MKTG 566 Marketing Decision Making

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MKTG 566 Marketing Decision Making

• Chapter 1 Foundations of Strategic Marketing
  Management
• Dr. John Drea

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Strategic Marketing Management consists of five
processes

• Defining the organizations business, mission,
  and goals
• Identifying and framing organizational growth
  opportunities
• Formulating product-market strategies
• Budgeting marketing, financial, and production
  resources
• Developing reformulation and recovery strategies

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1. Defining the organizations business, mission,
and goals

• The mission guides actions
• Too narrow, and your business is painted into a
  corner.
• Too broad, and you lack direction and focus
• A well-written mission should
• provide a vision for long-term direction
• Help to evaluate product and market opportunities
• Inspire and challenge employee.

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Mission Statement for Saturn
To market vehicles developed and manufactured in
the United States that are world leaders in
quality, cost and customer satisfaction, through
the integration of people, technology, and
business systems and to transfer knowledge,
technology, and experience throughout General
Motors.

• Long-term vision
• At what will Saturn excel?
• How will they achieve this (where will they
  focus)?

Products?
Markets?
Think about what is NOT in the mission.
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Goals should come from the mission

• Translation of the mission into results that need
  to be achieved
• In the case of Saturn, this involves
  interpretation
• What does it mean to be a world leader in
  quality, cost, and customer satisfaction?
• What should be done with people, technology, and
  business systems to achieve this?
• What types of knowledge, technology, and
  experience will be transferred to other divisions
  of GM? Do we transfer what we excel at, or do we
  transfer what they need (or both)?

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2. Identifying and framing organizational growth
opportunities

• What might we do
• What opportunities exist for us in the external
  environment
• Unserved or underserved needs
• Technological change
• What do we do best
• What is your core competency? (not as easy as it
  sounds what are you superior at delivering?)
• What must we do
• To compete in an industry, what do we have to do
  to compete? For example, accessing a channel of
  distribution is a common component for success in
  almost all businesses so is billing.
• Shifting the paradigm
• Re-inventing the way that customer needs can be
  met.

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2. Identifying and framing organizational growth
opportunities

• SWOT Analysis
• Strengths and weaknesses have an internal focus,
  opportunities and threats have an external focus.
• Consider the following
• How do your strengths and weaknesses match up
  against the benefits sought by buyers?
• Remember, just because you are good at something
  does not make it a true strength, unless the
  consumer values that competency. The inverse is
  also true with weaknesses.

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3. Formulating product-market strategies
Product-Market Strategies
MARKETS
Existing
New
Market Penetration
Market Development
Existing
PRODUCT (offerings)
Diversification
Product Development
New
(Also called new offering development)
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Market Penetration Strategies

• Typical focus is on building share by increase
  sales of existing products to existing customers
• Which elements of the marketing mix are
  emphasized in a market penetration strategy?
• Examine the
• Growth of the segment
• Competitors (barriers to enter/exit, likely
  responses)
• Do you have a core competency?

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Market Development Strategies

• Same products, new markets
• Assumes that product knowledge is transportable
  to a new segment.
• Is the strength of the business to be found in
  its products/services, as opposed to its
  knowledge of the current customer base?

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Product Development Strategies

• Same market, new offerings
• Product line extensions are an example
• Issues
• Knowledge of the market is critical
• What are the existing associations?
• How different will the new offering be from
  existing offerings?
• Cannibalism

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Diversification Strategies

• New market, new offerings
• Goal is typically to reduce financial risk, but
  often trades one form of risk for another
• Issues
• What is the likelihood of success when entering
  an unfamiliar market, and when dealing with an
  unfamiliar product?
• Are the skills that it took to be successful in
  one industry likely to be transferable into
  another industry?

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Decision Tree Analysis using Bayes Theorem
EV (S x Ps) (F x PF) where Ssuccess (in
) Ffailure (in ) Psprob. of
success Pfprob. of failure
Bayes Theorem PPos. (PPos S)PS (PPos
S)PF PNeg. (PNeg S)PS (PNeg S)PF
PSuccessful product with a positive survey
(PPos S)PS)/PPos PFailed product with a
positive survey (PPos F)PF)/PPos PSuccessful
product with a negative survey (PNeg
S)PS)/PNeg PFailed product with a negative survey
(PNeg F)PF)/PNeg
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Using Bayes Theorem and Decision Tree Analysis
(see next four slides)

• Assume you need to decide whether to introduce a
  new product to market. You have estimated the
  products chances of success at 80. If it is
  successful, you expect a profit of 2 million,
  but if it is unsuccessful you expect a loss of 5
  million. Should you introduce the new product?

EV (S x Ps) (F x PF) ?
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Using Bayes Theorem and Decision Tree Analysis

• Your VP of Marketing has suggested a survey of
  your customers to determine whether the product
  introduction should proceed. The est. cost of
  the research is 50,000.
• When the research is positive, there is a 90
  probability that the new product will be
  successful (i.e., 10 likelihood of failure).
• When the research is negative, there is a 30
  probability that the new product will be
  successful (i.e., 70 likelihood of failure).

PPos. (PPos S)PS (PPos F)PF ?PNeg.
(PNeg S)PS (PNeg F)PF ? PSuccessful
product if survey is positive ((PPos
S)PS)/PPos ? PFailed product if survey is
positive ((PPos F)PF)/PPos ? PSuccessful
product if survey is negative ((PNeg
S)PS)/PNeg ? PFailed product is survey is
negative ((PNeg F)PF)/PNeg ?
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Results, decision tree analysis w/ Bayes Theorem

• If the survey results are positive
• The probability of a successful product is ___,
  and the return would be __________.
• The probability of a failed product would be ____
  and the loss would be _________.
• EV ?
• Decision ?
• If the survey results are negative
• The probability of a successful product is ____,
  and the return would be ___________
• The probability of a failed product is ____, and
  the loss would be __________
• EV ?
• Decision ?