2 Developing Marketing Strategies and Plans Developing

2 Developing Marketing Strategies and Plans

Developing Marketing Strategies and Plans A strategy is a theory about how to gain competitive advantages. A good strategy is a strategy that actually generates such advantages. Strategic management is the process of specifying an organizations objectives, developing policies and plans to achieve these objectives, and allocating resources so as to implement the plans. 1 -2

Levels of Goals/Plans & Their Importance Mission Statement External Message Legitimacy for investors, customers, suppliers, community Strategic Goals/Plans Senior Management (Organization as a whole) Tactical Goals/Plans Middle Management (Major divisions, functions) Internal Message Legitimacy, motivation, guides, rationale, standards Operational Goals/Plans Lower Management (Departments, individuals) 1 -3

Strategic Goals and Plans Strategic Goals • Where the organization wants to be in the future • Pertain to the organization as a whole • Strategic Plans • Action Steps used to attain strategic goals • Blueprint that defines the organizational activities and resource allocations • Tends to be long term 1 -4

Levels of a Marketing Plan • Strategic • Target marketing decisions • Value proposition • Analysis of marketing opportunities • Tactical • • • Product features Promotion Merchandising Pricing Sales channels Service

Developing Marketing Strategies and Plans Part 1: Marketing Value and Customer Value 1) The value delivery process 2) The value chain 3) Core competencies 4) A holistic marketing orientation and customer value 5) The central role of strategic planning Part 2: Corporate and Division Strategic Planning 1) Defining the corporate mission 2) Defining the business 3) Assessing growth opportunities 4) Organization and organizational culture

Developing Marketing Strategies and Plan Part 3: Business Unit Strategic Planning 1) The business Mission 2) SWOT analysis 3) Goal Formulation 4) Strategic Formulation 5) Program Formulation and Implementation 6) Feedback and Control

Developing Marketing Strategies and Plan Part 4: Product Planning: the Nature and Contents of a Marketing Plan 1) Contents of the Marketing Plan

Hennes and Mauritz Walk into a trendy Soho boutique in New York City and you might see high-fashion Tshirts selling for $250. Go into an H&M clothing store and you can see a version of the same style for $25. Founded 55 years ago as a provincial Swedish clothing company, H&M (Hennes and Mauritz) has morphed into a clothing colossus with 950 stores in 19 countries and an ambitious plan to expand by 100 stores a year. The reason H&M has reached this point while so many other stores—such as once-hot Italian retailer Benetton—have floundered is that the company has a clear mission and the creative marketing strategies and concrete plans with which to carry it out. "Our business concept is to give the customer unbeatable value by offering fashion and quality at the best price, " is the H&M mission as expressed on the company's Web site. Nothing could sound simpler. Yet, fulfilling that mission requires a well-coordinated set of marketing activities.

Hennes and Mauritz For instance, it takes H&M an average of three months to go from a designer's idea to a product on a store shelf, and that "time to market" falls to three weeks for "high-fashion" products. H&M is able to put products out quickly and inexpensively by: 1 - having few middlemen and owning no factories 2 -buying large volumes 3 - having extensive experience in the clothing industry 4 - having a great knowledge of which goods should be bought from which markets 5 - having efficient distribution systems 6 - being cost-conscious at every stage

Nike Critics of Nike often complain that its shoes cost almost nothing to make yet cost the consumer so much. True, the raw materials and manufacturing costs involved in the making of a sneaker are relatively cheap, but marketing the product to the consumer is expensive. Materials, labor, shipping, equipment, import duties, and suppliers' costs generally total less than $25 a pair. Compensating its sales team, its distributors, its administration, and its endorsers, as well as paying for advertising and R&D, adds $15 or so to the total. Nike sells its product to retailers to make a profit of $7. The retailer therefore pays roughly $47 to put a pair of Nikes on the shelf. When the retailer's overhead (typically $30 covering personnel, lease, and equipment) is factored in along with • a $10 profit, the shoe costs the consumer over $80.

Encyclopedia Britannica http: //corporate. britannica. com The Encyclopædia Britannica was born in 18 th-century Scotland amid the great intellectual ferment known as the Scottish Enlightenment. According to one chronicler of Britannica history, Edinburgh in the mid-1700 s was "a city on the verge of a golden age, a center of learning and a home of writers, thinkers, and philosophers. “ The first edition of the Britannica was published one section at a time, over a three-year period, beginning in 1768. In 1990 Encyclopædia Britannica found itself in a precarious competitive environment. CDROMs and the internet had become the study tools of choice for students and others. Microsoft’s Encarta CD-ROM and IBM’s CD-ROM joint venture World Book were attracting Britannica’s customers. The result book sales fell 83% between 1990 -1997. In 1994 the company developed Britannica Online, the first encyclopedia for the Internet, which made the entire text of the Encyclopædia Britannica available worldwide. That year the first version of the Britannica on CD-ROM was also published. According to a company official: “we’re reinventing our business. We are not in the book business. We’re in the information business. ” By the 2006, the company had become a premier information site on the internet (200, 000) subscribers and (150, 000) web sites selected 1 -12

Part 1: Marketing Value and Customer Value Marketing and Customer Value • Marketing involves satisfying consumers' needs and wants. • The task of any business is to deliver customer value at a profit. • In a hypercompetitive economy with increasingly rational buyers faced with abundant choices, a company can win only by fine-tuning the value delivery process and choosing, providing, and communicating superior value. • The traditional view of marketing is that the firm makes something and then sells it. In this view, marketing takes place in the second half of the process. • The company knows what to make and the market will buy enough units to produce profits. Companies that subscribe to this view have the best chance of succeeding in economies marked by goods shortages where consumers are not fussy about quality, features, or style—for example, with basic staple goods in developing markets. 1 -13

Part 1: Marketing Value and Customer Value The value delivery process Marketing and Customer Value The value delivery process • The traditional view of the business process, however, will not work in economies where people face abundant choices. • The smart competitor must design and deliver offerings for well-defined target markets. • This belief is at the core of the new view of business processes, which places marketing at the beginning of planning. 1 -14

Part 1: Marketing Value and Customer Value The value delivery process Marketing and Customer Value The value delivery process 1 -15

Part 1: Marketing Value and Customer Value The value delivery process Marketing and Customer Value The Japanese have further refined this view with the following concepts: • • • Zero customer feedback time. Customer feedback should be collected continuously after purchase to learn how to improve the product and its marketing. Zero product improvement time. The company should evaluate all improvement ideas and introduce the most valued and feasible improvements as soon as possible. Zero purchasing time. The company should receive the required parts and supplies continuously through just-in-time arrangements with suppliers. By lowering its inventories, the company can reduce its costs. Zero setup time. The company should be able to manufacture any of its products as soon as they are ordered, without facing high setup time or costs. Zero defects. The products should be of high quality and free of flaws. 1 -16

Part 1: Marketing Value and Customer Value 2) The Value Chain Michael Porter of Harvard has proposed the value chain as a tool for identifying ways to create more customer value. According to this model, every firm has combination of activities performed to design, produce, market, deliver, and support its product. The value chain identifies nine strategically relevant activities that create value and cost in a specific business. These nine value-creating activities consist of five primary activities and four support activities. 1 -17

Part 1: Marketing Value and Customer Value 2) The Value Chain The primary activities cover the sequence of: 1) bringing materials into the business (inbound logistics), 2) converting them into final products (operations), 3) shipping out final products (outbound logistics), 4) marketing them (marketing and sales), and 5) servicing them (service). 1 -18

Part 1: Marketing Value and Customer Value 2) The Value Chain The support activities: 1) technology development, 2) human resource management, 3) firm infrastructure—are handled in certain specialized departments, as well as elsewhere. 4) Procurement and hiring 1 -19

Part 1: Marketing Value and Customer Value 1 -20

Part 1: Marketing Value and Customer Value 2) The Value Chain Core Business Processes Include: 1) The market sensing process. 2) The new offering realization process. All the activities involved in researching, developing, and launching new high-quality offerings quickly and within budget. 3) The customer acquisition process. All the activities involved in defining target markets and prospecting for new customers. 4) The customer relationship management process. 5) The fulfillment management process. All the activities involved in receiving and approving orders, shipping the goods on time, and collecting payment. 1 -21

Part 1: Marketing Value and Customer Value 3) Core Competencies (page 39) To be successful, a firm also needs to look for competitive advantages beyond its own operations, into the value chains of suppliers, distributors, and customers. Value delivery network also called A supply Chain To carry out its core business processes, a company needs resources. In the past companies controlled most of the resources Change regarding this concept is changing Many companies today have partnered with specific suppliers and distributors to create a superior value delivery network also called a supply chain. 1 -22

3) Core Competencies • To carry out its core business processes, a company needs resources—labor power, materials, machines, information, and energy. • Traditionally, companies owned and controlled most of the resources that entered their businesses, but this situation is changing. • Many companies today outsource less critical resources if they can be obtained at better quality or lower cost. • Frequently, outsourced resources include cleaning services, landscaping, and auto fleet management. Kodak even turned over the management of its data processing department to IBM. 1 -23

4) What is Holistic Marketing? Holistic marketing sees itself as integrating the value exploration, value creation, and value delivery activities with the purpose of building long-term, mutually satisfying relationships and co prosperity among key stakeholders.

Holistic Marketing Framework The holistic marketing framework is designed to address three key management questions: 1. Value exploration - How can a company identify new value opportunities? 2. Value creation- flow can a company efficiently create more promising new value offerings? 3. Value delivery- How can a company use its capabilities and infrastructure to deliver the new value offerings more efficiently?

A Holistic Marketing Orientation And Customer Value

A Holistic Marketing Orientation And Customer Value VALUE EXPLORATION Because value flows within and across markets that are themselves dynamic and competitive, companies need a well-defined strategy for value exploration. Developing such a strategy requires an understanding of the relationships and interactions among three spaces: (1) the customer's cognitive space; (2) the company's competence space; and (3) the collaborator's resource space. The customer's cognitive space reflects existing and latent needs and includes dimensions such as the need for participation, stability, freedom, and change

A Holistic Marketing Orientation And Customer Value VALUE CREATION To exploit a value opportunity, the company needs valuecreation skills. Marketers need to: 1) identify new customer benefits from the customer's view; 2) utilize core competencies from its business domain; and 3) select and manage business partners from its collaborative networks. • To craft new customer benefits, marketers must understand what the customer thinks about, wants, does, and worries about. • Marketers must also observe who customers admire, who they interact with, and who influences them

VALUE DELIVERY • Delivering value often means substantial investment in infrastructure and capabilities. • The company must become proficient at customer relationship management, internal resource management, and business partnership management. • Customer relationship management fallows the company to discover who its customers are, how they behave, and what they need or want. • It also enables the company to respond appropriately, coherently, and quickly to different customer opportunities.

Developing Marketing Strategies and Plan 5) The Central Role of Strategic Planning Companies should have the capabilities to: 1) understanding customer value, 2) creating customer value, 3) delivering customer value, 4) capturing customer value, and 5) sustaining customer value.

5) The Central Role of Strategic Planning Only a handful of companies stand out as master marketers: Procter & Gamble, Southwest Airlines, Nike, Disney, Nordstrom, Wal-Mart, Mc. Donald's, Marriott Hotels, and several Japanese (Sony, Toyota, Canon) and European (IKEA, Club Med, Bang & Olufsen, Electrolux, Nokia, Lego, Tesco) companies These companies focus on the customer and are: 1)organized to respond effectively to changing customer needs. 2)have well-staffed marketing departments, and 3) all their other departments—manufacturing, finance, research and development, personnel, purchasing— also accept the concept that the customer is king.

Part 2: Corporate and Division Strategic Planning 1) 2) 3) 4) Defining the corporate mission Defining the business Assessing growth opportunities Organization and organizational culture 1 -32

Part 2: Corporate and Division Strategic Planning What is Strategic Planning? § It is the managerial process that helps to develop a strategic and viable fit between the firm’s objectives, skills, resources with the market opportunities available. § It helps the firm deliver its targeted profits and growth through its businesses and products. 1 -33

Part 2: Corporate and Division Strategic Planning calls for Action in three key areas? 1. managing a company's businesses as an investment portfolio. 2. assessing each business's strength by considering the market's growth rate and the company's position and fit in that market. 3. establishing a strategy For each business. 1 -34

Understanding Marketing Management To understand marketing management, we must understand strategic planning. Most large companies consist of four organizational levels: 1) the corporate level, 2) the division level, 3) the business unit level, and 4) the product level.

Understanding Marketing Management Corporate headquarters is responsible for designing a corporate strategic plan to guide the whole enterprise; it makes decisions on the amount of resources to allocate to each division, as well as on which businesses to start or eliminate. Each division establishes a plan covering the allocation of funds to each business unit within the division. Each business unit develops a strategic plan to carry that business unit into a profitable future. Finally, each product level (product line, brand) within a business unit develops a marketing plan for achieving its objectives in its product market.

Part 2: Corporate and Division Strategic Planning A marketing plan is the central instrument for directing and coordinating the marketing effort. It operates at a strategic and tactical level.

planning, implementation, and control cycle 1 -38

1) Defining the corporate mission How to go about it? § § Defining the corporate mission Establishing SBUs Allocating resources for SBUs Planning for new business 1 -39

Corporate Mission § This seeks to embody the entire goals of the organization and the objective of its existence. § It seeks to provide a sense of purpose, direction and opportunity 1 -40

Defining the Corporate Mission According to Peter Drucker, it is time to ask some fundamental questions. What is our business? Who is the customer? What is of value to the customer? What will our business be? What should our business be? Successful companies continuously raise these questions and answer them thoughtfully and thoroughly.

5 questions that the firm must ask itself § § § What is our business? Who is our customer? What does our customer need? What will our business be? What should our business be? 1 -42

Organizations develop mission statements to share with managers, employees, and (in many cases) customers. A clear, thoughtful mission statement provides employees with a shared sense of purpose, direction, and opportunity. The statement guides geographically dispersed employees to work independently and yet collectively toward realizing the organization's goals. 1 -43

Good mission Statements Mission statements are at their best when they reflect a vision, an almost "impossible dream" that provides a direction for the company for the next 10 to 20 years. Fred Smith wanted to deliver mail anywhere in the United States before 10: 30 A. M. the next day, so he created Fed. Ex. 1 -44

Rubbermaid Commercial Products, Inc. “Our vision is to be the Global Market Share Leader in each of the markets we serve. We will earn this leadership position by providing to our distributor and end-user customers innovative, high-quality, costeffective and environmentally responsible products. We will add value to these products by providing legendary customer service through our Uncompromising Commitment to Customer Satisfaction. ”

Motorola “ The purpose of Motorola is to honorably serve the needs of the community by providing products and services of superior quality at a fair price to our customers; to do this so as to earn an adequate profit which is required for the total enterprise to grow; and by doing so, provide the opportunity for our employees and shareholders to achieve their personal o b j e c t i v e s. ”

e. Bay “We help people trade anything on earth. We will continue to enhance the online trading experiences of all—collectors, dealers, small businesses, unique item seekers, bargain hunters, opportunity s e l l e r s , a n d b r o w s e r s. ”

Good Mission Statements 1. focus on a limited number of goals. The statement, "We want to produce the highest-quality products, offer the most service, achieve the widest distribution, and sell at the lowest prices" claims too much. 2. stress the company's major policies and values. 3. define the major competitive spheres within which the company will operate

Major Competitive Spheres • • • Industry Products Competence Market segment Vertical channels (Ford) Geographic

Defining the Business Companies often define their businesses in terms of products: They are in the "auto business" or the "clothing business. "

Defining the Business A business must be viewed as a customersatisfying process, not a goods-producing process. Products are transient; basic needs and customer groups endure forever. Transportation is a need: the horse and carriage, the automobile, the railroad, the airline, and the truck are products that meet that need.

Dimensions that Define a Business • Customer groups • Customer needs • Technology

Table 2. 2 Product Orientation vs. Market Orientation Company Product Market Missouri-Pacific Railroad We run a railroad We are a peopleand-goods mover Xerox We make copying equipment We improve office productivity Standard Oil We sell gasoline We supply energy Columbia Pictures We make movies We entertain people

Strategic Business Units The purpose of identifying the company's strategic business units is to develop separate strategies and assign appropriate funding. 1 -54

SBU has three characteristics: 1. It is a single business or collection of related businesses that can be planned separately from the rest of the company. 2. It has its own set of competitors. 3. It has a manager who is responsible for strategic planning and profit performance and who controls most of the factors affecting profit. 1 -55

Assessing Growth Opportunities 1. planning new businesses, 2. downsizing, or 3. terminating older businesses. 1 -56

Assessing Growth Opportunities 1 -57

Assessing Growth Opportunities 1. 2. 3. 4. INTENSIVE GROWTH Integrative Growth Diversification Growth Downsizing and Divesting Older Business 1 -58

Assessing Growth Opportunities 1 -59

Assessing Growth Opportunities 1. market-penetration strategy The company first considers whether it could gain more market share with its current products in their current markets. 2. market-development strategy the company considers whether it can find or develop new markets for its current products. 3. product-development strategy the company considers whether it can develop new products of potential interest to its current markets 4. diversification strategy the company will also review opportunities to develop new products for new markets. 1 -60

Four market-product strategies: alternative ways to expand sales revenues for Ben & Jerry’s Slide 2 -27

Success Probability for each of the 4 basic strategies: Diversification strategy 1 in 20 Market-development Strategy is 1 in 4 Product-development strategy 50 -50 Market-penetration is the highest

Business Unit Strategic Planning § Strategic planning: § § § Developing a strategic fit between organizational goals and capabilities, and changing marketing opportunities 1 -63

Ben & Jerry’s: a SWOT analysis to get it growing again Slide 2 -34

Business Portfolio Analysis • Cash Cows – SBU’s that have a high market share of a low sales growth market. • Stars – SBU’s that have a high market share of a high sales growth market. • Question marks – SBU’s that have a low market share of a high sales growth market. • Dogs – SBU’s that have a low market share of a low sales growth market.

IV. Strategic Marketing Process whereby an organization allocates it marketing mix resources to reach its target markets. Planning Implementation Evaluation

Planning Phase – Situation Analysis • This is a complete analysis of the firm’s situation which assesses internal strengths and weaknesses and external threats and opportunities (SWOT) • Internal analysis (controllable factors) – assess the firm itself to identify strengths and weaknesses • External analysis (uncontrollable factors) – assess the firm’s external environment to identify opportunities and threats

Planning Phase – Marketing Objectives • Specific levels of performance desired for a product or product line to be achieved by a given date. • Stated in terms of market share, sales, profit • Should be measureable, attainable, specific, and consistent with organizational objectives

Planning Phase: Product Positioning • The process where marketers try to create a product image or identity in the minds of their target market relative to competitive products.

Implementation Phase • Process of putting the marketing plan into action. • Involves great attention to detail

Evaluation • Involves measuring the results of the actions from the implementation phase and comparing them with goals set in the planning phase. sales analysis market share analysis expense to sales analysis

SBU Establishing Strategic Business Units A business can be defined in terms of three dimensions: customer groups, customer needs, and technology. § It is a company within a company § The business is differentiated from the rest of the company § It has its own set of competitors § It is a separate profit centre 1 -72

Assigning Resources to SBUs The purpose of identifying the company’s strategic business units is to develop separate strategies and assign appropriate funding to the entire business portfolio. Senior managers generally apply analytical tools to classify all of their SBUs according to profit potential. Two of the best-known business portfolio evaluation models are the Boston Consulting Group model and the General Electric model. 1 -73

SWOT Analysis § § Strengths Weaknesses Opportunities Threats 1 -74

The Mission • Mission; the organization’s reason for existing. • Mission Statement; • states the basic business scope and operations • may include the market and customers • some may describe company values, product quality, attitudes toward employees 1 -75

Corporate Headquarters’ Planning Activities • Define the corporate mission • Establish strategic business units (SBUs) • Assign resources to each SBU • Assess growth opportunities

Good Mission Statements • • • Focus on a limited number of goals Stress major policies and values Define major competitive spheres Take a long-term view Short, memorable, meaningful

Characteristics of SBUs • It is a single business or collection of related businesses • It has its own set of competitors • It has a leader responsible for strategic planning and profitability

Ansoff’s Product-Market Expansion Grid • • Market penetration strategy Market development strategy Product development strategy Diversification strategy

Ansoff’s Product-Market Grid Current products Current Mkts New Mkts Mkt penetration strategy Mkt development strategy New products Product development strategy Diversification strategy 1 -80

The Planning Process § § Analysing Market opportunities Developing Marketing strategies Planning Marketing Programs Managing the Marketing Effort 1 -81

Marketing Control § Annual Plan control § Profitability control § Strategic Control 1 -82

Market-oriented strategic planning Market-oriented strategic is the managerial process of developing and maintaining a viable fit among the organization’s objectives, skills, and resources and its changing market opportunities. The aim of strategic planning is to shape the company’s businesses and products so that they yield target profits and growth and keep the company healthy despite any unexpected threats that may arise. 1 -83

What is Corporate Culture? Corporate culture is the shared experiences, stories, beliefs, and norms that characterize an organization.

SWOT Analysis • • Strengths Weaknesses Opportunities Threats

Goal Formulation Once the company has performed a SWOT analysis, it can proceed to develop specific goals for the planning period. • • Unit’s objectives must be hierarchical Objectives should be quantitative Goals should be realistic Objectives must be consistent

Market Opportunity Analysis (MOA) • Can the benefits involved in the opportunity be articulated convincingly to a defined target market? • Can the target market be located and reached with cost-effective media and trade channels? • Does the company possess or have access to the critical capabilities and resources needed to deliver the customer benefits?

Strategic Formulation 1) Porter’s Generic Strategies • Overall cost leadership • Differentiation • Focus 2) Strategic Alliances There are four forms of MDS. 1) Exporting 2) Licensing 3) Joint Venture 4) Direct Investment

Marketing Plan Contents ü Executive summary ü Table of contents ü Situation analysis ü Marketing strategy ü Financial projections ü Implementation controls

Evaluating a Marketing Plan ü Is the plan simple? ü Is the plan specific? ü Is the plan realistic? ü Is the plan complete?