BUS 620 Week 1 assignment

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Chapter 1

Strategic Planning and the Marketing Management Process

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Learning Outcomes

By the end of this chapter, you should:

Understand the fundamentals, concepts, and func�ons of marke�ng and marke�ng management. Know the four elements of the marke�ng mix and be able to provide examples of the common areas of decision making related to each. Recognize the purpose, goals, and basic design of a marke�ng plan. Understand how different levels of strategy work together to promote the objec�ves of the firm.

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Ch. 1 Introduction This chapter inves�gates the fundamentals of strategic planning and the marke�ng management process. We begin with the basics of marke�ng: What is it and why is it of value? You may already be familiar with some of the core concepts of marke�ng from previous coursework or your professional experience. Just to be sure, we review the essen�al func�ons and precepts of the discipline right at the start. We then move on to an examina�on of the process of marke�ng management and the development of strategy. This sec�on highlights the strategy alterna�ves available to the organiza�on and how the marke�ng mix can be deployed to achieve strategic objec�ves. We then examine how a marke�ng plan iden�fies the specific tac�cs for the implementa�on of strategy. The concluding sec�ons of Chapter 1 examine how different levels of strategy interact to guide the organiza�on.

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Throughout my career I have traveled extensively and experienced my fair share of layovers and delays at airports. I have found that reading and conversa�on are the two most reliable ways to pass the �me while wai�ng for flights to arrive, weather to clear, and bo�lenecks to resolve themselves. On one such occasion in Toronto, I was cha�ng with a flight a�endant about our respec�ve career choices and ambi�ons. Once I had explained that I taught marke�ng at a university and did some work as a marke�ng consultant as well, she seemed disappointed. "Marke�ng? Really?" she asked incredulously. "I mean, you sound like a very smart man. . . . isn't that kind of a waste?" I was stunned and a li�le embarrassed . . . and never did find a suitable response before the conversa�on migrated to other topics. If given a second chance, I would offer a good defense for my choices. I would explain that there's more to marke�ng than she probably realized. I would do my best to explain away the bad rap that the field has go�en over the years. I would try to impress upon her the economic value and social benefits that we all derive from a vast array of diverse marke�ng ac�vi�es. But I s�ll think about that conversa�on every so o�en. It helps me to keep things in perspec�ve.

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1.1 The Importance and Scope of Marketing Marke�ng has been defined in many different ways over the years, and simply defining the term has been a conten�ous and controversial topic in both academic and business domains for nearly a century. It is a business discipline that can be defined according to its ac�vi�es, func�ons, processes, roles, values, scope, economic u�lity, and social significance based on the priori�es of its advocates and cri�cs. This text focuses exclusively on the processes of effec�ve marke�ng and marke�ng management from a business decision maker's perspec�ve. In this regard, the prac�ce of marke�ng can be defined as "the management process responsible for iden�fying, an�cipa�ng, and sa�sfying customer requirements profitably" (Chartered Ins�tute of Marke�ng, 2011). More specifically, marke�ng management can be understood as "a set of processes for crea�ng, communica�ng, and delivering value to customers and for managing customer rela�onships in ways that benefit the organiza�on and its stakeholders" (American Marke�ng Associa�on, 2011).

Both defini�ons stress that understanding buyers' wants and needs is at the very heart of marke�ng's role in the crea�on of customer value. Increasingly compe��ve global markets and rapidly shi�ing consumer needs have increased the complexity of markets and amplified the importance of the marke�ng func�on. Consequently, marke�ng and market research have emerged as essen�al core competencies for most types of organiza�ons. The responsive character of the marke�ng func�on to both rapid changes and gradual shi�s in both micro- and macro-environment condi�ons have made effec�ve marke�ng an essen�al tool for both nonprofit and for-profit organiza�ons. In short, marke�ng management provides the ability to succeed by effec�vely mee�ng the needs of target customers in a dynamic environment.

Marke�ng is essen�al to the effec�ve promo�on and successful opera�on of most business organiza�ons. The scope and pervasiveness of this essen�al func�on is evident from both the aggregate economic impact of marke�ng and the range of jobs in the field. "Sales employees in manufacturing, service, and other industries; retail employees; and workers in transporta�on, communica�ons, and other related groups represent between one-fourth and one-third of the civilian labor force. About 50 cents of every retail dollar goes to cover marke�ng costs" (World Academy Online, 2011). Marke�ng provides a very broad range of employment opportuni�es throughout business and industry, as described in Table 1.1.

Table 1.1: The 26 marke�ng occupa�ons

Product Management Adver�sing Retailing Sales Marke�ng Research Non-Profit

Product Manager, consumer goods. Develops new products that can cost millions of dollars, with advice and consent of management. A job with great responsibility.

Account execu�ve. Maintains contact with clients while coordina�ng the crea�ve work among ar�sts and copywriters. In full- service ad agencies, account execu�ves are considered partners with the client in promo�ng the product and aiding in marke�ng strategy.

Buyer. Selects products a store sells; surveys consumer trends and evaluates the past performance of products and suppliers.

Direct. Compensa�on is based mostly on commission.

Project manager, supplier. Coordinates and oversees the conduc�ng of market studies for a client.

Marke�ng manager. Develops and directs mail campaigns, fundraising, and public rela�ons for nonprofit organiza�ons.

Administra�ve manager. Oversees the organiza�on within a company that transports products to consumers and handles customer service.

Media buyer analyst. Deals with media sales representa�ves in selec�ng adver�sing media; analyzes the value of media being purchased.

Store manager. Oversees the staff and services at a store.

Sales to channel. Sells to another step in the distribu�on channel (between the manufacturer and the store or customer). Compensa�on is salary plus bonus.

Account execu�ve, supplier. Serves as liaison between client and market research firm; similar to an adver�sing agency account execu�ve.

Opera�ons manager. Supervises warehousing and other physical distribu�on func�ons; o�en directly involved in moving goods on the warehouse floor.

Copywriter. Works with the art director in conceptualizing adver�sements; writes the text of print or radio ads or the storyboards of television ads.

Industrial/semi- technical. Sells supplies and services to businesses. Compensa�on is salary plus bonus.

Project director, in- house. Acts as project manager for the market studies conducted by the firm.

Traffic and transporta�on manager. Evaluates the costs and benefits of different types of transporta�on.

Art director Handles the visual component of adver�sements.

Complex/professional. Sells complicated or custom-designed products to businesses. Requires an understanding of the technology of a product. Compensa�on is salary plus bonus.

Marke�ng research specialist, adver�sing agency. Performs or contracts for market studies for agency clients.

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In this adver�sement, Duz's marke�ng concept is to differen�ate its detergent from its compe�tors by sta�ng that the consumer can have the whitest whites "without red hands" caused by harsh cleaning chemicals.

Be�mann/Corbis/AP Images

Inventory control manager. Forecasts demand for stockpiled goods; coordinates produc�on with plant managers; keeps track of current levels of shipments to keep customers supplied.

Sales promo�on manager. Designs promo�ons for consumer products; works at an ad agency or a sales promo�on agency.

Administra�ve analyst planner. Performs cost analyses of physical distribu�on systems.

Public rela�ons manager. Develops wri�en or filmed messages for the public; handles contacts with the press.

Customer service manager. Maintains good rela�ons with customers by coordina�ng sales staffs, marke�ng management, and physical distribu�on management.

Specialty adver�sing manager. Develops adver�sing for the sales staff and customers or distributors.

Physical distribu�on consultant. Expert in the transporta�on and distribu�on of goods.

Adapted from Rosenthal and Powell, 1984

Marketing as Philosophy: The Marketing Concept

The concept of marke�ng as a business discipline has evolved significantly over �me. The field of marke�ng was once regarded simply as a branch of economics, and the emphasis was on the efficient produc�on and distribu�on of goods. In the early decades of the twen�eth century, the marke�ng emphasis became twofold: developing improved ways to sell what you produce, and improving product quality.

A different perspec�ve on the role of marke�ng began to emerge in the years following World War II. The growth of discre�onary income in the postwar era altered the rela�ve balance of power between buyers and sellers. In contrast to the pa�erns established during the Great Depression and the scarcity of the war years, buyers now had the means to be selec�ve about their purchases. Product branding became increasingly important as a means of differen�a�ng products from each other in terms of price, func�onal a�ributes, benefits, and quality. To compete effec�vely, sellers needed to develop a sharper understanding of what different types of customers wanted from the products the sellers offered. This realiza�on provided the impetus behind changes in how marke�ng was done and led to the formal recogni�on of the marke�ng concept. The marke�ng concept is a customer-oriented philosophy of business management that stresses that the objec�ves of the organiza�on can best be met through the analysis and sa�sfac�on of customers' wants and needs. This philosophy maintains that sustainable compe��ve advantage rests in focusing all of the organiza�on's efforts on iden�fying and sa�sfying the needs of the customer be�er than the organiza�on's compe�tors.

In contrast to the produc�on and selling emphasis of earlier eras, the market orienta�on established by the marke�ng concept places higher priority on understanding customers' needs before designing and producing a good or service. It explicitly recognizes that, to be successful, all of the func�ons and resources of the organiza�on need to be integrated and aligned with the goal of customer sa�sfac�on. And it explicitly iden�fies customer sa�sfac�on as the key to long- term success and profitability.

In a fundamental sense, the discipline of marke�ng remains focused on the interac�on between supply and demand, just as it did in its infancy. However, the contrasts between the contemporary customer orienta�on of marke�ng and tradi�onal economics are quite substan�al. Economic analyses of markets typically assume that all people are the same in their preferences for a given product and that all products in a category are iden�cal. In contrast, the founda�on of contemporary marke�ng prac�ce is the understanding that segments of buyers differ from other groups with respect to their wants and needs. Similarly, the value of contemporary marke�ng is based on the ability of firms to differen�ate

their unique product brands from others in the market. In a sense, it is the unrealis�c nature of these classical economic assump�ons about people and products that makes the discipline of marke�ng necessary.

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Typical marke�ng objec�ves include new products, increasing share the market, and iden�fying new markets. The marke�ng mix is integrated to meet the needs of the targeted market segments. Think of a par�cular product; how does the company appeals to their target market?

Avoiding Marke�ng Myopia

Over �me, some marke�ng organiza�ons lose sight of the importance of maintaining a customer-centered focus. In 1960, Theodore Levi� coined the term "marke�ng myopia" to describe short-sighted marke�ng strategy. The term refers to the poten�ally disastrous tendency of managers to focus on the products they sell rather than the customers they serve. As a result, they can lose sight of consumers' wants and needs as these preferences shi� over �me.

The histories of many industries provide vivid illustra�ons of opportuni�es that have been missed when management's view of buyers' wants has been shortsighted and product-oriented. The owners and managers of the vast railroad empire that dominated transporta�on at the start of the twen�eth century were focused on the efficient opera�on of trains rather than customers' needs for safe and affordable transporta�on. Consequently, they didn't recognize the opportunity to diversify into other forms of passenger and freight transport such as airplane, bus, car, and truck transporta�on.

Many successful mo�on picture companies from the "golden years" of Hollywood simply failed to recognize that their product was about entertainment rather than making movies. Many missed out on the opportunity to become television networks, for example (though 20th Century Fox is a notable excep�on). Similarly, many radio networks simply failed when confronted with the challenge of television. However, the Na�onal Broadcas�ng Corpora�on (NBC), Columbia Broadcas�ng System (CBS), and the American Broadcas�ng Company (ABC) successfully made the transi�on.

Staying focused on customers' needs is essen�al in all types of organiza�ons. Marke�ng managers need to ask themselves regularly: What business are we really in? Hospitals that focus on promo�ng wellness behave differently than those focused on trea�ng illness. A firm that realizes its business is about personal expression will respond to more opportuni�es than one that sees itself as a gree�ng card company.

Marketing Fundamentals

Marke�ng can be used to achieve a wide range of objec�ves. It determines what prospec�ve buyers want, and it also establishes the game plan for mee�ng customer demand. Although different types of organiza�ons do the work of marke�ng in different ways, the essen�al concepts of the process are the same for all. This sec�on explains those basic concepts and illustrates them using shampoo as an example product.

To begin with, a market is made up of all the individuals, groups, and organiza�ons that want or need a product and have the resources required to purchase. Products may be goods, services, ideas, places, or people. Very few markets are homogeneous, or made up of people who are all the same. Groups of prospec�ve buyers within most product markets differ from other groups based on their specific wants, needs, or purchasing ability. Market segments are clusters of prospec�ve and current customers who are similar to each other in ways that lead them to respond to a firm's marke�ng mix similarly. The process of dividing the total market into dis�nct groups or submarkets based on similar wants, needs, behaviors, or other characteris�cs is called market segmenta�on.

Marke�ng: Sa�sfying Customer Needs

Consider a very simple product like shampoo. The poten�al market for this product would include anyone with hair. Yet consumers' expecta�ons for what their shampoo should do covers a wide range of needs. Although cleaning hair is a feature that is common to all brands, one segment of the market will place the highest priority on figh�ng dandruff. Another will place greater importance on the aesthe�cs of fuller-looking, shinier hair. A third segment may stress the need for a brand that will make its hair more manageable. And, inevitably, there is always a segment whose primary priority when choosing between brands is price. It is important to recognize that these segments are not mutually exclusive with respect to the features they are seeking in a brand. Several segments, for example, may

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This father and son shop at a warehouse store to buy economy-size household items in bulk to save money. How do companies appeal to these customers?

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want a brand that fights dandruff and makes hair shiny. However, segments are defined by differences in the rela�ve importance that each a�aches to dis�nct product a�ributes.

Each of these segments can ini�ally be defined according to what it wants from the brand it buys. An important next step in the process of market segmenta�on is examining the demographic, lifestyle, and behavioral characteris�cs of buyers who share similar needs and priori�es. The fuller-looking, shinier hair segment might be composed primarily of women aged 16 through 35. Perhaps they are less likely to be married than the popula�on at large and more socially ac�ve. Personal appearance in general, and fitness in par�cular, may be important lifestyle descriptors for this segment. The importance of developing these types of profiles is that it enables marketers to shape the promo�onal message to suit the prospec�ve buyers' lifestyles, and profiles play an important role in iden�fying the best media alterna�ves to reach the target segment. One common misconcep�on is that market segments are somehow preexis�ng divisions of the market just wai�ng for the marke�ng manager to uncover them. That is, some managers believe that market segments are simply wai�ng to be discovered in the way fossils are just below the surface, wai�ng for a paleontologist to uncover them. This is not the case. Market segments can be created by marke�ng managers based on any product or buyer characteris�cs that will be the most profitable. In fact, crea�ng new market segments within old, established product markets is one way to create new opportuni�es for the firm.

Consider the market for baby shampoo. The category name suggests a very limited poten�al market. Over the years, however, marketers have iden�fied new market segments for this product. Consumers who are concerned about the chemical "harshness" of regular shampoo brands represent an alterna�ve to the tradi�onal market. Customers with color-treated hair may find this type of shampoo a be�er op�on than "adult" brands. In short, any group of buyers who value gentleness as an essen�al product benefit of shampoo is a poten�al market segment.

Think About It

The migra�on of a brand's focus from the needs of one target market to the inclusion of others is usually confined to entering new, but similar, product-use segments—for example, from one group of buyers washing their hair to another with slightly different shampoo preferences. However, marke�ng history is replete with examples of big jumps across product categories. For instance, Arm & Hammer Baking Soda was originally limited to use as a baker's ingredient. It is now promoted for uses in household deodorizing products, toothpastes, laundry detergents, and cat li�er. Some�mes these new uses are ini�ally promoted by the manufacturer, but just as o�en they are pioneered by consumers. If you ever need to install window �n�ng film in your home or car, some manufacturers recommend preparing the glass surface by cleaning it with baby shampoo.

Can you think of other examples where products are being used for purposes different than those intended by the manufacturer?

Do you suppose it was ini�ally the manufacturer's or a consumer's new idea?

A target market is the term used to describe a group of poten�al buyers that the firm seeks to sa�sfy with its marke�ng mix. It is the segment of the market to which the firm directs its product and marke�ng efforts. Separate marke�ng mixes are developed to suit each target market according to its preferences and needs. The target market for any given product may be a single market segment, mul�ple pooled segments, or a mass market characterized by a prototypical consumer.

The tools available to the marke�ng manager to influence the target market to purchase one brand over another are collec�vely referred to as the marke�ng mix. O�en referred to as the "4 Ps," the marke�ng mix is the combina�on of four controllable factors that contribute to the organiza�on's marke�ng program: product, price, place, and promo�on. The way in which these variables are combined makes up the core marke�ng strategy of the organiza�on. The marke�ng mix is the tool kit of marketers insofar as these four elements are under the discre�onary control of the organiza�on. They provide the means by which the organiza�on can respond to and adapt to uncontrollable environmental factors such as economic, demographic, technological, natural, poli�cal, and cultural forces.

Let's return to the shampoo category. What can we say about the target market and marke�ng mix for the low-price segment of the market? In terms of demographics, you are likely to find that this segment is price sensi�ve because those in it are from the lower end of the household income spectrum. The demands of raising a large family may also be a factor in their desire to hold down expenses on common household items such as shampoo. The marke�ng mix required to sell to this segment would have several dis�nc�ve features. The product would have to be inexpensive to produce and package. This target market is not looking for anything "fancy," and a no-frills packaging presenta�on helps to communicate a good-value-for-money message. A compe��vely low price is essen�al, though this can be achieved in different ways such as coupon deals and economy-size packaging. The place element requires the manufacturer to secure distribu�on in those outlets where frugal shoppers go. These would include the big-box chain stores, price clubs, and discount and warehouse stores. The promo�onal message would necessarily emphasize value and low price.

Think About It

For virtually every product sold there is a low-price segment within the market. Suave brand shampoo has been very successful in the low-price segment of this market with promo�onal themes such as Suave does what theirs does . . . but for a lot less and Suave does what theirs does for less than half the price.

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Two product benefits for shampoo are contrasted in this map: adding volume and cleansing hair. The size of the circles indicates the market share owned by the brand. Which dominates the market?

Think of some other adver�sing themes that are intended to persuade price-conscious consumers., Can there be more than one successful brand pursuing this strategy in any given market? Can more than one brand successfully pursue this strategy in any given market?

Product differen�a�on is the term used to describe the process of dis�nguishing one product or brand from another. A product is said to be differen�ated when it is perceived as dis�nct from compe�tors' products based on any tangible or intangible feature. Product differen�a�on also refers to the generic strategy that promotes the characteris�cs or unique benefits of its brand over compe�tors' brands in the same market.

Product posi�oning, or brand posi�oning, refers to the strategy and tac�cs involved in crea�ng and shaping the brand's image in the mind of prospec�ve buyers. These images are defined rela�ve to how consumers perceive compe�ng products. Consumer percep�ons (not actual differences between products) are the cri�cal issue. In general, the term "posi�oning" can be used in reference to the process by which marketers create an iden�ty in the minds of consumers for either a product or brand.

The rela�ve posi�on of one brand to others is some�mes illustrated using a posi�oning map or perceptual chart, as shown in Figure 1.1.

Figure 1.1: Brand posi�oning map

Successful product differen�a�on and posi�oning rela�ve to the needs the target market can provide a firm with a differen�al advantage over compe�tors based on the unique a�ributes or benefits of its brand, which encourage consumer purchase. Differen�al advantages provide buyers with substan�al reasons to prefer one brand over another. Both product differen�a�on and the effec�ve posi�oning of the brand contribute to building differen�al advantages over compe�ng products.

Basic Marketing Functions

Although our approach to the prac�ce of marke�ng management emphasizes a process-oriented perspec�ve, it is worthwhile to briefly note the six primary func�ons of marke�ng management:

1. Environmental analysis 2. Consumer analysis 3. Product planning 4. Price planning 5. Place or physical distribu�on planning 6. Promo�on planning

Environmental and consumer analysis are essen�ally market research func�ons that provide the means to iden�fy new opportuni�es, evaluate market poten�al, and select target markets. One approach to environmental analysis is called PEST analysis. This model focuses on the study of poli�cal, economic, social, and technological forces within the environment that might impact the organiza�on's strategic plan. Consumer analysis provides an in-depth examina�on of the forces that shape demand. These include cultural, socioeconomic, and personal dimensions of the consumer environment. Environmental and consumer analysis are inves�gated in detail in Chapters 3 and 4.

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Product, price, place, and promo�on all have to do with the marke�ng mix, or the 4 Ps. When examined from a func�onal perspec�ve, the 4 Ps of the marke�ng mix provide the strategy planning pla�orm for the pursuit of market opportuni�es iden�fied in the environmental and consumer analyses. Specific decision-related considera�ons for each of the marke�ng mix variables are addressed in the next sec�on.

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How can you apply this process to a company, product, and target market you are aware of?

CVS and many other companies are mee�ng shoppers' needs conveniently and, ul�mately, building more traffic for their stores.

Associated Press

1.2 The Marketing Management Process Marke�ng management is a process that is intended to facilitate transac�ons by bringing buyers and sellers together. Consistent with the marke�ng concept, the ul�mate goal of the process is to create exchanges that sa�sfy both company and customer.

As illustrated in Figure 1.2, the process of marke�ng management from the seller's perspec�ve can be characterized as a series of four stages of decision making: situa�on analysis, marke�ng strategy, marke�ng mix decisions, and implementa�on and control.

Figure 1.2: Marke�ng management process

Each of these stages is described in greater detail in the sec�ons that follow. Before proceeding, however, it is important to keep two features of the model in mind. The purpose of the model is to provide a measure of discipline to the process of marke�ng management to improve the quality of managers' decisions. Its value lies in making sure that the decision maker is deliberate, thorough, and systema�c in the planning and execu�on of marke�ng strategy. An important considera�on when evalua�ng the model is that it is not simply a linear recipe card for decision making. It is intended to provide an aid to assessing the goodness of fit between marke�ng problems and alterna�ve solu�ons. As such, it is not a subs�tute for thinking. The model can only be as useful, flexible, and dynamic as the user makes it.

Stage I: Situation Analysis

In many instances, corporate, division, and business unit level goals and strategic priori�es will shape and direct the process of marke�ng management from the outset. Given those constraints, the first step of the process is to undertake a thorough analysis of the current situa�on and environment confron�ng the organiza�on. Situa�on analysis is at the heart of marke�ng's endeavor to iden�fy new opportuni�es to sa�sfy unmet customer wants and needs. Opportuni�es typically stem either from finding new ways to serve the needs of exis�ng customers or uncovering new markets for exis�ng product or service lines. Many new opportuni�es incorporate elements of both new products and new markets. Product-related opportuni�es for a regional hospital, for example, might include the addi�on of alterna�ve therapies (e.g., acupuncture) or crea�ng satellite wellness or express-care centers in local shopping centers and malls. The addi�on of a new service line in sports medicine and rehabilita�on care might be one way to reach a new segment of the market.

The goal in situa�on analysis is to provide an analysis of both macro- and micro-environmental factors that will impact marke�ng strategy. The process also serves to make the organiza�on cognizant of its capabili�es and resource limita�ons. For this reason, SWOT analysis (discussed in Chapter 3) is a star�ng point for performing situa�on analysis that is favored by many managers. SWOT is an analy�cal procedure that requires considera�on of the firm's internal Strengths and Weaknesses rela�ve to the Opportuni�es and Threats posed by the external environment.

Since the objec�ve of situa�on analysis is to uncover viable market opportuni�es, it needs to be comprehensive in scope. One way to make sure that all relevant features of the environment are considered is by using the 4 Cs framework: company, customers, compe�tors, and climate/culture. In this model, company refers to the internal capabili�es and resources of the firm, while the remaining three Cs represent elements of the external environment. (Applica�ons of this model are discussed in Chapter 5.)

Regardless of the analy�cal devices and techniques deployed, the final product of the situa�on analysis is an accurate map of both the internal and external environmental circumstances confron�ng the organiza�on. This process may iden�fy poten�al problems in the firm's current marke�ng plan that require remedial ac�on. However, the primary objec�ve is to iden�fy market opportuni�es by demonstra�ng gaps between consumer preferences and the current array of compe��ve brands. Once the most a�rac�ve of these opportuni�es are evaluated, a marke�ng strategy for applying the organiza�on's resources to sa�sfy the poten�al market demand is created.

Let's consider again the challenges confron�ng a regional hospital. The high cost of delivering quality health care and many pa�ents' limited ability to pay reflect both internal and external environmental

challenges. This growing gap or tension necessarily poses a threat to maintaining high levels of pa�ent sa�sfac�on. Marke�ng opportuni�es exist to help narrow this gap. The concept of crea�ng wellness centers at shopping centers and malls is one possible response to the challenge. These express health care centers could provide basic care for common ailments, rou�ne inocula�ons, and short customer wai�ng �mes and extended hours to make the centers more convenient. If staffed only by a registered nurse, the per-pa�ent cost of treatment for common ailments and minor injuries in this se�ng would be far less than clinic or hospital visits.

Stage II: Marketing Strategy

A�er the situa�on analysis has iden�fied the best opportuni�es for the firm, a mul�layered strategic plan is required to effec�vely and efficiently capitalize on them. The most general level of strategy that needs to be addressed at this stage in the marke�ng management process is the iden�fica�on of the generic strategy

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Strategic alterna�ves stem from either brand differen�a�on or cost-related advantages. These advantages can be broad or narrow in scope—why do you think that is?

that is best suited to pursuing the opportunity. The three basic types of generic marke�ng strategy are product differen�a�on, cost leadership, and market focus (Porter, 1980).

Product differen�a�on strategy requires dis�nguishing your product from compe�tors' in a way that makes prospec�ve buyers prefer your brand. The basis of differen�a�on can be tangible or intangible a�ributes of the product—including the brand image itself. For this reason, product differen�a�on strategy is o�en most closely iden�fied with the marke�ng func�on.

Cost leadership strategy allows a firm with lower overall costs of produc�on and marke�ng to a�ract price-sensi�ve customers by selling at rela�vely lower prices than compe�tors. Lower costs can be derived from economies of scale and experience curve efficiencies in manufacturing and other opera�onal areas of the organiza�on. Compe��vely lower direct and indirect opera�ng costs may also be rooted in outsourcing, �ghter produc�on cost control processes, more-efficient distribu�on networks, and higher rates of capacity u�liza�on.

Market focus strategy is not a separate or dis�nctly different strategy from the other two, but instead describes the scope over which the firm will implement either cost leadership or differen�a�on strategies. Organiza�ons may opt to compete in broadly defined mass markets or focus on narrower segments of the market. In a narrow, focused approach to strategy, compe��ve advantage is gained by serving the unique needs of a market segment or niche be�er than larger compe�tors can because of their size.

The generic strategy op�ons for a regional health care provider can be defined in the same way as they would be for any other type of organiza�on. Hospitals can pursue a differen�a�on strategy based on several dimensions of care. For example, some may opt to emphasize the latest in high technology, while others stress personal care. The contrast of high tech versus high touch is typical in fields such as cardiology, obstetrics, and senior care.

Cost leadership in health care can be achieved through more efficient opera�ons and superior cost management techniques. Some advantages are uniquely �ed to economies, giving bigger organiza�ons an advantage. However, smaller health care systems have access to cost-savings opportuni�es that diminish as the size of the organiza�on increases. Focus strategy op�ons, as noted, simply describe the scope over which the firm will implement either cost leadership or differen�a�on strategies. In a health care se�ng, this typically applies to decisions made for individual service lines versus the organiza�on as a whole.

The best generic strategy is chosen based on how the unique strengths of the organiza�on relate to the opportunity iden�fied by the situa�on analysis. All organiza�ons thrive in environments that allow them to leverage their strengths rela�ve to their compe�tors. The strengths of a firm are typically rooted in either superior brand differen�a�on or cost advantages over other producers. Further, these advantages can be applied in either broadly defined markets or narrow market niches. The resul�ng generic strategy op�ons are illustrated in Figure 1.3.

Figure 1.3: Porter's generic strategies

The chosen generic strategy, as the name suggests, provides a broadly defined strategic orienta�on for pursuing the iden�fied market opportunity. Beyond this ini�al determina�on of an overall strategy, three other closely related strategy decisions need to be made before an opera�onal marke�ng plan can be developed. These more specific strategic op�ons relate to market segmenta�on, product differen�a�on, and brand posi�oning.

Strategic planning is as much an art as a science, and there is no one "best way" to organize the effort. Table 1.2 provides one simple model that you may find helpful.

Table 1.2: A matrix model of marke�ng management

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The Marke�ng Mix

PRODUCT PRICE PLACE PROMOTION

Generic Market Strategy

Market Segmenta�on

Product Differen�a�on

Brand Posi�oning

Once decisions regarding the four strategy categories in the le�-hand column have been made, their goodness of fit with the four elements of the marke�ng mix can be assessed by examining each intersec�on in the 16-cell matrix. For example, is our pricing strategy (column 2) consistent with our generic market strategy, market segmenta�on strategy, product differen�a�on strategy, and brand posi�oning strategy? In prac�ce, managers may find it useful to fill in each cell of the matrix to demonstrate how each element of the marke�ng mix contributes to the strategic objec�ves established in the le�-hand column. This exercise can refine the process of strategic planning and avoid costly mismatches down the road.

Marke�ng strategy provides the overall "ba�le plan" for capitalizing on the opportuni�es ini�ally iden�fied through the situa�on analysis. The next step in the process of marke�ng management is to develop the plans for the implementa�on of the marke�ng mix.

Stage III: Marketing Mix Decisions

The marke�ng mix represents the basic tool kit of marke�ng since it provides the means for execu�ng strategy. In keeping with the marke�ng concept, the objec�ve is to make decisions and develop plans that relate the 4 Ps to the target market to provide greater perceived value than compe�tors can offer. Each of the four elements of the marke�ng mix will be addressed in detail in subsequent chapters. The outline that follows provides a brief summary of typical decisions that marke�ng managers need to make within each of the four categories.

The product variable includes both tangible and intangible dimensions of physical products and services. Common areas of product-related decision making include:

New product development, Test marke�ng, Branding and brand management, Product design and styling, Packaging, Product safety, Quality control, Post-purchase product service and support, Ancillary services and accessories, Product mix and product line management, and Product life cycle management.

The pricing variable includes both economic and psychological characteris�cs. Common areas of price-related considera�ons and decision making include:

Evalua�on of price elas�city of demand, Mee�ng legal and ethical pricing constraints, Introductory price se�ng (price skimming versus penetra�on pricing), Price discrimina�on Cost-based pricing versus demand-based pricing versus compe��on-based pricing, Economic value es�ma�on, Pricing through channels of distribu�on, Geographic pricing, Discoun�ng policies, Price–quality correla�on, Pres�ge pricing, Price lining, Leader pricing, Seasonal pricing, Bundling, Profitability and margin analysis, Break-even analysis, and Sales and profit projec�ons.

The place variable relates primarily to distribu�on and focuses on ge�ng the product to the customer. Common areas of place-related considera�ons and decision making include:

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Retailers are increasingly looking to social media to strengthen rela�onships with customers. In this image, Charlo�e Russe displays a Facebook promo�on to gain more customer support and store traffic.

Najlah Feanny/Corbis

Evalua�ng alterna�ve distribu�on plans and networks, Selec�ng distribu�on channels, Establishing and maintaining channel rela�onships, Nego�a�ng and administering channel contracts, Resolving channel conflict and maintaining channel control, Managing distribu�on coverage/intensity (intensive versus selec�ve versus exclusive), Evalua�ng and implemen�ng push versus pull strategies, Inventory management and control, Order processing, and Warehousing.

The promo�on variable encompasses a wide range of func�ons related to the firm's overall communica�ons program. Common areas of promo�on-related decision making include:

Se�ng and evalua�ng communica�ons goals, Assessing alterna�ve communica�on channels, Establishing promo�on budgets, Measuring promo�onal effec�veness, Adver�sing, Message and media planning, Social media promo�ons, Personal selling and sales management, Recrui�ng and training salespeople, Sales territory management and sales force alloca�on, Publicity and public rela�ons, Consumer- and middleman-directed sales promo�ons.

Think About It

Select a consumer product of personal interest—one that you have purchased within the past six months. It can be anything, just as long you are familiar with the product and generally understand how it is marketed. Using the matrix model of marke�ng management in Table 1.2, fill in the cells of the matrix as completely and thoroughly as you can for the brand that you purchased. Be sure that your entries correspond to your perspec�ve as a customer for this brand. In short, you are the target market. You may wish to create one or more posi�oning maps to help illustrate how you perceive the compe��ve playing field. Once you're done, examine the intersec�on of each cell.

How do the elements of the marke�ng mix align with the four strategy categories in the le�-hand column?

Does every one of the 4 Ps contribute to each of the strategic objec�ves established in the le�-hand column? Do you see room for improvement?

How would this assessment be different for other types of customers?

Stage IV: Implementation and Control

The value of the three preceding stages in the process of marke�ng management depend wholly the organiza�on's ability to effec�vely implement the developed strategy. Stages I through III have iden�fied the opportunity within the marketplace, isolated the best strategic op�on for exploi�ng the opportunity, and created the marke�ng mix that will faithfully execute the strategy. The final stage of the process is to implement the marke�ng mix decisions that have been made and monitor the results.

The final stage in the marke�ng management process is to assess whether the goals and objec�ves established through the four-step process and corresponding marke�ng plan are being achieved. This evalua�on and control process relies on specific, measureable, short-term goals or benchmarks established for the new marke�ng ini�a�ve. The comparison of performance to objec�ves provides cri�cally important performance feedback and enables decision makers to make adjustments to the marke�ng program as needed. Although poor performance may implicate the effec�veness of the marke�ng mix for a given program, it should also cause marke�ng managers to reexamine their assump�ons about the nature of the market opportunity they are pursuing. No plan can meet expecta�ons if the es�mates of market poten�al for a new opportunity are unrealis�cally inflated. Specific techniques for evalua�ng market demand and forecas�ng sales are developed in Chapter 5.

The detailed plan for implementa�on is called a marke�ng plan. The American Marke�ng Associa�on defines a marke�ng plan as "a document composed of an analysis of the current marke�ng situa�on, opportuni�es and threats analysis, marke�ng objec�ves, marke�ng strategy, ac�on programs, and projected or pro- forma income (and other financial) statements. This plan may be the only statement of the strategic direc�on of a business, but it is more likely to apply only to a

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specific brand or product. In the la�er situa�on, the marke�ng plan is an implementa�on device that is integrated within an overall strategic business plan" (American Marke�ng Associa�on, 2011).

The specific format for a marke�ng plan can vary substan�ally from one instance to the next, depending on the nature of the firm, the market, and the opportunity in ques�on. In each instance, however, the intent of the wri�en plan is to provide a detailed, systema�c blueprint for implemen�ng the decisions reached in the marke�ng management process. The outline for a typical marke�ng plan is provided in the next sec�on.

It is also worth no�ng that most compe��ve market environments are in a constant state of flux to a greater or lesser degree. The impact of macro- and micro- environmental forces on market demand requires careful monitoring. Marke�ng managers must be able to adapt the marke�ng mix for any given product to respond to these changes. Consequently, the process of marke�ng management itself requires con�nual monitoring and modifica�ons to the marke�ng mix in response to shi�s in the character of the target opportunity. As with most things in marke�ng, the focus must remain on the customer and the pursuit of ways to meet buyers' needs more effec�vely and consistently than one's compe�tors.

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A marke�ng plan iden�fies the company's strengths and weaknesses and the poten�al threats of the marke�ng environment. This ensures that specific products like PlaySta�on 3 reach the right target audience and market.

Associated Press

1.3 The Marketing Plan The marke�ng plan is the set of opera�onal blueprints that translates the ini�al strategic choices iden�fied by the marke�ng management process into ac�ons. It establishes the firm's ini�al marke�ng strategy and iden�fies the ac�vi�es required to carry out the overall plan. Marke�ng plans specify target markets and provide an overview of the decision-oriented steps and objec�ves for each element of the marke�ng mix. Addi�onal informa�on usually includes market research plans, consumer and environmental analyses, and sales forecasts.

There are many formats, outlines, and styles for wri�ng marke�ng plans, which reflects the need to tailor the plan to suit the product, market, and specific audience it is intended to reach. The following annotated outline is intended to provide a flexible guide to wri�ng a marke�ng plan, while allowing the marke�ng manager to adapt the model to suit the unique demands of most business situa�ons.

Marketing Plan Outline

The marke�ng plan outline consists of 11 sec�ons. It begins with an execu�ve summary that provides a preview of the main points of the plan. Sec�on II describes the current situa�on confron�ng the firm and includes an assessment of the compe��ve environment. This is a pivotal sec�on insofar as it forces marke�ng managers to develop a comprehensive understanding of the markets in which they are compe�ng. The sec�on that follows presents the results of any market research that has a direct

bearing on the viability of the plan.

Sec�ons III through V describe all of the strategic decisions and goals related to the pursuit of this market opportunity, with par�cular emphasis on market segmenta�on and product posi�oning. Sec�ons VI through IX provide a breakdown of how the marke�ng mix will be used to accomplish those strategic goals.

The final two sec�ons of the marke�ng plan include forecasts of the financial results an�cipated from the execu�on of the plan and a summary of the long-range plans for this product.

SECTION I: Execu�ve Summary

The execu�ve summary should provide an overview of the en�re plan, including a descrip�on of the product, the differen�al advantage, the required investment, and an�cipated sales and profits.

SECTION II: Situa�on Analysis and Assessment of the Compe��ve Environment

This sec�on of the marke�ng plan needs to:

Provide a review of past performance for exis�ng programs covered by the plan. Discuss any issues within the macro-environment that are per�nent to demand for your product, markets, and the proposed marke�ng plan. Do you intend to profit from any changes taking place in the marketplace? Macro-environmental dimensions may include: demographic shi�s, legal/poli�cal factors, changing lifestyles, social changes, economic trends, technological changes, or shi�s in cultural/religious values. Describe your compe�tors, their products, and strategies. What are their advantages in the market? What channels do they use? Iden�fy their strengths and weaknesses. Prepare a SWOT chart illustra�ng strengths, weaknesses, opportuni�es, and threats relevant to the plan.

SECTION III: Researching Market Opportuni�es and Market Poten�al

This sec�on of the marke�ng plan will present any informa�on that indicates the viability of this product. This could include either primary or secondary data that describe the size or poten�al of this market.

Fully describe your market research plans. What types of research would you conduct prior to introducing this product? Be explicit when explaining the purpose or intent of this research plan. Describe your research methodology as completely as possible.

SECTION IV: Market Segmenta�on, Product Differen�a�on, and Posi�oning

Present your segmenta�on analysis by iden�fying the market segments, segment name, and descrip�ve characteris�cs. Include a chart presen�ng this informa�on and the purchase determinant a�ributes, features, or benefits for each of the following:

Target Market Selec�on/Strategy. This should be based on the preceding analysis, specifying target market(s) by name and buyer characteris�cs. Describe your target market segment(s) in detail by using demographics, psychographics, geography, lifestyle, or whatever segmenta�on variables are appropriate. Explain why this is your target market. Describe the size and other relevant group characteris�cs. Product Differen�a�on. This should be a descrip�on of the essen�al difference between your product and its closest compe�tors. Indicate any poten�al for a�rac�ng other groups of consumers in the future: Why is it a superior alterna�ve for some buyers . . . specifically your target market? What is the mo�va�on of buyers and users of compe�ng products? What would be their mo�va�on for buying your product?

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Product Posi�oning. Here you should prepare complete posi�oning maps or comparable charts for your product and compe�ng products on relevant dimensions.

SECTION V: Statement of Marke�ng Strategy and Goals

Based on the analysis presented in Sec�ons I through IV, specify your overall marke�ng strategy for the product. In this sec�on you need to state your goals for the product in terms of sales volume, market share, return on investment, or other measures, and the �me needed to achieve each of them. Sec�ons VI through IX will describe your implementa�on of this strategy—how you will deploy the marke�ng mix to carry out your strategy.

SECTION VI: Product Planning

This part of the marke�ng plan should discuss your firm's product planning issues. What is your brand management strategy? Describe your ra�onale for this choice. Discuss product packaging and the purposes your packaging serves. Include a discussion of relevant product features that were not described previously.

SECTION VII: Pricing

Here, discuss the nature of your pricing strategy and tac�cs for this product rela�ve to compe�ng brands and subs�tute products. Organize this sec�on to stress any factors or strategies that are important to the success of your marke�ng plan. Be certain to address the issue of "skimming" versus penetra�on pricing.

SECTION VIII: Place, Physical Distribu�on, or Loca�on Strategy

In this sec�on, you should specify the details of your distribu�on strategy, compare your system of product delivery to those used by compe�tors, and describe where your service will be offered or how the service will be delivered to the buyer. How important is the choice of loca�on? Discuss the relevance of push versus pull strategies with respect to your goals.

SECTION IX: Promo�on

State the goals of your promo�onal strategy and iden�fy your promo�onal campaign theme clearly and concisely. Remember to explain how the choice of goals and themes will accomplish the objec�ves stated in Sec�on V. You should also discuss how the elements of the promo�ons mix are interrelated in your promo�onal efforts. Where do your priori�es lie?

SECTION X: Projec�ons of Sales, Costs, and Profits

You will need to determine project or product launch startup costs and a monthly opera�ons budget. Calculate the break even point for alterna�ve price levels and provide sales and cash flow projec�ons for same.

SECTION XI: Summary and Conclusion

In addi�on to a summary overview of the plan, you should also provide a descrip�on of your long-range plans and expecta�ons for this product. This sec�on also offers an opportunity to highlight the strengths of your marke�ng plan and acknowledge its weaknesses.

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Companies are increasingly responding to customers' social concerns as well as their product needs to strengthen the image of the brand.

WireImage/Ge�y Images

1.4 Hierarchy of Corporate, Business, and Marketing Strategies The process of marke�ng management takes place within the much broader context of the organiza�on's limited resources and objec�ves. The hierarchy of most large organiza�ons requires that the strategic direc�on for the whole body is established at the highest levels. Consequently, marke�ng decisions at lower levels of the hierarchy must be informed and shaped by an understanding of the organiza�on's larger priori�es and goals.

The term strategy has many meanings, depending on the context in which it is used. In its simplest form, however, a strategy is a long-term plan of ac�on designed to achieve specific objec�ves. In business, common strategic goals are o�en expressed in terms of growth and profitability. Strategy is dis�nct from tac�cs, which are the short-term means required to execute the strategy and achieve the stated goals.

In this sec�on, we turn our a�en�on to big picture issues by tracing the path of strategic planning from its origins in the company mission statement and through the development of a corporate-level strategy un�l we reach the level of the individual business units. It is at the business unit level of decision making that marke�ng managers take charge of strategic planning.

Corporate Mission Statement

Most large organiza�ons develop mul�ple levels or layers of strategy over �me. Corporate-level strategy establishes the opera�onal domain or boundaries of the organiza�on. The corporate mission statement defines the purpose and scope of the organiza�on. In doing so, it typically sets forth the company's values and establishes the predominant areas of business focus and prac�ce. A formal corporate mission statement may also include other features such as the historical roots of the firm, the prevailing management philosophy, relevant environmental concerns, and a statement of what the company perceives as its dis�nc�ve competencies.

Peter Drucker, a twen�eth-century business author, believes that the mission of a corpora�on can be defined by the answer to five basic ques�ons (Drucker, 2008):

1. What is our mission? 2. Who is our customer? 3. What does the customer value? 4. What are our results? 5. What is our plan?

Corporate mission statements define the character of the company for people inside and outside the company. The most significant role of the mission statement for company managers is in shaping the development of corporate-level and business-level strategy.

Corporate Strategy

Strategies at all levels of an organiza�on share certain features. They define the objec�ves that the business will pursue within a given environment, and they guide the alloca�on of organiza�onal resources and effort. At a basic level of analysis, corporate-level strategy is primarily concerned with establishing the corporate domain by answering the core ques�on, "What businesses should we be in?" Business-level strategy is designed to answer the ques�on, "In which product markets should we compete within these businesses?" Marke�ng strategy is a statement of how a brand or product line will achieve its objec�ves within the broader context of business-level objec�ves.

Corporate-level strategy defines the business areas in which the organiza�on will compete and provides a statement of the core ra�onale required to integrate the subordinate goals of the opera�onal subunits and func�onal departments. This is necessary to be certain that every strategic business unit (SBU) within the company is pulling in the same direc�on.

Strategic Business Units

Strategic business units are o�en the unit of analysis for planning corporate strategy, and they can be defined in many ways. SBU typically refers to any major product or service line within a company that is small enough to be flexible in its response to external market forces and big enough to exercise direct control over the internal decision factors affec�ng its performance. From a marke�ng manager's perspec�ve, this includes direct control over the elements of the marke�ng mix. Most SBUs have a significant degree of managerial autonomy and have their own objec�ves and business strategies independent of the organiza�on as a whole. The strategy statement for a strategic business unit defines the markets in which the business will compete and describes how it intends to achieve and promote a compe��ve advantage in that market. From the perspec�ve of planning corporate strategy, SBUs represent the individual elements within the company's por�olio of business ventures.

Alloca�ng Corporate Resources

Large corpora�ons typically have many SBUs under their organiza�onal umbrella. Having an array or por�olio of product lines and brands under the control of one en�ty affords the company several poten�al advantages. Managers can shi� the investment of corporate resources to those SBUs that hold the promise of greater growth and profitability while reducing their commitment to less a�rac�ve op�ons. These resources may include the assignment of key managerial talent, research

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The BCG Growth-Share Matrix helps managers assign corporate resources to opportuni�es with the greatest poten�al by evalua�ng each SBU's rela�ve market share and the corresponding rate of market growth.

and development funding, and marke�ng support. Marke�ng support includes the company's investment in product development, adver�sing, promo�ons, the development of distribu�on channels, and the commitment of increased support from the sales staff.

In the early 1970s the Boston Consul�ng Group (BCG) introduced a conceptual planning model for managing a por�olio comprised of mul�ple SBUs. The BCG Growth-Share Matrix is an aid to decision making that displays each of the firm's strategic business units on a two-by-two graph defined by forecasted market growth rate and current rela�ve market share. Each SBU is assigned to one of four categories on the resul�ng matrix as a func�on of its market share rela�ve to immediate compe�tors and growth rates for the industry.

The BCG matrix illustrated in Figure 1.4 provides a framework for evalua�ng the alloca�on of corporate resources among different business units. Recommenda�ons for the alloca�on of resources to strategic business units are made according to where the units are situated within the BCG Growth-Share Matrix.

Figure 1.4: BCG Growth-Share Matrix

Cash cow is a business unit that has a large market share in a mature, slow-growing industry. These units typically generate large profits and require rela�vely li�le investment to maintain their market share in slow growth industries. Cash generated from cash cows can be reinvested into other, growth-oriented SBUs.

Stars are defined by their rela�vely high market shares in high-growth markets. They tend to generate substan�al profits but also consume substan�al resources to finance their con�nued growth in rapidly growing, compe��ve markets. Just "keeping up" in these dynamic markets may require a substan�al commitment from the firm. If successful, a star will become a cash cow in the long run, as its industry matures.

A ques�on mark (some�mes called a "problem child") is a business unit that holds a rela�vely small market share in a high growth market. These units do not generate substan�al profits at this �me, but they require resources to grow their market share. Whether they will succeed and develop into stars is usually uncertain, but they s�ll require high levels of investment to maintain or build their market share. The decision to invest in these opportuni�es or divest them is among the most challenging ones facing marke�ng managers.

Dogs provide the organiza�on with li�le profitability or opportunity for sales growth. These are SBUs with rela�vely small market shares, surviving in a low-growth or mature industry. A dog may not require substan�al cash to maintain its market posi�on, but it �es up capital that could be be�er invested in other product lines.

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Companies succeed by looking for new ways to serve their customers' essen�al needs. A fruit "floral" basket is an example of this innova�ve response to customer desires.

Design pics/SuperStock

The BCG por�olio analysis can be applied to organiza�ons of kinds and sizes. Consider the challenges facing a small retail florist shop. Perhaps its cash cows are made-to-order floral arrangements and fresh-cut flowers sold to walk-in traffic. The market is defined by the store's loca�on. These represent the core SBUs that generate most of the stores profits.

Online sales and local delivery have been growing in popularity. This shop got into this aspect of the market earlier than most. It enjoys rela�vely high market share on a citywide basis and con�nued sales growth. Though quite profitable on a per-order basis, the costs of maintaining the website, making deliveries, and promo�ng the service have been limi�ng the overall profitability and growth of this SBU. It will require investment in newer technology and dedicated delivery staff to remain compe��ve in this market. This could be considered a star.

Recently this florist has been experimen�ng with line extensions of edible products such as fruit baskets and chocolate bouquets. This is currently a very high-growth market in this area, but franchised compe�tors are capturing most of the sales volume. To build market share, this ques�on mark would require significant investments in new prepping/packaging facili�es, the acquisi�on of more inventory, and a big commitment to adver�sing and promo�on. If the franchised opera�ons are already too well entrenched in prospec�ve buyers' minds, all of this investment could be lost.

Small toys, stuffed animals, and novel�es related to specific holidays are also sold at the retail shop. The margins are quite poor, since the florist needs to compete on price with the big-box retailer across the street. These lines require far more inventory and retail space than they are worth. However, many of the store's oldest and most loyal customers have

been faithfully buying these items for years. In fact, the tradi�on began with many of the current customers' parents at a �me when there were no big-box retailers in the city. The owner may feel the need to keep this dog to retain the loyalty and goodwill of some of his best customers.

The underlying conceptual model is straigh�orward and intui�vely appealing, but, as with all of the decision making aids presented in this text, it is not intended to be a subs�tute for thinking. Each SBU requires considera�on and subsequent analysis on its own merits. O�en other considera�ons take precedence over near-term growth. Some�mes, for example, a firm will retain an "old dog" long a�er its financial value to the company has ended. Old flagship brands have value in terms of the company's image, its rela�onship to core customer groups, and its significance to the firm's own employees.

Although the BCG matrix can be of great value in the process of strategic planning, it is necessary to understand the basic assump�ons required by the model. First, it assumes that increasing market share will result in a corresponding growth in profitability. However, the costs of building market share o�en grow propor�onately faster than the corresponding improvements in profits. In short, "buying" more market share can cost more than it is worth.

A second poten�al weakness in the applica�on of this model is that it can only provide a snapshot of the current situa�on. There is a built-in assump�on that growing markets will con�nue to grow and not decline. If this assump�on is violated by the reality of dynamic market shi�s, the firm may reassign resources to units that represent a declining opportunity. Conversely, the model may underes�mate the poten�al value that remains in declining markets and prompt a shi� of resources away from profitable opportuni�es.

Expansion and Diversifica�on

The BCG Growth-Share Matrix model focuses on how to allocate corporate resources within an exis�ng por�olio of business units to improve the organiza�on's performance in the dimensions of growth and profitability. Two other paths to the pursuit of these goals rely on the expansion of the current business por�olio and diversifica�on into new areas of business. Decisions about expanding or diversifying the corpora�on's por�olio of SBUs are complex and typically have substan�al consequences for the organiza�on, but the iden�fica�on and development of new opportuni�es is essen�al to the growth and long-term success of the firm. As we will see in subsequent sec�ons of the text, marke�ng managers rely on several different approaches to finding and evalua�ng growth opportuni�es. In Chapter 3 we will examine a range of applica�ons and market research methodologies for uncovering poten�al new ventures. This includes the Ansoff Matrix model and SWOT analysis. Chapter 5 will explore the techniques that marke�ng managers use to evaluate market demand for new products and forecast sales.

Strategic Decisions for Marke�ng Managers

When it comes to making strategic decisions, marke�ng managers necessarily take their lead from strategies set at the corporate and divisional levels of their organiza�on. The larger strategic context for the iden�fica�on of marke�ng objec�ves, new market opportuni�es, and subsequent development of marke�ng plans is provided by the organiza�on's corporate strategic plan. In many instances, the specific corporate culture will also establish a prevailing theme in terms of generic compe��ve strategies. For example, some companies find that their core competencies in manufacturing or distribu�on favor the pursuit of a cost leadership strategy in most product-markets. In fact, such firms are likely to evaluate prospec�ve market opportuni�es based on the ability to exercise this compe��ve advantage.

A marke�ng strategy is a statement of how a brand or product line will coordinate the marke�ng mix to achieve its objec�ves. The strategy for a given product or service is always specific to its target market. Marke�ng objec�ves iden�fy growth and profitability goals for the firm in quan�ta�ve terms (e.g., sales, profit, and market share) as well as establish benchmarks for qualita�ve goals (e.g., market leadership and corporate image). To be effec�ve in shaping decision making, these objec�ves must be specific, measurable, and stated specifically for the �me period for which they are in effect. These objec�ves can then be converted into detailed goals that shape the integra�on and coordina�on of the marke�ng mix. Marke�ng strategy also provides direc�on regarding issues such as the segmenta�on of the market, iden�fica�on of the target market, posi�oning, and the alloca�on of budgets.

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Ch. 1 Conclusion The strategic applica�on of the principles of marke�ng management provides many firms with an essen�al compe��ve advantage in crowded markets. The value of the marke�ng func�on increases as the compe��on for customers and market share intensifies. Effec�ve managers are those who can leverage the resources of the firm to serve the needs of their target market more efficiently and effec�vely than their compe�tors.

At the core of marke�ng strategy is the marke�ng concept: the philosophy that emphasizes customer sa�sfac�on as the means to sustained compe��ve advantage and profitability. Consequently, companies need to be keenly aware of the need to understand value: the basis on which consumers make purchasing decisions. Our focus in the next chapter will be on the marke�ng manager's role in crea�ng value for the buyer as the primary path to producing customer sa�sfac�on.

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Ch. 1 Learning Resources

Key Ideas

Cri�cal Thinking Ques�ons

1. Marke�ng can't possibly be the only effec�ve business strategy. What alterna�ve strategy paradigms or philosophies are there? Can these alterna�ves be used effec�vely in isola�on? Can they be used in conjunc�on with marke�ng strategy?

2. Why is so much emphasis in marke�ng placed on brands? How did companies compete with each other before there were brands? 3. What does a brand name mean to a consumer? Consider some of your favorite brands. Are you brand loyal? Why? 4. The marke�ng concept requires balancing the interests of consumers against those of the company. What happens if things get out of balance and you become too

focused on just customer sa�sfac�on or just profitability? 5. Marke�ng myopia happens all the �me in business. Consider what different types of businesses would look like if they just focused on the quality of the products

they sell and ignored the preferences of customers. 6. Product differen�a�on and brand posi�oning are very important concepts. Can you explain how these two concepts differ from each other? Use two or three

specific examples to illustrate the contrast. 7. Why are new market opportuni�es and growth considered essen�al to the survival of both small and large companies? Why can't an organiza�on remain content

to stay where it is? 8. Explain how Porter's generic strategy op�ons could be applied to a symphony orchestra, a carpet manufacturer, and a CPA firm. Does this model of three

alterna�ve strategies seem to work be�er in one of these contexts than the other? Why? 9. The text noted that strategic business units are typically the unit of analysis for planning corporate strategy. Why does this make more sense than planning at the

divisional level for large corpora�ons?

Key Terms

Click on each key term to see the defini�on.

BCG Growth-Share Matrix (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A decision making aid that displays strategic business units on a two-by-two graph defined by forecasted market growth rate and rela�ve market share.

cash cow (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

An SBU with a large market share in a mature, slow-growing industry.

corporate mission statement (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A formal, wri�en statement that defines the purpose and scope of the organiza�on.

cost leadership strategy (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Leveraging lower overall costs of produc�on to enable the firm to a�ract price-sensi�ve customers by selling at prices that are rela�vely lower than compe�tors' prices.

differen�al advantage (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

SLIDE 1 OF 10

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The unique product a�ributes or benefits that provide buyers with significant and substan�al reasons to prefer one brand over another.

dogs (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

SBUs with li�le profitability or li�le opportunity for sales growth.

generic strategy (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A general level of strategy applied to the pursuit of market opportuni�es. The three basic types of generic marke�ng strategy are product differen�a�on, cost leadership, and market focus.

market (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

All the individuals, groups, and organiza�ons that want or need a product and have the resources required to purchase.

market focus strategy (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A strategy op�on defined by the scope over which the firm will implement either cost leadership or differen�a�on strategies.

market segmenta�on (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

The process of dividing the total market into dis�nct groups or submarkets based on similar wants, needs, behaviors, or other characteris�cs.

market segments (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Clusters of prospec�ve and current customers who are similar to each other in ways that lead them to respond to a firm's marke�ng mix similarly.

marke�ng concept (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A customer-oriented philosophy of business management which stresses that the objec�ves of the organiza�on can best be met through the analysis and sa�sfac�on of customers' wants and needs.

marke�ng management (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A set of processes for crea�ng, communica�ng, and delivering value to customers and for managing customer rela�onships in ways that benefit the organiza�on and its stakeholders.

marke�ng mix (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Tools available to the marke�ng manager to influence the target market to purchase one brand over another. O�en referred to as the 4 Ps.

marke�ng objec�ves (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Growth and profitability goals for the firm expressed in quan�ta�ve and qualita�ve terms.

marke�ng plan (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A document composed of an analysis of the current marke�ng situa�on, marke�ng objec�ves, marke�ng strategy, marke�ng mix plans, and financial projec�ons.

marke�ng strategy (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A statement of how a brand or product line will coordinate the marke�ng mix to achieve its objec�ves.

place (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

One of four variables in the marke�ng mix; relates primarily to distribu�on and loca�on decisions.

pricing (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

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One of four variables in the marke�ng mix; relates to both economic and psychological dimensions of price se�ng.

product (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

One of four variables in the marke�ng mix; relates to both tangible and intangible dimensions of physical products and services.

product differen�a�on (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

The process of dis�nguishing one product or brand from another.

product differen�a�on strategy (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Dis�nguishing your product from compe�tors' products in a way that makes prospec�ve buyers prefer your brand. The basis of differen�a�on can be tangible or intangible a�ributes of the product.

product posi�oning (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

The strategy and tac�cs involved in crea�ng and shaping the brand's image in the mind of prospec�ve buyers. Product posi�oning is also referred to as brand posi�oning.

promo�on (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

One of four variables in the marke�ng mix; relates to the firm's overall communica�ons program.

ques�on mark (problem child) (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

An SBU that holds a rela�vely small market share in a high-growth market.

rela�ve market share (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

The ra�o of one SBU's market share to the market share of its largest compe�tor.

stars (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

SBUs that exhibit rela�vely high market share in high-growth markets.

strategic business unit (SBU) (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Any product or service line within a company that is small enough to be flexible in its response to external market forces and big enough to exercise direct control over the internal decision factors affec�ng its performance.

strategy (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A long-term plan of ac�on designed to achieve specific objec�ves.

tac�cs (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

The short-term means required to execute strategy and achieve specific objec�ves.

target market (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A group of poten�al buyers that the firm seeks to sa�sfy with its marke�ng mix. It is the segment of the market at which the firm directs its product and marke�ng efforts.

Web Resources

This website provides free access to hundreds of contemporary ar�cles on all phases of marke�ng and marke�ng management. This expansive range of thought- provoking readings should be of interest to both students and marke�ng professionals. This can be a valuable to reference as you read each successive chapter of this text. www.chapmanrg.com/IMR/ (h�p://www.chapmanrg.com/IMR/)

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This is the home of the U.S. Small Business Administra�on on the Web. The site provides a wide array of resources for small businesses, small-business owners, and prospec�ve business owners. It includes informa�on on company forma�on, marke�ng a business, legal tools, and expert advice from professionals. It has a great deal of prac�cal informa�on on developing business plans. www.sba.gov (h�p://www.sba.gov)

This site provides informa�on specific to the prepara�on and presenta�on of marke�ng plans. Features include a marke�ng plan outline, conduc�ng market research, iden�fying your best poten�al customers, and understanding your compe��on. www.mplans.com (h�p://www.mplans.com)

This is the homepage for Sales & Marke�ng Management, one of the leading publica�ons in the sales and marke�ng field. The website provides free access to ar�cles and expert opinion on all phases of the marke�ng management process. www.salesandmarke�ng.com (h�p://www.salesandmarke�ng.com)

This link provides direct access to the Occupa�onal Outlook Handbook at the U.S. Bureau of Labor Sta�s�cs. This source profiles several hundred occupa�ons describing the nature of the work involved, typical pay ranges, and employment projec�ons for the coming decade. h�p://bls.gov/ooh/ (h�p://bls.gov/ooh/)