Identify the competitors to CNN and organize them in terms of their intensity of competition. 2. Pick any company or brand/business on which to focus. What business is it in? Who are i

1 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1

Chapter 1

Strategic Market Management—An Introduction and Overview

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Plans are nothing, planning is everything. Dwight D. Eisenhower

Even if you are on the right track, you'll get run over if you just sit there Will Rodgers

If you don't know where you're going, you might end up somewhere else Casey Stengel

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Marketing supply chain management is the process of minimizing risks and maximizing efficiency in creating, producing, and distributing marketing materials.

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Dynamic Markets • All markets are dynamic.

• Multiple forces feed these changes, including digital technologies, the rise of China and India, trends in healthy living, energy crises, political instability, and more.

• The result is markets that are not only dynamic but risky, complex, and cluttered.

• Such convoluted markets make strategy creation and implementation far more challenging.

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Dynamic Markets • How do you develop successful strategies in dynamic markets?

• How do you stay ahead of the competition?

• How do you stay relevant to the customer?

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The 4 dimensions that define an effective business strategy

1. product-market investment decision – where to compete 2. customer value proposition – the difference between the

benefits customers perceive they are getting from an offering minus the perceived cost of obtaining these benefits

3. assets and competencies 4. functional strategies and programs.

7 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

WHERE TO COMPETE • Which sectors should receive investments in resources and management

attention?

• Which should have resources withdrawn or withheld?

• Sometimes the most important business scope decision is what products or segments to avoid to conserve resources needed to compete successfully elsewhere.

• More important than the scope is the scope dynamics.

− What product markets will be entered or exited?

8 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Product-Market Investment Decision • Invest to grow (or enter the product market)

• Invest only to maintain the existing position

• Milk the business by minimizing investment

• Recover as many of the assets as possible by liquidating or divesting the business

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CUSTOMER VALUE

3 BIG BASIC QUESTIONS OF MARKETING

1. Who are my customers?

2. What do my customers value? (Doesn’t mean bargain)

3. How can I give what they want better than my competition?

10 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

CUSTOMER VALUE • A strategy that fails to create customer value has no future.

• Value must resonate with a segment of customers and offer more benefits and/or lower costs than competitors.

• Creating value for customers and ensuring long-term profits are central tasks in strategy.

11 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

CUSTOMER VALUE • Value (nice definition) – a customer’s estimation of the worth of a product

based on a comparison of its costs and benefits, including quality, relative to other products.

Customer value = perceived benefits – perceived costs (taking risk into account)

4 TYPES OF VALUE 1. Functional – purpose

2. Monetary – price relative to the function

3. Social – status or connection

4. Psychological – expression

12 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

1. Functional – determined by the product itself, whether it meets the customer’s needs and wants, and the usefulness of the products

2. Monetary – the value of a product or service measured in terms of money, supply, and demand.

3. Social – the relative importance that people place on changes to their wellbeing.

4. Psychological – The extent to which a product allows consumers to express themselves or feel better.

13 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

CUSTOMER VALUE • Customers’ perceived cost dimensions…

− Price paid is the most straightforward cost.

− Acquisition costs (comprised of searching, ordering, processing, receiving, and installing costs)

− Operating costs (notably energy consumption)

− Maintenance

− Disposal

14 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Assets and Competencies • The strategic assets and competencies that underlie the strategy are the critical

resources that produce sustainable competitive advantage (SCA).

• These resources produce a competitive advantage because they can be converted into sources of value for customers;

− rare,

− not easily imitated

− good substitutes do not exist

15 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Assets and Competencies • A strategic asset is a resource that the firm owns or controls that can be

leveraged in the design or implementation of a firm’s strategy.

− financial assets

− human assets (leaders and employees)

− physical assets (plant and equipment)

− legal assets (patents and trademarks)

− brand reputations

− customer relationships

− powerful knowledge of markets.

16 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Assets and Competencies • Competencies leveraging assets to perform activities important to the firm’s

strategy.

• The ability of assets and competencies to support a strategy will in part depend on their strength relative to competitors

17 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Functional Strategies and Programs • A company’s value proposition, assets, and competencies require the support of

functional activities to succeed.

• Functional strategies or programs that could drive the business strategy might include:

− Information technology strategy

− Distribution strategy

− Global strategy

− Quality program

− Sourcing strategy

− Logistical strategy

− Manufacturing strategy

− Analytics program

18 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18

External and Customer Analysis

Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

19 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

External and Customer Analysis • The purpose of an enterprise is to create and keep a customer.

—Theodore Levitt

• Consumers are statistics. Customers are people.

—Stanley Marcus

• Before you build a better mousetrap, it helps to know if there are any mice out there.

—Mortimer B. Zuckerman

20 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

External Analysis • A successful external analysis needs to be directed and purposeful.

• There is always the danger that it will become an endless process resulting in an excessively descriptive report.

• Without discipline and direction, volumes of useless descriptive material can easily be generated.

• The external analysis process should be motivated throughout by a desire to affect strategy.

21 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

External Analysis • Should suggest strategic decision alternatives or influence by addressing the

following questions:

• Should existing business areas be liquidated, milked, maintained, or targeted for investment?

• Should new business areas be entered?

• What are the value propositions? What should they be?

• What assets and competencies should be created, enhanced, or maintained?

• What strategies and programs should be implemented in functional areas?

• What should be the positioning strategy, segmentation strategy, distribution strategy, brand-building strategy, manufacturing strategy, and so on?

22 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

23 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

An external analysis can contribute to strategy indirectly by identifying the following: • Significant trends and future events

• Example – concern about saturated fat or the emergence of a new competitor

• Threats and opportunities • Example – a new technology

• Strategic uncertainties that could affect strategy outcomes • Example – a natural disaster, terrorism etc…

24 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Methodology for Strategic Uncertainties 1. A strategic decision would be logical because a delay would be

costly or risky. 2. Information acquisition and analysis could mitigate uncertainty

or impacts. 3. Uncertainty could be modeled by a scenario analysis.

25 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Level of Analysis • To conduct an external analysis, the market or submarket

boundaries need to be specified. • The scope of external analysis can involve an industry

• broadly defined (sporting goods) • narrowly defined (high-performance skis) • scope defined that falls in between such as:

 Ski clothing and equipment  Skis and snowboards  Downhill skis

26 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

• External analysis begins first with customer and then competitor analyses

• These define the relevant industry or industries. • An industry can be defined in terms of the needs of a

specific group of customers

27 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

THE SCOPE OF CUSTOMER ANALYSIS – SEGMENTATION

• Who are the biggest customers? • The most profitable? • The most attractive potential customers? • Do the customers fall into any logical groups based on needs,

motivations, or characteristics? • How could the market be segmented into groups that would

require a unique business strategy?

28 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

How Should Segments Be Defined?

• Geographic • Demographic • Physiographic • Customer characteristics vs product related approaches

1. Can a competitive offering be developed and implemented that will appeal to the target segment?

2. Can the appeal of the offering and the subsequent relationship with the target segment be maintained over time despite competitive responses?

3. Is the resulting business from the target segment worthwhile vs the investment required to develop and market an offering tailored to it?

29 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

How Should Segments Be Defined?

30 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

How Should Segments Be Defined?

31 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Benefits The most useful segmentation variable is the benefits sought from a product.

Example – In gourmet frozen dinners and entrées, the market can be divided into

• buyers who are calorie-conscious, • those who focus on nutrition and health • those interested in taste • price-conscious buyers.

Each segment implies a very different strategy.

32 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Price Sensitivity • The trade-off between low price and high quality is both useful

and pervasive • It is appropriate to consider it separately. • There is a well-defined breakdown between those customers

concerned first about price and others who are willing to pay extra for higher quality and features.

• The segment dictates the strategy.

33 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Loyalty • Brand loyalty, is an important consideration in allocating

resources • The highest priority is to retain existing loyal customers.

• Increase their commitment intensity • Encourage them to talk to others.

• The key is often to reward the loyal customer by living up to expectations consistently, providing an ongoing relationship, and offering extras.

34 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Applications • Some products and services, particularly industrial products,

can best be segmented by use or application. • A laptop may be needed by some for use while traveling,

whereas others may use it at the office. • One segment may use a computer primarily for Internet

access, while others may use it for editing documents or for data analysis.

• Some might use a four-wheel drive for light industrial hauling, and others may buy primarily for recreation.

35 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Focus Strategy vs Multiple Segments Focus: a single segment, which can be much smaller than the market as a whole.

Multiple Segments. General Motors provides the classic example. In the 1920s, the firm

positioned the Chevrolet for price-conscious buyers, the Cadillac for the high end, and the Oldsmobile, Pontiac, and Buick for well-defined segments in between.

There can be important synergies between segment offerings.

36 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

THE SCOPE OF CUSTOMER ANALYSIS – CUSTOMER MOTIVATIONS

After identifying customer segments, the next step is to consider their motivations: What lies behind their purchase decisions? Consider… • What elements of the product/service do customers value most? • What are the customers’ objectives? • What are they really buying? • How do segments differ in their motivation priorities? • What changes are occurring in customer motivation? In customer

priorities?

37 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

THE SCOPE OF CUSTOMER ANALYSIS – CUSTOMER MOTIVATIONS

EXAMPLE: Internet shopper segments motivations…

Newbie shoppers—need a simple interface, as well as a lot of hand-holding and reassurance.

Reluctant shoppers—need information, reassurance, and access to live customer support.

Frugal shoppers—need to be convinced that the price is good and they don’t have to search elsewhere.

Strategic shoppers—need access to the opinions of peers or experts and choices in configuring the products they buy.

Enthusiastic shoppers—need community tools to share their experiences, as well as engaging tools to view the merchandise and personalized recommendations.

Convenience shoppers—(the largest group) want efficient navigation, a lot of information from customers and experts, and superior customer service.

38 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

THE SCOPE OF CUSTOMER ANALYSIS – CUSTOMER MOTIVATIONS

Another task of customer motivation analysis is to determine the relative importance of the motivations.

BUYER HOT BUTTONS • Motivations can be categorized as important or unimportant • Hot buttons are motivations whose salience and impact on markets are

significant and growing. • What are buyers talking about? • What are stimulating changes in buying decisions and use patterns?

39 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

THE SCOPE OF CUSTOMER ANALYSIS – CUSTOMER MOTIVATIONS Consumer retail food products hot buttons… Freshness and naturalness: Grocery stores have responded with salad bars, packaged precut vegetables, and efforts to upgrade the quality and selection of their fresh produce. Healthy eating: Low fat, particularly saturated and trans fat, is a prime driver, but concern about sodium, sugar, and processed foods is also growing and affecting product offerings in most food categories. Ethnic eating: A growing interest in ethnic flavors and cooking such as Asian, Mediterranean, and Caribbean cuisines has led to an explosion of new offerings. Brands usually start in ethnic neighborhoods, move into natural food and gourmet stores, and finally reach the mainstream markets. Gourmet eating: The success of Williams-Sonoma and similar retailers reflects the growth of gourmet cooking and has led to the introduction of a broader array of interesting cooking aids and devices. Meal solutions: The desire for meal solutions has led to groups of products being bundled together as a meal and to a host of carryout prepared foods offered by both grocery stores and restaurants. Low-carb foods. The influence of low-carb diets has created a demand for reduced-carb food variants in both grocery stores and restaurants. Convenience. Shoppers have taken convenience to a new level with frozen dinners and cake mixes and even canned soup considered to demand too much preparation. Open and eat is the key. Snacks and yogurt deliver.

40 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

THE SCOPE OF CUSTOMER ANALYSIS – CUSTOMER MOTIVATIONS

• Changing Customer Priorities is critical to gain insight into changes in customers’ priorities. • In the high-tech area, customer priorities often evolve from needing

help in selecting and installing the right equipment to wanting performance to looking for low cost.

• In the coffee business, customer tastes and habits have evolved from buying coffee at grocery stores to drinking coffee at gourmet cafés to buying and brewing their own whole-bean gourmet coffees.

• Assuming that customer priorities are not changing can be risky. • It is essential to ask whether a significant and growing segment has

developed priorities that are different from the basic business model.

41 Guffey and Loewy, Essentials of Business Communication, 12th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

THE SCOPE OF CUSTOMER ANALYSIS – UNMET NEEDS

• An unmet need is a customer need that is not satisfied by existing product offerings. • OfficeMax found that people, especially women profe

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