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Chapter 2: Marketing Strategy

Chapter Objectives

After reading this chapter, students should understand:

·The elements of a complete marketing strategy

·Developing a value proposition

·Developing a sustainable competitive advantage

·Positioning products and services

·The product life cycle and how it affects marketing strategies

Chapter Overview

This chapter provides a framework for the development of a marketing strategy, one of the key functions of a marketing manager’s job.

Chapter Outline and Key Terms

Complete Marketing Strategy

Key Terms:

·Marketing strategy

·Customer and competitive targets,

·Core strategy

·Value proposition

·Product positioning

·Marketing mix

·Mission statement

The Marketing Strategy Framework (Figure 2.1, page 37) includes:

·Objective (Criterion against which success or failure are measured.)

·Customer Targets (Specific customers the marketing manager wants to buy the product or service.)

·Competitor Targets (The most likely competition for that product or service.)

·Core Strategy (Includes the value proposition and product positioning)

·Value proposition (Most important component of the core strategy. Summarizes how the product/service is differentiated in the market.)

·Product positioning (Value proposition is operationalized and represented to the customer)

·Marketing Mix (Represents a set of decisions that implements the marketing strategy. Often referred to as “The 4 P’s:” Price, Product, Place, and Promotion,) It includes decisions about:

·Price

·Channels of distribution

·Product

·Communications

·Customer relationship management.

·Mission Statement (Describes in general terms the company’s major business thrusts, customer orientation, or business philosophy.)

Illustration: Miller Brewing, Inc. (

Miller Brewing and Coors Brewing are now MillerCoors.com

Objectives

Key Terms:

·Mission Statement

Keys to creating effective objectives include:

·Objectives should have a quantified performance standard

·Objectives should have a clear time frame

·Objectives should be stated in measurable terms

·Objectives should be ambitious enough to be challenging

Customer and Competitor Targets

Key Terms:

·Target Market

·Market Penetration

·Market Development Strategy

·Value Proposition

·Differentiation

Target Market: Group of customers or segment on which the marketing manager has decided to focus a marketing strategy. There are strategic alternatives to segment a market (Figure 2.2, page 32). Strategic alternatives include:

·Market Penetration Strategy

·Targets own customers

·Can also target competitor’s customers

·Market Development Strategy

·Targets customers in existing targeted segments

·Targets new segments

Illustration: Wii (

Grey Poupon

(

The Core Strategy: The Value Proposition: Customer and competitor targets are summarized and customer’s reason to buy the product or service rather than the competitor’s is clearly stated.

The Core Strategy: Differentiation. Also called the competitive or differential advantage.

·Competitive Advantage: The strategic development of some basis on which customers will choose a firm’s product or service over its competitors’.

·Successful basis on which to such advantage

·Should generate customer value

·Increased value must be perceived by customer

·Advantage should be difficult to imitate

·Three general approaches to developing competitive advantage

·Cost- or price-based advantage (economies of scale, experience curve)

·Illustrations (Page 46)

·IKEA (

·Jiffy Lube (

·The Vanguard Group (

·Walmart (

·Quality-based or differentiation advantage

·Illustrations (Page 48)

·Anheuser-Busch (

·Marks & Spencer (

·Perkin Elmer Applied Biosystems (

·Oral-B (

·Sony Mavica Digital Camera (

·Snap-on Tools (

·Perceived quality or brand-based advantage

·Perceptual map: Based on marketing research from customers. Measures competing products on a variety of attributes. (Figure 2.5)

·Brand position: Customers’ perceptions of one brand in relations to its competitors.

·Brand equity: The value of a brand name in communicating quality or other aspects of a product.

·Differential Advantage: One of the three components of how a particular product or service is better than the competition.

The Core Strategy: Product Positioning. Takes the competitive advantage and makes it clear to the customer what the product stands for and how it different from the other offerings in the product category.

To develop a good positioning decision, the marketer needs to know:

·What dimensions do customers use to evaluate product offerings in the industry or category?

·How important is each in the decision process?

·How do you and the competition compare?

·What decision processes do the customers use?

Marketing Strategies Over the Product Life Cycle

Product Life Cycle (PLC): The PLC is a conceptual framework of how product or service strategies can shift with changes in the market. Strategies used in the marketing mix will vary over time according to stage of the product life cycle. (Figure 2.7 demonstrates the S-curve shaped PLC)

PLC may have separate strategies and approaches. The four discrete stages of the PLC are:

1. Introductory Phase:

·Product or service is new

·Sales volume may increase slowly because of lack of marketing or customer acceptance

2. Growth Phase

·Product sales are growing

·Competitors are increasing in number

·Market segmentation begins to be a key issue

3. Maturity Phase

·Sales curve has flattened out

·Few new buyers in the market

4. Decline Phase

·Product sales are decreasing

Teaching Tips and Strategies from Barbara S. Faries, MBA

This chapter focuses on the basic principles of marketing strategy and common components a student will encounter as a professional including the marketing mix, differentiation and positioning, and the product life cycle.

Key terms and concepts introduced include:

  1. The development of a marketing strategy.
  2. Customer and competitive targets.
  3. Marketing mix and the elements of the marketing mix.
  4. Market penetration strategy.
  5. Market development strategy.
  6. Competitive advantage.
  7. Differentiation advantage.
  8. Economies of scale.
  9. Experience curve.
  10. Differentiation.
  11. Perceptual map.
  12. Brand positioning and brand equity.
  13. Positioning/repositioning.
  14. Product life cycle and the individual phases (introductory phase, growth phase, and maturity phase).

Suggestions:

Note: Two recurring themes in this Instructor’s Manual will be the first two items:

·Link theory to practice.

·Engage students to link work experience to the concepts demonstrated in the text.

·Instructors are encouraged to link theory to practice by finding current examples in the corporate environment that demonstrate the key concepts above.

·If your class contains those already working in the field, have them describe how the concepts in theory match those in the actual workplace.

·The basis of marketing strategy is the marketing mix. It is sometimes help to take one or several companies with which the students are familiar and have them analyze or quickly list how the companies use the marketing mix.

·As both an undergrad and graduate instructor, I find students often struggle with the concepts of differentiation, segmentation, targeting, and positioning. The first and last terms are often confused. It is essential that some time be spent to establish a clear understanding of these terms. I often pick companies that the students might be familiar and outline each company’s differentiation, segmentation, targeting, and positioning strategies. While consumer examples are often top-of-mind, a business-to-business example is critical, as most of the students will more than likely work in this environment.

·Another key concept for students will be “product life cycle.” Pick both consumer and business-to-business product/service examples and have the students discuss where those products/services are in the life cycle. Take a single product/service and discuss how different strategies are used at different stages. The different strategies at different stages are often challenging for the students to grasp so an active exercise to demonstrate these is often effective.

·

Review Questions

1. Using Nintendo’s Wii as an example, discuss the Marketing Strategy Framework:

·Objective (How will Nintendo judge its success or failure?)

·Customer Targets (Who are the specific customers Wii wants to buy the product?)

·Competitor Targets (Who are the Wii’s competitors?)

·Core Strategy (Includes the value proposition and product positioning)

·Value proposition (What is the Wii’s value proposition? How does the Wii differentiate itself in the marketplace?)

·Product positioning (What is the Wii’s product positioning?)

This exercise is designed to have the student think through a current product’s marketing strategy framework. The instructor is encouraged to conduct student discussion and keep in mind that different students may have differing but equally insightful answers. The classroom discussion and the student’s differing insights will demonstrate how executives in “real-life situations” may have different observations on the same or similar situation.

2. Discuss the Marketing Mix and its components. How does the Wii use the marketing mix?

Have the students work through the Wii’s use of the marketing mix including the product, place (distribution), pricing, and promotional strategies.

3. What are differentiation, positioning, and targeting (segmentation)? Pick one of the following companies and describe their differential, positioning, and targeting strategies: Walmart, IKEA, Anheuser-Busch, Southwest Airlines, Apple.

This exercise is designed to assist students in seeing how companies are currently using these strategies.

4. Describe each stage of the product life cycle. Select a representative product or service that exemplifies each of the stages.

WD-40 is often an interesting example to use in this exercise since it is produced by a company that essentially has one product and has “reinvented itself” over time. (Background articles include: The Wall Street Journal, May 23, 2006. Article discusses product life cycle management, marketing strategy, branding, and re-branding.)

The instructor may also choose to use the Wii has an example. The product is clearly currently in a growth phase, but ask the students to envision how Nintendo might change the strategy in the growth or decline phases? Have the students discuss how the product may be repositioned to extend product life.

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