Strategic Marketing

1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space
3. Strategic Market Segmentation
4. Strategic Customer Relationship Management
5. Capabilities for Learning about Customers and Markets
6. Market Targeting and Strategic Positioning
7. Strategic Relationships
8. Innovation and New Product Strategy
9. Strategic Brand Management
10. Value Chain Strategy
11. Pricing Strategy
12. Promotion, Advertising and Sales Promotion
Strategies
13. Sales Force, Internet, and Direct Marketing Strategies
14. Designing Market-Driven Organizations
15. Marketing Strategy Implementation And Control

Chapter 2

Markets and
Competitive
Space

McGraw-Hill/Irwin

Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

MARKETS AND COMPETITIVE SPACE

Markets and Strategies

Defining and Analyzing Product-Markets

Describing and Analyzing End-Users

Analyzing Competition
Market Size Estimation
Developing a Strategic Vision about the
Future

2-3

MARKETS AND STRATEGIES

The Challenges
Markets are increasingly complex, turbulent, and interrelated.
Importance of a broad view of the market.
Essential to develop a vision about how the market is likely to
change in the future.
Continuous Monitoring is Necessary to:
Find promising opportunities
Identify shifts in value requirements
Understand competitors positioning
Guide targeting and positioning
decisions

2-4

OPPORTUNITIES OUTSIDE THE

COMPETITIVE BOX
The Competitive Box
New Types of
Competition

New
Customers

Traditional Competitors

Conventional Value
Propositions

New
Business
Models
New
Customers

Existing Customer
Base
New Customer
Base(s)
2-5

AN ARRAY OF CHALLENGES
Disruptive Innovation

Fast Changing
Markets

Drivers of Changes
in Markets

Commoditization
Threats

Creating New Market Space

2-6

Markets Impact Strategies

* Market changes often require altering

strategies
* Forces of change create both market
opportunities and threats
* Inherent danger in faulty market sensing

2-7

DEFINING AND ANALYZING

PRODUCT-MARKETS
Determine the Boundaries and
Structure of the Product-Market

Form the
Product-Market
Describe and
Analyze End-Users
Analyze
Competition
Forecast
Market Size and
Rate of Change
2-8

Matching Needs with Product Benefits

* A product market matches people with
needs to the product benefits that satisfy
those needs
A product market is the set of products
judged to be substitutes within those usage
situations in which similar patterns of
benefits are sought by groups of
customers.*
*Srivastava, et al. (1984) Journal of Marketing, Spring, 32.
2-9

INNOVATION FEATURE
Progressive Insurance:
Customer Needs at the Center of Strategy
*

*
*
*
*
*

In the period 1994 to 2004, Progressive Insurance increased sales from $1.3 billion
to $9.5 billion, and ranks high in the Business Week Top 50 U.S. companies for
shareholder value creation.
The company invents new ways of providing services to save customers time,
money and irritation, while often lowering costs at the same time.
Loss adjusters are sent to the road accidents rather than working at head office,
and they have the power to write checks on the spot.
Progressive reduced the time needed to see a damaged automobile from seven
days to nine hours.
Policy holders cars are repaired quicker, and the focus on this central customer
need has won much automobile insurance business for Progressive.
These initiatives also enable Progressive to reduce its own costs the cost of
storing a damaged automobile for a day is $28, about the same as the profit from a
six-month policy.

Source: Adapted from Mitchell, Adrian (2004)Heart of the Matter, The Marketer, June 12, 14.
2-10

Product Market Boundaries and Structure

Determining Product-Market Structure

1. Start with the generic need satisfied by

the product category of interest to
management
2. Identify the product categories (types) that
can satisfy the generic need
3. Form the specific product markets within
the generic product market
2-11

Illustrative Fast-Food
Product-Market Structure

SUPER
MARKETS

MICROWAVE
OVENS

FAST-FOOD
MARKET
CONVENIENCE
STORES

TRADITIONAL
RESTAURANTS

2-12

Extent of Market Complexity

Three characteristics of markets:

* 1. Functions or uses of the product
* 2. The enabling technology of the
product
* 3. Customer segments in the productmarket
2-13

Illustrative Product Market Structure

Food and beverages
for breakfast meal

Generic Product
Class
Product Type

Cereals

Variant A

Ready to eat
Regular

Natural
Nutritional

Life

Product 19

Pre-sweetened

Special K

Variant B

Brands
2-14

DEFINING AND ANALYZING MARKETS

Define Product-Market Boundaries and Structures
Identify and Describe End-Users

Analyze Industry and Value Added Chain

Evaluate Key Competitors

Forecast Market Size

and Growth Trends
2-15

Identifying and
Describing Buyers

Building
Customer
Profiles

DESCRIBING
AND
ANALYZING
END-USERS

How
Buyers
Make
Choices

Environmental
Influences
2-16

Identifying and Describing End-Users

*

Illustrative buyer characteristics in consumer

markets:

Family size, age, income, geographical

location, sex, and occupation
* Illustrative factors in organizational markets:
Type of industry
Company size
Location
Type of products
2-17

How Buyers Make Choices

BUYING DECISION PROCESS:

1. Problem recognition
2. Information search

3. Alternative evaluation
4. Purchase decision
5. Post-purchase behavior
2-18

Environmental
Influences

External factors influencing buyers

needs and wants:
Government, social change,
economic shifts, technology etc.
* These factors are often noncontrollable but can have a major
impact on purchasing decisions
*

2-19

Building Customer Profiles

*

Start with generic product market

Move next to product- type and variant

profiles >> increasingly more
specific

Customer profiles guide decision

making (e.g. targeting, positioning,
market segmentation etc.)
2-20

ANALYZING COMPETITION
1. Define the Competitive
Arena for the Generic,
Specific, and Variant
Product Markets

4. Identify
and
Evaluate
Potential
Competitors

PRODUCTMARKET
STRUCTURE
AND
MARKET
SEGMENTS

2. Identify
and
Describe
Key
Competitors

3. Evaluate
Key
Competitors
2-21

Examples of Levels of Competition

Baseball
cards
Bottle
water

Fast
Food

Regular
colas

Beer

Video
Games
Diet lemon
limes

Ice
Cream

Diet-Rite
Cola
Fruit
flavored
colas

Diet
Coke

Diet Pepsi
Wine

Product from
competition:
Product category diet colas
competition:
Juices
soft drinks

Lemon
limes

Coffee

Budget competition:
food & entertainment

Generic competition:
beverages

2-22

Industry Analysis
*

Industry size, growth, and composition

Typical marketing practices

Industry changes that are anticipated (e.g.

consolidation trends)

Industry strengths and weaknesses

Strategic alliances among competitors

2-23

Defining Industry Structure & Characteristics

SUPPLIERS
Industry Form
Industry
Environment
Competitive
Forces

PRODUCERS
WHOLESALERS/
DISTRIBUTORS
RETAILERS/DEALERS

Value
Added
Chain

CONSUMER/
ORGANIZATIONAL END
USERS
2-24

Competitive Forces
1. Rivalry among existing firms.
2. Threat of new entrants.
3. Threat of substitute products.

4. Bargaining power of suppliers.

5. Bargaining power of buyers.
Source: Michael E. Porter, Competitive Advantage, Free Press, 1985, 5.
2-25

Key Competitor Analysis

*
*
*
*
*
*
*

Business scope and objectives

Management experience, capabilities,
and weaknesses
Market position and trends
Market target(s) and customer base
Marketing program positioning strategy
Financial, technical, and operating
capabilities
Key competitive advantages (e.g.,
access to resources, patents)
2-26

Extent of
Market Coverage

Current
Capabilities

Competitor
Evaluation

Customer
Satisfaction

Past
Performance
2-27

MARKET SIZE ESTIMATION

Product-Market Forecast
Relationships

Market Potential
Estimate

(area denotes sales in $s)

Unrealized
Potential

Company
Sales
Forecast

Industry
Sales
Forecast

2-28

Product-Market Forecast Relationships for

Industrial Painting Units
Sales (in 1000s
of units)
900
800
700
600
500
400
300
200
100
0
2003
2004

Market
Potential
Sales Forecast

Company XYZ
Sales Forecast

2005

2006

2007

2008

2009

2010
2-29

DEVELOPING A STRATEGIC VISION ABOUT

THE FUTURE
Industry Boundaries Blurring and Evolving
Competitive Structure and Players Changing
Value Migration Paths
Product Versus Business Design
Competition
Firms are Collaborating to Influence Industry
Standards
Source: C. K. Prahalad, Journal of Marketing, Aug. 1995, vi.
2-30