Value-Based Marketing Strategy: Transforming Old to New

1. Value-based marketing strategy

2. New marketing meets old marketing:New marketing wins

3. Agenda • Problems with traditional strategic marketing planning process • Products, brands and innovation • Price and value • Distribution channels and value chains • Marketing communications • The “new marketing” challenge • Marketing is strategy

4. Problems with traditional strategic marketing planning process

5. Ten steps of the strategic marketing planning process (McDonald 2007) 1 Mission Phase One Goal Setting 2 Corporate Objectives 3 Marketing Audit 4 Market overview Phase Two Situation Review 5 SWOT analysis 6 Assumptions 7 Marketing objectives and strategies Phase Three Strategy Formulation 8 Estimate expected results and identify alternative plans and mixes 9 Budget Phase Four Resource allocation and Monitoring Measurement and review 10 First year detailed implementation programme

6. PLANNING PROCESS 4 MAIN STAGES - A. ANALYSIS – data driven/market-place/company position within it/relative to competition B. OBJECTIVES – link to corporate strategy/ use ‘SMART’ technique C. STRATEGY – consistent with corporate strategy/general direction which will deliver the objectives D. TACTICS – the detailed action plans underpinning the strategy

7. Strategic Marketing Planning process • Requires one year to complete all stages • Needs hard data from detailed and in-depth analysis of market before company can make decisions • Undertaken by marketers/strategists without involvement of other people in organisation

8. Strategic Marketing Planning process • Requires one year to complete all stages • Nope not necessarily • Needs hard data from detailed and in-depth analysis of market before company can make decisions • Should be ongoing • Undertaken by marketers/strategists without involvement of other people in organisation • insane

9. Problems with strategic planning process • Based on ideas of “Planning School” • Machine assumption • produce each of the component parts as specified, assemble them according to the blueprint, and the end product (strategy) will result! • Often reduced to a numbers game of performance control that had little to do with strategy Source: Mintzberg et al (1998) Strategy safari, Hemel Hempstead, Prentice hall

10. Fallacies of Strategic Planning • Predetermination • Organisation must be able to predict the course of its environment, to control it, or simply to assume its stability • Impossible to predict discontinuities (e.g. technological breakthroughs or price increases) • Requires stability during strategy making Source: Mintzberg et al (1998) Strategy safari, Hemel Hempstead, Prentice hall

11. Fallacies of Strategic Planning • Detachment • It is through administrative systems that planning and policy are made possible, because the systems capture knowledge about the task… true management by exception, and true policy directions are now possible, because management is no longer wholly immersed in the details of the task itself. • Effective strategists .. immerse themselves in daily detail while being able to abstract the strategic messages Source: Mintzberg et al (1998) Strategy safari, Hemel Hempstead, Prentice hall

12. Fallacies of Strategic Planning • Failure of formalisation • Failure of: • forecasting to predict discontinuities • institutionalisation to provide innovation • Hard data to substitute for soft • Fixed schedules to respond to dynamic factors Source: Mintzberg et al (1998) Strategy safari, Hemel Hempstead, Prentice hall

13. Problem • Companies don’t have time to wait for plan to be developed • Rejected marketing and strategy (strategy departments closed in 1980’s) • Customers not accept being dictated to by companies and changed relationship – Customer is King

14. Old marketing is about marketing programmes structured/planned around traditional model operations/tactical New marketing is concerned with the underlying process of going to market and strategic choices Old marketing has not kept up…

15. Confronting revolution in markets Identifying renewal opportunities Developing new ways of doing business/new business models or reinvention The “new marketing” challenge

16. The “new marketing” challenge • Is it real? • Are markets revolutionised (since when?) • The need for renewal –is it new? • Is reinvention/revolution necessary or irresponsible? • Or is this a message for incompetent 2nd raters? • How did your firm get where it is? • What are its problems and opportunities?

17. Market revolution drives renewal and reinvention RENEWAL Coping/ adaptation mechanisms Disruptive pressures on existing business models REVOLUTION Radical market and customer change/trends Value-creating opportunities for new business models REINVENTION Designing new ways of doing business

18. Marketing is strategy “the fate of marketing hinges on elevating the role of marketing executives from promotions- focused tacticians to customer-focused leaders of transformational initiatives that are strategic, cross-functional and bottom-line oriented” Nirmalya Kumar, 2004

19. Marketing is strategy “the fate of marketing hinges on elevating the role of marketing executives from promotions- focused tacticians to customer-focused leaders of (transformational) initiatives that are strategic, cross-functional and bottom-line oriented” Nirmalya Kumar, 2004

20. Value-based marketing strategy

21. Agenda • Brand marketing • Relationship marketing • Value-driven strategy • The search for customer value

22. Three themes in marketing • Branding • Relationship marketing • Value

23. Branding is central to conventional marketing thinking – brand the product/service, company, person, country, etc. Brands bring important benefits to customers (reduced search time) and companies (brand equity or value) Brand marketing

24. Brand marketing • Branding can transform markets • Cool brands often win • BUT – brands do not make you unbeatable • Coca-Cola • Levi-Strauss • Marlboro

25. Coca-cola • Most valuable brand in world • 1999 had 50% market share of world soft drinks market • Problem – world fell out of love with carbonated soft drinks • Tried to keep up with fragmenting soft drinks market • Introduced bottled water, flavoured water, juice-based drinks, flavoured iced tea and coffee drinks and energy drinks • Use local brands • Products not always branded with Coca-cola name • Lost market share to Pepsi

26. Dazani • UK customers assume bottled water from natural sources ie springs • Coca- Cola purified water from tap water in London • Origin came to light when a complaint was made to the British Food Standards Agency over Coke's use of the word "pure" in its Dasani marketing - implies that tap water is 'impure'. • Like Nestle, McDonald's and Cadbury Schweppes, Coke makes a gratifying target for journalists, in that all those companies trade heavily on their brand. • Source: Guardian March 4, 2004

27. Brand marketing • Issues that go wrong with branding • blind branding • private brand competition • brands which are liabilities • counterfeit brands • wrong brand trajectory, e.g., Stella Artois “wife beater”

28. Brand marketing • Strategic brand management is the priority not creativity • Does the brand create customer value and how?

29. Customer relationship provides the basis for market segmentation Contrast the relationship the customer wants (long-term vs short-term) with the closeness wanted in the supplier relationship (close vs distant) Relationship marketing

30. Value has become the central focus of strategy (because there is no choice) The key issue is now value innovation (in the customer’s terms) But value does not have a single meaning e.g., operational excellence vs. customer intimacy vs. product leadership (Treacy and Wiersema, 1995) Value-driven strategy

31. Treacy and Wiersema- Value Disciplines • Operational Excellence • Providing customers with reliable products or services at competitive prices and delivered with minimal difficulty or inconvenience • Customer intimacy • Segmenting and targeting markets precisely and then tailoring offerings to match exactly the demands of those niches • Companies combine detailed customer knowledge with operational flexibility – can respond quickly to almost any need and creates customer loyalty • Product Leadership • Offering leading-edge products and services that enhance the customer’s use or application of the product • Make rivals goods obsolete Source: Treacy, M. and Wiersema, F., 1993, Customer Intimacy and Other Value Disciplines Harvard Business Review January- February

32. Choice of strategic value pathway Source: Barnes et al (2009) Creating and Delivering your Value Proposition, Kogan Page p 46

33. The danger of making assumptions “we know what our customers want” “bung in some customer service” “just make it cheaper” or, perhaps, take customer value seriously? The search for customer value

34. Value as rational cost/benefit analysis Value migration value migrates from one attribute feature to another different people buy different value Customer value is complex, multi-dimensional, unstable and idiosyncratic, but it is what matters The search for customer value