Session 5_Marketing Strategy.pdf

Session 5: Marketing strategy Marketing strategy: how it fits into business strategy What is a strategy? • Strategy is a plan that aims to give the enterprise a competitive advantage over rivals. It is about understanding what you do, knowing what you want to become, and, most important, focusin...

Session 5: Marketing strategy Marketing strategy: how it fits into business strategy What is a strategy? • Strategy is a plan that aims to give the enterprise a competitive advantage over rivals. It is about understanding what you do, knowing what you want to become, and, most important, focusing on how you plan to get there. Aligning marketing strategy with business strategy • Every function must likewise align its goals and activities with the larger business strategy. In the case of marketing, everything it does- from pricing, to distribution, to how it communicated with customers- should be planned in a way that serves strategic goals. • Marketing needs to answer: what difference is valued and by whom? • Marketing practitioners need to provide input in (among others): competitive threats, profitable opportunities, latent customer needs. Source: Marketing strategy: how it fits into business strategy. Harvard Business School Publishing, 2005 The strategy process Vision Mission Goals Strategy creation External environment Implementation tactics Performance measurement Source: Marketing strategy: how it fits into business strategy. Harvard Business School Publishing, 2005 Internal environment How to define a marketing strategy • 3 phases: analysis, decisions and outcome • Each phase has its specific content Source: Core reading. Framework for marketing strategy formation. Harvard Business School Publishing, 2019 How to define a marketing strategy Once the 3 phases are completed you have to implement it and measure it • Timeline and Implementation Plan: • Creating a timeline that outlines when each marketing activity or campaign will be executed. This ensures that the marketing strategy is carried out effectively and efficiently. • Monitoring and Measurement: • Establishing key performance indicators (KPIs) to track the success of your marketing efforts. Regularly measuring and analyzing results to make data-driven adjustments to the strategy. • Risk Assessment and Contingency Plans: • Identifying potential risks and challenges that could affect the implementation of the marketing strategy and developing contingency plans to mitigate these risks. • Feedback and Adaptation: • Continuously collecting feedback from customers, monitoring market changes, and being prepared to adapt the marketing strategy as needed to stay competitive and relevant. The 5 C´s: customer, company, collaborators, competition and context • Customer: how potential customers make a purchase decision? Who is involved in the decision? Assess the potential market size and customer wiliness to pay for your product. Customer=riders 1. Premium: chauffer service 2. High-Frequency riders (HFR): quick and effortless 3. Commuters: respect my routine 4. Social: ride cheaply and safety with friends 5. Traver: helping hand The 5 C´s: customer, company, collaborators, competition and context • Company: Strengths and weaknesses. Need to understand firm´s finances, R&D capabilities, manufacturing sites and other assets. • Collaborators: external partners that can be accessed to complement those of the company The 5 C´s: customer, company, collaborators, competition and context • Competition: assess other´s offerings, the market they address, how they address it and how all that will evolve over time The 5 C´s: customer, company, collaborators, competition and context • Context: It is always changing. PESTEL: Political, Economic, Social, Technological, Environmental and Legal How market strategy changes subject to the phase of the product life cycle where the product is REINTRODUCTION HYPERMATURITY DECLINE Source: Core reading. Framework for marketing strategy formation. Harvard Business School Publishing, 2019 How market strategy changes subject to the phase of the product life cycle where the product is § Products (market offerings) have a limited life. § Sales pass through distinct stages, each posing different challenges, opportunities and problems to the seller. A company’s positioning and differentiation strategy must change as the product, market and competitors change over the product life cycle. § Profits rise and fall at different stages of the product life cycle. Watch video on different stages in PLC (8 min): § Products require different marketing, financial, manufacturing, purchasing and human resources strategies at each stage. http://www.youtube.com/watch?v=CRfjJ9yOyp0 Source: Core reading. Framework for marketing strategy formation. Harvard Business School Publishing, 2019 How market strategy changes subject to the phase of the product life cycle where the product is Source: Core reading. Framework for marketing strategy formation. Harvard Business School Publishing, 2019 How market strategy changes subject to the phase of the product life cycle where the product is Source: https://marketing-insider.eu/product-life-cycle-strategies How market strategy changes subject to the phase of the product life cycle where the product is Source: https://marketing-insider.eu/product-life-cycle-strategies How market strategy changes subject to the phase of the product life cycle where the product is Product Life Cycle – Further considerations § Not all products go over all PLC stages § Each product has a specific PLC’s length § Each product’s stages (on the PLC) has a specific length § The PLC is a dynamic concept that may change quickly. Therefore marketers have to be quite cautious when assuming the stage in which a specific product is Source: Core reading. Framework for marketing strategy formation. Harvard Business School Publishing, 2019 How market strategy changes in the phases of the product life cycle • In which product life cycle are these products? How market strategy changes in the phases of the product life cycle • In which product life cycle are these products? How market strategy changes in the phases of the product life cycle • In which product life cycle are these products? How market strategy changes in the phases of the product life cycle • In which product life cycle are these products? How market strategy changes in the phases of the product life cycle • Penetration, frequency, retention, premiumization Penetration: attracting new customers to increase a company's market share or customer base within its existing market or industry. Frequency: repeatedly exposing the target audience to marketing messages or advertisements over a specific period to enhance brand recall and message retention. Retention: preserve/maintain your existing customers and encourage repeat business. A retention strategy aims to build strong, long-lasting relationships with customers, increase their loyalty to the brand, and reduce customer churn (the rate at which customers stop doing business with the company). This is often more cost-effective than constantly acquiring new customers. Premiumization: positioning a product, brand, or service as high-quality, exclusive, and offering superior value compared to competing offerings in the market. The goal is to differentiate the product from lowerpriced alternatives and to attract a specific target audience that is willing to pay a premium for the perceived higher quality. Source: Marketing strategy: how it fits into business strategy. Harvard Business School Publishing, 2005 Source: The right customers: acquisition, retention and development. Harvard Business School Publishing, 2005 How market strategy changes in the phases of the product life cycle • How penetration, frequency, retention, premiumization fit with the product life cycle? 1. Introduction Stage: 1. Penetration Strategy: It is the recommended strategy for introduction stage. During the introduction stage, a penetration strategy can be employed to quickly gain market share and establish a foothold in the market. This involves offering competitive pricing, promotions, and incentives to attract early adopters and create awareness. 2. Frequency Strategy: To generate interest and awareness, frequency marketing can be used to expose the target audience to the new product's features and benefits through consistent advertising and communication. 3. Retention Strategy: Early adopters are crucial during this stage. A retention strategy can involve providing exceptional customer service, addressing feedback, and continuously engaging with these initial customers to build loyalty and encourage repeat purchases. https://magrocardona.com/ https://www.instagram.com/magrocardona/ First store opened in Dec 2017 Source: The right customers: acquisition, retention and development. Harvard Business School Publishing, 2005 How market strategy changes in the phases of the product life cycle • How penetration, frequency, retention, premiumization fit with the product life cycle? 2. Growth Stage: 1. Penetration Strategy: Continued penetration efforts can help capture a larger share of the growing market as more customers become aware of and interested in the product. 2. Frequency Strategy: It is the recommended strategy for growth stage. As competition intensifies, maintaining consistent frequency of marketing messages helps keep the brand top-ofmind and sustain growth. 3. Retention Strategy: Building a base of loyal customers becomes increasingly important. A retention strategy can involve implementing loyalty programs, offering personalized experiences, and expanding customer engagement. Source: The right customers: acquisition, retention and development. Harvard Business School Publishing, 2005 How market strategy changes in the phases of the product life cycle • How penetration, frequency, retention, premiumization fit with the product life cycle? 3. Maturity Stage: 1. Penetration Strategy: Penetration strategies may become less effective in mature markets. Companies might consider focusing on increasing market share through acquisition or targeting new segments. 2. Frequency Strategy: Maintaining a moderate frequency of marketing communications to remind customers of the product's benefits can help sustain sales. 3. Retention Strategy: It is the recommended strategy for maturity stage. Retaining customers becomes critical in the face of increased competition. Implementing comprehensive retention strategies, such as providing superior customer service and continuous value, can help maintain loyalty. Source: The right customers: acquisition, retention and development. Harvard Business School Publishing, 2005 How market strategy changes in the phases of the product life cycle • How penetration, frequency, retention, premiumization fit with the product life cycle? 4. Decline Stage: 1. Penetration Strategy: In the decline stage, penetration strategies are generally not suitable, as the market is shrinking. 2. Frequency Strategy: Reducing frequency of marketing efforts might be appropriate as resources are reallocated. 3. Retention Strategy: Focusing on retaining the most loyal and profitable customers can help maximize revenue during the decline stage. 4. Premiumization Strategy: It is the recommended strategy for decline stage. A premiumization strategy could be considered to cater to a niche market that values exclusivity and is willing to pay a premium, thereby extending the product's life cycle https://www.brother.es/faxes/fax2845?gclid=EAIaIQobChMIifmIv4PhgQMVz9 vICh3VUQP1EAQYASABEgJ4z_D_BwE Source: The right customers: acquisition, retention and development. Harvard Business School Publishing, 2005 BLOCK 1 IKEA´s vision “To create a better everyday life for the many people” https://www.ikea.com/gb/en/this-is-ikea/about-us/the-ikea-vision-and-valuespub9aa779d0 https://businessmodelanalyst.com/ikea-mission-and-vision-statement/ IKEA´s mission “A better everyday for most people” https://www.ikea.com/gb/en/this-is-ikea/about-us/the-ikea-vision-and-valuespub9aa779d0 https://businessmodelanalyst.com/ikea-mission-and-vision-statement/ INDIA2018 Marketing strategy: how it fits into business strategy 5C´S The 5 C´s: customer, company, collaborators, competition and context Customer: IKEA connected with Indian consumers in different ways: • demographic • understanding consumer behavior and beliefs and the differences between regions • population purchasing power - Emotionally: touching the soft spot of child labor, and genuinely collaborating with Unicef to limit it - Socially: Opening the right businesses in the right locations, providing jobs to local talents: offered Indis jobs by having a local office - Culturally: • Understanding Indian homes, families values, food habits (changed the menu of the restaurant to meet local flavors) and taste preferences, • Changed the furniture structure to deal with humidity • Providing servicing needs • While keeping the WOW factor of the Swedish culture: convenience, less expensive products and modern/digital touch. 34 The 5 C´s: customer, company, collaborators, competition and context Company: • Holistic approach because IKEA acted not only as a furniture company but also as a partner to create properity to India. • Long term because IKEA has to be clear that the investment will worth it • Adaptation is key because they need to answer Indis´needs Collaborators: support from local parties & authorities Competition: understanding the fragmented furniture market, assess other´s offerings, the market they address, how they address it and how all that will evolve over time Context: It is always changing. PESTEL: Political, Economic, Social, Technological, Environmental and Legal 35 Marketing strategy: how it fits into business strategy Entry strategy (in 2018) was: First step: build the brand through large-format stores • Pros: Large format stores allowed consumers to touch products, test quality and increase awareness. Also adding the personal touch aspect to the buying experience • Cons: expensive investment 36 How did Ikea generate awareness of the opening in Hyderabad? IKEA India - Make Everyday Brighter! – YouTube #MakeEverydayBrighter: How IKEA planned their Indian entry! | Social Samosa Using autos equipped with VR goggles Revamping bus stop at Hej Hyderabad to display their popular designs You can watch 2 videos here: https://medium.com/strategy-insider/ikea-hyderabad-guerrilla-marketing-at-its-best-71b0bb6487df How did Ikea generate awareness of the opening in Hyderabad? Using Guerrilla marketing at its best Placing ads on empty boxes at the airport 1000-seat restaurant inside the store that serves both Swedish & local cuisine Source: https://medium.com/strategy-insider/ikea-hyderabad-guerrilla-marketing-at-its-best-71b0bb6487df 38 Marketing strategy: how it fits into business strategy Second step: set up the e-commerce • Pros: helped to save costs before investing in some locations. It helped to measure the demand, analyze targets and behaviors and grow your reach • Cons: distribution and logistics Third step: experiment with new formats • Pros: explore and try different concepts with lower budgets before building the big and definitive ones. Adapting to the customer needs • Cons: Unstable in terms of planning and efficiency 39 IKEA Launched Two Pop-Up Trucks In Mumbai Just For 45 Days However, strategy is not something “fixed”, actually the 3 step strategy was reshaped as they were learning from the market • In Mumbai IKEA opened first the online service followed by the physical store. So they are probably testing this approach to deciding how to proceed in the rest of the cities. https://www.moneycontrol.com/news/business/companies/retailing-why-ikea-is-tweaking-its-india-strategy-4377151.html At the end of 2022 • • • Ikea operates three big-format furniture and home stores in Hyderabad, Mumbai and Bangalore Offers online services in Hyderabad, Mumbai, Bangalore, Pune and Gujarat It also opened two small-format city centres in Mumbai opened in December 2021, and July 2022, respectively https://www.livemint.com/companies/company-results/ikea-india-revenue-up-73-in-fy22-but-loss-widens-11666958279886.html Now, we move to an IKEA mature market like Spain to discuss in which stage of the life cycle IKEA is in India vs Spain and proposed a strategy (penetration, frequency, retention, and premiumization) Nearly 100 distribution points across Spain • What do you think is the strategy in Spain? • What are the differences between Spain and India? • What about your home countries? Pick up IKEA design point IKEA store IKEA planning studios Pop up store Session 5 Team work 1. Identify, describe and justify in which phase of the product life cycle your product is and proposed 1 strategy and justify it (penetration, frequency, retention, premiumization)