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CHAPTER 2

Company and Marketing Strategy:Partnering to Build CustomerRelationships

Copyright 2014 by Pearson Education

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Learning ObjectivesAfter studying this chapter, you should be able to:1. Explain company-wide strategic planning and its four

steps.

2. Discuss how to design business portfolios and developgrowth strategies.

3. Explain marketings role in strategic planning and howmarketing works with its partners to create and delivercustomer value.

4. Describe the elements of a customer-driven marketing

strategy and mix, and the forces that influence it.5. List the marketing management functions, including the

elements of a marketing plan, and discuss theimportance of measuring and managing return onmarketing investment.

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At the corporate level, the company starts the strategicplanning process by defining its overall purpose andmission (see Figure 2.1).

This mission then is turned into detailed supportingobjectives that guide the whole company.

Next, headquarters decides what portfolio of businessesand products is best for the company and how muchsupport to give each one.

In turn, each business and product develops detailedmarketing and other departmental plans that supportthe companywide plan.

Thus, marketing planning occurs at the business-unit,product, and market levels, supporting companystrategic planning with more detailed planning forspecific marketing opportunities.

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Figure 2.1: Steps in Strategic Planning


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2.1.1 Defining a Market-Oriented Mission

An organisation exists to accomplish something.

A mission statement is a statement of the organisationspurpose what it wants to accomplish in the largerenvironment.

To define its mission, the company should address thefollowing questions: What is our business? Who is thecustomer? What is of value to the customer? What willour business be? What should our business be?

Some companies define their missions in product or

technology terms. Mission statements should be market oriented. A market-oriented mission statement defines the

business in terms of satisfying basic customer needs.

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Table 2.1 provides several examples of product-oriented versus market-oriented businessdefinitions.

Mission statements should have the followingcharacteristics:

serve as a guide for what the organization wantsto accomplish.

be market-oriented rather than product-oriented.

be neither too narrow, nor too broad. fit with the market environment.

be motivating.

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2.1.2 Setting Company Objectives and Goals

The companys mission needs to be turned intodetailed supporting objectives for each level ofmanagement.

Each manager should have objectives and beresponsible for reaching them.

The mission leads to a hierarchy of objectives,including business objectives and marketingobjectives.

Marketing strategies must be developed tosupport these objectives.

Each broad marketing strategy must then bedefined in greater detail.

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2.1.3 Designing the Business Portfolio Guided by the companys mission statement and

objectives, management must plan its businessportfolio - the collection of businesses and productsthat make up the company.

The best business portfolio is the one that best fits thecompanys strengths and weaknesses to opportunitiesin the environment.

Business portfolio planning involves two steps.

First, the company must analyse its current business

portfolio and decide which businesses should receivemore, less, or no investment.

Second, it must shape the future portfolio bydeveloping strategies for growth and downsizing.

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Analyzing the Current Business Portfolio The major activity in strategic planning is businessportfolio analysis, whereby management evaluates the

products and businesses making up the company. The company will want to put strong resources into its

more profitable businesses and phase down or drop itsweaker ones.

Managements first step is to identify the key businessesmaking up the company.

These can be called the strategic business units. A strategic business unit (SBU) is a unit of the company

that has a separate mission and objectives and that canbe planned independently from other companybusinesses.

An SBU can be a company division, a product line withina division, or sometimes a single product or brand.

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The next step in business portfolio analysis calls formanagement to assess the attractiveness of its various SBUsand decide how much support each deserves.

Most companies are well advised to focus on adding productsand businesses that fit closely with the firms core philosophyand competencies.

The purpose of strategic planning is to find ways in which thecompany can best use its strengths to take advantage ofattractive opportunities in the environment.

Thus, most standard portfolio-analysis methods evaluateSBUs on two important dimensions the attractiveness ofthe SBUs market or industry and the strength of the SBUsposition in the market or industry.

The best-known portfolio-planning method was developed bythe Boston Consulting Group, a leading managementconsulting firm.

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The Boston Consulting Group Approach Using the Boston Consulting Group (BCG) approach, a

company classifies all its SBUs according to the growthshare matrix shown in Figure 2.2. On the vertical axis, market growth rate provides a

measure of market attractiveness.

On the horizontal axis, relative market share serves as ameasure of company strength in the market. The growth-share matrix defines four types of SBUs:

Stars, Cash cows, Question marks, and Dogs. Once it has classified its SBUs, the company must

determine what role each will play in the future.

One of four strategies can be pursued for each SBU:build, hold, harvest, and divest.

As time passes, SBUs change their position in thegrowth-share matrix.

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FIGURE 2.2: THE BCG GROWTH-SHARE MATRIX

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Developing Strategies for Growth and Downsizing

Beyond evaluating current businesses, designing thebusiness portfolio involves finding businesses and productsthe company should consider in the future.

Companies need growth if they are to compete moreeffectively, satisfy their stakeholders, and attract top talent.

At the same time, a firm must be careful not to makegrowth itself an objective.

The companys objective must be profitable growth.

Marketing must identify, evaluate, and select marketopportunities and lay down strategies for capturing them.

One useful device for identifying growth opportunities is theproduct/market expansion grid, shown in Figure 2.3. Product/market expansion grid is a portfolio-planning tool

for identifying company growth opportunities throughmarket penetration, market development, productdevelopment, or diversification.

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Figure 2.3: The Product/Market Expansion Grid

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Market penetration is a strategy for company growth by increasingsales of current products to current market segments withoutchanging the product.

Market development is a strategy for company growth byidentifying and developing new market segments for currentcompany product.

Product development is a strategy for company growth by offeringmodified or new products to current market segments.

Diversification is a strategy for company growth through startingup or acquiring businesses outside the companys currentproducts and markets.

Companies must not only develop strategies for growing their

business portfolios but also strategies for downsizing them. Downsizing is a strategy to reduce the business portfolio by

eliminating products or business units that are not profitable orthat no longer fit the companys overall strategy.

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2.2 PLANNING MARKETING: PARTNERING TOBUILD CUSTOMER RELATIONSHIPS

Marketing plays a key role in the strategic planningprocess.

In addition to customer relationship management(CRM), marketers must also practice partner

relationship management.

Partner relationship management is a process of

working closely with partners in other companydepartments and outside the company to jointly

bring greater value to customers.

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2.2.1 Partnering with Other CompanyDepartments

Each company department can be thought of

as a link in the companys value chain. That is, each department carries out value-

creating activities to design, produce, market,deliver, and support the firms products.

The firms success depends not only on how

well each department performs its work butalso on how well the activities of variousdepartments are coordinated.

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2.2.2 Partnering with Others in the Marketing System To create customer value, the firm must look

beyond its own value chain and into the valuechains of its suppliers, distributors, and,ultimately, customers.

More companies today are partnering with theother members of the supply chain to improve theperformance of the customer value deliverynetwork.

Value-delivery network is a network that is made

up of the company, suppliers, distributors, andultimately customers who partner with eachother to improve the performance of the entiresystem.

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2.3 MARKETING STRATEGY ANDTHE MARKETING MIX

The strategic plan defines the companys overall mission andobjectives.

Marketings role and activities are shown in Figure 2.4, whichsummarizes the entire marketing process and the forcesinfluencing company marketing strategy.

Consumers stand in the centre. The goal is to build strong and profitable relationships with

customers. First, through market segmentation, targeting, and positioning,

the company decides which customers it will serve and how. Next, the company designs a marketing mix made up of

factors under its control product, price, place, and

promotion. To find the best marketing mix and put it into action, the

company engages in marketing analysis, planning,implementation, and control.

Through these activities, the company watches and adapts tothe actors and forces in the marketing environment.

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FIGURE 2.4: MANAGING MARKETING STRATEGIES AND

THE MARKETING MIX


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2.3.1 Customer-Driven Marketing Strategy

Companies know that they cannot profitably serve allconsumers in a given market at least not allconsumers in the same way.

Thus, every company must divide up the total market,choose the best segments, and design strategies forprofitably serving chosen segments.

This process involves market segmentation, markettargeting, differentiation, and positioning.

Market Segmentation: is the process of dividing amarket into distinct groups of buyers who have distinctneeds, characteristics, or behaviour and who mightrequire separate products or marketing mixes.

A market segment consists of consumers who respondin a similar way to a given set of marketing efforts.

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Market Targeting: is the process ofevaluating each market segmentsattractiveness and selecting one or moresegments to enter.

Positioning: is arranging for a product tooccupy a clear, distinctive, and desirableplace relative to competing products in theminds of target consumers.

Effective positioning begins with

differentiation actually differentiating thecompanys market offering so that it givesconsumers more value.

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2.3.2 Developing an Integrated Marketing Mix

Once the company has decided on its overallcompetitive marketing strategy, it is ready to beginplanning the details of the marketing mix.

The marketing mix is the set of controllable, tacticalmarketing tools that the firm blends to produce theresponse it wants in the target market.

The marketing mix consists of everything the firm cando to influence the demand for its product.

The many possibilities can be collected into fourgroups of variables known as the four Ps: product,price, place, and promotion. Figure 2.5 shows the particular marketing tools under

each P.

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Figure 2.5: The Four Ps of the Marketing Mix


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Product means the goods-and-services combinationthe company offers to the target market.

Price is the amount of money customers have to pay toobtain the product.

Place includes company activities that make theproduct available to target consumers. Promotion means activities that communicate the

merits of the product and persuade target customersto buy it.

An effective marketing programme blends all of themarketing-mix elements into a coordinated programmedesigned to achieve the companys marketingobjectives by delivering value to consumers.

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2.4 MANAGING THE MARKETING EFFORT The company wants to design and put into action the

marketing mix that will best achieve its objectives in itstarget markets. Figure 2.6 shows the relationship between the fourmarketing management functions analysis, planning,implementation, and control. The company first develops companywide strategic plans,

then translates them into marketing and other plans foreach division, product, and brand. Through implementation, the company turns the plans

for actions. Control consists of measuring and evaluating the results

of marketing activities and taking corrective action where

needed. Finally, marketing analysis provides information and

evaluations needed for all of the other marketingactivities.

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FIGURE 2.6: MANAGING MARKETING: ANALYSIS, PLANNING,

IMPLEMENTATION, AND CONTROL


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2.4.1 Marketing Analysis Managing the marketing function begins with a complete

analysis of the companys situation (the SWOT analysis).

See Figure 2.7.

2.4.2 Marketing Planning Through strategic planning, the company decides what it

wants to do with each business unit.

Marketing planning involves deciding on marketingstrategies that will help the company attain its overall

strategic objectives. A detailed marketing plan is needed for each business,

product, or brand.

Table 2.2 outlines the major sections of a typical productor brand plan.

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FIGURE 2.7: SWOT ANALYSIS: STRENGTHS (S), WEAKNESSES (W),

OPPORTUNITIES (O), AND THREATS (T)


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TABLE 2.2: CONTENTS OF A MARKETING PLAN

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2.4.3 Marketing Implementation

Planning good strategies is only a start towardsuccessful marketing.

A brilliant marketing strategy counts for little if thecompany fails to implement it properly.

Marketing implementation is the process that turnsmarketing plans into marketing actions to accomplishstrategic marketing objectives.

Implementation involves day to day, month to monthactivities that effectively put the marketing plan towork.

Whereas marketing planning addresses the what andwhy of marketing activities, implementation addressesthe who, where, when, and how.

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2.4.4 Marketing Department Organisation The company must design a marketing organisation that

can perform marketing strategies and plans. Modern marketing departments can be arranged in several

ways.

The most common form of marketing organisation is thefunctional organisation, in which different marketingactivities are headed by a functional specialist a sales

manager, advertising manager, marketing researchmanager, customer service manager, or new-productmanager.

A company that sells across the country or internationallyoften uses ageographic organisation, in which its sales andmarketing people are assigned to specific countries,regions, and districts.

Companies with many very different products or brandsoften create a product management organisation.

For companies that sell one product line to many differenttypes of markets and customers that have different needsand preferences, a market or customer managementorganisation might be best.

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2.4.5 Marketing Control

Because many surprises occur during theimplementation of marketing plans, the marketingdepartment must practice constant marketing control.

Marketing control involves evaluating the results ofmarketing strategies and plans and taking correctiveaction to ensure that objectives are attained.

Operating control involves checking ongoingperformance against the annual plan and takingcorrective action when necessary.

Strategic control examines whether the companysbasic strategies are well matched to its opportunities.

A major tool for strategic control is a marketing audit.

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2.5 MEASURING AND MANAGING RETURNON MARKETING INVESTMENT

Marketing managers must ensure that theirmarketing dollars are being well spent.

Marketers are developing better measures of returnon marketing investment.

Return on marketing investment ROI) is the netreturn from a marketing investment divided by thecosts of the marketing investment.

Marketing ROI provides a measurement of the profitsgenerated by investments in marketing activities.

See Figure 2.8.

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FIGURE 2.8: RETURN ON MARKETING INVESTMENT

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