CH-1-2 Defining Marketing for the 21st Century – Marketing Management: A South Asian Perspective : Chapter Notes

This Document Contains Chapters 1 to 2 Chapter 1 Defining Marketing for the 21st Century LEARNING OBJECTIVES In this chapter, we will address the following questions: Why is marketing important? What is the scope of marketing? What are some fundamental marketing concepts? How has marketing management changed? What are the tasks necessary for successful marketing management? SUMMARY Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Marketing management is the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value. Marketers are skilled at managing demand: they seek to influence its level, timing, and composition for goods, services, events, experiences, persons, places, properties, organizations, information, and ideas. They also operate in four different marketplaces: consumer, business, global, and nonprofit. Marketing is not done only by the marketing department. It needs to affect every aspect of the customer experience. To create a strong marketing organization, marketers must think like executives in other departments, and executives in other departments must think more like marketers. Today’s marketplace is fundamentally different as a result of major societal forces that have resulted in many new consumer and company capabilities. These forces have created new opportunities and challenges and changed marketing management significantly as companies seek new ways to achieve marketing excellence. There are five competing concepts under which organizations can choose to conduct their business: the production concept, the product concept, the selling concept, the marketing concept, and the holistic marketing concept. The first three are of limited use today. The holistic marketing concept is based on the development, design, and implementation of marketing programs, processes, and activities that recognize their breadth and interdependencies. Holistic marketing recognizes that everything matters in marketing and that a broad, integrated perspective is often necessary. Four components of holistic marketing are relationship marketing, integrated marketing, internal marketing, and socially responsible marketing. The set of tasks necessary for successful marketing management includes developing marketing strategies and plans, capturing marketing insights, connecting with customers, building strong brands, shaping the market offerings, delivering and communicating value, and creating long-term growth. OPENING THOUGHT Marketing is too often confused and identified with advertising or selling techniques, and our practices and theories are all too often invisible to the average consumer. The instructor should spend some class time differentiating between advertising/promotion techniques and marketing. Students who are not marketing majors will have some difficulty accepting the encompassing role that marketing has on the other functional disciplines within a firm. For those students who have never been exposed to marketing and its components, the instructor’s challenge is to educate the students about the world of marketing. The in-class and outside of class assignments noted in this text should help both educate and excite the students about the “world of marketing.” TEACHING STRATEGY AND CLASS ORGANIZATION PROJECTS 1. Semester-Long Marketing Plan Project An effective way to help students learn about marketing management is through the actual creation of a marketing plan for a product or service. This project is designed to accomplish such a task. Dividing the class into groups, have each group decide on a “fictional” consumer product or service they wish to bring to market. During the course of the semester, each of the elements of the marketing plan, coordinating with the text chapter, will be due for the instructor’s review. The instructor is encouraged to review each submission and suggest areas for improvement, for more detailed study, or if acceptable to allow the students to proceed to the next phase in development. Students can use the computer program Marketing Plan Pro in creating their proposals and submissions and in their final presentation(s). At the end of the semester, each group is to present their entire marketing plan to the class. The following is an outline of this process: Chapter # Title Element of the Marketing Plan Due 1 Defining Marketing for the 21st Century None, group formation and begin the process of selecting the product or service. 2 Developing Marketing Strategies and Plans Formation of groups; first presentation of “product” to instructor for approval. 3 Gathering Information and Scanning the Environment Competitive information and environmental scanning project(s) completed and presented for instructor’s review. 4 Conducting Marketing Research and Forecasting Demand Initial marketing research parameters completed; demand forecasted and target market selections defined. 5 Creating Customer Value, Satisfaction, and Loyalty Students should have completed their value proposition for the fictional product, defined how they will deliver satisfaction, and maintain customer loyalty. 6 Analyzing Consumer Markets Definitive data on the consumer for the product/service including all demographic and other pertinent information obtained and ready for instructor’s approval. 7 Analyzing Business Markets No report due for this chapter; allows students and instructor to “catch up” on the project. 8 Identifying Market Segments and Targets Specific market segmentation, targeting, and positioning statements by the students due. 9 Creating Brand Equity At this point in the semester, students are to have their “branding” strategy developed for their project. Questions to have been completed include the brand name, its equity position, and the decisions in developing the brand strategy. 10 Crafting the Brand Positioning At this point in the semester, student projects should be completed to include their fictional product or service’s brand positioning. In relationship to the material contained in the chapter, students should have delineated and designed a differentiated brand positioning for their project. 11 Competitive Dynamics At this point in the semester-long project, students should be prepared to present their competitive analysis. Who are the market leaders for their chosen product or service? What niche have they identified for their product/service? Is their product or service going to be a leader, follower, or challenger to well-established products or brands? 12 Setting Product Strategy At this point in the semester-long project, students should have set their group project’s product or service strategy. Instructors are to evaluate their submissions on the product (or service) features, quality, and price and other considerations of “product” found in this chapter. 13 Designing and Managing Services At this point in the semester-long project, those students who have selected a “service” idea for the marketing plan must submit their offering. Students whose project is a “productbased” component do not have anything to submit for this chapter. 14 Developing Pricing Strategies and Programs At this point in the semester-long project, students should be prepared to hand in their pricing strategy decisions for their fictional product/service. In reviewing this section, the instructor should make sure that the students have addressed all or most of the material concerning pricing covered in this chapter. 15 Designing and Managing Marketing Channels and Value Networks At this point in the semester-long project, students should present their channel decisions for getting their product or service to the consumer. In evaluating this section, the instructor should evaluate the completeness of the projects to the material contained in this chapter. 16 Managing Retailing, Wholesaling, and Logistics At this point in the semester-long project for the “fictional” product or service, students should be directed to turn in their retailing, wholesaling, and logistical marketing plans. Those students who are acting in the role of providing a new “service” should include here their plans for locations, hours of operations, and how their “service” plans on managing demand and capacity issues. 17 Designing and Managing Integrated Marketing Communications At this point in the semester-long project, students should have agreed upon their integrated marketing communications matrix. The instructor is encouraged to evaluate the submissions vis-à-vis the material presented in this chapter. In reviewing the submissions, the instructor should evaluate the continuity of the message across all possible communication media (students will tend to concentrate their media on television or on the Internet and exclude other forms such as personal selling and radio). 18 Managing Mass Communications: Advertising, Sales Promotions, Events, and Public Relations At this point in the semester-long project, students should submit their advertising program complete with objectives, budget, advertising message, and creative strategy, media decisions, and sales and promotional materials. 19 Managing Personal Communications: Direct Marketing and Personal Selling At this point in the semester-long project, students who have decided to market their product/service through direct market channels should submit their proposals. All other groups must decide at this point if they will use a direct sales force, and if so, to outline the specifics (including financials) for this option. 20 Introducing New Market Offerings At this point in the semester-long project, in this section should be a brief write up by the students as to the consumer-adoption process for their new product. How will the consumer learn about their new product and how quickly will they adopt it? Will the product first be targeted to heavy users and early adopters, then to early and late majorities? What is their estimated time for full adoption? 21 Tapping into Global Markets If the project is to be exported to another country, then students’ submissions regarding how the product is to be distributed should be included here; otherwise this begins the presentation phase of the project; student groups should begin their presentations to the class. 22 Managing a Holistic Marketing Organization Second phase of the presentations of the project; students should ensure that their marketing plans contains a holistic view of the marketing process. Under the projects heading for each chapter will be a reminder of the material due when that chapter is scheduled to be discussed in class. ASSIGNMENTS In small groups, ask the students to comment on AirAsia’s “maverick” approach to marketing and discuss their views on how the company communicates with consumers—visually through its website, social media, print ads, sponsorship, events etc.; by sound, or via verbal communication? Assign students the task of visiting some companies Web sites to see if they feel that the company is responding to the changes in marketing today, namely, customer-orientated marketing. Suggestions include firms like Amazon.com and Krispy Kreme. Have the students comment on what they find there of particular interest to them. Students can choose a firm of their preference, interview key marketing management members and ask the firm how they are reacting to the changes in marketing management for the 21st Century (students should ask and have answers to all of the points listed in the chapter in Table 1.1). Have the students read Ryan Huang’s “Feature phone ads still a draw,” ZDNet, July 12, 2012 (http://www.zdnet.com) and comment on how effective they believe cell phone advertisements will be in the future. Have the students reflect upon their favorite product and/or service. Then have the students collect marketing examples from each of these companies. This information should be in the form of examples of printed advertising, copies of television commercials, Internet advertising, or radio commercials. During class, have the students share what they have collected with others. Questions to ask during the class discussion should focus on why this particular example of advertising elicits a response from you. What do you like/dislike about this marketing message? Does everyone in the class like/dislike this advertising? END-OF-CHAPTER SUPPORT MARKETING DEBATE—Does Marketing Create or Satisfy Needs? Marketing has often been defined in terms of satisfying customers’ needs and wants. Critics, however, maintain that marketing does much more than that and creates needs and wants that did not exist before. According to these critics, marketers encourage consumers to spend more money than they should on goods and services they really do not need. Take a Position: Marketing shapes consumer needs and wants versus marketing merely reflects the needs and wants of customers. Suggested Response: Pro: With the vast amount of information available to marketers today and the emphasis on relational marketing, marketers are in more of a position to suggest needs and wants to the public. Certainly, not all consumers have all the needs and wants suggested by society today. However, with the vast amount of exposure to these societal needs and wants via the media, a substantial amount of consumers will, through mere exposure, decide that they “have” the same needs and wants of others. Marketers by their efforts increase peer pressure, and group thinking, by showing examples of what others may have that they do not. An individual’s freedom to choose is substantially weakened by constant and consistent exposure to a range of needs and wants of others. Marketers should understand that when it comes to resisting the pressure to conform, that individuals are and can be weak in their resolve. Marketers must take an ethical position to only market to those consumers able to purchase their products. Con: Marketing merely reflects societal needs and wants. The perception that marketers influence consumers’ purchasing decisions discounts an individual’s freedom of choice and their individual responsibility. With the advent of the Internet, consumers have greater freedom of choice and more evaluative criteria than every before. Consumers can and do make more informed decisions than previous generations. Marketers can be rightly accused of influencing wants, along with societal factors such as power, influence, peer pressure, and social status. These societal factors pre-exist marketing and would continue to exist if there was no marketing efforts expended. Marketing shapes consumer needs and wants by influencing perceptions, creating desire through advertising, and introducing new products that redefine consumer expectations. While it reflects existing needs, it also actively drives demand and creates aspirations that consumers may not have initially recognized. MARKETING DISCUSSION Consider the broad shifts in marketing. Do any themes emerge in them? Can you relate the shifts to major societal forces? Which force has contributed to which shift? Suggested Response: The major themes that emerge in these broad shifts are technology, decentralization, and empowerment. As companies face increased global competition, they are beginning to increase their attention to all aspects of marketing and are beginning to encompass marketing as a corporate goal and not just a departmental function. The major societal forces at work: two-income families, increased technology, fewer firms, increased consumer education, and empowerment are forcing companies and marketers to shift their thinking about marketing and rethink their best business practices. Themes such as digital transformation, personalization, and sustainability emerge in broad marketing shifts. These shifts are related to societal forces like technological advancement, increasing consumer demand for tailored experiences, and growing environmental awareness, each driving changes in marketing strategies and practices. Marketing Lesson: Nike What are the pros, cons, and risks associated with Nike’s core marketing strategy? Suggested Answer: One of Nike’s core marketing strategies is their belief in the “pyramid of influence” and its dependency on a core group of athletes to influence shoe purchases. While this may have worked in the past, there is no guarantee that future athletes will command such influence on the shoe purchaser in the future. Athlete influence(s) can and could decrease due to changing consumer preferences and changes in consumer tastes and priorities. Athletic influence could be adversely affected by the actions/inactions by Nike’s chosen spokespersons. Nike’s core marketing strategy, focused on high-profile endorsements and emotional branding, drives strong brand loyalty and high visibility but risks alienating some consumers due to high costs and potential overemphasis on celebrity influence. It also faces challenges like backlash from controversial endorsements or ethical concerns. If you were Adidas, how would you compete with Nike? Suggested Answer: I would emphasize my “international” scope of producing great soccer shoes and could also extend my marketing to emphasize my “everyday / everyone” usage for my products. Creating a point of difference for Adidas versus Nike is key to a sustainable advantage—Adidas’ soccer shoes for example are a good starting point to differentiate one brand versus another. If I were Adidas, I would compete with Nike by emphasizing unique product innovations, such as advanced sustainability practices and personalized customer experiences, while leveraging strategic partnerships and collaborations to enhance brand differentiation and appeal. Marketing Lesson: GOOGLE With a portfolio as diverse as Google’s, what are the company’s core brand values? Suggested Answer: Google’s core brand values: 1) “To organize the world’s information and make it universally accessible and useful” as stated by Google. This means that Google is trying to provide its advertisers better tools to target their ads and understand the effectiveness of their advertising. 2) “Make the Web a more personalized experience.” Google’s management believes that information should be shared amongst all peoples, at all times, from all platforms. Google’s core brand values include innovation, user-centricity, and accessibility. These values drive its commitment to creating impactful technology, improving user experiences, and making information universally accessible. What’s next for Google? Is it doing the right thing taking on Microsoft with its cloud computing, Apple in the fight for smart phones, and the Chinese government on censorship search? Answer: Student answers will vary depending upon the “allegiance” to Apple products, but for the most part, Google is providing / can provide credible competition to both Microsoft and Apple for and in mobile computing which seems to be the future of and use for the personal computer. As for taking on the Chinese government on censorship search, Google is simply standing by its core values. Google’s focus on cloud computing, smartphone innovation, and addressing censorship aligns with its goal of leading in technology and information access. While these actions are strategic for growth, they come with risks and ethical considerations that require careful management and balance. DETAILED CHAPTER OUTLINE Formally or informally, people and organizations engage in a vast number of activities we could call marketing. Good marketing has become increasingly vital for success. But what constitutes good marketing is constantly evolving and changing. The success of AirAsia is attributed largely to the adoption of new marketing practices. Good marketing is no accident, but a result of careful planning and execution using stateof-the-art tools and techniques. It becomes both an art and a science as marketers strive to find creative new solutions to often-complex challenges amid profound changes in the 21st Century marketing environment. THE IMPORTANCE OF MARKETING The first decade of the 21st Century challenged firms to prosper financially and even survive in the face of an unforgiving economic environment. Marketing is playing a key role in addressing those challenges. Finance, operations, accounting, and other business functions won’t really matter without sufficient demand for products and services so the firm can make a profit. In other words, there must be a top line for there to be a bottom line. Marketing’s broader importance extends to society as a whole. Marketing has helped introduce and gain acceptance of new products that have eased or enriched people’s lives. CEOs recognize the role of marketing in building strong brands and a loyal customer base, intangible assets that contribute heavily to the value of a firm. Marketers must decide what features to design into a new product or service, what prices to set, where to sell products or offer services, and how much to spend on advertising, sales, the Internet, or mobile marketing. THE SCOPE OF MARKETING To prepare to be a marketer, you need to understand what marketing is, how it works, who does it, and what is marketed. What Is Marketing? Marketing is about identifying and meeting human and social needs. One of the shortest good definitions of marketing is “meeting needs profitably.” The American Marketing Association offers the following formal definition: “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” Marketing management is the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value. We can distinguish between a social and managerial definition of marketing. A social definition of marketing is that “marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others.” Managers sometimes think of marketing as “the art of selling products,” but many people are surprised when they hear that selling is not the most important part of marketing! Selling is only the tip of the marketing iceberg. What Is Marketed? Marketers market 10 main types of entities: goods, services, events, experiences, persons, places, properties, organizations, information, and ideas. Let’s take a quick look at these categories. Goods Physical goods constitute the bulk of most countries’ production and marketing efforts. Services As economies advance, a growing proportion of their activities focus on the production of services. The U.S. economy today produces a 70–30 services-to-goods mix. Events Marketers promote time-based events, such as major trade shows, artistic performances, and company anniversaries. Experiences By orchestrating several services and goods, a firm can create, stage, and market experiences. Walt Disney World’s Magic Kingdom allows customers to visit a fairy kingdom or a pirate ship. People Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, and other professionals all get help from celebrity marketers. Places Cities, states, regions, and whole nations compete to attract tourists, residents, factories, and company headquarters. Properties Properties are intangible rights of ownership to either real property (real estate) or financial property (stocks and bonds). Organizations Organizations work to build a strong, favorable, and unique image in the minds of their target publics. Information The production, packaging, and distribution of information are major industries. Ideas Every market offering includes a basic idea. Products and services are platforms for delivering some idea or benefit. Who Markets? Marketers and Prospects A marketer is someone who seeks a response—attention, a purchase, a vote, a donation— from another party, called the prospect. Marketers are skilled at stimulating demand for their products Marketing managers seek to influence the level, timing, and composition of demand to meet the organization’s objectives. Eight demand states are possible: Negative demand—Consumers dislike the product and may even pay to avoid it. Non-existent demand—Consumers may be unaware of or uninterested in the product. Latent demand—Consumers may share a strong need that cannot be satisfied by an existing product. Declining demand—Consumers begin to buy the product less frequently or not at all. Irregular demand—Consumer purchases vary on a seasonal, monthly, weekly, daily, or even hourly basis. Full demand—Consumers are adequately buying all products put into the marketplace. Overfull demand—More consumers would like to buy the product than can be satisfied. Unwholesome demand—Consumers may be attracted to products that have undesirable social consequences. Markets Traditionally, a “market” was a physical place where buyers and sellers gathered to buy and sell goods. Economists describe a market as a collection of buyers and sellers who transact over a particular product or product class. The five basic markets are: Resource Markets Government Markets Manufacturer Markets Intermediary Markets Consumer Markets A) Sellers and buyers are connected by flows: Seller sends goods, services, and communications to the market. In return they receive money and information. There is an exchange of money for goods and services. There is an exchange of information. Marketers use the term market to cover various grouping as customers. They view sellers as constituting the industry and buyers as constituting the market. They talk about need markets, product markets, demographic markets, and geographic markets; or they extend the concept to cover voter markets, labor markets, and donor markets. Sellers and buyers are connected by four flows (Figure 1.2). Sellers send goods and services and communications such as ads and direct mail to the market: in return they receive money and information such as customer attitudes and sales data. Key Customer Markets Consumer Markets Consumer goods and services, such as soft drinks and cosmetics, spend a great deal of time trying to establish a superior brand image. Business Markets Companies selling business goods and services often face well-informed professional buyers skilled at evaluating competitive offerings. Global Markets Companies in the global marketplace must decide which countries to enter; how to enter each; how to adapt product and service features to each country; how to price products in different countries; and how to design communications for different cultures. Non-profit and Governmental Markets Companies selling to nonprofit organizations with limited purchasing power need to be price careful. Marketplaces, Marketspaces, Metamarkets The marketplace is physical, The marketspace is digital, and Metamarkets are the result of marketers packaging a system that simplifies carrying out these related products/service activities. CORE MARKETING CONCEPTS Needs, Wants, and Demands Needs—basic human requirements, needs become wants when they are directed to specific objects that may satisfy the need. Marketers do not create needs, needs pre-exist marketers. Marketers influence wants. We distinguish five types of needs: Stated needs Real needs Unstated needs Delight needs Secret needs Target markets, Positioning and Segmentation Marketers start by dividing the market into segments. Identify and profile distinct groups of buyers who might prefer or require varying products/services mixes by examining: Demographic information Psychographic information Behavioral information Target market – which group presents the greatest opportunity Market offering – develops an offering to satisfy the wants of the target market Offering and Brands Value proposition: a set of benefits they offer to customers to satisfy their needs II) Brand: is an offering from a known source Value and Satisfaction The buyer chooses the offering he or she perceives to deliver the most value, the sum of the tangible and intangible benefits and costs to her. Value is a central marketing concept Customer value triad is the combination of quality, service, and prices. Value perceptions increase with quality and service but decrease with price. Marketing Channels: To reach a target market, the marketer uses three kinds of marketing channels. Communication channels Distribution channels Service channels Supply Chain The supply chain is a longer channel stretching from raw materials to components to finished products carried to final buyers. Competition: includes all the actual and potential rival offerings and substitutes a buyer might consider. Marketing environment Task environment: includes the actors engaged in producing, distributing, and promoting the offering. Broad environment: Demographic Environment Economic Physical Technological Political-Legal Social-Cultural THE NEW MARKETING REALITIES Major societal forces affecting marketing: Network information Globalization C) Degregulation Privatization Heightened Competition Industry Convergence Retail Transformation Disintermediation Consumer buying power Consumer information Consumer participation Consumer resistance New Consumer Capabilities—These major societal forces create complex challenges for marketers, but they have also generated a new set of capabilities to help companies cope and respond. Marketers can use the Internet as a powerful information and sales channel Researchers can collect fuller and richer information about markets, customers, and prospects and competitors Marketers can tap into social media to amplify their brand message Marketers can facilitate and speed external communication among customers Marketers can send ads, coupons, samples, and information to customers who have requested them or given the company permission to send them Marketers can reach consumers on the move with mobile marketing Companies can produce individually differentiated goods Companies can improve purchasing, recruiting, training, and internal and external communications Companies can facilitate and speed up internal communication among their employees by using the Internet as a private Intranet Companies can improve their cost efficiency by skillful use of the Internet MARKETING IN THE ORGANIZATION Although an effective CMO is crucial, increasingly marketing is not done only by the marketing department. Because marketing must affect every aspect of the customer experience, marketers must properly manage all possible touch points. Marketing must also be influential in key general management activities. COMPANY ORIENTATIONS TOWARD THE MARKETPLACE Review of the evolution of earlier marketing ideas: The Production Concept A) The production concept holds that consumers will prefer products that are widely available and inexpensive. The Product Concept A) The product concept holds that consumers will favor those products that offer the most quality, performance, or innovative features. The Selling Concept A) The selling concept holds that consumers and businesses, will ordinarily not buy enough of the organization’s products, therefore, the organization must undertake aggressive selling and promotion effort. The Marketing Concept A) The marketing concept holds that the key to achieving organizational goals consists of the company being more effective than competitors in creating, delivering, and communicating superior customer value to your chosen target markets. The Holistic Marketing Concept The holistic marketing concept is based on the development, design, and implementation of marketing programs, processes, and activities that recognize their breadth and interdependencies. Holistic marketing acknowledges that everything matters in marketing— and that a broad, integrated perspective is often necessary. Holistic marketing recognizes and reconciles the scope and complexities of marketing activities. Holistic marketing: Relationship marketing Integrated marketing Internal marketing Performance marketing Relationship Marketing—a key goal of marketing is to develop deep, enduring relationships with people and organizations that directly or indirectly affect the success of the firm’s marketing activities. Relationship marketing aims to build mutually satisfying long-term relationships with key constituents in order to earn and retain their business. Four key constituents of relationship marketing are: Customers Employees Marketing partners And members of the financial community The ultimate outcome of relationship marketing is a unique company asset called a marketing network, consisting of the company and its supporting stakeholders. The operating principle is simple: build an effective network of relationships with key stakeholders and profits will follow. Companies are also shaping separate offers, services, and messages to individual customers, based on information about past transactions. Because attracting a new customer may cost five times as much as doing a good enough job to retain an existing one, relationship marketing also emphasizes customer retention. Integrated Marketing Integrated marketing occurs when the marketer devises marketing activities and assembles marketing programs to create, communicate, and deliver value for consumers such that “the whole is greater than the sum of its parts.” Two key themes are: Many different marketing activities can create, communicate, and deliver value Marketers should design and implement any one marketing activity with all other activities in mind All company communications must be integrated—integrated communication strategy means choosing communication options that reinforce and complement each other. The company must also develop an integrated channel strategy. Online marketing activities are increasingly prominent in building brands and sales. Internal Marketing Internal marketing, an element of holistic marketing, is the task of hiring, training, and motivating, able employees who want to serve customers well. Marketing is no longer the responsibility of a single department—it is a company-wide undertaking that drives the company’s vision, mission, and strategic planning. Performance Marketing Performance marketing requires understanding the financial and non-financial returns to business and society from marketing activities and programs. Financial accountability: marketers are increasingly being asked to justify their spending in terms of brand building and growing the customer base. Social responsibility marketing: Marketers must consider the ethical, environmental, legal, and social context of their role and activities. THE NEW 4 P’S Old 4 P’s New 4 P’s Product People Place Processes Promotion Programs Price Performance People reflect internal marketing and the fact that employees are critical to marketing success. Processes reflect all the creativity, discipline, and structure brought to marketing management. Programs reflect all of the firm’s consumer-directed activities. Performance is holistic marketing to capture the range of possible outcomes/measures that have financial and non-financial implications, and implications beyond the company itself. MARKETING MANAGEMENT TASKS With the holistic marketing philosophy as a backdrop, we can identify a specific set of tasks that make up successful marketing management and marketing leadership. MARKETING MANAGEMENT TASKS: EMPEROR INC. Developing marketing strategies and plans (Chapter 2). Capturing Marketing Insights (Chapters 3 and 4). Connecting with Customers (Chapters 5, 6, 7). Building strong brands (Chapters 9, 10, and 11). Shaping the market offerings (Chapters 12 and 13). Delivering value (Chapters 15 and 16). Communicating value (Chapters 17, 18, and 19). Creating Long-Term Growth (Chapters 20, 21, and 22). Marketing memo: Marketer’s frequently asked questions Lists the 14 most commonly asked questions in preparing a marketing plan. Chapter 2 Developing Marketing Strategies and Plans LEARNING OBJECTIVES In this chapter, we will address the following questions: How does marketing affect customer value? How is strategic planning carried out at different levels of the organization? What does a marketing plan include? CHAPTER SUMMARY The value delivery process includes choosing (or identifying), providing (or delivering), and communicating superior value. The value chain is a tool for identifying key activities that create value and costs in a specific business. Strong companies develop superior capabilities in managing core business processes such as new-product realization, inventory management, and customer acquisition and retention. Managing these core processes effectively means creating a marketing network in which the company works closely with all parties in the production and distribution chain, from suppliers of raw materials to retail distributors. Companies no longer compete—marketing networks do. According to one view, holistic marketing maximizes value exploration by understanding the relationships between the customer’s cognitive space, the company’s competence space, and the collaborator’s resource space; maximizes value creation by identifying new customer benefits from the customer’s cognitive space, utilizing core competencies from its business domain, and selecting and managing business partners from its collaborative networks; and maximizes value delivery by becoming proficient at customer relationship management, internal resource management, and business partnership management. Market-oriented strategic planning is the managerial process of developing and maintaining a viable fit between the organization’s objectives, skills, and resources and its changing market opportunities. The aim of strategic planning is to shape the company’s businesses and products so they yield target profits and growth. Strategic planning takes place at four levels: corporate, division, business unit, and product. The corporate strategy establishes the framework within which the divisions and business units prepare their strategic plans. Setting a corporate strategy means defining the corporate mission, establishing strategic business units (SBUs), assigning resources to each, and assessing growth opportunities. Strategic planning for individual businesses includes defining the business mission, analyzing external opportunities and threats, analyzing internal strengths and weaknesses, formulating goals, formulating strategy, formulating supporting programs, implementing the programs, and gathering feedback and exercising control. Each product level within a business unit must develop a marketing plan for achieving its goals. The marketing plan is one of the most important outputs of the marketing process. OPENING THOUGHT For most students, one of the most challenging concepts in this chapter is the definition of strategy. The second area of concern presented in this chapter, is the understanding of strategic versus tactical decisions. Definitions can be confusing and are often taken for granted, so the instructor is encouraged to spend sufficient class time covering the distinctions between these two. Finally, this chapter contains a case analysis using Marketing Plan Pro software that may present some difficulties to students unfamiliar with its use. It is important to note that the objective of the inclusion of this software is to familiarize students with the many aspects of the marketing plan—not for them to become experts in the use of this specific software. The instructor may want to emphasize its usage at his or her discretion. TEACHING STRATEGY AND CLASS ORGANIZATION PROJECTS For the semester-long project, with this chapter, we continue the formation of groups; first presentation of “product” to the instructor for approval; review of process; and calendar of “due dates.” As a group presentation project, have each group present their marketing plan to the class. Non-presenting groups should be ready to evaluate the accuracy of the numbers presented, critique, refute, and/or debate the findings of the other groups. Each group presentation should be followed by a written presentation of their marketing plan. Students should be encouraged to review selected companies’ annual reports to collect from these reports the corporations’ mission statements, strategy statements, and target market definitions. The collected material can be discussed in class comparing the companies’ overall business, marketing, and customer strategies. Every marketing plan must include the company mission, analysis of strengths, weaknesses, opportunities, and threats and state the marketing and financial objectives for the plan period. As marketing executives, group members have been assigned to: Draft a mission statement for senior management to review. Prepare a summary of strengths, weaknesses, opportunities, and threats (SWOTs). List the marketing and financial objectives the company has for the new product or service. The instructor should direct each group to enter the mission statement, SWOT, and financial and marketing objectives in a written marketing plan, or type them into the Mission, SWOT, and Objectives sections of Marketing Plan Pro. ASSIGNMENTS In small groups, ask students to construct a simple timeline of Sentosa’s development in the past 5 years (they will need time to do the online research). Get students to share their views on how each milestone has created customer value for the island attraction’s target markets. Each student is in effect a “product.” Like all products you (they) must be marketed for success. Have each of your students’ write their own “mission statement” about their career and a “goal statement” of where they see themselves in 5 years, 10 years, and after 20 years. Select a local firm or have the students select firms in which they are familiar (current employers or past employers, for example) and have them answer the questions posed by the Marketing Memo, Marketing Plan Criteria regarding the evaluation of a marketing plan. Make sure the students are specific in their answers. As a group presentation project, have the students read the Web article, “Are airline ‘alliances’ actually useful for passengers?” by Clive Dorman, The Age, October 8, 2012 (http://www.theage.com.au) and share their views. Then have the students collect real life feedback on the various airline alliances. During class, have the students share the feedback they have collected with others. Questions to ask during the class discussion should focus on feedback relating to customer convenience, service and satisfaction. END-OF-CHAPTER SUPPORT MARKETING DEBATE—What Good Is a Mission Statement? Mission statements are often the product of much deliberation and discussion. At the same time, some critics claim that mission statements sometimes lack “teeth” and specificity, or do not vary much from firm to firm and make the same empty promises. Take a position: Mission statements are critical to a successful marketing organization versus Mission statements rarely provide useful marketing value. Pro: A well-crafted corporate mission statement reflects the values of the firm as they relate to the community at large, its stakeholders, its employees, and its customers. Once the firm’s positions are delineated in the mission statement, marketing can begin the process of setting its priorities, goals, and objectives derived from the stated priorities of the firm. With the advent of holistic marketing, what the firm believes about the communities at large and what strategic direction the firm wishes to take should be defined through its mission statement. Con: Mission statements are written for public consumption and rarely if ever do they reflect the actual goals, objectives, and mission of the firm. These statements are for public consumption and are written to placate the corporate stakeholders, employees, and consumers. Although most mission statements are written with good intentions, the real direction of the firm must be found in the application of its business practices. Marketing should not make the mistake of deriving its goals, objectives, and strategies from these platitudes. MARKETING DISCUSSION Consider Porter’s value chain and the holistic marketing orientation model. What implications do they have for marketing planning? How would you structure a marketing plan to incorporate some of their concepts? Answer: Michael Porter’s value chain is a tool for identifying ways to create more customer value. This value chain identifies nine strategically relevant activities that create value and cost in a business. There are five primary activities and four support activities in this value chain. The five primary activities are: inbound logistics, operations, outbound logistics, marketing and sales, and service. The four support activities are: procurement, technology development, human resource management, and infrastructure. Before the marketing function begins its planning, it first must examine the costs and performance of the firm in each of these value-creating activities and look for ways to improve or reduce costs/products as needed. Marketing must also force the firm to benchmark itself to the competition in all of these areas. The structure of the marketing plan must take into account each of the five primary activities and each of the four support activities. A marketing plan must incorporate both a “downstream” and “upstream” review in the process to deliver superior customer value. This means that the planning process must include areas for improvement in the five primary areas and the four support areas as part of its strategy and product development. Essentially, the marketing plan becomes an “improvement” document for the firm in each of these nine strategic activities delineating areas for change or modification for the firm. Marketing Lesson: TWG Evaluate TWG’s strategy to be a fashion designer tea brand. Suggested answer: With its base in Singapore, TWG is close to the five tea-growing capitals of Asia—China, India, Sri Lanka, Taiwan, and Japan. This ensures that the tea leaves can be quickly delivered for freshness. TWG aims to make tea an affordable indulgence. Just like spending a large sum on a bespoke or limited edition bag at Louis Vuitton, TWG wants consumers to likewise, be willing to pay a relatively higher sum for gourmet tea. Its tea bags are easily three times the price of Twinings or Lipton. Seeing tea like fashion, TWG introduces every season with a collection, creating more than two dozens of flavors each year. In Singapore, its tea salons in business area Raffles Place and high-end shopping malls, Ion and Marina Bay Sands, are elegantly decorated, offering an intimate and relaxing atmosphere. Set amidst designer shops such as Harry Winston, Louis Vuitton, Cartier, and Giorgio Armani. Based on the aforementioned, TWG’s strategy to be a fashion designer tea brand has similar focus and alignment with that of haute couture fashion designers. TWG’s strategy to position itself as a fashion designer tea brand leverages luxury and exclusivity, appealing to high-end consumers seeking premium experiences. This niche positioning enhances brand differentiation but requires consistent quality and sophisticated marketing to sustain its upscale image. Do you think the concept of experience can be extended to tea beyond consumption at tea salons? Suggested answer: Students’ answers will vary but most may offer that since TWG “wants its customers to feel that they are traveling to a different place with their palate” and its teas are offered on a premium airline like Singapore Airlines and the upscale Dean & Deluca food chain, the appropriate answer would be “yes”, the concept of experience can be extended to tea beyond consumption at tea salons. Yes, the concept of experience can be extended to tea through immersive events, educational workshops, and unique packaging. Creating exclusive tea-related experiences, such as private tastings or tea pairings with gourmet foods, can enhance the brand’s allure and customer engagement. What expansion plans do you think TWG should engage in? What factors might limit its expansion? Suggested answer: Students’ answers will vary. TWG’s expansion plans should include making inroads into more channels like upscale supermarkets, five-star hotel chains and airlines. Depending on markets it targets, demographic, psychographic and behavioral factors (coffee drinkers’ preference for coffee as a “wake-up” and “tea-time” beverage) might limit its expansion. TWG should consider expanding into new international markets and diversifying into luxury lifestyle products. Factors limiting expansion might include market saturation, high operational costs, and maintaining the brand’s exclusivity and quality standards. Marketing Lesson: INTEL Discuss how Intel changed ingredient-marketing history. What did it do so well in those initial marketing campaigns? Suggested answer: Intel created a “brand” identity for their microprocessor and created a campaign in which consumers “pulled” the brand through the marketing process by asking for “Intel Inside” their computers. This “pull” campaign was very successful and carried over to other Intel chips like the Atom and Centrino Duo. Intel revolutionized ingredient marketing by coining the "Intel Inside" campaign, effectively highlighting its processors as a key product feature. The campaign succeeded by building consumer trust in the technology and creating a recognizable, trusted brand association with high-performance computing. Evaluate Intel’s recent marketing efforts. Did they lose something by dropping the “Intel Inside” tagline or not? Suggested answer: Student answers will vary but most might say that Intel has lost brand resonance and positioning with their dropping the “Intel inside” marketing campaign. One could argue that once a company has such brand recognition and has such a successful campaign that they should not walk away from it. Critics will say that the success of “Intel inside” could now be used to draw consumers to look for Intel chips in the new generation of Mobile devices, like it did for the first generations of laptops and desktops, (the “pull” strategy) and as such Intel may lose their brand identity/preference for devices containing their chips in the future. Intel’s recent marketing efforts have shifted towards broader technology and innovation themes, reflecting its expanded focus beyond processors. While dropping the “Intel Inside” tagline may have reduced immediate brand recognition, it has allowed Intel to emphasize its role in diverse technology advancements and future growth. DETAILED CHAPTER OUTLINE Key ingredients of the marketing management process are insightful, creative strategies and plans that can guide marketing activities. Developing the right marketing strategy over time requires a blend of discipline and flexibility. Firms must stick to a strategy but also constantly improve it. They must also develop strategies for a range of products and services within the organization. MARKETING AND CUSTOMER VALUE The task of any business is to deliver customer value at a profit. In a hypercompetitive economy with increasingly informed buyers faced with abundant choices, a company can win only by fine-tuning the value delivery process and choosing, providing, and communicating superior value. The Value Delivery Process The traditional view of marketing is that the firm makes something and then sells it. Will not work in economies where people each with individual wants, perceptions, preferences, and buying criteria. New belief: marketing begins with the planning process. Value creation and delivery can be divided into three phases: Choosing the value (segment the market, select target market, develop “offering”). Providing the value (product features, prices, and distribution channels). Communicating the value (sales force, internet, advertising, and communication tools). The Value Chain Michael Porter’s Value Chain identifies nine strategically relevant activities that create value and costs in a specific business (five primary and four support activities). Primary activities: Inbound logistics (material procurement). Operations (conversion into final product). Outbound logistics (shipping out final products). Marketing (marketing and sales). Servicing (service after the sale). Support activities: 1) Procurement. Technology development. Human resource management. Firm infrastructure. The firm’s task is to examine its costs and performance in each value-creating activity and to look for ways to improve it. Core business processes: The market sensing process (marketing intelligence). The new offering realization process (research and development). The customer acquisition process (defining target markets and consumers). The customer relationship management process (deeper understanding of consumers). The fulfillment management process (receiving, shipping, and collecting payments). Strong companies are reengineering their work flows and building cross-functional teams to be responsible for each process. Many companies today have partnered with specific suppliers and distributors to create a superior value delivery network. Value-delivery network (supply chain) To be successful, a firm also needs to look for competitive advantages beyond its own operations, into the value chains of suppliers, distributors, and customers. Core Competencies The key, then, is to own or nurture the resources and competencies that make up the essence of the business—outsource if competency is cheaper and available. A core competency has three characteristics: Makes a significant contribution to perceived customer benefits Has applications in a wide variety of markets It is difficult for competitors to imitate Competitive advantage also accrues to companies that possess distinctive capabilities or excellence in broader business processes. Competitive advantage ultimately derives from how well the company “fits” its core competencies and distinctive capabilities into tightly interlocking “activity systems.” Business realignment may be necessary to maximize core competencies. It has three steps: defining the business concept or “big idea”; shaping the business scope; and positioning the company’s brand identity. Many multinationals find it difficult to replicate their core competencies in China. Williamson and Zeng found that multinationals have clear advantages over local companies in China in two areas—industry-specific technology and managerial competence. However, such core competencies are handicapped by several characteristics in the Chinese business landscape: Poor infrastructural support Inflexibility Fragmented market Less developed market Better understanding Leaner and more flexible Opportunity to catch up McKinsey found that many successful Asian companies adopt at least one of three strategies to harness their core competence: Expand quickly to capture global market opportunities Become atomizers Become asset-light by using intangibles A Holistic Marketing Orientation and Customer Value Holistic marketers succeed by managing a superior value chain that delivers a high level of product quality, service, and speed. Holistic marketers address three key management questions: Value exploration—identify new value opportunities. Value creation—efficiently creates more promising new value offerings. Value delivery—deliver the new value offerings more efficiently. Developing strategy requires the understanding of the relationships and interactions among these three spaces. Value Exploration (p. 9) Customer’s cognitive space (reflects existing and latent needs and includes participation, stability, freedom, and change). Company’s competence space (broad versus focused scope of business and depth physical versus knowledge-based capabilities). The collaborator resource space (horizontal and vertical partnerships). Value Creation A) Marketer’s need to: Identify new customer benefits from the customer’s view. Utilize core competencies. Select and manage business partners from its collaborative networks. Value Delivery—What Companies Must Become? Often requires an investment in infrastructure and capabilities. Proficient at customer relationship management—Who the customers are, and respond to different customer opportunities. Internal resource management—Integrate major business processes within a single family of software modules. Business partnership management—Allow the company to handle complex relationships with its trading partners. The Central Role of Strategic Planning Successful marketing requires capabilities such as understanding, creating, delivering, capturing, and sustaining customer value. To ensure they select and execute the right activities, marketers must give priority to strategic planning in three areas: Managing a company’s businesses as an investment portfolio; Assessing each business’ strength by considering the market’s growth rate and the company’s position and fit in that market; and 3) Establishing a strategy. Most large companies consist of four organizational levels: corporate, division, business unit, and 4) product. The marketing plan is the central instrument for directing and coordinating the marketing effort. It operates at two levels: strategic and tactical. The strategic marketing plan lays out the target markets and the firm’s value proposition, based on an analysis of the best market opportunities. The tactical marketing plan specifies the marketing tactics, including product features, promotion, merchandising, pricing, sales channels, and service. CORPORATE AND DIVISION STRATEGIC PLANNING A) All corporate headquarters undertake four planning activities: 1) Defining the corporate mission. Establishing strategic business units (SBUs). Assign resources to each SBU. Assessing growth opportunities. Defining the Corporate Mission An organization exists to accomplish something: to make cars, lend money, provide a night’s lodging. Over time, the mission may change, to take advantage of new opportunities or respond to new market conditions. To define its mission, a company should address Peter Drucker’s classic questions:1 What is our business? Who is the customer? What is of value to the customer? What will our business be? What should our business be? These simple-sounding questions are among the most difficult a company will ever have to answer. Successful companies continuously raise and answer them. Organizations develop mission statements to share with managers, employees, and (in many cases) customers. A clear, thoughtful mission statement provides a shared sense of purpose, direction, and opportunity. Mission statements are at their best when they reflect a vision, an almost “impossible dream” that provides direction for the next 10 to 20 years. Good mission statements have five major characteristics. They focus on a limited number of goals. The statement “We want to produce the highest-quality products, offer the most service, achieve the widest distribution, and sell at the lowest prices” claims too much. They stress the company’s major policies and values. They narrow the range of individual discretion so employees act consistently on important issues. They define the major competitive spheres within which the company will operate. Table 2.1 summarizes some key competitive dimensions for mission statements. They take a long-term view. Management should change the mission only when it ceases to be relevant. They are as short, memorable, and meaningful as possible. Three- to fourword corporate mantras like “Better global society” for Samsung may be useful. Table 2.1 Defining Competitive Territory and Boundaries in Mission Statements Industry—Some companies operate in only one industry; some only in a set of related industries; some only in industrial goods, consumer goods, or services; and some in any industry. Products and applications—Firms define the range of products and applications they will supply. Competence—The firm identifies the range of technological and other core competencies it will master and leverage. Market segment—The type of market or customers a company will serve is the market segment. Vertical—The vertical sphere is the number of channel levels, from raw material to final product and distribution, in which a company will participate. Geographical—The range of regions, countries, or country groups in which a company will operate defines its geographical sphere. Establishing Strategic Business Units Companies often define themselves in terms of products: They are in the “auto business” or the “clothing business.” Market definitions of a business, however, describe the business as a customer-satisfying process. Products are transient; basic needs and customer groups endure forever. Transportation is a need: the horse and carriage, automobile, railroad, airline, ship, and truck are products that meet that need. Viewing businesses in terms of customer needs can suggest additional growth opportunities. A target market definition tends to focus on selling a product or service to a current market. Pepsi could define its target market as everyone who drinks carbonated soft drinks, and competitors would therefore be other carbonated soft drink companies. A strategic market definition, however, also focuses on the potential market. A business can define itself in terms of three dimensions: customer groups, customer needs, and technology. An SBU has three characteristics: It is a single business, or a collection of related businesses, that can be planned separately from the rest of the company. It has its own set of competitors. It has a manager responsible for strategic planning and profit performance, who controls most of the factors affecting profit. The purpose of identifying the company’s strategic business units is to develop separate strategies and assign appropriate funding. Assigning Resources to Each SBU Once it has defined SBUs, management must decide how to allocate corporate resources to each. Several portfolio-planning models provide ways to make investment decisions. Assessing Growth Opportunities Assessing growth opportunities includes planning new businesses, downsizing, and terminating older businesses. If there is a gap between future desired sales and projected sales, corporate management will need to develop or acquire new businesses to fill it. The first option is to identify opportunities for growth within current businesses (intensive opportunities). The second is to identify opportunities to build or acquire businesses related to current businesses (integrative opportunities). Third is to identify opportunities to add attractive unrelated businesses (diversification opportunities). Intensive Growth Corporate management’s first course of action should be a review of opportunities for improving existing businesses. One useful framework for detecting new intensive-growth opportunities is a “product-market expansion grid”. The company first considers whether it could gain more market share with its current products in their current markets, using a market-penetration strategy. Next it considers whether it can find or develop new markets for its current products, in a market development strategy. Then it considers whether it can develop new products of potential interest to its current markets with a product-development strategy. Later the firm will also review opportunities to develop new products for new markets in a diversification strategy. These intensive growth strategies offer several ways to grow. Still, that growth may not be enough and management must also look for integrative growth opportunities. Integrative Growth A business can increase sales and profits through backward, forward, or horizontal integration within its industry. Diversification Growth Diversification growth makes sense when good opportunities exist outside the present businesses—the industry is highly attractive and the company has the right mix of business strengths to succeed. Downsizing and Divesting Older Businesses Companies must carefully prune, harvest, or divest tired old businesses to release needed resources to other uses and reduce costs. Organization and Organizational Culture Strategic planning is done within the context of the organization. A company’s organization consists of its structures, policies, and corporate culture, all of which can become dysfunctional in a rapidly changing business environment. What exactly is a corporate culture? Some define it as “the shared experiences, stories, beliefs, and norms that characterize an organization.” A customer-centric culture can affect all aspects of an organization. Sometimes corporate culture develops organically and is transmitted directly from the CEO’s personality and habits to the company employees. Sometimes corporate culture develops organically and is transmitted by the CEO’s personality. Marketing Innovation Innovation in marketing is critical. Imaginative ideas on strategy exist in many places within a company. A) Innovation in marketing is critical. BUSINESS UNIT STRATEGIC PLANNING The Business Mission Each business unit needs to define its specific mission within the broader company mission. SWOT Analysis The evaluation of a company’s strengths, weaknesses, opportunities, and threats is called SWOT analysis. It involves monitoring the external and internal marketing environment. Use market opportunity analysis (MOA) Environmental threat—unfavorable trend or development External Environment (Opportunity and Threat) Analysis A business unit must monitor key macroenvironment forces and significant microenvironment factors that affect its ability to earn profits. It should set up a marketing intelligence system to track trends and important developments and any related opportunities and threats. Good marketing is the art of finding, developing, and profiting from these opportunities.2 A marketing opportunity is an area of buyer need and interest in which there is a high probability that a company can profitably satisfy that need. There are three main sources of market opportunities. The first is to supply something that is in short supply. This requires little marketing talent, as the need is fairly obvious. The second is to supply an existing product or service in a new or superior way. There are several ways to uncover possible product or service improvements: by asking consumers for their suggestions (problem detection method); by asking consumers to imagine an ideal version of the product or service (ideal method); and by asking consumers to chart their steps in acquiring, using, and disposing of a product (consumption chain method). The third source often leads to a totally new product or service. Opportunities can take many forms, and marketers have to be good at spotting them. Consider the following: A company may benefit from converging industry trends and introduce hybridproducts or services that are new to the market. A company may make a buying process more convenient or efficient. A company can meet the need for more information and advice. A company can customize a product or service that was formerly offered only in a standard form. A company can introduce a new capability. A company may be able to deliver a product or a service faster. A company may be able to offer a product at a much lower price. To evaluate opportunities, companies can use Market Opportunity Analysis (MOA) to ask questions like: Can the benefits involved in the opportunity be articulated convincingly to a defined target market(s)? Can the target market(s) be located and reached with cost-effective media and trade channels? Does the company possess or have access to the critical capabilities and resources needed to deliver customer benefits? Can the company deliver the benefits better than any actual or potential competitors? Will the financial rate of return meet or exceed the company’s required threshold for investment? An environmental threat is a challenge posed by an unfavorable trend or development that, in the absence of defensive marketing action, would lead to lower sales or profit. Internal Environment (Strengths/Weaknesses) Analysis It is one thing to find attractive opportunities and another to be able to take advantage of them. Each business must evaluate its internal strengths and weaknesses. Goal Formulation Once the company has performed a SWOT analysis, it can proceed to goal formulation, developing specific goals for the planning period. Goals are objectives that are specific with respect to magnitude and time. A) The firm sets objectives, and then manages by objectives (MBO). For MBOs to work they must meet four criteria: They must be arranged hierarchically, from the most to least important. Objectives should be stated quantitatively whenever possible. Goals should be realistic. Objectives must be consistent. Strategic Formulation Goals indicate what a business unit wants to achieve; strategy is a game plan for getting there. Every business must design a strategy for achieving its goals, consisting of a marketing strategy and a compatible technology strategy and sourcing strategy. Porter’s Generic Strategies Michael Porter has proposed three generic strategies that provide a good starting point for strategic thinking: Overall cost leadership. Differentiation. 3) Focus. According to Porter, firms directing the same strategy to the same target market constitute a strategic group. Strategic Alliances Companies are discovering that there is a need for strategic partners if they hope to be effective. Many strategic alliances take the form of marketing alliances. These fall into four major categories: Product or service alliances. Promotional alliances. Logistics alliances. Pricing collaborations. To keep strategic alliances thriving, corporations have begun to develop organizational structures for support and have come to view the ability to form and manage partnerships as core skills (called Partner Relationship Management, PRM). Program Formulation and Implementation A great marketing strategy can be sabotaged by poor implementation. Marketing must estimate its costs. In implementing strategy, companies must not lose sight of the multiple stakeholders involved and their needs. According to McKinsey & Company, strategy is only one of seven elements in successful business practice. The first three—strategy, structure, and systems are considered the “hardware” of success. The next four—style, skills, staff, and shared values are the “software.” “Style” means company employees share a common way of thinking and behaving. “Skills” means employees have the skills needed to carry out the company’s strategy. “Staffing” means the company has hired able people, trained them well, and assigned them to the right jobs. “Shared values,” means the employees share the same guiding values. Feedback and Control As it implements its strategy, the firm needs to track the results and monitor new developments. A company’s strategic fit with the environment will inevitably erode because the market environment changes faster than the company’s 7 Ss. Organizations are subject to inertia and are set up as efficient machines and it is difficult to change one part without adjusting everything else. PRODUCT PLANNING: THE NATURE AND CONTENTS OF A MARKETING PLAN Working within the plans set by the levels above them, product managers come up with a marketing plan for individual products, lines, brands, channels, or customer groups. Each product level (product line, brand) must develop a marketing plan for achieving its goals. A marketing plan is a written document that summarizes what the marketer has learned about the marketplace and indicates how the firm plans to reach its marketing objectives. A. Marketing plans are becoming more customer and competitor orientated. The plan draws more input from all the business functions and is team developed. B. Contents of the marketing plan: Executive summary and table of contents. Situation analysis. Marketing strategy. Financial projections. Implementation controls. The Role of Research To develop innovative products, successful strategies, and action programs, marketers need up-to-date information about the environment, the competition, and the selected market segments. Often, analysis of internal data is the starting point for assessing the current marketing situation, supplemented by marketing intelligence and research investigating the overall market, the competition, key issues, threats, and opportunities. As the plan is put into effect, marketers use research to measure progress toward objectives and identify areas for improvement. Finally, marketing research helps marketers learn more about their customers’ requirements, expectations, perceptions, satisfaction, and loyalty. Thus, the marketing plan should outline what marketing research will be conducted and when, as well as how the findings will be applied. The Role of Relationships Although the marketing plan shows how the company will establish and maintain profitable customer relationships, it also affects both internal and external relationships. First, it influences how marketing personnel work with each other and with other departments to deliver value and satisfy customers. Second, it affects how the company works with suppliers, distributors, and partners to achieve the plan’s objectives. Third, it influences the company’s dealings with other stakeholders, including government regulators, the media, and the community at large. Marketers must consider all these relationships when developing a marketing plan. From Marketing Plan to Marketing Action Most companies create yearly marketing plans. Marketers start planning well in advance of the implementation date to allow time for marketing research, analysis, management review, and coordination between departments. As each action program begins, they monitor ongoing results, investigate any deviation from plans, and take corrective steps as needed. Some prepare contingency plans. Marketers must be ready to update and adapt marketing plans at any time. The marketing plan should define how progress toward objectives will be measured. Managers typically use budgets, schedules, and marketing metrics for monitoring and evaluating results. Budgets compare planned expenditures with actual expenditures for a given period; schedules show when tasks were supposed to be completed and when they actually were; and marketing metrics track actual outcomes of marketing programs to see whether the company is moving forward its objectives. Peter Drucker, Management: Tasks, Responsibilities and Practices (New York: Harper and Row, 1973), Chapter 7. Philip Kotler, Kotler on Marketing (New York: Free Press, 1999). Instructor Manual for Marketing Management: A South Asian Perspective Philip Kotler, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha 9789810687977, 9780132102926