Principles of Marketing Ch 2

P r i n c i p l e s o f M a r k e ti n g

Dr. Karim Kobeissi

Chapter 2:Company and Marketing Strategy

-Partnering to Build Customer Relationships

S t r a t e g y - D e fi n i ti o n

A strategy, is an IDEA, a

conceptualization of how the goal

could be achieved.

L e v e l s o f S t r a t e g y

Organizations have different levels of strategy, particularly for larger or global

organizations. They identify:

Corporate Strategy which is concerned with the overall purpose and scope of the organization.

Business Unit Strategy which defines how to compete successfully in a particular market.

Functional or Operational Strategies that describe how the corporate and business unit

strategies will be operationalized in different functional areas or business processes. Functional

strategies refer to marketing, supply chain management, human resources, finance and

information systems strategies.

Strategy Vs Tactic

• A tactic is an activity we adopt to execute the strategy.

• Different tactics may be deployed as part of a single strategy. For

example, one strategy to gain market share would be brand building.

As part of a company's brand building strategy, they may adopt

different tactics like (a) online advertising and (b) celebrity supports.

Companywide Strategic Planning: Defining Marketing’s Role

How do companies compete and succeed in a global market

place?

One part of the answer is a commitment to creating and

retaining satisfied customers.

The second part is adapting to a continuously changing

marketplace through market-oriented strategic planning.

This is the focus of strategic planning—The continuous

process of developing and maintaining a strategic fit

between the organization’s goals and resources and its

changing marketing opportunities. The strategic planning

process helps the organization in allocating its resources to

take advantage of opportunities in the marketplace.

• The company-wide strategic planning guides marketing

strategy and planning.

Corporate Strategic Planning

At the corporate level, all companies start the strategic planning

process by undertaking three planning activities:

1. Defining the corporate /division mission.

2. Setting company objectives and goals.

3. Designing the business portfolio.

Strategic Planning at Corporate Levels

1. Defining the Corporate Mission

• The corporate mission is a statement of the company’s

purpose – what it wants to accomplish in the larger

environnement.

• Market-oriented mission statement: Defines the

business in terms of satisfying basic customer needs

2. Setting Company Objectives and Goals

The company needs to turn its

mission into detailed

supporting objectives for

each level of management.

• Each manager should have

objectives and be responsible

for reaching them.

3 . Designing the Business Portfolio

Guided by the company’s mission statement and objectives, management

now must plan its business portfolio — the collection of businesses

and products that make up the company.

The best business portfolio is the one that best fits the company’s

strengths and weaknesses to opportunities in the environment.

Business portfolio planning involves two steps:

1) The company must analyze its current business portfolio and determine

which businesses should receive more, less, or no investment.

2) The company must shape the future portfolio by developing strategies

for growth and downsizing.

Analyzing the Current Business Portfolio The major activity in strategic planning is business portfolio analysis, whereby

management evaluates the products and businesses that make up the

company. The company will want to put strong resources into its more

profitable businesses (SBU’s) and drop its weaker ones.

The purpose of strategic planning is to find ways in which the company can

best use its strengths to take advantage of attractive opportunities in the

environment. So most standard portfolio analysis methods evaluate SBUs

on two important dimensions: the 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 is the growth Share Matrix that

was developed by the Boston Consulting Group.

Shaping the Future Business Portfolio

Once it has classified its SBUs, the company must determine what role

each will play in the future. It can pursue one of four strategies for

each SBU:

1) - The company can invest more in the business unit to build its share.

2)- The company can invest just enough to hold the SBU’s share at the

current level.

3)- The company can harvest the SBU, milking its short-term cash flow

regardless of the long-term effect.

4)- The company can divest the SBU by selling it or phasing it out and

using the resources elsewhere.

Business Units Strategic Planning

At the business unit level, each strategic business

unit (SBU) develops its own strategic plan to

carry that business unit into a profitable future.

The Strategic Planning Process at SBU Level

Marketing Strategy Formulation for Growth and Downsizing

Marketing Strategy is a functional level strategy that

presents the broad marketing approach which will

be used to achieve the marketing plan's objectives.


Marketing Strategy Formulation for Growth and Downsizing

The Product/market expansion grid is a tool for identifying

company growth opportunities through:

1) Market Penetration

2) Market Development

3) Product Development

4) Diversification


Developing Marketing Strategies for Growth and Downsizing

Market penetration is a growth strategy increasing sales to current market segments without changing the product

Market development is a growth strategy that identifies and develops new market segments for current products



Product development is a growth strategy that offers new or modified products to existing market segments

Diversification is a growth strategy through starting up or acquiring businesses outside the company’s current products and markets


The Four Growth Marketing Strategies of the Product-Market Growth Matrix


Downsizing is the reduction of the business portfolio by

eliminating products or business units that are not

profitable or that no longer fit the company’s overall

strategy


Planning Marketing: Partnering to Build Customer Relationships

Marketing alone can’t create superior customer value. Under

the company-wide strategic plan, marketers must work

closely with other departments to form an effective

internal company value chain and with other companies

in the marketing system to create an overall external

value delivery network that jointly serves customers.


Partner Relationship Management

Partner relationship management is the process of working

closely with partners in other internal departments to

form an effective value chain that serves the customer, as

well as partnering effectively with other companies in the

marketing system to form a competitively superior value-

delivery network.


Value Chain: The series of internal departments that carry out

value-creating activities to design, produce, market, deliver,

and support a firm’s products.

Partnering with Other Internal Departments

The Internal Value Chain


Value delivery network is made up of the company,

suppliers, distributors, and ultimately customers

who partner with each other to improve

performance of the entire system.

Partnering with Others in the Marketing System

Marketing Strategy and the Marketing Mix

Marketing Strategy

Marketing strategy is the marketing logic (idea) by

which the business unit hopes to achieve its

marketing objectives.


The strategic plan defines the company’s overall mission and objectives. Marketing’s role is shown in the beside figure, which summarizes the major activities involved in managing a customer-driven marketing strategy and the marketing mix.

Consumers are in the center. The goal is to create value for customers and build profitable customer relationships.

Customer-Driven Marketing Strategy

Once it fully understands consumers and the marketplace, marketing

management can design a customer-driven marketing strategy. To

design a winning marketing strategy, the marketing manager must

answer two important questions:

1) What customers will we serve (what’s our target market)?

2) How can we serve these customers best (what’s our value

proposition)?

1- Selecting Customers to Serve

The company must first decide whom it will serve. It does this by

dividing the market into segments of customers - (a) market

segmentation and selecting which segments it will go after - (b)

market targeting. Some people think of marketing management as

finding as many customers as possible and increasing demand. But

marketing managers know that they cannot serve all customers in

every way. By trying to serve all customers, they may not serve any

customers well. Instead, the company wants to select only customers

that it can serve well and profitably. Ultimately, marketing managers

must decide which customers they want to target and on level,

timing, and nature of their demand.

(a)- Market Segmentation

Market Segmentation is the sub-

dividing of customers into

homogenous sub-set of

customers where any sub-set

may conceivably selected as

market target to be reached

with distinct Marketing Mix.

How Can We Segment the Market?

(b)- Market Targeting

• Market Targeting - Involves evaluating

each segment’s attractiveness and

selecting one or more segments to enter

according to organizational resources &

objectives. Targeting reduces time and cost

as well as increases sales.

• Target Market – A set of buyers sharing

common needs or characteristics that the

company decides to serve.

Evaluating Market Segments • Segment Size and Growth– Analyze current sales, growth rates and expected

profitability for various segments.• Segment Structural Attractiveness– Consider effects of: competitors, availability of

substitute products and, the power of buyers & suppliers.

• Company Objectives and Resources– Company skills & resources needed to succeed in

that segment(s).– Look for Competitive Advantages.

2- Choosing a Value Proposition

The company must also decide how it will serve targeted customers ?

How the company will:

a) Differentiate itself in the marketplace?

b) Position itself in the marketplace?

Accordingly, the company must choose its value proposition.

D i ff e r e n ti a ti o n Differentiation is the

act of designing a

set of meaningful

differences to

distinguish the

company's offering

from competitor's

offerings.

P o s i ti o n i n g

Positioning is the act of arranging for

a product to occupy a clear,

distinctive, and desirable place

relative to competing products in

the minds of target consumers.

V a l u e P r o p o s i ti o n

The end result of positioning is the creation of a market-focused value

proposition - The set of benefits a company promises to deliver to

customers to satisfy their needs - to answer the customer’s question:

“Why should I buy your offer rather than a competitor’s offer?” – it is a

simple clear statement of why the target market should buy the product.

Such value propositions differentiate one brand from another and the

product’s position can be viewed as the main result of its

differentiation.

A Product Positioning Map

Segmentation, Targeting, Positioning – STP: The Essence of Strategic Marketing


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


The four Ps

• Product• Price• Place• Promotion

2-29

Developing an Interrelated Marketing Mix


Developing an Interrelated Marketing MixThe four Ps

Product is the goods and services in combination that the company offers to the target market

Price is the amount of money customers have to pay to obtain the product

2-30


Developing an Integrated Marketing MixThe four Ps

Place is the company activities that make the product available to target customers

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

2-31

Managing the Marketing Effort

Managing the marketing effort requires:1) Analysis2) Planning3) Implementing4) Controlling

Managing the Marketing Effort: 1- Marketing Analysis

Analysis is the complete analysis of the company’s situation in a SWOT analysis that evaluates the company’s:

• Strengths• Weaknesses• Opportunities• Threats

Marketing Analysis

Strengths include internal capabilities, resources, and positive situational factors that may help to serve company customers and achieve company objectives

Weaknesses include internal limitations and negative situational factors that may interfere with company performance

Opportunities are favorable factors or trends in the external environment that the company may be able to exploit to its advantage

Threats are unfavorable external factors or trends that may present challenges to performance

Managing the Marketing Effort: 1- Marketing Analysis

Planning is the development of strategic and marketing plans to achieve company objectives

Marketing strategy consists of the specific strategies for target markets, positioning, the marketing mix, and marketing expenditure levels.

Managing the Marketing Effort: 2- Market Planning

Sections of a marketing plan include:• Executive summary• Current marketing situation• Threats and opportunities• Objective and issues• Action programs / Strategies & Tactics• Budgets• Controls

Market Planning

Managing the Marketing Effort: 3- Marketing Implementation

Implementing is the process that turns marketing plans into marketing actions to accomplish strategic marketing objectives

Successful implementation depends on how well the company blends its people, organizational structure, decision and reward system, and company culture into a cohesive action plan that supports its strategies


Marketing Department Organization

• Functional• Geographic • Product• Market or customer management



Functional organization: This is the most common form of

marketing organization with different marketing

functions headed by a functional specialist

• Sales manager

• Market research manager

• Customer service manager

• New product manager



Geographic organizations: 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 band.



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.



Customer management involves a customer focus and not a

product focus for managing customer profitability and

customer equity.

Managing the Marketing Effort: 4- Marketing Control

Controlling is measuring and evaluating results and

taking corrective action as needed

• Operating control

• Strategic control

2-45

Operating control involves checking ongoing performance against annual plan and taking corrective action as needed

Strategic control involves looking at whether the company’s basic strategies are well matched to its opportunities


Marketing audit

Marketing audit is a comprehensive, systematic, independent, and periodic examination of a company’s environment, objectives, strategies, and activities to determine problem areas and opportunities


Measuring and Managing Return on Marketing Investment (ROI)

Return on marketing investment is the net return from a

marketing investment divided by the costs of the marketing

investment. Marketing ROI provides a measurement of the

profits generated by investments in marketing activities.


Measuring and Managing Return on Marketing Investment Customer-Centered Measures

• Customer acquisition• Customer retention• Customer lifetime value


Principles of Marketing Ch 2

Documents

Transcript of Principles of Marketing Ch 2