Huge topics in class will be: Optimal resource
allocation, Determining optimal position
(positioning value allocation, positioning
brand/service/product), management of
Marketing Strategy Summary innovation, creating new markets, managing
Lecture 1: Introduction to marketing strategy brands over time (ex. B2C > B2B)
Thinking, Fast and Slow
- System 1 (unconscious, uncontrollable, effortless, great capacity, fast, nonverbal, parallel, associative,
emotional)
- System 2 thinking (aware, inefficient, intentional, controllable)
→ Think of the two as a continuum.
Evaluative conditioning in advertising
Ex. Max Verstappen – Red Bull. You love Max, so you love Red Bull (ex. System 1).
A Love of Tactics: Marketing = 4Ps?
Marketing as tactics
- Sales promotions and coupons
- Advertising, logos, brochures…
Marketing as cost (vs. investment)
- The accountability problem: if you cannot justify your budget, maybe you shouldn’t have it
- The accounting problem: you see marketing as costs in the balance sheet, but not how much revenue it gives
(‘it can never generate anything’)
Surrendered decisions to other dept
- Pricing, CRM, digital, …
Marketing vs Strategy
-Definition of marketing: the process of identifying and profitably satisfying customers’ wants and needs.
- Definition of strategy: business strategy is a clear set of plans, actions and goals that outline how a business
will compete in a particular market, or markets, with a product or number of products or services.
→ It’s a false dichotomy: actually the same thing. Marketing = strategy: if companies are bundles of processes
designed to deliver customer value.
The goal and how to get there
CMO ultimate goal: profitable growth (= growing your company in a profitable way).
(Metric: market share)
→ New ultimate goal of CMO: Sustainable profitable growth, or: creating shared value (see next page).
How to get there: doing things better than the competition, by changing management.
Market Forces: 1. Porter’s five forces; 2. 5Cs: Customers, Competitors, Company, Collaborators, Context
,How marketing is changing: Product Orientation → Customer Orientation → System Orientation
Marketing has been changing: starting at product orientation
The definitions of marketing have changed over time. Ex. difference 1960 - now:
- In 1960, nothing about wants and needs, no customer centric perspective but product centric perspective. I
have a product, I want to sell it = product orientation. Ex. In wine industry: producing wine, just want to sell it.
- Modern definition: satisfying customer wants and needs (ex. the need of a good glass of wine with dinner).
→ Ex. Slide label wine bottle > Beaune > what region it is > what grape it is: pinot noir > light body wine > you
know to combine with what food. But if it was customer oriented, the label would say where it comes from,
what to pair it with, etc. because most consumers don’t know it when looking at the label showed before.
Customer orientation: Drill example
Product orientation: it’s a drill.
Customer orientation: need = making a hole, drill = solution to the need of making a hole
But there is a deeper need. Even though people drill very few holes a year and they could borrow one, they
mostly don’t. Most drills are being bought when people are moving out (=customer segment, mostly young
men) to do some construction work. The need to buy your own drill is the need to be independent. Fastest
growing customer segment = younger women to establish independence.
→ Focus on the benefits to the customer.
System orientation
Traditional marketing thought: “As long as consumption creates value for both consumers and
companies, we should encourage unlimited consumption”.
Assumption of marketing has to change to establish a transformation to a more sustainable way of
marketing. No more focusing on encouraging unlimited consumption if it has a devastating impact
on the environment. We need to create shared value. Towards a system orientation.
→ New ultimate goal of CMO: Sustainable profitable growth, or: creating shared value.
Company examples
Sometimes change needs to come from companies rather than from countries. Focus on
innovation.
- Example company = Danone, purpose driven company. Also focused on financial innovation:
new measures of profit: carbon adjusted earnings per share.
→ Mission statement should give purpose to the company, identity to the brand and act as a
catalyst for innovation at all levels.
- Example company = Evian. Product innovation, ex. in bottled water, how to reduce plastic use. Evian water
dispenser. Also packaging innovation. No wrapper around plastic bottles but imprint brand in bottle.
→ Consistent communication. Example Dua Lipa as spokesperson for Evian. Vision of purity in different ways:
Dua Lipa singing acapella.
→ Purpose driven campaigns can be really good (=consistency) at increasing trust, awareness if you do it well.
If not (= inconsistency), you are worse off than if you didn’t mention purpose in the first place.
Financial performance benefits of shared value
1. Enhanced firm reputation
2. Stakeholder endorsement (both internal and external)
3. Risk mitigation
4. Improved innovative capacity (via access to knowledge and internal capabilities)
,Lecture 2: Marketing driven strategies through optimal resource allocation
Market forces → Change management → Shared value
What do you need to change? You will have a lot of products, services, brands, etc. under your management.
Means to assess what to do with them; which ones should I invest in and how much? Overall question to
answer: How do I allocate the overall pot of resources that I have in my company to the various things that I
could allocate it to?
Markstrat tool to use at every level. Sequence of brands in one or two markets. It is a perceptual map that
measures performance to economy. Where to invest in? And where do I focus on (advertising, innovation,
sales)?
Two dimensions of Resource Allocation (RA)
Horizontal: different products or brands that you are going to
allocate your resources to. Where am I going to invest in?
Strategic dimension for your decision making.
Horizontal resource allocation = brand portfolio management
Why necessary? Some companies have very large portfolios. The further they grow, the more they start to
merge into/overshadow each other. To prevent brand cannibalization. Ex. P&G lost the rights to the White
Cloud trademark after the company retired the brand and left it unprotected (see required reading 2b).
The branded house: put brand main name on everything the company does (like the brand Virgin)
→ Advantages: i) Halo effect, ii) Efficiency (pour all of your resources into one big brand which you can then roll
out over different categories)
→ Disadvantages: i) Halo effect, ii) Hard to have consistent image in different product categories (but the brand
Apple f.i. is good at it)
The house of brands: do not put company’s main brand name on products, but keeping brands as separate as
possible (like P&G, Unilever)
→ Advantages: i) Allows you to go for those brand associations that are most valuable for every category (ex.
Duracell batteries commercial with pink bunny: just keeps going), ii) Target different customer segments (as well
as value or premium priced products), risk management (all ‘independent’ from each other, but not 100% risk
free: transparency)
→ Disadvantages: build up every brand from scratch (expensive)
Vertical: for each of those brands/products, you are going to make a lot of secondary decisions. When focusing
on a specific brand/product, where am I going to allocate the investment to? Look at the 4Ps:
Price - like price reductions (costly)
Promotion - like advertising (mass media, social media, endorsers, public campaigns, etc.)
Place – distribution (new sales force, new channels: online, classic, mass retailers, specialty stores, etc.)
Product – does it need to be innovated/changed?
Disadvantages of large brand portfolios:
- Fragmentation of marketing resources, opportunity costs (ex. Virgin only needs to build one brand, P&G
multiple)
- Destroying economies of scale
- Management dilution
- Brand blurring (when brands start losing meaning because they stop serving their most important functions)
→ Brands are meant to be unique. If there are too many brands, the brand start losing that discriminating
power. Ex. cars: badge engineering; different car manufacturers working on the same car by sharing R&D
platforms to cut costs, then put own ‘badge’ (brand) on the car.
, Tools to help make sense of large brands management portfolios that can help managers to decide between the
different elements (where to invest in?):
The Boston Consulting Group (BCG) Growth-Share Matrix
It has two primary dimensions:
- Relative market (or segment) share on the horizontal axis, goes from high to low
→ How to get in the ‘high’ zone: a larger market share than the greatest competitor
- Market (or segment) growth rate on the vertical axis, goes from low to high
→ Commonly made mistake: the vertical axis does NOT represent how much the brand is growing: it represents
how much the market that the brand is in is growing. Ex.: Unilever has two toothpaste brands. If toothpaste 1 is
doing really well and gaining more market share every year, and toothpaste 2 is not, they are still going to be on
the same level in the matrix. The toothpastes are both in the same category, which has a certain growth rate
and therefore at the vertical axis it stays at the same level.
1 = your market share / market share largest competitor
Perfect duopoly: me and someone else, we have exactly the same share. My share / share other = the same = 1
- Cash cows: high share in slow-growing markets
- Stars: high share in fast-growing markets
- Question marks: low share in fast-growing markets
- Dogs: low share in slow-growing markets
Why would cash cows generate more cash than f.i. stars?
For stars (high share in fast-growing markets) your costs are much higher too keep that high market share, also
because the competition is more intense (ex. new market, a lot of companies are investing in a new product.
Once the market starts maturing, the profit starts to rise).
In terms of resource allocation, how does the BCG matrix work?
Resources should be coming from your cash cows’ fund and they should be invested in your question marks,
because they are in fast growing markets and therefore have potential. The question marks should improve
such that you can turn them into stars. If you already have stars, they already need a lot of investment, so there
is also going a lot of money from the cash cow’s to the stars. When you develop your stars and you keep them
long enough, eventually the market will mature/stop growing; you don’t need that much investment anymore
and they become your cash cows. Finally, the dogs are the brands that you retire, because they don’t serve a
long-term or future profitable function. Then cash cows become dogs and that’s how the cycle continues.
Advantages Disadvantages
• Easy to perform • What about business units/brands on the boundaries?
• Quick overview of strategic positions of entire • Huge impact of ‘market definition’
business portfolio • What is the cutoff value of high vs low?
• Good starting point for more thorough analysis • No dynamic information – crucial for RA! It is static, captures 1
• Everyone knows it moment instead of movement over the years
• Clients expect it • Market share and industry growth ≠ profitability
• Synergies between units?
• With money from cash cow, first defend cash cow instead of
investing in “?” with very bad prospects (read: dot.com mentality/
bubble)
