Marketing Chapter 2

What is the formal definition of a "Marketing Audit"?

"A systematic, critical, impartial review and appraisal of the total marketing operation: of the basic objectives and policies of the operation and the assumptions which underlie them, as well as of the methods, procedures, personnel and organization employed to implement the policies and achieve the objectives."

Why is it important to define the company and have a mission statement?

"If you never think about the company's mission and spell it out, you run the risk of making the wrong strategic decisions. The company, for example, may change its course and get involved in activities that are counterproductive to its growth. Without a clear mission, the company may also overlook marketing opportunities and may not be able to take advantage of them."

BONUS: Here are the ten questions to determining the quality of Marketing Plans.

1. To what extent will the company's position in the market be compromised, if the assumptions underlying the marketing plan prove to be incorrect? 2. Is the required information available, and is the market research of high quality? 3. Do the marketing objectives and strategy follow logically from the results of the situation analysis? 4. Is the marketing plan consistent with the business strategy and objectives, and what impact will it have on the company's profits and market share? 5. Can the marketing plan be executed, and are the necessary resources available? 6. Are the marketing mix variables properly aligned and consistent with the rest of the plan? 7. Will implementing the plan evoke negative reactions from competitors, and if so, how will we respond to that eventuality? 8. Is the marketing strategy's primary goal to attract new customers or to increase consumption among existing customers? 9. Does the marketing strategy contribute to increasing brand equity and brand preference? 10. Will the marketing plan lead not only to short-term success, but also strengthen the company's profitable market position long term?

What is a "Marketing Plan"?

A detailed document that describes the context and scope of an organization's marketing efforts specifying how it will allocate available resources and use various marketing tools to achieve its formulated objectives within a particular time period, as well as offer potential returns.

What is the Cost Leadership Strategy?

A firm concentrates on cutting expenses and reducing prices of its standardized products, while appealing to a wide range of market segments. Doesn't have to have the lowest price, but the lowest costs in operations, allowing cost reduction throughout the value chain.

What's the difference between a regular audit and a functional audit?

A functional audit is an audit of a specific piece of the marketing strategy, rather than the whole. Concerned with performance evaluation, not soundness of the objectives and strategy.

What makes a good mission statement?

A good Mission Statement identifies the center of the company: what is the company, what business are they in, who is it for, who are its customers, what are their needs and wants? The mission statement is a formal declaration of this. It should not include products or markets, but instead describe core technologies and company strengths that can be used to make products to meet needs.

What is the definition of an "Organization"? A "Marketing Organization"?

A mechanism in which a managerial philosophy is translated into action. The vehicle for making decisions about the marketing mix and implementing them.

What is the "Executive Summary"? Why should it be written last?

A one to two page synopsis of the plan's key points and recommendations and an overview for those who aren't directly involved in the plan to get the general idea of it. Though it is the first component, should be written last as it acts as an abstract of the plan.

What is a "Strategic Profile"?

A plan from the uppermost level of management as to what resources are allocated to each SBU.

What is "Control" in Marketing?

A process of gathering data from implementation to ensure the project is going according to plan, and if it begins to veer taking corrective actions.

What is included in the Situation (and SWOT Analysis)?

A systematic analysis of the firm's operating environment, or the brand's current status in the marketplace. Should discuss relevant environmental factors such as trends, distributors, competition, and review of the previous year's activities with criticism.

What is "Cash Flow"?

Amount of money traveling in and out of a business, liquidity.

What is in an executive summary?

An introduction, summarizing the product's prior performance. The objectives of the plan. A brief explanation of the marketing opportunities Activities to meet objectives Resources required for the plan Sales forecasts and benchmarks to measure results.

What are the three phases of executing a "Marketing Strategy"?

Analysis (gathering the necessary data and coming to conclusions), Marketing Strategizing (developing the strategy and tactical plans, as well as controls), and Implementation (execution and control of the plans).

What are the four key elements to a marketing plan?

Analysis, Vision, Activities, and Outcome

What are the four stages managers go through Marketing Planning, and what do they mean?

Analysis: Gathering data and research on the situation, Planning: Creating a stable plan that can be executed, Implementation: Putting the plan into place, Control: Maintaining the results of the plan and gathering new data for further analysis.

What is the Focus Strategy? What are its two sub-strategies?

Appealing specifically to one or a small number of target markets, and completely meeting the needs of a small group of buyers/niche. The subtypes are Cost Focus, as in lower prices by a cost advantage from a very specific market, and Differentiation Focus, as in products or services significantly different than competitors.

Why write a marketing plan?

Assess the feasibility of the proposed marketing objectives and strategies. Enumerate essential tasks and specify who is responsible for executing them. Provide a rationale for obtaining financing by calculating the monetary requirements and other resources needed to implement the plan. Provide insight into the anticipated results. Serve as a standard against which the company's progress can be measured and evaluated, in order to make any necessary adjustments.

What is "Evaluation"?

Assessing the extent to which the marketing objectives are being accomplished.

What are the four primary components of the "Marketing Strategy", and what do they mean?

Brand Image (To make products and services recognizable and attractive in the customer's eyes) Quality (The product must meet customer expectations on performance) Innovation (To create unique benefits of this product) Ongoing Customer Relationship (To meet the customer's needs as best as possible, even after the initial purchase)

What are the 4 strategies for Portfolio Analysis?

Build Strategy, Hold Strategy, Harvest Strategy, Divest Strategy

What is a "Hierarchy of Objectives"?

Clearly prioritizing and sub dividing objectives across departments and individuals.

What are the 4 types of external/environmental factors?

Competitors, Market Trends, Industry Trends, Distribution Channels

What does Corporate Strategy manage?

Corporate Strategy manages individual SBUs within a corporation.

What are the three levels of Strategy, in order of highest to lowest?

Corporate Strategy, Business Strategy, Marketing Strategy

What are the three generic strategies?

Cost Leadership, Differentiation, and Focus

What are marketing strategies geared towards?

Creating a sustainable competitive advantage.

What are the three things that comprise the Abell model?

Customers (Which groups or market segments are you targeting, who is your target?) Needs (What products features or benefits are your customers looking for?) Technologies (How can we satisfy unmet needs with new technology?)

What is a "Centralized" Organization? A "Decentralized" Organization?

Decisions made by top level managers and delegated responsibilities down the chain. Decision making is delegated to the lower levels of the hierarchy.

What's the worst strategy?

Don't be stuck in the middle.

What is a "Product Management Organization"?

Each product/brand is ran by a Product Manager/Brand Manager. They then implement strategic and annual plans for a product or product group. Each has assistant product managers with one or more areas of responsibility for the product. Product Manager has to convince upper management of the value of each product.

What are the internal and external uses of a mission statement?

Externally, when published with promotional materials, shows what is distinct about this company. Internally, motivate employees and to get them to reflect on strategy.

What is the first step to completing your objectives?

Finding the strategic options and picking the one that works best.

What is a "Geographic Organization"?

Firms that operate internationally often organize marketing departments based on geographic location. Functional specialists are assigned to geographic regions and report to a regional manager, then regional managers report to the CMO or Marketing Vice President. Works well for companies that have to appeal to different tastes in different regions. Sales force is improved by knowing the local customs and culture better, as well as reduction of travel.

What are the two principles that drive the Portfolio Analysis Technique/BCG Matrix?

First, Economies of Scale, meaning the bigger an operation is the less it costs to produce its product, and then the Experience Curve, meaning companies gain efficiency when they have more experience making the product.

What should the introduction of the Marketing Plan do?

For new products and brands it should be included to give an idea of what the concept is, as well as inform the reader about the market and competition for this product. This should pique interest and get managers/investors on board with your ideas.

What is the Differentiation Strategy?

Get customers to pay a premium for superior or unique products with a particular brand image. The key is being perceived as better than the competition.

What is "Sub Optimization"?

Inner department bickering where one department puts themselves in front of the marketing team/rest of the company.

What does Internal Analysis address? External Analysis?

Internal: Addresses factors within the company's direct control, controllable factors. External: Identifies the Environmental Factors, or factors that are outside of the company's direct control. Also non-controllable factors.

What is a "Harvest Strategy"?

Investments in marketing are kept to a minimum in order to maximize cash flow. This kind of 'milking' may lead to a reduced market share. A harvest strategy is appropriate for cash cows with dubious prospects, as well as for question marks and dogs.

What are the advantages and limitations of Portfolio Analysis?

It is a good overhead view of how your SBUs look, and is useful for determining what to invest in and what to dispose of. It is limited because it relies on the experience curve, is simplistic, and doesn't account for synergy between companies.

What should a good long term strategy set up?

It sets up Competitive Advantage, or some type of leg up you have on other business competition.

What are the 4 confrontations that can come from correlated variables on the SWOT analysis/Confrontation Matrix?

Leverage (Strength + Opportunity), Problem (Threat + Weakness), Constraints (Opportunity + Weakness), Vulnerabilities (Strength + Threat)

What's usually different between low level and high level objectives (outside of the obvious)?

Low level objectives are more concrete and exact, high level objectives are more abstract and broad.

What are the two axis on the Boston Matrix?

Market Growth, which is the rate the market is growing at, and Market Share, which is the percentage of the market owned by your company.

What are the four routes for expansion in the Ansoff Model?

Market Penetration (Same Market/Same Product), Market Development (New Market/Same Product), Product Development (Same Market/New Product), Diversification (New Market/New Product)

What is developed to make sure Implementation is done in an efficient and systematic manner?

Marketing Action Plan

At what level does "Marketing Strategy" work?

Marketing strategy works at the level of a product, brand, or product line. This is called Marketing Planning.

What is "Strategic Market Control"?

Measuring if the strategy being used is still the best and most effective one.

What makes for good objectives?

Objectives must be ambitious but realistic, specific in time and measurements (be measurable), consistent with other goals, and clearly stated which ones have priority.

What are "Opportunities"? "Threats"?

Opportunities: Circumstances a firm could exploit to their advantage. Threats: Current or developing circumstances that could negatively impact firm performance.

What are the two primary models used for Strategic Analysis?

The Boston/BCG Matrix and the Ansoff Model/Product-Market Expansion Matrix.

What are the four plans that root the business strategy?

The business plan, the product plan, the operational plan, and the marketing plan.

What is a "Core Problem"?

The central problem an organization is facing.

What is a "Mission Statement"?

The company's strategic vision, including its corporate philosophy, the overall goals, top management's values and priorities and the strategies it pursues.

Why is "Analysis" important?

The customer has various choices that they could make, but while the company could focus on meeting all needs, this would be fruitless. Deciding on a target market/customer is necessary.

What is "Strategic Planning"?

The development of a long term plan to use the resources of an organization in an optimal way, within the constraints of the mission of the organization.

What is "Control"?

The formal and informal mechanisms for evaluating (and if necessary correcting) results to assure the objectives are efficiently maintained.

What is a "Hold Strategy"?

The goal of this investment strategy is to maintain the SBU's current (relative) market share by defending its market position. A company may pursue this defensive strategy of milking its investments for its lucrative cash cows.

What else is included in a full marketing audit?

The long-term and short-term objectives on which the policy is based, the size and nature of the various market segments and the company's relative position in each segment, and the company's strengths and weaknesses in fighting for market share in each of the segments.

Using the Abell model, what parts of the "Business Definition" does the product define verses the market define?

The market defines the customers as they comprise the market, but the Needs and Technologies both describe elements of Products.

At what level does "Business Strategy" work?

The planning level for divisions, SBUs, or subsidiaries. CEO of an operating unit develops the business strategy and also distributes resources inside the SBU.

When should the results/testing controls be done?

The results of the controls should be checked regularly; how often depends on volume of sale as well as what the instrument being evaluated is. Must be sufficiently long enough to gather new data but not long enough where corrective action is lost.

What are the two most basic choices a company has to make?

The size and composition of markets served (Target Market or Competitive Scope) and how the company will compete in the market (Competitive Advantage).

What is a "Market Management Organization"?

There is a series of marketing managers which deal with each target market/customer. Market managers then may have assistance from specialists. With good communication there is no copying of efforts between markets. Works well when customer needs and preferences wildly differ, as well as when there are several different marketing channels going on.

What are "Marketing Objectives"?

These are goals to achieve, such as increasing market share by a certain degree.

What makes for good benchmarks for Marketing Strategy?

They must focus on effectiveness, eg are the targets being met, and efficency, eg is the cost worth the price of this plan.

What are "Core Competencies"?

Things the customer values that are hard for competition to duplicate.

What is a "Build Strategy"?

This is an aggressive growth strategy to increase market share, for example by going after new target markets. This may come at the expense of short-term profit, but it is a good way of turning question marks into stars.

What are 10 common sections of marketing plans (also what do they include)?

Title Page, Executive Summary, Table of Contents, Introduction, Situation/SWOT Analysis, Business Strategy and Objectives, Strategic Options, Marketing Objectives, Marketing Strategies, Marketing Programs (Tactics), Implementation/Budgets/Control, Appendices

What is the key function of the mission statement?

To direct growth of the SBU.

What is the manager's job for implementation?

Translating the plan into detailed assignments, activities, budgets, and time schedules for those involved in implementation, and making sure that they are executed successfully.

Why are objectives sometimes not achieved? What should be done when objectives are not met?

Unrealistic expectations, poor strategy, and unexpected changes in the marketing environment. Sometimes this means adjusting the marketing strategy, sometimes this means adjusting the objectives themselves.

Which routes for expansion are the most common? How uncommon are the uncommon ones?

Vast majority of firms go through Market Penetration and Product Development strategies; around 10% engage in Market Development and Diversification.

What are "Strategic Options"?

Ways to achieve Marketing Objectives. You could dive deeper into your current market with your current products or explore new markets and products to satisfy different customers (Ansof Matrix)

What is "Competitive Advantage"?

What makes the product have a unique value from other products.

What are signs of a bad marketing plan?

What separates a good marketing plan from a bad one is the consideration of the customer's needs and wants. Another sign of a bad plan: there's not enough differentiation from the previous plan. As well, be weary of radical change without a clear reasoning behind it; all actions must have rationale behind them.

What is "Glocalization"?

When a global company functions as if a domestic company.

Why is evaluating and having controls important?

When proper controls exist, the company is able to act quickly to improve performance. If the plan is well structured, assessing the marketing mix variables should be easy and able to be understood in varying circumstances.

What is a "Product-Market Combination"?

Where the SBU falls in the Ansoff Matrix; comparing Market Share and Market Growth.

What is a "Divest Strategy"?

Sometimes the best strategy is to withdraw - by liquidating or selling off SBUs like dogs and question marks - if the proceeds from the sale will generate a higher return on investment elsewhere.

What does SMART PC stand for and what is it describing? (Also, though they are not in the definition, what does each mean?)

Specific, Measurable, Achievable, Relevant, Time-Bound, Prioritized, and Consistent. These are qualities your objectives should have.

What is a "Business Definition"? What is "Business Scope"?

Specifies the company's activities, including limits but leaving room for new products/services. The extent of the firm's current activities.

What are the four cells of the Boston Matrix?

Stars (High Growth/High Market Share/Even Profit) Wild Cats (High Growth/Low Market Share/Negative Profit) Cash Cows (Low Growth/High Market Share/Great Profit) Dogs (Low Growth/Low Market Share/Small Profit)

What is a "Marketing Audit"?

Strategic evaluation by a third party to help marketers formulate recommendations for improving strategy and implementation.

Why is the strategic plan important?

Strategic plan outlines the direction of the company, but in broad terms.

What is the difference between Strategy, Tactics, and Policy?

Strategy: Long term planning, Tactics: Short term planning/action. Together these form Policy.

What four components are in a SWOT analysis? Which are internal, which are external?

Strengths and Weaknesses (the internal components), Opportunities and Threats (the external components)

What are "Strengths"? "Weaknesses"?

Strengths: Abilities that help a firm achieve its goals. Weaknesses: Constraints that could obstruct a firm's goals.

What is a "Vision Statement"? The "Image"?

Short statements of what a company wants to achieve in the future. The idea of the unit that it seeks to project.

When should an audit take place?

Should be taken before the firm hits a major problem; it is both a prognosis and a diagnosis, examining past, current, and future conditions. Do it when things are running smoothly; as such there will not be a panic to make changes immediately, as well as prevent carelessness and complacency.

What are "Scenarios"?

Situations that the company may or may not run into.

What is a "Functional Organization"?

Primary three functions are served by different departments: purchasing, manufacturing, and marketing. Functional specialists supervise their own functional areas. These then directly report to management, either the CMO or Marketing Vice President. Simple but only has one outlet.

How has the defining a business changed between Product Oriented companies and Marketing Oriented companies?

Product Oriented companies defined a business unit by the products they create or the technology. Now, defines a business unit by the relationship the SBU has with the given market. This gives the freedom to develop new products that fill old needs ("Oil" company vs "Energy" company)

What does the Abell model refer to SBUs as?

Product-Market-Technology combinations

What does SBU stand for and mean?

SBU: Strategic Business Unit. An SBU is essentially a division of an organization that operates independently; each SBU has its own range of products and customers and is responsible for implementing their own strategy.

What are the four phases of "Control"?

Setting specific marketing goals (or other standards for performance), measuring progress toward realizing these goals, comparing the results (actual performance) with the goals (expected performance) and taking corrective action when necessary.