Principles of Marketing: Company and Marketing Strategy

Introduction: Building Brand Equity

Rolex serves as a prime example of building brand equity through a customer-driven marketing mix.
It holds the position of the largest luxury watch brand globally.
Rolex's core offering extends beyond wristwatches; it sells a "sentiment of achievement and belonging to an exclusive club."

Learning Objective 2.1: Company-Wide Strategic Planning

Strategic Planning Defined

Strategic planning is the continuous process of developing and maintaining a strategic fit between the organization’s objectives and capabilities on one hand, and its evolving marketing opportunities on the other.

Four Steps in Strategic Planning

The broader company strategy, much like the marketing strategy, must be customer-focused.
Corporate Level:
- Defining the company mission.
- Setting company objectives and goals.
- Designing the business portfolio.
Business Unit, Product, and Market Level:
- Planning marketing and other functional strategies.
This company-wide strategic planning serves as a guiding framework for marketing strategy and planning.

Defining the Company Mission

The mission statement articulates the organization's fundamental purpose and what it aims to achieve within the broader environment.
Example: CVS Health
- Its overarching mission is to be a "pharmacy innovation company."
- Its goal is "helping people on their way to better health."
- All marketing strategies and programs must be aligned with and support this core mission.

Product-Oriented vs. Market-Oriented Business Definitions

A market-oriented definition focuses on the customer's needs and experiences, rather than just the product itself.
Starbucks:
- Product-Oriented: "We sell coffee and snacks."
- Market-Oriented: "We sell The Starbucks Experience, one that enriches people’s lives in one moment, one human being, one extraordinary cup of coffee at a time."
Panera:
- Product-Oriented: "We sell fast-casual food in our restaurants."
- Market-Oriented: "We give customers Food as it should be: food that tastes good; food that feels good; food that does good things for them and the world around them."
Airbnb (Real Marketing 2.1):
- Mission: "Belong Anywhere—Don’t Stay There. Live There."
- Offers unique homes and experiences to live like a local, emphasizing belonging and immersion over mere accommodation.

Setting Company Objectives and Goals

Strategic planning involves translating the mission into detailed supporting objectives for each level of management.
Business Objectives:
- Building profitable customer relationships.
- Investing in research and development.
- Improving overall profits.
Marketing Objectives:
- Increasing market share.
- Creating local partnerships.
- Increasing promotion efforts.

Learning Objective 2.2: Designing Business Portfolios and Developing Growth Strategies

The Business Portfolio

The business portfolio is the collection of businesses and products that collectively constitute the company.
Portfolio analysis is a critical activity within strategic planning where management evaluates the various products and businesses that compose the company.
Example: Mars Inc. is recognized not only as the leading candy maker but also as a premier pet nutrition and healthcare company globally, reflecting a diverse business portfolio.

Strategic Business Units (SBUs)

An SBU can be:
- A company division.
- A product line within a division.
- A single product or brand.

Analyzing the Current Business Portfolio

The process involves:
- Identifying strategic business units (SBUs).
- Assessing the attractiveness of each SBU.
- Deciding how much support each SBU deserves.

Problems with Matrix Approaches (e.g., BCG Growth-Share Matrix)

Several challenges are associated with using matrix approaches like the BCG matrix:
- Difficulty in precisely defining SBUs and accurately measuring market share and growth rates.
- They can be time-consuming to execute.
- They are often expensive to conduct.
- They tend to focus primarily on current businesses, potentially neglecting future planning and innovation.
- Example: ESPN has grown into a vast and complex brand portfolio encompassing over $50$ distinct entities.

The Product/Market Expansion Grid

The product/market expansion grid is a tool for identifying company growth opportunities through market penetration, market development, product development, or diversification.
Existing Products, Existing Markets: Market Penetration
- Increasing sales of current products to current market segments without changing the product.
Existing Products, New Markets: Market Development
- Identifying and developing new market segments for current company products.
- Example: Starbucks is rapidly expanding in China, opening a new store approximately every 15 hours.
New Products, Existing Markets: Product Development
- Offering modified or new products to current market segments.
New Products, New Markets: Diversification
- Starting or acquiring businesses outside the company's current products and markets.
- Example: Starbucks is entering the "ultra-premium" market with Starbucks Reserve Roasteries and Princi Bakery and Cafe shops.

Developing Strategies for Growth and Downsizing

Strategies for Growth: Companies aim to grow by continuously identifying and pursuing new opportunities.
- Example: Starbucks has built an ambitious, multipronged growth strategy to sustain its rapid expansion.
Downsizing: This occurs when a company needs to prune, harvest, or divest businesses that are unprofitable, no longer fit the company's overall strategy, or require too much resource allocation relative to their potential.

Learning Objective 2.3: Marketing's Role in Strategic Planning and Partnering

Partnering with Other Company Departments

The value chain refers to a series of internal departments within a company that perform value-creating activities to design, produce, market, deliver, and support a firm’s products.
Each department affects the final customer experience and value.
Example: Walmart’s ability to deliver on its promise to "Save Money. Live Better." by offering products at lower prices is contingent on the collaborative contributions of individuals across all its departments, from purchasing and logistics to store operations and marketing.

Partnering with Others in the Marketing System

A value delivery network consists of the company, its suppliers, distributors, and ultimately customers, all partnering with each other to enhance the performance of the entire system in delivering customer value.

Learning Objective 2.4: Customer Value-Driven Marketing Strategy and Mix

Marketing Strategy and the Marketing Mix

At its core, marketing's fundamental purpose is to create customer value and cultivate profitable customer relationships.
Marketing strategy addresses two crucial questions:
- Which customers will we serve (segmentation and targeting)?
- How will we create value for them (differentiation and positioning)?
Following these decisions, the company constructs a marketing program – embodied by the Four Ps – to deliver the intended value to its targeted consumers.

Customer Value-Driven Marketing Strategy

Marketing strategy is the underlying marketing logic by which a company plans to create customer value and achieve sustainable, profitable customer relationships.

Market Segmentation

Market segmentation is the process of dividing a total market into distinct groups of buyers.
These groups have varied needs, characteristics, or behaviors, and may require distinct products or tailored marketing mixes.
A market segment is a specific group of consumers who respond in a similar way to a given set of marketing efforts.

Market Targeting

Market targeting is the process of evaluating the attractiveness of each market segment and subsequently selecting one or more segments to enter.

Market Positioning

Market positioning involves arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.
Differentiation is the initial step in the positioning process.
Achieving effective positioning enables the brand to stand out from competing products and brands, granting it the greatest advantage in its target markets.
Example: Adidas positions itself with the powerful tagline "Nothing is impossible." This simple statement forms the core backbone of its entire marketing strategy.

Developing an Integrated Marketing Mix

The marketing mix refers to the set of controllable, tactical marketing tools—product, price, place, and promotion—that the firm blends to produce the response it desires in the target market.

The Four Ps of the Marketing Mix

Product: The goods-and-services combination the company offers to the target market.
Price: The amount of money customers must pay to obtain the product.
Place: Company activities that make the product available to target consumers.
Promotion: Activities that communicate the merits of the product and persuade target customers to buy it.

Learning Objective 2.5: Marketing Management Functions and ROI

Managing the Marketing Effort

Effective marketing management involves a continuous process encompassing:
- Analysis: Understanding the market.
- Planning: Developing marketing strategies.
- Implementation: Executing the plans.
- Control: Evaluating results and taking corrective action.

SWOT Analysis

SWOT Analysis is a foundational strategic planning tool used to evaluate a company's:
- Strengths (S): Internal capabilities that may help a company reach its objectives.
- Weaknesses (W): Internal limitations that may interfere with a company’s ability to achieve its objectives.
- Opportunities (O): External factors that the company may be able to exploit to its advantage.
- Threats (T): Current and emerging external factors that may challenge the company’s performance.

Market Planning—Parts of a Marketing Plan

A comprehensive marketing plan typically includes:
- Executive summary: A brief overview of the plan.
- Marketing situation: Current market background and relevant facts.
- Threats and opportunities: Key external factors identified through SWOT.
- Objectives and issues: What the plan aims to achieve and challenges to address.
- Marketing strategy: The broad approach to achieving objectives.
- Action programs: Specific steps and tactics to implement the strategy.
- Budgets: Financial resources allocated for the activities.
- Controls: Mechanisms for monitoring progress and taking corrective action.

Marketing Implementation

Marketing implementation is the process of transforming marketing strategies and plans into concrete marketing actions to achieve specified strategic marketing objectives.
It addresses the practical questions of who, where, when, and how the marketing activities will be carried out.

Measuring and Managing Return on Marketing Investment (Marketing ROI)

Return on Marketing Investment (Marketing ROI) is a critical metric.
It represents the net return from a marketing investment divided by the costs of the marketing investment.
Expressed mathematically:
\text{Marketing ROI} = \frac{\text{Net Return from Marketing Investment}}{\text{Costs of Marketing Investment}}
It serves as a fundamental measurement of the financial profits directly generated by investments in marketing activities, demonstrating accountability and efficiency in marketing spending.