MKTG 6201 Overview
Company & Competition
Organizational success depends on alignment…
within the internal system and with the external environment.
The role of management is to recognize & resolve tensions.
Smith and Lewis 2011
The answer to which strategy is most effective is never…
A is more effective than B, but rather…
A is more effective under Conditions C1 &
B is more effective under Conditions C2.
The test of a first-rate intelligence is the ability to hold two
opposed ideas in the mind at the same time, & still retain the
ability to function.
F. Scott Fitzgerald 1945
Glenn Voss
1
Case Analysis & Recommendation
In case analysis, you apply frameworks and
models to generate insights for solving a real or
simulated business problem to achieve
organizational success.
You also calculate metrics to assess the likely
outcomes associated with various alternatives.
Your recommendation is formulated as a
strategy.
2
Case Analysis & Recommendation
Models
Frameworks
Metrics
Concepts & Terminology
3
What is Terminology?
• A system of words used to name concepts
in a particular discipline.
• Examples:
– Objectives, Resources & Capabilities
– Segmentation, Targeting & Positioning
– Product, Price, Promotion-Communication,
Place-Channel
– Customer Relationship Management
– Customer Acquisition & Retention
– Customer Satisfaction & Value
4
Terminology
• An objective is defined as:
– The criterion by which the success or failure of the
strategy is measured.
• Characteristics of well-written objectives:
– Lists a quantified standard of performance.
– Designates a clear time frame.
– States goal in measurable terms.
– Should be challenging but realistic.
• Objectives frequently require trade-offs; e.g.,
increasing market share versus increasing profits;
acquiring new customers versus retaining current
23% market share & 28% share of profits
customers. Samsung:
Apple:
9% market share & 72% of profits
Worldwide mobile phones
5
Terminology (cont)
• Resource: tangible (e.g., equipment, machinery,
mail list), intangible (e.g., brand name, customer
knowledge), or human asset that the firm
currently possesses.
• Capability: the ability to deploy individual
resources (e.g., patents, know-how, brand names,
equipment) to perform a task or activity to
produces a desired end result. What the firm can
do (i.e., skills) as a result of teams of resources
working together.
We are interested in resources & capabilities that are
rare & valuable.
6
Common Job Interview Mistakes
7
What is a Metric?
• A measure for quantitatively assessing a complex
process or outcome, along with procedures for
carrying out and interpreting the measures.
• Frequently become objectives, for example:
– Market share
– Revenue or Unit sales volume
– Incremental contribution
– Customer lifetime value (CLV)
– Growth in any of the above (e.g., % change from
last year or quarter)
8
Common Intermediate Objectives (Metrics)
Not as compelling as Volume or Financial Objectives
•
•
•
•
•
•
•
•
Customer satisfaction
Customer loyalty
Customer acquisition & retention
Customer trial & repeat
Brand awareness
Brand preference
Brand loyalty
Brand equity
9
What is an Analytic Framework?
• A structured approach to defining, analyzing
or communicating the characteristics of a
complex system or process.
• Examples:
– Comprehensive Metabolic Panel, CBC…
– Google’s PageRank Algorithm
– Competitive Advantage
– SWOT Analysis
– Product-Market Growth Strategies
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Competitive Advantage (Framework)
How to create, communicate, capture, and sustain unique
value for the customer:
• Cost Leadership – Lowest cost structure (large share & low price)
• Marketing Differentiation – providing superior perceived
value by developing
– Unique image (brand-centric differentiation) achieved through targeting,
positioning & communication capabilities (large share, high advert costs)
– Close relationships with customers (customer-centric differentiation)
achieved through CRM capabilities & customization (higher prices & costs)
• Product Differentiation – offering superior economic value
by creating superior product/service features & quality
through innovation & product development capabilities
(small-to-medium share, large profit margins)
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Other Terminology with Similar Meaning
Cost Leadership
(Operations & Logistics Driven)
Tata/Dell
Operational
Excellence
"A great deal"
"Best price"
"Trouble free basic service"
Product Differentiation
(R&D, Technology & Sales Driven)
Product or Innovation
Differentiation
"Always at cutting edge"
"High price but worth it"
"Constantly renewing and creative"
Porsche/Apple
Marketing Differentiation
(Brand Advertising or CRM Driven)
Marketing Differentiation
Customer Responsive
“Great brand"
"Really understands me"
“Valuable business partner"
GM/IBM
See McKinsey’s “Unbundling the corporation
12
Core Strategy Overview
Cost Leadership Operational Excellence
Thrust of strategy
Organization
• Lowest delivered cost
• Reliability/efficiency
Marketing Differentiation –
Brand- or Customer-centric
• Complete personalized solution
• Infomediary
Product/
Innovation Differentiation
• Innovative features
• Greater functionality
• Top down – employees • Front-line autonomy
directed
• Have it your way mindset based on
• Flat structure
fine-grained information
• Decentralized
• Team-oriented/ loose-knit
• Experimentation
Core processes
• Standardized
• Modular operations
• Logistics/fulfillment • Integrated view of customer
• manufacturing
• Service
• Product development
• Market sensing
Economic driver
• Scale
• Scope
• Speed
• Production
• Supply chain
• Customer/Collaborator relations
• Positioning & Communications
• Product Innovation
• Competitor knowledge
• Price, reliability,
access…
• Mkt Penetration &
exploration
• Price & distribution
• Relationships, customization, full
service…
• Customer satisfaction & retention
• Product proliferation, promotion &
lateral collaborators
• Innovation, design,
features…
• Product & market
exploration
• Product innovation & key
collaborators at all levels
Critical Capabilities
Value Proposition
Marketing Objectives
Implementation
SWOT Analysis
Incorporating the 5 Cs
Company1 Strengths
Company1 Weaknesses
Identify valuable & rare
Identify valuable & rare
resources & capabilities that resources & capabilities
the company1 currently
that the company1 currently
possesses.
lacks.
Opportunities
Threats
Relevant opportunities
Relevant threats with
w/respect to customers2,
respect to customers2,
collaborators3, competitors4 collaborators3, competitors4
& the overall socioeconomic, & the overall
technology, legal context5.
socioeconomic, technology,
5.
legal
context
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See the Primer on SWOT Analysis
What is a Model?
• A hypothetical or simple description of a
complex system or process.
• Effective strategies rely on insightful or valid
models.
• Examples:
– Aristotle’s Geocentric Model
• accountedModel
for all observations
of Mechanics
the movement of the sun and
– Newton’s
of Classical
the moon, and the planets, and the stars;
– Marketing
Strategy Formulation & Implementation
• good predictor of future positions of celestial bodies (i.e.,
– Product
Life Cycle Model
verifiable)
• simplicity
(PrincipleModels
of Parsimony) - as few assumptions or rules
– Demand
Elasticity
as possible & no contradictions.
15
Porter’s Value Chain Model
Competitive Advantage in the Value Chain
Product Differentiation
Marketing Differentiation
Cost Leadership
16
Marketing Process Model
SWOT Analysis
Company Customers Competitors Collaborators Context
Market
Segmentation
Create
Value
Selection &
Targeting
Product/Service
Offering
Promotion/
Communicate & Communication
Capture Value
Customer
Acquisition
Product/Service
Offering Positioning
Place/
Channel
Pricing
Customer
Retention/Expansion
Revenue & Profits
Customer
Relationship
Management
Sustain
Value
17
Marketing Strategy Model
Formulation & Implementation
Segmentation & Targeting define product market ,
competitors & product-market growth strategy.
1. Objective(s)
2. Target Customers – Segment, Profile & Target
3. Key Competitors – Objectives, target customers,
strategy, strengths & weaknesses
4. Core Strategy – Competitive advantage; market
penetration, market development, product
development, or diversification; & positioning
5. Marketing Mix Implementation
Product Pricing Channel Communications CRM
Strategy Strategy Strategy
Strategy
Strategy
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Segmentation Variable Framework
Demographic





Age
Family size
Family life cycle
Gender
Social class
 Income
 Occupation
 Education
 Race
 Generation
Geographic
 Country/Region/Culture
 Urban/rural
 Climate
Psychological




Lifestyle
Personality traits
Expertise & awareness
Attributes/Benefits sought
Behavioral (esp. w/CRM)
 Usage rate & loyalty
 Occasions
 Purchase patterns
For working professionals in North Texas seeking career
advancement, the Cox PMBA is a part-time program that…
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VALS Psychographic Groups (Framework)
Use in the Flare Case to Develop Customer Descriptions
Take the VALS survey at:
http://www.strategicbusinessinsights.com/vals/presurvey.shtml
20
Marketing Strategy Model
Formulation & Implementation
1. Objective(s)
2. Target Customers – Segment, Profile & Target
3. Key Competitors – Objectives, target customers,
strategy, strengths & weaknesses
4. Core Strategy – Competitive advantage; market
penetration, market development, product
development, or diversification; & positioning
5. Marketing Mix Implementation
Product Pricing Channel Communications CRM
Strategy Strategy Strategy
Strategy
Strategy
21
Competitor Analysis
See Market Evolution
The first thing to note about the competitive
environment is the number of competitors. As the
number of competitors increases (decreases):
• Competitive market is more fragmented
(concentrated),
• Barriers to entry are lower (higher),
• Supply and demand are more heterogeneous and
dynamic,
• Competitive advantage focuses more on productcentric innovation (downstream brand-centric or
customer-centric differentiation or cost leadership)
• Growth focuses more on revenues (profits) &
customer acquisition (retention).
22
Competitor Analysis
•
•
•
•
See Product Market Definition
Philosophy
• Offensive or Defensive
which is related to
• Leader or Follower
Objectives
• Growth (revenue/market share) or
profit related objectives?
Strategy
• Competitive advantage
– Cost leadership
– Marketing differentiation
– Product differentiation
• Targeted customers
• Offering position
Strengths &
• Resources & capabilities to:
Develop & produce superior products
Weaknesses
Communicate & distribute offering
Manage customer relationships
23
Marketing Capabilities
• Product Management: develop & deliver superior-quality or customized goods & services.
• Communications Management and Brand-building: create and manage customer value
perceptions leading to high levels of brand equity, using effective: positioning, advertising
message delivery, personalized communications, & integrated marketing communications
• Pricing Management: extract the optimal revenue & profit from customers through price
discrimination tactics, e.g., using sophisticated yield management capability; unrelated to
charging a high (product or marketing differentiation) or low (cost leadership) price.
• Channel Management: establish and manage channels of distribution that effectively and
efficiently deliver value to end-user customers
• Customer Relationship Management: identify profitable customers and prospects and
initiate, maintain, and leverage relationships with these customers to create superior customerlevel profits. Requires data collection & interpretation for individual customers, individual
customer targeting capability, and personalized communications capability.
• Market Sensing & Customer Insights: Ability to learn about customers, competitors, channel
members and the broader market to develop actionable market intelligence and customer
segmentation and targeting schema
• Marketing Planning & Implementation: conceive and implement marketing strategies that
optimize the match between the firm’s resources (including multiple product lines and brands)
and the marketplace to achieve superior sales and profits
Marketing Strategy Model
Formulation & Implementation
1. Objective(s)
2. Target Customers – Segment, Profile & Target
3. Key Competitors – Objectives, target customers,
strategy, strengths & weaknesses
4. Core Strategy – Competitive advantage; market
penetration, market development, product
development, or diversification; & positioning
5. Marketing Mix Implementation
Product Pricing Channel Communications CRM
Strategy Strategy Strategy
Strategy
Strategy
25
Product-Market Growth Strategy Framework
K&P pp. 7-12
Markets
Existing
Existing
New
Market Penetration
Expand share and/or size of
current customer wallet
Market Development
Acquire new customer markets
Product Development
Develop new offering
features/attributes
Diversification
Develop totally new offerings
targeting new markets
Offerings
New
26
Product & Market Exploration Capabilities
Markets
Existing
Existing
Offerings
New
New
Exploitation
Market
exploration
Cost Leadership: Google and
Amazon
with incremental
refinement
of by building
Adapt current
offering
mostly
compete
scale
to to create
current product & market
new market (& capabilities); e.g.,
exploit their digitally-delivered
data
capabilities
new geographic
market or new
management and search
capabilities
therapeutic
use for existing drug
Amazon “good at making
everything as low-cost as possible.”
Google’s “cloud services will cost
50% less than competing products.”
Product exploration
Create new product features &
capabilities that enhance
offerings’ appeal to current
markets
Product & Market exploration
Create entirely new productmarket categories & capabilities;
Can Amazon’s Kindle compete
Can Google X deliver “worldeffectively in the tablet market? changing moonshots”?
27
Product & Market Exploration Capabilities
Markets
Samsung
New
Existinghas
repositioned
itself
as a
Exploitation
with
incremental
Market exploration
competitive
consumer
refinement
of current
product &
Adapt current offering to create
market capabilities
new market (& capabilities); e.g.,
brand,
exploiting
Existing Samsung “built its business around
new geographic market or new
existing capabilities,
producing & selling components to …
therapeutic
for existing
Apple’s use
strength
has drug
developing
new
Apple, Sony & Hewlett-Packard…” &
been in creating or
doublesproduct
Apple’s investment
equipment
(featuresin &)
Offerings
establishing
entirely
new
development
Product
& Market
exploration
Product
exploration
product-markets
Create
entirely new(i.e.,
productCreate new
product features
&
capabilities,
&
market
categories
& capabilities;
capabilities that enhance
radical
or disruptive
spending
“$3
billion
on
offerings’ appeal to current
New
innovation) in rapid
ads, compared
markets with
Apple (Jobs): “Consumers don’t
succession
(i.e.,
know what
theyspeed)
want.”
Samsung:
“We get
most
of our ideas
Apple’s
$933
million
but iPod,
has not
delivered
iPhone,
iPad…
the market.”
andfrom
Microsoft’s
$1.9
since Jobs’ departure.
billion.”
28
Marketing Strategy Model
Formulation & Implementation
1. Objective(s)
2. Target Customers – Segment, Profile & Target
3. Key Competitors – Objectives, target customers,
strategy, strengths & weaknesses
4. Core Strategy – Competitive advantage; market
penetration, market development, product
development, or diversification; & positioning
5. Marketing Mix Implementation
Product Pricing Channel Communications CRM
Strategy Strategy Strategy
Strategy
Strategy
Internal consistency between objectives, target customers &
competitors, core strategy, and marketing mix implementation is the
single-most important criterion for grading case recommendations. 29
MKTG 6201 Course Materials
Textbook:
• Strategic Marketing Problems
– Roger Kerin & Robert Peterson (K&P)
Cases:
• Cases in course packet
Lectures and Discussions:
• In conjunction with cases & handouts of
slides
30
MKTG 6201 Course Learning Outcomes
At the end of this course, you should be able to:
• Understand how company strengths & weaknesses
& external opportunities & threats influence the
success of a marketing strategy; Qualitative Analysis
• Develop and communicate marketing action plans
that effectively target, attract, and retain profitable
Recommendation
customer segments; &
• Conduct basic quantitative analyses to evaluate
the outcomes associated with alternative
marketing programs. Metrics/Quantitative Analysis
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Assessment & Grade Distribution
• Group Homework (5 × 4)
• Final Examination
• Total
Cox Recommended Grade Distribution
A/AB/B+
B-…
20
20
40
40%
50%
10%
32
Sample Grade Sheet
Topic
Poor
Fair
Good
Excellent
Financial Comparison
What assumptions are required to make
the next-best alternative better?)
.25
.5
.75
1
Economic Value Analysis and
Consistency with price elasticity estimates
.25
.5
.75
1
Comparative advantage analysis
.25
.5
.75
1
Summary marketing strategy
.25
.5
.75
1
TOTAL
33
Financial Analysis in Marketing
K&P Chapter 2
•
•
•
•
•
•
•
Marketing Pro Formas
Breakeven Analysis
Customer Lifetime Value (CLV)
Sales Forecasts
Economic Value Analysis
Channel Margin Calculus
Demand Elasticity
34
Developing Pro Forma & B/E Analyses
Traditional Line Items
Revenues
Cost of Goods Sold
Gross Margin (Profit)
Operating Expenses (e.g., SG&A)
Operating Margin (Profit)
Net Income Before Tax
Income Tax
Net Income After Tax
Dollars
Price * Quantity
COGS/unit * Quantity
GM/unit * Quantity
Variable (VC) & Fixed (FC)
Revenue–COGS–VC–FC
%
100%
COGS%
GM%
Can vary
-
See the South Delaware Coors Pro Forma
To conduct breakeven analysis for a proposed change, group variable costs
VC = COGS & Variable Operating Expenses
35
And then focus on Incremental Fixed Expenses
Organizing for Effective B-E Analysis
Traditional Income Statement
Sales revenue
- Cost of goods sold
= Gross margin (profit)
Incremental Costing
Sales revenue
- Incremental, avoidable VC
= Total (Gross) contribution ($)
=
- Incremental, avoidable FC
= Net contribution (profit)
Selling expenses
Depreciation
Administrative overhead
Operating margin (profit)
- Interest expense
= Pretax profit…
- Other fixed or sunk costs
= Pretax profit…
Contribution Margin % (CM%)
= Total Contribution / Sales revenue
Contribution Margin $ ($CM)
= Total Contribution / Sales volume
or $ Contribution per unit
36
Breakeven (BE) Analysis
To calculate Incremental Sales Revenue required to
breakeven (BER) for a given level of incremental
fixed costs (FC):
Net Contribution
0
+ FC
0
FC/(P – VC/unit)
BER = BEQ * P
= Incremental Revenue – VC – FC
= (Q * P) – (Q * VC/unit) – FC
= Q (P – VC/unit)
– FC + FC
= Q required to break even (BEQ)
VC
Q
P
CM
= Incremental Variable Cost
= Incremental Quantity
= Incremental Price
= P – VC/unit
See also http://harvardbusinessonline.com/flatmm/flashtools/breakeven/
37
Calculate Breakeven for the Following
Opening a New Office
Variable Costs
COGS
Direct Operating Costs
Total Variable Costs
Selling Price = $25
BEQ = FC/(P – VC/unit)
BEQ =
BER =
20%
20%
40%
Fixed Costs/Year
Fixed salaries
160,000
Depreciation
50,000
Utilities & phone
12,000
Insurance
10,000
Interest
20,000
Property Taxes
10,000
Maintenance/Janitorial 5,600
Miscellaneous
2,400
TOTAL
$270,000
38
Review Questions
• What does organizational success depend on?
• What are the 5 Cs and how do they relate to a SWOT
analysis?
• What are three approaches to achieving competitive
advantage? Which are most relevant to marketing?
• What are some key marketing resources & capabilities?
• What are the 5 steps in the marketing strategy formulation
& implementation model?
• What are the 4 key growth strategies?
• What are the 5 marketing mix elements (4 Ps + 1)?
39
Next Week
Chris Millican, Boston Consulting Group
South Delaware Coors Case
This is a practice case that addresses whether an MBA student should invest in a
Coors distributorship in South Delaware. The initial decision focuses on which
marketing research to purchase in order to assess the viability of the distributorship.
You will have ten minutes during class to make that decision as a group. After
purchasing the research, you will have 20 minutes to develop a pro forma and
recommendations for the Coors distributorship (see the Coors Excel spreadsheet).
If you need more background on breakeven analysis, review the Breakeven Tool. To
complete the spreadsheet, fill in the key assumptions that are highlighted in yellow.
The spreadsheet should fill in as you enter these numbers. Note that constructing
spreadsheets in this manner is extremely important because it allows you to
conduct “What-if” analyses by simply changing your assumptions.
To prepare for class, read the case carefully, review the Coors Excel spreadsheet,
and think about the following questions.
40