Marketing Strategy: Customer Perspective PDF

© Kyryl Lakishyk - Católica Lisbon School of Business and Economics  -Karl von Clausewitz, Prussian general and military theorist...

© Kyryl Lakishyk - Católica Lisbon School of Business and Economics  -Karl von Clausewitz, Prussian general and military theorist On War (1832) © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Military context → decisions and actions to achieve relative superiority over opponents. Management scholars added two elements to apply the strategy concept to business: the need to make the differential advantage sustainable and the idea that the objective of any business strategy is to enhance firm performance (60 and 70s) Marketers argue that it must be from the perspective of the customer (90s) © Kyryl Lakishyk - Católica Lisbon School of Business and Economics   Customer ultimately determines strategy’s success or failure  The shift in focus from firm to customer by incorporating the customer’s perspective represents a natural, long-term progression in strategy. › Economists tend to take an industry-level perspective, and management scholars adopt a firm-centric perspective, but customer is an even smaller unit of analysis. Customers › Helps explain variation in firms’ performance by addressing smaller and smaller units of analysis Competitors  Customers represent the fundamental unit of analysis for marketing Context strategy, because each individual customer is an independent, The 5-C Framework decision-making entity. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Thus, five key elements are critical to marketing strategy: › Customer perspective › Leads to a differential advantage over competitors › Sustaining the advantage over time › Ability to enhance firm performance › Guides decisions and actions Marketing strategy consists of decisions and actions focused on building a sustainable differential advantage, relative to competitors, in the minds of customers, to create value for stakeholders. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  → Needs Wants Demand Derived from states of Form that needs take as Demand includes only deprivation they are shaped by those consumers who Physical—food, society, culture and have the desire (want) clothing, warmth and individual personality. for particular objects, safety and have access and Social—belonging and → Benefits resources (buying power) to obtain it. affection Wants are usually described Individual—knowledge in terms of objects that will and self-expression satisfy needs by providing benefits. → Attributes Benefits are supported by © Kyryl Lakishyk - Católica Lisbon School of Business and Economics attributes.... and don’t always behave as we would expect them to behave. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  › Different consumers interpret the world (marketing mix) differently, thus displaying different perceptions. › Different preferences lead to various modes of behavior › Marketing’s objective is to study and understand this relationship and leverage it to the benefit of both the firm and consumers. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics   Customer heterogeneity is the fundamental “problem” that all firms must address when developing an effective marketing strategy  Assuming all customers are the same is a recipe for failure, at least in the long term, as competitors will better satisfy subsegments with more aligned offerings, leading to a downward spiral in which the firm has fewer, less profitable customers that are more costly to serve The assumption is that all customers differ and that an effective marketing strategy must manage ever-present customer heterogeneity. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Individual differences Life experiences Functional needs Self-identity/image Marketing activities © Kyryl Lakishyk - Católica Lisbon School of Business and Economics 10  A person’s stable and consistent way of responding to the Favorite colors, Big 5 personality traits (openness, environment in a specific domain conscientiousness, extraversion, agreeableness, neuroticism) An individual’s life experiences capture events and A child raised closer to the equator, in warmer climates, will experiences unique to his or her life that have lasting impact typically have a higher preference for spicy foods, as a carryover of on the value and preference he or she places on products past generations when spices were used to preserve and help and services, which in turn affects preferences independent mask the taste of food more likely to spoil in warmer climates of individual differences What price can they afford to pay (income), how long does the An individual’s personal decision weightings across product need to last (quality, warranty), when will they use the functional attributes based on his or her personal product (battery powered, size), and are there any special usage circumstances features that they need (waterproof)? Motorcycle riders often wear leather (functional and image driven,) Customers actively seek products that they feel will support and Goths like the color black because of their desire to identify or promote their desired self-image with the image of a specific user or social group BMW paid $25 million to have James Bond drive a BMW in the Firms’ attempts to build linkages between their brands and movie Skyfall, based on the belief that Bond’s image would be prototypical identities or meanings aspirational to many potential target customers (e.g., men aged from 30 to 50 years) © Kyryl Lakishyk - Católica Lisbon School of Business and Economics Source: Palmatier, 2017  Segment Segment Potential customers Niche Segment segment Mass marketing, which Niche marketing, which One-to-one marketing, shift utilized mass media to concentrated all marketing efforts towards tailoring of one or more appeal to an entire market on a small but specific and well- aspects of the firm’s marketing mix with a single message defined segment of the population to the individual customer Media Few national channels Many online channels (narrowcasting) Manufacturing Large batch manufacturing Modular manufacturing/digital printing Communication Phone/direct mail Internet/social media © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  In order to better match heterogeneous customer needs, firms focus their efforts on small “homogenous” customer groups : Dividing market into groups of similar customers (slice the pie into pieces) : Selecting best customer group to sell to (picking the slice to eat) : Improve your relative advantage in the minds of your targeted customers © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Consists of dividing the market into groups of customers where: Customers within group have very similar needs Customers across groups have different needs Needs: Needs and benefits desired by customers for your offering Segment on needs/benefits not descriptors Descriptors: Observable customer characteristics that help you find and classify customers (e.g., gender, age, income, size, education, etc.) © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Segmentation - Targeting - Positioning Prof. Kyryl Lakishyk © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  A. Irrelevant B. Heterogeneous C. Not exclusive D. Not exhaustive © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  1. Identify and refine “pool” of potential customers needs and descriptors (qualitative research) 2. Collect data from random assortment of potential customers on the “importance” of needs/benefits to purchase decision 3. Use “needs/benefits” to segment the market into 3 to 7 homogeneous customer groups Often need to group like questions together using factor analysis before clustering customers # segments based on results, ability to manage, and actionable 4. Use descriptor variables to characterize the segments 5. Name segments (communication tool) © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Factor analysis is a data reduction technique that can be used to identify a small number of latent “factors” that explain the major variation in a large number of observed variables. Cluster Analysis: considering consumers’ importance weights on important attributes of choice and then clusters them into groups where: within group variation on preferences for attributes is low across group variation on preferences for attributes is high Discriminant Function Analysis: predict to which segment a customer will belong based on their descriptors © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Look for high quality, high- Highly interested in Like premium quality performance and easy-to- Sonite product. products, and price use products Demand high can be seen as an Can afford expensive performance products indication of quality products Quite price sensitive Tech dependent, have good product knowledge through Value performance and extensive product comparison. convenience Demand high quality–price ratio. But very price sensitive 59 © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Archetypal Segmentation: the process of analyzing consumer characteristics to identify extreme types (AKA archetypes). › All customers then identified as a mixture of the archetypes MORRIS, L., SCHMOLZE, R. (2006), Consumer Archetypes: a New Approach to Developing © Kyryl Lakishyk - Católica Lisbon School of Business and Economics Consumer Understanding Frameworks, Journal of Marketing Research, 46, 289-300.  Describing segments using a persona that represents each segment ? ? ? © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  The consumers allocated to each segment should be similar in some relevant way Some form of data should be available to measure the size of the market segment The market segment should be large enough, in terms of sales and profitability, to warrant the firm’s possible attention The market segment should be reachable, particularly in terms of distribution and communication The firm needs to be able to implement a distinctive marketing mix for each market segment Each market segment should respond better to a distinct marketing mix, rather than a generic offering © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Strategic Tactical targeting targeting Value - Channel - based analysis based analysis © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Segment A (target) Segment B (target) Segment C (non-target) Offering A Offering B © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Customer value Value Company value Strategic targeting Target Customer customers identification Customer demographics Profile Customer behavior Tactical targeting © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  1. Size of the segment 1. Market potential, current market penetration 2. Growth of the segment 2. Growth forecasts based on past data and trends 1. Barriers to entry, barriers to exit, position of 1. Competition competitors, ability to retaliate 2. Segment saturation 2. Gaps in the market 3. Insulation from Competition 3. Patentability of products, barriers to entry 4. Environmental Risk 4. Economic, political and technological change 1. Fit with company resources 1. Coherence with company’s strengths and image 2. Relationship with other 2. Synergy, cost interactions, image transfers, segments cannibalization 3. Profitability 3. Entry costs, margin levels, return on investment © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Using descriptors that correspond to benefits sought by the consumers is key to effective segmentation and targeting. “Slice-of-the-pie” “Sniper” “Shot-in-the-dark” targeting targeting targeting (too narrow) (optimal) (off base) Specifying a target based on descriptors Focusing on a wrong observable too narrowly, while excluding some consumer profile (who do not find our consumers whose needs/wants would offering valuable). match our benefits. Value-based segment (unobservable) © Kyryl Lakishyk - Católica Lisbon School of Business and Economics Profile-based segment (observable) © Kyryl Lakishyk - Católica Lisbon School of Business and Economics   Coca-Cola has adopted a new branding strategy (use of brand elements) across all of its products, with a more dominant role of red.  Individual variants no longer have their own identities and are considered flavors of one brand – Coca Cola. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Not finding descriptors that help describe the profile of consumers who will value our benefits may lead to wasted marketing spending. Specifying target consumers too broadly on the observable descriptors. The profile includes consumers who don’t want/need the value we’ve designed. “Sniper” “Shotgun” targeting targeting (optimal) (too broad) Value-based segment (unobservable) Profile-based segment (observable) © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Strategic Tactical segmentation segmentation (profile-based) (value-based) Group customers Identify the behavioral, into segments based demographic, and on their needs and psychographic profile of resources strategically viable customers All potential Channel A Channel C Strategic customers targeting Channel B (entire market) (value-based) Tactical targeting Identify a customer need that (profile-based) the company can meet better Identify effective and cost- than the competition in a way efficient channels to reach that creates value for the strategically viable customers company and its collaborators © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Positioning Reasons Value to choose (needs/ (benefits, wants) attributes) Developing a value proposition Identifying target consumers © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Your view of brands Brand Brand Brand Brand Their view of your brands A B C D Attribute 1 ? Brand Brand Brand Brand A D C B Brand Attribute 2 Brand B Brand Brand Brand Brand C Brand ? C A B D D Attribute N Brand A © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Perceptual/Positioning Map: a spatial representation of the perceptions consumers in your target market have about you and/or your competitors on the relevant attributes for choice Gentleness Panasorb Panadol Ben-u-ron Effectiveness Bayer Aspegic Brufen © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  May be used to present consumer preferences (ideal attributes) Gentleness Segment 2 Segment 1 Effectiveness © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Perceptual/Positioning Map: The slope of the ideal vector here indicates the preferred ratio of the two dimensions by the consumers within each segment. Gentleness Segment 2 Panasorb Panadol Ben-u-ron Segment 1 Effectiveness Bayer Aspegic Brufen © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  May be used to represent ideal points of the consumers preferences. Gentleness Segment 2 Segment 1 Effectiveness © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Perceptual/Positioning Map: The slope of the ideal vector here indicates the preferred ratio of the two dimensions by the consumers within each segment. Gentleness Segment 2 Panasorb Panadol Ben-u-ron Segment 1 Effectiveness Bayer Aspegic Brufen © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  1) Markstrat uses an ideal point model. GenX Prof 2) Ideal points evolve over time 3) Important to balance NEED 1 Mil GenZ positioning between needs (MDS) and benefits/attributes (Semantic Scale) Boom NEED 2 © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  NEEDS: Economy, Performance, Convenience, Flexibility … © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Purchase funnel and customer journey are similar ideas, but they mean different things. HOW AND WHEN TO WHAT IS THE MAIN CONNECT WITH THE OBJECTIVE? TARGET? © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  A Customer Journey Map is a visualization framework, designed to highlight a customer’s experience, from their first pain point to contact with your brand, to sale, and further beyond. Using personas for this is key to understanding the customer experience © Kyryl Lakishyk - Católica Lisbon School of Business and Economics https://www.forbes.com/advisor/business/software/customer-journey-map/  Travel Agency Services © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics Source : Competing on Customer Journeys, Edelman & Singer, Harvard Business Review, November 2015 © Kyryl Lakishyk - Católica Lisbon School of Business and Economics Source : https://go.forrester.com/blogs/16-09-30-how_do_buyer_journeys_relate_to_the_customer_life_cycle/ © Kyryl Lakishyk - Católica Lisbon School of Business and Economics Source : Dave Chaffey, Fiona Ellis-Chadwick (2015), Digital Marketing: Strategy, Implementation and Practice, Pearson, 6th Edition  AWARENESS CONSIDERATION This is an overview of PREFERENCE steps a customer goes PURCHASE through when considering, TRIAL / CONSUMPTION purchasing, using, and USER maintaining loyalty to a EXPERIENCE REPURCHASE product or service. LOYALTY ADVO CACY © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Awareness – Extent to which a product is recognized by potential consumers and is correctly associated with a particular product. AWARENESS Consideration – Consumer evaluation of how your offering meets this need, including the evaluation of offerings from your competitors. Preference – A consumer’s logical and emotional INTEREST inclination towards one solution or another, ultimately leading to a purchasing decision. Purchase intention – Consumers will intend to purchase the product if they can find it Market share – Consumer has bought your product. ACTION Loyalty – Likelihood that previous consumers will continue to buy your product. ENGAGEMENT Advocacy – Consumers will promote and recommend your product. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  We can’t evaluate our situation by looking only at our market share and/or sales. SCENARIOS #1 #2 #3 #4 Awareness 50% 75% 80% 100% Intention 40% 35% 28% 20% Availability 100% 77% 90% 100% Market Share 20% 20% 20% 20% © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  We can’t evaluate our situation by looking only at our market share and/or sales. SCENARIOS #1 #2 #3 #4 Awareness 50% 75% 80% 100% Intention 40% 35% 28% 20% Availability 100% 77% 90% 100% Market Share 20% 20% 20% 20% © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  This study is made on N respondents. Let’s assume that N = 1000. The study starts with a number of questions to determine what segment the respondents belong to. Let’s assume that our 1000 respondents are all the same segment. QUESTION: “What SONITE (Vodite) brands do you know ?” Respondents can list several brands. Number of respondents aware of: The study will summarize this information for each segment: SONG only 348 Brand Awareness (% of respondents aware of) 549 respondents –SONG 54.9% MOST only 78 are aware of SONG. –MOST 21.4% TOLL only 68 –TOLL 19.3% SONG’s SONG & MOST 95 Brand Awareness Keep in mind: SONG & TOLL 83 level is 54.9% –Awareness does not sum to 100%. MOST & TOLL 19 –Sum of awareness is usually lower than 100% at the early stage of the market. SONG & MOST & TOLL 23 –Sum of awareness is much greater than 100% when the market is developed. Not aware at all 287 –Even if sum of awareness is greater than 100%, it does not mean that Total 1000 1000 all consumers are aware of at least one SONITE and/or Vodite. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  This study is made on the same N respondents; awareness and PI are in the same study. QUESTION 1: “Do you intend to purchase a Sonite (Vodite) during the next 12 months?” QUESTION 2: “If yes, what brand do you intend to buy?” Respondents can only choose one brand. Let’s assume that the responses are: QUESTION 1: 240 out of 1000 respondents intend to purchase SONITE. The study summarizes this information by segment: QUESTION 2: out of these 240 respondents: –34 intend to purchase SONG, Purchase Intentions (% of respondents intending –26 intend to purchase MOST to purchase) –180 intend to purchase TOLL –SONG 14% We see that only 18% (180/1000) of respondents intend to purchase –MOST 11% TOLL –TOLL 75% But the PI published for TOLL is not 18% but 75% (180/240). This TOTAL 100% means that 75% of the respondents who intent to purchase a SONITE have chosen TOLL © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  You may want to calculate the “share of preference” for the brands. This tells you what consumers would choose during a focus group, where products are presented to respondents To calculate preferences, you must eliminate awareness from the equation. All you have to do is to divide PI by Awareness and then the sum of the obtained numbers to normalize to 100%. Brand Purchase Normalized Awareness Intentions PI/BA to 100 SONG 54.90% 14% 0.255 5.5% As you can see, TOLL is by far the MOST 21.40% 11% 0.514 11.0% preferred product. Its PI is lower than 83.5% because its awareness level is lower TOLL 19.30% 75% 3.886 83.5% than that of other marketed SONITES 4.655 © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Some businesses break their marketing funnel down into smaller stages. Others claim that marketing has evolved, consumers interact with many different touchpoints: the marketing funnel is no longer relevant because the buying process is no longer linear. Of course, the traditional sales funnel needs to be adapted to the firm’s sector and customers’ consumption habits. Nevertheless, it remains a robust model to set strategic objectives. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  MARKETING STRATEGY: A Decision-Focused Approach Chapters 6-7 © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Planning for Market Entry and growth Prof. Kyryl Lakishyk © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  The overall scope and direction of a firm and the way in which its various business Tax & Legal operations work together to achieve particular goals. Finance Both Corporate and HR Marketing strategy Operations R&D influence human resources, operations, and R&D. Decisions and actions focused on building a sustainable differential advantage, relative to competitors, in the minds of customers, to create value for stakeholders. Sales & Marketing © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Positioning and Marketing Mix © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Consider the relative size of Rogers’ innovation adoption segments as a guide for new technologies Mean time of adoption → Decreasing tolerance of risk → © Kyryl Lakishyk - Católica Lisbon School of Business and Economics Source: Everett Rogers: The Diffusion of Innovations, 1962  Demand (units) peaks at maturity Marketing Profits ($) peak in late growth Losses/ Investments ($) Sales and Profits Over the Product Category's Life: from Inception to Demise © Kyryl Lakishyk - Católica Lisbon School of Business and Economics   with different propensity to adopt innovations (customer heterogeneity)  imitate each other and opinion leaders (diffusion of innovations)  induces product life cycle (endogenous or supply side): › PLC is a dependent variable that is influenced partially by the strategy of all firms (“supply generates its own demand”); › By adapting the strategy to the PLC stage firms change the growth pattern of sales through their marketing programs; › Therefore marketing strategy and marketing programs change the shape and duration of product and brand PLC. Mean time of adoption → Decreasing tolerance of risk → © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Growing, Lager Players None to limited Intense Concentrating and contracting attracted Assortment and Verity One to limited Proliferation Contraction, Consolidation increasing Unsophisticated, More sophisticated; More Price Conscious Price Dominant uneducated, unaware demanding increase Broad Emergence Clarification Agglomeration Differentiate by new Commoditization of core Core Product Benefits Core benefits migrate attributes (delighters), benefits; differentiate by new drive choice toward “must haves’ copycats non-core attributes Limited Availability; Mass, Discount and More limited, Discount and Broader Distribution Specialty Direct direct; © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics Timeline of iPhone Models https://support.apple.com/en-us/HT201296 © Kyryl Lakishyk - Católica Lisbon School of Business and Economics Timeline of iPhone Models https://support.apple.com/en-us/HT201296 *Available since iPhone 5S (2013) © Kyryl Lakishyk - Católica Lisbon School of Business and Economics Kano, N., Takahshi, F & Tsuji, S. (1984). © Kyryl Lakishyk - Católica Lisbon School of Business and Economics Attractive quality and must-be quality. The Journal of the Japanese Society for Quality Control, April, pp. 39-48.  Education and Maximize market Maximize profits; Milk the brand Awareness share Defend share Diversify brands and Improve quality; Phase out the Establish quality models, differentiate Service, warranty weak offerings on features Skimming or Several price points Price to match Cut price Penetration (with reduction) Selective Intensive More intensive Go selective Awareness, Awareness w/ mass Reduce to Stress brand, highlight educate on needs market, minimal, new attributes early adopters differentiated benefits Reminder © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Chief managerial criticism of PLC approach: ▪ You can’t predict well how long the cycle will stretch ▪ You can’t tell where you are until you’ve been there It is tempting to apply PLC concept to brands, but it makes more sense to apply to product categories (“automobiles”), industries (“internal combustion engine cars”) Knowing where you are in the PLC gives you a “conventional wisdom” for marketing strategy → Reduces the vast number of alternative strategies You can diagnose the stage you are in by looking around… © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  › We have a defensible patent › We don’t see any other providers in the market › Our chief problem is meeting demand › We see “new entrants” into our turf › We observe a lot of advertising based on features › The industry players are well-known › We observe a lot of competition on price and sales promotion deals › Competing technologies have been announced › Pricing is brutal, with “irrational players” © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  First choice of market segments and positions Pioneer may influence customer choice criteria Economies of scale and experience Communication and Distribution advantages High switching costs for early adopters Possibility of positive network effects Possibility of preempting scare resources © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Take advantage of pioneer’s marketing mistakes: Positioning, product benefits, communication Take advantage of latest technology Take advantage of pioneer’s limited resources (if not entrenched) © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Relatively established drivers of consumer choice Ability to avoid direct competitive confrontation Ability to serve niche markets Provide service/support above levels large market players © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  –What is currently the highest price in the Sonite market ? –The Sonite market has existed for several years. What was the price of the very first Sonite10 or 15 years ago? –How many Vodite brands do you expect on the market next period? In 2 periods ? In 3 periods? –Use the benchmarking study: a team having spent more than $7 Mil likely to launch a Vodite –How does this translate in terms of market share? –What is the base cost of your Vodite project? –With a distribution margin of 40%, what should be your price to make a decent contribution margin? –Do you expect your Vodite brands to be more or less profitable than your Sonite brand? –What is your objective in term of total contribution from Vodites over the next 3 years: $10m? $50m? $100m? –Do you expect a price pressure from consumers? –What happens usually with new technologies? –Will additional competition reduce or reinforce this pressure on price? © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  INNOVATORS EARLY EARLY LATE LAGGARDS ADOPTERS MAJORITY MAJORITY © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Potential consumers are not aware of ▪ Poor Awareness the product/don’t understand the benefits ▪ Unrecognized need ▪ Lacks performance ▪ Prices too high Products are not attractive enough ▪ Hard to use ▪ Not Available Regardless of attractiveness, potential customers are not able to afford the product. Potential customers are aware and have the intention to buy, but it is not available to them. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Latent (Hidden) customer heterogeneity: potential differences in desires that are unobserved and have not been manifested in customer purchase preferences or behaviors yet Latent customer heterogeneity can stem from several constraints: › Legal constraints (government regulations, patents) › Economic constraints (prohibitive prices, due to the size of the market or the costs of providing) › Technological constraints (only known way to make something) › Innovation constraints (no firm has yet identified and satisfied the need) © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Situation Analysis, Goals and Objectives Prof. Kyryl Lakishyk © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Strategy is framed by choice: what will we choose to do, and what will we choose NOT do? Success is built on capability: how will we put in place people, processes and systems? Lafley, A. G., & Martin, R. L. (2013). Playing to Win: How Strategy Really Works. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics Harvard Business Review Press.  To inspire humanity – both in To accelerate the world's To create a better everyday life the air and on the ground transition to sustainable for the many people energy © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Situation Assessment The 3Cs remind us that …the resources of the Company......should be aligned to delight Customers......to beat the Competition © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Spontaneity Assertiveness Caution Control © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  DRIVER/DIRECTOR/ AMIABLE/SOCIALIZER/ EXPRESSIVE/PROMOTER ANALYTICAL/ANALYZER CONTROLLER COLLABORATOR/RELATOR Answer questions COMMUNICATING Slow down-give support and assurances Provide more facts than you may want to Use your natural style Be open and friendly DRIVER Don’t stress variables or alternatives Encourage evaluation WITH… Don’t let egos clash Take time to socialize To bring communication to a conclusion, Be patient Be prepared for a tough contest to win another Driver to Show personal benefits and recognition to persuade make decisions easy for Amiable and To close, be firm, polite and decisive after your side the Expressive reassure that decision presenting facts allowing adequate evaluation time Be formal and to the point Keep your distance: no touching Be factual; give more facts than you like COMMUNICATING EXPRESSIVE Don’t joke or waste time Earn their trust Don’t try to impress Analytical with your Let Driver feel important Don’t compete for recognition Don’t overly socialize importance WITH… Avoid being apologetic Stick to business Give plenty of support material Don’t bluff answers Don’t fell rejected by the possible bluntness of the Driver Be sure to focus on a commitment to action Give and testimonials Don’t touch; keep your distance Don’t compete for recognition Be polite and reassuring To persuade, be direct and confident after all Stick to business question and answered Be sure to focus on a commitment to action Accept the openness and friendliness of Will relate well with other Amiables COMMUNICATING Be yourself, but confident Expressives Be assuring with them, but also confident Answer questions confidently AMIABLE Recognize and accept the Driver’s aggressive style Be friendly but don’t let them waste a lot of your WITH… and assertive Give the facts they want Refuse to be intimidated time Don’t wait for them to be totally comfortable Refuse to let their perpetual skepticism Be confident and get to the point sooner and more Don’t bog them down with details to press for decision-just provide assurances discourage you forcefully than you feel comfortable with Conclude by appealing to the personal ego-do it that it is the right one more quickly than you like to Don’t try to be impressive with excessive facts and figures; Try to be friendly and fun COMMUNICATING ANALYTICAL Be friendly; earn Amiable’s trust Give bottom line answers Be excited about new ideas Keep control Slow down on the facts; allow Amiables to WITH… Concentrate on high points Sell to the person not the features Be friendly digest them Get excited about new ideas Don’t bog them down with details Present both sides Avoid getting too detailed Appeal to the individual’s ego, Close before you feel all the necessary facts are Close earlier than you feel comfortable doing Conclude with assurances Not onLisbon © Kyryl Lakishyk - Católica the merits of of School theBusiness proposal, andproduct, or service- Economics disclosed difficult for Analyticals  What the organization is good at doing, important capabilities What an organization lacks or does poorly relative to other organizations Developments or conditions in the environment that have favorable implications for the organization Pose dangers to the welfare of the organization © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Management Economic Marketing Competition Manufacturing Consumer R&D Technology Finances Legal/Regulatory Product Industry/Market Offerings Structure © Kyryl Lakishyk - Católica Lisbon School of Business and Economics   Look for causes, not characteristics: Rather than simply list characteristics of the firm’s internal and external environments, as an analyst, you should also explore the resources possessed by the firm and/ or its competitors that are the true causes of the firm’s strengths and weaknesses.  Examine issues from the customers’ perspective: Evaluate the perceptions of each customer segment that the firm attempts to target.  Be focused: A single, broad analysis leads to meaningless generalizations. Instead, separate analyses for each product– market combination. You should still put it all together in the same matrix. For example, “poor product fit” should be identified for a specific market, not broadly, as a whole.  Search extensively for competitors: Although major brand competitors are the most important, the analyst must not overlook generic competitors that address the same need. Potential future competitors must also be considered.  Separate internal issues from external issues: If an issue would exist even if the firm did not exist, the issue should be classified as external. In the SWOT framework, opportunities (and threats) exist independently of the firm and are associated with characteristics or situations present in the economic, customer, competitive, cultural, technological, political, or legal environments in which the firm resides. Marketing options, strategies, or tactics are not a part of the SWOT analysis.  Collaborate with other functional areas: SWOT analysis is an opportunity to share information and perspective across departments. This cross-pollination of ideas allows for more creative and innovative solutions to marketing problems. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics   Firms in this position can develop marketing strategies to aggressively take on multiple opportunities.  Expansion and growth, with new products and new markets, are the keys to an aggressive approach.  Firms are often so dominant that they can actually reshape the industry or the competitive landscape to fit their agenda. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics   Firms in this position have a great deal to offer, but external factors weaken their ability to pursue aggressive strategies.  To help offset these threats, firms can use marketing strategy to diversify their portfolio of products, markets, or even business units. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics   Often temporary, firms having too many internal problems to consider strategies that would take advantage of external opportunities.  Typically, firms must ‘put their own house’ in order before looking beyond their current products or markets.  Firms take a defensive posture when they become overwhelmed by internal and external problems simultaneously. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Broad, desired accomplishments stated in general terms: Goals indicate the direction the firm attempts to move in, as well as the set of priorities it will use in evaluating alternatives and making decisions. Goals should be: attainable realistic internally consistent comprehensive some degree of intangibility © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  LEVERS OUTCOMES 4Ps Promotion 4As Awareness Product Acceptability Price Affordability Place Availability*/ Accessibility* Brand Strategy – Marketing Mix Overall Market Strategy *Anderson, J., & Markides, C. (2007). Strategic Innovation at the Kotler … + Base of the Pyramid. MIT Sloan Management Review, 49(1), 83–88 McCarthy, E. J. (1960). Basic Marketing: A Managerial Approach. Richard D. Irwin, Inc. ** Sheth, J. N., & Sisodia, R. S. (2012). The 4 A's of Marketing: Creating Value for Customer, Company and Society. Routledge. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics © Kyryl Lakishyk - Católica Lisbon School of Business and Economics https://www.youtube.com/watch?v=GWDxTUdxo9A  Specific and quantitative benchmarks that can be used to gauge progress toward the achievement of the marketing goals. › should be attainable with a reasonable degree of effort. › may be either continuous or discontinuous, depending on the degree to which they depart from present objectives. › should specify the time frame for their completion. › should be assigned to specific areas, departments, or individuals who have the responsibility to accomplish them. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics   Objectives should be “SMART”—Specific, Measureable, Achievable, Relevant, and Time-specific  Three distinct sorts of objectives are useful and common in developing marketing strategies: › Sales objective › Customer objectives › Financial or profit objectives © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Modelling & forecasting Prof. Kyryl Lakishyk © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  LEVERS OUTCOMES 4Ps Promotion 4As Awareness Product Acceptability Price Affordability Place Availability*/ Accessibility* Brand Strategy – Marketing Mix Overall Market Strategy *Anderson, J., & Markides, C. (2007). Strategic Innovation at the Kotler … + Base of the Pyramid. MIT Sloan Management Review, 49(1), 83–88 McCarthy, E. J. (1960). Basic Marketing: A Managerial Approach. Richard D. Irwin, Inc. ** Sheth, J. N., & Sisodia, R. S. (2012). The 4 A's of Marketing: Creating Value for Customer, Company and Society. Routledge. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Specific and quantitative benchmarks that can be used to gauge progress toward the achievement of the marketing goals. › should be attainable with a reasonable degree of effort. › may be either continuous or discontinuous, depending on the degree to which they depart from present objectives. › should specify the time frame for their completion. › should be assigned to specific areas, departments, or individuals who have the responsibility to accomplish them. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics   Objectives should be “SMART”—Specific, Measureable, Achievable, Relevant, and Time-specific  Three distinct sorts of objectives are useful and common in developing marketing strategies: › Sales objective › Customer objectives › Financial or profit objectives © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  A. Customer-based methods & Judgment-based methods* B. Sales Extrapolation methods C. Model-Based methods * Chapter 5 for detailed review of these methods © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Exercise 1 How many times does letter f appear in the sentence below? Read and count them only once; do not go back and recount them. ________ Forecast files from folders of foreign experts are frequently the result of many months of formal scientific efforts combined with the formidable experience of many faculty. How confident are you in your answer? Rate your confidence on a scale of 0 to 100, where 0 means that you are sure you are wrong, and 100 means that you are sure you right. _________ © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Exercise 2 Threatened by a superior enemy force, the general faces a dilemma. Her intelligence officers say that her soldiers will be caught in an ambush in which 600 of them will die unless she leads them to safety by one of two available routes: 1) The first route, 200 soldiers will be saved. 2) The second route, there’s a one-third chance that 600 soldiers will be saved and a two-thirds chance that none will be saved. Which route should she take? © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Exercise 3 Threatened by a superior enemy force, the general faces a dilemma. 600 soldiers will die unless he leads them to safety by one of two available routes: 1) The first route - 400 soldiers will die. 2) The second route - one-third chance that no soldiers will die, and a two-thirds chance that 600 soldiers will die. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Exercise 4 Selma is 31, single, outspoken, and very bright. She majored in philosophy in college. As a student, she was deeply concerned with discrimination and other social issues and participated in anti-nuclear demonstrations. Which statement is more likely? a. Selma works as a bank teller. b. Selma works as a bank teller and is active in the feminist movement. © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  “We don’t like their sound, and guitar music is on the way out.” Dick Rowe, Decca Records exec., rejecting the Beatles’ demo tape, 1962 “This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication (and) is inherently of no value to us.” Western Union, 1876 © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  “I think there is a world market for maybe five computers.” Thomas Watson, Chair, IBM, 1943 “Computers in the future may weigh no more than 1.5 tons.” Popular Mechanics, 1949 “Who the hell wants to hear actors talk?” H.M. Warner, Warner Bros., 1927 “Everything that can be invented has been invented.” C. H. Duell, Commissioner, U.S. Office of Patents, 1899 © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Engineer Concept & Design Testing Launch Opportunity Identification and Idea Generation © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Development Costs can be reduced Cost Prob. of Expected Expected per try Success tries Cost Introduction $10M 10% 10 $100M Save by introducing testing phase Cost Prob. of Expected Expected per try Success tries Cost Testing $2M 20% 10 $20M Introduction $10M 50% 2 $20M 10% $40M © Kyryl Lakishyk - Católica Lisbon School of Business and Economics  Development Costs can be reduced Cost Prob. of Expected Expected per try Success tries Cost Introduction $10M 10% 10 $100M