Early Entry Strategy Enter market in quick succession after the leader  Superior marketing strategy Ample resources  Strong commitment to challenge market leader

Serve entire spectrum of the market Selling differentiated products to different market segments Use marketing mix combinations in different segments Top management commitment to embrace entire market Strong financial position

Laggard Entry Strategy Enter market at end of growth/ maturity phase as  Imitator (me-too product) production capability, MR ability  Initiator (unconventional strategies) with ability to generate creative marketing strategies

Marketing Strategies: Introduction Stage  Profits -ve/ low, high promotional expenditure, to inform potential consumers, induce product trial and ensure availability  Market pioneer- first can be rewarding, but risky & expensive  Coming later makes sense if with superior technology, quality, or brand strength.  Speeding up innovation time essential in an era of shortening PLC and obsolescence Pioneer Advantage (inventor, product pioneer or market pioneer)  Strong brand name recall, establishes brand attributes of product class, economies of scale, technological leadership, patents & ownership of scarce assets.  Pioneer weaknesses: crude new products, high product-development costs, lack of resources, improper positioning, an idea before its time, managerial incompetence or complacency Growth Stage


[email protected]


54

 Rapid sales climb, consumer base growth  New competitors enter, attracted by the opportunities  Prices maintained or fall slightly  Companies maintain / increase promotional expenditures, educate market, take on competition, profits increase, costs fall due to volumes Strategies to sustain rapid market growth  Improve quality, add new product features, improve styling  Add new models, flanker products, enter new market segments  Increase distribution coverage and enter new distribution channels.  Shift from product-awareness advertising to product-preference advertising  Lower prices to attract the next layer of price-sensitive buyers  Trade-off between high market share and high current profits. Invest in product improvement, promotion, and distribution, to capture a dominant position. Maturity Stage  Growth declines, longer stage, marketing mature products key challenge, 3 phases:  Growth, sales growth rate starts to decline  Stable, flat sales due to market saturation  Decaying maturity, sales decline, customers begin to switch  Sales slowdown creates industry overcapacity, intensifies competition  Industry consolidation, few dominant firms, many nichers, profits through volumes  Key issue- be in the “big 3” or niche  Abandon weaker products, concentrate on more profitable & new products Market Modification Expand mature brand market by driving sales volume = no. of users x usage rate/user  Expand number of brands users by converting nonusers, expand number of brand users by entering new market segments  Convert competitors’ customers  Convincing current users to increase brand use, users, usage Product Modification Modifying product characteristics through quality, feature or style improvement  Quality improvement aims at increasing product’s functional performance  New features to expand product’s performance, versatility, safety, or convenience  Build image as an innovator, win loyalty of market segments that value these features  Feature style improvement may only increase product’s aesthetic appeal. Marketing Strategies: Decline Stage  Sales decline- technology advance, shifts in consumer tastes & competition  Over capacity, increased price-cutting, and profit erosion- firms may withdraw from the market or reduce number of products offered


[email protected]

Marketing Strategy 3.0 (MBA Notes)- Dr Amit Rangnekar      

55

Stop, increase or maintain investment Drop unprofitable customer groups, strengthen investment in lucrative niches Harvest firm’s investment to recover cash quickly Divest the business Strategy depends on industry attractiveness & company’s competitive strength Rejuvenating mature product, often by adding value to original product

Defensive marketing warfare strategy used to defend competitive advantages; generally used by leader, major players to reduce risk/effects of attack, and strengthen position

Offensive marketing warfare strategysecure competitive advantage, generally used by challengers to target leader and significant players

Flanking marketing warfare strategy

Guerilla marketing warfare strategy

protect competitive advantages Pre-emptive strike - Attack before you are attacked Position Defense - Erect fortifications Mobile defense - Constantly change positions Counter-offensive - When attacked, launch counter-offensive at attacker’s weak point Strategic withdrawal - Retreat and regroup to live & fight another day Flank positioning - Strengthen your flank Deterrence strategy- convince competitors to keep out of your markets. Win the battle in the minds of the enemy. Attack competitive advantages Frontal Attack – Confront direct head-on Encirclement- Envelop opponents position Leapfrog strategy - Avoid confrontation, bypassing enemy or competitive forces Operate in areas of little importance to competitor, by leader to take on low price players or trade up, or by challenger to take on leader. Introduce new brand in same / similar segment to compete with competitor, to protect main brand and attack competitor’s flank Use limited resources to attack, then retreat, hide, attack, never face to face and with unusual campaigns)


Nokia with full range, NPL Nokia in lowest range Nokia range at sensitive price points Nokia psychographic segmentation Nokia set up Indian manufacturing unit to tap economies of scale and compete with all players Smart phones unsuccessful, competing in other segments Nokia E series in smart phones, N series in entertainment phones, 1100 for economy phones Reliance in plastics

Pepsodent v Colgate Pepsi v Coke, Surf/ Rin v Ariel Micromax, Google HTC, Blackberry

Intel Celeron, Kingfisher Red

Bean bags,

[email protected]

Marketing Strategy 3.0

Recommend Documents