The document discusses business continuity planning (BCP) and disaster recovery planning (DRP). It begins by distinguishing BCP from DRP, with BCP describing critical processes and personnel to protect during an emergency using a business impact analysis, while DRP describes exact steps personnel follow in a disaster. It then outlines the key steps in BCP, including identifying scope, creating a business impact assessment, and obtaining commitment. Recovery strategies like hot, warm and cold sites are discussed, as well as testing plans through walkthroughs and simulations. The importance of planning and testing plans is emphasized.
Introduction to ArtificiaI Intelligence in Higher Education
BCP and DRP Plans Explained
1. Business Continuity Planning and Disaster Recovery Planning
Dr. Cindi Nadelman
New England College
ECS 6200 – Managing Information Security
Week 6 - Lecture
*
*
ObjectivesDistinguish between the business continuity plan
(BCP) and the disaster recovery plan (DRP)Follow the steps in
the BCPExplain to business executives why planning is
importantDefine the scope of the business continuity
planIdentify types of disruptive eventsOutline the contents of a
business impact analysis (BIA)Discuss recovery strategies and
the importance of crisis managementExplain backup and
recovery techniques, including agreements for shared sites and
alternate sites
*
3. *
Overview of the Business Continuity Plan and Disaster
Recovery Plan
Present the BCP to key senior management and obtain
organizational and financial commitment
Each department needs to understand its role in the plan and
support and help maintain it
The BCP project team must implement the planBCP must be
updated with changes in the organization
*
Why the BCP Is So Important80% of businesses without a
recovery plan either closed or never reopened within 18
months70% of companies go out of business after a major data
loss80% of companies without a BCP fail within 2 years60% of
companies that lose their data shut down within 6 months of a
disaster
Source: Continuity Central,
http://continuitycentral.com/feature0660.html
*
Types of Disruptive EventsNatural events Earthquakes, fires,
floods, mudslides, snow, ice, lightning, hurricanes, tornadoes,
and so forthExplosions, chemical fires, hazardous waste spills,
smoke, and water damagePower outages caused by utility
failures, high heat and humidity, solar flares, and so forth
5. and performs a cost/benefit analysis for countering risksThree
stepsPrioritize the business processes, possibly using a scoring
system to assign a weight or value to each processDetermine
how long each process can be down before business continuity
is seriously compromisedIdentify the resources required to
support the most critical processes
*
Disaster Recovery PlanningThe goals of the DRPKeeping the
computers running Meeting formal and informal service-level
agreements with customers and suppliersBeing proactive rather
than reactive
*
Identifying Recovery StrategiesThe BCP will identify the
critical business processes that must be protected through the
BIA documentsThe function of the DRP is to identify the exact
strategy for recovering those processes, specifically IT systems
and services that are struck by a disaster
Understanding Shared-Site Agreements
Arrangements between companies with similar data processing
centersSave time and moneyCould be difficult to implement
*
*
Using Alternative SitesThree main formsHot siteProvide an
6. uninterrupted serviceexpensiveCold siteProvides only facilities
with no hardware or softwareCost effective but it takes longer
to set upWarm Provides the facilities with hardwareSoftware
must be restored
*
Hot Site: A hot-site facility assumes the entire burden of
providing backup
computing services for the customer. The hot site poses some
security
risk as the data is now stored, backed up, and theoretically
accessible
to a third party.
Cold Site: The cold site provides the facilities including
power, air conditioning, heat, and other environmental systems
necessary to
run a data processing center without any of the computer
hardware or software.
The cold site is a cheaper solution than hot-site services, but
you get what you pay for.
Warm Site: The warm-site facility is a compromise between
the services offered by hot- and cold-site vendors. A warm-site
facility
provides the building and environmental services previously
mentioned, with
the addition of the hardware and communication links already
established.
■Multiple centers: in this case, processing is distributed across
multiple
sites that may be in-house or part of a shared-site agreement.
■Service bureaus: Known for their quick response but high cost,
service
bureaus provide backup processing services at a remote
7. location.
Service bureaus also perform primary application processing
such as
payroll systems and have extra capacity available for DRP
services.
■Mobile units: a third-party vendor provides a data
processing center on wheels, complete with air conditioning and
power systems.
Making Additional ArrangementsMultiple centersProcessing
distributed across multiple sitesService bureausProvide backup
processing services at remote locationQuick response, but high
costMobile unitsThe cloud
*
*
Testing the Disaster Recovery PlanWalk-throughsMembers of
the key business units meet to trace their steps through the plan,
looking for omissions and inaccuraciesSimulationsCritical
personnel meet to perform a “dry run” of the emergency,
mimicking the response to a true emergency as closely as
possibleChecklistsA more passive type of testing and a first step
toward a more comprehensive test
*
How to Test a Disaster Recovery PlanParallel testingThe backup
processing occurs in parallel with production services that never
stop Full interruptionProduction systems are stopped as if a
disaster had occurred to see how the backup services perform
8. *
SummaryBCP and DRP are formal processes in any business
that is concerned about maintaining its operation in the face of a
disaster or interruption To implement its DRP a company
typically uses outside services The plan must be thoroughly
tested using one or more of the five testing techniques
*
*
*
Hot Site: A hot-site facility assumes the entire burden of
providing backup
computing services for the customer. The hot site poses some
security
risk as the data is now stored, backed up, and theoretically
accessible
to a third party.
Cold Site: The cold site provides the facilities including
power, air conditioning, heat, and other environmental systems
necessary to
run a data processing center without any of the computer
hardware or software.
The cold site is a cheaper solution than hot-site services, but
you get what you pay for.
Warm Site: The warm-site facility is a compromise between
the services offered by hot- and cold-site vendors. A warm-site
facility
provides the building and environmental services previously
mentioned, with
the addition of the hardware and communication links already
9. established.
■Multiple centers: in this case, processing is distributed across
multiple
sites that may be in-house or part of a shared-site agreement.
■Service bureaus: Known for their quick response but high cost,
service
bureaus provide backup processing services at a remote
location.
Service bureaus also perform primary application processing
such as
payroll systems and have extra capacity available for DRP
services.
■Mobile units: a third-party vendor provides a data
processing center on wheels, complete with air conditioning and
power systems.
Encyclopedia of Health Care Management
Vision
Contributors: Rebecca I. Porterfield
Edited by: Michael J. Stahl
Book Title: Encyclopedia of Health Care Management
Chapter Title: "Vision"
Pub. Date: 2004
Access Date: April 23, 2019
Publishing Company: SAGE Publications, Inc.
11. The statement typically is brief, consisting of one or two
sentences. A well-conceived, effective vision state-
ment will
• Convey a broad sense of direction that unifies organizational
direction
• Aid in changing organizational direction and the rationale for
redirection when internal resistance ex-
ists
• Provide all levels within the organization a clear
understanding of where the organization's future lies
• Provide executives with an opportunity for a clear, consistent
compass for resource justification and
allocation
• Rally and energize employees and stakeholders
• Set an expectation of energy and action
• Provide confidence in the organizational leaders to set
direction
When the organizational leader communicates the organization's
vision, it sends a signal throughout the or-
ganization that change is happening. The vision may serve as a
catalyst for new thinking and at the same
time may ferret out internal resistance to change. The vision for
the organization's future, by definition, will
necessitate the rethinking of resource alignment to accomplish
the vision.
The vision statement is frequently considered the “drumbeat” of
the organization. It is clear, consistent, reso-
nant, and often repeated. The vision statement frequently is
written as a logo or catchy phrase that captures
the internal and external public. It is the “march” of the
organization providing a cadence and direction for
13. SAGE Reference
Page 2 of 4
Encyclopedia of Health Care Management
Finding the most effective means of communicating the vision
statement is as critical as its development. The
statement should create a visual image that evokes excitement
and pride. Ideally it should be simple enough
to be remembered yet complex enough to establish commitment.
The vision should be transmitted through
media that gets the attention of the organization. Most
important, the highest-ranking executive must consis-
tently and clearly articulate the vision in every forum in which
he or she participates. The vision must always
be recognized as coming from the top of the organization.
Vision Statements and Strategic Planning
Unlike mission statements, which are frequently developed
down to the department level, vision statements
are generally developed for the organization as a whole. The
exception to this is for those very large multina-
tional conglomerates that have unrelated business units. The
multinationals may have a strategic vision for
the corporation as a whole and one for each of the strategic
business units, depending on the level of diversity
among the units.
As the vision directionally sets the purpose for change and the
mission statement focuses on the existing pur-
pose, the gap between these two statements necessitates goals,
objectives, and strategies to move the orga-
14. nization from its mission to its vision. The external
environmental analysis used to develop the vision and the
internal assessment of the organization's strengths and
weaknesses supporting its mission must converge.
This convergence effectively links internal resources with
external factors essential to accomplish the vision
and is reflected through the strategic plan at the corporate level.
The vision statement, broadly defined, sets the direction,
whereas the strategic plan charts the course. As an
example, if a local hospital sets a vision to become a regional
hub, the strategic plan will articulate the steps
(both short term and long term) to accomplish the vision.
Vision Statements in Health Care
The health care industry has, over the past decade and into the
foreseeable future, been highly affected by
government regulation, population demographics, and political
legislation. These factors have required health
care providers to reassess who they are and the services they
will deliver. Some organizations have narrowed
their scope of operations in favor of specialized services, while
others have expanded their scope of opera-
tions through acquisition and other strategies to large and
specialized population segments. Each strategy,
whether product based or customer based, requires changes in
operations. It is critical, especially in times of
dynamic environmental shifts, to develop and articulate a new
strategic vision. By communicating the vision,
confidence is gained that senior management is willing and
ready to meet new challenges, that employees
do not have to be worried about changes ahead, and that
stakeholders (the community, the customers, the
stockholders) are assured that the organization understands its
industry and can provide and deliver the ser-
18. as a broadly phrased statement of the firm's
long-term goals; it distinguishes the firm from others in its
industry and specifies the scope of the operations
in terms of the firm's product or market. It spells out goals, is a
statement of aspirations, and focuses one's
actions. The mission expresses the vision of the firm's founders
or strategic planners and also communicates
the image that they seek to project. It often also indicates the
principal customer or client needs that the firm
will satisfy. Thus, the mission statement describes the firm's
products, services, market, customers needs,
and technology such that it also reflects the values and goals of
the top managers, and ideally all the mem-
bers of the firm. The mission statement defines the firm's
overall plan in a succinct and engaging manner and
with a tone that reflects the climate of the business itself.
A mission statement seeks to answer the following questions:
What is the problem or the need that the or-
ganization is trying to address? What makes this organization
unique? Who benefits from the work of the
organization? Why does this organization exist? What customer
or client needs do we fulfill? What sets our
organization apart from our competitors? A mission statement
should be brief, clear, and concise; it should be
short enough that it can be easily remembered by the people in
the organization. A mission statement should
also be inspiring, free of jargon, and achievable. Members of
the organization must be able to support the
mission.
Through the mission statement, the managers and associates in
the firm attempt to clearly articulate their
long-term goals and what makes their organization special and
worthy of people's attention. A mission state-
ment thus expresses the values of the members of the
19. organization. A mission statement focuses the efforts
of all in the organization so that all are more likely to be “on
the same page”; this better enables the firm to
survive and to achieve long-term profitability and growth. This
statement can then serve as a basis for shared
expectations, long-range planning, deciding priorities, and
performance evaluations.
A mission statement that is developed systematically and is
comprehensive is an invaluable tool in directing
and implementing policy. A mission statement thus serves as a
guide to top managers when they make strate-
gic decisions on the deployment of the organization's resources.
Without it a manager may make decisions
on the basis of one's biases and concern for “turf.” A clearly
stated mission statement enables a manager to
focus on the long-range goals of the organization as a whole and
not on the manager's particular priorities or
preferences. Such a mission statement also provides a sense of
shared expectations for people in the orga-
nization. It is important to give such guidance today, given
global operations and people working in different
countries and cultures. Thus, the mission statement specifies
values and goals and provides a unity of direc-
tion that is intended to include many nations, peoples, and
generations.
From outside the organization, one can view a mission
statement as an instrument for learning about the
goals of the organization, as well as its likely planning
strategies. For a potential employee or customer, a
mission statement may be a principal reason why one might
seek or reject joining the firm as an employee
or purchasing the firm's product or service. Thus, a mission
statement communicates a description of the firm
to prospective employees, customers, and other stakeholders, so
21. the organization. Thus, the mission statement itself can be kept
relatively brief—ideally, a few sentences that
can be remembered—but additional important items can also be
included.
More than 90% of large firms possess a mission statement and a
code of business conduct. Formulating a
mission statement can be a valuable experience for the members
of the group that is seeking to clarify their
goals, although it is not always easy. The completed mission
statement might seem to be deceptively simple,
since a mission statement can be as brief as a sentence or two.
But to distill the meaning of the organization
or the group into those concise, meaningful sentences requires
discipline, insight, patience, and cooperation.
To develop a mission statement, leaders of the group often ask
such questions: Who are we? What do we
do? Why do we do it? What should we be doing? What do we
stand for? Then someone takes the key points
and attempts to draft a mission statement. The draft is sent back
to the group for their comment in order to
clarify the statement. It may then go through several rounds of
revisions. Moreover, organizations generally
update their mission statements periodically with a similar
iterative process.
The process of coming to a consensus on the mission statement
is generally a learning experience for the
group. Some firms begin the drafting process during a retreat of
the board. This is appropriate for a board,
since the broad goals of the organization are a major
responsibility of the board. But a group cannot efficient-
ly write a mission statement together; quibbling over words can
waste much time. The process will proceed
better by circulating a draft written by one person, perhaps the
22. founder, or a top manager who took notes
during an initial group session. For the mission to be successful
and for everyone in the organization to own
that mission, it is essential that each person have some
opportunity to participate in formulation. Conducting
workshops, whereby all in the organization are able to comment
on the mission, helps focus workers' efforts,
gain cooperation, and build morale among the group.
There is not a clear distinction between a mission statement and
a vision statement. A mission statement
relates an organization's purpose, while some describe a vision
statement as a “vision of the future.” One
attempt to distinguish is to call the vision the destination and
the mission the journey.
Often a mission statement precedes a firm's ethics statement and
sometimes the terms mission statement,
ethics statement, and code are used interchangeably. Some
firms, such as Johnson and Johnson (J&J), call
their mission statement a Credo. J&J's Credo was the foundation
that enabled top management to effectively
deal with the tragedy of the poisoning of Tylenol pills. By the
CEO James Burke's own account, he acted on
J&J's Credo, which stated that their first responsibility was to
the doctors, nurses, and patients, all those who
used their products. They were open about the problem and
mounted a costly and successful recall of all
products. As a result, the firm and the product survived and
prospered.
Some firms have set out their basic principles in a values
statement, which sets forth the basic values on
which the firm is based. The values statement often follows a
firm's mission statement, and these values often
make reference to the founder(s) actions and guiding principles
24. ture and select senior managers and more often select their chief
executives from within the firm.
Mission statements often stress the superior quality of the
product or service offered. Mission statements also
generally include elements such as the importance of integrity,
respect for the individual worker, service to
the customer, and responsibility to the community. It is
important that the mission provide a foundation for
the existing and desired ideology and that the members of the
firm have integrity in acting out that mission.
However, each mission is unique and thus reflects the industry,
market, and values of the people within the
firm.
In many cases, firms do not live up to their own stated mission.
Mission statements are sometimes platitudes
and public relations gestures, that is, statements that are
designed to make the firm look reputable and re-
sponsible to its outside constituencies. If a mission is too
general, it is ineffective because it does not describe
the particular firm. Mission statements are sometimes too ideal;
that is, since they are aspirational, they are
not realistic. However, mission statements are statements of
ambition, so it is not surprising if those aspira-
tions are not always perfectly achieved.
Collections of some of the best business mission statements
have been gathered and analyzed. These re-
searchers have also provided some background on the individual
firms and how those mission statements
were developed. Organizations that are presented include AES,
Bayer, Cadbury Schwepps, Caterpiller, Com-
erica, Cummins Engine, Donnelly, Ford, General Motors,
Herman Miller, Hershey, Hewlett Packard, Hong
Kong Ethics Development Center, Hyatt, J&J, Kroger, Levi
25. Strauss, Marriott, Procter & Gamble, Sears, Star-
bucks, TRW, UNUM, and Whirlpool.
Nonprofit organizations (NGOs) are less likely to develop a
mission statement, partially because members
feel that their mission is already clear to stakeholders. In
addition, funding agencies generally do not con-
tribute to the general purpose of an NGO, but to specific
projects, so there is less incentive to spend the time
and energy to develop a mission statement. Moreover, a mission
may seem to limit an NGO if a new project
and funding is available. Nevertheless, the same rationale for a
mission statement is true for NGOs: to provide
direction, coherence, and a goal by which to judge individual
and organizational achievement and success.
Moreover, since NGOs do not enjoy the automatic feedback of
profit and loss, it is even more important to
fashion a mission statement and to set goals.
Gerald F. Cavanagh
http://dx.doi.org/10.4135/9781412956260.n523
See also
• Caux Principles
• Codes of Conduct, Ethical and Professional
• Global Codes of Conduct
• Global Reporting Initiative
• Social Accountability (SA)
• Strategic Planning
• Transparency International
• United Nations Global Compact
Further Readings
Abrahams, J.(1995).Mission statement book: 301 corporate
mission statements from America's top compa-
28. Value Proposition, Learning Topic (Value Proposition, 2019).
Retrieved from
https://leocontent.umuc.edu/content/umuc/tgs/mba/mba640/2192
/learning-topic-list/value-proposition.html?ou=354651
SCOTT, J. (2015). MOVING MOUNTAINS. (cover
story). Landscape Management, 54(4), 32. Retrieved from
htttp://search.ebscohost.com.ezproxy.umuc.edu/login.aspx?direc
t=true&db=f5h&AN=101982551&site=eds-live&scope=site
Walsh, J., PhD. (2017). Value proposition. Salem Press
Encyclopedia. Retrieved from
http://search.ebscohost.com.ezproxy.umuc.edu/login.aspx?direct
=true&db=ers&AN=90558491&site=eds-live&scope=site
Learning Topic
Strategic Alliances
Faced with the challenge of turbulent markets and changing
consumer tastes and preferences, organizations are increasingly
using global strategic alliances in an effort to secure
commercial advantage and eliminate waste from their
distribution channels (Wu, Shih, & Shan, 2009). These alliances
use global virtual innovation teams that cross national borders
and help to create and enhance the alliance's competitive
position.
Organizations are no longer isolated islands; they need to
collaborate with one another—including with competitors—in
order to survive (Bengtsson, Eriksson, & Wincent, 2010; Ybarra
& Turk, 2011). Alliances enable organizations to obtain needed
technical and managerial knowledge, to secure valuable
resources (Muthusamy & White, 2005), and to enhance
organizational innovation (Ahuja, 2000). Alliances enable
interorganizational knowledge exchange; member organizations
gain access to unavailable knowledge and may accelerate their
29. innovation process and enhance their competitive advantage.
Global virtual teams are at the core of any knowledge exchange.
These teams capitalize on their diverse knowledge and talent
pool to leverage their organization's global new-product
development efforts (Salomo, Keinschmidt, & de Brentani,
2010). However, while global virtual teams have their
advantages, managing them can be a challenge as they operate
across time, space, and corporate boundaries, and because their
communication is primarily electronic (Montoya, Massey,
Hung, & Crisp, 2009).
References
Ahuja, G. (2000). Alliance networks, structural holes, and
innovation: A longitudinal study. Administrative Science
Quarterly, 45, 425-455. Retrieved from
http://www.johnson.cornell.edu/Administrative-Science-
Quarterly.aspx
Bengtsson, M., Eriksson, J. & Wincent, J. (2010). Co-opetition
dynamics – an outline for further inquiry. Competitiveness
Review, 20(2), 194–214. doi: 10.1108/10595421011029893
Montoya, M. M., Massey, A. P., Hung, Y. C., & Crisp, C. B.
(2009). Can you hear me now? Communication in virtual
product development teams. Journal of Product Innovation
Management, 26(20), 139–155. doi: 10.1111/j.1540-
5885.2009.00342.x
Muthusamy, S. K., & White, M. A. (2005). Learning and
knowledge transfer in strategic alliances: A social exchange
view. Organization Studies, 26(3), 415–441.
Salomo, S., Keinschmidt, E. J., de Brentani, U. (2010).
Managing new product development teams in a globally
dispersed NPD program. Journal of Product Innovation
Management, 27(7), 955–971.
Wu, W. Y., Shih, H., & Chan, H. (2009). The analytic network
process for partner selection criteria in strategic
alliances. Expert System with Applications, 36(3), 4646–4653.
doi: 10.1016/j.eswa.2008.06.049
Ybarra, C. E. & Turk, T. A. (2011). Strategic alliances with
30. competing firms and shareholder value. Journal of Management
and Marketing Research, 6, 1–10. Retrieved from
http://www.aabri.com/jmmr.html
Learning Resource
Crafting a Digital Marketing Strategy
Any activity with an end goal (whether it’s winning a war,
building a city, or selling a product) should have a blueprint in
place for every person in the organization to follow. In digital
marketing, however, there is no single definitive approach—
each business must create its own roadmap. However, there are
questions you can use to guide the process.
A strategy needs to cover who you are, what you are offering
and to whom, and why and how you are doing so. The steps and
questions below cover what an organization should be aware of
when creating and implementing a strategy that will meet its
marketing objectives and solve its challenges.
Step 1: Examine the Context
The first step in crafting a successful strategy is to examine the
context of the organization and the various stakeholders:
· What is the context in which you are operating (PESTLE
factors) and how is this likely to change in the future?
· Who are you, why does your brand matter, and what makes
your brand useful and valuable?
· Who are your customers, and what needs, wants, and desires
do they have?
· Who are your competitors? These may extend beyond
organizations that compete with you on the basis of price and
product and could also be competition in the form of abstracts
such as time and mindshare.
Thorough market research will reveal the answers to these
questions.
Step 2: Examine Your Value Exchange
Once you have examined the market situation, the second step is
an examination of your value proposition or promise. In other
31. words, what unique value can your organization add to that
market? It is important to identify the supporting value-adds to
the brand promise that are unique to the digital landscape. What
extras, beyond the basic product or service, do you offer to
customers?
The internet offers many channels for value creation. However,
the value depends largely on the target audience, so it is crucial
to research your users and gather insights into what they want
and need.
Content marketing is the process of conceptualizing and
creating this sort of content. Examples of value-based content
include a DIY gardening video for a hardware brand, a research
paper for a business analyst, or a funny infographic for a
marketing company.
Step 3: Establish Digital Marketing Goals
When setting your digital marketing goals, there are three key
aspects to consider: objectives, key performance indicators
(KPIs), and targets. Let’s look at each one in turn.
Objectives
Objectives are essential to any marketing endeavor. Without
them, your strategy would have no direction and no end goal or
win conditions. It’s important to be able to take a step back and
ask several questions:
· What are you trying to achieve?
· How will you know if you are successful?
Objectives need to be SMART:
· specific—The objective must be clear and detailed, rather than
vague and general.
· measurable—The objective must be measurable so that you
can gauge whether you are attaining the desired outcome.
· attainable—The objective must be something that is possible
for your brand to achieve, based on available resources.
· realistic—The objective must also be sensible and based on
data and trends; don’t exaggerate or overestimate what can be
achieved.
· time-bound—Finally, the objective must be linked to a
32. specific timeframe.
Key Performance Indicators
Key performance indicators (KPIs) are the specific metrics or
pieces of data that you will look at to determine whether your
tactics are performing well and meeting your objectives. For
example, a gardener may look at the growth rate, color, and
general appearance of a plant to evaluate whether it is healthy.
In the same way, a marketer will look at a range of data points
to determine whether a chosen tactic is delivering. KPIs are
determined per tactic, with an eye on the overall objective.
Targets
Finally, targets are the specific values that are set for your KPIs
to reach within a specific time period. If you meet or exceed a
target, you are succeeding; if you don’t reach it, you’re falling
behind on your objectives and you need to reconsider your
approach (or your target).
Example of Digital Marketing Goals
SMART objective: Increase sales through the eCommerce
platform by 10 percent within the next six months.
KPIs:
· Search advertising—number of search referrals; cost per click
on the ads
· Facebook brand page—number of comments and shares on
campaign; specific posts
Targets:
· Search advertising—one thousand search referrals after the
first month, with a 10 percent month-on-month increase after
that
· Facebook brand page—50 comments and 10 shares on
campaign-specific posts per week
Step 4: Establish Tactics and Evaluation
Tactics are the specific tools or approaches you will use to meet
your objectives, for example, a retention-based email
newsletter, a Facebook page, or a CRM implementation. As a
strategy becomes more complex, you may have multiple tactics
working together to try to achieve the same objective. Tactics
33. may change (and often should), but the objective should remain
your focus.
Many digital tools and tactics are available once you have
defined your digital marketing objectives. Each tactic has its
strengths. For example, acquisition (gaining new customers)
may best be driven by search advertising, while email is one of
the most effective tools for selling more products to existing
customers
Common Tactics and Their Outcomes
Tactic
Outcome
SEO—This is the practice of optimizing a website to rank
higher on the search engine results pages for relevant search
terms. SEO involves creating relevant, fresh and user-friendly
content that search engines index and serve when people enter a
search term that is relevant to your product or service.
Customer retention and acquisition—SEO has a key role to play
in acquisition, as it ensures your organization’s offering will
appear in the search results, allowing you to reach potential
customers. A site that is optimized for search engines is also a
site that is clear, relevant and well designed. These elements
ensure a great user experience, meaning that SEO also plays a
role in retention.
Search advertising—In pay-per-click or search advertising, the
advertiser pays only when someone clicks on their ad. The ads
appear on search engine results pages.
Sales, customer retention, and acquisition—The beauty of
search advertising is that it is keyword based. This means an ad
will come up in response to the search terms entered by the
consumer. It therefore plays a role in sales, acquisition and
retention. It allows the advertiser to reach people who are
already in the buying cycle or are expressing interest in what
they have to offer.
Online advertising—Online advertising covers advertising in all
areas of the Internet – ads in emails, ads on social networks and
34. mobile devices, and display ads on normal websites.
Branding and acquisition—The main objective of display
advertising is to raise brand awareness online. It can also be
more interactive and therefore less disruptive than traditional or
static online advertising, as users can choose to engage with the
ad or not. Online advertising can be targeted to physical
locations, subject areas, past user behaviors, and much more.
Affiliate marketing—Affiliate marketing is a system of reward
whereby referrers are given a finder’s fee for every referral they
give.
Sales and branding—Online affiliate marketing is widely used
to promote eCommerce websites, with the referrers being
rewarded for every visitor, subscriber or customer provided
through their efforts. It is a useful tactic for brand building and
acquisition.
Video marketing—Video marketing involves creating video
content. This can either be outright video advertising, or can be
valuable, useful, content marketing.
Branding, customer retention, and value creation—Since it is so
interactive and engaging, video marketing is excellent for
capturing and retaining customer attention. Done correctly, it
provides tangible value— in the form of information,
entertainment or inspiration—and boosts a brand’s image in the
eyes of the public.
Social media—Social media, also known as consumer-generated
media, is media (in the form of text, visuals and audio) created
to be shared. It has changed the face of marketing by allowing
collaboration and connection in a way that no other channel has
been able to offer.
Branding, value creation, and participation—From a strategic
perspective, social media is useful for brand building, raising
awareness of the brand story and allowing the consumer to
become involved in the story through collaboration. Social
media platforms also play a role in building awareness, due to
their shareable, viral nature. They can also provide
crowdsourced feedback and allow brands to share valuable
35. content directly with their fans.
Email marketing—Email marketing is a form of direct
marketing that delivers commercial and content-based
messages to an audience. It is extremely cost effective, highly
targeted, customizable on a mass scale and completely
measurable—all of which make it one of the most powerful
digital marketing tactics.
Customer retention and value creation—Email marketing is a
tool for building relationships with potential and existing
customers through valuable content and promotional messages.
It should maximize the retention and value of these customers,
ultimately leading to greater profitability for the organization as
a whole. A targeted, segmented email database means that a
brand can direct messages at certain sectors of their customer
base in order to achieve the best results.
The table below expands on some of the most popular tactics
available to digital marketers and their possible outcomes.
Once the objectives and tactics have been set, these should be
cross-checked and re-evaluated against the needs and resources
of your organization to make sure your strategy is on the right
track and no opportunities are being overlooked.
Step 5: Ongoing Optimization
It is increasingly important for brands to be dynamic, flexible,
and agile when marketing online. New tactics and platforms
emerge every week, customer behaviors change over time, and
people’s needs and wants from brands evolve as their
relationships grow. The challenge is to break through the online
clutter to connect with customers in an original and meaningful
way.
This process of constant change should be considered in the
early stages of strategy formulation, allowing tactics and
strategies to be modified and optimized as you go. After all,
developing a digital marketing strategy should be iterative,
innovative, and open to evolution.
37. purchasing alliances (Kotler & Keller, 2015). For example, the
Renault-Nissan Alliance led by Chairman Carlos Ghosn is able
to secure preferential prices from its suppliers. Neither Renault
nor Nissan would be able to get the same prices when buying
alone. Although vertical coordination of this type may foster
strong customer-supplier relationships, it may also involve risks
(e.g., limited flexibility).
Business to business (B2B) marketers use every available
marketing tool to gain and retain customers. They bundle
valuable services with their product offerings, use systems
selling (i.e., buying a total-solution package from a single
vendor), and capitalize on online and offline communications.
Furthermore, B2B marketers are increasingly borrowing
marketing practices from business-to-consumer markets to
create and enhance their brands (Kotler & Keller, 2015). These
marketers routinely rely on long-term personal relationships
with their major customers, providing useful information and
establishing trust to secure big contracts (Zhang, Watson IV,
Palmatier, & Dant, 2016).
While B2B companies recognize the disruptive power of
technology, many have been cautious in anticipating the impact
of advances such as the internet, social media, and
crowdsourcing on corporate buying behavior. These companies
have also been slow to adopt marketing analytical tools and big
data, even though these developments could change existing
company-wide business practices and models. Changes to
company-wide operations require a closer alignment between
the business marketers and other functional units within the
company. For example, several B2B companies increasingly
rely on social media to incorporate the voice of the customer
(VoC) to narrow the gap between sales, marketing, and
innovation (Spekman, 2015).
Much of the B2B sector is in the service business (e.g., hotels,
38. banks, airlines, hospitals, and repair companies), just as many
employees in the manufacturing sector, including accountants,
lawyers, and IT professionals, are actually service providers. As
B2B companies struggle to differentiate their physical products,
they are increasingly striving for service differentiation by
providing faster customer response, faster complaints
resolution, and timely delivery (Kotler & Keller, 2015).
References
Kotler, P. & Keller, K. L. (2015). Marketing management (15th
ed.). Upper Saddle River, NJ: Pearson.
Spekman, R. E. (2015). The Journal of Business-to-Business
Marketing at 21 and my perspective on the field of B to B
marketing. Journal of Business-to-Business Marketing, 22(1–2),
87–94. doi:10.1080/1051712X.2015.1020245
Zhang, J. Z., Watson IV, G. F., Palmatier, R. W., & Dant, R. P.
(2016). Dynamic relationship marketing. Journal of Marketing,
80(5), 53–90. doi:10.1509/jm.15.0066
Resources
· Reading: Business Buying Behavior
Learning Resource
What is Marketing?
What makes a business idea work? Does it only take money?
Why are some products a huge success and similar products a
dismal failure? How was Apple, a computer company, able to
create and launch the wildly successful iPod, yet Microsoft's
first foray into digital audio players was a total disaster? If the
size of the company and the money behind a product's launch
were the difference, Microsoft would have won. But for
Microsoft to have won, it would have needed something it has
not had in a while—good marketing, so it could produce and
sell products that consumers want.
So how does good marketing get done?
39. Defining Marketing
Marketing is defined by the American Marketing Association as
"the activity, set of institutions, and processes for creating,
communicating, delivering, and exchanging offerings that have
value for customers, clients, partners, and society at large"
(American Marketing Association, n.d.). If you read the
definition closely, you see that there are four activities, or
components, of marketing:
· creating—the process of collaborating with suppliers and
customers to create offerings that have value
· communicating—broadly, describing those offerings, as well
as learning from customers
· delivering—getting those offerings to the consumer in a way
that optimizes value
· exchanging—trading value for those offerings
The traditional way of viewing the components of marketing is
via the four Ps:
· product—goods and services (creating offerings)
· promotion—communication
· place—getting the product to a point at which the customer
can purchase it (delivering)
· price—the monetary amount charged for the product
(exchanging)
Introduced in the early 1950s, the four Ps were called the
marketing mix, meaning that a marketing plan is a mix of these
four components.
If the four Ps are the same as creating, communicating,
delivering, and exchanging, you might be wondering why there
was a change. The answer is that they are not exactly the
same. Product, price, place, and promotion are nouns. As such,
these words fail to capture all the activities of marketing. For
example, exchanging requires mechanisms for a transaction,
which consist of more than simply a price or place. Exchanging
requires, among other things, the transfer of ownership. For
example, when you buy a car, you sign documents that transfer
the car's title from the seller to you. That's part of the exchange
40. process.
Even the term product, which seems pretty obvious, is limited.
Does the product include services that come with your new car
purchase (such as free maintenance for a certain period of time
on some models)? Or does the product mean only the car itself?
Finally, none of the four Ps describes particularly well what
marketing people do. However, one of the goals of this book is
to focus on exactly what marketing professionals do.
Value
Value is at the center of everything marketers do. What does
value mean?
When we use the term value, we mean the benefits buyers
receive that meet their needs. In other words, value is what the
customer gets by purchasing and consuming a company's
offering. Although the offering is created by the company, the
value is determined by the customer.
Furthermore, our goal as marketers is to create a profitable
exchange for consumers. By profitable, we mean that the
consumer's personal value equation is positive. The personal
value equation is
value = benefits received – [price + hassle].
Hassle is the time and effort the consumer puts into the
shopping process. The equation reflects personal impressions,
because each consumer will judge the benefits of a product
differently, as with the time and effort he or she puts into
shopping. Value, then, varies for each consumer.
One way to think of value is to imagine a meal in a restaurant.
If you and three friends go to a restaurant and order the same
dish, each of you will like it more or less depending on your
personal tastes. Yet the dish was exactly the same, priced the
same, and served exactly the same way. Because your tastes
varied, the benefits you received varied. Therefore, the value
varied for each of you. That's why we call it a personal value
equation.
Value varies from customer to customer based on each
customer's needs. The marketing concept, a philosophy
41. underlying all that marketers do, requires that marketers seek to
satisfy customer wants and needs. Firms operating with that
philosophy are said to be market oriented. At the same time,
market-oriented firms recognize that the exchange must be
profitable for the company to be successful. A marketing
orientation is not an excuse to fail to make profit.
Firms don't always embrace the marketing concept and a market
orientation. Beginning with the Industrial Revolution in the late
1800s, companies were production oriented. They believed that
the best way to compete was by reducing production costs. In
other words, companies thought that good products would sell
themselves. Perhaps the best example of such a product was
Henry Ford's Model A automobile, the first product of his
production line innovation. Ford's production line made the
automobile cheap and affordable for many more people.
The production era lasted until the 1920s, when production-
capacity growth began to outpace demand growth, and new
strategies were called for. There are, however, companies that
still focus on production as the way to compete.
From the 1920s until after World War II, companies tended to
be selling oriented, meaning they believed it was necessary to
push their products by heavily emphasizing advertising and
selling. Consumers during the Great Depression and World War
II did not have as much money, so the competition for their
available dollars was stiff. The result was this push approach
during the selling era. Companies like the Fuller Brush
Company and Hoover Vacuum began selling door-to-door, and
the vacuum-cleaner salesperson position was created. Just as
with production, some companies still operate with a push
focus.
In the post–World War II environment, demand for goods
increased as the economy soared. Some products, limited in
supply during World War II, were now plentiful to the point of
surplus. Companies believed that to compete, they had to sell
different products than the competition, so many focused on
product innovation. This focus on product innovation is called
42. the product orientation. Companies like Procter & Gamble
created many products that served the same basic function as
one another, but with a slight twist or difference in order to
appeal to a different consumer, and as a result products
proliferated. But as consumers had many choices available to
them, companies had to find new ways to compete. Which
products were best to create? Why create them? The answer was
to create what customers wanted, leading to the development of
the marketing concept, and from about 1950 to 1990, businesses
operated in the marketing era.
So what era would you say we're in now? Some call it the value
era, a time when companies emphasize creating value for
customers. Is that really different from the marketing era, in
which the emphasis was on fulfilling the marketing concept?
Maybe not. Others call today's business environment the one-to-
one era, meaning that the way to compete is to build
relationships with customers one at a time and to serve each
customer's needs individually. For example, the longer you are a
customer of Amazon, the more details they gain about your
purchasing habits and the better they can target you with offers
of new products. With the advent of social media and the
empowerment of consumers through ubiquitous information
from consumer reviews, there is clearly greater emphasis on
meeting customer needs. But is that substantially different from
the marketing concept?
Still others argue that this is the time of service-dominant logic,
and that we are in the service-dominant logic era.
Service-dominant logic is an approach to business that
recognizes that consumers want value no matter how it is
delivered, whether it's via a product, a service, or a combination
of the two.
Although there is merit in this belief, there is also merit to the
value approach and the one-to-one approach, and all three
beliefs are intertwined. Perhaps, then, the name for this era has
yet to be decided.
Whatever era we're in now, most historians would agree that
43. defining and labeling it is difficult. Value and one-to-one
approaches are both natural extensions of the marketing
concept, so we may still be in the marketing era. To make
matters more confusing, not all companies adopt the philosophy
of the era. For example, in the 1800s, Singer and National Cash
Register adopted strategies rooted in sales, so they operated in
the selling era forty years before it existed. Some companies are
still in the selling era. Recently, many believed automobile
manufacturers had fallen into trouble because they had been
working too hard to sell or push product and not hard enough on
delivering value.
Creating Offerings That Have Value
Marketing creates goods and services that the company offers at
a price to its customers or clients. The entire bundle consisting
of the tangible good, the intangible service, and the price is the
company's offering. When you compare one car to another, for
example, you can evaluate each of these dimensions—the
tangible, the intangible, and the price—separately. However,
you can't buy one manufacturer's car, another manufacturer's
service, and a third manufacturer's price when you actually
make a choice. Together, the three make up a single firm's
offer.
Marketing people do not create the offering alone. For example,
when the iPad was created, Apple's engineers were also
involved in its design. Apple's financial personnel had to review
the costs of producing the offering and provide input on how it
should be priced. Apple's operations group needed to evaluate
the manufacturing requirements the iPad would need. The
company's logistics managers had to evaluate the cost and
timing of getting the offering to retailers and consumers.
Apple's dealers also likely provided input regarding the iPad's
service policies and warranty structure. Marketing, however,
has the biggest responsibility because it is their responsibility
to ensure that the new product delivers value.
Communicating Offerings
Communicating is a broad term in marketing that means
44. describing the offering and its value to your potential and
current customers, as well as learning from customers what they
want and like. Sometimes communicating means educating
potential customers about the value of an offering, and
sometimes it means simply making customers aware of where
they can find a product. Communicating also means that
customers get a chance to tell the company what they think.
Today, companies are finding that to be successful, they need a
more interactive dialogue with their customers. For example,
Comcast customer service representatives monitor Twitter.
When they observe consumers tweeting problems with Comcast,
the customer service reps will post resolutions to their
problems. Similarly, JCPenney has created consumer groups
that talk among themselves on JCPenney-monitored websites.
The company might post questions, send samples, or engage in
other activities designed to solicit feedback from customers.
Mobile devices, like iPads and Droid smartphones, make mobile
marketing possible too. For example, if consumers check in at a
shopping mall on Foursquare or Facebook, stores in the mall
can send coupons and other offers directly to their phones and
computers.
Companies use many forms of communication, including
advertising on the internet or television, on billboards or in
magazines, through product placements in movies, and through
salespeople. Other forms of communication include attempting
to have news media cover the company's actions (part of public
relations), participating in special events such as the annual
International Consumer Electronics Show in which Apple and
other companies introduce their newest gadgets, and sponsoring
special events like the Susan G. Komen Race for the Cure.
Delivering Offerings
Marketing can't just promise value, it also has to deliver
value. Delivering an offering that has value is much more than
simply getting the product into the hands of the user; it also
entails making sure the user understands how to get the most
out of the product and that he or she is taken care of if service
45. is required later on. Value is delivered in part through a
company's supply chain. The supply chain includes a number of
organizations and functions that mine, make, assemble, or
deliver materials and products from a manufacturer to
consumers. The actual group of organizations can vary greatly
from industry to industry, and include wholesalers,
transportation companies, and retailers. Logistics, or the actual
transportation and storage of materials and products, is the
primary component of supply-chain management, but there are
other aspects of supply-chain management that we will discuss
later.
Exchanging Offerings
In addition to creating an offering, communicating its benefits
to consumers, and delivering the offering, there is the actual
transaction, or exchange, that has to occur. In most instances,
we consider the exchange to be cash for products and services.
However, if you were to fly to Louisville, Kentucky, for the
Kentucky Derby, you could pay for your airline tickets using
frequent-flier miles. You could also use Hilton Honors points to
pay for your hotel, and cash-back points on your Discover card
to pay for meals. None of these transactions would actually
require cash. Other exchanges, such as information about your
preferences gathered through surveys, might not involve cash.
When consumers acquire, consume, and dispose of products and
services, an exchange occurs. For example, via Apple's One-to-
One program, you can pay a yearly fee in exchange for
additional periodic product training sessions with an Apple
professional. Each time a training session occurs, another
transaction takes place. A transaction also occurs when you are
finished with a product. For example, you might sell your old
iPhone to a friend, trade in a car, or ask the Salvation Army to
pick up your old refrigerator.
Disposing of products has become an important ecological
issue. Batteries and other components of cell phones,
computers, and high-tech appliances can be very harmful to the
environment, and many consumers don't know how to dispose of
46. these products properly. Some companies, such as Office Depot,
have created recycling centers where customers can take their
old electronics.
Apple has a web page where consumers can fill out a form, print
it, and ship it to Apple along with their old cell phones and MP3
players. Apple then pulls out the materials that are recyclable
and properly disposes of those that aren't. By reducing the
hassle associated with disposing products, Office Depot and
Apple add value to their product offerings.
Key Points
The focus of marketing has changed from emphasizing the
product, price, place, and promotion mix to one that emphasizes
creating, communicating, delivering, and exchanging value.
Value is a function of the benefits an individual receives, and
consists of the price the consumer paid and the time and effort
the person expended making the purchase.
Who Does Marketing?
The short answer to the question of who does marketing is
"everybody!" But let's take a moment and consider in greater
detail how different types of organizations engage in marketing.
For-Profit Companies
The obvious answer to the question, who does marketing? is
for-profit companies like McDonald's, Procter & Gamble (the
makers of Tide detergent and Crest toothpaste), and Walmart.
For example, McDonald's creates a new breakfast chicken
sandwich for $1.99 (the offering), launches a television
campaign (communicating), makes the sandwiches available on
certain dates (delivering), and then sells them in its stores
(exchanging). When Procter & Gamble (P&G) creates a new
Crest tartar-control toothpaste, it launches a direct-mail
campaign in which it sends information and samples for dentists
to offer to their patients. P&G then sells the toothpaste through
retailers like Walmart, which has a panel of consumers sample
the product and provide feedback through an online community.
These are all examples of marketing activities.
47. For-profit companies can be defined by the nature of their
customers. A business-to-consumer (B2C) company like P&G
sells products to be used by consumers like you, while a
business-to-business (B2B) company sells products to be used
within another company's operations, as well as by government
agencies and entities. To be sure, P&G sells toothpaste to other
companies like Walmart (and probably to the army, prisons, and
other government agencies), but the end user is an individual
person.
Another way to categorize companies that engage in marketing
is by the functions they fulfill. P&G is a manufacturer, Walmart
is a retailer, and Grocery Supply Company is a wholesaler of
grocery items that buys from companies like P&G in order to
sell to small convenience store chains. Though they have
different functions, all these types of for-profit companies
engage in marketing activities. Walmart, for example,
advertises to consumers.
Grocery Supply Company salespeople will call on convenience
store owners to take orders and will build in-store displays.
P&G might help Walmart or Grocery Supply Company with
templates for advertising or suggest special cartons to use in an
in-store display, but all the companies are using marketing to
help sell P&G's toothpaste.
Similarly, all the companies engage in dialogue with their
customers to understand what to sell. For Walmart and Grocery
Supply, the dialogue may result in changing what they buy and
sell. For P&G, customer feedback may yield a new product or a
change in pricing strategy.
Nonprofit Organizations
Nonprofit organizations also engage in marketing. When the
American Heart Association (AHA) created a heart-healthy diet
for people with high blood pressure, it bound the diet into a
small book, along with access to a special website that people
could use to plan their meals and record their health-related
activities. The AHA then sent copies of the diet to doctors to
give to patients. When does an exchange take place, you might
48. be wondering? And what does the AHA get out of the
transaction?
From a financial standpoint, the AHA does not directly benefit.
Nonetheless, the organization is meeting its mission, or
purpose, of getting people to live heart-healthy lives and
considers the campaign a success when doctors give the books
to their patients. The point is that the AHA is engaged in the
marketing activities of creating, communicating, delivering, and
exchanging. This won't involve the same kind of exchange as a
for-profit company, but it is still marketing.
When a nonprofit organization engages in marketing activities,
this is called nonprofit marketing.
Some schools offer specific courses in nonprofit marketing, and
many marketing majors begin their careers with nonprofit
organizations.
Government entities also engage in marketing activities. For
example, when the US Army advertises to parents of
prospective recruits, sends brochures to high schools, or brings
a Bradley Fighting Vehicle to a state fair, the army is engaging
in marketing. The US Army also listens to its constituencies, as
evidenced by recent research aimed at understanding how to
serve military families more effectively. One result was
advertising aimed at improving parents' responses to their
children's interest in joining the army. Another was a program
aimed at encouraging spouses of military personnel to access
counseling services when their spouse is serving overseas.
Similarly, the Environmental Protection Agency (EPA) runs a
number of advertising campaigns designed to promote
environmentally friendly activities. One such campaign
promoted the responsible disposal of motor oil instead of simply
pouring it on the ground or into a storm sewer.
There is a difference between these two types of activities.
When the army is promoting the benefits of enlisting, it hopes
young men and women will join the army. By contrast, when the
EPA runs commercials about how to properly dispose of motor
oil, it hopes to change people's attitudes and behaviors so that
49. social change occurs. Social marketing, which can be done by
government agencies, nonprofit institutions, religious
organizations, and others, is conducted in an effort to achieve
certain social objectives. Convincing people that global
warming is a real threat via advertisements and commercials is
social marketing, as is the example regarding the EPA's
campaign to promote the responsible disposal of motor oil.
Individuals
If you create a résumé, are you using marketing to communicate
the value you have to offer prospective employers? If you sell
yourself in an interview, is that marketing? When you work for
a wage, you are delivering value in exchange for pay. Is this
marketing, too?
Some people argue that these are not marketing activities and
that individuals do not necessarily engage in marketing. (Some
people also argue that social marketing really isn't marketing
either.) What do you think? Can individuals market themselves
and their ideas?
Key Points
Marketing can be thought of as a set of business practices that
for-profit organizations, nonprofit organizations, government
entities, and individuals can use. When a nonprofit organization
engages in marketing activities, this is called nonprofit
marketing. Marketing conducted in an effort to achieve certain
social objectives is called social marketing.
Ask Yourself
· What types of companies engage in marketing?
· What is the difference between nonprofit marketing and social
marketing?
· What can individuals do for themselves that would be
considered marketing?
Why Study Marketing?
Products don't sell themselves. Generally, the "build it and they
will come" philosophy doesn't work. Good marketing educates
customers so that they can find the products they want, make
better choices about those products, and extract the most value
50. from them. In this way, marketing helps facilitate exchanges
between buyers and sellers for the mutual benefit of both
parties. Likewise, good social marketing provides people with
information and helps them make healthier decisions for
themselves and others.
Of course, all business students should understand all functional
areas of the firm, including marketing. There is more to
marketing, however, than simply understanding its role in the
business. Marketing has a tremendous impact on society.
Marketing Delivers Value
Marketing not only delivers value to customers, it also creates
value for the firm as it develops a reliable customer base and
increases its sales and profitability. Franklin D. Roosevelt, the
US president with perhaps the greatest influence on our
economic system, once said, "If I were starting life over again, I
am inclined to think that I would go into the advertising
business in preference to almost any other. The general raising
of the standards of modern civilization among all groups of
people during the past half century would have been impossible
without the spreading of the knowledge of higher standards by
means of advertising" (Famous Quotes and Authors, n.d.).
Roosevelt referred to advertising, but advertising alone is
insufficient for delivering value. Marketing finishes the job by
ensuring that what is delivered is valuable.
Marketing Benefits Society
Marketing benefits society in general by improving people's
lives in two ways. First, as we mentioned, it facilitates trade. As
you have learned, or will learn, in economics, being able to
trade makes people's lives better. Because better marketing
means more successful companies, jobs are created. This growth
generates wealth for workers, who are then able to make
purchases, which, in turn, creates more jobs.
The second way marketing improves the quality of life is
through the function of the value-delivery approach in creating
choices for consumers. When you add all the marketers together
who are trying to deliver offerings of greater value to
51. consumers and are effectively communicating that value,
consumers are able to make more informed decisions about a
wider array of choices. From an economic perspective, more
choices and smarter consumers are indicative of a higher quality
of life.
Marketing Costs Money
Marketing can sometimes be the largest expense associated with
producing a product. In the soft drink business, marketing
expenses account for about one-third of a product's price—
about the same as the ingredients used to make the soft drink
itself.
Some people argue that society does not benefit from marketing
when it represents such a huge chunk of a product's final price.
In some cases, that argument is justified. Yet when marketing
results in more informed consumers receiving a greater amount
of value, the cost is justified.
Marketing Offers People Career Opportunities
Marketing is the interface between producers and consumers,
shouldering the responsibility for both making money for the
company and delivering satisfaction to customers. In addition,
because marketing can be such an expensive part of a business
and is so critical to its success, companies actively seek strong
marketing employees. There are a variety of jobs available in
the marketing profession. The following positions represent
only a few of the opportunities available in the field.
· marketing research—Personnel in marketing research are
responsible for studying markets and customers in order to
understand what strategies or tactics might work best for firms.
· merchandising—In retailing, merchandisers are responsible for
developing strategies regarding what products wholesalers
should carry to sell to retailers such as Target and Walmart.
· sales—Salespeople meet with customers, determine their
needs, propose offerings, and make sure that the customer is
satisfied. Sales departments can also include sales support
teams who work on creating the offering.
· advertising—Whether it's for an advertising agency or inside a
52. company, some marketing personnel work on advertising.
Television commercials and print ads are only part of the
advertising mix. Many people who work in advertising spend all
their time creating advertising for electronic media, such as
websites and their pop-up ads, podcasts, etc.
· product development—People in product development are
responsible for identifying and creating features that meet the
needs of a firm's customers. They often work with engineers or
other technical personnel to ensure that value is created.
· direct marketing—Professionals in direct marketing
communicate directly with customers about a company's product
offerings via channels such as e-mail, chat lines, telephone, or
direct mail.
· digital media—Digital media professionals combine
advertising, direct marketing, and other areas of marketing to
communicate directly with customers via social media, the web,
and mobile media (including texts). They also work with
statisticians in order to determine which consumers receive
which message, and with IT professionals to create the right
look and feel of digital media.
· event marketing—Some marketing personnel plan special
events, orchestrating face-to-face conversations with potential
and current customers in a special setting.
· nonprofit marketing—Nonprofit marketers often don't get to
do everything listed previously, as nonprofits typically have
smaller budgets. But their work is always very important as they
try to change behaviors without having a product to sell.
A career in marketing can begin in a variety of ways. Entry-
level positions for new college graduates are available in many
of the roles previously mentioned.
A growing number of CEOs are people with marketing
backgrounds. Some legendary CEOs, like Ross Perot and Mary
Kay Ash, got their start in marketing. More recently, CEOs like
Mark Hurd, CEO of Oracle, and Jeffrey Immelt at GE, are
showing how marketing careers can lead to the highest position
of an organization.
53. Criticisms of Marketing
Marketing is not without its critics. We already mentioned that
one reason to study marketing is because it is costly, and
business leaders need to understand the cost/benefit ratio of
marketing in order to make wise investments. Yet that cost is
precisely why some criticize marketing. Some allege that if that
money could be put into research and development of new
products, perhaps the consumers would be better satisfied. Or,
some critics argue, prices could be lowered. But marketing
executives do not intentionally waste money on marketing, and
are always on the lookout for less expensive ways to have the
same performance.
Another criticism is that marketing creates wants among
consumers for products and services that aren't really needed.
For example, fashion marketing creates demand for high-dollar
jeans when much less expensive jeans can fulfill the same basic
function. Taken to the extreme, consumers may take on
significant credit card debt to satisfy wants created by
marketing, with serious negative consequences. When marketers
target their messages carefully so an audience that can afford
such products is the only group reached, such extreme
consequences can be avoided.
Key Points
By facilitating transactions, marketing delivers value to both
consumers and firms. At the broader level, this process creates
jobs and improves the quality of life in a society. Marketing can
be costly, so firms need to hire strong employees to manage
their marketing activities. Being responsible for both making
money for your company and delivering satisfaction to your
customers makes marketing a great career.
Ask Yourself
· Why study marketing?
· How does marketing provide value?
· Why does marketing cost so much? Is marketing worth it?
· What is the main cost of marketing?
Themes in Marketing
54. We previously discussed marketing as a set of activities that
anyone can do. Marketing is also a functional area in
companies, just like operations and accounting. Within a
company, marketing might be the title of a department, but
some marketing functions, such as sales, might be handled by
another department. Marketing activities do not occur
separately from the rest of the company, however.
As we have explained, pricing an offering, for example, will
involve a company's finance and accounting departments in
addition to the marketing team. Similarly, a marketing strategy
is not created solely by a firm's marketing personnel. Instead, it
flows from the company's overall strategy.
Everything Starts with Customers
Most organizations start with an idea of how to serve customers
better. Apple's engineers began working on the iPod by looking
at the available technology and thinking about how customers
would like to improve the availability and affordability of their
music, through downloading.
Many companies think about potential markets and customers
when they start. John Deere, for example, founded his company
on the principle of serving customers. When admonished for
making constant improvements to his products even though
farmers would take whatever they could get, Deere reportedly
replied, "They haven't got to take what we make and somebody
else will beat us, and we will lose our trade" (John Deere, n.d.).
He recognized that if his company failed to meet customers'
evolving needs, someone else would.
Here are a few mission statements from other companies. Note
that they all refer to their customers, directly or indirectly. Note
also how these are written to inspire employees and others who
interact with the company.
Company Mission Statements
· IBM
· Coca-Cola
· McDonald’s
· Merck
55. IBM will be driven by these values:
· Dedication to every client's success.
· Innovation that matters, for our company and for the world.
· Trust and personal responsibility in all relationships. (IBM,
n.d.)
Not all companies create mission statements that reflect a
marketing orientation. Note Apple's mission statement: "Apple
ignited the personal computer revolution in the 1970s with the
Apple II and reinvented the personal computer in the 1980s with
the Macintosh. Today, Apple continues to lead the industry in
innovation with its award-winning computers, OS X operating
system and iLife and professional applications. Apple is also
spearheading the digital media revolution with its iPod portable
music and video players and iTunes online store, and has
entered the mobile phone market with its revolutionary iPhone"
(Apple, Inc, 2009). This mission statement reflects a product
orientation, or an operating philosophy based on the premise
that Apple's success is due to great products and that simply
supplying them will lead to demand for them. Apple, and for
that matter, many other companies, have fallen prey to thinking
that they knew what a great product was without asking their
customers. In fact, Apple's first attempt at a graphic user
interface (GUI) was the LISA, a dismal failure.
The Marketing Plan
The marketing plan is the strategy for implementing the
components of marketing: creating, communicating, delivering,
and exchanging value. Once a company has decided what
business it is in and expressed that in a mission statement, the
firm then develops a corporate strategy. Marketing strategists
subsequently use the corporate strategy and mission and
combine that with an understanding of the market to develop the
company's marketing plan.
Marketers also want to know their customers—who they are and
what they like to do—so as to uncover this information.
Generally, this requires marketing researchers to collect sales
and other related customer data and analyze it. In this pursuit,
56. there are three important goals: understanding the customer's
wants and needs, understanding how the customer wants to
acquire, consume, and dispose of the offering, and determining
what makes up their personal value equation.
Once this information is gathered and digested, the planners can
work to create the right offering. Products and services are
developed, bundled together at a price, and then tested in the
market. Decisions have to be made about when to alter the
offerings, add new ones, or drop old ones. These decisions are
the focus of the next set of chapters and are the second step in
marketing planning.
Following the material on offerings, we explore the decisions
associated with building the value chain. Once an offering is
designed, the company has to be able to make it and then be
able to get it to the market. This step, planning for the delivery
of value, is the third step in the marketing plan.
The fourth step is creating the plan for communicating value.
How does the firm make consumers aware of the value it has to
offer? How can it help them recognize that value and decide
that they should purchase products? These are important
questions for marketing planners.
Once a customer has decided that her personal value equation is
likely to be positive, she will decide to purchase the product.
That decision still has to be acted on, however, which is the
exchange. As exchanges occur, marketing planners then refine
their plans based on the feedback they receive from their
customers, as well as what their competitors are doing and how
market conditions are changing.
The Changing Marketing Environment
We previously mentioned that the view of marketing has
changed from a static set of four Ps to a dynamic set of
processes that involve marketing professionals as well as many
other employees in an organization. The way business is being
conducted today is changing, too, and marketing is changing
along with it. There are several themes that underscore these
changes.
57. · ethics and social responsibility—Businesses exist only
because society allows them to. When businesses begin to fail
society, society will punish them or revoke their license. The
crackdown on companies in the subprime mortgage–lending
industry is one example. These companies created and sold
loans (products) that could only be paid back under ideal
circumstances, and when consumers couldn't pay these loans
back, the entire economy suffered greatly. Scandals such as
these illustrate how society responds to unethical business
practices. However, whereas ethics require only that you do no
harm, the concept of social responsibility requires that you
actively seek to improve the lives of others. Today, people are
demanding businesses take a proactive stance in terms of social
responsibility, and companies are being held to ever-higher
standards of conduct.
· sustainability—An example of social responsibility,
sustainability involves engaging in practices that do not
diminish the earth's resources. Coca-Cola, for example, is
working with governments in Africa to ensure clean water
availability, not just for manufacturing Coke products but for
all consumers in that region. Further, the company seeks to
engage the participation of American by offering opportunities
to contribute to clean-water programs. Right now, companies do
not have to engage in these practices, but because firms
represent the people behind them (their owners and employees),
forward-thinking executives are seeking ways to reduce the
impact their companies are having on the planet.
· service-dominant logic—You might have noticed that we use
the word offering a lot instead of the term product. That's
because of service-dominant logic, the approach to business that
recognizes that consumers want value no matter how it is
delivered—whether through a tangible product or through
intangible services. This emphasis on value drives the
functional approach to value that we've taken—that is, creating,
communicating, delivering, and exchanging value.
· metrics—Technology has increased the amount of information
58. available to decision makers. As such, the amount and quality
of data for evaluating a firm's performance is increasing. Earlier
in our discussion of the marketing plan, we explained that
customers communicate via transactions. Although this sounds
both simple and obvious, better information technology has
given us a much more complete picture of each exchange.
Cabela's, for example, combines data from Web browsing
activity with purchase history in order to determine the likely
next-best offer. Using data from many sources, we can build
more-effective metrics that can then be used to create better
offerings, better communication plans, and so forth.
· a global environment—Every business is influenced by global
issues. The price of oil, for example, is a global concern that
affects everyone's prices and even the availability of some
offerings. We already mentioned Coke's concern for clean
water. But Coke also has to be concerned with distribution
systems in areas with poor or nonexistent roads, a myriad of
government policies and regulations, workforce availability,
and many more issues associated with selling and delivering
Coke around the world. Even companies with smaller markets
source some or all their offerings from companies in other
countries or else face some sort of direct competition from
companies based in other countries. Every business
professional, whether working in marketing or elsewhere, needs
some understanding of the global environment in which
companies operate.
Key Points
A company's marketing plan flows from its strategic plan. Both
begin with a focus on customers. The essential components of
the plan are understanding customers, creating an offering that
delivers value, communicating the value to the customer,
exchanging with the customer, and evaluating the firm's
performance. A marketing plan is influenced by environmental
trends such as social responsibility, sustainability, service-
dominant logic, the increased availability of data and effective
metrics, and the global nature of the business environment.
59. Ask Yourself
· Why does everything start with customers? Or is it only
marketing that starts with customers?
· What are the key parts of a marketing plan?
· What is the relationship between social responsibility,
sustainability, service-dominant logic, and the global business
environment? How does the concept of metrics fit?
References
American Marketing Association. (n.d.). Definition of
marketing. Retrieved from
http://www.marketingpower.com/AboutAMA/Pages/Definitionof
Marketing.aspx?sq=definition+of+marketing
Apple, Inc. (2009). Apple's app store downloads top 1.5 billion
in first year. Retrieved from
http://www.apple.com/hk/en/pr/library/ 2009/07/14apps.html
Coca-Cola Company. (n.d.). Mission, vision & values.
Retrieved from http://www.thecoca-
colacompany.com/ourcompany/mission_vision_values.html
Famous Quotes and Authors. (n.d.). Franklin D. Roosevelt
quotes and quotations. Retrieved from
http://www.famousquotesandauthors.com/authors/franklin_d__r
oosevelt_quotes.html
IBM. (n.d.). About IBM. Retrieved from
http://www.ibm.com/ibm/us/en
John Deere (n.d.). John Deere: A biography. Retrieved from
http://www.deere.com/en_US/compinfo/history/johndeere2.html
McDonald's. (n.d.). Our company. Retrieved from
http://aboutmcdonalds.com/mcd/our_company/mcd_faq/student_
research.html#1
Merck & Co. (n.d.). The new Merck. Retrieved from
http://www.merck.com/about/Merck%20Vision%20Mission.pdf
Licenses and Attributions
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Learning ResourceStrategic Planning
What Is a Value Proposition?
Individual buyers and organizational buyers evaluate products
and services to see if they provide desired benefits. For
example, when you're exploring vacation options, you want to
know the benefits of each destination and the value you will get
by going to each place. Before you (or a firm) can develop a
strategy or create a strategic plan, you have to develop a value
proposition. A value proposition is a 30-second elevator speech
stating the specific benefits a product or service offering
provides a buyer. It shows why the product or service is
superior to competing offers. The value proposition answers the
questions, "Why should I buy from you or why should I hire
you?" As such, the value proposition becomes a critical
component in shaping strategy.
The following is an example of a value proposition developed
by a sales consulting firm: "Our clients grow their business,
large or small, typically by a minimum of 30 percent to 50
percent over the previous year. They accomplish this without
working 80-hour weeks and sacrificing their personal lives"
(Lake, 2016).
Note that although a value proposition will hopefully lead to
profits for a firm, when the firm presents its value proposition
to its customers, it doesn't mention its own profits. That's
because the goal is to focus on the external market or what
customers want.
Firms typically segment markets and then identify different
target markets, or groups of customers, that they want to reach
when firms are developing their value propositions. Be aware
that companies sometimes develop different value propositions
61. for different target markets just as individuals may develop a
different value proposition for different employers. The value
proposition tells groups of customers (or potential employers)
why they should buy a product or service, vacation to a
particular destination, donate to an organization, hire you, etc.
Once the benefits of a product or service are clear, the firm
must develop strategies that support the value proposition. The
value proposition serves as a guide for this process. In the case
of our sales consulting firm, the strategies it develops must help
clients improve their sales by 30 percent to 50 percent.
Likewise, if a company's value proposition states that the firm
is the largest retailer in the region with the most stores and best
product selection, opening stores or increasing the firm's
inventory might be a key part of the company's strategy.
Looking at Amazon's value proposition, "Low price, wide
selection with added convenience anytime, anywhere," one can
easily see how Amazon has been so successful
(InfoMarketersZone.com, n.d.).
Individuals and students should also develop their personal
value propositions. Tell companies why they should hire you or
why a graduate school should accept you. Show the value you
bring. A value proposition will help you in different situations.
Think about how your internship experience and/or study abroad
experience may help a future employer. For example, you could
explain to the employer the benefits and value of going abroad.
Perhaps your study abroad experience helped you understand
customers that buy from Company X and your customer service
experience during your internship increased your ability to
generate sales, which improved your employer's profit margin.
Thus you may be able to quickly contribute to Company X,
something that Company X might value.Key Points
A value proposition is a 30-second elevator speech stating the
specific value a product or service provides to a target market.
Firms may develop different value propositions for different
groups of customers. The value proposition shows why the
product or service is superior to competing offers and why the