BUS 620 Managerial Marketing

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

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

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. Product-related opportunities for a regional hospital, for example, might include the addition of alternative therapies (e.g., acupuncture) or creating satellite wellness or express-care 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.

The goal in situation analysis is to provide an analysis of both macro- and micro-environmental 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.

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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 per-patient cost of treatment for common ailments and minor injuries in this setting would be far less than clinic or hospital visits.

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 price-sensitive 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, more-efficient 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 cost-savings 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.

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.