chapter 22 Flashcards
Marketing Basics
- Finding & using what works for their org and industry
- Allocating resources effectively
Finding & Using What Really Works
four basic business & management practices are what really works
Four Basic Business/Man Practices That Really Works
- Strategy
- Execution
- Culture
- Structure
Strategy
devise & maintain a clearly stated, focused strategy
Ex: Costco is the largest membership warehouse club chain & a key reason is its focused strategy that provides more product selection. Costco’s Strategy: expand into product categories that consumers are likely to buy in bulk
Execution
develop & maintain flawless operational execution
Ex: Toyota revolutionizes auto manufacturing & has continuous improvement
Culture
develop & maintain a performance-oriented culture
Ex: Google is one of the best comps to work for, its culture is based on “Focus on the user & all else will follow”, “great just isn’t good enough”, etc
Structure
build & maintain a fast, flexible, flat organization
Allocating Marketing Resources Using
Sales Response Functions
Sales Response Function
relates the expense of the marketing effort to the marketing results obtained
-S shaped
Maximizing Incremental Revenue Minus Incremental Cost
specific guideline for optimal resource allocation: allocate the firm’s marketing, production, & financial resources to the markets & products where the excess of incremental revenues over incremental costs is greatest
› As the annual marketing effort increases, so does the resulting annual sales revenue
Allocating Marketing Resources in Practice
share points
Share Points
analysis that uses percentage points of market share as the common basis of comparison to allocate marketing resources effectively for different product lines within the same firm
To Make These Resource Allocation Decisions, Marketing Mans Must Estimate:
- The Market Share for the product
- The Revenues associated with each point of market share
- The Contribution to overhead & profit (gross margin) of each share point
- Possible Cannibalization effects on other products in the line
Resource Allocation & The Strategic Marketing Process
Company resources are allocated effectively in the strategic marketing process by converting marketing information into marketing actions
Strategic Marketing Process
planning phase, implementation phase, evaluation phase
Planning Phase
marketing plans/programs that define goals (with pertinent marketing metrics) & the marketing mix strategies to achieve them
Implementation Phase
action memos that tell (1) who is (2) to do what (3) by when
Evaluation Phase
corrective action memos, triggered by comparing results with goals, often using the firm’s marketing metrics & displayed in marketing dashboards
Feedback Loop
corrective action memos become feedback loops that help improve decisions & actions in earlier phases of the strategic marketing process
The Planning Phase of the Strategic Marketing Process
Has 4 aspects
Four Aspects of The Planning Phase
- The Vital Importance of Marketing Metrics in Marketing Planning
- The Time Horizon of Marketing Plans
- Competing Planning Frameworks That Have Proven Useful
- Some Key Marketing Planning & Strategy Lessons
The Use of Marketing Metrics in Marketing Planning
› Measuring the results of marketing actions has become a central focus in many orgs
› This boils down to defining “where the org is going” - the quantitative goals &
› “Whether it is really going to get there” - the quantitative metrics used to measure actual performance
> Uses output & input metrics
Output Metrics
measure results
Ex: Revenue growth due to new products/servs
Input Metrics
measure the effort & expenditures that go into developing new products
Ex: Number of ideas/concepts in the new-product pipeline and R&D spending as a percentage of sales
The Time Horizon of Marketing Plans
marketing plans vary with the length of planning period, their purpose, & their audience
Two Kinds of Marketing Plans
Long-Range Marketing Plans
Annual Marketing Plans
Long-Range Marketing Plans
cover marketing-related investments & programs two to five years into the future
- Consider what products/servs to keep, add, & delete in the future using a portfolio analysis
- Present new marketing initiatives & address marketing org topics
- Originate at the CMO level in comps
- Give direction & a context for annual marketing plans
Annual Marketing Plans
detail marketing goals & strategies for a product, product line, or entire firm for a single year
- Place heavily emphasis on segmentation, targeting, positioning: elements of the marketing mix; & revenue and expense projections
- Attention to sales response functions & budgeting is critical
- Developed by a marketing or product manager
Competing Planning Perspectives for Pursuing Growth & Profit
Two Competing Planning Frameworks That Help Executives Make Important Resource Allocation Decisions
Two Competing Planning Frameworks That Help Executives Make Important Resource Allocation Decisions Are
- Generic Business Strategies
- Blue Ocean Strategy
Generic Business Strategies
a strategy that can be adopted by any firm, regardless of the product or industry involved, to achieve a competitive advantage
- Focuses on competitive advantage & competitive scope
- Competitive Advantage:
1. It can become the low-cost producer within the markets in which it competes
2. It can differentiate itself from competitors by developing points of difference in its product offerings/marketing programs - Competitive Scope:
1. Broad Target: the firm will be competing in many market segments
2. Narrow Target: firm will be competing in only a few segments or even a single segment
Four Generic Business Strategies
cost leadership strategy
differentiation strategy
cost focus strategy
differentiation focus strategy
Cost-leadership Strategy
focuses on reducing expenses and, in turn, lowers product prices while targeting a broad array of market segments
-May be done by securing less expensive raw materials from lower-cost suppliers or investing in new production equipment to reduce unit costs & improve quality
Ex: Campbell Soup’s strategy resulted in lower prices for customers causing its market share to increase 60% of the soup market
Differentiation Strategy
requires products to have significant points of difference - product offerings, brand image, higher quality, advanced technology, or superior service - to charge a higher price while targeting a broad array of market segments
- Allows firm to charge a price premium
Ex: General Mills uses this strategy in stressing its nutritious, high quality brands in reaching a diverse array of customer segments
Cost Focus Strategy
involves controlling expenses and, in turn, lowering product prices targeted at a narrow range of market segments
- Retail chains targeting only a few market segments in a restricted group of products often use this
Ex: IKEA
Differentiation Focus Strategy
requires products to have significant points of difference to target one or only a few market segments
Ex: Bombas sells high-quality socks with distinguishing features that successfully reached the segment of consumers who favor comfortable socks
Blue Ocean Strategy
emphasizes the simultaneous pursuit of product or marketing program differentiation and lower cost in newly configured industries and markets envisioned by marketing strategists and entrepreneurs alike
- Companies are challenged to reimagine the marketplace
- They are advised to (1) look across traditional industry or market boundaries, (2) combine complementary products/servs & (3) create new buyer & user experiences for the purpose of fashioning new industries & markets & adopting business practices that foster customer value propositions
- Framework of the blue ocean strategy is the Four Actions Grid
Four Actions Grid
- focuses on increasing product & marketing program differentiation by creating & raising industry factors that are new & improved relative to existing conditions in the marketplace
- At the same time, the framework focuses on decreasing cost by eliminating & reducing prevailing industry factors that are no longer necessary or can be provided/performed below current industry standards
- By increasing marketplace differentiation & decreasing cost at the same tome, new consumer value propositions become possible
- Create: Apple was able to create a smartphone that no one expected
- Raise: Apple raised the industry standard for mobile devices
- Eliminate: iPhone eliminated a physical button with a multitouch interface allowing for easier use
- Reduce: Apple purposely avoided product proliferation
Guidelines for Developing Effective Marketing Plans
› Set Measurable, Achievable Goals
› Use a Base of Facts & Valid Assumptions
› Utilize an Open Strategy Formulation Process
› Use Simple, But Clear & Specific Plans
› Have Complete & Feasible Plans
› Make Plans Controllable & Feasible
› Find The Right Person To Implement The Plans
Four Problems That Emerge When Companies Engage in The Strategic Marketing Process
- Plans may be based on presumed knowledge or poor assumptions about environmental forces, especially future economic conditions & competitors’ actions
- Planners & their plans may have lost sight of their customers’ needs
- Too much time & effort may be spent on data collection & writing formal plans that are too complex to implement
- Line Operating Managers often feel no sense of ownership in implementing the plans
Implementation Phase
establishing the marketing organization (need ppl to implement)
developing timetables (time/deadlines)
obtaining and allocating budgets (money)
executing the marketing program (doing it)
Paralysis by Analysis
the tendency to excessively analyze a problem instead of taking action
- Management experts warn against this/ avoid it
- Call for a bias for action to overcome this
Bias for Action
recommend a do it, fix it, try it approach
Surface Problems with Open Communication
- When trouble develops, surface the problem immediately
- Get help- don’t keep the problem to yourself
Open Communications Environment
solutions are solicited from anyone who has a creative idea to suggest - from the janitor to the president
- Those Called on to Implement Plans need to understand both the goals sought & how they are to be accomplished
Program Champion
o a person who is willing and able to “cut the red tape” to move the program forward
- Has the ability to move back & forth b/w the big picture & the specific details as the situation warrants
Today’s Marketing Organizations Understand
(1) the evolving role of the chief marketing officer & (2) how line versus staff positions & divisional groupings interrelate to form a cohesive marketing organization
Chief Marketing Officer (CMO)
senior executive responsible for a firm’s marketing activities
- Serves role as the inside-the-company “voice of consumer”
CMOS Understand
- The changing characteristics of domestic & global consumers
- The role of digital media & mobile marketing in integrated marketing efforts
- How to validate decisions with the many new sources of data, information & AI
Line Positions
have the authority & responsibility to issue orders to people who report them
Staff Positions
have the authority & responsibility to advise people in line positions but cannot issue direct orders to them
Divisional Groupings
use -product line, functional, geographical, & market-based- to implement plans & achieve objectives
Product Line Groupings
a unit is responsible for specific product offerings
Functional Groupings
-such as manufacturing, marketing, & finance- that represent the different departments or business activities within a firm
Geographical Groupings
sales territories are subdivided according to geographical locations
Market-based Groupings
utilize specific customer segments, such as the banking, healthcare, or manufacturing segments
Matrix Organization
when Market-based Grouping is combined with Product Groupings
Category Manager
responsible for an entire product line. They attempt to reduce the possibility of one brand’s actions hurting another brand in the same category
Developing Timetables (PERT)
PERT: map out the whole process & figure out one step at a time can I take out a little bit of time from certain things & how does it affect the whole project
Resource Allocation (Money/Budget)
Share Point Analysis:
Estimates industry sales
Estimates firm’s market share
Compute gross margin per share point
How to Improve Implementation
Communicate
Be a Leader (Champion)
Reward Performance
Schedule Tasks
Just Do It
Seek Internal/External Feedback
The Evaluation Phase of the Strategic Marketing Process
Involves 2 things
Evaluation Phase
- The Marketing Evaluation Process Itself
- The Use of Marketing ROI, Metrics, & Dashboards
Marketing Evaluation
involves (1) comparing results with planned goals to identify deviations & then (2) taking corrective actions
Identify Deviations from Goals:
› quantitative results are measured using the marketing metrics & compared with the actual results of the marketing actions. Results are shown on dashboards.
Acting on Deviations from Goals
› marketing man interprets the marketing dashboard info using management by exception
Management by Exception
identifying results that deviate from plans to diagnose their causes & take new actions
Marketing Audit
are you following your marketing plan & is it truly accomplishing what you want
Two Kinds of Deviations To Look For, Each Triggering a Different Kind of Action
- Actual Results Exceed Goals
- Actual Results Fall Short of Goals
Actual Results Exceed Goals
marketing must act quickly to exploit unforeseen opportunities
Actual Results Fall Short of Goals
this requires a corrective action
Marketing ROI
› the application of modern measurement technologies to understand, quantify, and optimize marketing spending
- Benefits of using Marketing ROI
justifying expenditures, comparing efficiency w/ competitors, & increasing accountability
Marketing Metrics
depending on the specific goal/obj sought, one or a few key marketing metrics are chosen, such as market share, marketing ROI, cost per sales lead, cost per click, sales per square foot, etc
Marketing Dashboards
an effective dashboard highlights actual results that vary significantly from plans. This alerts the manager to potential problems
