Marketing Ch 1 & 2 PDF

36 PART 1 Defining Marketing and the Marketing Process closely with marketing partners inside and outside the decades. Sensible consumption has made a comeback, and company. In addition to being good at customer rela- it appears to be here to stay. More...

36 PART 1 Defining Marketing and the Marketing Process closely with marketing partners inside and outside the decades. Sensible consumption has made a comeback, and company. In addition to being good at customer rela- it appears to be here to stay. More than ever, marketers tionship management, they must be good at partner rela- must now emphasize the value in their value propositions. tionship management. The challenge is to balance a brand’s value proposition with current times while also enhancing its long-term LO5 Describe the major trends and forces that are equity. changing the marketing landscape in this age In recent years, marketing has become a major part of of relationships. the strategies for many not-for-profit organizations, such Dramatic changes are occurring in the marketing arena. as universities, hospitals, museums, zoos, symphony The digital age has created exciting new ways to learn orchestras, and even churches. Also, in an increasingly about and relate to individual customers. As a result, smaller world, many marketers are now connected globally advances in digital and social media have taken the mar- with their customers and marketing partners. Today, keting world by storm. Online, social media, and mobile almost every company, large or small, is touched in some marketing offer exciting new opportunities to target cus- way by global competition. Finally, today’s marketers are tomers more selectively and engage them more deeply. also re-examining their ethical and societal responsibilities. Although the new digital and social media offer huge Marketers are being called on to take greater responsibility potential, most marketers are still learning how to use for the social and environmental impacts of their actions. them effectively. The key is to blend the new digital Pulling it all together, as discussed throughout the approaches with traditional marketing to create a smoothly chapter, the major new developments in marketing can be integrated marketing strategy and mix. summed up in a single concept: creating and capturing cus- The Great Recession hit consumers hard, causing tomer value. Today, marketers of all kinds are taking advan- them to rethink their buying priorities and bring their tage of new opportunities for building value-laden consumption back in line with their incomes. Even as the relationships with their customers, their marketing part- post-recession economy has strengthened, consumers are ners, and the world around them. now showing an enthusiasm for frugality not seen in MyMarketingLab Study, practise, and explore real marketing situations with these helpful resources: Interactive Lesson Presentations: Work through interactive presentations and assess- ments to test your knowledge of marketing concepts. Study Plan: Check your understanding of chapter concepts with self-study quizzes. Dynamic Study Modules: Work through adaptive study modules on your computer, tablet, or mobile device. Simulations: Practise decision-making in simulated marketing environments. DISCUSSION QUESTIONS 1. Define marketing and outline the steps in the marketing 4. What is consumer-generated marketing? Describe process. examples of both invited and uninvited consumer exchanges. 2. What is marketing myopia, and how can it be avoided? 5. Discuss trends impacting marketing and the implica- 3. What is customer-engagement marketing, and how is tions of these trends on how marketers deliver value to it related to the surge in digital and social media customers. technologies? CRITICAL THINKING EXERCISES 1. Select a publicly traded company and research how does marketing expenditures represent for the company? much was spent on marketing activities in the most Have these expenditures increased or decreased over the recent year of available data. What percentage of sales past five years? Write a brief report of your findings.  CHAPTER 1 Marketing: Creating and Captur ing Customer Value 37 2. Go to the website of a company, organization, or 3. Search the Internet for salary information regarding jobs in specific brand that has a link to Facebook, Google+, marketing; for example, look for sites such as www.pay- YouTube, Twitter, and/or Pinterest. Click on the links scale.com/research/CA/Country=Canada/Salary. What is and describe how that company is using social media to the national average salary for five different jobs in market- market its products. Evaluate its effectiveness in creating ing? How do the averages compare in different areas of the customer engagement. country? Write a brief report on your findings. ONLINE, MOBILE, AND SOCIAL MEDIA MARKETING Eight years after the launch of its wildly successful Xbox Microsoft’s Smart-Glass apps. One thing the Xbox One 360, Microsoft finally launched its new Xbox One at the isn’t able to do is play old games. Competitor Sony plans to end of 2013. The company hoped the new console would come out with its PlayStation 4 that will have touch sen- turn around the 71 percent plunge in profits it experienced sors in its controller and allow players to play any game— in 2012. The Xbox One touts a Blu-ray video player, current or old—instantly over the Internet. Both companies voice-activated on-demand movies and TV, Skype calling, are banking on more digital and social media applications and social media integration. Smart-TV features customize to save them from the fate competitor Nintendo faced menus for each player and tailor content for individual with its failed Wii U console, which it introduced in 2012. users. Xbox Live’s 48 million members are able to interact on social media during special televised events such as the QUESTIONS Olympics, Super Bowl, Oscars, and other special program- 1. Debate whether these new features in game consoles ming. Games have greater artificial intelligence, enabling are enough to survive against the growth of smartphone players to feel as if the virtual athletes are making decisions and tablet apps that offer free or inexpensive games. on their own. Sports data such as daily performance and injury updates feed into online games, such as Madden 2. Brainstorm three new game console features incorpo- NFL, mirroring their real-world counterparts. Players are rating digital, mobile, or social media technology to able to augment live televised games with fantasy football encourage consumer interaction and engagement with gaming. stats that can be shared with friends via Skype and THINK LIKE A MARKETING MANAGER Boathouse is a leading Canadian specialty retailer special- QUESTIONS izing in active lifestyle apparel and equipment, catering to 1. Suppose you are the marketing manager at Boathouse. outdoor thrill seekers and sports enthusiasts alike. What How would you describe your value proposition? began as a small business in St. Catharines has grown to over 80 retail locations across Canada and an online store, 2. What specific elements of Boathouse’s website and social media presence help create customer loyalty? Boathousestores.com. The company also has an active What other ways could the company build relationships presence on social media. Visit Boathouse’s website and with its customers? social media pages and answer the following questions. MARKETING ETHICS With two-thirds of adults and one-third of school-aged bottled drinks sold at restaurants, theatres, and sporting children in the United States overweight or obese, the events. Although the ban applied to drinks having more mayor of New York City, Michael Bloomberg, took action than 25 calories per 8 ounces, it did not apply to 100 per- against the soft drink industry. Mayor Bloomberg banned cent juice or milk-based beverages. Establishments serving big sugary drinks such as 7-Eleven’s mammoth 32-ounce fountain drinks feared a significant revenue drop because “Big Gulp.” The ban put a 16-ounce cap on fountain and these drinks are often marked up at 10 to 15 times their 38 PART 1 Defining Marketing and the Marketing Process cost. Many consumers opposed the ban because they per- QUESTIONS ceived it as further encroachment of the “nanny state.” Even 1. Should marketers embrace the societal marketing con- though this ban did not go into effect because a judge ruled cept with respect to foods or products that could be that Mayor Bloomberg did not have jurisdiction to impose harmful to consumers? Discuss an example of a com- it, he had already banned smoking in public parks and trans pany embracing the societal marketing concept with fats in restaurant foods, and had required chain restaurants respect to the obesity epidemic. to include calorie information on menus. New York isn’t 2. Is government intervention even necessary, given the the only city that has taken action. The San Francisco city overall decline in demand for soft drinks? Why or council passed the Healthy Food Incentive Ordinance, ban- why not? ning toys inside children’s meals that do not meet strict nutritional standards. This leads many to ask, “What’s next?” MARKETING BY THE NUMBERS Consumer consumption makes up a large portion of the QUESTIONS U.S. gross domestic product (GDP). The American Cus- 1. Visit www.theacsi.org and learn about the American tomer Satisfaction Index (ACSI) is an economic barometer Customer Satisfaction Index (ACSI). Write a report of consumers’ satisfaction with goods and services across explaining the index and compare indices for five dif- many sectors of the economy. The company that produces ferent industries along with the national average. Are the index interviews nearly 80 000 Americans annually to there differences in customer satisfaction among indus- create a national, sector, industry, and company satisfaction tries? Explain why or why not. index. The ACSI benchmarks 10 economic sectors, 43 2. The Customer Satisfaction Index (CSI) is measured industries, and hundreds of companies and federal and local similarly in other countries. Find another country’s CSI government sectors. Although the sales and profit data are and compare results to the American Customer Satis- historical, the ACSI is considered a leading economic indi- faction Index (ACSI). Are U.S. consumers more or less cator of macroeconomic growth. Marketers use this index to satisfied than consumers in the other country? Are measure the pulse of the consumer. Research has shown it to trends in the national score similar? be a predictor of GDP and personal consumption expendi- ture (PCE) growth, and even stock market performance. END-OF-CHAPTER CASE PINTEREST: REVOLUTIONIZING THE WEB—AGAIN In less than two years after its 2010 launch, Pinterest Despite the seemingly infinite possibilities for exploration, reached the milestone of 10 million unique monthly expression, and creation, he felt that the Internet was visitors—faster than any other site in history. At that time, organized in a way that boxed people in. For starters, the it was driving more traffic than Google+, YouTube, and nature of “search” in any online context may seem to pro- LinkedIn combined. One year later, it reached 50 million mote discovery, but it actually stunts it. For example, unique monthly visitors. Pinterest is still growing so fast Google depends on finely tuned queries in order to yield that trying to quantify its success with such a number useful results. Try to find something when you’re not seems pointless. quite sure what you want—say, “nice Father’s Day gift” or Rather, the impact of this brash young start-up can be even “very special Father’s Day gift”—and Google isn’t observed in much more substantial ways. In fact, Pinterest really much help. The bottom line is, if you try talking to seems to have accomplished the unlikely feat of revolu- Google as you would talk to a friend or a department store tionizing the Web—something that seems to happen clerk, it won’t know where to begin. every couple of years. Like Amazon, Google, Facebook, The belief that discovery is a problem on the Inter- and others before it, Pinterest has put businesses and other net isn’t original to Silbermann. In fact, it’s an issue that websites everywhere on notice that they’d better orient many digital designers have struggled with since the themselves around its platform or be left behind. And like launch of the Web, but no one has seemed to be able to the other Internet revolutionists before, Pinterest’s impact solve. Take Amazon, for example. As successful as it is, has caused even the top dogs to stop and take notice. Amazon’s entire structure is set up like every other com- Indeed, Pinterest is changing web design. It is also chang- merce site—a detailed system of menus and categories. ing e-commerce. And it looks like Pinterest has solved To browse for something, users must function within one of the Internet’s biggest problems. this structure while at the same time being pulled in doz- ens of different directions by suggested items and com- THE DISCOVERY PROBLEM peting products. At first blush, Pinterest may sound like any other social “You spend three hours buying a $20 toaster,” says media site, full of people sharing images and commenting Barry Schwartz, psychology professor and author of The on them. Founder and CEO Ben Silbermann’s big idea Paradox of Choice. “Amazon and Google pretty much stink for Pinterest came as he and college buddy Paul Sciarra at browsing,” echoes Leland Rechis, director of product struggled to make a business out of their first product, a experience at Etsy. But Amazon and Google are not alone. shopping app called Tote. Although Tote failed to take The entire Internet is structured as a series of ever-more- off, it revealed a pent-up need among Internet users. Tote specific menus, inconsistent with how the human mind users didn’t buy things (kind of a necessity for a shopping works. The types of free-associative leaps that happen nat- app). But they did email themselves pictures of products urally as people walk through shopping malls, meander to view later. through a museum, or even drive down the street are Silbermann—a lifetime collector of “stuff ”—could nearly impossible online. identify with that. As a boy, he had a particular fascination As Silbermann and his co-founders worked to sketch with collecting bugs. “I really liked insects,” he says. “All out Pinterest, the three were intent on eliminating another kinds: flies, grasshoppers, weevils.” He spent his youth col- limiting characteristic of online design. Social networks lecting, pinning, drying, tagging—creating his own pri- are all organized around feeds—lines of text or images vate museum of natural history. So when Silbermann and organized by time. This setup makes it impossible to Sciarra met Pinterest’s third co-founder, Evan Sharp, the browse multiple images at once. The Pinterest team idea of a digital collection—of books, clothes, or even wanted to change this. “We were really excited about insects—as a powerful medium for self-expression began bringing something that wasn’t immediate and real time, to take shape. something that wasn’t a chronological feed,” says Sharp. As the three began working on developing Pinterest, They pictured a grid of images rather than the directories, something about all-things-Internet bothered Silbermann. time stamps, and pagination so commonly imposed by the 39 40 PART 1 Defining Marketing and the Marketing Process Web. The goal for Pinterest was to create an interface that ambitions, and desires. It’s as if each person is saying, would feel more like visiting a store or a museum. “Here are the beautiful things that make me who I am— As Pinterest took shape, there was no question in the or who I want to be.” And there is no single theme to a minds of its creators that it was to be a social network at its pinboard. Pinterest is a place where young women plan core. As such, Silbermann’s ability to look beyond the their weddings, individuals create the ultimate wish list of tunnel vision of social media entrepreneurship set Pinter- food dishes, and couples assemble furniture sets for their est apart from the pack in yet another way. Although the new home. And departing from other social networks, current social Web is frequented by millions, most of them every Pinterest homepage is an ever-changing collage that are observers, not creators; they’re taking part in the expe- is the sum of each user’s choices. rience on only one level. Not everyone is a photographer, Given that Pinterest’s design has departed from Inter- a filmmaker, or a broadcaster. “Most people don’t have net convention in so many ways, it’s only natural that its anything witty to say on Twitter or anything gripping to growth dynamics would break from present trends. In the put on Facebook, but a lot of them are really interesting United States, most successful social services spread people,” Silbermann says. “They have awesome taste in through early adopters on the nation’s coasts, then break books or furniture or design, but there was no way to through to the masses. But Pinterest’s growth has been share that.” scattered throughout the heartland, driven by such unlikely cohorts as the “bloggernacle” of tech-savvy SOMETHING COMPLETELY DIFFERENT young Mormons. Additionally, nearly 80 percent of Pin- The Pinterest team’s focus on solving some of the most lim- terest’s users are women, most between the ages of 25 and iting characteristics of the Internet yielded fruit. When Pin- 54—another demographic not normally associated with terest launched in March 2010, it was widely hailed as one fast-growing social media sites. of the most visually stunning sites ever. Silbermann, Sciarra, and Sharp went through 50 working versions of the site, HOPE FOR MONETIZATION painstakingly tweaking column widths, layouts, and ways of Perhaps the biggest splash that Pinterest has made in the presenting pictures to perfection. “From the beginning, we Internet pool is its huge influence on consumer purchas- were aware that if we were going to get somebody to spend ing. Although many dot-coms have made a profit by sell- all this time putting together a collection, at the very least, ing online, the digital world in general still struggles with the collection had to be beautiful,” Silbermann says. Pinter- turning eyeballs into dollars. Even Facebook, although it est’s grid—interlocking images of fixed width and varying turns a profit, prompts relatively few of its 1-billion-plus heights—is a key element of its design; the grid rearranges members to open their wallets. itself every time a new image is pinned, meaning users But something about the combination of Pinterest’s rarely see the same home page twice. elegant design and smart social dynamics has users shop- Pinterest also bucked conventional online design in ping like mad. According to e-commerce tracker other ways. At a time when “gamification” was hot, Pin- RichRelevance, the average sale resulting from a Pinterest terest displayed no elements of competition. There is no user following an image back to its source and then buy- leader board or any other means of identifying the most ing an item is $180. For Facebook users, it’s only $80. And popular pinners. Pinterest also did away with page views— for tweeters, it’s only $70. Companies are already jumping the predominant metric for illustrating growth and on this opportunity. One of the primary ways brands are momentum. Rather, Pinterest’s “infinite scroll” automati- driving traffic to their own Pinterest or external site is by cally loads more images as the user expands the browser or paying opinion leaders to pin an image of their product. scrolls downward. With almost no time spent clicking or For example, companies pay Satsuki Shibuya, a designer waiting for pages to load, this feature has proven addictive with more than a million followers, between $150 and for many. $1200 per image. And because of Pinterest’s authentic “When you open up Pinterest,” Silbermann says, feel, it’s almost impossible to tell the difference between “you should feel like you’ve walked into a building full of paid pins and unpaid pins—something that can’t be said of stuff that only you are interested in. Everything should feel other sites. handpicked for you.” As Pinterest debuted, it was obvious It’s little wonder, then, that so many other social that Silbermann and his cohorts had succeeded. Pinterest media sites have taken note of Pinterest. Numerous copy- page after Pinterest page has the feel of a collection cat sites (such as Fancy and Polyvore) have mimicked Pin- designed by someone to reflect his or her own needs, terest’s look and feel, right down to the font selections.  CHAPTER 1 Marketing: Creating and Captur ing Customer Value 41 The influence of Pinterest’s design is also notable on sites QUESTIONS FOR DISCUSSION such as Lady Gaga’s social network LittleMonsters.com 1. Analyze the forces in the marketing environment and the question-and-answer site Quora. Even Facebook’s that have contributed to Pinterest’s explosion in move to Timeline was notably Pinterest-like. popularity. Despite all the ways that Pinterest has departed from 2. Why has Pinterest demonstrated such a high the typical path of dot-com development, it has largely influence on consumers’ decision to purchase stayed the course in terms of making money. In other products? words, as of yet, Pinterest isn’t generating any revenue, 3. Discuss ways that companies can use Pinterest to instead focusing on building its base and honing its site before it tries to do so. Still, Silbermann and friends are build their own brands and generate sales. tossing lots of ideas around. For example, Pinterest could 4. What are some threats that Pinterest faces in the sell advertising, as so many other social media do. In fact, future? Give recommendations for dealing with analysts estimate that Pinterest could generate $500 mil- those threats. lion in advertising revenue in 2016 when it adopts its new ad sales platform. It could also adopt a referral fee model, Sources: Based on information from Max Chafkin, “Can Ben Silber- mann Turn Pinterest into the World’s Greatest Shopfront?” Fast retaining a percentage of the sale price of every item sold Company, October 2012, pp. 90–96+; Ekaterina Walter, “What the as the result of a pin. And there are other possibilities as Pinterest Redesign Means for Brands,” Fast Company, April 16, well. Pinterest has had no trouble raising all the venture 2013, www.fastcompany.com/3008342/what-pinterest-redesign- capital that it needs and has been valued at $2.5 billion, means-brands; and J. J. Colao, “Why Is Pinterest a $2.5 Billion despite the fact that it is yet to earn a nickel. “There was Company? An Early Investor Explains... ,” Forbes, May 8, 2013, www.forbes.com/sites/jjcolao/2013/05/08/why-is-pinterest-a- never a doubt in our minds that we could make a s#*%load 2-5-billion-company-an-early-investor-explains. of money,” says a former Pinterest employee. Apparently, investors feel the same way.  Northern Lights projection mapping, courtesy Capital Celebrations and Christie® AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO 1 explain company-wide strategic planning and its four steps 2 discuss how to design business portfolios and develop growth strategies 3 explain marketing’s role in strategic planning and how marketing works with its partners to create and deliver customer value 4 describe the elements of a customer-driven marketing strategy and mix, and the forces that influence it 5 list the marketing management functions, including the elements of a marketing plan, and discuss the importance of measuring and managing return on marketing investment  CHAPTER Company and Marketing Strategy: Partnering to Build 2 Customer Relationships PREVIEWING THE CONCEPTS In Chapter 1, we explored the marketing process by which companies create value for customers in order to capture value from them in return. In this chapter, we dig deeper into steps two and three of the marketing process—designing customer-driven marketing strategies and constructing marketing pro- grams. First, we look at the organization’s overall strategic planning, which guides marketing strategy and planning. Next, we discuss how, guided by the strategic plan, marketers partner closely with others inside and outside the firm to create value for customers. We then examine marketing strategy and planning—how marketers choose target markets, position their market offerings, develop a marketing mix, and manage their marketing programs. Finally, we look at the important step of measuring and managing return on marketing investment (marketing ROI). Let’s look at an example of a Canadian company whose careful strategic planning has helped it capitalize on a revolutionary new market—the need for ultra-high-tech visual display systems used in business, government, entertainment, and even advertising. ORGANIZING AND PLANNING FOR SUCCESS AT CANADA’S CHRISTIE DIGITAL SYSTEMS Christie Digital Systems Canada is a global visual technology company and a leader in Canada’s ICT (information and communications technology) industry. The company designs and manufactures a variety of display technologies and solutions for cinema, large audience environments, control rooms, business presentations, training facilities, 3-D and virtual reality, simulation, education, media, and government. Its flagship line has been its digital cinema solutions—Christie is the only single-source provider of cinema projectors in all of North America, and one of only a handful in the world. The firm’s design and engi- neering facility and main manufacturing facility are located in Kitchener, Ontario. Christie Digital Systems Canada was formed in 1999, when Christie—a California- based film projector manufacturer—merged with Electrohome Visual Displays, at the time Canada’s largest consumer electronics manufacturer, based in Kitchener. Over the past decade the company has experienced rapid growth. However, success didn’t come over- night for Christie. When the company took its present form in late 1999, the first year’s revenue for the new organization was about $100 million, and the Kitchener facility 44 PART 1 Defining Marketing and the Marketing Process employed only 200 people. Today, annual revenues top $800 million and the employees number more than 1400 worldwide, with 700 in Kitchener. And it was more than just the corporate letterhead that changed after the acquisition. The company had to change its business strategy as well as its marketing strategy. Christie Digital Systems Canada president Gerry Remers explains: “We went from being a com- pany that was focused on its traditional dealer channels to a company whose product strategy was focused on the entertainment and film industries—a market that changes rapidly.” This flexibility and commitment to innovation has led to an evolving mission for the company, which is to help its customers create and share the world’s best visual experi- ences. Remers says that Christie has expanded beyond the entertainment industry to encompass the “unlimited opportunity in the area of visual communication, so we are going to continue to develop new products and new solutions to meet the needs of the market. The fact of the matter is we’re going to see pixels everywhere.” The products that Christie designs, manufactures, and markets are not sold to con- sumers, though most consumers are probably familiar with the results. For example, Christie’s projection or image-mapping projectors and software are used by scores of amusement parks, public festivals, and advertising agencies to deliver compelling visual content to all manner of outdoor and indoor surfaces. The company’s technologies are also used by the post-production facilities of such filmmakers as James Cameron to pro- duce high-resolution and immersive 3-D movie-going experiences. Christie signed a five- year agreement with Cameron’s Lightstorm Entertainment to exchange research, testing, development, and technical support on the industry’s most exciting new technology—high frame rate (HFR) movies that end the eye strain and nausea often associated with 3-D film viewing. Cameron said that he selected Christie for this “journey of discovery” because the company is fully committed to his vision and shares his dedication to continually push the boundary of digital cinema. The full potential of 3-D and HFR technology to fully immerse audiences in the world of the movie before them is the holy grail of cinematography. Peter Jackson’s Park Road Post Production group also uses Christie technology, and Christie projectors were chosen for the world premiere of the first-ever HFR 3-D feature- length movie, The Hobbit: An Unexpected Journey. For several summers, Christie’s projection mapping technology has turned Ottawa’s Parliament Hill into a virtual storybook with the production of a sound and light show. First there was “Mosaika—Canada through the Eyes of Its People;” later, a new show called Northern Lights. These shows are accompanied by a surround sound system and an audio track, and the digital lights “paint” a video canvas onto the six-story-high Parliament Build- ing Centre Block, including the iconic Peace Tower in the middle. And those are just a few examples of where people might encounter Christie’s technology. The company has installed more than 100 000 projection solutions worldwide and is recognized as one of the most innovative visual technology companies in the world, boasting 12 major patents, two Academy Awards, and countless industry awards. In terms of top-level corporate organization, Christie Digital Systems Canada is a sub- sidiary of Christie Digital Systems, which in turn is a wholly owned subsidiary of Ushio Inc. of Japan. Its sister subsidiary is Christie Digital Systems USA, and both Christie Canada and Christie USA have their own presidents, reporting to the CEO and president of Christie Digital Systems, Inc. Christie has four major strategic business units (or SBUs): entertain- ment solutions, business products, visual environments, and managed services. Within these business units there are groups tasked with developing solutions for the following segmented markets: entertainment (both cinema and staging venues), visualization,  CHAPTER 2 Company and Marketing Strategy: Partner ing to Build Customer Relationships 45 business products, control room solutions, digital signage, managed (professional) ser- vices, medical imaging, and simulation solutions. Christie also has three subsidiary compa- nies: Christie Medical (Memphis, Tennessee), Vista Systems (Phoenix, Arizona), and Nationwide (equipment leasing). Christie’s vice-president of global and corporate marketing, Kathryn Cress, is respon- sible for strategic planning and for reaching Christie’s strategic marketing objectives: world- wide brand recognition and market leadership. She oversees brand equity management to ensure the delivery of tightly integrated global marketing strategies and communications. She is also responsible for outbound marketing programs, including the promotion of product launches, public relations, trade shows, events, partner marketing, advertising, Web marketing, and messaging platforms. Under her supervision, Christie’s marketing function has been organized into six main departments: experiential marketing, digital mar- keting, marketing programs, communications and branding, publicity and promotions, and media and public relations. Outside the organization, Christie’s key suppliers and distributors compose part of its value delivery network—the chain of partner organizations that supply the raw materials to the manufacturing plant and the partner organizations that help move the finished products into the hands of end-user customers. The company has a mission statement for working with supplier partners: “Our mission is to drive world class value from our supply chain to meet Christie’s business goals through proactive supplier and Christie stakeholder engage- ment, timely responsiveness, and the relentless pursuit of continuous improvement.” As for distribution, Christie sells its products through both a direct sales force and a multichannel system, including distributors who sign a contract committing them to pur- chase a minimum dollar amount of product, which they then resell to dealer/integrators; VIP partners, who are dealer/integrators that purchase more than six figures annually, then sell to end-user customers. There are also rental and staging companies that buy Christie products to run their productions, but that don’t necessarily resell those products. And you might recognize the names of some of Christie’s largest customers: Starbucks, Cineplex Entertainment, the London Stock Exchange, Boeing, Paramount, Cinépolis, IBM, Univer- sity of Waterloo, Harrods, Industrial Light & Magic, Loews, the Montreal Police Service, Shell, and Deutsche Telekom. In keeping with the company’s leading-edge technology philosophy, Christie is fully engaged with social media. After each trade show appearance, the company’s market- ing managers produce an internal report on the show’s effect on social media. For example, they count the number of mentions on Twitter and YouTube before and after the show. They also track the postings of industry bloggers and discover new bloggers who write about projection technology. On Facebook, they track the number of views of content related to the show; for example, the press releases and photo albums. In sum- marizing the social media findings after one trade show, the marketing managers noted that, in the future, Christie should explore using bloggers as a way of telling stories about Christie’s presence at future trade shows and to develop these stories into con- tent marketing. As the global need for increased security and mission-critical public and private ser- vices expands, Christie is pouring more research into delivering solutions for the most complex control room environments. What sets Christie apart from—and ahead of—its global competitors? A spirit of teamwork and a welcoming attitude toward change are the building blocks upon which Christie has become number one in its customers’ estimation, by delivering quality customer service, reliable products, and innovative solutions.1 46 PART 1 Defining Marketing and the Marketing Process LIKE Christie, outstanding marketing organizations employ strongly customer-driven marketing strategies and programs that create customer value and relationships. These marketing strategies and programs, however, are guided by broader company-wide stra- tegic plans, which must also be customer focused. Thus, to understand the role of mar- keting, we must first understand the organization’s overall strategic planning process. Company-Wide Strategic Planning: Defining Marketing’s Role LO1 Each company must find the game plan for long-run survival and growth that makes the most sense given its specific situation, opportunities, objectives, and resources. Strategic planning This is the focus of strategic planning—the process of developing and maintaining The process of developing and a strategic fit between the organization’s goals and capabilities and its changing mar- maintaining a strategic fit between the keting opportunities. organization’s goals and capabilities Strategic planning sets the stage for the rest of the planning in the firm. Companies and its changing marketing usually prepare annual plans, long-range plans, and strategic plans. The annual and long- opportunities. range plans deal with the company’s current businesses and how to keep them going. In contrast, the strategic plan involves adapting the firm to take advantage of opportunities in its constantly changing environment. At the corporate level, the company starts the strategic planning process by defin- ing its overall purpose and mission (see Figure 2.1). This mission is then turned into detailed supporting objectives that guide the whole company. Next, senior managers at the corporate level decide what portfolio of businesses and products is best for the company and how much support to give each one. In turn, each business and product develops detailed marketing and other departmental plans that support the company- wide plan. Thus, marketing planning occurs at the business-unit, product, and market levels. It supports company strategic planning with more detailed plans for specific marketing opportunities. Defining a Market-Oriented Mission An organization exists to accomplish something, and this purpose should be clearly stated. Forging a sound mission begins with the following questions: What is our busi- ness? Who is the customer? What do consumers value? What should our business be? These simple-sounding questions are among the most difficult the company will ever have to answer. Successful companies continually raise these questions and answer them carefully and completely. Mission statement Many organizations develop formal mission statements that answer these questions. A statement of the organization’s A mission statement is a statement of the organization’s purpose—what it wants to purpose—what it wants to accomplish accomplish in the larger environment. A clear mission statement acts as an “invisible in the larger environment. hand” that guides people in the organization. FIGURE 2.1 Steps in Strategic Planning Business unit, product, Corporate level and market level Defining Setting company Designing Planning marketing the company objectives the business and other functional mission and goals portfolio strategies  CHAPTER 2 Company and Marketing Strategy: Partner ing to Build Customer Relationships 47 Some companies define their missions in product or technology terms (“We make and sell furniture” or “We are a chemical-processing firm”), and then run into problems when the nature of the market changes. Marketing guru Theodore Levitt calls this problem “marketing myopia,” and suggests that mission statements should be market oriented and defined in terms of satisfying basic customer needs. Products and technologies eventually become outdated, but basic market needs may last for- ever. Indigo Books & Music’s mission isn’t simply to sell books and music. Its mis- sion is “to inspire our customers and those they care about with life-enriching products and experiences.” Likewise, Under Armour’s mission isn’t just to make performance sports apparel, it’s “to make all athletes better through passion, design, and the relentless pursuit of innovation.” Table 2.1 provides several other examples of product-oriented versus market-oriented business definitions.2 Mission statements should be meaningful and specific, and yet motivating at the same time. They should emphasize the company’s strengths in the marketplace. Too often, mission statements are written for public relations purposes and lack specific, workable guidelines. Instead, they should emphasize the company’s Indigo strengths and forcefully declare how it intends to win in the marketplace. For example, Google’s mission isn’t to be the world’s best search engine; it’s to organize Exhibit 2.1 Indigo Books & Music’s mission the world’s information and make it universally accessible and useful. is “to inspire our customers and those they Finally, a company’s mission should not be stated as making more sales or care about with life-enriching products and profits—profits are only a reward for creating value for customers. Instead, the experiences.” mission should focus on customers and the customer experience the company seeks to create. Take Buffalo Wild Wings, for example. This sports bar chain started in Ohio in 1982 and now has more than 1000 locations in the U.S., Canada, and Mexico—but doesn’t even mention wings in its mission statement: Customers do, in fact, come to Buffalo Wild Wings to eat wings and drink beer, but also to watch sports, trash talk, cheer on their sports teams, and meet old friends Reprinted by permission of Buffalo Wild Wings, Inc. Buffalo Wild Wings® is a and make new ones—that is, a total eating and social experience. “We realize that we’re not just in the business From www.buffalowildwings.com. ©2013 by Buffalo Wild Wings, Inc. of selling wings,” says the company. “We’re something much bigger. We’re in the business of fueling the sports fan experience.” True to that broader mission, Buffalo Wild Wings creates in-store and online promotions that inspire camaraderie. “It’s about giving them tools to not just be spectators but advocates of the brand,” says the registered trademark of Buffalo Wild Wings, Inc. chain. For example, the brand’s very active website draws 1.4 million visitors per month, and its Facebook page has more than 10 million fans. Pursuing a customer-focused mission has paid big dividends for Buffalo Wild Wings. The wing joint’s sales have quadrupled in the past eight years and the company brags that it’s the number one brand in its industry for fan engagement.3 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 respon- Exhibit 2.2 Customer-focused mission: The fast-growing Buffalo Wild Wings chain’s mission is to provide a total eating and social environment that “fuels the sible for reaching them. For example, most consum- sports fan experience.” As a result, it creates in-store and online experiences that ers recognize the name Heinz for its ketchup—the promote brand fan engagement. company, H.J. Heinz, sells more than 650 billion  48 PART 1 Defining Marketing and the Marketing Process TABLE 2.1 Market-Oriented Business Definitions Company Product-Oriented Definition Market-Oriented Definition Facebook We are an online social network. We connect people around the world and help them share important moments in their lives. Google We operate an online search engine. We help you organize the world’s information and make it universally accessible and useful. Home Depot We sell tools and home repair and We empower consumers to achieve the homes of improvement items. their dreams. Revlon We make cosmetics. We sell lifestyle and self-expression; success and status; memories, hopes, and dreams. Ritz-Carlton Hotels & We rent rooms. We create the Ritz-Carlton experience—one that Resorts enlivens the senses, instills well-being, and fulfills even the unexpressed wishes and needs of our guests. bottles of ketchup each year. But Heinz owns a breadth of other food products under a variety of brands, marketed in different countries around the world. For example, Heinz’s most popular Canadian brands are Heinz Ketchup, Heinz 57, and Alpha-Getti. In New Zealand, Heinz markets food products such as condensed tomato soup under the brand Watties; and Plasmon, a Heinz-owned brand, is the leading brand of infant/ nutrition products in Italy. Globally, Heinz ties this diverse product portfolio together under what it calls a vision statement rather than a mission statement: “To be the best food company, growing a better world.” This broad mission leads to a hierarchy of objectives, including business objectives and marketing objectives. Heinz’s main business objective is to be the best food company. It does this by investing OUR VISION: heavily in research. However, research is expensive and must be TO BE THE BEST FOOD COMPANY, funded through improved profit, so improving profits becomes GROWING A BETTER WORLD. another major objective for Heinz. Profits can be improved by increasing sales or reducing costs. Sales can be increased by improving the company’s share of domestic and international markets. These goals then become the company’s current marketing objectives. Marketing strategies and programs must be developed to support these marketing objectives. To increase its market share, Heinz is con- stantly broadening its product lines and expanding into new markets. For example, in the last few years Heinz added breakfast products to © H.J. Heinz Company, Used with permission its Weight Watchers Smart Ones brand, a new line of potatoes called Grillers to its Ore Ida brand, and Balsamic Ketchup to its ketchup line in Canada. The company works at expanding its ability to create and manufacture new products, for example by purchasing an 80 percent stake in Quero (a Brazilian brand of tomato-based sauces, ketchup, condiments, and vegetables) and, more recently, by partnering with the Chinese government to build the largest infant cereal production plant in the world in Foshan City, Guangdong province.4 These are Heinz’s broad marketing strategies. Each broad market- ing strategy must then be defined in greater detail. For example, increasing the product’s promotion may require more advertising and Exhibit 2.3 Company objectives: Heinz’s overall objective is public relations efforts; if so, both requirements will need to be spelled “to be the best food company, growing a better world.” out. In this way, the firm’s mission is translated into a set of objectives for the current period.  CHAPTER 2 Company and Marketing Strategy: Partner ing to Build Customer Relationships 49 Designing the Business Portfolio LO2 Guided by the company’s mission statement and objectives, management must now plan its business portfolio—the collection of businesses and products that make up the Business portfolio company. The best business portfolio is the one that best fits the company’s strengths and The collection of businesses and weaknesses to opportunities in the environment. products that make up the company. Most large companies have complex portfolios of businesses and brands. Strategic and marketing planning for such business portfolios can be a daunting but critical task. Consider the size and scope of Rogers Communications Inc., for example. Rogers is a large and diversified communications and media company that operates a number of businesses. The company operates in four main areas: it is Canada’s largest provider of wireless communications services and runs a chain of retail stores; it pro- vides cable television and high-speed Internet services; it offers business telecom, data networking, and IP solutions to small, medium, and large enterprises and government customers; and it owns large-scale media assets, including television stations, radio stations, the Toronto Blue Jays and Rogers Centre, the Shopping Channel, and dozens of publications in English and French, including Chatelaine, Maclean’s, Flare, Market- ing, Canadian Business, Today’s Parent, and Sportsnet, in both print and digital formats. Managing this vast business portfolio profitably requires a combination of diligence, skill, and talent. Whether the company’s business portfolio consists of only one or two operations or dozens, the strategic planning process is the same: First, the company must analyze its current business portfolio and determine which businesses should receive more, less, or no investment. Second, it 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 man- Portfolio analysis agement evaluates the products and businesses that make up the company. The company The process by which management will want to put strong resources into its more profitable businesses and phase down or evaluates the products and businesses drop its weaker ones. that make up the company. Management’s first step is to identify the key businesses that make up the company, called strategic business units (SBUs). An SBU can be a company division, a product line within a division, or sometimes a single prod- uct or brand. The company next assesses the attractiveness of its various SBUs and decides how much support each deserves. When designing a business portfolio, it’s a good idea to add and support products and businesses © Rogers Communications Inc. that fit closely with the firm’s core philoso- phy and competencies. 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 Exhibit 2.4 Managing the business portfolio: Many people think of Rogers as just the cable attractiveness of the SBU’s market or indus- company, but in reality it is a collection of media and entertainment businesses. try, and the strength of the SBU’s position in 50 PART 1 Defining Marketing and the Marketing Process FIGURE 2.2 The BCG Growth–Share Matrix Star Question mark High Market growth rate Low Cash cow Dog High Low Relative market share that market or industry. The best-known portfolio-planning method was developed by the Boston Consulting Group, a leading management consulting firm.5 The Boston Consulting Group Approach Using the now-classic Boston Consulting Growth–share matrix Group (BCG) approach, a company classifies all its SBUs according to the growth–share A portfolio-planning method that matrix, as shown in Figure 2.2. On the vertical axis, market growth rate provides a measure evaluates a company’s strategic of market attractiveness. On the horizontal axis, relative market share serves as a measure of business units (SBUs) in terms of its company strength in the market. The growth–share matrix defines four types of SBUs: market growth rate and relative market share. SBUs are classified as stars, Stars. Stars are high-growth, high-share businesses or products. They often need cash cows, question marks, or dogs. heavy investments to finance their rapid growth. Eventually their growth will slow down, and they will turn into cash cows. Cash Cows. Cash cows are low-growth, high-share businesses or products. These established and successful SBUs need less investment to hold their market share. Thus, they produce a lot of cash that the company uses to pay its bills and support other SBUs that need investment. Question Marks. Question marks are low-share business units in high-growth mar- kets. They require a lot of cash to hold their share, let alone increase it. Management has to think hard about which question marks it should try to build into stars and which should be phased out. Dogs. Dogs are low-growth, low-share businesses and products. They may generate enough cash to maintain themselves but do not promise to be large sources of cash. The 10 circles in the growth–share matrix represent a company’s 10 current SBUs. The company has two stars, two cash cows, three question marks, and three dogs. The areas of the circles are proportional to the SBU’s dollar sales. This company is in fair shape, although not in good shape. It wants to invest in the more promising question marks to make them stars and to maintain the stars so that they will become cash cows as their markets mature. Fortunately, it has two good-sized cash cows. Income from these cash cows will help finance the company’s question marks, stars, and dogs. The company should take some decisive action concerning its dogs and its question marks. Once it has classified its SBUs, the company must determine what role each will play in the future. One of four strategies can be pursued for each SBU. The company can invest more in the business unit to build its share. Or it can invest just enough to hold the SBU’s share at the current level. It can harvest the SBU, milking its short-term cash flow  CHAPTER 2 Company and Marketing Strategy: Partner ing to Build Customer Relationships 51 regardless of the long-term effect. Finally, the company can divest the SBU by selling it or phasing it out and using the resources elsewhere. As time passes, SBUs change their positions in the growth–share matrix. Many SBUs start out as question marks and move into the star category if they succeed. They later become cash cows as market growth falls, then finally die off or turn into dogs toward the end of their life cycles. The company needs to continually add Martin Beddall/Alamy new products and units so that some of them will become stars and, eventually, cash cows that will help finance other SBUs. Problems with Matrix Approaches The BCG and other formal methods revolutionized strategic planning. However, such centralized Exhibit 2.5 Strategic planning through cross-functional teams: One of the reasons why approaches have limitations: They can be diffi- Disney is a top media conglomerate is that it disabled its centralized strategic planning group cult, time-consuming, and costly to implement. and replaced it with division managers. Management may find it difficult to define SBUs and measure market share and growth. In addition, these approaches focus on clas- sifying current businesses but provide little advice for future planning. Because of such problems, many companies have dropped formal matrix methods in favour of more customized approaches that better suit their specific situations. Moreover, unlike former strategic-planning efforts that rested mostly in the hands of senior manag- ers at company headquarters, today’s strategic planning has been decentralized. Increas- ingly, companies are placing responsibility for strategic planning in the hands of cross-functional teams of divisional managers who are close to their markets. For example, consider The Walt Disney Company. Most people think of Disney as theme parks and wholesome family entertainment. But in the mid-1980s, Disney set up a powerful, centralized strategic planning group to guide the company’s direc- tion and growth. Over the next two decades, the strategic planning group turned The Walt Disney Company into a huge and diverse collection of media and entertainment businesses. The sprawling Walt Disney Company grew to include everything from theme resorts and film studios (Walt Disney Pictures, Touchstone Pictures, Pixar, and others) to media networks (ABC Television plus Disney Channel, ESPN, A&E, His- tory Channel, and a half-dozen others), consumer products, and a cruise line. The newly transformed Disney proved hard to manage and performed unevenly. To improve performance, Disney disbanded the centralized strategic planning unit, decentralizing its functions to Disney division managers. As a result, Disney retains its position at the head of the world’s media conglomerates. Disney’s sound strate- gic management of its broad mix of businesses has helped it fare better than rival media companies.6 Developing Strategies for Growth and Downsizing Beyond evaluating current busi- nesses, designing the business portfolio involves finding businesses and products the com- pany should consider in the future. Companies need growth if they are to compete more effectively, satisfy their stakeholders, and attract top talent. At the same time, a firm must be careful not to make growth itself an objective. The company’s objective must be to manage profitable growth. Marketing has the main responsibility for achieving profitable growth for the company. Marketing needs to identify, evaluate, and select market opportunities and establish strategies 52 PART 1 Defining Marketing and the Marketing Process FIGURE 2.3 The Product–Market Expansion Grid Existing New products products Market Product Existing penetration development markets New Market Diversification markets development Product–market expansion grid for capturing them. One useful device for identifying growth opportunities is the product– A portfolio-planning tool for identifying market expansion grid, shown in Figure 2.3.7 We apply it here to Starbucks. company growth opportunities through In only three decades, Starbucks has grown at an astonishing pace, from a small Seattle coffee market penetration, market shop to a nearly $13.3 billion powerhouse with more than 18 000 retail stores in 62 countries. development, product development, or In the United States alone, Starbucks serves more than 70 million espresso-dependent cus- diversification. tomers each week. Starbucks gives customers what it calls a “third place”—away from home and away from work. Growth is the engine that keeps Starbucks perking. However, in recent years, the company’s remarkable success has drawn a full litter of copycats, ranging from direct competitors such as Caribou Coffee to fast-food merchants such as McDonald’s McCafé. Almost every eatery, it seems, now serves its own special premium brew. To maintain its incredible growth in an increasingly overcaffeinated marketplace, Starbucks must brew up an ambitious, multipronged growth strategy.8 First, Starbucks’ management might consider whether the company can achieve Market penetration deeper market penetration—making more sales to current customers without chang- A strategy for company growth by ing its original products. It might add new stores in current market areas to make it easier increasing sales of current products to for customers to visit. In fact, Starbucks plans to add 3000 new stores over the next few current market segments without years. Improvements in advertising, prices, service, menu selection, or store design might changing the product. encourage customers to stop by more often, stay longer, or buy more during each visit. For example, Starbucks is remodelling many of its stores to give them more of a neigh- bourhood feel—with earth tones, wood counters, and handwritten menu boards. And to boost business beyond the breakfast rush, which still constitutes the bulk of the company’s revenue, the chain has added an evening menu in some markets featuring wine, beer, and tapas such as “Warmed Rosemary and Brown Sugar Cashews” and “Bacon Wrapped Dates with Balsamic Glaze.” Market development Second, Starbucks might consider possibilities for market development—identifying A strategy for company growth by and developing new markets for its current products. For instance, managers could review identifying and developing new market new demographic markets. Perhaps new groups—such as seniors—could be encouraged segments for current company to visit Starbucks coffee shops for the first time or to buy more from them. Managers products. could also review new geographic markets. Starbucks is now expanding swiftly in non- U.S. markets, especially Asia. The company has 1000 stores in Japan, more than 1500 stores in China, and approximately 700 in South Korea. Product development Third, Starbucks could consider product development—offering modified or new A strategy for company growth by products to current markets. For example, to capture a piece of the $2 billion single-serve offering modified or new products to market, Starbucks developed Via instant coffee, and sells its coffees and Tazo teas in K-Cup current market segments. packs that fit Keurig at-home brewers. Starbucks has also introduced a lighter-roast coffee called Blonde, developed to meet the tastes of the 40 percent of U.S. coffee drinkers who prefer lighter, milder roasts. As well, Starbucks is forging ahead into new product catego- Diversification ries. For instance, it has entered the US$8 billion energy drink market with Starbucks A strategy for company growth through Refreshers, a beverage that combines fruit juice and green coffee extract. starting up or acquiring businesses Finally, Starbucks might consider diversification—starting up or buying businesses outside the company’s current products beyond its current products and markets. For example, the company acquired Evolution and markets. Fresh, a boutique provider of super-premium fresh-squeezed juices. Starbucks intends to  CHAPTER 2 Company and Marketing Strategy: Partner ing to Build Customer Relationships 53 use Evolution as its entry into the “health and wellness” category, including stand-alone stores called Evolution By Starbucks. Companies must not only develop strategies for growing their business portfolios but also strate- gies for downsizing them. There are many rea- sons why a firm might want to abandon products or markets. The firm may have grown too fast or Bloomberg/Getty Images entered areas where it lacks experience. The mar- ket environment might change, making some of the company’s products or markets less profitable. For example, in difficult economic times, many firms prune out weaker, less-profitable products and markets to focus their more limited resources on the strongest ones. Finally, some products or Exhibit 2.6 Strategies for growth: business units simply age and die. To maintain its incredible growth, When a firm finds brands or businesses that are unprofitable or that no longer fit its Starbucks has brewed up an ambitious, overall strategy, it must carefully prune, harvest, or divest them. For example, P&G sold multipronged growth strategy. off the last of its food brands, Pringles, to Kellogg, allowing the company to focus on household care and beauty and grooming products. And in recent years, GM has pruned Downsizing several underperforming brands from its portfolio, including Oldsmobile, Pontiac, Sat- Reducing the business portfolio by urn, Hummer, and Saab. Weak businesses usually require a disproportionate amount of eliminating products or business units management attention. Managers should focus on promising growth opportunities that are not profitable or that no longer instead of frittering away energy trying to salvage fading ones. fit the company’s overall strategy. Planning Marketing: Partnering to Build Customer Relationships LO3 The company’s strategic plan establishes what kinds of businesses the company will oper- ate and its objectives for each. Then, within each business unit, more detailed planning takes place. The major functional departments in each unit—marketing, finance, accounting, purchasing, operations, information systems, human resources, and others— must work together to accomplish strategic objectives. Marketing plays a key role in the company’s strategic planning in several ways. First, marketing provides a guiding philosophy—the marketing concept—that suggests that company strategy should revolve around building profitable relationships with important consumer groups. Second, marketing provides inputs to strategic planners by helping to identify attractive market opportunities and by assessing the firm’s potential to take advantage of them. them Finally, within individual business units, marketing designs strategies for reaching the unit’s objectives. Once the unit’s objectives are set, marketing’s task is to help carry them out profitably. Customer value is the key ingredient in the marketer’s formula for success. success However, as we noted in Chapter 1, marketers alone cannot produce superior value for customers customers. Although marketing plays a leading role, it can be only a partner in attracting, keeping, and growing customers. In addition to customer relationship management, marketers must practise partner relationship management. They must work closely with partners in other company departments to form an effective internal value chain that serves the customer. Moreover, they must partner effectively with other companies in the marketing system to form a competitively superior external value delivery network. One company that epitomizes the concept of providing value for its customers by developing relationships with them is Nike. (See Marketing@Work 2.1.) 54 PART 1 Defining Marketing and the Marketing Process MARKETING@WORK 2.1 Nike’s Customer-Driven Marketing: Building Brand Engagement and Community The Nike “swoosh”—it’s everywhere! climbing, bicycling, and hiking. It seemed According to one industry analyst, “The Just for fun, try counting the swooshes that things just couldn’t be going any legendary brand blew up its single-slo- whenever you pick up the sports pages better. In the late 1990s, however, Nike gan approach and drafted a whole new or watch a basketball game or tune into stumbled and its sales slipped. As the playbook for the digital era.” a televised soccer match. Over the past company grew larger, its creative juices Nike still invests heavily in traditional nearly 50 years, through innovative mar- seemed to run a bit dry and buyers advertising. But its spending on TV and keting, Nike has built the ever-present seeking a new look switched to compet- print media has dropped by a whopping swoosh into one of the best-known ing brands. Looking back, Nike’s biggest 30 percent in only three years, even as its brand symbols on the planet. obstacle may have been its own incred- global marketing budget has increased Early on, a brash, young Nike revolu- ible success. As sales grew, the swoosh steadily. Traditional media now account tionized sports marketing. To build image may have become too common to be for only about 20 percent of the brand’s and market share, the brand lavishly out- cool. Instead of being anti-establishment, $1 billion U.S. promotion budget. Instead, spent competitors on big-name endorse- Nike was the establishment, and its hip, Nike spends the lion’s share of its mar- ments, splashy promotional events, and once-hot relationship with customers keting budget on nontraditional media. big-budget, in-your-face “Just Do It” ads. cooled. Nike needed to rekindle the Using community-oriented, digital-based Whereas competitors stressed technical brand’s meaning to consumers. social networking tools, Nike is now performance, Nike built customer rela- To turn things around, Nike returned building communities of customers who tionships. Beyond shoes, apparel, and to its roots: new product innovation and talk not just with the company about the equipment, Nike marketed a way of life, a a focus on customer relationships. But it brand, but with each other as well. genuine passion for sports, a “just do it” set out to forge a new kind of brand– Nike has mastered social networking, attitude. Customers didn’t just wear their customer connection—a deeper, more both online and off. Whether customers Nikes, they experienced them. As the personal, more engaging one. This time come to know Nike through ads, in-per- company stated on its site, “Nike has around, rather than simply outspending son events at Niketown stores, a local always known the truth—it’s not so much competitors on big media ads and Nike running club, or at one of the com- the shoes but where they take you.” celebrity endorsers who talk at custom- pany’s profusion of community Web and Nike powered its way through the ers, Nike shifted toward cutting-edge social media sites, more and more people early years, aggressively adding prod- digital and social media marketing tools are bonding closely with the Nike brand. ucts in a dozen new sports, including that interact with customers to build Nike has raced ahead of its industry baseball, golf, skateboarding, wall brand connections and community. in the use of today’s new social network- ing tools. In a ranking of 42 sportswear companies, digital consultancy L2 crowned Nike “top genius” in “digital IQ” for its innovative use of online, mobile, and social media. L2 also placed Nike first in creating brand “tribes”—large groups of highly engaged users—with the help of social media platforms such Stefano Dal Pozzolo/Newscom as Facebook, Twitter, Instagram, and Pinterest. For example, the main Nike Facebook page has more than 23 million Likes. The Nike Basketball page adds another 8 million, NIKEiD 2.5 million more, and Nike Running another 5.6 mil- lion. More than just numbers, Nike’s social media presence engages custom- ers at a high level and gets them talking Exhibit 2.7 Nike has mastered social networking, both online and off, creating deep with each other about the brand. engagement and community among customers. Its Nike+ and FuelBand apps and Nike excels at cross-media cam- technologies have made Nike a part of the daily fitness routines of millions of customers paigns that integrate the new media with around the world. traditional tools to build brand commu- nity. For example, Nike’s “Find Your  CHAPTER 2 Company and Marketing Strategy: Partner ing to Build Customer Relationships 55 Greatness” campaign for the 2012 Nike Fuel points. “Life is a sport,” the headlines from Twitter, or videos that Olympics launched two days before the video concludes. “Make it count.” Every- debut on YouTube rather than on prime- opening ceremonies—not with splashy day athletes can use NikeFuel to track time TV. More than just something to buy, media ads but with a video posted on their personal performance, then share the Nike brand has once again become a YouTube, Nike websites, and other digital and compare it across sports and geo- part of customers’ lives and times. platforms. The compelling video featured graphic locations with others in the As a result, Nike remains the world’s people getting in touch with their inner global Nike community. The Nike+ Fuel- largest sports apparel company, an athlete. Then, on opening day, Nike fol- Band mobile app lets users watch their impressive 25 percent larger than clos- lowed up with big-budget TV ads in 25 progress, get extra motivation on the go, est rival Adidas. During the past several countries based on the video. But rather and stay connected with friends. years, even as the faltering economy left than just running the ads in isolation, the Nike+ has engaged a huge global most sports apparel and footwear com- campaign urged customers to share brand community. The tickers on nikep- petitors gasping for breath, Nike’s global their feelings about the “Find Your Great- lus.com update continually with numbers sales and income sprinted ahead nearly ness” message via Twitter and other digi- in the billions: 35 566 409 830 steps 60 percent. tal media using a “#findgreatness” taken, 50 841 842 647 calories burned, As in sports competition, the stron- hashtag. Within a month, the video had and 14 364 639 579 NikeFuel points gest and best-prepared brand has the been viewed more than 5 million times earned. The site also tracks personal best chance of winning. With deep on Nike’s YouTube channel alone. achievements earned and daily goals hit brand–customer relationships comes Nike has also built brand community by individuals in the Nike+ community. To powerful competitive advantage. And through groundbreaking mobile apps date, the millions of Nike+ users world- Nike is once again very close to its cus- and technologies. For example, its Nike+ wide have logged 844 265 265 miles. tomers. Notes Nike CEO Mark Parker, apps have helped Nike become a part of That’s 33 740 trips around the world, or “Connecting used to be, ‘Here’s some the daily fitness routines of millions of 1759 journeys to the moon and back. product, and here’s some advertising. customers around the world. The Nike+ Thus, Nike has built a new kinship and We hope you like it.’ Connecting today is FuelBand, for instance, is an ergonomic sense of community with and between a dialogue.” work of art. Worn on the wrist, FuelBand the brand and its customers. Nike’s mar- converts just about every imaginable keting strategy is no longer only about Sources: Austin Carr, “Nike: The No. 1 Most Innovative Company of 2013,” Fast Company, March 2013, pp. 89–93+; physical movement into NikeFuel, Nike’s big-budget ads at arm’s length and aloof Mary Lisbeth D’Amico, “Report Sends Nike and Adidas to Head own universal activity metric. According celebrity endorsers. Instead, the brand is of Digital Marketing Class,” Clickz, September 25, 2012, www. to a Nike video called “Counts,” whether connecting directly with customers, clickz.com/clickz/news/2208172/report-sends-nike-and- adidas-to-head-of-digital-marketing-class; Brian Morrissey, your activity is running, jumping, base- whether it’s through local running clubs, a “Nike Plus Starts to Open Up to Web,” Adweek, July 20–July ball, skating, dancing, stacking sports performance-tracking wristband, a 27, 2009, p. 8; and Sebastian Joseph, “Nike Takes Social cups, or chasing chickens, it counts for 30-storey billboard that posts fan Media In-House,” Marketing Week, January 3, 2013. Partnering with Other Company Departments Each company department can be thought of as a link in the company’s internal value Value chain chain.9 That is, each department carries out value-creating activities to design, produce, The series of internal departments that market, deliver, and support the firm’s products. The firm’s success depends not only on carry out value-creating activities to how well each department performs its work, but also on how well the various depart- design, produce, market, deliver, and ments coordinate their activities. support a firm’s products. For example, Walmart’s goal is to create customer value and satisfaction by providing shoppers with the products they want at the lowest possible prices. Marketers at Walmart play an important role. They learn what customers need and stock the stores’ shelves with the desired products at unbeatable low prices. They prepare advertising and merchandis- ing programs and assist shoppers with customer service. Through these and other activi- ties, Walmart’s marketers help deliver value to customers. However, the marketing department needs help from the company’s other depart- ments. Walmart’s ability to help you “Save Money. Live Better” depends on the purchas- ing department’s skill in developing the needed suppliers and buying from them at low cost. Walmart’s information technology (IT) department must provide fast and accurate information about which products are selling in each store. And its operations people must provide effective, low-cost merchandise handling.