Unit 4 Case Study

Marketing Management

Key ingredients of the marketing management process are insightful, creative strategies and plans that can guide marketing activities. Developing the right marketing strategy over time requires a blend of discipline and flexibility. Firms must stick to a strategy but also constantly improve it. They must also develop strategies for a range of products and services within the organization.

Founded in 1994 by Web-surfing Stanford University grad students, Yahoo! grew from a tiny upstart surrounded by Silicon Valley heavyweights to a powerful force in Internet media. Yahoo! worked hard to be more than just a search engine. The company proudly proclaims it is “The only place anyone needs to go to find anything, communicate with anyone, or buy anything.” Its range of services includes e-mail, news, weather, music, photos, games, shopping, auctions, and travel. A large percentage of revenues comes from advertising, but the company also profits from subscription services such as online personal ads, premium e-mail, and small-business services. Although Yahoo! strives to achieve a competitive advantage over rival Google with its vast array of original content, Google’s ascension to the runaway leader in search, e-mail, and related services has made it a darling with advertisers. Yahoo!’s acquisition of photo-sharing service Flickr, social bookmark manager Del.icio.us, and online video editing site Jumpcut strengthened its capabilities. Yahoo! has also continued to grow globally in Europe and Asia, helped in part by the acquisition of Kelkoo, a European comparison-shopping site, for $579 million, and of 46 percent of Alibaba, a Chinese e-commerce company, for $1 billion in cash. Discussions with Microsoft about a possible merger culminated in a 10-year deal in June 2009 that gave Microsoft full access to the Yahoo! search engine, to be used in future Microsoft projects for its own search engine, Bing. CEO Carol Bartz faced many questions, however, about how Yahoo! should best move forward.1

This chapter begins by examining some of the strategic marketing implications in creating customer value. We’ll look at several perspectives on planning and describe how to draw up a formal marketing plan.

Marketing and Customer Value

The task of any business is to deliver customer value at a profit. In a hypercompetitive economy with increasingly informed buyers faced with abundant choices, a company can win only by fine-tuning the value delivery process and choosing, providing, and communicating superior value.

Marketing Management

The Value Delivery Process

The traditional view of marketing is that the firm makes something and then sells it, with marketing taking place in the selling process. Companies that subscribe to this view have the best chance of succeeding in economies marked by goods shortages where consumers are not fussy about quality, features, or style—for example, basic staple goods in developing markets.

This traditional view will not work, however, in economies with many different types of people, each with individual wants, perceptions, preferences, and buying criteria. The smart competitor must design and deliver offerings for well-defined target markets. This realization inspired a new view of business processes that places marketing at the beginning of planning. Instead of emphasizing making and selling, companies now see themselves as part of a value delivery process.

We can divide the value creation and delivery sequence into three phases.2 First, choosing the value represents the “homework” marketing must do before any product exists. Marketers must segment the market, select the appropriate target, and develop the offering’s value positioning. The formula “segmentation, targeting, positioning (STP)” is the essence of strategic marketing. The second phase is providing the value. Marketing must determine specific product features, prices, and distribution. The task in the third phase is communicating the value by utilizing the sales force, Internet, advertising, and any other communication tools to announce and promote the product. The value delivery process begins before there is a product and continues through development and after launch. Each phase has cost implications.

The Value Chain

Harvard’s Michael Porter has proposed the value chain as a tool for identifying ways to create more customer value.3 According to this model, every firm is a synthesis of activities performed to design, produce, market, deliver, and support its product. The value chain identifies nine strategically relevant activities—five primary and four support activities—that create value and cost in a specific business.

The primary activities are (1) inbound logistics, or bringing materials into the business; (2) operations, or converting materials into final products; (3) outbound logistics, or shipping out final products; (4) marketing, which includes sales; and (5) service. Specialized departments handle the support activities—(1) procurement, (2) technology development, (3) human resource management, and (4) firm infrastructure. (Infrastructure covers the costs of general management, planning, finance, accounting, legal, and government affairs.)

The firm’s task is to examine its costs and performance in each value-creating activity and look for ways to improve it. Managers should estimate competitors’ costs and performances as benchmarks against which to compare their own. And they should go further and study the “best of class” practices of the world’s best companies. We can identify best-practice companies by consulting customers, suppliers, distributors, financial analysts, trade associations, and magazines to see whom they rate as doing the best job. Even the best companies can benchmark, against other industries if necessary, to improve their performance. To support its corporate goal to be more innovative, GE has benchmarked against P&G as well as developing its own best practices.4

Marketing Management

The firm’s success depends not only on how well each department performs its work, but also on how well the company coordinates departmental activities to conduct core business processes.5 These processes include:

• • The market-sensing process. All the activities in gathering and acting upon information about the market

• • The new-offering realization process. All the activities in researching, developing, and launching new high-quality offerings quickly and within budget

• • The customer acquisition process. All the activities in defining target markets and prospecting for new customers

• • The customer relationship management process. All the activities in building deeper understanding, relationships, and offerings to individual customers

• • The fulfillment management process. All the activities in receiving and approving orders, shipping the goods on time, and collecting payment

Strong companies are reengineering their work flows and building cross-functional teams to be responsible for each process.6 At Xerox, a Customer Operations Group links sales, shipping, installation, service, and billing so these activities flow smoothly into one another. Winning companies excel at managing core business processes through cross-functional teams. AT&T, LexisNexis, and Pratt & Whitney have reorganized their employees into cross-functional teams; cross-functional teams exist in nonprofit and government organizations as well.

To be successful, a firm also needs to look for competitive advantages beyond its own operations, into the value chains of suppliers, distributors, and customers. Many companies today have