BALAKRISHNAN

Framework Framework for for Marketing Marketing Strategy Strategy

Evolution Evolution of of Marketing Marketing Marketing Marketing as as Organizational Organizational Philosophy Philosophy

Dr. P.V. (Sundar) Balakrishnan

Production Production Philosophy Philosophy

Selling Selling Philosophy Philosophy

Marketing Marketing Philosophy Philosophy

Managing World-Class Organizations

Marketing Marketing Concept Concept
This is going on today at Internet Time!

Balakrishnan

S #1

Balakrishnan

S #2

we were under the misapprehension that a computer program and a product are the same thing. A lot of programmers believe that when they finish writing a line of code and do some testing, they have a product. They have done the first twenty percent.
Ed Oates, Founder of Oracle The Difference between God and Larry Ellison by Mike Wilson, 1997

computer program vs. a product BUT The thing still has to be packaged; it has to be marketed; it has to be sold; it has to be maintained. . . We knew that instinctively, but we really didnt have the business acumen to run a rapidly growing company.
Ed Oates, Founder of Oracle in The Difference between God and Larry Ellison by Mike Wilson

Balakrishnan

S #3

Balakrishnan

S #4

Basic Marketing Concept

Achieving Achieving the the SATISFACTION SATISFACTION of of the the Customers Customers Needs Needs

Customer Focus

While While

Achieving Achieving the the OBJECTIVES OBJECTIVES of of the the Organization Organization

Satisfy the needs of a group of customers better than the competition.

Balakrishnan

S #5

Balakrishnan

S #6

NPM

BALAKRISHNAN

The Marketing Concept

To achieve organizational (& Societal) goals by determining the needs and wants of customers and delivering the desired benefits more effectively and efficiently than competitors.

There is only one valid definition of business purpose: to create a customer.

- Peter Drucker

Everything starts with the customer.

- Lou Gerstner, CEO of IBM

Creating shareholder wealth is not the purpose of the business. It is the reward for creating customer value. - Michael Tracy and Fred Wiersema in CFO magazine

Balakrishnan

S #7

Balakrishnan

S #8

Marketing Framework
The new view A 6th C!
Customers

CONTEXT CONTEXT

Competitors

COMPANY

Complementors

Collaborators

Complementor Competitor
Source: Robert Dolan, HBS Note Balakrishnan S #9 Balakrishnan

Customer value your product more if the complementors product is present (e.g., hot dog producer and mustard producer!) Customer value your product less if the competitors product is present
S #10

Recasting the 6C - 4P Framework in Value Terms

Exploring Value Creating Value Customer Company Competitor Collaborators Complementors Context Product Price Place Promotion Communicating Value Delivering Value Capturing Value Sustaining Value
Balakrishnan S #11

Marketing Marketing Analysis Analysis

TOPICS TOPICS Business Business Definition Definition Matching Matching SUPPLY SUPPLY <===> <===> DEMAND DEMAND Sizing Up Marketing Situations Sizing Up Marketing Situations PLC ==> ==> Marketing Marketing Mix Mix PLC

Balakrishnan

S #12

NPM

BALAKRISHNAN

1. 1.Business Business Definition Definition What Business Are We In? The Great Organizations are constantly unprogressive. They will not take on the big thing...
Justice Louis D. Brandeis (1912)

1. 1.Business Business Definition Definition(contd) (contd) What Business Are We In?

Example: AT&T:
===>Telephone ===>Voice Transmission

Examples: a) GAS Company ! b) Western Union: ==> Telegraph Business. c) Railroad Companies

Paradigm Shift:-- Internet Model Not

Ask Ask your your Neighbor Neighbor :: ABC ABC TV==> TV==> What What Business Business are are they they in? in?

Balakrishnan

S #13

Balakrishnan

S #14

To

Market
0 1 2 3 4 5

Market
0 Shipments 1 2 3 4 5

Shipments A (Us) B Other Total 403,027 369,916 367,057 495,192 388,520 324,010 548,905 349,396 343,885 550,351 323,005 370,374 541,388 342,197 202,495 515,000 297,000 129,070 941,070

A (Us) B Other Total

403,027 369,916 367,057

495,192 388,520 324,010

548,905 349,396 343,885

550,351 323,005 370,374

541,388 342,197 202,495

515,000 297,000 129,070 941,070

1,140,000 1,207,722 1,242,186 1,243,730 1,086,080

1,140,000 1,207,722 1,242,186 1,243,730 1,086,080

Market Shares (%) A (Us) B Other 35.4 32.4 32.2 41.0 32.2 26.8 44.2 28.1 27.7 44.2 26.0 29.8 49.8 31.5 18.6 54.7 31.6 13.7

Market Shares (%) A (Us) B Other 35.4 32.4 32.2 41.0 32.2 26.8 44.2 28.1 27.7 44.2 26.0 29.8 49.8 31.5 18.6 54.7 31.6 13.7

Position in a
Balakrishnan

Market =>

!
S #15 Balakrishnan

Dominant Position in a Declining Market => Cash Cow!

S #16

How Broadly do we define our Market?

0 Shipments A (Us) B Other Processors Total 403,027 369,916 367,057 60,040 1,200,040 495,192 388,520 324,010 112,220 1,319,942 548,905 349,396 343,885 209,800 1,451,986 550,351 323,005 370,374 392,352 1,636,082 541,388 342,197 202,495 733,699 1,819,778 515,000 297,000 129,070 1,372,016 2,313,086 1 2 3 4 5

How Broadly do we define our Market?

1980 Shipments A (Us) B 403,027 369,916 495,192 388,520 324,010 112,220 1,319,942 548,905 349,396 343,885 209,800 1,451,986 550,351 323,005 370,374 392,352 1,636,082 541,388 342,197 202,495 733,699 1,819,778 515,000 297,000 129,070 1,372,016 2,313,086 1981 1982 1983 1984 1985

Other Electric 367,057 Electronic Word 60,040 Processors Total 1,200,040

Market Shares (%) A (Us) B Other Processors 33.6 30.8 30.6 5.0 37.5 29.4 24.5 8.5 37.8 24.1 23.7 14.4 33.6 19.7 22.6 24.0 29.8 18.8 11.1 40.3 22.3 12.8 5.6 59.3

Market Shares (%) A (Us) B Other Electric Electronic Word Processors 33.6 30.8 30.6 5.0 37.5 29.4 24.5 8.5 37.8 24.1 23.7 14.4 33.6 19.7 22.6 24.0 29.8 18.8 11.1 40.3 22.3 12.8 5.6 59.3

Share in a
Balakrishnan

Market =>

!
S #17 Balakrishnan

Declining Share in a Growing Market => Problem Child!

Electric Typewriter/ Word Processor Market

S #18

NPM

BALAKRISHNAN

Business BusinessDefinition Definition

EXAMPLE: EXAMPLE: ABC ABC Television Television

ABC ABC TV==> TV==> What What Business Business are are they they in? in?

Need to Consider:
How Narrowly we define/ ===> Restriction on Focus! How Consumers perceive the product from their point-of-view? ===> (Consumption) I.e., PRODUCT BENEFITS
Example:

PRODUCT

MARKET

What is Our Product?

I.e., what do we SUPPLY?

Drill

===> Need a better drill?

What is Our Market?

Consumers Need:

DEMAND? I.e., who do we sell our product to?

ABC TV - Business is to :

ABC TV==> What Business are they in?

Balakrishnan

S #19

Balakrishnan

S #20

EXAMPLE: EXAMPLE:ABC ABC Television Television

ABC ABC TV==> TV==> What What Business Business are are they they in? in?

Products

PRODUCT

MARKET

A bundle of Attributes that provide Consumers with certain Benefits. Also called
Resource; Marketing Offer; Customer Solution

What is Our Product?

I.e., what do we SUPPLY?

Ex: Drill Bits.

Benefits provided?

What is Our Market?

DEMAND? I.e., who do we sell our product to?

ABC TV - Business is to :

Sellers who focus on the Specific product rather than the Benefits provided suffer from Marketing Myopia.

Supply Audiences
Balakrishnan

to

Advertisers!
S #21 Balakrishnan S #22

2. 2.Matching MatchingSUPPLY SUPPLY <==> <==>DEMAND DEMAND

3. 3. Sizing Sizingup upthe the Marketing Marketing Situation Situation Organizational Organizational Philosophy Philosophy

SUPPLY

DEMAND

PRODUCT

MARKET

Marketing Marketing Concept Concept

JOB:
To Make this Exchange Process Possible To Increase the Efficiency of the Marketing Exchange

Exchanges Exchanges

Strategies Strategies

Product

Market

Balakrishnan

S #23

Balakrishnan

S #24

NPM

BALAKRISHNAN

3a. 3a.Demand DemandAnalysis Analysis

3b. 3b.SUPPLY SUPPLYPROGRAMS: PROGRAMS:Marketing MarketingMix Mix

PRODUCT

MARKET

Product Line Decisions

Price Decisions

What is Our Market? SIZE GROWTH SHARE CHOOSERS (DMUS) CHOICE PROCESS (DMP)

DEMAND DEMAND

Marketing Marketing Mix Mix

Distribution Decisions
S #25 Balakrishnan

Communications Decisions
S #26

Balakrishnan

MARKETING SITUATION APPRAISAL

Performance Performance Metrics Metrics Model Model

CAUSE
CONTROLLABLE FACTORS Marketing Mix -Price -Product -Promotion -Place
UNCONTROLLABLE FACTORS

STRATEGY

Product Market/Segment
Size Rate of Growth
Demand Analysis

EFFECTS
Behavioral Response -Awareness -Interest -Purchase -Satisfaction/Loyalty

Market Share Relative Market Share Decision Making Unit Decision Making Process Product Benefits

Supply Programs

Price/Value-Added Basis Communications Program Distribution Program Success Factors/Other Forces

Independent Variables -Competition -Tastes -Legal -Economy -Cultural -Socio/Economic

S #27 Balakrishnan

Performance Measure -Sales -Profit/ROI -Market Share -BDI -Benefits/Cost -Image

S #28

Balakrishnan

Strategy - Basics

Mission

Mission Business Objectives Marketing Objectives Marketing Strategy

Who is the customer? What is the value to the customer ? What will our business be? What should our business be?

Balakrishnan

S #29

Balakrishnan

S #30

NPM

BALAKRISHNAN

Factors that affect mission

Components of a Strategy Statement: SORCS Model Scope

Breadth of strategic domain: number and types of industries, product lines, market segments. Reflects company mission and strategic intent (vs. Strategic fit)

History Current preferences of owners and management Market environment Resources

Distinctive competencies - Core competencies
Hamel and Prahalad

Objectives and Goals

Desired level of accomplishment on one or more performance dimensions and the growth vector

Resources & their deployment

Allocation of human, financial and other resources across businesses, markets, etc.

Competitive advantage
What are the distinctive competencies or strengths relative to competitors?

Synergy
Improving overall efficiency and effectiveness by exploiting synergies across businesses and product markets

Balakrishnan

S #31

Balakrishnan

S #32

Compaq
Formulating and implementing marketing strategy

Hierarchy of strategies
External Environment Corporate objectives & strategy Corporate strategy: Capturing market share leadership in the PC industry; Seeking further growth by developing new products for corporate networks Provides direction on company mission, kind of businesses to be in, growth policies Business-level strategy: For the consumer market, differentiate offerings from IBMs by providing greater value through lower prices, improved services and development of user friendly products Addresses the way a business competes in an industry Marketing strategy (or Functional strategy): How to divide market into segments, which segments to target, what products to offer each segment, what prices to charge and what promotional appeals to use. Plan for pursuing the companys objectives for a specific product-market. The marketing job of monitoring the needs and wants of the consumer to identify market opportunities and threats, in this case, was a major input into corporate strategy
S #33 S #34

Business objectives & strategy Market opportunity analysis * Environment & Competitor Analysis * Industry dynamics * Customer analysis and STP

Formulating strategies for specific market situations * Strategies for new market entries * Strategies for growth markets * Strategies for mature and declining markets

Balakrishnan

Implementation & Control

Balakrishnan

The BCG Growth-Share Matrix

PORTFOLIO ANALYSIS for Resource Deployment:

Boston Consulting Groups Matrix Based on the principle of balancing cash flows

Growth & Cash Required

High > 10%

STARS

Invest
Fl ow

???

Reinvest
C

Problem Child No Invest Divest

Low <10% CASH COW 1 DOG

Cash Flow
Balakrishnan S #35 Balakrishnan

as h

10

Relative Market Share wrt Biggest Competitor 0.1 S #36 logarithmic scale

NPM

BALAKRISHNAN

The BCG Growth-Share Matrix

HIGH
STARS
* Market Leaders * Fast Growing * Require Investment to Grow * Protect Share * Reinvest earnings through price cuts, Product Improvement, More Efficiency * Obtain Large Share of New Users

LOW
PROBLEM CHILDREN
* Rapid Growth * Poor Profit Margins * Enormous Demand for Cash * Invest to Aggressively build share * Buy existing shares by acquiring

HIGH

STRATEGY

STRATEGY

Market Growth

CASH COWS
* Profitable Products * Generate More Cash Than Needed For Share Maintenance * Slow Sales Growth * Maintain Market Dominance * Invest in Process Technology Improvement and Price Leadership, R&D in Other Product Markets

DOGS * Majority of Products fall in this category

LOW

STRATEGY

STRATEGY * Focus on a specialized, defendable segment

* Cost disadvantage - few growth opportunities at Reasonable Cost * Markets not Growing

* Harvest: Cut back all support to maintenance * Divest (sell); Abandon (Delete from line)

Balakrishnan

Market Attractiveness

S #37

NPM