Lecture 1- Intro to marketing strategy
What is marketing?
Marketing as tactics:
• Sales promotions and coupons
• Advertising, logos, brochures
Marketing as cost (vs investment):
• Accountability problem: Did sales really increase because of marketing or just
because more people walked by and bought the product?
• Accounting problem: Marketing campaigns are classified in accounting as costs,
while they actually also bring in revenue.
The marketing decisions are often taken in other departments like pricing, CRM etc.
Marketing as a philosophy
• Marketing is bigger than the marketing department.
• Marketing is putting the customer at the centre of all you do. It is not only much
broader than selling, it is not a specialized activity at all. It influences the entire
business. It’s the whole business seen from the point of view of the final result,
that is, from the customer’s point of view.
Marketing definition
• Marketing= Process of identifying and profitably satisfying customers’ wants and
needs.
• Business strategy= 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.
• If companies are bundles of processes designed to deliver customer value,
marketing= strategy. So, Marketing = Strategy.
The goal for marketing and how to get there
• This course takes CMO perspective: Chief Marketing Officer.
• The goal of a company from marketing perspective should be profitable growth (in
market share).
• Marketing managers main focus: Change management= Focus on adapting to the
changes in the market → Changing market forces, which are affected by the 5 Cs
and Porter’s 5 Forces.
• 5 Cs: Customers, Competitors, Company,
Collaborators, Context
• Porter’s 5 Forces:
- Competition in the industry
- Potential of new entrants into the industry
- Power of suppliers
- Power of customers
- Threat of substitute products
,Marketing is changing
• Marketing from product-orientation= Marketing is the execution of business
activities aimed at navigating a stream of products and services from the
manufacturers to the customer. → Has moved more towards customer orientation.
• Marketing from customer-orientation= Marketing is the process of identifying and
profitably satisfying customer wants and needs.
• Does the need explain the sales? Often no, there is some deeper meaning behind it.
EG: A drill. People do not own a drill because they really need it often. Still, everyone
has a drill. People buy it when they move in their first house because it gives a feeling
of growing up and masculinity, not because they really need it.
• Customer-orientation is thinking when seeing a drill; this is not a drill, but a way to
make holes. Customer-orientation focuses on understanding the customer and
their needs. You focus on the benefits to the customer.
Implicit assumption at the heart of traditional marketing thought
• Assumption traditional marketing: As long as consumption creates value for both
consumers and companies, we should encourage unlimited consumption. → We
need to rethink this assumption: Now with climate change, this consumption should
change into a more sustainable consumption → System-orientation.
• Primary focus should change from profitable growth to shared value. Still, you
should manage the market changes better than the competition and
therefore understand the same market forces.
• The change should come from governments and companies and
innovations. Thus, change management could be replaced by
‘innovation’.
Example financial innovation by Danone: Introduced earnings per
share adjusted for the costs of carbon emissions.
Example packaging innovation by Evian: Imprinting the logo into the
bottle so you don’t need the plastic wrapper.
• A mission statement should give purpose to the company, identity
to the brand and act as a catalyst for innovation at all levels.
• Most important for brands is consistent communication.
• Purpose can build appeal, but only if it is done well. If the purpose is
strong, brand trust, commitment and fame increase. But if the
purpose is unsuccessful all of these factors decrease.
• EG: In the example of Gilette’s ‘The Best a Man Can Be’, the commercial is clearly
purpose-driven, trying to explain the purpose of Gilette. But not done well; about
sexism while women’s razors are more expensive. Whole commercial is undermined.
Doing well by doing good
Financial performance can benefit from shared value:
• Enhanced firm reputations
• Stakeholder endorsement (internal and external)
• Risk mitigation
• Improved innovative capacity (via access to knowledge and internal capabilities)
BUT: Creating shared value or purpose for a company will cost lots of money. Still, it can
be worth it.
,Lecture 2- Resource allocation
What to change?
This class is about resource allocation. To which parts of the company
should and shouldn’t you allocate resources (money) for change
management in order to reach the share value.
Two dimensions of resource allocation
Two dimensions of resource allocation:
1. Horizontal (brand portfolio management)
You divide your resources between different brands. Which brands do you invest in
and which ones you do not invest in? → The more strategic dimension.
2. Vertical
After deciding to allocate money and effort into each brand you need to make
secondary decisions on investments in price, promotion, place or product. → The
more tactical dimension.
This lecture will focus on
frameworks to solve this
problem.
Horizontal resource allocation= Brand portfolio management
Two types of brand portfolios:
• Branded House= All brands are related to one main brand. Such as with Virgin.
• House of Brands= All brands are separate but are in one portfolio. Such as with
Unilever.
Advantages of having all independent brands in the portfolio (House of Brands):
• You can have multiple brands within a product category. EG: A luxury shampoo but
also a more value-driven shampoo.
• Allows you to pick those brand associations for each brand that are most valuable
within its category. EG: Duracell has the association of ‘keeps going’ while this
association does not apply to any other products within the brand portfolio of P&G.
Disadvantages of large brand portfolios with different brands:
• Fragmentation of marketing resources, opportunity costs. You have to create a
whole brand around each product. A company like Virgin (all brands are related to
the brand Virgin) does not have to do this.
, • Destroying economies of scale
• Management attention dilution
• Brand blurring (if you have too many brands, it is not clear what the difference
between each product is anymore)
Boston Consulting Group (BCG) Growth-Share Matrix
Two dimensions:
• Relative market share (from high to low)
1 is the mid-point. You are here when your market share is the same as that of the
biggest competitor. When you are a monopoly, you are at the left of the x-axis. When
you are a duopoly, you are in the middle.
• Market growth rate (from low to high)
This is a more subjective dimension. You have to compare the growth rates between
different markets that you operate in.
EG: In FMCG the products are already well-settled, people know they have to brush
their teeth and they are already converted or cannot be converted. Therefore, the
growth in this sector is lower.
• Vertical axis: How much the market that the brand is in is growing. So, if you have
two toothpastes and TP1 is doing well and gaining more market share each year
and TP2 is not, then they will still have the same position on the vertical axis,
although their position on the horizontal axis is different (because they have a
different market share). If TP1 goes more to the left, then TP2 gets a lower market
share and thus the distance between them horizontally becomes bigger.
• Often the cash cows’ profit is higher than that of the stars because the costs for the
stars are much higher as this market is still growing and very competitive. It is very
costly to keep the market share high. The cash cows are much more settled in within
the stable market with stable market shares. When the market starts maturing the
profits also always start to rise.
• The money stream should go like this: The cash cows fund the question marks so
you can turn them into stars. The stars also need a lot of investment from the
profits of the cash cows. When the market of the stars start maturing, the market
growth rate slows down and the stars also become cash cows. The dogs are the
brands you retire over time.
• It is possible for dogs to become question marks when the market grows. But often
markets grow a lot only when they are launched and not suddenly halfway. After
the peak the market growth often decreases slowly.
• The most important to do is to always protect the cash cows.
