Chapter-2: Developing Marketing Strategies and Plans

This chapter begins by examining some of the strategic marketing implications in creating customer
value. We’ll look at several perspectives on planning and describe how to draw up a formal marketing
plan.

Marketing and Customer Value

Marketing is not just about selling products—it is about delivering customer value profitably.
Businesses succeed when they understand customer needs, create offerings that provide superior value,
and communicate that value effectively. This requires proper planning, coordination across different
departments, and focusing on long-term strategy.

In order to understand how companies, provide superior customer value and gain competitive advantage,
four key areas are explained under Marketing and Customer Value:

1. The Value Delivery Process

How value is built.

 Old view: Make → Sell → Market (worked only when products were limited, and customers had
few choices).
 New view: Start with customers first → design products for specific target markets.
 Three phases of value delivery:
1. Choosing the value – Do market research, segmentation, targeting, and positioning
(STP).
2. Providing the value – Decide product features, price, and distribution.
3. Communicating the value – Use advertising, sales, internet, etc., to promote.

👉 Marketing starts before the product exists and continues throughout the product lifecycle.

2. The Value Chain (Michael Porter)

Michael Porter proposed the value chain as a tool for creating customer value. A firm is a collection of
activities that design, produce, market, deliver, and support products. These activities add value and cost.

Activities in the Value Chain

Primary Activities (directly create value for the customer):

1. Inbound logistics – bringing in raw materials and resources.

2. Operations – converting inputs into finished products.
3. Outbound logistics – distributing and shipping products.
4. Marketing & sales – creating demand and selling products.
5. Service – supporting customers after purchase.

Support Activities (enable efficiency and effectiveness):

1. Procurement – sourcing raw materials and inputs.

2. Technology development – R&D, process improvement, innovation.
3. Human resource management – recruiting, training, retaining staff.
4. Firm infrastructure – general management, finance, planning, legal, and administration.

Managerial Use of the Value Chain

 Companies must analyze costs and performance in each activity.

 Benchmarking against competitors and even other industries helps identify best practices.
 Example: GE benchmarked against P&G.

Key Core Business Processes

Key processes companies must manage well:

1. Market sensing (understanding market trends)

2. New offering realization (developing and launching products)
3. Customer acquisition (finding new customers)
 4. Customer relationship management (building long-term relationships)
5. Fulfillment management (order handling, delivery, payments)

Strong firms often use cross-functional teams (different departments working together).

Cross-Functional Teams

 Strong firms reengineer workflows and form cross-functional teams for each process.
 Examples:
o Ford → reduced water usage per vehicle by 30%.
o AT&T, LexisNexis, Pratt & Whitney → reorganized into cross-functional teams.
o Common in nonprofits and government too.

Beyond the Firm: The Value Delivery Network

 Competitive advantage also depends on suppliers, distributors, and customers.

 Firms partner across the supply chain to build a superior value delivery network.

3. Core Competencies

 Firms should focus on what they do best and outsource non-core activities.
 A core competency must:
1. Provide competitive advantage.
2. Be usable in many markets.
3. Be difficult to imitate.
 Examples: Product design, market sensing, customer linking, channel bonding.
 Sometimes firms need realignment by:

1. Redefining the business concept,

2. Reshaping business scope,
3. Repositioning the brand.

4. The Central Role of Strategic Planning

 Only a few companies excel as master marketers, To continuously deliver customer value, a
company needs clear long-term direction. Strategic planning
  These companies have well-staffed marketing departments, strong marketing leadership (often a
successful CMO), and company-wide recognition that the customer is king.

Marketers prioritize strategic planning is essential in three areas:

1. Managing businesses as investment portfolios.

2. Assessing market growth & company’s position.
3. Developing long-term strategies.

Organizational Levels in Large Companies:

1. Corporate – designs corporate strategic plan, allocates resources, decides which businesses to
start or eliminate.
2. Division – plans resource allocation to business units.
3. Business Unit – develops strategy for profitable growth.
4. Product – creates marketing plan for product line/brand objectives.

Marketing Plan:

 Central tool for directing and coordinating marketing efforts.

 Two levels:
1. Strategic marketing plan – defines target markets and value proposition based on
market opportunities.
2. Tactical marketing plan – specifies tactics: product features, promotion, pricing,
channels, merchandising, service.
 Strategic planning cycle includes planning, implementation, and control (see Figure 2.1).
Companywide Strategic Planning

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.

Companies usually prepare:

 Annual plans
 Long-range plans
 Strategic plans
Steps in Strategic Planning

Levels:

 Corporate level (Top management)

 Business unit, product, and market level

1. Defining a Market-Oriented Mission

 Mission statement defines the organization’s purpose—what it wants to accomplish in the larger
environment.
 A market-oriented mission focuses on satisfying basic customer needs, not just selling
products.

Good Mission Statements:

 Focus on limited goals

 Stress company’s major policies and values
 Define competitive spheres of operation
 Take a long-term view
 Are short, memorable, and meaningful

 Business definition:
o Product-oriented: Focus on the product (e.g., “We sell gasoline”).
o Market-oriented: Focus on customer needs (e.g., “We supply energy”).
 Examples:

Company Product-Oriented Market-Oriented

Amazon We sell books, electronics, etc. online We make online buying fast, easy, and enjoyable
Disney We are an online social network We connect people and help them share moments
Nike We sell athletic shoes and apparel We bring inspiration and innovation to every athlete
2. Setting Company Objectives and Goals

 Mission is turned into detailed objectives that guide the whole company.

Business Objectives:

 Build profitable customer relationships

 Invest in research
 Improve profits

Marketing Objectives:

 Increase market share

 Create local partnerships
 Increase promotion

3. Designing the Business Portfolio

The business portfolio is the collection of businesses and products that make up the company.

Portfolio analysis is a major activity in strategic planning whereby management evaluates the products
and businesses that make up the company.

Analyzing the Current Business Portfolio

Strategic Business Unit (SBU):

An SBU is a unit of a company that has its own mission and objectives and can be planned separately
from the rest of the company.

Examples of SBUs:

 A company division
 A product line within a division
  A single product or brand

Steps to Analyze the Business Portfolio:

1. Identify SBUs – Find the key businesses that make up the company.
2. Assess attractiveness – Evaluate how attractive each SBU is (market growth, market share,
profitability, etc.).
3. Decide support level – Decide how much investment or support each SBU should get.

BCG Matrix (Growth-Share Matrix)

The Boston Consulting Group developed this tool to evaluate SBUs based on market growth rate and
relative market share.

Four Categories:

 Stars 🌟 – High growth, high share → need heavy investment, can become cash cows
 Question Marks ❓ – High growth, low share → need a lot of investment to grow or may fail
 Cash Cows 🐮 – Low growth, high share → produce steady cash, support other SBUs
 Dogs 🐶 – Low growth, low share → may break even or be phased out
Problems with Matrix Approaches

 Hard to define SBUs and measure market share/growth accurately

 Time-consuming and costly to conduct
 Focus mainly on current businesses, not on future opportunities or innovations

Value Analysis – Evaluates each SBU’s contribution to overall company value; helps decide which
businesses to grow, hold, or divest.

4. Assessing Growth Opportunities

1. Intensive Growth – Focuses on improving and expanding the company’s existing business/ Grow
current business.

 To achieve intensive growth, companies use the Product/Market Expansion Grid (also called the
Ansoff Matrix).

 This tool helps identify company growth opportunities by combining existing/new products and
existing/new markets.

 It suggests four strategies:

 Market penetration: Increase sales of current products in existing markets. ex: Coca-Cola
running aggressive ad campaigns to boost sales of its soft drinks.
 Market development: Enter new markets using existing products. ex: Starbucks opening stores
in new countries.
 Product development: Introduce new products to current markets. ex: Apple launching new
versions of the iPhone for its existing customers.
 Diversification: Create new products for entirely new markets. ex: Amazon entering the cloud
computing market with Amazon Web Services.
2. Integrative Growth – Integrative growth means expanding a business by building closer
relationships within the industry—either by taking control of suppliers, distributors, or competitors.
This helps the company gain more control over the supply chain, sales channels, or market share.

There are three types:

 Backward integration: Acquire or merge with suppliers to control supply. ex: Starbucks buying
coffee farms to control its coffee bean supply.
 Forward integration: Acquire or merge with distributors/retailers to control sales channels. ex:
Apple opening its own retail stores instead of relying on third-party retailers.
 Horizontal integration: Acquire or merge with competitors to increase market share. ex:
Facebook acquiring Instagram to increase its social media market share.

3. Diversification Growth – Enter new and unrelated industries that are attractive and profitable to
spread risk and find new opportunities.

4. Downsizing and Divesting

 Companies prune old businesses to free resources and cut costs.

 Example: American Express spun off its financial advisory unit to focus on core services.

5. Organization and Culture

  Structure, policies, and culture influence strategy implementation.
 Culture is hard to change but essential for success.
 Customer-centric culture improves service and decision-making.
 Example: Enterprise Rent-A-Car empowers employees to resolve customer issues locally.

6. Marketing Innovation

 Innovation drives growth and competitive advantage.

 Encourage fresh ideas from:
1. Young or diverse employees
2. Employees far from headquarters
3. Industry newcomers
 Example: Reckitt Benckiser generates 35% of sales from products <3 years old.
 Scenario analysis (used by Shell) helps predict possible futures and plan strategies.

All these ensure sustainable growth, customer focus, and strategic advantage.

Business Unit Strategic Planning Process

Business Unit Strategic Planning refers to the process through which each business unit of a company
develops its own plan in alignment with the overall corporate strategy. This process ensures that the
business unit defines its mission, analyzes its internal and external environment, sets goals, formulates
strategies, and implements programs effectively. To understand the steps involved in Business Unit
Strategic Planning, the following areas are discussed in detail:
1. The Business Mission

Each business unit must define its own mission within the broader company mission. The mission
clarifies the unit’s purpose, target customers, and the unique value it offers. A well-defined mission helps
employees understand what the business is focusing on and what it should avoid.

Example: A television-studio lighting company might define its mission as: “To target major television
studios and become their preferred supplier for advanced and reliable studio lighting solutions.” Notice
it doesn’t aim to serve small studios, compete on lowest price, or enter unrelated markets.

2. SWOT Analysis

Definition:

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.

It is the overall evaluation of a company’s internal and external environment.

 Strengths and Weaknesses → come from inside the company (internal factors).
 Opportunities and Threats → come from the outside world (external factors).

This analysis helps the company understand its current position and plan strategies to compete
effectively.

External Environment (Opportunities & Threats)

 A business must monitor its environment carefully:

o Macroenvironment: broad forces like economy, technology, politics, social trends.
o Microenvironment: customers, competitors, suppliers, intermediaries.
 Companies often use a marketing intelligence system to track changes and trends.

Purpose:

 To find opportunities the company can take advantage of.

  To detect threats that can harm the company.

Marketing Opportunities

A marketing opportunity is an area where customers have a need or interest that the company can
profitably satisfy.

Good marketing means spotting, developing, and profiting from these opportunities.

Main sources of market opportunities:

1. Offer something that is in short supply

o Easy to do because the need is obvious.
2. Offer an existing product in a better way
o Use methods like:
 Problem detection method: Ask customers what problems they face.
 Ideal method: Ask them to imagine the perfect version of the product.
 Consumption chain method: Study how customers buy, use, and dispose of the
product.
o These often lead to new ideas or improvements.
3. Create a totally new product or service
o Innovative approach that creates a new market.

Examples of Spotting Opportunities

 Industry convergence: Phones now include camera, GPS, and internet (e.g., iPhone).
 Make buying easier: Mobil introduced Speed Pass (RFID) for quick fuel payments.
 Provide information: Angi (formerly Angie’s List) helps people find reviewed local services.
 Customization: Timberland lets customers design their own boots.
 New capability: iMac allowed users to create and upload digital “iMovies.”
 Faster delivery: FedEx delivers faster than the U.S. Postal Service.
 Lower price: Generic drugs are cheaper alternatives to brand-name medicines.
Market Opportunity Analysis (MOA)

To evaluate each opportunity, companies should ask:

1. Can we clearly explain the benefits to the target market?

2. Can we find and reach this market with cost-effective channels?
3. Do we have the resources and skills to deliver these benefits?
4. Can we do it better than competitors?
5. Will the profits meet our required return on investment?

Eisenhower Decision Matrix

This matrix helps to prioritize tasks based on their urgency and importance.

It has four quadrants:

1. Do (Urgent + Important)
o Tasks that must be done immediately.
 o Examples: upcoming deadlines, urgent problems, crises.
2. Decide (Not Urgent + Important)
o Tasks that are important but not time-sensitive.
o Should be scheduled and planned for later.
o Examples: skill development, long-term planning, building relationships.
3. Delegate (Urgent + Not Important)
o Tasks that are time-sensitive but not crucial.
o Should be delegated to others if possible.
o Examples: routine emails, minor admin tasks, some meetings.
4. Delete (Not Urgent + Not Important)
o Tasks that waste time and give little or no value.
o Should be eliminated.
o Examples: mindless social media scrolling, unnecessary distractions.

Why it is Useful in SWOT Analysis

SWOT Analysis identifies:

 Strengths (internal positive factors)

 Weaknesses (internal negative factors)
 Opportunities (external positive factors)
 Threats (external negative factors)

After identifying these, you often end up with many possible actions to take.
Here’s how the Eisenhower Matrix helps:

 It lets you prioritize which actions to do first based on urgency and importance.
 Opportunities can be sorted: which ones are urgent and important (Do now) vs. important but
not urgent (Decide and plan).
 Threat responses can be planned: urgent and important threats must be handled now; less urgent
threats can be scheduled.
 Weakness-fixing tasks can be organized based on how quickly they need to be solved.
 Unnecessary or low-impact tasks related to weaknesses can be deleted to save resources.

SWOT tells you what to do, and the Eisenhower Matrix helps decide when and how to do them.
Internal Environment (Strengths and Weaknesses) Analysis

 It’s not enough to only find attractive opportunities — a company must also have the internal
ability (strengths) to take advantage of them.
 Every business must evaluate its own strengths and weaknesses to understand what it can and
cannot do well.
 Strengths are internal positive capabilities (e.g., strong brand, skilled staff, efficient operations).
 Weaknesses are internal limitations (e.g., poor brand image, weak distribution network, low
funds).

Example: Dell

 Strength: Sold directly to customers more efficiently than IBM and Compaq.
 Weakness: Weak brand image and no strong dealer network.
 Opportunity: Customers becoming more informed and knowing exactly what they want.
 Threat: Risk of failing to build a big enough customer base.
 Result: Used internet-based direct sales, mass customization, and just-in-time manufacturing to
turn opportunity into success.

Why It’s Important

 Helps decide which opportunities match the company’s strengths.

 Shows which weaknesses must be fixed to reduce threats or seize opportunities.
 Guides companies to focus resources on areas where they can succeed.
 A company doesn’t need to fix every weakness or use every strength—only the ones linked to
key opportunities.

3. Goal Formulation

After analyzing internal and external factors, the business unit sets specific goals for a defined period.
Goals should be:

 Specific and measurable (quantitative targets, e.g., increase ROI to 15% in two years).
 Realistic and achievable (based on strengths and market opportunities).
 Hierarchical (prioritize major objectives like profitability over minor ones).
  Consistent (avoid conflicts, e.g., maximizing sales and profits simultaneously may be
impossible).

Example: A company may aim to increase market share by 10% in 2 years while maintaining product
quality and customer satisfaction.

4. Strategy Formulation

Strategy is the plan for achieving goals. It defines how a business will compete and what activities it will
perform. Michael Porter suggested three generic strategies:

 Cost Leadership: Compete by having the lowest costs (e.g., Walmart).

 Differentiation: Offer unique products or services valued by customers (e.g., Apple).
 Focus: Target a specific niche market and excel there (e.g., Rolex focusing on luxury watches).

Example: Travelocity uses differentiation by offering a wide range of travel services, while Lowest fare
uses cost leadership for budget travelers.

5. Strategic Alliances

Sometimes, a business cannot achieve its goals alone. Alliances with other companies can help leverage
capabilities, enter new markets, or reduce costs. Strategic alliances can be for products, promotions,
logistics, or pricing.

There are four main types of strategic alliances:

1. Product Alliances

Companies collaborate to create or offer products together.

Example:

 Starbucks & PepsiCo — Starbucks supplies ready-to-drink coffee, while PepsiCo handles
bottling and global distribution.
 Nike & Apple — Integrated Nike+ technology into Apple devices to track fitness data.

2. Promotional Alliances
Companies join to promote each other’s products or services.

Example:

 McDonald's & Coca-Cola — Often run joint advertising campaigns and co-brand in-store
promotions.

 Marvel & Burger King — Movie release tie-ins with kids’ meals and themed merchandise.

3. Logistics Alliances

Companies cooperate to share distribution, warehousing, or delivery systems.

Example:

 Amazon & United Parcel Service (UPS) — UPS handles last-mile delivery and returns for
Amazon.
 Toyota & DHL — Partnered to improve global parts delivery and supply chain efficiency.

4. Pricing Alliances

Companies agree to bundle products or offer joint pricing deals.

Example:

 Spotify & Hulu — Offered a combined subscription plan at a discounted price.

 American Express & Delta Air Lines — Co-branded credit cards give customers airline rewards
and exclusive pricing perks.

Example: Airlines like Lufthansa and United formed Star Alliance to provide seamless global travel.
Another example is Kraft acquiring Cadbury to enter emerging markets.

6. Program Formulation and Implementation

Once strategies are chosen, they must be turned into concrete action plans (programs) and
implemented effectively. Even the best strategy will fail if it’s not executed well.
Key Activities in This Step:

 Plan marketing programs: Decide on specific actions—like product launches, advertising

campaigns, pricing tactics, or distribution plans.
 Allocate resources: Assign budgets, manpower, and time to each program based on priority and
expected returns.
 Align with strategy: Make sure all programs support the overall strategic goals of the business
unit.
 Estimate costs: Calculate the expected expenses of each program to ensure they are profitable.
 Use Activity-Based Costing (ABC): ABC helps identify which marketing activities actually
generate profit and which don’t.

Example:

If a company wants to become a technological leader, it should:

 Invest in Research & Development (R&D) to innovate new products,

 Provide training to employees to improve skills,
 Run marketing campaigns to highlight new technology,
 Track program costs using ABC to confirm the investments are worthwhile.

7. Feedback and Control

Because markets, competitors, and customer needs constantly change, companies must track their
performance and adjust strategies when needed.

Key Points:

 Feedback: Collect performance data (sales figures, market share, customer satisfaction, ROI,
etc.)

to see if goals are being met.

 Control: Compare actual results with planned goals and take corrective actions if there are gaps.
 Continuous improvement: This cycle helps a company remain efficient (doing things right) and
effective (doing the right things).

Example:
  Nokia failed to adapt to the rise of smartphones and lost market share.

 Apple constantly collects feedback, monitors trends, and updates its products (like the iPhone) to
stay competitive.

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The Nature and Contents of a Marketing Plan

A marketing plan is a written document that explains how a company will achieve its marketing
objectives for a product, brand, customer group, or channel. It is developed by marketing managers while
working within the overall company strategies. The marketing plan summarizes what the marketer has
learned about the market, competitors, and customers, and outlines the strategies, tactics, and financial
resources needed to meet the objectives.

Marketing plans provide direction, focus, and motivation. They inform internal staff and external
partners (such as suppliers, distributors, and agencies) about the goals and how to achieve them.
Nonprofit organizations use marketing plans to guide fundraising and outreach, while government
agencies use them to raise awareness of public initiatives or stimulate tourism.

Unlike a business plan, which covers all aspects of a company, a marketing plan is more focused,
documenting how the organization will achieve strategic goals through specific marketing strategies and
tactics, starting with the customer. It also ensures coordination with other departments.

Example: If a marketing plan aims to sell 200,000 units of a product in a year, the production team must
produce enough units, finance must provide funding, and HR must hire and train staff. Without
organizational support, even a strong marketing plan cannot succeed.

Common Shortcomings

Marketing executives often report that plans fail due to:

 Lack of realism
 Insufficient analysis of competitors
  Short-term focus instead of long-term planning

Typical Structure of a Marketing Plan

1. Executive Summary and Table of Contents

Provides a concise overview of the plan, highlighting key points, objectives, and strategies.

2. Situation Analysis

Analyzes the market environment, including:

o Sales and costs

o Market size and growth
o Competitors and their strengths/weaknesses
o Macroenvironment factors (trends, regulations, technology)

Example: A smartphone company may analyze market growth trends, customer preferences, and
competitor launches before introducing a new phone.

3. Marketing Strategy

Defines:

o The mission of the marketing program

o Marketing and financial objectives
o Customer needs the product aims to satisfy
o Competitive positioning

Example: A coffee brand may position itself as a premium, ethically sourced option for urban
young professionals.

4. Marketing Tactics

Lists the activities to implement the strategy, including:

o Product/Service Offering: Features, benefits, and unique selling points.

 o Pricing: General price range, discounts, and incentives.
o Distribution/Channels: How the product will reach customers (direct sales, retail,
online).
o Communications: High-level guidance on advertising, promotions, and media strategy.
5. Financial Projections

Forecasts sales, expenses, and profitability.

o Sales forecast: Expected sales by product and time period

o Expense forecast: Cost of marketing programs and operations
o Break-even analysis: Number of units to cover costs
o Risk analysis: Optimistic, pessimistic, and most likely scenarios for revenue and profit

Example: A shoe company may forecast selling 50,000 pairs per quarter and estimate the costs
for production, marketing, and distribution to calculate break-even points.

6. Implementation Controls

Specifies how the plan will be monitored and adjusted. This includes monthly or quarterly goals,
budgets, and responsibilities. If performance deviates, corrective actions are taken.

The Role of Research

Marketing decisions must be based on up-to-date information about customers, competitors, and market
conditions. Research helps:

 Assess the current market situation

 Identify opportunities and threats
 Track progress toward marketing objectives
 Understand customer preferences, satisfaction, and loyalty

Example: Surveys or focus groups may reveal that customers want eco-friendly packaging, influencing
product design and marketing messages.

The Role of Relationships

A marketing plan not only targets customers but also guides:

 Internal relationships: How marketing staff collaborate with other departments (production,
finance, HR).
 External relationships: How the company works with suppliers, distributors, and partners.
 Stakeholder relationships: Interaction with regulators, media, and the community.

Example: A company planning a product launch must coordinate marketing campaigns with suppliers,
logistics, and advertising agencies to ensure smooth execution.

From Marketing Plan to Action

Marketing planning starts well before implementation to allow time for research, analysis, and
coordination. As programs are executed:

 Progress is monitored
 Deviations are investigated
 Corrective actions are applied

Marketing plans also include budgets, schedules, and metrics:

 Budgets track planned vs. actual spending

 Schedules show when tasks are due and completed
 Metrics measure results and progress toward objectives

Example: A company may track website traffic, social media engagement, and monthly sales to ensure
the marketing plan is working as intended.

Research informs decisions, relationships enable smooth execution, and ongoing monitoring
ensures success. Without these three, even a perfect marketing plan can fail.