THE SCOPE OF MARKETING MANGEMENT AND THE MARKETING PLANNING PROCESS

Lecture 1

Learning Objectives
Define marketing in strategic terms Specify the characteristics of strategy and strategic decisions Understand the nature of the debate about the future role of marketing and its contribution to management The meaning of customer satisfaction and its relationship to quality management The characteristics of market oriented organization The relationship between middle-level management and top-management decisions The marketing planning process as a systematic approach for developing and coordinating marketing decisions

The nature of marketing

Numerous definitions have emerged, with differing emphases on the process of marketing, the functional activities that constitute marketing, and the orientation (or philosophy) of marketing The Chartered Institute of Marketing, defines it as: . . . the management process for identifying, anticipating and satisfying customer requirements profitably. A slightly longer but conceptually similar definition of marketing was proposed by the American Marketing Association (AMA) in 1985: Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives.

The nature of marketing

Criticism Of AMA definition AMA definition is more of a list than a definition and is therefore clumsy and inconvenient to use it fails to provide a demarcation as to what necessarily is or is not marketing. AMA definition presents marketing as a functional process conducted by the organizations marketing department The general thrust of the more recent literature on marketing theory is that marketing is increasingly being conceptualized as an organizational philosophy or an approach to doing business

The nature of marketing

This strategic as opposed to a functional approach to marketing is captured by McDonald Marketing is a management process whereby the resources of the whole organization are utilized to satisfy the needs of selected customer groups in order to achieve the objectives of both parties. Marketing, then, is first and foremost an attitude of mind rather than a series of functional activities. Thus, the marketing concept is that managerial orientation which recognizes that: success primarily depends upon identifying changing customer wants developing products and services which match these better than those of competitors

The nature of marketing

The contrasting emphases on customers and competitors can be highlighted as in Figure 1 If an enterprise is managed a little better than customers expect, and if this is done in a slightly better way than competitors can manage, then the enterprise should be successful

Competitor Orientation
Minor Minor Major

Self-centered
Customer Orientation

Competitorcentered

Major

Customeroriented

Market-driven

The nature of marketing

The self-centered category is characterized by an introspective orientation that focuses on year-on-year improvements in key operating ratios, or on improvements in sales volume without making direct comparisons with competitors. Such an orientation is potentially disastrous when viewed in strategic term At the opposite extreme is a market-driven approach to marketing which seeks to balance a responsiveness to customers requirements on the one hand with direct competitor comparisons on the other

The nature of marketing

Giving balanced approach to customer orientation and competitor orientation marketing can be seen as operating at three levels 1. Marketing as a culture, characterized by a set of values and beliefs that highlights the importance of the customers interests 2. Marketing as a strategy, concerned with the choice of products, markets and competitive stance 3. Marketing as the set of tactics that provides the basis for the implementation of the business and competitive strategy.

Principal task of the marketing function in a management concept is not so much skillful in making customers do what suits the interests of the business as to be skillful in convincing and then making the business do what suits the interests of the customer

John B. McKitterick, Former General Electric executive

The Market Oriented Organization

1. 2. 3. 4. Marketing orientation consists of five elements: Customer orientation: having sufficient understanding of the target buyers to be able to create superior value for them continuously Competitor orientation: recognizing competitors strengths, weaknesses, and strategies Inter-functional coordination: coordinating and developing company resources in a manner that focuses on creating value for the customer Long term focus: adopting a perspective that includes a continuous search for ways to add value by making appropriate investments in the business Profitability: earning revenues sufficient to cover long term expenses and satisfy key constituencies

5.

Market Orientation
Customer Orientation Target Market

Long Term profit focus Inter functional coordination Competitor Orientation

However, achieving the interfunctional coordination necessary to implement the marketing concept is not easy. Effective coordination requires that information on buyer needs be known throughout the organization and that each functional department appreciate the constraints faced by other units. Additionally there must be a strong commitment to the goals of customer satisfaction and profitability. The importance of an organization wide commitment to the customer cannot be overstated. Firms need to develop other innovative mechanism for building commitment

Benson Shapiro; Harvard University Professor

Market Driven Strategy

Becoming Market Oriented

Achieving Superior Performance

Determining Distinctive Capabilities

Matching Customer Value Requirements to Capabilities

Characteristics of Market Driven Strategy

Becoming Market Oriented Customer the focal point of a companys total operation Culture is systematically and entirely committed to continuous creation of superior customer value Requires the use of superior organizational skills in understanding and satisfying customers monitor rapidly changing customer needs and wants, determine the impact of changes on customer behavior increase the rate of product innovation, implement strategies that build the organizations competitive advantage Requires the involvement and support of entire workforce An organization that is market oriented has both a culture committed to provide superior customer value and processes for creating value for buyers Market orientation requires: a. Customer focus b. Competitor intelligence c. Cross-functional cooperation and involvement

Characteristics of Market Driven Strategy

Determining Distinctive Capabilities An organizations capabilities are not a particular business function, asset, or individual instead core processes of the organization Classifying the organization capabilities is useful in identifying distinctive capabilities One way is to determine whether the processes operate from outside the business to inside, inside out or spanning process The outside in process connect the organization to outside environment , providing feedback and forging external relations The inside out process are the activities necessary to satisfy customer value requirements The outside in processes play a key role in offering directions for spanning and inside out capabilities which respond to customer needs and requirements

Classifying Capabilities
External Capabilities Internal Capabilities

Outside in Processes

Inside out processes

Spanning Process Financial Management Cost control Technology development Integrated logistics Manufacturing processes Human resources management Environmental health and safety

Market Sensing Customer linking Channel bonding Technology monitoring

Customer order fulfillment Pricing Purchasing Customer service delivery New product development Strategy developmenf

Characteristics of Market Driven Strategy

Creating Value for Customers Buyers form value expectations and decide to purchase goods based on their perceptions of products benefits less costs incurred Customer satisfaction indicates how well the product use experience compares to buyers value expectations Superior value results from a very favorable use experience compared to expectations and value offerings of competitors

Characteristics of Market Driven Strategy

Providing Value to the customers The organizations distinctive capabilities are used to deliver value by: differentiating the product offering lower prices relative to competing brands Or a combination of lower cost and differentiating Deciding which avenue to follow requires matching capabilities to the best value opportunities There is difference between value and innovation Value innovation is what counts this is defined as creating new value propositions that lead to increased customer satisfaction, loyalty, and ultimately sustainable, profitable growth

Characteristics of Market Driven Strategy

Becoming Market Driven Characteristics of Market Driven Organization Becoming market oriented, leveraging distinctive capabilities Finding good match between customers value requirements and the organization capabilities These actions are expected to lead to superior customer value and organizations capabilities A market driven organization must identify which capabilities to develop and which investment commitments to make Market orientation research and customer linking capabilities point to the importance of market sensing and customer linking capabilities to achieving successful market driven strategies

Becoming Market Driven

1. Market sensing capabilities Sensing involves more than collecting information It must be shared across functions and interpreted to determine what actions need to be initiated 2. Customer linking capabilities Creating and maintaining close relationship with customer is important for market driven strategies These relationship offer advantages to both buyer and seller through information sharing and collaboration Customer linking also reduces the possibility of a customer shifting to another supplier

Becoming Market Driven

3. Aligning Structure and Processes Market orientation and process capabilities require more emphasis on cross-functional processes Changes require improving existing processes as well as redesigning processes Primary targets of reengineering are sales and marketing, customer relationship management, order fulfillment and distribution The objective of business process changes are to improve the overall level of product quality, reduce cost, and improve service delivery

The elements of the marketing mix

Dimensions of Market Driven Firms

1 The extent to which a customer focus pervades the entire organization 2 The commitment to delivering value 3 The identification and development of distinctive competencies 4 The formation of strategic partnerships 5 The development of strong relationships with strategically important customers 6 The emphasis upon market segmentation, targeting and positioning 7 The use of customer information as a strategic asset 8 The focus on customer benefits and service 9 Continuous improvement and innovation 10 The definition of quality based on meeting customers expectations 11 A commitment to having the best informationtechnology available.

Levels of Marketing Management

Distinction between top level and middle level management is found in the type of decisions they make, not only in job titles. In small organization both responsibilities may be handled by one person Middle Level Managers: Focus on specific customer needs and on adapting the firms products, prices, promotional effort, to meet these needs As a general rule, middle management decisions focus on the sales and profitability of individual products, brands, or lines of closely related products marketed as a group Top level Management Provide long term direction of the organization regarding the markets, and needs that will be served Kinds of products that will be produced Which business to enter or exit How to allocate resources across these business

The Two Levels of Marketing Management Titles CEO VP marketing Other VPS Level Top Management Type of decisions Markets to be served Products to offer Products objectives Allocation of resource Product Design Prices Prices Advertising Sales promotion
Selling and distribution Customer service

Marketing manager Middle Management Brand manager Sales manager Promotion manager Customer service Manager

Levels of Marketing Management

Although top management and middle level managers focus on different decisions, their activities depend on and influence one another 1. Middle managers provide top management with information on sales and profit trends and on problem and opportunities. This information is useful for top management in developing the overall corporate strategy 2. The decisions made by top management will influence the difficulty of the task faced by middle managers. Top management will set goals and general directions for middle mangers, middle managers must establish the detailed plans for achieving these goals

Strategic decisions and the nature of strategy

Strategic decisions are concerned with seven principal areas 1. They are concerned with the scope of an organizations activities, and hence with the definition of an organizations boundaries. 2. They relate to the matching of the organizations activities with the opportunities of its substantive environment. Since the environment is continually changing it is necessary for this to be accommodated via adaptive decision-making that anticipates outcomes as in playing a game of chess. 3. They require the matching of an organizations activities with its resources. In order to take advantage of strategic opportunities it will be necessary to have funds, capacity, personnel, etc., available when required. 4. They have major resource implications for organizations such as acquiring additional capacity, disposing of capacity, or reallocating resources in a fundamental way

Strategic decisions and the nature of strategy

5. They are influenced by the values and expectations of those who determine the organizations strategy. Any repositioning of organizational boundaries will be influenced by managerial preferences and conceptions as much as by environmental possibilities. 6. They will affect the organizations long-term direction. 7. They are complex in nature since they tend to be nonroutine and involve a large number of variables. As a result, their implications will typically extend throughout the organization

Strategic Decisions
Decision-making consists of three key aspects: analysis, choice and implementation. Strategic analysis focuses on understanding the strategic position of the organization, which requires that answers be found to such questions as What changes are taking place in the environment? How will these changes affect the organization and its activities? What resources does the organization have to deal with these changes? What do those groups associated with the organization wish to achieve?

Strategic Decisions
Strategic choice has three aspects: The generation of strategic options, which should go beyond the most obvious courses of action The evaluation of strategic options, which may be based on exploiting an organizations relative strengths or on overcoming its weaknesses The selection of a preferred strategy which will enable the organization to seize opportunities within its environment or to counter threats from competitors

Strategic Decisions
Strategic implementation is concerned with translating a decision into action The allocation of resources to new courses of action will need to be undertaken Need for adapting the organizations structure to handle new activities Training personnel and devising appropriate systems.

A summary model of the elements of strategic management (source:Johnson and Scholes, 1988, p. 16)

Differences between strategic planning and marketing planning

The marketing/strategy interface

Strategic planning logically precedes marketing planning by providing a framework within which marketing plans might be formulated Understanding the strategic situation confronting an organization is an essential starting point in developing a marketing strategy.(Cravens 1986) This understanding can be derived from an assessment of: Organizational capabilities Threats from environmental forces Competitors strengths and weaknesses Customers needs The strong interdependence of strategic and marketing planning is clearly seen in the diagram

The marketing strategy process

The marketing strategy process

The question becomes: given a specific type of strategy, what marketing structures, policies, procedures, and programs are likely to distinguish high performing business units from those that are relatively less effective, efficient, or adaptable? Part of the answer is undoubtedly the extent to which the organization reflects a customer orientation

Left-handed and right-handed organizations

The issue of customer orientation has been discussed by Doyle (1994) in terms of what he refers to as left-handed and right-handed organizations In the case of left-handed or financially-driven organizations, he suggests that the key planning mechanism is the financial plan or budget, with costs, expenses, debt and assets and the elements of the marketing mix all being controlled in order to achieve financial goals The consequence of this is that when sales begin to slip there is a tendency to cut back on areas such as advertising and R&D in order to maintain or boost profits.

Left-handed organizations

Left-handed and right-handed organizations

In Right handed organizations Business decisions flow back from an understanding of customers rather than from a financial requirement Market-led approach, which is based on the idea of achieving market leadership through superiority in meeting customers needs, has typically been associated with Japanese organizations. By contrast, the financially driven approach has all too often been a reflection of British and US organizations The idea of a left- versus right-handed orientation leads in turn to the notion of wrong-side-up and right-side-up organizations Given the importance to any organization of its customers, it follows that staff must be customer-led

The two types of organization

Marketing challenges of the new millennium

According to an international study of 220 managers with a view to identifying the challenges that marketing managers were facing, identified the following as the principal challenges: High and rising levels of competition across virtually all markets Far higher levels of price competition An increasing emphasis upon and need for customer service A demand for higher levels of product quality Higher rates of product innovation Changing and less predictable customer needs The emergence of new market segments The growing power of distribution channels Growing environmental (green) concerns Increases in government regulations European integration Increasing advertising and promotional costs

Marketing challenges of the new millennium

The three most significant of these challenges proved to be The consolidation of competition as fewer but larger players emerge Changing customers and their demands The globalization of markets and competition

Marketing challenges of the new millennium

Coping with these changes requires marketing response in several ways: It needs to take on a far more direct line responsibility within the organization, with an emphasis upon segment or product management, where the focus is upon customer segments or particular products or technologies The effect of this would be that marketing thinking and action would be better integrated into day-to-day business decisions Marketing needs to become more strategic and less specialized in its nature, so that it becomes part of a more integrated process Marketing or customer orientation becoming far more widespread. This would mean that marketing would no longer be the isolated concern of a few people, but of staff throughout the business

The conflicting environmental and organizational forces

Changing emphases within marketing

Marketing priorities for the new millennium: As the pace of change increases, the speed of anticipation and response will become ever more important and time-based competition more essential. As markets fragment, customization will become more necessary. With expectations rising, quality will become one of the basic rules of competition (in other words, a 'must have) rather than a basis for differentiation. Information and greater market knowledge will provide a powerful basis for a competitive advantage Sustainable competitive advantage will increasingly be based upon an organizations core competencies. The consequences of a lack of strategic focus will become more evident and more significant. As market boundaries are eroded, the need to think globally will become ever more necessary. In this way, the marketing planner will be able to offset temporary or permanent declines in one market against growing opportunities in another

Changing emphases within marketing

Differentiation will increasingly be based upon service. Partnerships with suppliers and distributors will become far more strategically significant Strategic alliances will become more necessary as a means of entering and operating within markets, partly because they offer the advantages of access to greater or shared knowledge, but also because of the sharing of costs and risks. A far greater emphasis upon product, service and process innovation.

Changing emphases within marketing

These marketing priorities have substantial implications for organizational structures and cultures Doyle (1994) identifies the ten most obvious of these as being the need to: Doyle (1994, pp. 3846) identifies the ten most obvious of these as being the need to: 1 Break hierarchies and reorganize around flatter structures 2 Organize around small(er) business units 3 Develop self-managing teams 4 Re-engineer 5 Focus upon developing networks and alliances 6 Move towards transactional forms of organization

Changing emphases within marketing

7 Become a true learning organization 8 Emphasize account management in order to integrate specialist expertise across the organization for the benefit of the customer 9 Recognize the importance of expeditionary marketing so that, instead of focusing upon what Hamel and Prahalad refer to as blockbuster innovation designed to get it right first time, the organization concentrates upon developing a stream of low-cost, fast-paced innovative products 10 Rethink the way in which the board of directors operates so that it focuses to a far greater extent upon strategic direction rather than control and day-to-day management.