The Marketing Book 5th Edition

Existing New

Diversification

(Reducing or

INCREASING RISK)

Existing

New

CUSTOMERS

PRODUCTS

Controlling marketing and the measurement of marketing effectiveness 519

generated by the industry, e.g. increasing the
total size of the market, adding value to
existing products. Thus, it is possible for all
competitors in the industry to benefit from
‘creating value’ strategies, although they will
not all necessarily benefit equally. However,
strategies aimed at creating value for the
industry should result in less aggressive com-
petitive responses; they can even be described
as being ‘co-operative’ ways of competing.
Capturing value is all about gaining a
greater share of the total value available within
the industry. As a result, it tends to be a ‘win–
lose’ game, and this can result in much more
aggressive competitive reactions. In some dis-
astrous examples these reactions resulted in
dramatic price wars, which left everyone much
worse off financially.
The financial planning and control process
should therefore identify the type of share-
holder value creation which should result from
the proposed marketing strategy. This will help
in predicting the likely competitor response.
Selling new products to new customers
has also been quite well researched and the
shareholder value creation is also disappoint-
ing. Many companies seem to adopt this
strategy as a risk-reducing strategy but a ‘new,
new’ strategic thrust is really an increase in
risk, because it is not normally built on any

existing competitive advantage, as shown in

Figure 20.6.

This introduces the modifications to the

Ansoff matrix shown in Figure 20.5 because the

key strategic thrust relates to the existing

source of competitive advantage on which the

growth strategy is based. In the case of selling

new products to existing customers, this should

be the loyal base of existing customers for

whom new products are to be developed or

acquired. Correspondingly, the strategy of find-

ing new customer groups, markets or segments

in which to sell existing products should be

built on an existing successful product which is

capable of generating a super profit in its

existing market.

These strategic thrusts are examined in

more detail in the following sections, which

deal respectively with brand-led, customer-led

and product-led strategies.

Brand-led strategies

Brands can be based either around products

(e.g. Coca-Cola, Marlboro, Microsoft, Intel) or

around customers (e.g. Marks & Spencer, Tesco,

Virgin). They are therefore considered before

either customer-led strategies or product-led

Figure 20.6 Diversification using the Ansoff matrix