Module 2- (5 Cs, 7Ts)
Table of Contents
Issues in Situation Analysis .................................................................................................................... 5

Analysis Alone Is Not a Solution................................................................................................ 5

Data Are Not the Same as Information ....................................................................................... 5

The Benefits of Analysis Must Outweigh the Costs ................................................................... 5

Conducting a Situation Analysis Is a Challenging Exercise ....................................................... 5
The Internal Environment ....................................................................................................................... 5

Review of Current Objectives, Strategy, and Performance ........................................................ 5

Availability of Resources ............................................................................................................ 5

Organizational Culture and Structure ......................................................................................... 5
The Customer Environment .................................................................................................................... 5
5 W1H model ...................................................................................................................................... 5
Competition............................................................................................................................................. 5
Types of competition: ......................................................................................................................... 5
1. Brand competitors ........................................................................................................................ 5
2. Product competitors,..................................................................................................................... 5
3. Generic competitors, ..................................................................................................................... 5
4. Total budget competitors,............................................................................................................. 5
All four types of competition are important, but brand competitors rightfully receive the greatest
attention, as customers see different brands as direct substitutes for each other. For this reason,
strategies aimed at getting customers to switch brands are a major focus in any effort to beat brand
competitors.......................................................................................................................................... 5
PESTLE (In brief) ................................................................................................................................... 5
Developing competitive advantage and strategic focus .......................................................................... 5
Competitive Advantage basic strategies: operational excellence, product leadership, and customer
intimacy .............................................................................................................................................. 5
Strategic Focus-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) ..................... 5
Generic marketing Strategy- Segmenting Targeting and Positioning..................................................... 6
The concept of targeting: .................................................................................................................... 6
Its divided into two parts- ............................................................................................................... 6

The logic of targeting .............................................................................................................. 6

Strategic and Tactical aspects of the process .......................................................................... 6
Strategic- ......................................................................................................................................... 6
Strategic Targeting: Competitive Perspective ................................................................................. 7
Tactical- Identification Problem: demographic and behavioral. ..................................................... 7
To solve this problem, the company must link the value-based customer segment with certain
observable characteristics describing this segment. ........................................................................ 7
Targeting Effectiveness and Cost Efficiency .................................................................................. 7
Essence of Segmentation- ................................................................................................................... 7
.......................................... 7
Key Segmentation Principles .......................................................................................................... 7
Value Creation and Strategy ............................................................................................................... 8
Customer Value Domains- ............................................................................................................ 8
................................................................................ 8
The Value Function......................................................................................................................... 8
In this context, four aspects of the value function merit attention: ................................................. 8

reference-point dependence, ................................................................................................... 8

loss aversion, ........................................................................................................................... 8

diminishing marginal value, and ............................................................................................. 8

effort optimization .................................................................................................................. 8
Developing Competitive Advantage-.............................................................................................. 8
Strategies for Creating Superior Customer Value-Improve the offering’s performance on a given
attribute, Add a new attribute on which the offering has an advantage, Increase the perceived
importance of an attribute on which the offering has an advantage .............................................. 9
Positioning Strategy ............................................................................................................................ 9
(1)defining the frame of reference that customers should use when thinking about the company’s
offering – ......................................................................................................................................... 9
and ................................................................................................................................................. 10
(2) identifying the offering's primary benefit. common positioning strategies: single-benefit
positioning, multi-benefit positioning, and holistic positioning.................................................... 10
Understanding Company Value- Key Profit Drivers ........................................................................ 10
...................................................................................................................................................... 10
Creating collaborator value: business-to-business-to-customer........................................................ 10
Domains of collaboration-value .................................................................................................... 10
Advantages of Collaboration ........................................................................................................ 11
Drawbacks of Collaboration ......................................................................................................... 11
Levels of Collaboration- ............................................................................................................... 11
Alternatives to Collaboration........................................................................................................ 11
Managing Collaborator Relationships ......................................................................................... 11
Managing PRODUCT & Services- ...................................................................................................... 11
Product and Service attributes........................................................................................................... 11
Product and Service Decisions- performance, consistency, reliability, durability, compatibility, ease
of use, technological design, degree of customization, form, style, and packaging ......................... 11
Managing BRAND- .............................................................................................................................. 11
Brands help differentiate the offering in two main ways: ................................................................. 11

by creating a unique brand identity- unique, memorable, likeable, and consistent , flexible to
adapt to changes in the market environment and and the company’s product-line strategy ........ 11

by associating the brand with a meaning that resonates with its potential buyers- domainsQuality, Price and Emotional social and self expressive benefits. ............................................... 11
Branding decisions: ........................................................................................................................... 11
•
Brand Hierarchy- .................................................................................................................. 11
•
Brand dynamics- ................................................................................................................... 11
•
Brand equity- ........................................................................................................................ 11
Managing Price- .................................................................................................................................... 11
Pricing Policy/ approaches to pricing ............................................................................................... 11
Pricing Strategy: ............................................................................................................................... 12
), customers’ price sensitivity ( ..................................................................................................... 12
Competitive Pricing-directly from manufacturers to end users (price discounts, volume discounts,
and coupons), as well as price cuts and incentives offered by manufacturers to channel partners
(wholesale discounts and various promotional allowances). ............................................................ 12
Understanding Price Wars- (Situations)- Offering differentiation, Cost structure., Market growth,
Customer Loyality ............................................................................................................................ 12
Price wars have detrimental effect of Company’s Profitability- ....................................................... 12
Fixed cost effect- Reducing price of an offering with 10% profit margin by 1% can lead to 10%
decrease in operating income. ....................................................................................................... 12
Competitive reaction ................................................................................................................... 12
Increased price sensitivity .......................................................................................................... 12
Brand devaluation ....................................................................................................................... 12
Circumventing Price Wars- Verify the threat of a price war., Evaluate the likely impact of the
competitor’s actions, Develop segment-specific strategies to address the competitive threat( not
taking an action, repositioning an existing offering, and adding new offerings ) ............................ 12
Managing incentives- ............................................................................................................................ 12
Incentives primary goals: .............................................................................................................. 12
Collaborator Incentives- Monetary incentives, Stocking allowance, Cooperative advertising
allowance, Market-development allowance:, Display allowance, Spiffs:, Volume discount:, Offinvoice incentive, Cash discount, Inventory financing.................................................................. 12
Managing communication- ................................................................................................................... 13
Setting Communication Goals -Identifying focus, Performance benchmark ................................ 13
Defining the Communication Strategy- Target audience, Value proposition .............................. 13
Developing the Message- Product, Price, Brand, Incentive, Distribution related ....................... 13
Media- budget, media type, and scheduling ................................................................................. 13
Creative solution- type of appeal used in the campaign (information, humor, or fear) and
execution style (text, format, and layout). ..................................................................................... 13
Implementation- ............................................................................................................................ 13
Control- evaluating the success of the communication campaign with respect to its goals ......... 13
Managing distribution- ......................................................................................................................... 13
Key decisions ................................................................................................................................ 13
Coopetition Strategy- Positive Sum Game ........................................................................................... 13
Co-Creation ........................................................................................................................................... 13
Blue Ocean ............................................................................................................................................ 13
Red Ocean ............................................................................................................................................. 13
Market (5Cs)
Issues in Situation Analysis
 Analysis Alone Is Not a Solution
 Data Are Not the Same as Information
 The Benefits of Analysis Must Outweigh the Costs
 Conducting a Situation Analysis Is a Challenging Exercise
The Internal Environment
 Review of Current Objectives, Strategy, and Performance
 Availability of Resources
 Organizational Culture and Structure
The Customer Environment
5 W1H model
Competition
Types of competition:
1. Brand competitors
2. Product competitors,
3. Generic competitors,
4. Total budget competitors,
All four types of competition are important, but brand competitors rightfully receive the
greatest attention, as customers see different brands as direct substitutes for each other. For this
reason, strategies aimed at getting customers to switch brands are a major focus in any effort
to beat brand competitors
PESTLE (In brief)
Developing competitive advantage and strategic focus
Competitive Advantage basic strategies: operational excellence, product leadership, and
customer intimacy
Strategic Focus-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)
Generic marketing Strategy- Segmenting Targeting and Positioning
The concept of targeting:
Its divided into two parts The logic of targeting
Fail to fulfill needs of any
one
One for all
Mid path – will fail to
fulfill needs of both
Logic of targeting
One for each
Co. might not have
resources to develop
offering to meet needs of
both
Company might have to
scale operations to develop
low priced offerings for
quality focused customer
Technical Know how to
develop high performance
offering for quality
focused customer.
 Strategic and Tactical aspects of the process
Strategic-
Target Attractiveness- monetary (Customer revenues and Cost of Serving) and strategic (product-line
value, scale value, communication value, and information value. )
Target Compatibility-include:
existing business infrastructure, collaborator networks, human capital, intellectual property, strong
brands, established customer base, synergistic offerings, access to scarce resources, and access to
capital.
Strategic Targeting: Competitive Perspective
Tactical- Identification Problem: demographic and behavioral.
To solve this problem, the company must link the value-based customer segment with certain
observable characteristics describing this segment.
Targeting Effectiveness and Cost Efficiency
Essence of Segmentation-
Key Segmentation Principles
key principles:
 relevance,
 similarity,
 exclusivity, and
 comprehensiveness.
 MECE rule- Mutually exclusive and collectively exhaustive
Value Creation and Strategy
Customer Value Domains-
The Value Function
An offering’s ability to create value is determined by three key factors:
the attributes defining the company’s offering,
(2) the relative importance of these attributes for target customers, and
(3) the offering’s performance on these attributes.
VA = w1*a1+w2*a2+w3*a3+...+wn*an
In this context, four aspects of the value function merit attention:
 reference-point dependence,
 loss aversion,
 diminishing marginal value, and
 effort optimization
Developing Competitive AdvantageThe above discussion implies that to succeed an offering should aim to maximize its advantage
on the attributes that are most important to target customers, while maintaining parity on the
less relevant attributes.
Strategies for Creating Superior Customer Value-Improve the offering’s performance on a
given attribute, Add a new attribute on which the offering has an advantage, Increase the
perceived importance of an attribute on which the offering has an advantage
Positioning Strategy
(1)defining the frame of reference that customers should use when thinking about the
company’s offering –
Frame of
reference
Comparitive
• Competitive framing
• Product line framing
Non-Comparitive
• Need based framing
• User based framing
• Category based framing
and
(2) identifying the offering's primary benefit. common positioning strategies: single-benefit
positioning, multi-benefit positioning, and holistic positioning.
Understanding Company Value- Key Profit Drivers
Four core strategies that aim to improve the awareness, availability, attractiveness, and/or
affordability of the offering.
Creating collaborator value: business-to-business-to-customer
Domains of collaboration-value-design collaboration, value-communication collaboration,
value-delivery collaboration
Advantages of Collaboration- Effectiveness, Cost efficiency, Flexibility, Speed.
Drawbacks of Collaboration- Loss of control, Loss of competencies, Empowering the
competition
Levels of Collaboration- Explicit collaboration, Implicit collaboration
Alternatives to Collaboration- Vertical integration, Horizontal integration
Managing Collaborator Relationships Collaborator Power -Offering differentiation, Collaborator size, Strategic importance,
Switching costs
 Collaborator Conflicts- Conflicts in Vertical Collaboration(Vertical Channel and
Horizontal Channel ), Conflicts in Horizontal Collaboration
TACTICS (7 Ts)
Managing PRODUCT & ServicesProduct and Service attributes can be classified into one of three categories: search,
experience, and credence
Product and Service Decisions- performance, consistency, reliability, durability, compatibility,
ease of use, technological design, degree of customization, form, style, and packaging
Managing BRANDBrands help differentiate the offering in two main ways:
 by creating a unique brand identity- unique, memorable, likeable, and consistent ,
flexible to adapt to changes in the market environment and and the company’s productline strategy
 by associating the brand with a meaning that resonates with its potential buyersdomains- Quality, Price and Emotional social and self expressive benefits.
Branding decisions:
• Brand Hierarchy- Individual, umbrella, hybrid
•
Brand dynamics- Brand repositioning, Brand extensions
•
Brand equity- Brand equity and power
Managing PricePricing Policy/ approaches to pricing : cost-based pricing, competitive pricing, and demand
pricing.
Pricing Strategy: including the company’s strategic goals (Skim and Penetration Pricing
), customers’ price sensitivity (Elastic, Inelastic), and the psychological aspects of customers’
response to the offering’s price. (effects—reference-price effects, price-quantity effects, pricetier effects, price-ending effects, and product-line effects)
Competitive Pricing-directly from manufacturers to end users (price discounts, volume
discounts, and coupons), as well as price cuts and incentives offered by manufacturers to
channel partners (wholesale discounts and various promotional allowances).
Understanding Price Wars- (Situations)- Offering differentiation, Cost structure., Market
growth, Customer Loyality
Price wars have detrimental effect of Company’s ProfitabilityFixed cost effect- Reducing price of an offering with 10% profit margin by 1% can lead to
10% decrease in operating income.
Competitive reaction
Increased price sensitivity
Brand devaluation
Circumventing Price Wars- Verify the threat of a price war., Evaluate the likely impact of the
competitor’s actions, Develop segment-specific strategies to address the competitive threat(
not taking an action, repositioning an existing offering, and adding new offerings )
Managing incentives-
Incentives primary goals: to manage the timing of customers’ purchases, to selectively reach
specific segments, and to respond to competitive promotions
Collaborator Incentives- Monetary incentives, Stocking allowance, Cooperative advertising
allowance, Market-development allowance:, Display allowance, Spiffs:, Volume discount:,
Off-invoice incentive, Cash discount, Inventory financing
Managing communication-
Setting Communication Goals -Identifying focus, Performance benchmark
Defining the Communication Strategy- Target audience, Value proposition
Developing the Message- Product, Price, Brand, Incentive, Distribution related
Media- budget, media type, and scheduling
Creative solution- type of appeal used in the campaign (information, humor, or fear) and
execution style (text, format, and layout).
Implementation- logistics and the timeline
Control- evaluating the success of the communication campaign with respect to its goals
Managing distributionKey decisions: channel structure, channel coordination (ownership-based, contractual, and
implicit), channel type (breadth and depth of their assortments), channel coverage (Extensive,
Limited), and channel exclusivity.
Coopetition Strategy- Positive Sum Game
Co-Creation
Blue Ocean
Red Ocean
End Of Module II
 "Dynamic Pricing Strategies: Evidence from Field Experiments" by Luca Corazzini,
Stefano Galavotti, Rupert Sausgruber, and Paola Valbonesi (The Review of Economic
Studies, 2014).
 "Dynamic Pricing in E-Commerce: Evidence from Field Experiments on eBay" by
Anindya Ghose, Panagiotis G. Ipeirotis, and Beibei Li (MIS Quarterly, 2012).
 "Microeconomics" by Robert S. Pindyck and Daniel L. Rubinfeld (Prentice Hall, 9th
edition, 2017).
 "Managerial Economics and Business Strategy" by Michael Baye and Jeff Prince
(McGraw-Hill, 9th edition, 2020)