2 Developing Marketing Strategies and Plans
A strategy is a theory about how to gain competitive advantages. A good strategy is a strategy that actually generates such advantages. Strategic management is the process of specifying an organizations objectives, developing policies and plans to achieve these objectives, and allocating resources so as to implement the plans. Developing Marketing Strategies and Plans
Levels of Goals/Plans & Their Importance External Message Legitimacy for investors, customers, suppliers, community Mission Statement Strategic Goals/Plans Senior Management (Organization as a whole) Internal Message Legitimacy, motivation, guides, rationale, standards Tactical Goals/Plans Middle Management (Major divisions, functions) Operational Goals/Plans Lower Management (Departments, individuals)
Strategic Goals and Plans Strategic Goals • Where the organization wants to be in the future • Pertain to the organization as a whole • Strategic Plans • Action Steps used to attain strategic goals • Blueprint that defines the organizational activities and resource allocations • Tends to be long term
Strategic Target marketing decisions Value proposition Analysis of marketing opportunities Tactical Product features Promotion Merchandising Pricing Sales channels Service Levels of a Marketing Plan
Developing Marketing Strategies and Plans Part 1: Marketing Value and Customer Value • The value delivery process • The value chain • Core competencies • A holistic marketing orientation and customer value • The central role of strategic planning Part 2: Corporate and Division Strategic Planning • Defining the corporate mission • Defining the business • Assessing growth opportunities • Organization and organizational culture
Developing Marketing Strategies and Plan Part 3: Business Unit Strategic Planning • The business Mission • SWOT analysis • Goal Formulation • Strategic Formulation • Program Formulation and Implementation • Feedback and Control
Developing Marketing Strategies and Plan Part 4: Product Planning: the Nature and Contents of a Marketing Plan Contents of the Marketing Plan
Hennes and Mauritz Walk into a trendy Soho boutique in New York City and you might see high-fashion T-shirts selling for $250. Go into an H&M clothing store and you can see a version of the same style for $25. Founded 55 years ago as a provincial Swedish clothing company, H&M (Hennes and Mauritz) has morphed into a clothing colossus with 950 stores in 19 countries and an ambitious plan to expand by 100 stores a year. The reason H&M has reached this point while so many other stores—such as once-hot Italian retailer Benetton—have floundered is that the company has a clear mission and the creative marketing strategies and concrete plans with which to carry it out. "Our business concept is to give the customer unbeatable value by offering fashion and quality at the best price," is the H&M mission as expressed on the company's Web site. Nothing could sound simpler. Yet, fulfilling that mission requires a well-coordinated set of marketing activities.
Hennes and Mauritz For instance, it takes H&M an average of three months to go from a designer's idea to a product on a store shelf, and that "time to market" fallsto three weeks for "high-fashion" products. H&M is able to put products out quickly and inexpensively by: 1- having few middlemen and owning no factories 2-buying large volumes 3- having extensive experience in the clothing industry 4- having a great knowledge of which goods should be bought from which markets 5- having efficient distribution systems 6- being cost-conscious at every stage
Nike Critics of Nike often complain that its shoes cost almost nothing to make yet cost the consumer so much. True, the raw materials and manufacturing costs involved in the making of a sneaker are relatively cheap, but marketing the product to the consumer is expensive. Materials, labor, shipping, equipment, import duties, and suppliers' costs generally total less than $25 a pair. Compensating its sales team, its distributors, its administration, and its endorsers, as well as paying for advertising and R&D, adds $15 or so to the total. Nike sells its product to retailers to make a profit of $7. The retailer therefore pays roughly $47 to put a pair of Nikes on the shelf. When the retailer's overhead (typically $30 covering personnel, lease, and equipment) is factored in along with • a $10 profit, the shoe costs the consumer over $80.
Encyclopedia Britannica http://corporate.britannica.com The Encyclopædia Britannica was born in 18th-century Scotland amid the great intellectual ferment known as the Scottish Enlightenment. According to one chronicler of Britannica history, Edinburgh in the mid-1700s was "a city on the verge of a golden age, a center of learning and a home of writers, thinkers, and philosophers.“ The first edition of the Britannica was published one section at a time, over a three-year period, beginning in 1768. In 1990 Encyclopædia Britannica found itself in a precarious competitive environment. CD-ROMs and the internet had become the study tools of choice for students and others. Microsoft’s Encarta CD-ROM and IBM’s CD-ROM joint venture World Book were attracting Britannica’s customers. The result book sales fell 83% between 1990-1997. In 1994 the company developed Britannica Online, the first encyclopedia for the Internet, which made the entire text of the Encyclopædia Britannica available worldwide. That year the first version of the Britannica on CD-ROM was also published. According to a company official: “we’re reinventing our business. We are not in the book business. We’re in the information business.” By the 2006, the company had become a premier information site on the internet (200,000) subscribers and (150,000) web sites selected
Part 1: Marketing Value and Customer Value Marketing and Customer Value • Marketing involves satisfying consumers' needs and wants. • The task of any business is to deliver customer value at a profit. • In a hypercompetitive economy with increasingly rational buyers faced with abundant choices, a company can win only by fine-tuning the value delivery process and choosing, providing, and communicating superior value. • The traditional view of marketing is that the firm makes something and then sells it. In this view, marketing takes place in the second half of the process. • The company knows what to make and the market will buy enough units to produce profits. Companies that subscribe to this view have the best chance of succeeding in economies marked by goods shortages where consumers are not fussy about quality, features, or style—for example, with basic staple goods in developing markets.
Part 1: Marketing Value and Customer Value The value delivery process Marketing and Customer Value The value delivery process • The traditional view of the business process, however, will not work in economies where people face abundant choices. • The smart competitor must design and deliver offerings for well-defined target markets. • This belief is at the core of the new view of business processes, which places marketing at the beginning of planning.
Marketing and Customer Value Part 1: Marketing Value and Customer Value The value delivery process The value delivery process 1-15
Part 1: Marketing Value and Customer Value The value delivery process Marketing and Customer Value The Japanese have further refined this view with the following concepts: • Zero customer feedback time. Customer feedback should be collected continuously after purchase to learn how to improve the product and its marketing. • Zero product improvement time. The company should evaluate all improvement ideas and introduce the most valued and feasible improvements as soon as possible. • Zero purchasing time. The company should receive the required parts and supplies continuously through just-in-time arrangements with suppliers. By lowering its inventories, the company can reduce its costs. • Zero setup time. The company should be able to manufacture any of its products as soon as they are ordered, without facing high setup time or costs. • Zero defects. The products should be of high quality and free of flaws.
Part 1: Marketing Value and Customer Value 2) The Value Chain Michael Porter of Harvard has proposed the value chain as a tool for identifying ways to create more customer value. According to this model, every firm has combination of activities performed to design, produce, market, deliver, and support its product. The value chain identifies nine strategically relevant activities that create value and cost in a specific business. These nine value-creating activities consist of five primary activities and four support activities.
Part 1: Marketing Value and Customer Value 2) The Value Chain The primary activities cover the sequence of: 1) bringing materials into the business (inbound logistics), 2) converting them into final products (operations), 3) shipping out final products (outbound logistics), 4) marketing them (marketing and sales), and 5) servicing them (service).
2) The Value Chain The support activities: 1) technology development, 2) human resource management, 3) firm infrastructure—are handled in certain specialized departments, as well as elsewhere. 4) Procurement and hiring Part 1: Marketing Value and Customer Value 1-19
Part 1: Marketing Value and Customer Value 2) The Value Chain Core Business Processes Include: • The market sensing process. • The new offering realization process. All the activities involved in researching, developing, and launching new high-quality offerings quickly and within budget. • The customer acquisition process. All the activities involved in defining target markets and prospecting for new customers. • The customer relationship management process. • The fulfillment management process. All the activities involved in receiving and approving orders, shipping the goods on time, and collecting payment.
Part 1: Marketing Value and Customer Value 3) Core Competencies (page 39) To be successful, a firm also needs to look for competitive advantages beyond its own operations, into the value chains of suppliers, distributors, and customers. Value delivery network also called A supply Chain To carry out its core business processes, a company needs resources. In the past companies controlled most of the resources Change regarding this concept is changing Many companies today have partnered with specific suppliers and distributors to create a superior value delivery network also called a supply chain.
3) Core Competencies • To carry out its core business processes, a company needs resources—labor power, materials, machines, information, and energy. • Traditionally, companies owned and controlled most of the resources that entered their businesses, but this situation is changing. • Many companies today outsource less critical resources if they can be obtained at better quality or lower cost. • Frequently, outsourced resources include cleaning services, landscaping, and auto fleet management. Kodak even turned over the management of its data processing department to IBM.
4) What is Holistic Marketing? Holistic marketing sees itself as integrating the value exploration, value creation, and value delivery activities with the purpose of building long-term, mutually satisfying relationships and co prosperity among key stakeholders.
Holistic Marketing Framework The holistic marketing framework is designed to address three key management questions: 1. Value exploration - How can a company identify new value opportunities? 2. Value creation- flow can a company efficiently create more promising new value offerings? 3. Value delivery- How can a company use its capabilities and infrastructure to deliver the new value offerings more efficiently?
A Holistic Marketing Orientation And Customer Value VALUE EXPLORATION VALUE EXPLORATION Because value flows within and across markets that are themselves dynamic and competitive, companies need a well-defined strategy for value exploration. Developing such a strategy requires an understanding of the relationships and interactions among three spaces: (1) the customer's cognitive space; (2) the company's competence space; and (3) the collaborator's resource space. The customer's cognitive space reflects existing and latent needs and includes dimensions such as the need for participation, stability, freedom, and change
A Holistic Marketing Orientation And Customer Value VALUE CREATION • To exploit a value opportunity, the company needs value-creation skills. Marketers need to: • identify new customer benefits from the customer's view; • utilize core competencies from its business domain; and • select and manage business partners from its collaborative networks. • To craft new customer benefits, marketers must understand what the customer thinks about, wants, does, and worries about. • Marketers must also observe who customers admire, who they interact with, and who influences them
VALUE DELIVERY • Delivering value often means substantial investment in infrastructure and capabilities. • The company must become proficient at customer relationship management, internal resource management, and business partnership management. • Customer relationship management fallows the company to discover who its customers are, how they behave, and what they need or want. • It also enables the company to respond appropriately, coherently, and quickly to different customer opportunities.
Developing Marketing Strategies and Plan 5) The Central Role of Strategic Planning Companies should have the capabilities to: • understanding customer value, • creating customer value, • delivering customer value, • capturing customer value, and • sustaining customer value.
5) The Central Role of Strategic Planning Only a handful of companies stand out as master marketers: Procter & Gamble, Southwest Airlines, Nike, Disney, Nordstrom, Wal-Mart, McDonald's, Marriott Hotels, and several Japanese (Sony, Toyota, Canon) and European (IKEA, Club Med, Bang & Olufsen, Electrolux, Nokia, Lego, Tesco) companies These companies focus on the customer and are: 1)organized to respond effectively to changing customer needs. 2)have well-staffed marketing departments, and 3) all their other departments—manufacturing, finance, research and development, personnel, purchasing—also accept the concept that the customer is king.
Part 2: Corporate and Division Strategic Planning Part 2: Corporate and Division Strategic Planning • Defining the corporate mission • Defining the business • Assessing growth opportunities • Organization and organizational culture
Part 2: Corporate and Division Strategic Planning What is Strategic Planning? • It is the managerial process that helps to develop a strategic and viable fit between the firm’s objectives, skills, resources with the market opportunities available. • It helps the firm deliver its targeted profits and growth through its businesses and products.
Part 2: Corporate and Division Strategic Planning Strategic Planning calls for Action in three key areas? managing a company's businesses as an investment portfolio. assessing each business's strength by considering the market's growth rate and the company's position and fit in that market. establishing a strategy For each business.
Understanding Marketing Management To understand marketing management, we must understand strategic planning. Most large companies consist of four organizational levels: • the corporate level, • the division level, • the business unit level, and • the product level.
Understanding Marketing Management 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) within a business unit develops a marketing plan for achieving its objectives in its product market.
Part 2: Corporate and Division Strategic Planning A marketing plan is the central instrument for directing and coordinating the marketing effort. It operates at a strategic and tactical level.
Defining the corporate mission How to go about it? • Defining the corporate mission • Establishing SBUs • Allocating resources for SBUs • Planning for new business
Corporate Mission • This seeks to embody the entire goals of the organization and the objective of its existence. • It seeks to provide a sense of purpose, direction and opportunity
Defining the Corporate Mission According to Peter Drucker, it is time to ask some fundamental questions. What is our business? Who is the customer? What is of value to the customer? What will our business be? What should our business be? Successful companies continuously raise these questions and answer them thoughtfully and thoroughly.
5 questions that the firm must ask itself • What is our business? • Who is our customer? • What does our customer need? • What will our business be? • What should our business be?
Organizations develop mission statements to share with managers, employees, and (in many cases) customers. A clear, thoughtful mission statement provides employees with a shared sense of purpose, direction, and opportunity. The statement guides geographically dispersed employees to work independently and yet collectively toward realizing the organization's goals.
Good mission Statements Mission statements are at their best when they reflect a vision, an almost "impossible dream" that provides a direction for the company for the next 10 to 20 years. Fred Smith wanted to deliver mail anywhere in the United States before 10:30 A.M. the next day, so he created FedEx.
Rubbermaid Commercial Products, Inc. “Our vision is to be the Global Market Share Leader in each of the markets we serve. We will earn this leadership position by providing to our distributor and end-user customers innovative, high-quality, cost- effective and environmentally responsible products. We will add value to these products by providing legendary customer service through our Uncompromising Commitment to Customer Satisfaction.”
Motorola “The purpose of Motorola is to honorably serve the needs of the community by providing products and services of superior quality at a fair price to our customers; to do this so as to earn an adequate profit which is required for the total enterprise to grow; and by doing so, provide the opportunity for our employees and shareholders to achieve their personal objectives.”
eBay “We help people trade anything on earth. We will continue to enhance the online trading experiences of all—collectors, dealers, small businesses, unique item seekers, bargain hunters, opportunity sellers, and browsers.”
Good Mission Statements 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. stress the company's major policies and values. define the major competitive spheres within which the company will operate
Major Competitive Spheres • Industry • Products • Competence • Market segment • Vertical channels (Ford) • Geographic
Defining the Business Companies often define their businesses in terms of products: They are in the "auto business" or the "clothing business."