2

Principles of Marketing

Company and Marketing

Strategy
Learning Objectives
After studying this chapter, you should be able to:
1. Explain companywide strategic planning and its steps
2. Discuss how to design business portfolios and develop growth
strategies
3. Explain marketing’s role in strategic planning and how
marketing works with its partners to create and deliver
customer value
4. Explain the Marketing Process
5. Explain the elements of a marketing plan, and discuss the
importance of measuring return on marketing investment
1. Companywide Strategic Planning:
Defining Marketing’s Role

1. Strategic Planning

Strategic planning is the process of

developing and maintaining a strategic fit
between the organization’s goals and
capabilities and its changing marketing
opportunities
Companywide Strategic Planning:
Defining Marketing’s Role

Defining a Market-Oriented Mission

Mission statement: The organization’s

purpose, what it wants to accomplish in the
larger environment
Market-oriented mission statement:
Defines the business in terms of satisfying
basic customer needs
2. Companywide Strategic Planning:
Defining Marketing’s Role

Designing the Business Portfolio

The business portfolio is the collection of

businesses and products that make up the
company
Companywide Strategic Planning:
Defining Marketing’s Role

Analyzing the Current Business Portfolio

Analyzing the current business portfolio is

the process by which management
evaluates the products and businesses
making up the company
Companywide Strategic Planning:
Defining Marketing’s Role

Steps in Analyzing the Current Business Portfolio

1. Identify key businesses making up the

company
2. Assess the attractiveness of its various SBUs
3. Decide how much support each SBU
deserves
Companywide Strategic Planning:
Defining Marketing’s Role

Steps in Analyzing the Current Business Portfolio

Identify key businesses making up the company

 Strategic business unit (SBU) is a unit of the
company that has a separate mission and objectives
that can be planned separately from other company
businesses
 Company division
 Product line within a division
 Single product or brand
Companywide Strategic Planning:
Defining Marketing’s Role

Steps in Analyzing the Current Business Portfolio

Assess the attractiveness of various SBUs and

decide how much support each deserves
Companywide Strategic Planning:
Defining Marketing’s Role
Analyzing the Current Business Portfolio
The Boston Group Approach

Growth share matrix is a portfolio planning method that

evaluates a company’s strategic business units in terms of
their market growth rate and relative share
Strategic business units are classified as:
 Stars
 Cash Cows
 Question marks
 Dogs
Analyzing Current SBU’s:
Boston Consulting Group Approach
Relative Market Share
High Low
Stars Question Marks
?
High
Market Growth Rate

• High growth & share • High growth, low share

• Profit potential • Build into Stars or phase out
• May need heavy • Require cash to hold
investment to grow market share

Cash Cows Dogs

• Low growth, high share • Low growth & share
• Low profit potential
Low

• Established, successful
SBU’s
•Produce cash
Companywide Strategic Planning:
Defining Marketing’s Role

Analyzing the Current Business Portfolio

The Boston Group Approach

Stars are high-growth, high-share businesses or products

requiring heavy investment to finance rapid growth. They
will eventually turn into cash cows.

Cash cows are low-growth, high-share businesses or products

that are established and successful SBUs requiring less
investment to maintain market share
Companywide Strategic Planning:
Defining Marketing’s Role

Analyzing the Current Business Portfolio

The Boston Group Approach

Question marks are low-share business units in high-growth

markets requiring a lot of cash to hold their share

Dogs are low-growth, low-share businesses and products that

may generate enough cash to maintain themselves but do
not promise to be large sources of cash
Companywide Strategic Planning:
Defining Marketing’s Role

Developing Strategies for Growth and Downsizing

Product/market expansion grid is a tool for

identifying company growth opportunities.
Developing Growth Strategies or Planning New
Businesses:
Three types of growth strategies:

Intensive Integrative Diversification growth

growth growth
Market penetration Backward integration Concentric
Market development Forward integration diversification
Product development Horizontal integration Horizontal
strategy diversification
Conglomerate
diversification
Developing Growth Strategies or Planning
New Businesses:

 Intensive Growth Strategies

 Market penetration
 Market development
 Product development
Companywide Strategic Planning:
Defining Marketing’s Role

Intensive Growth Strategies

a. Market penetration is a growth strategy
for increasing sales to current market
segments without changing the product
b. Market development is a growth strategy
that identifies and develops new market
segments for current products
c. Product development is a growth strategy
that offers new or modified products to
existing market segments
Developing Growth Strategies or Planning
New Businesses:

Developing Strategies for Growth and Downsizing

Downsizing is the reduction of the business

portfolio by eliminating products or business
units that are not profitable or that no
longer fit the company’s overall strategy
 Integrative Growth Strategies
VERTICAL INTEGRATION
Toward the Source of Supply

Backward

HORIZONTAL
INTEGRATION Similar
Businesses
Acquired
Forward

Toward the Customer

 Integrative growth

Three Integrative growth strategies are

available:
1. Backward integration
Here, company acquires one or more of its suppliers to
gain more control or generate more profit.
2. Forward integration
Company acquires some wholesalers or retailers if they are profitable

3. Horizontal integration
Company acquires one or more competitors if govt. does
not bar this move.
 Diversification growth Strategies

1. Concentric diversification strategy

Company seeks new products that have technological
and/or marketing synergies with existing product lines.
2. Horizontal diversification strategy
Company searches for new products that are
technologically unrelated to its current product lines.
3. Conglomerate diversification
strategy
Company seeks new businesses that have no
relationship to the company's current technology,
products or markets.
 3. Planning Marketing: Partnering
to Build Customer Relationships
Partnering with Other Company Departments

Value chain is a series of departments that

carry out value-creating activities to
design, produce, market, deliver, and
support a firm’s products
 Planning Marketing: Partnering
to Build Customer Relationships
Partnering with Others in the Marketing System
Value delivery network is made up of the
company, suppliers, distributors, and
ultimately customers who partner with
each other to improve performance of the
entire system
 4. The Marketing Process
Demographic- Marketing Technological-
Economic Intermediaries Natural
Environment Environment

Product

Target
Suppliers Place Price Publics
Consumers

Promotion

Political- Social-
Legal Competitors Cultural
Environment Environment
 The Marketing Process
Key Elements
• Analyzing  The strategic planning
marketing and business portfolio
opportunities analysis processes help to
• Selecting target
identify and evaluate
markets marketing opportunities.
• Developing the
marketing mix
• Managing the  The purpose of the marketing
marketing effort process is to help the firm
plan how to capitalize on
these opportunities.
The Marketing Process

Key Elements  The segmentation process

divides the total market
into market segments.
• Analyzing marketing
 Target marketing
opportunities determines which
segment(s) are pursued.
• Selecting target
markets  Marketing positioning
• Developing the marketing mix is a process of occupying
a distinctive position in
• Managing the marketing effort the minds of the
customers.
 The Marketing Process
Key Elements  Competitor analysis guides
competitive marketing
strategy development.
• Analyzing marketing
opportunities  Strategy leads to tactics by
• Selecting target markets way of the marketing mix:
 The “Four Ps”
• Developing the
(seller viewpoint)
marketing mix
• Managing the marketing effort  The “Four Cs
(customer viewpoint)
 Developing the Marketing Mix
Product Price
“Goods-and-service” Amount of money
combination that a that consumers
company offers a have to pay to
target market Obtain the product

Target
Customers

Intended
Positioning

Activities that Company activities

persuade target that make the
customers to buy product available
the product
Promotion Place
Developing the Marketing Mix

The Four P
Components
of the
Marketing
Mix
 The 4P’s 4C’s & 4A’s of the
Marketing Mix

4 P’s 4 C’s 4 A’s

(Seller Point of View) (Customer Point of View) (Individual Point of View)

 Product Acceptability
 Customer o
 Price
o Affordability
 Place Solution o Accessibility
 Promotion  Customer Cost o Awareness
 Convenience

 Communicatio
-Jogodish Sheth
n
-McCarthy
The Marketing Process

 [Link] analysis
Key Elements  Provides information helpful in

planning, implementation, and

control
• Analyzing marketing  B. Marketing planning
opportunities  Strategies and tactics

• Selecting target markets  C. MKT implementation

• Developing the marketing  Turns plans into action
mix  D. Marketing control
• Managing the  Operating control
marketing effort
 Strategic control

 Marketing audit
Managing the Marketing Effort
Marketing Analysis of Company’s Situation

Marketing Marketing Control

Planning Implementation
Measure
Results
Develop Strategic Carry Out
Plans The
Evaluate
Plans Results
Develop
Marketing Take
Plans Corrective
Action
 5. Contents of a Marketing Plan
Executive Summary
Current Marketing Situation
Threats and Opportunity Analysis
Objectives and Issues
Marketing Strategy
Action Programs
Budgets
Controls
33
Marketing planning
 Executive Summary
 Current Marketing Situation:
Market  Product  Competition
Distribution Macro-environment
 Threats/Opportunities/Issues analysis
SWOT analysis Issue analysis
 Objectives
Financial Marketing
 Marketing Strategy
 Action Program
 Budgets
 Controls: Review Implementation results and spot deviations
 Include Contingency Plan
Marketing Control

Set Marketing Goals

(What do we want to achieve?)

Measure Performance
(What is happening?)

Evaluate Performance
(Why is it happening?)

Take Corrective Action

(what should we do about it?)
3. Marketing Strategy and the
Marketing Mix

3. Marketing Strategy

Marketing strategy is the marketing logic by

which the business unit hopes to achieve its
marketing objectives
Marketing Strategy and the
Marketing Mix

Customer-Driven Marketing Strategy

Market segmentation is the division of a

market into distinct groups of buyers who
have distinct needs, characteristics, or
behavior and who might require separate
products or marketing mixes
Marketing Strategy and the
Marketing Mix

Customer-Driven Marketing Strategy

Market segment is a group of consumers who

respond in a similar way to a given set of
marketing efforts

Target marketing is the process of evaluating

each market segment’s attractiveness and
selecting one or more segments to enter
 Marketing Strategy and the
Marketing Mix

Customer-Driven Marketing Strategy

Market positioning is the arranging for a

product to occupy a clear, distinctive, and
desirable place relative to competing
products in the minds of the target
consumer
Marketing Strategy and the
Marketing Mix

Developing an Integrated Marketing Mix

Marketing mix is the set of controllable

tactical marketing tools—product, price,
place, and promotion—that the firm blends
to produce the response it wants in the
target market
 Marketing Strategy and the
Marketing Mix
Developing an Integrated Marketing Mix
The four Ps

 Product
 Price
 Place
 Promotion
Marketing Strategy and the
Marketing Mix

Developing an Integrated Marketing Mix

The four Ps

Product is the goods and services in

combination that the company offers to the
target market

Price is the amount of money customers have

to pay to obtain the product
Marketing Strategy and the
Marketing Mix
Developing an Integrated Marketing Mix
The four Ps

Place is the company activities that make the

product available to target customers

Promotion is the activities that communicate

the merits of the product and persuade
target customers to buy it
Marketing Strategy and the
Marketing Mix

Developing an Integrated Marketing Mix

The 4 Ps versus The 4 Cs
Product Customer solution
Price Customer cost
Place Convenience
Promotion Communication
4. Managing the Marketing Effort

4. Managing the marketing effort requires:

 Analysis
 Planning
 Implementing
 Controlling
Managing the Marketing Effort

Marketing Analysis

Analysis is the complete analysis of the

company’s situation in a SWOT analysis that
evaluates the company’s:
 Strengths
 Weaknesses
 Opportunities
 Threats
Managing the Marketing Effort
Marketing Analysis

Strengths include internal capabilities,

resources, and positive situational factors
that may help to serve company customers
and achieve company objectives

Weaknesses include internal limitations and

negative situational factors that may
interfere with company performance
Managing the Marketing Effort

Marketing Analysis

Opportunities are favorable factors or trends in

the external environment that the company
may be able to exploit to its advantage

Threats are unfavorable factors or trends that

may present challenges to performance
Managing the Marketing Effort
Market Planning

Planning is the development of strategic and

marketing plans to achieve company
objectives

Marketing strategy consists of the specific

strategies for target markets, positioning,
the marketing mix, and marketing
expenditure levels
 Managing the Marketing Effort
Market Planning
Sections of a marketing plan include:
 Executive summary
 Current marketing situation
 Threats and opportunities
 Objective and issues
 Action programs
 Budgets
 Controls
Managing the Marketing Effort

Marketing Implementation

Implementing is the process that turns marketing

plans into marketing actions to accomplish strategic
marketing objectives

Successful implementation depends on how well the

company blends its people, organizational structure,
decision and reward system, and company culture
into a cohesive action plan that supports its
strategies
Managing the Marketing Effort

Marketing Department Organization

 Functional
 Geographic
 Product
 Market or customer management
Managing the Marketing Effort
Marketing Department Organization

Functional organization: This is the most

common form of marketing organization
with different marketing functions headed
by a functional specialist
 Sales manager
 Market research manager
 Customer service manager
 New product manager
Managing the Marketing Effort
Marketing Department Organization

Geographic organizations: Useful for companies that

sell across the country or internationally. Managers
are responsible for developing strategies and plans
for a specific region.

Product Management: Useful for companies with

different products or brands. Managers are
responsible for developing strategies and plans for a
specific product or band.
Managing the Marketing Effort

Marketing Department Organization

Market or customer management

organization: Useful for companies with
one product line sold to many different
markets and customers. Managers are
responsible for developing strategies and
plans for their specific markets or customers.
Managing the Marketing Effort

Marketing Department Organization

Customer management involves a customer

focus and not a product focus for managing
customer profitability and customer equity
Managing the Marketing Effort

Marketing Control

Controlling is measuring and evaluating

results and taking corrective action as
needed
 Operating control
 Strategic control
Managing the Marketing Effort

Marketing Control

Operating control involves checking ongoing

performance against annual plan and taking
corrective action as needed

Strategic control involves looking at whether

the company’s basic strategies are well
matched to its opportunities
Managing the Marketing Effort

Marketing Control

Marketing audit is a comprehensive,

systematic, independent, and periodic
examination of a company’s environment,
objectives, strategies, and activities to
determine problem areas and opportunities
 5 Measuring and Managing Return
on Marketing Investment

Return on Marketing Investment

(ROI)

Return on marketing investment (ROI)

is the net return from a marketing
investment divided by the costs of the
marketing investment. Marketing ROI
provides a measurement of the profits
generated by investments in marketing
activities.
Measuring and Managing Return on
Marketing Investment

Customer-Centered Measures

 Customer acquisition
 Customer retention
 Customer lifetime value