MARKETING MANAGEMENT

Dr. Ahmed A Shalaby

Learning Levels
Cognitive Knowledge Application Diagnosis / Trouble-shooting Creating new knowledge / Theory

Course Outline
I. II. III. IV. V. VI. VII. VIII. IX. X. Introduction From corporate strategy to marketing strategy and plan Creating customer satisfaction and loyalty Buying behavior Competitive analysis and competitive strategy Market segmentation and targeting Market positioning Branding Marketing mix decisions Marketing information system 3

 How does marketing create, deliver and communicate

value to target customers?

 What are the key marketing processes: the marketing

work?
 What is the role of core competencies in creating

sustainable competitive advantage?

 What are Mega trends? Are they threats and/or

opportunities? How can we manage them?

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What is Marketing Management?

Marketing management is the art and science of: choosing target markets, getting, keeping, and growing customers through Creating, communicating, and delivering superior customer value
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Competitive Advantage
Competitive advantage: A company's ability to perform in one or more ways that competitors cannot or will not match. Marketing focuses on advantages relevant to customers.

How to create and sustain it? By fitting a companys core competencies and distinctive capabilities into operational systems for value exploration, creation and delivery in ways that are hard to imitate by competitors.

The Four Cs Marketing Mix Product

Customer Solution Place Convenience Price Customer Cost Promotion Communication
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The Role of Marketing in the Company

Production Marketing
Customer

The customer is the focal point Marketing is the integrative function

II- FROM CORPORATE TO MARKETING STRATEGY

 What is Strategy, Strategic plan, and Operational plan? How are they

related?
 

What are the levels of strategic management? (Corporate, business unit, functional (e.g. marketing), product or market) What is strategic analysis in marketing? What are the tools? (e.g. portfolio models, Porters five forces model, growth models, SWOT analysis). How can we use them to formulate strategies?

 Marketing Plan, Marketing Control

In preparing for battle I have always found that plans are useless but planning is indispensable Dwight Eisenhower Why?
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Market-Oriented Strategic Planning Integrating Intuition & analysis

When is strategic analysis relevant? Uncertainty Competition Longer term Need for flexibility Major choices

Objectives

Resources

Strategic Fit Core Competencies

Opportunities

What is the relationship between strategic planning and operational planning?

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Efficiency versus Effectiveness

Strong Strong

Weak

1. Thrive

2. Die slowly

Weak

3. Survive

4.Die quickly
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Porters Generic Strategies for Competitive Advantage

Overall cost/efficiency leadership. How? (economies of scale, modify supply chain, lean manufacturing..) Differentiation. How? (Strong branding, in-depth understanding of customers, unique quality)
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Marketing Alliance Strategies

Product or Service Alliances. Promotional Alliances. Logistical Alliances.

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Planning Process

External Audit Vision & Mission SWOT Goals Strategies Operational Planning Feedback & Control

Internal Audit

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Levels of Strategic Planning

Corporate Strategic business unit (SBU). * Pros and cons Functional (e.g. Marketing strategies) Product / Market
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Portfolio Models: How healthy is your portfolio of SBUs or Products?

THE MODELS HELP TO:
DIAGNOSE THE HEALTH OF THE PORTFOLIO GUIDE RESOURCE ALLOCATION (build, hold, harvest or divest) IMPROVE CASH FLOW MANAGEMENT

FOCUS ON TWO DIMENSIONS

Market attractiveness (market size, market growth, profitability, competition etc.) Business strength (market share, share of growth, product quality, unit costetc.)

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Portfolio Models: Boston Consulting Group Growth-Share Model

20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0

Stars

Question Marks

Market Growth Rate

4 5
Cash Cow

2 1
Dogs

High

>1

1 Relative Market Share

<1

Low
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This analysis covers the past, what about the future?

Growth Strategies: Ansoffs Product/Market Expansion Grid

Existing products 1. Market penetration New products 3. Product development

Existing markets

New markets

2. Market development

4. Diversification

Other Strategies for growth: Integrative growth (vertical, horizontal)

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SWOT analysis
External Analysis
Opportunities Threats

Internal Analysis
Strengths Weaknesses Use check-lists (e.g. PESTLE analysis: political, economic, social, technological, legal, ecological; Management audits). Look for interactions among internal and external factors.
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Internal Analysis: Strengths & Weaknesses

(actual and potential)

Marketing and customer equity Finance Manufacturing / operations Organization Focus on those S&Ws that are critical to achieving company vision have the greatest interaction with O&T. Describe those interactions.

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Translating SWOT issues into actions

Strengths (maintain, build and leverage) Opportunities (prioritize and optimize) Weaknesses (remedy or exit) Threats (counter) Do TOWS analysis (next page)
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SWOT/TOWS ANALYSIS (Interactions)

Internal External
STRENGTHS S1 .. S2 .. STRATEGIES to use OPPORTUNITIES O1 .. O2 .. THREATS T1 . T2 . strengths to exploit opportunities (e.g. S1/O2) WEAKNESSES W1 . W2 . . STRATEGIES to overcome weaknesses to enable the organization to exploit opportunities (e.g. W2/O1) STRATEGIES to overcome weaknesses to enable the organization to deal with threats
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STRATEGIES to use strengths to deal with threats

The Marketing Plan: Outline

Executive Summary & Table of Contents Describe Current Marketing Situation (market, product, competition, distribution, macro environment) SWOT Analysis, strategic issues/opportunities

Objectives
Marketing Strategy (segmentation, targeting, Positioning, 4 PS) Operational plan and budget Projected Profit-and-loss
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Controls

The Control Process

Goal setting
What do we want to achieve?

Performance measurement
What is happening?

Performance diagnosis
Why is it happening?

Corrective action
What should we do about it?

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Measuring Marketing Performance

Defining marketing metrics / KPIs (e.g., awareness, market share) Measuring marketing plan performance
Sales analysis Market share analysis Marketing expense to sales analysis

Profitability analysis Determining corrective action.

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III. Creating Customer Value, Satisfaction

What governs customer satisfaction and loyalty? How do we measure and track customer satisfaction? How do we use value delivery networks to achieve customer satisfaction and make money? How should we manage relationships with different types of customers for maximum customer equity and marketing productivity?
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Determinants of Customer Delivered Value

Image value Personnel value Services value Product value Monetary cost Time cost
Energy cost

Total customer value Customer delivered value Total customer cost

Psychic cost
Which competitor delivers the highest delivered value as perceived by customers? 27

Customer Relationship Management (CRM): Concept & Technology

Building relationships with valued customers to maximize their long term value and profitability (customer differentiation?)

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CRM: The Basic Process

1. Identify your customers and prospects 2. Differentiate them; their needs, their value 3. Interact with them to strengthen and deepen relationships. 4. Customize your products, services and messages to customers What is included in the customers data base, other than names, addresses and telephone numbers? From where do we get this info? 29

IV. Analyzing Buying Behavior

 How do we learn about buying behavior?

(theory vs. empirical research)

 What are the different roles played during

the buying process?

 What are the steps in the buying process?  Do all buying processes involve the same

degree of complexity?
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Four Types of Buying Behavior

High Involvement Significant differences between brands Few differences between brands Low Involvement

Complex
(beliefs, attitudes, choice)

VarietySeeking Habitual

DissonanceReducing

Where do you want to be as a marketer?

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Consumer Buying Process

Problem recognition Information Search
Sources: personal, commercial, Public, experiential

Evaluation of alternatives Purchase decision Post-purchase behavior

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COMPETITIVE STRATEGY
 Wide vs. narrow definition of competition  What are the sources of competitive threats? Porter s five forces model  What do you need to know about your key competitors?  How do you build a competitive intelligence system?  Should you attack, defend or follow and how?
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Porters Five Forces Model: a Tool for Formulating Competitive strategy

Supplier Power
Power of suppliers relative to buyers is similar to relationship between producers and buyers see below

Industry Rivalry Entry Threat

Scale economies Cost advantages Capital requirements Access to customers / distribution channels Legal and regulatory barriers Potential for retaliation Price Sensitivity: Product cost vs. total cost Product differentiation Competition between buyers No / size / concentration Diversity of competition Excess capacity Exit barriers Cost structure Distribution channels

Threat of Substitutes
Buyer propensity to substitute Relative price performance of substitutes Additional benefits offered by substitutes

Buyer Power

Bargaining Power No./ size / concentration of buyers & suppliers Switching costs 34 Information available Ability to integrate backward

Analyzing Competitors
Identify competitors (present & potential; direct & indirect; industry & market) and investigate their: Objectives Strategies Strengths & Weaknesses (share of market, mind, heart) Reaction Patterns (laid-back, selective, tiger),
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Hypothetical Market Structure & Strategies

Market leader
Expand Market

challenger

Follower

Nicher

(new users, new uses, more usage)

Defend Market Share Expand Market Share

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Defense Strategies by Leaders

(2) Flank defense (1)Position defense (6) Contraction defense

(3) Preemptive defense

Attacker

(4) Counteroffensive defense

Defender
Strategic withdrawal

(5) Mobile defense

Best defense is a good offense, e.g. Kodak-Fuji battle

Market broadening & market 37 diversification

Challengers Attack Strategies (against a specific opponent (concentrate your strengths against the competitors weaknesses)
(4) Bypass attack (analogous to mobile defense) (2) Flank attack (1) Frontal attack

Attacker
(3) Encirclement blitz attack on many fronts

Defender

(5) Guerilla attack

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Market follower strategies

Counterfeiter Cloner (slight variation) Imitator (of some things while maintaining differentiation from leader) Adapter / improver
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VI. SEGMENTATION AND TARGETING

 Why segment? What are the uses of segmentation?  What are segmentation approaches, procedures?  Segmentation criteria  Targeting criteria  Niche marketing

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Uses of Segmentation
Appraising competitive strengths, Planning product / product line, Determining advertising and selling strategy, Channel design strategy Setting precise marketing objectives
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Levels Of Market Segmentation

 Mass marketing (shotgun)  Segment marketing; different marketing programs for different segments (rifle)  Niche marketing  Individual marketing (or mass customization) **********  The key is to weigh the costs and benefits of segmentation.  Segmentation involves both division and aggregation processes. How?
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Research-Based Market-Segmentation Procedure

I. Survey of actual & potential customers (informal, formal) Motivations / needs Attitudes / preferences Explicit behavior Demographic characteristics II. Analysis Factor analysis (every factor represents several highly correlated variables) Discover clusters (maximally different segments) III. Profiling segments / clusters (attitudes, behavior, demographics, psychographics, media patterns). Remember: Segmentation should be reviewed regularly CRM data as a source of segmentation
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Two Approaches To Segmentation

a) segment on the basis of customers characteristics, then examine possible differences in market response; b) segment on the basis of market response or customer needs, then examine possible differences in customer characteristics. An example of this approach: segment on he basis of light or heavy use of the product; then research the characteristics of each group (segment) Most segmentation schemes combine the two approaches Q: Can we get the members of a targeted segment to select themselves?
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EXAMPLE: Tooth paste market

Worrier Profile Demograp hic Psychogra phic 20-40 Large families Conservati ves Sociable Teens Young smokers High sociability Sensory Children Independe nt 35-40 Male

High self High involvemen autonomy, t value oriented Colgate Aquafresh Private label

What is bought,

Product Examples

Signal Mentadent P

Macleans Ultrabrite

Why is it bought % of market

Benefits sought

Stop decay Attract attention %50% 30%

Taste 15%

Functionali ty 5%
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Criteria for Targeting

Contribution to profitability and growth Fit with companys competencies Degree of competition
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FOOD FOR THOUGHT

SEGMENTATION IS NOT A SUBSTITUTE FOR CREATIVITY In traditional segmentation, the market is considered as a given. What about creating a whole new market? Segment attractiveness change over time.
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VII. POSITIONING

y Points of difference vs. points of parity y perceptual mapping, y Differentiation as a tool for positioning y Product life cycle: marketing strategy

implications
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Positioning Strategy
Positioning: is the act of designing the companys offering and image to occupy a distinctive place in the target markets mind within a certain competitive frame of reference. Successful positioning strategy involves the total marketing mix.
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Brand Image and Product Positioning

Locations and dimensions are based on consumers perception 51 of brands. `

Product Life Cycle Sales & profits ($)

Introduction Growth

Maturity

Decline

Time

Why this pattern? Any other possible patterns? Why? How do you know the stage you are in?; Can you influence the PLC?; Curves for fashions, fads? What are the 52 marketing implications?

VII. BRANDING
 Definition of Brands, Branding  Brand Equity
Dimensions Measurement Drivers

 Brand naming  Brand extension  Brand portfolio  Role of Branding in Competitive Strategy
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Customer Based Brand Equity

The differential effect that brand knowledge has on consumer response to the marketing of that brand (perceptions, preferences, behavior). Marketers invest in customer brand knowledge

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Dimensions of brand knowledge

Brand awareness: Brand recall (aided, unaided) Brand recognition Brand image / association: Type of brand associations:
Attributes (product, price, packaging, use imagery) Benefits (functional, experiential, symbolic) Attitudes

Brand strength Favorability of association Strength of associations Uniqueness of associations

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Brand Extension

80 90% of new products are brand extensions 90%

ADVANTAGE New product success

(Parent brand leverage, reduced cost, less risk of failure)

DISADVANTAGES Brand dilution Cannibalization

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Brand Portfolio
A brand Portfolio is the set of all brands a particular firm offers in a particular category.
WHY MULTIPLE BRANDS? To maximize brand equity by: Increasing shelf space Attracting customers seeking variety Enhancing competition within the firm Criteria: Maximum market coverage AND minimum overlap
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Brand Roles in a Brand Portfolio

Flankers / Fighters. Cash cows. Low-end entry-level. High-end prestige.
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IX. MAJOR MARKETING MIX DECISIONS: PRODUCT, PRICE, PLACE, PROMOTION (4 Ps)
How is every element of the marketing mix tailored to the target market and strategic positioning? What are the interdependencies among the elements of the marketing mix?

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PRODUCT: Product Augmentation over time

Potential product Augmented product Expected product
Basic product

Core benefit + Expected benefits

+ Unexpected benefits + Possible future benefits

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PRODUCT: PRODUCT LINE DECISIONS

Bases for product-line decisions (e.g. extension, pruning): Contribution to sales and profits (80-20 rule?) Interaction among items in the mix Market profile (product map shows positions of all products that belong to the company and its competitors on relevant attributes)
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PRICE: Setting Pricing Policy : Six Steps

1. Selecting the pricing objective 2. Determining demand Response to price: How? 3. Estimating costs 4. Analyzing competitors costs, prices, and offers 5. Selecting a pricing method 6. Selecting final price
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In a study covering 2400 companies, McKinsey concluded that a 1 percent improvement in price created an improvement in operating profits of 11.1 percent.

PLACE: Channel Design Decisions

Analyzing the service levels desired by customers (Lot size, Waiting time, Spatial convenience, Product variety, Service backup) Establishing channel objectives and constraints (vary by market segment, product type) Identifying major channel alternatives (types, number*, terms and responsibilities) Evaluating major alternatives (economic, control and adaptive criteria) *exclusive, selective, intensive

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PLACE: Types of Vertical Marketing Systems

Sources Of Channel Power
Coercive Reward  Legitimate Expert
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Corporate Common Ownership at Different Levels of the Channel Administered Leadership is Assumed by One or a Few Dominant Members

Contractual Contractual Agreement Among Channel Members

PROMOTION: Communication: Dialogue Not Monologue Maximize opportunities for interactive dialogue with customers before, during and after purchase.

Main purpose: reinforce strategic positioning.

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Message Problems

Selective Attention Selective Distortion Selective Retention

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Effective Communication Process

1. Identify & analyze target audience 2. Determine communication objectives 3. Design the message 4. Select channels 5. Decide on communications mix 6. Establish budget 7. Measure and evaluate results
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X - Marketing Information System

 The role of environment scanning  What is the marketing information system and its

components?
 The role of marketing research in marketing

decision making.
 What are the types and steps of marketing

research?
 

How do we design samples and collect data? How do we measure present and future demand?
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MIS Components
A marketing information system (MIS) consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers.
Components: Internal records Marketing intelligence system Marketing research system Marketing decision support system

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Degree of Problem Clarity: its impact on research design

Exploratory Unaware of problem Our sales are declining & we dont know why. Descriptive Aware of problem What kind of people are buying our product? Causal Problem clearly defined Will buyers purchase our products in a new package?

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Research Methodologies

Observational Focus-group Survey (saying) Behavioral Data (doing) Experimental (control)

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Exercise
Problem/ issue
Improving product image Increasing distribution coverage Increasing profit margin Dealing with a decline in mkt share
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Research Objective (s)

Decision implications

GUIDELINES FOR CASE ANALYSIS

I. DIAGNOSIS
1. Review key quantitative and qualitative performance indicators
Profitability Growth Market share Customer satisfaction, loyalty Brand equity Process efficiency, effectiveness

2. Identify performance gaps, given the company vision / long term goals

I. DIAGNOSIS
3. Identify performance drivers, i.e., factors that lie behind performance gaps and are likely to be the levers used to fill the gaps. 4. Review key environment trends and their likely impact on company performance. 5. Conclusion: strategic issues / questions that need management attention and resolution. For each issue, discuss: Dimensions of the issue: what, where, how, why? The importance of the issue The relevant marketing theory

SOLUTIONS: WHAT CAN BE DONE ABOUT THE KEY ISSUES

1. For each issue, think creatively of alternative solutions 2. Analyze pros and cons of each alternative, based on relevant criteria (the likely impact of a particular action on company vision / goals, cost, difficulties of implementation, etc.)

SOLUTIONS: WHAT CAN BE DONE ABOUT THE KEY ISSUES

3) Based on the above analysis, select the best alternative for each issue. 4) Integrate all your selected alternatives into an integrated action plan for the company. 5) Going beyond the specific case, what are the relevant learned lessons that can be applied in similar situations?