Marketing module_1.pdf

Subject Code: 1.5
Subject Name: Marketing for
Customer Value
Faculty Name:
Dr. Noor Firdoos Jahan
Professor, Department of Marketing, RVIM

Module 1
ESSENTIALS OF MARKETING
Importance of marketing, Core marketing
concepts, Company orientation towards
market place, Marketing management tasks,
Marketing strategies and plans, SWOT
analysis, Marketing environment,
Competitive dynamics

What Is Marketing?
A Philosophy
An Attitude
A Perspective
A Management
Orientation
A Set of Activities,
including:
Products
Pricing
Promotion
Distribution / Place

Definition Of Marketing
AMA : Marketing is an organizational
function and a set of processes for
creating, communicating, and
delivering value to customers and for
managing customer relationships in
ways that benefit the organization and
its stakeholders.
Kotler : A social and managerial
process whereby individuals and
groups obtain what they need and want
through creating and exchanging
products and value with others.
American Marketing
Association
Dr. Philip Kotler

Simply put
Marketing is the delivery of customer
satisfaction at a profit.
Goals
Attract new customers by promising
superior value and keep and grow current
customers by delivering satisfaction.

What are Consumers’
Needs, Wants, and Demands?
Needs - state of felt
deprivation including
physical, social, and
individual needs i.e hunger
Wants - form that a human
need takes as shaped by
culture and individual
personality i.e. bread
Demands - human wants
backed by buying power i.e.
money

Five types of need
1. Stated needs (the customer wants an inexpensive car).
2. Real needs (the customer wants a car, the operating
cost of which, not initial price, is low).
3. Unstated needs (the customer expects good service
from the dealer).
4. Delight needs (the customer would like the dealer to
include an onboard navigation system).
5. Secret needs (the customer wants friends to see him as
a savvy consumer).

PRODUCTS / OFFERS / SATISFIERS / RESOURCES
• Anything that can be offered to someone to
satisfy a need or want is a product .
• Product refers to physical object
• Services refer to intangible object

What is Marketed?
• Goods
• Services
• Events
• Experiences
• Persons
• Places
• Properties
• Organizations

Who Markets?
• Marketers and Prospects
A marketer is someone who seeks a response-a
attention, a purchase, a vote, a donation from
another party called prospect. If two parties are
seeking to sell something to each other, we call
them both marketers.

WHAT IS MARKET ?
• A market consists of all the potential
customers sharing a particular need or want
who might be willing and able to engage in
exchange to satisfy that need or want.

Key Customer Markets
• Consumer Markets
• Business Markets
• Global Markets
• Non Profit and Government Markets

Marketplaces,
Marketspaces and
Metamarkets

A SIMPLE MARKETING SYSTEM
Industry Market
Communication
Information/Feedback
Goods & Services
Money

The Concept of Exchange
• Lamb : The idea that people give up something to receive
something they would rather have.
• Kotler : The act of obtaining a desired object from someone by
offering something in return.
Necessary Conditions
for Exchange
At Least Two Parties
Something of Value
Communication and Delivery
Freedom to Accept or Reject
Desire to Deal With Other Party

Exchange may not take place even
if conditions are met;
An agreement must be reached; and
Marketing occurs even if exchange does
not take place.

VALUE AND SATISFACTION
• Value is the customers’ estimate of the
Product’s capacity to satisfy a set of goals
• Value is the ratio between what the
customer gets and what he gives (V=B/C)
• Customer gets benefits & assume costs
• WHEN :Customer Expectance=Performance (satisfied)
• Customer Expectance>Performance (dis-satisfied)
• Customer Expectance<Performance (Highly satisfied)

Customer Value
Customer Value
The ratio of benefits to the sacrifice necessary
to obtain those benefits

Customer Value Requirements
• Offer products that perform
• Give consumers more than they expect
• Avoid unrealistic pricing
• Give the buyer facts
• Offer organization-wide commitment in service
and after-sales support

Customer Satisfaction
The feeling that a product has met or exceeded
the customer’s expectations.
Customer Satisfaction

Maintaining Customer Satisfaction
 Meet or exceed customer’s expectations
 Focus on delighting customers
 Provide solutions to customer’s problems
 Cultivate relationships,
NOT one-time transactions

Relationship Marketing
The name of a strategy
that entails forging long-term partnerships with
customers, both individuals and firms.

Requirements
for
Building
Relationships
Who are your customers
What do customers value
How do they prefer to interact
What do they want to buy

Building Long-Term Relationships
 Customer-oriented personnel
 Effective training programs
 Empowered employees
 Teamwork

IMPORTANCE OF MARKETING
- Society
1. Marketing helps to achieve, maintain and raise
the standards of living
- Marketing is means through which production and
purchasing power are converted into consumption.
- Better marketing  Mass production
- Mass production  Low cost
- Low cost  More buying power  Higher standard
of living

2. Marketing Increases employment opportunities
- Marketing involves various functions / sub-
functions (Buying, Selling, Transport, Warehousing,
Financing, Risk management etc)
- These functions create need for different
specializations
- About 30-40% population depends directly or
indirectly on marketing

3. Marketing increases national income
- More purchasing power  increase in national
income
4. Helps maintain economic stability &
development
- By maintaining demand supply balance

5. Link between producer & consumer
6. Removes imbalance of supply & demand by
transferring surpluses
7. Helps create utilities of time, place &
possession

IMPORTANCE OF MARKETING
– Business Firms
1. Marketing Generates Revenue, by generating
sales & thereby profits
2. Marketing helps decision making process (what,
when & how much to produce, store or
transport)
3. Helps change management & innovations

The Scope of Marketing
To prepare to be a marketer, you need to
understand:
• what marketing is
• how it works
• what is marketed, and
• who does the marketing.
Copyright © 2012 Pearson
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Marketing in Practice
Box 1.1: Improving CMO Success
1. Make the mission and responsibilities clear.
2. Fit the role to the marketing culture and structure.
3. Ensure the CMO is compatible with the CEO.
4. Remember that showpeople don’t succeed.
5. Match the personality with the CMO type.
6. Make line managers marketing heroes.
7. Infiltrate the line organization.
8. Require right-brain and left-brain skills

The New Marketing Realities
Major societal forces
• Network information technology
• Globalization
• Deregulation
• Privatization
• Heightened competition
• Industry convergence
• Consumer resistance
• Retail transformation
• Disintermediation
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New Consumer Capabilities
• A substantial increase in buying power
• A greater variety of available goods and
services
• A great amount of information about
practically anything
• Greater ease of interacting, placing and
receiving orders
• An ability to compare notes on products and
services
• An amplified voice to influence public opinion
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New Company Capabilities
• Internet
• Marketing research
• Internal communication
• External communication
• Personalization of messages
• Rewards and promotions
• Mobile marketing
• Personalization of products
• Savings from using the internet
• Online training products
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More companies can produce
individually differentiated goods

Company Orientation Toward
the Marketplace
• Given these marketing realities, what
philosophy should guide a company’s
marketing efforts?
• Increasingly, marketers operate consistent
with a holistic marketing concept, Let’s review
the evolution of earlier marketing ideas.

WHAT IS MARKETING MANAGEMENT ?
• Marketing Management is the analysis,
planning, implementation and control of
programs designed to create, build and
maintain beneficial exchanges and
relationships with target markets for the
purpose of achieving Organisational
objectives.
• There are FIVE competing concepts under
which organizations conduct their marketing
activities. They are:

Marketing Management Philosophies
Production Concept
Selling Concept
Marketing Concept
Societal Marketing Concept
Focus on internal capabilities of the
firm.
Focus on satisfying customer needs
and wants while meeting objectives
Focus on satisfying customer needs
and wants while enhancing individual
and societal well-being
Product Concept
Focus on aggressive sales techniques
and believe that high sales result in
high profits
Focus on Quality of the products of
the firm.
There are FIVE competing concepts under which organizations conduct
their marketing activities:

(1) THE PRODUCTION CONCEPT
Produce
Sell
Consumers
Company
Produce more & more
Practically sells itself

THE PRODUCTION CONCEPT
• Consumers will favour those products that
are widely available and low in cost.
• Therefore increase production and cut down
costs.
• And build profit through volume.

(2) THE PRODUCT CONCEPT
Produce
Quality
Products
Sell
Consumers
Practically sells itself,if
it gives most quality for
money
Buyers admire well-made products and can
appraise product quality and performance.

THE PRODUCT CONCEPT
• Consumers will favour those products that
offer the most quality, performance, or
innovative features.
• Therefore, improve quality, performance and
features.
• This would lead to increased sales and
profits.

(3) SELLING CONCEPT
• Consumers have normal tendency to resist.
Produce
Sell it Consumers
Aggressive selling &
promotion efforts
Making sales becomes primary function and
consumer satisfaction secondary .

THE SELLING CONCEPT
• Consumers , if left alone , will not buy
enough of company’s products.
• Therefore, promote sales aggressively.
• And,build profit through quick turnover.

(4) MARKETING CONCEPT
• “ LOVE THE CUSTOMER , NOT THE PRODUCT ”
Consumers
Produce it
Market it
Learn what they
want(MR)
Sell what they want(Satisfy
needs of customers)

THE MARKETING CONCEPT
• The key to achieving organizational goals
consist in determining the needs and wants
of target markets and delivering the desired
satisfactions more effectively and efficiently
than competitors.
• And build profit through customer
satisfaction and loyalty.

(5) THE SOCIETAL MARKETING CONCEPT
• It is Marketing Concept (+) Society’s well
being.
• Balancing of following three considerations while
setting marketing policies :
-Customer’s want satisfaction -Society’s
well being -Company’s profits
 Less toxic products
 More durable products
 Products with reusable
or recyclable materials

Review: Marketing Management
Philosophies
Production
Sales
Marketing
Societal
What can we make or do best?
How can we sell more aggressively?
What do customers
want and need?
What do customers want and need, and
how can we benefit society?
Orientation Focus

Sales vs Market Orientation
Sales Orientation Market Orientation
(1) Organization Focus Inward –fulfill organization’s
needs.
Outward – fulfill wants and
preferences of customers.
(2) What type of business
organization is in?
Selling goods and services. Satisfying customers needs
and wants and delivering
superior value.
(3) To whom the product is
directed?
Everybody. Specific groups of people.
(4) Firm’s primary goal Achieve profit through
maximum sales volume.
Achieve profit through
customer satisfaction.
(5) Ways to achieve the
goal
Through intensive
promotion.
Through coordinated
marketing and inter-
functional activities.

The Holistic Marketing Concept
The Holistic Marketing Concept recognizes that
‘everything matters’ in marketing, and that a
broad, integrated perspective is often
necessary.
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• The Holistic Marketing Concept
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• Relationship Marketing
building mutually satisfying long-term
relationships
with key parties, in order to earn and retain
their business.
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Integrated Marketing
• Integrated Marketing
Four Ps
• Product
• Price
• Place
• Promotion
These represent the seller’s
view of marketing tools.
SIVA
• Solution: how can I solve my problem?
• Information: where can I learn more about it?
• Value: what is my total sacrifice to get this
solution?
• Access: where can I find it?
Customer questions, corresponding to the
4Ps
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Integrated Marketing
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Internal Marketing
Internal Marketing ensuring that everyone in
the organization embraces appropriate
marketing principles, especially senior
management
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Performance Marketing
• Performance Marketing
Financial Accountability
Social Responsibility Marketing
• Social Initiatives
• Corporate social marketing
• Cause marketing
• Corporate philanthropy
• Corporate community involvement
• Socially responsible business practices
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Marketing Management Tasks
• Developing market strategies and plans
• Capturing marketing insights
• Connecting with customers
• Building strong brands
• Shaping market offerings
• Delivering value
• Communicating value
• Creating long-term growth
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Functions of CMOs
• Strengthening the brands
• Measuring marketing effectiveness
• Driving new product development based on
customer needs
• Gathering meaningful customer insights
• Utilizing new marketing technology

STATE OF DEMAND AND MARKETING TASK
• State of demand
• Negative Demand
• No Demand
• Latent Demand
• Falling Demand
• Irregular Demand
• Full Demand
• Overfull Demand
• Un-wholesome Demand
•
• Marketing task
• Conversional Mktg.
• Stimulational Mktg.
• Developmental Mktg.
• Remarketing
• Synchro-marketing
• Maintenance Mktg.
• Demarketing
• Counter-marketing

Marketing Management Tasks
1. Conversional Marketing
- Used during negative demand
- Customer dislikes the product
- May even pay to avoid the product
- It is a rare condition
- e.g. Waste Water

2. Stimulational Marketing
- Used during No demand
- Customer is indifferent to the product
- Task of converting no-demand into positive demand
- Connect the product with existing need
- Create environment where need is felt
- e.g. Mushrooms

3. Developmental Marketing
- Used during Latent demand
- Consumers share need for something which does not
exist
- Opportunity for Marketer to develop a product
- e.g. Electronic cigarette

4. Remarketing
- Used during fading demand
- Consumers find either no use for the product or better
alternatives in the market
- Marketers recreate the demand
- e.g. Cinema halls

5. Synchro Marketing
- Used during irregular demand
- Seasonal products
- Results in wasteful underutilization of production
capacity
- Marketers attempt to streamline the demand to meet
supply capacity
- e.g. Hotels at hill stations, flight tickets during peak
season

6. Maintenance Marketing
- Used during robust demand
- Established products
- Does not need efforts to push supplies
- Keep a watch on competition
- Keep sharpening the saw

7. Demarketing
- Used during overfull demand
- Or when you want to exit certain business
- Supply falls short of demand
- Marketers discourage customers in choosing certain
products

8. Counter Marketing
- Used when demand is considered unwholesome
- Like alcohol, drugs
- Marketers try to destroy demand

Developing Marketing
Strategies and Plans

Marketing and Customer Value
• Marketing involves satisfying customer’s needs and wants. The task of
any business is to deliver customer value at a profit while being socially
responsible.
• In a hypercompetitive economy with increasingly rational buyers faced
with abundant choices, a company can win only by fine-tuning the value
delivery process and choosing, providing and communicating superior
value.

3 Vs approach to Marketing
• London Business School’s Nirmalya Kumar
has put forth a 3 Vs approach to Marketing.

What is the Value Chain?
The value chain is a tool used for identifying and to create more customer
value because every firm is a synthesis of primary and support activities
performed to design, produce, market, deliver, and support its product.

Holistic Marketing Orientation
and Customer value
Key management questions are:
• Value exploration —How a company identifies new value
opportunities?
• Value creation —How a company efficiently creates more
promising new value offerings?
• Value delivery —How a company uses its capabilities and
infrastructure to deliver the new value offerings more
efficiently?
Holistic Marketing sees itself as integrating the value
exploration, value creation, and value delivery activities
with the purpose of building long-term, mutually
satisfying relationships and co-prosperity among key
stakeholders.

What is Strategic Planning?
• It is the managerial process that helps to
develop a strategic and viable fit between the
firm’s objectives, skills, resources with the
market opportunities available. It helps the
firm deliver its targeted profits and growth
through its businesses and products.

Corporate and Division Strategic
Planning
• Some corporations give their business units a
lot of freedom to set their own sales and
profit goals and strategies.
• Others set goals for their business units but let
them develop their own strategies. Still others
set the goals and participate in developing
business unit strategies.

Process of Strategic Planning at
corporate headquarters
All corporate headquarters undertake four planning
activities:
• Define the corporate mission
• Establish strategic business units (SBUs)
• Assign resources to each SBU
• Assess growth opportunities

Corporate Mission
• This seeks to embody the entire goals of the
organization and the objective of its existence.
• It seeks to provide a sense of purpose,
direction and opportunity
• For e.g. e-bay’s mission:
“to provide a global trading platform where
practically anyone can trade practically
anything”.

Good Mission Statements
• Focus on a limited number of goals
• Stress major policies and values
• Define major competitive spheres
• Take a long-term view
• Short, memorable, meaningful

Major Competitive Spheres
• Industry
• Products
• Competence
• Market segment
• Vertical channels
• Geographic

Motorola
“The purpose of Motorola is to honorably
serve the needs of the community by providing
products and services of superior quality at a
fair price to our customers; to do this so as to
earn an adequate profit which is required for
the total enterprise to grow; and by doing so,
provide the opportunity for our employees and
shareholders to achieve their personal
objectives.”

eBay
“We help people trade anything on earth.
We will continue to enhance the online
trading experiences of all—collectors,
dealers, small businesses, unique item
seekers, bargain hunters, opportunity
sellers, and browsers.”

Dimensions that Define a Business
• Customer groups
• Customer needs
• Technology

Establishing Strategic Business Unit
SBU:
• It is a company within a company
• The business is differentiated from the rest of the
company
• It has its own set of competitors
• It is a separate profit centre

Characteristics of SBUs
Large companies normally manage quite different businesses, each
requiring its own strategy. GE has classified its business into 89
strategic business units, SBU has three characteristics:
• It is a single business or collection of related businesses
• It has its own set of competitors
• It has a manager responsible for strategic planning and
profitability

Assigning Resources to Each SBU
Several investment planning models provide ways to make
investment decisions as follows:
• The GE/McKinsey Matrix classifies each SBU by the extent of its
competitive advantage and the attractiveness of its industry.
Management can decide to grow, “harvest” or draw cash from, or
hold on to the business.
• Another model, BCG’s Growth-Share Matrix, uses relative market
share and annual rate of market growth as criteria to make
investment decisions, classifying SBUs as dogs, cash cows,
question marks, and stars.

GE Model Usage
• The 9 cells of the matrix are grouped into 3
broad categories:
• The favorable category (1,2,3)
– The organisation should build and grow these
businesses
• The medium investment allocation
priorities (A,B,C)
– These should simply be maintained – no
expansion and no divesting
• Businesses that are not doing well (i,ii,iii)
– These should be harvested and divested

Industry/
market
attractivene
ss
Competitive Strengths
High
Low
The GE model
Strong Average
1 2 C
3 B Ii
A i iii
Medium
Weak

SBU strategies
• Build
• Hold
• Harvest
• Divest

Assessing Growth Opportunities:
Ansoff’s Product-Market Expansion Grid
• Market penetration strategy
• Market development strategy
• Product development strategy
• Diversification strategy

STRATEGIC BUSINESS UNIT
PLANNING PROCESS

Business Mission
• Each business unit needs to define its specific within the broader
company mission. Thus, a television-studio-lighting-equipment
company might define its mission as, “To target major television
studios and become their vendor of choice for lighting
technologies that represent the most advanced and reliable
studio lighting arrangements.

SWOT Analysis
• Strengths
• Weaknesses
• Opportunities
• Threats
SWOT analysis is a strategic planning technique that analyzes a
company’s internal STRENGTHS and WEAKNESSES, and studies
OPPORTUNITIES and THREATS in the external sales environment.

Goal Formulation
Once the company has performed a SWOT analysis, it can proceed to
goal formulation, developing specific goals for the planning period.
Goals are objectives that are specific with respect to magnitude and
time. Most business units pursue a mix of objectives, including
profitability, sales growth, market share improvement, risk
containment, innovation, and reputation. The business unit sets
these objectives and then manages by objectives (MBO). For an MBO
system to work, the unit’s objectives must meet four criteria:
• Unit’s objectives must be hierarchical
• Objectives should be quantitative
• Goals should be realistic
• Objectives must be consistent

Strategic Formulation:
Michael Porter has proposed three Generic Strategies that provide
a good starting point for strategic thinking:
1. Overall cost leadership. Firms work to achieve the lowest
production and distribution costs so they can underprice
competitors and win market share.
2. Differentiation. The business concentrates on achieving
superior performance in an important customer benefit area
valued by a large part of the market.
3. Focus. The business focuses on one or more narrow market
segments,gets to know them intimately, and pursues either
cost leadership or differentiation within the target segment.

Marketing Alliances
• Product or service alliances —One company licenses another to
produce its product, or two companies jointly market their
complementary products or a new product.
• Promotional alliances —One company agrees to carry a
promotion for another company’s product or service
• Logistics alliances —One company offers logistical services for
another company’s product.
• Pricing collaborations —One or more companies join in a special
pricing collaboration.

Programme Formulation and
Implementation
• Once the business unit has developed its principal
strategies, it must work out detailed support
programs.
• A great marketing strategy can be sabotaged by poor
implementation. If the unit has decided to attain
technological leadership, it must plan programs to
strengthen its R&D department, gather technological
intelligence, develop leading-edge products, train the
technical sales force, and develop ads to
communicate its technological leadership.
• Once the marketing programs are formulated, the
marketing people must estimate their costs.

Feedback and Control
• As it implements its strategy, a firm needs to track the
results and monitor new developments.
• Some environments are fairly stable from year to year.
Other environments evolve slowly in a fairly predictable
way.
• Still other environments change rapidly in major and
unpredictable ways.
• Nonetheless, a company can count on one thing: The
marketplace will change; and when it does, the company
will need to review and revise its implementation,
programs, strategies, or even objectives.

Product Planning: the Nature
and Contents of a Marketing
Plan

Marketing Plan
• A marketing Plan is a written document that
summarises what the marketer has learned
about the market place and indicates how the
firm plans to reach its marketing objectives.
• It contains tactical guidelines for the
marketing programmes and financial
allocations over the planning period.

Marketing Plan
• Marketing plans are becoming more customer
and competitor oriented.
• They draw more realistic from all the
functions
and are team developed.
• Planning is becoming a continuous process to
respond to rapidly changing market
conditions.
• Most MPs cover one year in 5 to 50 pages.

Contents of Marketing Plan
• Executive summary and table of contents.
• Situational analysis
– This contains relevant background data on the sales,
costs, the market, competitors, and the various forces
in the micro environment.
– How do we define the market, how big is it , and how
fast is it growing?
– What are relevant trends?
– What is the pdt offering, and what critical isuues do
we face?
– SWOT analysis.

Contents of Marketing Plan
• Marketing Strategy.
• Financial projections.
• Implementation controls
– Monitoring and adjusting implementation
of the plan.
– Goals and budget of each month or quarter
– Periodical review and corrective action
– Contingency plan

• Challenges
• Shifting consumer lifestyles
• Low ratings of food and service
quality
• Atmosphere not upscale
• Image of being unclassy,
uncultured and uncool to younger
target markets
Case Study
McDonald’s – Challenges and Reactions
• Marketing Initiatives
• Focus on core competency of
consistent products and reliable
service
• Upscale alternative including McCafe
and Bistro Gourmet
• Healthier food options with
elimination of “supersize” and
introduction of Go Active! Adult
Happy Meal

The Marketing Environment
• Marketing Environment:
• The actors and forces outside marketing that affect marketing
management’s ability to build and maintain successful
relationships with target customers
• Microenvironment
• Includes the actors close to the company
• Macroenvironment
• Involves larger societal forces

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– Marketing must consider
other parts of the
organization including
finance, R&D, purchasing,
operations and
accounting
– Marketing decisions must
relate to broader
company goals and
strategies
Microenvironment
Actors
1. The company
2. Suppliers
3. Marketing
intermediaries
4. Customers
5. Competitors
6. Publics

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– Marketers must watch
supply availability and
pricing
– Effective partnership
relationship management
with suppliers is essential
Microenvironment
Actors
1. The company
2. Suppliers
3. Marketing
intermediaries
4. Customers
5. Competitors
6. Publics

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– Help to promote, sell and
distribute goods to final
buyers
– Include resellers, physical
distribution firms, marketing
services agencies and
financial intermediaries
– Effective partner relationship
management is essential
Microenvironment
Actors
1. The company
2. Suppliers
3. Marketing
intermediaries
4. Customers
5. Competitors
6. Publics

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– The five types of
customer markets
• Consumer
• Business
• Reseller
• Government
• International
Microenvironment
Actors
1. The company
2. Suppliers
3. Marketing
intermediaries
4. Customers
5. Competitors
6. Publics

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– Conducting competitor
analysis is critical for
success of the firm
– A marketer must monitor
its competitors’ offerings
to create strategic
advantage
Microenvironment
Actors
1. The company
2. Suppliers
3. Marketing
intermediaries
4. Customers
5. Competitors
6. Publics

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– A group that has an
actual or potential
interest in or impact on
an organization
– Seven publics include:
• Financial
• Media
• Government
• Citizen-action
• Local
• General
• Internal
Microenvironment
Actors
1. The company
2. Suppliers
3. Marketing
intermediaries
4. Customers
5. Competitors
6. Publics

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Macroenvironmental Forces
The Macroenvironment
• Demographic
• Economic
• Natural
• Technological
• Political
• Cultural

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Demographic Environment
• Demographic Environment:
– The study of human populations in terms of size,
density, location, age, gender, race, occupation
and other statistics

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• Changing age structure of the U.S.
population is the single most important
demographic trend
• Baby boomers, Generation X, and
Generation Y are the key groups

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• Born between 1946 and
1964
• Represent 28% of the
population; earn 50% of
personal income
• Many mini-segments exist
within the boomer group
• Entering peak earning years
as they mature
Baby Boomers
Generation X
Generation Y
Key Generations

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• Born between 1965 and 1976
• First latchkey children
• Maintain a cautious
economic outlook
• Respond to socially
responsible companies
• Will be primary buyers of
most goods by 2010
Baby Boomers
Generation X
Generation Y
Key Generations

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• Born between 1977 and
1994
• 72 million strong; almost as
large a group as their baby
boomer parents
• New products, services,
and media cater to GenY
• Challenging target for
marketers
Baby Boomers
Generation X
Generation Y
Key Generations

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Natural Environment
• Natural Environment:
– Involves the natural resources that are needed as
inputs by marketers or that are affected by
marketing activities
• Trends
– Shortages of raw materials
– Increased pollution
– Increased government intervention

3 - 132
Technological Environment
– The most dramatic force shaping our destiny
– Rapidly changing force which creates many new
marketing opportunities but also turns many
existing products extinct

3 - 133
Political Environment
• Consists of laws, government agencies and pressure
groups that influence or limit various organizations
and individuals in a given society
– Legislation affecting businesses worldwide has increased
– Laws protect companies, consumers and the interests of
society
– Increased emphasis on socially responsible actions

3 - 134
Cause-Related Marketing
• Marketers create link between brand and charitable
organization
• Demonstrates social responsibility
• Helps build positive brand image
• Examples include General Mill’s Box Tops for
Education, Tang and Mothers Against Drunk Driving,
Eddie Bauer and local schools

3 - 135
Cultural Environment
• Made up of institutions and other forces that
affect a society’s basic values, perceptions,
preferences and behaviors.

3 - 136
Marketing Management
Themselves
 Identify with
brands for self-
expression
Others
 Recent shift from
“me” to “we”
society
Organizations
 Trend of decline in
trust and loyalty
to companies
Society
 Patriotism on the
rise
Nature
 “lifestyles of health
and sustainability”
(LOHAS) consumer
segment
Universe
 Includes religion
and spirituality
Cultural Environment
Includes people’s views of…

3 - 137
Responding to the
Marketing Environment
•
• “There are three kinds of companies: those
who make things happen, those who watch
things happen, and those who wonder what’s
happened.”

CHAPTER11
COMPETITIVE DYNAMICS

Competitive Strategies/ Strategies
to compete
• Having a competitive advantage is necessary
for a firm to compete in the market
• But what is more important is whether the
competitive advantage is sustainable
• A firm must identify its position relative to the
competition in the market
• By knowing if it is a leader, challenger,
follower or nicher, it can adopt appropriate
strategies to compete

Figure 11.1 Hypothetical
Market Structure
10%
Mark
et
Nich
ers
20%
Mark
et
Follo
wer
30%
Market
Challe
nger
40%
Mark
et
Lead
er

Strategies for Market Leaders
Market Leader’s objectives:
• Expand the total market by
– Finding new users
– Creating new uses, and
– Encouraging more usage
• Protect its current market share by
– Adopting defense strategies (see following slides)
• Increase its market share
– Note the relationship between market share and
profitability

Which strategy to use?
Depends on your answer to the following:
• Is it worth fighting?
• Are you strong enough to fight?
• How strong is your defense?
• Do you have any choice but to fight?

Defense Strategy
• A market leader should generally adopt a defense
strategy
• Six commonly used defense strategies
– Position Defense
– Mobile Defense
– Flanking Defense
– Contraction Defense
– Pre-emptive Defense
– Counter-Offensive Defense

Figure 11.6 Six Types of
Defense Strategies

Defense Strategy (cont’d)
Position Defense
• Least successful of the defense strategies
• “A company attempting a fortress defense
will find itself retreating from line after line
of fortification into shrinking product
markets.” Saunders (1987)
• e.g. Mercedes was using a position defense
strategy until Toyota launched a frontal
attack with its Lexus.

Mobile Defense
• By market broadening and diversification
• For marketing broadening, there is a need to
– Redefine the business (principle of objective), and
– Focus efforts on the competition (the principle of
mass)
• e.g. Legend Holdings, the top China PC maker Legend
has announced a joint venture with AOL to broaden
its business to provide Internet services in the
mainland

Flanking Defense:
• Secondary markets (flanks) are the weaker
areas and prone to being attacked
• Pay attention to the flanks
• e.g. San Miguel introduced a flanking brand
in the Philippines, Gold Eagle, as a defense
against APB’s Beerhausen

Contraction Defense
• Withdraw from the most vulnerable
segments and redirect resources to those
that are more defendable
• By planned contraction or strategic
withdrawal
• e.g. India’s TATA Group sold its soaps and
detergents business units to Unilever in
1993

Pre-emptive Defense
• Detect potential attacks and attack the
enemies first
• Let it be known how it will retaliate
• Product or brand proliferation is a form of
pre-emptive defense e.g. Seiko has over
2,000 models

Counter-Offensive Defense
• Responding to competitors’ head-on attack
by identifying the attacker’s weakness and
then launch a counter attack
• e.g. Toyota launched the Lexus to respond
to Mercedes attack

Market Challenger Strategies
The market challengers’ strategic objective is to
gain market share and to become the leader
eventually
How?
• By attacking the market leader
• By attacking other firms of the same size
• By attacking smaller firms

Market Challenger Strategies
(cont’d)
Types of Attack Strategies
• Frontal attack
• Flank attack
• Encirclement attack
• Bypass attack
• Guerrilla attack

Frontal Attack
• Seldom work unless
– The challenger has sufficient fire-power (a 3:1
advantage) and staying power, and
– The challenger has clear distinctive
advantage(s)
• e.g. Japanese and Korean firms launched
frontal attacks in various ASPAC countries
through quality, price and low cost

Flank attack
• Attack the enemy at its weak points or
blind spots i.e. its flanks
• Ideal for challenger who does not have
sufficient resources
• e.g. In the 1990s, Yaohan attacked
Mitsukoshi and Seibu’s flanks by
opening numerous stores in overseas
markets

Encirclement attack
• Attack the enemy at many fronts at the
same time
• Ideal for challenger having superior
resources
• e.g. Seiko attacked on fashion, features,
user preferences and anything that
might interest the consumer

Bypass attack
• By diversifying into unrelated products
or markets neglected by the leader
• Could overtake the leader by using new
technologies
• e.g. Pepsi use a bypass attack strategy
against Coke in China by locating its
bottling plants in the interior provinces

Guerrilla attack
• By launching small, intermittent hit-and-
run attacks to harass and destabilize the
leader
• Usually use to precede a stronger attack
• e.g. airlines use short promotions to
attack the national carriers especially
when passenger loads in certain routes
are low

Which Attack Strategy should a
Challenger Choose?
Use a combination of several strategies to
improve market share over time

Market-Follower Strategies
• Theodore Levitt in his article, “Innovative
Imitation” argued that a product imitation
strategy might be just as profitable as a
product innovation strategy
e.g. Product innovation--Sony
Product-imitation--Panasonic

Market-Follower Strategies (cont’d)
• Each follower tries to bring distinctive advantages to its target market-
-location, services, financing
• Four broad follower strategies:
– Counterfeiter: The best example of counterfeiting is selling the
originals via piracy. Where cloning involves manufacturing of slightly
altered products, counterfeiting involves thieving and is a black
market follower strategy (which is illegal)
– Cloner: Cloning makes advantage of the top brands and makes
same to same products. e.g. the IBM PC clones
– Imitator e.g. car manufacturers imitate the style of one another
– Adapter e.g. many Japanese firms are excellent adapters initially
before developing into challengers and eventually leaders

Market-Nicher Strategies
• Smaller firms can avoid larger firms by
targeting smaller markets or niches that
are of little or no interest to the larger
firms
e.g. Logitech--mice
Microbrewers--special beers

Market-Nicher Strategies (cont’d)
• Nichers must create niches, expand the
niches and protect them
– e.g. Nike constantly created new niches--
cycling, walking, hiking, cheerleading, etc
• What is the major risk faced by nichers?
– Market niche may be attacked by larger firms
once they notice the niches are successful

Multiple Niching
“[A] firm should `stick to its niching’ but not
necessarily to its niche. That is why multiple
niching is preferable to single niching. By
developing strength in two or more niches the
company increases its chances for survival.”
Philip Kotler

Example of Nicher:
Challenger Superstore
• Challenger Superstore is a discount retailer
of computers and accessories
• It opened its first overseas store in Bangkok
at a cost of 90 million baht (S$3.7 million)
• In October 2000, it closed its Bangkok store
“after failing to pay rent amounting to
about 6 million baht”
Discussion: Why do you think Challenger
failed in Thailand?

T.H.A.N.K Y.O.U F.O.R
U.N.D.E.R.S.T.A.N.D.I.NG

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