Marketing Management 2 Course Wrap-Up:

Making Good Strategic Marketing Decisions

The end of your reign over a multi-million dollar Markstrat firm

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Session #16:Agenda for MM2– MARKETING STRATEGY

Tips for Writing a Good ExamQuick & Dirty Course OverviewMarkstrat Overview (Part I)FinaleCourse Evaluations

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My own ‘Game Plan’for Responding to Case Exams

First skim case and carefully read the questions Then read case carefully marking parts relevant to

answers Then for each question

Go over case selectively taking notes about answers Write answer

Before answering questions out-of-order, make sure there are no significant interdependencies

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Suggestions for Doing Well in Exams: An Exam Taker’s Perspective

If exam seems difficult do not panic; you are (most likely.. ) in good company

Assumptions Feel free to make reasonable assumptions.

BUT not assumptions that completely trivialize the question. Do not assume that you are necessarily ‘not getting it’ if you cannot

find data you feel is needed. Bullet-form presentation tends to be more effective (on average).

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Suggestions for Doing Well in Exams: A Grader’s Perspective

Be considerate of grader (e.g., legible handwriting & order matter; being eloquent generally doesn’t)

Be sure to explain your reasoning No need to repeat what you said elsewhere, but

important to direct grader to what & where the point was previously made

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Suggestions for Doing Well in Exams: A Grader’s Perspective (cont.)

Answers are generally not compensatory Plan your time carefully

Collect points Try to write ‘something reasonable’ about every part of each

question, if only how you’d answer it if you had time

When it doubt, do add (sometimes even multiple options)

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Key Lessons from Course

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Key Lessons from Course

Good External Focus is CriticalCompetitors

Carefully evaluate competitive environment (e.g., strategic market definition, competition assessments methods; American Airlines, Sealed Air, BMW, Zantac)

ConsumersCarefully evaluate customer preferences (e.g.,

semantic scales, MDS, conjoint; Optical Distortion, market research techniques, Stew Leonard’s, Sealed Air, Car driving video, Makstrat)

KEY SLIDE

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Key Lessons from Course (cont.)

Anticipate, understand, & create change Competitors (e.g., American Airlines, Zantac, Vodites)

Consider abilities & motivations Consumers (e.g., Sealed Air, BMW)

Understand & fulfill customer needs (e.g., reason-based choice, loss aversion, etc. ideas; BMW, Zantac, Vodites)

Seek gaps/opportunities (e.g., BMW, Sealed Air, Zantac, Sonites) Build on strengths & offset weaknesses (e.g., BMW, Zantac)

Think several steps ahead

KEY SLIDE

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Key Lessons from Course (cont.)

But to truly succeed you must alsoFocus, especially if resources limited (e.g., Zantac, successful

Markstrat firms)

Implement effectively (e.g., Optical Distortion, Zantac, Markstrat)

Have contingency plans (e.g., BMW, Zantac, successful Markstrat firms)

Shape consumer preferences (e.g., reason-based choice, loss aversion, manage customer perceptions ideas; BMW, Zantac, Vodites)

KEY SLIDE

If all else fails:

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Key Lessons from Case Studies

Sealed Air: External focus & fit is criticalCritical to consider state & expected changes in:

Customer needs; Competition; Environment.

Internal policy very important, but cannot ignore external realities American Airlines: Competitive DynamicsDifficult to predict competitive reactions Critical to assess motivations of all significant competitorsCompetitive analysis must consider outcome sequences Price competition– very difficult to “win”

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Key Lessons from Case Studies (cont.)

BMW: Changing “Rules of the Game” Beware of ‘holes in the market’ Examine & challenge “rules of the game” Most competitive advantages will not last

Optical Distortion: Successfully introducing really new products is very difficult and

most likely to fail (for variety of reasons) Simple ‘implementation’ problems can kill an otherwise good product

Anticipate & confront consumer objections to product adoption Various types of risks

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Key Lessons from Case Studies

Zantac: Attacking & Defending Market LeadershipMinor advantage can ‘win game,’ with good marketing (positioning &

4P’s) Price: understand customer perception (e.g., quality) & economic

incentives (e.g., who pays, price sensitivity)

Sales force: strong effort Advertising: focused & clear messages

Attacking a Market Leader (despite disadvantages e.g., size, resources) Focus Consider strategic partnerships First, attack under-defended markets & competitors’ “blind spots” Anticipate reactions (understand motives, past behavior), have contingency plans

Defending Market Leadership Seek gaps (between offerings & customer needs), close them first (before competitors)

Develop new segments; have high levels of marketing investments

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Major (Crude) Marketing Strategy Ideas to Consider

Sustainability of Competitive Advantages: You can create & re-define markets, but so can competitors + customer preferences evolve over time anyway specific competitive advantages will not lastPlanning: Strategic thinking cannot be done one step at the timeResource Allocation Rule: What matters is the marginal, not the average effect of marketing spending.Performance Diagnostics Rule: Don’t focus solely on performance (e.g., sales) to analyze a firm’s position. Understand what drives results (AIDA).Determinant vs. Important Attributes: An important attribute is determinant only if it differentiates among products.Price ( /smearing) War: Rarely does anyone win; beware not to start one by mistake.

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Assessing & Shaping Customer Preferences

Assessing Customer Perceptions & Preferences MDS: When customer perceptions are shaped by aggregate factors that cannot be

articulated or evaluated easily Conjoint Analysis: Customers may be unable or unwilling to indicate their

preferences for some attributes Semantic Scales: when customers think in terms of a few well-defined attributes Overall: All methods give excellent data, when employed effectively Other Methods: Many useful methods available (qualitative)

Tools for Strategic Shaping of Customer Preferences Reason-Based Choices (e.g.: Attraction Effect, Meaningless Differentiation) Loss Aversion & Framing (e.g.: Endowment Effect, Status Quo Bias, pioneering advantage) Perception Management (e.g., fill ‘empty’ time, deflate expectations)

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Diagnose & Address Sales Problem/ Success: A Hierarchy of Effects (/ AIDA) Viewpoint

Effect Measure Main Forces Information Your DecisionDo customers know about us?

Awareness advertising, forgetting, share-of-voice

advertising experiment, comp. ad spending

advertising

Do customers want to buy us?

Purchase intentions

customer perceptions, product features, advertising, competition

MDS, semantic scales, conjoint analysis

targeting, positioning, product, price, ad message

Can customers buy us?

Distribution coverage

sales force, ‘feet-on-the-street’,product, price, ads

sales force experiment, comp. sales forces, MDS

sales force (size, allocation), product, price, advertising

Do retailers get enough products?

stock outs maturity of segment, product attractiveness

market forecasts, MDS

An effective “higher” step increases your potential at “lower” stepsIf ANY step is bad, effectiveness of all “lower” steps decreasesTo allocate resources effectively, you must understand marginal effects of increased/ decreased spending

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Attributes of Innovations that Improve/Detract from their Chances of Adoption by Consumers

The Relative advantage of the innovation over the products/procedures it is designed to supersede.Its perceived complexity.Its compatibility in use with present behavior patterns and complementary products.The ease with which its features (especially its benefits) can be observed and communicated.The degree of risk (physical, financial and social) attached to adoption of the innovation in preference to existing products or procedures.The extent to which the innovation can be tried on a limited basis before being adopted on a large scale, permanent basis.

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Markstrat

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What Tends to Surprise StudentsHow small factors become critical as competition drives firms to new heightsWhy? Informed customers choose the product that best suits their needs

How hard it is to build a sustainable competitive advantage Why? In the absence of unique capabilities temporary advantages are competed away

Difficulties in assessing the right figures (e.g., market potential)Why? One must search for patterns, discount for sampling error; then forecast with a blend of data, models & judgments; AND– not expect perfect accuracy

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Common Significant Pitfalls

Heavy anchoring on present in planning desired future

Spreading resources too thinly

Lack of consistent direction, being reactive,

slow to change,

insufficient contingency plans

Not anticipating competitive moves

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Advertising/Sales Force for Sonite Brands

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P0 P1 P2 P3 P4 P5 P6 P7

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Example: Artemis Industry

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Spreading Resources Too Thinly: Cupid’s Marketing Spending per Sonite Brand

10001500200025003000350040004500500055006000

P0 P1 P2 P3 P4 P5 P6 P7

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Insufficient Preparation of Contingency Plans

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Why: Information Gathering

Over-confidence Markstrat: how can you improve SIGH? It has a 66% share.

SmithKline: how can you improve Tagamet? Defining customer perceptions from your own perspective

Markstrat: more-power/ lower-price is better. SmithKline: Tagamet’s side effects are a non-issue

Focusing on available & easily process-able information Markstrat: conjoint & semantic vs. MDS or combination

BMW: using preferences of European (German) consumer to predict behavior of American consumers

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Why: Forecasting

Forecasts for Shipbuilding

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75 80 85 90 95Actual 1976 19801984 1988

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Why: Analysis and Conclusions Strategic thinking is not forward looking enough

Usually only one move in advance (if at all) Markstrat: must look at least 2 to 3 periods ahead BMW: not anticipating an end of the conspicuous consumption era

Bad predictions about future change Markstrat: not paying attention to market evolution; not considering

competitors’ motivations, abilities & competitiveness; wishful thinking American Airlines: did not anticipate uncooperative ‘players’ Smithkline: did not anticipate Glaxo strength / success

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Why: Feedback and Learning

Experience is inevitable; learning is not No detailed record of assumptions and expectations

Adjust predictions after seeing results (hindsight bias)

Attribution of success and failure (fundamental attribution bias)

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Marketing Beyond P2

This is a core class; many topics are covered in greater depth elsewhere electives

Consumer Behavior Marketing Research Industrial Marketing Strategy (InduStrat) CRM, e-marketing, Retailing, Communications, Branding, Healthcare

Marketing… Future core courses Independent study PhD Program

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