Chapter 2 Company & Marketing Strategy Partnering to Build Customer Relationships

1. Chapter 2Company & Marketing Strategy Partnering to Build Customer Relationships Professor Marshall Queens College

2. Strategic Planning • The process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities.

3. Steps in Strategic Planning • Defining the company mission • Setting company objectives and goals • Designing the business portfolio • Planning marketing and other functional strategies

4. Mission Statement A statement representing the organization’s purpose – what it wants to accomplish. Note: you can usually find a company’s mission statement on their website under ‘Investor Relations’ or ‘Corporate information’. ebay’s Mission: http://pages.ebay.com/aboutebay/thecompany/companyoverview.html

5. Mission Statement Guidelines • Should be market oriented and defined in terms of customer needs. Example: Charles Schwab – ‘guardian of its customers’ financial dreams’ • Should be realistic • Should be specific (not too narrow or broad) • Should fit the market environment. Example: Girl Scouts old: ‘to prepare young girls for motherhood and wifely duties’ – new: ‘where girls grow strong’. • Should be motivating. Example: Walt Disney aims to ‘make people happy’.

6. Designing the Business Portfolio • The business portfolio is the collection of businesses and products that make up the company. • The company must: • analyze its current business portfolio or Strategic Business Units (SBUs), • decide which SBUs should receive more, less, or no investment, • develop growth strategies for growth or downsizing. An SBU can be a company division, a product line, or a single product or brand.It has a separate mission & can be planned independently from other company businesses.

7. The BCG Growth-Share Matrix Star Often need heavy investment to finance rapid growth. These turn into Cash Cows. Question Mark Require a lot of cash to hold market share. Some are built into stars and some are phased out. High Market Growth Rate Cash Cow Established. Need less investment to hold market share. These support other SBUs. Dog May generate enough cash to sustain themselves but do not support other SBUs. Low High Low Relative Market Share The size of the circles is proportional to the SBU’s dollar sales. Each SBU has a life cycle and over time, SBUs change positions in the matrix. The company needs to keep adding new products so that some will become stars & cash cows.

8. The BCG Growth-Share MatrixExample: Macintosh Star iPod Question Mark High Market Growth Rate Cash Cow Mac Computers Dog MacOS Low High Low Relative Market Share Relative Market Share: the ratio of sales of a particular brand to total sales of that product type in a defined region (country).

9. Ways to Research Market Share • 10K Reports • SIC Codes (Standard Industry Classification) • NAICS Codes (North American Industry Classification) • Use Library Databases & Journals to look up articles related to the company/industry

10. Problems with Matrix Approaches • Difficult to quantify market share and market growth. • Focus on current business not future planning. • Companies have shifted toward customized, decentralized approaches to strategic planning.

11. Product/Market Expansion Grid Strategies for company growth Existing Products New Products Market Penetration Increasing sales of current products to current market segments without changing the product. Product Development Offering modified or new products to current market segments. Existing Markets Market Development Identifying and developing new market segments for current products. Diversification Starting up or acquiring businesses outside the company’s current products and markets. New Markets

12. Product/Market Expansion Grid Examples of Starbucks’ growth Existing Products New Products Market Penetration Starbucks is adding 23 stores per week. Product Development Starbucks recently added hot breakfast sandwiches to its menu. Existing Markets Market Development Starbucks might consider new demographic markets (for example: senior citizens or different ethnic groups). Diversification Starbucks tested new restaurant concepts in San Francisco to enter a new related market. New Markets

13. Marketing’s Role in Strategic Planning • Provide a guiding philosophy (the marketing concept) • Provide inputs to strategic planners • Design strategies to reach objectives The major functional departments in each unit of the company – marketing, finance, accounting, purchasing, operations, information systems, human resources, and others - must work together to accomplish the strategic objectives.

14. Value Delivery Network • Company’s value chain – internal departments that must perform and coordinate activities • Distributors (for example Pepsi has partnered with the college dining halls) • Suppliers (for example Dell has partnered with Microsoft and Intel)

15. Marketing Strategy The following steps help the company choose which customers to serve and how: • Market Segmentation • Target Marketing • Market Positioning

16. Market Segmentation • The process of dividing a market into distinct groups of buyers with different needs, characteristics, or behavior who might require separate products of marketing programs. • A market segment consists of consumers who respond in a similar way to a given set of marketing efforts.

17. Target Marketing • Involves evaluating each market segment’s attractiveness and selecting one or more segments to enter. • Target segments that can sustain profitability.

18. Market Positioning • Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. • Begins with differentiating the company’s marketing offer so it gives consumers more value.

19. The set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market. Consists of the 4 Ps Product Price Place Promotion Marketing Mix

20. Product VarietyQualityDesignFeaturesBrand NamePackagingServices Price List PriceDiscountsAllowancesPayment PeriodCredit Terms Target Customers Intended Positioning Place ChannelsCoverageAssortmentsLocationsInventoryTransportationLogistics Promotion AdvertisingPersonal SellingSales PromotionPublic Relations

21. 4 P’s - Seller’s View Product Price Place Promotion 4 C’s - Buyer’s View Customer Solution Customer Cost Convenience Communication The 4 P’s & the 4 C’s of theMarketing Mix

22. SWOT AnalysisAn analysis of your company verses competition Strengths Competitive Advantages Weaknesses Limitations the firm has in its marketing strategy Threats Barriers that may prevent the firm from reaching its goals Opportunities Favorable conditions that could yield rewards

23. SWOT AnalysisAn analysis of your company verses competition Strengths your specialist marketing expertise a new, innovative product or service location of your business quality processes and procedures any other aspect of your business that adds value to your product or service Weaknesses lack of marketing expertise undifferentiated products or services (i.e. in relation to your competitors) location of your business poor quality goods or services damaged reputation Threats a new competitor in your home market price wars with competitors a competitor has a new, innovative product or service competitors have superior access to channels of distribution taxation is introduced on your product or service Opportunities a developing market such as the Internet mergers, joint ventures or strategic alliances moving into new market segments that offer improved profits a new international market a market vacated by an ineffective competitor http://www.marketingteacher.com/SWOT/walmart_swot.htm http://www.marketingteacher.com/SWOT/starbucks_swot.htm

24. Sections of Marketing Plan • Executive summary – summarizes main goals • Current marketing situation • Analysis of threats and opportunities that the product might face • Objectives for the brand • Marketing strategy • Action programs – what/when/who • Marketing budget – expected costs & revenues • Controls – how progress is monitored http://college.hmco.com/business/pride/foundations/1e/students/sample/sample.pdf

25. Marketing Control Process • Set Goals • Measure Performance • Evaluate Performance • Take Corrective Action

26. Marketing Department Organization • Functional Organization – by marketing activity (sales, advertising, etc.) • Geographic Organization – by location • Product Management Organization – by product or brand • Market or Customer Organization – by market/type of customer • Combination

27. Video Case Dunkin’ Donuts (10 minutes)

28. Thoughts • Is Dunkin’ Donuts more product-oriented or customer-oriented? • How would you prepare against the invasion of Starbucks and Krispy Kreme? https://www.dunkindonuts.com http://www.starbucks.com http://www.krispykreme.com