Company and Marketing Strategy

Partnering to Build Customer Relationships

Chapter 2

Priciples of Marketingby Philip Kotler and Gary Armstrong

PEARSON

1

Companywide Strategic Planning: Defining Marketing’s Role

Explain company-wide strategic planning and its four steps.

2

Designing the Business PortfolioDiscuss how to design business portfolios and develop growth strategies.

Objective Outline

3

Planning Marketing: Partnering to Build Customer Relationships

Explain Marketing’s role in strategic planning and how marketing works with its partners to create and deliver customer value.

4

Marketing Strategy and the Marketing MixDescribe the elements of a customer-driven marketing strategy and mix and the forces that influence it.

Objective Outline

5

Managing the Marketing EffortMeasuring and Managing Return on

Marketing InvestmentList the marketing management functions, including the elements of a marketing plan, and discuss the importance of measuring and managing return on marketing investment.

Objective Outline

Companywide Strategic Planning: Defining Marketing’s Role

Strategic planning is the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities.

Companies usually prepare annual plans, long-range plans, and strategic plans.

The annual and long-range plans deal with the company’s current businesses and how to keep them going.

In contrast, the strategic plan involves adapting the firm to take advantage of opportunities in its constantly changing environment.

Companywide Strategic Planning: Defining Marketing’s Role

• Like the marketing strategy, the broader company strategy must be customer focused.

• Company-wide strategic planning guides marketing strategy and planning.

Defining a Market-Oriented Mission

The mission statement is the organization’s purpose, what it wants to accomplish in the larger environment.

Market-oriented mission statement defines the business in terms of satisfying basic customer needs.

Defining a Market-Oriented Mission

Setting Company Objectives and Goals

Business objectives

•Build profitable customer relationships•Invest in research•Improve profits

Marketing objectives

•Increase market share•Create local partnerships•Increase promotion

Designing the Business Portfolio

The business portfolio is the collection of businesses and products that make up the company.

Business portfolio planning involves two steps:

the company must analyze

its current business

portfolio and determine

the investment

shape the future

portfolio by developing

strategies for growth and downsizing

Analyzing the Current Business Portfolio

Portfolio analysis is a major activity in strategic planning whereby management evaluates the products and businesses that make up the company

Management’s first step is to identify the key businesses that make up the company, called strategic business units (SBUs).

SBU

Company division

Product line within a division

Single product or brand

Analyzing the Current Business Portfolio

The company next assesses the attractiveness of its various SBUs and decides how much support each deserves.

Tthe attractiveness of the SBU’s market or industry and the strength of the SBU’s position in that market or industry.

The best-known portfolio-planning method was developed by the Boston Consulting Group, a leading management consulting firm.

The Boston Consulting Group Approach

A company classifies all its SBUs according to the growth-share matrix. The growth-share matrix defines four types of SBU’s:

Stars are high-growth, high-share businesses

or products. They often need heavy investments to finance their rapid

growth.

These established and successful SBUs need less investment to hold their market

share.

They may generate enough cash to

maintain themselves but do not promise to

be large sources of cash.

They require a lot of cash to hold their

share, let alone increase it.

The Boston Consulting Group Approach

It can pursue one of four strategies for each SBU.

Build：It can invest more in the

business unit.

Hold:It can just enough to

share at the current level.

Harvest：It can harvest

the SBU, milking its short-term

cash.

Divest：It can divest the SBU by selling it or

phasing it out and using the

resources elsewhere.

Problems with Matrix Approaches

It have some limitations:

• Difficulty in defining SBUs and measuring market share and growth• Time consuming• Expensive• Focus on current businesses, not future planning

Methods to improve:

• Dropped formal matrix methods in favor of more customized approaches that better suit their specific situations• Today’s strategic planning has been decentralized

Developing Strategies for Growth and Downsizing

Product/market expansion grid is a portfolio-planning tool for identifying company growth opportunities through market penetration, market development, product development, or diversification.

• Market development ─ Companies can grow by developing new markets for existing products. For example, Starbucks is expanding rapidly in China, which by 2015 will be its second-largest market, behind only the United States.

• Diversification ─ Through diversification, companies can grow by starting or buying businesses outside their current product/markets. For example, Starbucks is entering the “health and wellness” market with stores called Evolution By Starbucks.

Developing Strategies for Growth and Downsizing

Market penetration

•Company growth by increasing sales of current products to current market segments without changing the product

Market development

•The company growth by identifying and developing new market segments for current company products.

Product development

•Company growth by offering modified or new products to current market segments.

Diversification •Company growth through starting up or acquiring businesses outside the company’s current products and markets.

Planning Marketing: Partnering to Build Customer Relationships

Marketing plays a key role in the company’s strategic planning in several ways:

First, marketing provides a guiding philosophy—the marketing concept—that suggests the company strategy should revolve around building profitable relationships with important consumer groups.

Second, marketing provides inputs to strategic planners by helping to identify attractive market opportunities and assessing the firm’s potential to take advantage of them.

Finally, within individual business units, marketing designs strategies for reaching the unit’s objectives. Once the unit’s objectives are set, marketing’s task is to help carry them out profitably.

Partnering with Other Company Departments

Value chain is a series of departments that carry out value-creating activities to design, produce, market, deliver, and support a firm’s products.

That is, each department carries out value-creating activities to design, produce, market, deliver, and support the firm’s products.

Partnering with Others in the Marketing System

Value delivery network is the network made up of the company, its suppliers, its distributors, and, ultimately, its customers who partner with each other to improve the performance of the entire system.

Toyota’s performance against Ford depends on the quality of Toyota’s overall value delivery network versus Ford’s.

Marketing Strategy and the Marketing Mix

Next comes marketing strategy—the marketing logic by which the company hopes to create this customer value and achieve these profitable relationships.

Customer-Driven Marketing Strategy

Most companies are in a position to serve some segments better than others.

Thus, each company must divide up the total market, choose the best segments, and design strategies for profitably serving chosen segments.

This process involves:

Marketing segmentation Positioning

Market Segmentation

The process of dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors, and who might require separate products or marketing programs, is called market segmentation.

Market segment is a group of consumers who respond in a similar way to a given set of marketing efforts.

Marketing Targeting

Market targeting is the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.

A company with limited resources might decide to serve only one or a few special segments or market niches.

Most companies enter a new market by serving a single segment; if this proves successful, they add more segments.

Marketing Differentiation and Positioning

Positioning is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of the target consumer.

Thus, effective positioning begins with differentiation—actually differentiating the company’s market offering so that it gives consumers more value.

Developing an Integrated Marketing Mix

Marketing mix is the set of controllable tactical marketing tools—product, price, place, and promotion—that the firm blends to produce the response it wants in the target market.

Product means the goods-and-services combination the company offers to the target market.

Price is the amount of money customers must pay to obtain the product.

Promotion refers to activities that communicate the merits of the product and persuade target customers to buy it.

Place includes company activities that make the product available to target consumers.

The marketing mix ─ or the four Ps ─ consists of tactical marketing tools blended into an integrated marketing program that actually delivers the intended value to target customers.

An effective marketing program blends the marketing mix elements into an integrated marketing program designed to achieve the company’s marketing objectives by delivering value to consumers. The marketing mix constitutes the company’s tactical tool kit for establishing strong positioning in target incentives.

Developing an Integrated Marketing Mix

It holds that the four Ps concept takes the seller’s view of the market, not the buyer’s view. From the buyer’s viewpoint, in this age of customer value and relationships, the four Ps might be better described as the four Cs:

4Ps

Product

Price

Place

Promotion

4Cs

Customer solution

Customer cost

Convenience

Communication

Managing the Marketing Effort

Managing the marketing process requires the four marketing management functions:

Marketing Analysis

The marketer should conduct a SWOT analysis ,by which it evaluates the company’s overall strengths (S), weaknesses (W), opportunities (O), and threats (T).

Marketing Planning

Through strategic planning, the company decides what it wants to do with each business unit. Marketing planning involves choosing marketing strategies that will help the company attain its overall strategic objectives.

Positioning

Market mix

Marketing expenditur

e level

Target markets

Marketing

strategy

Marketing Strategy:It outlines how the company intends to create value for target customers in order to capture value in return.

Marketing Implementation

Marketing implementation is the process that turns marketing plans into marketing actions to accomplish strategic marketing objectives.

Whereas marketing planning addresses:

what

why

who

where

when

how

Many managers think that “doing things right” (implementation) is as important as, or even more important than, “dong the right things”(strategy).

Marketing Department Organization

Functional organization

•This is the most common form of marketing organization with different marketing functions headed by a functional specialist.

Geographic organization

•Useful for companies that sell across the country or internationally. Managers are responsible for developing strategies and plans for a specific region.

Product management

•Useful for companies with different products or brands. Managers are responsible for developing strategies and plans for a specific product or brand.

Market or customer management organization

•Useful for companies with one product line sold to many different markets and customers. Managers are responsible for developing strategies and plans for their specific markets or customers.

Marketing Control

Marketing control is the measuring and evaluating the results of marketing strategies and plans and taking corrective action to ensure that the objectives are achieved.

Management first sets specific

marketing goals.

Measures its performance in the market

placeEvaluates the causes of any differences

between expected and

actual performance

Management takes

corrective action to close

the gaps between goals

and performance

Four steps of marketing control:

Measuring and Managing Return on Marketing Investment

Return on marketing investment (or marketing ROI) is the net return from a marketing investment divided by the costs of the marketing investment.

It measures the profits generated by investments in marketing activities.

Many companies are assembling such measures into marketing dashboards ─ meaningful sets of marketing performance measures in a single display used to monitor strategic marketing performance.

Measuring and Managing Return on Marketing Investment

The End