MANAGEMENT MARKETING.docx

**MANAGEMENT MARKETING** LESSON1 Importance of Marketing The first decade of the 21st century\ challenged firms to prosper financially and\ even survive in the face of an unforgiving\ economic environment. **Marketing** is playing a key role in\ addressing those challenges. Finance,\ operations,...

**MANAGEMENT MARKETING** LESSON1 Importance of Marketing The first decade of the 21st century\ challenged firms to prosper financially and\ even survive in the face of an unforgiving\ economic environment. **Marketing** is playing a key role in\ addressing those challenges. Finance,\ operations, accounting, and other\ business functions won't really matter\ without sufficient demand for products and\ services so the firm can make a profit. In\ other words, there must be a top line for\ there to be a bottom line. Thus financial\ success often depends on marketing\ ability. What is Marketing? The American Marketing Association offers the following formal definition: Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and\ exchanging offerings that have value for\ customers, clients, partners, and society at large. **Marketing management** takes place when at least one party to a potential exchange thinks about the means of achieving desired responses from other parties. Thus we see marketing management as the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and\ communicating superior customer value. What is Marketed? - **GOODS\ **Physical goods constitute the bulk of most countries' production and marketing efforts. Each year, U.S. companies market billions of fresh, canned, bagged, and frozen food products and millions of cars,\ refrigerators, televisions, machines, and other mainstays of a modern economy. - **SERVICES**\ As economies advance, a growing proportion of their activities focuses on the production of services. The U.S.\ economy today produces a 70--30 services-to-goods mix. Services include the work of airlines, hotels, car\ rental firms, barbers and beauticians, maintenance and repair people, and accountants, bankers, lawyers,\ engineers, doctors, software programmers, and management consultants. Many market offerings **mix goods**\ and **services**, such as a **fast-food meal.\ ** - **EVENTS**\ Marketers promote time-based events, such as major trade shows, artistic performances, and company\ anniversaries. Global sporting events such as the Olympics and the World Cup are promoted aggressively to\ both companies and fans. - **EXPERIENCES**\ By orchestrating several services and goods, a firm can create, stage,\ and market experiences. Walt Disney World's Magic Kingdom allows\ customers to visit a fairy kingdom, a pirate ship, or a haunted house.\ There is also a market for customized experiences, such as a week at a\ baseball camp with retired baseball greats, a four-day rock and roll fantasy - **PERSONS**\ Artists, musicians, CEOs, physicians, high-profile lawyers and financiers,\ and other professionals all get help from celebrity marketers. Some\ people have done a masterful job of marketing themselves---David\ Beckham, Oprah Winfrey, and the Rolling Stones. Management\ consultant Tom Peters, a master at self-branding, has advised each\ person to become a "brand." - **PLACES**\ Cities, states, regions, and whole nations compete to attract tourists,\ residents, factories, and company headquarters. Place marketers include\ economic development specialists, real estate agents, commercial banks,\ local business associations, and advertising and public relations\ agencies - **PROPERTIES\ **Properties are intangible rights of ownership to either real property (real estate) or\ financial property (stocks and bonds). They are bought and sold, and these\ exchanges require marketing. Real estate agents work for property owners or\ sellers, or they buy and sell residential or commercial real estate. Investment\ companies and banks market securities to both institutional and individual\ investors. - **ORGANIZATIONS**\ Organizations work to build a strong, favorable, and unique image in the minds of\ their target publics. In the United Kingdom, Tesco's "Every Little Helps" marketing\ program reflects the food marketer's attention to detail in everything it does, within\ the store and in the community and environment. - **INFORMATION\ **The production, packaging, and distribution of information are major industries. Information is essentially what books, schools, and universities produce, market,\ and distribute at a price to parents, students, and communities. - **IDEAS\ **Every market offering includes a basic idea. Charles Revson of Revlon once observed: "In the factory we make cosmetics; in the drugstore we sell hope." Products and services are platforms for delivering some idea or benefit. Social\ marketers are busy promoting such ideas as "Friends Don't Let Friends Drive Drunk"\ and "A Mind Is a Terrible Thing to Waste. They seek to influence the level, timing, and\ composition of demand to meet the organization's objectives. EIGHT DEMAND STATES: 1\. **Negative demand**---Consumers dislike the product and may even pay to\ avoid it.\ 2. **Nonexistent demand**---Consumers may be unaware of or uninterested in\ the product.\ 3. **Latent demand**---Consumers may share a strong need that cannot be\ satisfied by an existing product.\ 4. **Declining demand**---Consumers begin to buy the product less frequently or\ not at all.\ 5. **Irregular demand**---Consumer purchases vary on a seasonal, monthly,\ weekly, daily, or even hourly basis.\ 6. **Full demand**---Consumers are adequately buying all products put into the\ marketplace.\ 7. **Overfull demand**---More consumers would like to buy the product than can\ be satisfied.\ 8. **Unwholesome demand**---Consumers may be attracted to products that\ have undesirable social consequences. **Core Marketing Concepts** To understand the marketing function, we need to understand the following core set of concepts:\ **Needs** are the basic human requirements such as for air, food, water, clothing, and shelter. Humans also have strong needs for recreation, education, and entertainment. **Demands** are wants for specific products backed by an ability to pay. We can distinguish five types of needs:\ 1. **Stated needs** (The customer wants an inexpensive car.)\ 2. **Real needs** (The customer wants a car whose operating cost, not initial price, is low.)\ 3. **Unstated needs** (The customer expects good service from the dealer.)\ 4. **Delight needs** (The customer would like the dealer to include an onboard GPS navigation system.)\ 5. **Secret needs** (The customer wants friends to see him or her as a savvy consumer.) **Target Markets, Positioning, and Segmentation** -marketers start by dividing the market into segments. They identify and profile\ **distinct groups of buyers** who might prefer or **require varying product** and\ **service mixes** by examining **demographic**, **psychographic, and behavioral\ differences among buyers**. After identifying market segments, the marketer\ decides which present the greatest opportunities--- which are its **target\ markets**. For each, the firm develops a market offering that it positions in the\ minds of the target buyers as delivering some central benefit(s). **Offerings and Brands** Companies address customer needs by putting forth a **value proposition**, a set\ of benefits that satisfy those needs. The **intangible value proposition** is made\ physical by an offering, which can be a combination of products, services,\ information, and experiences. A **brand** is an offering from a known source. **Value and Satisfaction\ **The buyer chooses the offerings he or she perceives to deliver the most value, the sum of the tangible and intangible benefits and costs to her. **Value**, a central marketing concept, is primarily a combination of quality, service, and price (qsp), called the customer value triad. **Value perceptions** increase with quality and service but decrease with price. We can think of marketing as the identification, creation, communication, delivery,\ and monitoring of customer value. **Satisfaction** reflects a person's judgment of a product's perceived performance in relationship to expectations. If the performance falls short of expectations, the customer is disappointed. If it matches expectations, the customer is satisfied. If it exceeds them, the customer is\ delighted Marketing Channels\ To reach a target market, the marketer uses three kinds of marketing channels. **Communication channels** deliver and receive messages from target buyers and include newspapers, magazines, radio, television, mail,\ telephone, billboards, posters, fliers, CDs, audiotapes, and the Internet. Beyond these, firms communicate\ through the look of their retail stores and Web sites and other media. Marketers are increasingly adding\ **dialogue channels** such as e-mail, blogs, and toll-free numbers to familiar monologue channels such as ads. The marketer uses **distribution channels** to display, sell, or deliver the physical product or service(s) to the\ buyer or user. Marketers clearly face a design challenge in choosing the best mix of communication, distribution, and service channels for their offerings. **Supply Chain\ **The supply chain is a longer channel stretching from raw materials to components to finished products carried to final buyers. **Competition\ Competition** includes all the actual and potential rival offerings and substitutes a buyer might consider. Marketing Environment\ The marketing environment consists of the **task environment** and the **broad environment.** The **task environment** includes the actors engaged in producing, distributing, and promoting the offering. These are the\ company, suppliers, distributors, dealers, and target customers. In the supplier group are material suppliers and service suppliers, such as marketing research agencies, advertising agencies, banking and insurance\ companies, transportation companies, and telecommunications companies. **Distributors and dealers** include agents, brokers, manufacturer representatives, and others who facilitate\ finding and selling to customers. The **broad environment** consists of six components: - **demographic environment** - **economic environment** - **social-cultural environment** - **natural environment** - **technological environment** - **political-legal environment** Marketers must pay close attention to the trends and developments in these and adjust their marketing strategies as needed. New opportunities are constantly\ emerging that await the right marketing savvy and ingenuity. **The New Marketing Realities** ** Network information technology**. The digital revolution has created\ an Information Age that promises to lead to more accurate levels of production, more targeted communications, and more relevant pricing.\ **Globalization**. Technological advances in transportation, shipping, and communication have made it easier for companies to market in, and consumers to buy from, almost any country in the world.\ Deregulation. Many countries have deregulated industries to create greater competition and growth opportunities. Privatization. Many countries have converted public companies to private ownership and management to\ increase their efficiency. Heightened competition. Intense competition among domestic and foreign brands raises marketing costs\ and shrinks profit margins. presenting a significant competitive threat. Industry convergence. Industry boundaries are blurring as companies recognize new opportunities at the\ intersection of two or more industries. Retail transformation. Store-based retailers face competition from catalog houses; directmail firms;\ newspaper, magazine, and TV direct-to-customer ads; home shopping TV; and e-commerce. In response,\ entrepreneurial retailers are building entertainment into their stores with coffee bars, demonstrations, and\ performances, marketing an "experience" rather than a product assortment. Dick's Sporting Goods has\ grown from a single bait-andtackle store in Binghamton, New York, into a 300-store sporting goods retailer\ in 30 states. Part of its success springs from the interactive features of its stores. Customers can test golf\ clubs in indoor ranges, sample shoes on its footwear track, and shoot bows in its archery range. Disintermediation. The amazing success of early dot-coms such as AOL, Amazon.com, Yahoo!, eBay,\ E\*TRADE, and others created disintermediation in the delivery of products and services by intervening in\ the traditional flow of goods through distribution channels. These firms struck terror into the hearts of established manufacturers and retailers. In response, traditional companies engaged in reintermediation and became "brick-and-click" retailers, adding online services to their offerings. Some became stronger\ contenders than pure-click firms, because they had a larger pool of resources to work with and established brand names. **Consumer buying power**. In part, due to disintermediation via the Internet, consumers have\ substantially increased their buying power. From the home, office, or mobile phone, they can compare\ product prices and features and order goods online from anywhere in the world 24 hours a day, 7 days a week, bypassing limited local offerings and realizing significant price savings. Even business buyers can run a reverse auction in which sellers compete to capture their business. They can readily join others to\ aggregate their purchases and achieve deeper volume discounts. Consumer information. Consumers can collect information in as much breadth and depth as they want about practically anything. They can access online encyclopedias, dictionaries, medical information, movie ratings, consumer reports, newspapers, and other information sources in many languages from\ anywhere in the world. Consumer participation. Consumers have found an amplified voice to influence peer and public opinion.\ In recognition, companies are inviting them to participate in designing and even marketing offerings to\ heighten their sense of connection and ownership. Consumers see their favorite companies as workshops\ from which they can draw out the offerings they want.\ Consumer resistance. Many customers today feel there are fewer real product differences, so they show\ less brand loyalty and become more price- and quality-sensitive in their search for value, and less tolerant\ about undesired marketing. **The Product Concept\ **The product concept proposes that consumers favor products offering the most quality, performance, or innovative features. However, managers are sometimes caught in a love affair with their products. They might commit the "better-mousetrap" fallacy, believing a better product will by\ itself lead people to beat a path to their door. A new or improved product will not necessarily be successful unless it's priced, distributed, advertised, and sold properly. **The Selling Concept\ **The selling concept holds that consumers and businesses, if left alone, won't buy enough of the organization's products. It is practiced most aggressively with unsought goods---goods buyers don't normally think of buying such as insurance and cemetery plots---and when firms with overcapacity\ aim to sell what they make, rather than make what the market wants. Marketing based on hard selling is risky. It assumes customers coaxed into buying a product not only won't return or bad- mouth it or complain to consumer organizations but might even buy it again. **The Marketing Concept\ **The marketing concept emerged in the mid-1950s41 as a customer-centered, sense-and-respond philosophy. The job is to find not the right customers for your products, but the right products for your customers. Dell doesn't prepare a perfect computer for its target market. Rather, it provides product platforms on which each person customizes the features he or she desires in the computer. **The Holistic Marketing Concept** "Marketing Memo: Marketing Right and\ Wrong" suggests where companies go wrong---and how they can get it right---in their marketing. The holistic marketing concept is based on the development, design, and implementation of marketing programs, processes, and activities that recognize their breadth and interdependencies. Holistic marketing acknowledges that everything matters in marketing---and that a broad, integrated perspective is often necessary. **Relationship Marketing\ **Increasingly, a key goal of marketing is to develop deep, enduring relationships with people and organizations that directly or indirectly affect the success of the firm's marketing activities. Relationship marketing aims to build mutually satisfying long-term relationships with key constituents in order to earn and retain their business. Integrated Marketing\ Integrated marketing occurs when the marketer devises marketing activities and assembles marketing programs to create, communicate, and deliver value for consumers such that "the whole\ is greater than the sum of its parts." Two key themes are that (1) many different marketing activities can create, communicate, and deliver value and (2) marketers should design and implement anyone marketing activity with all other activities in mind. **Internal Marketing\ **Internal marketing, an element of holistic marketing, is the task of hiring, training, and motivating able employees who want to serve customers well. It ensures that everyone in the organization\ embraces appropriate marketing principles, especially senior management. Smart marketers recognize that marketing activities within the company can be as important---or even more important--- than those directed outside the company. It makes no sense to promise excellent\ service before the company's staff is ready to provide it. **Performance Marketing\ **Performance marketing requires understanding the financial and nonfinancial returns to business and society from marketing activities and programs. Top marketers are increasingly going beyond\ sales revenue to examine the marketing scorecard and interpret what is happening to market share, customer loss rate, customer satisfaction, product quality, and other measures. They are also considering the legal, ethical, social, and environmental effects of marketing activities and\ programs. **Updating The Four Ps\ **McCarthy classified various marketing activities into marketing-mix tools of four broad kinds, which\ he called the four Ps of marketing: product, price, place, and promotion. **People** reflects, in part, internal marketing and the fact that employees are critical to marketing\ success. Marketing will only be as good as the people inside the organization. It also reflects the fact that marketers must view consumers as people to understand their lives more broadly, and not just as they shop for and consume products and services. **Processes** reflects all the creativity, discipline, and structure brought to marketing management. Marketers must avoid ad hoc planning and decision making and ensure that state-of-the-art marketing ideas and concepts play an appropriate role in all they do. Only by instituting the right set of processes to guide activities and programs can a firm engage in mutually beneficial long-term relationships. Another important set of processes guides the firm in imaginatively generating insights and breakthrough products, services, and marketing activities. **Programs** reflects all the firm's consumer-directed activities. It encompasses the old four Ps as well as a range of other marketing activities that might not fit as neatly into the old view of marketing. Regardless of whether they are online or offline, traditional or nontraditional, these activities must\ be integrated such that their whole is greater than the sum of their parts and they accomplish\ multiple objectives for the firm. We define **performance** as in holistic marketing, to capture the range of possible outcome measures that have financial and nonfinancial implications (profitability as well as brand and customer equity), and implications beyond the company itself (social responsibility, legal, ethical,\ and community related). Finally, these new four Ps actually apply to all disciplines within the company, and by thinking this way, managers grow more closely aligned with the rest of the company. **LESSON2** **Developing Marketing Strategies and Plans** **Marketing and Customer Value** The task of any business is to deliver customer value at a profit. In a hypercompetitive economy with increasingly informed 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 Value Delivery Process** We can divide the value creation and delivery sequence into three phases. 1\. Choosing the value represents the **"homework"** marketing must do before any product exists. Marketers must segment the market, select the appropriate target, and develop the **offering's value positioning**. The formula "segmentation, targeting, positioning (STP)" is the essence of strategic marketing.  2\. Providing the value. Marketing must determine specific product features, prices, and distribution.  3\. **Communicating the value** by utilizing the sales force, Internet, advertising, and any other communication tools to announce and promote the product. The value delivery process begins before there is a product and continues through development and after launch. Each phase has cost implications. **The Value Chain** Harvard's Michael Porter has proposed the value chain as a tool for identifying ways to create more customer value. According to this model, every firm is a synthesis of activities performed to design, produce, market, deliver, and support its product. **The primary activities are ** \(1) inbound logistics, or bringing materials into the business;  \(2) operations, or converting materials into final products;  \(3) outbound logistics, or shipping out final products;  \(4) marketing, which includes sales; and  \(5) service.  **Specialized departments handle the support activities---** \(1) procurement,  \(2) technology development,  \(3) human resource management, and  \(4) firm infrastructure. (Infrastructure covers the costs of general management, planning, finance, accounting, legal, and government affairs.)  **A Holistic Marketing Orientation and Customer Value** One view of holistic marketing sees it 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 marketers address three key management questions:** 1\. **Value exploration**---How a company identifies new value opportunities 2\. **Value creation**---How a company efficiently creates more promising new value offerings 3**. Value delivery**---How a company uses its capabilities and infrastructure to deliver the new value offerings more efficiently **The Central Role of Strategic Planning** The **marketing plan** is the central instrument for directing and coordinating the marketing effort. It operates at two levels: strategic and tactical. The strategic marketing plan lays out the target markets and the firm's value proposition, based on an analysis of the best market opportunities. The tactical marketing plan specifies the marketing tactics, including product features, promotion, merchandising, pricing, sales channels, and service **Corporate and Division Strategic Planning** Some corporations give their business units freedom to set their own sales and profit goals and strategies. Others set goals for their business units but let them develop their own strategies. Still others set the goals and participate in developing individual business unit strategies. **All corporate headquarters undertake four planning activities:** 1\. Defining the corporate mission To define its mission, a company should address Peter Drucker's classic questions: What is our business? Who is the customer? What is of value What should our business be? These simple-sounding questions are among the most difficult a company will ever have to answer. Successful companies continuously raise and answer them. 2\. Establishing strategic business units Companies often define themselves in terms of products: They are in the "auto business" or the "clothing business." Market definitions of a business, however, describe the business as a customer- satisfying process. Products are transient; basic needs and customer groups endure forever. Transportation is a need: the horse and carriage, automobile, railroad, airline, ship, and truck are products that meet that need. 3\. Assigning resources to each strategic business unit Assessing growth opportunities Once it has defined SBUs, management must decide how to allocate corporate resources to each. Several portfolio-planning models provide ways to make investment decisions. The GE/McKinsey Matrix classifies each SBU by the extent of its competitive advantage and the attractiveness of its industry. **Assessing Growth Opportunities** Assessing growth opportunities includes planning new businesses, downsizing, and terminating older businesses. If there is a gap between future desired sales and projected sales, corporate management will need to develop or acquire new businesses to fill it. **INTENSIVE GROWTH ** Corporate management's first course of action should be a review of opportunities for improving existing businesses. One useful framework for detecting new intensive- growth opportunities is a "product-market expansion grid." It considers the strategic growth opportunities for a firm in terms of current and new products and markets. **INTEGRATIVE GROWTH ** A business can increase sales and profits through backward, forward, or horizontal integration within its industry. Merck has gone beyond developing and selling prescription pharmaceuticals. **DIVERSIFICATION GROWTH ** Diversification growth makes sense when good opportunities exist outside the present businesses---the industry is highly attractive and the company has the right mix of business strengths to succeed. From its origins as an animated film producer, The Walt Disney Company has moved into licensing characters for merchandised goods, publishing general interest fiction books under the Hyperion imprint, entering the broadcast industry with its own Disney Channel as well as ABC and ESPN, developing theme parks and vacation and resort prop- erties, and offering cruise and commercial theatre experiences. **DOWNSIZING AND DIVESTING OLDER BUSINESSES ** Companies must carefully prune, harvest, or divest tired old businesses to release needed resources for other uses and reduce costs. To focus on its travel and credit card operations, American Express in 2005 spun off American Express Financial Advisors, which provided insurance, mutual funds, investment advice, and brokerage and asset management services (it was renamed Ameriprise Financial). **Organization and Organizational Culture** Strategic planning happens within the context of the organization. A company's organization con- sists of its structures, policies, and corporate culture, all of which can become dysfunctional in a rapidly changing business environment. Whereas managers can change structures and policies (though with difficulty), the company's culture is very hard to change. Yet adapting the culture is often the key to successfully implementing a new strategy. **Marketing Innovation** Innovation in marketing is critical. Imaginative ideas on strategy exist in many places within a company. Senior management should identify and encourage fresh ideas from three underrepresented groups: employees with youthful or diverse perspectives, employees far removed from company headquarters, and employees new to the industry. Each group can challenge company orthodoxy and stimulate new ideas. **The Business Mission** Each business unit needs to define its specific mission within the broader company mission. Thus, a television-studio-lighting-equipment company might define its mission as, "To target major television studios and become their vendor of choice for lighting technologies that represent the most advanced and reliable studio lighting arrangements." Notice this mission does not attempt to win business from smaller television studios, offer the lowest price, or venture into non-lighting products. **SWOT Analysis** The overall evaluation of a company's strengths, weaknesses, opportunities, and threats is called SWOT analysis. It's a way of monitoring the external and internal marketing environment. **EXTERNAL ENVIRONMENT (OPPORTUNITY AND THREAT) ANALYSIS ** A business unit must monitor key macroenvironment forces and significant microenvironment factors that affect its ability to earn profits. It should set up a marketing intelligence system to track trends and important developments and any related opportunities and threats. **INTERNAL ENVIRONMENT (STRENGTHS AND WEAKNESSES) ANALYSIS ** It's one thing to find attractive opportunities, and another to be able to take advantage of them. Each business needs to evaluate its internal strengths and weaknesses. **PORTER'S GENERIC STRATEGIES**  Michael Porter has pro- posed three generic strategies that provide a good starting point for strategic thinking: overall cost leadership, differentiation, and focus. ** Overall cost leadership.** Firms work to achieve the lowest production and distribution costs so they can underprice competitors and win market share. They need less skill in marketing. The problem is that other firms will usually compete with still-lower costs and hurt the firm that rested its whole future on cost. ** Differentiation.** The business concentrates on achieving superior performance in an important customer benefit area valued by a large part of the market. The firm seeking quality leadership, for example, must make products with the best components, put them together expertly, inspect them carefully, and effectively communicate their quality. ** Focus.** The business focuses on one or more narrow market segments, gets to know them intimately, and pursues either cost leadership or differentiation within the target segment. **STRATEGIC ALLIANCES**  Even giant companies---AT&T, Philips, and Nokia---often cannot achieve leadership, either nationally or globally, without forming alliances with domestic or multi- national companies that complement or leverage their capabilities and resources. 1. Product or service alliances---One company licenses another to produce its product, or two companies jointly market their complementary products or a new product. The credit card industry is a complicated combination of cards jointly marketed by banks such as Bank of America, credit card companies such as Visa, and affinity companies such as Alaska Airlines. 2\. Promotional alliances---One company agrees to carry a promotion for another company's product or service. McDonald's teamed up with Disney for 10 years to offer products related to current Disney films as part of its meals for children. 3\. Logistics alliances---One company offers logistical services for another company's product. Warner Music Group and Sub Pop Records created the Alternative Distribution Alliance (ADA) in 1993 as a joint venture to distribute and manufacture records owned by independent labels. ADA is the leading "indie" distribution company in the United States for both physical and digital product. 4\. Pricing collaborations---One or more companies join in a special pricing collaboration. Hotel and rental car companies often offer mutual price discounts. **Program Formulation and Implementation** Even a great marketing strategy can be sabotaged by poor implementation. If the unit has decided to attain technological leadership, it must strengthen its R&D department, gather technological intelligence, develop leading-edge products, train its technical sales force, and communicate its technological leadership. **Feedback and Control** A company's strategic fit with the environment will inevitably erode, because the market environment changes faster than the company's seven Ss. Thus, a company might remain efficient yet lose effective- ness. Peter Drucker pointed out that it is more important to "do the right thing"---to be effective---than "to do things right"---to be efficient. The most successful companies, however, excel at both. **Product Planning: The Nature and Contents of a Marketing Plan** Working within the plans set by the levels above them, product managers come up with a market- ing plan for individual products, lines, brands, channels, or customer groups. Each product level, whether product line or brand, must develop a marketing plan for achieving its goals. A marketing plan is a written document that summarizes what the marketer has learned about the marketplace and indicates how the firm plans to reach its marketing objectives.43 It contains tactical guidelines for the marketing programs and financial allocations over the planning period. Executive summary and table of contents. The marketing plan should open with a table of contents and brief summary for senior management of the main goals and recommendations. Situation analysis. This section presents relevant background data on sales, costs, the market, competitors, and the various forces in the macroenvironment. How do we define the market, how big is it, and how fast is it growing? What are the relevant trends and critical issues? Firms will use all this information to carry out a SWOT analysis. Marketing strategy. Here the marketing manager defines the mission, marketing and financial objectives, and needs the market offering is intended to satisfy as well as its competitive positioning. All this requires inputs from other areas, such as purchasing, manufacturing, sales, finance, and human resources. Financial projections. Financial projections include a sales forecast, an expense forecast, and a break-even analysis. On the revenue side is forecasted sales volume by month and product category, and on the expense side the expected costs of marketing, broken down into finer categories. The break-even analysis estimates how many units the firm must sell monthly (or how many years it will take) to offset its monthly fixed costs and average per-unit variable costs. A more complex method of estimating profit is risk analysis. Here we obtain three estimates (optimistic, pessimistic, and most likely) for each uncertain variable affecting profitability, under an assumed marketing environment and marketing strategy for the planning period. The computer simulates possible outcomes and computes a distribution showing the range of possible rates of returns and their probabilities. Implementation controls. The last section outlines the controls for monitoring and adjusting implementation of the plan. Typically, it spells out the goals and budget for each month or quarter, so management can review each period's results and take corrective action as needed. Some organizations include contingency plans. **The Role of Research** To develop innovative products, successful strategies, and action programs, marketers need up-to-date information about the environment, the competition, and the selected market segments. Often, analysis of internal data is the starting point for assessing the current marketing situation, supplemented by marketing intelligence and research investigating the overall market, the competition, key issues, threats, and opportunities. As the plan is put into effect, marketers use research to measure progress toward objectives and identify areas for improvement. **The Role of Relationships** Although the marketing plan shows how the company will establish and maintain profitable customer relationships, it also affects both internal and external relationships. First, it influences how marketing personnel work with each other and with other departments to deliver value and satisfy customers. Second, it affects how the company works with suppliers, distributors, and partners to achieve the plan's objectives. Third, it influences the company's dealings with other stakeholders, including government regulators, the media, and the community at large. Marketers must consider all these relationships when developing a marketing plan. **From Marketing Plan to Marketing Action** Most companies create yearly marketing plans. Marketers start planning well in advance of the implementation date to allow time for marketing research, analysis, management review, and coordination between departments. As each action program begins, they monitor ongoing results, investigate any deviation from plans, and take corrective steps as needed. Some prepare contingency plans; marketers must be ready to update and adapt marketing plans at any time. LESSON3 **Making marketing decisions in a fast-changing world is both an art and a science.** To provide context, insight, and inspiration for marketing decision making, companies must possess comprehensive, up-to-date information about macro trends, as well as about micro effects particular to their business. Holistic marketers recognize that the marketing environment is constantly presenting new opportunities and threats, and they understand the importance of continuously monitoring, forecasting, and adapting to that environment. **Components of a Modern Marketing Information System** The major responsibility for identifying significant marketplace changes falls to the company's marketers. Marketers have two advantages for the task: disciplined methods for collecting information, and time spent interacting with customers and observing competitors and other outside groups. Some firms have marketing information systems that provide rich detail about buyer wants, preferences, and behavior. Companies with superior information can choose their markets better, develop better offerings, and execute better marketing planning. **The Philippines' abundant offerings on a modest budget** In 2012, they launched a campaign that branded the Philippines as the perfect destination, accompanied by the catchy slogan, "It's More Fun in the Philippines." This campaign proved highly successful on social media, making it a valuable case study for other Destination Marketing Organisations (DMOs) worldwide. **The power of crowdsourcing** One of the key drivers of the \#ItsMoreFunInThePhilippines campaign's success was the Philippines' substantial social media presence, boasting 27 million Facebook users at the time. The DOT initiated the campaign by inviting social media users in the country to create their advertisements using an online tool. Within hours, the hashtag \#ItsMoreFunInThePhilippines erupted on Twitter, and the campaign went viral. **Internal Records** To spot important opportunities and potential problems, marketing managers rely on internal reports of orders, sales, prices, costs, inventory levels, receivables, and payables. 1\. The Order-to-Payment Cycle 2\. Databases, Data Warehousing, and Data Mining **Marketing Intelligence** 1\. The Marketing Intelligence System A **marketing intelligence system** is a set of procedures and sources that managers use to obtain everyday information about developments in the marketing environment. -*Train and motivate the sales force to spot and report new developments.* \- *Motivate distributors, retailers, and other intermediaries to pass along important intelligence.* \- *Hire external experts to collect intelligence.* \- *Network internally and externally.* \- *Set up a customer advisory panel.* \- *Take advantage of government-related data resources.* \- *Purchase information from outside research firms and vendors* **Analyzing the Macroenvironment** 1. Needs and Trends Enterprising individuals and companies manage to create new solutions to unmet needs. \- A fad is "unpredictable, short-lived, and without social, economic, and political significance." *e.g. A company can cash in on a fad such as Crocs clogs, Elmo TMX dolls, and Pokémon gifts and toys, but getting it right requires luck and good timing.* \- a trend is more predictable and durable than a fad; trends reveal the shape of the future and can provide strategic direction. *e.g. A trend toward health and nutrition awareness has brought increased government regulation and negative publicity for firms seen as peddling unhealthy food.* \- A megatrend is a "large social, economic, political, and technological change \[that\] is slow to form, and once in place, influences us for some time---between seven and ten years, or longer." *e.g. The Yankelovich Monitor interviews 2,500 people nationally each year and has tracked 35 social value and lifestyle trends since 1971, such as "anti-bigness," "mysticism," "living for today," "away from possessions," and "sensuousness."* **The Demographic Environment** Demographic developments often move at a fairly predictable pace. The main one marketers monitor is *population,* including the size and growth rate of population in cities, regions, and nations; age distribution and ethnic mix; educational levels; household patterns; and regional characteristics and movements. \- WORLDWIDE POPULATION GROWTH \- POPULATION AGE MIX \- ETHNIC AND OTHER MARKETS \- EDUCATIONAL GROUPS \- HOUSEHOLD PATTERNS **The Economic Environment** The available purchasing power in an economy depends on current income, prices, savings, debt, and credit availability. \- CONSUMER PSYCHOLOGY \- INCOME DISTRIBUTION \- INCOME, SAVINGS, DEBT, AND CREDIT **The Sociocultural Environment** From our sociocultural environment we absorb, almost unconsciously, a world view that defines our relationships to ourselves, others, organizations, society, nature, and the universe. **The Natural Environment** In Western Europe, "green" parties have pressed for public action to reduce industrial pollution. In the United States, experts have documented ecological deterioration, and watchdog groups such as the Sierra Club and Friends of the Earth carry these concerns into political and social action. **The Technological Environment** It is the essence of market capitalism to be dynamic and tolerate the creative destructiveness of technology as the price of progress. **The Political-Legal Environment** The political and legal environment consists of laws, government agencies, and pres- sure groups that influence various organizations and individuals. Sometimes these laws create new business opportunities. **Forecasting and Demand Measurement** The company must then measure and forecast the size, growth, and profit potential of each new opportunity. There are many productive ways to break down the market: **The potential market** is the set of consumers with a sufficient level of interest in a market offer. However, their interest is not enough to define a market unless they also have sufficient income and access to the product. **The available market** is the set of consumers who have interest, income, *and* access to a particular offer. The company or government may restrict sales to certain groups; a particular state might ban motorcycle sales to anyone under 21 years of age. Eligible adults constitute the *qualified available market*---the set of consumers who have interest, income, access, and qualifications for the market offer. **The target market** is the part of the qualified available market the company decides to pursue. The company might concentrate its marketing and distribution effort on the East Coast. **The penetrated market** is the set of consumers who are buying the company's product. There are many productive ways to break down the market: **The potential market** is the set of consumers with a sufficient level of interest in a market offer. However, their interest is not enough to define a market unless they also have sufficient income and access to the product. **The available market** is the set of consumers who have interest, income, *and* access to a particular offer. **The target market** is the part of the qualified available market the company decides to pursue. **The penetrated market** is the set of consumers who are buying the company's product. **MARKET DEMAND** The marketer's first step in evaluating marketing opportunities is to estimate total market demand. **Market demand** for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program. **MARKET FORECAST** Only one level of industry marketing expenditure will actually occur. The market demand corresponding to this level is called the **market forecast**. **MARKET POTENTIAL** The market forecast shows *expected* market demand, not maximum market demand. For the latter, we need to visualize the level of market demand resulting from a very high level of industry marketing expenditure, where further increases in marketing effort would have little effect. ***CHAIN-RATIO METHOD*** which multiplies a base number by several adjusting percentages. Suppose a brewery is interested in estimating the market potential for a new light beer especially designed to accompany food. It can make an estimate with the following calculation: A white paper with black text Description automatically generated The upper limit of market demand for a product is sales potential. If we estimate the same quantity for a brand, the estimate is called sales potential for a brand. Sales potential for a brand: Q = n x q x m x p Where: Q = Sales potential for a brand (in dollars) n = Total number of buyers q = quantity purchased by an average buyer per year m = expected market share of the brand p = price of the brand per unit When we define buyers, we need to be careful. Depending on the product/service, our target segment may be made up of "households" or "individuals". For example, targeting Generation X families for lawn mowers requires the marketer to focus on households. Targeting teenagers for marketing toothpaste requires the marketer to focus on individuals. Another very critical point is that when we try to estimate the total number of buyers, we need to keep in mind the detailed description of the target market we would like to serve. Especially the demographic bases that you used to specify your target market will be very useful in this regard. For example, suppose that you are planning to introduce a smartphone application and you are interested in "Smart Phone Owners", "25-35 years old", "university graduate". If you can find the following percentages in various databases, you can compute the total number of potential buyers as follows. Let us assume that you found the following statistic: