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Priciples of Marketing by Philip Kotler and Gary Armstrong

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Priciples of Marketing

by Philip Kotler and Gary Armstrong

Chapter 2
Company and Marketing Strategy
Partnering to Build Customer
Relationships
PEARSON
Objective Outline
Companywide Strategic Planning: Defining
Marketing’s Role
1 Explain company-wide strategic planning and its four
steps.

Designing the Business Portfolio


Discuss how to design business portfolios and
2
develop growth strategies.
Objective Outline
Planning Marketing: Partnering to Build
Customer Relationships
3 Explain Marketing’s role in strategic planning and
how marketing works with its partners to create and
deliver customer value.

Marketing Strategy and the Marketing Mix


4 Describe the elements of a customer-driven marketing
strategy and mix and the forces that influence it.
Objective Outline

Managing the Marketing Effort


Measuring and Managing Return on
Marketing Investment
List the marketing management functions, including
5 the elements of a marketing plan, and discuss the
importance of measuring and managing return on
marketing investment.
Companywide Strategic Planning: Definin
g Marketing’s Role
 Strategic planning is the process of developing and maintaini
ng a strategic fit between the organization’s goals and capabilit
ies and its changing marketing opportunities.
 Companies usually prepare annual plans, long-range plans, and
strategic plans.
 The annual and long-range plans deal with the company’s curr
ent businesses and how to keep them going.
 In contrast, the strategic plan involves adapting the firm to take
advantage of opportunities in its constantly changing environm
ent.
Companywide Strategic Planning:
Defining Marketing’s Role

• Like the marketing strategy, the broader company


strategy must be customer focused.
• Company-wide strategic planning guides marketing
strategy and planning.
Defining a Market-Oriented Mission
 The mission statement is the organization’s purp
ose, what it wants to accomplish in the larger env
ironment.
 Market-oriented mission statement defines the bu
siness in terms of satisfying basic customer needs
.
Defining a Market-Oriented Mission
Setting Company Objectives and Goals

Business Marketing
objectives objectives
• Build profitable • Increase market
customer share
relationships • Create local
• Invest in partnerships
research • Increase
• Improve profits promotion
Designing the Business Portfolio
 The business portfolio is the collection of busine
sses and products that make up the company.
 Business portfolio planning involves two steps:

the company must shape the future


analyze its current portfolio by
business portfolio and developing strategies
determine the for growth and
investment downsizing
Analyzing the Current Business Portfolio
 Portfolio analysis is a major activity in strategic
planning whereby management evaluates the pro
ducts and businesses that make up the company
 Management’s first step is to identify the key bus
inesses that make up the company, called strategi
Company
division
c business units (SBUs).
Product line
SBU within a
division

Single product
or brand
Analyzing the Current Business Portfoli
o

The company next assesses the attractiveness of its


various SBUs and decides how much support each
deserves.

Tthe attractiveness of the SBU’s market or industry


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

The best-known portfolio-planning method was


developed by the Boston Consulting Group, a leading
management consulting firm.
Stars are high-growth,
The Boston Consulting Group
They requireApproach
high-share businesses a lot of
or products. They often cash to hold their
need heavy investments share, let alone
 A company classifies
to finance itsall
their rapid SBUsincrease
according
to th it.
growth.
e growth-share matrix. The growth-share matrix
defines four types of SBU’s:

These established They may generate


enough cash to
and successful SBUs
maintain themselves
need less investment but do not promise to
to hold their market be large sources of
share. cash.
The Boston Consulting Group Approach
 It can pursue one of four strategies for each SBU.

Build : Hold:
It can invest more in the It can just enough to
business unit. share at the current
level.

Harvest : Divest :
It can harvest the SBU, It can divest the SBU by
milking its short-term selling it or phasing it
cash. out and using the
resources elsewhere.
Problems with Matrix Approaches
 It have some limitations:
• Difficulty in defining SBUs and measuring market share and
growth
• Time consuming
• Expensive
• Focus on current businesses, not future planning
 Methods to improve:
• Dropped formal matrix methods in favor of more customized
approaches that better suit their specific situations
• Today’s strategic planning has been decentralized
Developing Strategies for Growth and Dow
nsizing
• Market development ─ Companies can grow by developing new markets
for existing products. For example, Starbucks is expanding rapidly in
China, which by 2015 will be its second-largest market, behind only the
United
Product/market
States. expansion grid is a portfolio-pl
anning tool for identifying company growth oppo
• Diversification ─ Through diversification, companies can grow by
rtunities
starting through
or buying market
businesses penetration,
outside their currentmarket deve For
product/markets.
lopment,
example, product
Starbucks development,
is entering the “health or
anddiversification.
wellness” market with
stores called Evolution By Starbucks.
Developing Strategies for Growth a
nd Downsizing

Market • Company growth by increasing sales of


current products to current market
penetration segments without changing the product

Market • The company growth by identifying and


developing new market segments for
development current company products.

Product • Company growth by offering modified


or new products to current market
development segments.

• Company growth through starting up or


Diversification acquiring businesses outside the
company’s current products and
markets.
Planning Marketing: Partnering to Build C
ustomer Relationships
 Marketing plays a key role in the company’s strategic pla
nning in several ways:
First, marketing provides a guiding philosophy—the marketing
concept—that suggests the company strategy should revolve
around building profitable relationships with important consumer
groups.

Second, marketing provides inputs to strategic planners by helping


to identify attractive market opportunities and assessing the firm’s
potential to take advantage of them.

Finally, within individual business units, marketing designs


strategies for reaching the unit’s objectives. Once the unit’s
objectives are set, marketing’s task is to help carry them out
profitably.
Partnering with Other Company Departm
ents
 Value chain is a series of departments that carry out valu
e-creating activities to design, produce, market, deliver, a
nd support a firm’s products.
 That is, each department carries out value-creating activit
ies to design, produce, market, deliver, and support the fir
m’s products.
Partnering with Others in the Marketing Sy
stem
 Value delivery network is the network made up of the co
mpany, its suppliers, its distributors, and, ultimately, its c
ustomers who partner with each other to improve the perf
ormance of the entire system.
 Toyota’s performance against Ford depends on the quality
of Toyota’s overall value delivery network versus Ford’s.
Marketing Strategy and the Marketing Mi
x
 Next comes marketing strategy—the marketing
logic by which the company hopes to create this
customer value and achieve these profitable relati
onships.
Customer-Driven Marketing Strategy
 Most companies are in a position to serve some segments bette
r than others.
 Thus, each company must divide up the total market, choose th
e best segments, and design strategies for profitably serving ch
osen segments.
 This process involves:

Marketing
segmentation Positioning

Market
targeting
Market Segmentation
 The process of dividing a market into distinct groups of b
uyers who have different needs, characteristics, or behavi
ors, and who might require separate products or marketin
g programs, is called market segmentation.
 Market segment is a group of consumers who respond in
a similar way to a given set of marketing efforts.
Marketing Targeting
 Market targeting is the process of evaluating each mark
et segment’s attractiveness and selecting one or more seg
ments to enter.
 A company with limited resources might decide to serve
only one or a few special segments or market niches.
 Most companies enter a new market by serving a single s
egment; if this proves successful, they add more segment
s.
Marketing Differentiation and Positioning
 Positioning is arranging for a product to occupy a clear, d
istinctive, and desirable place relative to competing produ
cts in the minds of the target consumer.
 Thus, effective positioning begins with differentiation—
actually differentiating the company’s market offering so
that it gives consumers more value.
Product means the
Price is the amount
Developing an Integrated Marketing Mix
goods-and-services
combination the
of money customers
The
marketing
must pay to obtain
company offers to the
the product. mix ─ or
 Marketing mix is the set
target market. of controllable tactical the four Ps
marketing tools—product, price, place, and prom ─ consists
of tactical
otion—that
Promotion the firm
refers to blends to produce the respon marketing
An effective marketing program blends the
se it wants
activitiesinthat
the target market. Place includestools
marketing the
communicate mixmerits
elements into an integrated blended
company activities
of marketing
the product program
and designed to achieve the
that make the
into an
company’s
persuade targetmarketing
customers objectives byproduct
delivering integrated
value to consumers. The marketing mix available
constitutes to
marketing
to buy it. target consumers.
the company’s tactical tool kit for establishing program
strong positioning in target incentives. that
actually
delivers the
intended
value to
target
customers.
Developing an Integrated Marketing Mix
 It holds that the four Ps concept takes the seller’s view of
the market, not the buyer’s view. From the buyer’s viewp
oint, in this age of customer value and relationships, the f
our Ps might be better described as the four Cs:
4Ps 4Cs
Product Customer solution
Price Customer cost
Place Convenience
Promotion Communication
Managing the Marketing Effort
 Managing the marketing process requires the four marketing m
anagement functions:
Marketing Analysis
 The marketer should conduct a SWOT analysis ,by which it e
valuates the company’s overall strengths (S), weaknesses (W),
opportunities (O), and threats (T).
Marketing Planning
 Through strategic planning, the company decides what it wants
to do with each business unit. Marketing planning involves cho
osing marketing strategies that will help the company attain its
overall strategic objectives.
Positioning

Marketing Strategy:
It outlines how the Marketi
Marketi
Target ng
ng
company intends to markets
markets
Market mix
strategy
strategy
create value for target
customers in order to
capture value in return.
Marketing
Marketing
expenditure
expenditure
level
level
Marketing Implementation
 Marketing implementation is the process that turns mar
keting plans into marketing actions to accomplish strategi
c marketing objectives.
 Whereas marketing planning addresses:
what
 Many managers think thatwhy“doing things right” (implementation)
is as important as, or even more important than, “dong the right
who
things”(strategy).
where
when
how
Marketing Department Organization
•• This
This is
is the
the most
most common
common form
form of
of marketing
marketing
Functional organization
organization with
with different
different marketing
marketing functions
functions
organization headed
headed byby aa functional
functional specialist.
specialist.

•• Useful
Useful for
for companies
companies that
that sell
sell across
across the
the country
country or
or
Geographic internationally.
internationally. Managers
Managers are are responsible
responsible forfor
organization developing
developing strategies
region.
region.
strategies and
and plans
plans for
for aa specific
specific

•• Useful
Useful for
for companies
companies with
with different
different products
products or
or
brands.
brands. Managers
Managers are
are responsible
responsible for
for developing
developing
Product management strategies
strategies and
and plans
plans for
for aa specific
specific product
product or
or brand.
brand.

Market or customer •• Useful


Useful for
for companies
companies with
with one
one product
product line
line sold
sold to
to
many
many different
different markets
markets and
and customers.
customers. Managers
Managers
management are
are responsible
responsible for
for developing
developing strategies
strategies and
and plans
plans
organization for
for their
their specific
specific markets
markets or
or customers.
customers.
Marketing Control
 Marketing control is the measuring and evaluating the r
esults of marketing strategies and plans and taking correct
ive action to ensure that the objectives are achieved.
Management first sets Measures its
specific marketing performance in the
goals. market place

Four steps of
marketing
control:
Management takes Evaluates the causes of
corrective action to any differences
close the gaps between between expected and
goals and performance actual performance
Measuring and Managing Return on Mark
eting Investment
 Return on marketing investment (or marketing ROI) i
s the net return from a marketing investment divided by t
he costs of the marketing investment.
 It measures the profits generated by investments in marke
ting activities.
 Many companies are assembling such measures into mar
keting dashboards ─ meaningful sets of marketing perfor
mance measures in a single display used to monitor strate
gic marketing performance.
Measuring and Managing Return on Mark
eting Investment
The End

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