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How can you apply this process to a company, product, and target market you are aware of?
1.2 The Marketing Management Process Marketing management is a process that is intended to facilitate transactions by bringing buyers and sellers together. Consistent with the marketing concept, the ultimate goal of the process is to create exchanges that satisfy both company and customer.
As illustrated in Figure 1.2, the process of marketing management from the seller's perspective can be characterized as a series of four stages of decision making: situation analysis, marketing strategy, marketing mix decisions, and implementation and control.
Figure 1.2: Marketing management process
Each of these stages is described in greater detail in the sections 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 marketing management to improve the quality of managers' decisions. Its value lies in making sure that the decision maker is deliberate, thorough, and systematic in the planning and execution of marketing strategy. An important consideration when evaluating 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 marketing problems and alternative solutions. As such, it is not a substitute 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 priorities will shape and direct the process of marketing management from the outset. Given those constraints, the first step of the process is to undertake a thorough analysis of the current situation and environment confronting the organization. Situation analysis is at the heart of marketing's endeavor to identify new opportunities to satisfy unmet customer wants and needs. Opportunities typically stem either from finding new ways to serve the needs of existing customers or uncovering new markets for existing product or service lines. Many new opportunities incorporate elements of both new products and new markets. Productrelated opportunities for a regional hospital, for example, might include the addition of alternative therapies (e.g., acupuncture) or creating satellite wellness or expresscare centers in local shopping centers and malls. The addition of a new service line in sports medicine and rehabilitation care might be one way to reach a new segment of the market.
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CVS and many other companies are meeting shoppers' needs conveniently and, ultimately, building more traffic for their stores.
Associated Press
The goal in situation analysis is to provide an analysis of both macro and microenvironmental factors that will impact marketing strategy. The process also serves to make the organization cognizant of its capabilities and resource limitations. For this reason, SWOT analysis (discussed in Chapter 3) is a starting point for performing situation analysis that is favored by many managers. SWOT is an analytical procedure that requires consideration of the firm's internal Strengths and Weaknesses relative to the Opportunities and Threats posed by the external environment.
Since the objective of situation analysis is to uncover viable market opportunities, 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, competitors, and climate/culture. In this model, company refers to the internal capabilities and resources of the firm, while the remaining three Cs represent elements of the external environment. (Applications of this model are discussed in Chapter 5.)
Regardless of the analytical devices and techniques deployed, the final product of
the situation analysis is an accurate map of both the internal and external environmental circumstances confronting the organization. This process may identify potential problems in the firm's current marketing plan that require remedial action. However, the primary objective is to identify market opportunities by demonstrating gaps between consumer preferences and the current array of competitive brands. Once the most attractive of these opportunities are evaluated, a marketing strategy for applying the organization's resources to satisfy the potential market demand is created.
Let's consider again the challenges confronting a regional hospital. The high cost of delivering quality health care and many patients' 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 patient satisfaction. Marketing opportunities exist to help narrow this gap. The concept of creating 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, routine inoculations, and short customer waiting times and extended hours to make the centers more convenient. If staffed only by a registered nurse, the perpatient cost of treatment for common ailments and minor injuries in this setting would be far less than clinic or hospital visits.
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Stage II: Marketing Strategy
After the situation analysis has identified the best opportunities for the firm, a multilayered strategic plan is required to effectively and efficiently capitalize on them. The most general level of strategy that needs to be addressed at this stage in the marketing management process is the identification of the generic strategy that is best suited to pursuing the opportunity. The three basic types of generic marketing strategy are product differentiation, cost leadership, and market focus (Porter, 1980).
Product differentiation strategy requires distinguishing your product from competitors' in a way that makes prospective buyers prefer your brand. The basis of differentiation can be tangible or intangible attributes of the product—including the brand image itself. For this reason, product differentiation strategy is often most closely identified with the marketing function.
Cost leadership strategy allows a firm with lower overall costs of production and marketing to attract pricesensitive customers by selling at relatively lower prices than competitors. Lower costs can be derived from economies of scale and experience curve efficiencies in manufacturing and other operational areas of the organization. Competitively lower direct and indirect operating costs may also be rooted in outsourcing, tighter production cost control processes, moreefficient distribution networks, and higher rates of capacity utilization.
Market focus strategy is not a separate or distinctly different strategy from the other two, but instead describes the scope over which the firm will implement either cost leadership or differentiation strategies. Organizations may opt to compete in broadly defined mass markets or focus on narrower segments of the market. In a narrow, focused approach to strategy, competitive advantage is gained by serving the unique needs of a market segment or niche better than larger competitors can because of their size.
The generic strategy options for a regional health care provider can be defined in the same way as they would be for any other type of organization. Hospitals can pursue a differentiation 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 operations and superior cost management techniques. Some advantages are uniquely tied to economies, giving bigger organizations an advantage. However, smaller health care systems have access to costsavings opportunities that diminish as the size of the organization increases. Focus strategy options, as noted, simply describe the scope over which the firm will implement either cost leadership or differentiation strategies. In a health care setting, this typically applies to decisions made for individual service lines versus the organization as a whole.
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Strategic alternatives stem from either brand differentiation or costrelated advantages. These advantages can be broad or narrow in scope—why do you think that is?
The best generic strategy is chosen based on how the unique strengths of the organization relate to the opportunity identified by the situation analysis. All organizations thrive in environments that allow them to leverage their strengths relative to their competitors. The strengths of a firm are typically rooted in either superior brand differentiation or cost advantages over other producers. Further, these advantages can be applied in either broadly defined markets or narrow market niches. The resulting generic strategy options 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 orientation for pursuing the identified market opportunity. Beyond this initial determination of an overall strategy, three other closely related strategy decisions need to be made before an operational marketing plan can be developed. These more specific strategic options relate to market segmentation, product differentiation, and brand positioning.
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 marketing management
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The Marketing Mix
PRODUCT PRICE PLACE PROMOTION
Generic Market Strategy
Market Segmentation
Product Differentiation
Brand Positioning
Once decisions regarding the four strategy categories in the lefthand column have been made, their goodness of fit with the four elements of the marketing mix can be assessed by examining each intersection in the 16cell matrix. For example, is our pricing strategy (column 2) consistent with our generic market strategy, market segmentation strategy, product differentiation strategy, and brand positioning strategy? In practice, managers may find it useful to fill in each cell of the matrix to demonstrate how each element of the marketing mix contributes to the strategic objectives established in the lefthand column. This exercise can refine the process of strategic planning and avoid costly mismatches down the road.
Marketing strategy provides the overall "battle plan" for capitalizing on the opportunities initially identified through the situation analysis. The next step in the process of marketing management is to develop the plans for the implementation of the marketing mix.
Stage III: Marketing Mix Decisions
The marketing mix represents the basic tool kit of marketing since it provides the means for executing strategy. In keeping with the marketing concept, the objective is to make decisions and develop plans that relate the 4 Ps to the target market to provide greater perceived value than competitors can offer. Each of the four elements of the marketing mix will be addressed in detail in subsequent chapters. The outline that follows provides a brief summary of typical decisions that marketing 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 productrelated decision making include:
New product development, Test marketing, Branding and brand management, Product design and styling, Packaging, Product safety, Quality control,
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Postpurchase 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 characteristics. Common areas of pricerelated considerations and decision making include:
Evaluation of price elasticity of demand, Meeting legal and ethical pricing constraints, Introductory price setting (price skimming versus penetration pricing), Price discrimination Costbased pricing versus demandbased pricing versus competitionbased pricing, Economic value estimation, Pricing through channels of distribution, Geographic pricing, Discounting policies, Price–quality correlation, Prestige pricing, Price lining, Leader pricing, Seasonal pricing, Bundling, Profitability and margin analysis, Breakeven analysis, and Sales and profit projections.
The place variable relates primarily to distribution and focuses on getting the product to the customer. Common areas of placerelated considerations and decision making include:
Evaluating alternative distribution plans and networks, Selecting distribution channels, Establishing and maintaining channel relationships, Negotiating and administering channel contracts, Resolving channel conflict and maintaining channel control, Managing distribution coverage/intensity (intensive versus selective versus exclusive), Evaluating and implementing push versus pull strategies, Inventory management and control, Order processing, and Warehousing.
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Retailers are increasingly looking to social media to strengthen relationships with customers. In this image, Charlotte Russe displays a Facebook promotion to gain more customer support and store traffic.
Najlah Feanny/Corbis
The promotion variable encompasses a wide range of functions related to the firm's overall communications program. Common areas of promotionrelated decision making include:
Setting and evaluating communications goals, Assessing alternative communication channels, Establishing promotion budgets, Measuring promotional effectiveness, Advertising, Message and media planning, Social media promotions, Personal selling and sales management, Recruiting and training salespeople, Sales territory management and sales force allocation, Publicity and public relations, Consumer and middlemandirected sales promotions.
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 marketing 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 perspective as a customer for this brand. In short, you are the target market. You may wish to create one or more positioning maps to help illustrate how you perceive the competitive playing field. Once you're done, examine the intersection of each cell.
How do the elements of the marketing mix align with the four strategy categories in the lefthand column?
Does every one of the 4 Ps contribute to each of the strategic objectives established in the left hand column? Do you see room for improvement?
How would this assessment be different for other types of customers?
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Stage IV: Implementation and Control
The value of the three preceding stages in the process of marketing management depend wholly the organization's ability to effectively implement the developed strategy. Stages I through III have identified the opportunity within the marketplace, isolated the best strategic option for exploiting the opportunity, and created the marketing mix that will faithfully execute the strategy. The final stage of the process is to implement the marketing mix decisions that have been made and monitor the results.
The final stage in the marketing management process is to assess whether the goals and objectives established through the fourstep process and corresponding marketing plan are being achieved. This evaluation and control process relies on specific, measureable, shortterm goals or benchmarks established for the new marketing initiative. The comparison of performance to objectives provides critically important performance feedback and enables decision makers to make adjustments to the marketing program as needed. Although poor performance may implicate the effectiveness of the marketing mix for a given program, it should also cause marketing managers to reexamine their assumptions about the nature of the market opportunity they are pursuing. No plan can meet expectations if the estimates of market potential for a new opportunity are unrealistically inflated. Specific techniques for evaluating market demand and forecasting sales are developed in Chapter 5.
The detailed plan for implementation is called a marketing plan. The American Marketing Association defines a marketing plan as "a document composed of an analysis of the current marketing situation, opportunities and threats analysis, marketing objectives, marketing strategy, action programs, and projected or proforma income (and other financial) statements. This plan may be the only statement of the strategic direction of a business, but it is more likely to apply only to a specific brand or product. In the latter situation, the marketing plan is an implementation device that is integrated within an overall strategic business plan" (American Marketing Association, 2011).
The specific format for a marketing plan can vary substantially from one instance to the next, depending on the nature of the firm, the market, and the opportunity in question. In each instance, however, the intent of the written plan is to provide a detailed, systematic blueprint for implementing the decisions reached in the marketing management process. The outline for a typical marketing plan is provided in the next section.
It is also worth noting that most competitive market environments are in a constant state of flux to a greater or lesser degree. The impact of macro and microenvironmental forces on market demand requires careful monitoring. Marketing managers must be able to adapt the marketing mix for any given product to respond to these changes. Consequently, the process of marketing management itself requires continual monitoring and modifications to the marketing mix in response to shifts in the character of the target opportunity. As with most things in marketing, the focus must remain on
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the customer and the pursuit of ways to meet buyers' needs more effectively and consistently than one's competitors.
