Presentation on theme: "WHY A STRATEGY? n We can’t predict the future, we have to build it and take decisions in the present as part of a coherent long-term plan."— Presentation transcript:
WHY A STRATEGY? n We can’t predict the future, we have to build it and take decisions in the present as part of a coherent long-term plan.
n Taking a decision in an uncertain environment n A lucid view of the future (external assessment) n A lucid view of the company’s capabilities (internal assessment) The principles of strategic thinking:
THE WAY IN WHICH THE COMPANY INVESTS ITS RESOURCES TO CHANGE A COMPETITIVE SITUATION TO ITS ADVANTAGE OR STABILIZE IT, TAKING INTO ACCOUNT THE CHANGES IN ITS ENVIRONMENT. THE WAY IN WHICH THE COMPANY INVESTS ITS RESOURCES TO CHANGE A COMPETITIVE SITUATION TO ITS ADVANTAGE OR STABILIZE IT, TAKING INTO ACCOUNT THE CHANGES IN ITS ENVIRONMENT. DO NOT CONFUSE WITH THE CONCEPT OF OBJECTIVES. THE NOTION OF STRATEGY:
Internal assessment n A questioning about the company’s capabilities and future development n An evaluation of the strengths and weaknesses n Strength: an expertise that will enable the company to secure its position in the market n Weakness: a key success factor that the company does not fully master
THE STAGES IN STRATEGIC DECISION-MAKING STRENGTHS CONSTRAINTS OPPORTUNITIES THREATS ENVIRONMENT COMPANY Does the company have the means to exploit this opportunity? Is there a market opportunity? MARKETING STRATEGY Marketing objective Target Positioning Marketing mix
Overall objectives Financial or non-financial Financial objectives Production objectives HRM objectives Marketing objectives n Are based on the company’s overall objectives n Concern the target markets for which the company is seeking to change reactions.
Marketing objectives Distribution objectives: presence in retail outlets, sales force Communication objectives: image recall They may also be set out in accordance with different policies (communication, sales force, distribution
n Increased purchases by current customers n Maintain market share n Increase in the number of product tests n Obtain a better re-purchase rate
Grow by 15 % in segment A within 2 years, 13 to 15 % market share in 1 year... To be operational, they must be: n expressed in measurable terms n accompanied by deadlines n evaluated in a realistic, stimulating manner n prioritized and consistent with each other
The concept of “target” Understanding the concept Know-how: choosing the target
Segmentation is an observation The target is the first major decision in the marketing strategy
THE CONCEPT OF TARGET n MARKET SEGMENT (S) AT WHICH THE PRODUCT IS AIMED
A B C focused marketing differentiated marketing undifferentiated marketing
The focused targeting strategy n Propose a single offer to a single segment: –Porsche for sports cars n A distinctive expertise based on specialization n Limitations linked to dependence on a single market segment
The differentiated targeting strategy n Propose different offers to different segments n Greater independence with regard to the ups and downs of the market n A more expensive strategy
Th undifferentiated targeting strategy n Propose a single offer and ignore segmentation –Guérande salt n The least expensive strategy n The riskiest strategy: –risk of trivializing the product –the offer must be highly attractive, e.g. as a result of an innovation that modifies traditional segmentation smart
Choosing the targeting strategy: n the segment’s potential n consistent with the company’s capabilities
Once you have chosen the target Differentiate the offer
The concept of positioning Understanding the concept Know-how: define a positioning in the marketing strategy
n In a context of market congestion, the consumer finds it less easy to distinguish between products or brands. n Positioning is used to fight against this trivialization. Why define a positioning?
DEFINITION: Promoting a product vis-à-vis competitors’ products in the consumer’s mind through the expression of differences that are objective or imaginary desired by the market e.g. a technical feature e.g. brand image
The conditions for good positioning: the reference triangle for positioning Product features: a coherent differentiation Competitive brand positioning: an exclusive differentiation Market expectations: a differentiation that is decisive for the consumer.
n Buy two identical Michelin tyres at the same time and gain access to Michelin OnWay, three innovative services for coping with mishaps on the road in Europe n Tyre Assistance n Tyre Damage Warranty n SOS Direction
Product features: The quality image of the brand, A structure set up specially Competitive brand positioning: The only brand to offer this service Market expectations: safety and rapid repair service: undeniable expectations on the part of motorists.
The conditions for good positioning; the differentiation must also be: n Communicable n Defendable n Accessible for the consumer n Profitable for the company
Points for positioning n Via the product –Certain product features Enriched with omegas3 –Solutions to a problem Palmolive for sensitive skin –Opportunities for use Washing powder for black clothing –User categories Jacques Dessange anti-ageing –By creating a new category “The morning health treatment” –…–…
n Via the service –Practicality Change your contract with Bouygues Télécom –Delivery “La Redoute 48-hr delivery” –Installation –Advice –After-sales service –Employees in contact with the customers…
Positioning strategies very poorvery good not prominentDo not act Reinforce the decisive nature of the characteristic prominent Improve the evaluation of the product on the characteristic Maintain the positioning Evaluating the product on its characteristics Importance of the characteristic
The required positioning n The positioning required by the company is conveyed by the choices made on the mix, which aim to express the distinctive features that the company wishes to see consumers attribute to the product.
Perceived positioning: n The positioning perceived by the consumer matches the characteristics that the consumer attributes to the product
Differentiation criterion A Differentiation criterion B brand A brand C brand B brand D
Positioning analysis tools n Perceptual analysis: this pinpoints those attributes that are decisive in the consumer’s mind and his perception of the different offers on the market n Perceptual maps: these are used to pinpoint brands that are perceived in a similar way –pinpoint brands whose positioning is isolated –show variances between required and perceived positioning
Dream The others Nous deux Intimité Femme actuelle Avantages Prima Modes and travaux Marie Claire Elle Madame Figaro Marie France The example of the perception of women’s magazines Me Reality Seduction Practical Escape
brand A brand C brand B brand D segment4 segment3 segment2
Once you have defined the positioning, Express it through the product, the price, distribution and communication
THE MARKETING MIX n A set of variables on which the company can act to implement its strategy. A combination of four policies, which, together, form the global offer to the customer: –the product policy, –the price policy, –the distribution policy, –the communication policy. Guiding principle: positioning
MANAGING THE MARKETING MIX: 3 principles n The Coherence rule, n Budget distribution, n Choosing the driving component: –Skimming strategy or penetration?
PULL STRATEGY n Attract the consumer towards the product n Communication: the driving component in the mix n Importance of the brand in the buying criteria
PUSH STRATEGY n Push the product towards the consumer n Distribution: the driving component in the mix n Importance of retail outlet advice in the buying criteria
The conditions for the success of a strategy n Is the envisaged strategy coherent? n Is the strategy compatible with the company’s resources. n Is the strategy a winning one? n Is the strategy not too risky? n Will the strategy be profitable?
THE NOTION OF PRODUCT n Here, it is the consumer’s perception that defines the product n The solution chosen by the company with a view to satisfying a previously detected need in a market
l Product and /or service – which frontier? product service
tangible product global product generic product The three levels of a product satisfaction felt by the consumer services before, during and after the sale functional characteristics
THE CONCEPT OF LIFE CYCLE n A product has a limited life n Its sales go through different evolutionary phases n Its level of profit varies according to each stage in the cycle n The way in which the mix policies are managed differs at each stage.
The life cycle time sales launch growth maturity decline
n It is not a predictive model n The definition of the phases is subjective n In practice we see some very different life cycles THE LIMITATIONS OF THE MODEL
IMMORTAL PRODUCT Long learning process SUCCESSIVE RELAUNCHES Gimmick product Other life cycle curves
The value of the model n It attracts the attention to the limited life span of the product n It helps us to analyze the life cycle of the product compared to that of the market, brand, etc.
Managing the marketing mix during the life cycle. n LAUNCH PHASE LANCEMENT: –product: no major modifications –price: decision to be taken: skimming or penetration –distribution: placing the product –communication: objective: publicize the product, high budget
n GROWTH PHASE: –product: no change in general –price: no change in general –distribution: broaden the circuits –communication: keep up the effort
n MATURITY PHASE : –product: minor modifications (adjustments compared to competitors), range extension –price: response to the competition –distribution: slow the arrival of competitor products –communication: keep up the image
n DECLINE PHASE: –product: no expensive modifications –price: occasional special offers or frequent price reductions –distribution: abandon certain retail outlets –communication: any promotional actions
Managing the product portfolio n The B.C.G. model n vertical axis: market growth rate n horizontal axis: relative market share
What is a brand? n the distinctive sign of a product n much more than that: a vehicle for the emotional components in the relationship with the consumer n takes a very long time to build, quickly destroyed
The brand’s functions n Product location n Guarantee n Personalization n Fun aspect
Managing a brand portfolio: 4 possible strategies n Own a global brand n Sell several products under the same brand: umbrella brand n Be established in several segments with different brands : product brand n Propose a varied offer by covering the same target with a broad assortment and a single brand: range brand
Brands in danger? n Two threats: –consumer trends –company errors
Changes in consumer practices n the role of the distributors: – the increasing interest in own n Consumer behaviour –the role of price –product information: a consumer who buys like a professional
Company errors n brand overkill n widespread use of umbrella brands n over-exploitation of a brand’s potential
What’s the future for brands? n Established brands –legendary –Significant –cultural exceptions n Condemned brands –followers –opportunists –bulimics
What is a new product? n A new brand on a market, n A range extension, n A product improvement, n A less expensive product, n Repositioning, n An entirely new product
n Market fragmentation, lower profits, n Complexity of regulations, n Production cost, n Shorter life cycles Having a good idea... Increasingly difficult
SOURCES OF IDEAS: n Internal: –sales force, R&D, creativity groups n External: –customers, distributors.
STAGES IN THE LAUNCH PROCESS n CONCEPT TEST n FINANCIAL ANALYSIS n PRODUCT FABRICATION
THE CONCEPT TEST: n A description of the idea from the point of view of the benefits that the consumer will gain from it, n Objectives: –evaluate the obstacles and incentives, –Define the competitive environment
FINANCIAL ANALYSIS n Sales estimates n Cost estimates: –Raw materials, labour, etc. –Development costs: R&D, studies... –Allocated overheads –Marketing expenditure n Estimate of the product’s gross contribution n Evaluation of the rate of return on investment
THE PROCESS OF ADOPTION BY THE CONSUMER n The time taken to adopt the product depends on the product’s characteristics: –relative advantage of innovation, –compatibility with the individual’s experience –communicability
The differences in behaviour in adopting innovation time 2.5% 16%34% 13.5% Early receptives Early majority Late majority Latecomers The pioneers Reflection Scepticism Tradition Risk
PRICE: A SPECIFIC VARIABLE n The only variable in the mix in which external/internal coherence is expressed n A monetary expression of value –Greater value in exchange for an expected satisfaction n Notion of perceived value: –in cash –in time –in effort …
The traditional approach to price- fixing INTERNAL ASPECTS EXTERNAL ASPECTS Acceptability in the market Competition Regulations Marketing objective Positioning Cost analysis PRICE
Determining the psychological price n We have to ask two questions –What is the price beyond which the consumer would not buy the product because he finds it too expensive? –What is the price below which the consumer would not buy the product because he finds it of insufficient quality?
Analyzing the answers n the percentage of non - buyers –the people who indicate a maximum price are –non-buyers at higher prices n the percentage of buyers with regard to the maximum price –the person who announces a minimum price considers that the quality is insufficient for all the other higher prices n the percentage of buyers –the people who are above the minimum limit and for whom the maximum price is not reached
Taking the results into account n We obtain a demand curve n The psychological price is the one that maximizes the number of buyers n The chosen price is not necessarily the psychological price
The two price policies Sales volume Unit margin Skimming policy Penetration policy
PENETRATION POLICY Choose a low price to make your mark across a large part of the market from the outset Choose a low price to make your mark across a large part of the market from the outset As long as there is: elastic demand at the price, high-end market already satisfied, strong competition, Intensive distribution
SKIMMING POLICY: Sell at a high price, focusing on a group of buyers prepared to pay that price As long as: the life cycle is quite short, the product can be imitated quickly, a low price would not be very profitable, demand is inelastic
Buyer reactions to price changes n Possible perceptions of a price reduction –the product is selling badly –the product is about to be replaced –the quality has fallen –the price will fall even further, it’s better to wait n Possible perceptions of a price increase –heavy demand and the risk of a stock shortage –Risk of an increase at a later date –the price is fixed at the maximum tolerated by the market
Competitor reactions to price changes n Problem of anticipating the competitor’s reactions –Statistical analysis of his previous reactions –Analysis of his strategy
The company’s reactions to competitor price changes n Maintain our price –and do nothing –counter-attack in other areas n Reduce our price n Increase and counter-attack on the product
Price: variable number 1 in the mix? n A choice criterion for the consumer against a background of ferocious competition n A challenge to the traditional price-fixing model
The new price paradox quality price Value-added offer Stripped-down offer
New price-fixing methods n The value price approach n The target price approach n The target cost approach n Limitations: the “reduction in cost/human resources management” equation
The Every Day Low Price n Objective: to put an end to the promotional overkill by offering low, stable prices n How? Through a better reorganization of all the company’s processes
The New Deal offer n Create new market conditions by differentiating the product differently n Innovate!!! n Differentiate through a combination of quality /price/ innovation.
The distribution functions n From the production site to the consumer location: n transport n making up an assortment n storage n consideration of the commercialization risk n pre- and after-sales services
DESIGNING A DISTRIBUTION CIRCUIT n CHANNEL: a set of agents who intervene between the production site and the place where the product is consumed; –there are several types of channels n CIRCUIT: a set of channels chosen by a company to distribute its product
PROBLEM: n WHAT FUNCTION(S) SHOULD THE PRODUCER DELEGATE?
WARNING!! n the removal of an intermediary from the channel does not mean that the function is removed n the final price does not necessarily depend on the number of people involved in the channel
GENERALLY SPEAKING: SCREEN WITH THE MARKET COST: Short circuit Long circuit
THE CRITERIA FOR CHOOSING A CHANNEL: n The target market n The product n The company
Market criteria n buying behaviour, n customer spread, n order frequency.
Product criteria n need for advice in the retail outlet n life cycle phase n type of purchase: day-to- day consumption or not
TYPES OF PURCHASES AND TYPES OF CIRCUITS: Day-to-day purchase: Considered purchase : Speciality purchase: Intensive distribution Selective distribution Exclusive distribution
Company criteria n financial resources, n previously established in the channel, n ability to negotiate with the different people involved in the channel
THE PREDOMINANCE OF THE RETAILER n anonymous, unbranded product n local market n traditional distribution structures n retailer in control of his supplies
THE TRIUMPH OF THE PRODUCER n development of producer brands n development of pull-type strategies
The distributors’ reaction n development of central purchasing consortiums n existence of a listing right n appearance of distributor brands n need for “distributor marketing”
Managing the power struggle: the manufacturers’ advantages n the intense competitive pressure between the distributors –the development of hard discount –the need for greater differentiation between the distribution chains n The essential role of a significant brand
The distributor’s expectations: Sales growth Optimized brand policy Reduction in stock Reduction in costs Benefits of partnership