Lear ning Outcomes LO1 Define the term marketing LO2 Describe four marketing management philosophies LO3 Discuss the differences between sales and market orientations LO4 Describe several reasons for studying marketing Copyright 2010 by Cengage Learning Inc. All Rights Reserved 1 Chapter 2: Strategic Planning for Competitive Advantage Prepared by Amit Shah, Frostburg State University Designed by Eric Brengle, B-books, Ltd. Copyright 2010 by Cengage Learning Inc. All Rights Reserved 2 Learning Outcomes LO1 Understand the importance of strategic marketing and know a basic outline for a marketing plan LO2 Develop an appropriate business mission statement LO3 Explain the components of a situation analysis Copyright 2010 by Cengage Learning Inc. All Rights Reserved 3 Learning Outcomes LO4 Explain the criteria for stating good marketing objectives LO5 Identify sources of competitive advantage LO6 Identify strategic alternatives LO7 Discuss target market strategies Copyright 2010 by Cengage Learning Inc. All Rights Reserved 4 LO1 The Importance of Strategic Marketing What Strategic Planning Why Long-term profitability and growth How Write a marketing plan GE, Toys R Us, McDonalds Copyright 2010 by Cengage Learning Inc. All Rights Reserved 5 Strategic Marketing Management What is the organization’s main activity? How will it reach its goals? THE ANSWER IS A MARKETING PLAN. 6 Copyright 2010 by Cengage Learning Inc. All Rights Reserved Marketing Planning Marketing Plan- A written document that acts as a guidebook for the marketing manager. Copyright 2010 by Cengage Learning Inc. All Rights Reserved 7 Building a marketing plan is more than just meeting and knocking around ideas haphazardly… And it’s DEFINITELY more than adopting a strategy just because “all of a sudden” you decided it seemed like a good idea… A Marketing Plan is a Roadmap for All of a Company’s Business Efforts Marketing Plans are: – Strategic and extensive – Organized and analytical – Either short or long range (depending on the company) Marketing Plan Elements Business Mission Statement Situation or SWOT Analysis Objectives Marketing Strategy Target Market Strategy Marketing Mix Product Distribution Promotion Price Implementation Evaluation Control Copyright 2010 by Cengage Learning Inc. All Rights Reserved 11 LO2 Business Mission Statement Q: What business are we in? A: Business mission statement Too narrow Too broad Just right marketing myopia no direction focus on markets served and benefits customers seek Copyright 2010 by Cengage Learning Inc. All Rights Reserved 12 LO1 Star Trek Enterprise Why is a mission statement important? Southwest Airlines Mission Statement SOURCE: http://www.southwestairlines.com/about_swa/mission.html 14 Copyright 2010 by Cengage Learning Inc. All Rights Reserved AMA’s Mission Statement Samples Find a sample to share Parkway Mission statement 15 Defining the Business Mission • Answers the question, “What business are we in?” • Focuses on the market(s) rather than the good or service • Strategic Business Units (SBUs) may also have a mission statement 16 LO2 TODAY’S ORGANIZATIONS ORGANIZATIONAL STRUCTURE AND STRATEGIES Strategic Business Unit (SBU) • GE Technology Infrastructure (healthcare, aviation, transportation) • GE Energy (energy, oil & gas, water) • GE Capital (Commercial Finance, GE Money) • NBC Universal (television, music, film) Marketing Plan Elements Business Mission Statement Situation or SWOT Analysis Objectives Marketing Strategy Target Market Strategy Marketing Mix Product Distribution Promotion Price Implementation Evaluation Control Copyright 2010 by Cengage Learning Inc. All Rights Reserved 18 Conducting a Situation Analysis LO3 SWOT Analysis- Identifying internal strengths and weaknesses and also examining external opportunities and threats. Copyright 2010 by Cengage Learning Inc. All Rights Reserved 19 SWOT Analysis S W O T Things the company does well. Internal External Things the company does not do well. Conditions in the external environment that favor strengths. Conditions in the external environment that do not relate to existing strengths or favor areas©South-Western of currentCollege weakness. Publishing Copyright 2010 by Cengage Learning Inc. All Rights Reserved 20 LO4 THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE Step 1: Situation (SWOT) Analysis • Situation Analysis • SWOT Analysis Strengths Weaknesses Opportunities Threats LO4 THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE Step 1: Situation (SWOT) Analysis • SWOT Analysis Study Identify Industry Trends Analyze Competitors Assess the Organization Research Present and Prospective Customers Ben & Jerry’s SWOT analysis serves as the basis for management actions regarding growth LO3 Components of a Situation Analysis production costs marketing skills financial resources image technology ENVIRONMENT INTERNAL Strengths Weaknesses Copyright 2010 by Cengage Learning Inc. All Rights Reserved 24 Marketing Objective A statement of what is to be accomplished through marketing activities. Copyright 2010 by Cengage Learning Inc. All Rights Reserved 25 Marketing Objectives Realistic Measurable Time specific Compared to a benchmark “Our objective is to increase sales of Purina brand cat food by 15 percent over 2009 sales of $300 million.” Copyright 2010 by Cengage Learning Inc. All Rights Reserved 26 LO4 Criteria for Good Marketing Objectives Realistic, measurable, and time-specific objectives consistent with the firm’s objectives: 1. Communicate marketing management philosophy 2. Provide management direction 3. Motivate employees 4. Force executives to think clearly 5. Allow for better evaluation of results Copyright 2010 by Cengage Learning Inc. All Rights Reserved 27 Marketing Plan Elements Business Mission Statement Situation or SWOT Analysis Objectives Marketing Strategy Target Market Strategy Marketing Mix Product Distribution Promotion Price Implementation Evaluation Control Copyright 2010 by Cengage Learning Inc. All Rights Reserved 28 Describing the Target Market LO7 Discuss target market strategies. Copyright 2010 by Cengage Learning Inc. All Rights Reserved 29 Marketing Strategy Marketing Strategy- The activities of selecting and describing one or more target markets and developing and maintaining a market mix that will produce mutually satisfying exchanges with target markets. Copyright 2010 by Cengage Learning Inc. All Rights Reserved 30 Target Market Strategy • Segment the market based on groups with similar characteristics • Analyze the market based on attractiveness of market segments • Select one or more target markets Copyright 2010 by Cengage Learning Inc. All Rights Reserved 31 Target Market Strategy Appeal to the entire market with one marketing mix Concentrate on one marketing segment Appeal to multiple markets with multiple marketing mixes Copyright 2010 by Cengage Learning Inc. All Rights Reserved 32 The Concept of Market Segmentation Copyright 2010 by Cengage Learning Inc. All Rights Reserved 33 LO4 Bases for Segmenting Consumer Markets Geography • Region • Market size • Market density • Climate Demographics Psychographics • • • • • • • • • Age Gender Income Race/ethnicity Family life cycle Personality Motives Lifestyle Geodemographics Benefits • Benefits sought Copyright 2010 by Cengage Learning Inc. All Rights Reserved Usage Rate • • • • Former Potential 1st time Light or irregular • Medium • Heavy 34 Family Life Cycle Copyright 2010 by Cengage Learning Inc. All Rights Reserved 35 How do we Understand the Pet Owner’s Attitudes? There are 7distinct segments of pet owners and they all shop in your stores: Segmentation study tells us how pet owners feel about their pets and the role food plays in that relationship. Their attitudes influence the brands they purchase and their sensitivity to price, promotion, and assortment. Expert Driven Providers Expert advice – from veterinarian, breeder or other perceived expert – is very important. Information seekers Nutrition focused Primarily feed dry food Very low price sensitivity Practical Providers Uninvolved Owners They like pets, but are not goo-goo about them. Food must be: - Affordable - Quick - Easy to feed Look for convenient, practical, affordable food High price sensitivity - Will switch for a good deal Healthy Habitualists Basic Food Feeders Look for something easy and nutritious. Pet most likely belongs to the children, but needs to be fed. Very brand loyal Not as worried about taste Food that looks like human food is more appealing Very high price sensitivity High price sensitivity-look for sales Indulgent Nutritionists Pampering Preparers Still searching for right balance of taste and nutrition. Homemade food is used to show love. Try new products Nutrition is important, but taste is paramount Food = Love Average price sensitivity Mix wet and dry Like variety Below average price sensitivity Store-bought food alone does not suffice 36 Segmentation Example Female Department Shoppers classified into five groups based upon demographics, values, and attitudes. For Example: 1. Fashion Statement-most affluent and educated, use credit cards, expect to be treated well by retail personnel. 2. Wanna-Buys –similar to a fashion statement but with less income. Enjoy buying on impulse. Segmentation Example 3. Family Values – represent large families, often are professionals, buying focuses on children or the home 4. Down to Basics – Most likely to have children, not college educated, careful spenders, prefer not to use credit, like coupons. 5. Matriarchs- older often retired, they like department stores but are risk adverse and have few purchase plans. Who’s Who? 1.Fashion Statement, 2.Family Values, 3. Wanna Buy’s, 4. Matriach 5.Down-to-Basics Who’s Who? Matriach Family Values Down-toBasics Wanna Buy’s Fashion Statement Marketing Plan Elements Business Mission Statement Situation or SWOT Analysis Objectives Marketing Strategy Target Market Strategy Marketing Mix Product Distribution Promotion Price Implementation Evaluation Control Copyright 2010 by Cengage Learning Inc. All Rights Reserved 41 Strategic Directions LO6 Identify strategic alternatives. Copyright 2010 by Cengage Learning Inc. All Rights Reserved 42 Competitive Advantage Cost Types of Competitive Advantage Product/Service Differentiation Niche Strategies 43 Copyright 2010 by Cengage Learning Inc. All Rights Reserved Cost Competitive Advantage Cost Competitive Advantage- Being the low-cost competitor in an industry while maintaining satisfactory profit margins. Examples: Obtain inexpensive raw materials Design products for ease of manufacture Control overhead costs Copyright 2010 by Cengage Learning Inc. All Rights Reserved 44 Product differentiation • • • • • • Brand Names –Lexus Product Reliability -Maytag Strong Dealer Network -Caterpillar tractor Service -Fed Ex Image –Neiman Marcus Nike---Product Innovation -Nike Air and Nike Shox 45 Niche Competitive Advantage Niche Competitive Advantage The advantage achieved when a firm seeks to target and effectively serve a small segment of the market. Example: Sensodyne/Polident/Poligrip Orvis—fishing company 46 Strategic Alternatives Market Penetration Increase market share among existing customers McDonalds: Beanie Babies Market Development Attract new customers to existing products Coke in India 850/350 Product Development Create new products for present markets Taco Bell Fresco Style Diversification Introduce new products into new markets Sony-Columbia pictures 47 Ansoff’s Strategic Opportunity Matrix Present Product Present Market New Market New Product Market Penetration Product Development McDonalds sells More happy meals With Disney promo McDonalds introduces Salads and McWater Market Development Diversification McDonalds opens Restaurants in China McDonalds introduces Line of children’s clothing Online 48 LO6 Strategic Alternatives Identify strategic alternatives Market development = customers Market penetration = share Product development = products = new products + new markets Diversification Copyright 2010 by Cengage Learning Inc. All Rights Reserved 49 LO3 SETTING STRATEGIC DIRECTIONS WHERE DO WE WANT TO GO? Business Portfolio Analysis (BCG) Boston Consulting Group Market Growth Rate High Stars Question Marks Cash Cows Dogs Low High Low Relative Market Share BCG business portfolio analysis for Kodak’s consumer SBUs for 2003 (solid circle) and 2011 (hollow circle) ③ ② Kodak digital picture frame ① Kodak digital photo printer ④ Kodak digital camera Kodak film sales: US, Canada, & W. Europe BCG Portfolio Matrix Boston Consulting Group Computer Example Stars Notebooks Cash Cows Laptops/ Personal computer Problem Children/Question Marks Palm Pilots Dogs Mainframe computer 52 Portfolio Matrix Strategies Pringles Build Hold Bisquick/General Mills Harvest Lever Brothers/Lifebuoy Divest 53 Copyright 2010 by Cengage Learning Inc. All Rights Reserved Assignment • Select a partner • Select a business to of interest to research • Design a BCG (Boston Consulting Group) Model Matrix for the business using one PowerPoint slide • Include the company Stars, Cash Cows, Problem Children and Dogs Marketing Plan Elements Business Mission Statement Situation or SWOT Analysis Objectives Marketing Strategy Target Market Strategy Marketing Mix Product Distribution Promotion Price Implementation Evaluation Control Copyright 2010 by Cengage Learning Inc. All Rights Reserved 55 Marketing Mix: The “Four Ps” Price Promotion Place Product 56 Marketing Mix: The “Four Ps” The starting point of the “4 Ps” Includes Physical unit Package Warranty Service Brand Image Value Product Products can be… Tangible goods Ideas Services 57 Marketing Mix: The “Four Ps” Product availability where and when customers want them Place All activities from raw materials to finished products Ensure products arrive in usable condition at designated places when needed 58 Marketing Mix: The “Four Ps” Role is to bring about exchanges with target markets by: Informing Educating Persuading Reminding Promotion Includes integration of: Personal selling Advertising Sales promotion Public relations 59 Marketing Mix: The “Four Ps” Price is what a buyer must give up to obtain a product. Price The most flexible of the “4 Ps”-- quickest to change Competitive weapon Price x Units Sold = Total Revenue 60 The elements of the marketing mix must be blended to produce a cohesive marketing program LO10 Techniques for Effective Strategic Planning Continual attention Creativity Management commitment Effective Strategic Planning Copyright 2010 by Cengage Learning Inc. All Rights Reserved 62 Following Up the Marketing Plan • Implementation • Evaluation • Control • Marketing audit is… • • • • Comprehensive Systematic Independent Periodic Copyright 2010 by Cengage Learning Inc. All Rights Reserved 63 LO9 Implementation, Evaluation, and Control Implementation Evaluation Product Place Promotion Price Met objectives? Audits • • • • comprehensive systematic independent periodic Copyright 2010 by Cengage Learning Inc. All Rights Reserved 64