Marketing Management Module MANMGT1 PDF

SCHOOL OF BUSINESS ADMINISTRATION AND ACCOUNTANCY MANMGT1 MARKETING MANAGEMENT Prepared by: Learning Module for Independent Learning Madeline Meno-Salvino, LPT, MBE Learning Module for I...

SCHOOL OF BUSINESS ADMINISTRATION AND ACCOUNTANCY MANMGT1 MARKETING MANAGEMENT Prepared by: Learning Module for Independent Learning Madeline Meno-Salvino, LPT, MBE Learning Module for Independent Learning 1  TABLE OF CONTENTS MODULE CONTENT PAGE INCLUSIVE DATES INTRODUCTION TO THE MODULE August 14 - 18, 2023 I. Defining Marketing for the 21st century 4 August 21 - 25, 2023 II. Developing Marketing Strategies and Plans 16 III. Gathering Information and Scanning the Environment August 28 - 31, 2023 30 Analyzing the Macro Environment September 4 - 8, 2023 IV. Creating Customer Value, Satisfaction and Loyalty 41 September 11 - 15, 2023 V. Analyzing Consumer Markets 49 September 19 - 22, 2023 FIRST GRADING EXAMINATION September 25 - 29, 2023 VI. Identifying Market Segments and Targets 57 October 2 - 6, 2023 VII. Creating Brand Equity 60 October 9 - 13, 2023 VIII. Crafting The Brand Positioning 69 October 16 - 20, 2023 IX. Dealing with Competition 77 October 23 - 27, 2023 X. Setting Product Strategy 89 October 30 - 31, 2023 MIDTERM EXAMINATION November 6 - 10, 2023 XI. Developing Pricing Strategies and Programs 108 November 13 - 17, 2023 XII. Designing and Managing Value Networks and Channels 122 November 20 - 24, 2023 XIII.Designing and Managing Integrated Marketing Communications 144 XIV. Managing Mass Communications: Advertising, Sales November 27 - 30, 2023 153 Promotions, Events and Public Relations December 4 - 8, 2023 XV. Introducing New Market Offerings 170 December 11- 14, 2023 FINAL EXAMINATION Learning Module for Independent Learning 2  INTRODUCTION OF THE MODULE A. COURSE CODE AND COURSE TITLE: MARKETING MANAGEMENT (MANMGT1) COURSE DESCRIPTION: In this comprehensive and practical introduction to marketing management, students will improve their ability to make effective marketing decisions, including assessing marketing opportunities and developing marketing strategies and implementation plans. Course topics include market-oriented strategic planning, marketing research and information systems, buyer behavior, target market selection, competitive positioning, product and service planning and management, pricing, distribution, and integrated communications, including advertising, public relations and sales promotions. Through a combination of interactive discussions, cases, practical examples, individual assignments, and a group project, the course applies marketing topics to consumer and business-to-business products, services, and nonprofit organizations. Students gain significant experience in communicating and defending their marketing recommendations and building on the ideas of others. (updated from CMO39 s.2006, CMO17-18 s.2017) B. REQUIREMENT OF THE COURSE: Each student enrolled in MANMGT1 should have a thorough understanding of the principles in Marketing Management considering all aspects of the 4PS of Marketing. The level of understanding will be measured through series of chapter quizzes every week. The coverage of the quizzes will be based from the notes and other learning materials given every week. Before the end of the semester, a social media marketing plan will be submitted as a final requirement. In this online learning period, there will be different ways on how activities can be submitted:(FLAP v3, p.6) a. If the student has strong and reliable access to the internet: 1. Canvas (assigned page) should be utilized for submitting activities during the due dates specified during each assessment activity. 2. In the absence of laptops and personal computers making submission of computerized output impossible, a picture of the activity in written form can be submitted to Canvas (assigned page) 3. Each output should present the student‘s name, schedule, details assigned b. If the student cannot submit the activity through Google classroom: 1. The activity should be sent through her teacher‘s email address. 2. The outputs can be either computerized (doc file) or picture of the activity in written form (in jpeg form when attached) 3. Each output should present the student‘s name, schedule, chapter covered c. Requirements and assessment tasks must be submitted every grading period, not later than the deadline set by the subject teacher. Submission of accumulated tasks (first grading, midterms and finals tasks) at the end of the semester is strictly not allowed. d. Non submission of requirements on the set deadline shall be given a score of zero. Grades will be computed based on the policy on the computation of grades. Learning Module for Independent Learning 3  DEFINING MARKETING IN THE 21ST CENTURY 1. OBJECTIVES OF THE LESSON – The student must :  Describe key marketing concepts, theories and techniques for analyzing a variety of marketing situations. 2. LESSON PROPER – INTRODUCTION Marketing‘s broader importance extends to society as a whole. Marketing has helped introduce and gain acceptance of new products that have eased or enriched people‘s lives. It can inspire enhancements in existing products as marketers innovate to improve their position in the marketplace. Successful marketing builds demand for products and services, which, in turn, creates jobs. By contributing to the bottom line, successful marketing also allows firms to more fully engage in socially responsible activities. (Kotler & Keller, 2012) Marketing is about identifying and meeting human and social needs. One of the shortest good definitions of marketing is ―meeting needs profitably.‖ When eBay recognized that people were unable to locate some of the items they desired most, it created an online auction clearinghouse. When IKEA noticed that people wanted good furnishings at substantially lower prices, it created knockdown furniture. These two firms demonstrated marketing savvy and turned a private or social need into a profitable business opportunity. 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. (Kotler & Keller, 2012) Marketing management is the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value. A social definition shows the role marketing plays in society; for example, one marketer has said that marketing‘s role is to ―deliver a higher standard of living.‖ Here is a social definition that serves our purpose: Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others. Managers sometimes think of marketing as ―the art of selling products,‖ but many people are surprised when they hear that selling is not the most important part of marketing! Selling is only the tip of the marketing iceberg. Peter Drucker, a leading management theorist, puts it this way: There will always, one can assume, be need for some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available. (Kotler & Keller, 2012) What Is Marketed? (Kotler & Keller, 2012) Marketers market 10 main types of entities: goods, services, events, experiences, persons, places, properties, organizations, information, and ideas. Let‘s take a quick look at these categories. 1. GOODS. Physical goods constitute the bulk of most countries‘ production and marketing efforts. Each year, 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. Learning Module for Independent Learning 4  2. SERVICES As economies advance, a growing proportion of their activities focuses on the production of services. Services include the work of airlines, hotels, car rental firms, barbers and beauticians, maintenance and repair people, and accountants, bankers, lawyers, engineers, doctors, software 3. programmers, and management consultants. Many market offerings mix goods and services, such as a fast-food meal. 4. 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. 5. 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 camp, or a climb up Mount Everest. 6. PERSONS Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, and other professionals all get help from celebrity marketers.10 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.‖ 7. 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. 8. 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. 9. ORGANIZATIONS Organizations work to build a strong, favorable, and unique image in the minds of their target publics. Universities, museums, performing arts organizations, corporations, and nonprofits all use marketing to boost their public images and compete for audiences and funds. 10. 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. 11. 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. DEMAND STATES 1. Negative Demand – Negative demand is a type of demand which is created if the product is disliked in general. The product might be beneficial but the customer does not want it. 2. Unwholesome demand – Unwholesome demand is the other side of Negative demand. In negative type of demands, customer does not want the product even though product might be necessary for the customer. Learning Module for Independent Learning 5  But in unwholesome demand, the customer should not desire the product, yet the customer wants the product badly. 3. No demands – Certain products face the challenge of no demand. The best example for the same can be education courses where there is very low demand or no demand at all. Such cases are very hard to counter. 4. Latent Demand – Latent demand is, as the name suggests, a demand which the customer realizes later. Thus, while buying the product, he might not desire some features. But later on, he might think about those features and buy the product. 5. Declining demand – Declining demand is when demand for a product is declining. For example, when CD players were introduced and IPOD came in the market, the demand for walkman went down. 6. Irregular demand – Irregular demand can be demand which is not consistent. The best example of irregular demand is seasonal products like umbrellas, air conditioners or resorts. These products sell irregularly and sell more during peak season whereas their demand is very low during non-seasons. The best way to counter irregular demand is to introduce incentives for the customer to buy the product. 7. Full demand – In an ideal environment, a company should always have full demand. Full demand means that the demand is meeting the supply potential of the company. It also means that the markets are happy with the products of the company and that people want to buy from the same company. 8. Overfull demands – Overfull demands happen when the companies manufacturing capacity is limited but the demand is more than the supply. This can be observed in the cement industry occasionally. KEY CUSTOMER MARKETS (Kotler & Keller, 2012) Consider the following key customer markets: consumer, business, global, and nonprofit.  Consumer Markets Companies selling mass consumer goods and services such as juices, cosmetics, athletic shoes, and air travel spend a great deal of time establishing a strong brand image by developing a superior product and packaging, ensuring its availability, and backing it with engaging communications and reliable service.  Business Markets Companies selling business goods and services often face well-informed professional buyers skilled at evaluating competitive offerings. Business buyers buy goods to make or resell a product to others at a profit. Business marketers must demonstrate how their products will help achieve higher revenue or lower costs. Advertising can play a role, but the sales force, the price, and the company‘s reputation may play a greater one.  Global Markets Companies in the global marketplace must decide which countries to enter; how to enter each (as an exporter, licenser, joint venture partner, contract manufacturer, or solo manufacturer); how to adapt product and service features to each country; how to price products in different countries; and how to design communications for different cultures. They face different requirements for buying and disposing of property; cultural, language, legal and political differences; and currency fluctuations. Yet, the payoff can be huge.  Nonprofit and Governmental Markets Companies selling to nonprofit organizations with limited purchasing power such as churches, universities, charitable organizations, and government agencies need to price carefully. Lower selling prices affect the features and quality the seller can build into the offering. Much government purchasing calls for bids, and buyers often focus on practical solutions and favor the lowest bid in the absence of extenuating factors. Learning Module for Independent Learning 6 MARKETPLACES, MARKETSPACES, AND METAMARKETS (Kotler & Keller, 2012) The marketplace is physical, such as a store you shop in; the marketspace is digital, as when you shop on the Internet. Northwestern University‘s Mohan Sawhney has proposed the concept of a metamarket to describe a cluster of complementary products and services closely related in the minds of consumers, but spread across a diverse set of industries. Metamarkets are the result of marketers packaging a system that simplifies carrying out these related product/service activities. The automobile metamarket consists of automobile manufacturers, new and used car dealers, financing companies, insurance companies, mechanics, spare parts dealers, service shops, auto magazines, classified auto ads in newspapers, and auto sites on the Internet. A car buyer will engage many parts of this metamarket, creating an opportunity for metamediaries to assist him or her in moving seamlessly through them. Edmund‘s (www.edmunds.com) lets a car buyer find the stated features and prices of different automobiles and easily click to other sites to search for the lowest-price dealer for financing, accessories, and used cars. Metamediaries also serve other metamarkets, such as home ownership, parenting and baby care, and weddings. CORE MARKETING CONCEPTS (KOTLER & KELLER, 2012)  Needs, wants, and demands. 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. These needs become wants when they are directed to specific objects that might satisfy the need. A person needs food but may want rice, lamb, and carrots. Wants are shaped by our society. Demands are wants for specific products backed by an ability to pay. Many people want a Mercedes; only a few are able to buy one. Companies must measure not only how many people want their product, but also how many are willing and able to buy it. These distinctions shed light on the frequent criticism that ―marketers create needs‖ or ―marketers get people to buy things they don‘t want.‖ Marketers do not create needs: Needs preexist marketers. Marketers, along with other societal factors, influence wants. They might promote the idea that a Mercedes would satisfy a person‘s need for social status. They do not, however, create the need for social status. Some customers have needs of which they are not fully conscious or that they cannot articulate. 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, SEGMENTATION. Not everyone likes the same cereal, restaurant, college, or movie. Therefore, 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). Volvo develops its cars for buyers to whom safety is a major concern, positioning its vehicles as the safest a customer can buy. Learning Module for Independent Learning 7  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. A brand name such as McDonald‘s carries many associations in people‘s minds that make up its image: hamburgers, cleanliness, convenience, courteous service, and golden arches. All companies strive to build a brand image with as many strong, favorable, and unique brand associations as possible  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. 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. These channels may be direct via the Internet, mail, or mobile phone or telephone, or indirect with distributors, wholesalers, retailers, and agents as intermediaries. To carry out transactions with potential buyers, the marketer also uses service channels that include warehouses, transportation companies, banks, and insurance companies. 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. The supply chain for coffee may start with Ethiopian farmers who plant, tend, and pick the coffee beans, selling their harvest to wholesalers or perhaps a Fair Trade cooperative. If sold through the cooperative, the coffee is washed, dried, and packaged for shipment by an Alternative Trading Organization (ATO) that pays a minimum of $1.26 a pound. The ATO transports the coffee to the developing world where it can sell it directly or via retail channels. Each company captures only a certain percentage of the total value generated by the supply chain‘s value delivery system. When a company acquires competitors or expands upstream or downstream, its aim is to capture a higher percentage of supply chain value.  Competition. Competition includes all the actual and potential rival offerings and substitutes a buyer might consider. An automobile manufacturer can buy steel from U.S. Steel in the United States, from a foreign firm in Japan or Korea, or from a minimill such as Nucor at a cost savings, or it can buy aluminum for certain parts from Alcoa to reduce the car‘s weight, or engineered plastics from Saudi Basic Industries Corporation (SABIC) instead of steel. Clearly, U.S. Steel would be thinking too narrowly about its competition if it thought only of other integrated steel companies. In the long run, U.S. Steel is more likely to be hurt by substitute products than by other steel companies.  Marketing environment. The marketing environment consists of the task environment and the broad Learning Module for Independent Learning 8  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, and 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. Here are two good examples. THE NEW MARKETING REALITIES (KOTLER & KELLER, 2012).Major Societal Forces  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. International travel has continued to grow as more people work and play in other countries.  Deregulation. Many countries have deregulated industries to create greater competition and growth opportunities. In the United States, laws restricting financial services, telecommunications, and electric utilities have all been loosened in the spirit of greater competition.  Privatization. Many countries have converted public companies to private ownership and management to increase their efficiency, such as the massive telecom company Telefónica CTC in Chile and the international airline British Airways in the United Kingdom.  Heightened competition. Intense competition among domestic and foreign brands raises marketing costs and shrinks profit margins. Brand manufacturers are further buffeted by powerful retailers that market their own store brands. Many strong brands have become megabrands and extended into a wide variety of related product categories, presenting a significant competitive threat.  Industry convergence. Industry boundaries are blurring as companies recognize new opportunities at the intersection of two or more industries. The computing and consumer electronics industries are converging, for example, as Apple, Sony, and Samsung release a stream of entertainment devices from MP3 players to plasma TVs and camcorders. Digital technology fuels this massive convergence.  Retail transformation. Store-based retailers face competition from catalog houses; direct mail 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. Learning Module for Independent Learning 9  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. Personal connections and user-generated content thrive on social media such as Facebook, Flickr (photos), Del.icio.us (links), Digg (news stories), Wikipedia (encyclopedia articles), and YouTube (video). Social networking sites—such as Dogster for dog lovers, TripAdvisor for ardent travelers, and Moterus for bikers—bring together consumers with a common interest.  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. A Yankelovich study found record levels of marketing resistance from consumers; a majority reported negative opinions about marketing and advertising and said they avoid products they feel are overmarketed. NEW COMPANY CAPABILITIES (KOTLER & KELLER, 2012) These major societal forces create complex challenges for marketers, but they have also generated a new set of capabilities to help companies cope and respond.  Marketers can use the Internet as a powerful information and sales channel. The Internet augments marketers‘ geographical reach to inform customers and promote products worldwide. A Web site can list products and services, history, business philosophy, job opportunities, and other information of interest.  Marketers can collect fuller and richer information about markets, customers, prospects, and competitors. Marketers can conduct fresh marketing research by using the Internet to arrange focus groups, send out questionnaires, and gather primary data in several other ways. They can assemble information about individual customers‘ purchases, preferences, demographics, and profitability. The drugstore chain CVS uses loyalty-card data to better understand what consumers purchase, the frequency of store visits, and Learning Module for Independent Learning 10  other buying preferences.  Marketers can tap into social media to amplify their brand message. Marketers can feed information and updates to consumers via blogs and other postings, support online communities, and create their own stops on the Internet superhighway. Dell Corporation‘s @DellOutlet Twitter account has more than 600,000 followers. Between 2007 and June 2009, Dell took in more than $2 million in revenue from coupons provided through Twitter, and another $1 million from people who started at Twitter and went on to buy a new computer on the company‘s Web site.  Marketers can facilitate and speed external communication among customers. Marketers can also create or benefit from online and offline ―buzz‖ through brand advocates and user communities. Word-of-mouth marketing agency BzzAgent has assembled a nationwide volunteer army of 600,000 consumers who join promotional programs for products and services they deem worth talking about. In 2005, Dunkin‘ Donuts hired BzzAgent to help launch a new espresso beverage, Latte Lite. Three thousand trained volunteers (called BzzAgents) in 12 test markets experienced the Latte Lite, formed their opinions, engaged in natural conversations about the product, and reported back to BzzAgent via the company‘s reporting interface. After four weeks, product sales had increased by more than 15 percent in test markets.  Marketers can send ads, coupons, samples, and information to customers who have requested them or given the company permission to send them. Micro-target marketing and two-way communication are easier thanks to the proliferation of special-interest magazines, TV channels, and Internet newsgroups. Extranets linking suppliers and distributors let firms send and receive information, place orders, and make payments more efficiently. The company can also interact with each customer individually to personalize messages, services, and the relationship.  Marketers can reach consumers on the move with mobile marketing. Using GPS technology, marketers can pinpoint consumers‘ exact location and send them messages at the mall with coupons good only that day, a reminder of an item on their wish list, and a relevant perk (buy this book today and get a free coffee at the bookstore‘s coffee shop). Locationbased advertising is attractive because it reaches consumers closer to the point of sale. Firms can also advertise on video iPods and reach consumers on their cell phones through mobile marketing.  Companies can make and sell individually differentiated goods. Thanks to advances in factory customization, computer technology, and database marketing software, customers can buy M&M candies, TABASCO jugs, or Maker‘s Mark bottles with their names on them; Wheaties boxes or Jones soda cans with their picture on the front; and Heinz ketchup bottles with customized messages.32 BMW‘s technology allows buyers to design their own car models from among 350 variations, with 500 options, 90 exterior colors, and 170 trims. The company claims that 80 percent of the cars bought in Europe and up to 30 percent bought in the United States are built to order.  Companies can improve purchasing, recruiting, training, and internal and external communications. Firms can recruit new employees online, and many have Internet training products for their employees, dealers, and agents. Retailer Patagonia has joined Walt Disney, General Motors, and McDonald‘s in embracing corporate blogging to communicate with the public and employees. Patagonia‘s The Cleanest Line posts environmental news, reports the results of its sponsored athletes, and posts pictures and descriptions of employees‘ favorite outdoor locations.  Companies can facilitate and speed up internal communication among their employees by using the Learning Module for Independent Learning 11  Internet as a private intranet. Employees can query one another, seek advice, and download or upload needed information from and to the company‘s main computer. Seeking a single online employee portal that transcended business units, General Motors launched a platform called mySocrates in 2006 consisting of announcements, news, links, and historical information. GM credits the portal with $17.4 million in cost savings to date.  Companies can improve their cost efficiency by skillful use of the Internet. Corporate buyers can achieve substantial savings by using the Internet to compare sellers‘ prices and purchase materials at auction, or by posting their own terms in reverse auctions. Companies can improve logistics and operations to reap substantial cost savings while improving accuracy and service quality. COMPANY ORIENTATION TOWARD THE MARKETPLACE (KOTLER & KELLER, 2012) Given these new marketing realities, what philosophy should guide a company‘s marketing efforts? Increasingly, marketers operate consistent with the holistic marketing concept. Let‘s first review the evolution of earlier marketing ideas.  The production concept is one of the oldest concepts in business. It holds that consumers prefer products that are widely available and inexpensive. Managers of production-oriented businesses concentrate on achieving high production efficiency, low costs, and mass distribution. This orientation makes sense in developing countries such as China, where the largest PC manufacturer, Legend (principal owner of Lenovo Group), and domestic appliances giant Haier take advantage of the country‘s huge and inexpensive labor pool to dominate the market. Marketers also use the production concept when they want to expand the market.  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 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 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 marketing concept holds that the key to achieving organizational goals is being more effective than competitors in creating, delivering, and communicating superior customer value to your target markets. Harvard‘s Theodore Levitt drew a perceptive contrast between the selling and marketing concepts: Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling is preoccupied with the seller‘s need to convert his product into cash; marketing with the idea of satisfying the needs of the customer by means of Learning Module for Independent Learning 12  the product and the whole cluster of things associated with creating, delivering, and finally consuming it. Several scholars found that companies embracing the marketing concept at that time achieved superior performance.  The Holistic Marketing Concept. Without question, the trends and forces that have defined the first decade of the 21st century are leading business firms to a new set of beliefs and practices. ―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 (KOTLER & KELLER, 2012) 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. Four key constituents for relationship marketing are customers, employees, marketing partners (channels, suppliers, distributors, dealers, agencies), and members of the financial community (shareholders, investors, analysts). Marketers must create prosperity among all these constituents and balance the returns to all key stakeholders. To develop strong relationships with them requires understanding their capabilities and resources, needs, goals, and desires. The ultimate outcome of relationship marketing is a unique company asset called a marketing network, consisting of the company and its supporting stakeholders—customers, employees, suppliers, distributors, retailers, and others—with whom it has built mutually profitable business relationships. The operating principle is simple: build an effective network of relationships with key stakeholders, and profits will follow. Thus more Learning Module for Independent Learning 13 companies are choosing to own brands rather than physical assets and are subcontracting activities to firms that can do them better and more cheaply, while retaining core activities at home. INTEGRATED MARKETING (KOTLER & KELLER, 2012) 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 any one marketing activity with all other activities in mind. When a hospital buys an MRI from General Electric‘s Medical Systems division, for instance, it expects good installation, maintenance, and training services to go with the purchase. All company communications also must be integrated. Using an integrated communication strategy means choosing communication options that reinforce and complement each other. A marketer might selectively employ television, radio, and print advertising, public relations and events, and PR and Web site communications so each contributes on its own as well as improving the effectiveness of the others. Each must also deliver a consistent brand message at every contact. INTERNAL MARKETING (KOTLER & KELLER, 2012) 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. Marketing is no longer the responsibility of a single department—it is a company-wide undertaking that drives the company‘s vision, mission, and strategic planning. It succeeds only when all departments work together to achieve customer goals : when engineering designs the right products, finance furnishes the right amount of funding, purchasing buys the right materials, production makes the right products in the right time horizon, and accounting measures profitability in the right ways. Such interdepartmental harmony can only truly coalesce, however, when management clearly communicates a vision of how the company‘s marketing orientation and philosophy serve customers. PERFORMANCE MARKETING (KOTLER & KELLER, 2012) 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. FINANCIAL ACCOUNTABILITY Marketers are increasingly asked to justify their investments in financial and profitability terms, as well as in terms of building the brand and growing the customer base. They‘re employing a broader variety of financial measures to assess the direct and indirect value their marketing efforts create and recognizing that much of their firms‘ market value comes from intangible assets, particularly brands, customer base, employees, distributor and supplier relations, and intellectual capital. Marketing metrics can Learning Module for Independent Learning 14 help firms quantify and compare their marketing performance along a broad set of dimensions. Marketing research and statistical analysis assess the financial efficiency and effectiveness of different marketing activities. SOCIAL RESPONSIBILITY MARKETING. Because the effects of marketing extend beyond the company and the customer to society as a whole, marketers must consider the ethical, environmental, legal, and social context of their role and activities. The organization‘s task is thus to determine the needs, wants, and interests of target markets and satisfy them more effectively and efficiently than competitors while preserving or enhancing consumers‘ and society‘s long-term well-being. LG Electronics, Toshiba, and NEC Display Solutions offer electronic recycling programs, for instance, often providing consumers with prepaid postage to return old items. MARKETING MANAGEMENT TASKS (KOTLER & KELLER, 2012)  Developing Marketing Strategies and Plans. The first task facing Atlas is to identify its potential long- run opportunities, given its market experience and core competencies. Atlas can design its cameras with better features. It can make a line of video cameras, or it can use its core competency in optics to design a line of binoculars and telescopes. Whichever direction it chooses, it must develop concrete marketing plans that specify the marketing strategy and tactics going forward.  Capturing Marketing Insights. Atlas needs a reliable marketing information system to closely monitor its marketing environment so it can continually assess market potential and forecast demand. Its microenvironment consists of all the players who affect its ability to produce and sell cameras—suppliers, marketing intermediaries, customers, and competitors. Its macroenvironment includes demographic, economic, physical, technological, political-legal, and social-cultural forces that affect sales and profits. Atlas also needs a dependable marketing research system. To transform strategy into programs, marketing managers must make basic decisions about their expenditures, activities, and budget allocations. They may use sales-response functions that show how the amount of money spent in each application will affect sales and profits.  Connecting with Customers. Atlas must consider how to best create value for its chosen target markets and develop strong, profitable, long-term relationships with customers. To do so, it needs to understand consumer markets. Who buys cameras, and why? What features and prices are they looking for, and where do they shop? Atlas also sells cameras to business markets, including large corporations, professional firms, retailers, and government agencies, where purchasing agents or buying committees make the decisions. Atlas needs to gain a full understanding of how organizational buyers buy. It needs a sales force well trained in presenting product benefits.  Building Strong Brands. Atlas must understand the strengths and weaknesses of the Zeus brand as customers see it. Is its 35mm film heritage a handicap in the digital camera market? Suppose Atlas decides to focus on the consumer market and develop a positioning strategy. Should it position itself as the ―Cadillac‖ brand, offering superior cameras at a premium price with excellent service and strong advertising? Should it build a simple, low-priced camera aimed at more price-conscious consumers? Or something in between? Atlas must also pay close attention to competitors, anticipating their moves and knowing how to react quickly and decisively. It may want to initiate some surprise moves, in which case it needs to anticipate how its competitors will respond.  Shaping the Market Offerings. At the heart of the marketing program is the product—the firm‘s tangible offering to the market, which includes the product quality, design, features, and packaging. To gain a competitive advantage, Atlas may provide leasing, delivery, repair, and training as part of its product Learning Module for Independent Learning 15  offering A critical marketing decision relates to price. Atlas must decide on wholesale and retail prices, discounts, allowances, and credit terms. Its price should match well with the offer‘s perceived value; otherwise, buyers will turn to competitors‘ products.  Delivering Value. Atlas must also determine how to properly deliver to the target market the value embodied in its products and services. Channel activities include those the company undertakes to make the product accessible and available to target customers. Atlas must identify, recruit, and link various marketing facilitators to supply its products and services efficiently to the target market. It must understand the various types of retailers, wholesalers, and physical-distribution firms and how they make their decisions.  Communicating Value. Atlas must also adequately communicate to the target market the value embodied by its products and services. It will need an integrated marketing communication program that maximizes the individual and collective contribution of all communication activities. Atlas needs to set up mass communication programs consisting of advertising, sales promotion, events, and public relations. It also needs to plan more personal communications, in the form of direct and interactive marketing, as well as hire, train, and motivate salespeople.  Creating Successful Long-Term Growth. Based on its product positioning, Atlas must initiate new- product development, testing, and launching as part of its long-term view. The strategy should take into account changing global opportunities and challenges. 3. ASSESSMENT – a. The student should take quiz on Canvas. DEVELOPING MARKETING STRATEGIES AND PLANS 1. OBJECTIVES OF THE LESSON – The student must : a. Define a marketing strategy b. Describe the elements of a marketing plan c. Determine market attractiveness using SWOT analysis 2. LESSON PROPER – MARKETING AND CUSTOMER VALUE (KOTLER & KELLER, 2012) 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 finetuning the value delivery process and choosing, providing, and communicating superior value. The Value Delivery Process The traditional view of marketing is that the firm makes something and then sells it, with marketing taking place in the selling process. Companies that subscribe to this view have the best chance Learning Module for Independent Learning 16 of succeeding in economies marked by goods shortages where consumers are not fussy about quality, features, or style—for example, basic staple goods in developing markets. This traditional view will not work, however, in economies with many different types of people, each with individual wants, perceptions, preferences, and buying criteria. The smart competitor must design and deliver offerings for well-defined target markets. This realization inspired a new view of business processes that places marketing at the beginning of planning. Instead of emphasizing making and selling, companies now see themselves as part of a value delivery process. We can divide the value creation and delivery sequence into three phases. First, 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. The second phase is providing the value. Marketing must determine specific product features, prices, and distribution. The task in the third phase is 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 value chain identifies nine strategically relevant activities—five primary and four support activities—that create value and cost in a specific business. 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.) The firm‘s task is to examine its costs and performance in each value-creating activity and look for ways to improve it. Managers should estimate competitors‘ costs and performances as benchmarks against which to compare their own. And they should go further and study the ―best of class‖ practices of the world‘s best companies. We can identify best-practice companies by consulting customers, suppliers, distributors, financial analysts, trade associations, and magazines to see whom they rate as doing the best job. Even the best companies can benchmark, against other industries if necessary, to improve their performance. To support its corporate goal to be more innovative, GE has benchmarked against P&G as well as developing its own best practices. The firm‘s success depends not only on how well each department performs its work, but also on how well the company coordinates departmental activities to conduct core business processes.These processes include:  The market-sensing process. All the activities in gathering and acting upon information about the market  The new-offering realization process. All the activities in researching, developing, and launching new high- quality offerings quickly and within budget Learning Module for Independent Learning 17  The customer acquisition process. All the activities in defining target markets and prospecting for new customers  The customer relationship management process. All the activities in building deeper understanding, relationships, and offerings to individual customers  The fulfillment management process. All the activities in receiving and approving orders, shipping the goods on time, and collecting payment. CORE COMPETENCIES Traditionally, companies owned and controlled most of the resources that entered their businesses— labor power, materials, machines, information, and energy—but many today outsource less-critical resources if they can obtain better quality or lower cost. The key, then, is to own and nurture the resources and competencies that make up the essence of the business. Many textile, chemical, and computer/electronic product firms do not manufacture their own products because offshore manufacturers are more competent in this task. Instead, they focus on product design and development and marketing, their core competencies. A core competency has three characteristics: (1) It is a source of competitive advantage and makes a significant contribution to perceived customer benefits. (2) It has applications in a wide variety of markets. (3) It is difficult for competitors to imitate. Competitive advantage also accrues to companies that possess distinctive capabilities or excellence in broader business processes. Wharton‘s George Day sees market-driven organizations as excelling in three distinctive capabilities: market sensing, customer linking, and channel bonding. In terms of market sensing, he believes tremendous opportunities and threats often begin as ―weak signals‖ from the ―periphery‖ of a business. He offers a systematic process for developing peripheral vision, and practical tools and strategies for building ―vigilant organizations‖ attuned to changes in the environment, by asking three questions each related to learning from the past, evaluating the present, and envisioning the future. Competitive advantage ultimately derives from how well the company has fitted its core competencies and distinctive capabilities into tightly interlocking ―activity systems.‖ Competitors find it hard to imitate Southwest Airlines, Walmart, and IKEA because they are unable to copy their activity systems. 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 coprosperity among key stakeholders.‖12 Holistic marketers thus succeed by managing a superior value chain that delivers a high level of product quality, service, and speed. They achieve profitable growth by expanding customer share, building customer loyalty, and capturing customer lifetime value. 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 Learning Module for Independent Learning 18  Successful marketing thus requires capabilities such as understanding, creating, delivering, capturing, and sustaining customer value. Only a select group of companies have historically stood out as master marketers. These companies focus on the customer and are organized to respond effectively to changing customer needs. They all have well-staffed marketing departments, and their other departments accept that the customer is king. To ensure they select and execute the right activities, marketers must give priority to strategic planning in three key areas: (1) managing a company‘s businesses as an investment portfolio, (2) assessing each business‘s strength by considering the market‘s growth rate and the company‘s position and fit in that market, and (3) establishing a strategy. The company must develop a game plan for achieving each business‘s long-run objectives. Most large companies consist of four organizational levels: (1) corporate, (2) division, (3) business unit, and (4) product. Corporate headquarters is responsible for designing a corporate strategic plan to guide the whole enterprise; it makes decisions on the amount of resources to allocate to each division, as well as on which businesses to start or eliminate. Each division establishes a plan covering the allocation of funds to each business unit within the division. Each business unit develops a strategic plan to carry that business unit into a profitable future. Finally, each product level (product line, brand) develops a marketing plan for achieving its objectives. 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. Next, we consider planning at each of these four levels of the organization. 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 2. Establishing strategic business units 3. Assigning resources to each strategic business unit 4. Assessing growth opportunities Defining the Corporate Mission An organization exists to accomplish something: to make cars, lend money, provide a night‘s lodging. Over time, the mission may change, to take advantage of new opportunities or respond to new market Learning Module for Independent Learning 19 conditions. Amazon.com changed its mission from being the world‘s largest online bookstore to aspiring to become the world‘s largest online store; eBay changed from running online auctions for collectors to running online auctions of all kinds of goods; and Dunkin‘ Donuts switched its emphasis from doughnuts to coffee. Organizations develop mission statements to share with managers, employees, and (in many cases) customers. A clear, thoughtful mission statement provides a shared sense of purpose, direction, and opportunity. Mission statements are at their best when they reflect a vision, an almost ―impossible dream‖ that provides direction for the next 10 to 20 years. Sony‘s former president, Akio Morita, wanted everyone to have access to ―personal portable sound,‖ so his company created the Walkman and portable CD player. Fred Smith wanted to deliver mail anywhere in the United States before 10:30 AM the next day, so he created FedEx. Good mission statements have five major characteristics. 1. They focus on a limited number of goals. The statement ―We want to produce the highest quality products, offer the most service, achieve the widest distribution, and sell at the lowest prices‖ claims too much. 2. They stress the company’s major policies and values. They narrow the range of individual discretion so employees act consistently on important issues. 3. They define the major competitive spheres within which the company will operate. summarizes some key competitive dimensions for mission statements. 4. They take a long-term view. Management should change the mission only when it ceases to be relevant. 5. They are as short, memorable, and meaningful as possible. Marketing consultant Guy Kawasaki advocates developing three- to four-word corporate mantras rather than mission statements, like ―Enriching Women‘s Lives‖ for Mary Kay. 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 customersatisfying 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. Viewing businesses in terms of customer needs can suggest additional growth opportunities. Some companies that have moved from a product to a market definition of their business. They highlight the difference between a target market definition and a strategic market definition. A target market definition tends to focus on selling a product or service to a current market. Pepsi could define its target market as everyone who drinks carbonated soft drinks, and competitors would therefore be other carbonated soft drink companies. A strategic market definition, however, also focuses on the potential market. If Pepsi considered everyone who might drink something to quench their thirst, its competition would include noncarbonated soft drinks, bottled water, fruit juices, tea, and coffee. To better compete, Pepsi might decide to sell additional beverages with promising growth rates. A business can define itself in terms of three dimensions: customer groups, customer needs, and technology. consider a small company that defines its business as designing incandescent lighting systems for television studios. Its customer group is television studios; the customer need is lighting; the technology is Learning Module for Independent Learning 20 incandescent lighting. The company might want to expand to make lighting for homes, factories, and offices, or it could supply other services television studios need, such as heating, ventilation, or air conditioning. It could design other lighting technologies for television fluorescent bulbs. Large companies normally manage quite different businesses, each requiring its own strategy. At one time, General Electric classified its businesses into 49 strategic business units (SBUs). An SBU has three characteristics: 1. It is a single business, or a collection of related businesses, that can be planned separately from the rest of the company. 2. It has its own set of competitors. 3. It has a manager responsible for strategic planning and profit performance, who controls most of the factors affecting profit. ASSIGNING RESOURCES TO EACH 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. Management can decide to grow, ―harvest‖ or draw cash from, or hold on to the business. Another model, BCG’s Growth-Share Matrix, uses relative market share and annual rate of market growth as criteria to make investment decisions, classifying SBUs as dogs, cash cows, question marks, and stars. Portfolio-planning models like these have fallen out of favor as oversimplified and subjective. Newer methods rely on shareholder value analysis, and on whether the market value of a company is greater with an SBU or without it (whether it is sold or spun off). These value calculations assess the potential of a business based on growth opportunities from global expansion, repositioning or retargeting, and strategic outsourcing. 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. This illustrates this strategic-planning gap for a major manufacturer of blank compact disks called Musicale (name disguised). The lowest curve projects the expected sales over the next five years from the current business portfolio. The highest describes desired sales over the same period. Evidently, the company wants to grow much faster than its current businesses will permit. How can it fill the strategic-planning gap? The first option is to identify opportunities for growth within current businesses (intensive opportunities). The second is to identify opportunities to build or acquire businesses related to current businesses (integrative opportunities). The third is to identify opportunities to add attractive unrelated businesses (diversification opportunities). 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 intensivegrowth opportunities is a Learning Module for Independent Learning 21 ―product-market expansion grid.‖ It considers the strategic growth opportunities for a firm in terms of current and new products and markets. The company first considers whether it could gain more market share with its current products in their current markets, using a market-penetration strategy. Next it considers whether it can find or develop new markets for its current products, in a market-development strategy. Then it considers whether it can develop new products of potential interest to its current markets with a product-development strategy. Later the firm will also review opportunities to develop new products for new markets in a diversification strategy. Consider how ESPN has employed growth opportunities. 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. It formed joint ventures in 1989 with Johnson & Johnson to sell over-the-counter pharmaceuticals; in 1991 with DuPont to expand basic research, and in 2000 with Schering-Plough to develop and market new prescription medicines. Horizontal mergers and alliances don‘t always work out. The merger between Sears and Kmart didn‘t solve either retailer‘s problems. Media companies, however, have long reaped the benefits of integrative growth. Here‘s how one business writer explains the potential NBC could reap from its merger with Vivendi Universal Entertainment to become NBC Universal. Although it‘s a farfetched example, it gets across the possibilities inherent in this growth strategy: [When] the hit movie Fast & Furious 4 (produced by Universal Pictures) comes to television, it would air on Bravo (owned by NBC) or USA Network (owned by Universal), followed by the inevitable bid to make the movie into a TV series (by Universal Television Group), with the pilot being picked up by NBC. The show then begins airing on Hulu.com (owned in part by NBC), and ultimately leads to the creation of a popular amusement-park attraction at Universal Studios. 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 properties, and offering cruise and commercial theatre experiences. Several types of diversification are possible for Musicale. First, the company could choose a concentric strategy and seek new products that have technological or marketing synergies with existing product lines, though appealing to a different group of customers. It might start a laser disk manufacturing operation, because it knows how to manufacture compact discs. Second, it might use a horizontal strategy to search for unrelated new products that appeal to current customers. Musicale might produce compact disc cases, for example, though they require a different manufacturing process. Finally, the company might seek new businesses that have no relationship to its current technology, products, or markets, adopting a conglomerate strategy to consider making application software or personal organizers. 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 Learning Module for Independent Learning 22 renamed Ameriprise Financial). ORGANIZATION AND ORGANIZATIONAL CULTURE Strategic planning happens within the context of the organization. A company‘s organization consists 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. What exactly is a corporate culture? Some define it as ―the shared experiences, stories, beliefs, and norms that characterize an organization.‖ Walk into any company and the first thing that strikes you is the corporate culture—the way people dress, talk to one another, and greet customers. When Mark Hurd became CEO of HP, one of his goals was to reinvigorate the famous ―HP Way,‖ a benevolent but hard-nosed corporate culture that rewarded employees amply but expected teamwork, growth, and profits in return. A customer-centric culture can affect all aspects of an organization. Sometimes corporate culture develops organically and is transmitted directly from the CEO‘s personality and habits to the company employees. Mike Lazaridis, president and co-CEO of BlackBerry producer Research In Motion, is a scientist in his own right, winning an Academy Award for technical achievement in film. He has hosted a weekly, innovation-centered ―Vision Series‖ at company headquarters that focuses on new research and company goals. As he states, ―I think we have a culture of innovation here, and [engineers] have absolute access to me. I live a life that tries to promote innovation.‖ 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. ―Marketing Insight: Creating Innovative Marketing‖ describes how some leading companies approach innovation. Firms develop strategy by identifying and selecting among different views of the future. The Royal Dutch/Shell Group has pioneered scenario analysis, which develops plausible representations of a firm‘s possible future using assumptions about forces driving the market and different uncertainties. Managers think through each scenario with the question, ―What will we do if it happens?‖ adopt one scenario as the most probable, and watch for signposts that might confirm or disconfirm it. To find breakthrough ideas, some companies find ways to immerse a range of employees in solving marketing problems. Samsung‘s Value Innovation Program (VIP) isolates product development teams of engineers, designers, and planners with a timetable and end date in the company‘s center just south of Seoul, Korea, while 50 specialists help guide their activities. To help make tough trade-offs, team members draw ―value curves‖ that rank attributes such as a product‘s sound or picture quality on a scale from 1 to 5. To develop a new car, BMW similarly mobilizes specialists in engineering, design, production, marketing, purchasing, and finance at its Research and Innovation Center or Project House. Learning Module for Independent Learning 23 BUSINESS UNIT STRATEGIC PLANNING 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 nonlighting 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. Good marketing is the art of finding, developing, and profiting from these opportunities.30 A marketing opportunity is an area of buyer need and interest that a company has a high probability of profitably satisfying. There are three main sources of market opportunities. The first is to offer something that is in short supply. This requires little marketing talent, as the need is fairly obvious. The second is to supply an existing product or service in a new or superior way. How? The problem detection method asks consumers for their suggestions, the ideal method has them imagine an ideal version of the product or service, and the consumption chain method asks them to chart their steps in acquiring, using, and disposing of a product. This last method often leads to a totally new product or service. Marketers need to be good at spotting opportunities. Consider the following:  A company may benefit from converging industry trends and introduce hybrid products or services that are new to the market. Major cell manufacturers have released phones with digital photo and video capabilities, and Global Positioning Systems (GPS).  A company may make a buying process more convenient or efficient. Consumers can use the Internet to find more books than ever and search for the lowest price with a few clicks.  A company can meet the need for more information and advice. Angie‘s List connects individuals with local home improvement contractors and doctors that have been reviewed by others.  A company can customize a product or service. Timberland allows customers to choose colors for different sections of their boots, add initials or numbers to their boots, and choose different stitching and embroidery.  A company can introduce a new capability. Consumers can create and edit digital ―iMovies‖ with the iMac and upload them to an Apple Web server or Web site such as YouTube to share with friends around the world.  A company may be able to deliver a product or service faster. FedEx discovered a way to deliver mail and packages much more quickly than the U.S. Post Office. Learning Module for Independent Learning 24  A company may be able to offer a product at a much lower price. Pharmaceutical firms have created generic versions of brand-name drugs, and mail-order drug companies often sell for less. To evaluate opportunities, companies can use market opportunity analysis (MOA) to ask questions like: 1. Can we articulate the benefits convincingly to a defined target market(s)? 2. Can we locate the target market(s) and reach them with cost-effective media and trade channels? 3. Does our company possess or have access to the critical capabilities and resources we need to deliver the customer benefits? 4. Can we deliver the benefits better than any actual or potential competitors? 5. Will the financial rate of return meet or exceed our required threshold for investment? An environmental threat is a challenge posed by an unfavorable trend or development that, in the absence of defensive marketing action, would lead to lower sales or profit. 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. Businesses can evaluate their own strengths and weaknesses by using a form like the one shown in ―Marketing Memo: Checklist for Performing Strengths/Weaknesses Analysis.‖ Clearly, the business doesn‘t have to correct all its weaknesses, nor should it gloat about all its strengths. The big question is whether it should limit itself to those opportunities for which it possesses the required strengths, or consider those that might require it to find or develop new strengths. Managers at Texas Instruments (TI) were split between those who wanted to stick to industrial electronics, where TI has clear strength, and those who wanted to continue introducing consumer products, where TI lacks some required marketing strengths. Goal Formulation Once the company has performed a SWOT analysis, it can proceed to goal formulation, developing specific goals for the planning period. Goals are objectives that are specific with respect to magnitude and time. Most business units pursue a mix of objectives, including profitability, sales growth, market share improvement, risk containment, innovation, and reputation. The business unit sets these objectives and then manages by objectives (MBO). For an MBO system to work, the unit‘s objectives must meet four criteria: 1. They must be arranged hierarchically, from most to least important. The business unit‘s key objective for the period may be to increase the rate of return on investment. Managers can increase profit by increasing revenue and reducing expenses. They can grow revenue, in turn, by increasing market share and prices. 2. Objectives should be quantitative whenever possible. The objective ―to increase the return on investment (ROI)‖ is better stated as the goal ―to increase ROI to 15 percent within two years.‖ 3. Goals should be realistic. Goals should arise from an analysis of the business unit‘s opportunities and strengths, not from wishful thinking. 4. Objectives must be consistent. It‘s not possible to maximize sales and profits simultaneously. Other important trade-offs include short-term profit versus long-term growth, deep penetration of existing markets versus development of new markets, profit goals versus nonprofit goals, and high growth Learning Module for Independent Learning 25 versus low risk. Each choice calls for a different marketing strategy. Many believe adopting the goal of strong market share growth may mean foregoing strong short-term profits. Volkswagen has 15 times the annual revenue of Porsche—but Porsche‘s profit margins are seven times bigger than Volkswagen‘s. Other successful companies such as Google, Microsoft, and Samsung have maximized profitability and growth. Strategic Formulation Goals indicate what a business unit wants to achieve; strategy is a game plan for getting there. Every business must design a strategy for achieving its goals, consisting of a marketing strategy and a compatible technology strategy and sourcing strategy PORTER’S GENERIC STRATEGIES Michael Porter has proposed 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. The online air travel industry provides a good example of these three strategies: Travelocity is pursuing a differentiation strategy by offering the most comprehensive range of services to the traveler; Lowestfare is pursuing a lowest-cost strategy; and Last Minute is pursuing a niche strategy by focusing on travelers who have the flexibility to travel on very short notice. Some companies use a hybrid approach. According to Porter, firms directing the same strategy to the same target market constitute a strategic group. The firm that carries out that strategy best will make the most profits. Circuit City went out of business because it did not stand out in the consumer electronics industry as lowest in cost, highest in perceived value, or best in serving some market segment. Porter draws a distinction between operational effectiveness and strategy. Competitors can quickly copy the operationally effective company using benchmarking and other tools, thus diminishing the advantage of operational effectiveness. Porter defines strategy as ―the creation of a unique and valuable position involving a different set of activities.‖ A company can claim it has a strategy when it ―performs different activities from rivals or performs similar activities in different ways.‖ STRATEGIC ALLIANCES Even giant companies—AT&T, Philips, and Nokia—often cannot achieve leadership, either nationally or globally, without forming alliances with domestic or multinational companies that complement or leverage their capabilities and resources. Just doing business in another country may require the firm to license its product, form a joint venture with a local firm, or buy from local suppliers to meet ―domestic content‖ Learning Module for Independent Learning 26 requirements. Many firms have developed global strategic networks, and victory is going to those who build the better global network. The Star Alliance brings together 21 airlines, including Lufthansa, United Airlines, Singapore Airlines, Air New Zealand, and South Africa Airways, in a huge global partnership that allows travelers to make nearly seamless connections to hundreds of destinations. Many strategic alliances take the form of marketing alliances. These fall into four major categories. 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. Once they have formulated marketing programs, marketers must estimate their costs. Is participating in a particular trade show worth it? Will a specific sales contest pay for itself? Will hiring another salesperson contribute to the bottom line? Activity-based cost accounting (ABC)—described in greater detail in can help determine whether each marketing program is likely to produce sufficient results to justify its cost. Today‘s businesses recognize that unless they nurture other stakeholders—customers, employees, suppliers, distributors—they may never earn sufficient profits for the stockholders. A company might aim to delight its customers, perform well for its employees, and deliver a threshold level of satisfaction to its suppliers. In setting these levels, it must not violate any stakeholder group‘s sense of fairness about the treatment it is receiving relative to the others. A dynamic relationship connects the stakeholder groups. A smart company creates a high level of employee satisfaction, which leads to higher effort, which leads to higher-quality products and services, which creates higher customer satisfaction, which leads to more repeat business, which leads to higher growth and profits, which leads to high stockholder satisfaction, which leads to more investment, and so on. This virtuous circle spells profits and growth. According to McKinsey & Company, strategy is only one of seven elements—all of which start with the letters—in successful business practice. The first three—strategy, structure, and systems—are considered the ―hardware‖ of success. The next four—style, skills, staff, and shared values—are the ―software.‖ The first ―soft‖ Learning Module for Independent Learning 27 element, style, means company employees share a common way of thinking and behaving. The second, skills, means employees have the skills needed to carry out the company‘s strategy. Staffing means the company has hired able people, trained them well, and assigned them to the right jobs. The fourth element, shared values, means employees share the same guiding values. When these elements are present, companies are usually more successful at strategy implementation. 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 effectiveness. 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. Once an organization fails to respond to a changed environment, it becomes increasingly hard to recapture its lost position. 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 marketing 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. It contains tactical guidelines for the marketing programs and financial allocations over the planning period. A marketing plan is one of the most important outputs of the marketing process. It provides direction and focus for a brand, product, or company. Nonprofit organizations use marketing plans to guide their fund-raising and outreach efforts, and government agencies use them to build public awareness of nutrition and stimulate tourism. A marketing plan usually contains the following sections.  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. Learning Module for Independent Learning 28  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. 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. Finally, marketing research helps marketers learn more about their cus