preface - okanagan collegepeople.okanagan.bc.ca/ghomer/business/mppt3.doc · web viewconvenience...

Contemporary Marketing, First Canadian Edition Boone/ Kurtz/MacKenzie/Snow

PART THREE OF THE MARKETING PLAN

Marketing Strategies

In this section of the marketing plan you will develop your marketing strategies. The end

result of this process will be a plan that possess both internal and external fit – i.e., leverage

the organization’s strengths, minimize the effect of or eliminate its weaknesses, take

advantage of the external opportunities, and minimize the effect of, or avoid, market threats.

The first step in the process is to identify the segment(s) in the market you want to target.

Next, the optimal positions of your product mix, product lines, and individual product items

are selected. From this point forward, you will plan how to support the sales of your

products via promotional, distribution, and customer service efforts.

The strategic dimensions can be viewed via a continuum ranging from inadequate,

adequate, to leadership. This perspective is meant to provide a basis from which to compare

the relative strategic targets (not necessarily “positions,” as strategy is more about where you

want to be, than where you actually are) of the industry players (i.e., your competitors). The

“relative” consideration is important because it implies that the target is judged by how it

stacks up against competitors in the consumers’ mind (i.e., your place in the market). This is

to say that you can spend an extremely high amount of money, time, effort, resources,

attention, etc., on a particular dimension and still not be seeking a leadership position

because others in the industry are targeting the same position (i.e., level of focus). In other

words, your focus could be considered adequate, as this level of focus on a particular

dimension is the “cost of doing business” (i.e., what is expected by consumers and required

to compete in this industry given your overall comprehensive business strategy and it’s

corresponding fit and trade-off requirements, as well as the industry forces). Similarly, a

leadership position might be somewhat “easily” achieved if other players in the industry are

not (or can’t) focused on this dimension. It is important to note that “adequacy” is not

necessarily a “bad thing.” Rather, it implies that a firm is focusing on (doing) what at least

minimally (and perhaps optimally) needs to be done to compete with respect to a particular

Boone /Kurtz/MacKenzie/Snow ~ Contemporary Marketing, First Canadian EditionPart Three of the Marketing Plan

dimension. An inadequate strategy (position) is by its nature, a “bad thing,” as it implies that

a firm is not focusing on (doing) what minimally needs to be done to compete with respect to

a particular dimension. As such, a recommendation will need to be made to elevate this

status to at least adequate, if not to pursue a leadership focus/position.

Leadership is literally defined as surpassing all other competitors on a particular

dimension. While a sole position in front of all other competitors is a good metric to start

with, one does not have to limit oneself to a categorical delineation (i.e., there is only one

leader). For some (if not most or all) dimensions in some (most/all) industries, there may

incidences in which a couple, or a perhaps a few firms hold a significant “lead” over most of

the other competitors, but there is not necessarily a significant difference between these

leaders.

The first important point is that one recognize who, how and why these firms conduct

business via this strategy/position to compete, relative to each of the other leaders and versus

the other non-leaders. Of course, the debate is contingent upon how the industry/market is

defined in the first place. In the end, the important point is not to spend an inordinate amount

time debating sole leadership (however, the debate process can be an insightful exercise);

rather, the key is to gain a better understanding of how and why the relevant industry players

conduct business.

The second important point is that a firm should either pursue a leadership or an adequate

position – not a position somewhere along the continuum. The reason for this is the nature of

the definition of “adequate.” That is, this is what is minimally required to “adequately”

compete. Any more than this is viewed as a waste of resources, unless a firm is seeking, and

can justify via a cost/benefit analysis, a leadership position (a competitive advantage is to be

gained, if it is affordable, by pursuing it). Otherwise, a strategy of adequacy is appropriate. It

is important to note, then, that adequate is not one finite position; rather, it should be viewed

as a minimal necessary range to compete (one could consider this the “price of entry” or the

“cost of doing business”), and it is a function of the competitors’ strategies and their actual

efforts, considered, in addition, within the context of the strategy and resources of the firm

itself. Any strategy and actual effort less than this minimal target range is considered to be

“inadequate,” and must be addressed.

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Of course, while a firm’s strategy should only target to be adequate or to be a leader on a

dimension, a firm’s actual position on the position may be, and is often, somewhere in

between. This can be explained by two possibilities. The first possibility is that the firm is

strategically targeting a leadership position and is in the process of attaining this (i.e.,

allocating resources), and the change (i.e., movement along the continuum) can take time due

to necessary expenditures, technological or logistical developments, and/or the perceived

position in consumer’s minds. Conversely, a firm could be attempting to move from a

leadership position to an adequate position (e.g., because they do not have the resources to

maintain the leadership position or perhaps they no longer consider the leadership position as

a worthwhile advantage given the ROI or its synergy, or the lack thereof, with its targets for

the other strategic dimensions). The second explanation for this “actual” middle-ground

position is that the firm is not strategically grounded. That is, they lack a solid, justifiable

direction. In other words, they are wasting resources that could otherwise be allocated to

other strategic dimensions to more effectively compete and to achieve the overall

organizational mission, objectives, and goals. This often occurs because of a lack of

strategic planning that is not integrated across all of the functions of an organization.

The judgment of whether or not a strategic focus/position is optimal is of course a

function of the analysis of, interpretation of, and decisions regarding the comprehensive

business strategy, the firm’s focus on the other strategic dimensions, the firm’s resources, the

industry forces and environmental influences, and the relative strategic focus/positions and

capabilities of the competitors. As such, an adequate or leadership position may be the

optimal choice (strategy) for a particular dimension. It is important to note that leadership is

not required in all or most of the dimensions, or even any leadership focuses/positions for the

dimensions within one particular strategy. In fact, it is quite likely that no firm would be able

to financially support this combination of strategies; nor is it likely that it would be necessary

to compete and/or succeed. The key is in designing a combination of strategies that

optimally fits the internal and external environments, leverages the firm’s resources, and

targets a position that provides a sustainable competitive advantage relative to the strategic

targets and actual strategic positions of the other industry players.

The pursuit of an optimal combination of the strategic targets for these market

dimensions is a key to success (i.e., a sustainable competitive advantage). Again, the optimal

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combination is a function of its fit with the internal and external environments, the firm’s

resources, and current and future effects of the industry structure and forces, relative to the

strategic targets and actual strategic positions of the other industry players. Don’t let the

concept of one (sole) industry leader, nor a rigid absolute categorical definition of leadership, or

even the dimensions themselves bind your thinking/analytical and strategic recommendation

process. The important point to remember is that you should use these frameworks as a means to

help you better understand the intent (strategy/choice) of the industry players and their potential

effect on each other and market conditions. A strategy should attempt to be adequate or a leader

(within some given range, not necessarily a specifically defined, immobile point), and it should

be revisited because market conditions are dynamic, not static; as such, strategies should be, too,

when necessary (i.e., there is some limit to how often and how much a strategy should change, as

there is a benefit to be realized by keeping on target and focusing on execution, rather than a

continuous strategy development process). Once again, don’t target a middle of the road strategy

(i.e., between adequate and leadership), as this is a waste of resources (but keep in mind the

actual position might be in the middle, as explained earlier due to the process of achieving the

adequate or leadership strategy) – it is here that your analysis will have to help you decide which

way and how to go forward.

1.1. Target Market(s) Selection

Based on the market segments identified in the previous section, you need to determine

which one(s) you will target as individual, unique and separate segments. By selecting these

segments you are acknowledging that you will treat them differently with respect to one or

more of components of your marketing strategies; and therefore, as you develop your plan

via the remaining parts of this framework outline, be sure to address how each component

will be constructed to meet the needs, wants, and characteristics of each of your targeted

segments. Listed immediately below are some questions to consider for this section. (Keep

in mind that you can include other information you deem relevant and beneficial for the

reader.)

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o Using the labels of the segments you identified in the previous section, list the market

segment(s) you will target in which to sell your product.

o Discuss why this segment (these segments) is (are) targeted?

What are the unique product features(in terms of performance, price, and

brand status) that this targeted segment needs/wants, and how can your

product(s) fulfill these needs?

What are the unique characteristics of this segment that make it appealing to

your organization and why/how does it fit with your product offering?

1.2. Product Portfolio Mix

The combination of products (i.e., goods and services) that a business unit sells is called its

“product mix.” The level of intensity refers to the “breadth and depth” of this mix, wherein

breadth is defined by the number of product “lines,” and depth is defined by the number of

product “items/models” within a product line. Typically, breadth is represented horizontally on a

product-mix chart/diagram, and depth is depicted vertically. The key question for this dimension

is to determine the optimal mix of product offerings. The breadth and depth decision is a

function of a firm’s internal resources, its overall comprehensive business strategy, and the

strategies and capabilities of its competitors, as well as industry forces, consumer trends of needs

and wants, and how the market is segmented. The goal is to better understand how each firm

attempts to compete, and the relative advantages of each strategy, given the existing marketplace

conditions. A firm may want more product lines if it wants to address needs and wants across a

variety of product uses within a market. This strategy can help the firm to gain and leverage the

brand name, if a family brand (i.e., the same brand name) is uses for all of the product lines. A

firm may want more product items with a product item if the market has targeted segments that

are quite diverse in terms of it needs and wants, as well as other driving factors (e.g.,

demographics) that would cause each segment to want significantly different attributes from the

product type/line. While giving the target market more choice of product lines/items (which is

an obvious result of more breadth and depth – i.e., this approach allows a firm to “cover more

ground”), more choice is not always a good thing. An answer to the question “Is there too much

choice?” should be considered. There can be such a thing as “too much choice,” wherein the

result might be one of the following conditions: confusing the consumer; product lines/items not

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seen as being significantly different; or the sub-segments with different preferences not being

large enough to justify special attention. There are, of course, other strategic considerations

when making breadth and depth decisions. If a firm wants more breadth and depth, it will need

to consider the cost and benefit requirements of and impact on other strategic dimensions.

Finally, does the division of product lines make sense in terms of fit within the organizational

structure? Listed immediately below are some questions to consider for this section. (Keep in

mind that you can include other information you deem relevant and beneficial for the reader.)

o How many product lines and items are needed to fulfill the needs of the market segments targeted? Why?

o Do you have the internal resources to financially support and manage this product mix?o What synergies can be achieved by this product combination? o What are the potential drawbacks to this product mix combination?

Cannibalization? Consumer Confusion? Other?

1.3. Product Positioning Strategy

A product’s position is the function of how consumers view it in terms of its quality,

value, and status. The product dimensions of performance, price, and brand address these

three benefits respectively. For each product you must decide how/where to position it on all

three dimensions. The combination of these dimensions will result in the overall product

position (i.e., the consumer’s opinion of the product). This positioning decision is, of course,

predicated on the needs, wants, and characteristics of the market segments targeted for this

product, the external business environment, the positions of products in the competitors’

product mixes, the positions of other products in your product mix, and the financial and

managerial capabilities of supporting this mix of product positions via the sales support

strategies that follow in this section.

1.3.1. Performance

In short, the performance dimension of a product’s position pertains to what it does and

how well it does it. The specific factors one would use to define a product level of

performance can/will vary from product to product and even from segment to segment,

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depending on what the segment deems important and how/why it uses the product (i.e., the

needs and wants the product is fulfilling by purchasing/using the product). The combination

of the levels of performance for each of these factors (weighted by each factors degree of

importance) will then represent the overall level of performance of the product. It is

important to note that the judgment of performance is predicated on the segment’s perceived

performance. That is, a product is only as good as what the segment believes it to be. This is

not to say that the reality of a product’s performance is not important, because how a product

really performs certainly will influence how it’s performance is perceived by users (based on

their experience with it) or potential users (based on what they have read about it, what they

have observed from others using it, or judgments taken from such cues as price, brand equity,

the packaging, etc.; however, consumers do not conduct scientific tests to evaluate a product

performance or might not be able to delineate or value distinct, minor, or unobservable

differences in product quality Listed immediately below are some questions to consider for

this section. (Keep in mind that you can include other information you deem relevant and

beneficial for the reader.)

o Does your product address the performance criteria that are most important to your target segment(s)?

o How does your product compare to competitors’ products in regard to what your target segment(s) need and/or want? For example:

Speed Durability Reliability Taste Size Portability Convenience Longevity

1.3.2. Price

Of course, the price of a product is a dimension in which virtually all products are judged

to some extent, depending on its degree of demand elasticity. While this analysis is fairly

straight-forward (i.e., comparing the product’s actual price to the price of competing products),

you should also consider how your targeted segment(s) determine the price of a product – for

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example, the purchase price, or the cost of ownership (e.g., repairs, product life, frequency of

repurchase), resale value, interest paid on a loan to purchase the product, etc.).

1.3.3. Brand

A product’s brand is in essence its reputation, its “personality.” It conveys the level of

status that segments’ associate with the product and the degree to which they identify with it and

want it. In addition, it can have a significant effect on the value judgments of the perceived

performance of a product’s and the value of the price to be paid for it. The assessment of how a

product’s brand compares to its competitors is, for the most part, more subjective than the

assessments of performance and price. That is, you must ascertain what your brand, and

competitors’ brands represent and communicate to your targeted segment(s). This analysis will

require consumer research (e.g., surveys, and focus groups) on the awareness, recall, perceived

meaning, status, and value of the brands.

1.4. Sales Support Strategies

Once your have established your product portfolio and positioning strategies, you develop

what it will take to support the sales process for all of its product lines. The Sales Support

strategy dimensions that a business unit should manage include: switching costs, promotion,

distribution, and customer service.

1.4.1. Switching costs

This dimension refers to the extent that it is difficult for a customer to switch to a

competing product/brand. Conversely, you could also consider how easy a firm makes it for a

competitor’s customer to switch to your product/brand. In essence, we are talking about barriers

to switching. The idea behind creating barriers to switching is to hold on to a customer, because

there is often a strong correlation between profitability of a customer and length of time as a

customer (i.e., it is often more costly to attract a new customer than to retain one – there are of

course, exceptions to this). Some examples of barriers to switching include: contracts, product

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use complexity, training, compatibility with existing systems and use situations, customer service

(which could be a key attribute of the product itself), the prestige of a product/brand, the overall

quality, price, and value of a product/brand, as well as product/brand loyalty. The key concept

here is that a firm wants to make it difficult for (or less likely that) a customer will switch to a

competitor’s product/brand. Of course, a proactive/positive approach would be preferred (e.g.,

due to quality, brand image, value, customer service, loyalty), rather than a more

defensive/negative approach (e.g., contracts, complexity, capability) because a firm would not

want its customers to feel as though they are “stuck” and then always on the look out to switch as

they become more frustrated. In essence, a positive switching cost is an opportunity to build a

relationship with the customer, but in some cases, the other switching cost can be the most

effective and do not have to be viewed as necessarily negative if other positive/proactive actions

(e.g., customer service, value, etc.) are pursued by the firm. Similarly, a key consideration is

whether the target segment views the product as different than other products in the marketplace.

If brands are not seen as being significantly different in terms of fulfilling customer needs, then it

will be difficult to keep them from wanting (or not seeing a reason not) to switch, and a firm

would then want to possess some barrier (make it more difficult) to switch.

1.4.2. Promotion

A firm can support the sales its product lines and items by building awareness and

perception of the product, its status, value, and/or its quality. How does the business unit

promote the overall awareness of the brand of all of the product lines and items? Does the

promoted message/position of the product fit with all of the product lines and items? Leadership

is this dimension would be defined by the firm that has the greatest brand and promotional

support for all of its product lines and items. Some key considerations in this area include: how

much money is spent and the effort (frequency and reach) on promoting the product mix and the

overall brand name; what level of awareness of the brand exists; and how correct or consistent

the perception of the overall brand is as it relates to the target markets and the product items

themselves. As you analyze this dimension, you must obviously consider its effect on the impact

of its product mix intensity (breadth and depth) and geographic coverage, as well as the efforts of

it competitors. In some cases (e.g., the beverage and automobile industry), the price of entry can

be quite high/expensive and sole leadership may not be possible/feasible. In these cases, there

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might be several leaders that are significantly above the rest. A determination of whether or not

the lower level competitors are inadequate, would have to include a review of their overall

strategic goals, capabilities, and the markets (e.g., coverage and niche) that they want to serve at

this time.

1.4.3. Distribution

Where, geographically, these products are sold denotes the extent of “coverage” that a

business unit is strategically pursuing. For example: Are the products available city or province-

wide, regionally, nationally, or in the global marketplace? A leadership target/position in this

marketing dimension is exhibited by having the largest territorial presence (i.e., their products

are available in more geographic places than any other competitor’s). Pursing more coverage, of

course, increases the potential market (number of consumer and sales) to be served. It also

provides the opportunity to spread the word (awareness and image) of the brand. The pursuit of

increased presence comes at a cost and increases the number of competitors and segments that

have to be strategically addressed – and of course, it has implications regarding a firm’s other

strategic business decisions. The distribution channel(s) a business unit utilizes to “go-to-

market” (i.e., where the products are sold) signifies the strategic level of “exposure” targeted.

Examples of possible distribution channels include: brick and mortar retail, direct-sales force, the

Internet, telemarketing, call-centers, etc. Of course, depending on the industry, one can take

more of a micro perspective to differentiate between channels (e.g., in the beverage market, one

could identify grocery stores, convenience stores, vending machines, and on-premise locations as

different ways to go-to-market). While all selling products via all available channels and to all

available target segments would maximize exposure, the important consideration here is that

each of these distribution mediums represents different ways and means to make your products

available to your target market(s), and thus, a decision has to be made to determine the optimal

combination of channels to achieve the strategy (i.e., level of adequacy or leadership). The

single versus multiple versus exhaustive channels decision should be made with respect to

strategic trade-offs. There are different variable and fixed costs associated with each channel,

and each channel will have different levels of effectiveness for different target markets due to the

unique characteristics of each. One must also consider the fit of the different attributes of the

product lines and items with different channels. As such, the purpose of the distribution channel

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exposure analysis and recommendation is to determine which channels best fit each product and

target segments in terms of cost, demand, ability to best position, communicate, and make the

product available. Convenience to the target market is of course, a key consideration (i.e., you

want your product available to your target segment); however, there are some other

considerations; for example, the image that is projected when a product line(s) /item(s) are sold

in exclusive channels (i.e., only one channel that may connote prestige or quality) versus a more

mass-market, exhaustive approach (i.e., available in most or all channels). How is this decision

effected, or how does it impact the other strategic business unit level decisions such as niche,

flexibility, mix-intensity and coverage, etc.? The dimension of distribution channel control

refers to the extent to which an organization has power in a channel (e.g., it influences where and

when a firm’s products are sold, the wholesale and retail price, and how and when payments are

made). A firm can gain control (power and influence) via the volume it sells, the service and

value it provides, the prestige of its products/brands, the demand for its products, and the access

to target markets it provides. The dimension of branding and promotion can be integrated with

this discussion of distribution channel control to illustrate the two methods of supporting the

sales process—the “push” or “pull” strategy. A “push” strategy is when a firm focuses it

promotion and channels sales efforts on the next member (forward) of the value chain. For

example, when a manufacturer tries to persuade a distributor or a retailer to sell its products by

providing incentives and influence, this is referred to as “pushing” the product through the

channel. The more effective this effort is, the more influence and/or control a firm has – thus,

there exists a dual perspective or consideration of branding and promotion and distribution

channel control. A “pull” strategy is when a manufacturer focuses its branding and promotion

efforts at the end consumer. By creating a demand for the product/brand, the retailers and

distributors will want (have to) be very willing and want to carry the product – thus the product

is “pulled” down through the channel. The result of this can also provide control – here again,

there exists a dual perspective or consideration of branding and promotion in conjunction with

distribution channel control.

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Marketing Plan Worksheets

I. Price Decisions

A.Marketing Plan Financials

1. Identify costs associated with each of the following elements of the plan:

Feature CostProduct manufacture

Marketing research

Competitive intelligence

Packaging

Intermediaries

Distribution network

On-line promotion

Promotional tools design

Promotional tools production

Media costs

Sales force compensation

Domain name registration

ISP contract

Website development – design

Website hosting

OTHER

TOTAL

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2. Calculate the break-even point for selling:

Break even = $

3. Can you sell enough to cover costs? Yes No

B.Strategy

1. Circle the strategy you are most likely to use:

Penetration Skimming Status-quo

2. Where is your product in the PLC?

Introductory Growth Maturity Decline

3. How will this affect your pricing strategy?

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C.Price Comparison

1. Compare your price to that of your competitor. Whose is higher?

2. If serious price differences exist, describe how you will communicate your differential advantage:

D.Discounts

1. Circle the discounts you will offer to online customers:

Quantity Cash Functional

Seasonal Promotional Rebates

2. Circle the discounts you will offer to off-line customers:

Quantity Cash Functional

Seasonal Promotional Rebates

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3. Account for any differences in discounts allowed to two customer groups:

E. Geographic Price Differences

1. Customers will pay shipping YesNo

2. All customers will pay same shipping Yes No

3. Customers pay shipping based on distance YesNo

Rationale:

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II. Promotion Decisions A. Marketing and Promotions Objectives

1. Promotional objectives:a.b.c.d.e.f.

2. Online promotion? YesNo

Describe:

3. Off-line promotion? Yes No

Describe:

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4. Promotional Theme

a. Promotional theme is:

b. Promotional message is:

5. Copyright needed? Yes No

B. Design

1. Promotional tools designed by: In-house personnelOutside agencyCombination

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C. Media

1. Select media for promotions:

Television (stations)

Radio (stations)

Newspapers

Magazines Outdoor (cities)

Internet (sites)

Other

D. Advertising

1. All advertising pieces have uniform theme and style: Yes No

If not, justify:

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2. Ads have sufficient information on product benefits: Yes No

If not, how can you increase this information?

3. Will customers be given details in ad on how to request additional product information from your company?

Yes No

E. Public Relations Activities

1. List public relations activities:

2. Bad publicity response strategy:

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F. Sales Promotion Tools

1. Select promotion tools:Regular coupon Rebate Tradeshow

Contest Sweepstakes Samples

On-line coupon Demonstrations Premiums

Other

G. Sales

1. Do you need a sales force? Yes No

If yes, how will you compensate them?

Salary only Salary + Commission

Commission Only Other

2. Will salespeople have a quote? Yes No

3. How will you organize sales territories?

By product By customer type Geographically

4. Will you compensate differently for online sales activity? Yes No

5. List sales alliances you intend to pursue:

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III. Distribution and Distribution Methods

A. Method

1. Preferred distribution method:

Direct Intermediaries

2. If applicable, number of channels:

Dual channels Multiple channels Channel alliances Nontraditional channels

B. Costs

1. Variable distribution costs will affect price of end product to consumer:

Yes No

2. Describe the role cost will play in your distribution method:

C. Distribution Facilities

1. Global distribution facilities needed Yes No2. Warehouses needed Yes No

a. If yes, number of warehouses:

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b. List warehouse locations:

3. Fulfillment services Yes No4. Packing companies Yes No5. Transportation firms Yes No6. Billing services Yes No

7. List other channel facilitators you anticipate needing:

8. Will you distribute your product through a retail location?

Yes No

a. If yes, what type of retail location will you use? (Select all that apply.)

Chain store Specialty store FranchiseDepartment store Discount store Supermarket

Convenience store Drugstore Warehouse clubRestaurant Factory outlet

9. Will you distribute your product through nonstore channels?

Yes No

a. If yes, what type of retail location will you use? (Select all that apply.)

Vending machine Direct retailing Direct mailCatalogue and mail order Telemarketing Internet

Shop-at-home

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10. Will you be a part of a franchise system as a franchisee? Yes No

11. Business format franchise? Yes No12. Product and trade-name franchise? Yes No13. Will you franchise your offering? Yes No

14. Describe your retailing mix, if applicable:

15. If you will have your own distribution outlets, describe your plan

for each element of the store atmosphere:

Employee type and density

Merchandise type and density

Fixture type and density

Sound

Visual factors

Odors

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D. Special Consideration for Services

1. Will you distribute your service via a website? Yes No2. Will you distribute your service to other websites? Yes No3. What level of service will you distribute via the Web? Full Partial4. List aspects of service you will distribute via the Web:

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