Marketing management Principles

Chapter 2

COMPANY AND MARKETING STRATEGY:

PARTNERING TO BUILD CUSTOMER

RELATIONSHIPS

MARKETING STARTER: CHAPTER 2

Nike’s Customer-Driven Marketing: Building Brand Engagement and

Community

Synopsis

Nike began making running shoes in the 1960s and quickly expanded into numerous products for other sports

and outdoor activities. From the beginning, Nike marketed aggressively through sports stars’ endorsements,

mega-events, and its “Just Do It” ads. It marketed a way of life, and an attitude, not simply athletic products. It

also was perceived as antiestablishment, until it became the establishment and no longer cool.

Nike refocused and set about to create deeper and stronger customer relationships with the brand. The company

did this by communicating with customers, rather than talking at them. It revolutionized sports marketing in its

early days. It revolutionized customer-driven marketing and social networking. It has even moved into apps

and mobile technologies as part of its products. It is showing the way to other companies about how to build

deep customer relationships and how to truly connect with customers in meaningful ways.

Discussion Objective

A brief discussion of the Nike story will help to solidify the importance of creating a companywide marketing

strategy that is customer-focused, and revamping it when necessary. This theme began in Chapter 1 and

continues in Chapter 2. It also provides a nice opportunity to examine overall company strategy and mission,

and their relationship to marketing strategy and activities. Finally, Nike provides a great example of how

companies are taking new directions in building customer relationships and brand community. Nike has always

focused on the brand experience. In the early years, it built the brand’s image through media advertising and

celebrity endorsements. Now, it focuses a sizable portion of its marketing efforts on creating more personal and

involving brand experiences.

Starting the Discussion

To make the chapter-opening Nike story more personally relevant to the class, begin by asking, “How many of

you wear Nike shoes or gear? Has Nike changed its offerings in the time you have been buying its products? In

what way?” After a brief opening discussion, go online with students to explore Nike’s website

(http://www.nike.com).

Direct the discussion using the following questions. As always, keep the discussion moving with plenty of

student input.

Discussion Questions

1. What is Nike really selling? What are customers really buying? How and how deeply do customers relate

to the Nike brand? (Nike sells a lot more than just shoes. When customers purchase something at Nike,

they are buying much more. They are buying a brand experience. Ask students what that brand

experience feels like to them.)

2. If you worked as a Nike operations manager, financial analyst, IT specialist, or human resources

manager, why would it be important for you to understand Nike’s marketing strategy? This question digs

into the relationship between corporate strategy and marketing strategy, and marketing’s role in broader

company strategy. Non–marketing students often ask, “Why do I need to understand marketing”? The

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answer—as noted in Chapter 1 and later in Chapter 2—everyone in the company needs to align behind

the mission of creating customer value.

3. How does the chapter-opening Nike story relate to what comes later in the chapter? (This questions

transitions the discussion into Chapter 2 topics such as overall company strategy and mission,

marketing’s role, customer-driven marketing strategy and planning, and measuring marketing ROI.)

CHAPTER OVERVIEW

Use Power Point Slide 2-1 Here

In the first chapter, we explored the marketing process by which companies create value for

the consumer in order to capture value in return. In this chapter, we look at designing

customer-driven marketing strategies and constructing marketing programs. First we look at

the organizations overall strategic planning, which guides marketing strategy and planning.

Next, we discuss how marketing partners closely with others inside and outside the firm to

create value for customers. We then examine marketing strategy and planning—how

marketers choose target markets, position their market offerings, develop a marketing mix,

and manage their marketing programs. Lastly, we will look at the step of measuring and

managing return on marketing investment.

CHAPTER OBJECTIVES

Use Power Point Slide 2-2 and 2-3 Here

1. Explain companywide strategic planning and its four steps.

2. Discuss how to design business portfolios and develop growth strategies.

3. Explain marketing’s role under strategic planning and how marketing works with its

partners to create and deliver customer value.

4. Describe the elements of a customer-driven marketing strategy and mix, and the

forces that influence it.

5. List the marketing management functions, including the elements of a marketing

plan, and discuss the importance of measuring and managing return on marketing

investment.

CHAPTER OUTLINE

p. 38

INTRODUCTION

Nike began by making running shoes and quickly expanded

into equipment and apparel for other sports and activities.

When Nike stumbled, it overcame the struggles by focusing

very intently on customers. In the digital age, Nike works

to build deep and strong relationships with customers.

It engages them by talking with them rather than at them. It

builds a Nike community.

p. 38

Photo: Nike

Even during the Great Recession, Nike managed to continue

growing and gaining market share, while competitors

struggled. This seems to confirm the wisdom of Nike’s

marketing strategy.

 Assignments, Resources

Use Small Group Assignment 1 here

Use Individual Assignment 1 here

 Opening Vignette Questions

1. Discuss Nike’s marketing strategy in terms of

delivering increased customer value. What is

inherently better about the current Nike

marketing from the customer’s point of view?

2. For a while, Nike lost its “cool” factor. Based

on your experience and perception, has it gotten

it back? Why or why not?

3. What comes next for Nike in the 21st century?

What new marketing strategies might the

company develop to remain fresh and relevant?

p. 40

PPT 2-4

PPT 2-5

PPT 2-6

Explain company-wide strategic planning and its four

steps.

COMPANY-WIDE STRATEGIC PLANNING:

DEFINING MARKETING’S ROLE

The hard task of selecting an overall company strategy for

long-run survival and growth is called strategic planning.

Strategic planning is the process of developing and

maintaining a strategic fit between the organization’s goals

and capabilities and its changing market opportunities.

Strategic planning sets the stage for the rest of the planning

in the firm.

Companies typically prepare annual plans, long-range plans,

and strategic plans.

At the corporate level, the company starts the strategic

planning process by defining its overall purpose and

mission (see Figure 2.1). It then creates detailed supporting

objectives that guide the entire company. Next,

headquarters reviews the portfolio of businesses and

products is best for the company and how much support to

give each one. In turn, each business and product develops

Learning Objective

1

p. 40

Key Term:

Strategic Planning

p. 41

Figure 2.1:

Steps in Strategic

Planning

detailed marketing and other departmental plans that

support the company-wide plan. Thus, marketing planning

occurs at the business-unit, product, and market levels.

 Assignment, Resources

Use Discussion Question 2-1 here

Use Video Case here

 Troubleshooting Tip

Most students have had no experience with strategy

or strategy formulation (especially at the under-

graduate level). Because their background in

strategy is weak, their ability to strategically plan is

also weak. The best way to attack this problem is to

follow the explanation sequence provided by the

text. Before this discussion begins, however, it

might be useful to find areas where students have

had strategic planning experience (such as athletics,

student politics, games, video games, chess,

computer games, etc.). By asking the students to

recall and relate these experiences, parallels can be

drawn to business strategies and the plans that result

from these strategies (for example, think of all the

military and athletic terms that might be used to

describe business strategy—i.e., flanker movement

for flanker brands).

p. 40

PPT 2-7

Defining a Market-Oriented Mission

Many organizations develop formal mission statements. A

mission statement is a statement of the organization’s

purpose—what it wants to accomplish in the larger

environment.

A clear mission statement acts as an “invisible hand” that

guides people in the organization.

A market-oriented mission statement defines the business in

terms of satisfying basic customer needs.

Management should avoid making its mission too narrow or

too broad.

Missions should be realistic, specific, fit the market

environment, based on the company’s distinctive

competencies, and motivating.

p. 41

Key Term: Mission

Statement

p. 41

Table 2.1: Product-

versus Market-

Oriented Business

Definitions

 Assignments, Resources

Use Critical Thinking Exercise 2-8 here

p. 44

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PPT 2-10

p. 44

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p. 45

PPT 2-13

Setting Company Objectives and Goals

The company’s mission needs to be turned into detailed

supporting objectives for each level of management.

The mission leads to a hierarchy of objectives, including

business objectives and marketing objectives.

Marketing strategies and programs must be developed to

support these marketing objectives.

Review Learning Objective 1: Explain company-wide

strategic planning and its four steps.

Discuss how to design business portfolios and develop

growth strategies.

Designing the Business Portfolio

A business portfolio is the collection of businesses and

products that make up the company.

The best portfolio is the one that best fits the company’s

strengths and weaknesses to opportunities in the

environment.

A strategic business unit (SBU) is a unit of the company

which has a separate mission and objectives and that can be

planned independently from other company businesses.

p. 44

Ad: Heinz

Learning Objective

2

p. 44

Key Term: Business

Portfolio

 Assignments, Resources

Use Real Marketing 2.1 here

Use Additional Project 1 here

Use Think-Pair-Share 1 here

p. 45

PPT 2-14

PPT 2-15

Analyzing the Current Business Portfolio

The major activity in strategic planning is business

portfolio analysis, whereby management evaluates the

products and businesses making up the company.

The next step in business portfolio analysis calls for

management to assess the attractiveness of its various SBUs

and decide how much support each deserves.

Most standard portfolio-analysis methods evaluate SBUs on

two important dimensions—the attractiveness of the SBU’s

market or industry and the strength of the SBU’s position in

p. 45

Key Terms:

Portfolio Analysis

PPT 2-16

that market or industry.

The Boston Consulting Group Approach. The best-known

portfolio-planning method was developed by the Boston

Consulting Group.

This matrix defines four types of SBUs:

 Stars: high-growth market, high-share product

 Cash cows: low-growth market, high-share product

 Question marks: low-share product, high-growth

market

 Dogs: low-share product, low-growth market

Once it has classified its SBUs, the company must

determine what role each will play in the future.

The company can invest more in the business unit in order

to grow its share. It can invest just enough to hold the

SBU’s share at the current level. It can harvest the SBU,

milking its short-term cash flow regardless of the long-term

effect. Or it can divest the SBU by selling it or phasing it

out.

p. 45

Key Term: Growth-

Share Matrix

p. 45

Figure 2.2: The

BCG Growth-Share

Matrix

 Assignments, Resources

Use Discussion Question 2-2 here

Use Small Group Assignment 2 here

Use Individual Assignment 2 here

 Troubleshooting Tip

This simple matrix is the basis for many portfolio

analysis techniques. An easy way to cover this

material quickly is to assign each of the four parts to

four students in advance of class. Next, have them

respond to example suggestions (illustrations of the

four cells) from their classmates. This will reinforce

the material for the entire class.

p. 46

PPT 2-17

Problems with Matrix Approaches

Portfolio-analysis approaches have limitations.

 They can be difficult, time-consuming, and costly to

implement.

 Management may find it difficult to define SBUs

and measure market share and growth.

 These approaches focus on classifying current

businesses but provide little advice for future

planning.

Because of such problems, many companies have dropped

formal matrix methods in favor of more customized

p. 46

Photo: Disney

p. 47

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approaches that are better suited to their specific situations.

Developing Strategies for Growth and Downsizing

Designing the business portfolio involves finding businesses

and products the company should consider in the future.

Marketing has the main responsibility for achieving

profitable growth for the company.

Marketing must identify, evaluate, and select market

opportunities and lay down strategies for capturing them.

The product/market expansion grid looks for new

opportunities.

The product/market expansion grid is shown in Figure

2.3.

 Market penetration involves making more sales to

current customers without changing its products.

 Market development involves identifying and

developing new markets for its current products.

 Product development is offering modified or new

p. 47

Photo: Starbucks

p. 47

Figure 2.3: The

Product/Market

Expansion Grid

pp. 47

Key Terms:

Product/Market

Expansion Grid,

Market Penetration,

Market

Development,