MARKETING CH1-2

Strategic marketing management addresses two questions:

(1) What is the organization's main activity at a particular time? (2) How will it reach its goals?

Promotion ch 2

- includes advertising, public relations, sales promotion, and personal selling. -role in the marketing mix is to bring about mutually satisfying exchanges with target markets by informing, educating, persuading, and reminding them of the benefits of an organization or a product.

Price

- is what a buyer must give up in order to obtain a product. It is often the most flexible of the four Ps—the element quickest to change. Marketers can raise or lower prices more frequently and easily than they can change other marketing mix variables. -is an important competitive weapon and is very important to the organization because price multiplied by the number of units sold equals total revenue for the firm.

A group of scholars has discovered that there are four elements of value that each addresses a basic consumer need. Each element contains multiple attributes. These are:

1. Functionality (convenience) 2. Life-changing (hope and motivation) 3. Emotional(product design and entertainment) 4. Social-impact

Ways Businesses Promote Customer-Oriented Personnel

1. Role of Training (offering programs to get workers to promote customer service) 2. Empowerment (delegation of authority where workers can make decisions) 3. Teamwork entails collaborative efforts of people to accomplish common objectives.

An exchange can take place only if the following five conditions exist:

1. There must be at least two parties. 2. Each party has something that might be of value to the other party. 3. Each party is capable of communication and delivery. 4. Each party is free to accept or reject the exchange offer. 5. Each party believes it is appropriate or desirable to deal with the other party.*

Four Characteristics of a Marketing Audit

1. comprehensive 2. systematic 3. independent 4. periodic Comprehensive: The marketing audit covers all the major marketing issues facing an organization—not just trouble spots. Systematic: The marketing audit takes place in an orderly sequence and covers the organization's marketing environment, internal marketing system, and specific marketing activities. The diagnosis is followed by an action plan with both short-run and long-run proposals for improving overall marketing effectiveness. Independent: The marketing audit is normally conducted by an inside or outside party that is independent enough to have top management's confidence and has the ability to be objective. Periodic: The marketing audit should be carried out on a regular schedule instead of only in a crisis. Whether it seems successful or is in deep trouble, any organization can benefit greatly from such an audit.

Marketing has two facets.

1. philosophy, an attitude, a perspective, or a management orientation that stresses customer satisfaction. 2.marketing is an organizational function and a set of processes used to implement this philosophy.

When properly created, an SBU has the following characteristics:

A distinct mission and a specific target market Control over its resources Its own competitors A single business or a collection of related businesses Plans independent of the other SBUs in the total organization. In theory, an SBU should have its own resources for handling basic business functions: accounting, engineering, manufacturing, and marketing.

Ansoff's Strategic Opportunity Matrix which matches products with markets. Firms can explore these four options:

A firm using the market penetration(^^^) alternative would try to increase market share among existing customers. Market development means attracting new customers to existing products. Ideally, new uses for old products stimulate additional sales among existing customers while also bringing in new buyers. A product development strategy entails the creation of new products for present markets. Diversification is a strategy of increasing sales by introducing new products into new markets.

Target Market Strategy

A market segment is a group of individuals or organizations who share one or more characteristics. They therefore may have relatively similar product needs.

In contrast, market-oriented organizations recognize that promotion decisions are only one of four basic marketing mix decisions that must be made: product decisions, place (or distribution) decisions, promotion decisions, and pricing decisions.

A market-oriented organization recognizes that each of these four components is important.

task force

A___ is a tightly organized unit under the direction of a manager who, usually, has broad authority. A____is established to accomplish a single goal or mission and thus works against a deadline.

Strategic Alternatives Three of the most commonly used tools are

Ansoff's strategic opportunity matrix, the Boston Consulting Group model, and the General Electric model. Selecting which strategic alternative to pursue depends on which of two philosophies a company maintains about when to expect profits—right away or after increasing market share. In the long run, market share and profitability are compatible goals.

The Marketing Plan

Based on the company's or SBU's overall strategy, marketing managers can create a marketing plan for individual products, brands, lines, or customer groups.

Marketing offers great career opportunities

Between one-fourth and one-third of the entire civilian workforce in the United States performs marketing activities. areas as professional selling, marketing research, advertising, retail buying, distribution management, product management, product development, and wholesaling.

After classifying the company's SBUs in the matrix, the next step is to allocate future resources for each. The four basic strategies are to:

Build (star (probably a problem child at present), building would be an appropriate goal) Hold (a key goal would typically be to hold or preserve market share so that the organization can take advantage of the very positive cash flow) Harvest (This strategy is appropriate for all SBUs except those classified as stars. The basic goal is to increase the short-term cash return without too much concern for the long-run impact.) Divest (Getting rid of SBUs with low shares of low-growth markets is often appropriate. Problem children and dogs are most suitable for this strategy.)

on-demand marketing

Consumers (1) want to interact anywhere, anytime; (2) want to do new things with varied kinds of information in ways that create value; (3) expect data stored about them to be targeted specifically to their needs or to personalize their experiences; and (4) expect all interactions with a company to be easy. --delivers relevant experiences throughout the consumer's decision and buying process that are integrated across both physical and virtual environments

The Innovation Matrix These ranges are broken down into three levels:

Core Innovation Adjacent Innovation Transformational Innovation

Who is the Boss?

Customers use their widespread knowledge to shop smarter; leading executives such as former Procter & Gamble CEO A. G. Laffey to conclude that "the customer is boss."* Founder of Walmart and Sam's Club, Sam Walton, echoed this sentiment when he reportedly once said, "There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else."*

Large companies may manage a number of very different businesses, called strategic business units (SBUs).

Each SBU has its own rate of return on investment, growth potential, and associated risks and requires its own strategies and funding.

Costs can be reduced in a variety of ways:

Experience curves ( tell us that costs decline at a predictable rate as experience with a product increases. The experience curve effect encompasses a broad range of manufacturing, marketing, and administrative costs. ) Efficient labor: No-frills goods and services (removing frills and options from a product or service. Southwest Airlines, for example, offers low fares, but no seat assignments or meals. Low costs give Southwest a higher load factor and greater economies of scale, which, in turn, mean lower prices.) Government subsidies (Governments can provide grants and interest-free loans to target industries.) Product design: Reengineering (rethinking and redesign of business processes to achieve dramatic improvements in critical measures of performance. It often involves reorganizing functional departments such as sales, engineering, and production into cross-disciplinary teams.) Production innovations: New methods of service delivery:

After the audit has been completed, three tasks remain.

First, the audit should profile existing weaknesses and inhibiting factors, as well as the firm's strengths and the new opportunities available to it. Recommendations The second task is to ensure that the role of the audit has been clearly communicated. It is unlikely that the suggestions will require a radical change in the way the firm operates. The audit's main role is to address the question "Where are we now?" and to suggest ways to improve what the firm already does. The final postaudit task is to make someone accountable for implementing recommendations. All too often, reports are presented, applauded, and filed away to gather dust. The person made accountable should be someone who is committed to the project and who has the managerial power to make things happen

Carefully specified objectives serve several functions

First, they communicate marketing management philosophies and provide direction for lower-level marketing managers so that marketing efforts are integrated and pointed in a consistent direction. Objectives also serve as motivators by creating something for employees to strive for. When objectives are attainable and challenging, they motivate those charged with achieving the objectives. Additionally, the process of writing specific objectives forces executives to clarify their thinking. Finally, objectives form a basis for control: the effectiveness of a plan can be gauged in light of the stated objectives.

The marketing concept includes the following:

Focusing on customer wants and needs so that the organization can distinguish its product(s) from competitors' offerings Integrating all the organization's activities, including production, to satisfy customer wants Achieving long-term goals for the organization by satisfying customer wants and needs legally and responsibly

Customer-Oriented Personnel

For an organization to be focused on building relationships with customers, employees' attitudes and actions must be customer oriented.

Customer Experience Index (CxPi)

Forrester Research discovered that when companies experience gains in the firm's

Any market segment that is targeted must be fully described. Demographics, psychographics, and buyer behavior should be assessed.

If segments are differentiated by ethnicity, multicultural aspects of the marketing mix should be examined. If the target market is international, it is especially important to describe differences in culture, economic and technological development, and political structure that may affect the marketing plan. Global marketing is covered in more detail in Chapter 5.

MISSION STATEMENTS---in terms of the benefits customers seek, instead of goods and services, offers at least three important advantages:

It ensures that the firm keeps focusing on customers and avoids becoming preoccupied with goods, services, or the organization's internal needs. It encourages innovation and creativity by reminding people that there are many ways to satisfy customer wants. It stimulates an awareness of changes in customer desires and preferences so that product offerings are more likely to remain relevant.

Why study marketing?

Marketing plays an important role in society, marketing is important to businesses, marketing offers outstanding career opportunities, and marketing affects your life every day.

Control

Once a plan is chosen and implemented, its effectiveness must be monitored. _______provides the mechanisms for evaluating marketing results in light of the plan's objectives and for correcting actions that do not help the organization reach those objectives within budget guidelines.

Marketing Objectives Should Be...

Realistic: Managers should develop objectives that have a chance of being met. Measurable: Managers need to be able to quantitatively measure whether or not an objective has been met Time specific: By what time should the objective be met? Compared to a benchmark: If the objective is to increase sales by 15 percent, it is important to know the baseline against which the objective will be measured. Will it be current sales? Last year's sales?

Transformational Innovation:

Represented by the red arc in Exhibit 2.2, these decisions result in brand-new markets, products, and often new businesses. The company must rely on new, unfamiliar assets to develop the type of breakthrough decisions that fall in this category. Some notable examples are Apple in technology (including the iPhone, iPad, and Apple Watch), Uber in transportation, and Airbnb in hospitality.

Core Innovation:

Represented by the yellow circle in Exhibit 2.2, these decisions implement changes that use existing assets to provide added convenience to existing customers and potentially entice customers from other brands. Blue Apron, the meal kit company, is starting to sell its kits in physical stores, in addition to its subscription online model. This strategy should help the company reach more customers as its growth slows.*

is relative market share,

The measure of market share used in the portfolio approach _______ the ratio between the company's share and the share of the largest competitor.

The size of the circle in each cell of the matrix represents dollar sales of the SBU relative to dollar sales of the company's other SBUs. The portfolio matrix breaks SBUs into four categories:

Stars: A star is a fast-growing market leader. A cash cow is an SBU that generates more cash than it needs to maintain its market share. A problem child, also called a question mark, shows rapid growth but poor profit margins. A dog has low growth potential and a small market share. Most dogs eventually leave the marketplace.

CHAPTER 2

Strategic Planning for Competitive Advantage 2-1Understand the importance of strategic planning 2-2Define strategic business units (SBUs) 2-3Identify strategic alternatives and know a basic outline for a marketing plan 2-4Develop an appropriate business mission statement 2-5Describe the components of a situation analysis 2-6Identify sources of competitive advantage 2-7Explain the criteria for stating good marketing objectives 2-8Discuss target market strategies 2-9Describe the elements of the marketing mix 2-10Explain why implementation, evaluation, and control of the marketing plan are necessary 2-11Identify several techniques that help make strategic planning effective

Which of the following statements is true regarding effective strategic planning?

Strategic planning requires top management's support and participation

customer satisfaction

The customers' evaluation of a good or service in terms of whether that good or service has met their needs and expectations is called

Product Strategies

The decisions marketers help make about what products, a business should sell regarding quantities, sizes, packaging, warranties, brand names, image, design the marketing mix typically starts with the product Products can be tangible goods such as computers, ideas like those offered by a consultant, or services such as medical care. Products should also offer customer value.

Several examples of industries that tend to use a sales orientation follow.

The insurance industry The Automotive Industry Business-to-Business Sales

Customer Value

The relationship between benefits and the sacrifice necessary to obtain those benefits

One of the keys to success overlooked by many businesses is to actively follow up on the marketing plan.

The time spent researching, developing, and writing a useful and accurate marketing plan goes to waste if the plan is not used by the organization. One of the best ways to get the most out of a marketing plan is to correctly implement it. Once the first steps to implementation are taken, evaluation and control will help guide the organization to success as laid out by the marketing plan.

Four competing philosophies strongly influence an organization's marketing processes.

These philosophies are commonly referred to as production, sales, market, and societal marketing orientations.

The Boston Consulting Group Model

To determine the future cash contributions and cash requirements expected for each SBU,

Conducting a Situation Analysis

What is the first step in the traditional top-down marketing plan? SWOT analysis—that is, the firm should identify its internal strengths (S) and weaknesses (W) and also examine external opportunities (O) and threats (T).

the marketing plan is only as good as the information it contains and the effort, creativity, and thought that went into its creation. Having a good marketing information system and a wealth of competitive intelligence (covered in Chapter 9) is critical to a thorough and accurate situation analysis. The role of managerial intuition is also important in the creation and selection of marketing strategies. Managers must weigh any information against its accuracy and their own judgment when making a marketing decision. Further, every marketing plan has different content, depending on the organization and its mission, objectives, targets, and marketing mix components.

Writing the Marketing Plan

The fundamental problem with a sales orientation, as with a production orientation

a lack of understanding of the needs and wants of the marketplace.

production orientation

a philosophy that focuses on the internal capabilities of the firm rather than on the desires and needs of the marketplace "What can we do best?" "What can our engineers design?" "What is easy to produce, given our equipment?" In the case of a service organization, managers ask, "What services are most convenient for the firm to offer?" and "Where do our talents lie?"

marketing

activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.*

Defining the Business Mission

answers the question, "what business are we in?" the business mission profoundly affects the firm's long-run resource allocation, profitability, and survival business mission statements that are stated too narrowly suffer from marketing myopia

Place, or distribution, strategies

are concerned with making products available when and where customers want them. The goal is to make sure products arrive in usable condition at designated places when needed.

Marketing includes the following activities, which are vital to business organizations:

assessing the wants and satisfactions of present and potential customers, designing and managing product offerings, determining prices and pricing policies, developing distribution strategies, and communicating with present and potential customers.

portfolio matrix

classifies each SBU by its present or forecast growth and market share. The underlying assumption is that market share and profitability are strongly linked.

Marketing Plan Elements

defining the business mission, performing a situation analysis, defining objectives, delineating a target market, and establishing components of the marketing mix. Other elements that may be included in a plan are budgets, implementation timetables, required marketing research efforts, or elements of advanced strategic planning.

The General Electric Model

developed by General Electric (GE). The dimensions used in this model—market attractiveness and company strength—are richer and more complex than those used in the Boston Consulting Group model but are harder to quantify.

Evaluation

entails gauging the extent to which marketing objectives have been achieved during the specified time period.

product/service differentiation competitive advantage

exists when a firm provides something that is unique and valuable to buyers beyond simply offering a lower price than that of the competition .Comparatively competing products, are angular, black and white, plastic and glass, and completely expressionless. The fun designs Google uses helps its products to stand out.*

societal marketing orientation

extends the marketing concept by acknowledging that some products that customers want may not really be in their best interests or the best interests of society as a whole. This philosophy states that an organization exists not only to satisfy customer wants and needs and to meet organizational objectives but also to preserve or enhance individuals' and society's long-term best interests.

Marketing Plays an Important Role in Society

feeding Americans

Marketing strategy (2)

involves the activities of selecting and describing one or more target markets and developing and maintaining a marketing mix that will produce mutually satisfying exchanges with target markets.

Customer relationship management (CRM)

is a company-wide business strategy designed to optimize profitability, revenue, and customer satisfaction by focusing on highly defined and precise customer groups. This is accomplished by organizing the company around customer segments, establishing and tracking customer interactions with the company, fostering customer-satisfying behaviors, and linking all processes of the company from its customers through its suppliers.

competitive advantage

is a set of unique features of a company and its products that are perceived by the target market as significant and superior to those of the competition. It is the factor or factors that cause customers to patronize a firm and not the competition. 3 types: cost, product/service differentiation, and niche.

marketing concept

is a simple and intuitively appealing philosophy that articulates a market orientation It states that the social and economic justification for an organization's existence is the satisfaction of customer wants and needs whilemeeting organizational objectives.

Relationship marketing

is a strategy that focuses on keeping and improving relationships with current customers. It assumes that many consumers and business customers prefer to have an ongoing relationship with one organization rather than switch continually among providers in their search for value.

sales orientation

is based on the belief that people will buy more goods and services if aggressive sales techniques are used and that high sales result in high profits. Not only are sales to the final buyer emphasized, but intermediaries are also encouraged to push manufacturers' products more aggressively.

sustainable competitive advantage

is one that cannot be copied by the competition. is a function of the speed with which competitors can imitate a leading company's strategy and plans. Imitation requires a competitor to identify the leader's competitive advantage, determine how it is achieved, and then learn how to duplicate it.

Big Data

is the discovery, interpretation, and communication of meaningful patterns in data.

Promotion

is the means by which organizations communicate with present and prospective customers about the merits and characteristics of their organization and products.

Implementation

is the process that turns a marketing plan into action assignments and ensures that these assignments are executed in a way that accomplishes the plan's objectives. - activities may involve detailed job assignments, activity descriptions, time lines, budgets, and lots of communication. -requires delegating authority and responsibility, determining a time frame for completing tasks, and allocating resources.

Firms that adopt and implement the marketing concept are said to be ________, meaning that they assume that a sale does not depend on an aggressive sales force but rather on a customer's decision to purchase a product.

market oriented

cost competitive advantage

means being the low-cost competitor in an industry while maintaining satisfactory profit margins.

Achieving a market orientation involves

obtaining information about customers, competitors, and markets; examining the information from a total business perspective; determining how to deliver superior customer value; and implementing actions to provide value to customers.

exchange

people giving up something in order to receive something else they would rather have. Two (or more) people may barter or trade such items as baseball cards or oil paintings.

often referred to as the four Ps

product place (distribution) promotion and Promoting strategies--designed to produce mutually satisfying exchanges with a target market. Price

Although implementation is essentially "doing what you said you were going to do," many organizations repeatedly experience failures in strategy implementation. MUST BE

properly communicated and may or may not be written

Why Write a Marketing Plan?

provides a basis for comparison of actual and expected performance; provides clearly stated activities to work toward common goals; provides an examination of the marketing environment; serves as a reference for the success of future activities; allows entry into the marketplace with awareness The written marketing plan provides clearly stated activities that help employees and managers understand and work toward common goals. Writing a marketing plan allows you to examine the marketing environment in conjunction with the inner workings of the business. Serves as a reference point for the success of future activities awareness of possibilities and problems.

marketing mix

refers to a unique blend of product, place (distribution), promotion, and pricing strategies (often referred to as the four Ps) designed to produce mutually satisfying exchanges with a target market. The marketing manager can control each component of the marketing mix, but the strategies for all four components must be blended to achieve optimal results. Any marketing mix is only as good as its weakest component. Successful marketing mixes have been carefully designed to satisfy target markets. Variations in marketing mixes do not occur by chance. Astute marketing managers devise marketing strategies to gain advantages over competitors and best serve the needs and wants of a particular target market segment. By manipulating elements of the marketing mix, marketing managers can fine-tune the customer offering and achieve competitive success

niche competitive advantage

seeks to target and effectively serve a single segment of the market (see Chapter 8). For small companies with limited resources that potentially face giant competitors, niche targeting may be the only viable option. A market segment that has good growth potential but is not crucial to the success of major competitors is a good candidate for developing a--- strategy serve only a limited geographic market

There are three general strategies for selecting target markets.

selected by appealing to the entire market with one marketing mix, concentrating on one segment, or appealing to multiple market segments using multiple marketing mixes characteristics, advantages, and disadvantages of each strategic option

Marco is the owner of Salon Concepts, which offers nail, hair, and massage services. Marco wants to increase revenues and decides to offer new services to men, focusing on shaving, beard or mustache care, and barber services. Marco believes these new services will enable the salon to grow and maintain profitability over time. In launching grooming services for men, Marco has made a(n) _______ decision.

strategic

The differences between sales and market orientations are

substantial.

The fundamental objectives of most businesses are

survival, profits, and growth

A sales-oriented organization targets its products at "everybody" or "the average customer." A market-oriented organization aims at specific groups of people.

t

Because most potential customers are not "average," they are not likely to be attracted to an average product marketed to the average customer.

t

Building relationships with existing customers directly addresses two of the three possibilities and indirectly addresses the other. LONG-TERM RELATIONSHIPS

t

Many of the historic sources of competitive advantage—technology, innovation, and economies of scale—allowed companies to focus their efforts internally and prosper

t

Marketing is a part of the job of everyone in the organization. Therefore, a basic understanding of marketing is important to all businesspeople.

t

Some firms are known for delivering superior customer value and satisfaction.

t

The AMA's definition of marketing recognizes the importance of a societal marketing orientation by including "society at large" as one of the constituencies for which marketing seeks to provide value.

t

Customer value is not simply a matter of high quality. A high-quality product that is available only at a high price will not be perceived as a good value, nor will bare-bones service or low-quality goods selling for a low price.

t. Price is a component of value

Personnel in sales-oriented firms

tend to be inward looking, focusing on selling what the organization makes rather than making what the market wants.

Strategic planning

the managerial process of creating and maintaining a fit between the organization's objectives and resources and the evolving market opportunities. The goal of strategic planning is long-run profitability and growth. Thus, strategic decisions require long-term commitments of resources.

The two orientations can be compared in terms of five characteristics:

the organization's focus, the firm's business, those to whom the product is directed, the firm's primary goal, and the tools used to achieve the organization's goals.

Adjacent Innovation:

these decisions are designed to take company strengths into new markets. This space uses existing abilities in new ways. For example, Botox, the popular cosmetic drug, was originally developed to treat intestinal problems and to treat crossed eyes. Leveraging the drug into cosmetic medicine has dramatically increased the market for Botox.

Four common reasons for failing to achieve a marketing objective are

unrealistic marketing objectives, inappropriate marketing strategies in the plan, poor implementation, and changes in the environment after the objective was specified and the strategy was implemented.

Mission Statement

which is the foundation of any company's marketing plan.

marketing audit

—a thorough, systematic, periodic evaluation of the objectives, strategies, structure, and performance of the marketing organization. -helps management allocate marketing resources efficiently. it is also an excellent way to improve communication and raise the level of marketing consciousness within the organization. It is a useful vehicle for selling the philosophy and techniques of strategic marketing to other members of the organization.

Marketing Myopia

—defining a business in terms of goods and services rather than in terms of the benefits customers seek. In this context, myopia means narrow, short-term thinking.

environmental scanning

—the collection and interpretation of information about forces, events, and relationships in the external environment that may affect the future of the organization or the implementation of the marketing plan. -- helps identify market opportunities and threats and provides guidelines for the design of marketing strategy.

Market opportunity analysis (MOA)

—the description and estimation of the size and sales potential of market segments that are of interest to the firm and the assessment of key competitors in these market segments. After the firm describes the market segments, it may target one or more of them.