BUSINESS MARKETING

Market-Driven Strategy
versus
Market-Driving Strategy
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Market-Driven Strategy
 BUSINESS MARKETING

What is Market-Driven Strategy?

• Market-Driven strategy is the long term planning of a business to provide

the maximum value or advantages to the customers.

• The main target of the market driven strategy is to provide maximum

value to the customers.
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• According to David W. Cravens &

Nigel F. Piercy: “Marketing-
driven strategy provides a
companywide perspective which
mandates more effective
integration of a activities and
processes that impact customer
value.”.
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Market-driven strategy consists of activities

and processes that create and provide
superior customer value.
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Characteristics of Market-Driven
Strategy
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According to Cravens & Piercy (2006), the characteristics of

market driven strategies include:

1. Becoming market oriented.

2. Determining distinctive capabilities.

3. Finding a match between customer value and organizational

capabilities.

4. Obtaining superior performance by providing superior

customer value.
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1. Becoming market oriented.

• A market orientation is a business perspective that placed the

customer as the center of a company’s total operations

• This concepts is basically holds the same idea as the “marketing

concept” that is being discussed before in “what is marketing”.
Moreover, a business is market-oriented when “its culture is
systematically and entirely committed to the continuous creation of
superior customer value”.
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• However, for a business to achieve market orientation, it involves the

use of superior organizational skills in understanding and satisfying
customers.
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A market-oriented organization always :

• gathers information about its customers, competitors, and the

markets;
• analyze it from a total business perspective,
• decides how to deliver superior customer value,
• and finally takes actions to provide value to customers
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The requirements for the organizations to become market-oriented:

• Customer focus
Understand the customer needs, wants, and responses towards the
products delivered

• Competitor intelligence
Understand the competitor just like the customer

• Cross-functional cooperation and involvement

Abilities to get all business functions to work together in providing
superior customer value)
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Examples of Market-
Oriented Companies
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Example 1

Amazon have anticipated the

needs of their customers and tried
to make their plans around it. It
knows that most of the consumers
do not like to pay the delivery
charges.

Hence they have offered various

options for free or minimum
payment delivery.
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It has started a scheme Amazon

Locker, self-service pickup boxes,
for clients that cannot be at home
during the delivery time.
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Example 2

Intel Corp is one of the most

popular names in the world that
changed its policy from a product
orientation to market orientation
in the year 2005 when it appointed
its new CEO Paul S Otellin
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Example 2

It then started creating and customizing

products that met the specific needs of
its customers, for example, introduced
products that were meant to solve
customer problems like virus and
crash.
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2. Distinctive Capabilities:

• Identifying an organization’s distinctive capabilities is a crucial part

of market-driven strategy.

• Capabilities can be defined as “complex bundles of skills and

accumulated knowledge, exercised through organizational processes,
that enable firms to coordinate activities and make use of their
assets”
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2. Distinctive Capabilities:

The Major components of distinctive capabilities are:

• Organizational Processes.
• Skills and Accumulated Knowledge.
• Coordination of Activities.
• Assets.
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2. Distinctive Capabilities:

Example:

Zara’s new-product development

process, which illustrates the retailer’s
distinctive capabilities, where the new-
product development applies the skills
of their design team and benefits from
the team’s accumulated knowledge
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The coordination of activities across business functions during new-

product development is facilitated by information and technology (the
product designs take into account the manufacturing requirements as
well as offering high fashion products).

The asset is the strong brand image possessed by Zara which helps the
launching of the new product.
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3. Creating Value for Customers:

• Customer Value is “the outcome of a process that begins with a

business strategy anchored in a deep understanding of customer
needs”.

• The creation of customer value is an important challenge for the

managers, since it is an ongoing competitive challenge in
maintaining successful market-driven strategies.

• Being able to overcome these challenge, the organization is believed

to be able to successfully deliver the customer value; hence fulfilled
their goals.
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3. Creating Value for Customers:

• Superior customer value occurs when the buyer has a very positive
use experience compared to his/her expectations as well as the value
offerings of competitors

• The values could be product differentiation, lower prices than

competing brands, or a combination of lower cost and differentiation.
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Examples of Customer Value

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Examples of Customer Values In a Retail Store.

A small children’s boutique that sells high-end baby clothes and toys may
choose to incorporate: heirloom, fun/entertainment, and avoids hassle.

The boutique could:

• Create signature offerings and events that allow parents to create

custom keepsakes (heirloom)

• Build a designated area in the store where children can play while
their parents shop (fun/entertainment).
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Develop an online profile for children so that family and friends can
check to see what size the child is when buying gifts and clothing
(avoids hassle).
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Examples of Customer Values In an Auto Shop.

An auto shop that offers state inspections, oil changes, and tune-ups may
use: organizes, reward me, and informs. The auto shop could:

• Create auto profiles so customers can track their services and receive
notifications when services are due (organizes).

• Implement loyalty programs that reward customers for their

continued patronage (reward me).
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Examples of Customer Values In an Auto Shop.

• Provide in-store educational digital signage content that describes

products and services in a way that customers who are unfamiliar
with the auto industry can understand (informs).
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Examples of Customer Values At a Hotel.

Values are also relevant to businesses in the hospitality industry. A

small boutique hotel along the beach in Florida may choose to
incorporate: therapeutic, affiliation/belonging, and sensory appeal.

The hotel could:

• Provide additional services such as massage, therapeutic yoga, spas,

and meditation (therapeutic).
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• Create a community by setting up an online group or in-person,

annual event that is focused on the other values their property
supports (affiliation/belonging).

• Offer themed hotel rooms that make guests feel as though they are in
another time and place (sensory appeal
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Example of Companies with Market-

Driven Strategy
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Example 1

Home Depot has set objectives

andformulated a strategy to provide
superior customer value through
unprecedented customer service. Arthur
Blank, Home Depot’s CEO and cofounder,
has instilled the concept of putting the
customer first.
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Example 1
In an interview with Forbes
Magazine, Blank says,

“We are in the relationship business,

not the transaction business. People
can buy this merchandise from
somewhere else. The challenge is
always remembering to walk in the
customer’s footsteps, not our own.”
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Example 1
• Customers are responsible for suggesting 70% of Home Depot’s
50,000 products. 50,000 customers also attended Home Depot
University, a four-week education program for do-it-yourself
customers. Home Depot continuously “tweaks” and updates stores to
continuously deliver value to customers.
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Through the deep understanding of this

concept, ability to implement and manage all
the elements, as well as the constant
management and updates of the strategy, it is
believed that the organization will able to
achieve its goals.
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A market-driven organization puts the

customer first in every aspect of the
organization, and must possess certain
capabilities – market awareness,
organizational flexibility, strategic vision,
and external relationships.
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Market-Driving Strategy
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Market-Driving Strategy

• Without a market-driving strategy, a marketing plan

focusing solely on the served market is incomplete as it
risks losing the underserved or unserved markets
(sometimes even bigger than current customers) to other
competitors.

• Thus, market-driving strategy should be viewed as a

source of innovation and growth for old businesses as
well as a new and major revenue source of firms.
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Market-Driving Strategy

• Market-Driving Strategies are strategies that embrace

innovative changes in the logic of industry and business
system to grow its profit and industry’s demand from
underserved and unserved markets.
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• There are two important things to take note of here —

value proposition and value chain.
• Value proposition is the benefit that consumers and
customers derive from owning and using the products or
services.
• Value chain, on the other hand, defines how the
individual activities required to create, produce and
deliver value fit together in the total business plan to
create profit for the firm and value proposition for the
customer.
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• Unlike traditional marketers who are tactics oriented,

market-driving strategies espouse that practitioners look at
both value proposition and value chain, with the aim of
growing the total market in a sustainable way, instead of
short-term oriented brand switching activities.
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3 Different Levels of Market-Driving

Strategy based on Value Proposition and
Value Chain.
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Level 1: A major change in value proposition more than

a major change in business system.

The introduction of Bibingkinitan

or mini-Bibingka in over 100 malls
is an example of level 1 market-
driving strategy.
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Level 1: A major change in value proposition more than

a major change in business system.

Observing the popularity of “tingi”

(smaller pack) in the Philippines,
Bibingkinitan, simply converted
the traditional bibingka into a
smaller product with mass appeal
at affordable price points.
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Level 1: A major change in value proposition more than

a major change in business system.
Selecta is the dominant brand of ice
cream in the Philippines, but it was not
so a few years ago, as it was neck-to-
neck with Nestle. Problematic with
declining industry demand, the
marketers went on to ask mothers what
they liked to serve during birthdays and
what they actually served.
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Level 1: A major change in value proposition more than

a major change in business system.
The result of their insighting led them to launch Selecta’s 3-in-1 ice
cream, combining three of the favorite ice cream flavors in a tub at an
affordable price. With this huge success that turned around shrinking
industry demand, they even extended to four flavors with 3-in-1 plus 1,
wanting to own the term “3-in-1.”

Meantime, Nestle was not able to immediately respond with the new
value proposition of Selecta, as they did not have the technology to do 3-
in-1.
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Level 1: A major change in value proposition more than

a major change in business system.
Mothers were happy they were able to serve
what they really liked to serve, children were
happy with each of their favorite flavors,
while fathers were happy too with a cost-
saving solution, improving not just
company’s sales but also industry demand in
the process, attracting many lapsed
customers to return.
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Level 2: A major change in business system more than a

major change in value proposition.

The launch of Fern-C calcium

ascorbate via network marketing in
2006 is an example of level 2
market-driving strategy.
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Level 2: A major change in business system more than a

major change in value proposition.

Instead of tapping doctors and drugstores like the

market leaders then, they made use of a zero-based
network of users with the opportunity to earn while
consuming the product. The result is their taking
over the Vitamin C market within 2 years from the
company’s relaunch.
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Level 2: A major change in business system more than a

major change in value proposition.

Waters used to be sold in appliance and

other retail stores on cash basis in the late
’80s and early ’90s, however, its growth
was constrained with its inability to
explain the product features and benefits
of the high end products in stores.
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Level 2: A major change in business system more than a

major change in value proposition.

• This led to stores requiring them to go on promotional sale,

with the additional problem of the fixed cost of hiring its
own promo girls and the automatic termination of these
promo girls in five months just when their competency is
peaking.
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Level 2: A major change in business system more than a

major change in value proposition.

• Waters then decided to create its own independent direct sales

force who were able to go direct to the customers (instead of
waiting for them to go to the retail stores) to promote the
product, backed with installment plans that nearly matches
what consumers typically pay monthly for water delivered by
their water refill stations
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Level 2: A major change in business system more than a

major change in value proposition.

• The installment plans allowed more affordability for the

consumers while enhancing the business opportunity for its
sales network. Today, Waters Philippines is expanding to
Indonesia to tap into a bigger combined market.
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Level 3: A major change in value proposition coupled

with a major change in business system.

Jobstreet is an example of level

3 market-driving strategy.
Instead of job applicants
buying Sunday newspapers
featuring classified
advertisements, they can
simply apply online (business
system) anytime.
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Level 2: A major change in business system more than a

major change in value proposition..

Instead of job applicants searching page for page for the position
they like, Jobstreet provides more convenience by focusing on
positions applicants are looking for while allowing hiring
companies to look at a summarized version of all the applicants
(value proposition)
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Level 3: A major change in value proposition coupled

with a major change in business system.

Inquirer Libre is an example of

level 3 market-driving strategy,
which saw a major change in
value proposition coupled with
a major change in business
system.
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Level 3: A major change in value proposition coupled

with a major change in business system.

As the leading broadsheet in the Philippines, Inquirer wanted to broaden its

readership base to include younger consumers, so in November 2001, it
launched Inquirer Libre.

The Inquirer’s mother brand gave the new tabloid-size newspaper

immediate credibility among its train riders. Libre (meaning “free” in
English) is a complimentary morning daily that is heavy in entertainment
and with a lot of light, human interest articles designed to be read in 15
minutes. Instead of selling the newspaper, it gave away Libre for free.
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Level 3: A major change in value proposition coupled

with a major change in business system.

Instead of tapping newspaper dealers, it went straight to consumers by way

of self-service pick-up stations, hence, avoiding traditional trade margins
and sales returns (after all, it’s a free paper).

Instead of showing half naked women targeting blue-collar workers, it

decided to be a wholesome paper targeting the young white-collar workers.
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Level 3: A major change in value proposition coupled

with a major change in business system.

Hence, instead of the usual readers in their 30s to 40s, Libre readers are
mostly in their 20s not known to be newspaper buyers. This is an example
of category point-of-entry marketing that will eventually turn some of the
current Libre readers to broadsheet readers in the future.
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Therefore, the higher the level, the more sustainable the

competitive advantage can be as market leaders do not
typically retaliate immediately against another player with a
different business system.

Established market leaders have a tendency to protect their

financials, measure market shares from among direct
competition and avoid the boldness of a new business system,
among other reasons, because it is not within their core
competency.
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This reluctance to attack allows the new players to gain a

foothold of the market faster and cheaper, enabling them to
expand from a niche to mainstream player sooner.
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It is not enough for firms to formulate a value proposition

for customers, but to ensure a corresponding innovation in
value chain or business system internally that can help
carry out the value proposition and create greater but more
sustainable wealth for the firm.
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Thus, a market-driving strategy (MDS) is a holistic

and strategic approach to traditional strategy
formulation because it looks at both inside and
outside of the company – that of including value
chain and underserved / unserved markets.
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Market-Driven Strategy Market-Driving Strategy

Responding to the
Shaping the needs of
needs ofthe existing
the new customers
customers

Can happen at the same time