Marketing Management 2 Course Wrap-Up: Making Good Strategic Marketing Decisions The end of your reign over a multi-million dollar Markstrat firm
2 Session #16: Agenda for MM2– MARKETING STRATEGY Tips for Writing a Good Exam Quick & Dirty Course Overview Markstrat Overview (Part I) Finale Course Evaluations
3 My own ‘Game Plan’ for Responding to Case Exams First skim case and carefully read the questions Then read case carefully marking parts relevant to answers Then for each question Go over case selectively taking notes about answers Write answer Before answering questions out-of-order, make sure there are no significant interdependencies
4 Suggestions for Doing Well in Exams: An Exam Taker’s Perspective If exam seems difficult do not panic; you are (most likely.. ) in good company Assumptions Feel free to make reasonable assumptions. BUT not assumptions that completely trivialize the question. Do not assume that you are necessarily ‘not getting it’ if you cannot find data you feel is needed. Bullet-form presentation tends to be more effective (on average).
5 Suggestions for Doing Well in Exams: A Grader’s Perspective Be considerate of grader (e.g., legible handwriting & order matter; being eloquent generally doesn’t) Be sure to explain your reasoning No need to repeat what you said elsewhere, but important to direct grader to what & where the point was previously made
6 Suggestions for Doing Well in Exams: A Grader’s Perspective (cont.) Answers are generally not compensatory Plan your time carefully Collect points Try to write ‘something reasonable’ about every part of each question, if only how you’d answer it if you had time When it doubt, do add (sometimes even multiple options)
10 Key Lessons from Course (cont.) But to truly succeed you must also Focus, especially if resources limited (e.g., Zantac, successful Markstrat firms) Implement effectively (e.g., Optical Distortion, Zantac, Markstrat) Have contingency plans (e.g., BMW, Zantac, successful Markstrat firms) Shape consumer preferences (e.g., reason-based choice, loss aversion, manage customer perceptions ideas; BMW, Zantac, Vodites) KEY SLIDE If all else fails:
11 Key Lessons from Case Studies Sealed Air : External focus & fit is critical Critical to consider state & expected changes in: Customer needs; Competition; Environment. Internal policy very important, but cannot ignore external realities American Airlines : Competitive Dynamics Difficult to predict competitive reactions Critical to assess motivations of all significant competitors Competitive analysis must consider outcome sequences Price competition– very difficult to “win”
12 Key Lessons from Case Studies (cont.) BMW : Changing “Rules of the Game” Beware of ‘holes in the market’ Examine & challenge “rules of the game” Most competitive advantages will not last Optical Distortion: Successfully introducing really new products is very difficult and most likely to fail (for variety of reasons) Simple ‘implementation’ problems can kill an otherwise good product Anticipate & confront consumer objections to product adoption Various types of risks
13 Key Lessons from Case Studies Zantac : Attacking & Defending Market Leadership Minor advantage can ‘win game,’ with good marketing (positioning & 4P’s) Price: understand customer perception (e.g., quality) & economic incentives (e.g., who pays, price sensitivity) Sales force: strong effort Advertising: focused & clear messages Attacking a Market Leader (despite disadvantages e.g., size, resources) Focus Consider strategic partnerships First, attack under-defended markets & competitors’ “blind spots” Anticipate reactions (understand motives, past behavior), have contingency plans Defending Market Leadership Seek gaps (between offerings & customer needs), close them first (before competitors) Develop new segments; have high levels of marketing investments
14 Major (Crude) Marketing Strategy Ideas to Consider Sustainability of Competitive Advantages : You can create & re- define markets, but so can competitors + customer preferences evolve over time anyway specific competitive advantages will not last Planning: Strategic thinking cannot be done one step at the time Resource Allocation Rule: What matters is the marginal, not the average effect of marketing spending. Performance Diagnostics Rule: Don’t focus solely on performance (e.g., sales) to analyze a firm’s position. Understand what drives results (AIDA). Determinant vs. Important Attributes: An important attribute is determinant only if it differentiates among products. Price ( /smearing) War: Rarely does anyone win; beware not to start one by mistake.
15 Assessing & Shaping Customer Preferences Assessing Customer Perceptions & Preferences MDS : When customer perceptions are shaped by aggregate factors that cannot be articulated or evaluated easily Conjoint Analysis : Customers may be unable or unwilling to indicate their preferences for some attributes Semantic Scales : when customers think in terms of a few well-defined attributes Overall : All methods give excellent data, when employed effectively Other Methods : Many useful methods available (qualitative) Tools for Strategic Shaping of Customer Preferences Reason-Based Choices (e.g.: Attraction Effect, Meaningless Differentiation) Loss Aversion & Framing (e.g.: Endowment Effect, Status Quo Bias, pioneering advantage) Perception Management (e.g., fill ‘empty’ time, deflate expectations)
16 Diagnose & Address Sales Problem/ Success: A Hierarchy of Effects (/ AIDA) Viewpoint EffectMeasureMain ForcesInformationYour Decision Do customers know about us? Awarenessadvertising, forgetting, share-of-voice advertising experiment, comp. ad spending advertising Do customers want to buy us? Purchase intentions customer perceptions, product features, advertising, competition MDS, semantic scales, conjoint analysis targeting, positioning, product, price, ad message Can customers buy us? Distribution coverage sales force, ‘feet-on-the- street’,product, price, ads sales force experiment, comp. sales forces, MDS sales force (size, allocation), product, price, advertising Do retailers get enough products? stock outsmaturity of segment, product attractiveness market forecasts, MDS An effective “higher” step increases your potential at “lower” steps If ANY step is bad, effectiveness of all “lower” steps decreases To allocate resources effectively, you must understand marginal effects of increased/ decreased spending
17 Attributes of Innovations that Improve/Detract from their Chances of Adoption by Consumers The Relative advantage of the innovation over the products/procedures it is designed to supersede. Its perceived complexity. Its compatibility in use with present behavior patterns and complementary products. The ease with which its features (especially its benefits) can be observed and communicated. The degree of risk (physical, financial and social) attached to adoption of the innovation in preference to existing products or procedures. The extent to which the innovation can be tried on a limited basis before being adopted on a large scale, permanent basis.
19 What Tends to Surprise Students How small factors become critical as competition drives firms to new heights Why? Informed customers choose the product that best suits their needs How hard it is to build a sustainable competitive advantage Why? In the absence of unique capabilities temporary advantages are competed away Difficulties in assessing the right figures (e.g., market potential) Why? One must search for patterns, discount for sampling error; then forecast with a blend of data, models & judgments; AND– not expect perfect accuracy
20 Common Significant Pitfalls Heavy anchoring on present in planning desired future Spreading resources too thinly Lack of consistent direction, being reactive, slow to change, insufficient contingency plans Not anticipating competitive moves
21 Advertising/Sales Force for Sonite Brands Example: Artemis Industry
22 Spreading Resources Too Thinly: Cupid’s Marketing Spending per Sonite Brand
23 Insufficient Preparation of Contingency Plans
24 Why: Information Gathering Over-confidence Markstrat: how can you improve SIGH? It has a 66% share. SmithKline: how can you improve Tagamet? Defining customer perceptions from your own perspective Markstrat: more-power/ lower-price is better. SmithKline: Tagamet’s side effects are a non-issue Focusing on available & easily process-able information Markstrat: conjoint & semantic vs. MDS or combination BMW: using preferences of European (German) consumer to predict behavior of American consumers
26 Why: Analysis and Conclusions Strategic thinking is not forward looking enough Usually only one move in advance (if at all) Markstrat: must look at least 2 to 3 periods ahead BMW: not anticipating an end of the conspicuous consumption era Bad predictions about future change Markstrat: not paying attention to market evolution; not considering competitors’ motivations, abilities & competitiveness; wishful thinking American Airlines: did not anticipate uncooperative ‘players’ Smithkline: did not anticipate Glaxo strength / success
27 Why: Feedback and Learning Experience is inevitable; learning is not No detailed record of assumptions and expectations Adjust predictions after seeing results (hindsight bias) Attribution of success and failure (fundamental attribution bias)
28 Marketing Beyond P2 This is a core class; many topics are covered in greater depth elsewhere electives Consumer Behavior Marketing Research Industrial Marketing Strategy (InduStrat) CRM, e-marketing, Retailing, Communications, Branding, Healthcare Marketing… Future core courses Independent study PhD Program was