Principles of Marketing Chapter 2: Company & Marketing Strategy

Dr. James Carver – Auburn University Strategic Planning Managing the strategic fit between one’s goals and capabilities and its changing marketing opportunities. Adapting the resources of the firm to the opportunities and threats of an ever-changing retail environment. Focused not on current business but future opportunities Dr. James Carver – Auburn University

Steps in Strategic Planning Corporate level: i.e., headquarters Define mission statement Set objectives and goals Design business portfolio Strategic Business Unit (SBU) level e.g., a product line, division, single product, or brand Plan functional strategies for delivering value Includes marketing planning Dr. James Carver – Auburn University

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. Can be: A division, A product line within a division, A single product or even brand. Dr. James Carver – Auburn University

Dr. James Carver – Auburn University Mission Statement A mission statement is a statement of the organization’s purpose–what it wants to accomplish in the larger environment. It’s a basic description of the fundamental nature, rationale, and direction of the firm. Basically answers “what business are we in?” Less than 60% have a written mission statement* Dr. James Carver – Auburn University

Mission Statement (Cont.) Should be crafted at “the most meaningful level of generalization possible” Should be market oriented, not product oriented Risk Marketing Myopia Focused on customer experience, not sales and profits. Dr. James Carver – Auburn University

Dr. James Carver – Auburn University Goals and Objectives Established as a hierarchy of objectives that “feed” the lower levels: Business objectives More about “what” (e.g., increase profits) Marketing objectives More about “how” (e.g., increase market share domestically) Dr. James Carver – Auburn University

Goals and Objectives (cont.) Each manager should have objectives and be responsible for reaching them. Why? Provide direction and guidance to the firm in the formulation of its strategies. An [intermediate] “destination” for the firm Establish a standard against which to measure and evaluate future firm performance. They minimize the ability for ex post justification Dr. James Carver – Auburn University

Designing the Business Portfolio The collection of businesses and products that make up the company. Portfolio planning involves two steps: Analyze current portfolio & decide which should receive more, less, or no investment Shape future portfolio through development and downsizing Dr. James Carver – Auburn University

Dr. James Carver – Auburn University Portfolio Analysis Steps: Identify key SBUs that make up company Assess each SBU’s attractiveness Decide how much support is deserved Most analyses are based on 2 factors (BCG): Attractiveness of market (i.e., growth rate) Strength within each market (i.e., share) Dr. James Carver – Auburn University

Boston Consulting Group (BCG) Growth-Share Matrix Dr. James Carver – Auburn University

Strategies from the BCG Matrix Stars: High-share / high-growth Strategy: Build into cash cow via investment. Cash cows: High-share / low-growth Strategies: Maintain or harvest cash to support STARS. Question marks: Low-share / high-growth Strategies: Build into STAR via investment OR reallocate funding and let slip into DOG status. Dogs: Low-share / low-growth Strategies: Maintain or divest investments. Dr. James Carver – Auburn University

Problems with Matrix Approaches Several problems exist: Can be difficult, time consuming, and costly Difficult to define SBU’s market share & growth rate. Focus on current businesses, not future planning. Dr. James Carver – Auburn University

Product/Market Expansion Grid An alternative to the Product Matrix approach: Identify growth opportunities based more on “needs” Dr. James Carver – Auburn University

From Strategic Planning to Building Relationships Marketing plays a key role in strategic planning: Provides a guiding philosophy. The marketing concept Provides input to strategic planners. Identifies attractive market opportunities Designs strategies to reach objectives. Dr. James Carver – Auburn University

The “Integrated Effort” Portion of the Marketing Concept Marketers play a vital role, but can’t do it alone They Must: Manage the internal value chain Cross-functional management Coordinate the external value delivery system Interfirm management (e.g., channel management) “Marketing is Everything” (McKenna HBR 1991) Little “m” marketing buy-in is critical Dr. James Carver – Auburn University

Marketing Strategy and the Marketing Mix The goal of marketing strategy is: Create value & build customer relationships Marketing strategy decisions include: Market segmentation Targeting Differentiation Positioning Marketing strategy guides the marketing mix Dr. James Carver – Auburn University

Marketing Strategy Decisions Segmentation: The process of dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors and who might require separate products or marketing programs. Targeting: Involves evaluating each market segment’s attractiveness and selecting one or more segments to enter. Dr. James Carver – Auburn University

Differentiation and Positioning Creating superior customer value by actually meeting the needs better than the competition* Note: Text defined differentiation with “differentiating” Assists in later positioning Positioning: Arranging (perceptually*) a product to occupy a clear, distinctive, and desirable place relative to competing products Dr. James Carver – Auburn University

Dr. James Carver – Auburn University 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 Dr. James Carver – Auburn University

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 Dr. James Carver – Auburn University

Dr. James Carver – Auburn University Marketing Management Four marketing management functions: Marketing analysis Marketing planning Marketing implementation Marketing control Dr. James Carver – Auburn University

Developing a Differentiation Strategy Firms begin with a SWOT analysis. Internally: What are the firm’s relative strengths and weaknesses? Externally: What potential threats and opportunities exist within the market? Successful firms will… Leverage strengths that minimize future threats, and Correct weaknesses that coincide with market opportunities Dr. James Carver – Auburn University

Dr. James Carver – Auburn University SWOT Analysis Strengths: What major competitive advantage(s) do we have? What are we good at? What do customers perceive as our strong points? Dr. James Carver – Auburn University

SWOT Analysis Weaknesses What major competitive advantage(s) do competitors have over us? What are competitors better at than we are? What are our major internal weaknesses?

SWOT Analysis Opportunities What favorable environmental trends may benefit our firm? What is the competition doing in our market? What areas of business that are closely related to ours are undeveloped?

SWOT Analysis Threats What unfortunate environmental trends may hurt our future performance? What technology is on the horizon that may soon have an impact on our firm?

Marketing Implementation Turns marketing plans into marketing actions by addressing: Who Where When How Implementation can be difficult but is critical to success. Dr. James Carver – Auburn University

Organizing Marketing Departments Four general types of organizations: Functional organization: Each marketing activity is headed by a functional specialist. e.g., sales manager, advertising manager, marketing research manager, etc. Most common form Geographic organization: Sales and marketing people are assigned to specific countries, regions, and/or districts. Best for firms that sell internationally or across country Dr. James Carver – Auburn University

Marketing Department Organization (cont.) Product management organization: One person is responsible for complete strategy and marketing program for a single product Best for firms that sell many different products and/or brands Market (or customer) organization: Manager responsible for particular market or type of customer Best for firms that sell one product line to many different markets Or some combination thereof… Dr. James Carver – Auburn University

Marketing Control Process Marketing control involves four steps: Set goals Measure performance Evaluate performance Take corrective action In essence it’s “Closed Loop” marketing* Dr. James Carver – Auburn University