Sunday, December 15, 2013

A Strategic Marketing Planning Tool


Over the years the leading marketing and management thinkers have developed theories that look for answers as to why companies failed after enjoying a period of tremendous success.



Theodore Levitt attributed failures to the leaders of these companies being myopic and defining their business mission too narrowly. For example, railroads considering themselves as being in the railroad business rather than the transportation business was myopic and prevented them from entering into air transportation, shipping and trucking.



Clayton Christensen developed the theories on disruptive innovations and suggested that, over time, industry-leading companies continued developing product enhancements that were driven by the most demanding and profitable customers. As a result a significant portion of customers not wanting or needing all of the product enhancements were vulnerable to attack from new companies offering less expensive, “good enough” product alternatives.



W. Chan Kim and Renee Mauborgne developed theories suggesting that “blue oceans” of opportunities existed within the traditional competitive business environment. These “blue oceans” provide opportunities for new companies to enter the market in a way that is protected from existing market participants.



All three theories are correct and are overlapping. An industry leader that begins to lose market share to new market entrants may have defined the scope of business too narrowly, focused too much on the most profitable customers or left identifiable market opportunities unidentified. In fact, it is probably a combination all of these factors that cause a company to become stagnant and ultimately begin to fail.

Recognition of the need for a broader marketing strategic planning effort is the first step in developing an on going strategic marketing process that can keep a company at the leading edge of its industry.

This process begins with a situation analysis that assesses the state of the market place, the industry and the strengths, weaknesses, opportunities and threats that affect the company as well as its competition.

After the situation analysis there should be an assessment of the vision of the company. Are there occurrences that would suggest that the company’s vision is too narrow? In the newspaper industry the occurrence of digital delivery of news and classified advertising might have suggested that newspapers were in the information distribution business.

Further, if newspapers had taken a different view of niche, free distribution news products, there might have been a realization that a “good enough” product was attracting their least profitable customers. This would be an indication that a market disruption was possible.

Finally, a “blue ocean” strategy canvas might have revealed opportunities that resulted in new businesses such as on-line searchable classified ads. This could have been an opportunity for newspapers as well as companies like Craig’s List.

Using all three of the theoretical approaches provides better insights and a grid can be developed to develop strategic actions for price, place, product and promotion and assess the needed requirements for the workforce, cash requirements, operational procedures and capital expenditures. This process can also identify potential gateways that can allow a transition from the current mode of operations to a new business scenario.

An Example

To demonstrate how to use this process, I will use a regional newspaper as the industry leader in a rapidly changing market place to develop a possible marketing strategy.

SITUATION ANALYSIS WORKSHEET

   Industry –
1.    Changing to digital access
2.    Old model of ad value changing
3.    More focus on custom advertising
4.    Print revenue losses not replaced by Internet revenues
5.    Print and deliver model has high variable and fixed costs
6.    Significant number of readers and advertisers prefer print and deliver model for news, advertising and preprints
7.    Consolidation/reduction of workforce due to technology.
8.    Technology is continuing to be more sophisticated and less expensive.
  
   Market –
1.    Numerous suburban newspapers have high readership in their community
2.    Internet is increasingly the preferred choice to obtain news and information
3.    Population and economic growth is highest in the suburbs
    4.   Suburbs attract younger professionals that are less likely to prefer printed newspaper

   SWOT ANALYSIS

1.    Strengths - reputation, wide distribution network, corporate resources, local and regional news coverage.
2.    Weaknesses – print product cost structure, low penetration in markets with strong suburban newspapers.
3.    Opportunities  - Digital market growth, desire for relevant information, new technology developments and cost reductions, increase in availability of customized Internet application.
4.    Threats – competition with smaller, more productive staffs, rapid growth of population and retailers in suburbs, decline in print audiences.

POTENTIAL DISRUPTIONS

1.    Low cost cell phones with limited capabilities and no contracts
2.    Digital preprints
3.    Independent journalists covering specialty news and distributing digitally
4.    Digital ad agencies to place ads for all formats.

BLUE OCEAN STRATEGY CANVAS








Strategy Worksheet

Based on the series of analyses above, a strategist can begin to develop a strategy spreadsheet for Price, Place, Product and Promotion. measured against the impact on the organization’s workforce, cash requirements, operational procedures and capital equipment requirements.

Based on the above analysis, strategies that might be considers are:

PRODUCT – Focus on local and regional news coverage, develop products for conversion of print products to digital products including digital preprints, develop customized news and information delivery capabilities and software applications. Develop classified free digital classified ads with a print upgrade.

Price – Low cost for all digital products and cost based pricing for print products. Preprint delivery would be priced to compete with “marriage mail” products. Create "value pockets" that match provide customized information for readers and serve as high value customer groupings for advertisers.

Place – Print products delivered with long-term plan to convert to digital delivery. Preprint delivery would be by news carrier or post office with long-term plan to convert to digital delivery.

Promotion – Emphasize local news and shopping information, original content, and classified ads with impact. For advertisers, emphasize low cost per reach.

Since each strategic move has implications for the organization, each of the strategies considered should be measured against the impact on the organization as shown in the chart below.

ORGANIZATIONAL IMPACT CHART


PRODUCT -
PRICE
PLACE
PROMOTION
WORKFORCE
Content stringers, mixed with employees for content. Internal sales staff.

High productivity for staff through technology
Outsource and contract for printing and distribution.
Internal brand manager. Outsource ad campaigns.
CASH REQUIREMENTS
Minimize fixed expenses for facilities etc.
Cash flows maximized
Distribution costs below revenues.
Utilize efficient promotions but have constant market pressure
OP. PROCEDURES
High use of technology and outsourcing
High use of technology and outsourcing
High use of technology and outsourcing
High use of technology and outsourcing

CAP. EQUIP. REQUIREMENTS

Outsource software development and lease equipment.
Outsource software development and lease equipment.
Outsource software development and lease equipment.
Outsource software development and lease equipment.


Copyright GWR Research 2013

At this point the strategist has a pretty good feel for what is needed to begin considering tactics. The tactics will describe how each action and organizational implication will be addressed specifically. The result will be a comprehensive plan the can then be converted into a budget.

As a marketing strategy is developed it is important to recognize that individual elements of the strategy do not stand-alone. Price, place, product and promotion are interconnected. Price can affect the image of the product and the organization and influence the nature of the promotion. Promotion can affect the price, the product and the mode of distribution.
As each of the four Ps has an impact on the others, they have an impact on cash flow requirements, management systems, workforce requirements and capital equipment.

It is important that the process take place in the sequence described above and that the original vision and mission set the parameters for all actions. If strategy development does not follow a disciplined approach, there is a chance that the outcomes hoped for by the organization’s leaders will not be realized.




Sunday, November 17, 2013

VISION AND MISSION SHOULD DRIVE STRATEGY


The chart below demonstrates the approach for developing a successful marketing strategy. The graphic suggests that a vision and mission should drive the price, place product and promotion marketing components and that once these 4 Ps are identified a strategy can be developed.

It is interesting to ask which of the 4 P’s is most important.  To determine value of each of the four Ps requires a vision and mission statement that clearly defines the nature of a business, the market segment to be served and an idea of what success looks like.


For my classes at the University of Houston’s Bauer College of Business I have used the example of an individual with a pressure washer and limited funds wishing to enter into the maintenance business and grow to be a major player in home and commercial maintenance.

This individual might create a mission statement that as follows:  1) To make available quality exterior maintenance service to home and business clients throughout the state of Texas, and 2) Create value and make a difference.

The vision statement might be as follows: 1) Using internal cash flows to develop an organization that provides exceptional quality service at reasonable rates, 2) Create a network of technology and industrial partners to provide innovative and effective solutions for exterior building maintenance, 3) Develop an organization that is highly effective, lean and fast moving and 4) Maximize financial returns.

This vision and mission statement would help determine how the components of marketing would fit together to develop a marketing strategy. Since we know that it is to be a self-financed operation and that the only service now available is pressure washing, identifying the market that can be served now is important. The potential customers are those that need pressure washing but can’t afford or don’t want the services of well-established exterior maintenance companies.

After some consideration a strategy statement might be developed. In this case the marketing strategy statement might be: To market convenient, low price pressure washing service to individual home and small business owners while adding services and markets as cash flow allows.

Here the Ps requiring attention will be promotion to efficiently let potential customers know of the service available. The place P will also be important in that the service should be offered only in areas that can be served with existing personnel and equipment.

It is with the vision and mission driven strategy that the Planning, Organizing, Directing and Controlling components of management can be employed. At this point strategy directs the development of the tactics that are in alignment with the vision and mission.

Planning would start with available resources and describe the process to grow from a single pressure washer driven organization to a statewide organization providing services to a large base of customers. The plan would describe the growth rate based on reasonable customer base growth and new services to be offered. The planning would consider the type of work force to deliver the service (brokered, through other providers, independent contractors, employees and so on).

The plan would describe the internal cash flows and the amount of cash to be used to maintain and grow the business. It would also describe approaches to increase cash flows, incur debt or invite equity partners into the business.

The plan would also describe the whether the types of equipment needed, when it would be needed and if it should be leased or purchased. Finally, the planning process would indentify the methods by which the company would be managed from sales approaches to accounting procedures from quality control to credit management and job logistics.

After the plan is developed and compared with the vision, mission and strategy the business can set the organizational structure, understand how to direct activities and create reports that allow management to gauge how closely actual results measure against planned goals.

This is a simple example but shows the importance of understanding what an organization wishes to do (vision/mission and strategy) before developing tactics.

I recently visited with a young entrepreneur who had a small business that was seasonal. This entrepreneur also had a pretty clear idea of what he would like his business to grow to over time.

Faced with the need to fill in the off-season business cycles he thought he would provide other types of seasonal businesses. While it was a reasonable approach the seasonal business would not move his company toward the ultimate goal he had set for the business.  I advised that using an approach of filling available work time with work that didn’t support the long-term goals of the business could change the focus and perhaps prevent the attainment of the long-term goal.

Young entrepreneurs aren’t the only people facing this dilemma. Seasoned CEOs find themselves faced with challenges and responding to market changes and competitors in ways that are not in keeping with the organizations mission and vision. These CEOs are usually driven by short-term profit requirements and analyst’s expectations.

It can be difficult to always go back to check to see if the latest tactics being implemented to address a business challenge support the firm’s mission and vision. It is more difficult to require that mid-level managers spread across many operating units only implement tactical solutions that are in keeping with the firm’s overall mission and vision driven strategy.

However, by not insuring implemented tactics are in alignment with a mission and vision driven strategy is the surest way for an organization to find itself in an unintended business, producing value for unintended markets. This can spell financial ruin in the worst case and in the best of cases it will require a change in the mission and vision statement and direction of the business.



Wednesday, November 6, 2013

USING INFORMATION TO CREATE A COMPETITIVE ADVANTAGE


I have been involved in developing marketing strategies that required the developing a competitive advantage in markets filled with strong competitors. I have consistently found that developing solid information on the market and the competitors was critical in building a foundation for the strategy.

Information Sources

Gathering information on the market and the competition is readily available if you know where to look. Information on the market is available through census data, industry data and consumer research. Most of this is readily available on the Internet.

Gathering data on the competition is also readily available.  Some of the information can be taken from financial reports if the competitor is a publicly traded company. These reports usually give key statistics, profiles of key managers and basic financial data.

Information on competitors can also be gathered from customers, vendors and public records. Developing financial profiles of a competitors business can also provide valuable information.

This information can point to some strengths and weaknesses of the competitors, opportunities and threats in the market place, in the environment and customer profiles.

Below are a couple of examples that underscore how specific information can help in developing a competitive advantage.


The Houston Post

In late 1994 newspapers were confronted with rapidly rising newsprint costs.  I was the Financial Director at the Houston Chronicle at the time. We decided that although we had good relationships with suppliers and strong contracts through our parent company, Hearst, it would be important to project future newsprint rate increases and develop advertising and circulation rate increase programs. As a result, the Chronicle announced that it would have three 8% rate increases: one in September 1994, one in January 1995 and one in June 1995.

We were concerned about our major competitor, the Houston Post. They, of course could, decide not to increase their ad or circulation rates and gain market share.

I had been tracking the ad linage each day for the Houston Post by purchasing their newspaper and measuring the ads. I estimated their ad rates based on what we learned from customers that bought ads from the Post. Making assumptions based on circulation and the size of their organization I was able to have a pretty good idea of the Post’s revenues, expenses and contribution margin. My projections showed that the Post had a small contribution margin and my guess was that they too would increase ad rates for two reasons. First they would increase ad rates to accommodate the rise in newsprint costs and second they would increase ad rates because local advertisers wanted two major newspapers competing against each other to hold ad rates down.

One of the interesting things I learned while doing the research was that the Post did not have long -term newsprint agreements with the manufacturers and was buying newsprint on the spot commodities market. This meant their newsprint costs would be much more volatile than ours. This made it even more likely that they would increase their ad rates in concert with our announced rate increases.

Unbelievably, the Post announced that they would not increase ad rates and the Chronicle reports of rising newsprint costs were inaccurate. As soon as this announcement was made, I went to the Chronicle’s President, Gene McDavid, and said that I couldn’t see the Post making it for another 6 months using that strategy. Clearly newsprint rates were going up and if the Post were able to gain more advertising by not raising rates they would require more newsprint at volatile spot market rates.

Interestingly, in April 1995, the Chronicle bought the assets of the Post and Houston became a one major newspaper town.

Creating a pricing strategy for advertising and circulation during this time was dependent upon gathering quality information on the market and the competition. The sources of information had to be reliable. Newsprint rate increase information came form the vendors selling newsprint with which the Chronicle had outstanding relationships. Information on the competition came from tracking the competitor as well as newsprint salespeople who let the Chronicle know about the buying habits of the competition.

While the Chronicle did not anticipate the move made by the Post on advertising rates, the approach used by the Chronicle set a strategy that would be successful regardless of the actions of the competition.

ADVO

In late 1995 the Houston Chronicle embarked on a strategy to recapture advertising revenue lost to direct mail, specifically revenue lost to “marriage mail”. 

Marriage mail is a program that allows several advertisers to put their circulars in a mail package and share the postage expense. This provides a cost savings to the advertiser.  ADVO became a leader in providing this type of advertising package nationwide. During the 1980s many retailers moved their circular advertising out of newspapers and into ADVO’s marriage mail program.

Houston newspapers lost virtually all of the grocery advertising to ADVO in the mid 1980s. Prior to ADVO grocery advertising had been a key advertising revenue source for the Houston Chronicle.

I led the effort to create a product to compete with the ADVO program.  It seemed that the Chronicle would be able to combine mail delivery (for non-newspaper subscribers) with newspaper delivery (for newspaper subscribers) and provide an advertising product similar to ADVO’s product that would be less expensive since circulars could be added to newspapers without increasing the delivery costs.

In the information gathering process we discovered that ADVO earned low postal rates by providing saturation coverage (covering 100% of the households). ADVO also saved costs by eliminating the mail labels on each package (each package had the same contents and went to every house thereby eliminating the need for a label and making delivery very easy for the post office).

We knew that by combining newspaper delivery with mail delivery, we would need to provide each mailed package with a label since no area would be comprised of mail only or newspaper only delivery. We also knew that to get the lowest postal rates we would have to put our mail packages in postal carrier walk sequence to make the delivery for the addressed package as easy as the ADVO package,

Developing a newspaper and labeled mail delivery product for the Chronicle advertisers resulted in a program that could provide customized delivery for advertiser. That is, since we knew the addresses of subscribers and mail delivered nonsubscribers, we could have different circulars in each package. For advertisers this meant that they could have different advertising circulars for different neighborhoods or subdivisions or specific addresses. This was a feature that could not be offered by ADVO with the undifferentiated, unlabeled marriage mail packages.

Over the course of a year or so following the development of the newspaper and labeled mail program the Chronicle won back all of the grocery advertisers and has held that advertising category to this day.

The success of this program resulted from gathering information on the competitor’s product and developing a complete understanding of the sales and production process. This information led to the development of program for the Houston Chronicle that grew to be one of its key revenue sources.

I now teach marketing strategy courses to undergraduate and MBA students at the University of Houston Bauer College of Business. These classes are divided into teams and work with real clients to develop specific marketing strategies during the semester. The first half of the semester is devoted to gathering information on the market, the competition, the company and the environment. With this information and specific objectives set by the client company, students spend the second half of the semester developing marketing strategies.

In every case students are told to look for that one piece of information that can contribute to developing a marketing strategy that can have a significant positive impact on the client companies.

In the example of the Houston Post it was the financial tracking and the knowledge of the newspaper-purchasing program that led to the Chronicle’s successful strategy.

For the ADVO example it was the knowledge of the packaging and delivery process that allowed the development of a strategy to which ADVO could not respond.

Over the years I have been involved in many strategic marketing efforts and every successful project can be traced to developing solid information on the customers, the market and the competition.

Tuesday, October 8, 2013

Developing a Successful Marketing Strategy


Set an Objective

The marketing effort begins with an objective. This objective can be to create a new business to serve a specific market, launch a new product for an existing business, develop a new market with existing products and so on.

After establishing the objective it is important to take a hard look at the business you are in or are hoping to start. This exercise will help to better understand your current position in the industry and possible avenues for growth. For example, if owning a cup cake specialty shop, you should determine if you are in the cup cake business, confectionary business, restaurant business, or bakery business and so on.  The choice will affect the strategy that might be employed to achieve the objective.

                                    Identify a Customer Base
Also considering the business, it is important to identify the potential customer base (key customers) you will be serving and your business capabilities. For example if you are entering an established market but have limited resources you may be forced to serve the least profitable customer. In other words, the market leaders will have developed products and services that serve the most profitable customers and your limited resources will put you at a disadvantage when competing for those customers.

This exercise may also uncover other customer segments that may offer opportunities but may not represent the key customer category. If you , for example, served the least profitable customer you might also find some of the industry’s more profitable customers might have a reason to choose your product or service.

Going after the least profitable customers may be an advantage since the market leaders are not likely to focus on customers that would require resources to be taken from efforts to serve their more profitable clients. This approach would make you a disruptor and you product a disruptive innovation since you would be starting with the least profitable customer and work to create ways to “move up the customer chain” in this market.

On the other hand if you have a new idea or innovation and want to compete for the very profitable customers then you must consider ways of protecting your market position. Since this innovation can likely be duplicated in some fashion by the competition it will be important to choose a marketing strategy that makes duplication by competitors more difficult.  If this innovation or approach allows the best customers in the market to be served better then your introduction would be considered a sustaining innovation.



                                                Set a Strategy

Strategy is WHAT you will do as a business.

As an example, if you had some basic equipment and could perform basic pressure washing of concrete, your customers would likely be individuals that could not afford or perhaps didn’t need the range of services offered by the more established pressure washing services.  A careful look at the type of business, the customer segment and the resources might be helpful in developing a marketing strategy. In this case the strategic statement might be: “To enter the maintenance service business by providing basic pressure washing services to homeowners with a plan to expand service offerings to homeowners and businesses in Texas”.

In this case you are a potential market disruptor (trying to make a profit serving the least profitable customer) that will be part of the maintenance service industry and will start with a pressure washing service.

Understand that being a disruptor is not defined by the amount of resources or how long the entrant has been in business. A disruptor is defined by the position of the customer on the profit scale in the market that is being entered.

                                          Develop the Tactics

Tactics are HOW you will successfully execute the strategy.

Tactics will require attention to the Price, Place, Product and Promotion components of marketing and the Planning, Organizing, Directing and Controlling principles of management. Additionally the tactics will have to consider how the marketing components and management principles fit with the Workforce, Financial requirements/capabilities, Capital equipment needs and Operational procedures.

The more the marketing, management and operational plans are in concert, the better the chances of achieving the strategic goal. This set of exercises is critical in the sense that they are focused on creating the most efficient, objective driven organization possible.

Considering the pressure washing service the tactics might involve the following:
1)   PRODUCT – power washing home decks, driveways and sidewalks expanding to gutter cleaning, window cleaning and pool service then moving into commercial maintenance (This approach provides the ability to grow horizontally and vertically – (gateway capacity).
2)   PRICING – Start with simple low level pricing moving to a bundling approach as more services are added.
3)   PLACE – begin in an area easily served by limited manpower and resources with a plan to expand to adjacent areas so supply chain and resources are not strained.
4)   PROMOTION – limit promotion to grow business within the ability to serve the demand. Begin with very targeted, low cost promotion and expand as territory is increased.
5)   WORKFORCE – contract labor that can be quickly assigned to complete jobs. As the business grows evaluate the need for permanent employees with specialized expertise.
6)   FINANCIAL REQUIREMENTS – small amount of start up cash, initial payment from customers should be enough to cover the cost of completing the job. Consider half payment at sale and half at completion.  Put aside 20% of each job for investment into company growth and new equipment. Assume 10% of each job will be used for repair and maintenance.
7)   OPERATIONAL PROCEDURES – utilize contract labor at negotiated and contracted rates that allow easy determination and maintenance of profit margins. Require bonding of contractors to provide assurance the job will be completed and allow some level of comfort to the customer when requiring half of the job cost be paid in advance.
8)   CAPITAL EQUIPMENT – basic, rugged pressure washing equipment. Expand the inventory of equipment as business increases.


This is a simple example but illustrates that there is a sequence that should be followed for the best results.  If you start with tactical measures or with a strategy that hasn’t identified the industry or customer base a great deal of time will be spent course correcting to develop a successful model.

Every time you reevaluate and change direction requires internal changes that can be costly in that each of the tactical categories listed above will likely be impacted.

This process works for established businesses, new businesses and businesses that have had a significant change in their industry.

Simply stated  - “Objective before strategy and strategy before tactics”

Tuesday, September 24, 2013

Strategy Before Tactics


An MBA student asked me not long ago, if I knew of companies that developed or updated strategies on a regular basis. He went on to say that he was in charge of providing IT support for his organization and when asking for the strategic direction of the company he was told “to increase profit by X% in the next operating period.”

This was clearly not a strategy but an operational goal. Operational goals are almost always addressed with tactical solutions.

The longer an organization has been in existence, the less likely a regular strategic planning process will exist. Leadership will recognize changes in the environment, new financial goals, changes in operation procedures, new challenges and competition. Almost always tactical plans are developed to address the market changes and financial goals. 

Tactical plans will include pricing structure changes, development of new products, new human resource programs and new operational procedures. These plans can be very intricate and very sophisticated. For example to increase revenues an organization might deploy a dynamic pricing program that provides different pricing for different consumers based on the perceived value to the customer at a specific time. This is a very sophisticated pricing program but doesn’t qualify as a strategy. In fact the tactic might be at odds with the intended strategy.

For example, if a company had a goal to market a product that would develop a deep loyalty with customers that was based on image, branding and the ongoing relationship with its consumers, a dynamic pricing program might be viewed as opportunistic by some consumers and actually work against the overall strategy.

A good example of this is when Doug Ivester, former CEO of Coca Cola, mentioned that Coke might consider using vending machines that would charge a higher price as weather temperatures increased.

This move would not be in keeping with the mission:
            1) To refresh the world,
            2) To inspire moments of optimism and happiness and
            3) To create value and make a difference.

While this pricing move wasn’t deployed, the fact that Ivester mentioned the possibility showed he was more of a tactical thinker rather than strategic.  Here, Ivester forgot the importance of Coke to the consumers and resulted in a huge negative reaction by the media and the market even though the program was never implemented.

Coca Cola had another instance where tactics and strategy were confused. With the introduction of the New Coke, Coca Cola forgot the history and the relationship with the market.  By eliminating the original coke flavor and introducing the New Coke, executives did not consider the value of the long-term relationship of customers with the original Coke flavor.

The vision, outlined above, should be the most important consideration in strategy development. Tactical considerations should then follow.

The overriding consideration overlooked in both of these actions by Coca Cola was the relationship of the market with the brand that had been a part of the lives of individuals during the good and bad times of the twentieth century.

Interestingly, both of these tactical moves might have been successfully implemented if tactical solutions had been designed to fit well with the overall strategy. For example, if vending machines had been deployed to give discounts when temperatures fluctuated, the company could have maximized margins and still provided the consumers with a positive view of the company. With the introduction of the New Coke, keeping the original flavor would have provided a means of satisfying the psychological mystique associated with the founding brand while allowing consumers to try the new flavor.

Remembering to put strategy before tactics requires discipline to periodically review the company’s mission statement and overall strategy and to make certain tactical moves are in alignment with the firm’s strategy.

To insure that this process is employed an organization should consider requiring a strategic plan review annually and make sure that overall strategies recognize potential paradigm shifts and still are in alignment with the vision of the organization. Once the strategy is approved then all tactical decisions should be in alignment with the strategy.

It should be noted that there can be sub strategies that also must be in agreement with the overall vision and strategy. Tactical decisions must then be in alignment with the sub strategies.  A retailer, for example, may have an overall strategy to maximize market share and profitability. Strategies for price, distribution, product and promotion can then be developed. For price the retailer might choose Every Day Low Pricing, for product the retailer might choose to mix national and private label products and so on for promotion and distribution sub strategies.

Tactics for pricing would include pricing mix for national and private label brands that would maximize sales and procurement (payments made by national brands for shelf space and promotional support) revenues. Clearly it would be important to insure that while tactics to improve the two categories of revenue the retailer did not endanger the EDLP or market position strategies.

When determining if a new program fits well with the overall strategy of the company, ask the following questions
  • 1.  Profitability/market acceptability  - will the product generate a profit and a market?
  • 2. Accreditation requirements – Does the product meet industry and legal standards?
  • 3. Length of project – Can the product be introduced in an acceptable time frame?
  • 4.    Accommodate systems – Does the new product make use of current systems or will new ones need to be developed?
  • 5.    Fit Image – Does the product fit the image the firm wishes to project?
  • 6.    Resources – is the new product resource and capital intensive?
  • 7.    Gateway capacity – Does this product lead to the possibility of new products or businesses being developed?
  • 8.    Negative Gateway capacity – Does this product have the potential of damaging other aspects of the operation?
  • 9.    Customer acceptance – will the customer accept this product over others offered in the market?

If any of theses questions can’t be answered favorably further investigation into new programs should be considered.