Chapter 2: Developing a Marketing Plan and Marketing Strategies ...
Chapter 2: Developing a Marketing Plan and Marketing Strategies Levels of Strategic Planning in Corporations • Corporate level planning is done by the company’s top management and focuses on the overall direction of the entire company • Corporate level planning focuses on the long term direction of the company, which is updated regularly to respond to change in the business environment • Large companies that operate several business lines may see each of their strategic business units (SBU’s) develop strategic plans for their products for their products and the markets they serve • An SBU is a division of the company that can be managed somewhat independently from other divisions since it markets a specific set of products to a clearly defined group of customers • Marketing Planning Process: a set of steps a marketer goes through to develop a marketing plan The Marketing Plan • A marketing plan is a written document composed of an analysis of the current marketing situation, opportunities and threats for the firm, marketing objectives and strategies specified in terms of the four Ps, action programs, and projected or proforma income (and other financial) statements • Planning Phase: when marketing executives and other top managers define the mission and objectives of the business, and evaluate the situations by assessing how various players, both inside and outside the organization, affect the firm’s potential for success • Implementing Phase: where marketing managers identify and evaluate different opportunities by engaging in a process known as segmentation, targeting, and positioning. They then develop and implement the marketing mix by using the four Ps. • Control Phase: the part of the strategic marketing planning process when managers evaluate the performance of the marketing strategy and take any necessary corrective actions. Step 1: Define the Business Mission and Objectives • Mission Statement: a broad description of a firm’s objectives and the scope of activities it plans to undertake; attempts to answer two main questions: What type of business is it? and What does it need to do to accomplish its goals and objectives. • These fundamental business issues must be answered at the highest corporate levels before marketing executives can get involved • Another key goal or objective often embedded in a mission statement is how the firm is building a sustainable competitive advantage Step 2: Conduct a Situation Analysis • Situation Analysis: is the second step in a marketing plan; uses a SWOT analysis that assesses both the internal environment with regard to its Strengths and Weaknesses and the external environment in terms of its Opportunities and Threats. • Additionally, the firms should assess the opportunities and uncertainties of the marketplace due to changes in cultural, demographic, social, technological, economic, and political forces (CDSTEP) • A SWOT analysis is designed to help the firm determine areas in which its strong and can compete effectively and areas where it is weak and vulnerable to competitive attacks • Enables the firms to understand where it has sustainable competitive advantage or unique advantage that cannot be easily copied by competitors and how it can leverage those advantages in response to new opportunities arising from changes in its external environment Step 3: Identify and Evaluate Opportunities by Using STP (Segmentation, Targeting, and Postitioning) • STP: the processes of segmentation, targeting, and positioning that firms use to identify and evaluate opportunities for increasing sales and profits
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With STP, the firm must first understand customer needs and subgroups or segments, determine which of those segments it should pursue or target, and finally decide how it should position its products and services to best meet the needs of those chosen targets
Segmentation: • Many types of customers appear to any market, and most firms cannot satisfy everyone’s needs. • Market Segment: a group of consumers who respond similarly to a firm’s marketing efforts • Market Segmentation: the process of dividing the market into distinct groups of customers where each individual group has similar needs, wants, or characteristics – who therefore might appreciate products or services geared especially for them in similar ways • Firms may also segment consumers based on benefits sought or sociocultural factors Targeting: • Target Marketing/ Targeting: the process of evaluating the attractiveness of various segments and then deciding which to pursue as a market • After identifying its target segments, a firm must evaluate each of its strategic opportunities • Firms typically are most successful when they focus on these opportunities that build on their strengths relative to those of their competition Positioning: • Positioning is what consumers think and feel about a brand or product, marketers try very hard through their various marketing efforts to shape consumers’ perceptions regarding their brand or product. • Market Positioning: involves the process of defining the marketing mix variable so that target customers have a clear, distinct, desirable understanding of what the product does or represents in comprising with competing products Set Marketing Objectives: • Normally the marketing manager is responsible for setting the specific marketing objectives for the product or brand over the life of the plan. • These objectives may include market share, revenues and profitability targets, unit sales volume, and brand awareness. Step 4: Implement Marketing Mix and Allocate Resources • In the fourth step of the planning process, marketers implement the marketing mix – product, price, promotion, and place for each product and service on the basis of what it believes its target markets will value • Each element of the four Ps must be fully integrated to achieve a coherent strategy. Product and Value Creation: • The key to the success of any marketing program is the creation of value, firms attempt to develop products and services that customers perceive as valuable enough to buy Price and Value for Money: • Value based marketing requires that firms change a price that customers perceive as giving them a good value for their products and services they receive. • Marketers should base price on the value that the customers perceives Place and Value Delivery:
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The firm must be able to, after it has created value through a product and/ or service, make the product or service readily accessible when and where the customer wants it
Promotion and Value Communication: • Marketers communicate the value of their offering, or the value proposition, to their customers through a variety of media, including TV, radio, magazines, buses, trains, blimps, sales promotion, publicity, the sales force, and the Internet. • Marketers therefore must consider which are the most efficient and effective methods to communicate with their customers, which goes back to understanding customers, the value created, and the message being communicated. • In addition to developing the four Ps and allocating resources, marketing managers must develop schedules: timelines for each activity and the personnel responsible for the respective activity to avoid bottlenecks and ensure smooth and timely implementation of the marketing mix activities. • Marketers must design the organization that will be responsible for putting the plan into action • The marketing organization is usually responsible for the daytoday operational decisions involved in executing the plan. Step 5: Evaluate Performance by Using Marketing Metrics • A metric is a measuring system that quantifies a trend, dynamic, or characteristic. • Metrics are used to explain why things happen and to project the future Who is Accountable for Performance? • At each level of the organization, the business unit and its managers should be held accountable for only the revenues, expenses, and profits they can control • Performance evaluations are used to pinpoint problem areas Performance Objectives and Metrics: • One approach is to compare a firm’s performance over time or to competing firms, using common financial metrics such as sales and profits • Another method is to view the firm’s products or services as a portfolio Financial Performance Metrics: • Some commonly used metrics to assess performance include revenues, or sales, and profits • A firm may wish to measure the relative level of sales and profits • The metrics used to evaluate firms vary depending on (1) the level of the organization at which the decision is made and (2) the resources the manager controls. Social Responsibility Performance Metrics • As Canadian companies become more convinced of the importance of social responsibility, we will likely see an increasing number of companies report corporate social responsibility metrics. Strategic Planning Is Not Sequential • Actual planning processes can move back and forth among these steps: defining the business mission, perform the situation analysis, identify opportunities, evaluate alternatives, set objectives, allocate resources, develop the implementation plan, and evaluate their performance and make adjustments Portfolio Analysis:
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In a portfolio analysis management evaluates the firm’s various products and business – its “portfolio” – and allocates resources according to which products are expected to be the most profitable for the firm in the future Strategic Business Unit (SBU): a division of the company that can be managed somewhat independently from other divisions from other divisions since it markets a specific set of products to a clearly defined group of customers. Product line: a group of products that consumers may use together or perceive as similar in some ways. Relative Market Shares: a measure of the product’s strength in a particular market, defined as the sales of the focal product divided by the sales achieved by the largest firm in the industry Market Growth Rate: the annual rate of growth of the specific market in which the product competes
Growth Strategies Market Penetration: • Market Penetration Strategy: a growth strategy that employs the existing marketing mix and focuses the firm’s effort on existing customers • Might be achieved by encouraging current customers to patronize the firm more often or buy more merchandise on each visit or by attracting new customers from within the firm’s existing target market Market Development: • Market Development Strategy: a growth strategy that employs the existing marketing offering to reach new market segments, whether domestic or international or segments not currently served by the firm • International expansion is generally riskier because firms must deal with differences in government regulations, cultural traditions, supply chain considerations, and language Product Development: • Product Development Strategy: a growth strategy that offers a new product or services to a firm’s current target market Diversification: • Diversification Strategy: a growth strategy whereby a firm introduces a new product or services to a market segment that it does not currently serve • Diversification opportunities may be either related or unrelated • In a related diversification opportunity, the current target market and/ or marketing mix shares something in common with the new opportunity • In an unrelated diversification, the new business lacks any common elements with the present business • Downsizing: exiting markets, reducing product portfolios, or closing certain businesses or store or plant location Marketing Strategy and Sustainable Competitive Advantage • Marketing Strategy: identifies a firm’s target market(s), a related marketing mix – the four Ps, and the basis upon which the firms plan to build a sustainable competitive advantage. • Sustainable Competitive Advantage: something the firm can persistently do better than its competitors that is not easily copied and thus can be maintained over a long period of time Building a Sustainable Competitive Advantage: • Establishing a competitive advantage means that the firm, in effect, builds a wall around its position in the market
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When the wall is high it will be difficult for competitors outside the wall to enter the market and compete for the firm’s target customers Thus, establishing a sustainable competitive advantage is key to long – term financial performance Four overarching strategies that focus on aspects of the marketing mix to create and deliver value and to develop sustainable competitive advantages Customer Excellence: involves a focus on retaining loyal customers and excellent customer service Operational Excellence: involves a focus on efficient operations and excellent supply chain management Product Excellence: involves focusing on achieving highquality products and effective branding and positioning Locational Excellence: involves focusing on food physical location and good internet presence
Customer Excellence: • Retaining loyal customers: o Loyalty means more than simply preferring to purchase from one firm industry instead of another, it means that customers are reluctant to patronize competitive firms o Several methods to build customer loyalty – developing a clear and precise positioning strategy, and achieving customer loyalty creates emotional attachment through loyalty programs o With such programs, companies can combine membership data with customer purchase data to develop a deeper understanding of the customer o Companies use this data to tailor their offering to better meet the needs of their loyal customers • Customer service: o Firms that offer good customer service must instill its importance in their employees over a long period of time so that it becomes part of the organizational culture o Once a marketer has earned a good service reputation, it can sustain this advantage for a long time because competitor is hard presses to develop a comparable reputation Operational Excellence: • Efficient Operations: o All marketers strive for efficient operations to get their customers the merchandise they want, when they want it, in the required quantities, and at a lower delivered cost than that of competitors. • Excellent Supply Chain Management and Strong Supplier Relations: o Firms with strong relationships may gain exclusive right to (1) sell merchandise in a particular region, (2) obtain special terms of purchase that are not available to competitors, or (3) receive popular merchandise that may be in short supply • Human Resource Management: o Knowledgeable and skilled employees committed to the firm’s objectives are critical assets that support the success of companies such as WestJet and Delta Hotels Product Excellence: • Others have been able to maintain their sustainable competitive advantage by investing in their brand itself; positioning their product or service by using a clear, distinctive brand image; and constantly reinforcing that image through their merchandise, service, and promotion. Locational Excellence: • A competitive advantage based on location is sustainable because it is not easily duplicated Multiple Sources of Advantage • Firms required multiple approaches to build a wall around their position that stands as high as possible
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With STP, the firm must first understand customer needs and subgroups or segments, determine which of those segments it should pursue or target, and finally decide how it should position its products and services to best meet the needs of those chosen targets
Segmentation: • Many types of customers appear to any market, and most firms cannot satisfy everyone’s needs. • Market Segment: a group of consumers who respond similarly to a firm’s marketing efforts • Market Segmentation: the process of dividing the market into distinct groups of customers where each individual group has similar needs, wants, or characteristics – who therefore might appreciate products or services geared especially for them in similar ways • Firms may also segment consumers based on benefits sought or sociocultural factors Targeting: • Target Marketing/ Targeting: the process of evaluating the attractiveness of various segments and then deciding which to pursue as a market • After identifying its target segments, a firm must evaluate each of its strategic opportunities • Firms typically are most successful when they focus on these opportunities that build on their strengths relative to those of their competition Positioning: • Positioning is what consumers think and feel about a brand or product, marketers try very hard through their various marketing efforts to shape consumers’ perceptions regarding their brand or product. • Market Positioning: involves the process of defining the marketing mix variable so that target customers have a clear, distinct, desirable understanding of what the product does or represents in comprising with competing products Set Marketing Objectives: • Normally the marketing manager is responsible for setting the specific marketing objectives for the product or brand over the life of the plan. • These objectives may include market share, revenues and profitability targets, unit sales volume, and brand awareness. Step 4: Implement Marketing Mix and Allocate Resources • In the fourth step of the planning process, marketers implement the marketing mix – product, price, promotion, and place for each product and service on the basis of what it believes its target markets will value • Each element of the four Ps must be fully integrated to achieve a coherent strategy. Product and Value Creation: • The key to the success of any marketing program is the creation of value, firms attempt to develop products and services that customers perceive as valuable enough to buy Price and Value for Money: • Value based marketing requires that firms change a price that customers perceive as giving them a good value for their products and services they receive. • Marketers should base price on the value that the customers perceives Place and Value Delivery:
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The firm must be able to, after it has created value through a product and/ or service, make the product or service readily accessible when and where the customer wants it
Promotion and Value Communication: • Marketers communicate the value of their offering, or the value proposition, to their customers through a variety of media, including TV, radio, magazines, buses, trains, blimps, sales promotion, publicity, the sales force, and the Internet. • Marketers therefore must consider which are the most efficient and effective methods to communicate with their customers, which goes back to understanding customers, the value created, and the message being communicated. • In addition to developing the four Ps and allocating resources, marketing managers must develop schedules: timelines for each activity and the personnel responsible for the respective activity to avoid bottlenecks and ensure smooth and timely implementation of the marketing mix activities. • Marketers must design the organization that will be responsible for putting the plan into action • The marketing organization is usually responsible for the daytoday operational decisions involved in executing the plan. Step 5: Evaluate Performance by Using Marketing Metrics • A metric is a measuring system that quantifies a trend, dynamic, or characteristic. • Metrics are used to explain why things happen and to project the future Who is Accountable for Performance? • At each level of the organization, the business unit and its managers should be held accountable for only the revenues, expenses, and profits they can control • Performance evaluations are used to pinpoint problem areas Performance Objectives and Metrics: • One approach is to compare a firm’s performance over time or to competing firms, using common financial metrics such as sales and profits • Another method is to view the firm’s products or services as a portfolio Financial Performance Metrics: • Some commonly used metrics to assess performance include revenues, or sales, and profits • A firm may wish to measure the relative level of sales and profits • The metrics used to evaluate firms vary depending on (1) the level of the organization at which the decision is made and (2) the resources the manager controls. Social Responsibility Performance Metrics • As Canadian companies become more convinced of the importance of social responsibility, we will likely see an increasing number of companies report corporate social responsibility metrics. Strategic Planning Is Not Sequential • Actual planning processes can move back and forth among these steps: defining the business mission, perform the situation analysis, identify opportunities, evaluate alternatives, set objectives, allocate resources, develop the implementation plan, and evaluate their performance and make adjustments Portfolio Analysis:
• • • • •
In a portfolio analysis management evaluates the firm’s various products and business – its “portfolio” – and allocates resources according to which products are expected to be the most profitable for the firm in the future Strategic Business Unit (SBU): a division of the company that can be managed somewhat independently from other divisions from other divisions since it markets a specific set of products to a clearly defined group of customers. Product line: a group of products that consumers may use together or perceive as similar in some ways. Relative Market Shares: a measure of the product’s strength in a particular market, defined as the sales of the focal product divided by the sales achieved by the largest firm in the industry Market Growth Rate: the annual rate of growth of the specific market in which the product competes
Growth Strategies Market Penetration: • Market Penetration Strategy: a growth strategy that employs the existing marketing mix and focuses the firm’s effort on existing customers • Might be achieved by encouraging current customers to patronize the firm more often or buy more merchandise on each visit or by attracting new customers from within the firm’s existing target market Market Development: • Market Development Strategy: a growth strategy that employs the existing marketing offering to reach new market segments, whether domestic or international or segments not currently served by the firm • International expansion is generally riskier because firms must deal with differences in government regulations, cultural traditions, supply chain considerations, and language Product Development: • Product Development Strategy: a growth strategy that offers a new product or services to a firm’s current target market Diversification: • Diversification Strategy: a growth strategy whereby a firm introduces a new product or services to a market segment that it does not currently serve • Diversification opportunities may be either related or unrelated • In a related diversification opportunity, the current target market and/ or marketing mix shares something in common with the new opportunity • In an unrelated diversification, the new business lacks any common elements with the present business • Downsizing: exiting markets, reducing product portfolios, or closing certain businesses or store or plant location Marketing Strategy and Sustainable Competitive Advantage • Marketing Strategy: identifies a firm’s target market(s), a related marketing mix – the four Ps, and the basis upon which the firms plan to build a sustainable competitive advantage. • Sustainable Competitive Advantage: something the firm can persistently do better than its competitors that is not easily copied and thus can be maintained over a long period of time Building a Sustainable Competitive Advantage: • Establishing a competitive advantage means that the firm, in effect, builds a wall around its position in the market
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When the wall is high it will be difficult for competitors outside the wall to enter the market and compete for the firm’s target customers Thus, establishing a sustainable competitive advantage is key to long – term financial performance Four overarching strategies that focus on aspects of the marketing mix to create and deliver value and to develop sustainable competitive advantages Customer Excellence: involves a focus on retaining loyal customers and excellent customer service Operational Excellence: involves a focus on efficient operations and excellent supply chain management Product Excellence: involves focusing on achieving highquality products and effective branding and positioning Locational Excellence: involves focusing on food physical location and good internet presence
Customer Excellence: • Retaining loyal customers: o Loyalty means more than simply preferring to purchase from one firm industry instead of another, it means that customers are reluctant to patronize competitive firms o Several methods to build customer loyalty – developing a clear and precise positioning strategy, and achieving customer loyalty creates emotional attachment through loyalty programs o With such programs, companies can combine membership data with customer purchase data to develop a deeper understanding of the customer o Companies use this data to tailor their offering to better meet the needs of their loyal customers • Customer service: o Firms that offer good customer service must instill its importance in their employees over a long period of time so that it becomes part of the organizational culture o Once a marketer has earned a good service reputation, it can sustain this advantage for a long time because competitor is hard presses to develop a comparable reputation Operational Excellence: • Efficient Operations: o All marketers strive for efficient operations to get their customers the merchandise they want, when they want it, in the required quantities, and at a lower delivered cost than that of competitors. • Excellent Supply Chain Management and Strong Supplier Relations: o Firms with strong relationships may gain exclusive right to (1) sell merchandise in a particular region, (2) obtain special terms of purchase that are not available to competitors, or (3) receive popular merchandise that may be in short supply • Human Resource Management: o Knowledgeable and skilled employees committed to the firm’s objectives are critical assets that support the success of companies such as WestJet and Delta Hotels Product Excellence: • Others have been able to maintain their sustainable competitive advantage by investing in their brand itself; positioning their product or service by using a clear, distinctive brand image; and constantly reinforcing that image through their merchandise, service, and promotion. Locational Excellence: • A competitive advantage based on location is sustainable because it is not easily duplicated Multiple Sources of Advantage • Firms required multiple approaches to build a wall around their position that stands as high as possible
