p. 38

INTRODUCTION

Nike began by making running shoes and quickly expanded into equipment and apparel for other sports and activities.

When Nike stumbled, it overcame the struggles by focusing very intently on customers.  In the digital age, Nike works to build deep and strong relationships with customers.

It engages them by talking with them rather than at them.  It builds a Nike community.

Even during the Great Recession, Nike managed to continue growing and gaining market share, while competitors struggled.  This seems to confirm the wisdom of Nike’s marketing strategy.

p. 38

Photo: Nike

Ø Assignments, Resources

Use Small Group Assignment 1 here

Use Individual Assignment 1 here

Ø Opening Vignette Questions

1. Discuss Nike’s marketing strategy in terms of delivering increased customer value. What is inherently better about the current Nike marketing from the customer’s point of view?

2. For a while, Nike lost its “cool” factor.  Based on your experience and perception, has it gotten it back?  Why or why not?

3. What comes next for Nike in the 21^st century? What new marketing strategies might the company develop to remain fresh and relevant?

p. 40

PPT 2-4

PPT 2-5

PPT 2-6

Explain company-wide strategic planning and its four steps.

COMPANY-WIDE STRATEGIC PLANNING: DEFINING MARKETING’S ROLE

The hard task of selecting an overall company strategy for long-run survival and growth is called strategic planning.

Strategic planning is the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing market opportunities.

Strategic planning sets the stage for the rest of the planning in the firm.

Companies typically prepare annual plans, long-range plans, and strategic plans.

At the corporate level, the company starts the strategic planning process by defining its overall purpose and mission (see Figure 2.1).  It then creates detailed supporting objectives that guide the entire company. Next, headquarters reviews the portfolio of businesses and products is best for the company and how much support to give each one. In turn, each business and product develops detailed marketing and other departmental plans that support the company-wide plan. Thus, marketing planning occurs at the business-unit, product, and market levels.

Learning Objective 1

p. 40

Key Term:

Strategic Planning

p. 41

Figure 2.1:

Steps in Strategic Planning

Ø Assignment, Resources

            Use Discussion Question 2-1 here

            Use Video Case here

Ø Troubleshooting Tip

Most students have had no experience with strategy or strategy formulation (especially at the undergraduate level). Because their background in strategy is weak, their ability to strategically plan is also weak. The best way to attack this problem is to follow the explanation sequence provided by the text. Before this discussion begins, however, it might be useful to find areas where students have had strategic planning experience (such as athletics, student politics, games, video games, chess, computer games, etc.). By asking the students to recall and relate these experiences, parallels can be drawn to business strategies and the plans that result from these strategies (for example, think of all the military and athletic terms that might be used to describe business strategy—i.e., flanker movement for flanker brands).

p. 40

PPT 2-7

Defining a Market-Oriented Mission

Many organizations develop formal mission statements. A mission statement is a statement of the organization’s purpose—what it wants to accomplish in the larger environment.

A clear mission statement acts as an “invisible hand” that guides people in the organization.

A market-oriented mission statement defines the business in terms of satisfying basic customer needs.

Management should avoid making its mission too narrow or too broad.

Missions should be realistic, specific, fit the market environment, based on the company’s distinctive competencies, and motivating.

p. 41

Key Term: Mission Statement

p. 41

Table 2.1: Product- versus Market-Oriented Business Definitions

Ø Assignments, Resources

Use Critical Thinking Exercise 2-8 here

p. 44

PPT 2-8

PPT 2-9

PPT 2-10

p. 44

PPT 2-11

PPT 2-12

p. 45

PPT 2-13

Setting Company Objectives and Goals

The company’s mission needs to be turned into detailed supporting objectives for each level of management.

The mission leads to a hierarchy of objectives, including business objectives and marketing objectives.

Marketing strategies and programs must be developed to support these marketing objectives.

Review Learning Objective 1: Explain company-wide strategic planning and its four steps.

Discuss how to design business portfolios and develop growth strategies.

Designing the Business Portfolio

A business portfolio is the collection of businesses and products that make up the company.

The best portfolio is the one that best fits the company’s strengths and weaknesses to opportunities in the environment.

A strategic business unit (SBU) is a unit of the company which has a separate mission and objectives and that can be planned independently from other company businesses.

p. 44

Ad: Heinz

Learning Objective 2

p. 44

Key Term: Business Portfolio

Ø Assignments, Resources

Use Real Marketing 2.1 here

Use Additional Project 1 here

Use Think-Pair-Share 1 here

p. 45

PPT 2-14

PPT 2-15

 PPT 2-16

Analyzing the Current Business Portfolio

The major activity in strategic planning is business portfolio analysis, whereby management evaluates the products and businesses making up the company.

The next step in business portfolio analysis calls for management to assess the attractiveness of its various SBUs and decide how much support each deserves.

Most standard portfolio-analysis methods evaluate SBUs on two important dimensions—the attractiveness of the SBU’s market or industry and the strength of the SBU’s position in that market or industry.

The Boston Consulting Group Approach. The best-known portfolio-planning method was developed by the Boston Consulting Group.

This matrix defines four types of SBUs:

· Stars: high-growth market, high-share product

· Cash cows: low-growth market, high-share product

· Question marks: low-share product, high-growth market

· Dogs: low-share product, low-growth market

Once it has classified its SBUs, the company must determine what role each will play in the future.

The company can invest more in the business unit in order to grow its share. It can invest just enough to hold the SBU’s share at the current level. It can harvest the SBU, milking its short-term cash flow regardless of the long-term effect. Or it can divest the SBU by selling it or phasing it out.

p. 45

Key Terms: Portfolio Analysis

p. 45

Key Term: Growth-Share Matrix

p. 45

Figure 2.2: The BCG Growth-Share Matrix

Ø Assignments, Resources

Use Discussion Question 2-2 here

Use Small Group Assignment 2 here

Use Individual Assignment 2 here

Ø Troubleshooting Tip

This simple matrix is the basis for many portfolio analysis techniques. An easy way to cover this material quickly is to assign each of the four parts to four students in advance of class. Next, have them respond to example suggestions (illustrations of the four cells) from their classmates. This will reinforce the material for the entire class.

p. 46

PPT 2-17

p. 47

PPT 2-18

PPT 2-19

PPT 2-20

Problems with Matrix Approaches

Portfolio-analysis approaches have limitations.

· They can be difficult, time-consuming, and costly to implement.

· Management may find it difficult to define SBUs and measure market share and growth.

· These approaches focus on classifying current businesses but provide little advice for future planning.

Because of such problems, many companies have dropped formal matrix methods in favor of more customized approaches that are better suited to their specific situations.

Developing Strategies for Growth and Downsizing

Designing the business portfolio involves finding businesses and products the company should consider in the future.

Marketing has the main responsibility for achieving profitable growth for the company.

Marketing must identify, evaluate, and select market opportunities and lay down strategies for capturing them. The product/market expansion grid looks for new opportunities.

The product/market expansion grid is shown in Figure 2.3.

· Market penetration involves making more sales to current customers without changing its products.

· Market development involves identifying and developing new markets for its current products.

· Product development is offering modified or new products to current markets.

· Diversification is where a company starts up or buys businesses outside of its current products and markets.

p. 46

Photo: Disney

p. 47

Photo: Starbucks

p. 47

Figure 2.3: The Product/Market Expansion Grid

pp. 47

Key Terms: Product/Market Expansion Grid, Market Penetration, Market Development, Product Development

p. 48

Photo: Starbucks

PPT 2-21

PPT 2-22

Companies must also develop strategies for downsizing their businesses.

Review Learning Objective 2: Discuss how to design business portfolios and develop growth strategies.

Ø Assignments, Resources 

Use Critical Thinking Exercises 2-6 and 2-7 here

Use Online, Mobile, and Social Media Marketing here

Use Marketing Ethics here

Ø Troubleshooting Tip

Many students will have an incomplete understanding of the growth strategies shown in the product/market expansion grid. Though these areas are carefully described in the text, it is useful to make sure that students understand the mix of alternatives available to the strategist. One way to do this is to pick another example besides the Starbucks coffee example used in the text and have the students suggest acceptable alternatives. Remind students to think about how the example companies have expanded or contracted in recent years. Lastly, make students practice using the terms from the expansion grid in their discussions so a proper business strategy vocabulary will be built. This practice will really help the students when an exam rolls around.

p. 48

PPT 2-23

p. 48

PPT 2-24

PPT 2-25

p. 49

PPT 2-26

PPT 2-27

Explain marketing’s role in strategic planning and how marketing works with its partners to create and deliver customer value.

PLANNING MARKETING: PARTNERING TO BUILD CUSTOMER RELATIONSHIPS

Within each business unit, more detailed planning takes place. The major functional departments in each unit must work together to accomplish strategic objectives.

Marketing provides a guiding philosophy—the marketing concept—that suggests that company strategy should revolve around building profitable relationships with important customer groups.

Marketing provides inputs to strategic planners by helping to identify attractive market opportunities and by assessing the firm’s potential to take advantage of them.

Marketing designs strategies for reaching the unit’s objectives.

Partnering with Other Company Departments

Each company department can be thought of as a link in the company’s value chain.

A value chain is the series of departments that carry out value-creating activities to design, produce, market, deliver, and support the firm’s products.

A company’s value chain is only as strong as its weakest link.

Success depends on how well each department performs its work of adding customer value and on how well the activities of various departments are coordinated.

In practice, departmental relations are full of conflicts and misunderstandings.

Partnering with Others in the Marketing System

The firm needs to look beyond its own value chain and into the value chains of its suppliers, distributors, and ultimately, customers.

More companies today are partnering with other members of the supply chain to improve the performance of the customer value delivery network.

Increasingly, today’s competition no longer takes place between individual competitors. Rather, it takes place between the entire value-delivery networks created by these competitors.

Review Learning Objective 3: Explain marketing’s role in strategic planning and how marketing works with its partners to create and deliver customer value.

Learning Objective 3

p. 48

Key Term: Value Chain

p. 49

Ad: True Value

p. 50

Key Term: Value Delivery Network

p. 50

PPT 2-28

PPT 2-29

p. 50

PPT 2-30

PPT 2-31

Describe the elements of a customer value-driven marketing strategy and mix, and the forces that influence it.

MARKETING STRATEGY AND THE MARKETING MIX

Marketing’s role and activities are show in Figure 2.4; it summarizes the major activities involved in managing marketing strategy and the marketing mix.

Marketing strategy is the marketing logic by which the company hopes to achieve these profitable relationships.

Customer-Driven Marketing Strategy

Companies know that they cannot profitably serve all consumers in a given market—at least not all consumers in the same way.

Market Segmentation

The process of dividing a market into distinct groups of buyers with different needs, characteristics, or behavior who might require separate products or marketing programs is called market segmentation.

A market segment consists of consumers who respond in a similar way to a given set of marketing efforts.

Learning Objective 4

p. 50

Figure 2.4: Managing Marketing Strategies and the Marketing Mix

p. 50

Key Term:

Marketing Strategy

p. 51

Key Terms: Market Segmentation, Market Segment

Ø Troubleshooting Tip

Market segmentation and targeting is universally a new concept to students, unless they happen to have a parent who works in marketing. Although this is discussed in detail in a future chapter, showing how a large, amorphous market can be broken down in more and more detailed groups of buyers will help.

p. 51

PPT 2-32

PPT 2-33

Market Targeting

Market targeting involves evaluating each market segment’s attractiveness and selecting one or more segments to enter.

A company should target segments in which it can profitably generate the greatest customer value and sustain it over time.

Market Differentiation and Positioning

A product’s position is the place the product occupies relative to competitors in consumers’ minds.

Marketers want to develop unique market positions for their products.

Market positioning is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target customers.

Positioning establishes differentiation.

To gain competitive advantage, the company must offer value to target consumers. This is accomplished through product differentiation—actually differentiating the company’s market offering so that it gives consumers more value.

p. 51

Key Term:

Market Targeting

p. 51

Key Term: Positioning

p. 52

Ad: Del Monte

p. 51

Key Term: Differentiation

Ø Troubleshooting Tip

Market positioning can be difficult to understand as well. Students will normally think of a product in terms of its features, and although positioning includes the features, it also spans the concepts of benefits and perceptions. Using examples of brands at opposite ends of a price continuum, such as Rolex versus Timex watches, helps drive home what positioning means.

p. 54

PPT 2-34

PPT 2-35

PPT 2-36

Developing an Integrated Marketing Mix

The marketing mix is the set of tactical marketing tools that the firm blends to produce the response it wants in the target market. This is described in Figure 2.5.

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

Price is the amount of money customers must pay to obtain the product.

Place includes company activities that make the product available to target consumers.

Promotion means activities that communicate the merits of the product and persuade target customers to buy it.

An effective marketing program blends all of the marketing mix elements into a coordinated program designed to achieve the company’s marketing objectives by delivering value to consumers.

Some critics feel that the four Ps may omit or underemphasize certain important activities.

From the buyer’s viewpoint, in this age of customer relationships, the four Ps might be better described as the four Cs:

· Customer solution

· Customer cost

· Convenience

· Communication

Review Learning Objective 4: Describe the elements of a customer value-driven marketing strategy and mix and the forces that influence it.

p. 54

Key Term: Marketing Mix

p. 54

Figure 2.5: The Four P’s of the Marketing Mix

Ø Assignments, Resources 

Use Additional Project 2 here

Use Real Marketing 2.2 here

Use Discussion Questions 2-3 and 2-4 here

Use Additional Project 3 here

Use Think-Pair-Share 2 here

Use Outside Example 1 and 2 here

p. 55

PPT 2-37

p. 55

PPT 2-38

PPT 2-39

List the marketing management functions, including the elements of a marketing plan, and discuss the importance of measuring and managing marketing return on investment 

MANAGING THE MARKETING EFFORT

Managing the marketing process requires the four marketing management functions shown in Figure 2.6.

· Analysis

· Planning

· Implementation

· Control

Marketing Analysis

Managing the marketing function begins with a complete analysis of the company’s situation.

The company must analyze its markets and marketing environment to find attractive opportunities and avoid environmental threats.

The marketer should conduct a SWOT analysis, by which it evaluates the company’s overall strengths, weaknesses, opportunities, and threats.

Learning Objective 5

p. 55

Figure 2.6: Managing Marketing: Analysis, Planning, Implementation, and Control

p. 55

Key Term:

SWOT analysis

p. 56

Figure 2.7: SWOT Analysis: Strengths (S), Weaknesses (W), Opportunities (O), and Threats (T)

Ø Assignments, Resources

            Use Critical Thinking Exercise 2-7 here

p. 56

PPT 2-40

Marketing Planning

Marketing planning involves deciding on marketing strategies that will help the company attain its overall strategic objectives.

A detailed marketing plan is needed for each business, product, or brand.

Table 2.2 outlines the major sections of a typical product or brand plan. See Appendix 1 for a sample marketing plan.

A marketing strategy consists of specific strategies: target markets, positioning, the marketing mix, and marketing expenditure levels.

p. 57

Table 2.2: Contents of a Marketing Plan

p. 56

PPT 2-41

p. 58

PPT 2-42

p. 58

PPT 2-43

p. 59

p. 59

PPT 2-44

p. 59

PPT 2-45

PPT 2-46

Marketing Implementation

Marketing implementation is the process that turns marketing plans into marketing actions in order to accomplish strategic marketing objectives.

Implementation involves day-to-day, month-to-month activities that effectively put the marketing plan to work.

Implementation addresses the who, where, when, and how.

In an increasingly connected world, people at all levels of the marketing system must work together to implement marketing strategies and plans.

Successful marketing implementation depends on how well the company blends its people, organizational structure, decision and reward systems, and company culture into a cohesive action program that supports its strategies.

Marketing Department Organization

The company must design a marketing organization that can carry out marketing strategies and plans.

The most common form of marketing organization is the functional organization. Under this organization functional specialists head the various marketing activities.

A company that sells across the country or internationally often uses a geographic organization.

Companies with many very different products or brands often create a product management organization. A product manager develops and implements a complete strategy and marketing program for a specific product or brand.

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

A market management organization is similar to the product management organization.

Market managers are responsible for developing marketing strategies and plans for their specific markets or customers.

Large companies that produce many different products flowing into many different geographic and customer markets usually employ some combination of the functional, geographic, product, and market organization forms.

Many companies are finding that today’s marketing environment calls for less focus on products, brands, and territories and more focus on customers and customer relationships.

More and more companies are shifting their brand management focus toward customer management.

Marketing Control

Marketing control involves evaluating the results of marketing strategies and plans and taking corrective action to ensure that objectives are attained.

Operating control involves checking ongoing performance against the annual plan and taking corrective action when necessary. Its purpose is to ensure that the company achieves the sales, profits, and other goals set out in its annual plan.

Strategic control involves looking at whether the company’s basic strategies are well matched to its opportunities.

Marketing strategies and programs can quickly become outdated, and each company should periodically reassess its overall approach to the marketplace.

MEASURING AND MANAGING RETURN ON MARKETING INVESTMENT

Marketing managers must ensure that their marketing dollars are being well spent.

In the past, many marketers spent freely on expensive programs, often without considering financial return on spending. In today’s constrained economy, that is changing.

In response, marketers are developing better measures of return on marketing investment (marketing ROI)—the net return from a marketing investment divided by the costs of the marketing environment.

A company can assess return on marketing in terms of standard marketing performance measures, such as brand awareness, sales, or market share.

Some companies are combining such measures into marketing dashboards—useful sets of marketing performance measures in a single display.

Increasingly marketers are using customer-centered measures of marketing impact, such as customer acquisition, customer retention, customer lifetime value, and customer equity.

Review Learning Objective 5: List the marketing management functions, including the elements of a marketing plan, and discuss the importance of measuring and managing marketing return on investment.

p. 56

Key Term: Marketing Implementation

p.

Photo: Marketing Planning and Control

p. 58

Key Term: Marketing Control

p. 59

Key Term: Return on Marketing Investment (Marketing ROI)

p. 60

Figure 2.8: Marketing Return on Investment

Ø Assignments, Resources

Use Discussion Question 2-5 here

Use Marketing by the Numbers here

Use Think-Pair-Share 3 here

Use Company Case here

Use Video Case here