Company and Marketing Strategy Partnering to Build Customer Relationships Chapter 2

Rest Stop: Previewing the Concepts Explain companywide strategic planning and its four steps. Discuss how to design business portfolios and growth strategies. Explain marketing’s role in strategic planning and how marketing works with its partners to create and deliver customer value. Describe the elements of a customer-driven marketing strategy and mix, and the forces that influence it. List the marketing management functions, including the elements of a marketing plan and discuss the importance of measuring and managing marketing ROMI. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

First Stop NIKE: Creating Brand Experiences & Community Challenge and Solution Late 1990s: Nike became a victim of its own success; sales slipped, ad creativity declined & customer relationships cooled. Nike Turnaround: Refocused on product innovation, revised mission statement, sought deeper, stronger, customer relationships via interactions with customers. Building Brand Experiences: Reduced mass media spending in favor of customer community building via social networking and in-person events, resulting in large market share gains. Nike’s Early Success 1970s: Nike’s earliest success was the waffle trainer and by 1979 the firm owned 50% of U.S. running shoe market. 1980s: Endorsements, promotional events, and heavy ad spending on “Just Do It” campaign revolutionized sports marketing. Nike built customer relationships by marketing a way of life. 1990s: Nike Swoosh logo became prominent; firm expanded into other sports and product offerings. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Strategic Planning Defined The process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Steps in Strategic Planning Process Corporate level: Defining the company mission. Setting objectives and goals. Designing the business portfolio. Business unit, product, and market level: Planning marketing strategy as well as other functional strategies. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

The Mission Statement Defined A mission statement is a statement of the organization’s purpose–what it wants to accomplish in the larger environment. Example: Nike’s mission is “to bring inspiration and innovation to every athlete* in the world (*if you have a body, you are an athlete).” Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall The Mission Statement Questions the mission statement should answer include: What is our business? Who is our customer? What do consumers value? What should our business be? Mission statements should be market oriented, not product oriented. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall The Mission Statement In addition to being market-oriented, well-defined mission statements should be: Meaningful. Specific. Motivating. Based on the firm’s strengths in the marketplace. Focused on customers and the customer experience rather than on sales and profits. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Setting Firm Objectives and Goals The mission should be translated into supporting objectives for each level of management. Creates a hierarchy of objectives that are consistent with one another. For example: Business objective: Increase profits. Marketing objective: Increase market share of domestic and international markets. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Designing the Business Portfolio The business portfolio is the collection of businesses and products that make up the company. The company must: Analyze its current business portfolio or strategic business units (SBUs) and decide which SBUs should receive more, less, or no investment. Develop strategies for growth and downsizing that will shape the future business portfolio. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Strategic Business Unit (SBU) A unit of the company that has a separate mission and objectives and that can be planned independently from other company businesses. An SBU can be a company division, a product line within a division, or sometimes a single product or brand. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall Portfolio Analysis Portfolio analysis: Process by which management evaluates the products and businesses making up the company. Resources are directed toward more profitable businesses while weaker ones are phased out or dropped. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall Portfolio Analysis Standard portfolio analysis evaluates SBUs on two important dimensions: Attractiveness of SBUs market or industry. Strength of SBUs position within that market or industry. BCG Growth Share Matrix uses market growth rate and relative market share to classify SBUs into four groups. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Boston Consulting Group Growth-share Matrix

BCG Growth-Share Matrix Stars: High-share of high-growth market. Strategy: Build into cash cow via investment. Cash cows: High-share of low-growth market. Strategies: Maintain or harvest for cash to build STARS. Question marks: Low-share of high-growth market. Strategies: Build into STAR via investment OR reallocate funding and let slip into DOG status. Dogs: Low-share of low-growth market. Strategies: Maintain or divest. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Problems with Matrix Approaches Several problems exist: Can be difficult, time consuming, and costly to implement. Difficult to define SBUs and measure market share and growth rate. Focus is on current businesses; gives little help with future planning. These problems have led to changes in the strategic planning process used by firms. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Product/Market Expansion Grid The product/market expansion grid can identify growth opportunities. Market penetration Existing markets, existing products Market development New markets, existing products Product development Existing markets, new products Diversification New products, new markets Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall Downsizing Downsizing reduces the business portfolio by eliminating products of business units that are not profitable or that no longer fit the company’s overall strategy. Many reasons exist for downsizing. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall Planning Marketing Marketing plays a key role in strategic planning: Provides a guiding philosophy. The marketing concept Provides input to strategic planners. Identifies opportunities Designs strategies to reach objectives. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Creating Customer Value Marketers must practice partner relationship management. Working with partners internally within the company can create an effective value chain. Working with external partners in the marketing system helps to form a superior value delivery network. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Value Delivery Network Components include: Company’s value chain Each department is a link Distributors Suppliers Customers Improved performance in delivery value to customers is the goal. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Marketing Strategy and the Marketing Mix Goal: create value for customers and build customer relationships. Marketing strategy decisions include: Market segmentation and targeting Differentiation and positioning Marketing strategy must guide marketing mix decisions. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Market Segmentation and Targeting The process of dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors and who might require separate products or marketing programs. Targeting: Involves evaluating each market segment’s attractiveness and selecting one or more segments to enter. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Differentiation and Positioning Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. Differentiation: Creating superior customer value by actually differentiating the market offering. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall The Marketing Mix The set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market. These tools are often called the 4 P’s: Product Price Place (distribution) Promotion Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall The Marketing Mix Product: Variety, features, brand name, quality, design, packaging, and services. Promotion: Advertising, sales promotion, public relations, and personal selling. Place: Channels, coverage, logistics, locations, transportation, assortments, and inventory. Price: List price, discounts, allowances, payment period, and credit terms. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

The 4 Ps and the 4 Cs of the Marketing Mix 4 Ps – Seller’s View Product Price Place Promotion 4 Cs – Buyer’s View Customer Solution Customer Cost Convenience Communication Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Managing the Marketing Effort Four marketing management functions: Marketing analysis SWOT analysis is key. Marketing planning Create marketing plan consistent with strategic plan. Marketing implementation Carry out the plans successfully. Marketing control Measure and evaluate results; take corrective action as needed. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall SWOT Analysis Strengths: Internal capabilities that may help a company reach its objectives. Weaknesses: Internal limitations that may interfere with a company’s ability to achieve its objectives. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall SWOT Analysis Opportunities: External factors that the company may be able to exploit to its advantage. Threats: Current and emerging external factors that may challenge the company’s performance. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Contents of a Marketing Plan Executive summary Current marketing situation Analysis of threats and opportunities Objectives and issues Marketing strategy Action programs Budgets Controls Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Marketing Implementation Turns marketing plans into marketing actions by addressing: Who Where When How Implementation can be difficult but is critical to success. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Organizing Marketing Departments Chief marketing officer (CMO) positions are becoming more common. Functional organization: Each marketing activity is headed by a functional specialist. E.g., sales manager, advertising manager, marketing research manager, etc. Geographic organization: Sales and marketing people are assigned to specific countries, regions, and/or districts. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Marketing Department Organization Product management organization: One person is given responsibility for complete strategy and marketing program for a single product. Market or customer organization: Manager responsible for particular market or type of customer (e.g., government buyers). Combination organization: Uses some combination of the previous four approaches. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Marketing Control Process Marketing control involves four steps: Set goals Measure performance Evaluate performance Take corrective action May require changing action programs or goals. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Marketing Control Process Operating control Evaluates performance against the annual plan and takes corrective action. Strategic control Evaluates whether strategies match opportunities. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Return on Marketing Investment Return on marketing investment is assessed using one or more methods: Standard marketing performance measures (marketing dashboards): Brand awareness, sales, market share. Customer-centered measures: Customer acquisition, customer retention, customer lifetime value, customer equity. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Rest Stop: Reviewing the Concepts Explain companywide strategic planning and its four steps. Discuss how to design business portfolios and growth strategies. Explain marketing’s role in strategic planning and how marketing works with its partners to create and deliver customer value. Describe the elements of a customer-driven marketing strategy and mix, and the forces that influence it. List the marketing management functions, including the elements of a marketing plan and discuss the importance of measuring and managing marketing ROMI. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall