Marketing

Strategies and tactics: the Cornerstones of Conventional Planning

Marketing and Strategy
Using Tested Concepts and New Ideas for Marketing Strategy.

 

STRATEGIES AND TACTICS: THE CORNERSTONES OF CONVENTIONAL PLANNING

Strategy is conventionally thought of as the overall game plan or blueprint that guides the organization toward achieving its objectives. Tactics are the detailed, individual activities that the organization undertakes to carry out the strategy. They specify how the elements of the marketing mix-the four Ps discussed in Lesson 1-will be allocated, and they allocate manufacturing, capital, people, and other resources as needed.
With the help of a strategic plan, members of the organization can develop tac­tical plans that are much more detailed than the strategic plan. A written plan per­mits others to evaluate the reasoning and assumptions that underlie the firm’s objectives. The plan helps to coordinate the activities that must be implemented to carry out the plan. It also serves as a control device: Actual results can be compared with the intended results outlined in the plan, and adjustments can be made if neces­sary. This formal view of the plan has not been entirely abandoned, but managers today are more likely to see vision or mission as driving the company, above strategy in the strategy-tactics hierarchy. They also may allow more leeway for employees than formal tactics and controls once did.
Marketing plays an important role in the firm’s strategic plan by providing spe­cific information about the firm’s current market position and its opportuniti6s for future market positions. Marketing also participates in the organization’s planning process by developing specific strategies and tactics for products, customers, distri­bution channels, and the like. These will be incorporated in varying degrees into the organization’s formal strategic plan, and will also form a stand-alone marketing plan to be followed by people in sales, product development, and other functions.
The process of strategic planning rests on assumptions held by the planner. As­sumptions concerning expected responses to marketing actions will shape the mar­keting strategy and tactics. Assessment of the outcomes allows the planner to validate those assumptions or create new ones. The importance of sound assumptions cannot be overemphasized.
Feedback provides the basis for evaluating and revising assumptions. Learning by feedback comes through experiencing the plan-execution-feedback process illus­trated in Exhibit 2.1.

See Exhibit 2.1

In the top-down approach, which was once the norm for most companies, the task of charting an overall strategy for an organization rests mainly with top manage­ment. That strategy then guides the decision making of managers at each organiza­tional level. Many firms now employ bottom-up planning, in which plans developed at the lower levels of the organization are blended into a master strategic plan. Such a plan may turn out to be more marketing oriented than a plan formulated by the top-down method, mostly because it is created by those in daily touch with the cus­tomers, the competitors, and the realities of operation. As a Fortune article pointed out, the strategic watchwords for the first half of the 1990s were “focus and flexibility.” Focus means determining what you do best and building on it. It originates at the top. Flexibility means drafting several possible scenarios for the future so the organization can be ready to explore opportunities as they arise without having to shoot from the hip, and it also means giving the bottom enough freedom to be truly flexible.

The 1980s: a Turning Point for Marketing And Strategy

MARKETING AND STRATEGY
Using Tested Concepts and New Ideas for Marketing Strategy.

 

THE 1980S: A TURNING POINT FOR MARKETING AND STRATEGY

If any single factor can be blamed for the death of strategic planning, it must be the failure of the U.S. economy to compete globally during the 1980s. This economic bot­tleneck in the United States forced a reexamination of every aspect of business man­agement. And even though the economy rebounded in the 1990s, that examination revealed too many warts for anyone to want to return to business as usual. The failure of conventional strategies and management methods became painfully obvious in the 1980s as the trade imbalance in categories such as autos, machine tools, consumer electronics, semiconductors, and textiles took a nasty turn for the worse on the econ­omist’s charts. A report from MIT’s Commission on Industrial Productivity summed up management’s initial response to the problem:

The decline of the U.S. economy puzzles most Americans. The qualities and talents that gave rise to the dynamism of the postwar years must surely be present still in the national character, and yet American industry seems to have lost much of its vigor. In looking for ways to reverse the decline, it is only natural to turn to the methods that succeeded in the golden years of growth and innovation. Many business managers have adopted just this strategy. The results, unfortunately, are rather like those of a man who keeps striking the same match because it worked fine the first time.
This failure to measure up to global competition left the people at Xerox look­ing through their pockets for another book of matches. Xerox’s story is an excellent il­lustration of what is happening to planning in U.S. businesses at this critical turning point in history. In 1974, Xerox had a stunning 86 percent world market share for photocopiers. What could possibly go wrong? As discussed shortly, conventional plan­ning models assume that strength and profits flow from strong market shares. But as new competitors, such as Ricoh and Canon, entered the market, Xerox fell back, all the way to a 17 percent market share in 1984.8 If strategic planning really was king, Xerox’s managers would have been beheaded! The company began to climb back out of its hole in the latter half of the 1980s, regaining lost share and improving quality. Along the way, Xerox invented new ways of planning and implementing strategy, and adopted many of the best techniques used by its Japanese competitors. We’ll start with a quick review of the planning models that led companies such as Xerox into so much trouble.
It is easy to dismiss the old approach to planning as worthless, but this is not fair. Managers today cannot ignore the old wisdom, but they also cannot rely on it to provide competitive advantage. One must know yesterday’s techniques to play the game, and must pioneer tomorrow’s techniques to win it. One must realize that the changing environment requires new tools, and the old tools by nature lose their edge when everyone learns to use them. As this lesson’s opening quote suggests, there is a sort of arms race in strategy, with the advantage going to the innovators. But, al­though “smart missiles” may now carry the day, it would still be folly to enter the bat­tlefield without a rifle. Business strategy is similar: Today’s planners must master both the old and the new. (And then, most likely, invent something of their own any­way. But more on that later!)

Marketing And Strategy

MARKETING AND STRATEGY
Using Tested Concepts and New Ideas for Marketing Strategy.

 

If the purpose of strategy is to gain competitive advan­tage, then by implication theories of strategy should be continually in flux. Any new insight that obtains wide currency. . . loses value in providing additional com­petitive advantage . . . This self-destructive aspect of strategic insight. . . has received limited attention, as has the attendant need to be continually innovative and creative.

Paul Schoemaker,
Graduate School of Business.
University of Chicago

If there’s a hell for planners, over the portal will be carved the term “cash cow.”

Stephen Hardis,
Vice President of Planning,
Eaton Corporation

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If theories of strategic planning should be “continually in flux,” as Paul Schoemaker observes in the first of our opening quotes, then all is well with the world, Because there cannot be any field more turbulent or unstable in the entire management panoply than strategic planning and its alter ego, marketing planning.
“Strategic planning is dead; long live strategic planning!” seems like an appro­priate way to begin this lesson, for it is necessary both to mark the passing of the old strategic planning and to note the exciting emergence of entirely new approaches, much as the succession of kings was once heralded. But the problem is, nobody seems quite sure who the rightful heir to the throne will be.
Since its birth in the 1950s and 1960s, strategic planning reigned by giving managers a new and exciting set of more marketing-oriented tools for analysis, plan­ning, and control. Innovators such as the Boston Consulting Group and General Elec­tric discovered the wisdom of identifying opportunities based on market analysis rather than solely on financial analysis, and their philosophy and techniques spread rapidly throughout the 1970s and into the 1980s. But strategic planning’s growth stalled in the 1980s, with many companies abandoning their large planning staffs and forsaking more complex analytical methods and planning processes, and by the begin­ning of the 1990s, it was moribund. When Gary Reiner of the Boston Consulting Group wrote in 1989 that “planning is passé,” it was clear that a succession was immi­nent. The problem was that the old king had left no legitimate offspring, so managers must find their own. They face the daunting task of planning in the face of great un­certainty and rapid change, and without any simple prescriptions guaranteed to do the trick. As Michael Porter of the Harvard Business School sees it, “The state of practice in this area is very primitive.”
What has replaced the orderly strategic planning cycles of the 1980s? The ex­perts offer many answers, but no single approach has been sufficiently successful to rein in peace for very long. David Aaker of the Haas School of Business at UC. Berkeley believes that strategic market management displaced strategic planning in the mid-1980s because “the planning cycle is inadequate to deal with the rapid rate of change that can occur in a firm’s external environment.” And he characterizes this new market-driven approach to strategy as being highly responsive to the “strategic surprises and fast-developing threats” of the modern marketplace.
Strategic market management is like a new, faster, and more flexible strategic planning in that it encourages “real-time” response to external changes, rather than tying an organization’s rate of change to its annual planning cycle. In theory, at least, this rapid-response approach to strategy should keep businesses on or above the pace of change in their markets, allowing them to anticipate, even lead change.
But the most popular form of business strategy in the 1990s is the massive “re­structuring” that is generally accompanied by a major downsizing and a closing of fa­cilities and/or sell-off of subsidiaries or brands. The daily financial news should provide you with fresh examples whenever you read this lesson. Here’s just one typ­ical example from The Wall Street Journal on the day we wrote this paragraph:Tool and hardware maker Stanley Works swung to a second-quarter loss because of a charge for a restructuring program that includes closing 53 of its 123 plants and elimi­nating about 4,500 jobs, or 24 percent of the company’s workforce.The popularity of this sort of massive restructuring, with its deep cuts of prod­uct lines, divisions, facilities, and people, is the strongest possible evidence that strategic planning as practiced today is unable to anticipate and prepare for change. If companies grew and changed along with their markets, they would never get so profoundly out of alignment as to necessitate closing a third of their plants or firing a fourth of their people.
The failure of formal planning processes to anticipate important changes and align the organization with them in advance led Henry Mintzberg, a strategy expert from McGill University, to title his major review of the field The Rise and Fall of Strategic Planning. The king is dead. Long live the new king.., whoever he may be!

Why split hairs? Because many people and many managers think U.S. organiza­tions have already adopted the marketing concept, whereas in fact its essence is still missing at most companies.

PEL & Dawlance – Introduction

PEL (Pak Electron Limited) and Dawlance both are Pakistani companies engaged in same business of Home Appliances. However, PEL is also making Power Products like Energy Meters, Transformers, Switch Gears etc. PEL is considered pioneer of eletrical appliances in Pakistan as it started its activities in 1956. PEL was taken over by Saigol Group of Companies. PEL is awarded SuperBrands Pakistan 2007-08. The Brand Ambessdor of PEL is Hadiqa Kayani which is famous singer of Pakistan.

Dawlance refers to reliablity and durability. Therefore, Dawlance products is generally considered as reliable and durable. One more thing I want to add here that, they are directly hitting the minds of viewers/readers by saying “kyun k Dawlance reliable hai”. Dawlance was established in 1980. Initially they started their business with referigerator manufacturing but now they are making refrigerators, deep freezers, washing machines, small appliances, air conditioners, televisions etc. There is no brand ambassador of Dawlance. Dawlance has become the largest company engaged in appliances business. Their customers are Middle-Upper, Upper-Lower, Upper-Middle-Class, Upper-Upper Class.

The Essence of Marketing — the Customer First, Last, and Always

Nothing is worthwhile unless it touches the customer.

–Edgar Woolard. CEO. DuPont’

As companies have downsized and tried to deliver services with fewer employees, customer satisfaction has fallen dramatically.

— American Sociery for Quality Control, reporting on the American Satisfaction Index

There was a tie when companies had never heard the name of marketing. Either they sold products or they didn’t sell them, depending on the success of the salespeople or retailers who were charged with making the sale. But even though the fundamental idea of marketing — to focus on how to better satisfy consumer– has been with us in a formal way only since 1950s, the message itself is timeless. You do not need a formal Marketing Department to “do” marketing, since it is most fundamentally a way of looking at your business. It is looking at your business from your customer’s point of view–not always a flattering perspective.

In fact, many businesses today still do not do formal marketing. The roadside vegitable stand has no marketing department, and doesn’t need one. Nor do many larger local businesses, and most entreprenuerial success only add marketing departments after they have made their first million. But whether or not there is a formal marketing department, every organization must do marketing to survive–and must do it exceptionally well to thrive.

Nobel 21″ Flat Screen Color Television – 21E16PF (Music Engine)

Today I bought a new television which is assembled in Pakistan at the price on which I could buy Samsung 21″ TV. Well… you guys might be thinking that I am so stupid. Why didn’t I purchase Samsung or any other brand? The reason is that there is no difference between motherboard of Samsung and Nobel. The only difference is Brand Name. The picture quality/resolution is perfect and I am loving it.Here are some feature of Nobel 21″ Flat Screen Color Television – 21E16PF:

• Ture Flat TV
• Hi-Power Top Woofers
• Multi System
• AV Stereo
• Sound Equalizer
• 255 Channels
• FS Tuner
• Full Function Remote Control

The voice quality is simply awesome and the woofers on the top of TV are working perfectly fine. The price is Rs. 10,000 (Approx. $160 US). There is 5 Years Tube and 2 Years Parts Warranty, what else you need? I must say that it’s the best TV for that low price. I will keep you updated about the performance of the TV but so far its going great.

Expanding the E*Trade Brand

E*Trade was founded in 1991 and partnered with America Online and CompuServe in 1992 to offer trading to users of those portals. In 1996, E*Trade established its own Internet site. That year, E*Trade spent $25 million on its first national advertising television campaign, which attempted to convince viewers: “Someday, we’ll all invest this way” and aired on popular network programming. Accompanying the television spots were two-page newspaper ads and Internet banners provocative lead-ins such as “Spank a Yuppie” and “Low Commissions. Leave your kids more to fight over.”E*Trade hired Goodby, Silverstein & Partners in 1999 to develop more national advertising. Goodby’s first campaign, titled “It’s time for E*Trade,” helped the company become one of the top four most recognized Internet brands in 1999 as ranked by Opinion Research Corp. According to agency co-founder Rich Silverstein, “In four months, we built the brand.” CEO Christos Cotsakos maintained that, “brand building was always first and foremost” among the company’s priorities.

The company launched a major ad blitz for the 2000 Super Bowl by buying two spots during the pre-game show, another two spots during the game, and sponsoring the halftime show. E*Trade “dominated the commercial showcase,” according to Brandweek. The memorable “Monkey” ad was named as the fourth-best Super Bowl ad of all time by an online consumer vote. As a result of its Super Bowl ad blitz, E*Trade enjoyed a 600 percent increase in new accounts in the quarter following the Super Bowl compared with the same period the previous year. E*Trade maintained a consistent ad push following the Super Bowl, spending $522 million – or 38 percent of revenues – on marketing.

In 1999, E*Trade diversified beyond online trading with its $1.8 billion purchase of online banking firm Telebank, which it renamed E*Trade Bank. E*Trade hopes to add other services to its site and become “a one-stop financial services supermarket.” Additionally, E*Trade sought to expand beyond the Internet and establish a brick-and-mortar presence that would allow it to compete with traditional brokerage firms. In August 2000, E*Trade opened the first of its brick-and-mortar locations, called “E*Trade Zones,” inside a SuperTarget store. The E*Trade Zones feature customer service representatives and a full complement of services from trading to bank transactions.

E*Trade also planned a network of 18,000 automated-teller machines in gas stations, drugstores, and supermarkets throughout 48 states, which the company upgraded to provide customers with access to brokerage accounts as well as bank accounts. To add to its list of services, in 2000 E*Trade partnered with Ernst & Young to offer both on- and offline investment advice to clients.

In 2000, E*Trade processed 150,000 transactions daily from its customer base of more than 3.6 million. In 2001, E*Trade was the third largest online broker in terms of number of accounts.

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[1] “Bank on It.” Brandweek, December 11, 2000; Louise Lee. “Not Just Clicks Anymore.” Business Week, August 28, 2000; Terry Lefton. “Jerry Gramaglia: Trading Up.” Marketers of the Year, Brandweek, October 11, 1999; Deborah Lohse. “E*Trade Campaign Asks Investors To Skip Brokers for On-line Service.” Wall Street Journal, September 5, 1997, p. B5

Pricing Showdown in the Cereal Market

The cereal category experienced interesting price competition in the late 1980s and early 1990s. During this time, the cereal industry as a whole aggressively raised prices on items as much as 5 to 6 percent every eight months. In order to disguise the higher prices, cereal makers attempted to offset them with a host of coupons, trade promotions, and other deals (such as two-for-the-price-of-one and buy-one-get-one-free or “bogo” offers) – a strategy dubbed “price-up, deal back.”

On April 4, 1994 (“Cheerios Monday”), General Mills, the number two player in the $8.7 billion cereal market with a 29 percent share, announced that it would lower prices between 30 cents and 70 cents a box (or 11 percent on average) on its eight most popular ready-to-eat cereals (Cheerios, Honey Nut Cheerios, Multi Grain Cheerios, Wheaties, Whole Grain Total, Golden Grahams, Lucky Charms, and Trix). General Mills also announced that it was cutting coupon and other promotional expenditures by $175 million.

General Mills was motivated by a number of factors. With prices as much as 25 percent lower, private label cereals had begun to make some significant inroads on sales, increasing their share of the market to 5.2 percent. Because of pervasive sales promotions, more than 60 percent of all cereal purchases were being made with some kind of coupon or discount. As Steve Sanger, president of General Mills, stated:

“The practice of pricing up and discounting back has become more and more and more inefficient for manufacturers and retailers and burdensome for consumers. There’s tremendous cost associated with printing, distributing, handling, and redeeming coupons. Because of this inefficiency, the 50 cents that the consumer saves by clipping a coupon can cost manufacturers as much as 75 cents. It just doesn’t make sense.”

Kellogg, the market leader with a 36 percent share, followed quickly with an announcement that it would stop offering the buy-one-get-one-free offers and attempted to hold firm on price increases by cutting costs. Recognizing a competitive opportunity, marketers of the number three and four cereal suppliers, Post and Quaker Oats, initially decided to continue to offer $1-plus coupons. Eventually, however, Post enacted a 20 percent across-the-board price cut and began to issue a new, all-purpose coupon that would apply to all sizes of all its cereals. Kellogg soon thereafter reduced prices an average of 19 percent on nearly two-thirds of its line.

The cycle of price cuts perpetuated by the bitter price war was bad for the bottom line. Kellogg, as the leader, suffered significantly as a result of the price wars. Kellogg’s profit margin shrunk, sales declined, and its market share plummeted. In 1998, Kellogg raised cereal prices an average of 2.7 percent, its first increase since 1994. This move signaled the end of the cereal price wars, but it did not solve Kellogg’s problems. In 1999, General Mills grabbed the domestic market share lead from Kellogg’s.

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[1] Richard Gibson, “General Mills to Slash Prices of Some Cereals,” Wall Street Journal, April 5, 1994, p. A-4; John McManus, “Sanity’s at Stake in Steve Sanger’s Cereal Showdown,” Brandweek, April 25, 1994, p.16; Betsy Spethman, “Kellogg Counters Big G Price Cuts: ‘Bogo’ a No Go June 1;” Brandweek, April 25, 1994, p.3, Julie Liesse and Kate Fitzgerald, “General Mills Price Cuts Fail to Stem Couponing,” Advertising Age, August 1, 1994, p.26. “Kellogg Raises the Prices of Some Cereals.” Orange County Register, December 15, 1998; Betsy Spethmann. “Breakfast in Battle Creek.” Promo, May 30, 2000

The Challenges Of Launching a New Brand

In 1996, Seagram Co. executives noticed a change in the vodka market. The popular Absolut brand of vodka, which Seagram distributed, was being replaced on the top shelf of trendy restaurants and nightspots by upstart “superpremium” vodkas like Grey Goose, Ketel One, and Belvedere. These superpremium vodkas came in tall, elegant cut-glass bottles and typically cost up to four dollars per glass more than Absolut. Research indicated that some of Absolut’s core customers had switched to the premium brands. Seagram sought to counter this trend by developing a high-end vodka in partnership with Absolut named Sundsvall after the Swedish town where it was distilled.

Sundsvall was positioned as a “super-Absolut, whose pedigree would make up for its late arrival and obliterate the rival upstarts.” Bottles of Sundsvall cost $30, twice as much as Absolut and more than four dollars more than Belvedere. While the other bottles in the category were made from either cut or frosted glass, the Sundsvall bottle was designed with clear glass and an orange shrink-wrap top in order “to stand out from the crowd.” In 1998, Absolut and Seagram launched the brand with a modest $2 million advertising budget. The companies devised what they called a “discovery” strategy, where Sundsvall was initially marketed only in eight metropolitan test markets in order to build buzz. In these markets, Sundsvall sponsored or hosted special events, such as invitation-only dinners at expensive restaurants where the brand was served exclusively.

When Sundsvall launched nationally, it garnered a lukewarm reception. One problem: premium brands like Belvedere had already been on the market for three years. Another problem was the packaging. Bartenders agreed that the product was high quality, but one bartender claimed the bottle “was too discreet for where it was competing.” Compared with the competition, Sundsvall sold at a plodding pace. For example, one Boston restaurant typically poured through two bottles a day of a competing brand, while a single bottle of Sundsvall might last three months there. In 1999, Sundsvall sold 1,000 cases of product, compared with sales of more than 100,000 cases each for Belvedere and Grey Goose.

A little more than a year after the launch, Absolut stopped production of Sundsvall and ceased all marketing activities. For a company that achieved incredible success marketing its flagship product over the last two decades, the disappointing Sundsvall brand was considered a major failure.

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[1] Shelly Branch. “Vodka on the Rocks: This High-End Brand Was an Absolut Flop.” Wall Street Journal, December 21, 2000.

What is a Brand?

“A brand is a name, term, sign, symbol, or design which is intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors”.From the above definition it is clear that a brand has a unique name which is used to identfiy the product (goods or services) of one seller/manufacturer/producer and the main purpose of giving a brand name is to differentiate one’s product from other competitors who have same product with different name.

Lets say, two companies ‘A’ and ‘B’ are producing sugar and if sugar comes in market without any brand, it is useless. The companies are going to give name to their products just to make it unique. There may be difference in quality, price etc of the product and the target market of both sellers may be different.

So, it is quite important that sellers must give unique name to their brands so that consumer can easily differentiate between the brands without any difficultly. Without brand name a product is “dead”.