Chapter 2
COMPANY AND MARKETING STRATEGY:
PARTNERING TO BUILD CUSTOMER
ENGAGEMENT, VALUE, AND RELATIONSHIPS
MARKETING STARTER: CHAPTER 2
Rolex: Building Brand Equity through a Customer-driven Marketing Mix
Synopsis
Rolex has become an outward expression of exclusiveness. Rolex pursues a premium pricing policy and sets its
prices with little regard to the competition, setting instead the price that others follow. Rolex uses a number of
marketing communication tools to effectively convey its positioning strategy, like print advertising in upmarket
publications, sponsorships, testimonials, and endorsements of sports that are generally considered upscale.
The company has also reacted to its rivals’ strategy to target a younger audience by sponsoring more current
testimonials in sports. With similar goals in mind, in 2013 Rolex created a page on Facebook and launched a
raft of digital content. Rolex adapted its marketing mix strategy by launching its Tudor brand to compete within
the accessible luxury market and also target a younger audience.
Discussion Objective
A brief discussion of the Rolex story will help to solidify the importance of creating a company-wide 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, Rolex provides a great example of how
companies are taking new directions in building customer relationships and brand community. Rolex has almost
always focused on the brand experience. In the early years, it built the brand’s image through testimonials. Now,
it focuses a sizable portion of its marketing efforts on a younger, more digital audience.
Starting the Discussion
To make the chapter-opening Rolex story more personally relevant to the class, begin by asking, “How many of
you own a Rolex or Tudor watch? Has Rolex changed its offerings in recent years? In what way?” After a brief
opening discussion, go online with students to explore Rolex’s website (http://www.rolex.com).
Direct the discussion using the following questions. As always, keep the discussion moving with plenty of
student input.
Discussion Questions
1. What is Rolex really selling? What are customers really buying? How and how deeply do customers
relate to the Rolex brand? (Rolex sells a lot more than just watches; they are buying a brand experience.
Ask students what that a luxury brand experience seems like to them.)
2. If you worked as a Rolex operations manager, financial analyst, IT specialist, or human resources
manager, why would it be important for you to understand its marketing strategy? This question digs into
the relationship between corporate strategy and marketing strategy, and marketing’s role in the broader
company strategy. Non-marketing students often ask, “Why do I need to understand marketing?” The
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 story relate to what comes later in the chapter? (This question 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 organization’s overall strategic planning, which guides marketing strategy and planning.
Next, we discuss how marketing partners work 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 here
1. Explain company-wide 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 value-driven marketing strategy and mix and the
forces that influence them.
5. List the marketing management functions, including the elements of a marketing
plan, and discuss the importance of measuring and managing marketing return on
investment.
CHAPTER OUTLINE
p. 62 INTRODUCTION
Rolex began by positioning itself in terms of its unmatched
precision. By association with distinguished pioneers, it
came to be associated with achievement, robustness, and
reliability as well. It has become an outward expression of
exclusiveness and cultivates this through its limited network
of fine jewelry stores.
It pursues a premium pricing policy and sets its prices with
little regard to the competition, setting instead the price that
others follow. Consumers are willing to pay the high prices
set by the company even during an economic downturn,
p. 63
Photo: Rolex
when other brands began discounting their watches.
In response to competition from large global conglomerates,
Rolex targeted a younger audience with a customer-driven
marketing mix in concert with constant innovation.
Assignments, Resources
Use Small Group Assignment 1 here
Use Individual Assignment 1 here
Opening Vignette Questions
1. Discuss Rolex marketing strategy in terms of
customer value. What is inherently better about
the current Rolex marketing from the customer’s
point of view?
2. For a while, Rolex was in danger of being
outperformed by global luxury conglomerates.
Based on your experience and perception, has
the company maintained its position? Why or
why not?
3. What comes next for Rolex in the 21st century?
What new marketing strategies might the
company develop to remain fresh and relevant?
p. 64
PPT 2-3
PPT 2-4
PPT 2-5
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
Learning Objective
1
p. 64
Key Term:
Strategic planning
p. 65
Figure 2.1:
Steps in Strategic
Planning
decides what 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 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 a business strategy—i.e., flanker movement
for flanker brands).
p. 64
PPT 2-6
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, consistent with the
market environment, based on the company’s distinctive
competencies, and motivating.
p. 65
Key Term: Mission
statement
p. 65
Table 2.1: Product-
versus
Market-Oriented
Business
Definitions
Assignments, Resources
Use Critical Thinking Exercise 2-8 here
p. 66
PPT 2-7
p. 66
PPT 2-8
PPT 2-9
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.
p. 66
Photo: CVS Health
Learning Objective
2
p. 67
Key Term: Business
portfolio
Assignments, Resources
Use Real Marketing 2.1 here
Use Additional Project 1 here
Use Think-Pair-Share 1 here
p. 67
p. 69
PPT 2-10
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 first step in business portfolio analysis is to identify the
key businesses that make up the company, the strategic
business units (SBUs). An SBU can be a company division,
a product line within a division, or a single product or
brand.
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.
p. 67
Key Terms:
Portfolio analysis
p. 69
PPT 2-11
PPT 2-12
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
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.
Key Term:
Growth-share
matrix
p. 69
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 prior to 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. 70
PPT 2-13
p. 70
PPT 2-14
PPT 2-15
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
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 the product.
Market development involves identifying and
developing new markets for its current products.
Product development involves offering modified or
new products to current markets.
Diversification involves a company starting up or
buying businesses outside of its current products and
markets.
p. 70
Photo: GE
p. 71
Figure 2.3: The
Product/Market
Expansion Grid
p. 70
Key Term:
Product/market
expansion grid
p. 71
Key Terms: Market
penetration, market
development,
product
development,
diversification
p. 71
Ad: Under Armour
PPT 2-16 Companies must also develop strategies for downsizing
their businesses. The company must carefully prune,
harvest, or divest brands or businesses that no longer fit its
overall strategy or are unprofitable.
Review Learning Objective 2: Discuss how to design
business portfolios and develop growth strategies.