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Lecture 5 Developing Marketing Strategies & Plan

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  • 1. Lecture 5 Developing Marketing Strategies & Plan; Prepared by Zaved Mannan 1 | P a g e Lecture 5 Developing Marketing Strategies and Plans Objectives At the completion of this lecture, you should be able to: • describe the value delivery process; • describe how marketing affects customer value; • explain the term ‘strategic’ planning; • appreciate the strengths and weaknesses of the business portfolio techniques; • distinguish the differences between strategic and business unit planning; and • understand the components of a successful marketing plan. Commentary Marketing and Customer Value As we discovered in the previous lecture, marketing involves satisfying consumers’ needs and wants, and customers seek to maximise value in their transactions. The traditional view of marketing was that the firm makes something and then sells it. In this approach, marketing tasks are seen to be performed only in the second half of the process. A more recent view of marketing is where marketing is involved in choosing or identifying values(s), then involved in providing and delivering these values, and , finally, in communicating these superior values to consumers. Essential Reading Textbook: Kotler, et al. (2009), Chapter 2 Reading 5.1: Comasaru, C., Day, J., & Lee, S. (1996). Developing a marketing plan for lemonhead. Management Decision, 34(8), 17-24.
  • 2. Lecture 5 Developing Marketing Strategies & Plan; Prepared by Zaved Mannan 2 | P a g e The Value Delivery Process • Marketing involves satisfying consumers’ needs and wants, and customers seek to maximise value in their transactions. • See fig 2.1, p. 34 • Traditional view: Make the product & sell the product. • Recent view: choosing or identifying values(s), then involved in providing and delivering these values, and finally, in communicating these superior values to consumers.
  • 3. Lecture 5 Developing Marketing Strategies & Plan; Prepared by Zaved Mannan 3 | P a g e The process can be divided into three phases: • Choosing the value: The marketer must segment the market, select the appropriate market target, and develop the offering’s value positioning. • Providing the value: Marketer must determine specific product features, prices, and distributions. • Communicating the value: The sales force, sales promotion, advertising, and other communication tools to announce and promote the product. Each of these value phases has cost implications. Value Chain The generic value chain proposed by Michel Porter is a useful tool for companies to determine ways to create more customer value. Porter argues that there are nine strategically relevant activities that create value and costs in an organization. As outlined in Kotler et al. (2009) these can be classified into two broad types: Primary activities: represents the sequence of brining materials into the firm (inbound logistics), converting them into final products (operations), shipping out the products (outbound logistics), marketing them (marketing and sales) and servicing them. Support activities: each of the above essential activities is linked to support activities – procurement, technology development (both product development and process development), human resource management and infrastructure (core ingredients that sustain the organization and the organizational culture). The firm’s task is to examine its costs and performance in each value-creating activity and to look for ways to improve it. Marketers should estimate their competitor’s costs and performances as benchmarks. Use of benchmarking allows organizations to compare their costs and performance against comparable organizations. These benchmarking activities can highlight areas of concern such as poor coordination between different departments as well gaps in particular competencies. READ example of NIKE in page 35, (Kotler et al, 2009). This example tells you how NIKE spends money for different marketing activities to create customer value. The raw materials and manufacturing costs of a product are relatively cheap, but marketing the product to the customer is expensive.
  • 4. Lecture 5 Developing Marketing Strategies & Plan; Prepared by Zaved Mannan 4 | P a g e If we conducted a value-chain analysis of Apple Computers Inc., we would probably agree that this high technology company was very good at technology development (e.g. development of the iPod) but has on-going problems in operations (problems
  • 5. Lecture 5 Developing Marketing Strategies & Plan; Prepared by Zaved Mannan 5 | P a g e with contract manufacture and quality control issues) partially caused by certain infrastructure issues (chronic inability to forecast demand and declining service culture) which then leads to outbound logistics problems. Strategic Planning As Kotler et al. (2009) point out; companies should understand, create and deliver customer value. They need to be customer focused and should be able to adapt and respond to changing customer needs. • Most companies operate on four organizational levels: – Corporate Planning , – Divisional Planning, – Business unit Planning – Product level Planning (Marketing Plan) • For each level marketers execute detail planning. Let’s discuss planning in each level. Corporate and division Strategic Planning The corporate or divisional level of an organization sits at the top of the corporate hierarchy and is responsible for identifying the ‘bigger picture’, or setting the corporate strategy. Each division will have plans based on the allocation of funds to each business unit within its division and each business unit has plans to carry out its business profitability. All corporate headquarters undertake four planning activities: 1. Defining the corporate process 2. Establishing strategic business units 3. Assessing resources to each SBU 4. Assessing growth opportunities. We will not discuss 3 & 4 in this lecture. Defining Corporate Vision • Vision is a future-oriented concept of the business. • It provides a company the sense of ‘where it is headed’ or ‘where we are going’. • An organization’s vision is designed to express the fundamental reason for the organization’s existence. • Usually, most organizations describe their visions in few sentences in the form of a statement – called vision statement.
  • 6. Lecture 5 Developing Marketing Strategies & Plan; Prepared by Zaved Mannan 6 | P a g e Characteristics of an Effective Vision • Vision statements of many companies show that most of them are o Vague, o Not complete to clearly communicate the intent of the management, o Not forward-looking, not inspiring, not distinctive, o Too broad and o Sometimes full of nicely worded abstracts. • These visions statements fail to say anything specific and really meaningful (such as becoming global leader). Changing the Vision • Microsoft changed its vision was “A computer on every desk and in every home” • Changed in 1990 to “Giving people the power to do what they want, where and when they want, on any device.”
  • 7. Lecture 5 Developing Marketing Strategies & Plan; Prepared by Zaved Mannan 7 | P a g e • Microsoft has expanded its lines of business well beyond computers. • It is now a major player in a number of new business areas such as PDAs, mobile phones, Tablet and video games. Defining the Corporate Mission All organizations exist to serve a purpose. The big question is exactly what is that purpose? Why does it exist, what is the mission? Kotler et al. (2009, p. 42) cite the famous management guru, Peter Drucker, who argues that organizations should ask themselves these simple, but profound questions: What is our business? Who is the customer? What is of value to the customer? What will our business be? What should our business be? By answering such questions companies will be better able to develop a practical ‘mission statement’. A good mission statement: 1. Focuses on a limited number of goals; 2. Stresses the major policies and values that the company wants to honour; and 3. Denies the major competitive scope within which the company will operate. A good mission statement is as short, memorable, and meaningful as possible. In short, a well-developed mission statement provides employees with a shared sense of purpose, direction and opportunity. Establishing Strategic Business Units The second planning activity requires the organization to identify its strategic business units (SBUs). • What business the company is presently in. • Mission statement must convey “who we are, what we do, and where we are now.” • Before define a business, ask yourself: – a) Is Coca-Cola in the soft-drink business? Vague mission statement: “We build brands and make the world a little happier by bringing our best to you.” Good mission statement (Google): “To improve the world’s information and make it universally accessible and useful.”
  • 8. Lecture 5 Developing Marketing Strategies & Plan; Prepared by Zaved Mannan 8 | P a g e – b) Is Coca-Cola in the beverage business? • Which one you choose? • Three dimensions can be used to define a business of a company. – Who is being satisfied? Customer – What is being satisfied? Needs of Customer. – How are customers’ needs being satisfied? Skills or Competencies.
  • 9. Lecture 5 Developing Marketing Strategies & Plan; Prepared by Zaved Mannan 9 | P a g e • Two kinds of definitions: – Market definition – Product definition • Companies often define their business in terms of products. • The market definition is superior to product definition. • Companies must see their business as a customer-satisfying process, not a goods-producing process. Comubia Pictures (Example) Product definition: “We make movies.” Market definition: “We market entertain.” See more example, Kotler (2009), p. 44 These examples highlight the difference between a target market definition and a strategic market definition. A target market definition tends to focus on selling a product or service to a current market. Pepsi could define its target market as everyone who drinks a cola beverage. A strategic market definition focuses on the potential markets. Pepsi could define its market as everyone who drinks something to quench their thirst (ex. Water, juice, coffee or tea.). A business can be defined in terms of three dimensions: customer groups, customer needs, and technology. For example, a company that defines its business as designing incandescent lighting systems for television studios would have television studios as its customer group; lighting as its customer need; and incandescent lighting as its technology. Large companies normally manage quite different businesses, each requiring its own strategy; General Electric, as one example, has established 49 strategic business units (SBUs). An SBU has three characteristics: (1) It is a single business or collection of related businesses that can be planned separately from the rest of the company; (2) it has its own set of competitors; and (3) it has a manager responsible for strategic planning and profit performance who controls most of the factors affecting profit. Business Strategic Planning This consists of eight steps: 1. Analysing the external environment-opportunities, threats. 2. Analysing the internal environment-strengths, weaknesses. 3. Choosing business objectives and goals. 4. Developing business strategies. 5. Preparing programs. 6. Implementing programs. 7. Gathering feedback.
  • 10. Lecture 5 Developing Marketing Strategies & Plan; Prepared by Zaved Mannan 10 | P a g e 8. Exercising control. In essence this is the core of a good marketing plan. Read Koteler et al (2009, pp. 49-55) for a thorough overview of this process. As marketers it is important that you understand these steps. Product Planning: The Marketing Plan The marketing plan created for each product line or brand is one of the most important outputs of planning for the marketing process. A marketing plan is a written document that summarizes what the marketer has learned about the marketplace and indicates how the firm plans to reach its marketing objective. A typical marketing plan has eight sections: Executive summary and table of contents: This brief summary outlines the plan’s main goals and recommendations; it is followed by a table of contents. Objectives: This section spells out the financial and marketing objectives to be achieved. Situational analysis: This section presents relevant background data on sales, costs, profits, the market, competitors, distribution, and the macro- environment, drawn from a fact book maintained by the product manager. Marketing strategy: This section explains the broad marketing strategy that will be implemented to accomplish the plan’s objectives. Action programs: This section outlines the broad marketing programs for achieving the business objectives. Each marketing strategy element must be elaborated to answer these questions: What will be done? When will it be done? Who will do it? How much will it cost? Projected profit-and-loss statement: Action plans allow the product manager to build a supporting budget with forecasted sales volume (units and average price), costs (production, physical distribution, and marketing), and projected profit. Once approved, the budget is the basis for developing plans and schedules for material procurement, production scheduling, employee recruitment, and marketing operations. Controls: This last section outlines the controls for monitoring the plan. Typically, the goals and budget are spelled out for each month or quarter so senior management can review the results each period. Sometimes contingency plans for handling specific adverse developments are included. READ ‘Marketing Memo: Marketing Plan Criteria’ for some guideline questions to ask in developing marketing plan. Kotler et al. (2009), p. 56).
  • 11. Lecture 5 Developing Marketing Strategies & Plan; Prepared by Zaved Mannan 11 | P a g e No two companies handle marketing planning and marketing plan content exactly the same way. Most marketing plans cover one year and vary in length; some firms take their plans very seriously, while others use them as only a rough guide to action. The most frequently cited shortcomings of marketing plans, according to marketing executives, are lack of realism, insufficient competitive analysis, and a short-run focus. Conclusion Market-oriented strategic planning is the process of developing and maintaining a viable fit between the organization’s objectives, capabilities, resources and its changing market opportunities. The aim is to shape the business and products, so that they achieve the specified performance hurdles. An issue for all organizations is how to best allocate scarce resources. A number of portfolio models are used to assist this difficult decision. Generally speaking, priority for scarce resources is determined by a number of issues such as market attractiveness, market or business strength, competitive pressure and long- term strategic aspirations. Finally, the formal process of marketing planning is a very useful discipline as it assists organizations to develop a viable strategy that aligns the capabilities of the organization against market opportunities. The value chain is a very useful tool to examine organizational activities that create value and costs in an organization. Benchmarking exercises allows organizations to compare their performance with comparable organizations. Based on this type of analysis, this tool assists senior management to identify capability gaps that must be satisfied by the development or acquisition of these deficiencies. READ Kotler et al. provide a sample marketing plan for Mithila Food Products Ltd. (2009, pp. 57-58). READ Reading 5.1: Comasaru, C., Day, J., & Lee, S. (1996). Developing a marketing plan for lemonhead. Management Decision, 34(8), 17-24. This reading provides a good example of a marketing planning approach where the company firs looked at what the customer values then identified their objectives and outlined a plan. It demonstrates the use of the BCG Matrix and the Ansoff Matrix in the planning process.
  • 12. Lecture 5 Developing Marketing Strategies & Plan; Prepared by Zaved Mannan 12 | P a g e The task of developing strategies that keep you ahead of the competition is sometimes likened to military operations, or game of chess – a cat and mouse game with offensive and defensive strategies. Prepared by Zaved Mannan Adjunct Faculty University of Liberal Arts Bangladesh (ULAB)