Marketing Strategy Exam 2

The cells of the SWOT Matrix may also be assessed quantitatively

-The *first step* is to quantify the magnitude of each element within the matrix (magnitude refers to how much of the element exists). -The *second step* is to rate the importance of each element (how significant is the element?). -The *final step* is to multiply the magnitude ratings by the importance ratings to create a total rating for each element. ■Those elements with the highest total ratings (positive or negative) should have the greatest influence in developing the marketing strategy.

The Consumer Buying Process: Need Recognition

1. *Need*-Occurs when the consumer's existing level of satisfaction and desired level of satisfaction are not the same •Based on internal or external stimuli 2. *Want*-Consumer's desire for a specific product that will satisfy the need 3.*Demand*- Occurs when a consumer's ability and willingness to purchase a specific product backs up the want for that product

Ch. 4- Benefits of SWOT Analysis

1. *Simplicity*- SWOT analysis requires no extensive training or technical skills to be used successfully. The analyst needs only a comprehensive understanding of the nature of the company and the industry in which it competes. 2. *Lower Costs*- Because specialized training and skills are not necessary, the use of SWOT analysis can actually reduce the costs associated with strategic planning. As firms begin to recognize this benefit of SWOT analysis, many opt to downsize or eliminate their strategic planning departments. 3. *Flexibility*- SWOT analysis can enhance the quality of an organization's strategic planning even without extensive marketing information systems. However, when comprehensive systems are present, they can be structured to feed information directly into the SWOT framework. The presence of a comprehensive information system can make repeated SWOT analyses un more smoothly and efficiently. 4. *Integration and Synthesis*- SWOT analysis gives the analyst the ability to integrate and synthesize diverse information, both of a quantitative and a qualitative nature. It organizes information that is widely known, as well as information that has only recently been acquired or discovered. SWOT analysis can also deal with a wide diversity of information sources. In fact, SWOT analysis helps transform information diversity from a weakness of the planning process into one of its major strengths. 5. *Collaboration*- SWOT analysis fosters collaboration and open information exchange between different functional areas. By learning what their counterparts do, what they know, what they think, and how they feel, the marketing analyst can solve problems, fill voids in the analysis, and eliminate potential disagreements before the finalization of the marketing plan.

Common Segmentation Variables Used in Consumer Markets

1. Behavioral segmentation (*most common/powerful*) 2. Demographic segmentation 3. Psychographic segmentation 4. Geographic segmenation

VALS Consumer Profiles

1. Innovators (High Resources, High Innovation) 2. Thinkers (Ideals) 3. Believers (Ideals) 4. Achievers (Achievement) 5. Strivers (Achievement) 6. Experiences (Self-Expression) 7. Makers (Self-Expression) 8. Survivors (Low Resources, Low Innovation)

Ch. 5 Exhibit 5.1 The Consumer Buying Process

1. Need recognition 2. Information search 3. Evaluation of alternatives 4. Purchase decision 5. Postpurchase decision

Opportunities and Threats=

External Environment

Strengths and Weaknesses=

Internal Environment

VALS Consumer Profiles are created by

Strategic Business Insights

Continuous Objectives

■ 20%-21% -Current objectives are similar to objectives set in the previous planning period -Objectives that are only slightly modified over time do not need new strategies, increased effort, or better implementation to be achieved

Discontinuous Objectives

■ 75%-90% -Significantly elevate the level of performance on a given outcome factor -Typically require new strategies to achieve higher performance -*Often a part of applying for the Malcolm Baldrige National Quality Award- promotes the development of discontinuous objectives. One of the standards they use to award this is to determine if the company has pursued a met discontinuous objective that shows some unique...*

The Consumer Buying Process:Information Search

■*Amount of time, effort, and expense dedicated to information search depends on:* -*Degree of risk involved in the purchase (financial risk, social risk, emotional risk, personal risk)* *MOST IMPORTANT FACTOR* -*Amount of expertise with the product category* -*Actual cost of the search (time and money)* ■Evoked set -*Narrowing down potential product choices to a few products that can meet consumer needs* -Represents the outcome of information search

Causes for each issue in a SWOT analysis can often be found in the firm's and competitors' resources

■*Financial Resources*- cash, access to financial markets, physical facilities, equipment, raw materials, systems and configurations ■*Intellectual Resources*- expertise, discoveries, creativity, innovation ■*Legal Resources*- patents, trademarks, contracts ■*Human Resources*- employee expertise and skills, leadership ■*Organizational Resources*- culture, customs, shared values, vision, routines, working relationships, processes and systems ■*Informational Resources*- customer and competitive intelligence, MIS ■*Relational Resources*- strategic alliances, relations with customers, vendors, and other stakeholders, bargaining power, switching costs ■*Reputational Resources*- brand names, symbols, image, reputation

Principles of Blue Ocean Strategy

■*Firms develop strategic focus by developing a strategy that stands apart from the competition* ■*Strategy canvas - Helps visually identify strategic focus* ■*Four Actions Framework - Used to reorient firm's strategic focus away from the competition* -("Blue Ocean Strategy" by W. Chan Kim and Renee Mauborgne)

The Consumer Buying Process:Postpurchase Evaluation (Continued)

■*High likelihood of cognitive dissonance when*: -*Dollar value of the purchase increases* -*Desirability of rejected alternatives is high* -*Purchase decision is emotionally involving* ■Firm's ability to manage dissatisfaction and cognitive dissonance is: -A key to creating customer satisfaction -A major influence on word of mouth communication

Strategy Canvas

■*Horizontal axis* -Identifies factors that the industry currently competes with and what customers receive from existing product offerings ■*Vertical axis* -Identifies offering level received by buyers for each factor -High levels mean that a company invests more and offers buyers more of that factor. ■*Value curve* -Identifies the firm's relative performance across its industry's factors of competition

Individualized Segmentation Approaches

■*One-to-one marketing* -Creating an entirely unique product offering for each customer (common in business markets) ■*Mass customization* -Extension of one-to-one marketing -Provides unique solutions to individual customers on a mass scale

Competitive Advantage Strategies

■*Operational Excellence* -Focus on efficiency of operations and processes -Lower cost operations lead to lower prices for customers - Ex. Walmart, Dell ■*Product Leadership* -Excellence in technology and product development -Most advanced, highest quality product offering in the industry - Ex. 3M, Apple ■*Customer Intimacy* -Understand customers better than the competition -Develop long-term customer relationships -Ex. Amazon, Nordstrom

Marketing Objectives

■*Specific, quantitative benchmarks* ■Allows you to measure progress toward the achievement of marketing goals ■Involve measurable, quantitative outcomes, with specific assigned responsibility for their accomplishment, and a definite time period for their attainment. ■Example- "For the sales department to decrease unfilled customer orders from 3% to 2% between January and June of this fiscal year"

Marketing Goals

■*Statements of broad, desired accomplishments* ■Expressed in general terms and do not contain specifics ■Gives direction to a firm's growth and priorities to be used for evaluating and making decisions -Example- A firm has a goal of having lower prices than the competition (How much lower?, Which competitors?).

Directives for a Productive SWOT Analysis

■*Stay Focused* -It is a mistake to complete one generic SWOT analysis for the entire organization. SWOT analysis really means SWOT analyses. ■*Search Extensively for Competitors* -Information on competitors is an important aspect of a SWOT analysis. All four types of competition are important (brand, product, generic, and total budget). ■*Collaborate with other Functional Areas* -Information generated from the SWOT analysis can be shared across functional areas. -SWOT analysis can generate communication between managers of different functions, creating an environment for creativity and innovation. ■*Examine Issues from the Customers' Perspective* -What do customers (and noncustomers): ■believe about us as a company? ■think of our product quality, customer service, price, overall value, convenience, and promotional messages in comparison to competitors? -What is the relative importance of these issues as customers see them? ■*Look for Causes, Not Characteristics* -Causes for each issue in a SWOT analysis can often be found in the firm's and competitors' resources. ■*Separate Internal Issues from External Issues* -Failure to understand the difference between internal and external issues is a major reason for a poorly conducted SWOT analysis.

Buyer Behavior in Business Markets

■*The Buying Center* -The group of people responsible for making purchase decisions. -Often complex and difficult to identify. ■*Hard and Soft Costs* -Consumers and organizations both consider hard costs-price and purchase costs such as shipping and installation. -Organizations also consider soft costs-downtime, opportunity costs, human resource costs associated with the compatibility of systems. ■*Reciprocity* -Each firm often markets products that the other firm buys. ■*Mutual Dependence* -Buyers and sellers are more likely to be dependent on one another. -Each client relationship represents a significant portion of the firm's profit.

Establishing a Strategic Focus

■*The overall concept of model that guides the firm as it weaves various marketing elements together into a coherent strategy.* ■Four major directions for strategic efforts -*Aggressive* (many internal strengths/many external opportunities) -*Diversification* (many internal strengths/many external threats) -*Turnaround* (many internal weaknesses/many external opportunities) -*Defensive* (many internal weaknesses/many external threats) ■While these are more common, other combinations of strengths and weaknesses are possible

Basis for Segmentation of Business Buyers

■*Type of organization* ■*Organizational characteristics (size, geographic location, or product usage)* ■*Benefits sought or buying processes* ■*Personal and psychological characteristics* ■*Relationship intensity*

A Simple Ratings Method

■*Use a scale of 1 (low magnitude), 2 (medium magnitude), 3 (high magnitude) for eachStrength and Opportunity.* ■Use a scale of -1 (low magnitude), -2 (medium magnitude), -3 (high magnitude) for each Weakness and Threat. ■Usea scale of 1 (weak importance), 2 (average importance), 3 (major importance) for all elements in the matrix.

The Four Actions Framework: Used to develop a Blue Ocean Strategy

■*Which factors that the industry takes for granted should be eliminated?* -These factors may no longer have value for buyers. ■*Which factors should be reduced well below the industry's standard?* -Have products been over designed in a race to beat competition? ■*Which factors should be raised well above the industry's standard?* -Has the industry forced customers to make compromises? ■*Which factors should be created that the industry has never offered?* -What are the potential new sources of value for buyers?

The SWOT Matrix

■A four-cell array used to categorize information at the conclusion of a SWOT analysis ■Should be based on customer perceptions, not the perceptions of the manager or firm (can be collected through focus groups or survey research). -If customer perceptions cannot be gathered, the manager should base the ratings on the input from employees, business partners, or their own intuition and expertise. ■Elements with the highest total ratings should have the greatest influence in developing the strategy. ■Focus on competitive advantages by matching strengths with opportunities *quantitatively organize the elements in the SWOT*

Developing and Leveraging Competitive Advantages

■Competitive advantages -*Can arise from many internal and external sources* -*Refer to real differences between competing firms* -*Can be based on perception rather than reality* -*Should possess a specific benefit for customers to be of value to firms*

Differentiated Marketing

■Dividing the total market into groups of customers having relatively common or homogenous needs -Developing strategies to pursue one or more of these groups ■Multi-segment approach -Attracting buyers in more than one segment by offering a variety of products that appeal to different needs ■Market concentration -Focusing on a single market segment

Niche Marketing

■Efforts are focused on one small, well-defined market segment or niche -Possess unique and specific set of needs ■Customers will pay high prices for products that match specialized needs ■Firms should understand and meet the needs of target customers completely in order to earn a substantial share of the market segment

Geographic Segmentation

■Firms often find that their customers are geographically concentrated. ■Geographic segmentation is often most useful when combined with other segmentation variables. (*rarely used in isolation*)

Target Marketing Strategies

■For firms that recognize differentiated market segments in their approach to market segmentation, they may employ one of several basic strategies for target market selection. ■*Note that Mass Market Targeting is not the same as Mass Marketing.* -*In Mass Marketing, the presence of different segments is not acknowledged* (when you don't recognize the present segment, no differentiated marketing program) -*In Mass Market Targeting, multiple segments are acknowledged and all are pursued.* (offer product for every segment out there, only by big companies)

What Makes Good Strategy?

■Good strategy is about matching the firm's strengths to the available opportunities. ■Blue Ocean Strategy defines good strategy as having these three characteristics: -*Focus*- Good strategy does not diffuse the company's efforts across all key factors of competition (the value curve clearly shows focus in the strategy). -*Divergence*- Good strategy differs from other competitors in the market (the value curve is unique from competitors). -*Compelling Tagline* - Good strategy can be summarized in a clear-cut statement that delivers a clear, compelling message to customers.

Separate Internal Issues from External Issues

■If the issue would exist even if the firm did not exist, the issue should be classified as external. ■*Marketing options, strategies, or tactics are not the same as opportunities.*

Mass Marketing

■Involves no segmentation ■Adopts an undifferentiated approach -A single product or brand -One price -One promotional program -One distribution system ■Works best when the needs of an entire market are similar ■Results in efficient production and lower marketing costs ■Risky since it makes firms vulnerable to competitors

Criteria for Successful Segmentation

■Segmentation approach must be: -*Identifiable and measurable* -*Substantial* -*Accessible* -*Responsive* -*Viable and sustainablethe segment must be ready, willing, and able to conduct business with the firm and the segment must also be sustainable over time.* ■Avoid -Ethically sensitive, yet legal segments -Segments that do not match firm's expertise

SWOT-Driven Strategic Planning

■The assessment of strengths and weakness must look beyond the firm's resources and product offerings to examine processes that meet customers' needs. This entails offering solutions to customers' problems, rather than specific products. ex. drill bit ■Achieving goals and objectives depends on creating capabilities by matching strengths with market opportunities. ■Weaknesses can be converted into strengths with strategic investment. Threats can be converted into opportunities with the right resources. ■Weaknesses that cannot be converted become limitations which must be minimized if obvious or meaningful to customers or other stakeholders.

The Consumer Buying Process: Postpurchase Evaluation

■The connection between buying process and developing long-term customer relationships ■Four possible outcomes -*Delight* -*Satisfaction* -*Dissatisfaction* -*Cognitive dissonance* *(post-purchase doubt)*

Traditional Market Segmentation Approaches

■Used successfully for decades by many successful firms ■Are not necessarily out-of-date ■Are sometimes used in combination with newer approaches ■*MassMarketing* ■*Differentiated Marketing* -MultisegmentApproach -Market Concentration Approach ■*Niche Marketing*