skript strategic sales and marketing ws 2012

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Strategic Sales andMarketing

Bachelor Degree, Major Seminar

Prof. Dr. Ralf Schlottmann

Winter Semester 2012 /13



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1 Introduction

1.1 Trends in the strategic behavior of industrial firms1.2 Dimensions of market oriented strategies1.3 Strategic Planning Process1.4 SWOT analysis as starting point

2 Definit ion of Sales and Marketing Targets

2.1 Role of Sales and Marketing in the Planning Process2.2 Structuring targets2.3 Sales and Marketing Targets2.4 Case Study

3 Developing Market Strategies

3.1 Growth Strategies

3.2 Positioning Strategies3.3 Market Targeting3.4 Spatial Strategies3.5 Strategic Combinations and competitive strategies3.6 Case Study

Table of contents (I)

WS 2012/13 Strategic Sales and Marketing



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4 Sales Partner Strategies 4.1 Sales channel strategy4.2 Cooperation models with sales partners4.3 Case Study

5 Analysis tools for strategic planning

5.1 Key Performance Indicators5.2 Gap Analysis5.3 Portfolio Analysis5.3 Case Study

Table of contents (II)




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Reference List

Becker , J .: Marketing-Konzeption, 9. Auflage, München 2009

Homburg, Ch.; Schäfer , H.; Schneider , J .: Sales Excellence, 7. Auflage, Wiesbaden 2012

Kotler , P.; Keller , K.L.: Marketing Management, 14th edition, London 2012

Kotler , P. ; Keller , K.L.; Bliemel, F.: Marketing Management, 12. Auflage, München 2007

Meffert, H.; Burman, C.; Kirchgeorg, M.: Marketing, 11. Auflage, Wiesbaden 2012

Winkelmann, P.: Vertriebskonzeption und Vertriebssteuerung, 5. Auflage, München 2012

Table of contents (II) / Reference list




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Internationalisation

• Limits of growth in the home country• Opening up new markets• Customers are pursuing internationalisation strategies too

Changing retail formats

• New sales channels such as E-commerce emerge

• Significant changes in the retail structure require sales strategies, in particularsales channel strategies

1 Introduction1.1 Trends in the strategic behavior of industrial firms




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Figure 1-1: Trend in retail landscape

Source: based on Handelsmonitor

5

4

3

2

1

C h n a

g ei n

t h ef u

t ur e

1 2 3 4 5

Relevance today

Specialised shops

Discounters

Supermarkets

Warehouses

Corner Shops

(Tanta-Emma Läden)

Second-Hand

Airport / Railway

Electronic Shopping

Factory Outl

et

Delivery services Fan Shops

AgriculturalDirectsales

Convenience StoresPetrol stations

Urban Entertainment Center

Shopping tourism





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Extreme posit ions in working together with retail channels

• Industry and retail find new forms of cooperation or• Both fight for marketing leadership in the retail channels

Bigger and bigger and faster and faster vs. highly specific

• Firms are forced to give themselves their own profile• Options:

Serving mass markets (bigger and faster) Working on niches (very specific segments)

Diversi fication vs. Concentration on the core businesses / Streamlining of

business units





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1 Introduction

Main functions in sales and marketing

… Sales ... Marketing

Product Manager

Brand Manager

Market ResearchManager

CommunicationManager

Head of sales (forregion, sales channel,product line,….)

Key Account Manager

Sales Representative

Sales Support

Trade Marketing manager

Customer relationship manager

E-Business manager

1.1 Trends in the strategic behavior of industrial firms




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„Whichproducts shall

be offeredmainly?“

Product focus

„On whichcustomers dowe want to

focus?“

Customerfocus

Dimensions of a market oriented strategies

„How doesthe companywant to act inthe market?“

Building up

and extendingcompetitiveadvantages

Source: based on Steffenhagen, H., Marketing – Eine Einführung, 6. Aufl., Stutt gart, Berlin, Kö ln 2008, p. 78

1 Introduction1.2 Dimensions of market oriented strategies

Figure 1-2: Dimensions of market oriented strategies




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These three dimensions can be divided into two parts:

1. Which shall be the company’s markets (strategic business units)?2. How do we want to work on these markets (competitive advantages of the

company)?

ad 1) Definit ion of the company’s markets

First of all a company has to define

Product Portfolio: on which product segments will the companyconcentrate?

Customer Portfolio: which customer segments shall be targeted?

see figures 1-3

These are then aggregated to Strategic Business Units (SBU)

SBUs should be defined on several dimensions, see figures 1-4 and 1-5





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Totalsubwaymunici-palservices

Customer Segments

Airtraffic

HousesFlats Powerplants

Industrialplants

commer-cialbuildings

fairs/stadiums

Shopsdepartm.stores

Securing goods

Fire brigade

Video control

Consulting

Reception

Admission control

In-house-offices

Fire alarm

Total

P r o d u c t S e g m e n t s

Figure 1-3: Planning company portfolio, example security market





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Potential demand of the customers

Target group-orientedtechnology

Potential Needs

Scope forproblem-solving

Technologies

Potential

customer groups

Source: based on Kotler, P., Keller, K.L., Bliemel, F., Marketing -Management, 12. Aufl., München 2007, p 95

Figure 1-4: Framework to define strategic business units





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Establishing contacts(e.g. Address services)

News

Practical business material

Further education

Specialized education

General education

Entertainment

Potential Needs

Print media

Acoustic

media

Audio & visualmedia

Interactive mediaof the telecom-munication

Usable

technologies

Privatehousehold

Household-overlappinggroups(e.g. clubs)

Privatebusinesses

Publiceducationsystem

Publicadministration

Potential

customer

segments

Source : based on Kotler, P., Keller, K.L., Bliemel, F., Marketing-Management, 12. Aufl ., München 2007, p. 95

Figure 1-5: Defining the business – example publishing market





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ad 2) How do we want to work on these markets / what are the competitive

advantages of the business?

Issues to be adressed:- How do we want to behave towards competition and other market participants?- How do we want them to perceive us?

⇒ The objective is to create competitive advantages!

If a company wants to be more successful than the competitors in selected product andcustomer segments, it has to perform in one or more ways the competitors cannot or will notmatch

Sources of competitive advantage can result either from internal capabilities which enable itto compete successfully or goodwill in customer’s perspective

see figure 1-6





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Competiti ve Advantages/ Disadvantages

can be caused by...

... strengths / weaknessesfrom the customer’s point of

view

... strengths / weaknessesconcerning capabilities/

preconditions

Source: Steffenhagen, H., Marketing – Eine Einfüh rung, 6. Aufl., Stutt gart, Berlin, Kö ln 2008, p. 91

We have (not) got internalcapabilities / preconditionswhich enable us to competesuccessfully

Customers (don‘t) relatecertain performance criteriaabove average to us, whichare important to theirsupplier-preferences

Figure 1-6: Sources of competitive advantage





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Demands to strengths from customer’s point of view

1. Importanti.e. they must refer to a criteria which is important for the customers

2. Perceived,

i.e. the advantage must be perceived by the customer as such

3. Durable

i.e. the advantage can not be caught up by competition easily





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Evaluation of

company

Competitor

1

Competitor

2

Importance

Quality of connection /Network

Price / Tarif and offer

Mobile phones

Mobile Internet

CRM / Service

Invoice / Billing

Importance: from 1 = not important to 10 = very importantEvaluation: from 1 = very bad to 10 = very good

Figure 1-7: Evaluation of the competitive position of a company, example mobile operator





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Mobile phones

Billing / Invoice

CRM / Service

Quality of connection/network

R e l a t i v e I m p o r t a n c

e

Relative Performance +- -

+

Ideal positioning

Figure 1-8: Example of competitive position of a mobile operator

Mobile Internet

Price / Tarif and offer





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Relevance of factors for company success

Decisive are the strengths / weaknesses as the customers see and value them (externalview)

but: strengths only results in sustainable success, if they are based on internal abilities /preconditions

⇒ The strengths regarding the abilities / requirements are at leastas decisive as the external view due to a lasting success





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Systematic marketing-planning is not very popular and has to manage several

resistances at the beginning because…

.. the current processes seem to be convenient for some managers because they areresponsible for their success and they expect the same for the future... intuition and decisions “off-the-cuff“ have been obviously successful... Lack of pressure to change: „Things are doing fine” (enough?)... systematic procedure takes a lot of time and effort

Nevertheless a marketing-plan and a marketing-concept are very common in manyfirms, especially in bigger ones.

And

Marketing decisions are so complex that it is impossible to make them in a well-

founded way without an underlying system!

1 Introduction1.3 Strategic Planning Process




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Marketing Concept: Conclusive plan which is geared to certain direction parameters

(objectives) and which summarizes the fundamental room for maneuver (strategy) andthe necessary operative actions (instruments)

Systematic strategic planning of the individual SBUs ideally follows a defined planningprocess

see figure 1-9

Structure of lectures is based on this:

Chapter 1.4: SWOT analysis as starting point

Chapter 2: Sales and Marketing targetsChapter 3/4: Sales and Marketing Strategies

Chapter 5: Tools for selecting strategies





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Levels of the Concept:

1st level

2nd level

3rd level

Fundamental Questions:

Where do want to go to?

How do we get there?

What do weneed to employfor this?

Marketing Targets (= Determination about

the “wishful places”)

Marketing Strategies (= Fixing the „Route“)

Marketing Mix

(= Selecting the “Vehicles”)

Source: Becker, J.: Marketing-Konzeption, 9. Auflage, München, 2009, p. 4


Figure 1-9: Elements of a Marketing Concept




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Externalenvironment(opportunity &threat analysis)

InternalEnvironment(strengths/weaknesses

analysis)

Feedback +control

Implemen-tation

Programformulation

Strategyformulation

Goalformulation

BusinessMission

Source: Kotler, P. / Keller K.L.: Marketing-Management, 14th edition, London 2012, p. 70


Figure 1-10: Strategic Planning Process




Identification and evaluation of Opportunities and Threats of the marketenvironment (external view)

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1 Introduction1.4 SWOT analysis as a starting point

Determining Strengths and Weaknesses of the company (internal view)

Bringing together internal and external view in a portfolio

Deduction of strategic options




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Source: Porter 1999, p. 50

Threat of

potential entrants

Power of buyers

Threat of

substitutes

Power of suppl iers Rivalry

Figure 1-11: Five Forces Model by Porter





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majorstrength

Majorweakness

minorweakness

neutralminorstrength

HI LOWMED

MarketingCompany reputationMarket shareCustomer satisfactionProduct quality

Service qualityInnovation effectivenessPricing effectiveness …

FinanceCash flowROI …

OrganizationVisionary, leadershipdedicated employees …

Manufacturing

Economies of scaleAbility to produce on timeCapacity …

Source: based on Kotler, P. / Keller K.L.: Marketing-Management, 14th edition, London 2012, p. 74

Figure 1-12: Strengths and weaknesses profile

1 Introduction

IMPORTANCEEVALUATION

1.4 SWOT analysis as a starting point


1 I d i



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Strenghts

Weaknesses

Opportunities ThreatsInternal

factors

External

factors

• Do we have thestrengths to use thechances coming up inthe market?

• Which opportunitiesdo we miss due to ourweaknesses?

• Do we have thestrengths to managethe upcoming threats?

• Which risks do we facedue to ourweaknesses?

Figure 1-13: SWOT analysis



2 S l d M k ti T t



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Figure 2-1: Different roles of marketing and sales

Typical constellations of divis ion of competences between marketingand sales

1: Marketing asservice department

of Sales

47%

Leading strategicand operative role

Marketing Services

2: equal weightbetween Marketing

and Sales

33%

Responsible forprices and sales

Responsible forproduct management

and advertising

3: Sales asexecuting

department of Marketing

20%

Account manager

Leading strategicand operative role

Share

Role of Sales

Role of

Marketing

Source: based on Homburg / Jensen / Klarmann 2005, p. 6

2 Sales and Marketing Targets2.1 Role of Sales and Marketing in the Planning Process


2 S l d M k ti T t



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Definition “ target” : intended result of one’s own actions

Essential to the realization of every marketing-concept is a market-oriented planning of the

targets

Fortarget structuring

there needs to be considered

1. Spectrum of targets

2. Relations between targets

3. Order of targets

see figures 2-2, 2-3, 2-4

2.2 Structuring of targets

2 Sales and Marketing Targets


2 S l d M k ti T t



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Figure 2-2: Spectrum of company targets

Market performance • Product quality• Service quality• Product range

competence

Market posit ion • Revenue• Market Share• New markets

Profitability • Profit• Margin• Return on equity

Financial • Creditworthiness• Liquidity• Capital structure

Power and prestige • Independence• Image• Political influence• Societal influence

Social• Employee satisfaction• Income and social

security• Social integration

Environmental protection • Reduction of emissions• Reduction of use of

natural resources• Recycling quotas




2 S l d M k ti T t



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Figure 2-3: Relations between targets

Source: Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p.21

a) Complementary relation

O1

O2 b) Competing relation

O1

O2

c) Indifferent relation

O1

O2

O1

O2

bzw.




2 S l d M k ti T t



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Business

Mission

Corporate-

Policies & Practices

Corporate Identity

Superior targets of the company

Targets for functional areas

(Marketing and Sales)

Intermediate targets (business units)

Sub targets (Marketing-Mix)

Superior

targets

Operativetargets

Means-end-

relationship

Increasing

concretion

of thetargets

Increasing quantity of targets

Figure 2-4: Target Pyramid




2 S l d M k ti T t



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Business Mission

→ specifies business purpose / gives a frame for maneuver

„A corporate mission is a long term vision of what the business is or is striving to become. The

basic issue is: What is our business and what should it be?“

„Starting point“ of each company and marketing-planning process, sense giving function for the company and description of the corporate current situation

Basic questions:

What are we? Why do we exist? What do we stand for? In what do we believe?

http://www.pg.com/en_UK/company/purpose-and-people.shtml

http://www.bmweducation.co.uk/coFacts/view.asp?docID=26





http://www.pg.com/de_DE/unternehmen/prinzipien/index.shtml





























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Corporate Policies / Practices and Corporate Identity

refers to commitment vs. societal-, economic and competitive order and also to basicbehaviour towards employees, customers, suppliers, capital owners, competitors and public

moral concept of the company

Examples:

http://www.pg.com/en_UK/company/purpose-people/purpose-values-and-principles.shtml http://www.unilever.de/ueberuns/grundsaetze/?WT.LHNAV=Grunds%C3%A4tze

→ Distinction between corporate policies / practices and corporate identity is quite difficult tofind in the real world. In fact, in many cases the sum of corporate policies / practices makesup the corporate identity.

Superior targets of the company

→ In today’s markets an avowal of long-term profit is matter of course for the companies





http://www.pg.com/en_UK/company/purpose-people/purpose-values-and-principles.shtml

http://www.unilever.de/ueberuns/grundsaetze/?WT.LHNAV=Grunds%C3%A4tze

http://www.unilever.de/ueberuns/grundsaetze/?WT.LHNAV=Grunds%C3%A4tze












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Figure 2-5: Operationalisation of targets

Operationalising targets

determining…

reference to

timingkind of target

reference to

product

segment

reference to

target group

extent o f

target

What do I want toachieve?

Content of thedesirable results

see 2.2

With which product,which product lines?

Referring to a certainbrand or product line

the company offers

To whom, Inwhich groups of customers do Iwant to achievethis?

How much do I want toachieve?

Aspiration level withrespect to value or

volumeOptions:

- fix figures, hencelimited extent of target

- min. or max. target

Until when shallthe target bereached?

In which period

shall the target bereached?







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1. Targets concerning the position within the market (market share/distribution)

a. Market Share targets

For the right evaluation of the own market position it is necessary to determine the marketshare in terms of quantity and value

customersrelevantof number Total

100customersof Numbersharefield

marketin thevendorsallof volumesalestotal

100volumesalesscompany' quantityof in termssharemarket

marketin thevendorsallof turnovertotal

100turnoverscompany' valueof in termssharemarket

•

=

•

=

•

=

2.3 Sales and Marketing Targets






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b. Distribution targets

Standard for the product’s market penetration (ubiquity)

These data are evaluated regularly by panel interviews

Panel: Survey that is done regularly with a stable group of economic units e.g.companies, retailers etc. with the same topic

Study objective: Investigating changes in the market or in behavior patterns

productsof classthesellwhichretailersallof turnover Total100brand/productasellwhichretailerstheof Turnover levelondistributiWeighted

productsof classthesellwhichretailersof number Total

100brand/productasellwhichretailersof Number levelondistributiNumeric

•=

•=







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Figure 2-6: Relation between the development of the distribution and the market share

Source: Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p.68

49/81 49/77 56/85 53/84 53/84 57/8886/98 83/97 83/97 85/97 89/99 88/9820/44 21/44 19/46 17/49 18/47 17/46

11/46 11/44 11/46 11/50 12/46 13/525/24 5/28 5/20 5/19 8/32 8/36

26 29 25 29 28 3049 46 50 43 45 4412 12 12 13 13 10

5 5 4 9 6 62 2 1 1 2 2

Brand ABrand BBrand C

Brand DBrand E

Market Share in %

Brand ABrand BBrand C

Brand DBrand E

Periods**

J /F M/A M/J J /A S/O N/DDistr. num./gew. * in %.

* Distribution numeric / weighted** J /F: J anuary / February ….







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Figure 2-7: Example for an Asymmetrical Market and Sales Volume Profile

Source Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p. 69

%Share of the

total market

%Market share

Market Structure Sales Structure of Company Y

51015202530

Ø market share (17 %)

Explanations:Relation market A to G is 1:6Relation market share A to G is 12:1

10 20 30 40 50 60 70

Market share below average

Regional / sectoralsubmarkets

A

B

C

D

E

F

G

35







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2. Price Position targets

attempt to fix a specific price positioning

Most of the product-markets can be linked up with one of these price classes:

- high-priced class (Premium-brand)

- consumer price class (classical branded article)

- low-priced class (no frills products)

see figure 2-8







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Figure 2-8: Market Levels and Price Classes of Beverage Industry incl. Market Shares (volume)

Source: Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p. 72

Market Levels

Market Shares

Price classes

(in €)

Uppermarket

Mediummarket

Lowermarket

15,75 and more

13,75 – 15,74

Up to 13,74

20 %

55 %

25 %







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Every company that wants to pursue a clear marketing strategy has to focus on one marketlevel it wants to occupy

⇒ Fundamental standard for the orientation of the firm’s marketing strategy

⇒ Central Orientation for the whole use of the marketing mix as well

3. Brand Positioning (Image and brand awareness)

Image: related to how customers see either a product or a company, i.e. product image andcompany image

Particularly in saturated markets a strong brand position and image is a key success factor,especially to reach a price premium

Brand awareness: is fundamental for a strong image⇒ brand awareness influences the allocation of certain features to a brand







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Correlation between awareness and image:

The following chain of impacts is supposed to be true:

Brand awareness ⇒ Brand sympathy ⇒ Brand usage

Four typical situations for the status of a brand are possible:

see figure 2-9

see figure 2-10







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Figure 2-9: Four Typical Situations for the Status of a Brand

Source: based on Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p. 78

Situation A: Balanced gradation

awareness

sympathy

usage

awareness

sympathy

usage

Situation B: Low sympathy backlog

awareness

sympathy

usage

Situation C: Low user-rate relating to thesympathy potential

awareness

sympathy

usage

Situation D: Low rate of sympathizers andusers relating to theawareness potential







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Figure 2-10: Differentiated brand status of selected brands


BrandsE D C B A

Values in %

100

90

8070

60

50

40

30

20

10

0

Being aware

Sympathizers

User

Brands

ABCDE

Being aware

9387664341

Sympathizer

4232281615

User

362217108

A,B =classical brands like 4711, ToscaC,D,E =modern (“life-style”) brands like J anine D., My Melody, Inspiré







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4. Purchasing range and -intensity

purchasing range: To how many % of the relevant target group do you really get in touch?

⇒ number of buyers per segment

purchasing intensity: Quantity per purchase?

Example (food-submarket):

see figure 2-11







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Figure 2-11: Purchasing Range and Intensity for Two Competing Brands in a Grocer’s shop


Brands

A

B

Purchasing Range

(in % of all panel-households)Purchasing intensity

(quantity/week)

83

46

250 g

625 g







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5. Customer Satisfaction

Customer satisfaction is an important key target as …... Usually only satisfied customers become regular customers... Caring for regular customers is more effective than acquiring new customers

Representative surveys prove this: Results of the „ Technical Assistance Research

Program“ (TARP):

Satisfied customers talk about their experiences to 3 people, unsatisfied to 9-10 (inaverage)

96% of the unsatisfied customers don’t complain to the company what means thatthere are 26 unsatisfied customers per complaint

Customers who complain about the product/service are more willing to stay loyal

Up to 70% of the customers who complained purchase the company’s productagain if the complaint was solved







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Figure 2-12: Consumer in a market for two brands over different phases


Brand B

100 %

40 %

Know

brand30 % have

tried brand

70 % have

not tried

brand

60 %

don‘t

know brand

80 % are

satisfied

20 % are not

satisfied

Brand A

100 %

40 %

have nottried brand

20 %

don‘t

know

brand

20 % are

satisfied

80 %

know

brand

60 %

have

tried

brand

80 % are

not

satisfied

Totalmarket

Awareness FirstBuyer

Satisfaction Totalmarket

Awareness FirstBuyer

Satisfaction







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Customer Satisfaction Survey of the „Deutsche Marketing-Vereinigung e.V.“ :

Regular surveys (since 1992 in Germany) about customer satisfaction:

see figure 2-13

http://www.servicebarometer.de/presse.html

Derived actions from these kind of results about customer satisfaction:- CRM Systems / customer retention programs- extensive customer complaint systems

Aggregat ion of these marketing object ives in a market ing mission statement:

The discussed target figures are fundamental targets of marketing and sales They are not the result of a single marketing instrument but of the whole marketing mix

see figure 2-14









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Figure 2-13: Relation Between Total Satisfaction and Reselection (Example Retail Banking)

Source: Kundenmonitor Deutschland 2001 (www.servicebarometer.de/kundenmonitor2001)

100 %

80 %

60%

40 %

20 %

0 %

1997

23%

77%

92%

22%

55%

6%

17%

6%

2% 100 %

80 %

60%

40 %

20 %

0 %

2001

78%

42%

12%

37%

16%

21%

72%

18%

4%

Probably /

definitely yes

possibly

probably/definitely not

Disappointed

customers (8%) (unsatis-fied and little

satisfied)

Satisfied

customers

(37%)(satisfied)

Convinced

customers

( 55%)(highly

satisfied)

Question:

Would youselect yourbank again?

Disappointed

customers (7%) (unsatis-fied and little

satisfied)

Satisfied

customers

(39%)(satisfied)

Convinced

customers

( 54%)(highly

satisfied)




3 Marketing Strategies



52

3 Market ing strategies

There are plenty of ways of taking marketing measures to reach the targets. But: Which arethe right ones?

⇒ Necessity to find a steering mechanism that helps choosing the right measures andinstruments and to ensure that these (operative) instruments are used towards targetachievement

Def. strategy (in general): It’s an aid to channel business decisions respectively the use of resources in the company (like guide rails on motorway)

Differentiation of strategy and tactics (instruments): see figure 3-1

Def. marketing strategy: Decision about the company’s planned market presence andpositioning

One way to structure the various kinds of strategic options: see figure 3-2

3 Marketing-Strategies





53

Strategy = basic predisposition

Characteristics:- determines the structure- real choice- mid-/long-term planning- lag effects- hard to correct

Decision making process:- complex, badly structured surrounding for

decision making- today's fundamental decisions are made

for tomorrow- comprehensive thought necessary

(looking at the complete company)- macro-view, more qualitative

Tactics = current dispositions

Characteristics:- determines the actual process- routine decisions (habitual behavior)- Short term planning- immediate effects- correction possible without considerable

problems

Decision making process:- clear, easily structured decision- today’s decisions are made to solve

today’s problems- thinking is focused on particular

functions within the company- micro-view, more quantitative

Fundamental orientation:

Being effective: „Doing the right things“

Fundamental orientation:

Being efficient: „Doing the things right“



Figure 3-1: Differences between Strategy and Tactics





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Growth Strategies:

Positioning Strategies

Market Targeting:

Spatial Strategies:

Four strategy levels Types of strategic decision Basic strategic options

Kind of product/ market-combinations

way of influencing the market

Way and level of distinguished

market targeting

Decision about the market- /sales area

current or new products incurrent or new markets

quality- or price-orientedcompetition

mass-marketing or market

segmentation

national or internationalsales strategy



Figure 3-2: Marketing Strategies





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Growth Strategies

Which products shall be offered to what kind of customer segments?

see figure 3-4

Every company has to take a decision about the occupation of these fields

g g3.1 Growth Strategies





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Product

segments

Market

segmentsCurrent markets New markets

Currentproducts

Newproducts

Market-developmentstrategy

Product-developmentstrategy

Strategy of diversification

Market-penetrationstrategy

Figure 3-3: Ansoff’s Product-Market Expansion Grid

Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, p. 148






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Market-penetration strategy

Goal: Increasing sales respectively market share with current products in current marketsand by that improving the proceeds and profit

Basis for this are two effects caused by a rising market share:

falling costs per unit (learning curve!) Growing influence on pricing (according to the price stability and –level) in the

market






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Market-development strategy

Goal: Develop new markets for current products by breaking up market limits

Strategy that is mainly based on a penetration strategy

Options to implement the market-development strategy:

see figure 3-4

Typical for both market-penetration and market-development strategy:

Both contribute mainly to realize a higher production volume Possibility to realize cost savings (Economies of Scale)






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Figure 3-4: Implementation of a Market-Development Strategy

1. Opening up addi tional markets(geographical-expansion strategy)– Filling gaps in the sales market

– Straightening of a incoherent sales market

2. Enter ing adjacent markets (= new uses for the current product)– Extension of the product usage (example Lindt: beneath the classical suitability as present

increasing meaning of the suitability to consume the pralines by oneself)– Creating new uses (e.g.: extension of the use of Penaten care products for kids towards the

care of sensitive skin of adults)– Creating new application areas (e.g. by special services and/or guarantees for existing

products and by that opening up new e.g. demanding target-groups)

3. Opening up new sub markets (= new consumers who differ from the current ones regardingcertain characteristics)

– Creating products for specific customers e.g. by suitable differentiation of the products(example: Lady Protector made by Wilkinson for wet shaving for women)

– Bringing customer-specific distribution channels into play (Example: “neighborhood-shops”for not yet served smaller customers and cash & carry markets for not yet served keyaccounts)

– Advertisements in consumer-specific media (possibly connected with a specific kind of address by means of “psychological” product differentiation)

Source: Becker, J.: Marketing Konzeption, 9. Auflage, München, 2009, p. 152 f.






60

Product-development strategy

Goal: Developing new products of potential interest to its current markets/ customers

(1) Systematic innovation policy

fundamental strategic decision: Which degree of innovation does the company aim at?

Genuine innovations:

→ Products, that originally didn't exist at all e.g. new technologies

Adapted products:

→ new products that are built upon existing products or services

Me-too products:→ imitated products, that differ more in terms of packaging and not in substantial

characteristics






61

(2) Product-range-policy

Fundamental strategic decisions:• width of the program• depth of the program

see figure 3-5

Every company has to decide on a certain width and depth of its product range1 Specialist strategy (narrow and deep) vs.

2 Generalist strategy (wide and flat)

New development concerning the program-policy:→ Bundling of products to sell a whole system.

Level of intensity of these systems:• Combined products• System covers one part of the program• System covers the whole program• Hard-, software and service system






62

Figure 3-5: Differentiation Generalist vs. Specialist

A1

A2

A3

new

B1

B2

B3

C1

C2

D

B4

A =filled chocolate

B =chocolate

C =chocolate barsD =other sweets

Generalist

Specialist

Width of the program ( = number of different types)

D e p t h o f t h e p r o g r a m

( =

n u m b e r o f d i f f e r e n

t s o r t s )







63

Diversif ication Strategy

Goal: Enlargement of the company’s strategic room to – from the company’s point of view – new products and new customers / markets by breaking out of thetraditional branches into neighboring or far away fields.

Diversification: Result of product-development on the one hand and market-development

see figure 3-6






64

new marketnew

applications

Figure 3-6: Stages on the way to diversification

Product-development

M a r k e t - d e v e l o p m

e n t

no changesimproved

technology

adaptationno changes

more intensive

treatment

new technology

improvedproduct

replacement

enlargement of the product range

new market-segmentation

newmarketing

technology

market

diversification







65

Kind of diversif ication strategies concerning the level of risk-spread:

1. Horizontal diversificationNew products which are connected with current product lines and furthermore have synergieswith these lines, e.g. by…

... employing the same (raw) materials or similar technologies

... using existing distribution channels

... supplying similar submarkets

2. Vertical diversificationEnlargement of the company’s value chain through...

forward integration: acquiring wholesalers or retailers to control the distributionchannels

backward integration: acquiring suppliers to control the raw material sources

Goals: - independence from other market participants- hope of increasing profits

3. Diversificat ion growthSeeking new businesses that do not have any relationship to current products, markets,technologies etc.






66

What about success / failures of the strategies in practice?

Horizontal diversification: Most common (> 50% of all diversification strategies)

Reasons for failures: Assumption, that the potential customers of the new products aresimilar to the current customers, what sometimes proves to be wrong

⇒ calculated synergies don’t materialize

Vertical diversification: Clearly lower importance

Diversification growth: cycles of growing and falling importance

Examples of typical Conglomerateshttp://www.ge.com/de/ourbusiness/index.html http://www.siemens.de/ueberuns/portfolio/Seiten/home.aspx




http://www.ge.com/de/ourbusiness/index.html

http://www.siemens.de/ueberuns/portfolio/Seiten/home.aspx

http://www.siemens.de/ueberuns/portfolio/Seiten/home.aspx

http://www.ge.com/de/ourbusiness/index.html



67

Implementation of diversification strategies

• Organic growth: Own research & development, own sales chains etc.→ Especially realized in case of horizontal diversificationReason: Similarity of products (e.g. production process)

• Know-how-buying: License agreements

• Buying products: Selling merchandises

• Joint-ventures: cooperation agreements

• Acquisitions: Participation / mergers → Typical for conglomerate diversification






68

Figure 3-7: Example of a Horizontal Diversification: Nestlé

Basics of Nestlé’s corporate policy:• Goal: Strengthening and developing the existing business• Besides: Double strategy: organic growth and acquisitions to strengthen the

current market position and to open up new markets

„We consider acquisitions especially if it’s possible to…

…round the current market position or product lines

…enter new interesting food businesses…improve the geographic balance of our global business.“

Important acquisitions of Nestlé:Carnation, USA (food)Herta, Germany (meat and sausages)Rowntree, GB (sweets)Buitoni, Italy (pasta)

Perrier , France (mineral water) Alpo Petfood, USA (animal food)Finitalgel, Italy (ice cream)...⇒Systematic policy of acquisitions which is more common in cases of conglomerate diversification


Source: based on Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, p.173





69

3.2 Positioning Strategies

Two mechanisms of influencing the market, set up on the market layers:

1. Price competit ion:Price as low as possible as the main instrument for steering the market

Typical for markets of “basic-needs-products”

⇒ Overall cost leadership (concept for discounter)

2. Quality competition:

Stress on other instruments than price Typical for markets where products offer an additional use beneath the basic one so thatthe price competition is outweighted by the quality competition

The aim is to achieve a brand preference in the customers’ mind

⇒ Preference strategy (High-price strategy, brand concept)

see figure 3-8






70

Figure 3-8: Impact of the Positioning Strategies on the ROI

Return oninvestment

Preferencestrategy(profit oriented/qualitative growth)

Neither-nor-strategy

Overall costleadership(turnover oriented/quantitative growth)


Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, p.358





71

This fact is reinforced by the development of the polarization of the markets, i.e. by the

change in the market layers structure

see figure 3-9see figure 3-10

Preference strategy

Goal: Building up qualitative preferences, which justify high prices from the customersPoint of view.

Brands as objects, the preferences are focused on

“Branding is a major issue in product strategy. As Russell Hanlin, the CEO of Sunkist

Growers, observed: “An orange is an orange … is an orange. Unless … that orange

happens to be Sunkist, a name 80% of customers know and trust.”

Well-known brands command a price premium






72

Figure 3-9: Fundamental Changes in the Market Structure

Upper

market

Mediummarket

Lowermarket

Lost-of-the-middle-

phenomenon

Starting point:Classical structure

(„Onion“)

=Lower

market is the

biggest

Result:New market structure

(„Bell“)

= Middle marketis the biggest

Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, p.359



3 Marketing-Strategies3 2 P iti i St t i



73

Figure 3-10: Polarisation of markets

Source: GfK 20 000er Haushaltspanel Consumer Scan, in: Horizont 10/2009, p. 4

Market share development in %(Base: 100 Produc t groups; average price ≥ price market leader)






74

Rising importance of the upper market layer:

see figure 3-11

Background: In several markets a high-tech standard and a fast adjustment of technologies and functions on a high level can be observed.

⇒

Building up preferences for brands enables the firms to mark off their own productsfrom others by using each non-price marketing-instruments

Precondition for the development of preferences:

→ Attitudes

⇒ Not only dependent on objective product characteristics but especially on thecustomers’ subjective perception






75

Figure 3-11: Increasing polarisation, example beer market

Source: GfK-Consumer Scan 2005

18 18 19 22 24 25 30

3933 31 24 21 22

23

4349 50 54 55 53

47

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2001 2002 2003 2004 2005 2006

Premium-beers* (>10,00 €)

Consumption beers(7,00 to 9,99 €)

Price entry beers (<6,99 €)

Purchasing volume in % (20 bott les 0,5 l returnable box)

Ø - price in €9,32 9,55 9,53 9,57 9,23 9,01

* brands:Beck‘s, Bitburger, Hasseröder,König, Krombacher, J ever,Radeberger, Veltins, Warsteiner,Wernesgrüner

9,56






76

Figure 3-12: Share of Premium Brands in the Chocolate Market

Source: GfK-Consumer Scan 2005

Strong Brands Are Able to Achieve a Price Premium



3 Marketing-Strategies3 2 Positioning Strategies



77

Question: How do brands work?

Identification function: make it possible to generate some more transparency in thegreat variety of products and articles and to emphasize the differences

Retention function: make the products recognizable to support the brand loyality

⇒ Orientation within a complex range of goods:

consumers assume that they purchase a reliable product with a constant qualityby buying a branded article

Broad distribution or uniform price loose their importance price argument loses its importance

Retailers as trouble-maker:

brands are mostly marketed aggressively i.e. by means of the price retailers undermine the brand image because the brands get involved in an

aggressive discount price competition






78

Way out: Creating “ Must-Have Brands” (brand personalities), which are essential forthe retailers with typical characteristics

Distribution level > 60% Awareness > 70% market share > 30%

Impact of brands on preferences:

see figure 3-13

Types of brands

1) Individual name: Single-brand concept

2) Family name: product-line / range-brand-concept

3) Corporate name






79

Figure 3-13: Example of a quality evaluation of two brands

Source: Freter, H., Marketing, München 2004, S. 60, siehe auch http://www.marktforschung-mit-neuromarketing.de

51%44%

5%

0%

20%

40%

60%

80%

Pepsi Coke no preference

23%

65%

12%

0%

20%

40%

60%

80%

Pepsi Coke indifferent

Blind test Test with offering of

brandPreference


Preference





80

1) Individual name

Each product of a company has its own brand name The company’s name remains in the background and is regularly not familiar to the customers

Goal: Creating a clear and unmistakable brand personality

2) Family name

a brand is selected for a certain product group / linea specific philosophy encircles all products






81

3) Corporate name

the company’s products are sold under a uniform brandthe brand’s message: The company and its competence as well as sympathy and the trustinto this firm

Especially suitable if…... the product range is to large and heterogeneous

... the target groups are similar

... the product segments are heavily dependent on the fashion (e.g. Boss)

In practice many companies use combinations






82

Changing brand strategies over time

starting point is usually an individual or corporate brandtwo strategic directions which both lead to a family-name-concept:

(1) Brand evolution

Basic idea: It’s getting harder to build up new brands in saturated markets (highinvestments, short marketing periods)

using strong individual brands with a strong image for new activities strong individual brands are transformed into family brands to enter new markets

faster and more efficiently

see figure 3-14

Principle: New products are arranged in groups around a well-tried core brand like satellites






83

Figure 3-14: Brand evolution example Nivea

Nivea Creme

Nivea –

body

cleaning

Nivea –

personal

hygiene

Nivea

For Men

Nivea

Baby(Baby-

care)

Nivea-hair

care

Source: http://www.nivea.de/Unser-Unternehmen/beiersdorf/Die-NIVEA-Geschichte

Nivea –

Deo

Nivea

Visage

(facialcleaning)

Nivea –

Make-Up

Nivea

Sun(sun

protection)

Nivea

Soft(moisturising

creme)




http://www.nivea.de/Unser-Unternehmen/beiersdorf/Die-NIVEA-Geschichte










84

(2) Restructur ing a brand

leading a corporate brand back towards a group of family brandsneed to restructure can become necessary if a firm diversifies strongly over time anddeparts too far from the core business

see figure 3-15

Goal

strengthening credibility and competence establishing craps for specific business units which ease product innovations and

their market penetration



3 Marketing-Strategies3.2 Positioning Strategies



85

Figure 3-15: Restructuring a Corporate Brand to a Group of Family Brands (here: Melitta)

Splitting Melitta’s activities into strategic business- and market units

Kaffee-Genuss

Melitta

CoffeeFilter paper

Coffee makerCoffee filter

brand

Frische undGeschmack

(Melitta)/

Toppits

Foils to keepfood fresh, tofreeze and to

roast and bakeit

brand

PraktischeSauberkeit

Swirl

Vacuumcleaner bags,Garbage bags,Odour filters

brand

BessereWohnumwelt

Aclimat

Air cleaners,Air moisteners

brand

Tee-Genuss

Cilia

Tea filters, Tea filtersystems

brand

Source: www.melitta.de

Tafelwasser-Bedarf

Aqamore

Watermachines &accessoires

brand






86

3 const itutional characteristics of a branded artic le (characteristics which are crucial forthe brand’s success)

Quality management

consistent quality management as the heart of the preference strategy

Image and a Unique Selling Proposition (USP)benefits, which are conveyed in its positioning to its target customersideal situation: unique selling proposition

⇒ special importance of advertising and promotion activities

Ubiquityhighest possible distribution grade of a brand in the market as critical success factor






87

Overall Cost Leadership

“The business works hard to achieve the lowest production and distribution costs so that itcan price lower than its competitors and win a large market share. Firms pursuing thisstrategy must be good at engineering, purchasing, manufacturing and physical distribution.

They need less skill in marketing.”

⇒ low prices as main marketing instrument

Strategy: firms target price-oriented buyers

German Consumers are rather price- than brand-oriented

see figure 3-16

Example: Discounters in the food retailing industry

see figures 3-17, 3-18






88

Figure 3-16: Branded articles vs. Price sensitivity

Source: UGW – POS-Marketing Report 2003/2004

Product group Favourite brand Brand on offer Favourite

product

No answer

Body care

Sweets

Non alcoholi c beverages

Alcoholic beverages

Washing powder

Joghurt

Cheese

Deep-frozen food

Detergents

Salty snacks

Average

32 % 37 % 18 % 13 %

32 % 42 % 23 % 3 %

32 % 36 % 18 % 14 %

30 % 10 %28 %32 %

26 % 46 % 22 % 6 %

25 % 45 % 25 % 5 %

21 % 33 % 29 % 17 %

20 % 33 % 37 % 10 %

17 % 38 % 26 % 19 %

28 % 37,6 % 24,2 % 10,2 %

5 %45 % 34 % 16 %

g g





89

Figure 3-17: Market shares in food retailing (1)

Source: Information Resources GmbH 2009

6,3 7,99,3 10,9 11,6 12,3 13 13,7 14,2 14,4 14,1 14,3 14,2 13,82

3 33 3 4 4 4 4 4 4 4 4 4

76,8 72,2 69,3 63,3 61,1 58,6 56,2 53,5 50,7 48,145,5 42,9 40,7 38,6

0

10

20

30

40

50

60

70

80

90

1993 1995 1997 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Food retailingwi thout Aldi

Aldi

Drugstores incl.

Schlecker

85.582.9 79.7

77.574.5 72.9

Number of POS in 1.000

76.1

71.068.8

66.563.7

61.459.1

56.7

g g





90

Figure 3-18: Market Shares in Food Retailing (2)

5,2 6,3 7,0 8,4 9 9,7 10,4 10,6 10,8 10,9 11,3 12 12,5 12,8

13,3 14,7 16,4 16,9 17,119,6 22,0 24,6 25,7 26,1 25,8 27,4 27,0 28,8

102,5102,1 99,5 100,5 99,8 99,8 101,1 99,5 100,2 99,6 99,5

100,8 104,7110,0

0

15

30

45

60

75

90

105

120

135

150

1993 1995 1997 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Food retaili ngwithout Aldi

Aldi

Drugstores incl.Schlecker

Revenue Billion Euros

Source: Information Resources GmbH 2009

g g





91

Figure 3-19: Advanced Model of the Basic Positioning of Business Units and Brands

Advantage in Performance

Advantage in price

Basic use plus

value added

Basic use

Upper-right field

Lower-left field

„Bermuda-triangle“(=dangerous position“between the chairs”)

Branded article/ Premium brand(Manufacturer brand)

Branded article,possibly second-brand(Manufacturer brand)

„Premium brand“ of the retailers

Possibly manufacturer’sthird brand

Private brandedmerchandiseNo-names /Generics

Discounter brand

Source: Becker, J.: Marketing Konzeption, 7. Auflage, München, 2002, S.227

g g





92

Brand strategies for the overall-cost-leadership:

(1)Private branded merchandiseRetailers as the owners of the brands, who are responsible for the quality

Goals

retailers (especially national ones) try to take the initiative and to arrange the marketby themselves so that these companies are not only the manufacturers’ distributors.

attracting price buyers reaching a certain independence of the manufacturer brands Increase of the customer’s loyalty

see figure 3-20

Compared to manufacturer brands, ubiquity is partially missing, but they possess featureswhich are similar to those of manufacturers brands

⇒ placed between preference-strategy and overall-cost-leadership, cheaper alternative tobranded articles

Usually retailers don’t have own production facilities at their disposal but shift their productionto other industrial undertakings.





93

Figure 3-20: Relevance of private branded merchandise objectives

Source: GfK

2,5

2,96

4,18

4,28

4,38

4,55

1 2 3 4 5

Covering gaps inproduct range

Improvement o f negotiation position vs.

Manufacturer

Support Companyimage

Margin improvement

Customer retention

Profiling

Very low… low… average… high… very high…

… relevance

n =43





94

(2)Discounter Brand

Lowest prices in the market

Typical characteristics:

concentration on pure price competition, lowest distribution costs all other kind of marketing instruments like shop-design, presentation of the goods

etc. are minimized to protect the extremely favorable cost-situation Concentrating on a limited product range with a high turnover rate Small profit margin but due to the large sales volume sufficient yields

⇒ Caused by the high quantities discounters are able to win manufacturers which canproduce a minimum quality for the cheapest possible price

Brand policies of the discounters: Own brands Me-too respectively fantasy-brands of the discounters’ suppliers Goods without any brand name Branded articles





95

Differences in prices between the dealer brands (rough indication):

• private branded merchandise compared to branded articles: ./. 20 – 30%• Discounter brands compared to branded articles: ./. 40 – 50%• Generics compared to branded articles: ./. 30 – 40%

(3)Generics

Especially convenience goods that means goods with a high rate of merchandise turnover andLow marketing, inventory and handling costs

Typical characteristics:

a. in the beginning

• no name• uniform and simple white packaging which was covered just by the product name (e.g.

Die Weißen vonRewe)





96

b. Over time:• Usage of other colours for the packaging (e.g. yellow) because the white one did not

distinguish the product range from other competitors• After that first pretty pictures on the white packaging• In parts the strict no-name-character was broken from the beginning by using a brand

name (e.g. A&P of Tengelmann)

⇒ No clear position between private branded merchandise on the one hand and generics onthe other

Geographical extension of retailer branding:

see figures 3-21, 3-22





97

Figure 3-21: Market shares of retail brands in Europe

Source: Metro-Handelslexikon 2010/11, p. 061

Market Shares of Retailer brands in European Food RetailingRevenue Share in %





98

Figure 3-22: The Lead of UK Retailers in the Development of House Brands

Source: Clarke, R., Davies, S., Dobson, P., Waterson, M.: Buyer Power and Competition in European Food Retailing, Edward Elgar Publishing 2002

Shares of retail brands

of English retailers

Sainsbury

(55%)

Tesco

(46%) Asda

(32%)

Marks & Spencers

(100%)

Argyll

(38%)

•“Sainsbury’s own brand ranges stand for greatquality at fair prices; a powerful propositionthat drives product innovation and quality.”

•They began with the basic own brand(‘Sainsbury’s’) and then proceeded to trade up;today: ‘Organics’ with over 700 lines, ‘Be Good

to Yourself’, ‘Taste the Difference’ with 850lines, ‘J ust Cook’, ‘Basics’ with 400 lines, ‘BlueParrot Café’ with 55 lines and ‘freefrom’

•Each of Sainsbury’s own brand products fallinto one of three price layers

•The product range becomes more lucrative

and profitable

•Many retail companies will introduce 800-1000new product lines each year





99

Conclusion

Up to now

Preference strategy seen as a typical strategy for manufacturers Overall-cost-leadership seen as a typical strategy of retailers (at least in the

consumer goods industry)

but

Polarization of the market leads to an increase of the market volume in the upper andlower market segment

a. Price-strategic working firms strive for the upper-right field, among other reasonsdue to price wars

b. preference-strategic operating firms strive for the lower-left field

⇒ Combined strategy, not a pure strategy concept anymore





100

ad a. Retailers str iving for the preference strategy

Attempt to place private merchandise brands which resemble branded articles

Trading-up: Dealer brands are improved concerning their product-, packaging- and brandquality up to classical advertising so that they become premium brands of the retailers.

ad b. Manufacturers striving for the overall-cost-leadership

Attempt of the manufacturers to offer products – with the help of third-brands etc.- which aresimilar to dealer brands (regarding the price) to profit from the attractive market volume inthis market area

Alternat ives Especially designed brands for price-buyer with an own price-performance-ratio Trading-down: originally branded goods were devalued regarding the product’s

performance and by that they became also cheaper.





101

Goals

Covering an interesting market volume

Protecting the preference brands against the aggressive pricing by the retailers

Precondition for a combined strategy:

Multi-brand concept with …

… a specific image for each brand… specific price-performance ratios in their special market segments… different marketing and sales channels

see figure 3-23, 3-24





102

Figure 3-23: VW Multi-Brand Concept

Source: Backhaus, K., Schneider, H., Strategisches Marketing, Stuttgart 2007, p. 33,

http://www.volkswagenag.com/vwag/vwcorp/content/de/brands_and_products.html

Brands of VW (private vehicles)*

* additionally: commercial vehicle brands VW and Scania







Distribution

ServiceProviders

(e.g. debitel)

Shops Tele-

marketingE-

Commerce Retail*

Private Customers

New channels,e.g. Aldi

Mobile Operator

Figure 3-24: Multichannel Sales System for multi brand concept

Direct Sales

Business

Customers

Service Provider

Channels

* Further differentiation in free retailers, contract retailers and E-Commerce retailers

103

…


3 Marketing strategies3.3 Market Targeting

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http://www.google.de/imgres?imgurl=http://www.future-tel.de/wp-content/uploads/2012/07/simyo_logo.png&imgrefurl=http://www.future-tel.de/prepaid-anbieter-simyo/165&usg=__GfOAeNI1yH64ckE0UdY1CuaJAXs=&h=299&w=400&sz=9&hl=de&start=2&zoom=1&tbnid=k7c-XW_EeBK7PM:&tbnh=93&tbnw=124&ei=E6JQUOvsJ4mI4gST44HwDQ&prev=/search%3Fq%3Dsimyo%26hl%3Dde%26gbv%3D2%26rlz%3D1R2ADBR_de%26tbm%3Disch&itbs=1

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104

3.3 Market Targeting

Decision, how many and which market segments shall be targeted

1) To what extent does the firm distinguish the market that it wants to operate in?

Mass market strategy:Offering standardised products which satisfy average needs of average customers.

Market segmentation strategy:Identifying special groups of customers who get a special product and marketing mix.

2) Should the company work on the total market or just on some parts of the total market?

Total market covering:

The firm covers the whole market

Partial market covering:

The firm targets selected market segments

⇒ see Figure 3-25WS 2012/13 Strategic Sales and Marketing




105

Figure 3-25: The four general strategic options for targeting a market

Mass market strategy:

Market segmentation strategy:

• with complete market coverage

• with partial market coverage

• with complete market coverage

• with partial market coverage

e.g. Nivea universal cream

e.g. Atrix hand cream

e.g. several Lauder -care

products: Estée Lauder,

Clinique, Aramis,

Prescriptives, Origins

e.g. Vichy-care system

Source: based on Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S. 240





106

Mass Market Strategy

a) Mass market strategy with a complete coverage of the market

Principle: The seller engages in the mass production, mass distribution and mass promotionof one product for all buyers (no distinction between different customer segments with differentneeds)

Strategy aims at creating the largest potential market Positive impact on production costs (lowest costs) and possibly lower prices or

higher margins

Examples: Henry Ford offered the Model-T-Ford “in any color, as long as it is black”. Coca Cola sold only one kind of Coke in a 6.5-ounce bottle.

Market: Basic market only minus these buyers, who can not be taken into consideration forthis product





107

b) Mass market strategy with a partial coverage of the market

Principle: Mass markets which are defined more narrowly compared to the mass market withtotal coverage of the market

⇒ Including characteristics that consider general differences in the customers’ needs.





108

Market segmentation strategy

Means to identify and distinguish these market segments are the segmentation criteria

see Figure 3-26

a) Market segmentation strategy wi th a complete coverage of the market

→ Every segment is covered by the company, but with different brands

b) Market segmentation strategy with a partial coverage of the market

→ The firm only targets a single or few market segments





109

Figure 3-26: Segmentation Criteria for Consumer Goods Markets

Demographiccriteria

Social-economic

criteria

Psychographic

criteria

Behaviourial

criteria

• Age

• Gender • Life stage

• Residence• ...

• Size of the household

• Income / purchasing power

• Social classes (school education, job)

• Possessory aspects• ...

• Personality (sincere, rebellious …)

• Knowledge

• Motives / sought-after benefits

• Atti tudes

• Buyer-readiness-stage

• ...

• Quantity and frequency of purchasing

• Usage rate

• Selection o f the stores

• Communication behavior

• ...

Source: based on Steffenhagen, H. Marketing - Eine Einführung, 6. Aufl., Stuttgart 2008, S. 42

„Lifestyle“

Segmentation





110

Conclusion

Market segmentation has gained more and more importance within the last decades.

Nonetheless: There are both arguments for mass marketing and for market segmentation.

see Figure 3-27

Advantages and disadvantages of both strategic options:

see Figure 3-28





111

Figure 3-27: Factors favouring a Process of Standardisation or Differentiation

Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S.289

• Standard products

• Mass distribution channels

• Urbanisation

• Modern communication techniques

• Increasing mobility

Factors favoring standardisation (strategic tendency: mass marketing)

Factors favoring di fferentiation (strategic tendency: market segmentation)

• Satisfaction of basic needs

• Increasing individuality of the people

• Increasing knowledge and education

• Creativity in production and consumption

• Increasing purchasing power





112

Disadvantages

Figure 3-28: Advantages and Disadvantages of Mass Market and Segmentation Strategy

Source: Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S. 290

Segmentation strategy

(“sniper concept” )•Necessity of demand analysis (to be able to

fulfill the specific needs of the target groups)•Gaining above-average scope for raising

prices•Good possibilities for steering the

submarkets•Opportunity to replace the price competition

largely by a quality competition

Overall

assessment

General

assessment

Advantages

Mass market strategy

(“shotgun concept”)

•Higher marketing expenditures•Possibly giving up mass production

(and by that the cost advantages)•Partly limited stability of market segments•Large demand for marketing know-how

(resp. appropriate marketing organisation)

•Cost advantages due to massproduction

•Covering the whole basic market(taking advantage of the wholepotential)

•Marketing mix which is simplified,standardised and less expensive

•Simplified marketing organisation

•Depending on the marketcharacteristics it is not possible to fulfilall customer needs

•Limited scope for changing prices(“monopolistic” range is fairly small)

•Limited opportunities to steer the

market systematically•Danger of price competition in mass

markets

Profitability due to the price competitiondepends mainly on a low cost position

Profitability due to above average prices





113

What does the suitabili ty of a segmentation strategy depend on?

1. Existence of segment-specific product expectation / a preference structure

see Figure 3-29

2. Cost-benefit analysis

Are the buyers willing to bear the additional costs caused by the segmentation, e.g.special product, distribution and communication measures?

Do we lose our „economy of scales“ effect in the back office due to the segmentation(necessity of separate product management and market information systems)?





114

Figure 3-29: Basic Market-Preference Patterns in the Ice-Cream Market

C r e

a m i n e s s

C r e

a m i n e s s

C r e

a m i n e s s

Sweetness Sweetness Sweetness

(a) Homogeneouspreferences

(b) Diffusedpreferences

(c) Clusteredpreferences

Source: based on Kotler, P., Keller, K.L., Bliemel, F., Marketing-Management, 12. Aufl., München 2007, S. 364





115

Outlook

Caused by the change in the field of communication technology, a third strategic alternativehas emerged in today’s market: The One-to-One Marketing

Past:

Almost complete orientation towards the mass market

Focus on a product in an anonymous market

Task of the mass marketing: Reaching the planned sales volume to achieve thecalculated decline of costs.

Besides: Dividing the market according to target groups

Problem: The proliferation of advertising media and distribution channels (“informationoverload”) is making it difficult and increasingly expensive to reach a mass audience.





116

Way out:

Developing a Customer Relationship Management

see Figure 3-30

Further development: One-to-one concept of an individual customer marketing (articulated byPeppers/Rogers 1993 for the first time)

idea of a „mom-and-pop store“, where the owner personally knows the customers and theirneeds and is able to put cross-selling into action with success

see Figure 3-31; 3-32





117

Value management for the customer

Value management from the customer (customerevaluation)

Integration of all communication and sales channelsBringing together Marketing, Sales, Service and

Administration

Customer oriented behaviour of all employees

Increase of customer value

Existing customers preferred to new customers

Permanent analysis, evaluation and optimisation of processes

CRM

Figure 3-30: Elements of CRM





118

Figure 3-31: Development of Strategic Patterns

Source: Weinberg, J., One-to-One-Marketing, in: Manschwetus, U., Rumler, A. (Hrsg.), Strategisches Internetmarketing,Wiesbaden 2002, S. 247

Individualisation 100 %

G e n e r a l i s a t i o n

100 % Undifferentiated

mass marketing

Differentiated

mass marketing

Segment-oriented

marketing

Niche-oriented

marketing

One-to-one marketing

The strategic marketing trend





119

Figure 3-32: From Mass Marketing to One-to-One-Marketing

Source: Kauffels, F.-J., E-Business, 2. Aufl., Bonn 2001, S. 76

Mass marketing One-to-one marketing

•Product-manager, who sells a product to asmany customers as possible (share of market)in a certain period of time

•Attempt to generate a constant stream of newcustomers

•Cost-saving one-way communication:Reaching the largest possible group of addressees with the help of non-selectiveadvertising via radio or TV

•Customer manager who sells as manyproducts as possible to one customer (share of customer) in a certain period of time)

•Attempt to generate a constant stream of newbusinesses with current customers

•Two-way communication by interacting withcustomers and individual customer-care

Objective:

Winning and keeping loyal customers with the help of individual contacts and treatment⇒ Paradigm change from “more customers for my products” to “more products for my customers”

(“share of customer” instead of “market share”)





120

Problem:

Enormous costs to implement this one-to-one approach using classic marketing

⇒ Only the progress in the information and communication technology enabled the practicalimplementation of the one-to-one-marketing concept

⇒ The cost structure for the new media is determined by fixed costs, which leads to areduction of the marginal unit costs with an increasing quantity of customers!

Background information on mass customisation:

http://store.nike.com/index.jsp?cp=EUNS_KW_NS09_DE_Google_B&country=DE⟨ _locale=de_DE&l=shop,nikeid

http://www.spreadshirt.net/de/DE/T-Shirt-gestalten/Selbst-gestalten-59


3.4 Spatial strategies

3 Marketing strategies



121


Decision about the firm’s market and sales areas

Strategic question about the territory, geo-political decision

(1) Domestic Marketing by covering

… local markets… regional markets… multi-regional markets… national markets

(2) Supranational Marketing by covering

… multi-national markets… international markets… global markets






122

(1) Domestic Marketing

Starting point for the geographic growth for most of the companies is a local market within itsconfines (small and medium-sized enterprises)

Further development snowball-effect type growth, i.e. passive (automatic) and not in a reallystrategic manner

The basic strategic options of the domestic marketing

a) Concentric /circular widening of the territory

• Existing territory is strengthened, systematically added by building rings• concentric area extension is often combined with a regionally different product- andprogram-mix






123

b) Selective area extension

Objective: Creating a sales area which is as closed as possible concerning the marketingpolicy with the help of a multi-stage procedure

Implementation: Own concepts to open up the markets, co-operations / cooperative solutions,licensing, franchising

c) Area extension step-by-step like independent islands

• Special case of the selective area extension• Selection of only a few areas• These islands constitute the starting point for a potential further development in a

concentric way of area extension

Conclusion: today there is a trend towards a national coverage of the market






124

(2) Supranational Marketing

Reaches far beyond a simple sales-area-aspectMore structuring, long-term binding effect for the whole business

General stages of supranational marketing

see Figure 3-34

Implementation of the internationalisation

Entry strategies into foreign markets, also called “implantation strategies”

see Figure 3-33






125

Figure 3-33: General stages of supranational marketing

Global

strategy

International

strategy

Multi-national

strategy→ The companies include several

neighbouring foreign markets intotheir marketing and sales concepts(e.g. Germany neighbouringEuropean countries)

→ Often: experimental strategy toselect experiences in foreign

countries, avoiding highinvestments in foreign countries→ Export with a minimum of risks

Two options:• Indirect export: The company

operates via independentintermediates (e.g. domestic-basedexport merchants)

• Direct export: The companyhandles their own exports (e.g. byforeign-based distributors oragents)

→ Ethnocentric approach

→ Mainly connected with thefoundation of independent salessubsidiaries or productionfacilities abroad

→ Branch is usually run bymanagers from the foreigncountry

→ Marketing plan is done on thespot, adaptation strategy for themarketing mix

→ Subsidiaries get a certain scopeof decision-making so that theycan orientate their strategytowards the specificcharacteristics of the market and

by that appear as quasi-nationalcompanies

→ Polycentric approach

→ Smooth transition to next stage

→ Operating on a worldwide level→ Large quantity of branches and

subsidiaries abroad→ Large share of foreign production→ International procurement of capital→ Worldwide recruiting of the top

management→

Headquarters as holding withguideline competence→ Marketing is as standardised as

possible and orientates towardscountry- respectively multi-cross-regional target groups

⇒ Geocentric approach

Typical:Multi-national standardisation of marketing mix

Requirement:Homogeneous structure of needs,e.g. computers, cars, planes






126

Figure 3-34: Implementation stages of supranational marketing


100%

100%

Capital and

management

from the

headquarters

Capital and management

from the foreign country

Export

Franchising

Licensing

Joint Venture

Foreign-based

assembly

Manufacturing

facilities

Subsidiary

Direct investments






Export via

japanese

importer

Sales and

Service

company

Manufacturing

facility

60s

Manufacturer of innovativeproducts such as industrial

laser-systems

stepwiseInternationalisation sincethe early 60s

Direct and indirect sales

Investment in 2009: morethan € 14 m US$

from 2009from 1977

Figure 3-35: Example of internationalisation: Trumpf in J apan

127WS 2012/13 Strategic Sales and Marketing





128

Evaluation of foreign markets

Evaluation according to various criteria:

see Figure 3-36

Conclusion with respect to spatial strategies

Home-country-focused firms are usually not able to cover just a local or regionalmarket but are forced to cover the whole national market

International companies are usually not able to remain on the level of export-

orientation

The level and the speed of expansion are dependent on the venturesomeness of thecompany and of the management board






129

Figure 3-36: Sequential Evaluation of Foreign Markets


29

72

22

attractive

countries

11

150 countries

121 count ries

49 countries

27 countries

16

Pre-selection- political situation- legal restrictions

Pre-selection- Population

- Gross national product

22 countries with alow potential- demand for

living space- economic basis

Evaluation of the…- market potential- market size- technical level

- number of regulations- availability of resources


3.5 Strategic Combinations and Competitive Strategies




130

3.5 Strategic Combinations and Competiti ve Strategies

So far: Isolated view of different types of strategies on four diverse strategic levels

But: Successful strategic concepts are rarely the result of a strategic decision on just one levelbut commonly the result of a strategy-bundling on various levels

(1) Vertical strategic combinations

see Figure 3-37

For your strategic decisions it is useful to include the profiles of the most important competitorsinto the process of decision making.

Objective: Deduction of strategic options for the own company

But: Freedom for the combination of strategies is only given in parts. Some strategy-typeshave to be combined with certain other ones to achieve the best possible effect






131

Figure 3-37: Strategy Profiles of your own Business Compared with an Important Competitor


Strategic levels

1.Growth

Strategies

2.Positioning

Strategies

3. Market

Targeting

4. Spatial

Strategies

Strategic options

Own business Main competitor

Marketpenetrationstrategy

Marketdevelopmentstrategy

Productdevelopmentstrategy

Diversificationstrategy

Preferencestrategy

Overall costleadership

Segmentation strategy(complete) (partial)

Localstrategy

Regionalstrategy

Nationalstrategy

Multina-tionalstrategy

Interna-tionalstrategy

Globalstrategy

Multi-regionalstrategy

Mass market strategy(complete) (partial)






132

(2) Horizontal strategic combinations

Bundling of strategies on a horizontal level were already illustrated above, e.g.:

Alphabetical strategy paths (growth strategies)

Combination of preference strategy and overall-cost leadership with the help of amulti-brand concept (positioning strategies)

Combination of mass-market- and segmentation strategy by a multi-brand-conceptas well (market targeting)

Reasons:

very often caused by stagnating or slowly growing markets Market polarisation

see Figure 3-38






133

Figure 3-38: Classical Multi-Zone Marketing and Limits of the Multi-Level Marketing


brand B (new)*

brand A

Trading

up

lowermarket

uppermarket

medium

marketbrand A

possiblemarketcoverage

Classical market struc ture(“onion”)

Newer market structure(“bell”)

As long as the medium market isthe biggest one the pointed out

market coverage may be enough!(multi-zone marketing)

As soon as the lower market becomesthe biggest one there is a need to

participate in the lower market.(multi-level marketing)

* Implementation if necessary also byproduction of trade- or generic goods






134

Competitive Strategies

Competitive strategies can’t be seen as independent strategic concepts; they make use of general strategic action patterns; it’s about the way of dealing with competitors, i.e. about thestrategic style

Basic patterns of competitive strategies

Two dimensions to differentiate the basic patterns:

(1) Level of „ standing out“ of the competition regarding marketing and technology

→ Innovative versus imitative

(2) Time of taking marketing measures

→ Avoiding competition (reactive) versus facing the competition (active)


T f C i i B h i





135

Figure 3-39: Types of Competitive Behaviour

Source: Meffert, H.: Marketing-Management, 1. Auflage, Wiesbaden, 1994, S. 157

Facing

competition

Imitative

Conflict

Dimensions of

behaviour Innovative

Avoid ingcompetition Evasion Adaptation

Cooperation






136

Evasion strategies

→

Attempt to avoid the higher competitive pressure by partially differing from thecompetitor’s measures

Adaptation st rategies

→ Aligning the own behaviour with the competitor’s one

Cooperation strategies

→ Explicit or implicit agreement concerning certain business practices

Conflict s trategies

→ The company’s target is to gain market shares by an innovative behaviour. In the mostaggressive way it is the objective to weaken the competitor as much as possible oreven to put him out of business


Fi 3 40 C bi ti f St t i K F t t G i C titi Ad t





137

Figure 3-40: Combination of Strategic Key Factors to Gain a Competitive Advantage

Approach compared with industry standard1

worse

higher

smaller

later

Key factors

Competitor profiles: company A company B

1 Standard might be the market leader or the top five companies –depending on the numbers of competitors

2 aspired product-/ service quality and ability to solve problems3 planned pricing4 planned market area5 planned strategic timing

1.Performance2

2.Price3

3.Area4

4.Time5

better

lower

larger

earlier

same

same

same

same


Fi 3 41 Influencing Factors Concerning the MarketEntry Timing

3.5 Strategic Combinations and Competitive Strategies3 Marketing strategies



138

Figure 3-41: Influencing Factors Concerning the Market-Entry Timing

Timing of the

market-entry:

• Pioneer

• Early adopter

• Late adopter

Corporate factors

F a c t o r s o f t h e s a l e s m a r k e t

P r o

d u c t

f a c t or s

Technological factors

• basic strategic behaviour

• venturesomeness

• company size• marketattractiveness

• market resistancedue toconsumers’ needs

• competitive marketpressure

• innovation level

• complexity

• dynamics of the technologicalprogress

• complexity of the technology


3.5 Strategic Combinations and Competitive Strategies3 Marketing strategies



139

Three fundamental strategies for the market-entry strategy:

(1) Pioneer-strategy / First Entry → The pioneer is always and definitely the first one in the market, i.e. he initiates the

introduction stage of a product

(2) Strategy of the early-adopters → Market-entry shortly after the pioneer→ Early adopter developed the product and the marketing-concept almost parallel to the

pioneer (possibly on purpose to learn from the pioneer’s experience)

(3) Strategy of the late adopters

→ Enters the market relatively late (after the end of the introduction in the product lifecycle)

→

Need to imitate regarding technology or marketing (often necessary to enter themarket with a low-price-strategy)→ Possible reasons

• avoiding high risk of market entry• lagging behind the technological product development


4.1 Sales Channel Strategy4 Sales Partner Strategies

Figure 4 1: Relevant decisions to set up the sales channel strategy



140

Selection of sales channels

Decision for type of sales

partner

Decisionregardingnumber of

sales partners

Decisions inthe context of multichannel-

sales

Figure 4-1: Relevant decisions to set up the sales channel strategy



Figure 4 2: Direct and indirect sales channels



141

Sales Channel

Direct

Personal sales

POS at customer

POS at supplier

Changing POS, e.g.fair

Impersonalsales

Telefonesales

E-Commerce

Mail orderbusiness

…

Indirect

Sales agents,e.g. sales

repre-sentatives

Authoriseddealers,

e.g.franchisepartners

Free

dealers

retailers

wholesalers

Figure 4-2: Direct and indirect sales channels



Figure 4 3: Type of sales partners



142

Type of sales

partner

Domesticcommerce

One-level

Retail

Wholesale

Multi-level

Cooperation

Concentration

Foreigncommerce

Importbusiness

Exportbusiness

Source: based on Meffert 2012, p. 552

Figure 4-3: Type of sales partners


Figure 4 4: Examples for market structures and involved parties




143

Manufacturer

Customers

Drug-stores

doctors

Delivery /

Invoice

Example Pharmaceutical

Industry

Manufacturer

Customers

Sanitary and

building retailer

Building comp./

plumber

Delivery /

Invoice

Need

development

Need

development

Example Sanitary products

architects

Figure 4-4: Examples for market structures and involved parties

Need

development

Need

development






144

Cement industry Pharmaceutical industry

Front Market

(customers / sales)Building material retailer pharmacies

Back Market(Processing / Usage)

Construction companies Doctors, hospitals

Consulting Market

(intermediariess)Architects, planning offices Health insurances, legislation

User Market(End-user)

Private households, industry…

patients

Source: based on Ackerschott, 2001, p. 194




Figure 4-6: Number of sales partners



145

Universal

Sales

Selective Sales Concentrated Sales

Concept

Sales via allpossible kindsof salespartners

Limitation of kind and number of sales partners to one or only a fewcategories

Consideration of those partnerswhich fulfill defined criteria (e.g.

certain consulting and servicelevels

Conscious selection of individual partners within acategory fulfilling highdemands (among other withrespect to location, productrange etc.)

Extreme case: exclusive sales

Goal

Strongpresence

Increase of

brandawareness

Trying to achieve brand beingmore sought after

High motivation andqualification of sales partnersImplementation of ademanding marketing concept

Marketing

Strategy

Mass marketstrategy

Market segmentation strategy(partial coverage aimed at)

Market segmentation strategy(partial coverage aimed at)

Figure 4-6: Number of sales partners


A M lti h l S l S t if th d t ld t l t i t




146

A company uses a Multichannel Sales System, if the products are sold at least via two,usually more, sales channels

Examples for multichannel sales systems − Insurance companies with own sales force, E-commerce offer, independent broker

and telefone sales− Mobile operators such as T-Mobile und E-Plus− Companies such as Nike and Adidas selling through own shops, retail chains,

Factory Outlet Centers, E-Commerce, …− …

Important decisions in the context of multichannel systems Shall the products be sold via several sales channels? Under which circumstances does it make sense to open new channels such as

discounters or E-Commerce? How shall the coordination of the sales channels be done?



Figure 4-7: Options for implementing E-Commerce in the sales system



147

Source: Becker 2000, p. 93

E-Commerce in existing

value chains

Support for existing

sales system

Innovative services for

endcustomers / sales

parter, extension of

delivery service

Building up new value

chains

New business field

New and innovative offers in E-

Commerce

Additional sales channel

Setting up a new sales

channel for the existing

company products

Figure 4 7: Options for implementing E Commerce in the sales system


Figure 4-8: Use of channels in a multichannel sales system, example consumer electronics




148

Source: based on Ehrlich/Erbenich/Kirchgeorg 2010, p. 68

MP 3 Player

TV Sets

Laptops / Notebooks

Which information channels have you used to inform yourself about consumer electronic products on offer (in

% of asked participants)

before purchase at purchase

Figure 4 8: Use of channels in a multichannel sales system, example consumer electronics


Figure 4-9: Clear allocation of functions to sales channels in a multichannel sales system




149

Source: based on Kotler, Bliemel, Keller, Marketing Management 2007, p. 887

Functions of sales management

customers

Openingsales

opportu-nities

Evaluationof salesopportu-

nities

SalesPreparation

Sale Services Accountmanagementafter sales

Key Account

ManagementClassical

Direct Sales

Large accounts

Telemarketing Medium sized accounts

Retail

Sales

Representatives Small and potential customers

Value adding

reseller

Figure 4 9: Clear allocation of functions to sales channels in a multichannel sales system


Figure 4-10: Factors influencing sales channel structure




150

Factorsinfluencing

sales channelstructure

Productcharacteristics

Competitivesituation

Customerpreferences

ressources

Strenth of sales partners

and conflictsituations

Possibilities forcustomerretention

Strategy

Figure 4 10: Factors influencing sales channel structure



Figure 4-11: Strength of sales partners and conflict situation



151

Causes of conflict in a sales channel system are to lead back to differences in therelation between manufacturer and retailer regarding …

Objectives Roles Power Communication

gu e S e g o saes pa e s a d co c s ua o



Figure 4-12: Basic Strategies in the cooperation of manufacturers to retailers



152

Active in the

response to

marketing activities

of the retailers

Active in the design

of the sales channels

Cooperation(acquisition of power)

Behavior of

manufacturer

Passive in the design

of the sales channels

Passive in the

response to

marketing activities

of the retailers

Alignment

(acceptance of power)Conflict

(power struggle)

Avoidance(avoid power struggle)

g g p



Figure 4-13: Vertical integration



153

Own retail chain

Concession

Factory Outlets

Shop in Shop

Franchise

Vertical integration

of the sales channel

Manufacturer Retailer

Own productideas

Long termcontractualbonding of supplier

Acquisition of a supplier

Source: based on Bos ton Consulti ng Group / Markenverband (2005)

g g


4.2 Cooperation models with sales partners4 Sales Partner Strategies

Figure 4-14: Key Account Management as organisational basis for cooperation



154

Key Account Management

Who are the Key Accounts?

Large customers by revenue/ sales volume

Customers of high strategicrelevance, e.g. referencecustomers

Selected sales partners

Tasks

Systematic acquisition of key accounts

Development of customerspecific marketing-conceptsand actions

Cross section function:

Steering all activities of acompany towards the keyaccounts

…

Objectives

Long term customerretention through exploring

common success potentialsand from this ensuring costreductions

Short term securing salestargets such as sales /revenue

…

g y g g p



Figure 4-15: Strategic options for Key Accounts



155

II. Cross

Selling

Source: Belz / Senn 1995, p. 48

I n t e g r a t i o n a n d s y n e r g y p o t e n t i a l

o f m a n u f a c t u r e r s

Integration and synergy potential of

Key account

highlow

l o w

h i g

h

IV. Strategic

Alliance

I. Early

warning

III.

Partnership

g g p y



Figure 4-16: Trends in Key Account Management



156

Multfifunctional teams substitute „KAM as lone

warrior“

Setting up strategic account relationships

Building value-enhancing partnerships

Outsourcing of KAM

Europe-wide and globally active Key Account

Manager

Environmental

changes such asInternationalisation

of customers,

increasing product

complexity etc.



Figure 4-17: Success factors in sales partner management



157

Success factors in sales partner management

1. Attractive businessmodel

a. Contractual sales

system as framework

b. Rights and duties of themanufacturer

c. Rights and duties of thesales partner

d. Pricing and terms of sale

2. Support in the operativebusiness

Decision for push- or pull

approach

Support for marketing

Motivation of sales agents

Information systems

3. Cooperationmanagement

Efficient Consumer

Response (ECR)

Supply ChainManagement (SCM)

Category Management(CM)


Efficient Consumer Response (ECR) involves cooperative partnerships between teh




158

Efficient Consumer Response (ECR) involves cooperative partnerships between tehmanufacturer and retailer in logistics and marketing with the objective to serve customerneeds better than in isolation

Through this short term optimisations can be done as well as build up long term

competitive advantages

For this a very intense cooperation and communication between the parties is necessaryto steer and optimise product- and information flows.

Example:http://www.markenartikel-magazin.de/no_cache/events/artikel/details/1003291-ecr-award-an-unternehmen-und-persoenlichkeiten-verliehen/

See figure 4-18



Figure 4-18: Cooperation areas of ECR (Efficient Consumer Response)



159

Cooperation in Logis tics

(Supply Chain Management)

Cooperation in Marketing

(Category Management)

Efficient Administ ration Efficient compos ition of assortment

Reduction of paperexchange

Avoiding multiplegatherings

Using EDIAssortment

composition per

shop

Assortmentcomposition

considering all

manufacturers

Optimisation of price and sales

space

Efficient operative logisti cs Efficient Promotion

Standardisedpackaging

Efficientconsignment

Cross DockingSales promotions

per shop

J oint evaluationof sales

promotion

Reduction of price promotions

Efficient stock replenishment Efficient Product Introduction

Vendor managedinventory / Co-

managed inventory

Automation of order transactions

Vendor ManagedInventory

J oint productdevelopment

Cooperativeproduct andmarket tests

Cooperativeproduct

introduction

Source: Homburg / Schäfer / Schneider 2012, p. 340

Efficient Consumer Response



Figure 4-19: Main targets of ECR (Efficient Consumer Response)



160

Efficient administration

Efficient operative logistics

Efficient stock replenishment

Efficient promotion

Efficient composition of assortment

Efficient product introduction

high

s t r a t e g i c

Source ECR Study by Coca-Cola, quoted by Frey 1997, p. 172

o p e r a t i v e

C o o p e r a t i o n

Complexitylittle

Category

Mgt.

Supply

Chain

Mgt.

Increase revenue andprofit, realisation of newgrowth potentialsthrough more efficientmarketing

Improvement of thecost structure of theproduct- andinformation flows alongthe value chaingthrough eliminating nonvalue adding processes


Supply Chain Management (SCM) is a computer-based steering of material, information




161

Supply Chain Management (SCM) is a computer based steering of material, informationand capital flows along the entire value chain from gaining raw material to the end customerwith the objective to integrate processes

The task of SCM is the optimisation of the delivery chainbeyond the own company

SCM is characterised through different principles

New technologies such as Radio Frequency Identification (RFID) lead to a continuousincrease ot the relevance of SCM

See figure 4-20

See figure 4-21



Figure 4-20: Structure and task of SCM



Supply Chain Management

Purchasing and supplier-management Sales and Order Processing

Manufacturer of

end-customer products

Sales

intermed.

Sales

agent

End-

customer

Supplier

Supplier

Supplier

Supplier of supplier

Supplier of supplier

Flow of information

Flow of materials

Flow of financials

Source: Meffert et al., 2012, p. 580



Figure 4-21: Principles of SCM



163

Source: Corsten/Gabriel 2002, p.10

•What are customer needs?

•Visualise value chain•Determination of critical activities•Adjustment of strategy

Positioning

•Adjustment of product and process acchitecture•Buildung product modules•Late set up of variants•Standardisation of interfaces

Postponement

•Exchange of information and data• Integration of IT-Systems•Convergence of logistics, IT and Operations Research•Use of Internet technology

Planning

•Synchronisation of value chain steps• Integration of suppliers•Optimising replenishment• J ust in time principles

Pull Principle

• Intensive communication•Cooperation with suppliers of systems•Building confidence•Search for „global optimum“

Partnering


Example: Efficient Replenishment through using RFID technology at Gerry Weber




EAN-basedprocesses, hencepersonal inventorytaking

Many mistakes ininventorymaintenance, due totheft etc.

Complex securing of products throughhard-tags

Customer satisfactionthrough better productpresence, revenue increaseby 7,5% through reduction of out of stock situations

Reduction of wrongdeliveries by 80%

Increase of share of secured

products to 100%

Reduction of effort inlogistics / goods received by75%

Equipment of 25mio. clothes withsewed RFID chips

164

p p g g gy y

Inefficiencies ResultsUse of SCM


Category Management (CM) is a joint process of retailer and manufacturer, where product




165

g y g ( ) j p pgroups are managed as strategic business units to increase customer benefit and throughthis business results

Analogue to a product manager a Category Manager plans and coordinates the productgroup / category

Targets and tasks of Category Management

See figure 4-22

See figure 4-23



Figure 4-22: Targets of Category Management



166

Qualitative targets Quanti tative targets

• Composition of assortment for differenttarget groups and different types of salespartners

• Image improvement with respect tocustomer orientation, performance

competence, pricing credibility etc.• Exploring new customer segments• Using potentials resulting from

combination effects• Increase of customer loyalty• Developing profiles in retail competition• Pricing with high value added

• Early discovery of trends

• Increase of profitability (contributionmargin, revenue, revenue rate)

• Reduction of capital lockup, profitmaximisation through revenue and profitincrease

• Revenue increase through avoidance of out-of-stock situations• Increase of expenditure intensity of

customers• Reduction of cost-intensive promotions• Cost optimisation of product launches

Source: based on Seifert, 2004, p. 152: L ingenfelder / Kahler 2004, p. 124



Figure 4-23: Functions of Category Management



Source: Henric Hahne: Category Management. Interface zum Handel, in: Absatzwirtschaft, Nr. 3, 1997, p. 74.


Example: efficient composition of assortment




Products which

are important forthe target groupare not available

Optimisation of assortmentthrough composition of product groups acc. Tocustomer buying behaviour

Analysis of consumer paneldata etc.

Reduction of brandswithin a category

Customer satisfactionthrough good product

presentation and productavailability

Stock turnover increases

POS spacedesignedaccording to

targets of retaileror manufacturer,not on the basisof customerrequirements

Optimisation of shelf-idealposition of products on thebasis of customer behaviour

(e.g. video observation) Internal criteria such as

contribution margin areconsidered with secondpriority

168

p p

Inefficiencies ResultsUse of CM





Strong organisations, which aim at

expanding the ECR concept (ECR

USA and ECR Europe)

Strong expansion in some

industries such as food and

consumer goods with traceablesuccess

Focus of the implementation lies on

shelf-optimisation and Supply Chain

Management

Only few applications in certain industries such

as consumer goods and specialised dealer

Less focus on marketing aspects of ECR

Main challenges

− Building internal preconditions such as theinvolvement of further departments, but

also soft factors such as motivation,

attitude

− Cultural fit with partner

− Critical mass required due to high

investments in IT systems

− Disclosure of dat with the risk of data

misuse

− Inbuilt conflict potential between industry

and retailers

169

Achievements but


5 Analysis Tools for Market-Oriented Strategic Planning

5 Tools for Strategic Planning5.1 Key Performance indicators



170

Various methods for evaluating strategies, tools for analysing and selecting actual strategies

5.1 Key Performance Indicators

Starting point for each kind of strategic decision: see Chapter 1.4

Breakdown of the strategic situation regarding two aspects of analysis:

(1) Analysing the company

(2) Analysing the external environment






171


Key issues to be analysed in the context of the

sales strategy

Do the sales channels behave according tostrategy?

Do they fulfill their sales expectations?

Do they fulfil quality expectations?

Do incentive- and coordination-mechanisms work?

Which costs and earnings contributions are therefrom the different sales channels?

see figure 5-1

Implications for the sales

strategy and -management

Can management of the individual sales

channels beimproved?

Is a strategy changerequired to change thesales channel

strategy?



Figure 5-1: Stepwise contribution margin calculation of sales channels of a mobile operator



Sales channel

1

Sales channel

2

Sales channel

3

Sales Channel

4Contribution Margin I m € 338 788 421 207

per Ø customer and month € 13 18 21 30

Customer acquisition costs m € 73 174 88 59

per new customer € 156 236 234 207

customer retention costs m € 41 81 27 10

per Ø customer monthly € 2 2 1 1

Contribution Margin II m € 224 534 307 138

cots of marketing etc. m € 3 64 62 12

per Ø customer monthly € 0,1 1 3 2

Contribution Margin III M € 221 469 244 126

per Ø customer monthly € 8 11 12 19

Payback months 14 16 14 8


(2) Analysing the external environment




173

Additional key figures to be analysed for the SWOT-analysis according to chapter 1-4:

• Market potential• Market volume• Sales volume• Market shares

see Figure 5-2 see Figure 5-3

For strategic planning not only the current situation is essential, but the key performanceindicators have to be projected into the future

⇒ Forecasting methods


Figure 5-2: Relation Between Market Potential, Market Volume and Sales Volume




174

Market potential

Market Volume

Sales volume of

company A to F

A

BC

D

E

F



Figure 5-3: Different Growth Potentials in Sub Segments of the Cosmetics Market




175


growth

potential

growth

potential

Not completely exploited market –Large potential e.g. cosmetics for men

The market is largely exhausted,the growth potential is small, e.g.cosmetics for women


There is a large variety of methods which can be differentiated along two dimensions…




176

1. ... according to the type of variable

Development forecasts

Variables that are to be forecasted are regarded as independent or exogenous, i.e. theycannot be influenced by the company

Impact forecasts

Variables that are to be forecasted depend on variables that can be influenced by the company(generally marketing instruments are regarded as independent variables)

2. ... according to the use of statistical methods

quantitative methods:

Data is predicted based on data from the past and using statistical methods

qualitative methods (heuris tic methods):Use of expert knowledge for prediction, trust in intuitive-subjective elements


Figure 5-4: Use of forecasting methods in marketing (survey results)

(3)(1) (2)




177


(3)

Frequency of use

(if used at all)(A) Statistical-mathematical methods:1. Extrapolat ion of t rends

2. Moving average3. Regression analysis

4. Exponent ial smoothing

5. Simulation approaches

6. Input-output forecasting

(B) More subjective methods:1. Estimate by sales force2. Estimate by management (technical and

business)

3. Forecasts based on customer surveys

4. Forecasts based on product tests

5. Analogy method (e.g. historical

or geographical analogy)

6. Extrapolation of test market results7. Group estimates (Delphi method)

(1)

Use in % of

334 companies

(2)

Assessment of

reliability

Characteristics

Forecasting methods

73.767.735.932.915.914.4

hhmmss

ddbdgd

87.785.9

81.7

50.0

46.7

37.715.9

db

d

d

b

dd

hh

h

m

h

ms

Assessment of rel iabil ity: b =particularly good, d =average, g =poor (determined by a combination of ratings and percentages of averageforecast-actual deviations)Frequency of use: h =frequently, m =sometimes, s =rarely (clustering on the basis of averages)


5.2 Gap analysis

5 Tools for Strategic Planning5.2 Gap analysis



178

Principle: the planned development of a key figure (e.g. profit or turnover) is confronted withthe expected results at the time of the planning date

Gap analysis can be differentiated according to...

...old and new products to take the product life cycle into consideration

...strategic and operative gap

see Figure 5-5

Ansoff́ s Product-Market Expansion Grid might be an obvious solution to close the gap

see Figure 5-6


Figure 5-5: Gap analysis (strategic and operative gap)




179


Turnover / Profit

Time

Strategic

planning gap

Operative

gap

Target line

new business

Adjusted currentbusiness

current business

Planning date


Figure 5-6: Using Ansoff’s Product-Market expansion grid to close the gap

5 Tools for Strategic Planning5.3 Portfolio analysis



180


Turnover / Profit

Time

Expected development(development line)

diversification strategy

produc t-development strategy

market-development strategy

market-penetration strategy

without implementing

any further actions

Planning date

Originally plannedfigures (target line)


5.3 Portfolio analysis




181

Basis:Financial considerations about the composition of a securities portfolio in order to reach thebest mixture of investments regarding risk and return

Goal Choosing the best product program regarding the future development of return

⇒ Mixture of strategic business units that yield and consume financial resources

⇒ Consideration of interdependencies between business units

Principle:Integrating in a two-dimensional matrix a ...

• business component (strengths / weaknesses of the relevant business units) andan

• environmental component (opportunities / threats within the relevant

environmental structure)

⇒ The strategic business units of a company are shown to derive norm strategies on thisbasis


Steps:




182

(1) Dividing company into strategic business units (SBU)

The SBU is a single business or bundle of related businesses that can be planned separatelyfrom the rest of the company

It clearly differs from other product-market combinations (internal homogeneity, externalheterogeneity) regarding…

... customer needs (need of quality, price and service)... its own set of competitors (structure of competition)

... structure of costs

It has it’s own management that is responsible for strategic planning and profit performance.Furthermore, the management is able to reinvest a certain share of the profit on its own.

It is possible to establish and take advantage of a competitive advantage for each product-market combination.


(2) Definit ion of the key success factors




183

Which key figures are originally responsible for the success of a company?

⇒ PIMS project (Profit Impact of Marketing Strategies) of the Strategic Planning

Institute, Cambridge / Mass.

Up to now it is the most comprehensive examination of the correlation between the company’s

strategic variables and the achievement of corporate goals

Subject: Examination of correlations between 37 strategic key factors (e.g. marketing budgetetc.) as independent variables and especially profitability and cash flow as dependentvariables

Basis: about 450 companies with more than 3000 SBUs within each line of business


Result: market share is the central factor that strongly correlates with profitability and cashflow




184

flow

What is the reason for the high importance of market share for profitability?

• …• …

• The learning curve

The average costs per unit related to the product’s value adding process (without materialcosts) fall about 20 to 30 % after its accumulated production volume doubles

see Figure 5-7


Figure 5-7: The learning curve

C t i E it




185


Costs in Euro per unit

Cumulative output (experience)

1 2 4 8 16 321

2

4

8

6

10

In case of a 20%

drop in costs

In case of a 30%

drop in costs


The concept of the experience curve is background for the particular importance of two keyfactors:




186

factors:

Market share: The company, that achieves a higher market share, benefits from theexperiences the company succeeds with higher volumes of production and sales, leading tofalling costs

⇒ Highly compressed factor for the company / internal component

Market growth: ...

⇒ Highly compressed factor for the environment / external component

Two concepts of portfo lio analysis:

(1) Growth-Share-Matrix of the Boston Consulting Group (BCG matrix)

(2) General-Electric-Model of McKinsey


(1) Growth-Share-Matrix of the Boston Consulting Group




187

The two dimensions of this portfolio matrix are:

• relative market share:

• market growth: average annual growth rate in %

Furthermore:

• Turnover

On this basis: Plotting the SBUs in this matrix, which is subdivided into four cells

see Figure 5-8

SBU‘s market share

market share of the largest competitor


Figure 5-8: Growth-Share-Matrix of the Boston Consulting Group




188

Source: based on Becker, J.: Marketing Konzeption, 9. Auflage, München 2009, S. 425

M a r k e t g r o w t h r a t e ( i n % )

Relative market sharehighlow

l o w

h i g h

QuestionMarks

Stars

Poor Dogs Cash Cows

0 1.0... ...

0%

?


The main results to derive from this kind of portfolio are:




189

Understanding that different SBUs with different conditions according to competition anddifferent growth rates have to be managed differently

⇒Each SBU must, according to its strategic position, either yield or receive financial resources

⇒Each SBU must be arranged in a balanced company portfolio

The SBU’s position in the four cells indicates a different type of business and recommendedstrategy (norm-strategy):

see Figure 5-9, 5-10


Figure 5-9: Characteristics of the BCG Matrix and its Norm Strategies (incl. Product-Life-Cycle)

I Question Marks II Stars




190


I. Question Marks

Characteristics:SBU has to spent a lot of money to keep up withthe fast-growing market; Cash-Flow is clearlynegative

PLC: Introduction

Norm strategy:Either raise the market share considerably if the

prospect is good otherwise divest or just harvest

Characteristics:

SBU that has a large relative market share in amarket with a slowed growth rate; produces a lotof cash which enables the company to support

other SBUs.PLC: Maturity

Norm strategy:

Hold the market share or harvest

Characteristics :

SBU has a weak market share in a low-growthmarket. The cash flow might be negative orbalanced on a low level.

PLC: Decline

Norm strategy:

Cut the market share / divest

Characteristics:SBU as the leader in a fast growing marketearns a lot of money; to keep up with the marketand to fight off attacks it has to spend substantialfunds; Cash-Flow might be balanced

PLC: Growth

Norm strategy:Hold or increase market share

(expansion strategy)

II. Stars

III. Cash CowsIV. Poor Dogs


Figure 5-10: Product Life Cycle and the Course of Cash-Flow in the BCG matrix




191

Source: Hinterhuber, H. H.: Strategische Unternehmensführung, Bd. 1, 6. Auflage, Berlin-New-York, 1996 S. 163

Product Life Cycle

Direction of cash flow (the cash flow caused by the withdrawal was not taken into consideration)

10

M a r k e

t g r o w t h r a t e i n %

I

II

IIIIV

I n v e s t m e n t

C o n t r i b u t i o n

m a r g i n

0 0.5 1.0 2.0 4.0

Relative market share = Market share of the companyMarket share of the strongest competitor


(2) General-Electr ic Model of McKinsey




192

The portfolio is put up by two dimensions:

• Market attractiveness• Relative competitive advantages / business strengths

Main difference to BCG matrix: To measure the two dimensions strategic planners must identify the factors underlying each

dimension and find a way to measure them and combine them in an index (multifactor matrix)


Market Attractiveness is determined by:




193

• Overall market size and annual market growth rate

• Market quality• Energy and raw material supply• Environmental requirements (determined by degree of governmental intervention,

environmental protection regulations, …)

Relative competitive advantages are determined by:

• Relative market position, determined by market share, company image, type of competitiveadvantages etc.

• Relative productive capacity, determined by production profitability, condition of productionfacilities, number and location of production facilities etc.

• Relative R&D potential, determined by product portfolio, product quality, rate of innovationetc.

• Relative qualification of management and employees


Determining the values for each business: Scoring model




194

see Figure 5-11

Based on both indicators: Construct a matrix of nine cells

Depending on the SBUs’ position von der Position in the matrix: norm strategies

see Figure 5-12, 5-13


Figure 5-11: Scoring model (Hydraulic Pumps Market)

Weight Score (1-5) Weighted sco re




195

Market

Att ractiveness

Own competitive

advantage

Overall market size

Annual market growth rate

Historical profit margin

Competitive intensity

Technological requirements

Inflationary vulnerability

Energy requirements

Environmental impact

Social-political-legal

Market share

Share growth

Product quality

Brand reputation

Distribution network

Promotional effectiveness

Productive capacity

Productive efficiency

Unit costs

Material supplies

R&D performance

Managerial personnel

0.20

0.20

0.15

0.15

0.15

0.05

0.05

0.05

Must be acceptable

1.00

Weight0.10

0.15

0.10

0.10

0.05

0.05

0.05

0.05

0.15

0.05

0.10

0.05

1.00

4

5

4

2

4

3

2

3

Score (1-5)4

2

4

5

4

3

3

2

3

5

3

4

0.80

1.00

0.60

0.30

0.60

0.15

0.10

0.15

3.70

Weighted score0.40

0.30

0.40

0.50

0.20

0.15

0.15

0.10

0.45

0.25

0.30

0.20

3.40

Source: based on Kotler, P., Keller, K.L., Bliemel, F., Marketing-Management, 12. Aufl., München 2007, S. 101 f.


Figure 5-12: Market Attractiveness-Competitive-Position Portfolio Matrix (McKinsey)

Value added




196


M a r k e t A t t r a c t i v e n e s s

Relative competitive advantage

highmediumlow

high

medium

low

C o n s u m p t i o n o f r e s o u r c e s

33 67 100

33

67

100

0

Investment andgrowth strategies

Selectivestrategies

Harvesting ordisinvestingstrategies


Figure 5-13: Norm strategies of McKinsey Matrix (1/2)

Objective Holding or strengthening the competitive advantages




197

Source: Sander, M., Marketing-Management, Stuttgart 2004, S. 314

Investment

and

growth

strategies

j

Selective

strategies

Actions

Cash-flow:

g g g p g

Technical and marketing-related efforts must aim at eliminatingweaknesses, at consolidating or strengthening the market position andpreventing competitors from entering the market segments

Negative in the short run, positive in the medium or long term

Meaning: SBU contribute to future profit and growth and require large investments

Objective: Growth or profit

Actions SBUs require large investments with uncertain economic outcome andmight contribute to future growth of the company

A:Offens ive

strategiesCompany must build on competitive advantages (e.g. increasing therelative market share, lowering unit costs, increasing differentiation)

Cash-flow: Negative in short and medium term, positive in the long run

Meaning: Company has to select the most promising of these SBU to ensurefuture profit potential


Figure 5-14: Norm strategies of McKinsey Matrix (2/2)

B: Transition Consolidating investment/growth strategy or a harvesting/disinvesting strategy




Selective

strategies

Harvesting or

disinvesting

Actions: Cost cutting efforts, product differentiation, improvement of customerservices, pricing policy etc.

strategies

g /g gy g/ g gyto maximise the cashflow by economisation and without using up too many

resources

Cash-flow: Positive in the short and medium term

Meaning: SBU contribute to company’s current profit and require little investment tosustain relative competitive advantages

C: Defensive

strategiesCompany must hold relative competitive advantage and prevent competitorsfrom entering this market segment

Objective:

Act ions:

Maximise cashflow, minimise loss

Use of complete cost cutting potential and synergies in production and sales

skript strategic sales and marketing ws 2012

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