Chapter 2 – Company & Marketing Strategy:

Partnering to Build Customer Relationships

Objective Outline:
 Explain companywide strategic planning & its 4 steps
 Discuss how to design business portfolio & develop growth
strategies
 Explain marketing’s role in strategic planning & how marketing
works with its partners to create & deliver customer value
 Describe the elements of a customer-driven marketing strategy &
mix & the forces that influence it
 List the marketing management functions, including the elements of
a marketing plan & discuss the importance of measuring & managing
return on marketing investment
Companywide Strategic Planning: Defining
Marketing’s Role
Strategic Planning
- the process of developing & maintaining a strategic fit between
the organization’s goals & capabilities & the changing marketing
opportunities

STEPS IN STRATEGIC PLANNING

Business unit,
product & other
Corporate Level functional strategies

Planning
Setting
Defining the Designing the marketing &
company
company business other
objectives &
mission portfolio functional
goals
strategies
 Defining a Market-Oriented Company
Mission
Mission Statement
- a statement of the organization’s purpose-what is wants to
accomplish in the larger environment
- it answers the questions: who we are? & what we do?
 Market-Oriented Business Definitions
Company Product-Oriented Market-Oriented
Definition Definition

Home Depot We sell tools & home repair & we empower consumers to
improvement items achieve the homes of their
needs
Kraft We make consumer food & We help people around the
drink world eat & live better
Nike We sell athletic shoes & apparel We bring inspiration &
innovation to every athlete* in
the world. (if you have a body,
you are an athlete)
Wal-Mart We run discount stores We deliver low prices everyday
& give ordinary folks the
chance to buy the same things
as rich people. “Save Money.
Live Better”
 Setting Company Objectives & Goals
Marketing strategies & programs must be developed to support marketing
objectives

Goals
- A goal is a broad aim you establish to start the business planning process.
- It is not something a company measures, according to the Invisible CMO
website.
-When a goal is discussed, there is no criteria established to measure
progress or to determine whether the goal has been achieved or not.
- Ex: to reduce expenses, to increase revenue, to increase productivity
 Setting Company Objectives & Goals
Objectives
- a specific milestone that you reach on the way to achieving your
goal
- must be SMART (Specific, Measurable, Attainable, Realizable &
Time-bounded)
- Ex:
 Designing the Business Portfolio
Business Portfolio
- the collection of businesses & products that make up the company
- business portfolio planning involves 2 steps:
1. Analyzing the current business portfolio
2. Developing strategies for growth & downsizing

Portfolio Analysis
- the process by which management evaluates the products & businesses
that make up the company
- the company will want to put down strong resources into its profitable
businesses & phase down or drop its weaker ones
 Step 1: Analyzing the Current Business
Portfolio
Step 1: Identify the key businesses that make up the
company called Strategic Business Units

SBUs
- it can be a company division, a product line within a division or
sometimes a single product or brand
- ex: San Miguel Corporation (San Miguel Brewery, Inc., Ginebra San
Miguel, Inc., San Miguel-Purefoods Co. Inc., San Miguel Packaging
Products & San Miguel Properties, Inc.)

Step 2: The company assesses the attractiveness of its various SBUs &
decides how much support each deserves. When designing a business a
portfolio, it’s a good idea to add & support products & businesses that
fit closely with the firm’s core philosophy & competencies
 Portfolio Planning Methods
The Boston Consultancy Group (BCG) Approach
- the company classifies all its SBUs according to the growth
share matrix

Growth Share Matrix

- a portfolio-planning method that evaluates a company’s SBUs in
terms of its market growth rate & relative market share. SBUs are
classified as stars, cash cows, question marks & dogs
The BCG Growth-Share Matrix
 Growth Share Matrix
Stars
- often need heavy investments to finance rapid growth. Eventually
their growth will slow down & they will turn into cash cows

Cash Cows
- established & successful SBUs need less investment to hold their
market share. They produce a lot of cash that the company uses to
pay its bills & to support other SBUs that need investment
 Growth Share Matrix
Question Marks
- requires a lot of cash to hold their share. Management has to
think hard which question marks it should try to build into stars &
which should be phased out

Dogs
- may generate enough cash to maintain themselves but do not
promise to be large sources of cash
 4 Strategies that can be pursued for each SBU
Build
- a company can invest more in the SBU in order to build its share

Hold
- it can invest just enough to hold the SBUs share at the current level

Harvest
- it can harvest the SBU, milking its short-term cash flow regardless of
the long-term effect

Divest
- by selling the SBU or phasing it out & using the resources elsewhere
 Problems with Matrix Approaches
 Can be difficult
 Time-consuming
 Costly to implement
 Management may find it difficult to define SBUs & measure market
share and growth
 Focuses on classifying current businesses but provide little advice
for future planning
 Step 2: Developing Strategies for
Growth & Downsizing
Companies need growth if they are to compete more effectively,
satisfy their stakeholders & attract top talent. The company’s
objective must be to manage “profitable growth”

One useful device for identifying growth opportunities is

product/market expansion grid
 Step 2: Developing Strategies for
Growth & Downsizing
Product/market expansion grid
- a portfolio-planning tool for identifying company growth opportunities
through market penetration, market development, product development
or diversification
 Product/Market Expansion Grid
Market Penetration
- a strategy for company growth by increasing sales of current
products to current market segments without changing the product
- more purchase & usage from existing customers
- gain customers from competitors
- convert non-users to users
 Product/Market Expansion Grid
Market Development
- a strategy for company growth by identifying & developing new
market segments for current company products
- new market segments
- new distribution channels
- new geographic areas
 Product/Market Expansion Grid
Product Development
- a strategy for company growth by offering modified or new products
to current market segments
- product modification via new features
- different quality levels
- creation or production or development of new product
 Product/Market Expansion Grid
Diversification
- a strategy for company growth through starting up or acquiring
businesses outside the company’s current products & markets
- Ex: JG Summit Holdings, Inc. (Parent company)
SBUs:Universal Robina Robinsons Land (including Robinsons Malls), Cebu
Pacific, United Industrial Corporation Limited (A Singapore listed
company), Robinsons Bank, JG Summit Petrochemical Corporation,
Philippine Long Distance Telephone Company (PLDT; Minority Stake)
Example:
14 years ago, Under Armour introduced its innovative line of
comfy, moisture-wicking shirts and shorts. Since then, it has
grown rapidly in its performance-wear niche.
Market penetration
 Under Armour offers an ever-increasing range of styles and colors in its
original apparel lines.
 It recently boosted its promotion spending in an effort to drive home its
“performance and authenticity” positioning.
 The company also added direct-to-consumer distribution channels,
including its own retail stores, Web site, and toll-free call center.
Market development
 the company recently
stepped up its emphasis on
women consumers
Product development
 In 2008, in an effort to transform itself from a niche
player to a mainstream brand
 Introduced high-performance running shoes
Diversification
 it could move into nonperformance leisurewear
 begin making and marketing Under Armour fitness
equipment
 Planning Marketing: Partnering to Build
Customer Relationships
Marketing plays a key role in the company’s strategic planning in several ways:
1. Marketing provides a guiding philosophy - the marketing concept
– that suggests that company strategy must revolve around building
profitable relationships with important consumer groups
2. Marketing provides inputs to strategic planners by helping to
identify attractive market opportunities & by assessing the
firm’s potential to take advantage of them
3. 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 thru CRM,
PRM, Value Chain & Value Delivery Network
 Partnering with other Company
Departments
Each company department can be thought of as a link in the company’s
internal value chain

Value Chain
- the series of internal departments that carry out value-creating activities to
design, produce, market, deliver & supports a firm’s products
 Partnering with other Company
Departments through Value Chain
Example of a Value Chain
 Partnering with others in the Marketing
System
In its quest to create customer value, company needs to look beyond its own
internal Value Chain & into the value chains of its suppliers, distributors &
its customers to improve the performance of the customer value delivery
network

Value Delivery Network

- the network made up of the company, suppliers, distributors & customers
who partner with each other to improve the performance of the entire
system

Supplier Distributor Customers

 MARKETING STRATEGY & THE MARKETING MIX
Marketing strategy
- the marketing logic by which the company hopes to create customer
value & achieve profitable customer relationships

- the company decides which customers it will serve (segmentation &

targeting) & how (differentiation & positioning)

- it identifies the total market, then divides it into smaller segments,

selects the most promising segments & focuses on serving & satisfying
the customers in segment
Managing Marketing Strategies & the Marketing Mix
Marketing is all about creating
customer value & profitable
customer relationships
Guided by the marketing
strategy, the company designs the
an integrated marketing mix
To find the best marketing
strategy & mix, the company
engages in marketing analysis,
planning, implementation &
control. Through these activities,
the company watches & adapts to
the actors & forces in the
marketing environment
 Customer-Driven Marketing Strategy
Each company must divide up the total market, choose the best
segments& design strategies for profitably serving chosen segments

This process involves:

1. Market segmentation
2. Market targeting
3. Differentiation
4. Positioning
 Customer-Driven Marketing Strategy
Marketing Segmentation
- dividing a market into distinct groups of buyers who have different
needs, characteristics or behaviors & who might require separate
products or marketing programs

Market Segments
- a group of consumers who respond in a similar way to a given set of
marketing effort

ex: consumers want the biggest, most comfortable car regardless of

price make up one segment
 Customer-Driven Marketing Strategy
Market Targeting
- the process of evaluating each market segment’s attractiveness &
selecting one or more segments to enter

Market Differentiation & Positioning

A product’s position is the place the product occupies relative to
competitor’s products in consumers’ minds

Positioning
- arranging for a product to occupy a clear, distinctive & desirable
place relative to competing products in the minds of the target
consumers
- the “why a shopper will pay a little more for your brand”
 Customer-Driven Marketing Strategy
Differentiation
- actually differentiating the market offering to create superior value
- once the company has chosen a desired position, it must take a
strong steps to deliver & communicate that position to target
consumers
 Developing an Integrated Marketing Mix
Marketing Mix
- the set of controllable tactical marketing tools – product, price,
place & promotion – that the firm blends to produce the response it
wants in the target market

Product
- the goods-and-services combination the company offers to the
target market

Price
- the amount of money customers must pay to obtain the product
 Developing an Integrated Marketing Mix
Place
- company activities that make the product available to target
consumers

Promotion
- activities that communicate the merits of the product & persuade
target customers to buy it
The 4Ps of the Marketing Mix
 Developing an Integrated Marketing Mix
The 4Ps might be better described as 4Cs

4Ps 4Cs
Product Customer solution
Price Customer cost
Place Convenience
Promotion Communication
 MANAGING THE MARKETING EFFORT
Being good to marketing in marketing management, companies also need
to pay attention to the management

Managing the marketing process requires the 4 marketing managing

functions:
1. Marketing Analysis
2. Marketing Planning
3. Marketing Implementation
4. Marketing Control
Managing the Marketing: Analysis, Planning,
Implementation & Control
 MANAGING THE MARKETING EFFORT
Marketing Analysis
- complete analysis of the company’s situation
- marketer should conduct a SWOT analysis

SWOT Analysis
- an overall evaluation of the company’s strengths (S), Weaknesses
(W), Opportunities (O) & Threats (T)
- the goal is to match the company strengths to attractive
opportunities in the environment while eliminating or overcoming
the weaknesses & minimizing the threats
SWOT Analysis
 MANAGING THE MARKETING EFFORT
Marketing Planning
- involves deciding on marketing strategies that will help the company
attain its overall strategic objectives
- a detailed marketing plan is needed for each business, product or
brand
- addresses the “what” & “why” of marketing activities
Contents of a Marketing Plan
 MANAGING THE MARKETING EFFORT
Marketing Implementation
- the process that turns marketing strategies & plans into marketing
actions in order to accomplish strategic marketing objectives
- addresses the “who”, “where”, “when” & “how” of marketing
activities
- many managers thinks that “doing things right” is implementation &
“doing the right things” is strategy
 MANAGING THE MARKETING EFFORT
Marketing Department Organization
- the company must design a marketing organization that can carry
out marketing strategies & plans

CMO (Chief Marketing Officer)

- heads up the company’s entire marketing operation & represents
marketing on the company’s top management team
- with equal footing with the CEO & CFO

Modern marketing departments can be arranged in several ways:

functional organization, geographic organization, product
management organization, market/customer management
organization
 MANAGING THE MARKETING EFFORT
Functional Organization
- the most common form of marketing organization
- it is headed by a functional specialist – sales manager, advertising
manager, marketing research manager, customer-service manager or
new-product manager

Geographic Organization
- a company that sells across the country & internationally
- its sales & marketing people are assigned to specific countries,
regions & district
 MANAGING THE MARKETING EFFORT
Product Management Organization
- a product manager develops & implements a complete strategy &
marketing program for a specific product or brand

Market/Customer Management Organization

- used by companies that sell one product line to many different types
of markets & customers that have different needs & preferences
- moving away from managing just product or brand profitability &
toward managing customer profitability & customer equity
 MANAGING THE MARKETING EFFORT
Marketing Control
- the process of measuring & evaluating the results of marketing
strategies, plans & taking corrective action to ensure that objectives
are achieved
- involves 4 steps:
1. Management sets specific marketing goals
2. Measures its performance in the marketplace
3. Evaluates the causes of any differences between
expected & actual performance
4. Management takes corrective action programs or
even changing the goals
 MANAGING THE MARKETING EFFORT
2 Types of Control:
1. Operating Control
- involves checking ongoing performance against the annual plan
& taking corrective action if necessary
- ensures that the company achieves the sales, profits, & other
goals set out in its annual plan

2. Strategic Control
- involves at looking whether the company’s basic strategies are
well matched to its opportunities
 MEASURING & MANAGING RETURN ON MARKETING
INVESTMENT
Marketing ROI (Return on Marketing Investment)
- the net return from a marketing investment divided by the costs of the marketing
investment
Marketing ROI is not only
measured in sales or
market share,
companies are now
using measures such as
customer satisfaction,
retention & equity.
These are more difficult
to measure but capture
both current & future
performance