Principles of Marketing

Eighteenth Edition, Global Edition

Chapter 2

Company and Marketing

Strategy Partnering to Build
Customer Engagement, Value,
and Relationships
Learning Objectives
2.1 Explain company-wide strategic planning and its four steps.
2.2 Discuss how to design business portfolios and develop growth
strategies.
2.3 Explain marketing’s role in strategic planning and how marketing
works with its partners to create and deliver customer value.
2.4 Describe the elements of a customer value-driven marketing strategy
and mix and the forces that influence them.
2.5 List the marketing management functions, including the elements of
a marketing plan, and discuss the importance of measuring and
managing marketing return on investment.
Rolex: Building Brand Equity through a Customer-
Driven Marketing Mix

“Rolex has established and maintained its pole position as the largest
luxury watch brand on the planet. At its core, Rolex doesn’t sell just
wristwatches, it sells a sentiment of achievement and belonging to an
exclusive club.”
Learning Objective 1
Explain company-wide strategic planning and its four steps.
 Company-Wide Strategic Planning (1 of 5)
Strategic planning is the process of developing and maintaining a strategic fit
between the organization’s goals and capabilities, and its changing marketing
opportunities.
Discussion Question
How might the strategic plan of the college or university influence decisions in the school’s
programs and offerings? How might it influence decisions in food services, dormitories,
executive education, and undergraduate versus graduate programs?

• 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.
Company-Wide Strategic Planning (2 of 5)

Figure 2.1 Steps in Strategic Planning

Company-Wide Strategic Planning (3 of 5)

The mission statement is the organization’s purpose; what it wants to accomplish in

the larger environment.
• Forging a sound mission begins with the following questions:

• What is our business?

• Who is the customer?
• What do consumers value?
• What should our business be?

• These simple-sounding questions are among the most difficult the company will ever have
to answer. Successful companies continuously raise these questions and answer them
carefully and completely.
Company-Wide Strategic Planning (3 of 5)

A mission statement should:

[Link] be myopic in product terms (Market-Oriented Business)

[Link] meaningful and specific
[Link] motivating
[Link] the company’s strengths
[Link] specific workable guidelines
[Link] be stated as making sales or profits
Company-Wide Strategic Planning (3 of 5)

C V S Health’s overall mission is to be a “pharmacy innovation company,”

one that is “helping people on their way to better health.” Its marketing
strategies and programs must support this mission.
Long Description:
The text corresponding to the advertisement
reads as follows:
• We are: A pharmacy innovation company
• Our strategy: Reinventing pharmacy
• Our purpose: Helping people on their path
to better health
• Our values: Innovation, collaboration,
caring, integrity, and accountability.
 Company-Wide Strategic Planning (4 of 5)
Product- versus Market-Oriented Business Definitions
Company Product-Oriented Definition Market-Oriented Definition

Starbucks We sell coffee and snacks. We sell “The Starbucks

Experience,” one that enriches
people’s lives in one moment, one
human being, one extraordinary cup
of coffee at a time.

Panera We sell fast-casual food in our We give customers “Food as it

restaurants. should be”: food that tastes good;
food that feels good; food that does
good things for them and the world
around them.
 Company-Wide Strategic Planning (5 of 5)
The company needs to turn its mission into detailed supporting
objectives for each level of management. Each manager should
have objectives and be responsible for reaching them.
Setting Company Objectives and Goals
• Business objectives
– Build profitable customer relationships
– Invest in research
– Improve profits
• Marketing objectives
– Increase market share
– Create local partnerships
– Increase promotion
Real Marketing 2.1: Airbnb’s Mission
Belong Anywhere–Don’t Stay There. Live There.
Learning Objective 2
Discuss how to design business portfolios and develop growth strategies.
Designing The Business Portfolio (1 of 8)
The business portfolio is the collection of businesses and products that make
up the company.
Portfolio analysis is a major activity in strategic planning whereby management
evaluates the products and businesses that make up the company.
The best business portfolio is the one that best fits the company’s strengths and
weaknesses to opportunities in the environment.
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.

Mars Inc. is not only the world’s number-one

candy maker; it is also a world-leading pet
nutrition and health-care company.
Designing The Business Portfolio (2 of 8)
Strategic business units can be a
• Company division
• Product line within a division
• Single product or brand

The company assesses the attractiveness of various SBUs and decides how
much support each deserves.
 Designing The Business Portfolio (3 of 8)
Analyzing The Current Business Portfolio
• Identify strategic business units (SBUs)
• Assess the attractiveness of its various SBUs
• Decide how much support each SBU deserves
When designing a business portfolio, it’s a good idea to add and support products and
businesses that fit closely with the firm’s core philosophy and competencies.

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 market or industry and the strength of the SBU’s
position in that market or industry.
Designing The Business Portfolio (4 of 8)
Figure 2.2 The BCG Growth-Share Matrix
It can pursue one of four strategies for each SBU.
• It can invest more in the business unit to build its share.
• Or it can invest just enough to hold the SBU’s share at the current
level.
• It can harvest the SBU, milking its short-term cash flow regardless of
the long-term effect.
• Finally, it can divest the SBU by selling it or phasing it out and using
the resources elsewhere
Designing The Business Portfolio (5 of 8)

Problems with Matrix Approaches

• Difficulty in defining S B U s and measuring market share and growth

• Time consuming
• Expensive
• Focus on current businesses, not future planning
Designing The Business Portfolio (6 of 8)
Figure 2.3 The Product/Market Expansion Grid
Designing The Business Portfolio (7 of 8)
Developing Strategies for Growth and Downsizing
Strategies for growth: To maintain its incredible growth, Starbucks has brewed up
an ambitious, multipronged growth strategy.
Designing The Business Portfolio (8 of 8)
Developing Strategies for Growth and Downsizing

Downsizing is when a company must prune, harvest, or divest businesses that

are unprofitable or that no longer fit the strategy.

A firm might want to abandon products or markets for a number of reasons.

• The firm may have grown too fast or entered areas where it lacks
experience.
• The market environment might change, making some products or markets
less profitable.
• Some products or business units simply age and die.
Learning Objective 3
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 (1 of 3)
Partnering with Other Company Departments
Value chain is a series of departments that carry out value creating activities to
design, produce, market, deliver, and support a firm’s products.
Planning Marketing: Partnering to Build Customer
Relationships (2 of 3)
Partnering with Other Company Departments

Marketing alone can’t create superior customer value. Under the company-
wide strategic plan, marketers must work closely with other departments to
form an effective internal company value chain.

The value chain: Walmart’s ability to help

you “Save Money. Live Better.” by
offering the right products at lower prices
depends on the contributions of people in
all of the company’s departments.
Planning Marketing: Partnering to Build
Customer Relationships (3 of 3)
Partnering with Others in the Marketing System

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.
Competition no longer takes place only between individual competitors.
Rather, it takes place between the entire value delivery network created by
these competitors.
Learning Objective 4
Describe the elements of a customer value-driven marketing strategy and mix and
the forces that influence them.
Marketing Strategy and the Marketing Mix (1 of 7)
 Marketing Strategy and the Marketing Mix (2 of 7)
Customer Value-Driven Marketing Strategy

Marketing strategy is the marketing logic by which the company hopes to create
customer value and achieve profitable customer relationships.

Marketing strategy involves deciding which customers the firm 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.
Marketing Strategy and the Marketing
Mix (3 of 7)
Customer Value-Driven Marketing Strategy

Market segmentation is the division of a market into distinct groups of buyers who
have different needs, characteristics, or behaviors and who might require separate
products or marketing mixes.

Market segment is a group of consumers who respond in a similar way to a given

set of marketing efforts.
Marketing Strategy and the Marketing
Mix (4 of 7)
Customer Value-Driven Marketing Strategy

Market targeting is the process of evaluating each market segment’s

attractiveness and selecting one or more segments to enter.
Market positioning is the arranging for a product to occupy a clear, distinctive, and
desirable place relative to competing products in the minds of target consumers.
Differentiation begins the positioning process.
Marketing Strategy and the Marketing
Mix (5 of 7)
Customer Value-Driven Marketing Strategy

Positioning is arranging Positioning: Adidas positions itself

for a product to occupy a with “Nothing is impossible.” This
clear, distinctive, and simple statement provides the
desirable place relative to backbone for its marketing strategy.
competing products from
competing brands and give
them the greatest
advantage in their target
markets.
Marketing Strategy and the Marketing Mix (6 of 7)
Developing an Integrated Marketing Mix
Marketing mix is the set of controllable, tactical marketing tools—product,
price, place, and promotion—that the firm blends to produce the response it
wants in the target market.
Marketing Strategy and the Marketing Mix (7 of 7)
Figure 2.5 The Four Ps of the Marketing Mix
 Marketing Strategy and the Marketing Mix
Developing an Integrated Marketing Mix

It is interesting to ask how to make the 4Ps more customer centric. This
leads to a redefining of the 4Ps to the 4Cs as follows:

•Product—Customer solution
•Price—Customer cost
•Place—Convenience
•Promotion—Communication
Learning Objective 5
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

Managing the marketing process requires the four marketing management

functions shown in Figure 2.6—analysis, planning, implementation, and control.
Managing the Marketing Effort (1 of 4)
Figure 2.6 Manging Marketing: Analysis, Planning, Implementation, and Control
Managing the Marketing Effort (3 of 4)
Market Planning—Parts of a Marketing Plan
• Executive summary
• Marketing situation
• Threats and opportunities
• Objectives and issues
• Marketing strategy
• Action programs
• Budgets
• Controls
Managing the Marketing Effort (4 of 4)
Marketing Implementation

• Turning marketing strategies and plans into marketing

actions to accomplish strategic marketing objectives
• Addresses who, where, when, and how
Many managers think that “doing things right” (implementation) is as
important as, or even more important than, “doing the right things”
(strategy).
Managing the Marketing Effort
Marketing Department Organization

Functional organization

Geographic organization

Product management organization

Market or customer management

 Functional Organization

 Modern marketing departments can be arranged in several

ways. The most common form of marketing organization is
the functional organization, under which different marketing
activities are headed by a functional specialist—a sales
manager, an advertising manager, a marketing information
manager, a customer service manager, or a new product
manager
 Geographic organization

A company that sells across the country or

internationally often uses a geographic
organization, assigning sales and marketing
people to specific countries, regions, and
districts
 Product management organization

 Companies with many very different products or brands

often create a product management organization.
 Market or customer management

 For companies that sell one product line to many different types of
markets and customers who have different needs and preferences, a
market or customer management organization might be best.

 Large companies that produce many different products flowing into

many different geographic and customer markets usually employ some
combination of the functional, geographic, product, and market
organization forms.
 Managing the Marketing Effort
Marketing Control
Controlling
 evaluating of results
 taking of corrective action to achieve objectives
 Operating control: involves checking ongoing performance against the
annual plan and taking corrective action when necessary. Its purpose is
to ensure that the company achieves the sales, profits, and other goals
set out in its annual plan. It also involves determining the profitability of
different products, territories, markets, and channels.
 Strategic control: involves looking at whether the company’s basic
strategies are well matched to its opportunities. Marketing strategies
and programs can quickly become outdated, and each company should
periodically reassess its overall approach to the marketplace.
Measuring and Managing Return on Marketing
Investment (1 of 2)
Return on Marketing Investment (Marketing ROI)

• Net return from a marketing investment divided by the costs of the marketing
investment
• Measurement of the profits generated by investments in marketing activities
Measuring and Managing Return on Marketing
Investment (2 of 2)
Figure 2.8 Marketing Return on Investment