CH 2 Successful Marketing & Organizational Strategies

Quality

A firm may offer the highest quality, as Medtronic does with its implantable medical devices.

Employee Welfare

A firm may recognize the critical importance of its employees by stating its goal of providing them with good employment opportunities and working conditions.

Growth Strategies

Knowing where the organization is at the present time enables managers to set a direction for the firm and allocate resources to move in that direction. Two techniques to aid managers with these decisions are (1) business portfolio analysis and (2) diversification analysis.

Sales

(dollars or units). If profits are acceptable, a firm may elect to maintain or increase its sales even though profits may not be maximized.

4 Market-Product Strategies

-Market penetration is a marketing strategy to increase sales of current products in current markets, such as selling more Ben & Jerry's Bonnaroo Buzz Fair Trade-sourced ice cream to U.S. consumers. There is no change in either the basic product line or the markets served. Increased sales are generated by selling either more ice cream (through better promotion or distribution) or the same amount of ice cream at a higher price to its current customers. -Market development is a marketing strategy to sell current products to new markets. For Ben & Jerry's, Brazil is an attractive new market. There is good news and bad news for this strategy: As household incomes of Brazilians increase, consumers can buy more ice cream; however, the Ben & Jerry's brand may be unknown to Brazilian consumers. -Product development is a marketing strategy of selling new products to current markets. Ben & Jerry's could leverage its brand by selling children's clothing in the United States. This strategy is risky because Americans may not see the company's expertise in ice cream as extending to children's clothing. -Diversification is a marketing strategy of developing new products and selling them in new markets. This is a potentially high-risk strategy for Ben & Jerry's if it decides to try to sell Ben & Jerry's branded clothing in Brazil. Why? Because the firm has neither previous production nor marketing experience on which to draw in marketing clothing to Brazilian consumers.

Business

A business describes the clear, broad, underlying industry or market sector of an organization's offering. To help define its business, an organization looks at the set of organizations that sell similar offerings—those that are in direct competition with each other—such as "the ice cream business." The organization can then begin to answer the questions, "What do we do?" or "What business are we in?"

Business Firm

A business firm is a privately owned organization such as Target, Nike, or Volkswagen that serves its customers to earn a profit so that it can survive.

Marketing Dashboard

A marketing dashboard is the visual computer display of the essential information related to achieving a marketing objective.24 Often, active hyperlinks provide further detail. An example is when a chief marketing officer (CMO) wants to see daily what the effect of a new TV advertising campaign is on a product's sales.

Marketing Plan

A marketing plan is a road map for the marketing activities of an organization for a specified future time period, such as one year or five years. No single "generic" marketing plan applies to all organizations and all situations. Rather, the specific format for a marketing plan for an organization depends on the following: • The target audience and purpose. Elements included in a particular marketing plan depend heavily on (1) who the audience is and (2) what its purpose is. A marketing plan for an internal audience seeks to point the direction for future marketing activities and is sent to all individuals in the organization who must implement the plan or who will be affected by it. If the plan is directed to an external audience, such as friends, banks, venture capitalists, or potential investors for the purpose of raising capital, it has the additional function of being an important sales document. In this case, it contains elements such as the strategic plan/focus, organization, structure, and biographies of key personnel that would rarely appear in an internal marketing plan. Also, the financial information is far more detailed when the plan is used to raise outside capital. The elements of a marketing plan for each of these two audiences are compared in • The kind and complexity of the organization. A small neighborhood restaurant has a somewhat different marketing plan than Medtronic, which serves international markets. The restaurant's plan would be relatively simple and directed at serving customers in a local market. In Medtronic's case, because there is a hierarchy of marketing plans, various levels of detail would be used—such as the entire organization, the strategic business unit, or the product/product line. • The industry. Both the restaurant serving a local market and Medtronic, selling heart pacemakers globally, analyze competition. However, their geographic thrusts are far different, as are the complexities of their offerings and, hence, the time periods likely to be covered by their plans. A one-year marketing plan may be adequate for the restaurant, but Medtronic may need a five-year planning horizon because product-development cycles for complex, new medical devices may be three or four years.

Market Strategy

A marketing strategy is the means by which a marketing goal is to be achieved, usually characterized by a specified target market and a marketing program to reach it. The term implies both the end sought (target market) and the means to achieve it (marketing program).

3. The Marketing Program

Activities in step 2 tell the marketing manager which customers to target and which customer needs the firm's product offerings can satisfy—the who and what aspects of the strategic marketing process. The how aspect—step 3 in the planning phase—involves developing the program's marketing mix (the four Ps) and its budget.

Strategic Marketing Process

After an organization assesses where it is and where it wants to go, other questions emerge, such as: -How do we allocate our resources to get where we want to go? -How do we convert our plans into actions? -How do our results compare with our plans, and do deviations require new plans? To answer these questions, an organization uses the strategic marketing process, whereby an organization allocates its marketing mix resources to reach its target markets. This process is divided into three phases: planning, implementation, and evaluation

SWOT

An effective summary of a situation analysis is a SWOT analysis, an acronym describing an organization's appraisal of its internal Strengths and Weaknesses and its external Opportunities and Threats. The SWOT analysis is based on an exhaustive study of four areas that form the foundation upon which the firm builds its marketing program: Identify trends in the organization's industry. Analyze the organization's competitors. Assess the organization itself. Research the organization's present and prospective customers.

Strategy

An organization has limited human, financial, technological, and other resources available to produce and market its offerings—it can't be all things to all people! Every organization must develop strategies to help focus and direct its efforts to accomplish its goals. However, the definition of strategy has been the subject of debate among management and marketing theorists. For our purpose, strategy is an organization's long-term course of action designed to deliver a unique customer experience while achieving its goals.9 All organizations set a strategic direction. And marketing helps to both set this direction and move the organization there.

Organizations

An organization is a legal entity that consists of people who share a common mission. This motivates them to develop offerings (products, services, or ideas) that create value for both the organization and its customers by satisfying their needs and wants.3 Today's organizations can be divided into business firms and nonprofit organizations.

Organizational Structure

An organization must connect with all of its stakeholders. Thus, an important corporate-level marketing function is communicating its core values and mission to them. Medtronic has a "rising figure" wall mural at its headquarters. The firm also presents every new employee with a medallion depicting this "rising figure" on one side and the company's mission statement on the other. And each December, several patients describe to a large employee holiday celebration how Medtronic devices have changed their lives.19 These activities send clear messages to employees and other stakeholders about organizational culture, the set of values, ideas, attitudes, and norms of behavior that is learned and shared among the members of an organization.

Core Values

An organization's core values are the fundamental, passionate, and enduring principles that guide its conduct over time. A firm's founders or senior management develop these core values, which are consistent with their essential beliefs and character. They capture the firm's heart and soul and serve to inspire and motivate its stakeholders—employees, shareholders, board of directors, suppliers, distributors, creditors, unions, government, local communities, and customers. Core values also are timeless and should not change due to short-term financial, operational, or marketing concerns. Finally, core values guide the organization's conduct. To be effective, an organization's core values must be communicated to and supported by its top management and employees; if not, they are just hollow words.

Organizational Foundation

An organization's foundation is its philosophical reason for being—why it exists. Successful visionary organizations use this foundation to guide and inspire their employees through three elements: core values, mission, and organizational culture

The Appendix

Arthur R. Kydd's appendix (1) describes what marketing and business plans are, including the purposes and guidelines in writing effective plans, and (2) provides a sample marketing plan.

Customers & Competitors

Ben & Jerry's customers are ice cream and frozen yogurt eaters who have different preferences (form, flavor, health, and convenience). Medtronic's customers are cardiologists and heart surgeons who serve patients. Lands' End communicates a remarkable commitment about its customer experience and product quality with these unconditional words: Guaranteed. Period. In today's global marketplace, the distinctions among competitors are increasingly blurred. Lands' End started as a catalog retailer. But today, Lands' End competes with not only other clothing catalog retailers but also traditional department stores, mass merchandisers, and specialty shops. Even well-known clothing brands such as Liz Claiborne now have their own chain stores. Although only some of the clothing in any of these stores directly competes with Lands' End offerings, all these retailers have websites to sell their offerings over the Internet. This means there's a lot of competition out there.

Action of SWOT

Build on a strength. Find specific efficiencies in distribution with Unilever's existing ice cream brands. Correct a weakness. Recruit experienced managers from other consumer product firms to help stimulate growth. Exploit an opportunity. Develop new product lines of low-fat, low-carb frozen yogurts and sorbets to respond to consumer health concerns. Avoid a disaster-laden threat. Focus on less risky international markets, such as Canada and Mexico.

Organizational Direction

Business Goals -Long term -Short term

Organizational Strategies

By level -Corporate -SBU -Functional By Offering -Product -Service -Idea

Marketing Metric

Each display in a marketing dashboard shows a marketing metric, which is a measure of the quantitative value or trend of a marketing activity or result. The choice of which marketing metrics to display is critical for a busy marketing manager, who can be overwhelmed with irrelevant data

Mission

By understanding its core values, an organization can take steps to define its mission, a statement of the organization's function in society that often identifies its customers, markets, products, and technologies. Often used interchangeably with vision, a mission statement should be clear, concise, meaningful, inspirational, and long-term Recently, many organizations have added a social element to their mission statements to reflect an ideal that is morally right and worthwhile. This is what Ben & Jerry's social mission statement shows in the chapter opener. Stakeholders, particularly customers, employees, and now society, are asking organizations to be exceptional citizens by providing long-term value while solving society's problems.

Competitive Advantage

Competencies should be distinctive enough to provide a competitive advantage, a unique strength relative to competitors that provides superior returns, often based on quality, time, cost, or innovation.

Organizational Foundation

Core Values Mission (vision) Organizational Culture

Customer Satisfaction

Customers are the reason the organization exists, so their perceptions and actions are of vital importance. Satisfaction can be measured with surveys or by the number of customer complaints an organization receives.

2. Market Product Focus & Goal Setting

Determining which products will be directed toward which customers (step 2 of the planning phase) is essential for developing an effective marketing program (step 3). Goal setting involves specifying measurable marketing objectives to be achieved. -Set marketing and product goals. Chances of new-product success are increased by specifying both market and product goals. Based on their market research, Medtronic executives set the following goal: Market its pacemaker within three years, manufactured in China for the Asian market. -Select target markets. The Champion pacemaker will be targeted at cardiologists and medical clinics performing heart surgery in India, China, and other Asian countries. -Find points of difference. Points of difference are those characteristics of a product that make it superior to competitive substitutes. Just as a competitive advantage is a unique strength of an entire organization compared to its competitors, points of difference are unique characteristics of one of its products that make it superior to competitive products it faces in the marketplace. For the Champion pacemaker, the key points of difference are high quality, long life, reliability, ease of use, and low cost. -Position the product. The pacemaker will be "positioned" in cardiologists' and patients' minds as a medical device that is high quality and reliable with a long, nine-year life. The name Champion was selected after testing acceptable names among doctors in India, China, Pakistan, Singapore, and Malaysia.

Diversification Analysis

Diversification analysis is a technique that helps a firm search for growth opportunities from among current and new markets as well as current and new products. For any market, there is both a current product (what the firm now sells) and a new product (what the firm might sell in the future). And for any product there is both a current market (the firm's existing customers) and a new market (the firm's potential customers).

Functional Level

Each strategic business unit has a functional level, where groups of specialists actually create value for the organization. The term department generally refers to these specialized functions such as marketing and finance At the functional level, the organization's strategic direction becomes its most specific and focused. Just as there is a hierarchy of levels within an organization, there is a hierarchy of strategic directions set by managers at each level.

Social Responsibility

Firms may seek to balance the conflicting goals of stakeholders to promote their overall welfare, even at the expense of profits.

Goals

Goals or objectives are statements of an accomplishment of a task to be achieved, often by a specific time. Goals convert an organization's mission and business into long- and short-term performance targets. Business firms can pursue several different types of goals

Implementation Phase

Implementation, the second phase of the strategic marketing process, involves carrying out the marketing plan that emerges from the planning phase. If the firm cannot put the marketing plan into effect—in the implementation phase—the planning phase was a waste of time. There are four components of the implementation phase: (1) obtaining resources (2) designing the marketing organization (3) developing planning schedules (4) actually executing the marketing program designed in the planning phase. Kodak provides a case example.

Business Plan

In contrast to a marketing plan, a business plan is a road map for the entire organization for a specified future period of time, such as one year or five years. A key difference between a marketing plan and a business plan is that the business plan contains details on the research and development (R&D)/operations/manufacturing activities of the organization. Even for a manufacturing business, the marketing plan is probably 60 or 70 percent of the entire business plan. For firms like a small restaurant or an auto repair shop, their marketing and business plans are virtually identical. The elements of a business plan typically targeted at internal and external audiences

Non-Profit Organization

In contrast, a nonprofit organization is a nongovernmental organization that serves its customers but does not have profit as an organizational goal. Instead, its goals may be operational efficiency or client satisfaction. Regardless, it also must receive sufficient funds above its expenses to continue operations.

CMO

In recent years many large firms have changed the title of the head of marketing from vice president of marketing to chief marketing officer (CMO). These CMOs have an increasingly important role in top management because of their ability to think strategically. Most bring multi-industry backgrounds, cross-functional management expertise, analytical skills, and intuitive marketing insights to their job.

Todays Organizations

In studying today's visionary organizations, it is important to recognize (1) the kinds of organizations that exist (2) what strategy is (3) how this strategy relates to the three levels of structure found in many large organizations

Structure of Today's Organizations

Large organizations are extremely complex. They usually consist of three organizational levels whose strategies are linked to marketing -Board of Directors -Corporate Level -Strategic Business Unit Level Functional Level -Information Systems -Finance -Research & Development -Marketing -Manufacturing -Human Resources

Teach For America

Launched by college senior Wendy Kopp, Teach For America is the national corps of outstanding recent college graduates who commit to teach for two years in urban and rural public schools and become lifelong leaders in expanding educational opportunity. In fall 2011, 9,300 corps members taught in 43 regions across the country, while nearly 24,000 Teach For America alumni continue working from inside and outside the field of education for the fundamental changes necessary to ensure educational excellence and equity.

Market Share

Market share is the ratio of sales revenue of the firm to the total sales revenue of all firms in the industry, including the firm itself.

Profit

Most firms seek to maximize profits—to get as high a financial return on their investments (ROI) as possible.

Marketing Plan

Most organizations tie the marketing metrics they track in their marketing dashboards to the quantitative objectives established in their marketing plan, which is a road map for the marketing activities of an organization for a specified future time period, such as one year or five years. The planning phase of the strategic marketing process usually results in a marketing plan that sets the direction for the marketing activities of an organization.

Industries

Organizations that develop similar offerings create an industry, such as the computer industry or the automobile industry. As a result, organizations make strategic decisions that reflect the dynamics of the industry to create a compelling and sustainable advantage for their offerings relative to those of competitors to achieve a superior level of performance. The foundation of much of an organization's marketing strategy is having a clear understanding of the industry within which it competes.

Profit

Profit is the money left after a business firm's total expenses are subtracted from its total revenues and is the reward for the risk it undertakes in marketing its offerings.

Organization of SMP

Planning Phase -SWOT Analysis -Market Product Focus & Goal Setting -Marketing Program (Marketing Plan) Implementation Phase (Results) Evaluation Phase

Marketing Mix Activities

Product - features brand name packaging service warranty Price - list price, discounts, allowances, credit terms, payment method Promotion - advertising, personal selling, public relations, sales promotion, direct marketing Place - outlets, channels, coverage, transportation, stock level

Competencies

Senior managers must ask the question: What do we do best? The answer involves an assessment of the organization's core competencies, which are its special capabilities—the skills, technologies, and resources—that distinguish it from other organizations and provide customer value. Exploiting these competencies can lead to success.

SBU

Some multimarket, multiproduct firms, such as General Electric and Johnson & Johnson, manage a portfolio or group of businesses. Each group is a strategic business unit (SBU), which is a subsidiary, division, or unit of an organization that markets a set of related offerings to a clearly defined group of customers. At the strategic business unit level, managers set a more specific strategic direction for their businesses to exploit value-creating opportunities. For less complex firms with a single business focus, such as Ben & Jerry's, the corporate and business unit levels may merge.

Quadrants In Growth Share

The BCG has given specific names and descriptions to the four resulting quadrants in its growth-share matrix based on the amount of cash they generate for or require from the organization: -Cash cows are SBUs that generate large amounts of cash, far more than they can invest profitably in themselves. They have dominant shares of slow-growth markets and provide cash to cover the organization's overhead and to invest in other SBUs. -Stars are SBUs with a high share of high-growth markets that may need extra cash to finance their own rapid future growth. When their growth slows, they are likely to become cash cows. -Question marks are SBUs with a low share of high-growth markets. They require large injections of cash just to maintain their market share, much less increase it. The name implies management's dilemma for these SBUs: choosing the right ones to invest in and phasing out the rest. -Dogs are SBUs with low shares of slow-growth markets. Although they may generate enough cash to sustain themselves, they do not hold the promise of ever becoming real winners for the organization. Dropping SBUs that are dogs may be required, except when relationships with other SBUs, competitive considerations, or potential strategic alliances exist.

Business Portfolio Analysis

The Boston Consulting Group (BCG), a nationally known management consulting firm, has developed business portfolio analysis. It is a technique that managers use to quantify performance measures and growth targets to analyze their firms' strategic business units (SBUs) as though they were a collection of separate investments. The purpose of the tool is to determine the appeal of each SBU or offering and then determine the amount of cash each should receive. More than 75 percent of the largest U.S. firms have used this analytical tool. The BCG business portfolio analysis requires an organization to locate the position of each of its SBUs on a growth-share matrix. The vertical axis is the market growth rate, which is the annual rate of growth of the SBU's industry. The horizontal axis is the relative market share, defined as the sales of the SBU divided by the sales of the largest firm in the industry. A relative market share of 10× means that the SBU has 10 times the share of its largest competitor, whereas a share of 0.1× means it has only 10 percent of the share of its largest competitor. The primary strength of business portfolio analysis lies in forcing a firm to place each of its SBUs in the growth-share matrix, which in turn suggests which SBUs will be cash producers and cash users in the future. Weaknesses of this analysis arise from the difficulty in (1) getting the needed information and (2) incorporating competitive data into business portfolio analysis.

Social Entrepreneurship

The answer: They are all "social entrepreneurs" that are actively practicing—you guessed it!—social entrepreneurship. In a nutshell, social entrepreneurship applies innovative approaches to organize, create, and manage a venture to solve the practical needs of society. They usually are nonprofit organizations and focus on issues facing people who lack the financial or political means to solve their own problems.

Corporate Level

The corporate level is where top management directs overall strategy for the entire organization. "Top management" usually means the board of directors and senior management officers with a variety of skills and experiences that are invaluable in establishing overall strategy.

1. Situation Analysis

The essence of situation analysis is taking stock of where the firm or product has been recently, where it is now, and where it is headed in terms of the organization's marketing plans and the external forces and trends affecting it.

Evaluation Phase

The evaluation phase of the strategic marketing process seeks to keep the marketing program moving in the direction set for it. Accomplishing this requires the marketing manager to (1) compare the results of the marketing program with the goals in the written plans to identify deviations and (2) act on these deviations—correcting negative deviations and exploiting positive ones.

Sight Life

The mission of SightLife is incredibly clear and specific: "To end cornea blindness." Cornea blindness, affecting 10 million people globally, can be cured by transplanting a donated, healthy cornea to replace a diseased one. Seattle-based SightLife finds cornea donors and prepares the tissues for surgery. Seeking to create 900 eye banks around the world, SightLife recruited Tim Schottman to lead the effort. He had been part of the global strategy team at Starbucks that often opened six or seven stores in a day. Schottman's reaction to the SightLife challenge was, "Ah, only 900—that's not that hard."

Organizational Strategies

The organizational foundation sets the "why" of organizations and the organizational direction sets the "what." To convert these into actual results, the organizational strategies are concerned with the "how." These organizational strategies vary in at least two ways, depending on (1) a strategy's level in the organization and (2) the offerings an organization provides to its customers.

CEO

The president or chief executive officer (CEO) is the highest ranking officer in the organization and is usually a member of its board of directors. This person must possess leadership skills and expertise ranging from overseeing the organization's daily operations to spearheading strategy planning efforts that may determine its very survival.

An Entrepreneur: Ben & Jerry's

The two founding entrepreneurs of Ben & Jerry's have successfully implemented some highly creative marketing and organizational strategies over the years. For example: Caring Dairy. They buy their milk and cream from a cooperative that guarantees their supplies are bovine growth hormone free. PartnerShops. Their "social entrepreneurship" PartnerShop programs enable community-based nonprofit organizations to own and operate ScoopShops that help employ at-risk youth and young adults to better their lives. Fair Trade. They believe that "people should get their fair share of the pie." To that end, they practice Fair Trade-certified sourcing of key ingredients—cocoa, coffee, and vanilla—for their deliciously unique flavors like Bonnaroo Buzz. These items are purchased from producers in developing countries who practice sustainable farming techniques. AIDS Prevention and Care. They developed a limited edition "Goodbye Yellow Brickle Road" ice cream in partnership with Sir Elton John to help his worldwide AIDS Foundation. The name is a play on one of his most popular song titles. The flavor is "an outrageous symphony of decadent chocolate ice cream, peanut butter cookie dough, butterbrickle, and white chocolate chunks." This creative, funky business is Ben & Jerry's Homemade Holdings, Inc., which links its mission statement to social causes designed to improve humanity, as shown on the next page.

Market Segmentation

This decision is often based on market segmentation, which involves aggregating prospective buyers into groups, or segments, that (1) have common needs and (2) will respond similarly to a marketing action. This enables an organization to identify the segments on which it will focus its efforts—its target market segments—and develop specific marketing programs to reach them.

Planning Phase

Three steps in the planning phase of the strategic marketing process: (1) situation (SWOT) analysis (2) market-product focus and goal setting (3) the marketing program.

Marketing Tactics

To implement a marketing program successfully, hundreds of detailed decisions are often required. These decisions, called marketing tactics, are detailed day-to-day operational decisions essential to the overall success of marketing strategies.

Strategic Direction

To set a strategic direction, an organization needs to answer two difficult questions: (1) Where are we now? and (2) Where do we want to go?

Data Visualization

Today's marketers use data visualization, which presents information about an organization's marketing metrics graphically so marketers can quickly (1) spot deviations from plans and (2) take corrective actions.

Hand In Hand International

Using a technique called microfinance, Hand in Hand provides small loans (about $125) to women in India, South Africa, and Afghanistan who want to start and operate a small business. A Hand in Hand self-help group reaches out to the poorest, least educated, would-be businesswomen and teaches them first the basics (reading, writing, and arithmetic) and then the skills needed to operate a business. Percy Barnevik, the founder of Hand in Hand, says he wanted to "gift" his knowledge, abilities, and passion as a retired CEO to improve society's quality of life.

Cross Functional Teams

When developing marketing programs for new offerings or for improving existing ones, an organization's senior management may form cross-functional teams. These consist of a small number of people from different departments who are mutually accountable to accomplish a task or a common set of performance goals. Sometimes these teams will have representatives from outside the organization, such as suppliers or customers, to assist them.

Acting on Deviations

When evaluation shows that actual performance has failed to meet expectations, managers need to take corrective actions. -Exploiting a positive deviation. If Kodak's innovative digital products sell better than expected, Kodak might try to move quickly to offer these to international customers—such as its digital photo printers for the German market. -Correcting a negative deviation. However, if Panasonic is able to surpass Kodak in global market share of digital cameras, Kodak may need to reduce prices.

Business Model

With today's increased global competition, many organizations are rethinking their business model, the strategies an organization develops to provide value to the customers it serves. Technological innovation is often the trigger for this business model change.