MKTG 301: PRINCIPLES OF MARKETING Jonathan Barran BBA,MBA,DBA

(Cand.)
 CHAPTER 2
COMPANY AND MARKETING STRATEGY-
PARTNERING TO BUILD CUSTOMER ENGAGEMENT ,VALUE AND
RELATIONSHIP
Learning Objectives
Explain company-wide strategic planning and its four steps.
Discuss how to design business portfolios and develop growth strategies.
Explain marketing’s role in strategic planning and how marketing works with its partners to create
and deliver customer value.
Describe the elements of a customer value–driven marketing strategy and mix and the forces that
influence them.
List the marketing management functions, including the elements of a marketing plan, and discuss
the importance of measuring and managing marketing return on investment.
✔ EXPLAIN COMPANY-WIDE STRATEGIC PLANNING AND ITS FOUR
STEPS.
COMPANY-WIDE STRATEGIC PLANNING: DEFINING MARKETING’S ROLE

LEARNING OBJECTIVE 2-1

WHAT IS
STRATEGIC
PLANNING ?
 WHAT IS STRATEGIC
PLANNING ?

Strategic planning sets the stage for the rest of

planning in the firm. Companies usually prepare
annual plans, long-range plans, and strategic plans.
The annual and long-range plans deal with the
company’s current businesses and how to keep them
going. In contrast, the strategic plan involves
adapting the firm to take advantage of
opportunities in its constantly changing environment.

Strategic planning is the process of developing and

maintaining a fit between the organization’s goals
and capabilities and its changing marketing
opportunities.
FOUR STEPS IN STRATEGIC PLANNING
 DEFINING A MARKET- ORIENTED MISSION

❑A mission statement is a statement of the organization’s purpose—what it wants to

accomplish in the larger environment. A clear mission statement acts as an “invisible hand”
that guides people in the organization.

❑A market–oriented mission statement defines the business in terms of satisfying basic

customer needs.
COMPANY MISSION
STATEMENTS
SETTING COMPANY OBJECTIVES AND GOALS

A company needs to turn its broad mission into detailed supporting objectives for
each level of management. Each manager should have objectives and be responsible
for reaching them.

Business Objectives Marketing Objectives

•Build Profitable customer relationships • Increase market share

•Invest in research •Create local partnerships
•Improve profits •Increase Promotion
 CVS company’s motto: “Health is everything.”
CVS Health’s broad mission leads to a hierarchy of objectives, including business objectives and marketing
objectives. CVS Health’s overall business objective is to increase access, lower costs, and improve the
quality of care. It does this through the products it sells at its retail pharmacies and by taking a more
active role in overall healthcare management through research, consumer outreach and education, and
support of health-related programs and organizations.
However, such activities are expensive and must be funded through improved profits, so improving profits
becomes another major objective for CVS Health.
✔ DISCUSS HOW TO DESIGN BUSINESS PORTFOLIOS AND
DEVELOP GROWTH STRATEGIES.
DESIGNING THE BUSINESS PORTFOLIO

LEARNING OBJECTIVE 2-2

 DESIGNING THE BUSINESS PORTFOLIO

❑The Business portfolio is the collection of businesses and products that

make up the company.
Business portfolio planning involves two steps:
First, the company must analyze its current business portfolio and
determine which businesses should receive more, less, or no investment.
Second, it must shape the future portfolio by developing strategies for
growth and downsizing.
❑ Portfolio analysis is a major activity in strategic planning whereby
management evaluates the products and businesses that make up the
company.

A company will want to put strong resources into its more profitable
businesses and phase down or drop its weaker ones. Management’s first step
is to identify the key businesses that make up the company, called strategic
business units (SBUs).

Strategic Business Units can be:

• Company division
• Product line within a division
• Single product or brand
 The purpose of strategic planning is to find ways in which the
company can best use its strengths to take advantage of
attractive opportunities in the environment. For this reason,
most standard portfolio analysis methods evaluate SBUs on
two important dimensions: the attractiveness of the SBU’s
STEPS IN market or industry and the strength of the SBU’s position in
that market or industry. The best-known portfolio-planning
ANALYZING method was developed by the Boston Consulting Group, a
THE leading management consulting firm.
CURRENT
BUSINESS
PORTFOLIO
 Stars. Stars are high-growth, high-share businesses or
products. They often need heavy investments to finance
their rapid growth. Eventually their growth will slow down,
and they will turn into cash cows.
Cash cows. Cash cows are low-growth, high-share
businesses or products. These established and successful
SBUs need less investment to hold their market share.
Thus, they produce a lot of the cash that the company uses
to pay its bills and support other SBUs that need
investment.
Question marks. Question marks are low-share business
units in high-growth markets. They require a lot of cash to
hold their share, let alone increase it. Management has to
think hard about which question marks it should try to build
into stars and which should be phased out.
Dogs. Dogs are low-growth, low-share businesses and
products. They may generate enough cash to maintain
themselves but do not promise to be large sources of cash.

BCG/
GROWTH SHARE MATRIX
 CONTINUED……

Problems with Matrix Approaches:

The BCG and other formal methods revolutionized strategic planning. However, such centralized
approaches have limitations: They can be difficult, time consuming, and costly to implement.
Management may find it difficult to define SBUs and measure market share and growth. In addition,
these approaches focus on classifying current businesses but provide little advice for future planning.
 DEVELOPING STRATEGIES FOR GROWTH
AND DOWNSIZING

Beyond evaluating current businesses, designing the business

portfolio involves finding businesses and products the company
should consider in the future. Companies need growth if they are to
compete more effectively, satisfy their stakeholders, and attract top
talent. At the same time, a firm must be careful not to make growth
itself an objective. The company’s objective must be to manage
“profitable growth.”
Marketing has the main responsibility for achieving profitable
growth for the company.
Marketing needs to identify, evaluate, and select market
opportunities and lay down strategies for capturing them.
THE PRODUCT/
MARKET Product/Market expansion grid - A portfolio-planning tool for identifying
company growth opportunities through market penetration, market
EXPANSION development, product development, or diversification.
Market penetration - Company growth by increasing sales of current
GRID products to current market segments without changing the product.
Market development - Company growth by identifying and developing
new market segments for current company products.
Product Development - Company growth by offering modified or new
products to current market segments.
Diversification - Company growth through starting up or acquiring
businesses outside the company’s current products and markets.
Downsizing- The reduction of the business portfolio by eliminating
products or business units that are not profitable or that not profitable or
that no longer fit the company’s overall strategy.
✔ EXPLAIN MARKETING’S ROLE IN STRATEGIC PLANNING AND
HOW MARKETING WORKS WITH ITS PARTNERS
TO CREATE AND DELIVER CUSTOMER VALUE.
PLANNING MARKETING: PARTNERING TO BUILD CUSTOMER RELATIONSHIPS

LEARNING OBJECTIVES 2-3

PLANNING MARKETING
PARTNERING TO BUILD CUSTOMER RELATIONSHIPS

Marketing plays a key role in the company’s strategic planning in several ways.
First, marketing provides a guiding philosophy—the marketing concept—that
suggests the company strategy should revolve around creating customer value and
building profitable relationships with important consumer groups. Second,
marketing provides inputs to strategic planners by helping to identify attractive
market opportunities and assessing the firm’s potential to take advantage of them.
Finally, within individual business units, marketing designs strategies for reaching
the unit’s objectives. Once the unit’s objectives are set, marketing’s task is to help
carry them out profitably.

Value Chain is a series of internal departments that carry out value-creating

activities to design, produce, market, deliver, and support a firm’s products.
Value delivery network is made up of the company, suppliers, distributors, and
ultimately customers who partner with each other to improve performance of the
entire system.
A company’s strategic plan establishes what kinds of businesses the company will
operate and its objectives for each. Then, within each business unit, more detailed
planning takes place. The major functional departments in each unit—marketing,
finance, accounting, purchasing, operations, information systems, human resources, and
others—must work together to accomplish strategic objectives.
✔ DESCRIBE THE ELEMENTS OF A CUSTOMER VALUE–DRIVEN
MARKETING STRATEGY AND MIX AND THE FORCES THAT
INFLUENCE THEM.
MARKETING STRATEGY AND THE MARKETING MIX

LEARNING OBJECTIVE 2-4

MARKETING STRATEGY AND THE MARKETING MIX

Marketing Strategy—the marketing logic by which the company hopes to create this
customer value and achieve these profitable relationships. The company decides which
customers it will serve (segmentation and targeting) and how (differentiation and
positioning). It identifies the total market and then divides it into smaller segments, selects the
most promising segments, and focuses on serving and satisfying the customers in these
segments.
Guided by marketing strategy, the company designs an integrated marketing mix made up of
factors under its control—product, price, place, and promotion (the four Ps). To find the best
marketing strategy and mix, the company engages in marketing analysis, planning ,
implementation, and control. Through these activities, the company watches and adapts to the
actors and forces in the marketing environment. We will now look briefly at each activity. In
later chapters, we will discuss each one in more depth.
MARKETING STRATEGY AND THE MARKETING MIX
CUSTOMER VALUE–DRIVEN MARKETING STRATEGY

The key to succeeding in a today’s competitive marketplace means customers must be

CUSTOMER CENTRED.
Companies know that they cannot profitably serve all consumers in each market—at least not
all consumers in the same way. There are too many kinds of consumers with too many kinds
of needs. Most companies can serve some segments better than others. Thus, each company
must divide up the total market, choose the best segments, and design strategies for profitably
serving chosen segments.
This process involves :
•Market Segmentation
•Market Targeting
• Differentiation
• Positioning.
MARKETING STRATEGY AND THE MARKETING MIX
CUSTOMER – CENTERED MARKETING STRATEGY

oMarket Segmentation - The market consists of many types of consumers, products, and
needs. The marketer must determine which segments offer the best opportunities. Consumers
can be grouped and served in various ways based on geographic, demographic,
psychographic, and behavioral
oMarket Segment - consists of consumers who respond in a similar way to a given set of
marketing efforts. In the car market, for example, consumers who want the biggest, most
comfortable car regardless of price make up one market segment. Consumers who care mainly
about price and operating economy make up another segment. It would be difficult to make
one car model that was the first choice of consumers in both segments. Companies are wise to
focus their efforts on meeting the distinct needs of individual market segments.
oMarket Targeting – the process of evaluating each market segment’s attractiveness and
selecting one or more segments to enter.
oMarketing positioning – the arranging for a product to occupy a clear, distinctive, desirable
place relative to competing products in the minds of the target consumer.
MARKETING STRATEGY AND THE MARKETING MIX
MARKET DIFFERENTIATION AND POSITIONING

Positioning- is arranging for a product to occupy a

clear, distinctive, and desirable place relative to
competing products in the minds of target consumers.
Marketers plan positions that distinguish their
products from competing brands and give them the
greatest advantage in their target markets.

Therefore, effective positioning begins with

differentiation—differentiating the company’s market
offering to create superior customer value. Once the
company has chosen a desired position; it must take
strong steps to deliver and communicate that position
to target consumers. The company’s entire marketing
program should support the chosen positioning
strategy.
 MARKETING STRATEGY AND THE MARKETING MIX
DEVELOPING AN INTEGRATED MARKETING MIX

The marketing mix is the set of tactical marketing tools that the firm blends to produce the response it wants in
the target market. The marketing mix consists of everything the firm can do to engage consumers and deliver
customer value. The many possibilities can be collected into four groups of variables.

The four Ps.

❖ Product means the goods-and-services combination the company offers to the target market. Thus, a Ford Escape consists of nuts and bolts, spark
plugs, pistons, headlights, and thousands of other parts. Ford offers several Escape models and dozens

of optional features. The car comes fully serviced and with a comprehensive warranty that is as much a part of the product as the tailpipe.

❖ Price is the amount of money customers must pay to obtain the product. For example, Ford calculates suggested retail prices that its dealers might
charge for each Escape. But Ford dealers rarely charge the full sticker price. Instead, they negotiate the price with each customer, offering discounts,
trade-in allowances, and credit terms. These actions adjust prices for the current competitive and economic situations and bring them into line with
the buyer’s perception of the car’s value.

❖ Place includes company activities that make the product available to target consumers. Ford partners with a large body of independently owned
dealerships that sell the company’s many different models. Ford selects its dealers carefully and strongly supports them. The dealers keep an
inventory of Ford automobiles, demonstrate them to potential buyers, negotiate prices, close sales, and service the cars after the sale.

❖ Promotion refers to activities that communicate the merits of the product and persuade target customers to buy it. Ford spends nearly $2.5 billion
each year on U.S. advertising to tell consumers about the company and its many products.11 Dealership salespeople assist potential buyers and
persuade them that Ford is the best car for them. Ford and its dealers offer special promotions—sales, cash rebates, and low financing rates—as
added purchase incentives. And Ford’s Facebook, Twitter, YouTube, Instagram, and other social media platforms engage consumers with the brand
and with other brand fans.
✔ LIST THE MARKETING MANAGEMENT FUNCTIONS, INCLUDING
THE ELEMENTS OF A MARKETING PLAN,
AND DISCUSS THE IMPORTANCE OF MEASURING AND
MANAGING MARKETING RETURN ON INVESTMENT.

MANAGING THE MARKETING EFFORT AND MARKETING RETURN ON INVESTMENT

LEARNING OBJECTIVE 2-5

 MANAGING THE MARKETING
EFFORT
MANAGING THE MARKETING EFFORT

Managing the marketing process requires the

five marketing management functions analysis,
planning, implementation, organization, and
control. The company first develops
company-wide strategic plans and then
translates them into marketing and other plans
for each division, product, and brand. Through
implementation and organization, the company
turns the plans into actions. Control consists of
measuring and evaluating the results of
marketing activities and taking corrective
action where needed.
 SWOT Analysis:
Strengths (S),
Weaknesses (W),
Opportunities (O),
Threats (T)

MANAGING THE MARKETING EFFORT

MARKETING ANALYSIS – SWOT ANALYSIS

 Marketing planning involves choosing
marketing strategies that will help the
company attain its overall strategic
objectives.

A detailed marketing plan is needed

MANAGING THE MARKETING for each business, product, or brand.
EFFORT

MARKET PLANNING – PARTS OF A MARKETING

PLAN
What does a marketing plan look like?

Our discussion focuses on product or

brand marketing plans.
MARKET PLANNING – PARTS OF A MARKETING
PLAN
 As the company expands, a marketing department
emerges to plan and carry out marketing activities.
MANAGING THE In large companies, this department contains many
specialists—product and market managers, sales
MARKETING managers and salespeople, market researchers, and
EFFORT
MARKETING DEPARTMENT ORGANIZATION
advertising and social media experts, among
others.
 MARKETING DEPARTMENT ORGANIZATION –
CONTINUED…
Modern marketing departments can be organized in various ways. Below are the most
common types of marketing structures:

● Functional Organization: Marketing activities are led by specialists in areas like sales
manager, advertising manager, or customer service manager.
● Geographic Organization: Companies operating in multiple regions assign sales and
marketing teams to specific areas.
● Product Management Organization: Firms with a wide range of products create
teams focused on individual products or brands.
● Market/Customer Management Organization: For businesses selling one product
line to diverse markets, teams focus on different customer segments.
Larger companies often use a combination of these approaches. Recently, there’s been a
shift toward customer management, focusing on customer profitability and relationships
rather than just product or brand profitability.
MEASURING
AND ❖ Marketing managers must ensure that their marketing dollars
are being well spent.
MANAGING In the past, many marketers spent freely on big, expensive
RETURN ON marketing programs and flashy advertising campaigns, often
without thinking carefully about the financial returns on their
MARKETING spending. Their goal was often a general one—to “build
brands and consumer preference.”
INVESTMENT They believed that marketing produces intangible creative
(ROI) outcomes, which do not lend themselves readily to measures of
productivity or return.
Marketing Return on Investment (or MARKETING ROI).

Marketing ROI is the net return from a marketing investment divided by the costs of
the marketing investment. It measures the profits generated by investments in
marketing activities.

Marketing ROI can be difficult to measure. In measuring financial ROI, both the R and
the I are uniformly measured in dollars.

For example, when buying a piece of equipment, the productivity gains resulting from
the purchase are straightforward. Yet, however, there is no consistent definition of
marketing ROI. For instance, returns such as engagement, advertising, and
brand-building impact aren’t easily put into dollar returns.

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

measures, such as brand awareness, sales, or market share. Many companies are
assembling such measures into marketing dashboards—meaningful sets of marketing
performance measures in a single display used to monitor strategic marketing
performance
Reference
Kotler, P & Armstrong, G
(2019). Principles of Marketing.
New York: Pearson 17th edn.
QUIZ DAY!!