Chapter 2 – Developing Marketing Strategies and Plans
I………………………………. Chapter Overview/Objectives/Outline
A. Overview
A major challenge for marketing-oriented companies as they respond to the rapidly changing
marketplace is to engage continuously in market-oriented strategic planning. They must learn
how to develop and maintain a viable fit between their objectives, resources, skills, and
opportunities. The strategic planning process is carried out at the corporate level, business
level, and product level. The objectives developed at the corporate level move down to lower
levels where business strategic plans and marketing plans are prepared to guide the company’s
activities. Strategic planning involves repeated cycles of planning, implementation, and
control.
Corporate strategic planning involves four planning activities. The first is to develop a clear
sense of the company’s mission in terms of its industry scope, products and applications scope,
competence scope, market segment scope, vertical scope, and geographical scope. A
well-developed mission statement provides employees with a shared sense of purpose,
direction, and opportunity.
The second activity calls for identifying the company’s strategic business units (SBUs). A
business is best defined by its customer groups, customer needs, and technologies. SBUs are
business units that can benefit from separate planning, face specific competitors, and can be
managed as profit centers.
The third activity calls for allocating resources to the various SBUs based on their market
attractiveness and business strength. Several portfolio models, including those developed by
the Boston Consulting Group, and General Electric, are available to help determine which
horizontal, and conglomerate diversification).
Each SBU conducts its own business strategic planning which consists of eight steps: defining
the business’ mission, analyzing the external environment, analyzing the internal environment,
choosing business objectives and goals, developing business strategies, preparing programs,
implementing programs, and gathering feedback and exercising control. All of these steps keep
and services.
Marketing plans focus on a product/market and consist of the detailed marketing strategies and
programs for achieving the product’s objectives in a target market. Marketing plans are the
central instrument for directing and coordinating the marketing effort. The distinction between
the strategic and tactical marketing plans and efforts is very important, because if the firm and
the coordination effort starts from the beginning.
The marketing planning process consists of five steps: analyzing market opportunities
researching and selecting target markets, designing market strategies, planning marketing
programs, and organizing, implementing, and controlling the marketing effort.
Marketing planning results in a marketing plan document that consists of the following
vice-president. A geographical marketing organization allocates its sales organization resources
along geographic lines, nationally, regionally, or locally. A product management organization
assigns products to product managers who work with functional specialists to develop and
achieve product plans. A market management organization assigns major markets to market
department and divisional marketing departments.
Marketing must work harmoniously with other functional areas. In its pursuit of the customer’s
interests, marketing may come into conflict with R&D, engineering, purchasing,
manufacturing, operations, finance, accounting, credit, and other functions. These conflicts can
be reduced when the company president commits the firm to a customer orientation and when
plans into action exercises describing who does what, when, and how. Effective
implementation requires skills in allocating, monitoring, organizing, and interacting at all
levels of the marketing effort. Evaluations and control include annual-plan control,
profitability control, efficiency control and strategy control. The capstone effort in this process
is the marketing audit.
B. Learning Objectives
Recognize the characteristics of high performance business.
Understand what is meant by “strategic” planning.
Know the major steps in strategic planning and their contribution to development of a
successful strategy.
Understand the strengths and weaknesses of the business portfolio techniques.
C. Outline
I. Introduction
II Marketing and Customer Value
A. The Value Delivery Process
market to sell it to
2. Value Creation marketing consists of identifying the market,
targeted profit
3. Establishing a strategy for each business (long-term)
4. Kumar “3 V’s” approach
5. Webster’s process: value definition, value development, value
delivery
B. The Value Chain
1. Five Primary Strategic Activities (Michael Porter Generci Value Chain
and sales, services
2. Four Support Activities – firm infrastructure, HR, technology
development, procurement
3. Five core business processes
and within budget
c. Customer acquisition
d. Customer relationship management
e. Fulfillment management
C. Core Competencies
1. Three characterisitics
contribution to perceived customer benefits
b. It has applications in a wide variety of markets
excellence in broader business processes.
distinctive capabilities, into activity systems
4. George Day defines three distinctive capabilites as:
a. Market sensing
b. Customer linking
c. Channel bonding
D. A Holistic Marketing Orientation and Customer Value
1. Value exploration
2. Value creation
3. Value delivery
E. The Central Role of Strategic Planning
1. Organizational levels: corporate, division, business unit, and product.
corporate sets guidelines for entire enterprise, division creates plan and
allocates funds for all business units within the division, business units
are revenue producers and create plans to generate profits, product
strategies are created within each business unit
2. Marketing Plan – two levels
a. Strategic – identifies target markets and value propositions
b. Tactical – specifies marketing tactics, e.g. 4 P’s
3. Planning, implementation and control cycle exhibited in Fig. 2.1
III. Corporate and Division Strategic Planning
A. Defining the corporate mission
1. Peter Drucker’s classic questions:
a. What is our business?
b. Who is the customer?
c. What is of value to the customer?
d. What will our business be?
e. What should our business be?
should be short, memorable and meaningful.
B. Establishing Strategic Business Units
1. Three dimensions (customer groups, customer needs, technology)
describe business in terms of customer satisfaction and not goods
producing process
b. Have own set of competitors
c. Has its own strateivc planning and profit performance
C. Assigning Resources to Each Strategic Business Unit
1. Decision to assign resources usually based upon shareholder value
analysis and SBU potential
strategic outsourcing
D. Assessing Growth Opportunities
1. Intensive growth (Ansoff matrix)
a. Market penetration strategy – current products to current markets
b. Market development strategy – current products to new markets
possible: concentric, horizontal, and conglomerate
E. Organization, Organizational Culture, and Innovation
1. Organization consists of its structures, policies, and corporate culture
2. Corporate culture has been defined as “the shared experiences, stories,
beliefs, and norms that characterize an organization”
market and include different uncertainties
IV. Business Unit Strategic Planning – Eight steps (refer to figure 2.2)
A. Business mission – SBUs’ specific mission within the broader company mission
B. SWOT analysis (External Opportunities and Threats)
1. Macro environment forces/actors analysis – discerning new marketing
opportunities
attractiveness and probability of success
3. Environmental threat – challenge posed by an unfavorable external trend
or development that would lead, in absence of defensive marketing
action, to lower sales or profit
SWOT analysis (Internal Strengths and Weakness)
organizational capabilities.
C. Goal formulation – after SWOT is completed, establish objectives that are
specific with respect to magnitude and time. To be effective goals must:
1. Be arranged hierarchically
2. Be stated quantitatively whenever possible
3. Be realistic
4. Be consistent
D. Strategy Formulation – the game plan for achieving the stated objectives
1. Three generic types of strategic thinking (Porter):
a. Overall cost leadership: lower costs allow lower prices, which
can lead to increased market share
b. Differentiation
or differentiation strategies within target segment
2. Firms that pursue the same strategy directed to the same target market
constitute a strategic group.
3. Operational effectiveness and strategy – based on strategic groups to
achieve distinctive market position
3. Strategic alliances
promotional, logistical, and pricing collaborations.
b) Partnership Relationship Management (PRM) – the ability to
form and manage partnerships to complement or leverage
existing marketing capabilities and resources.
E. Program Formulation and Implementation
1. Develop detailed programs to support the strategy
2. Establish ROI on programs
3. Implementation – McKinsey 7S framework
F. Feedback and control
new developments
2. Stratgeic fit with environment will erode as market changes faster than
the organization’s seven S’s
V. The Marketing Plan and Marketing Performance
A. Contents of a Marketing Plan
1. Executive summary and table of contents
2. Situation analysis – relevant background on sales, costs, profits, the
market, competition, and macro environment
3. Marketing strategy and programs – mission, marketing, and financial
objectives
4. Financial projections – sales and expense forecasts
5. Implementation controls
B. From Marketing Plan to Marketing Action
1. Start in advance to allow time for marketing research, review, analysis
and coordination
2. Define metrics for measuring effectiveness and efficiency..
C. Measuring Market Performance
1. Marketing Metrics (also discussed in Chapter 18)
quantify, compare, and interpret marketing performance
b. Tim Ambler suggests splitting metrics into two parts
1. short term results (e.g. sales turnover, shareholder value)
2. changes in brand equity (e.g. awareness, retention,
attitudes, behavior, market share, perceived, quality,
loyalty, # of complaints/returns)
2. Marketing Dashboards
entities (employees, suppliers, banks, etc.) who have a critical
interest and impact on the organization’s performance
D. Marketing Plan Performance
1. Sales analysis – measure and evaluate actual sales to goals
sales
5. Served market share – sales expressed as percentage of the total sales to
its served market (all buyers who are able and willing to buy the
organization’s products)
6. Relative market share – share in relation to its largest competitor
7. Marketing expense-to-sales ratio components – expense-to-sales, sales
force-to-sales, advertising-to-sales, sales-promotion-to-sales, marketing-
research-to-sales, sales-administration-to-sales
its financial leverage
9. Asset composition – (profit margins and asset turnovers)
a. Increase profit margin by increasing sales or cutting costs
b. Boost the asset turnover by increasing sales or reducing assets
E. Profitability Analysis
1. Identify the functional expenses, assigning the functional expenses to the
marketing entities
2. Prepare a profit-and-loss statement for each marketing entity
3. Determining corrective action
4. Increased adoption of marketing profitability analysis and activity
based accounting
VI Executive Summary
II. Lectures
A “Establishing a Winning Strategic Planning Formula”
The focus is on strategy in a market-oriented setting, and specifically the role and value of
selecting clear and effective approaches in the overall marketing process and strategy for the
company or organization. The discussion begins by considering examples of particular
strategies as a means of maintaining or increasing the firm’s market position. This leads into a
discussion of the implications for the introduction of related strategies for the firm and the
industry.
Teaching Objectives
To stimulate students to think about the critical issues, pro and con, for a firm when it
moves toward adoption of a market-oriented strategy.
To consider and reinforce various points from the marketing environment before
proceeding with specific strategy plans and programs
balanced strategic position within the industry.
Discussion
INTRODUCTION
In the years following the energy crises of the 1970s, our style of living has changed
considerably. Most businesses today are forced to deal strategically with a global world in
and give those customers what they want. These firms recognize that customers choose one
product or service over another for a very simple reason: They believe it’s a better value than
they could expect to get from the alternatives. Among the more successful endeavors in this
area are firms that recognize the consumer’s desire for value and high quality products and
to follow accepted accounting principles, with relatively uniform descriptions of financial
goals and financial measurements, few firms have ever moved toward a similar acceptance of
strategy development rules. If firms really believed in the concepts of customer value creation
and incorporated them into their corporate philosophies, there would be far fewer business
powerful because superior customer value is the best leading indicator of market share and
competitiveness. And, market share and competitiveness in turn drive the achievement of
long-term financial goals such as profitability, growth, and shareholder value.
Many corporations, including General Electric, AT&T, and others, have developed
that one product offers better value than another. This understanding is the most important
objective of a customer value analysis.
The factors that contribute to quality in the customer’s mind are not mysteries. Customers can
readily tell a researcher what the critical value factors are to him or her. A customer value
and a market-perceived price profile. The former summarizes the aspects of the marketplace
that are usually easiest to change to improve the business. In many markets, market-perceived
price may be a greater driver of customer decisions than market-perceived quality; however,
misconceptions.
The process of creating a market-perceived quality profile is relatively simple. Here are the
steps:
1. Ask people in the targeted market, both the firm’s customers and those of the
each business on each competing factor.
5. Multiply each business’s score on each factor by the weight of that factor, and
add the results to get an overall customer satisfaction score.
Results of the market-perceived quality profile: