Formulating Strategic Marketing Programs. What are the Benefits of Strategy?

Formulating Strategic Marketing Programs

What are the Benefits of Strategy?

Components of StrategyStatement of goals & objectives

Selection of strategic alternative(s)Selection of customer targets

Choice of competitor targets

Statement of core strategyDescription of supporting marketing mix

Description of supporting functional programs

Establish generaldirection of strategy

Positioning

Implementstrategy

Marketing goals & objectives are tied to: Organizational mission

What is the organization’s reason for being?

What does the firm stand for?

What is the basic operating philosophy?

Marketing Goals Desired general accomplishments stated in vague

terms.

Indicate the direction the firm is attempting to move and the set of priorities it will use in evaluating alternatives and making decisions.

Should be attainable and realistic.

Should be internally consistent.

Should be comprehensive and help to clarify the roles of all parties in the organization.

Should involve some degree of uncertainty.

Goals vs. Tactics

To have the largest, best-trained sales force in the industry. Hiring 100 new salespeople.

Having the best recognized company in the industry. Doubling the advertising budget.

Marketing Objectives Provide specific and quantitative benchmarks that

can be used to gauge progress toward the achievement of the marketing goals for which they are developed.

Should be attainable with a reasonable degree of effort.

Should specify the time frame for their completion.

Usually related to sales revenues, market share, profitability, or cash flow

Examples of Objectives The marketing department will be responsible for

having 40% of customers listing this financial institution as their primary financial institution within one year.

The sales department will increase sales 18% during the next 2 years.

Strategic Alternatives Three basic strategic directions:

Growth (sales or market share) Profitability Cash flow

Growth Strategies Market development strategies

Attract non-users Enter new markets

Attracting non-users Increase willingness to buy

Demonstrate benefits of product form Develop new product forms with desired benefits

Increasing ability to buy Offer lower prices or credit Provide greater availability

Enter new markets Broaden distribution

Move into new geographic markets Add channels of distribution

Product-line extension Vertical product line extension Horizontal product line extension

Expansion through acquisition or diversification

Market penetration strategies Increase purchase rate of existing customers Attract competitors’ customers

Increasing purchase rate Broaden usage

Provide examples of additional uses of product

Increase consumption levels Lower prices, special-volume packaging Improve buyers’ perceptions of product benefits

Increase rate of replacement Improve benefits, e.g., convenience, lower operating

costs, that encourage early replacement

Attracting competitors’ customers Head-to-head competition

Superior marketing effort Quality, selection, availability, brand name

recognition

Price-cost leadership Offer comparable quality at lower price

Differentiation adding a set of meaningful and valued differences

to distinguish the firm’s offering from competitors’ offerings

Criteria: important □ preemptive distinctive □ affordable superior □ profitable

Differentiation Variables

Product Services Personnel Channel Image

Form Ordering ease Competence Coverage Symbols

Features Delivery Courtesy Expertise Media

Performance Installation Credibility Performance Atmosphere

Conformance Customer training Reliability Events

Durability Customer consulting Responsiveness

Reliability Maintenance & repair

Communication

Repairability Miscellaneous

Style

Design

Package

Profitability Strategies Maintain satisfaction

Consistent, high quality Effective customer complaint system

Build strong customer relationships Encourage repeat business through formal relationships Target best customers

Develop complementary products Increase dependence on firm

Decrease costs/increase efficiencies

Increase price

Decrease product offerings/emphasize selling of most profitable products

Cash Flow Strategies Harvest market position

Systematically increase profit margin by reducing marketing expenses to capitalize on ST performance opportunities; may sometimes be able to increase price, also

Divest market position Sell firm Close down operation and sell assets

Implications of Product Life Cycle on Marketing Strategy

Introduction Stage Objective: Create awareness and product trial

Market development

Product—offer a basic product

Price—charge cost-plus

Distribution—selective

Communications—target advertising to early adopters and dealers to increase awareness; heavy sales promotion to stimulate trial

Growth Stage Objective: Maximize market share

Market penetration

Product—product extensions, warranties

Price—decrease prices to penetrate

Distribution—intensive

Communications—target advertising to mass market to increase awareness; reduce sales promotions

Maturity Stage Objective: Maximize profit while defending

market shareProduct—diversify products and brands

Price—match or best competitors’ prices

Distribution—more intensive

Communications—use advertising to stress brand differences and benefits; increase

sales promotions to encourage brand switching

Decline Stage Objective: Reduce expenditure and milk the

brand; focus on cash flow

Product—phase out weak models

Price—cut price

Distribution—selective; phase out unprofitable outlets

Communications—reduce and target hard-core loyals; reduce sales promotions to minimal levels