Developing Marketing Strategies and a Marketing Plan

What is Strategy?

Strategy involves a high-level plan to achieve one or more goals under conditions of uncertainty.

What is Marketing Strategy?

Marketing strategy focuses on how a company will create value for customers and build strong customer relationships.
It encompasses the decisions about Segmentation, Targeting, and Positioning (STP) and the Marketing Mix (Product, Price, Place, Promotion).

Marketing Plan

A marketing plan is a written document that analyzes the current marketing situation, assesses opportunities and threats, defines marketing objectives and strategies, and specifies how resources will be allocated and what performance metrics will be used.

Marketing Plan Process: 5 Steps

Step 1: Define the Business Mission & Objectives

Mission Statement: A broad description of a firm's objectives and the scope of activities it plans to undertake, answering:
- What type of business are we?
- What do we need to do to accomplish our goals and objectives?
Examples of Mission Statements:
- PepsiCo: "To provide consumers around the world with delicious, affordable, convenient and complementary foods and beverages from wholesome breakfasts to healthy and fun daytime snacks and beverages to evening treats."
  - PepsiCo has focused on a "guilt-free" category, which constitutes $45\%$ of its profits, appealing to health-conscious customers.
- Coke: "To refresh the world … To inspire moments of optimism and happiness … To create value and make a difference."
Corporate Objectives: Should be SMART:
- Measurable: Quantifiable targets (e.g., increase revenue by $20\%$ ).
- Time-dependent: Defined timeframe for achievement.
- Single-minded: A clear, singular focus (e.g., "increase share by $5\%$ and profit by $2\%$ " is not single-minded if the objectives conflict or lack clear prioritization).
- Realistic: Achievable given available resources and market conditions.
- Integrated: All business objectives should naturally link to higher- and lower-level objectives within the organization.
Influence of Corporate Objectives on Marketing:
- Increasing revenue by $20\%$ will influence marketing to focus on sales volume, pricing strategies, or acquiring more customers.
- Increasing profits by $10\%$ might lead marketing to focus on higher-margin products, cost-effective campaigns, or increasing return on marketing expenses.
- Achieving at least a $20\%$ market share will direct marketing efforts toward competitive strategies, brand awareness, and customer acquisition to gain market dominance.

Step 2: Conduct a Situation Analysis

SWOT Analysis: A systematic analysis of internal strengths and weaknesses and external opportunities and threats.
- Internal (Positive): Strengths - What the firm does well, advantageous aspects (e.g., diverse brand portfolio, strong celebrity endorsers, successful marketing campaigns, commitment to social causes for Pepsi).
- Internal (Negative): Weaknesses - Areas where the firm could improve, disadvantages (e.g., lower brand awareness and market share than rival Coca-Cola, environmentally unfriendly packaging for Pepsi).
- External (Positive): Opportunities - Favorable external conditions (e.g., expanding health food market, growth in global market share, acquisition of new brands for Pepsi).
- External (Negative): Threats - Unfavorable external conditions (e.g., water scarcity, popularity of reusable water bottles, soda taxes, increasing competition in snack food market for Pepsi).
Beyond SWOT: A comprehensive marketing strategy requires additional analyses:
- Customer analysis: Who are they, what do they want and value, are they satisfied, new trends?
- Competitor analysis: Who are they, their performance, their strategies, competitive advantages?
- Collaborator analysis: Key partners, suppliers, distributors.
- Macro-environment analysis: Economic, legal, regulatory, technological, social, cultural, and environmental factors.

Step 3: Identifying and Evaluating Opportunities (STP)

Segmentation: Dividing the market into distinct groups of customers with different needs, characteristics, or behaviors who might require separate products or marketing programs.
- Example (Hertz Car Rentals):
  - Segment 1: Luxury car enthusiasts (Dream Cars Collection: Jaguar XJ, Porsche Boxster).
  - Segment 2: Single thrill seekers and gear heads on vacation (Adrenaline Collection: Audi A3, Cadillac Escalade, Mercedes-Benz BMW).
  - Segment 3: Business customers and families who prefer a luxurious ride (Prestige Collection: Tesla Model Y).
  - Segment 4: Environment-conscious customers (Green Traveler Collection: Toyota Prius).
  - Segment 5: Families (SUV/Mini van/4x4 Collection: Chrysler Pacifica, Chevrolet Equinox).
  - Segment 6: Commercial customers (Commercial Van/Truck Collection: Ford Transit Van, Dodge Ram 1500).
Targeting: Evaluating each market segment's attractiveness and selecting one or more segments to enter.
Positioning: Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.
- Example (Hertz): Positions itself as a quality car and truck rental company that is the first choice for each target segment.

Step 4: Implement Marketing Mix and Allocate Resources

Product and Value Creation: Developing products and services that satisfy customer needs and wants.
Place and Value Delivery: Making the product or service available to customers when and where they want it.
Price and Value Capture: Determining the appropriate price to capture value from customers, considering costs, competition, and customer value.
Promotion and Value Communication: Communicating the value proposition to the target market and persuading them to buy.

Step 5: Evaluate Performance Using Marketing Metrics

This final step involves planning how to evaluate the strategy's results and implementation using marketing metrics.
Metrics are crucial for explaining why things happened and projecting future outcomes.
Performance Metrics Categories:
- Financial Performance Metrics (often by brand/product level or geographic level, not just total company sales):
  - Sales units
  - Revenue
  - Gross profit
- Marketing Performance Metrics:
  - Market share
  - Customer satisfaction
  - Customer loyalty
  - Customer retention rate
  - Brand awareness
  - Brand perception
  - Purchase intent
  - Website traffic
  - Product reviews
These metrics help understand past performance and inform future strategies.

Portfolio Analysis: Managing Multiple Brands

When a company has multiple brands, it needs to conduct "portfolio analysis" to manage its various products or strategic business units (SBUs).

Boston Consulting Group (BCG) Matrix

The BCG Matrix is a framework for analyzing a firm's product portfolio based on market growth rate and relative market share.
Axes:
- Y-axis: Market Growth Rate (High/Low) - An indicator of market attractiveness.
- X-axis: Relative Market Share (High/Low) - An indicator of the company's competitive strength within that market. Calculated as a brand's market share (or revenue) divided by the market share of the largest competitor in the sector.
Quadrants and Typical Suggestions:
- Star (High Market Growth, High Relative Market Share): Require heavy investment to finance rapid growth. Eventually, their growth will slow, and they will turn into Cash Cows. Suggestion: Consolidate/Expand.
- Cash Cow (Low Market Growth, High Relative Market Share): Generate more cash than they consume. They have established success and typically require less investment. This cash can fund other SBUs. Suggestion: Harvest.
- Question Mark / Problem Child (High Market Growth, Low Relative Market Share): High growth potential but low market share. They require significant investment to grow share but are risky. Management must decide whether to invest and turn them into Stars or divest. Suggestion: Invest/Improve or Divest.
- Dog (Low Market Growth, Low Relative Market Share): Low growth potential and low market share. They often generate just enough cash to break even, or even operate at a loss. They are typically divested. Suggestion: Divest.
In-class Activity Example:
- Brand A: Sales Revenue $200 \text{ million}$ , Market growth rate $40\%$ (High), Relative market share $1.5$ (High) $\rightarrow$ Star.
- Brand B: Sales Revenue $1 \text{ billion}$ , Market growth rate $5\%$ (Low), Relative market share $2.0$ (High) $\rightarrow$ Cash Cow.
- Brand C: Sales Revenue $100 \text{ million}$ , Market growth rate $30\%$ (High), Relative market share $0.1$ (Low) $\rightarrow$ Question mark.

Growth Strategies (Ansoff Matrix)

Growth strategies are approaches a company can take to expand its business.
Example (Disney's acquisition of Marvel): Disney's purchase of Marvel Entertainment for $4 \text{ billion dollars}$ in $2009$ allowed for various growth strategies, as Disney took over marketing efforts for Marvel films.

Market/Products and Service Strategies

1. Market Penetration

Focus: Current product or service in current markets.
Goal: Increase sales of existing products to existing customers.
Strategies:
- Encourage current users to consume more (e.g., coupons, loyalty cards, value packages).
- Acquire new customers within the current market for the existing product.
Example (Marvel): Expanding the distribution of its films to more platforms (theaters, YouTube, Google Play, Apple TV, Amazon Prime, Disney+, Vudu, DVDs in various retail locations).

2. Product Development

Focus: New product or service in current markets.
Goal: Create new products or services for current customers.
Example (Marvel): Launching new movies every year (e.g., Thunderbolts, The New Avengers, Fantastic4, Captain America: Brave New World).

3. Market Development

Focus: Current product or service in new markets.
Goal: Selling existing products or services to new segments or geographies.
Strategies:
- Targeting growing ethnic groups within the U.S.
- Global expansion.
Example (Marvel): Enhancing the viewing of its movies by expanding into more global markets.

4. Diversification

Focus: New product or service in new markets.
Goal: Entering entirely new markets with new products or services.
Types:
- Related Diversification: The new business shares some common elements or synergies with the existing business (e.g., Marvel pursuing related diversification with home décor items featuring its characters).
- Unrelated Diversification: The new business is completely different from the core business, making it very risky (e.g., if Marvel ventured into the child day care service industry, it would be unrelated and highly risky).
Risk: Diversification is generally considered the riskiest growth strategy.

Progress Check & Key Takeaways

The most appropriate sequence for creating a marketing plan is: Business mission and objectives $\rightarrow$ Situation analysis $\rightarrow$ STP $\rightarrow$ Marketing mix.
STP stands for Segmentation, Targeting, and Positioning.
The four quadrants of the portfolio analysis (BCG Matrix) represent Stars, Cash Cows, Question Marks, and Dogs.
Increasing sales by focusing on a current market with a current product is a Market Penetration strategy.
Growing the business from existing customers can be achieved through Market Penetration (e.g., encouraging more consumption) and Product Development (e.g., offering new products to current customers).
Diversification is the riskiest growth strategy. False statements about marketing strategy incorrectly define it, such as "can be defined as STP but not marketing mix" or "is the reason why the business exists."
An effective marketing action to increase profit by $10\%$ is to increase return on marketing expenses.
Marketing strategy should be built on internal strengths and external opportunities. Performance metrics are indeed used to explain why things happened and project the future. Customer satisfaction is a marketing performance metric that helps project future performance, unlike sales units or revenue which primarily reflect past performance.