Transcript defining and analyzing product-markets

Strategic Marketing
1. Imperatives for Market-Driven Strategy
2. Markets and Competitive Space
3. Strategic Market Segmentation
4. Strategic Customer Relationship Management
5. Capabilities for Learning about Customers and Markets
6. Market Targeting and Strategic Positioning
7. Strategic Relationships
8. Innovation and New Product Strategy
9. Strategic Brand Management
10. Value Chain Strategy
11. Pricing Strategy
12. Promotion, Advertising and Sales Promotion
Strategies
13. Sales Force, Internet, and Direct Marketing Strategies
14. Designing Market-Driven Organizations
15. Marketing Strategy Implementation And Control
Chapter 2
Markets and
Competitive
Space
McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
MARKETS AND COMPETITIVE SPACE
 Markets and Strategies
 Defining and Analyzing Product-Markets
 Describing and Analyzing End-Users
 Analyzing Competition
 Market Size Estimation
 Developing a Strategic Vision about the
Future
2-3
MARKETS AND STRATEGIES
The Challenges ―
Markets are increasingly complex, turbulent, and interrelated.
Importance of a broad view of the market.
Essential to develop a vision about how the market is likely to
change in the future.
Continuous Monitoring is Necessary to:
Find promising opportunities
Identify shifts in value requirements
Understand competitors’ positioning
Guide targeting and positioning
decisions
2-4
OPPORTUNITIES OUTSIDE THE COMPETITIVE BOX
The Competitive Box
New Types of
Competition
New
Customers
Traditional Competitors
Conventional Value
Propositions
New
Business
Models
New
Customers
Existing Customer
Base
New Customer
Base(s)
2-5
AN ARRAY OF CHALLENGES
Disruptive Innovation
Fast Changing
Markets
Drivers of Changes
in Markets
Commoditization
Threats
Creating New Market Space
2-6
Markets Impact Strategies
* Market changes often require altering
strategies
* Forces of change create both market
opportunities and threats
* Inherent danger in faulty market sensing
2-7
DEFINING AND ANALYZING PRODUCT-MARKETS
Determine the Boundaries and
Structure of the Product-Market
Form the
Product-Market
Describe and
Analyze End-Users
Analyze
Competition
Forecast
Market Size and
Rate of Change
2-8
Matching Needs with Product Benefits
* A product – market matches people with
needs to the product benefits that satisfy
those needs
“A product – market is the set of products
judged to be substitutes within those usage
situations in which similar patterns of
benefits are sought by groups of
customers.”*
*Srivastava, et al. (1984) Journal of Marketing, Spring, 32.
2-9
INNOVATION FEATURE
Progressive Insurance:
Customer Needs at the Center of Strategy
*
*
*
*
*
*
In the period 1994 to 2004, Progressive Insurance increased sales from $1.3 billion
to $9.5 billion, and ranks high in the Business Week Top 50 U.S. companies for
shareholder value creation.
The company invents new ways of providing services to save customers time,
money and irritation, while often lowering costs at the same time.
Loss adjusters are sent to the road accidents rather than working at head office,
and they have the power to write checks on the spot.
Progressive reduced the time needed to see a damaged automobile from seven
days to nine hours.
Policy holders’ cars are repaired quicker, and the focus on this central customer
need has won much automobile insurance business for Progressive.
These initiatives also enable Progressive to reduce its own costs – the cost of
storing a damaged automobile for a day is $28, about the same as the profit from a
six-month policy.
Source: Adapted from Mitchell, Adrian (2004)”Heart of the Matter,” The Marketer, June 12, 14.
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Product – Market Boundaries and Structure
*
Determining Product-Market Structure
1. Start with the generic need satisfied by
the product category of interest to
management
2. Identify the product categories (types) that
can satisfy the generic need
3. Form the specific product – markets within
the generic product – market
2-11
Illustrative Fast-Food Product-Market Structure
SUPER
MARKETS
MICROWAVE
OVENS
FAST-FOOD
MARKET
CONVENIENCE
STORES
TRADITIONAL
RESTAURANTS
2-12
Extent of Market Complexity
*
Three characteristics of markets:
* 1. Functions or uses of the product
* 2. The enabling technology of the
product
* 3. Customer segments in the productmarket
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Illustrative Product – Market Structure
Food and beverages
for breakfast meal
•Generic Product
Class
•Product Type
Cereals
•Variant A
Ready to eat
Regular
Natural
Nutritional
Life
Product 19
Pre-sweetened
Special K
•Variant B
•Brands
2-14
DEFINING AND ANALYZING MARKETS
Define Product-Market Boundaries and Structures
Identify and Describe End-Users
Analyze Industry and Value Added Chain
Evaluate Key Competitors
Forecast Market Size
and Growth Trends
2-15
Identifying and
Describing Buyers
Building
Customer
Profiles
DESCRIBING
AND
ANALYZING
END-USERS
How
Buyers
Make
Choices
Environmental
Influences
2-16
Identifying and Describing End-Users
*
Illustrative buyer characteristics in consumer
markets:

Family size, age, income, geographical
location, sex, and occupation
* Illustrative factors in organizational markets:
 Type of industry
 Company size
 Location
 Type of products
2-17
How Buyers Make Choices

BUYING DECISION PROCESS:
1. Problem recognition
2. Information search
3. Alternative evaluation
4. Purchase decision
5. Post-purchase behavior
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Environmental Influences
External factors influencing buyers’
needs and wants:
 Government, social change,
economic shifts, technology etc.
* These factors are often noncontrollable but can have a major
impact on purchasing decisions
*
2-19
*
Building Customer Profiles
Start with generic product – market
*
Move next to product- type and variant
profiles >> increasingly more
specific
*
Customer profiles guide decision
making (e.g. targeting, positioning,
market segmentation etc.)
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ANALYZING COMPETITION
1. Define the Competitive
Arena for the Generic,
Specific, and Variant
Product Markets
4. Identify
and
Evaluate
Potential
Competitors
PRODUCTMARKET
STRUCTURE
AND
MARKET
SEGMENTS
2. Identify
and
Describe
Key
Competitors
3. Evaluate
Key
Competitors
2-21
Examples of Levels of Competition
Baseball
cards
Bottle
water
Fast
Food
Regular
colas
Beer
Video
Games
Diet lemon
limes
Ice
Cream
Diet-Rite
Cola
Fruit
flavored
colas
Diet
Coke
Diet Pepsi
Wine
Product from
competition:
Product category diet colas
competition:
Juices
soft drinks
Lemon
limes
Coffee
Budget competition:
food & entertainment
Generic competition:
beverages
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Industry Analysis
*
Industry size, growth, and composition
*
Typical marketing practices
*
Industry changes that are anticipated (e.g.
consolidation trends)
*
Industry strengths and weaknesses
*
Strategic alliances among competitors
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Defining Industry Structure & Characteristics
SUPPLIERS
Industry Form
Industry
Environment
Competitive
Forces
PRODUCERS
WHOLESALERS/
DISTRIBUTORS
RETAILERS/DEALERS
Value
Added
Chain
CONSUMER/
ORGANIZATIONAL END
USERS
2-24
Competitive Forces
1. Rivalry among existing firms.
2. Threat of new entrants.
3. Threat of substitute products.
4. Bargaining power of suppliers.
5. Bargaining power of buyers.
Source: Michael E. Porter, Competitive Advantage, Free Press, 1985, 5.
2-25
Key Competitor Analysis
*
*
*
*
*
*
*
Business scope and objectives
Management experience, capabilities,
and weaknesses
Market position and trends
Market target(s) and customer base
Marketing program positioning strategy
Financial, technical, and operating
capabilities
Key competitive advantages (e.g.,
access to resources, patents)
2-26
Extent of
Market Coverage
Current
Capabilities
Competitor
Evaluation
Customer
Satisfaction
Past
Performance
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MARKET SIZE ESTIMATION
Product-Market Forecast
Relationships
Market Potential
Estimate
(area denotes sales in $’s)
Unrealized
Potential
Company
Sales
Forecast
Industry
Sales
Forecast
2-28
Product-Market Forecast Relationships for Industrial Painting
Units
Sales (in 1000s
of units)
900
800
700
600
500
400
300
200
100
0
2003
2004
Market
Potential
Sales Forecast
Company XYZ
Sales Forecast
2005
2006
2007
2008
2009
2010
2-29
DEVELOPING A STRATEGIC VISION ABOUT THE FUTURE
 Industry Boundaries Blurring and Evolving
 Competitive Structure and Players Changing
 Value Migration Paths
 Product Versus Business Design
Competition
 Firms are Collaborating to Influence Industry
Standards
Source: C. K. Prahalad, Journal of Marketing, Aug. 1995, vi.
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