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Chapter 2
Marketing STRATEGY PLANNING
When you finish this chapter, you should be able to:
1. Understand what a marketing manager does.
2. Know what marketing strategy planning isand why it will be the focus of this book.
3. Understand target marketing.
4. Be familiar with the four Ps in a marketing mix.
5. Know the difference between a marketing strategy, a marketing plan, and a marketing program.
6. Understand what customer equity is and why marketing strategy planners seek to increase it.
7. Be familiar with the text’s framework for marketing strategy planning--and why it involves a narrowing down from broad opportunities to the most attractive marketing strategy.
8. Know four broad types of marketing opportunities that help in identifying new strategies.
9. Understand why strategies for opportunities in international markets should be considered.
10. Understand the important new terms (shown below).
Multimedia Lecture Support Package to Accompany Essentials of Marketing
2-1
marketing management
process
strategic (management)
planning
marketing strategy
target market
marketing mix
target marketing
mass marketing
channel of distribution
personal selling
customer service
mass selling
advertising
publicity
sales promotion
marketing plan
implementation
operational decisions
marketing program
customer equity
breakthrough opportunities
competitive advantage
differentiation
S.W.O.T. analysis
market penetration
market development
product development
diversification
Multimedia Lecture Support Package to Accompany Essentials of Marketing
2-1
Outline of Chapter 2: MARKETING STRATEGY PLANNING
THE MANAGEMENT JOB IN MARKETING
MARKETING MANAGEMENT PROCESS--the process of (1) planning marketing activities, (2) directing the implementation of the plans, and (3) controlling these plans.
(Exhibit 2-1) "The Marketing Management Process"
· Managers should seek new opportunities
· Strategic management planning concerns the whole firm
STRATEGIC (MANAGEMENT) PLANNING--the managerial process of developing and maintaining a match between an organization's resources and its market opportunities.
WHAT IS A MARKETING STRATEGY?
MARKETING STRATEGY--specifies a target market and a related marketing mix.
TARGET MARKET--a fairly homogeneous (similar) group of customers to whom a company wishes to appeal.
MARKETING MIX--the controllable variables that the company puts together to satisfy a target group.
(Exhibit 2-2) "A Marketing Strategy"
SELECTING A MARKET-ORIENTED STRATEGY IS TARGET MARKETING
· Target marketing is not mass marketing
TARGET MARKETING--a marketing mix is tailored to fit some specific target customers.
MASS MARKETING--the typical production-oriented approach that vaguely aims at "everyone" with the same marketing mix.
"Target Marketing vs. Mass Marketing"
(Exhibit 2-3) Production-Oriented and Marketing-Oriented Managers Have Different Views of the Market"
· Mass marketers may do target marketing
· Target marketing can mean big markets and profits
DEVELOPING MARKETING MIXES FOR TARGET MARKETS
· There are many marketing mix decisions
· The four "Ps" make up a marketing mix
(Exhibit 2-4) "A Marketing Strategy--Showing the 4 Ps of a Marketing Mix"
"The Four Ps and Marketing Mix Planning"
-Customer is not part of the marketing mix
(Exhibit 2-5) "Strategy Decision Areas Organized by the Four Ps"
· Product--the good or service for the target's needs
· Place--reaching the target
CHANNEL OF DISTRIBUTION--any series of firms (or individuals) who participate in the flow of products from producer to final user or consumer.
(Exhibit 2-6) "Four Examples of Basic Channels of Distribution for Consumer Products"
· Promotion--telling and selling the customer
PERSONAL SELLING--direct spoken communication between sellers and potential customers.
CUSTOMER SERVICE—a personal communication between a seller and a customer who wants the seller to resolve a problem with a purchase.
MASS SELLING--communicating with large numbers of customers at the same time.
ADVERTISING--any paid form of nonpersonal presentation of ideas, goods, or services by an identified sponsor.
PUBLICITY--any unpaid form of nonpersonal presentation of ideas, goods, or services.
SALES PROMOTION--those promotion activities--other than advertising, publicity, and personal selling--that stimulate interest, trial, or purchase by final customers or others in the channel.
· Price--making it right
· Each of the four Ps contributes to the whole
· Strategy jobs must be done together
· Understanding target markets leads to good strategies
· Market-oriented strategy planning at Toddler University
THE MARKETING PLAN IS A GUIDE TO IMPLEMENTATION AND CONTROL
· Marketing plan fills out marketing strategy
MARKETING PLAN--a written statement of a marketing strategy and the time-related details for carrying out the strategy.
"The Marketing Plan"
· Implementation puts plans into operation
IMPLEMENTATION--putting marketing plans into operation.
OPERATIONAL DECISIONS--short-run decisions to help implement strategies.
(Exhibit 2-7) "Relation of Strategy Policies to Operational Decisions for Baby Shoe Company"
· Several plans make a whole marketing program
MARKETING PROGRAM--blends all of the firm's marketing plans into one "big" plan.
"Marketing Program"
(Exhibit 2-8) "Elements of a Firm's Marketing Program"
"Marketing Manager's Framework"
THE MARKETING PROGRAM SHOULD BUILD CUSTOMER EQUITY
· Expected profits depend on customer equity
CUSTOMER EQUITY—the expected earnings stream (profitability) of a firm’s current and prospective customers over some period of time.
· Owners expect financial returns
· Profit growth comes from customers
"Customer Equity Increases as Firm Attracts Customers, Retains Them, and Increases Earnings from Business with Them "
· The parts of the marketing program must work as a whole
· Planning for each strategy requires care
THE IMPORTANCE OF MARKETING STRATEGY PLANNING
· Time for new strategies in the watch industry
"Distribution of Different Firms Based on Their Marketing Performance"
WHAT ARE ATTRACTIVE OPPORTUNITIES?
· Breakthrough opportunities are best
BREAKTHROUGH OPPORTUNITIES--opportunities that help innovators develop hard-to-copy marketing strategies that will be very profitable for a long time.
· Competitive advantage is needed--at least
COMPETITIVE ADVANTAGE--a firm has a marketing mix that the target market sees as better than a competitor's mix.
"Competitive Advantage"
· Avoid hit-or-miss marketing with a logical process
"Focusing Marketing Strategy and Evaluating Market Opportunities"
"Marketing Strategy Planning Process"
(Exhibit 2-9) "Overview of Marketing Strategy Planning Process"
MARKETING STRATEGY PLANNING PROCESS HIGHLIGHTS OPPORTUNITIES
· Process narrows down from broad opportunities to specific strategy
· Screening criteria make it clear why you select a strategy
· Segmentation helps pinpoint the target
· Narrow down to a superior marketing mix
DIFFERENTIATION--the marketing mix is distinct from and better than what is available from a competitor.
· S.W.O.T. analysis highlights advantages and disadvantages
S.W.O.T. ANALYSIS--identifies and lists the firm’s strengths and weaknesses and its opportunities and threats.
TYPES OF OPPORTUNITIES TO PURSUE
"Examples of Different Types of Opportunities"
(Exhibit 2-10) "Four Basic Types of Opportunities"
· Market penetration
MARKET PENETRATION--trying to increase sales of a firm's present products in its present markets--probably through a more aggressive marketing mix.
· Market development
MARKET DEVELOPMENT--trying to increase sales by selling present products in new markets.
· Product development
PRODUCT DEVELOPMENT--offering new or improved products for present markets.
· Diversification
DIVERSIFICATION--moving into totally different lines of business--perhaps entirely unfamiliar products, markets, or even levels in the production-marketing system.
· Which opportunities come first?
INTERNATIONAL OPPORTUNITIES SHOULD BE CONSIDERED
· The world is getting smaller
· Develop a competitive advantage at home and abroad
· Get an early start in a new market
· Find better trends in variables
· Weigh the risks of going abroad
NOTES ON THE INTERACTIVE EXERCISE
Overview of the Exercise on Marketing Strategy (Growth Opportunities)
The purpose of this exercise is to help students extend their conceptual knowledge of the broad types of growth that a firm might choose to pursue with one or more strategies.
For each of the four types of growth opportunities, students are shown statements describing marketing actions undertaken in the context of specific brands. Students are expected to select the statement description that best illustrates the particular type of strategic opportunity that is under consideration.
Concept Review
The overarching purpose of strategic marketing planning is to match a firm’s capabilities, resources, and objectives to attractive opportunities that the firm is in a position to do something about. SWOT analysis is the preferred method of identifying and evaluating opportunities in light of the strengths and weaknesses of the firm, and the environmental forces that may influence the success or failure of the venture. While many firms will pursue more than one type of strategic opportunity concurrently, it is useful to distinguish the four basic types of opportunities in terms of their similarities and differences. The strategic opportunities discussed below represent the four combinations of A) present vs. new products, and B) present vs. new markets. It may be worth reminding students that “market” in this context refers to groups of consumers / businesses with a basic shared need, or new and untapped geographic locations. “New” products are those that are new to the company and are not restricted to first time product innovations that essentially create a new product category within an industry.
Market Penetration (present product; present market) occurs when a company undertakes various actions designed to encourage current customers to buy, consume, or in the case of charities – contribute more.
Market Development (present product, new market) occurs when a firm attempts to expand sales by targeting a new user market with an existing product. Two key methods of implementing this strategy include 1) selling an existing product to a new geographic market in which the firm currently does not conduct business, and 2) marketing new uses of existing products to new users.
Product Development (new product, present market) occurs when new or improved products are developed for present markets. Restaurants frequently undertake product development when they introduce new menu items or menu lines.
Diversification (new product, new market) is typically considered to be the riskiest opportunity of the four, as it requires a company to move into a totally new line of business while marketing to a new market. Risk is greater as the company’s lack of expertise and experience in both the product (industry, competition, production process, perhaps distribution channels, etc.) and market (targeted consumers, needs, buying habits, perhaps methods of reaching consumers) leaves greater potential for error.
Using the Exercise
Initial Screen
1. Slide one uses a replication of Exhibit 2-10 to introduce the four types of opportunities.
A. The interactive exercises are meant to be involving and fun for students. As you begin the exercise, you might lighten the mood and grab students’ attention by means of phrases such as: “{student name}, come on down! You’re the first contestant to play our game today!”
B. The professor then asks the student volunteer to choose any one of the four opportunities.
C. The professor clicks the portion of the strategic opportunity matrix that represents the student’s selection.
Next Screen
2. The screen pertaining to the selected strategic opportunity appears.
A. The professor reads the descriptions to the class.
B. The professor then asks students to select the statement that exemplifies the strategic opportunity being investigated, and clicks on the letter that corresponds to the student’s response.
C. If the wrong response is given, a buzzer will sound, and the letter designating the incorrect answer will turn red. For details related to right and wrong answers, refer to the ANSWERS AND EXPLANATION section below.
D. The selection process is repeated until the correct answer is chosen, and a cash register “Ch-ching!” sound is heard. The slide automatically transitions back to the expanded initial screen as described below in step 3.
Expanded Initial Screen with Correct Example
3. The four strategic opportunities are shown, with modifications.
A. Exhibit 2-10 is updated.
i. The opportunity that was previously chosen is displayed in a different color to indicate that it has already been investigated and cannot be reselected.
ii. The appropriate product/market grid cell is updated to show the answer that correctly illustrates an application of that strategic opportunity.
B. The remaining strategic opportunities transition briefly.
C. The professor asks for a student volunteer to select from the three remaining types of opportunity, and clicks on the table cell corresponding to that student’s choice.
Next Several Screens
4. The procedures described in steps 2 and 3 are repeated until all strategic marketing opportunity types have been examined.
Final Screen
5. The final screen displays each form of strategic opportunity accompanied by the correct statement describing marketing actions that provide that opportunity.
6. The professor clicks the indicated icon to end the exercise.
NOTE: Clicking the “X” at any time will end the exercise.
Answers and Explanations
MARKET PENETRATION
Answer A: INCORRECT, BUT DEBATABLE
This one is rather tricky. While the majority of people who purchase TV Guide do so for its functional value, there has always existed a small group who collects TV Guide for the sake of collecting. TV Guide’s strategy of publishing multiple covers is probably best described as an attempt to develop and grow a market that has existed, but has traditionally been ignored. Students may argue that A) TV Guide is actually following a market penetration strategy since collectors existed prior to its implementation and offering multiple covers encourages this group to buy more, or B) that it is actually an example of product development, since the cover is different. As a counterpoint, the instructor can point out that the new covers are simply a means by which a new use (collecting) is being satisfied, and that promoting new uses for existing products is a means of market development. The product itself (contents within the TV Guide) do not change, only the cover. Useful discussion can be generated as a result of differing points of view.
Answer B: CORRECT
Promotions have always been an excellent means of penetrating the market. Until the recent scandal, McDonald’s “Monopoly” promotion was the most successful of the company’s games.
Answer C: INCORRECT
The development of a new product by a company known as an ice cream manufacturer does not qualify as market penetration. Firms pursuing a market penetration strategy do not alter the product being sold, or the market to which it is targeted.
Answer D: INCORRECT
This is an example of product development by Dr. Pepper.
MARKET DEVELOPMENT
Answer A: INCORRECT
Developing a new product outside current areas of expertise for a new market (mechanics, do-it-yourselfers) is an example of diversification.