Strategic Marketing Issues (2 of 2) To limit (or not) the share of business done with a single customer

Strategic Marketing Issues (2 of 2)

To limit (or not) the share of business done with a single customer

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To be a price leader or a price follower

To offer a complete or limited warranty

To reward salespeople based on straight salary, straight commission, or a combination salary/commission

Social Media Marketing

Marketers must get customers involved in the company website and solicit suggestions in terms of product development, customer service, and ideas.

The company should enable customers to interact with the firm on the following social media networks:

Facebook

Google Plus

Twitter

Instagram

Foursquare

Social media marketing has become an important strategic issue. Marketing has evolved to be more about building a two-way relationship with consumers than just informing consumers about a product or service.

Table 8-1 The New Principles of Marketing

1. Do not just talk at consumers-work with them throughout the marketing process.

2. Give consumers a reason to participate.

3. Listen to-and join-the conversation outside your company’s website.

4. Resist the temptation to sell, sell, sell. Instead attract, attract, attract.

5. Do not control online conversations; let it flow freely.

6. Find a “marketing technologist,” a person who has three excellent skill sets (marketing, technology, and social interaction).

7. Embrace instant messaging and chatting.

Source: Based on Salvatore Parise, Patricia Guinan, and Bruce Weinberg, “The Secrets of Marketing in a Web 2.0 World,” Wall Street Journal, December 15, 2008, R1

Customers must not feel like they are a captive audience for advertising at a firm’s website. Table 8-1 provides new principles of marketing according to Parise, Guinan, and Weinberg.

Market Segmentation (1 of 3)

Market Segmentation

subdividing of a market into distinct subsets of customers according to needs and buying habits

widely used in implementing strategies

Market segmentation enables a small firm to compete successfully with a large firm by maximizing per-unit profits and per-segment sales.

Market Segmentation (2 of 3)

Strategies such as market development, product development, market penetration, and diversification require increased sales through new markets and products.

Market segmentation allows a firm to operate with limited resources because mass production, mass distribution, and mass advertising are not required.

To implement these strategies successfully, new or improved market-segmentation approaches are required.

Market Segmentation (3 of 3)

Market segmentation decisions directly affect the marketing mix variables:

Product

Place

Promotion

Price

Geographic and demographic bases for segmenting markets are the most commonly employed.

Table 8-2 The Marketing Mix Component Variables

Product	Place	Promotion	Price
Quality	Distribution channels	Advertising	Level
Features and options	Distribution coverage	Personal selling	Discounts and
Style	Outlet location	Sales promotion	allowances
Brand name	Sales territories	Publicity	Payment terms
Packaging	Inventory levels and locations	blank	blank
Product line	Transportation carriers	blank	blank
Warranty	blank	blank	blank
Service level	blank	blank	blank
Other services	blank	blank	blank

Source: Based on E. Jerome McCarthy, Basic Marketing: A Managerial Approach, 9th ed. (Homewood, I L: Richard D. Irwin, Inc., 1987), 37-44. Used with permission.

Evaluating potential market segments requires strategists to determine the characteristics and needs of consumers, to analyze consumer similarities and differences, and to develop consumer group profiles.

Retention-Based Segmentation

Tag #1: Is this customer at high risk of canceling the company’s service?

Tag #2: Is this customer worth retaining?

Tag #3: What retention tactics should be used to retain this customer?

Tag #1: Is this customer at high risk of canceling the company’s service? One of the most common indicators of high-risk customers is a drop off in usage of the company’s service. For example, in the credit card industry this could be signaled through a customer’s decline in spending on his or her card.

Tag #2: Is this customer worth retaining? This determination boils down to whether the post-retention profit generated from the customer is predicted to be greater than the cost incurred to retain the customer. Customers need to be managed as investments.

Tag #3: What retention tactics should be used to retain this customer? For customers who are deemed “save-worthy,” it’s essential for the company to know which save tactics are most likely to be successful. Tactics commonly used range from providing “special” customer discounts to sending customers communications that reinforce the value proposition of the given service.

Alternative Bases for Market Segmentation

Geographic

Region, country size, city size, density, climate

Demographic

Age, gender, family size, family life cycle, income, occupation, education, religion, race, nationality

Psychographic

Social class, personality

Behavioral

Use occasion, benefits sought, user status, usage rate, loyalty status, readiness stage, attitude toward product

Market segmentation on these characteristics is possible with the use of business analytics or data mining.

Product Positioning (1 of 2)

Product Positioning

entails developing schematic representations that reflect how your products or services compare to competitors’ on dimensions most important to success in the industry

Also called perceptual mapping

Product positioning is widely used for deciding how to meet the needs and wants of particular consumer groups.

Product Positioning Steps (1 of 2)

Select key criteria that effectively differentiate products or services in the industry.

Diagram a two-dimensional product-positioning map with specified criteria on each axis.

Plot major competitors’ products or services in the resultant four-quadrant matrix.

Product positioning can be summarized in five steps.

Product Positioning Steps (2 of 2)

Identify areas in the positioning map where the company’s products or services could be most competitive in the given target market. Look for vacant areas (niches).

Develop a marketing plan to position the company’s products or services appropriately.

Rules for Using Product Positioning as a Strategy-Implementation Tool

Look for the hole or vacant niche.

Don’t serve two segments with the same strategy.

Don’t position yourself in the middle of the map.

Some rules for using product positioning as a strategy-implementation tool are on this slide.

Product Positioning (2 of 2)

An effective product positioning strategy meets two criteria:

It uniquely distinguishes a company from the competition

It leads customers to expect slightly less service than a company can deliver

Firms need to inform customers about what to expect and then exceed the promise. Underpromise and overdeliver! That is a key for excellent strategy implementation.

Figure 8-2 Example of a Product- Positioning Map

A Perceptual Map for the Automobile Industry

Source: Based on info at Perceptual_mapping.

This is an example of a product positioning map for the auto industry.

Finance/Accounting Issues (1 of 3)

To raise capital with short-term debt, long-term debt, preferred stock, or common stock

To lease or buy fixed assets

To determine an appropriate dividend payout ratio

To use L I F O (Last-in, First-out), F I F O (First-in, First-out), or a market-value accounting approach

Several finance and accounting concepts central to strategy implementation are acquiring needed capital, developing projected financial statements, preparing financial budgets, and evaluating the worth of a business. Some examples of decisions that may require finance and accounting policies are included on the next two slides.

Finance/Accounting Issues (2 of 3)

To extend the time of accounts receivable

To establish a certain percentage discount on accounts within a specified period of time

To determine the amount of cash that should be kept on hand

Finance/Accounting Issues (3 of 3)

Acquire needed capital to implement strategies.

Develop projected financial statements to show expected impact of strategies implemented.

Determine the firm’s value (corporate valuation) in the event an offer is received.

Decide whether to go public with an Initial Public Offering (I P O).

Decide whether to keep cash offshore that was earned offshore.

Five especially important finance and accounting activities central to strategy implementation are listed on this slide and explained on later slides.

Acquiring Capital to Implement Strategies (1 of 2)

Successful strategy implementation often requires additional capital.

Besides net profit from operations and the sale of assets, two basic sources of capital for an organization are debt and equity.

When a firm needs additional capital, the choice is often made between debt or equity financing.

Acquiring Capital to Implement Strategies (2 of 2)

E P S = Earnings Per Share, which is Net Income divided by # of Shares Outstanding

Another term for Shares Outstanding is Shares Issued

E B I T = Earnings Before Interest and Taxes (also called operating income)

E B T = Earnings Before Tax

E A T = Earnings After Tax

Successful strategy implementation often requires additional capital. Besides net profit from operations and the sale of assets, two basic sources of capital for an organization are debt and equity.

Strategic Marketing Issues (2 of 2) To limit (or not) the share of business done with a single customer

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