Principles of Marketing

Dr. Karim

Chapter 2:Company and Marketing Strategy

-Partnering to Build Customer Relationships

S t r a t e g y - D e fi n i t i o n

A strategy, is an

IDEA, a

conceptualization of
how the goal could be
achieved.

Levels of Strategy
Organizations have different levels of strategy, particularly for
larger or global organizations. They identify:
Corporate Strategy which is concerned with the overall purpose and scope of the
organization.
Business Unit Strategy which defines how to compete successfully in a particular
market.
Functional or Operational Strategies that describe how the corporate and
business unit strategies will be operationalized in different functional areas or business
processes. Functional strategies refer to marketing, supply chain management,
human

resources,

finance

and

information

systems

strategies.

Strategy Vs Tactic
Atactic is an activity we adopt to execute the strategy.
Different tactics may be deployed as part of a single strategy.

For example, one strategy to gain market share would be

brand building. As part of a company's brand building
strategy, they may adopt different tactics like (a) online
advertising and(b) celebrity supports.

Companywide Strategic Planning: Defining Marketings Role

How do companies compete and succeed in a

global market place?
One part of the answer is a commitment to creating
and retaining satisfied customers.
The second part is adapting to a continuously
changing

marketplace

through

market-oriented

strategic planning. This is the focus of strategic

planningThe

continuous

developing

maintaining

between
resources

and
the
and

process
a

organizations
its

changing

strategic
goals

of
fit
and

marketing

opportunities. The strategic planning process helps

the organization in allocating its resources to take
advantage of opportunities in the marketplace.

The company-wide strategic planning guides

marketing strategy and planning.

Corporate Strategic Planning

At the corporate level, all companies start the strategic
planning process by undertaking

three planning

activities:
1. Defining the corporate /division mission.
2. Setting company objectives and goals.
3. Designing the business portfolio.

Strategic Planning at Corporate Levels

1. Defining the Corporate Mission

The corporate mission is a statement of the
companys

purpose

what

it

wants

to

accomplish in the larger environnement.

Market-oriented

mission

statement:

Defines the business in terms of satisfying

basic customer needs

2. Setting Company Objectives and Goals

The company needs to
turn

its

mission

into

detailed

supporting

objectives

for

each

level of management.
Each manager should
have objectives and be
responsible for reaching
them.

3 . Designing the Business Portfolio

Guided by the companys mission statement and objectives,
management now must plan its business portfolio the
collection of businesses and products that make up the
company.
The best business portfolio is the one that best fits the companys
strengths and weaknesses to opportunities in the environment.
Business portfolio planning involves two steps:
1) The company must analyze its current business portfolio and
determine which businesses should receive more, less, or no
investment.
2) The company must shape the future portfolio by developing
strategies for growth and downsizing.

Analyzing the Current Business

Portfolio

The major activity in strategic planning is business portfolio

analysis, whereby management evaluates the products and
businesses that make up the company. The company will want to
put strong resources into its more profitable businesses (SBUs)
and drop its weaker ones.
The purpose of strategic planning is to find ways in which the
company can best use its strengths to take advantage of
attractive opportunities in the environment. So most standard
portfolio analysis methods evaluate SBUs on two important
dimensions: the attractiveness of the SBUs market or industry
and the strength of the SBUs position in that market or industry.
The best-known portfolio-planning method is the growth Share
Matrix that was developed by the Boston Consulting Group.

Shaping the Future Business

Portfolio

Once it has classified its SBUs, the company must

determine what role each will play in the future. It can
pursue one of four strategies for each SBU:
1) - The company can invest more in the business unit to
build its share.
2)- The company can invest just enough to hold the SBUs
share at the current level.
3)- The company can harvest the SBU, milking its shortterm cash flow regardless of the long-term effect.
4)- The company can divest the SBU by selling it or
phasing it out and using the resources elsewhere.

Business Units Strategic Planning

At

the

business

unit

level,

each

strategic business unit (SBU) develops

its own strategic plan to carry that
business unit into a profitable future.

The Strategic Planning Process at SBU

Level

Companywide Strategic Planning: Defining Marketings Role

Marketing Strategy Formulation for Growth and Downsizing

Marketing Strategy is a functional level

strategy

that

presents

the

broad

marketing approach which will be used to

Companywide Strategic Planning: Defining Marketings Role

Marketing Strategy Formulation for Growth and Downsizing

The Product/market expansion grid is a tool

for identifying company growth opportunities
through:
1) Market Penetration
2) Market Development
3) Product Development

Companywide Strategic Planning: Defining Marketings Role

Developing Marketing Strategies for Growth and

Downsizing
Market penetration is a growth strategy
increasing sales to current market segments
without changing the product
Market development is a growth strategy that
identifies and develops new market segments
for current products

Companywide Strategic Planning: Defining Marketings Role

Developing Marketing Strategies for Growth and

Downsizing
Product development is a growth strategy that
offers new or modified products to existing
market segments
Diversification is a growth strategy through
starting up or acquiring businesses outside the
companys current products and markets

The Four Growth Marketing Strategies of theProduct-Market Growth

Matrix

Companywide Strategic Planning: Defining Marketings Role

Developing Marketing Strategies for Growth and

Downsizing
Downsizing is the reduction of the business
portfolio by eliminating products or business
units that are not profitable or that no longer
fit the companys overall strategy

Planning Marketing: Partnering to Build Customer

Relationships

Marketing alone cant create superior customer

value. Under the company-wide strategic plan,
marketers must work closely with other
departments to form an effective internal
company

value

chain

and

with

other

companies in the marketing system to

create an overall external value delivery
network that jointly serves customers.

Planning Marketing: Partnering to Build Customer

Relationships

Partner Relationship Management

Partner relationship management is the process of
working closely with partners in other internal
departments to form an effective value chain that
serves

the

customer,

as

well

as

partnering

effectively with other companies in the marketing

system to form a competitively superior valuedelivery network.

Planning Marketing: Partnering to Build

Customer Relationships
Partnering with Other Internal Departments
Value Chain: The series of internal departments
that

carry

out

value-creating

activities

to

design, produce, market, deliver, and support a

firms products.

The Internal Value Chain

Planning Marketing: Partnering to

Build Customer Relationships
Partnering with Others in the Marketing System

Value delivery network is made up of

the company, suppliers, distributors, and
ultimately customers who partner with
each other to improve performance of
the entire system.

Marketing Strategy and the

Marketing Mix
Marketing Strategy
Marketing strategy is the marketing logic
(idea) by which the business unit hopes
to achieve its marketing objectives.

Marketing Strategy and the Marketing Mix

The strategic plan defines the
companys overall mission
and objectives. Marketings
role is shown in the beside
figure,
which
summarizes the major
activities
involved
in
managing a customerdriven
marketing
strategy
and
the
marketing mix.
Consumers are in the center.
The goal is to create value
for customers and build
profitable
customer
relationships.

Customer-Driven Marketing Strategy

Once

it

fully

understands

consumers

and

the

marketplace, marketing management can design a

customer-driven

marketing

strategy.

To

design

winning marketing strategy, the marketing manager

must answer two important questions:
1) What customers will we serve (whats our target
market)?
2) How can we serve these customers best (whats our
value proposition)?

1- Selecting Customers to Serve

The company must first decide whom it will serve. It does this
by dividing the market into segments of customers - (a)
market segmentation and selecting which segments it will go
after - (b) market targeting. Some people think of marketing
management as finding as many customers as possible and
increasing demand. But marketing managers know that they
cannot serve all customers in every way. By trying to serve all
customers, they may not serve any customers well. Instead,
the company wants to select only customers that it can serve
well and profitably. Ultimately, marketing managers must
decide which customers they want to target and on level,
timing, and nature of their demand.

(a)- Market Segmentation

Market Segmentation is the subdividing

of

customers

into

homogenous

sub-set

of

customers where any sub-set

may conceivably selected as
market target to be reached
with distinct Marketing Mix.

How Can We Segment the Market?

(b)- Market Targeting

Market

Targeting

evaluating

each

Involves
segments

attractiveness and selecting one

or

more

according

segments
to

to

enter

organizational

resources & objectives. Targeting

reduces time and cost as well as
increases sales.
Target Market A set of buyers
sharing

common

needs

or

characteristics that the company

Evaluating Market Segments

Segment Size and Growth
Analyze current sales, growth rates and
expected profitability for various segments.
Segment Structural Attractiveness
Consider effects of: competitors, availability
of substitute products and, the power of
buyers & suppliers.
Company Objectives and Resources
Company skills & resources needed to
succeed in that segment(s).
Look for Competitive Advantages.

2- Choosing a Value Proposition

The company must also decide how it will serve
targeted customers ? How the company will:
a) Differentiate itself in the marketplace?
b) Position itself in the marketplace?
Accordingly, the company must choose its value
proposition.

D i ff

e r e n t i a t i o n

Differentiation is
the

act

of

designing a set
of

meaningful

differences

to

distinguish

the

company's
offering
competitor's
offerings.

from

Positioning

is

the

act

of

arranging for a product to

occupy a clear, distinctive,
and desirable place relative
to competing products in the
minds of target consumers.

Value

Proposition

The end result of positioning is the creation of a market-focused

value proposition - The set of benefits a company
promises to deliver to customers to satisfy their needs to answer the customers question:

Why should I buy your

offer rather than a competitors offer? it is a simple clear

statement of why the target market should buy the product.
Such value propositions differentiate one brand from
another and the products position can be viewed as the
main result of its differentiation.

A Product Positioning Map

Segmentation, Targeting,
Positioning STP: The Essence of
Strategic Marketing

Marketing Strategy and the

Marketing Mix
Developing an Integrated Marketing Mix

Marketing mix is the set of controllable

tactical marketing toolsproduct, price,
place,

and

promotionthat

the

firm

blends to produce the response it wants

in the target market

Marketing Strategy and the

Marketing Mix
Developing an Interrelated Marketing Mix
The four Ps

Product
Price
Place
Promotion

2-29

Marketing Strategy and the

Marketing Mix
Developing an Interrelated Marketing Mix
The four Ps

Product is the goods and services in

combination that the company offers to
the target market
Price is the amount of money customers
have to pay to obtain the product

2-30

Marketing Strategy and the

Marketing Mix
Developing an Integrated Marketing Mix
The four Ps

Place is the company activities that make

the product available to target customers
Promotion is the activities that
communicate the merits of the product
and persuade target customers to buy it

2-31

Managing the Marketing Effort

Managing the marketing effort requires:

1) Analysis
2) Planning
3) Implementing
4) Controlling

Managing the Marketing Effort: 1- Marketing Analysis

Analysis is the complete analysis of the

companys situation in a SWOT analysis
that evaluates the companys:
Strengths
Weaknesses
Opportunities
Threats

Marketing Analysis
Strengths include internal capabilities,
resources, and positive situational factors
that may help to serve company
customers and achieve company
objectives
Weaknesses include internal limitations
and negative situational factors that may
interfere with company performance

Managing the Marketing Effort: 1Marketing Analysis

Opportunities are favorable factors or
trends in the external environment that
the company may be able to exploit to its
advantage
Threats are unfavorable external factors or
trends that may present challenges to
performance

Managing the Marketing Effort: 2- Market

Planning
Planning is the development of strategic
and marketing plans to achieve company
objectives
Marketing strategy consists of the specific
strategies for target markets, positioning,
the marketing mix, and marketing
expenditure levels.

Market Planning

Sections of a marketing plan

include:

Executive summary
Current marketing situation
Threats and opportunities
Objective and issues
Action programs / Strategies & Tactics
Budgets
Controls

Managing the Marketing Effort: 3Marketing Implementation

Implementing is the process that turns marketing
plans into marketing actions to accomplish
strategic marketing objectives
Successful implementation depends on how well the
company blends its people, organizational
structure, decision and reward system, and
company culture into a cohesive action plan that
supports its strategies

Managing the Marketing Effort

Marketing Department Organization

Functional
Geographic
Product
Market or customer management

Managing the Marketing Effort

Marketing Department Organization
Functional organization: This is the most common
form of marketing organization with different
marketing

functions

specialist

Sales manager

Market research manager

Customer service manager

New product manager

headed

by

functional

Managing the Marketing Effort

Marketing Department Organization
Geographic organizations: Useful for companies that sell
across

the

country

or

internationally.

Managers

are

responsible for developing strategies and plans for a specific

region.

Product Management: Useful for companies with different

products or brands. Managers are responsible for developing
strategies and plans for a specific product or band.

Managing the Marketing Effort

Marketing Department Organization
Market
or
customer
management
organization: Useful for companies with
one product line sold to many different
markets and customers. Managers are
responsible for developing strategies and
plans for their specific markets or
customers.

Managing the Marketing Effort

Marketing Department Organization
Customer management involves a customer
focus and not a product focus for managing
customer profitability and customer equity.

Managing the Marketing Effort: 4- Marketing Control

Controlling is measuring and evaluating

results and taking corrective action as
needed

Operating control

Strategic control
2-45

Managing the Marketing Effort: 4- Marketing Control

Operating control involves checking

ongoing performance against annual plan
and taking corrective action as needed
Strategic control involves looking at
whether the companys basic strategies
are well matched to its opportunities

Managing the Marketing Effort: 4- Marketing Control

Marketing audit
Marketing audit is a comprehensive,
systematic, independent, and periodic
examination of a companys
environment, objectives, strategies, and
activities to determine problem areas and
opportunities

Managing the Marketing Effort: 4Marketing Control

Measuring and Managing Return on Marketing Investment
(ROI)
Return on marketing investment is the net return
from a marketing investment divided by the costs
of

the

marketing

investment.

Marketing

ROI

provides a measurement of the profits generated

by investments in marketing activities.

Managing the Marketing Effort: 4Marketing Control

Measuring and Managing Return on Marketing Investment
Customer-Centered Measures

Customer acquisition
Customer retention
Customer lifetime value