Company and Marketing Strategy Partnering to Build Customer Relationships Chapter 2

Strategic Planning: overview Strategic planning sets the stage for the rest of the planning in the firm. Companies usually prepare annual plans, long‑range plans, and strategic plans. The annual and long‑range plans deal with the company’s current businesses and how to keep them going. In contrast, the strategic plan involves adapting the firm to take advantage of opportunities in its constantly changing environment. The strategic planning process begins by defining the overall purpose and mission of the company. This mission is turned into objectives that guide the whole company. Marketing planning occurs at the business-unit, product, and market levels. Next slide defines strategic planning.

Strategic Planning Defined The process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities. The stages of the strategic planning process are outlined next… 2 - 3

Figure 2.1: Steps in Strategic Planning

Levels of Strategic Planning Process Corporate level: Defining the company mission. Setting objectives and goals. Designing the business portfolio. Business unit, product, and market level Functional level: setting functional strategies for each function. 2 - 5

The Mission Statement: overview A clear mission statement acts as an “invisible hand” that guides people in the organization. Mission statements should be market oriented, not product-oriented. A market-oriented mission statement should define the business in terms of satisfying basic customer needs. Management should avoid making its mission too narrow or too broad.

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).” 2 - 7

The Mission Statement: questions… Questions the mission statement should answer include: What is our business? Who is our customer? What do consumers value? What should our business be? 2 - 8

Well-defined Mission Statement 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. 2 - 9

Setting Firm Objectives and Goals The mission should be translated into supporting objectives for each level of management. It creates a hierarchy of objectives that are consistent with one another. Example: Business objective: Increase profits. Marketing objective: Increase market share of domestic and international markets. 2 - 10

Designing the Business Portfolio The business portfolio is the collection of businesses 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/or downsizing that will shape the future business portfolio. 2 - 11

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. 2 - 12

Portfolio Analysis Portfolio analysis: is a 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. 2 - 13

Portfolio Analysis (cont’d) 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. Next slide… 2 - 14

The Boston Consulting Group Approach 15

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. Strategy: Maintain or harvest for cash to build STARS. Question marks: Low-share of high-growth market. Strategy: Build into STAR via investment OR reallocate funding and let slip into DOG status. Dogs: Low-share of low-growth market. Strategy: Maintain or divest (selling it or phasing out). 2 - 16

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. 2 - 17

Product/Market Expansion Grid The product/market expansion grid can identify growth opportunities. See next slide… Market penetration (Existing markets, existing products) making more sales to current customers without changing products Market development (New markets, existing products) identifying and developing new markets for its current products Product development (Existing markets, new products) offering modified or new products to current markets Diversification (New products, new markets) starting up or buying businesses outside of its current products and markets. That is, switch to a different line of business 2 - 18

product/market expansion grid: Strategies for Growth opportunities 19

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 other reasons exist for downsizing. 2 - 20

Planning Marketing Marketing plays a key role in strategic planning: it provides a guiding philosophy (e.g. through the marketing concept) It provides input to strategic planners (e.g. through Identifying opportunities) Designs strategies to reach objectives. 2 - 21

Creating Customer Value Marketers must practice partner relationship management to enhance customer value, through: Working with partners internally within the company which can create an effective value chain. Working with external partners in the marketing system that helps form a superior value delivery network. 2 - 22

Value Chain Each company department engages in some type of value-creating activity (e.g. Purchasing, Marketing. operations, etc). Coordination between departments is key to providing superior value.

Value Delivery Network Today, companies are partnering with the other members of the supply chain to improve the performance of the customer value delivery network. Components of the value delivery network include: Company’s value chain (Each department is a link) Distributors Suppliers Customers 2 - 24

Marketing Strategy and the Marketing Mix Today, consumers are in the center, and that Profitable customer relationships are the goal. Marketing strategy decisions include: Market segmentation and targeting Differentiation and positioning (See next slide…) Marketing strategy must guide marketing mix decisions. 2 - 25

Marketing Strategy and the Marketing Mix Notes to Accompany Slide: This is a useful diagram to cover a roadmap of the book and of a marketing plan. 26

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 serve. 2 - 27

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. 2 - 28

The Marketing Mix The Marketing Mix is a 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 2 - 29

The Four Ps of the Marketing Mix Notes to Accompany Slide: The marketing mix is the set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market. 30

The Marketing Mix Product: Promotion: Place: Price: 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. 2 - 31

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 2 - 32

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. (See next slide...) 2 - 33

Figure 2.6: Managing Marketing: Analysis, Planning, Implementation, and Control

SWOT Analysis Strengths: Weaknesses: Opportunities: Threats: 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. 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. 2 - 35

Contents of a Marketing Plan Executive summary Current marketing situation Analysis of threats and opportunities Objectives and issues Marketing strategy Action programs Budgets Controls 2 - 36

Marketing Implementation Turns marketing plans into marketing actions by addressing: Who Where When How Implementation can be difficult but is critical to success. 2 - 37

Organizing Marketing Departments (1) Chief Marketing Officer (CMO): in small companies, one person may perform all the marketing functions under Chief Marketing Officer (CMO) position. Today, this type is becoming more common. (2) Functional organization: used mainly by big companies Each marketing activity is headed by a functional specialist. E.g., sales manager, advertising manager, marketing research manager, etc. (3) Geographic organization: Sales and marketing people are assigned to specific countries, regions, and/or districts. 2 - 38

Organizing Marketing Departments (cont’d) (4) Product management organization: One person is given responsibility for complete strategy and marketing program for a single product. (5) Market or customer organization: A Manager is fully responsible for particular market or type of customer (e.g., government buyers). Often used in companies that sell one product to many different kinds of buers. (6) Combination organization: Uses any combination of the previous approaches. 2 - 39

Marketing Control Process Marketing control: is evaluating the results of marketing strategies and plans and taking corrective action to ensure that objectives are achieved. Marketing control involves four steps: Set goals Measure performance Evaluate performance Take corrective action The corrective action may require changing action programs or even goals. 2 - 40

Marketing Control Process (cont’d) The control process includes the following: Operating control: Evaluates performance against the annual plan and takes corrective action. Strategic control: Evaluates whether strategies match opportunities. 2 - 41

MEASURING AND MANAGING RETURN ON MARKETING INVESTMENT Marketing managers must ensure that their marketing dollars are being well spent. Return on marketing investment is assessed using one or more of the following methods: Standard marketing performance measures (also called marketing dashboards): Examples include Brand awareness, sales, market share. Customer-centered measures: Examples include Customer acquisition, customer retention, customer lifetime value, customer equity. 2 - 42