Saturday, November 3, 2007

Marketing Strategies - Kotler's Description

Philip Kotler discussed marketing strategy in 5 chapters in his 9th edition of Marketing Management

Ch. 10 Differentiating and Positioning the Market Offering
Ch. 11 Developing New Products
Ch. 12 Managing Life cycle Stategies
Ch. 13 Designing marketing Strategies for Market Leaders, Challengers, Followers, and Niches
Ch. 14 Designing and Managing Global Marketing Strategies

Ch. 10 Differentiating and Positioning the Market Offering

The issues discussed in the area of differentiating and Positioning the market offering are:

TOOLS FOR COMPETITIVE DIFFERENTIATION
DEVELOPING A POSITIONING STRATEGY
COMMUNICATING THE COMPANY'S POSITIONING

TOOLS FOR COMPETITIVE DIFFERENTIATION

Differentiation - Definition: is the act of designing a set of meaningful differences to distinguish the company's offering from competitor's offerings.

Boston Consulting Group's differentiation opportunities matrix: It is a competitive advantage matrix but because Porter said cost leadership and differentiation are the generic competitive advantages, the matrix is applicable to differentiation opportunities.

Four types of industries identified by BCG matrix are:

Volume industry: only a few but very large competitive advantages are possible. The benefit of the advantage is proportional with company size and market share. Example given - construction industry - I am not happy with it meaning I have not understood the applicability of the idea to construction industry.

Stalemated industry: in this type there are only few opportunities and the benefit from each is small. The benefit is also not proportional to the size or market share.
Example: Steel industry - It is hard to differentiate the product or decrease its manufacturing cost.

Fragmented industry: in this type, there are many opportunities, but the benefit of each of them is small. Benefit does not depend on size or market share.

Specialized industry: in this type, the opportunities are more and benefits of each opportunity is high. The benefit is not related to size or market share.

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Application of the concept to security markets

Think!
What will be the classification of Stock broking, Investment banking and Mutual funds according to BCG matrix
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Kotler mentions, Milind Lele's observation that companies differ in their potential maneuverability along five dimensions:
their target market,
product,
place (channels),
promotion, and
price.

The freedom of maneuver is affected by the industry structure and the firm's position in the industry. For each potential competitive opportunity or option limited by the maneuverability, the company needs to estimate the return. Those opportunities that promise the highest return define the company's strategic leverage. The concept of maneuverability brings out the fact that a strategic option that worked very well in one industry may not work equally well in the other industry because of low maneuverability of that option in the different industry and by the firm in consideration.


Regarding the tools of differentiation, the discussion begins by identifying that market offering can be differentiated along five dimensions.

Product
Services that accompany marketing, sales and after sales services.
Personnel who interact with the customers
Channel
Image

Differentiating a Product

Features

Quality: Performance quality - the performance of the prototype or the exhibited sample, Conformance quality - The performance of every item made by the company under the same specification

Durability
Reliability
Repairability
Style
Design

Services differentiation

Ordering ease
Delivery
Installation
Customer training
Customer consulting
Miscellaneous services

Personnel Differentiation

Competence
Courtesy
Credibility
Reliability
Responsiveness
Communication
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Application:
Compare the employees of three mutual funds say UTI Mutual Fund, Reliance Mutual Fund and ICICI Prudential Mutual Fund on the criteria given for differetiating based on personnel.
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Channel differentiation

Coverage
Expertise of the channel managers
Performance of the channel in ease of ordering, and service, and personnel

Image differentiation

First distinction between Identity and Image - Identity is designed by the company and through its various actions company tries to make it known to the market.

Image is the understanding and view of the market about the company.

An effective image does three things for a product or company.

1. It establishes the product's planned character and value proposition.
2. It distinguishes the product from competing products.
3. It delivers emotional power and stirs the hearts as well as the minds of buyers.

The identity of the company or product is communicated to the market by

Symbols
Written and audiovisual media
Atmosphere of the physical place with which customer comes into contact
Events organized or sponsored by the company.


DEVELOPING A POSITIONING STRATEGY

Levitt and others have pointed out dozens of ways to differentiate an offering(Theodore Levitt: "Marketing success through differentiation-of anything", Harvard Business Review, Jan-Feb, 1980)

While a company can create many differences, each difference created has a cost as well as consumer benefit. A difference is worth establishing when the benefit exceeds the cost. More generally, a difference is worth establishing to the extent that it satisfies the following criteria.

Important: the difference delivers a highly valued benefit to a sufficient number of buyers.

distinctive: the difference either isn't offered by others or is offered in a more distinctive way by the company.

Superior: The difference is superior to othe ways obtaining the same benefit.

Communicable: The difference is communicable and visible to the buyers.

Preemptive: The difference cannot be easily copied by competitors.

Affordable: The buyer can afford to pay the higher price

Profitable: The company will make profit by introducing the difference.

Positioning is the result of differentiation decisions. It is the act of designing the company's offering and identity (that will create a planned image) so that they occupy a meaningful and distinct competitive position in the target customer's minds.

The end result of positioning is the creation of a market-focused value proposition, a simple clear statement of why the target market should buy the product.

Example:
Volvo (station wagon)
target customer-Safety conscious "upscale families"
Benefit - Durability and safety,
price - 20% premium,
value proposition - The safest, most durable wagon in which your family can ride.

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Application
Identify and write similar propositions from security market intermediaries
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How many differences to promote

Many marketers advocate promoting only one benefit in the market (Your market offering may have many differentiators, actually should have many differentiators in product, service, personnel, channel, and image).

Kotler mentions that double benefit promotion may be necessary, if some more firms claim to be best on the same attribute. Kotler gives the example of Volvo, which says and "safest" and "durable".

Four major positioning errors

1. Underpositioning: Market only has a vague idea of the product.
2. Overpositioning: Only a narrow group of customers identify with the product.
3. Confused positioning: Buyers have a confused image of the product as it claims too many benefits or it changes the claim too often.
4. Doubtful positioning: Buyers find it difficult to believe the brand claims in view of the products features, price, or manufacturer.

Different positioning strategies or themes:

1. Attribute positioning: the message highlights one or two of the atrributes of the product.
2. Benefit positioning:the message highlights one or two of the benefits to the customer.
3. Use/application positioning: Claim the product as best for some application.
4. User positioning: Claim the product as best for a group of users. - children, women, working women etc.
5. Competitor positioning: Claim that the product is better than a competitor.
6. Product category positioning: Claim as the best in a product category Ex: Mutual fund ranks - Lipper, CRISIL etc.
7. Quality/Price positioning: Claim best value for price

Which differences to promote:

This issue is related to the discussion of worth while differences to incorporate into the market offering done earlier. But now competitors positioning also needs to be considered to highlight one two exclusive benefits offered by the product under consideration.


COMMUNICATING THE COMPANY'S POSITIONING


Once the company has developed a clear positioning strategy, the company must choose various signs and cues that buyers use to confirm that the product delivers the promise made by the company.
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Application
Identify the signs and cues being used by security market intermediaries to convey their value propositions or punchlines
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Ch. 11 Developing New Products

Main Themes:

CHALLENGES IN NEW PRODUCT DEVELOPMENT
EFFECTIVE ORGANIZATIONAL ARRANGEMENTS
MANAGING THE NEW-PRODUCT DEVELOPMENT PROCESS
THE CONSUMBER ADOPTION PROCESS

Marketing management should play a key role in the new product development process. It is not lookout of R&D department alone. Marketing should actively participate in every stage of new product development.

The consulting firm Booz, Allen & Hamilton has identified six categories of new products in terms of their newness to the company and to the market place.

New-to-the-world products
New product lines: New product to the company
Addition to product line: New package sizes, flavours etc. of existing products of a company
Improvement and revisions of existing products; product we see with message “improved”
Repositioning: Existing products targeted to new market segments by expanding their value proposition to cover the new market segment (understandably geographic market expansion does not require new product).
Cost reduction: New products that provide similar performance at lower cost. Hindustan Lever developing Wheel in addition to Surf.



Ch. 12 Managing Life cycle Stategies

THE PRODUCT LIFE CYLES
MARKETING STRATEGIES THROUGHT THE PLC
MARKET EVOLUTION

Ch. 13 Designing marketing Strategies for Market Leaders, Challengers, Followers, and Niches

Main Themes:

MARKET-LEADER STRATEGIES
MARKET-CHALLENGER STRATEGIES
MARKET FOLLOWER STRATEGIES
MARKET-NICHER STRATEGIES

This chapter discusses the marketing strategies that take into account the position of the company in the industry structure and competitors’ strategies.

According to Arthur D. Little consulting firm, a firm will occupy one six competitive positions in a market (Robert V.L. Wright, A System for managing diversity, Cambrige, MA, 1974)

Dominant
Strong
Favourable
Tenable
Weak
Nonviable
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Application
Classify stock broking firms, mutual funds, and merchant banks on the above classification
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Ch. 14 Designing and Managing Global Marketing Strategies

DECIDING WHETHER TO GO ABROAD
DECIDING WHICH MARKET TO ENTER
DECIDING HOW TO ENTER THE MARKET
DECIDING ON THE MARKETING PROGRAM
DECIDING ON THE MARKETING ORGANIZATION



Related Article/Post

Consumer Behavior
http://nrao-mgmt-smi-handbook.blogspot.com/2008/09/consumer-behavior.html

1 comment:

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