Session 02 Developing Marketing Strategies and Plan

Kotler KellerPhillipKevin LaneMarketing Management 1

Developing Marketing Strategies and PlansChapter 2Discussion QuestionsHow does marketing affect customer value?

How is strategic planning carried out at different levels of the organization?

What does a marketing plan include?

Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 38Three Vs Approach to MarketingDefine the value segmentDefine the value propositionDefine the value networkCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 384Value based segmentation techniques talks about defining segmentation based on value placed by customers on the product.

Value proposition (VP) is a statement that clearly identifies what benefits a customer will receive by purchasing a particular product or service from a particular vendor.

Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 38Value network allows members to buy and sell products as well as share information

Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 38Three Vs Approach to Market OfferingVALUE CREATION How can a company efficiently create more promising new value offerings?

Value communication is based on relevant and timely information. Without such information, there can be no effective communication.

Value Delivery How can a company use its capabilities and infrastructure to deliver the new value offerings more efficiently? Eg: advertising and managing distributionCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 387What is the Value Chain?The value chain is a tool for identifying ways to create more customer value because every firm is a synthesis of primary and support activities performed to design, produce, market, deliver, and support its product.ORValue chain is a tool for identifying ways to create more customers value Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 388Core Business ProcessesCustomer relationship managementCustomer acquisitionMarket-sensingNew-offering realizationFulfillment managementCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 38A firms success depends in part on how well each department performs its role. However, firms must also coordinate departmental activities to conduct these core business processes.Market-sensing Activities involved in gathering and acting upon information about the market.New-offering realization Research, development, and launch of new high-quality product offerings quickly and within budgets.Customer acquisition All the activities in defining target markets and prospecting for new customers.Customer-relationship management Activities involved in in building deeper understanding, relationships, and offerings to individual customers.Fulfillment management process The activities that related to receiving and approving orders, shipping the goods on time, and collecting payments.9Core Business ProcessesMarket-sensing process All the activities in gathering market intelligence, spreading it within the organization, and acting on the information New-offering realization process All the activities in researching, developing, and launching new high-quality offerings quickly and within budget Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3810Customer acquisition process All the activities in defining target markets and prospecting for new customers

Customer relationship management process All the activities in building deeper understanding, relationships, and offerings to individual customers

Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 38Fulfillment management process All the activities in receiving and approving orders, shipping the goods on time, and collecting payment

Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 38Core CompetenciesCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3813Firms must focus on what they do well; things that are the essence of the business. A core competency must hold the above characteristics.Holistic Marketing

Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3814Holistic marketers addresses three key management questions:Value Exploration How the firm identifies new value opportunities.Value Creation How efficiently a company creates more promising new value offeringsValue Delivery How a company uses its capabilities and infrastructure to deliver the new value offering more efficiently.Marketing PlanDirects and coordinates the marketing effortProduct Line or Brand LevelStrategic and Tactical levels

Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3815A marketing plan is used to direct and coordinate the marketing effort and is created at the strategic and tactical level. Levels of a Marketing PlanStrategicAnalysis of marketing opportunitiesTarget marketing decisionsValue propositionTacticalProduct featuresPromotionMerchandisingPricingSales channelsServiceCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3816Strategic marketing plans begin with an analysis of market opportunities and based on whats learned leads to an identification of target markets and the firms value propositions. Tactical marketing plans focus on specific tactics such as product features, promotion, merchandising, pricing, sales channels, and service.

Corporate Strategic Planning

Define corporate missionEstablish SBUsAssign resources to SBUsAssess growth opportunities1234Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3817Corporate strategy focuses on these four elements. Defining the Corporate MissionWhat is our business?Who is the customer?What is of value to the customer?What will our business be?What should our business be?

Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3818In defining the corporate mission, organizations should start by answering Peter Druckers classic questions from these answers the organization can develop a good mission statement.Good Mission StatementsFocus on limited number of goalsStress major policies and valuesDefine major competitive spheres

Take a long-term viewShort, memorable, meaningfulCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3819To build total brand value by innovating to deliver customer value and customer leadership faster, better, and more completely than our competitionVague Mission StatementCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 38Vaguely written mission statement and philosophy20GOOGLES Mission StatementTo organize the worlds information and make it universally accessible and useful.Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 38Vague PhilosophyWe build brands and make the world a little happier by bringing our best to you.Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 38Vaguely written mission statement and philosophy22GOOGLEs PhilosophyNever settle for the best.Focus on the user and all else will follow.Its best to do one thing really, really well.Fast is better than slow.Democracy on the web works.You dont need to be at your desk to need an answer.You can make money without doing evil.There is always more information out there.The need for information crosses all borders.You can be serious without a suit.Great just isnt good enough.Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 38Major Competitive SpheresIndustryProductsMarketsegmentGeographicalCompetenceVerticalchannelsCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3824Major Competitive SpheresIndustry Some companies will operate in only one industry; some only in a set of related industries; some only in industrial goods, consumer goods, or services; and some in any industry. Products the range of products Competence technological and other core competencies

Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3825Market segment The type of market or customers a company will serve is the market segment.

Vertical channels from raw material to final product and distribution

Geographic regions, cities, countries etc

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-26Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 38A market orientated company is one that organizes its activities, products and services around the wants and needs of its customers. A product-orientated firm has its primary focus on its product and on the skills, knowledge and systems that support that product.

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-27Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 38Market orientation gets the right product: product orientation get the product right

Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 38Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-29Table 2.3 Product Orientation vs. Market OrientationCompanyProductMarketMissouri-Pacific RailroadWe run a railroadWe are a people-and-goods moverXeroxWe make copying equipmentWe improve office productivityStandard OilWe sell gasolineWe supply energyColumbia PicturesWe make moviesWe entertain peopleCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3829Defining Strategic Business UnitsTechnology

Customer groupsCustomer needsCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3830Companies often define themselves in terms of the products it produces. This view often limits a company. A market definition on the other hand describe the business as a customer-satisfying process. For example, if Xerox defined itself from only a product perspective (We make copying equipment) it would limit its ability to market products and services other than copiers.

SBUs can be defined by: 1) Customer needs; Customer groups; and 3) TechnologyCompanyProduct Definition Market DefinitionUnion PacificWe run a railroad.We are a people-and-goods mover.XeroxWe make copying equipment.We help improve office productivity.Hess CorporationWe sell gasoline.We supply energy.Paramount PicturesWe make movies.We market entertainment.Encyclopaedia BritannicaWe sell encyclopediasWe distribute information.CarrierWe make air conditioners and furnaces.We provide climate control in the home.Strategic Business UnitsCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 38Table 2.3 shows how companies define themselves based on whether they use a product or market definition. Market definitions allow for additional growth opportunities.31Strategies Suggested by Ansoffs Product-Market Expansion GridMarket penetrationMarket developmentProduct developmentDiversificationCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3832The 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.Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-33Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 38Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-34Product-Market Growth Matrix MarketPenetration Product DevelopmentPresent MarketsNew Markets Market DevelopmentDiversificationPresent productsNew ProductsCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 38Intensive GrowthProductsCurrentMarketsMarket PenetrationMarket DevelopmentProduct DevelopmentDiversificationNewCurrentNewProduct-Market Expansion GridCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3835Intensive growth looks for opportunities within current businesses. The product-market expansion grid looks at growth possibilities from the perspective of current and new products and markets.

Market Penetration gaining market share with current products and current customers. The company can achieve growth by having current customers purchase more, attract competitors customers, or bring non-buyers into the market.

Market Development Finding new markets for existing products. The firm can find new buyer groups (business customers rather than consumers), new distribution channels (online), or expand distribution to other regions or countries.

Product Development Develop new products to the current market. As the firm already has a relationship with current customers, they can develop new products to meet other, related needs of its customers.

Diversification Developing new products for new markets.Integrative GrowthBusinessCompetitorSupplierWholesalerCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3836A business can achieve growth through backward (buy supplier), forward (buy wholesaler), or horizontal (competitor) integration.Diversification Growth

New OpportunityCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3837Firms can often discover opportunities outside its present business. However, the new industry should be highly attractive (grow potential) and the company should have (or acquire) the right capabilities to succeed.SWOT AnalysisStrengthsWeaknessesOpportunitiesThreatsCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3838Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-39Market Opportunity Analysis (MOA)Can the benefits involved in the opportunity be articulated convincingly to a defined target market?Can the target market be located and reached with cost-effective media and trade channels?Does the company possess or have access to the critical capabilities and resources needed to deliver the customer benefits?Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3839Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-40Market Opportunity Analysis (MOA) (cont.)Can the company deliver the benefits better than any actual or potential competitors?Will the financial rate of return meet or exceed the companys required threshold for investment?Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3840Strategy FormulationPorters Generic Strategies

Strategic AlliancesCopyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3841Porter outlines three generic strategies that businesses can follow. They can focus on Cost Leadership, where they are seeking to achieve the lowest production and distribution costs to underprice competitors and gain market share; the can select a Differentiation strategy, where they focus on achieving better performance on a important customer benefit (such as quality or speed); or third, businesses can take a Focus approach where they concentrate on a narrow market segment, gaining as much insight about the segment as possible, and then pursue either a cost leadership or differentiation strategy.

Oftentimes, companies cannot achieve objectives without the use of partners. Strategic Alliances can be used to compliment or leverage current capabilities and resources to the benefit of both parties. Alliances fall into four categories:Product or service alliance.Promotional alliancesLogistic alliancesPricing collaborations.Porters Generic StrategiesOverall Cost LeadershipDifferentiationFocus

Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3842Porters Generic StrategiesOverall cost leadership aiming to be the lowest cost producer and/or distributor within their industry.

Differentiation Creating a product or service that is perceived as being unique through out the industry

Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 3843 Focus concentrating on the limited part of the market . (offering a specialized service in a niche market). He then subdivided the Focus strategy into two parts: "Cost Focus" and "Differentiation Focus. Cost Focus means emphasizing cost-minimization within a focused market, and Differentiation Focus means pursuing strategic differentiation within a focused market.

Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallSlide # of 38