Lecture 1 – Introduction
- Marketing strategy = “A thoughtful plan by a company to produce desired outcomes in the
marketplace vis-a-vis customers, channel members and competitors”
“ […] an organization’s integrated pattern of decision that specify its crucial choices concerning products,
markets, marketing activities and marketing resources in the creation, communication, and/or delivery of
products that offer value to customers in exchanges with the organization and thereby enables the organization
to achieve specific objectives.”
Strategic Marketing Decisions
Long-term holistic decisions concerning the future directions for the organizations
Features:
o Entail major resources commitments spread over long periods
o Impact over longer time periods
o Result in a distinguishable competitive advantage
o Irreversible or difficult to reverse
o Entails tradeoffs (e.g., if strategy A -> strategy B & C foregone…)
o Made in the context of other strategic decisions (interdependencies)
o Made at a higher level of the organization
VERSUS
Tactical Marketing Decisions
Example 1. Setting up a loyalty program
Some benefits:
o Access to business lounges
o Priority boarding
o Dedicated contact number
o Free seat selection at bookings
o Member only offers
Example 2. Establish a strategic partnership
When Apple released the Apple Pay app, the brand effectively changed how people perform transactions. This
app allows people to store their credit or debit card data on their phone, so they can use them without
physically having the card with them. But in order for this app to succeed, it needs credit card companies to
integrate with this technology.
,To get out ahead of its competition, MasterCard became the first credit card company to allow its users to store
their credit and debit cards on Apple Pay. MasterCard not only showed support of a major consumer tech
developer in this partnership -- it evolved along with its own customers in how they choose to make purchases
at the counter.
Other examples - Strategic Marketing Decisions
- Tactical Marketing Decisions / EXECUTION = Short term (annual or quarterly) decisions to execute the
strategic directions within the firm; filling in the marketing mix of the individual product or brand to
realize the company strategic goals
e.g., brand price level, advertising by brand, sales force allocation
Lecture 2. Strategic Pricing
Why is pricing hard?
o Easy version:
1. Figure out what people are willing to pay for the product or service
2. Do some econ-math and set the price that maximizes profit
3. Profit
Econ-math = (Elasticity + 1) / Elasticity * Marginal cost
,Why is pricing so hard?
Pricing is also an opportunity for innovation
1. Pricing strategies
o Individual products
o Product line pricing
• Reasoned choice form a set of alternative prices to achieve a certain objective within a planning period
• Factors affecting pricing decisions:
, Pricing individual products
1. Cost-based:
• Most commonly used in practice: 80% of firms rely on costs to set prices
• Advantages: simple method, costs are well known by firms, stable prices, perceived ‘fairness’
• Disadvantages: demand depends on the price! It also ignores competitors’ prices, ignores brand
positioning, assumes fixed variable costs (no economies of scale)
Useful to determine price minimum (price under which you are unwilling to sell)
- BUT NOT recommended to determine final consumer selling price
o Cost-plus pricing
= adding a standard mark-up to the cost of the product
(example is about a minion)
o Target pricing
= setting prices to make a target profit
2. Demand-based:
o Value-based pricing
= setting prices based on consumer willingness to pay for the product rather than on costs
▪ More profitable pricing strategy than cost-based pricing
▪ E.g., IKEA: willingness to pay --> determine ‘allowable costs’
▪ Determined by price elasticity:
= % change in demand brand / % change in price brand
▪ Recommended for: emotional products, branded products, niche brands, scare
products
Example:
• Price ski-pass:
• Price elasticity 1:
(+2,000/10,000)/(-20/400)
= +20%/-5%
= -4
- Marketing strategy = “A thoughtful plan by a company to produce desired outcomes in the
marketplace vis-a-vis customers, channel members and competitors”
“ […] an organization’s integrated pattern of decision that specify its crucial choices concerning products,
markets, marketing activities and marketing resources in the creation, communication, and/or delivery of
products that offer value to customers in exchanges with the organization and thereby enables the organization
to achieve specific objectives.”
Strategic Marketing Decisions
Long-term holistic decisions concerning the future directions for the organizations
Features:
o Entail major resources commitments spread over long periods
o Impact over longer time periods
o Result in a distinguishable competitive advantage
o Irreversible or difficult to reverse
o Entails tradeoffs (e.g., if strategy A -> strategy B & C foregone…)
o Made in the context of other strategic decisions (interdependencies)
o Made at a higher level of the organization
VERSUS
Tactical Marketing Decisions
Example 1. Setting up a loyalty program
Some benefits:
o Access to business lounges
o Priority boarding
o Dedicated contact number
o Free seat selection at bookings
o Member only offers
Example 2. Establish a strategic partnership
When Apple released the Apple Pay app, the brand effectively changed how people perform transactions. This
app allows people to store their credit or debit card data on their phone, so they can use them without
physically having the card with them. But in order for this app to succeed, it needs credit card companies to
integrate with this technology.
,To get out ahead of its competition, MasterCard became the first credit card company to allow its users to store
their credit and debit cards on Apple Pay. MasterCard not only showed support of a major consumer tech
developer in this partnership -- it evolved along with its own customers in how they choose to make purchases
at the counter.
Other examples - Strategic Marketing Decisions
- Tactical Marketing Decisions / EXECUTION = Short term (annual or quarterly) decisions to execute the
strategic directions within the firm; filling in the marketing mix of the individual product or brand to
realize the company strategic goals
e.g., brand price level, advertising by brand, sales force allocation
Lecture 2. Strategic Pricing
Why is pricing hard?
o Easy version:
1. Figure out what people are willing to pay for the product or service
2. Do some econ-math and set the price that maximizes profit
3. Profit
Econ-math = (Elasticity + 1) / Elasticity * Marginal cost
,Why is pricing so hard?
Pricing is also an opportunity for innovation
1. Pricing strategies
o Individual products
o Product line pricing
• Reasoned choice form a set of alternative prices to achieve a certain objective within a planning period
• Factors affecting pricing decisions:
, Pricing individual products
1. Cost-based:
• Most commonly used in practice: 80% of firms rely on costs to set prices
• Advantages: simple method, costs are well known by firms, stable prices, perceived ‘fairness’
• Disadvantages: demand depends on the price! It also ignores competitors’ prices, ignores brand
positioning, assumes fixed variable costs (no economies of scale)
Useful to determine price minimum (price under which you are unwilling to sell)
- BUT NOT recommended to determine final consumer selling price
o Cost-plus pricing
= adding a standard mark-up to the cost of the product
(example is about a minion)
o Target pricing
= setting prices to make a target profit
2. Demand-based:
o Value-based pricing
= setting prices based on consumer willingness to pay for the product rather than on costs
▪ More profitable pricing strategy than cost-based pricing
▪ E.g., IKEA: willingness to pay --> determine ‘allowable costs’
▪ Determined by price elasticity:
= % change in demand brand / % change in price brand
▪ Recommended for: emotional products, branded products, niche brands, scare
products
Example:
• Price ski-pass:
• Price elasticity 1:
(+2,000/10,000)/(-20/400)
= +20%/-5%
= -4
