1. Chapter 1: Introduction to Strategic Marketing What is Strategic Marketing? Strategy is a pattern/guide of major objectives, purposes, or goals and essential policies and plans for achieving those goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or is to be. On the other hand, marketing is the process by which companies create value for the customer and build strong customer relationship in order to capture value from the customer in return. So, we can say that- Strategic marketing refers to the identification of one or more competitive advantages a firm has in the markets it serves and the allocation of resources to exploit them. According to Kotler et al. (2010), “Strategic marketing is the process of developing and maintaining a strategic fit between the organization's goals and capabilities and its changing marketing opportunities. It relies on developing a clear company mission, supporting objectives, a sound business portfolio and coordinated functional strategies”. According to Cravens and Piercy (2003), “Strategic marketing is a market-driven process of strategy development that takes into account a constantly changing business environment and the need to deliver superior customer value”. According to Jain and Haley (2009), “Using its relative corporate strengths to achieve maximum positive differentiation over competition in meeting customer needs is called strategic marketing”. 1

2. Characteristics of Strategic Marketing Strategic marketing has the following characteristics- Emphasis on long-term implications: The long-term orientation of strategic marketing requires greater concern for the environment. Environmental changes are more probable in the long run than in the short run. In other words, in the short run, one may assume that the environment will remain stable, but this assumption is not at all likely in the long run. Corporate inputs: Strategic marketing decisions require inputs from three corporate aspects: corporate culture, corporate publics, and corporate resources. Corporate culture refers to the style, whims, fancies, traits, taboos, customs, and rituals of top management that over time have come to be accepted as intrinsic to the corporation. Corporate publics are the various stakeholders with an interest in the organization. Customers, employees, vendors, governments, and society typically constitute an organization’s stakeholders. Corporate resources include the human, financial, physical, and technological assets/experience of the company. Corporate inputs set the degree of freedom a marketing strategist has in deciding which market to enter, which business to divest, which business to invest in, etc. Varying roles for different products/markets: Traditionally it has been held that all products exert effort to maximize profitability. Strategic marketing starts from the premise that different products have varying roles in the company. For example, some products may be in the growth stage of the product life cycle, some in the maturity stage, others in the introduction stage. Products in the growth stage need extra investment; those in the maturity stage should generate a cash surplus. 2

3. Organizational level: Strategic marketing is conducted primarily at the business unit level in the organization. At General Electric, for example, major appliances are organized into separate business units for which strategy is separately formulated. At Gillette Company, strategy for the Duracell batteries is developed at the batteries business unit level. Relationship to finance: Strategic marketing decision making is closely related to the finance function. The importance of maintaining a close relationship between marketing and finance and, with other functional areas of a business is nothing new. But in recent years, frameworks have been developed that make it convenient to simultaneously relate marketing to finance in making strategic decisions. Sustainable competitive advantage: Strategic marketing provides long term advantages over the competitors. Strategic marketing identifies one or more competitive advantages a firm has in its markets and allocates resources to make them sustainable. 3

4. Importance of Strategic Marketing Strategic marketing is very much essential for almost every organization. The importance of strategic marketing can be understood from the below points – Strategic marketing helps in the formulation of long term business level strategy. It plays a vital role in the strategic management process of a firm. Failure in strategic marketing can block the way to achieve stipulated goals established by the strategic plan. Strategic marketing’s strategic status can help in the outperforming the competitors. 4

5. What does Strategic Marketing Involve? Strategic marketing involves the below things- Collecting information: Collects Primary and secondary data and information about 3Cs- customer, corporation, and competition as well as the environment. Analyzing information: It analyzes the collected information for deep understanding of the ever changing marketplace and environment. Identifying opportunities and issues: Strategic marketing involves the identification of unique opportunities and issues by using analytical models and tools such as BCG or GE matrix, PIMS project, game theory etc. Applying creativity: Strategic marketing creatively ensures desirable, differentiated and defensible position in the market. Creatively performing the marketing functions can lead to sustainable business. 5

6. Focus of Strategic Marketing Strategic marketing focused on the below level of the organization- Corporate Level – Management of the entire spectrum of businesses – Resource allocation, acquisitions, mergers etc. Strategic Business Unit Level – Focus on 3Cs: customer, competition, corporation – Where to compete – How to compete – When to compete Functional (individual product/market) level – Marketing management – Specific design of product, ad campaign etc. – 1 – year plan. 6

7. What do you mean by Strategic Business Unit (SBU)? Strategic business unit (SBU): A unit comprising one or more products having a common market base whose manager has complete responsibility for integrating all functions into a strategy against an identifiable competitor. It can also be termed as “strategic planning units” or “independent business units”. For example: QANTAS started out as an outback airline servicing Queensland and Northern territory. Then- – Expanded into a national and then an international airline. – Expanded into other areas where they believed they could operate successfully such as- 7

8. Why is it Essential to Break up a Company into SBUs? Because of the following reasons, it may be required to break up a company into SBUs- Major problems arise when trying to treat distinct businesses in the same way. What is required for success in one business is very different to what is required for success in another business. Different critical success factors, different strategies required for success, so needed to be treated differently. Unreasonable to expect any one person to have this in-depth knowledge and to keep up to date in all areas – yet this is what is required unless you split a business up into SBUs. 8

9. What are the Criteria that can be Considered for Creating SBUs? SBUs may be created by applying a set of criteria consisting of- Price: To the extent that price changes in a product entail a review of the pricing policy of other products, these products may have a natural alliance. Competitors: If various products/markets of a company share the same group of competitors, they may be amalgamated into an SBU for the purpose of strategic planning. Customer: Products/markets sharing a common set of customers belong together. Shared experience: Products/markets in different parts of the company having common R&D, manufacturing, and marketing components may be included in the same SBU. 9

10. How do we Identify SBUs? We can identify any business unit as SBU, if it satisfies the below issues/conditions- Unique business mission: Every SBU has unique business mission. Why it exists, is different to other SBUs. Clearly definable set of competitors: Every SBU has some competitors which are well known to the business. SBU Manager has autonomy: SBU manager has authority over resources in other areas. Competes with other SBUs within the organisation for resources: Every SBUs competes with other SBUs within the organisation for resources based on their respective abilities to achieve the corporation’s overall objectives. 10

11. Define Marketing Strategy Marketing strategy the logic through which the company wants to achieve its marketing objectives. Marketing strategies focus on ways in which a company can differentiate itself effectively from its competitors, capitalizing on its distinctive strengths to deliver better value to its customers. “Marketing strategy encompasses selecting and analyzing a target market and creating and maintaining an appropriate marketing mix that will satisfy those people.” (Pride and Ferrell) “It is a process consisting of analyzing environmental, market, competitive, and business factors affecting the corporation and its business units; identifying market opportunities and threats and forecasting future trends in business areas of interest to the enterprise; and participating in setting objectives and formulating corporate and business unit strategies.” (Cravens) 11

12. Key Elements of Marketing Strategy Formulation Formulation of marketing strategy is not an easy task and involves the careful consideration of many interrelated issues. Within a given environment, marketing strategy deals essentially with the interplay of three forces known as the strategic three C’s (strategic 3 Cs). They are- – Customer: Who are our customers? – Corporation: Rethinking about our organization. – Competition: Who are our competitors? Marketing strategies focus on ways in which a company can differentiate itself effectively from its competitors, capitalizing on its distinctive strengths to deliver better value to its customers. A complete market definition, well alliance between corporate strengths and the needs of the market, and superior performance related to its competitor is required for a perfect marketing strategy. The development and management of marketing strategies requires an organization’s marketing management to focus on several generic marketing management tasks such as opportunity analysis, target market selection, marketing mix development, and management and marketing activities. 12

13. Figure: Key elements of marketing strategy formulation 13 Customer Competition Corporation Marketing Strategy: Achieving maximum positive differentiation over competition in meeting customer needs

14. Marketing strategy, in terms of three key constituents i.e. all three Cs (as mentioned earlier), must be defined as an endeavor by a corporation to differentiate itself positively from its competitors, using its relative corporate strengths to better satisfy customer needs in a given environmental setting. Positive matching of the needs and objectives of customer and corporation is required for a lasting good relationship, and this matching must be better or stronger than the match between the customer and competitor. So it is important to know, to formulate marketing strategy, that- Where to compete? That means the market in which our business will operate. How to compete? That means the “means” of competition that is our products, services and related offerings. When to compete? That means our time to enter the market and continuous operation. 14

15. Strategic Marketing Process Marketing strategy is an analysis, planning, implementation, and control process designed to satisfy customer needs and wants. The process starts with an understanding of the corporate mission objectives and the strategy of each strategic business unit. The basic steps are- 1.Market situation analysis 2.Marketing strategy design 3.Marketing program development 4.Strategy implementation and management. Marketing situation analysis: The marketing situation analysis is the first step of the process, which considers market structure and supply and demand analysis, market segmentation, customer analysis, and competitor analysis. These analyses guide the choice of marketing strategy. Market definition establishes the overall competitive arena. It consists of locating and defining new product-markets that offer opportunities for a company, evaluating existing product-markets to determine strategic priorities, scanning the environment and forecasting future trends in product-markets. Market segmentation identifies and analyzes the alternative customer groups for targeting by an organization. Competitor analysis examines the strengths, weaknesses, and strategies of key competitors. 15

16. Figure: Strategic marketing process 16 Marketing situation analysis  Analyzing markets  Market segmentation  Analyzing competition Designing marketing strategy  Market targeting and positioning strategy  Marketing strategies for selected situations  Planning for new products Implementing and managing marketing strategy  Designing effective organizations  Marketing strategy implementation and control  Strategic role of information Marketing program development  Product portfolio strategy  Distribution strategy  Price strategy  Promotion strategy

17. Marketing strategy design: In the second step, marketing strategy design examines marketing advantages, customer targeting, positioning analysis, strategy selection for different situations, and new product strategy. Strategy selection considers the situational and competitive factors present in the product-market that is targeted which is shown by an arrow in the figure. Marketing program development: The third step is the development of marketing program. Specific strategies for products, distribution, price, and promotion must be designed to implement the positioning strategy selected by management. The programming task is to form a coordinated combination of the marketing mix ingredients that will achieve market target objectives in a cost-effective manner. Strategy implementation and management: In the final step, implementation and management of marketing strategy are examined. It focuses on evaluating and improving organizational effectiveness, the development of information and decision support systems, and marketing strategy implementation and control. This is the action phase of strategic marketing planning. 17

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19. Future of Strategic Marketing Strategic marketing is increasingly becoming important because of: Strategic marketing can provide extra leverage in intensified market share battle. Deregulation in many industries is mandating a move to strategic marketing. Many packaged goods companies are acquiring non-marketing oriented companies and attempts to gain market share through strategic marketing. Demographic shifts make strategic marketing an imperative. Unlocking new markets with the help of strategic marketing. Shifts in the channel Structure of many industries has posed new problems. Competitions from overseas companies are intensifying. The fragmentation of markets increased the necessity of strategic marketing. Availability of base technology and shortening product life cycle also require strategic marketing’s implications. 19

20. Failings in Strategic Marketing Problems associated with marketing strategy formulation and implementation are as follows- Too much emphasis on “where” to compete and not enough on “how” to compete: Too much emphasis on the market which the business serves, but not enough emphasis on the means (products) of satisfying the needs of the market. Too little focus on uniqueness and adaptability in strategy: Too little emphasis on the uniqueness, superiority, flexibility, differentiation, and defendability of the strategy. Inadequate emphasis on “when” to compete: Not enough emphasis on the timing of the business activation/operation. Timing to operate in a particular market depends on the below issues- – Market knowledge – Competition – Company readiness. 20

21. Addressing the Failings/Problems of Strategic Marketing We can solve the failings/ problems of strategic marketing by the below way- Develop attainability: Develop attainable goals and objectives. Involve key operating personnel: Involve key operating personnel like top executives, industry experts, specialists etc. Avoid becoming so engrossed in current problems that strategic marketing is neglected: Avoid becoming engrossed in current problems that may affect strategic planning and implementation. Don’t keep marketing strategy separate from the rest of management process: Marketing strategy formulation must be well coordinated with other management functions. Avoid formality in strategy formulation: Avoid formality in marketing strategy formulation that restraints flexibility and inhibits creativity. Create climate conducive to strategic planning: Avoid creating a climate that is resistant to strategic marketing. Avoid delegating strategy development to a planner: Don’t assume that marketing strategy development can be delegated to a planner. Avoid intuitive and conflicting decisions: Don’t overturn the strategy formulation mechanism with intuitive and conflicting decisions. 21

22. Strategic Marketing Vs. Marketing Management We can distinguished between strategic marketing and marketing management by the following way- 22 Point of differenceStrategic marketingMarketing management Time frame Long-range; i.e. decisions have long-term implications Day-to-day, i.e. decisions have relevance in a given financial year. OrientationInductive and intuitiveDeductive and analytical Decision processPrimarily bottom-upMainly top-down Relationship with environment Environment considered ever-changing and dynamic Environment considered constant with occasional disturbances Opportunity sensitivityOngoing to seek new opportunitiesAd hoc search for a new opportunity Organizational behavior Achieves synergy between different components of the organization, both horizontally and vertically Pursues interests of the decentralized unit Nature of jobRequires high degree of creativity and originality Requires maturity, experience, and control orientation Leadership styleRequires proactive perspectiveRequires reactive perspective MissionDeals with what business to emphasizeDeals with running a delineated business

23. End of Chapter 1 23