HKU Business School MKTG3531 Strategic Marketing Management Past Paper PDF

MKTG3531 Strategic Marketing Management Marketing Strategy Development Semester 1, 2024/2025 1 Learning Objectives 2 Assessing Market Opportunities 3 Basic Principle Value of Market...

MKTG3531 Strategic Marketing Management Marketing Strategy Development Semester 1, 2024/2025 1 Learning Objectives 2 Assessing Market Opportunities 3 Basic Principle Value of Market Inherent Opportunity = Attractiveness × Likelihood of Success 4 Tool: BCG Matrix (Growth Share Matrix) BCG Matrix provides a framework to evaluate market opportunities in terms of market growth rate (indicating attractiveness of a market segment) and relative market share of a company (indicating competitiveness of a company) 5 Tool: BCG Matrix (Growth Share Matrix) 6  Tool: BCG Matrix (Growth Share Matrix) Cash cows : Dominant share of slow-growth market. Generates large amounts of cash. Therefore, the excess cash contributes to company’s overhead and is invested in other market opportunities. Stars : High share of high-growth market that needs extra cash to finance future growth. 7  Tool: BCG Matrix (Growth Share Matrix) Question marks : Low share of high-growth markets. They require a lot of cash to maintain or increase market share. Management must choose which market opportunities to invest in and divest from the rest. Dogs : Low share of low-growth markets. They may generate enough cash to sustain themselves but do not hold promise of becoming winners for the firm. Management may consider divesting from them. 8  Tool: BCG Matrix (Growth Share Matrix) Discussion: Any potential issues with BCG matrix? 9 Tool: GE/McKinsey Matrix McKinsey & Company developed a nine-cell portfolio matrix as a tool for screening GE’s market opportunities. Likelihood of Success (i.e., Competitiveness) Low Medium High Attractiveness Low Medium High 10 General Method 1. Identify the set of market opportunities Geographical markets, new product markets, market segments, major customers, etc. 2. For each opportunity, assess (a) inherent attractiveness of the opportunity and (b) company’s relative competitiveness regarding this opportunity (i.e., likelihood of success) 3. Compare across opportunities in terms of both (a) and (b) 4. Target and allocate resources accordingly 11 Attractiveness and Competitiveness Analysis Inherent Likelihood of Success Attractiveness × (Competitiveness) 12 Attractiveness Assessment Define Attractiveness Criteria Determine Relative Importance Rate Each Segment on Each Criterion Compute Overall Attractiveness Scores 13 Attractiveness Assessment Define Attractiveness Criteria Determine Relative Importance Rate Each Segment on Each Criterion Compute Overall Attractiveness Scores 14 Define Attractiveness Criteria What would make a given market opportunity attractive or unattractive to us? 15 Common Attractiveness Criteria Market size Market growth rate Market profitability Competitive intensity Entry barriers Opportunity for differentiation Demand variability Rate of technology development 16 Market Size Current size vs. potential size China? Nominal GDP (in millions) 18000 Italy? 16000 14000 India? 12000 10000 8000 6000 4000 2000 0 1990 2000 2010 2020 17 Market Size Need to take competition into consideration when predicting market size → If many players in the market, the share you can secure is likely to be smaller Clearly identify the segment(s) you are looking at 18 Cost of Operation A&F withdrew from the Hong Kong market → It rented Pedder Building in Central at a rate of 7M HKD per month 19 Customer Loyalty 20 Attractiveness Assessment Define Attractiveness Criteria Determine Relative Importance Rate Each Segment on Each Criterion Compute Overall Attractiveness Scores 21 Relative Importance Attractiveness Criteria Relative Weights Total 100 22 Relative Importance of Attractiveness Criteria in Sportswear Attractiveness Criteria Relative Weights Market size 25 Market growth 20 Profit margins 30 Operational cost 25 Total 100 23 Attractiveness Assessment Define Attractiveness Criteria Determine Relative Importance Rate Each Segment on Each Criterion Compute Overall Attractiveness Scores 24 Segment Opportunities Ratings Criteria Segment 1 Segment 2 Segment 3 Segment 4 25 Segment Opportunities Ratings of Sportswear Criteria Amateurs Athletes Market size 10 6 Market growth 6 4 Profit margins 6 10 Operational cost 8 6 26 Attractiveness Assessment Define Attractiveness Criteria Determine Relative Importance Rate Each Segment on Each Criterion Compute Overall Attractiveness Scores 27  Attractiveness of Sportswear Segments Attractiveness Weight Amateurs Athletes Criteria (sum = 100) Market size 25 10 6 Market growth 20 6 4 Profit margins 30 6 10 Operational 25 8 6 cost Overall Attractiveness Score: 750 680 28 An Example of Attractiveness Analysis 29 Competitiveness Assessment Identify Success Factors Segments by Segment Determine Relative Importance Comparatively Rate Yourself on Each Factor Compute Overall Competitiveness Scores 30 Identify Success Factors Common Success Factors Market share Growth in market share Brand equity Distribution channel access Production capacity Financial resources Profit margins relative to competitors Patent protection 31 Relative Importance of Success Factors & Example Success Factors Relative Weights Product Quality 30 Service Quality 15 Availability 25 Price 30 Total 100 32 Comparative Scoring Rate your relative strength on each success factor (0-10 points) Success Factors Comparative Score Comparative Score (Seg. 1) (Seg. 2) Product Quality 6 4 Service Quality 10 6 Availability 6 4 Price 8 8 33  Compute Overall Competitiveness Scores Success Factors Relative Comparative Comparative Weights Score (Seg. 1) Score (Seg. 2) Product Quality 30 6 4 Service Quality 15 10 6 Availability 25 6 4 Price 30 8 8 Overall Competitiveness Scores 720 550 34  Attractiveness X Competitiveness Matrix 1000 Hold/ Grow/ Grow/ Selectivity Invest Invest 666 Harvest/ Hold/ Grow/ Attractiveness Divest Selectivity Invest 333 Harvest/ Harvest/ Hold/ Divest Divest Selectivity 0 0 333 666 1000 35 Competitiveness  Strategic Implication 1: Focus on opportunities that rate high on both attractiveness and competitiveness 1000 Hold/ Grow/ Grow/ Selectivity Invest $$$ Invest 666 $$ Harvest/ Hold/ Grow/ Attractiveness Divest Selectivity $$ Invest 333 $ Harvest/ $ Harvest/ Hold/ Divest Divest Selectivity 0 0 333 666 1000 36 Competitiveness Strategic Implication 2: Consider divesting or harvesting segments that score low on both dimensions 1000 Hold/ Grow/ Grow/ Selectivity Invest $$$ Invest 666 $$ Harvest/ Hold/ Grow/ Attractiveness Divest Selectivity $$ Invest 333 $ Harvest/ $ Harvest/ Hold/ Divest Divest Selectivity 0 0 333 666 1000 37 Competitiveness Strategic Implication 3: Hold average opportunities and selectively invest in them when there are extra resources 1000 Hold/ Grow/ Grow/ Selectivity Invest $$$ Invest 666 $$ Harvest/ Hold/ Grow/ Attractiveness Divest Selectivity $$ Invest 333 $ Harvest/ $ Harvest/ Hold/ Divest Divest Selectivity 0 0 333 666 1000 38 Competitiveness Strategic Implication 4: Keep a balance of (A) secure cash- generating options and (B) promising cash-absorbing opportunities so that the former supports the latter 1000 Hold/ Grow/ Grow/ B Selectivity Invest Invest B 666 Harvest/ Hold/ AGrow/ Attractiveness Divest Selectivity Invest 333 A Harvest/ Harvest/ Hold/ Divest Divest Selectivity 0 0 333 666 1000 39 Competitiveness Strategic Implication 5: Increase competitiveness for the most attractive opportunities 1000 Hold/ Grow/ Grow/ Selectivity Invest Invest 666 Harvest/ Hold/ Grow/ Attractiveness Divest Selectivity Invest 333 Harvest/ Harvest/ Hold/ Divest Divest Selectivity 0 0 333 666 1000 40 Competitiveness Strategic Implication 6: Attractiveness may sometimes be improved through refined segmentation 1000 Hold/ Grow/ Grow/ Selectivity Invest Invest 666 Harvest/ Hold/ Grow/ Attractiveness Divest Selectivity Invest 333 Harvest/ Harvest/ Hold/ Divest Divest Selectivity 0 0 333 666 1000 41 Competitiveness Summary Value of a market opportunity = Attractiveness x Likelihood of success Factors that may influence the inherent attractiveness of a market and your likelihood of success GE/McKinsey Matrix 42 Positioning 43 Positioning After you have made the decision about which market segment to target, you need to consider your positioning in the target market segment. Positioning requires 4 key decisions within the target segment: Select customer targets Frame competitor targets Design the value proposition Articulate reasons to believe 44 Positioning 45 Select Customer Targets Three issues are important in selecting customer targets Choosing the distribution system Targeting levels within the distribution system Targeting specific person types/roles 46 Select Customer Targets Choosing the distribution system: Identifying the appropriate distribution system to reach consumers/end users E.g., A component manufacturer A. The company → Finished-goods manufacturers B. The company → subassembly manufacturers → finished goods manufacturers C. The company → distributors → subassembly manufacturers → finished goods manufacturers How should you determine which distribution system to use to reach your customers? 47 Select Customer Targets Targeting levels within the distribution system: Deciding which distribution levels to target for effort 48 Select Customer Targets When Mattel introduced Barbie at the 1959 Toy Fair, retail buyers were not interested. Mattel later launched Barbie directly with TV advertising. Did Mattel use push or pull strategy? 49 Select Customer Targets Targeting specific person types/roles Which stage of gaining consumer insights is relevant here? Considerations in customer targeting: Reachability: Sometimes target customers are easy to identify but it is difficult to gain access to them (e.g., procurement personnel block access to other individuals in B2B businesses) Obvious vs. creative targets: Multiple competitors may target the obvious customer targets Influentials: Customer targets may be decision makers or anyone who exerts significant influence on the buying decision Personally benefits but does not pay: The ideal customer target has significant influence and personally benefits from the purchase, but does not pay (Why?) 50 Positioning 51 Frame Competitor Targets Competitor targets may be current and/or potential competitors, and/or direct and/or indirect competitors. Two categories of competitors: Competitors to avoid Competitors you are happy to face Subtlety in competitor targeting: The most effective competitor targeting may not be obvious Who benefits the most from designating major account firms as the Big 4? Why does Visa advertise that many restaurants globally accepts Visa cards but few accept AmEx? 52 Positioning 53 Design the Value Proposition Provides an answer to the question “Why should target customers prefer the firm’s offer to those of competitors?” Select the “platform” to position your brand “What do we want the target customer to remember about us?” “What aspect of our offering do we want to highlight?” It’s about what unique and superior aspect of your product you want to highlight 54 Platform Types Benefits Product user Use/application Against competitors 55 Platform Types – Benefits Associating a product with a benefit. 56 Platform Types – Product User Highlights the user (the ideal or representative target consumer) and suggests that the product is the ideal solution for that type of person and may even contribute to their social self-identity. 57 Platform Types – Use/Application Positions the product in terms of how it is used in the market by consumers. “You never actually own a Patek Philippe. You merely look after it for the next generation.” 58 Platform Types – Against Competitors Directly compare (or sometimes just imply), a comparison against certain well-known competitors (e.g., Avis vs. Hertz) 59  Platform Types – Against Competitors Discussion: 7-Up can potentially target different competitors and use competitive targeting in their positioning. Brainstorm some positioning alternatives for 7-up against competitors. Competitive Competitive Claim Claim Type Level/Category One lemon-lime soda “7-Up tastes better than Comparison against direct substitute Sprite” competitor The whole lemon-lime “7-Up, the best tasting Product-form superiority product form lemon-lime soda” The cola product form “7-up, the Uncola” Out of product form All beverages “7-up, the real thing, the Implied or claimed only one,” etc. uniqueness 60 Platform Selection Criteria Breadth of appeal: How many consumers will think of this difference when they consider different options? (i.e., the importance of this difference) Motivational power: Will consumers care about this? How much will consumers be willing to pay for this difference? Credible superiority: Will this difference make you superior to other substitutes/competitors? 61 Platform Selection Criteria (Con’d) Feasibility: Do we have the capability to deliver on this positioning promise? Communication: Is the positioning statement easy to communicate via media? Can it be simply understood by the target market? Sustainability: How easily could this position be duplicated by our competitors? Will it be cared about in the future? 62  Tool: Platform Evaluation Worksheet Platform Evaluation Criteria Platform Breadth of Motivational Credible Communicati Feasibility Sustainability appeal power superiority on 63 Platform Evaluation for Harley Davidson Platform Evaluation Criteria Platform Breadth of Motivational Credible Communicati Feasibility Sustainability appeal power superiority on Power ✓ ✓  ✓   Design ✓ ✓ ✓ ✓ ✓  Rebellious ✓ ✓ ✓ ✓ ✓ ✓ identity 64 Platform Evaluation for Harley Davidson 65  Articulate Reasons to Believe Determining the reasons-to-believe statement is an essential component of positioning. Scientific evidence Independent testing Prior performance Testimonial Proven competencies Examples: Citibank: Vast network of branches around the world Cisco: Technical expertise in routers and many successful installations In real life: If you realize that product quality is an important customer driver, should you highlight PQ in your positioning? 66 Develop Positioning Statements Your positioning statement must clearly distinguish your firm’s offer from competitor offers. It should: Convince customer target In the Context of Alternatives competitor target That they will receive these benefits and values value proposition Because we have these capabilities/features reasons to believe 67 Positioning Analysis and Modification Perceptual Analysis Positioning Position Modification 68 Perceptual Analysis Objectives: To understand consumers’ perceptions of your own brand versus your competitors’ brands Tools Perceptual map Limitation: Only account for some variances of decisions Multiattribute Modeling 69 Semantic Scales in MarkStrat The semantic scales study provides data based on a semantic differential questionnaire administered to 600 individuals. Several semantic scales corresponding to the physical attributes were presented to the respondents. Crucial information is derived from these questionnaires: brand perceptions, ideal value along each scale, ideal value evolution, brand maps and relationship between brand attributes and brand perceptions. 70 Semantic Scales in MarkStrat 71 Semantic Scales in MarkStrat 72 Semantic Scales in MarkStrat 73 Semantic Scales in MarkStrat How is the evolution of ideal points estimated? 74 Multidimensional Scaling in MarkStrat This study provides a joint space configuration obtained with multidimensional scaling. It relies on similarity and preference data on the complete set of brands available in the market. Information provided: brand perceptions, ideal value along each dimension, ideal value evolution, perceptual maps, influence of product characteristics on perceptual dimensions, and relationship between physical characteristics and brand perceptions. 75 Multidimensional Scaling in MarkStrat 76 Multidimensional Scaling in MarkStrat 77 Multidimensional Scaling in MarkStrat 78 Multidimensional Scaling in MarkStrat 79 Multiattribute Modeling in Positioning Identify key competitors Determine decision criteria in different market segments Assess importance weights in each market segment Assess each competitor (including yourself) on each criterion (0-10) 80  Example: Airlines to BKK Criteria Weight Weight Cathay Thai Air Asia (Backpackers) (Business) Pacific Airways Price 45 10 5 6 10 Safety 25 35 10 8 7 Timing 20 30 9 10 5 Food 5 10 9 8 3 Comfort 5 10 8 8 5 Entertainment 0 5 10 8 3 81 Positioning Perceptual Analysis Positioning Position Modification 82 Position Modification Options Improve your own ratings Hurt competitors’ ratings Change weights Introduce new criteria →Use multiattribute modeling and perceptual map to simulate effects 83 Common Positioning Error Underpositioning When customers have only vague ideas about the company and its products and do not perceive anything distinctive about them Overpositioning Customers have too narrow an understanding of the company, product, or brand Confused positioning Frequent changes and contradictory messages confuse customers Doubtful positioning Claims made for the product or brand are not regarded as credible 84 Positioning Summary The real marketplace is mental 4 key elements of positioning Design positioning with perceptual map and/or MAM Platform selection criteria: Breadth of appeal, motivational power, credible superiority, communication, feasibility, and sustainability Four repositioning options Common positioning errors 85 Strategic Focus 86 Some Common Tradeoffs in MarkStrat (and in Real Practice) “Our firm wants to upgrade our product design so that we can sell more, but R&D projects cost a lot of money” “Our firm wants to have a tighter control over marketing spending and have better financial outcomes, but that makes our product less visible in the market” 87 Tradeoff Sales Volume & Profit Margins Growth 88  Major Types of Marketing Strategies Long-term Profit Sales Volumes Profit Margins & Growth Customer Marketing Cost Share Increase Share Defense Selectivity Reduction Market Business Sales Mix Price Increase Development Expansion Improvement 89 Sales Volume & Growth Oriented Strategy Discussion: What would you do to stimulate sales? Share increase strategy Share defense strategy Market development Business expansion 90  Major Types of Marketing Strategies Long-term Profit Sales Volumes Profit Margins & Growth Customer Marketing Cost Share Increase Share Defense Selectivity Reduction Market Business Sales Mix Price Increase Development Expansion Improvement 91 Share Increase Strategy To increase sales by attracting buyers from rival brands, through significant spending on marketing mix variables What strategies can be used to increase market share? 92 Share Increase Strategy - Product New product development Multiple brands 93 Share Increase Strategy - Product New product development 94 Share Increase Strategy – Product 95 Share Increase Strategy – Promotion and Distribution Increase in advertising spending Other product promotion activities Access to more channels Prominence in distribution channels 96 Share Increase Strategy – Promotion and Distribution Other promotion activities such as discounts and bundle offers 97 Share Increase Strategy – Access to More Channels 98 Share Increase Strategy – Prominence in Distribution Channels E.g., Slotting fee in retail stores 99 Share Increase Strategy – Prominence in Distribution Channels E.g., Amazon Sponsored Products 100 Share Increase Strategy – Competitor Acquisition Acquire the company/brand owned by the competitor 101 Share Defense Strategy Pre-emption of market entry (making it hard for the competitors to enter the market) Offering special offers to existing customers To consumers who financed a new GM car, GM offered identical financing for a second new car purchased within the financing period. 102 Market Development & Business Expansion Strategy Targeting customers in other substitute product categories 103 Profit Margin-Oriented Strategy Discussion: What would you do to increase profit margins? Price increase strategy Sales mix improvement strategy Marketing cost reduction strategy Consumer selection strategy 104  Major Types of Marketing Strategies Long-term Profit Sales Volumes Profit Margins & Growth Customer Marketing Cost Share Increase Share Defense Selectivity Reduction Market Business Sales Mix Price Increase Development Expansion Improvement 105 Marketing Cost Reduction Strategy Downsizing Reengineering work process Outsourcing internal operations Cutting back on advertising and other promotional expenses 106 Consumer Selection Strategy Target profitable consumers: by usage rate; by loyalty; by price sensitivity; by cost of servicing Harvesting/Divestment Differentiated or niche marketing 107  Consumer Selection Strategy Whole Foods occupied 1.2% of the grocery market in the US (Walmart: about 15%); Whole Foods focuses on the wealthier and more health-conscious consumers, although this market is relatively small 108 Price Increase Strategy Commonly used by firms with monopoly-like positions Cashing out money from WeChat Pay or Alipay account used to be free. However, after obtaining dominant positions in the market, they changed their policy and now charge 0.1% transaction fees. 109 Price Increase Strategy Also used by some seasonal products 110 Sales Mix Improvement Strategy Many firms add services or offer additional features, trying to persuade customers to trade up to more expensive offers with higher profit margins 111 Sales Mix Improvement Strategy Many firms add services or offer additional features, trying to persuade customers to trade up to more expensive offers with higher profit margins 112 Strategic Focus Summary Two types of marketing strategies Volume & growth Profit margins Trade-off between the two main types of strategies is common Within each type of strategy, strategic options are not mutually exclusive Your strategic focus in MarkStrat 113