Marketing Principles #3

[samvara]

Missed this on account of being in Melbourne for Agile Australia. This is me reviewing the lecture slides.

Decision tools
Tools to deliver higher-level strategies:

• Portfolio analysis
  • Product life cycle concept
  • Product portfolio models (BCG and McKinsey)
• Value Chain analysis
• Porter’s generic strategies

Three levels of Product life cycle:

• Industry (motor cars)
• Category (sports cars)
• Brand (Porsche)
• Products have a limited life
• Products pass through distinct stages with different challenges and opportunities
• Profits rise and fall at different stages
• Products require different strategies in each life cycle stage

See textbook p 108 for more on PLC characteristics, objectives and strategies.

Problems with the PLC concept

• Lacks predictive and explanatory power.
• Can’t predict the length of time between stages.
• Hard to determine where a product is on the curve.
• Difficult to anticipate when changes will occur.
• Divergent patterns between industries.
• Competitors can affect the growth curve.

Boston Consulting Group growth/share matrix

• "Stars" - Continue to increase market share, if necessary at the expense of short term earnings
• "Cash Cows" - Maintain share and leadership until further investment becomes marginal
• "Question Marks" - Assess chances of dominating market segments: if good, go after share: if bad, redefine business or withdraw
• "Dogs" - Plan an orderly withdrawal so as to maximise cash flow

GE/McKinsey’s model of market attractiveness/business position: nine-cell portfolio matrix as a tool for screening GE's large portfolio of strategic business units

Porter’s generic strategies

Porter has identified three generic strategies:

• Overall cost leadership: making units of a fairly standardised product and under-pricing everybody else
• Differentiation: turning out something which the customers perceives as unique
• Focus: concentrating on a particular group of customers, geographic market, channel of distribution, or distinct segment of the product line

Blue Ocean Strategy (Kim & Mauborgne) - criticisms section on wikipedia is interesting.

Market Research

• Define the problem
• Specify decision alternatives
• State research objectives

Research Approaches

• Qualitative (exploratory)
• Quantitative (descriptive)
• Autonomic measures (eye cameras, ECG, sweat tests, neuromarketing, micri-expressions)

Brain scans reveal power of Super Bowl adverts

Questionnaire Do’s and Don’ts

• Ensure questions are free of bias
• Make questions simple
• Make questions specific
• Avoid jargon
• Avoid sophisticated words
• Avoid ambiguous words
• Avoid negatives
• Avoid hypotheticals
• Avoid words that could be misheard
• Use response bands
• Use mutually exclusive categories
• Allow for “other” in fixed response questions

Can you think of an example of bad research that you have seen recently?

Sampling Plan

• Sampling unit: Who is to be surveyed?
• Sample size: How many people should be surveyed?
• Sampling procedure: How should the respondents be chosen?

Competitive advantage

• Competitive advantage (Porter 1990) is when an organisation develops/acquires a combination of attributes that enables it to outperform its competitors, in an area of importance to its customers.
• There must be a reason why a customer does business with your organization, rather than your competitors.
• Marketing is about generating competitive advantages – reasons for customers to do business with you. It is also about taking competitors’ advantages away.

Sustainable competitive advantage (SCA) SCAs are:

• real (capability gap)
• rare
• valuable (positively influence customers’ decisions)
• hard to duplicate
• enduring over time
• conscious or subconscious

What is an SCA? Superior skills or superior resources (Day & Wensley)
Proven SCAs:

• Brand/reputation/image
• Understanding customers better
• Relationships with customers
• Organisational culture
• Intellectual properties (e.g. trademarks, logos)
• Location
• Distribution channel relationships & structure
• Relationships with suppliers (e.g. contracts, loyalty)
• Responsiveness to change and opportunities
• Niche markets

Sustainable Competitive Advantages: Individual activity

• Think about your own organization…
  • What sustainable competitive advantages does it have?
  • Which of its SCAs are most important?
  • What must they do to sustain these SCAs over time?
• Think about your organization’s key competitor(s)…
  • What competitive advantages does it have?
  • Which of these competitive advantages are sustainable, and which have the potential to be eliminated?

Competitive review

1. Identify all possible competitors
   • Direct (immediate competition)
     • Who is in your strategic group (similar strategies in similar markets)?
     • Positioning maps help identify them and indicate perceived proximity
   • Indirect (product substitutes)
     • Any entity that can deliver the same fundamental value to the customer
     • Understanding what customers do and don’t value is key.
2. Rate all possible competitors as threats to your ongoing performance
3. Profile/analyse the most threatening competitors
4. Benchmark
5. Select competitors to attack and to avoid.

Profiling a competitor

• Current market performance
• Competitive position
  • – Markets they compete in
  • – How they compete
• Corporate and marketing objectives and strategies
• Likely future goals and strategies
• Likely reactions to competitive moves.
• Strengths and weaknesses
• Capabilities and vulnerabilities
• Promotional activity
  • – Key messages
  • – Ad spend

Sources of competitive information

• First read the Code of Ethics from the Society of Competitive Intelligence Professionals (SCIP):

Competitive strategy

Competitive strategies for a market leader

1. Increase market share
2. Defend market share
   • Preemptive attack
   • Position defense
   • Counterattacks
   • Flank defense
   • Mobile defense
   • Contraction defense
3. Expand the market
   • Finding new users
   • Creating new uses
   • Encouraging more usage

Market follower strategies

• Counterfeiter
• Cloner
• Imitator
• Adapter

Market nicher strategies (no notes but examples)

• Little Creatures Pale Ale
• Green & Black's Organic Chocolate

Market challenger strategies

• Define the strategic objectives
• Define your opponents
• Choose a general attack strategy
• Choose a specific attack strategy

Some examples:

• Frontal attack: Virgin Cola declares war on Coke and Pepsi!
• Encirclement attack from Seiko
• Bypass strategy: Pepsi buys Gatorade
• Guerilla warfare from McDonald’s "You start with an ad campaign, making creative use of the competitor's identity, along with the line 'It just tastes better'…

Market challenger – specific attack strategies

• Price
• Product
  • – Product innovation
  • – Lower-priced goods
  • – Value-priced goods
  • – Prestige goods
  • – Product proliferation
  • – Manufacturing-cost reduction
• Place
  • – Distribution innovation
  • – Reduced delivery times
• Promotional intensity
• Service improvements

Need to balance orientations - Customer <-> Competition