Strategic Marketing Management

© 2012 Alexander Chernev

Figures and Graphs

The Role of Frameworks in Marketing Management

Typical problem

Specific solution

Typical solution

Specific problem

Framework

Abstraction Application

Trial & error

The 3-V Principle of Managing Value

Collaborator value

Customer value

Company value

OVP

Optimal value proposition

The G-STIC Framework for Action Planning

Goal

Strategy

Tactics

Implementation

Control

Identifying Target Markets: The 5-C Framework

CustomersCom

pany

Collaborators

Competitors

Context

Customers

Com

pany

Collaborators

Competitors

Context

Com

pany

Collaborators

Competitors

Context

Customers

Identifying Target Customers & Developing a Value Proposition

CustomersCom

pany

Collaborators

Competitors

Context

Com

pany

Collaborators

Competitors

Context

Customers

Collaborator value

Customer value

Company value

OVP

Collaborator value

Customer value

Company value

OVP

Value

Value

Designing the Tactics

Distribution

Communication

Service BrandProduct

PriceIncentives OVP

DistributionCommunication

Service BrandProduct

PriceIncentives OVP

DistributionCommunication

Service BrandProduct

PriceIncentives OVP

Environmental analysis

Performance evaluation

Focus Bench-marks

Value proposition

Target market

Implementation schedule

Organizational infrastructure

Business processes

Control

Strategy

Implementation

Goal

Tactics

Environmental analysis

Performance evaluation

Control

Implementation schedule

Organizational infrastructure

Strategy

Implementation

Goal

Focus Bench-marks

Tactics

Value proposition

Target market

Business processes

Developing an Action Plan: The Big Picture

Product Service Brand Price

Incentives Communication Distribution

Product Service Brand Price

Incentives Communication Distribution

Segmentation, Mass Marketing, & One-to-One Marketing

Offering ACustomer 1 Customer 2 Customer 3 Customer 4 Customer 5 Customer 6

Offering B

Segment-based marketing

Offering

Customer 1 Customer 2 Customer 3 Customer 4 Customer 5 Customer 6

Mass marketing

Customer 1Customer 2Customer 3Customer 4Customer 5Customer 6

Offering AOffering BOffering COffering DOffering EOffering F

One-to-one marketing

Market Segmentation Strategies

Non-segmentedmarket

Segmentation IISegmentation I Segmentation III

Strategic Targeting: Selecting Value-Based Segments

Segment ASegment B

Segment C

© 2006 Alexander Chernev

Tactical Targeting: Linking Value and Profile Segments

Demographics Geography

Behavior Psychographics

© 2006 Alexander Chernev

Tactical Targeting Scenarios

Value-based segment (unobservable)Profile-based-segment (observable)

“Shotgun” targeting(broad)

Oversegmentation(narrow)

Shot-in-the-dark(misaligned)“Sniper” targeting

(perfect fit)

Multi-Segment & Single-Segment Product Line Strategies

Segmentation Targeting

Offering 1

Offering 2

Offering 3

Action plan C1

Action plan C2

Action plan C3

Target segment C1

Target segment C2

Target segment C2

© 2006 Alexander Chernev

The Three Dimensions of Customer Value

Customer value

Psychological value

Monetary value

Functional value

Competitive Advantage: A Source of Customer Value

Irrelevant attributes

Shared attributes

Offering A Offering B

Competitive parity

Competitive advantage

Irrelevant attributes

Shared attributes

Strengths

WeaknessesWeaknesses

Strengths

The Concept of Economic Value Analysis

Monetizing functional value

Monetizing psychological value

Customer value

Psychological value

Monetary value

Functional value

Economic Value as a Function of the Differences in Total Costs

Difference in total cost

Difference in price

Offering X

Price

Price

Offering Y

Cost of ownershipCost of

ownership

Attribute-Value Map

j Competitive advantagek Competitive parity l Competitive disadvantage

k

Attribute 1 Attribute 2 Attribute 3 Attribute 4 Attribute 5

Company’s offering

Competitive offering A

Competitive offering Bj l

Customer value

Positioning Map

Attribute 1

Attribute 2

• Offering A

• Offering E

• Offering C

• Offering D

• Offering B

The Three Dimensions of Company Value

Customer value

Psychological value

Functional value

Monetary value

Creating Company Value: Profit-Growth Analysis

Net income

Costs

Revenues

Volume

Price

COGS

Competitors’customers

Other

New Customers

Current customers

New to the category

Marketing

Strategies for Managing Sales Growth

Managing adoption

Managing usage

Current customers

Competitors’ customers

Customers new to the category

Sales volume

The SWOT Framework

Opportunities

Strengths

Threats

Weaknesses

Favorable factors

Unfavorable factors

Market analysis

Company analysis

External factors

Internal factors

Product-Market Growth Matrix

Current products

New products

Current customers New customers

Market penetration

Product development

Market development

Diversification

Conflicts in Vertical Collaboration

Manufacturer

Distributor

Customer

Manufacturer

Customer

Vertical channel conflict Horizontal channel conflict

Distributor BDistributor A

Conflicts in Horizontal Collaboration

Customer

CollaboratorCompany

Steal-Share Strategy

Current users

Market-Growth Strategy

Current users

New users

Market-Growth Strategy for a Superior Offering

Current users

New users

Market-Innovation Strategy

Current users New users

Current market New market

Defensive Marketing Strategies

Do nothin

g

Customer costs

Customer benefits

Move upscale

Increase benefits

Reduce costs

Move downscale

Launch economy offering

Launch premium offering

The Five Forces of Competition

Competitors5

New entrants

Buyers

Substitutes

Suppliers1

3

2

4 1 – Bargaining power of suppliers2 – Bargaining power of buyers3 – Threat of new entrants4 – Threat of substitutes5 – Rivalry among extant competitors

Product/Service Management as a Value-Creation Process

Compe

titor

s

Customer

s

Compa

ny

Collaborators

Context

Collaborator value

Customer value

Company value

OVP

Collaborator value

Customer value

Company value

OVP

ProductService

Compe

titor

s

Customer

s

Compa

ny

Collaborator

s

ProductService

Context

Brand Price

Incentives

CommunicationDistribution

Service

Managing Products by Streamlining the Marketing Mix

Brand Price

Incentives

CommunicationDistribution

Service

Product

Product

Branding as a Value-Creation Process

Brand

Compe

titor

s

Customer

s

Compa

ny

Collaborators

Context

Collaborator value

Customer value

Company value

OVP

Compe

titor

s

Customer

s

Compa

ny

Collaborator

sBrand

Context

Collaborator value

Customer value

Company value

OVP

Brand

Service Incentives

Distribution

CommunicationPrice

Product

Managing Brands by Streamlining the Marketing Mix

Brand

Service Incentives

Distribution

CommunicationPrice

Product

Pricing as a Value-Creation Process

Price

Compe

titor

s

Customer

s

Compa

ny

Collaborators

Context

Collaborator value

Customer value

Company value

OVP

Compe

titor

s

Customer

s

Compa

ny

Collaborator

sPrice

Context

Collaborator value

Customer value

Company value

OVP

Price

Brand Incentives

Distribution

CommunicationService

Product

Managing Price by Streamlining the Marketing Mix

Price

Brand Incentives

Distribution

CommunicationService

Product

Managing Incentives as a Value-Creation Process

Incentives

Compe

titor

s

Customer

s

Compa

ny

Collaborators

Context

Collaborator value

Customer value

Company value

OVP

Compe

titor

s

Customer

s

Compa

ny

Collaborator

s

Incentives

Context

Collaborator value

Customer value

Company value

OVP

Incentives

Service Brand

Distribution

CommunicationPrice

Product

Managing Incentives by Streamlining the Marketing Mix

Incentives

Service Brand

Distribution

CommunicationPrice

Product

Pull and Push Promotion Strategies

Manufacturer

Retailer

Customer

Incentives Communications

Incentives Communications

Demand

Demand

Push strategy

Manufacturer

Retailer

Customer

Incentives Communications

Demand

Demand

Pull strategy

Communications as a Value-Creation Process

Commu-nication

Compe

titor

s

Customer

s

Compa

ny

Collaborators

Context

Collaborator value

Customer value

Company value

OVP

Compe

titor

s

Customer

s

Compa

ny

Collaborator

s

Commu-nication

Context

Collaborator value

Customer value

Company value

OVP

Service Brand

Distribution

IncentivesPrice

Product

Managing Communications by Streamlining the Marketing Mix

Commu-

nication

Service Brand

Distribution

IncentivesPrice

Product Commu-nication

Planning a Communication Campaign

Goal

Message

Media

Creative solution

Implementation

Control

Distribution as a Value-Creation Process

Distribution

Compe

titor

s

Customer

s

Compa

ny

Collaborators

Context

Collaborator value

Customer value

Company value

OVP

Compe

titor

s

Customer

s

Compa

ny

Collaborator

s

Distribution

Context

Collaborator value

Customer value

Company value

OVP

Distribution

Service Brand

Incentives

CommunicationPrice

Product

Managing Distribution by Streamlining the Marketing Mix

Distribution

Service Brand

Incentives

CommunicationPrice

Product

Distribution Channel Structure

Company

Wholesaler

Retailer

Customer

Retailer

CustomerCustomer

Direct channel Indirect channels

Hybrid channel

Managing Sales Growth

Current customers

New customers

Managing Sales Growth

Managing usage

Managing adoption

The Adoption Funnel

Awareness

Understanding

Attractiveness

Affordability

Availability

Purchase intent

Purchase

Identifying Adoption Gaps

oj k l m n p

All target customer

s

Aware of the

offering’s existence

Intend to purchase

the offering

Have access to

the offering

Understand the offering’s

benefits

Perceive the offering to be

attractive

Can afford the offering

Purchased the offering

Identifying Actionable Goals

Replacement frequency

Usage frequency

Usage quantity

Offering attractiveness

Offering availability

Consumption quantity

Identifying Consumption Gaps

AvailabilitySatisfaction Usage frequency

Usage quantity

Replacement frequency

The Typical S-Shaped Pattern of New Product Adoption

Time

Total adoptions

Inflection point

Speed of diffusion Market potential

Number of adoptions

Time

Managing the Product Life Cycle

Introduction Growth Maturity Decline

Sales

Time

Market size

Market growth

Competition

Small Moderate Large Moderate/Small

Low High Low Negative

Low Moderate High Moderate/Low

Extending Product Life Cycle through Innovation

Sales revenue

s

Time

First generation

Second generation

Third generation

Rogers’ Model of Adoption of Innovation

2.5% Innovators

13.5% Early

adopters

34% Early

majority

34% Late

majority

16% Laggards

Number of adoptions

Time

(x-2SD)

(x-SD) (x) (x+SD)

Moore’s Technology Adoption Model

Enthusiasts Visionaries Pragmatists Skeptics

Number of adoptions

Time

Early market Mainstream market

The chasm

Conservatives

Vertical Extensions

Price

Benefits

Upscale offering

Downscale offering

Horizontal Extensions

Price

Benefits

Offering A Offering B

Managing Product-Line Cannibalization

Single-offering scenario- Dual-offering scenario with cannibalization

Loss of share dueto cannibalization

New offering

New offering

Competitive

offerings

Existing

offerings

Competitive offerings

Competitive offerings

Existing offering

s

Existing offerings

Dual-offering scenario with cannibalization

The Fighting-Brand Strategy

Price Quality

Time

Incumbent brand

Fighting brand

Low-pricecompetitors

The Sandwich Strategy

Price Quality

Time

Incumbent brand

Fighting brand

Premium brand

Low-pricecompetitors

The Good-Better-Best Strategy

Price Quality

Time

Incumbent brand

Good

Better

Best

Low-pricecompetitors

The Typical S-Shaped Pattern of New Product Adoption

Time

Cumulative number of adoptions

Market potential

Inflection point

Speed of diffusion

The Typical Bell-Shaped Pattern of New Product Adoption

Number of adoptions

Time

© 2012 Alexander Chernev

Extra Figures and Graphs

Strategic and Tactical Targeting

Strategic targeting involves deciding which segments to serve and which to ignore

Tactical targeting involves identifying the profile of the already selected target customers

Segmentation Targeting

Segmentation Targeting

Identification(communication)

(distribution)

(strategic)Targeting (tactical)

Developing a Value Proposition and Positioning

Segmentation

Group customers into need-based segments

Targeting

Select target segments and identify means to reach these segments

Value proposition

Create a relevant value proposition

BenefitsCosts

PositioningIdentify the primary benefit of the offering

Primarybenefit