MKTG 3310 Chapter 2 PDF

Chapter 2: Organizing and Planning for Marketing Strategy 2.1) Marketing Strategy and Differentiation Strategy: a plan of action used to achieve a goal. The key is that the goals have to be spelled out and have to have some way to measure them (ex: “our goal is to increase sales by 10% in the next t...

Chapter 2: Organizing and Planning for Marketing Strategy 2.1) Marketing Strategy and Differentiation Strategy: a plan of action used to achieve a goal. The key is that the goals have to be spelled out and have to have some way to measure them (ex: “our goal is to increase sales by 10% in the next three months," not “we need to grow sales"). A business must think and act strategically to be successful. Business is fraught with different and conflicting goals. As a result, marketers are constantly engaged in strategy formulation. Marketing strategy: the managerial process of creating and maintaining plans for actions that facilitate exchanges that have value to both the customer and the company in an evolving environment. In basic terms, marketing strategy is goal-driven action plans that get customers to do what the company wants. 3 steps: 1. 1. Determine a plan of action a. What specific steps will be taken? regarding what we will sell, how much we will sell it for, and where and when we will sell it, and how we will promote it to our customers) First, the manager sets specific marketing goals and determines a plan of action to achieve the goals. 2. 2. Implement the plan a. tactics (How will we complete each of the actions in the plan and who will be responsible for each step?) b. Second, the plan is implemented using specific marketing tools and tactics. 3. 3. Evaluate the plan a. How will we measure if we are achieving objectives? Have to have specific measures tied directly to marketing goals: We can measure sales at the end of three months to see if we met our goal to increase sales by 10% in three months. b. Finally, the third step is to evaluate the plan activities to see what works, what doesn’t, and what needs to be adjusted to improve the likelihood of success. Key considerations for successful marketing 1. Marketing is strategic because customers don’t want the same thing the company marketing to them does Ex. example, customers want to get lots of benefits for low price but company wants to provide fewer benefits for high price—conflict is inherent in every marketing exchange so Marketing is, by definition, strategic. 2. Different marketing approaches are required for different customers ○ Ex: You can’t offer the same car to someone who is buying for prestige and luxury compared to someone who wants value and reliability—product, price, place, and promotion all need to be different to increase likelihood of an exchange. 3. Marketing success is not something that happens right away (plan on marketing outcomes take some time to be realized. Ex. Almost nobody jumps up during a basketball game to order pizza when they see a Dominoes ad during the game, but the ad still can have an impact when the customer thinks about getting pizza a couple weeks later and Dominoes comes to mind. Strategic Business Unit (SBU) A subgroup within an organization that decides its own strategy and has its own customers (Ex., General Electric has one SBU for appliances and another for jet engines. Each SBU is responsible for managing its own business and has its own set of functional units to handle the different aspects of the business. Marketing Department Marketing is, of course, one of the functional business units, with a staff that collectively makes the decisions needed to facilitate exchanges with customers—this staff is known as a marketing department. ○ The marketing department is specifically responsible for setting strategy, developing a plan, and executing activities that increase the likelihood that customers will engage with the company in exchanges. ○ Companies that focus on customers are more successful than those that focus on what they can make. Mission Statement A definition of a firm’s business focus that provides direction for a company. A good mission statement should clearly indicate what the company is about by taking into consideration what present customers and future customers might want in an exchange. Firms that focus only on what they do now rather than what they might need to do in the future miss opportunities and can become obsolete quickly. Marketing Myopia Defining your mission statement too narrowly and focusing on the company rather than the consumer and future environmental trends. What happened to Nextel and Nokia in the cell phone market? Apple entered the market with a new technology that offered the customer more value because it increased what you could do with the phone, it was stylish, and it was advanced. Today, this smartphone technology is a basic necessity in the market, but Nokia and Nextel have missed it. Railroads focused on making their railroad better, like engines and tracks, etc, but Their real business was transportation. Establishing A Competitive Advantage 1. Product differentiation: the key goal of marketing strategy is to set yourself apart from the competition, but have to do two things to work. 1. How will you be different from competitors? The difference has to be something customers can understand but can be real (different product) features) or perceived (brands have different images). BMW is more "performance,” while Mercedes is more "luxury." 2. How will the difference help us offer more value to the customers we target? The difference has to be important to target customers. something they value, so we gain an advantage over competitors. 3. Companies differentiate themselves by focusing on a unique selling proposition—the single most important point of differentiation from competitors. 4. Advantages are most profitable when the company can sustain the advantage over time. 2. Companies differentiate by focusing on a unique selling proposition. Ex. M&Ms 3. Competitive advantage: an advantage over competitors gained by offering greater customer value. Must be valuable to customers and tough for competitors to copy. Ex: Southwest Airlines When these airlines enter a specific market, they can offer a lower price than their larger competitors and still make a profit, which drove many of their larger competitors into bankruptcy and consolidation in order to compete on something other than price. 4. Once a competitive advantage has been decided, a company must be able to communicate it to customers. Marketers do this by creating a brand name to identify their products from others. An advantage one company has might be important to one customer, but another company can have a different advantage that appeals to other customers. Brand name: the collection of perceptions tied to a specific product that differentiates it from others and stands for something, like FedEx vs UPS They have different perceptions from customers Marketing is responsible for carrying out branding—the process of using marketing’s tools and tactics to reinforce perceptions of the brand in the market. 2.2) Market Planning 1. Key takeaway: creating and maintaining a competitive advantage requires all marketing activities to influence customer perceptions in a way that benefits the brand and should last. Implementing a successful marketing plan involves a high volume of planning and a coordinated marketing team effort. 2. Situation Analysis: Before a marketer decides what to do, she or he must understand the situation in great detail, as the situation dictates what is possible and sets constraints on marketing activities. ○ ○ ○ ○ ○ ○ The most common approach is SWOT 1. Strengths 2. Weaknesses 3. Opportunities 4. Threats Companies that can appropriately analyze the situation have the opportunity to take advantage of it, while those that do not will risk failure as the situation changes. 3. Marketing Objectives State what is to be accomplished through the marketing efforts. Objectives must meet several criteria to be effective. First, the objectives must be specific and not too broad. Second, objectives must be realistic. Third, objectives must be time bound. And finally, objectives should be measurable. You should be able to tell whether or not you have achieved an objective. Marketing objectives should be tied to a specific customer group. ○ Common marketing objectives are often set using actual numbers or changes in specific marketing variables such as number of customers, sales dollars, quantity sold, market share, and the like. 4. Plan ○ Since the purpose of the plan is to provide guidance for all the marketing activities, it must include all that is needed to inform all marketing decisions. ○ Identify a specific customer group (Ex. Target customer: students who are new to Auburn) ○ Pinpoint marketing objectives (Get 50 new memberships from new AU students for Fall semester.) ○ Calculate budget It might cost $2500 to create, print, and deliver flyers about the gym to student apartments near or on campus. ○ Identify the timeline Flyers need to be printed by August 1 and delivered by Aug. 15. Then measure new memberships at the end of first week of September) That is to say, activities should all have a purpose tied to one of the end marketing goals. ○ Marketing mix: the unique combination of marketing activities used to encourage and facilitate exchanges by delivering value to the customer. ○ Define specific marketing actions needed Product, place, price, promotion Each P is important, but it is the combination, the mix, that will determine the success or failure of the marketing strategy. ○ Product decisions cover what the company offers to the customer in exchange. A product could even be an idea. ○ Place (often referred to as distribution) decisions determine where and when the product will be made available to customers. ○ Price decisions set the physical cost of the product that the customer pays. Essentially, the price decision sets the minimum value for the company for the exchange. ○ Promotion decisions cover how the company will communicate its value to the customer. The promotion decisions are last in the mix because, until the specific product, place, and price have been set, it is difficult to develop a targeted promotion plan that effectively expresses value to the customer. The big difference between price and customer cost The price to go to KFC down the road might be cheaper, but if it is a hassle to go to KFC, you might eat at a hotel restaurant even though the price is higher. Hassle, time, etc. are also included in customer costs. 2.3) Marketing Implementation and Control Implementation: make sure everything is assigned to someone specifically. ○ Implementation includes detailed action assignments, descriptions of the specific activities required in the plan, timelines for completing the activities, budgets for the specific activities, and reporting and completion goals. ○ but often there are significant issues that arise during implementation that are difficult or, in some cases, impossible to predict. Three Primary Safeguards ○ First, action items in the plan are assigned to a specific person or team within the organization. ○ A second safeguard is to set expectations in terms of time, budget, and performance level where appropriate for each activity. Appropriate implementation should include expectations for sales units within a specific time frame and within a specific budget. ○ A third safeguard is developing and enforcing communication and reporting protocols during the implementation of a plan. Two Major Tools 1. Marketing dashboard: a snapshot of key marketing performance measures in a single display used to monitor strategic marketing performance (see slides for examples. 1. Provides current diagnostic information about the current performance in several key marketing performance dimensions. 2. While marketing dashboards provide a quick snapshot or summary of the current state of performance for key marketing indicators, a dashboard does not cover all the critical components in the marketing system, nor does it provide the marketer with explanations for why something is not as it should be. 3. Key measures on the dashboard are tracked so the manager can monitor the progress (or lack thereof) in real time. 4. The dashboard will also only be effective if thresholds have been developed that measure ongoing activity relative to expectations. 2. Marketing audit: a comprehensive investigation of the full marketing mix or a subset of the mix ( could even be a single activity) with the intention of checking for problems and uncovering reasons why a marketing activity is not performing as effectively as expected. When a more formal assessment is required, companies will use their second tool for assessing market performance and perform a marketing audit. Companies use dashboards to track current marketing performance and conduct audits to uncover marketing problems with the goal of making their marketing more effective.