chapter two: strategic planning for competitive advantage

BCG strategic alternatives

1. *build (invest)*: if an SBU has the potential to be a star, building would be an appropriate goal -stars & (sometimes) problem children are good candidates -stop & shop securing additional flu vaccines to gear up for increased demand 2. *hold (leave it alone)* -cash cows are good candidates 3. *harvest (promote to gain as much as possible)* -*all except stars* are good candidates -short-term goal of gaining cash flow for other investments or brand-building -book a cruise during "wave season" 4. *divest (sell off or phase out)* -problem children or dogs are good candidates -AT&T considers divesting DirectTV stake after losing ground to streaming services

"As with the SWOT analysis, it's important to view the organization from a __________________ perspective (concerning competitive advantage). It truly does not matter if the marketer believes the organization deserves to have a competitive advantage if the target market doesn't agree"

customer's

situation analysis by which firms should:

identify their internal strengths and weaknesses -done by focusing on organizational resources examine their external opportunities and threats -done via *environmental scanning*, which involves analyzing aspects of the marketing environment

adjacent innovation example

Old Bay has long been known for its signature spice blend. The company recently released a hot sauce infused with the dry spice, and it sold out within a very short time

true or false: marketing plans are critical to success

true; "because they provide formalized, written structure to the organization's strategy. For small businesses or aspiring entrepreneurs, business plans (which include marketing plans) are required before potential investors, lenders, or grant-funding agencies will consider providing capital. The remaining learning objectives to be covered for this chapter explore marketing plan components in detail"

true or false: you will find mission statements that look like vision statements, and vice versa

true; "It happens so commonly in practice that I hesitate to say there is any one RIGHT way to craft a mission statement. However, understanding this distinction can help marketers think about what the organization will look like in the future best-case scenario (vision), based on how the business will operate on a daily basis (mission)"

hold strategies

*maintain the current level of marketing investments, usually due to company satisfaction with the current performance of a brand or value offering.* The minivan example in the previous slide is a good illustration: there's no need to invest more money in a product that doesn't have high growth potential, but continues to be profitable

problem child (also called "question mark")

*shows rapid growth but poor profit margins. It has a low market share in a high-growth industry. It needs a great deal of cash to prevent conversion to the status of dogs. The strategies are to invest heavily to gain better market share, acquire competitors to get the necessary market share, or drop the SBU* -example: The pandemic has turned food delivery into more of a need than a luxury, resulting in a 113% increase in demand for that part of Uber's business. The problem: it's in a very competitive industry, and costs of doing business are high, making profitability more questionable. Add that to the huge decrease in demand for the company's flagship ride-hailing services and regulatory scrutiny, and the compcompany is scrambling to figure out how to get into more profitable forms of business

SWOT meaning

*strengths*: family-friendly environment; reasonable prices; large space; adaptive *weaknesses*: high employee turnover; un-optimized supplier relationships *opportunities*: increased food delivery; family vacationers; delayed school openings; food truck *threats*: decreased consumer spending; uncertain regulatory protection; virus outbreaks

*ultimate goal of the marketing plan =*

*sustainable competitive advantages*; "If you think about it, that's why the marketing plan can't be a one-and-done effort. The marketplace constantly evolves: consumer preferences change, loyal customers age out, competitors entire, technology advances...the list goes on. A competitive advantage truly can't be sustained if the marketing plan isn't viewed a part of a process that evolves with organizational strengths/weaknesses and external opportunities threats"

mission statement

*the foundation for an organization's marketing plan*. Ideally, it is known by every member of the organization, and agreement exists that every marketing strategy aligns with it. For this reason, good mission statements are not narrowly defined, but instead reflect what the organization aspires to do every day

core innovation example

Australian Gold, a 35-year-old sunscreen brand, realized that two of the ingredients in its previous formulas posed a risk to coral reefs. The company reformulated the product to remove the toxic ingredients

cost competitive advantage example

"As of August 2020, experts do not expect business or leisure air travel to reach pre-pandemic levels until 2024. Airlines—like just about every other business in the world—are struggling right now, and the outlook is pretty bleak for the next few years. Low cost carriers, like Countour, who offer shorter routes with basic amenities at a low price, have an edge over the Deltas of the universe for a variety of reasons. A big one is that they operate on much lower costs than the larger competitors. Consumers and businesses are cautious about spending money on travel right now, not to mention having concerns about the virus, itself. This article doesn't paint a beautiful future for anyone right now, but at least the LCCs have never been reliant on huge profit margins"

"Strategic planning is not a "one-and-done" organizational activity. It requires having a (you guessed it...) plan in place that provides structure to how new market opportunities/threats are identified, how the organization will address new market opportunities/threats, and how the effectiveness of the strategy will be measured and monitored"

"Dairy Queen has an interesting history. Once a mainstay for mall food courts, the company lost its loyal customer base, thanks to disappearing indoor mall traffic and perceptions that DQ was all about sweet treats. After rebranding its original business concept, the company focused on establishing beliefs that its restaurants were a place to get everything from burgers to chicken strip baskets to ice cream cones. They redesigned their retail space to make it more inviting for dine-in customers. Even in the midst of a pandemic, the parent company (Fourteen Foods) moved forward with opening its Oxford location. I have yet to drive by there when there isn't a line. Hopefully the restaurant's popularity will continue. The Inc.com article linked in this slide is part of a collaboration between Inc and Capital One Spark Business Venture Card. It highlights how three entrepreneurs made strategic decisions along the way to overcome obstacles like seasonality of demand, growth without profitability, and lack of resources as compared with competitors. Additionally, Capital One's strategy is reflected in their collaboration with Inc, which showcases the benefits of its credit card for small business owners. -*It's important to understand that strategy can change over time, but fundamental elements of the organization, like its mission, should be at the core of any marketing strategy change*"

"As I mentioned in an earlier lecture, Chapter 2 really addresses the heart of effective marketing strategy: planning. The problem with planning is that a lot of people (and organizations) don't really love to do it, but it really is necessary for success. Strategic planning is ongoing, and requires the marketer to actively shift marketing strategy to meet organizational objectives and goals"

"David's Bridal, like many specialty stores, lost so much of its market share in the past that the company filed for Chapter 11 bankruptcy and came out of it in 2019. But that doesn't mean that David's Bridal shut the doors and stopped planning. Zoey, the company's Apple Messenger chatbot, has been a large part of how David's Bridal simultaneously cut costs and enhanced customer experiences"

"Larger organizations that compete in different markets often organize their strategic planning in a sub-divided manner. The individual divisions are known as "*strategic business units*"

"For example, The Taylor Group Companies is a collection of SBUs, owned by the same parent company (originally named Taylor Machine Works), that provide a variety of products and services in the industrial machinery and heavy lifting sector. The short description under each SBU name provides an idea of what each specializes in"

"Ansoff's Opportunity Matrix is one of the most commonly used tools to determine a company's strategic direction. It is definitely a simplified model, but..."

"reflects the basic decisions that organizations can make when developing marketing strategy"

"Although we often think about the core value offering when we discuss different alternatives, it's important to remember that organizations can make strategic changes to all aspects of the customer experience"

"For example, a restaurant may partner with a third-party delivery service to earn a new market for its existing menu items. If the goal of this change is to increase market share among current customers, then the alternative is Market Penetration. If the goal is to earn new customers who prefer to dine at home, then the alternative is Market Development. The point is to think about both the change and the goal of the change in determining which alternative is being described"

product/service differentiation example

"Have you ever had a request for anything turned down over 100 times? Ryan Cohen, co-founder of Chewy.com, can probably tell you how it feels. When he pitched the idea for Chewy.com, an e-commerce pet care products retailer, over 100 investors said, "no way". Why? The existing competition—Amazon, PetSmart, PetCo--was way to strong. So how did Cohen and his co-founders create and ultimately sell Chewy for over $3b in 2017? Exceptional customer service. I'm talking about birthday cards for your pets, 24/7 live chat support, and the most flexible auto-ship offering I've ever experienced. This article talks about how Cohen saw the opportunity to be #1 in a very competitive market. Even during the pandemic, this company's customer focus shines. Just about anything you order online is subject to uncertain delivery times right now. And for the most part, people tend to understand why. Manufacturing facilities closed down due to the outbreak, companies are laying off employees to survive, it's just a scary time. Chewy was not immune to delays in their customers' auto-ship deliveries. How did the company handle it? They communicated. I received emails each month a few days before the auto-ship would typically be ordered, telling me that there may be a delay (e.g., I run out of dog food) if the dates remain in place, and recommending that I change the date (very, very easy to do, btw) to a little earlier in order to keep my inventory stocked. This is just an example of how during bad times, you can still differentiate yourself with excellent, authentic customer service"

niche competitive advantage example

"I learned about Penguin Magic in a book by Seth Godin, This Is Marketing. Before I discuss the company, I'll plug Godin's book. It's GREAT. He's passionate about marketing topics, and provides some awesome illustrations of them in practice. Penguin Magic definitely serves a very specialized audience: Amateur Magicians. The thing about professional magicians is that their audiences change across performances, so they don't have to be as concerned with repetitive tricks. Not so for amateurs, who perform for friends and family, and need to mix things up. The company has created a very close-knit customer community, demonstrating every trick with a video, posting legitimate trick reviews by magicians (pretty hard to please audience), and distributing their monthly magazine (pictured above). You can hopefully understand why this particular space in the market doesn't offer room for a lot of players"

"Divisions points may be by industry (e.g., Taylor Machine Works makes forklifts, Taylor Leasing & Rental focuses on financing agreements), region, or even function (e.g., School of Business)"

"Mitchell Companies is a parent organization comprised of 6 different SBUs. Mitchell Distributing (MS) and Chesapeake Beverage (MD) focus on getting Anheuser-Busch products to their business customers and being a wholesaler of these products, respectively. I recently interviewed Kyle Edmonds, co-owner of Mitchell Signs. This is a completely different business. The company designs and builds signs for organizations (think light-up lettering on banks or the occasional university football stadium). One thing Kyle told me was that the beauty of being an SBU in a larger company means you can offer great benefits to employees, due to the sheer number of them. But altogether, Mitchell Signs isn't making plans based on what the beer folks are doing"

SWOT example in footnotes

"The example I provide here is based on conversations with my mother and brother, co-owners of Lake Tiak-O'Khata, a family resort featuring a motel and cabin lodging, a full-service restaurant with a bar, and a recreational swimming area. Before COVID-19, the company was on track to have the best year (in terms of revenues) they'd ever seen. New menu items, a bar/dining room with a view, and a focus on social media strategy to get the word out played a role in that. Here's the thing about seasonal businesses: you rely on your peak demand times—April through September for the Lake—to get you through the slow ones—November through March. The Lake is typically booked solid through the summer months, primarily with groups who have been coming for years. By the Monday before Memorial Day, there wasn't a group left on the books. Scary, right? But they showed a real resilience that got them through. They immediately began working with a community bank to secure the first round of the Payroll Protection Program (special thanks here to a dedicated accountant and banker). When in-house dining was prohibited, they promoted family meal curbside pickup or delivery options. They were more than happy to expand their delivery radius (they literally took online orders for delivery 1 ½ hours away). They shifted focus from the big group customers of years past and positioned themselves as a great place for families to get away, especially if they wanted to avoid large crowds and just have some quality time together at a reasonable price. They worked longer hours than ever to make up for lost employees, and they took the down time to examine their inventory and supplier relationships so they could focus on optimizing costs. When they reopened the restaurant and event venues, they had enough space to comply with social distancing standards. Back to that week before Memorial Day, by Wednesday they were booked solid with this new type of summer customer, and they're working right now to secure lodging contracts with construction and other industrial companies who will be working in the area during the fall and winter months. It hasn't been easy, but by honestly looking at their SWOT analysis, they have been able to adapt"

steps involved in following up on the marketing plan footnotes:

"These last two sections are part of the marketing plan and should also be written out. For example, Evaluation and Control should include times when a strategy's effectiveness will be assessed, based on the marketing objectives set earlier. Having this and other information in writing ensures everyone is on the same page and avoids losing focus on following through after the hard work of creating the plan has been done. If you happen to be a marketing consultant instead of working inside an organization, you can expect your performance to be evaluated based on the plan. Consequently, it's important to set realistic objectives early on, and be up-front about the information you contribute to the SWOT analysis, for example"

Note that marketing objectives...

"don't always have to be about sales or profits, although they should be related to them. For example, if you know that people who visit your website before visiting your physical store are more likely to purchase your products than people who don't visit the site prior to visiting, gaining website visitors would be a good objective to have"

SBU's are often described as....

"operating independently of one another, which is true. Many have their own goals, management, and business structures. However, it's important to keep in mind that all SBUs are meant to contribute to the value of the brand overall, and are still under ownership of the parent company"

target market strategy footnotes:

"•Chapter 8 is dedicated to segmenting the larger market and selecting those segments that you will target, so I won't spend much time on it here. In short, you have to decide whether you plan to have one marketing mix for the entire market (which rarely works), or whether you plan to focus on segments that are (even a little bit) different from one another with respect to what they need. Take Chewy.com for example. Off the cuff, you may think that this organization is more of a niche/concentrated marketer, just due to the nature of its customer base. But if you explore the dropdown menu on their home page, you can see that the retailer appeals to different segments, based on the type of pet they have, for one. Pet fish owners have different needs than boa constrictor parents, and neither group really needs to scroll through products that aren't relevant to their pets. The general target customer? Pet fanatics. But even within that larger segment are sub-segments with different preferences. -Even some of the most specialized professional industries typically use differentiated/multi-segment targeting strategies. For example, a CPA might spend a lot of time working on tax returns, but might also be involved in offering payroll services and financial statement preparation for other clients"

elements of a marketing plan (slide 9 of ppw 2)

(in descending order) 1. business mission statement 2. situation, or SWOT, analysis 3. objectives 4. marketing strategy *target market strategy:* --> marketing mix: -product -place -promotion -price 5. implementation evaluation control

why is strategic planning so important?

*% operating costs cut: >30 *% customers opting to use chat instead of wait on the phone: 41 *% customers switch to messenger booking instead of in-story: 30 *% customer requests resolved on first chat: 90 *% customer requests resolved on first in-store interaction: 73

star

*a fast-growing market leader. Stars usually have large profits but need cash to finance growth. A marketing tactic is to protect market share by reinvesting earnings in product improvement, better distribution, more promotion, and production efficiency. They strive to capture new users as they enter the market* -example: This year, experts are expecting consumers to turn out in record numbers seeking flu vaccinations, due to concerns about being hospitalized or having higher vulnerability to COVID-19

harvest strategies

*are good for short-term goals or for building relationships with customers* Wave Season is a term describing January - March, when cruise lines often slash their prices and offer additional perks to appeal to potential customers. The campaigns can be effective for price-sensitive customers who want something to look forward to in dreary winter months

divest strategies

*are used for phasing out value offerings/brands that are classified as dogs, or that simply aren't contributing to the company's profitability in a satisfactory manner.* AT&T acquired DirectTV in 2015 for $67b. The goal at the time was to reach a paid TV audience and extend beyond wireless communications. However, the business has struggled with the rise of more affordable streaming services (e.g., Netflix and various other apps). Consequently, the company is considering divesting 50% of its ownership in DirectTV to help address a huge debt burden

build strategies

*focus on brands or value offerings that have high growth potential, whether they are already classified as stars, or need attention as problem children.* As I mentioned in the previous slide, pharmacy retailers, such as grocer Stop & Shop, are investing in additional flu vaccines to meet rapidly rising demand

cash cow

*generates more cash than it needs to maintain its market share. It is in a low-growth market, but the product has a dominant market share. The marketing strategy is to maintain market dominance by being the price leader and making technological improvements in the product. It allocates excess cash to products with high-growth prospects* -example: Minivans, in general, do not account for a high percentage of vehicle purchases. Consequently, there are only a few auto brands that still manufacturer them. However, The Dodge Caravan and Chrysler Pacifica (both owned by Fiat Chrysler) account for 57% of the market, and won't be going away anytime soon

dog

*has low growth potential and a small market share. Most dogs leave the market. The strategy options are to divest or harvest* -example: The Chrysler Fiat 500 has experienced low sales volume for years, and the manufacturer will be removing production and sales of the vehicle in the US by 2020

types of competitive advantages: (3)

1. *cost*: organization is efficient enough to offer low prices for quality products and still earn high enough profit margins -Low Cost Carriers (airlines) may have the edge over Full Service Carriers during transition from pandemic 2. *product/service differentiation*: value offering is superior to what competitors provide, usually (but not always) at a premium price -§"and I thought wow, if customers can go bananas for shoes online, imagine if we could do it for pet customers who are as fanatical and obsessed with their pets like I am."—Ryan Cohen, co-founder, Chewy.com 3. *niche*: organization effectively serves a small customer segment and competition either can't or doesn't see value in entering

2 steps involved in following up on the marketing plan:

1. *implementation*: -turns a marketing plan into action assignments -ensures these assignments are executed in a way that accomplishes the plan's objectives *involves: --> establishing timelines --> establishing budgets --> gaining acceptance from those involved--don't underestimate this! 2. *evaluation and control*: -gauges the extent to which the marketing objectives have been achieved during the specified time period *provides the mechanisms for: --> evaluating marketing results in light of the plan's objectives --> correcting actions that do not help the organization reach those objectives within budget guidelines

target market strategy: (3)

1. *undifferentiated*: appeal to the entire market with one marketing mix 2. *niche/concentrated*: concentrate on one marketing segment 3. *differentiated/multi-segment*: appeal to multiple market segments with multiple marketing mixes

characteristics of strategic business units (SBUs): (5)

1. distinct goals and a specific target market 2. control over its resources 3. its own competitors 4. a single business or a collection of related businesses 5. plans independent of other SBUs in the total organization

marketing objectives should be: (4)

1. realistic 2. measurable 3. time specific 4. compared to a benchmark examples: -"our objective is to increase the number of new website visitors from 1,000 to 5,000 by the end of the first quarter" -"our objective is to achieve 10% dollar market share in the cat food market within 12 months of product introduction"

strategic business unit (SBU)

a subgroup of a single business or a collection of related businesses within the larger organization

diversification example

Black Tap, a New York City-based burger restaurant, has added a vegan milkshake, the Black'N White CakeShake, to its menu in order to offer value to a new market of customers with dairy-free diets

transformational innovation example

CommonBond, a private student loan refinancing company, introduced a new SmartSave tool, the first of its kind. SmartSave allows CommonBond customer to transfer savings on student loans savings to a partner variable rate cash account1 that currently earns 1.70% APY,2 which is more than 18 times the national savings account average 3. There are no fees or minimums for the account

market development example

Dairy Queen is open in Oxford! You'll see the same menu here as you will in other DQ Grill & Chill locations, so nothing has changed there. The franchise if simply trying to tap into new market with its existing offerings

market penetration example

Loyalty programs are a great example of market penetration, because the goal is to increase wallet share, or the amount of money a customer spends with the organization over the course of the customer relationship. Foot Locker owns 8 brands, including Champs, Foot Action, and Eastbay. Each of those brands had their own loyalty programs. In January 2020, Foot Locker announced that all 8 loyalty programs would be combined into one, allowing customers of any of the brands to see and manage their accounts in a central location. "We know our most valuable customers are the ones who shop across all our brands, but we haven't really done anything to encourage that behavior until now," said Jed Berger, CMO of Foot Locker

product development example

Pinterest recently launched its "Try On" feature for lipsticks, and plans to include additional makeup items in the future. Pinterest users can search for a lipstick color and actually see what it would look like on them after uploading a picture

the goal of the marketing plan is to....

achieve SUSTAINABLE competitive advantage, which cannot be copied by competition

mission statements vs. vision statements

mission statements=foundation for an organization's marketing plan vision statements=reflect what the organization ultimately seeks to be -Renasant Corporation provides an excellent illustration of both (slide 5 ppw 3)

"When possible, SWOT analyses need to conducted with ____________ _____________ in the group. As a general rule, people tend to be more positively biased toward their own work. This is not an easy task to endure, because it requires being very honest about not only what is great, but what could be improved"

objective evaluators

strategic planning

ongoing process of creating and maintaining a fit between the organization's objectives and resources and the evolving market opportunities *addresses 2 questions:* 1. what is the organization's main activity at a particular time? 2. how will the organization facilitate mutually beneficial value exchanges with customers and other stakeholders at a particular time? -DQ Grill & Chill "Brings Smiles" to Oxford, MS; opens location July 2020 -Inc.com with Capital One Spark Business: "Competing with Giants: How Small Businesses Solve Big Business Problems"; panel discussion

external parts of SWOT:

opportunities & threats

Ansoff's Opportunity Matrix

present market + present product = *market penetration* (goal: increase market share of existing offerings among existing customers) present market + new product = *product development* (goal: develop new offerings to create value for existing customers) new market + present product = *market development* (goal: attract new customers to existing offerings) new market + new product = *diversification* (goal: develop new offerings to create value for new markets)

competitive advantage

set of unique features of a company and its value offerings that are perceived by the target market as significant and superior to the competition

marketing objective

statement of what is to be accomplished through marketing activities

internal parts of SWOT:

strengths & weaknesses