samenvatting marketing 2.pdf

# Introduction to marketing and customer value This section introduces the fundamental importance of marketing and innovation in business, emphasizing customer value as the core of strategic marketing. It explores how perceived benefits and costs influence customer decisions and the risks of commoditization. ## 1. Introduction to marketing and customer value Marketing and innovation are the fundamental functions of a business, with all other activities considered costs. The primary purpose of a business is to create and keep customers [1](#page=1). ### 1.1 The centrality of customer value in marketing Customer value is defined as the difference between the total benefits a customer perceives they receive and the costs involved in obtaining those benefits [2](#page=2). #### 1.1.1 Components of customer value * **Perceived Benefits:** These are the advantages customers associate with a product or service. For example, Tesla cars offer benefits such as sustainability, status, and comfort [2](#page=2). * **Perceived Costs:** These encompass all expenses incurred by the customer, including money, time, and effort. An example for Tesla includes the inconvenience of finding available charging stations during a trip [2](#page=2). #### 1.1.2 Creating perceived benefits Brands can create value by shaping the perceived benefits of their products. For instance, McDonald's fries are perceived to taste better due to branding, even in blind taste tests where the product is identical to non-branded fries. Similarly, a known brand of peanut butter can be perceived as tasting better than an identical, unknown brand [2](#page=2). > **Tip:** Focusing solely on decreasing costs without enhancing perceived benefits carries the risk of commoditization. This occurs when customers perceive little difference between a brand's product and cheaper private label alternatives, leading them to choose the lowest-priced option [2](#page=2). ### 1.2 The relationship between customer value, differentiation, and price sensitivity * **Commoditization:** In product categories where customers perceive brands as highly similar, price becomes a significant deciding factor, indicating high commoditization [2](#page=2). * **Brand Differentiation:** In categories with greater perceived value differences between brands, the brand's importance increases, and price sensitivity decreases. Customer value directly influences both brand differentiation and price sensitivity [2](#page=2). * **Inverse Relationship:** There is an inverse relationship between perceived benefits and price importance. When customers perceive minimal meaningful differences between brands (low perceived value), price dominates their decision-making. Conversely, when perceived benefits are high, customers become less sensitive to price [3](#page=3). ### 1.3 Marketing orientation #### 1.3.1 Selling orientation vs. Marketing orientation * **Selling Orientation:** This approach focuses on the company's strengths and products, pushing them onto customers with a short-term focus. It is often characterized as an "inside-out" perspective [3](#page=3). * **Marketing Orientation:** This perspective prioritizes understanding and meeting customer wants and needs. It adopts an "outside-in" focus [3](#page=3). > **Example:** The common saying, "People don’t want to buy a quarter-inch drill, they want a quarter inch hole," illustrates the marketing orientation, highlighting the need to understand the underlying customer desire rather than just the product itself [3](#page=3). #### 1.3.2 Marketing myopia Marketing myopia occurs when a company focuses too narrowly on its own strengths and products without adequately considering customer desires and evolving market needs. Nokia is cited as an example of a company that suffered from marketing myopia [3](#page=3). #### 1.3.3 The importance of sound marketing Adopting a marketing orientation over a selling orientation helps create value and reduces the impact of low prices, provided that the marketing strategy is "sound". Sound marketing requires control over key marketing elements [3](#page=3). ##### 1.3.3.1 Unsound marketing practices In many companies, such as airlines, the marketing chief may only control advertising. Crucial elements of the marketing mix, like pricing, flight schedules, service classes, and ground services, are often managed by other departments. Without control over the 4 Ps (Product, Price, Place, Promotion), marketing cannot effectively create true customer value [3](#page=3). ##### 1.3.3.2 Sound marketing example: P&G Procter & Gamble (P&G) is presented as an example of sound marketing. The company faced challenges in the past where its initial reaction was to cut costs to lower prices. However, P&G recognized its strength in innovation and shifted its strategy to focus on understanding the customer and developing better products, demonstrating a customer-centric approach [3](#page=3). ### 1.4 Conclusion Marketing is paramount because it delivers value to the customer. When executed soundly, marketing also generates significant value for the company [3](#page=3). --- # Marketing strategy and planning process This section details the foundational elements of marketing strategy and the systematic process involved in developing a strategic marketing plan, including problem analysis, objective setting, and the importance of SMART goals. ### 2.1 Defining marketing strategy and the strategic marketing plan Marketing is defined as the activities, institutions, and processes involved in creating, communicating, delivering, and exchanging offerings that provide value to customers, clients, partners, and society at large. A **marketing strategy** is an organization's overarching plan for engaging with the market to achieve its marketing objectives, considering its limited resources. This strategy can be implicit or explicit, manifesting as a **strategic marketing plan**. A strategic marketing plan is an internal company document that analyzes the marketplace and outlines the marketing strategies and programs designed to support business and organizational goals over a defined period, typically one to five years. Separate marketing plans may be developed for different brands, markets, new product launches, or special initiatives. These plans are intended to be dynamic and adaptable documents [4](#page=4). ### 2.2 The marketing planning process The marketing planning process is a structured approach to developing and executing marketing strategies. #### 2.2.1 Problem analysis Strategic problem analysis can be a planned process or incident-based, often triggered by negative events like the COVID-19 pandemic. It is crucial to distinguish between **symptoms** and the actual **problem**. For example, a headache is a symptom, while an allergy might be the underlying problem. The level of analysis must align with the abstraction level of the strategic marketing problem. For instance, if a problem affects all products, the strategic marketing plan may need a complete rewrite; if it's product-specific, the analysis should be limited to that brand [5](#page=5). There are two types of strategic problems: * **Negatively oriented problems:** These represent a gap between the current situation and a required future state, indicating that change is necessary, such as declining sales [5](#page=5). * **Positively oriented problems:** These describe a gap between the current and a desired future situation, where the organization wishes to improve its performance even if the current state is not problematic [5](#page=5). **Commoditization** occurs when differentiation between offerings diminishes, leading customers to choose based solely on price. An example is the news market, where online information became free. To combat this, some publications focused on niche content: HLN emphasized local news not readily available online, while De Standaard offered in-depth reports and investigations, creating unique value [6](#page=6). #### 2.2.2 Objective setting Defining initial goals is important, but objectives may need adjustment as more information becomes available through analysis. For example, an initial goal of acquiring 100 new customers might be revised if external analysis reveals this target to be unachievable. Objectives can address symptoms or be framed as positive challenges [6](#page=6). There are three primary categories of objectives: * **Financial objectives:** These are targets related to financial outcomes achieved through marketing strategies and programs, including sales volumes, market shares, profitability, and break-even targets [6](#page=6). * **Marketing objectives:** These are targets for achievements in marketing relationships and activities that directly support financial objectives. They focus on customer or stakeholder relationships, or internal activities like new product launches [6](#page=6). * **Societal objectives:** These are targets for accomplishing results related to social responsibility, indirectly influencing both marketing and financial achievements. Examples include environmental friendliness or charity donations [7](#page=7). All formulated goals should adhere to the **SMART** criteria: * **Specific:** The goal should be clear enough for unambiguous interpretation by different individuals. For instance, "to be the best" is not specific [7](#page=7). * **Measurable:** Goals must include quantifiable metrics or benchmarks to track achievement [7](#page=7). * **Attainable:** The goal should align with the organization's strategic direction [7](#page=7). * **Realistic:** The goal must consider the company's available resources and opportunities; a small company cannot realistically aim to become a market leader immediately [7](#page=7). * **Time frame for completion:** A deadline must be established for achieving the goal [7](#page=7). > **Tip:** For exams, be prepared to formulate SMART goals based on case study information, ensuring they are relevant and address the specific context provided. Examples of SMART goals include: * Product sales: "Sell a monthly volume of product X worth 3,000 dollars." [8](#page=8). * Profitability: "Increase the gross profit margin to 25 percent before the end of this year." [8](#page=8). * Break-even: "Achieve a break-even status for revenues and expenses on product Y before June 30th." [8](#page=8). * Customer acquisition: "Expand the customer base by acquiring 200 new customers throughout the current year." [8](#page=8). * Customer retention: "Reduce customer churn in the upcoming year by 10 percent." [8](#page=8). * Customer satisfaction: "Score 96 percent or higher in quarterly customer satisfaction surveys in the upcoming year." [8](#page=8). * Unit sales: "Sell 500 product units in each targeted segment during each month of the upcoming year." [8](#page=8). #### 2.2.3 External analysis External analysis involves examining the company's environment, categorized into two external levels: Macro and Meso. These levels provide insight into trends and events affecting companies and other actors. Factors outside an organization's control are external. These external trends and events can either hinder goals, presenting a **threat**, or assist them, representing an **opportunity**. It is essential to differentiate between internal (Strengths and Weaknesses) and external (Opportunities and Threats) factors for analysis [8](#page=8). ##### 2.2.3.1 Macro-level analysis The DESTEP framework serves as a checklist to ensure comprehensive consideration of various environmental elements where trends can emerge. A single trend can span multiple DESTEP categories, such as a shift towards vegan products impacting both social-cultural and ecological aspects. The goal is not to find a trend for each segment, but to identify relevant trends. The DESTEP analysis feeds into the SWOT analysis, helping to identify opportunities and threats. It is vital to select only those trends directly relevant to the specific problem at hand; for example, an aging population might be irrelevant for a Bluetooth speaker company but crucial for a company producing mobility aids. Decision-making should be deferred until after the analysis [8](#page=8). > **Tip:** When performing DESTEP analysis, focus on identifying trends and their potential impact. For group assignments, clearly identify trends, discuss their implications, and assign a numerical importance rating to each. --- # Environmental and internal analysis for marketing This section delves into the essential analyses required for effective marketing strategy development, encompassing external environmental scanning and internal resource assessment to identify competitive advantages. ### 3.1 External environmental analysis External environmental analysis involves examining factors outside of a company's direct control that can influence its operations and strategic decisions. These external factors are categorized into macro-level and meso-level environments [8](#page=8). #### 3.1.1 Macro-level analysis: The DESTEP model The DESTEP model is a comprehensive checklist designed to ensure thorough consideration of various external environmental elements where trends and events can occur. It helps identify potential opportunities and threats for a company. It is crucial to select only trends relevant to the specific problem or case being addressed. A single trend can sometimes impact multiple DESTEP categories [8](#page=8). * **Demographic:** This category includes factors such as world population booms, age distribution, changes in household compositions, and migration tendencies. For example, a beer producer in Belgium must be aware of the legal drinking age of sixteen [9](#page=9). * **Economic:** This encompasses economic climate and business cycles, disposable income, income distribution, price levels, inflation, saving behavior, unemployment rates, and consumer confidence [9](#page=9). * **Socio-cultural:** This aspect examines people's feelings about themselves, others, organizations, society, and nature. Social trends change rapidly, such as the shift towards sustainable and healthier products. Cultural aspects influence communication strategies for products and change more slowly. The AIO (Activities, Interests, Opinions) framework can be used to understand consumer lifestyles [9](#page=9). * **Technological:** This includes the speed of technological changes and product innovation, which can significantly impact employment [10](#page=10). * **Ecologic:** This involves considerations of finite resources, energy sources and costs, pollution, and government interventions. It also highlights the risk of "greenwashing," where companies falsely present themselves as environmentally responsible [10](#page=10). * **Political:** This encompasses legislation, public interest groups, and the concept of social responsibility [10](#page=10). > **Tip:** When applying DESTEP, the goal is not to find a trend in every segment but to identify the most relevant trends for the specific business context. The analysis of these trends will then inform the identification of opportunities and threats for a SWOT analysis [8](#page=8). #### 3.1.2 Meso-level analysis: Competitor analysis Meso-level analysis focuses on the competitive environment, requiring a thorough analysis of competitors as part of the strategic marketing plan. The insights gained from analyzing competitors and market forces (like Porter's Five Forces) can highlight opportunities and threats [10](#page=10). Key aspects of competitor analysis include: * Identifying main competitors [11](#page=11). * Understanding their goals, which influence their actions, though these are not always publicly disclosed [11](#page=11). * Determining their strategies [11](#page=11). * Conducting benchmarking, which involves comparing the company with best-in-class competitors on key elements such as cost drivers, value creators, and areas for improvement [11](#page=11). > **Example:** In the car industry, new entrants like self-driving car manufacturers pose a threat, while alternatives like e-scooters or public transport represent substitute products [10](#page=10). ### 3.2 Internal analysis Internal analysis focuses on a firm's resources and capabilities to determine its competitive advantage [12](#page=12). #### 3.2.1 The Resource-Based View (RBV) The Resource-Based View (RBV) posits that a firm's competitive advantage stems from its unique bundle of resources and competencies. It helps identify what gives a firm a competitive advantage and how it can be sustained over the long term [12](#page=12). * **Resources** are categorized as: * **Tangible Goods:** Physical assets like materials, components, and services necessary for operations, which are usually quantifiable [12](#page=12). * **Human Resources:** The expertise, skills, talents, and motivation of the staff [12](#page=12). * **Financial Means:** Access to or possession of financial resources [12](#page=12). * **Knowledge:** The information and understanding available within the company [12](#page=12). Different firms possess distinct resource configurations. For instance, AB InBev may have a strong brand name, extensive distribution channels, significant cash flow, and top management expertise, whereas a local brewery might excel in understanding local consumer needs and maintaining strong consumer relationships. Resource differences tend to persist over time [12](#page=12). #### 3.2.2 The VRIO Framework The VRIO framework is a tool derived from the RBV to assess whether resources and capabilities can lead to a sustained competitive advantage. It evaluates resources based on four criteria [12](#page=12): * **Valuable:** Does the resource create value for the customer and the company? Is the customer willing to pay for it [12](#page=12)? * **Rare:** How unique is the resource? Is it possessed by few or no competitors [12](#page=12)? * **Inimitable:** How difficult is it for competitors to copy or substitute the resource? This includes both direct imitation and the possibility of equivalent substitutes [12](#page=12). * **Organized:** Does the company effectively leverage and exploit this resource to generate profit [12](#page=12)? The VRIO framework helps categorize a firm's competitive position: * **Competitive Disadvantage:** A weakness in SWOT analysis; the resource does not meet the VRIO criteria [13](#page=13). * **Competitive Parity:** The resource is common, meeting the minimum standard but offering no uniqueness or advantage [13](#page=13). * **Temporary Competitive Advantage:** The resource creates value and is unique, but competitors are likely to replicate it soon [13](#page=13). * **Sustained Competitive Advantage:** A strength in SWOT analysis; the resource is unique, creates significant value, and is effectively leveraged by the organization [13](#page=13). > **Example:** Dunkin' Donuts offering coffee for the "average" American is valuable as it attracts a large market share, but it is not rare or inimitable. Conversely, a drive-thru feature, while valuable, is rare among high-end coffee shops that prefer customers to experience their in-store ambiance [13](#page=13). --- # Portfolio analysis and strategic choice This topic covers tools for analyzing a company's product or business unit portfolio and frameworks for making strategic choices about how to compete. ## 4. Portfolio analysis and strategic choice Portfolio analysis involves evaluating a company's range of products, brands, or Strategic Business Units (SBUs) to understand their current performance and potential. Strategic choice frameworks then guide decisions on how to achieve competitive advantage and growth within these portfolios [14](#page=14) [18](#page=18). ### 4.1 Portfolio analysis tools Portfolio analysis tools help categorize and understand the strategic position of different business units or products within a company's portfolio. #### 4.1.1 The BCG matrix (Growth Share Matrix) The BCG matrix, or Growth Share Matrix, is a tool used to analyze and categorize a company's portfolio of products, brands, or SBUs. It uses two dimensions: relative market share and market growth rate. The "relative" aspect of market share is crucial because a company's market share alone is less informative than its share compared to its largest competitor [14](#page=14). The matrix categorizes business units into four types: * **Cash Cows:** These units have a high market share in a low-growth market. They generate more money than they require, allowing companies to "milk" them for cash. An example is Coca-Cola's core brand within the Coca-Cola group [14](#page=14). * **Stars:** These units have a high market share in a high-growth market. They require significant investment to remain competitive due to high competition but also generate substantial revenue, often resulting in a break-even cash balance [14](#page=14). * **Question Marks (or?: )** These units have a low market share in a high-growth market. They do not generate much money and represent new brands that have not yet proven themselves. Companies must decide whether to invest in them to turn them into stars or divest them [14](#page=14). * **Dogs:** These units have a low market share in a low-growth market. They generate little revenue and may have a break-even or negative cash balance. While seemingly worthless, companies may strategically keep them for various reasons, such as driving customers to other profitable services, like banks offering savings accounts (dogs) to encourage customers to maintain other accounts for investment [14](#page=14). **Formulas for the BCG Matrix:** * **Relative Market Share:** $$ \text{Relative Market Share} = \frac{\text{Your product's market share}}{\text{Largest competitor's market share}} $$ * **Market Growth Rate:** $$ \text{Market Growth Rate} = \left( \frac{\text{End value} - \text{Start value}}{\text{Start value}} \right) \times 100 $$ **Disadvantage:** The BCG matrix does not inherently account for negative market growth, meaning numbers might need adjustment before categorization can occur [14](#page=14). #### 4.1.2 The Brand Portfolio Model (Riezebos) The Brand Portfolio Model, proposed by Riezebos, focuses on identifying and protecting key brands within a company's portfolio. The central idea is that one brand, often a "cash cow," holds paramount strategic importance and needs protection [15](#page=15). The model identifies four types of brands: * **Bastion Brand:** This is the company's core brand, representing its primary market position and values. It is the foundation of the company's offerings and carries the most strategic weight and market share [15](#page=15). * **Flanker Brand:** A supporting brand launched to target specific market segments or price points, thereby preventing competitors from capturing those customers. Flanker brands protect the bastion brand by filling market gaps, often at a similar quality and price level but focusing on unmet needs. For example, Pantene serves as a flanker brand to Head & Shoulders for Procter & Gamble, targeting different hair care needs (beauty vs. anti-dandruff) [15](#page=15). * **Prestige Brand:** A high-end brand positioned above the bastion brand to enhance the company's overall image and attract premium consumers. These brands typically command higher prices and are associated with exclusivity [15](#page=15). * **Fighter Brand:** A low-cost brand introduced to compete directly with discount or aggressive competitors without negatively impacting the image of the bastion brand [15](#page=15). #### 4.1.3 SWOT and Confrontation Matrix The SWOT analysis identifies internal Strengths and Weaknesses, and external Opportunities and Threats. It's crucial to distinguish between internal and external factors; for example, not being in a market space is a weakness, not an opportunity [16](#page=16). * **Strengths & Weaknesses:** These are internal elements affecting performance and are often critical success factors. They should be assessed relative to competition [16](#page=16). * **Opportunities & Threats:** These are external events that an organization must consider or proactively address, such as competitor actions, market trends, and macro-environmental shifts [16](#page=16). The Confrontation Matrix builds upon SWOT by exploring how to leverage these factors: * How can strengths be used to exploit opportunities [16](#page=16)? * How can strengths mitigate threats [16](#page=16)? * How can weaknesses be overcome to take advantage of opportunities [16](#page=16)? * How can weaknesses be improved to ward off threats [16](#page=16)? Strategic issues emerge from the interplay of external evolutions and internal resources. In practice, confrontation involves a group effort where participants score the impact of strengths/weaknesses on opportunities/threats (e.g., using scores of 5, 3, and 1). The process culminates in a list of key issues and a final summarizing statement [16](#page=16) [17](#page=17). ### 4.2 Strategic choice frameworks Strategic choice frameworks provide models for businesses to decide how to compete and grow. #### 4.2.1 Porter's generic strategies . Porter's generic strategies describe how a company can achieve competitive advantage by focusing on either cost leadership or differentiation, and by choosing a broad or narrow market scope. It is important not to confuse these with Porter's Five Forces model [18](#page=18). The four generic strategies are: * **Cost Leadership:** Focuses on serving a large number of customers with low prices, often associated with lower quality. Examples include Aldi and Ryanair [18](#page=18). * **Differentiation:** Focuses on serving a large number of customers by creating value through uniqueness, superior ingredients, or high standards. Apple is a prime example, appealing to both functional needs and subjective customer feelings [18](#page=18). * **Cost Focus:** Targets a specific segment of customers with low prices. Claires, targeting teenage girls with fashionable but inexpensive accessories, is an example [18](#page=18). * **Differentiation Focus:** Targets a specific segment with unique products at a higher price. Rolex, Rolls-Royce, and Prada exemplify this strategy [18](#page=18). Porter suggests that companies should ideally pick one strategy for long-term success, as being "stuck in the middle" (trying to do both cost leadership and differentiation for a broad market) can be confusing for customers and unsustainable [18](#page=18). #### 4.2.2 Treacy and Wiersema's value disciplines . Treacy and Wiersema's model updates Porter's by suggesting companies must excel in one value discipline while performing adequately in the other two [19](#page=19). The three value disciplines are: * **Product Leadership:** Focuses on creating the best possible products through innovation, R&D, and rapid technological advancement. Management styles tend to be flexible rather than hierarchical, fostering employee innovation. Examples include Apple, PlayStation, Nike, and Johnson & Johnson [19](#page=19). * **Operational Excellence:** Prioritizes providing reliable products at competitive prices through efficient logistics and standardized processes. This is distinct from cost leadership, as it aims for efficiency in delivering quality, not just low quality. Examples include McDonald's and Domino's. Toyota is cited as an example of operational excellence, contrasted with Dacia for cost leadership [19](#page=19). * **Customer Intimacy:** Focuses on building loyal customers by providing the best solutions tailored to their specific needs. Customer Relationship Management (CRM) is dominant. An example is a hotel that remembers a guest's pillow preferences [19](#page=19). #### 4.2.3 Ansoff's growth strategies . Ansoff's growth strategies provide a framework for companies to identify growth opportunities by considering whether the product and market are existing or new for the company [20](#page=20). The four strategies are: * **Market Penetration:** Aims for existing customers to buy more of the company's current products. This can involve encouraging current buyers to purchase more (deeper penetration) or attracting customers from competitors (broader penetration), such as Coca-Cola's promotions to sway Pepsi drinkers. However, this strategy is often not sustainable long-term as it's easily copied [20](#page=20). * **Product Development:** Involves offering new products and services to the company's existing market. Examples include Coca-Cola introducing variants like Zero, Light, or Life, or Heinz selling mayonnaise [20](#page=20). * **Market Development:** Involves finding new markets for existing products. This can be through geographic expansion, targeting different customer segments (e.g., B2B to B2C), or reaching new demographic groups. Tommy Hilfiger using both regular shops and outlets exemplifies reaching different segments [20](#page=20). * **Diversification:** Involves offering new products and services to new markets. This is a risky strategy, requiring significant promotional investment, with a notable failure rate. Examples include IKEA offering solar panels or Swatch producing smart cars. It is crucial not to confuse diversification with differentiation [20](#page=20). --- # Blue Ocean strategy and STP Blue ocean strategy and STP outlines a framework for creating new market spaces and demand by moving beyond competitive rivalry, complemented by the segmentation, targeting, and positioning process for effective market engagement. ## 5. Blue ocean strategy and STP ### 5.1 Blue ocean strategy Blue ocean strategy, developed in 2005, focuses on creating new market space and demand rather than competing within existing, crowded markets. It is defined as the simultaneous pursuit of differentiation and low cost to open up uncontested market space, thereby making competition irrelevant. This approach is based on the belief that market boundaries and industry structures are not fixed but can be reconstructed by industry players [21](#page=21) [22](#page=22). #### 5.1.1 Red ocean vs. Blue ocean **Red ocean** represents existing market spaces where companies compete intensely to beat rivals and capture existing demand. This often involves making a value-cost trade-off, leading to bloody competition and potential price wars, diminishing profitability [21](#page=21). **Blue ocean** strategies aim to make competitors irrelevant by creating new demand and disproving the value-cost trade-off. The focus shifts away from direct competition towards creating unique value [21](#page=21). > **Tip:** The "red ocean" analogy highlights the destructive nature of intense competition where companies "eat each other" in a fight for market share. #### 5.1.2 Transitioning from Red to Blue Ocean Companies can transition from red to blue oceans through two primary avenues: 1. **Establishing new industries:** Launching groundbreaking products or services that create entirely new markets, such as eBay or ChatGPT [21](#page=21). 2. **Expanding existing industry boundaries:** Innovating within established industries to create new market spaces and attract new customer segments. Examples include Cirque du Soleil and Yellow Tail wine [21](#page=21). > **Example:** Yellow Tail wine exemplifies Blue Ocean Strategy by simplifying wine consumption for casual consumers, removing complexities like vineyard prestige and enological jargon. By focusing on fun, easy-to-drink, and affordable wine, it attracted non-wine drinkers and created a new demand segment, making existing competition irrelevant [21](#page=21). #### 5.1.3 Framework for strategic choice To facilitate the move from red to blue ocean, a set of four key questions can be posed to evaluate strategic options [22](#page=22). Furthermore, the SFA (Suitability, Feasibility, Acceptability) matrix can be used to judge and explain chosen strategic options. This involves evaluating whether a strategy aligns with SWOT analysis (Suitability), its ease of implementation and resource requirements (Feasibility), and stakeholder acceptance (Acceptability). While not always a formal evaluation, the SFA matrix aims to support informed strategic choices [23](#page=23). ### 5.2 Segmentation, Targeting, and Positioning (STP) The STP process is a core component of marketing planning, designed to address saturated markets by focusing on specific customer groups rather than the entire market. It helps brands capture multiple segments and avoid losing customers to competitors [24](#page=24). #### 5.2.1 Segmentation Segmentation is the process of grouping customers into segments based on shared characteristics, behaviors, needs, or wants that influence their demand or usage of a product or service. This is crucial because no organization has the resources to serve every customer or mean everything to every customer [25](#page=25). **Common Segmentation Variables:** 1. **Geographic:** Based on location (continent, country, state, city, street). It's widely used due to data availability and its influence on needs and wants (e.g., climate affecting transportation choices) [25](#page=25) [26](#page=26). 2. **Demographic:** Based on measurable population characteristics like age, gender, income, education, etc. 3. **Psychographic:** Based on lifestyle, personality, values, and interests (e.g., BioPlanet targeting customers with "green" values) [26](#page=26). 4. **Behavioral:** Based on product-related behavior, such as usage rate, loyalty, benefits sought, and purchase occasion [25](#page=25) [26](#page=26). > **Conclusion:** There is no single "golden" approach to market segmentation. The most effective method involves using multiple segmentation variables to mitigate the downsides of individual approaches [25](#page=25). **Criteria for Effective Segmentation:** For segmentation to be useful in marketing planning, segments must be: * **Identifiable:** Customers within segments share common traits [26](#page=26). * **Responsive:** Segments react differently to marketing efforts [26](#page=26). * **Actionable:** Competitive advantage can be gained by focusing on specific segments [26](#page=26). * **Accessible/Reachable:** Segments can be reached through marketing and distribution channels [26](#page=26). * **Substantial:** Segments are large enough or potentially profitable to warrant attention [26](#page=26). #### 5.2.2 Targeting Targeting involves making decisions about which segments to focus on and which to ignore, as it is impossible to be everything to everyone [24](#page=24) [26](#page=26). **Targeting Strategies:** * **Undifferentiated Marketing (Mass Marketing):** Uses one marketing mix for the entire market. This is the cheapest strategy and can be viable in growing markets with low competition [26](#page=26). * **Differentiated Marketing:** Develops separate marketing mixes for different segments (e.g., Marketing Mix 1 for Segment A, Marketing Mix 2 for Segment B). It focuses on segment differences and is more expensive but better addresses diverse needs [26](#page=26). * **Selective Specialization:** Focusing on a few chosen categories and creating distinct marketing strategies for each [27](#page=27). * **Product Specialization:** Focusing on a specific product category and creating different marketing mixes within it [27](#page=27). * **Market Specialization:** Focusing on a particular segment and offering various product categories to that group [27](#page=27). * **Full Market Coverage:** Offering different products for different markets, which is theoretical and resource-intensive [27](#page=27). * **Concentrated Marketing (Niche Marketing):** Focuses on the specific needs and wants of a single segment, creating a tailored marketing mix. Risks include the segment shrinking or attracting competitors if it grows [27](#page=27). * **Individual Marketing:** Tailors a marketing mix for an individual consumer. This is the most extreme form, often seen in B2B, and technology has made it more feasible. Customization goes further by including the customer in product creation [27](#page=27). > **Note:** A "persona" is a fictitious yet realistic profile representing typical customer behavior within a targeted segment. While providing insights, personas can be stereotypical and should not be the sole basis for targeting decisions [28](#page=28). #### 5.2.3 Positioning Positioning is the creation of a distinct mental image or impression consumers have of a product, service, or brand, setting it apart from competitors. It involves determining the key message to deliver and how to influence customer perceptions [24](#page=24) [28](#page=28). **Developing Effective Positioning:** Effective positioning should be a response to consumer problems and differentiate the product from competitors. Key considerations include [28](#page=28): * **What customers want/need:** This can be related to product attributes, benefits, usage occasions, user characteristics, activities, origin, product class, or competitors [28](#page=28). * **The competition:** Understanding commonalities (Points of Parity, PoP) and differences (Points of Difference, PoD) with competitors is crucial [29](#page=29). **Unique Selling Proposition (USP):** A USP is a simple and convincing claim that differentiates a product. While too many claims can be confusing and reduce credibility, up to three claims may be necessary to differentiate or override negative perceptions, provided they are supported by proof. Positioning decisions should ideally align consumer needs with competitor insights [29](#page=29). --- # Marketing mix, implementation, and evaluation This section delves into the practical execution and assessment of marketing mix strategies, focusing on how product, price, place, and promotion decisions are put into action and measured for effectiveness [30](#page=30) [31](#page=31) [32](#page=32) [33](#page=33) [34](#page=34) [35](#page=35) [36](#page=36) [37](#page=37) [38](#page=38). ### 6.1 The marketing mix (4 Ps) The marketing mix encompasses the core tactical decisions related to the four Ps: product, price, place, and promotion. These decisions are crucial for achieving pre-set marketing objectives and are further detailed in tactical and operational plans [30](#page=30). #### 6.1.1 Product The "Product" aspect of the marketing mix refers to both tangible goods and intangible services, encompassing physical items, services, and even people or places that deliver value by meeting specific consumer needs [30](#page=30). ##### 6.1.1.1 Features and benefits * **Features:** Characteristics that enable a product to provide specific benefits [30](#page=30). * **Benefits:** The value or advantage consumers gain from a product's features [30](#page=30). Marketers should critically evaluate if each feature offers value to consumers, if features need reformulation to match target segment expectations, and what features to add or remove [30](#page=30). * **Feature bloating:** Occurs when too many non-essential features are added, potentially confusing customers, increasing costs without willingness to pay more, and ultimately disadvantaging the product [30](#page=30). ##### 6.1.1.2 Quality of a product Quality is defined as the extent to which a product's performance meets consumer expectations, from a user-based perspective. High-quality products better meet customer expectations than competing products. Perceptual maps can illustrate how well a product aligns with target segment needs, indicating its quality level [30](#page=30). ##### 6.1.1.3 Packaging and labeling Packaging and labeling can add value from a consumer's viewpoint [31](#page=31). * **Functions of packaging:** * Convey features and benefits of a product, aiding informed purchasing decisions [31](#page=31). * Build brand image by reflecting sophistication and premium quality [31](#page=31). * Draw consumer attention on store shelves [31](#page=31). * **Labels:** Provide warnings, product information, or instructions for appropriate use [31](#page=31). ##### 6.1.1.4 Branding Branding is pivotal for product planning as it provides identity and differentiation, stimulating customer response. Unbranded products are commodities indistinguishable except by price, while branded products can evoke different customer responses due to the rational or emotional value they add [31](#page=31). #### 6.1.2 Price Price and value are intrinsically linked, with consumers assessing value by comparing perceived benefits against costs [32](#page=32). * **Benefits:** Include intrinsic characteristics, feelings, emotions, and brand experiences [32](#page=32). * **Costs:** Encompass not only the monetary price but also the effort required to obtain a product [32](#page=32). Price is a significant contributor to cost perceptions. When a brand adds less value, price becomes more important [32](#page=32). ##### 6.1.2.1 External factors influencing pricing * **Customers:** Their perceived value guides pricing decisions, although cost is often the starting point in practice. Value-based pricing starts with customer perception of what they are willing to pay [33](#page=33). * **Competitors:** Pricing must remain within the competitive range, charging equally high or slightly lower prices [33](#page=33). * **Distributors:** Their price expectations and marketing goals influence pricing strategies, with discount stores aiming for lower prices [33](#page=33). ##### 6.1.2.2 Internal factors influencing pricing * **Costs:** The final price should cover costs, which represent the lower pricing limit where a company avoids losses [33](#page=33). * **Break-even point:** The sales level where revenue equals costs. The formula for break-even units is [34](#page=34): $$ \text{Break-even units} = \frac{\text{Fixed costs}}{\text{SP} - \text{VC}} $$ where SP is the selling price per unit and VC is the variable cost per unit [34](#page=34). * **Target group & positioning:** A low-cost strategy aligns with price-conscious consumers, while a high price signals status for goods like iPhones [34](#page=34). * **Product strategy:** 1. **Skimming strategy:** Setting a high price for a new product to establish a perception of high quality or unique value, gradually reducing it for different consumer segments over time. This strategy helps recoup development costs swiftly [34](#page=34). 2. **Penetration strategy:** Introducing a product at a low price to gain market share rapidly, with gradual price increases later [34](#page=34). #### 6.1.3 Place (Distribution) Place refers to all aspects of distribution, including distribution levels, partners, and reversed channels [34](#page=34). ##### 6.1.3.1 Distribution levels Distribution levels indicate the number of intermediaries involved [34](#page=34). * **Direct distribution:** The producer distributes directly to the end consumer without intermediaries [34](#page=34). * **Indirect distribution:** Involves one or more intermediaries. * **Indirect short channel:** One retailer is involved. This facilitates easier data exchange and relationship building [35](#page=35). * **Indirect long channel:** Includes a wholesaler in addition to a retailer [35](#page=35). Each intermediary adds value and expects a profit margin, impacting the difference between the producer's selling price and the retail price [34](#page=34). ##### 6.1.3.2 Distribution partners The selection of distribution partners depends on the product and market stage [35](#page=35). * **Innovative products:** Start with a limited number of outlets and exclusive distribution to build curiosity and allow sales staff to familiarize themselves with the product [35](#page=35). * **Mature markets:** Transition to intensive distribution [35](#page=35). * **Declining markets:** Selective distribution is used to lower distribution costs [35](#page=35). ##### 6.1.3.3 Reversed channels These channels handle the return, repair, or recycling of sold products [35](#page=35). #### 6.1.4 Promotion Promotion encompasses marketing communication efforts [35](#page=35). ##### 6.1.4.1 Communication targets * **Push strategy:** Communication is directed towards intermediaries (retailers, wholesalers) [35](#page=35). * **Pull strategy:** Communication primarily targets end consumers to create demand that compels distributors to stock the product. An example is Intel stickers on laptops [35](#page=35) [36](#page=36). ##### 6.1.4.2 Communication content based on product type The message content should align with the type of goods being marketed: * **Low involvement goods (e.g., soda drinks):** Marketers first aim to impact cognitions, then trigger purchase, and finally couple emotional experiences with consumption [36](#page=36). * **High involvement goods (e.g., cars):** Marketers focus on opinions, then emotions, and finally product-related behaviors like visiting a dealership [36](#page=36). * **Highly experiential goods (e.g., theme parks):** Marketers prioritize emotion, followed by emotion again, and conclude with cognitions of the behavior [36](#page=36). Marketers must align communication efforts with the consumer response model relevant to the product type [36](#page=36). ### 6.2 Implementation Implementation involves creating an action plan to put marketing mix decisions into practice [37](#page=37). * **Schedules:** Time-defined plans for completing tasks and activities, helping to coordinate implementation, avoid conflicts, and measure progress. They list main tasks, assign start/end dates, and identify responsible individuals [37](#page=37). * **Milestones:** Key moments in the plan's implementation, such as product development, launch, or campaign execution [37](#page=37). * **Work plan:** Often requires a Gantt chart for detailed project management [37](#page=37). ### 6.3 Evaluation Evaluation is the final step in developing a marketing plan, aiming to verify if goals have been met [37](#page=37). * **Interim evaluation:** Should be planned to allow for timely adjustments if goals are not being met, rather than waiting until the end of the plan's duration [37](#page=37). #### 6.3.1 Metrics Metrics are numerical measures of performance-related activities and outcomes used to track progress towards objectives. They can be identical to goals or more specific, concrete versions, and can indicate how performance should evolve over time [38](#page=38). #### 6.3.2 Return on investment in marketing (ROMI) ROMI measures the profitability of marketing activities. The formula is: $$ \text{ROMI} = \frac{\text{Net profit attributed to marketing activity (euros)} - \text{Marketing investments (euros)}}{\text{Marketing investments (euros)}} $$ It refers to the additional revenues generated by marketing investments. For example, a direct mail campaign costing 100,000 euros with an incremental revenue of 500,000 euros and a 60% net profit margin would yield a ROMI of 2, meaning every euro invested generates an additional two euros in profit [38](#page=38). ROMI is gaining traction, particularly with direct and internet marketing due to their ability to clearly link efforts and results. However, calculating ROMI becomes more problematic for marketing activities with less direct attribution, such as television commercials [38](#page=38). #### 6.3.3 Return on marketing objective (ROMO) Marketing campaigns may have objectives beyond direct sales or profit, such as changing brand perception. ROMO acknowledges these broader marketing goals where the return is not immediately financial [38](#page=38). > **Tip:** While ROMI is increasingly important, it's crucial to remember that marketing objectives can be diverse and may not always translate directly into immediate financial returns. ROMO provides a framework for evaluating objectives that go beyond profit. > **Conclusion:** ROMI is rapidly gaining prominence in marketing, yet it can be challenging to align with the wide array of objectives that marketing seeks to achieve [38](#page=38). --- ## Common mistakes to avoid - Review all topics thoroughly before exams - Pay attention to formulas and key definitions - Practice with examples provided in each section - Don't memorize without understanding the underlying concepts

| Term | Definition | |------|------------| | Customer Value | The difference between the total benefits a customer perceives to receive and the total costs (money, time, effort) involved in obtaining those benefits. | | Commoditization | A situation where customers perceive little to no difference between products or services offered by different providers, leading them to choose solely based on price. | | Selling Orientation | A business approach that primarily focuses on pushing products onto customers through sales efforts, often with a short-term perspective and an inward-looking view of the company's capabilities. | | Marketing Orientation | A business approach that emphasizes understanding and meeting customer needs and wants, adopting an external-looking perspective to create value for the customer. | | Marketing Myopia | A short-sighted approach to marketing where a company focuses too narrowly on its existing products or services without considering the underlying customer needs they fulfill, potentially missing market shifts. | | Marketing Strategy | A business's overall plan for interacting with the market to achieve its marketing objectives, taking into account limited resources and encompassing a clear set of consistent choices that fit the environment. | | Strategic Marketing Plan | An internal company document that details the market situation and outlines marketing strategies and programs to support business and organizational goals over a specified period. | | Problem Analysis | The process of identifying and understanding strategic marketing problems, which can be planned or incident-based, distinguishing between symptoms and the actual problem, and analyzing at the appropriate level of abstraction. | | Negatively Oriented Problem | A situation where there is a gap between the current state and a required future state, indicating that a change is necessary, such as declining sales. | | Positively Oriented Problem | A situation where there is a gap between the current and a desired future state, but the current situation is not inherently problematic; it reflects a desire to improve or achieve more. | | Commoditization (in problem analysis) | The state where customers can no longer distinguish between different offerings, leading them to opt for the cheapest option, often driven by new ways of accessing information or similar product features. | | Financial Objectives | Targets related to achieving financial results through marketing strategies, such as sales volumes, market shares, profitability, and break-even targets. | | Marketing Objectives | Targets for achievements in marketing relationships and activities that support financial objectives, focusing on customer relationships or internal activities like new product launches. | | Societal Objectives | Targets related to social responsibility, such as environmental friendliness or charitable donations, which indirectly influence marketing and financial achievements. | | SMART Goals | Goals that are Specific, Measurable, Attainable, Realistic, and have a Time frame for completion, ensuring clarity and trackability. | | Macro-Level Analysis | An analysis of the broader environmental factors influencing a business, including demographic, economic, socio-cultural, technological, ecological, and political aspects (often using the DESTEP framework). | | Meso-Level Analysis | An analysis focused on the industry and competitive landscape, often involving frameworks like Porter's Five Forces to understand market dynamics and competitive pressures. | | DESTEP Analysis | A framework for macro-environmental analysis that examines Demographic, Economic, Socio-cultural, Technological, Ecological, and Political factors to identify trends and potential opportunities or threats. | | Resource-Based View (RBV) | A strategic management perspective that suggests a firm's competitive advantage stems from its unique bundle of resources and competencies, which are difficult for competitors to imitate. | | VRIO Framework | A tool for analyzing firm resources to identify competitive advantage. It assesses if a resource is Valuable, Rare, Inimitable, and Organized to be leveraged by the company. | | Competitive Parity | A situation where a resource or offering is common in the market, representing a minimum standard rather than a source of competitive advantage. | | Temporary Competitive Advantage | A competitive advantage that arises from a valuable and unique resource, but it is expected that competitors will eventually replicate it. | | Sustained Competitive Advantage | A long-term competitive advantage that stems from a valuable, rare, inimitable, and effectively organized resource or capability, representing a core strength. | | BCG Matrix (Growth-Share Matrix) | A portfolio analysis tool that categorizes business units or products based on their market growth rate and relative market share, classifying them as Stars, Cash Cows, Question Marks, or Dogs. | | Relative Market Share | A company's market share compared to its largest competitor, used in the BCG matrix to indicate its competitive position within an industry. | | Market Growth Rate | The percentage change in market size over a period, used in the BCG matrix to assess the attractiveness of a market. | | Brand Portfolio Model (Riezebos) | A model for analyzing brand portfolios, identifying key brand roles such as Bastion, Flanker, Prestige, and Fighter brands, designed to protect and enhance the company's overall market position. | | Bastion Brand | The core brand of a company, representing its main market position and values, and carrying the most strategic importance. | | Flanker Brand | A supporting brand launched to target specific segments or price points, aiming to capture customers and protect the bastion brand by covering market gaps. | | Prestige Brand | A high-end brand positioned above the bastion brand to enhance the company's image and attract premium consumers. | | Fighter Brand | A low-cost brand introduced to compete with discount or aggressive competitors without damaging the image of the company's main brand. | | SWOT Matrix | A strategic planning tool that assesses a company's internal Strengths and Weaknesses, and external Opportunities and Threats. | | Confrontation Matrix | A tool used to match internal strengths and weaknesses with external opportunities and threats, helping to formulate strategic issues and guide strategic decisions. | | SFA Matrix (Suitability, Feasibility, Acceptability) | A framework used to evaluate and select strategic options by assessing their suitability in relation to the SWOT analysis, feasibility of implementation, and acceptability to stakeholders. | | Suitability (SFA) | The extent to which a strategic option aligns with the SWOT analysis and addresses the identified strategic issues. | | Feasibility (SFA) | The ease and practicality of implementing a strategic option, considering the resources, capabilities, and time required. | | Acceptability (SFA) | The extent to which stakeholders, such as customers, investors, and employees, will accept and support a proposed strategic option. | | Segmentation | The process of dividing a broad consumer or business market into subgroups of consumers based on shared characteristics, behaviors, needs, or wants. | | Targeting | The process of selecting specific market segments to focus marketing efforts on, based on their attractiveness and the company's ability to serve them. | | Positioning | The process of creating a distinct image and identity for a product, service, or brand in the minds of the target consumers, differentiating it from competitors. | | Undifferentiated Marketing | A market coverage strategy where a company targets the entire market with a single marketing mix, essentially practicing mass marketing. | | Differentiated Marketing | A market coverage strategy where a company targets several market segments and designs separate marketing mixes for each. | | Concentrated Marketing (Niche Marketing) | A market coverage strategy where a company focuses its marketing efforts on one or a few specific market segments or niches. | | Individual Marketing (Mass Customization) | The most specific market coverage strategy, where a company tailors its marketing mix to the needs and wants of an individual consumer. | | Persona | A fictitious yet realistic profile representing how specific customers in targeted segments would typically behave in a marketing situation, used to gain insights. | | Positioning Diagram | A visual representation, often a perceptual map, used to illustrate how a brand or product is perceived by consumers relative to competitors based on key attributes or benefits. | | Points of Parity (PoP) | Features or benefits that are common among competing brands within a product category; they are necessary to be considered a viable option in the market. | | Points of Difference (PoD) | Features or benefits that uniquely distinguish a brand or product from its competitors and are valued by the target market. | | Unique Selling Proposition (USP) | A concise and compelling statement that highlights a unique benefit or attribute of a product or service that differentiates it from the competition and persuades customers to buy. | | Marketing Mix (4 Ps) | The set of controllable, tactical marketing tools that a firm uses to produce the response it wants in the target market: Product, Price, Place, and Promotion. | | Feature Bloating | The addition of excessive features to a product that are not desired by the target segment, leading to confusion, increased costs, and a disadvantage. | | Quality (of a product) | The extent to which a product's performance meets or exceeds consumer expectations; it is a user-based assessment. | | Packaging and Labeling | Elements of a product that enhance its appeal, convey information, protect the product, and contribute to brand image and consumer attention. | | Branding | The process of creating a unique name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers, adding rational or emotional value. | | Price Skimming Strategy | A pricing strategy where a new product is launched at a high price to recoup development costs and create a perception of high quality, with the price gradually reduced over time. | | Penetration Strategy | A pricing strategy where a product is introduced at a low price to rapidly gain market share, with prices potentially increased later once a strong market position is established. | | Place (Distribution) | Refers to all activities associated with making the product available to target consumers, including distribution channels, intermediaries, and logistics. | | Push Strategy | A promotion strategy where a producer directs its marketing efforts and offers incentives to intermediaries (wholesalers and retailers) to stock and promote the product. | | Pull Strategy | A promotion strategy where a producer directs its marketing efforts primarily towards end consumers to create demand, thereby "pulling" the product through the distribution channels. | | Low Involvement Goods | Products that are inexpensive, frequently purchased, and pose little risk to the consumer, requiring less extensive decision-making. | | High Involvement Goods | Products that are expensive, infrequently purchased, and carry a high degree of risk for the consumer, requiring extensive decision-making. | | Implementation Plan | A detailed plan outlining how marketing strategies and tactics will be put into practice, including schedules, milestones, and responsibilities. | | Gantt Chart | A type of bar chart that illustrates a project schedule, showing the start and finish dates of the terminal elements and summary elements of a project. | | Evaluation | The final step in the marketing planning process, involving the assessment of whether marketing goals have been met and making necessary adjustments to the plan. | | Metrics | Numerical measures of specific performance-related activities and outcomes used to track progress towards objectives and goals. | | Return on Marketing Investment (ROMI) | A financial metric that measures the profitability of marketing activities by comparing the net profit attributed to marketing to the marketing investment. | | Return on Marketing Objective (ROMO) | A metric that assesses the success of marketing campaigns in achieving objectives beyond immediate sales or profit, such as changing brand perception. |