From reading the last chapter you should understand the important role that marketing plays in the success of our free market economy and in every agribusiness. Now let’s take the next step, and learn how to manage marketing within the confines of the firm.
Just as marketing has evolved in the general economy, its mission has also changed within the firm in response to new market situations. Until the 1960s when the supply of most items began to dominate demand, the major thrust of marketing work was about how to move things quickly, efficiently, and at lowest cost from here to there. Agricultural marketing focused heavily on the selection of modes of transportation—barge versus rail—and where to build warehouses and grain elevators so as to minimize the total cost of bring the product to the seller. Demand didn’t matter since you could sell everything you had for sale. Demand seemed endless. As the 1960s closed, people began to realize they had more stuff to sell than anybody wanted. Marketing classes responded by teaching people how to sell. The rational was that with enough effort you could “sell eggs to a chicken.” It soon became apparent that while this hard sell approach might work in the short run, it was not a long run solution to the problem of overproduction. Around this time Theodore Leavitt published an article in the Harvard Business Review that called for a new approach to marketing. Leavitt called it the marketing approach you heard about in the last chapter. Rather than starting the marketing effort after the product is produced, Leavitt proposed starting with finding out what customers wanted and then working backward to design the product. It is the best solution in a world where supply exceeds the demand for just about everything.
With the adoption of the marketing approach marketing gives direction to everything the firm does. It also reinforces the value of looking at business management through the lens of the four functions of management approach. Let’s see what happens when we do this. You learned earlier that the planning management function’s objective is put the firm in the best possible position relative to future business conditions and consumer needs. What better way to realize this objective than to employ the marketing approach to see what consumers really want before beginning production. What you learn from this research will help you sharpen the definition of the firm’s purpose (what the firm is going to), and the firm’s objective (how it is going to gain its competitive edge by doing things better, faster, quicker than its competitors). These insights can help the business shape its organizational structure, by helping it identify the critical tasks that must be done for the firm to be successful and seeing that they are given prominence so the organization delivery its products with maximum efficiency and effectiveness. Again, what you learn about consumer wants helps managers design their feedback mechanism (the control function) so they capture the performance of the key items that consumers are most interest in. If all the other steps are done right, it up to management to lead (the directing function) all the employees in profitably satisfying the consumer needs using the you product sell. Thus, what you learn about customer needs from employing the marketing approach gives direction and urgency to everything the firm does to fulfill that need.
Up to now we have taken a big picture perspective at what happens in marketing within a firm. Now it is time to take a more detailed look at what it takes to successfully market a single product. This process is made easier when we employ the idea of the four Ps of marketing—product, price, place, and promotion. The four Ps are things over which managers can exercise control and adjust quickly to fit each situation so they can maximize the chances of making a sale. The goal is to offer just the right product, at just the right price, in just the right place, and with just the right advertising (promotion) to satisfy each customer. Making the sale is all about putting together that perfect set of Ps that your customers cannot resist. You can only do this if you really understand what your customers really want. But what customers really want is always changing. This is why this assessment of customer needs is a never ending activity.
The four Ps of marketing are also called the marketing mix.
At the center of marketing management is the business plan. It is your detailed description of how your firm is going to succeed. It is more than just a checklist of things to do. It tells you, your employees, and the your customers a lot about you and your approach to business. As we said earlier people---both employees and customers---are a vital parts of this process. In today’s booming economy with low unemployment rates people have choices about where they buy things and where they work. They like to do both with organizations whose values match their own. Businesses that operate with integrity and honor have any easier time attracting and keeping good employees and customers. This is why we put values at the start of the business plan. Our next step is define who our customers are, and what unmet need we are going to fill for them.
Once the unmet customer need is defined, we need to decide how we are going to be fill that need. This well defined unmet consumer is the firm’s purpose---what the firm is going to do.
The next step in this process is to define how the firm is going to fill that need. This is the firm’s objective. The objective defines the firm’s sustainable competitive advantage---what it is going to do that is better, faster, quicker, and cheaper than any of its competitors at filling this unmet customer need. The objective is sustainable when what it does is not easily or quickly copied by competitors. With these steps in place, you have the basis for a successful business venture. Now it is time to flesh out the details of your business vision so you can transform it to an operating concern. The first step in that transformation is to develop a marketing plan.
The marketing plan is comprehensive, step-by-step plan that explains to managers, employees, customers, suppliers, and everyone else just how you are going to achieve your success. Each of the four sections of the marketing deals with a key part of this plan. The first section descriptions the current market situation Next section analyzes the situation to see what opportunities exist. The third section is devoted to laying out the details of just how your plan will be successful The last two sections describe the financial implications of your plan and detail how you are going to monitor your progress.
Analysis of the current situation includes review what is going on in this market today and what is likely to happen in the future Timing is everything in business. Opening a small grocery store in rural town that is across the street from a brand new Wal-Mart Superstore is more of a long shot than doing it at the end of town that is just opening a new major housing subdivision with no other food stores for miles. Keeping up with the actions your local planning and zoning board in town may be your first priority since this is where you will find out who your newest competitors might be. The vigilance is needed to understand the impact of the national economy only our business.
Once you have collected all the information you need about the current market situation it is time to systematically analyze what you have found to see where you can be successful. This means matching your analysis of what is going on outside the firm with its internal situation so see where it is most likely to make the most money. A key part of the process is transforming this marketing vision into measurable and attainable financial and marketing objectives. For example, if your original financial goal was to make a 30 percent annual return on your invested capital, selling computer software makes a whole lot more sense than going into the agri-food business. Let’s look more closely at the this analysis process by examining the TOWS analysis—External Threats and Opportunities facing the firm and Internal Strengths and Weaknesses facing the firm.
This TOWS Analysis Grid makes it easier to analyze each potential market strategy by forcing it into one of the four boxes—SO, WO, ST, or WT. The two columns across the top group business separates strategies into those that play to firm’s internal strengths (raise its return on invested capital, ROIC) or weaknesses (lower its return on invested capital). The two horizontal rows separates potential strategies into those that when they interact with the outside world that will either increase its ROIC (Opportunities) or reduce ROIC (Threats). Ideally a new product or strategy will play to a firm’s strength and allow it be able to capitalize on an opportunity presented by the external market. A goofy example might be you are the world’s largest processor of prune juice and have exclusive contracts with prune growers all over world, when it is discovered that prune juice is the perfect cure for dandruff. The point here is scrutinize each potential strategy in this type of framework so you can appreciate its implications before you do anything.
This part of the marketing plan is more familiar to most of us. It deals with the particulars in the marketing plan. Target Market—which group of consumers is our product designed to appeal to the most. Product Positioning---what should consumers think of when they first see our product. Product Line---how many variations of our product should we sell And so on. We will talk more about these when we get to chapter 7 on staying competitive.
This seems like a lot of work. The reality is that agribusinesses that perform this type of analysis on everything they do make more profits because they are more efficient and effective in everything they do. This is reflected in their return on invested capital (ROIC). Their success starts with a clearly defined business purpose and a carefully crafted business objective that gives them a sustainable competitive advantage.
In addition that have a carefully prepared marketing that includes an effective marketing mix of the right product with the right price being sold in the right place with the right promotion To fit the market situation
One of the biggest changes in marketing management in recent years has been the shift from mass marketing to target marketing. Products are no long designed to fit some general customer profile and then mass produced so everyone gets the same thing. Everyone is happy with the product but not totally happy because it does fit you exactly. A good example are one size fits all socks. They fit everyone, but not exactly. Target marketing—also called mass customization—give us the ability to develop products that do fit your exact specifications and at prices most of us can afford. In may cases we are willing to pay a higher price to get greater satisfaction from what we buy. Fitted socks are more expensive, but we are willing to pay more because they give us greater satisfaction. The end of this chapter covers three ways to estimate the size of potential product markets. This calculation is another vital part of the economic valuation of products and strategies that needs to be in the marketing plan.
Changing Role of Marketing within
Focus on lower cost & physical efficiency
Marketing shift from physical efficiency to selli
Adoption of marketing approach
Marketing and Four Functions of
4 Ps of Marketing
4 Ps of marketing
Combination of 4 controllable variables
The Business Plan
How to accomplish its purpose
current market situation
opportunities and issues
I. Current Market Situation
II. Opportunities and Issues Analysis
~Opportunities & Threats outside firm
~Strengths & Weaknesses within firm
~Financial & Marketing Objectives
III. Marketing Strategy
~ID Target Market ~Sales Promotion
~Product Positioning ~Res. & Develop
~Product Line ~Market Research
~Sales Force ~Level of Service
~Advertising—when and where
Benefits of A Good Marketing Plan
Firms achieve higher rates of return on invested
capital when they have
--A clear business purpose
--A clear business objective
that is reflected in a well-thought-out marketing
an effective marketing mix
Benefits of A Good Marketing Plan
Analyzing Market Potential
Transition mass to target marketing
Estimating market potential