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
Question Marks ?
Market Growth Rate

Marks
High

• High growth & share ••High

Highgrowth,
growth,low
lowshare
share
• Profit potential ••Build
Buildinto
intoStars
Starsor
orphase
phaseout
out
• May need heavy ••Require
Requirecash
cashto
tohold
hold
investment to grow market
marketshare
share
Cash
Cash Cows
Cows Dogs
Dogs
••Low ••Low
Lowgrowth
growth&&share
Lowgrowth,
growth,high
highshare
share ••Low
share
Lowprofit
profitpotential
Low

••Established,
Established,successful
successful potential
SBU’s
SBU’s
••Produce
Producecash
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:
[Link] 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

ys ng

M la n
ar n
a l eti

P
is

ke i n
A n a rk
Product

ti n g
M

g
Target
Suppliers Place Price Publics
Consumers

n
tio
en g
M Co n

ta
em i n
ar tr

Promotion

pl k e t
ke o l

Im ar
ti n

M
g

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

Key Elements  The segmentation

process divides the
total market into
market segments.
• Analyzing marketing
opportunities  Target marketing
• Selecting target determines which
segment(s) are
markets pursued.
• Developing the marketing
mix  Marketing positioning
• Managing the marketing is a process of
effort occupying a distinctive
position in the minds
of the customers.
 The Marketing
Process
Key Elements  Competitor analysis
guides competitive
marketing strategy
• Analyzing marketing development.
opportunities
• Selecting target markets  Strategy leads to
tactics by way of the
• Developing the marketing mix:
marketing mix  The “Four Ps”

• Managing the marketing (seller viewpoint)

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

44 P’s
P’s 44 C’s
C’s 44 A’s
A’s
(Seller (CustomerPoint
Pointof
ofView)
View)
(SellerPoint
Pointof
ofView)
View) (Customer (IndividualPoint
(Individual Pointof
ofView)
View)

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

-JogodishSheth
-Jogodish Sheth
-RobertLauterborn
-Robert Lauterborn
-McCarthy
-McCarthy
The Marketing Process

 [Link] analysis
Key Elements  Provides information

helpful in planning,
implementation, and
• Analyzing marketing control
opportunities  B. Marketing planning
• Selecting target markets  Strategies and tactics

• Developing the  C. MKT implementation

marketing mix  Turns plans into action

• Managing the  D. Marketing control

marketing effort  Operating control

 Strategic control

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

Marketing
Marketing Marketing
Marketing Contro
Planning
Planning Implementation
Implementation l
Measure
Results
Develop
Develop Strategic
Strategic Carry
Carry Out
Out
Plans
Plans The
The Evaluate
Plans
Plans Results
Develop
Develop
Marketing
Marketing Take
Plans
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
Marketing Control
Control

Set
Set Marketing
Marketing Goals
Goals
(What
(Whatdo
dowe
wewant
wantto
toachieve?)
achieve?)

Measure
Measure Performance
Performance
(What
(Whatis
ishappening?)
happening?)

Evaluate
Evaluate Performance
Performance
(Why
(Whyis
isitithappening?)
happening?)

Take
Take Corrective
Corrective Action
Action
(what
(whatshould
shouldwe
wedo
doabout
aboutit?)
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