Strategic Planning Concepts & Principles (cont...)

MARKET (OR CUSTOMER) SEGMENTATION
The identification of specific groups (segments) of customers who respond differently from other groups to competitive strategies.

Some typical bases for market segmentation:

• Geography
• Demography (age, sex, education, etc.)
• Socio-economic grouping and income
• Ethnic group
• Benefits sought / needs
• Usage rate and brand loyalty
• Attitudes
• Lifestyle
• Professional membership
  

The strategy is then directly aimed at satisfying the specific need of the identified segment we want to serve.

MISSION
What an org/unit is for; a statement of purpose of being; why it exists; its role in the world.

A sense of mission is essential if employees are to believe in their org/unit. They have to think that they are there to achieve something of real value.

Include the following elements in the mission statement:
WHAT the org/unit provides (the products; services)
WHO they provide it to (the customers; clients)
HOW it will be done (the methods, processes, technologies, unique capabilities and competencies)
WHY they do it (motivation/reason)

A mission statement should incorporate the notion of "stretch", ambition and inspiration.

ORIENTATION TOWARDS CHANGE
There are three choices:

1. REACTIVE ORIENTATION: Wait for things to change; then react to it.
2. PROACTIVE ORIENTATION: Foresee/anticipate that things will change; then act before it happens.
3. IMPACTIVE ORIENTATION: Actively participate in the necessary change; creating your own future.

PRICE; COST
With all the emphasis on time, responsiveness and quality, one might wonder whether customers still care about price.

One can be assured that whether a business unit is following a low-cost or a differentiated strategy, customers will always be concerned with the price they pay for the product or service.

Even price-sensitive customers, however, may favour suppliers that offer not low prices, but low costs to acquire and use the product or service.

You can't be a best-cost producer without having a high-quality product or service.

QUALITY
Quality measures the defect level of incoming products/services as perceived and measured by the customer. Quality could also measure on-time delivery - the accuracy of the company's delivery forecasts. The combination of performance and service measures how the company's products or services contribute to creating value for its customers.

Today, quality has shifted from a strategic advantage to a competitive necessity. Many organisations that could not reliably deliver defect-free products or services have ceased to be serious competitors.

Service companies have a particular problem not faced by manufacturers. When a manufacturer's product or piece of equipment fails to work or satisfy the customer, the customer will usually return the product or call the company asking for repairs to be made. In contrast, when a quality failure occurs in a service company, the customer has nothing to return and usually no one responsive to complain to. The customer's response is to cease patronising the organisation. The service organisation may eventually note a decline in business and market share, but such a signal is delayed (lagging indicator) and almost impossible to reverse. The organisation will typically not even know the identity of customers who tried the service, were poorly treated, and then decided never to use that organisation's services again.

For this reason, several service firms offer service guarantees. This offer, to immediately refund not only the purchase price but generally a premium above the purchase price, provides several valuable benefits to a company. First, a guarantee allows it to retain a customer who otherwise might be lost forever. Second, an organisation receives a signal (leading indicator) about the incidence of defective service, enabling it to initiate a programme of corrective action. And, finally, knowledge of the existence of the service guarantee provides strong motivation and incentives for the people delivering customer service to avoid defects that would trigger a request for the guarantee.

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