Module 5, Marketing Management

Developing Marketing Strategies

and Plans
Module 5: Marketing Strategies
 Developing Marketing Strategies and Plans –
Corporate And Division Strategic Planning,

 Business Unit Strategic Planning,

 Product Planning – New Product Development and

 Product Life Cycle –Stages

Developing Marketing Strategies and Plans

Marketing and Customer Value

The Value Delivery Process
The Value Chain
Core Competencies
The Central Role of Strategic Planning

Corporate and Division Strategic Planning

 Marketing and Customer Value

The task of any business is to deliver customer value at a

profit. A company can win only by fine-tuning the value
delivery process and choosing, providing, and
communicating superior value to increasingly well-
informed buyers.
The Value Delivery Process

Instead of emphasizing making and selling, companies now see themselves as

part of a value delivery process. We can divide the value creation and delivery
sequence into three phases.

 First, choosing the value is the “homework” marketers must do before any
product exists. They must segment the market, select the appropriate target,
and develop the offering’s value positioning. The formula “segmentation,
targeting, positioning (STP)” is the essence of strategic marketing.

 The second phase is providing the value. Marketing must identify specific
product features, prices, and distribution.
 The task in the third phase is communicating the value by utilizing the
Internet, advertising, sales force, and any other communication tools to
announce and promote the product.
What is the Value Chain?
Harvard’s Michael Porter has proposed the value chain as a tool for
identifying ways to create more customer value.
According to this model, every firm is a synthesis of activities performed to
design, produce, market, deliver, and support its product. Nine
strategically relevant activities— five primary and four support activities—
create value and cost in a specific business.

The primary activities are (1) inbound logistics, or bringing materials into
the business; (2) operations, or converting materials into final products; (3)
outbound logistics, or shipping out final products; (4) marketing, which
includes sales; and (5) service.

Specialized departments handle the support activities—(1) procurement,

(2) technology development, (3) human resource management, and (4) firm
infrastructure. (Infrastructure covers the costs of general management,
planning, finance, accounting, legal, and government affairs.)
 Core Business Processes
The firm’s success depends not only on how well each department performs its
work, but also on how well the company coordinates departmental activities to
conduct core business processes.
These processes include:
• The market-sensing process—gathering and acting upon information
about the market
• The new-offering realization process—researching, developing, and
launching new high-quality offerings quickly and within budget
• The customer acquisition process—defining target markets and
prospecting for new customers

• The customer relationship management process—building deeper

understanding, relationships, and offerings to individual customers

• The fulfillment management process—receiving and approving orders,

shipping goods on time, and collecting payment
Characteristics of Core Competencies

• A source of competitive advantage

• Applications in a wide variety of markets

• Difficult to imitate
 Holistic Marketing
Key management questions are:
•Value exploration —How a company identifies new value
opportunities?
•Value creation —How a company efficiently creates more
promising new value offerings?
•Value delivery —How a company uses its capabilities and
infrastructure to deliver the new value offerings more efficiently?
Holistic Marketing sees itself as integrating the value
exploration, value creation, and value delivery activities with the
purpose of building long-term, mutually satisfying relationships
and co-prosperity among key stakeholders.
 What is a Marketing Plan?

A marketing plan is the central instrument for

directing and coordinating the marketing effort. It
operates at a strategic and tactical level.
 Levels of a Marketing Plan

• Strategic • Tactical
• Target marketing • Product features
decisions • Promotion
• Value • Merchandising
proposition • Pricing
• Analysis of • Sales channels
marketing
• Service
opportunities
Corporate Headquarters’ Planning Activities

• Define the corporate mission

• Establish strategic business units (SBUs)

• Assign resources to each SBU

• Assess growth opportunities

 Good Mission Statements

• Focus on a limited number of goals

• Stress major policies and values

• Define major competitive spheres

• Take a long-term view

• Short, memorable, meaningful

 Major Competitive Spheres

• Industry

• Products

• Competence

• Market segment

• Vertical channels

• Geographic
Rubbermaid Commercial Products, Inc.

“Our vision is to be the Global Market Share

Leader in each of the markets we serve.
We will earn this leadership position by
providing to our distributor and end-user
customers innovative, high-quality, cost-
effective and environmentally responsible
products. We will add value to these products
by providing legendary customer service
through our Uncompromising Commitment
to Customer Satisfaction.”
 Motorola

“The purpose of Motorola is to honorably

serve the needs of the community by providing
products and services of superior quality at a
fair price to our customers; to do this so as to
earn an adequate profit which is required for
the total enterprise to grow; and by doing so,
provide the opportunity for our employees and
shareholders to achieve their personal
objectives.”
 eBay

“We help people trade anything on earth.

We will continue to enhance the online
trading experiences of all—collectors,
dealers, small businesses, unique item
seekers, bargain hunters, opportunity
sellers, and browsers.”
 Dimensions that Define a Business

• Customer groups
• Customer needs
• Technology
 Product Orientation vs. Market Orientation

Company Product Market

Missouri-Pacific We run a railroad We are a people-
Railroad and-goods
mover
Xerox We make copying We improve office
equipment productivity

Standard Oil We sell gasoline We supply energy

Columbia Pictures We make movies We entertain

people
 Characteristics of SBUs

• It is a single business or collection of

related businesses
• It has its own set of competitors

• It has a manager responsible for strategic

planning and profitability
 Assigning Resources to Each SBU
Several investment planning models provide ways to make
investment decisions as follows:
•The GE/McKinsey Matrix classifies each SBU by the extent of

its competitive advantage and the attractiveness of its industry.

Management can decide to grow, “harvest” or draw cash from,
or hold on to the business.
•Another model, BCG’s Growth-Share Matrix, uses relative

market share and annual rate of market growth as criteria to

make investment decisions, classifying SBUs as dogs, cash
cows, question marks, and stars.
 Assessing Growth Opportunities:
Ansoff’s Product-Market Expansion Grid

• Market penetration strategy

• Market development strategy

• Product development strategy

• Diversification strategy
 Business Unit
Strategic Planning
 Business Mission
• Each business unit needs to define its specific mission
within the broader company mission. Thus, a television-
studio-lighting-equipment company might define its mission
as, “To target major television studios and become their
vendor of choice for lighting technologies that represent the
most advanced and reliable studio lighting arrangements.
 SWOT Analysis

• Strengths

• Weaknesses

• Opportunities

• Threats
 Market Opportunity Analysis (MOA)
• Can the benefits involved in the opportunity be articulated
convincingly to a defined target market?
• Can the target market be located and reached with cost-
effective media and trade channels?
• Does the company possess or have access to the critical
capabilities and resources needed to deliver the customer
benefits?
• Can the company deliver the benefits better than any
actual or potential competitors?
• Will the financial rate of return meet or exceed the
company’s required threshold for investment?
 Goal Formulation
Once the company has performed a SWOT analysis, it can
proceed to goal formulation, developing specific goals for the
planning period. Goals are objectives that are specific with
respect to magnitude and time. Most business units pursue a
mix of objectives, including profitability, sales growth, market
share improvement, risk containment, innovation, and
reputation. The business unit sets these objectives and then
manages by objectives (MBO). For an MBO system to work,
the unit’s objectives must meet four criteria:
•Unit’s objectives must be hierarchical

•Objectives should be quantitative

•Goals should be realistic

•Objectives must be consistent

 Strategic Formulation:
Porter’s Generic Strategies
• Overall cost leadership. Firms work to achieve the lowest
production and distribution costs so they can underprice
competitors and win market share.
• Differentiation. The business concentrates on achieving
superior performance in an important customer benefit
area valued by a large part of the market.
• Focus. The business focuses on one or more narrow
market segments,gets to know them intimately, and
pursues either cost leadership or differentiation within the
target segment.
 Strategic Formulation :
Marketing Alliances
• Product or service alliances —One company licenses
another to produce its product, or two companies jointly
market their complementary products or a new product.
• Promotional alliances —One company agrees to carry a
promotion for another company’s product or service
• Logistics alliances —One company offers
logistical services for another company’s product.
• Pricing collaborations —One or more companies join in a
special pricing collaboration.
Marketing Plan Contents
 Executive summary
 Table of contents
 Situation analysis
 Marketing strategy
 Financial projections
 Implementation controls
Evaluating a Marketing Plan

 Is the plan simple?

 Is the plan specific?
 Is the plan realistic?
 Is the plan complete?
New Product
Development and
Product Life-Cycle
Strategies
Major Stages in New Product Development
Idea generation : systematic search for new
ideas

• Internal sources : brainstorming

• External sources : customers, competitors,

distributors and suppliers

Idea screening : identify good ideas and drop

poor ones

• Usefulness to consumers

• Good for company

• Fit with objectives and strategies

• Have the resources

• Add value
 Major Stages in New Product Development
Concept development and concept testing :
• Concept development : detailed version of the
product concept in
meaningful consumer terms

• Concept testing : testing new-product concepts

for consumer appeal

Marketing strategy : initial strategy for product

concept :

• Target market, positioning, and sales,

market share, and profit
goals

• Price, distribution, and marketing budget

• Strategy statement, long-run sales,

profit goals, and marketing mix
Major Stages in New Product Development

Business analysis : review of sales, costs, and

profit projections to determine if they meet
company objectives.

Product development : developing the

product concept into a physical product

• Large investment

• Building a prototype

• Testing for safety, durability, and

acceptability
Major 6 of 12in New Product Development
Stages
Test marketing : testing the product in
more realistic market settings

• Determine the target market profile

• Assess consumer acceptability,

trial, repeat purchase rate

• Evaluate trade reception and

distribution penetration

• Design effective media plans

 Standard test markets

 Controlled test markets

 Simulated test market

 Major Stages in New Product Development

Commercialization : introducing a new

product into the market

• Introduction timing

• Market rollout or full-scale

introduction

 Sequential product development

 Simultaneous (team-based) product

development
Introduction to Product Life Cycle Concepts
Products, services, and processes all have a life
cycle. For products, the life cycle begins when raw
materials are extracted or harvested. Raw materials
then go through a number of manufacturing steps
until the product is delivered to a customer. The
product is used, then disposed of or recycled.

Processes also have a life cycle. The life cycle

begins with planning, research and development.
The products and processes are then designed and
constructed. A process will have an active lifetime,
then will be decommissioned and, if necessary,
remediation and restoration may occur.
 Product Life - Cycle Template Gragh
It involves four distinct stages :

Introduction, Growth, Maturity, and Decline.

 Introduction stage : The product life-cycle

stage in which the new product is first
distributed and made available for
purchase.

 Growth stage : The product life-cycle stage

in which a product’s sales start climbing
quickly.

 Maturity stage : The stage in the product

life cycle in which sales growth slows or
levels off.

Modify the market, the product, and

the marketing mix.

 Decline Stage : The product life cycle stage

in which a product’s sales decline
 Relationship Between Sales and Profit
in Product Life - Cycle
Product Life Cycle (PLC) : The course of a product’s sales and profits over its life
Introduction Stage of the PLC

Sales Low sales

Costs High cost per customer

Profits Negative

Create product awareness

Marketing Objectives
and trial
Product Offer a basic product

Price Use cost-plus

Distribution Build selective distribution

Advertising Build product awareness among early

adopters and dealers
 Growth Stage of the PLC

Sales Rapidly rising sales

Costs Average cost per customer

Profits Rising profits

Marketing Objectives Maximize market share

Product Offer product extensions, service,

warranty
Price Price to penetrate market

Distribution Build intensive distribution

Advertising Build awareness and interest in the

mass market
 Maturity Stage of the PLC

Sales Peak sales

Costs Low cost per customer

Profits High profits

Marketing Objectives Maximize profit while defending

market share
Product Diversify brand and models

Price Price to match or best competitors

Distribution Build more intensive distribution

Advertising Stress brand differences and benefits

 Decline Stage of the PLC

Sales Declining
sales
Costs Low cost per
customer
Profits Declining
profits
Marketing Reduce expenditure and milk
Objectives the brand
Product Phase out weak
items
Price Cut price

Distributio Go selective: phase out

unprofitable
n
outlets
Advertising Reduce to level needed to retain
hard-core loyal customers
 Summary of PLC
Characteristics: Introduction Growth Maturity Decline
Sales Low Rapidly rising sales Peak Declining sales
Costs High cost Average cost Low cost Low cost
per customer per customer per customer per customer
Profits Negative Rising profits High profits Declining profits
Customers Innovators Early adopters Middle majority Laggards
Competitors Few Growing number Stable number Declining number
Marketing objectives:
Create product Maximize market Maximize profit & Reduce expenditure
awareness and trial share defend market share & milk brand
Strategies:
Product Offer basic product Offer product Diversify brand and Phase out weak
extensions, service models items
Price Use cost-plus Price to penetrate Price to match or Cut price
market best competitors
Distribution Build selective Build intensive Build more Selective; phase out
distribution distribution intensive distribution unprofitable outlets
Advertising Build awareness Build awareness & Stress brand Reduce to level
differences needed
early adopters/dealers interest mass market and benefits to retain hard-core
loyals
Sales promotion Heavy sales Reduce promotion Increase to encourage Reduce to minimal
promotion due
to entice trial to heavy demand brand switching level