Marketing Strategy MBA Notes 1.0

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar Check out these Notes and Case Studies at www.dramitrangnekar.com Sub Topic Marketing Environment Strategy Marketing plan Industry Analysis (Porter’s 5 forces) Controlling plan implementation Marketing concepts Marketing Mix (4Ps) Product New Product Development (NPD) Place Price Promotion Integrated marketing Communication(IMC) Brand Management Marketing Strategy Segmentation Targeting Positioning Differentiation Product life cycle (PLC) Strategic Gap Analysis Ansoff’s Product Market matrix BCG Matrix GE Matrix Porter’s Generic strategies Mckinsey’s 7S Model Competitive Strategy Competitive Strategies Market Dominance strategies Market Leader’s strategies Market Challenger’s strategies Market Follower’s strategies Market Nicher’s strategies Customer and competitor orientation

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Case Studies from Moser Baer McDonalds India launch Fab India, Faze3 Nivea

Tata Nano, ZooZoos Dabbawallas Amul Bisleri DNA Mumbai launch Natural Ice cream, Amar Chitra Katha, Rolex, Audi Nivea Sun Hidesign Moov Dolce & Gabbana Harley Davidson Samsung Toyota Gillette Brand Dominance- India Chic Shampoo Aircel Vodafone (Hutch) Dabbawallas, Kancheepuram Sarees

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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.

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar Marketing Strategy – Mumbai University Assessment -100 marks Course Content 1. Marketing strategy - Overview 2. Pillars of Marketing - STPD strategies 3. Market situation strategy - Leaders, challengers, followers, nichers 4. 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 Marketing Strategy (Ferrell 4e/ Walker 2e), Marketing Strategy - Boyd. Walker and Larreche Marketing as Strategy (Nirmalya Kumar) Marketing Management (Philip Kotler 13e / Saxena 4e) 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

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar Marketing Environment

Source: MIT-Sloan 2006

Effective corporate mission statements Broad Transportation Functional Based on customer needs

Physical

business Railroad business

Specific Long-distance transportation for large-volume producers of low-value, low-density products Long-haul, coal carrying railroad

Based on existing products / technology

Strategy1. Directing action towards desire outcome 2. A plan that aims to give the enterprise a competitive advantage over its rivals. 3. Broad formula for how a business is going to compete. Competitive strategy is deliberately choosing a different set of activities to deliver a unique mix of value.” Michael Porter 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 relates to strategy • Business activities/functions align with business strategy- achieve corporate objectives

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar

•

• Marketing- firm’s link to customers & competitors, hence shapes strategy at all levels 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. Marketing and business strategy Corporate level Business/es you should be in SBU level Product level Marketing plan

Tactics to beat competition Implement tactics, how Attain marketing goals, how

Set strategic corporate goals, Develop broad marketing strategy SBU goals, marketing plan, budgets, tactics Product goals, plans, budgets, specific tactics Marketing strategy implementation

Marketing strategy defines • The target segment- size, demographics, psychographics • How should the product be positioned to appeal to the marketprimary 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) Strategic marketing environment

Illustration- PC market • 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 Strategy (MBA Notes 2010)- Dr Amit Rangnekar Marketing Plan- “Plan your work, and work your plan” Marketing 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 the target market Product position, distribution & pricing Specific actions to achieve stated goals Eg sales force reorganization, customer rebates, national ad campaign, direct mail etc

Monthly marketing budget Monthly sales forecast (units & value) Periodic plans- monitor, review & action SWOT Analysis- To 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,

Weaknesses (Internal) Proposition, capabilities gaps, presence, strength, reputation, reach, financials, vulnerabilities, timescales, deadlines, pressures, supply chain, morale, attrition, commitment, leadership, processes & systems, management,

Opportunities (External) Market / business / product development, industry potential and phase, competitor vulnerabilities, new markets, demographics or lifestyle trends, global influences, technology, innovation, niches, verticals / horizontals, geographies, surprise, new contracts, information and research, partnerships, distribution, volumes, production, economies, season, influences

Threats (External) PEST, competitive intentions, market demand, contracts and partners, sustaining capacities, finances & capabilities, obstacles, insurmountable weaknesses, industry cycles, seasonality

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar Situation analysis

The Environment

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

Sociocultural Demographics & psychographics, Attitudes, opinions, beliefs, buyer behaviour, ethnic & religious factors

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

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

How to analyse Industry - (Michael Porter, HBR-Jan, 2008) • Good industry analysis looks at average profitability over a period • 3-5 year period can distinguish temporary/ cyclical changes from structural changes • Industry analysis should not declare an industry attractive or unattractive but help understand the underpinnings of competition and the root causes of profitability • Analyse industry structure quantitatively, than qualitatively with lists of factors • Quantify the 5 forces: % age of buyer's total cost accounted for by industry's product (to understand buyer price sensitivity); %age of industry sales required to fill a plant or operate logistical network of efficient scale (to assess barriers to entry); buyer's switching cost (to determine inducement an entrant or rival must offer customers).

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar • Define relevant industry: Products, exclusive/ indirect industry, scope, competition • Identify & segment participants- buyers, suppliers, competitors, substitutes & potential entrants • Assess drivers of each competitive force- determine which are strong & weak- Why • Determine overall industry structure & consistency- profitability levels & reasons, controlling factors; are more profitable players better positioned wrt the 5 forces • Analyse future changes (+/-) in each force • Aspects of industry structure, influenced by company, competitors or new entrants Common Pitfalls • Defining industry- too broadly or too narrowly. • Paying equal attention to all forces than focusing on the most important ones. • Confusing effect (price sensitivity) with cause (buyer economics). • Using static analysis that ignores industry trends. • Confusing cyclical or transient changes with true structural changes. • Use framework for strategic choices than declare industry - attractive/ unattractive Industry Environment Analysis (Porter’s 5 Forces of competition) 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

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar • 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 Unattractive industry (low profit potential)

Attractive industry(High profit potential)

Low entry barriers Suppliers and buyers have strong positions Strong threats from substitute products Intense rivalry among competitors

High entry barriers Suppliers and buyers have weak positions Few threats from substitute products Moderate rivalry among competitors

Strategic Dimensions- Extent of technological leadership, product quality, pricing policy, distribution channels, customer service Strategic Groups- Set of firms emphasizing similar strategic dimensions & using similar strategies. Intra strategic group firm competition greater than between firms outside that strategic group. More heterogeneity in performance of firms within strategic groups. Eg Cars, PC, Airlines, segmented by sensitivity to price, quality, technology & service Implementing the plan via the Marketing Mix • Identify target customer segments • Address customers through the marketing mix- 4Ps (Refer section on marketing mix ) Best of plans, adequate resources, skills, and effective implementation- no guarantee of success as

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar • lower than expected customer demand • Consumers use products in ways you never intended • Previously invisible competitor blindsides you with dazzling new offering • The cost of an ad campaign higher than estimated Controlling Plan Implementation (HBS)

Marketing Plan Summary


Marketing Concepts • •

•

Product-Offered to satisfy needs OR company’s offer to customers Product-Tangible eg Books ; Services-Intangible eg Banking, Finance, Hospitality Products also deliver services eg car-product & transportation-service, Mobile • Products sans service risky eg TV, Fridge, AC without back-up Service Team -Risky Value (valere-latin- worth)• Consumer’s estimate of the utility/capacity of a product/brand to satisfy their needs. Price is what you pay, value is what you get- Warren Buffet Mobiles- convergence Value proposition- Bundle of benefits a product offers to fulfill customer needs & wants Brand- An identifying symbol/words/mark distinguishing a product/company from its competitors. Branding is an essential part of marketing. Brand = (Functional + Economic+ Emotional) Value Propositions. Nokia- Functional, Amul- Economic, Saffola- Emotional Market (mercor-to buy Latin) • Potential + Existing customers sharing a common need/want, able & willing to engage / enter in exchange to satisfy their needs/wants Eg Pharma Market=Doctors + Hospitals + Trade • Economics( Buyers+ Sellers= Market), Marketers(Sellers= Industry, Buyers=Market) Customer- One who buys goods or services- Mother Consumer- One who consumes, but may or may not have purchased- Kid Client- A customer/ consumer/ party who pays for professional services- Lawyer, Hotel, Prosumer: Producing consumers, active, regular and influencing consumers who also initiate feedback Customer satisfaction: Core- Quality, service, value; Desire (Within an arms length of desire- coke), customer delight (Maruti service), delivery (blue dart), service (Taj) Marketing • Identify, create & manage demand to provide value to a customer for a profit -Kotler • Process that identifies, anticipates, satisfies customer requirements profitably-CIM • The right product, in the right place, at the right time, at the right price.-Adcock • Marshalling organisational resources to meet changing needs of the customerPalmer • Concept- Satisfaction of customer & their needs, focus of business activities. IBM

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar •

• • • • •

Philosophy- Owned by everyone from within the organization

Management (Manus –hand Latin)-Optimal utilization of resources to achieve objectives eg Electricity Management is doing things right, leadership is doing right things-Peter Drucker Manager- Responsible for application & performance of knowledge- Peter Drucker Marketing Management- Demand management Marketing Mix (Neil H. Borden, '4Ps'- McCarthy) Marketing 'tactics' or tools or mix elements leading to different strategies, perceptions & value propositions Car- Mix of Engine, Mileage, Looks, Price, Features, Quality, EMI options Product Brand, features, design, quality, range Warranty, AMC, service, size, packing, performance Promotion Sales Promotion, Personal Selling, Advertising, Sponsorship, Multi-level Marketing, Direct Marketing, Trade fair & Expositions

Price Strategies, Credit, Costs Place Channels, location, coverage, transportation, inventory, width, spread, reach, shippers

Product (What satisfies a need) “We lead the public with new products than ask them what products they want. The public does not know what’s possible, but we do, so instead of doing much market research, we create a market for a product by educating them” (Akio Morita, Sony) • ‘Product/service design guided by a deep understanding of what customers need, want,

and are willing to pay for, as determined by market understanding and research.’ HBS • Differentiate by physical aspects & less tangible elements ( warranty, ASS, service) Competition Category Need fulfilled

Brand Competitors Product Competitors

Generic Competitors

Basic requirement

Market products similar customer features, benefits & price

Beverages

Refreshment

Chocolates Films

Dessert/ snack Entertainment

Cars

Transportation

Coke, Pepsi Thums Up Dairy Milk, 5Star Celebrations PVR Fame Adlabs Maruti, Hyundai Tata

Market different products to solve same problem, satisfy same basic need Regular water

• Physical distinctions:

Compete in same class, but differ in features, benefits & price Tea, Nimbu Pani Mineral water Mithai, Namkeens Ice creams, Fruits Single screen Drama theatre Small cars, Big cars, SUVs

Aniseed/Saunf Candy, Sugar TV, Shopping Reading, Internet Taxi, Auto, BEST, Local train, Walk

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar • Form—size, shape, physical structure, Features— intrinsic to the product

• • • • • •

• • • •

• • •

Performance quality—level at which the product’s primary characteristics function Conformance quality—the degree to which all units of the product perform equally Durability—the product’s expected operating life under natural or stressful conditions Reliability—the probability that the product won’t malfunction or fail Repairability—the ease with which the product can be fixed if it malfunctions Style—product’s look and feel, Design- easy to use, sleek, lasts long Service distinctions Ordering ease—how easy it is for customers to buy the product Delivery—how quickly and accurately the product is delivered Installation- how well work is done to make the product usable in its intended location Customer training—whether company offers to train customers in using the product Customer consulting—whether company offers advice or research services to buyers Maintenance & repair-how company helps customers keep product in working order

New Product Development (NPD) Stages • Idea generation- Employees, sales force, trade, competitors, customers Idea screening- Feasible, workable, practical Concept development & 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 NPD- risky but if based on a sound foundation- market segmentation, understanding and targeting customers - risk reduces. If NPD is first and then you figure out how to market, it usually leads to disaster. Exception- Alexander Bell invented the Telephone, but it was an innovation.Today- NPD compete with similar products /effective substitutes and customers are spoilt for choice as well as bombarded by product and marketing messages. Marketers- primary link between company, customers & competitors- strategically placed to identify latent /unmet needs and communicate to the company. Play role in pricing, place, promotion and launch plans. New Products Types -Incrementally altered or improved 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

• Listen to existing market

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar • Create demand • Educate market Change the basis of industry competition: • Electric lighting, antibiotics, microwave, credit card, transistor, heart pacemaker, hip and knee replacements, GPS

• Accommodate current demand •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? Why new product development (NPD) • Changing customer needs – Diet Coke, Saffola • New Segment Entry- Maruti SX4 • New Capabilities- UB Group • New Concepts- Suzuki Swift, Tata Ace / 1L Car • New technology- I-Pod, I-Phone, TV • Changing market needs- Scooters to Bikes • Own successes- Brand / line extensions- Maggi • Competitive Successes- Krackjack- 50:50, Marie • Product lifecycle- MS Office, Play Station 1,2,3 • Portfolio / Business realignment- Reliance Mobile • Environmental changes- Music downloads

Unex p Oppo lored rtunit ies

Product decisions Design: As the USP- ipod, iphone, LG Chocolate. 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)

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar 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 means- and 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. 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.

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar 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 Strategy Positioning Strategy

Product Repositioning Strategy

Place brand in a part of the market that will have a favorable reception as compared to competition Maintain unique position by creating aura of a distinctive product Manage multiple brands by careful positioning to avoid internal competition or cannibalization

Product Scope Strategy

Reviewing current positioning & marketing mix to seek a new and more appropriate position existing customers-promote varied product uses To reach new users- present product with a different twist to people not favorably inclined, without alienating current customers To presenting new or latent product uses or for purposes not originally intended (Burnol as antiseptic)

Product Design Strategy

Perspectives of product mixsingle-product multiple products system-of-products strategy

Deals with degree of product standardization standard product customized product modified standard product

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

New Product Strategy Introduce product new to previous line/ new type of satisfaction to the marketImprove/modify product product imitation product innovation. Keycorporate aspirations toward NPL organizational openness to creativity environmental favour toward creativity screening method for new ideas evaluation process


Source: Harvard Business Review

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 to visit bookstores or browse through hundreds of books. Amazon offered convenience, faster alternative, greater selection and reviews Source- Dolan, HBS, 2000 • 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,

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar 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 Manufacturer Manufacturer

3-Level Manufacturer

4-Level Manufacturer C&F

Retailer Consumer Retail /Malls

Retailer Consumer Garments

Stockist Consumer Industrial, IT

Consumer IT Hardware

5-Level Manufacturer C&F Stockist Retailer Consumer Pharma /FMCG

• 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 insights, service • Speciality (Sports), supermarket (Big Bazaar), convenience (Kirana), factory outlets, warehouses, direct sellers (Encyclopaedia), vending machine (Tea), cooperatives (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, Payments risky, gaining popularity, delivery costly- Books, CDs, medicines, travel, tourism • 3rd Party Logistics ( AirFreight, GATI)- Tremendous scope Channel Decisions • 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 Distribution Strategy Distribution Scope Strategy How to effectively reach target customersexclusive distribution (sole rights to 1 retailer to serve given area) intensive distribution (product available at all possible retail outlets) selective distribution (selected retail outlets from many, given to serve area)

Multiple Channel Strategy Employing 2/more different channels to distribute goods and services complementary (each channel handles a non-competing product/ market segment) competitive (two different and competing channels sell the same product)

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar Assess: • customer buying habits • gross margin/ turnover rate • dealer capability to provide service • dealer capability to carry full product line • product styling

Market segmentation & Cost/benefit analysis • complementary channels prompted by: geographic considerations, business volume, need to distribute noncompeting items, and saturation of traditional distribution channels • competitive channels can be a response to environmental changes.

Exercise: X company uses which aspects of ‘place’ in its marketing plans? Are these effective in satisfying customers and generating sales and profits, or could new channels be added?

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 • Price decisions- price point, list price, discounts, payment period, etc • Commodities differentiated by price • Price is high when product is perceived as new, unique, and without strong substitutes • Pricing flexibility is a function of product uniqueness with implications for the PLC • Objectives: sales, profits, market share, ROI, competitive position, demand, costs, survival etc • Center-stage in marketing wars, Inter-firm rivalry-Mobile Industry • Product differentiation blunted- Surf / Ariel, Mature products / Markets- TVs • Economic Value Proposition- Titan- High priced despite local & Grey market competition Pricing Methods By Cost - Cost Plus and Break Even By Competition - Going Rate, competitive, cartelling- Tyre industry, sealed bids (tenders) Customer Oriented- Perceived Value (Lifestyles), Auctions (bazee), Value-Buffett, McDonalds Pricing Strategies • Penetration- HQLP- NPL, Entry, Attract, Ensure trial- Amul • Premium- HQHP-Sustainable advantage- Bose Speakers, Benz

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar • • • • • •

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

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 (unique or incompatible) 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 Pricing Strategy Matrix

Price High Medium Low Quality High 1-Premium 2-HighValue 3-Penetration (Quality is only Medium 4-Over-charging 5-Medium Value 6-Good Value indicative) Low 7-RipOff / 8 False Economy 9-Economy Skimming • 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-Eclair, Rs2-Chocky, Rs5-5Star,Rs50-Heroes,Rs100-(Heroes), Nokia Maruti pricing strategy (hypothetical prices for illustration) Prices in lakhs 2.5 3 3.5 4 4.5 5 5.5 6

6.5

7

7.5 8 8.5

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar Alto AStar Estilo Wagon R Ritz Swift Desire

LX LXI VX AX LX LXI VX AX LX LXI VX AX LX LXI VX AX LX LXI VX AX LX LXI VX AX LX LXI VX AX

If you 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 a wide range where a customer may end up buying a lower version of a higher car model than planned. 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


•

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

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar • 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, Flexitimings, Initiators earn maximum, financial schemes -suspect • Promotion Mix Strategy- ICICI 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: To influence customer to make a purchase. AKIPIS Mnemonic. 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 or help save money or provide value. Communicate key benefits-

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar comfortable city centre to city centre travel, will allow 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- this puts rail travel ahead. 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 Aware of product but considers Favourably disposed Would select product if similar to competitors to the product purchase was made today 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.

Buys product

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar (Communication vehicles- Dolan, IMC, HBS 2000)

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

Creative control on ad content, surely gets published

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

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar 3 Shelf Life 4 Consumers 5 Creativity 6 Objective

Can repeat ads as long as budget allows. Longer shelf life than press release Guarded response to an ad Blatant Awareness, trial, sales

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?

Brand Management Product Levels: The Customer Value Hierarchy To plan the market offering, consider 5 product levels encompassing the augmentations & transformations the product ultimately undergoes. Each level adds to customer value. Product Level s

What it means

Marketers Job

Hotel Customer

ITC Hotels

Core

Service/product bought Benefits

Provide benefits

Place to sleep Bed, bath, closet

BudgetFortune

Basic

Turn benefit to product


• • •

Expected

Attributes & conditions

Minimum expectations- price, convenience locationimportant (emerging markets)

Clean bed & toilets, peace

Augmented

Exceed expectations

Augmented benefits become expected benefits- important in (developed markets)

Satellite TV, Tea m/c, net

Super deluxe - ITC

Potential

New ways to satisfy & differentiate

Customised service

Welcom HeritagePalaces

Anticipate & innovate

5-StarWelcome

Product Mix Mix- Set of all products & product lines- total portfolio Width- No. of product lines- HUL (11)- soaps, toothpaste, shampoo, detergents etc Depth-No. of variants of each product in the line- Lux- 4 fragrances * 2 sizes= 8 Packaging • The 1st point of interaction between the brand and the customer • Colour, form, size, convenience become USPs & brand identities- Laalwala toothpaste • Right sizing is important as it offers value and also caters to the single use customer -Shampoo Sachet, Chota Coke, Bisleri, Liquor- quart, Pint, Nips, Half Nips • Innovations- Bubble / blister (razor, tablets), tetrapak (storage & perishability), hologram (additional security)- Castrol 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


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

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 Brand Positioning (Also refer positioning under STPD) • 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 Moov- Backaches

1. 2.

Positioning = combining internal (brand identity+ image) + outward brand expressions (guarantees, service, performance & packaging) to determine a frame of reference by: Identifying the target market (which brand for which market) Nature of competition (direct, indirect, PLC stage, intense, consolidated, fragmented) 3. Points-of-parity (pop) associations- shared values between brand & competitors, common denominators defining the category. PoP leveraged to negate competitors’ PoD. Eg 5 star hotel restaurants, HTC v IPhone. 4. Points-of-difference (pod) brand associations- attributes/benefits consumers associate with a brand, positively evaluate & believe they cannot find to the same extent with other brand. Creating strong, favorable and unique POD associations is a real challenge, but essential for competitive brand positioning. IPhone, I PoD-Apple brand and innovation. 5.Understanding consumer behavior & considerations in choosing brands- price points, culture, buying patterns, attitudes, preferences. The Nike PoP & PoD associations • Nike- PoD MJ, Air & Basketball • Adidas- PoD Top athletes • Reebok- PoD Tennis • Other associations are category PoPs Exercise1. How should Maruti position itself wrt Tata Nano?

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar 2. POPs & PODs for Apple i-Phone 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 name absent Unique value, personality, identity, positioning, sustainable competitive advantage Rationale- Unless product cannot stand on its own, it does not deserve to be launched 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

Brand Extension

Old

Product category Old

New

Line extension

Brand 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. New

Brand name


Sub brand

New brand

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

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar • • •

• •

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 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/their aspirations-Niche brands

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar 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 communicationSwatch- 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 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 • High brand awareness and consumer loyalty, difficult to put a value on 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, but has limited impact on brand image (Lisette 1998)

• • •

• • • •

Branding of tech products/companies Product parity- differentiation blunted, few advantages, obsolescence, piracy • Product proliferation- short PLC,perpetual change- Aurobindo NPL 3 weeks Converging & New Technologies- Borderless world, obsolescence Strong brands- stability, market dominance, command premium, enterprise value • Consumer touch points magnify the impact • From Product to Idea, to Product-Customer-Idea plus customer touch points not only brand touch points. Increasing relevance in a customer’s life• MS-Office suite designed by being with users than surveys • IPod- Mix(Interaction with PC, buy/store/retrieve music & weave life around music) 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

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar 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

Marketing Strategy STPD- (Segmentation, Targeting, Positioning, Differentiation) •

Segmentation Where to compete • Identify buyer subsets with similar needs demonstrating similar buyer behavior • Segment- viable, profitable, access, measurable, potential, competitive intensity, values fit- Entry? • Tourists- by state/country, age, interests- adventure, history, sports, nature, cuisine Segmentation methods Demographic segmentation (AEGIS- Age, Education, Geography, Income, Sex) By customer markets • Geography-City, State, Zone (Coke-Chota-Rural, Bada –Urban) • Demographics- Income (Garments/Car), occupation, education, religion, age (Hospitals), sex (insurance, hospital), social class (middle/lower/upper), marital status, Generation (Net savvy) • Behaviour- Occasions (Tours/Greetings/Weddings) Benefits (Quality-Sony/Nokia, Service-Dominos), Usage (consumption, heavy, light), User (new, regular), Loyalty (loyal, split, shifters, switchers), Readiness (Informed, interested, unaware), Attitude (+ve/-ve, hostile), Convenience (EMI, Home Delivery), User (Brides, Pregnancy) • Ideal- integrated segment mix By business markets • Demographic- Industry, Company size, Markets • Operational Variables- Technology, Business terms Segmentation Matrix- Mobiles- Users (YUP, Execs, Students, Non execs, Housewives) v Features (PDA, entertainment, GPRS, memory, talk time) 1. • • • •

Psychographic segmentation (Cultural, social, psychological and lifestyle) Psychographics- lifestyle (outdoor/clubs), personality (Woodlands-rugged/extrovert) Cultural- Deepest / broadest influence Social- Family/friends-most influential, religious, professional Lifestyle- How you spend your time + money + how you live eg From 1997- 1999, Readers Digest lost 3 million customers to niche magazines - food, fashion, car,

VALS- Values, Attitudes, Lifestyle Segmentation AIO- How people spend time, what interests them, self view & world view AIO

Activities

Interests

Opinions

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar Example Marketer

Work, Hobbies, Shopping Family, Community, Fashion, Food Self, PEST Identify lifestyle segments, buying patterns, consumption, usage, attitude, target relevant segments eg Nike to Joggers, Adidas serious sportsmen, Reebok Tennis

Sports Shoes Market (Exercise) Which segments do Nike, Adidas & Reebok target Cricket

Tennis

Soccer

Hockey

TT

Adventure

Badminton

Fitness

Pro Amateur Casual

Targeting- Which product, which market • Select segment/s to target, target resource allocation at this segment

• Mass marketing- Targeting the marketing mix towards the entire market, not specific to any segment eg Amul butter, Parle G • Differentiated marketing- Targeting different marketing mixes towards different segments eg UB group markets multiple whisky brands within the premium whisky segment (Teacher’s, Antiquity, Single Malt, Black Dog) • Market concentration- Concentrating the mix on any one segment of the market eg Ferrari- luxury sports cars, Nirma economy detergents • Niche Marketing- Target small market segment with specific, specialized marketing mix. Niche profitable to operate for nicher but not attractive for major players to enter


Positioning - Customer perception (Positioning also under brand management) • Creating distinct and valued, physical and perceptual differences between one’s product and its competitors, as perceived by the target customer • The act of designing the firm’s market offering so that it occupies a distinct and valued place in the minds of its target customers • Project brand identity & personality, create perception & image in consumer's mind • C2C Brand perceptions differ intra segment eg Food stalls- VFM, range, clean, cheap • Outward expression of brand, to develop a strategic, sustainable competitive advantage • Manages perceptions, results in brand image & reputation Positioning types

Positioning anomalies

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 Value-Budget Hotels, Residential flats

Under-Fridge-PUF • Over- Casio start @ Rs 500, perceived expensive earlier Confused- Top Ramen Noodles-‘Smooth’ Doubtful- Tall promises-Teak plantations, finance schemes

Positioning strategies Single Double Triple Multiple positioning

Camry-Touch Perfection Tavera-Comfortable family car Liquidity, safety, returns-MFs

strategy presented differently to various target audiences, accurate judgment of the market segments and their precise needs /wants

Central positioning- nutrition Energy- drink for active people Dietary food supplement- elderly & pregnant ladies Essential growth supplement- youngsters Nutritional revitalize- busy executives Appeal to various segments with intact central positioning

A chocolate-based health drink

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 P S

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Positions that firms successfully own in India consumer’s minds Beauty- Lux Premium-Bose, Benz Thanda- Coke World scale- Reliance Reach-HLL, Glaxo, Colgate, ITC Friendly salesmen-Eureka Forbes Youth- Pepsi, Swatch Fast food- Udipi, Vada Pav, Sev Puri Kids-McDonalds, Esselworld, J&J Economy- Big Bazaar Tourism-Goa, Kerala, Rajasthan

Generic-Cadbury/Xerox/Amul/ BandAid Range- Vijay Sales, Alfa, Nokia Macho- Enfield Bullet Performance- Nokia, Bata, Titan Innovation- Sony, Apple Fever- Crocin Service- Private Banks, Maruti Delivery-Domino’s/ Blue Dart Indian MNC-Ranbaxy, Infosys, Wipro Value-Dollar Shops, Factory outlets Headache-Saridon/Anacin

Exercise: Walmart’s India entry strategy based on above perceptual map Differentiation: how to compete (STP undertaken to help differentiate) • Add meaningful & valuable differences to distinguish company’s offering from competitor’s • By form / features- Coke bottle shape, Heinz thick ketchup, Vertu-Concierge • Identify tangible differences between brand & competitors-conscious, rational benefits like PQRSTUV-, Performance (Nokia), Quality (Sony), Rate (Big Bazaar), Range (Maruti, Vijay Sales), Service (ICICI Bank), Technology (HP), Utility (Bata), Value(Titan),Convenience (EMIs, Loan terms) • Intangible Benefits - emotional, sub-conscious benefits a brand owns- Status (Benz, Bose) or House value (Armani, Rolex)- most important leverage for brand dominance Sustainable advantages- Brand perception as unique (Sony Trinitron), sustainable customer benefit, difficult for competitors to substitute (Amul Price, Toyota low cost) Differential variables Brand Performance, features, form, conformance, reliability, style, design, quality Service Delivery, ease of ordering & installation, customer training People Competence, response, courtesy, credibility, reliability, responsiveness, communication Channel Coverage, expertise, cost effectiveness, performance Image Symbol, colour, slogan, ambience, atmosphere Differentiation Criteria- important, distinct, superior, preemptive, affordable, profitable Summary


Product Life Cycle Helps interpret brand/market dynamics, useful in planning, control. Every product goes through a lifecycle but length, shape, duration, phases differ

PLC - Applications Sales Costs Profits Customers Competitors Objectives Strategies Products Price Distribution Advertising Sales Promotion PR Personal Selling Direct Sponsorships

Introduction Low Highest Nil Innovators Nil/existing Awareness, Trial

Growth High High Start Adopters Many MS, Usage

Maturity Highest High High Majority Max/New tech Profit, Maintain MS

Decline Ebb Low Ebb Laggards Many Reduce costs

Brand

Build, extend, service

Diversify, revive

Cost + Availability Awareness Heavy to entice Trial/purchase Max Target customers, Trade Mix Max

Penetrate, Skim Intensive Awareness, benefits Cater to demand Selective Convince, convert

Competitive Extensive, Visibility Differentiation Encourage brand switch / substitution Selective Defend

Sustain, hive out weak Review, drop Watchful Target Minimum

New customers, mix Significant

Loyals Specific

Nil Minimum Selective Nil

PLC Strategies • Pioneer Advantage- Inventor, product pioneer, market pioneer • Growth Stage- Add products, quality, features, styles, models, segments, coverage, channels, shift advertising from awareness to preference, reduce price to attract next segment of buyers • Maturity Stage- By modifying- Markets- Expand brand users and brand usage Products- quality, features Mix- Price, channels, promotion, services • Decline Stage- Review investments, selective focus on key segments, markets and brands, divest

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar Analysing market opportunities Strategic gap analysis

• Different market needs & groups(segments) • Target groups/markets it can satisfy in a superior way (targeting) • Locate brand in the minds of consumers (positioning) • Communicate offering (promotion) to the target market • Target market recognises firm’s distinctive offering (differentiation) • How brand satisfies consumer needs in a unique way—customer-focused value proposition

• • •

Current Products

New Products

Current

Market Penetration

New Product Development- NPD

Launch 800, grabbed market share on styling, fuel economy, affordability

New models Van, Zen, Esteem, Wagon R, Baleno, Swift, SX4

New

Markets

Intensive Growth Strategies Ansoff’s Product-Market Matrix- Offers strategic choices to achieve growth objectives Eg- Maruti Suzuki

Market Development

Diversification

Launch in class II-IV towns, easy loans, higher payback periods

Training schools, Auto insurance, True Value cars,

Market Penetration – go rural, price penetration Market Development- new audience, new region, exports NPD- existing customers, develop, innovate, new- Automobiles • Diversification- related - Amul milk to foods, unrelated- Amul into Garments • Integrative growth- Vertical-Backward (Reliance- Polyesters), forward (VideoconNext), Horizontal- M&A (HLL-Lakme)


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GE matrix or Growth Share Matrix 4 • Market Attractiveness v Business strengths H ig h Optimal business portfolio to fit firm strengths, 3 exploit attractive industries/markets • Which SBU's to invest, build, nurture, hive M e d iu • Circle in Matrix is SBU, Circle size= market 2 size, pie size = SBU market share • Arrows= future direction & movement of SBU's L o w 1 • Forecast for N3-5Y, including strategy, PLC, 4 competition, technology, policy, incorporate in length & direction of arrows

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M a r k e t G r o w th

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• Diversification growth- Reliance Retail BCG Matrix- Product Portfolio Matrix (Parle Biscuits) For SBUs/brands portfolio planning than decision making R e l a t i v e M a r k e 2 5 % Order- Question Mark, Star, Cash Cow & Dog Q u e s t io S t a 4r • Dogs-Low share of low growth market, no cash generation, 3 1 consume cash, rid, hive 5 2 • Cash cows- High share of low growth market, cash 1 0 % generators, low investment, ex-stars, economies, profits, fund other brands 6 8 • Question Mark -Low share of high growth market, 7 consume resources, generate little- retain/grow/hive D o g C a s h C o w 0 % • Stars-High share of high growth market, high costs low 1 0 x 1 x 0 profits, generate high income, build • Portfolio balance critical, reduce dogs, milk cash cows build stars • Use funds generated by cash cows to turn ? to Stars, may become cash cows. Some ? may become dogs, larger contribution from successful products to compensate failures Limitations- Profitability, trends, environment, SBU sensitivities not considered

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Factor Ratings • Market attractiveness-attractive4 to unattractive1, Business strength-4strong to 1 weak • Top 3 corner- strong in attractiveness, invest/grow; • Diagonal 3- medium in attractiveness, selectivity, manage earnings; • Bottom 3 corner- low in attractiveness, 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 Review factors affecting Market Attractiveness: • Size, growth, profits, demand, pricing, risks, competition/rivalry, differentiation Factors affecting SBU Competitive Strength

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Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar •

Assets, competence, relative brand strength, market share, growth, loyalty, relative margin, technology / innovation, distribution, capacity, financial resources, cost structure GE Matrix- later and more advanced version of the BCG Matrix in three aspects: • Broader- Market /Industry attractiveness replaces growth as attractiveness dimension • Competitive strength replaces RMS to assess each SBU competitive position • GE Matrix 3*3 grid, allows more sophistication while the BCG Matrix has only 2*2 Limitations- Core competencies not represented, SBU Interactions not considered

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Generic Strategies- Porter Sources of competitive advantage-Cost leadership, Differentiation, Focus Competitive Advantage- A sustainable advantage over the competition gained by offering consumers / customers greater value and benefits through better PQRSTUV & people C

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L o w C H o i gs th C Cost Leadership Low cost leader-competitive advantage to produce at lowest cost, ‘no frills’- Amul Low cost not always low price- Toyota- high quality, lower costs, better margins

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C o m p e t it iv e s c o p e

• • • • •

Perceptible Changes Quality to World Class-Titan Creativity to Innovation- Technology Durability to Obsolescence- IT Price to EMI- Housing, Insurance Range to Features- All in one mobiles

o s t

Differentiation Over communication (urban Indian adult 681 messages daily), Information overflow Intense Local, Regional, National, International Competition- 25000+ pharma firms Spoilt for choice- 4 car models 1983 to 14 in 1993 to 83 in 2003, Brand clutter • Select 1/more vacant differentiated needs, position firm to meet criteria-Domino’s • Premium pricing- Reflect superior product quality, features and service, Reasons to prefer the product over other, less differentiated products- Plasma TV, Benz • 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- Sony, Nokia • Innovation and improvement are 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 targeting broader customers group, existing brands not meeting demand Tour Operators- Nepal or HP or South only, Glaxo- Pharmaceuticals • Niche- Specialization by narrow segment / market / industry, but small, specialist niches could disappear in long term- often used by smaller firms- Florist, Sports shop

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar • •

•

Cost focus – Difficult to achieve if industry depends on economies of scale- telecom Eg Country Level -Strategic Differentiation China India Hard InfrastructureSoft InfrastructurePorts,Roads,Power, Mfrg Software, ITES, Auto, Biotech Factory of the World Back End Government support Entrepreneurship 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 Exercise:


Competitive Strategy Marketing strategies of a market leader, followers, nicher and challengers Business Strategies (Kellogg) 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

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 Competitive strategies • Market dominance- Leader(Nokia), challenger(Samsung), follower (Sony), nicher (HTC) • Innovation strategies – Based on NPD, cutting edge 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 Market dominance – Measure of the strength or control of a brand, service or firm relative to competitive offerings, generally expressed in terms of market share, geographical reach and number of players. Monopoly, duopoly, oligopoly, fragmentation, consolidation, concentration.

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar Market dominance strategies Market leader- dominant, substantial market share (MS) and reach. • Expand the total market by new users, new uses, more usage - Moov • Protect MS- improved customer service, distribution effectiveness, reduce costs, NPD • Increase MS by targeting one or more major competitor(s) • • • •

Market challenger- strong, not dominant but follows an aggressive strategy to gain MS Target industry leader and smaller, more vulnerable competitors. Price discounts / reduction, line extensions, intensify promotions NPL, reduce / upgrade product quality, Improve service and distribution, cost reductions Market follower- strong, not dominant, content to stay there. Safe, low risk player • Develop strategies parallel to market leader, hope to gain share from the leader • Plays on accepted norms in best practices, R&D, risks and costs- low failure rates • No head-on battle with the market leader Market nicher- focus /concentrate marketing mix on select few markets / segments • Specialise in a niche, large & profitable, but small enough to be ignored by the majors • Profit margins emphasized rather than revenue or market share. • Competitive advantage gained through effectiveness rather than efficiency • Successful nichers- High value added industries/ market high end products, high margins. Firm gains insight into its competitive position by classifying competitors and self by the role each plays as market leader, market challenger, market follower or market nicher, based on which they plan and implement strategies in line with their objectives. 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

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar • 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 • 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

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar 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 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

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar 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 • 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

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar 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, 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 market- all 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 variations- Vicks, 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 Niche specialist End user Vertical level Customer size Specific customer Geographic Product / product line Product feature Job-shop Quality-price Service

Firm specialisation 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

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar Channel

Serves only one channel of distribution

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• Focus on customer development (market growth 4%, quality(reach, prices, new services) • Formulate competitive reactions (increase ad/promo spends, price cuts) • Alert firm, market focused

Market Scope Strategy Single Market Strategy

Multi Market Strategy

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

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

sensitive segment • @ 8%; deal-prone customer segment grows fast, but such customers not loyal • Reach & satisfy quality segment, avoid price cuts • Identify opportunities, target customer & emerging needs better wrt resources & goals

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

Total Market Strategy 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 Strategy (MBA Notes 2010)- Dr Amit Rangnekar 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 • 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. By spending money on product improvement, promotion, and distribution, it can capture a dominant position. Maturity Stage  Growth declines, longer stage, marketing mature products is a 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

Marketing Strategy (MBA Notes 2010)- Dr Amit Rangnekar Expand mature brand market by driving sales volume = no. of brand users x usage rate per 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 Program Modification Modify other marketing program elements- 4 Ps and services 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 • 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


Marketing Strategy MBA Notes 1.0

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