Strategic Role of Marketing

ROLE OF STRATEGIC
MARKETING
MANAGEMENT
© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-1

PURPOSE OF MARKETING
To create long-term and

mutually beneficial
exchange relationships
between an entity and the
publics (individuals and
organizations) with which it
interacts.
RESPONSIBILITIES OF MARKETING
MANAGERS
 Direct day-to-day operations

 Make strategic decisions
 Chart the organization’s direction
 Create and sustain a competitive
advantage
 Affect the organization’s long-
term performance
RESULTS OF THE EVOLUTION OF THE
MARKETING MANAGER
 Created the Chief Marketing

Officer (CMO) position
 Increased popularity of strategic

marketing management
 Half of Fortune 1000 have CMOs

RESPONSIBILITIES OF CMOs
 Define the business mission
 Analyze environmental, competitive,

and business situations
 Develop business objectives and goals
 Define customer value propositions

and their marketing strategies

SKILL SET OF CMOs
 Analytic abilities
 Intuitive sense
 Creativity

STRATEGIC MARKETING
MANAGEMENT PROCESSES
 Define business, mission, and goals
 Identify/frame growth opportunities
 Formulate product-market strategies
 Budget resources
 Develop reformulation and recovery

strategies
DEFINING THE
ORGANIZATION’S
BUSINESS, MISSION,
AND GOALS

BUSINESS DEFINITION
 Outlines the scope of operations
 Is neither obvious nor easy to define
 An firm defines its business by:

• The customers served and their needs
• The means or technology used to satisfy needs

BUSINESS MISSION
Consists of a written statement that:

 Underscores the scope of an
organization’s operations
 Reflects management’s vision of
the organization
 Describes an organization’s
purpose
 Crystallizes the organization’s
long-term direction and character
BUSINESS MISSION
Consists of a written statement that:

 Helps identify and evaluate
product-market opportunities
 Inspires employees
 Provides direction for goal-setting
 Applies to not-for-profit organizations
as well
BUSINESS GOALS OR OBJECTIVES
 Convert the mission into tangible

actions and results to be achieved
by a specified time frame
 Are divided into three categories:
Production Financial Marketing

Objectives Objectives Objectives

Production • Manufacturing and service capacity

Objectives • Product and service quality
• Return on investment • Profit

Financial
• Return on sales • Cash flow
Objectives
• Shareholder wealth
• Market share • Customer satisfaction

Marketing • Sales volume • Customer value creation
Objectives • Profit • Customer lifetime value
• Marketing productivity
A situation analysis is an
appraisal of operations to
determine reasons for the
gap between what was or
is expected and what has
happened or will happen.
IDENTIFYING AND
FRAMING
ORGANIZATIONAL
GROWTH
OPPORTUNITIES
CONVERTING ENVIRONMENTAL OPPORTUNITIES
INTO ORGANIZATIONAL OPPORTUNITIES
Ask three questions:

Environmental
 What might we do? Opportunities
Distinctive
 What do we do best? Competencies
Success
 What must we do? Requirements

WHAT MIGHT WE DO?
Environmental Opportunities
 Unmet or changing consumer needs
 Unsatisfied buyer groups
 New means or technologies for

delivering value to prospective buyers

WHAT DO WE DO BEST?
Distinctive Competency
Describes an organization’s
unique strengths or qualities,
including skills, technologies,
or resources, that distinguish
it from other organizations.
WHAT DO WE DO BEST?
Distinctive Competency
Two criteria must be satisfied:
 Competitors cannot imitate it
 Provide customers with superior value

WHAT DO WE DO BEST?
Success Requirements
Basic tasks that an

organization must perform
in a market or industry to
compete successfully.

SWOT ANALYSIS
SWOT analysis is a formal framework

for identifying and framing organizational
growth opportunities.
- Type of Factor -
Organization Favorable Unfavorable
Internal
Strengths Weaknesses
Capabilities
External
Opportunities Threats
Environment

STRENGTHS AND WEAKNESSES
INTERNAL ENVIRONMENT
Internal strengths and weaknesses are an organization’s
controllable activities that are performed well or poorly. They
arise in the management, marketing, finance, accounting,
production, research and development, and computer
information systems activities of a business.
Identifying and evaluating organizational strengths and
weaknesses in the functional areas of a business is an
essential strategic management activity.
Organizations strive to pursue strategies that capitalize on
internal strengths and improve on internal weaknesses.
Strengths and weaknesses are determined relative to
competitors.

SWOT ANALYSIS
A business unit must monitor key macro environment forces and
significant microenvironment factors that affect its ability to earn
profits. The business unit should set up a marketing intelligence system to
track trends and important developments and any related opportunities
and threats.
Good marketing is the art of finding, developing, and profiting from these
opportunities.
A marketing opportunity is an area of buyer need and interest that a
company has a high probability of profitably satisfying.
An opportunity is a condition in the external environment that may
help a company to achieve strategic competitiveness.
An environment threat is a challenge posted by an unfavorable trend or

development that would lead, in the absences of defensive marketing
action, to lower sales or profit.
A threat is a condition in the external environment that may hinder a
company’s effort to achieve strategic competitiveness.

Relevance of
Brand
Recognition
Strong
S Product
Range
Sales &
W
Financial Distribution
Muscles Network
Research & Updated
Marketing Research
resources
data
Male skincare
Market growth
Social acceptance of
O Aware consumer
T
male skin care Competition
products
SWOT ANALYSIS
What the organization is good at

Strengths doing or some characteristic that
gives it an important capability
What an organization lacks or

Weaknesses does poorly relative to other
organizations
Developments or conditions in the

Opportunities environment that have favorable
implications for the organization
Pose dangers to the welfare of the

Threats
organization
EXHIBIT 1.1: SAMPLE SWOT ANALYSIS
FRAMEWORK
Internal External
Strengths Weaknesses Opportunities Threats
Factors Factors
 Management  Economic
 Marketing  Competition
 Manufacturing  Consumer
 R&D  Technology
 Finance  Legal/Regulatory
 Offerings  Industry/Market
Structure

SWOT ANALYSIS
Questions to ask after a SWOT

analysis:
 Which strengths represent distinctive
competencies?
 Which weaknesses disqualify the

organization from pursuing certain
opportunities?
 Does a pattern emerge from the SWOT?

FORMULATING
PRODUCT-MARKET
STRATEGIES

PRODUCT-MARKET STRATEGY
A product-market strategy
involves selecting specific
markets and profitably
reaching them through an
integrated program called
a marketing mix.
EXHIBIT 1.2: PRODUCT-MARKET
STRATEGIES
Markets
Existing New
Market Market
Existing
Penetration Development
Offerings
New Offering
New Diversification
Development

EXHIBIT 1.2: PRODUCT-MARKET
STRATEGIES

PRODUCT-MARKET STRATEGIES
Market Penetration Strategy
A market-penetration strategy
dictates that an organization seeks
to gain greater dominance in a
market in which it already has an
offering (existing offerings →
existing markets).
Market Penetration Strategy Involves
 Increasing present buyers’ usage or

consumption rates of the offering
 Attracting buyers of competing
offerings
 Stimulating product trial among
potential customers
Market Penetration Strategy Considerations
 Examine market growth
 Assess competitive reaction
 Analyze the capacity of the market to

increase usage or consumption rates
and the availability of new buyers

Market Development Strategy
A market-development strategy
dictates that an organization
introduce its existing offerings to
markets other than those it is
currently serving (existing offerings
→ new markets).
Market Development Strategy Involves
 Adjusting the marketing mix, such as:

• Modifying the basic product offering
• Using different distribution outlets
• Changing the sales effort or advertising
 Analyzing competitors’ strengths,

weaknesses, and potential for retaliation
Market Development Strategy Involves
 Identifying the number, motivation, and

buying patterns of new buyers
 Determining the organization’s ability to

adapt to new markets to evaluate success

Market Development Strategy International Forms
Exporting Licensing
Joint Venture/ Direct

Strategic Alliance Investment

Exporting
 Involves marketing the same offering in

another country through sales offices or
intermediaries
 Is a popular option for entering foreign

markets because it:
• Easy to initiate
• Requires minimal capital investment

Licensing
 Is a contract where a firm (licensee) is given

the rights to patents, trademarks, etc. by the
owner (licensor) in turn for a royalty or fee
 Is a low-risk, quick, and capital-free entry

into a foreign market
 Limits the control of the licensor over

production and marketing by the licensee
Joint Venture/Strategic Alliance
 Creates a new entity in the host country from an

investment by both a foreign and a local company
 Allows the two firms share ownership, control, and
profits of the entity
 Is popular because one firm may not have the
required resources to enter a market
 Ensures against trade barriers
 May cause disagreements between the partners
regarding how the new entity should be run
Direct Investment
 Involves investing in a manufacturing and/or

assembly facility in a foreign market
 Is the most risky and requires the most

commitment
 Brings the firm closer to its customers
 May be the most profitable market-entry option
 Often follows the other three options
New Offering Development Strategy
A product- (new offering-)

development strategy dictates
that an organization create new
offerings → existing markets.

New Offering Development Strategy Involves
Product
Developing totally new offerings
Innovation
Enhancing the value to

Product customers of existing offerings
Augmentation through bundling or improving
functional performance
Product Adding different features, sizes,

Line Extension etc. to broaden the existing line
New Offering Development Strategy Factors
 The market size and volume needed for profitability

 The magnitude and timing of competitors’
responses
 The impact of the new product on the sales of

existing offerings (cannibalism)
 The capacity of the organization to deliver the

offerings to the market(s)
 The presence of significant points of difference
Cannibalism
 The Negative impact of Companies New Product on the Sales

performance of Existing products.
 Occurs when sales of a new offering come at the expense of sales of

existing offerings the firm already markets
 Is common in product development programs
 Key issue: Does the new offering detract from the overall profitability
of the firm’s total offering mix

Diversification Strategy
A diversification strategy involves

the development or acquisition of
offerings new to the organization
and the introduction of those
offerings to publics not previously
served by the organization
(new offerings → new markets).
Diversification Strategy Considerations
 Many firms have adopted this strategy to

take advantage of growth opportunities
 Is very risky because both the offerings and

markets served are new to the organization
 Can be successful if the organization

applies its distinctive competencies to
reaching new markets with new offerings
Strategies are evaluated based on:

 The organization’s business definition,
mission, and capabilities
 Market capacity and behavior
 Environmental forces
 Competitive activities
Strategy analysis depends on:

 Availability and evaluation of relevant
market information
 Data collected should include :

• Market size
• Consumer buying behavior and requirements
• Environmental forces
STRATEGY SELECTION
Strategies are chosen based on:

 Costs and benefits of a strategy
 Probabilities of success for a strategy
 Competitive structure, market

dynamics, and opportunity costs
 The offering itself

EXHIBIT 1.3: DECISION-TREE FORMAT
Action Response Outcome
R1 O1
A1
R2 O2
R1 O3
A2
R2 O4
EXHIBIT 1.4: SAMPLE DECISION-TREE
Action Response Outcome
Aggressive Estimated profit

Market- competition of $2 million
penetration
Passive Estimated profit
strategy competition of $3 million
Aggressive Estimated profit

Market- competition of $1 million
development
strategy Passive Estimated profit
competition of $4 million

THE MARKETING MIX
Communication
Aggressive
Strategy
competition
Product Channel
Customer
Strategy Aggressive Strategy
competition
Passive
competition
Price
Strategy
CUSTOMER VALUE PROPOSITION
A cluster of Aggressive
benefits that an
competition
organization promises
customers to satisfy their
needs. Aggressive
competition
Passive
competition
Wal-Mart Michelin

FORMULATING THE MARKETING MIX
 Depends on the success

requirements of the market
Estimated profit
 Must be consistent with: of$3 million
• The needs ofAggressive

the markets served
competition
• The organization’s capacity
Estimated profit
• The marketing mix activities of $4 million

IMPLEMENTING THE MARKETING MIX
 Is an art and a science
 Requires an understanding of:

Estimated profit
of$3 million
• Markets
• Environmental forces
Aggressive
• Organizational capacity
competition
Estimated profit
• Marketing mix activities of $4 million
• Competitor reactions
BUDGETING
MARKETING, FINANCIAL,
AND PRODUCTION
RESOURCES

BUDGETING
A budget is a formal,
quantitative expression of
an organization’s planning
and strategy initiatives
expressed in financial
terms.
DEVELOPING
REFORMULATION AND
RECOVERY STRATEGIES

MARKETING AUDIT
A marketing audit is a comprehensive,

systematic, and periodic examination of
a firm’s or business unit’s marketing
environment, objectives, strategies, and
activities to determine problem areas and
opportunities and recommend a plan of
action to improve the firm’s marketing
performance.

MARKETING AUDIT
Addresses the following questions:
Strategic Are we doing the right things?
Operational Are we doing things right?

REFORMULATION AND RECOVERY
STRATEGIES
Have the following purposes:

 Forces marketing managers to ask
“What if…?” questions
 Allows for contingency plans,

preplanning of reformulation and
recovery strategies that lead to
faster reaction time in implementing
remedial action
DRAFTING A
MARKETING PLAN

MARKETING PLAN
A marketing plan is a formal,

written document that describes
the context and scope of an
organization’s marketing effort
to achieve defined goals or
objectives within a specific
future time period.
MARKETING PLAN
 Consists of:
Business Marketing Product
Plan Plan Plan
 Each has these time dimensions:
Short-term Focus: 1-year period
Long-term Focus: 3- to 5-year period

MARKETING ETHICS AND
SOCIAL RESPONSIBILITY

ETHICS AND SOCIAL RESPONSIBILITY
 Most marketing decisions involve

some degree of moral judgment
 Marketers should take actions that
are legal, ethical, and socially
responsible

Strategic Role of Marketing

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ROLE OF STRATEGIC

© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-1

To create long-term and

 Direct day-to-day operations

 Created the Chief Marketing

 Increased popularity of strategic

 Half of Fortune 1000 have CMOs

 Define the business mission

 Analyze environmental, competitive,

 Develop business objectives and goals

 Define customer value propositions

© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-5

© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-6

 Define business, mission, and goals

 Identify/frame growth opportunities

 Formulate product-market strategies

 Develop reformulation and recovery

© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-8

 Outlines the scope of operations

 Is neither obvious nor easy to define

 An firm defines its business by:

• The means or technology used to satisfy needs

© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-9

Consists of a written statement that:

Consists of a written statement that:

 Convert the mission into tangible

 Are divided into three categories:

Production Financial Marketing

© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-12

Production • Manufacturing and service capacity

• Return on investment • Profit

• Market share • Customer satisfaction

Ask three questions:

© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-16

 Unmet or changing consumer needs

 Unsatisfied buyer groups

 New means or technologies for

© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-17

Two criteria must be satisfied:

 Competitors cannot imitate it

 Provide customers with superior value

© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-19

Basic tasks that an

© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-20

SWOT analysis is a formal framework

© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-21

© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-22

An environment threat is a challenge posted by an unfavorable trend or

© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-23

What the organization is good at

What an organization lacks or

Developments or conditions in the

Pose dangers to the welfare of the

© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-26

Questions to ask after a SWOT

 Which weaknesses disqualify the

 Does a pattern emerge from the SWOT?

© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-28

© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-30

© 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-31

Market Penetration Strategy

Market Penetration Strategy Involves

 Increasing present buyers’ usage or

Market Penetration Strategy Considerations