In this chapter, we dig deeper into steps two and three of the marketing process:

designing customer-driven marketing strategies and constructing marketing

programs.

First, we look at the organizations overall strategic planning, which guides marketing
strategy and planning.

Next, we discuss how, guided by the strategic plan, marketers partner closely with
others inside and outside the firm to create value for customers.

We then examine marketing strategy and planninghow marketers choose target

markets, position their market offerings, develop a marketing mix, and manage their
marketing programs.

Finally, we look at the important step of measuring and managing return on

marketing investment (marketing ROI).

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Nike has mastered social networking, both online and off, creating deep engagement
and community among customers. Its Nike+ and FuelBand apps and technologies
have made Nike a part of the daily fitness routines of millions of customers around
the world.

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Objective 1 Explain company-wide strategic planning and its four steps.
Objective 2 Discuss how to design business portfolios and develop growth
strategies.
Objective 3 Explain marketings role in strategic planning and how marketing
works with its partners to create and deliver customer value.
Objective 4 Describe the elements of a customer value-driven marketing strategy
and mix and the forces that influence it.
Objective 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.

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Objective 1 Explain company-wide strategic planning and its four steps.
Objective 2 Discuss how to design business portfolios and develop growth
strategies.
Objective 3 Explain marketings role in strategic planning and how marketing
works with its partners to create and deliver customer value.
Objective 4 Describe the elements of a customer value-driven marketing strategy
and mix and the forces that influence it.
Objective 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.

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Discussion Question
How might the strategic plan of the college or university influence decisions in the
schools programs and offerings? How might it influence decisions in food services,
dormitories, executive education, and undergraduate versus graduate programs?

Strategic planning sets the stage for the rest of planning in the firm. Companies
usually prepare annual plans, long-range plans, and strategic plans.

The annual and long-range plans deal with the companys 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.

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At the corporate level, the company starts the strategic planning process by defining
its overall purpose and mission (see Figure 2.1).

This mission is then turned into detailed supporting objectives that guide the entire
company. Next, 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.

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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?

These simple-sounding questions are among the most difficult the company will ever
have to answer. Successful companies continuously raise these questions and answer
them carefully and completely.

A mission statement should:

1.Not be myopic in product terms

2.Be meaningful and specific
3.Be motivating
4.Emphasize the companys strengths
5.Contain specific workable guidelines
6.Not be stated as making sales or profits

Discussion Question
A market-oriented mission statement defines the business in terms of satisfying basic
customer needs. Ask the students to evaluate how the IBM mission statement meets
the criteria of a market-oriented mission statement.

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The 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.

The company can tie a diverse product portfolio together under a mission.

This broad mission leads to a hierarchy of objectives, including business objectives

and marketing objectives such as to build profitable customer relationships by
developing superior products.

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The Heinz companys mission reflects business objectives and marketing objectives to
build profitable customer relationships by developing superior products.

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Discussion Question
Explain how marketing plays a key role in an organizations strategic planning.

Learning Objective 1 Summary

Strategic planning sets the stage for the rest of the companys planning. Marketing
contributes to strategic planning, and the overall plan defines marketings role in the
company. Strategic planning involves developing a strategy for long-run survival and
growth. It consists of four steps.

(1) Defining the companys mission

(2) Setting objectives and goals
(3) Designing a business portfolio
(4) Developing functional plans

The companys 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.

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The best business portfolio is the one that best fits the companys 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.

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

The company will want to put strong resources into its more profitable businesses
and phase down or drop its weaker ones.

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When designing a business portfolio, its a good idea to add and support products
and businesses that fit closely with the firms core philosophy and competencies.

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 SBUs market or industry and the
strength of the SBUs position in that market or industry.

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Discussion Question
Ask the students to suggest product categories that might fit in each of the BCG
quadrants.

The best-known portfolio-planning method is the now-classic Boston Consulting

Group (BCG) approach. The growth-share matrix defines four types of SBUs.

Stars are high-growth, high-share businesses or products requiring heavy

investment to finance rapid growth. They will eventually turn into cash cows.
Cash cows are low-growth, high-share businesses or products that are established
and successful SBUs requiring less investment to maintain market share.
Question marks are low-share business units in high-growth markets requiring a
lot of cash to hold their share.
Dogs are low-growth, low-share businesses and products that may generate enough
cash to maintain themselves but do not promise to be large sources of cash.

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Because of these problems, many companies have dropped formal matrix methods in
favor of more customized approaches that better suit their specific situations.

Increasingly, companies are placing responsibility for strategic planning in the hands
of cross-functional teams of divisional managers who are close to their markets.

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Marketing needs to identify, evaluate, and select market opportunities and establish
strategies for capturing them. One useful device for identifying growth opportunities
is the product/market expansion grid, Figure 2.3.

Market penetration involves making more sales to current customers without

changing its original product such as by adding new stores in current market areas to
make it easier for customers to visit.

Market development involves identifying and developing new markets for its current
products. For instance, managers could review new demographic markets. Perhaps
new groupssuch as seniorscould be encouraged. Managers could consider new
geographic markets in U.S. markets and in non-U.S. markets, especially Asia.

Product development involves offering modified or new products to current markets

such as by moving into new product categories.

Diversification involves starting up or buying businesses beyond its current products

and markets. For example, the company could acquire a company that operates in
different market segments with a different product mix.

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Strategies for growth: To maintain its incredible growth, Starbucks has
brewed up an ambitious, multipronged growth strategy. - STEFAN WERMUTH/Reuters/Corbis

In only three decades, Starbucks has grown at an astonishing pace, from a small Seattle coffee shop to
an over $14.9 billion powerhouse with more than 20,000 retail stores in over 64 countries.

To maintain its incredible growth in an increasingly overcaffeinated marketplace, Starbucks must brew
up an ambitious, multipronged growth strategy.

First, Starbucks management might consider whether the company can achieve deeper market
penetrationmaking more sales to current customers without changing its original products.

Second, Starbucks might consider possibilities for market development identifying and developing
new markets for its current products. For instance, managers could review new demographic markets.

Third, Starbucks could consider product developmentoffering modified or new products to current
markets.

Finally, Starbucks might consider diversificationstarting up or buying businesses beyond its current
products and markets. For example, the company acquired Evolution Fresh, a boutique provider of
super-premium fresh-squeezed juices.

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A firm might want to abandon products or markets for a number of reasons.

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.

Some products or business units simply age and die.

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Discussion Question
Name and describe the four product/market expansion grid strategies. Provide an
example of a company implementing each strategy.

Learning Objective 2 Summary

Guided by the companys 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.

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Marketing alone cant create superior customer value. Under the company-wide
strategic plan, marketers must work closely with other departments to form an
effective internal company value chain.

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Marketing alone cant create superior customer value. Under the company-wide
strategic plan, marketers must work closely with other departments to form an
effective internal company 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 chains customers handle their home improvement
projects. They form the foundation for the brands Behind Every Project Is a True
Value positioning.

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More companies today are partnering with other members of the supply to improve
the performance of the customer value delivery network.

Competition no longer takes place only between individual competitors. Rather, it

takes place between the entire value delivery network created by these competitors.

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Discussion Question
What is marketings key role in company strategic planning?

Learning Objective 3 Summary

Under the strategic plan, the major functional departments marketing, finance,
accounting, purchasing, operations, information systems, human resources, and
othersmust work together to accomplish strategic objectives. Marketing plays a key
role in the companys strategic planning by providing a marketing concept philosophy
and inputs regarding attractive market opportunities. Within individual business units,
marketing designs strategies for reaching the units 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.

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Consumers stand in the center of Figure 2.4 where the goal is to create value for
customers and build profitable customer relationships.

Next comes marketing strategythe marketing logic by which the company hopes to
create this customer value and achieve these profitable relationships. The company
decides which customers it will serve (segmentation and targeting) and how
(differentiation and positioning).

Guided by marketing strategy, the company designs an integrated marketing mix

made up of factors under its controlproduct, price, place, and promotion (the four
Ps).

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 actors and forces in
the marketing environment.

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The market consists of many types of customers, products, and needs. The marketer
must determine which segments offer the best opportunities. Consumers can be
grouped and served in various ways based on geographic, demographic,
psychographic, and behavioral factors.

Every market has segments, but not all ways of segmenting a market are equally
useful. For example, Tylenol would gain little by distinguishing between low-income
and high-income pain relief users if both respond the same way to marketing efforts.
In the car market, for example, consumers who want the biggest, most comfortable
car regardless of price and consumers who care mainly about price and operating
economy represent two different segments.

Companies are wise to focus their efforts on meeting the distinct needs of individual
market segments.

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A company should target segments in which it can profitably generate the greatest customer
value and sustain it over time.

A company might decide to serve

only one or a few special segments or market niches, segments that major
competitors overlook or ignore.
several related segmentsperhaps those with different kinds of customers but
with the same basic wants.
all market segments, offering a complete range of products.

Most companies enter a new market by serving a single segment; if this proves successful,
they add more segments.

The company must determine how to differentiate its market offering for each targeted
segment and what positions it wants to occupy in those segments. A products position is the
place it occupies relative to competitors products in consumers minds. Marketers plan
positions that distinguish their products from competing brands and give them the greatest
advantage in their target markets.

Discussion Questions (based on the chapter opener)

1.How does Nike segment their market?
2.What appears to be their most important segments?
3.How does Nike position their products in the marketplace?

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The iconic 100-year-old Del Monte brand designed its entire integrated marketing
campaignfrom television and print ads to its online, mobile, and social media
contentaround the Bursting with Life positioning.

More than just words, the campaign slogan positions Del Montes canned fruits and
vegetables as quality ingredients that contribute to a healthy lifestyle. They are
grown in America, picked and packed at the peak of ripeness, [and contain the]
same essential nutrients as fresh.

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After determining its overall marketing strategy, the company is ready to begin
planning the details of the marketing mix, one of the major concepts in modern
marketing.

The marketing mix consists of everything the firm can do to influence the demand for
its product.

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The many possibilities can be collected into four groups of variablesthe four Ps. Figure 2.5 above shows the
marketing tools under each P.

Product means 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 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 companys marketing objectives by delivering value to consumers. The marketing mix
constitutes the companys tactical tool kit for establishing strong positioning in target markets.

Some critics think that the four Ps may omit or underemphasize certain important activities. For example, they
ask, Where are services? or Where is packaging? As Figure 2.5 suggests, many marketing activities that might
appear to be left out of the marketing mix are included under one of the four Ps.

The issue is not whether there should be four, six, or ten Ps so much as what framework is most helpful in
designing integrated marketing programs.

It is interesting to ask how to make the 4Ps more customer centric. This leads to a redefining of the 4Ps to the 4Cs
as follows:

ProductCustomer solution
PriceCustomer cost
PlaceConvenience
PromotionCommunication

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Discussion Questions
What are the four Ps of marketing? What insights might a firm gain by considering
the four Cs rather than the four Ps?

Learning Objective 4 Summary

Customer 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).

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Managing the marketing process requires the four marketing management functions
shown in Figure 2.6analysis, 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 information and evaluations needed for all the
other marketing activities.

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The company should analyze its markets and marketing environment to find
attractive opportunities and identify environmental threats.

It should analyze company strengths and weaknesses as well as current and possible
marketing actions to determine which opportunities it can best pursue.

The goal is to match the companys strengths to attractive opportunities in the

environment, while simultaneously eliminating or overcoming the weaknesses and
minimizing the threats.

Marketing analysis provides inputs to each of the other marketing management

functions.

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Marketing planning involves choosing marketing strategies that will help the company
attain its overall strategic objectives. A detailed marketing plan is needed for each
business, product, or brand.

What does a marketing plan look like?

Table 2.2 outlines the major sections of a typical product or brand marketing plan.

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A brilliant marketing strategy counts for little if the company fails to implement it
properly.

Many managers think that doing things right (implementation) is as important as,
or even more important than, doing the right things (strategy).

The fact is that both are critical to success, and companies can gain competitive
advantages through effective implementation.

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Functional organization is the most common form of marketing organization with
different marketing functions headed by a functional specialist.

Geographic organization is useful for companies that sell across the country or
internationally. Managers are responsible for developing strategies and plans
for a specific region.

Product management organization is useful for companies with different products or

brands. Managers are responsible for developing strategies and plans for a
specific product or brand.

Market organization is useful for companies with one product line sold to many
different markets. Managers are responsible for developing strategies and
plans for their specific markets.

Customer management organization involves a customer focus and not a product

focus for managing customer profitability and customer equity. Managers
are responsible for developing strategies and plans for their specific
customers.

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Because many surprises occur during the implementation of marketing plans,
marketers must practice constant marketing control.

Evaluating the results of marketing strategies and plans and taking corrective action
to close the gaps between goals and performance are the steps taken in the
marketing control function.

Operating control involves checking ongoing performance against the annual plan
and taking corrective action when necessary.

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

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Measuring return on marketing investment has become a major marketing emphasis.

A company can assess marketing ROI in terms of standard marketing performance

measures, such as brand awareness, sales, or market share. Many companies are
assembling such measures into marketing dashboardsmeaningful sets of marketing
performance measures in a single display used to monitor strategic marketing
performance.

Increasingly, however, beyond standard performance measures, marketers are using

customer-centered measures of marketing impact, such as customer acquisition,
customer retention, customer lifetime value, and customer equity.

We can view marketing expenditures as investments that produce returns in the form
of more profitable customer relationships.

In good times and bad, whether or not marketers are ready for it, theyre going to be
asked to justify their spending with financial data, says one marketer. Adds another,
marketers have got to know how to count.

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Discussion Question
What is a marketing dashboard and how is it useful to marketers? What types of performance
measures do marketers use to assess marketing performance?

Learning Objective 5 Summary

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 implementationturning 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, market management
organization or customer 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, todays 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.

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