Strategic Market Analysis

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Session4StrategicthinkinganddecisionmakingSTP.pdf

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Lesson 4: Strategic thinking and decision making – product, brand portfolios & STP

What is required for each section?

From the lessons so far, what models will you be using in the second assignment?

Assignment 2

Schedule

• Moving on with the strategic planning process

• Recap key concepts/understanding

• Model evaluation

• Segmentation, targeting & positioning (branding)

- Definition, rationale & example

- Typical segments & examples

- Marketing mix and branding

Please continue your reviewing of Strategy development – high level decision making (Chapter 4)

The strategic management process

From Reed 2015

• Strategic style model – determined by?

The strategic management process

From Reed 2015

• PESTEL environment analysis (remote)

• Porter’s five forces (near) • McKinsey’s 7-Ss model (internal)

Situation analysis

Internal

capabilities

Remote environment

Near environment

Remote

environment • Political-legal • Economy

• Sociocultural

• Technology

• Natural

environment

Near environment • Market review

• Future market

attractiveness

• Competitive review

• Distribution

channels

• Customers

• Supply (See Porter’s five forces later)

Internal capabilities • Organisation-wide

• Marketing (See McKinsey’s 7S model later)

key strategic issues & concerns

for the retail industry?

Porter’s 5 forces model: Apply for NOW & in 10 years?

Bargaining power of suppliers

Threat of new entrants

Competitive rivalry

Threat of substitutes

Bargaining power of buyers

Pros?

Cons?

Critiquing planning models and tools

Main purpose / outcome?

Shortcomings? NB. What

can these

models do?

What can’t

they do?

Review of internal capabilities

The McKinsey 7-S model of organisation effectiveness

Problems and opportunities statement

• The final stage of the situation analysis – the

preparation of a problems and opportunities

summary statement.

Key problems and opportunities statement

1. Assessment of the organisation’s capabilities

2. Identification of current opportunities

3. Identification of future opportunities

4. Identification of threats facing the organisation

5. Strategic implications - the strategic issues/challenges confronting the organisation

• Ansoff’s matrix • BCG matrix • PLC • etc.

Revisiting competitive advantage

According to Porter all strategy options are

based on relative costs and differentiation …

There are four generic strategies or routes to

competitive advantage:

• At an industry-wide level of competition

– Cost leadership

– Differentiation

• At a focus or market niche level of

competition

– Cost leadership

– Differentiation Competitive advantage is a critical element in product & brand strategy

Product-market strategies

How do developed and emerging markets

for fit into this model for tobacco?

Encourage new users? Pricing strategy to increase smoking? Enhance the appeal of brands? …Innovate?

…Innovate - how? Product modifications / enhancements Brand line extensions – new variants Introduce new cigarette brands Totally new products

Totally new products?

The BCG product portfolio model

OR it can be applied by product categories

• We will now further develop your understanding of strategic positioning, marketing objectives, as well as segmentation– starting with segmentation

Schedule

• Moving on with the strategic planning process

•Recap key concepts/understanding

•Model evaluation

• Segmentation, targeting & positioning (branding)

-Definition, rationale & example -Typical segments & examples -Marketing mix and branding

Segmentation perspectives

Segmentation

“dividing a larger market into smaller pieces based on

one or more meaningful, shared characteristics”

(Soloman and Stuart 1997)

Why bother?

Examples of shared characteristics?

Advantages of segmentation

• Generates > understanding of marketing environment,

customers and competition

– helps to identify opportunities in market

• Helps to develop more effective mix as

– more precise marketing objectives defined

• More effective allocation of resources

– rifled approach to marketing

• Customers get products/services that match their needs

– > customer loyalty & retention

Applies equally well to B2C & B2B markets

Defining customers (B2C & B2B)

➢ Consumer - The ultimate end user (not just the purchaser) of goods, ideas and services for personal consumption or household use. (B2C)

➢ Business – organisations that buy goods and services: • to use in producing other products/services

• for the purpose of reselling

• to support ongoing business operations and initiatives

What are some the key ways that organisational and consumer

buying differ?

Steps in effective segmentation

1. Strategic orientation – decide / confirm organisational strategy / direction

3. Targeting & positioning – enhance understanding of the targeted segments by

investigating in detail their specific habits, attitudes and characteristics

4. Implementation & mix development – identify / develop a service / product mix

most appealing to the chosen segments that will facilitate the chosen strategic direction

2. Segment evaluation – develop potential segment profiles & evaluate

attractiveness in terms of Distinctiveness / Size / Accessibility / Stability / Match with

orientation

A classic case in segmentation (and strategic brand positioning)

We have never believed that ‘one size fits all’. Our portfolio of more than 200 brands

is based on distinct strategic segments. (BAT, 2011 Annual Report)

Differentiated marketing typically creates

more total sales than undifferentiated

marketing. (Kotler et al. 2009)

Segmentation, Targeting and

Positioning

Consumer behaviour and

consumer markets

•Most companies have moved away from mass marketing and towards target marketing – identifying market segments, selecting one or more of them, and developing products and marketing programs tailored to each.

•Companies must design customer-driven marketing strategies that build the right relationships with the right customers.

Bases and variables for

segmenting markets

Geographic

segmentation

Divides buyers into different geographical units such as

nations, regions, states, LGAs, cities or even

neighbourhoods. The company pays attention to

geographic differences in need and wants.

Demographic

segmentation

Divides buyers into segment based on demographic

variables (e.g. age, gender, income, occupation etc).

Widely used base because customer needs and wants

often vary according to demographics.

Behavioural

segmentation

Divides buyers into segments based on their knowledge,

attitudes, uses or responses to products. For many

marketers, this is the starting point for building market

segments.

Psychographic

segmentation

Divides buyers into different segments based on social

class, lifestyle or personality characteristics. People in the

same demographic group can have very different

pychographic profiles.

Geographics

Region

Major variables

City size

Population density

Climatic zone

Other relevant geographic variable

When making decisions about where to locate new outlets, McDonalds carefully studies census data and considers the size of the population in a given area as well as the population density.

Demographics

Age

Major variables

Gender

Family size/Family life cycle

Occupation

Income

Education

Nationality/Race/Ethnicity

Religion

Psychographics

Socioeconomic status

Major variables

Values & attitudes

Lifestyle groupings

(e.g. Conspicuous consumers)

Personality

Behavioural

Benefit sought

Major variables

User status

(e.g. users, non-users, novices, ex-users)

Usage rate

(e.g. light, medium and heavy users)

Loyalty status

(e.g. brand loyals, brand switchers)

Marketers rarely limit their

segmentation analysis to

only one or a few variables.

Rather, they mostly use

multiple segmentation

bases in an effort to identify

smaller, better-defined

target groups.

Requirements for effective

segmentation

There are many ways to segment a market, but not all segmentations

are effective. To be useful, market segments must be…

Accessible: able to be reached and served

efficiently

Substantial: segment size is profitable

Actionable: effective programs can be

designed to serve segments

Differentiable: segments are conceptually

different and respond to different marketing

mix elements

Segmentation and targeting

Following segmentation, firms must evaluate the various segments and

decide how many and which segments it can serve best.

F a c to

rs t o

c o

n s id

e r

ta rg

e ti n

g …

Segment size & growth

Segment structural

attractiveness

Company objectives &

resources

Market targeting strategies

Differentiation and

positioning

• A product’s position is

the way the product is

defined by consumers

on important attributes

– the place the product

occupies in the

consumer’s mind

relative to competing

products.

Positioning maps

Which differences to promote?

Not all points of difference are meaningful or worthwhile. A difference that is

worth establishing has the following criteria…

Distinctive: competitors do not offer the difference

Important: is highly valued by customers

Pre-emptive: competitors cannot easily copy the

difference

Superior: the difference is superior to other ways in which

customers might obtain the benefit

Communicable: visible to buyers

Affordable: buyers can afford to pay for the difference

Profitable: the company can introduce the difference

profitably

Overview

•Moving on with the strategic planning process

•Recap key concepts/understanding

•Model evaluation

• Segmentation, targeting & positioning (branding) -Definition, rationale & example -Typical segments & examples -Marketing mix and branding