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Marketing: An Introduction

Thirteenth Edition

Chapter 2

Company and Marketing Strategy: Partnering to Build Customer Engagement, Value, and Relationships

Learning Objectives (1 of 4)

2-1. Explain company-wide strategic planning and its four steps.

2-2. Discuss how to design business portfolios and develop growth strategies.

2-3. Explain marketing’s role in strategic planning and how marketing works with its partners to create and deliver customer value.

This chapter explains company-wide strategic planning and its four steps. It discusses how to design business portfolios and develop growth strategies. It also explains marketing’s role in strategic planning and how marketing works with its partners to create and deliver customer value.

Learning Objectives (2 of 4)

2-4. Describe the elements of a customer value-driven marketing strategy and mix and the forces that influence it.

2-5. List the marketing management functions, including the elements of a marketing plan, and discuss the importance of measuring and managing marketing return on investment.

This chapter further describes the elements of a customer value-driven marketing strategy and mix and the forces that influence it. Finally, it lists the marketing management functions, including the elements of a marketing plan, and discusses the importance of measuring and managing return on marketing investment.

First Stop: Starbuck’s Customer Value-Driven Marketing Strategy

More than just coffee, Starbucks sells the Starbucks Experience, one that “enriches people’s lives one moment, one human being, one extraordinary cup of coffee at a time.”

Starbucks didn’t sell just coffee, it sold “The Starbucks Experience”—“an uplifting experience that enriches people’s lives one moment, one human being, one extraordinary cup of coffee at a time.” At Starbucks, the smells, the sound of beans grinding, watching baristas blend and brew the brand’s specialty coffees—all became as much or more a part of the customer experience, as the coffee itself.

Starbucks opened stores everywhere at a breakneck pace. For example, one three-block stretch in Chicago contained six stores and in New York City, there were two Starbucks in one Macy’s store. One satirical publication headline read: “A New Starbucks Opens in the Restroom of Existing Starbucks.” Starbucks began to evolve into more of a caffeine filling station - competing with the likes of McDonalds, for many of the same customers.

Starbucks needed to “reignite the emotional attachment with customers” and Starbucks’ store managers participated in a morale-building reorientation to emphasize the point. The company closed all of its U.S. locations for 3 hours to conduct nationwide employee training, on the basis of producing satisfying customer experiences. Thus began a process of continual renewal which reignited “The Starbucks Experience” through new products, innovative store formats and new platforms for engaging customers.

Learning Objective 2-1

Explain company-wide strategic planning and its four steps.

Strategic Planning

Game plan for long-run survival and growth

Helps to maintain a strategic fit between its goals and capabilities and changing marketing opportunities.

Companies must find the game plan for long-run survival and growth that makes the most sense given its specific situation, opportunities, objectives, and resources. This is the focus of strategic planning - the process of developing and maintaining a strategic fit between the organization’s goals, capabilities and its changing marketing opportunities.

Strategic planning sets the stage for the rest of planning in the firm. Companies prepare annual plans, long-range plans, and strategic plans. The annual and long-range plans deal with the company’s current businesses and how to keep them going. In contrast, the strategic plan involves adapting the firm to take advantage of opportunities in its constantly changing environment.

Figure 2.1 - Steps in Strategic Planning

Company-wide strategic planning guides marketing strategy and planning. Like the marketing strategy, the broader company strategy must be customer focused.

This figure illustrates the steps in strategic planning. At the corporate level, the company starts the strategic planning process by defining its overall purpose and mission. The mission is turned into detailed supporting objectives that guide the entire company. Then, headquarters decides what portfolio of businesses and products is best for the company and how much support to give each one.

In turn, each business and product develops detailed marketing and other departmental plans that support the company-wide plan. Thus, marketing planning occurs at the business-unit, product, and market levels. It supports company strategic planning with more detailed plans for specific marketing opportunities.

Mission Statement

Statement of the organization’s purpose

Market oriented - defined in terms of satisfying basic customer needs

Emphasize the company’s strengths

Focus on customers and the customer experience

A mission statement refers to the organization’s purpose. What it wants to accomplish in the larger environment. Forging a sound mission begins with the following questions: What is our business? Who is the customer? What do consumers value? What should our business be? Successful companies continuously raise these questions and answer them carefully and completely.

Mission statements should be market oriented and defined in terms of satisfying basic customer needs.

Mission statements should be meaningful and specific, yet motivating. They should emphasize the company’s strengths and tell forcefully how it intends to win in the marketplace. For example, Google’s mission is to give people a window into the world’s information, wherever it may be found.

Finally, a company’s mission should focus on customers and the customer experience it seeks to create. For example, Buffalo Wild Wings chain’s mission is to provide a total eating and social environment that “fuels the sports fan experience.”

Setting Company Objectives and Goals (1 of 2)

Detailed supporting objectives for each level of management

Setting a hierarchy of objectives

Business objectives

Marketing objectives

A company needs to turn its mission into detailed supporting objectives for each level of management. Each manager should have objectives and be responsible for reaching them.

A broad mission leads to a hierarchy of objectives, including business objectives and marketing objectives. Marketing strategies and programs must be developed to support marketing objectives.

For example, the renamed CVS Health, views itself as a “pharmacy innovation company,” one that is “helping people on their path to better health.” The company’s motto: “Health is everything.”

Setting Company Objectives and Goals (2 of 2)

The renamed CVS Health’s motto is “Health is everything.”

CVS Health’s overall mission is to be a “pharmacy innovation company” that “helps people on their way to better health.” Its marketing strategies and programs must support this mission.

- CVS Caremark Corporation

Learning Objective 2-1 Summary

Strategic planning

Defining the company’s mission

Setting objectives and goals

Designing a business portfolio

Developing functional plans

Company mission statement

Market oriented, realistic, specific

Motivating, consistent with market environment

Strategic planning sets the stage for the rest of the company’s planning. Marketing contributes to strategic planning, and the overall plan defines marketing’s role in the company. Strategic planning involves developing a strategy for long-run survival and growth. It consists of four steps: (1) defining the company’s mission, (2) setting objectives and goals, (3) designing a business portfolio, and (4) developing functional plans. The company’s mission should be market oriented, realistic, specific, motivating, and consistent with the market environment. The mission is then transformed into detailed supporting goals and objectives, which in turn guide decisions about the business portfolio. Then each business and product unit must develop detailed marketing plans in line with the company-wide plan.

Learning Objective 2-2

Discuss how to design business portfolios and develop growth strategies.

Business Portfolio (1 of 2)

Collection of businesses and products that make up the company

Steps in business portfolio planning:

Analyze the firm’s current business portfolio

Develop strategies to shape the future portfolio

A business portfolio is a collection of businesses and products that make up the company. The best business portfolio is the one that best fits the company’s strengths and weaknesses to opportunities in the environment.

Business portfolio planning involves two steps. First, the company must analyze its current business portfolio and determine which businesses should receive more, less, or no investment. Second, it must shape the future portfolio by developing strategies for growth and downsizing.

Business Portfolio (2 of 2)

Disney has become a sprawling collection of media and entertainment businesses.

Managing the business portfolio: Most people think of Disney as theme parks and wholesome family entertainment, but over the past two decades, it’s become

a sprawling collection of media and entertainment businesses that requires big doses of the famed “Disney Magic” to manage.

- Martin Beddall/Alamy

Portfolio Analysis

Management’s evaluation of the products and businesses that make up the company

Identify the strategic business units (SBUs)

Assess SBUs’ attractiveness and decide on the level of support SBU deserves

Direct resources toward more profitable businesses and phase down or drop its weaker ones

The major activity in strategic planning is business portfolio analysis, which is the process by which management evaluates the products and businesses that make up the company.

There are two steps for analyzing portfolios. Management’s first step is to identify the key businesses that make up the company, called strategic business units (SBUs). An SBU can be a company division, a product line within a division, or sometimes a single product or brand. The company next assesses the attractiveness of its various SBUs and decides how much support each deserves.

The purpose of strategic planning is to find ways in which the company can best use its strengths to take advantage of attractive opportunities in the environment. For this reason, most standard portfolio analysis methods evaluate SBUs on two important dimensions: the attractiveness of the SBU’s market or industry and the strength of the SBU’s position in that market or industry.

Figure 2.2 - The BCG Growth-Share Matrix

The best-known portfolio-planning method was developed by the Boston Consulting Group (BCG), a leading management consulting firm. This BCG Growth-Share matrix shows the classification of company’s SBUs. Market growth rate provides a measure of market attractiveness. Relative market share serves as a measure of company strength in the market.

The Growth-Share Matrix defines four types of SBUs:

Stars are high-growth, high-share businesses or products.

Cash cows are low-growth, high-share businesses or products.

Question marks, are low-share business units in high-growth markets.

Dogs are low-growth, low-share businesses and products.

The 10 circles in this growth-share matrix would represent a company’s 10 current SBUs. The company must decide how much it will invest in each product or business SBU. It must decide whether to build, hold, harvest or divest.

Growth-Share Matrix

Evaluates a company’s SBUs in terms of market growth rate and relative market share

Problems with Growth-Share Matrix

Difficult, time consuming, and costly

Difficult to define and measure

Provides little advice for future planning

The growth-share matrix is a portfolio-planning method that evaluates a company’s SBUs in terms of market growth rate and relative market share. As time passes, SBUs change their positions in the growth-share matrix. Many SBUs start out as question marks and move into the star category if they succeed. They later become cash cows as market growth falls, and then finally die off or turn into dogs toward the end of the life cycle.

There are limitations for the BCG approach. It can be difficult, time consuming, and costly to implement. Management may find it difficult to define SBUs and measure market share and growth. In addition, these approaches focus on classifying current businesses but provide little advice for future planning.

Figure 2.3 - The Product/Market Expansion Grid

The product/market expansion grid refers to a portfolio-planning tool for identifying company growth opportunities through market penetration, market development, product development, or diversification.

Companies must first consider if they can achieve deeper market penetration. That is, make more sales to current customers without changing the original products. Secondly, companies must consider possibilities for market development. This refers to identifying and developing new markets for its current products. Third, companies could consider product development by offering modified or new products to current markets. Finally, companies might consider diversification, which refers to starting up or buying businesses beyond the firm’s current products and markets.

Developing Strategies for Growth

Under Armour has grown at a blistering rate under its multipronged growth strategy.

Downsizing

Products or business units that are unprofitable or no longer fit the company’s overall strategy

Reasons to abandon products or markets

Rapid growth of the company

Lack of experience in a market

Change in market environment

Decline of a particular product

Companies must not only develop strategies for growing their business portfolios but also strategies for downsizing them. When a firm finds brands or businesses that are unprofitable or that no longer fit its overall strategy, it must carefully prune, harvest, or divest them.

There are many reasons that a firm might want to abandon products or markets. The firm may have grown too fast or entered areas where it lacks experience. The market environment might change, making some products or markets less profitable. For example, in difficult economic times, many firms prune out weaker, less-profitable products and markets to focus their more limited resources on the strongest ones. Finally, some products or business units simply age and die.

Learning Objective 2-2 Summary

Portfolio analysis

BCG Growth-Share Matrix

Product market expansion grid

Strategies for growth and downsizing

Guided by the company’s mission statement and objectives, management plans its business portfolio, or the collection of businesses and products that make up the company. The firm wants to produce a business portfolio that best fits its strengths and weaknesses to opportunities in the environment. To do this, it must analyze and adjust its current business portfolio and develop growth and downsizing strategies for adjusting the future portfolio. The company might use a formal portfolio-planning method. But many companies are now designing more customized portfolio-planning approaches that better suit their unique situations.

Learning Objective 2-3

Explain marketing’s role in strategic planning and how marketing works with its partners to create and deliver customer value.

Planning Marketing: Partnering to Build Customer Relationships

Provides a guiding philosophy

Marketing concept—company strategy should create customer value and build profitable relationships

Provides inputs to strategic planners

Identify market opportunities and potential to take advantage of them

Designs strategies for reaching the business unit’s objectives

Marketing plays a key role in the company’s strategic planning in several ways.

First, marketing provides a guiding philosophy - the marketing concept - that suggests the company strategy should revolve around creating customer value and building profitable relationships with important consumer groups.

Second, marketing provides inputs to strategic planners by helping to identify attractive market opportunities and assess the firm’s potential to take advantage of them.

Finally, within individual business units, marketing designs strategies for reaching the unit’s objectives.

Partnering with Other Company Departments (1 of 2)

Company departments are links in the company’s internal value chain.

Firm’s success depends on how well the various departments coordinate their activities.

Marketers should ensure all the departments are customer-focused and develop a smooth functioning value chain.

Each company department can be thought of as a link in the company’s internal value chain. That is, each department carries out value-creating activities to design, produce, market, deliver, and support the firm’s products.

The firm’s success depends not only on how well each department performs its work but also on how well the various departments coordinate their activities.

Marketers must find ways to get all departments to “think consumer” and develop a smoothly functioning value chain. One marketing expert puts it this way: “True market orientation . . . means that the entire company obsesses over creating value for the customer and views itself as a bundle of processes that profitably define, create, communicate, and deliver value to its target customers…. Everyone must do marketing regardless of function or department.”

Partnering with Other Company Departments (2 of 2)

True Value’s Internal Value Chain.

The value chain: These True Value ads recognize that everyone in the organization—from marketing research analyst, Jeff Alvarez to operations manager, Tom Statham—must contribute to helping the chain’s customers handle their home improvement projects. They form the foundation for the brand’s “Behind Every Project Is a True Value” positioning.

True Value and “Start Right. Start Here.” are registered trademarks of True Value Company. The print ads and images are copyrighted works of authorship of True Value Company.

True Value’s ability to help you “Start Right. Start Here.” depends on purchasing’s skill in developing the needed suppliers and buying from them at low cost. True Value’s information technology people must provide fast and accurate information about which products are selling in each store. Their operations people must provide effective, low-cost merchandise handling and delivery.

Partnering with Others in the Marketing System

Companies should assess value chains

Internal departments

External: suppliers, distributors and customers

Value delivery network is composed of the company, its suppliers, its distributors, and its customers

To create customer value, the firm needs to look beyond its own internal value chain and into the value chains of its suppliers, distributors, and, ultimately, its customers.

Companies are partnering with other members of the supply chain to improve the performance of the customer value delivery network. The customer value delivery network partners with each other to improve the performance of the entire system in delivering customer value.

For example, Ford’s performance against Toyota depends on the quality of Ford’s overall value delivery network versus Toyota’s. Even if Ford makes the best cars, it might lose in the marketplace if Toyota’s dealer network provides a more customer-satisfying sales and service experience.

Learning Objective 2-3 Summary

Planning Marketing

Partnering to build customer relationships

Partnering with other company departments

Partnering with suppliers, distributors and customers

Value delivery network

Under the strategic plan, the major functional departments—marketing, finance, accounting, purchasing, operations, information systems, human resources, and others—must work together to accomplish strategic objectives. Marketing plays a key role in the company’s strategic planning by providing a marketing concept philosophy and inputs regarding attractive market opportunities. Within individual business units, marketing designs strategies for reaching the unit’s objectives and helps to carry them out profitably. Marketers alone cannot produce superior value for customers. Marketers must practice partner relationship management, working closely with partners in other departments to form an effective value chain that serves the customer. And they must also partner effectively with other companies in the marketing system to form a competitively superior value delivery network.

Learning Objective 2-4

Describe the elements of a customer value-driven marketing strategy and mix and the forces that influence it.

Figure 2.5 Managing Marketing Strategy and the Marketing Mix

Marketing strategy involves two key questions: Which customers will we serve (segmentation and targeting)? How will we create value for them (differentiation and positioning)? Then the company designs a marketing program—the four Ps—that delivers the intended value to targeted consumers.

At its core, marketing is all about creating customer value and profitable customer relationships.

Customer Value-Driven Marketing Strategy

Marketing logic by which the company creates customer value and achieves profitable customer relationships

Integrated marketing mix: product, price, place, and promotion

Activities for best marketing strategy and mix

Marketing analysis

Planning, implementation, and control

The strategic plan defines the company’s overall mission and objectives. Thus, marketing strategy refers to the marketing logic by which the company hopes to create customer value and achieve profitable customer relationships.

Guided by marketing strategy, the company designs an integrated marketing mix made up of factors under its control, which are product, price, place, and promotion.

To find the best marketing strategy and mix, the company engages in marketing analysis, planning, implementation, and control. Through these activities, the company watches and adapts to the factors and forces in the marketing environment.

Market Segmentation and Market Targeting

Market segmentation

Dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors, and who might require separate products or marketing programs

Market segment

Group of consumers who respond in a similar way to a given set of marketing efforts

Market targeting

Evaluating each market segment’s attractiveness and selecting one or more segments to enter

Market segmentation refers to dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors, and who might require separate products or marketing programs.

A market segment is a group of consumers who respond in a similar way to a given set of marketing efforts. In the car market, for example, consumers who want the biggest, most comfortable car regardless of price, make up one market segment. Consumers who care mainly about price and operating economy, make up another segment.

Market targeting involves evaluating each market segment’s attractiveness and selecting one or more segments to enter. A company should target segments in which it can profitably generate the greatest customer value and sustain it over time.

Positioning (1 of 2)

Positioning the product to occupy a clear, distinctive, and desirable place relative to competing products

Differentiating the market offering to create superior customer value

The entire marketing program should support the chosen positioning strategy.

After a company has decided which market segments to enter, it must determine how to differentiate its market offering for each targeted segment and what positions it wants to occupy in those segments. Positioning is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.

Effective positioning begins with differentiation. This refers to actually differentiating the market offering to create superior customer value. Once the company has chosen a desired position, it must take strong steps to deliver and communicate that position to target consumers. The company’s entire marketing program should support the chosen positioning strategy.

Positioning (2 of 2)

Southwest’s positioning as “The LUV Airline” is reinforced by the colorful heart in its new logo and plane graphics design.

From its founding, Southwest Airlines has positioned itself as “The LUV Airline,” a positioning recently reinforced by the colorful heart in its new logo and plane graphics design. As recent Southwest advertising affirms, “Without a heart, it’s just a machine.” The airline has “always put Heart in everything it does.”

Figure 2.5 - The Four Ps of the Marketing Mix

The marketing mix is the set of tactical marketing tools that the firm blends to produce the response it wants in the target market. This figure shows the four marketing tools, the four Ps.

Product is the goods-and-services combination the company offers to the target market.

Price is the amount of money customers must pay to obtain the product.

Place includes the company activities that make the product available to target consumers.

Promotion refers to activities that communicate the merits of the product and persuade target customers to buy it.

An effective marketing program blends the marketing mix elements into an integrated marketing program designed to achieve the company’s marketing objectives by delivering value to consumers.

Criticisms of the Four Ps

Omits or underemphasizes service products

Needs to include packaging as a product decision

Buyer’s perspective would emphasize the four A s:

Acceptability

Affordability

Accessibility

Awareness

Some critics think that the four Ps may omit or underemphasize certain important activities. These include services like banking, airline, and retailing services which fall under the category of products. These are known as service products.

Another criticism includes the need for packaging to be included in the four Ps, as it is considered one of the many product decisions.

The main criticism is that the four Ps emphasize only the seller’s viewpoint. Hence, to cater to the buyer’s viewpoint in this age of customer value and relationships, the four Ps might be better described as the four A s. These include acceptability, affordability, accessibility, and awareness.

Figure 2.6 - Managing Marketing: Analysis, Planning, Implementation, and Control

Managing the marketing process requires the four marketing management functions as illustrated in this figure.

They include analysis, planning, implementation, and control.

The company first develops company-wide strategic plans and then translates them into marketing and other plans for each division, product, and brand.

Through implementation, the company turns the plans into actions.

Control consists of measuring and evaluating the results of marketing activities and taking corrective action where needed.

Finally, marketing analysis provides the information and evaluations needed for all the other marketing activities.

Figure 2.7 - SWOT Analysis: Strengths (S), Weaknesses (W), Opportunities (O), and Threats (T)

Managing the marketing function begins with a complete analysis of the company’s situation. The marketer should conduct a SWOT Analysis. This refers to an overall evaluation of the company’s strengths (S), weaknesses (W), opportunities (O), and threats (T).

Strengths include internal capabilities, resources, and positive situational factors that may help the company serve its customers and achieve its objectives.

Weaknesses include internal limitations and negative situational factors that may interfere with the company’s performance.

Opportunities are positive factors or trends in the external environment that the company may be able to exploit to its advantage.

Threats are negative external factors or trends that may present challenges to performance.

Learning Objective 2-4 Summary

Customer value-driven marketing strategy

Market segmentation and market segment

Market targeting

Positioning and differentiating

Four Ps of the marketing mix

Analysis, planning implementation and control

SWOT analysis

Customer engagement, value, and relationships are at the center of marketing strategy and programs. Through market segmentation, targeting, differentiation, and positioning, the company divides the total market into smaller segments, selects segments it can best serve, and decides how it wants to bring value to target consumers in the selected segments. It then designs an integrated marketing mix to produce the response it wants in the target market. The marketing mix consists of product, price, place, and promotion decisions (the four Ps).

Learning Objective 2-5 (1 of 2)

List the marketing management functions, including the elements of a marketing plan, and discuss the importance of measuring and managing marketing return on investment.

Contents of a Marketing Plan (1 of 2)

Section	Purpose
Executive summary	Brief summary of the main goals and recommendations
Current marketing situation	Gives the market description and the product, competition, and distribution review
Threats and opportunities analysis	Helps management to anticipate important positive or negative developments
Objectives and issues	States and discusses marketing objectives and key issues

Marketing planning involves choosing marketing strategies that will help the company attain its overall strategic objectives.

The plan begins with an executive summary that quickly reviews major assessments, goals, and recommendations. The main section of the plan presents a detailed SWOT analysis of the current marketing situation, as well as, potential threats and opportunities. The plan next states major objectives for the brand and outlines the specifics of a marketing strategy for achieving them.

Contents of a Marketing Plan (2 of 2)

Section	Purpose
Marketing strategy	Outlines the broad marketing logic and the specifics of target markets, positioning, marketing expenditure levels, and strategies for each marketing mix element
Action programs	Spells out how marketing strategies will be turned into specific action programs
Budgets	Details a supporting marketing budget that is a projected profit-and-loss statement
Controls	Outlines the controls that will be used to monitor progress, allow management to review implementation results, and spot products that are not meeting their goals

A marketing strategy consists of specific strategies for target markets, positioning, the marketing mix, and marketing expenditure levels. It outlines how the company intends to create value for target customers in order to capture value in return. In this section, the planner explains how each strategy responds to the threats, opportunities, and critical issues spelled out earlier in the plan.

Additional sections of the marketing plan lay out an action program for implementing the marketing strategy along with the details of a supporting marketing budget. The last section outlines the controls that will be used to monitor progress, measure return on marketing investment, and take corrective action.

Market Implementation

Turning marketing strategies and plans into marketing actions to accomplish strategic marketing objectives

Addresses the who, where, when, and how of the marketing activities

Market implementation is the process of turning marketing strategies and plans into marketing actions to accomplish strategic marketing objectives. Whereas marketing planning addresses the what and why of marketing activities, implementation addresses the who, where, when, and how.

Marketing Department Organization

Functional organization

Geographic organization

Product management organization

Market or customer management organization

Combination organization

The company must design a marketing organization that can carry out marketing strategies and plans.

Modern marketing departments can be arranged in several ways. The most common form of marketing organization is the functional organization. Under this organization, different marketing activities are headed by a functional specialist.

A company that sells across the country or internationally often uses a geographic organization. Its sales and marketing people are assigned to specific countries, regions, and districts.

A company with different products or brands may create a product management organization. Under this approach, a product manager develops and implements a complete strategy and marketing program for a specific product or brand.

A market or customer management organization approach is best suited for companies that sell one product line to many different types of markets and customers who have different needs and preferences.

Large companies that produce different products, flowing into many different geographic and customer markets, employ a combination of the functional, geographic, product, and market organization forms.

More and more, companies are shifting their brand management focus toward customer management—moving away from managing only product or brand profitability and toward managing customer profitability and customer equity.

Marketing Control

Measuring and evaluating the results of marketing strategies and plans

Operating control ensures that the company achieves its sales, profits, and other goals.

Strategic control involves looking at whether the company’s basic strategies are well matched to its opportunities.

Marketing control refers to measuring and evaluating the results of marketing strategies and plans and taking corrective action to ensure that the objectives are achieved. This may require changing the action programs or even changing the goals.

Operating control ensures that the company achieves the sales, profits, and other goals set out in its annual plan. It also involves determining the profitability of different products, territories, markets, and channels.

Strategic control involves looking at whether the company’s basic strategies are well matched to its opportunities.

Marketing Return on Investment (ROI)

Net return from a marketing investment divided by the costs of the marketing investment

Assessment measures

Standard marketing performance measures

Customer-centered measures

Marketing return on investment or marketing ROI is the net return from a marketing investment divided by the costs of the marketing investment. It measures the profits generated by investments in marketing activities.

Companies can assess marketing ROI in terms of standard marketing performance measures, such as brand awareness, sales, or market share. Such measures can be assembled through marketing dashboards, which are sets of marketing performance measures in a single display used to monitor strategic marketing performance.

Increasingly, marketers also use customer-centered measures of marketing impact, such as customer acquisition, customer engagement, customer retention, customer lifetime value, and customer equity. These measures capture not only current marketing performance, but also future performance, resulting from stronger customer relationships.

Figure 2.8 - Marketing Return on Investment

This figure views marketing expenditures as investments that produce returns in the form of more profitable customer relationships.

Marketing investments result in improved customer value and satisfaction, which in turn increases customer attraction and retention.

This increases individual customer lifetime values and the firm’s overall customer equity.

Increased customer equity, in relation to the cost of the marketing investments, determines return on marketing investment.

Learning Objective 2-5 (2 of 2)

Contents of a marketing plan

Analysis, planning and implementation

Operating and strategic marketing control

Marketing department organization

Marketing return on investment

To find the best strategy and mix and to put them into action, the company engages in marketing analysis, planning, implementation, and control. The main components of a marketing plan are the executive summary, the current marketing situation, threats and opportunities, objectives and issues, marketing strategies, action programs, budgets, and controls. Planning good strategies is often easier than carrying them out. To be successful, companies must also be effective at implementation—turning marketing strategies into marketing actions. Marketing departments can be organized in one way or a combination of ways: functional marketing organization, geographic organization, product management organization, or market management organization. In this age of customer relationships, more and more companies are now changing their organizational focus from product or territory management to customer relationship management. Marketing organizations carry out marketing control, both operating control and strategic control. More than ever, marketing accountability is the top marketing concern. Marketing managers must ensure that their marketing dollars are being well spent. In a tighter economy, today’s marketers face growing pressures to show that they are adding value in line with their costs. In response, marketers are developing better measures of marketing return on investment. Increasingly, they are using customer-centered measures of marketing impact as a key input into their strategic decision making.

Learning Objectives (3 of 4)

2-1. Explain company-wide strategic planning and its four steps.

2-2. Discuss how to design business portfolios and develop growth strategies.

2-3. Explain marketing’s role in strategic planning and how marketing works with its partners to create and deliver customer value.

Learning Objectives (4 of 4)

2-4. Describe the elements of a customer value-driven marketing strategy and mix and the forces that influence it.

2-5. List the marketing management functions, including the elements of a marketing plan, and discuss the importance of measuring and managing marketing return on investment.