Chapter 2 Company and Marketing Strategy: Partnering to Build Customer Relationships Company-Wide Strategic Planning: Defining Marketings Role

e Strategic planning: The process of developing and maintaining a strategic fit between the organizations goals and capabilities and its changing marketing opportunities Annual plans, long-range plans, and strategic plans Annual and long range deal with the companys current businesses and how to keep them going Strategic involves adapting the firm to take advantage of opportunities in its constantly changing environment Steps in strategic planning o Defining the companys mission setting companys objectives and goals designing the business portfolio planning marketing and other functional strategies

Defining a Market-Oriented Mission Mission statement is a statement of the organizations purpose what it wants to accomplish in the larger environment. It should be market oriented and defined in terms of satisfying basic customer needs It should be meaningful and specific yet motivating. They should emphasize the companys strengths in the marketplace Focus on customers and the customer experience the company seeks to create

Setting Company Objectives and Goals The company needs to turn its mission into detailed supporting objectives for each level of management

Designing the Business Portfolio Business portfolio is the collection of businesses and products that make up the company Involves two steps o Analyze its current business portfolio and determine which businesses should receive more, less, or no investment aka portfolio analysis Identify the key businesses that make up the company, called strategic business units (SBUs) Assess the attractiveness of its various SBUs and decides how much support each deserves The best-known portfolio-planning method is the Boston Consulting Group (BCG) Approach that classifies SBUs according to the growth-share matrix Stars: high-growth, high-share businesses or products. They often need heavy investments to finance their rapid growth. Eventually their growth will slow down, and they will turn into cash cows Cash cows: low-growth, high share businesses or products. These established and successful SBUs need less investment to hold their market share. Thus, they produce a lot of the cash that the company uses to pay its bills and support other SBUs that need investment Question marks: low-share business units in high-growth markets. They require a lot of cash to hold their share, let alone increase it. Management has to think hard about which question marks it should try to build into stars and which should be phased out Dogs: Low-growth, low-share businesses and products. They may generate enough cash to maintain themselves but do not promise to be large sources of cash Four strategies for each SBU: invest more in the business to build its share, invest just enough to hold the SBUs share at the current level, harvest the SBU and milk its short-term cash flow regardless of the long-term effect, divest the SBU by selling it or phasing it out and using the resources elsewhere SBUS can change their position in the growth-share matrix over time Problems with matrix approach: difficult, time consuming, and costly to implement, management may find it difficult to define SBUs and measure market share and growth, approach focus on classifying current businesses but provide little advice for future planning o Must shape the future portfolio by developing strategies for growth and downsizing Product/market expansion grid a portfolio planning tool for identifying company growth opportunities through: Market penetration o Making more sales without changing its original product o Spur growth through marketing mix improvements adjusting its product design, advertising, pricing, and distribution efforts Market development o Identifying and developing new market for its current products o New demographic markets (using existing product to target females instead of males) or new geographical markets (expand internationally) Product development o Offering modified or new products to current markets Diversification

o Starting up or buying businesses beyond its current products and markets o Must be careful not to overextend their brands positioning Why develop strategies for downsizing? Firm may have grown too fast or entered areas where it lacks experience o Occurs when a firm enters too many international markets without the proper research or when a company introduces new products that do not offer superior customer value Some products or business units simply age and die

Planning Marketing: Partnering to Build Customer Relationships Key roles marketing play in the companys strategic planning: Provides a guiding philosophy the marketing concept that suggests that company strategy should revolve around building profitable relationships with important consumer groups Provides inputs to strategic planners by helping to identify attractive market opportunities and assessing the firms potential to take advantage of them Design strategies for reaching the units objectives

Partnering with other company departments to form an effective internal value chain The firms success depends not only on how well each department performs its work but also on how well the various departments coordinate their activities For example, Walmarts ability to offer the right products at low prices depends on the purchasing departments skill in developing the needed suppliers and buying from them at low cost

Partnering with others in the marketing system to form a competitively superior external value delivery network More companies today are partnering with other members of the supply chain suppliers, distributors, and ultimately customers to improve the performance of the customer value delivery network 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 building long-term supplier relationships based on mutual benefit

Marketing Strategy and The Marketing Mix Marketing Strategy the marketing logic by which the company hopes to create this customer value and achieve these profitable relationships Marketing Mix made up of factors under its control product, price, place, and promotion Customer-Driven Marketing Strategy Firms cannot possibly serve every single customer hence, must divide up the total market, choose the best segments, and design strategies for profitable serving chosen segments This process involves: o Market segmentation Dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviours, and who might require separate products or marketing programs A market segment consists of consumers who respond in a similar way to a given set of marketing efforts o Market targeting The process of evaluating each market segments attractiveness and selecting one or more segments to enter A company should target segments in which it can profitably generate the greatest customer value and sustain it over time Target niche market (Logitech dominating the PC mouse market), several related segments (A&F targets college students, teens and kids), enter new market by serving a single segment (Nike started with innovative running shoes for runners) and eventually seek full market coverage (Nike now makes and sells a broad range of sports products) o Market differentiation and positioning Positioning arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers Essential to develop unique market positions for products If a product is perceived to be exactly like others on the market, consumers would have no reason to buy it Identify possible customer value differences that provide competitive advantages on which to build the position such as charging lower prices or offering more profits to justify higher prices Differentiation actually differentiating the market offering to create superior customer value

Developing an Integrated Marketing Mix Marketing Mix the set of marketing tools (4Ps) that the firm blends to produce the response it wants in the target market o Product: the goods and services combination the company offers to the target market o Price: the amount of money the customers must pay to obtain the product o Place: company activities that make the product available to target consumers o Promotion: activities that communicate the merits of the product and persuade customers to buy it An effective marketing program blends each marketing mix element into an integrated marketing program designed to achieve the companys marketing objectives y delivering value to consumers

Managing the Marketing Effort Managing the marketing process requires the four marketing management functions analysis, planning, implementation, and control Marketing Analysis Analysis of the companys situation using SWOT analysis The goal is to match the companys strengths to attractive opportunities in the environment, while eliminating or overcoming the weaknesses and minimizing the threats

Marketing Planning Marketing planning involves choosing marketing strategies that will help the company attain its overall strategic objectives Marketing strategies consists of specific strategies for target markets, positioning, the marketing mix, and marketing expenditure levels

Marketing Implementation The process that turns marketing plans into marketing actions to accomplish strategic marketing objectives

Marketing Control Marketing control involves measuring and evaluating the results of marketing strategies and plans and taking corrective action to ensure that the objectives are achieved Involves 4 steps: o Sets specific marketing goals o It then measures its performance in the marketplace o Evaluates the causes of any differences between expected and actual performance o Management takes corrective action to close the gaps between goals and performance Operating control involves checking ongoing performance against the annual plan and taking corrective action when necessary Strategic control involves looking at whether the companys basic strategies are well matched to its opportunities

Measuring and Managing Return on Marketing Investment Return on marketing investment (or marketing ROI) Net return from a marketing investment divided by the costs of the marketing investment. It measures the profits generated by investments in marketing activities