Chapter 22 – Pulling It All Together: The Strategic Marketing Process
22-1
CHAPTER CONTENTS
PAGE
POWERPOINT RESOURCES TO USE WITH LECTURES …………………………………… 22-2
LEARNING OBJECTIVES (LO) ……………………………………………………………………………. 22-4
KEY TERMS ………………………………………………………………………………………………………….. 22-4
LECTURE NOTES
• Chapter Opener: Strategic Marketing Helps General Mills Adapt to New Tastes! ….. 22-5
• Marketing Basics: Doing What Works and Allocating Resources (LO 22-1) ………… 22-7
• The Planning Phase of the Strategic Marketing Process (LO 22-2; LO 22-3) ………. 22-12
• The Implementation Phase of the Strategic Marketing Process (LO 22-4;
LO 22-5) …………………………………………………………………………………………………….. 22-23
• The Evaluation Phase of the Strategic Marketing Process (LO 22-6) …………………… 22-31
APPLYING MARKETING KNOWLEDGE …………………………………………………………… 22-38
BUILDING YOUR MARKETING PLAN ………………………………………………………………. 22-41
VIDEO CASE (VC)
• VC-22: General Mills Warm Delights™: Indulgent, Delicious, and Gooey! ………….. 22-42
APPENDIX D CASE (D)
• D-22: Naked® Juice: Strategy for Growth ………………………………………………………… 22-46
IN-CLASS ACTIVITY (ICA)
• ICA 22-1: How Far Can General Mills Go with Line and Brand Extensions? ………. 22-49
CONNECT APPLICATION EXERCISES ………………………………………………22-54
• Geely – Porter’s Generic Business Strategies Case Analysis
• Synergy Analysis Click and Drag*
• Strategic Marketing Helps General Mills Adapt to New Tastes! Video Case
*Note: An alternate version of each Click and Drag exercise is available in Connect for students with
accessibility needs.
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POWERPOINT RESOURCES TO USE WITH LECTURES
PowerPoint
Textbook Figures Slide
Figure 22-1 A sales response function shows the impact on sales at various levels of
marketing effort on annual sales revenue ………………………………………………………….. 22-7
Figure 22-2 The actions in the strategic marketing process are supported and directed by
detailed reports, studies, and memos ……………………………………………………………….. 22-9
Figure 22-3 Porter’s four generic business strategies …………………………………………………………… 22-14
Figure 22-4 Market-product grids show alternative strategies for a lawn mower manufacturer …. 22-17
Figure 22-5 An ideal merger for Great States to obtain full market-product coverage ………………. 22-19
Figure 22-6 The organization of a business unit in a typical consumer packaged goods firm,
shows two product or brand groups ………………………………………………………………… 22-35
Figure 22-7 The evaluation phase of the strategic marketing process ties results and actions
to goals using marketing metrics and dashboards………………………………………………. 22-39
Figure 22-8 The marketing dashboard for the distribution channels for General Mills’ Warm
Delights Minis (WDM) ………………………………………………………………………………….. 22-43
Figure 22–8A Monthly unit sales by channel (#) ………………………………………………………………… 22–44
Figure 22–8B Stores carrying Warm Delights Minis by channel (%) …………………………………….. 22–45
Figure 22–8C Nov/Dec total sales revenues by channel (%) ………………………………………………… 22–46
Figure 22–8D Average number of flavors carried by channel (#) ………………………………………….. 22–47
Marketing Matters
Marketing Matters—Customer Value: A Test of Your Skills: Where Are the Synergies? ………….. 22-16
Marketing Matters—Entrepreneurship: Ask Disruptive Questions to Achieve Disruptive
Innovations ……………………………………………………………………………………………………………………… 22-24
Marketing Matters—Learning from Mistakes and Avoiding Traps on the Way to Blue Oceans ….. 22-31
Chapter 22 – Pulling It All Together: The Strategic Marketing Process
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POWERPOINT RESOURCES TO USE WITH LECTURES
PowerPoint
Slide
Web Links
22-1: General Mills Video ………………………………………………………………………………………………….. 22-4
22-2: Skunk Works Video ………………………………………………………………………………………………….. 22-5
22-3: Papa John’s Video ……………………………………………………………………………………………………. 22-21
22-4: F-35 Video ………………………………………………………………………………………………………………. 22-27
22-5: Warm Delights Video Case ……………………………………………………………………………………….. 22-48
In-Class Activity (ICA)
ICA 22-1: How Far Can General Mills Go with Line and Brand Extensions? …………………………… 22-54
Chapter 22 – Pulling It All Together: The Strategic Marketing Process
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LEARNING OBJECTIVES (LO)
After reading this chapter students should be able to:
LO 22-1: Explain how marketing managers allocate their limited resources.
LO 22-2: Describe Porter’s generic strategies and synergy analysis planning frameworks.
LO 22-3: Explain what makes an effective marketing plan.
LO 22-4: Use a time-based agenda and an action item list to conduct a meeting.
LO 22-5: Describe an organization’s marketing department and the role of a product manager.
LO 22-6: Explain the use of marketing ROI, metrics, and dashboards in evaluating marketing
programs.
KEY TERMS
action item list
market-based groupings
cost focus strategy
marketing ROI
cost leadership strategy
product line groupings
differentiation focus strategy
program champion
differentiation strategy
sales response function
functional groupings
share points
generic business strategy
staff positions
geographical groupings
synergy analysis
line positions
time-based agenda
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LECTURE NOTES
STRATEGIC MARKETING HELPS GENERAL MILLS ADAPT TO NEW
TASTES!
Both consumer tastes and expectations are changing for new products, particularly in the
supermarket. Consumers demand convenient, healthy, and good-tasting food.
• General Mills’ strategic marketing process – planning, implementation, and
evaluation – are essential and played an important role in developing new desert
called Warm Delights.
b. Vivian Callaway, VP at General Mills:
c. Callaway believes that:
• “Consumers often say one thing in marketing research studies and then…
• Do something else when facing a supermarket shelf.”
d. To overcome the marketing research problem, Callaway and her team ran
marketing experiments that involved:
• Putting a prototype dessert in a store. • Improving the prototype.
• Measuring the results. • Repeating the process.
e. The result:
f. The special packaging:
• Is based on the team’s research that…
• Showed extending the black microwavable bowl outside the edges of the
Warm Delights package…
• Communicated its cooking convenience to prospective buyers.
A. Planning for Even More Change.
• General Mill’ U.S. retail sales exceed $17 billion. While consumer tastes are
changing, an environmental scan shows how important a good strategic marketing
process is. Consider the following:
• Expense.
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– The launch of a new cereal typically costs up to $30 million.
– Usually involves replacing one of more than 300 competing breakfast
cereals already sitting on retailers’ shelves.
• Success Rate.
– Only one out of four brands “succeeds,” which…
– Is defined as maintaining distribution for three to four years…
– In the $9.5 billion U.S. ready-to–eat (RTE) cereal market, which…
– Has had flat or slightly declining sales in recent years.
• Market Trends.
– Following low-carbohydrate diets.
C. Creative Initiatives at Big G
• General Mills introduces over 300 new food products annually around the world.
• These products respond to consumers’ changing tastes.
• So, in light of these consumer trends and the competition it faces in the consumer
packaged foods industry, General Mills is offering consumers these new products:
a. Fiber One snack bars
b. Chex gluten-free mix
c. Nature Valley Protein granola
d. Trix with four colors (instead of six to eliminate artificial colors/flavors)
[Video 22-1: General Mills]
• The success or failure of these and other products develops”
a. Are related to the planning, implementation, and evaluation phases of…
b. The strategic marketing process General Mills uses.
[ICA 22-1: How Far Can General Mills Go with Line and Brand Extensions?]
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I. MARKETING BASICS: DOING WHAT WORKS
AND ALLOCATING RESOURCES [LO 22-1]
• Marketers continuously search for a competitive advantage, which is:
a. A unique strength relative to what competitors are doing now and…
b. What they are likely to do in the future.
• Marketers must then figure out how to exploit it, which involves:
a. Finding and using what works for their organization and industry.
b. Effectively allocating resources.
A. Finding and Using What Really Works
• Researchers conducted an in-depth analysis of 160 companies and over 200
management tools. Their findings:
a. There is no direct relationship between firms’ use of these techniques and
superior business performance.
b. There are four basic business practices that matter or “what really works.”
c. Firms with excellence in all four of these areas are likely to achieve superior
business performance.
d. Concluded that which of these basic practices a firm chooses to use is less
important than flawless execution of the ones it does use.
• Industry leaders such as Home Depot:
a. Do all four of the basic practices extremely well, not just two or three.
b. Are vigilant about continuing to do them well when conditions change.
• In contrast, Lululemon, Sears, and Groupon are struggling today to get these
basics right and regain their past success.
• Companies that stand out today in each of the four key business practices are:
a. Strategy: Devise and maintain a clearly stated, focused strategy
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b. Execution: Develop and maintain flawless operational execution
• Toyota is the best at revolutionizing the design and manufacture of autos.
• Its managers:
– Created the doctrine of kaizen, or continuous improvement.
– Is now used across the auto industry.
• Toyota launched a new program called “bundled development” that allows
suppliers to develop parts 3 or 4 years in advance.
c. Culture: Develop and maintain a performance-oriented culture
• For 6th year, Google was ranked number one on Fortune’s list of the 100
Best Companies to Work For.
• Its culture is based on several key principles:
– “Focus on the user and all else will follow.”
– “You can make money without doing evil.”
– “Great just isn’t good enough.”
• The performance result?
[Video 22-2: Skunk Works]
d. Structure: Build and maintain a fast, flexible, flat organization (Lockheed).
• Successful small organizations:
– Often grow into bureaucratic large ones with…
– Layers of managers and red tape that slow decision-making.
• Lockheed Martin’s Skunk Works:
– Delivers world-class aircraft with…
– Only a small team of engineers, designers, and machinists.
• Key guidelines Skunk Works has adopted:
• A firm:
a. Cannot allocate unlimited resources to achieving each of these practices.
b. must make choices on where its resources can give the greatest return.
B. Allocating Marketing Resources Using Sales Response Functions
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1. Maximizing Incremental Revenue Minus Incremental Cost.
a. Marketers should:
• Allocate the firm’s marketing, production, and financial resources to
markets and products.
• Calculate where the excess of incremental revenues over incremental costs
is greatest (see Chapter 13).
b. [Figure 22-1] illustrates the resource allocation principle that is inherent in
the sales response function.
• The annual marketing effort (expenses) is plotted on the horizontal axis.
– Advertising. – Direct marketing.
• The firm’s annual sales revenue is plotted on the vertical axis.
• As the annual marketing effort increases, so does sales revenue.
• The relationship is assumed to be S-shaped:
– Shows that an additional $1 million of marketing effort from
$3 million to $4 million (see Point A)…
• At the left end of the S-curve:
– The cost of marketing effort to gain new customers is high because…
– They must be made aware of the product.
• At the right end of the S-curve:
2. An Example of Resource Allocation.
a. Figure 22-1 shows the S-curve for a new General Mills product such as Very
Berry Cheerios.
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b. Assume that the sales response function in Figure 22-1 does not change
through time due to changing consumer tastes and incomes.
c. Point A shows the position of the firm in year 1, whereas Point B shows it
three years later in year 4.
d. General Mills wants to increase sales.
• Wants to launch new advertising and sales promotion actions.
e. Year 1:
• Increase in marketing effort from $3 million to $4 million = $1 million.
• Increase in sales revenue from $30 million to $50 million = $20 million.
f. Year 4:
• Increase in marketing effort from $6 million to $7 million = $1 million.
• Increase in sales revenue from $70 million to $73 million = $3 million.
• The ratio of incremental sales revenue to incremental marketing effort
= $3 million to $1 million = 3:1.
g. In summary:
• In Year 1: A dollar of extra marketing effort returned $20 in sales revenue,
whereas in year 4 it returned only $3 in sales.
• If no other expenses are incurred, it might make sense to spend $1 million
in Year 4 to gain $3 million in incremental sales revenue.
h. The essence of resource allocation is simple:
• Put incremental resources where the incremental returns are greatest over
the foreseeable future.
• Assess how scare resources are allocated among a broad portfolio of
strategic business units, products, and brands.
• However, since the recession some companies have preferred to retain
capital rather than invest in new products – called the capitalist’s dilemma.
22–11
3. Allocating Marketing Resources in Practice.
a. Share points: Is an analysis that:
• Uses percentage points of market share as the common basis of
comparison.
• Allocates marketing resources effectively for different product lines within
the same firm.
• Allows the firm to answer the question, “How much is it worth to increase
market share by another 1 (or more) percentage point?”
b. This analysis enables higher-level managers to make resource allocation
trade-offs among different kinds of business units the company owns.
c. To make these resource allocation decisions, marketers must estimate the:
• Market share for the product.
4. Resource Allocation and the Strategic Marketing Process.
a. Company resources are allocated effectively in the strategic marketing process
by converting marketing information into marketing actions.
b. [Figure 22-2] Summarizes the strategic marketing process from Chapter 2.
• The upper half of each box in highlights the actions involved in that part
of the strategic marketing process.
c. Marketing actions and the information needed to develop them overlap
throughout the three phases of the strategic marketing process.
d. Each phase has an output report:
Chapter 22 – Pulling It All Together: The Strategic Marketing Process
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e. The corrective action memos become feedback loops in that improve
decisions and actions in earlier phases of the strategic marketing process.
LEARNING REVIEW
22-1. What are the four basic practices “that really work”—that are characteristics of
industry-leading firms?
22-2. What is the significance of the S-shape of the sales response function in Figure 22-
1?
II. THE PLANNING PHASE OF
THE STRATEGIC MARKETING PROCESS
Four aspects of the strategic marketing process are:
• The vital importance of metrics in marketing planning.
• The varieties of marketing plans.
• Marketing planning frameworks that have been proven useful.
• Some key marketing planning and strategy lessons.
A. The Use of Marketing Metrics in Marketing Planning
• Planners have a tongue-in–cheek truism:
a. “If you don’t know where you’re going, any road will get you there.”
b. In making marketing plans, the “road” chosen:
• Is really the quantitative goal plus…
• The quantitative metric used to measure whether the goal is achieved.
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• Measuring the effectiveness of marketing activities has become a central focus in
many organizations, which involves defining:
a. “Where the organization is going”—the quantitative goals.
b. “Whether it is really getting there”—the quantitative marketing metrics used
to measure actual performance.
c. This focus emphasizes:
• The need for data-driven decision making and…
• The importance of choosing and displaying the right marketing metrics in
marketing dashboards…
• So managers:
• Most firms stress innovation to help achieve growth.
a. Marketing work closely with R&D and operations to…
b. Complete successful innovation projects.
• Firms use two different kinds of innovation metrics:
a. Output metrics.
• The revenue growth from new products or services (16%).
• Customer satisfaction with new products or services (13%).
b. Input metrics.
• Generally, it is far easier to measure marketing inputs rather than outputs.
a. Measuring “the number of R&D projects” (an input) is far easier than…
b. Measuring “customer satisfaction with new products or services” (an output).
• But as shown in Figure 22-2, the evaluation phase of the strategic marketing
process involves comparing actual results—output metrics—with the goals set.
• Where possible, marketers prefer to use effective output metrics if they are
available.
Chapter 22 – Pulling It All Together: The Strategic Marketing Process
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B. The Variety of Marketing Plans
• The planning phase of the strategic marketing process usually results in a
marketing plan that sets the direction for the marketing activities of the firm.
• A marketing plan:
a. Is the heart of a business plan.
b. Varies with the length of the planning period, the purpose, and the audience.
1. Long-Range Marketing Plans.
a. Cover marketing activities from 2 to 5 years into the future.
2. Annual Marketing Plans.
a. Are developed by a marketing or product manager in a consumer products firm.
b. Deal with marketing goals and strategies for a product, product line, or entire
firm for a single year.
C. Marketing Planning Frameworks: The Search for Growth [LO 22-2]
• Marketing planning for a firm with many products competing in many markets is
a complex process.
• These planning efforts find the means for increased growth in sales and profits.
• Two techniques help marketers make important resource allocation decisions:
(1) Porter’s generic business strategies and (2) synergy analysis.
1. Porter’s Generic Business Strategies.
a. [Figure 22-3] Michael E. Porter has developed a framework that identifies
four basic, or “generic,” strategies.
b. A generic business strategy:
Chapter 22 – Pulling It All Together: The Strategic Marketing Process
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c. The columns in the framework identify the two fundamental alternatives a
firm can use in seeking a competitive advantage:
• Become the low-cost producer in the markets within which it competes
or…
• Develop points of difference in its product offerings or marketing
programs to differentiate it from competitors.
d. The rows in the framework identify the competitive scope:
e. The columns and rows:
• Result in four generic business strategies, any one of which can…
• Provide a competitive advantage among similar strategic business units in
the same industry.
f. A cost leadership strategy (cell 1—Campbell’s Soup).
• Focuses on:
– Reducing expenses and, in turn…
– Lowering product prices while…
– Targeting a broad array of market segments.
• Marketers can:
g. A differentiation strategy (cell 2—General Mills).
• Requires products to have significant points of difference in:
– Product offerings. – Advanced technology.
– Brand image. – Superior service.
– Higher quality.
h. A cost focus strategy (cell 3—IKEA).
• Involves controlling expenses while…
• Lowers product prices targeted at a narrow range of market segments.
Chapter 22 – Pulling It All Together: The Strategic Marketing Process
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i. A differentiation focus strategy (cell 4—Chobani Greek Yogurt).
• Requires products to have significant points of difference.
• Targets one or only a few market segments.
j. These strategies also form the foundation for Michael Porter’s theory about
what makes a nation’s industries successful, as discussed in Chapter 7.
2. Synergy Analysis.
a. Synergy analysis:
• Seeks market-product opportunities by…
• Finding the optimum balance of efficiencies between marketing and
R&D-manufacturing/production.
b. Synergy analysis blends diversification analysis from Chapter 2 and the
market-product grid framework from Chapter 9.
c. Two kinds of synergy are critical in developing corporate and marketing
strategies: (1) marketing synergy and (2) R&D–manufacturing synergy.
MARKETING MATTERS
Customer Value: A Test of Your Skills—Where Are the Synergies?
Great States Corp. markets a line of nonpowered, powered walking, and powered
riding lawn mowers. A market-product grid for the business is shown below. It distributes
nonpowered mowers in all three market segments, but powered and walking mowers are
distributed only in suburban markets. Powered riding mowers are not offered for any of the
three markets. Here are the strategy dilemmas:
• Where are the marketing synergies (efficiencies)?
• Where are the R&D-manufacturing synergies (efficiencies)?
• What would a market-product grid look like for an ideal company that Great States
could merge with in order to achieve both marketing and R&D-manufacturing
synergies (efficiencies)?
For answers to these questions, study both the figure below and Figure 22-4.
Chapter 22 – Pulling It All Together: The Strategic Marketing Process
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d. Marketing and manufacturing synergies can also come about through mergers
and acquisitions that…
• Provide greater customer value by…
• Performing organizational functions more efficiently.
e. You develop a market–product grid to analyze future opportunities and
identify three major segments in the consumer market based on geography:
f. The product groupings or clusters are:
• Nonpowered mowers. • Powered riding mowers.
• Powered walking mowers.
g. Recall that a market-product grid helps identify important trade-offs in the
strategic marketing process.
• The important marketing synergies, or efficiencies, run horizontally across
the rows.
• The important R&D–manufacturing synergies, or efficiencies, run
vertically down the columns.
h. [Figure 22-4] The synergy effects for the five market-product combinations
are:
• Market-product concentration.
R&D–manufacturing.
• Market specialization.
– The firm gains marketing synergy through providing a complete
product line.
– R&D–manufacturing have the difficulty of developing and producing
three different products.
• Product specialization.
– The firm gains R&D–manufacturing synergy through producing only a
nonpowered lawn mower.
Chapter 22 – Pulling It All Together: The Strategic Marketing Process
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• Selective specialization.
– The firm doesn’t get either marketing or R&D–manufacturing
synergies…
– Because of the uniqueness of the market-product combinations.
• Full coverage.
i. [Figure 22-5] Shows the ideal merger partner, which follow a full-coverage
strategy.
• This would give the maximum potential synergies—if the merged
companies’ resources were not spread too thin.
LEARNING REVIEW
22-3. What is the difference between an input metric and an output metric?
22-4. Describe Porter’s four generic business strategies.
Answer: A generic business strategy is one that can be adopted by any firm, regardless
of the product or industry involved to achieve a competitive advantage. Porter’s four
Chapter 22 – Pulling It All Together: The Strategic Marketing Process
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LEARNING REVIEW CONTINUED
22-5. Where do (a) marketing synergies and (b) R&D–manufacturing synergies appear
when using the synergy analysis framework?
Answer: Synergy analysis seeks market-product opportunities by finding the optimum
D. Some Marketing Planning and Strategy Lessons [LO 22-3]
Applying market-product frameworks require a great deal of managerial judgment.
1. Guidelines for an Effective Marketing Plan.
a. “Plans are nothing; planning is everything.”
b. Careful planning focuses an organization’s efforts and leads to success.
c. The plans themselves, which change with events, are often secondary.
d. Effective planning and plans have:
• Identifiable objectives.
e. Some guidelines in developing effective marketing plans are:
• Set measurable, achievable goals. Goals should be:
– Quantified and measurable in terms of:
* What is to be accomplished.
• Use a base of facts and valid assumptions.
– The more a marketing plan is based on facts and valid assumptions…
Chapter 22 – Pulling It All Together: The Strategic Marketing Process
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• Use simple, but clear and specific, plans.
– People at all levels in the firm must know what, when, and how they
are to accomplish their tasks.
– Involve people with the right skills and experience in the planning.
• Have complete and feasible plans. Marketing plans must:
• Make plans controllable and flexible. Marketing plan results must:
– Be compared with planned targets.
– Allow replanning—the flexibility to update the original plans.
• Find the right person to implement the plans. But make sure that person is
2. Problems in Marketing Planning and Strategy.
a. Problems occur during the planning phase of the strategic marketing process:
• Bad news is filtered out as information goes up each organizational level
(see Chapter 2) to give top management a very rosy picture.
b. Other problems that emerge from the strategic marketing process include:
• Plans may be based on very poor assumptions about environmental
forces, especially changing economic conditions and competitors’ actions.
[Video 22-3: Papa John’s Video]
• Too much time and effort are spent on data collection and writing plans
that are too complex to implement.
• Line operating managers often feel no sense of ownership in implementing
the plans. The solution: Assign more planning activities to those line
managers responsible for actually carrying them out.