Chapter 2: Developing Marketing Strategies and a Marketing Plan

What is a Marketing Strategy?

- Marketing strategy: identifies a firms target market, a related marketing mix (the four P’s) and the
bases upon which the firm plans to build a sustainable competitive advantage
- Sustainable competitive advantage: an advantage over the competition that is not easily copied and
thus can be maintained over a long period of time
- There are four overarching strategies that focus on aspects of the marketing mix to create and deliver
value and to develop sustainable competitive advantages
o Customer Excellence: focuses on retaining loyal customers and excellent customer service
o Operational excellence: achieved through efficient operations and excellent supply chain and
human resource management
o Product excellence: having products with high perceived value and effective branding and
positioning
o Locational excellence: having a good physical location and internet presence

Customer Excellence:
- Achieved when a firm develops value based strategies for retaining loyal customers and provides
outstanding customer service

Retaining Loyal Customers:

o Having a strong brand, unique merchandise, superior customer service help solidify loyal
customer base
o Loyalty means that customers are reluctant to patronize competitive firms
o Although the benefits to consumers of loyalty programs are limited since only a small
percentage of customers save enough points to claim their rewards, loyalty programs are a
boon to marketers
Providing Outstanding Customer Service:
o Provided by employees, and invariably, humans are less consistent than machines.
o Firms that offer good customer service must instill its importance in their employees over a
long period of time so that it becomes part of the organizational culture

Operational Excellence:
- Through their efficient operations, excellent supply chain management, and strong relationships with
their suppliers
- Marketers strive for efficient operations to get their customers the merchandise they want, when they
want it, in the required quantitates, and at a lower delivered cost than that of their competitors
- Develop sophisticated distribution and information systems and strong relationships with vendors
- Firms with strong relationships may gain exclusive rights to:
o Sell merchandise in a particular region
o Obtain special terms of purchase that are not available to competitors
o Receive popular merchandise that may be in short supply

Product Excellence:
- Having product’s with high perceived value and effective branding and positioning
- Positioning products or service by using a clear, distinctive brand image and constantly reinforcing that
image through merchandise, service and promotion
Locational Excellence:
- A competitive advantage based on location is sustainable because it is not easily duplicated
- Tim Hortons and Starbucks have developed a strong competitive advantage with their location
selection
o High density of stores in some markets that it is very difficult for a competitor to enter the
market and find good locations

Multiple Sources of Advantage:

- Firms require multiple approaches to a competitive advantage
o West jet; good value that meets their expectations, good customer service, good customer
relations, offering great prices

The Marketing Plan:

- a written document composed of an analysis of the current marketing situation, opportunities and
threats for the firm, marketing objectives and strategy specified in terms of the Four P’s, action
programs, and projected or pro forma income statements
- three major phases of marketing plan are:
o Planning
o Implementation
o Control
- Marketing plan entails five steps:
o First two steps are in the planning stage
 Step 1: marketing executives and other top managers define the mission and objectives
of the business
 Step 2: evaluate the situation by assessing how various players, both inside and outside
the organization, affect the firm’s potential for success
o Two steps in Implementation Phase:
 Step 3: marketing managers identify and evaluate different opportunities by engaging in
a process known as segmentation, targeting and positions
 Step 4: they implement the marketing mix by using the 4 P’s
 o Control Phase:
 Step 5: evaluating the performance of the marketing strategy by using marketing
metrics and taking any necessary corrective actions

Step 1: Define the Business Mission and Objectives:

- Mission statement is a broad description of a firm’s objectives and the scope of activities it plans to
undertake, attempts to answer two main questions:
o What type of business are we?
o What do we need to do to accomplish our goals and objectives?

Step 2: Conduct a Situation Analysis:

- Situation analysis using SWOT
o Assesses both the internal environment with regard to its strengths and weaknesses and the
external environment in terms of its opportunities and threats
 Strength
 Positive internal attributes of the firm
 Weakness
 Negative attributes of the firm
 Opportunities
 Positive aspects of the external environment
 Threats
 Negative aspects of the company’s external environment
o Additionally should assess the opportunities and uncertainties of the market place due to
changes in cultural, demographic, social, technological, economic and political forces (CDSTEP)
- SWOT enables firm to understand where is has sustainable competitive advantages or unique
advantages that cannot be easily copied by competitors and how it can leverage those advantages in
response to new opportunities arising from changes in its external environment
- Requires the firm to undertake a critical assessment of its resources, capabilities, organization,
strategies, and performance in relation to competitors

Step 3: Identify and evaluate Opportunities by Using STP (Segmentation, Targeting, and Positioning)
- The firm must first understand customer needs and wants through market research, then divide the
market or customers into distinct subgroups or segments, determine which of those segments it
should pursue or target and finally decide how it should position its products to best meet the needs of
those chosen targets

Segmentation:
o Market segment: a group of consumers who respond similarly to a firms marketing efforts
o Market segmentation: the process of dividing the market into distinct groups of customers –
where each individual group has similar needs, wants, or characteristics – who therefore might
appreciate products or services geared especially for them in similar ways

Targeting:
o Target marketing (targeting): the process of evaluating the attractiveness of various segments
and then deciding which to pursue as a market

Positioning:
o Must determine how it wants to be positioned within those segments
 o Market Positioning: the process of defining the marketing mix variables so that target
customers have a clear, distinct, desirable understanding of what the product does or
represents in comparison with competing products
o After identifying its target segments, a firm must evaluate each of its strategic opportunities

Step 4: Implement Marketing Mix and Allocate Resources:

- Implementing product, price, promotion and place for each product and service on the basis of what
the company believes its target markets will value
o Makes important decisions about how it will allocate its scarce resources to its various products
and services

Product and Value Creation:

o Creation of value so firms attempt to develop products and services that customers perceive as
valuable enough to buy

Price and Value for Money:

o Firm provides a product or service and it return it receives money
o Value based marketing requires firms charge a price customers perceive as giving them good
value for what they are receiving
o Pricing is the only activity that actually brings in money by generating revenue
 If a price is too high, it will not generate volume
 If a price is too low, it may result in lower than necessary margins and profits

Place and Value Delivery:

o Firm must be able to make the product or service readily accessible when and where the
customer wants it
o Many companies use online websites and online marketing strategies to deliver place value for
their customers
 Although same cannot be said for non-profit organizations

Promotion and Value Communication:

o Communicate the value of their offering, or the value proposition to their customers through a
variety of media, including TV radio magazines, buses, trains etc.
 Makes it possible to expand firms to the whole world
o Retailers add value to their offerings through their efficient and effective communications
strategies

- In addition to developing the four P's and allocating resources, marketing managers must develop
schedules, timelines for each activity and the personnel responsible for the respective activity – to
avoid bottlenecks and ensure smooth and timely implementation of the marketing mix activities
- Determine who is responsible for putting plan into action

Step 5: Evaluate Performance by using Marketing Metrics:

- Evaluating the results of the strategy and implementation program by using marketing metrics
o Metric is a measuring system that quantifies a trend, dynamic, or characteristic
 Used to explain why things happened and to project the future
- Begin by reviewing the implementation programs, and their analysis may indicate that the strategy
needs to be reconsidered
Who is Accountable for Performance?
- Performance evaluations are used to pinpoint problem areas
- Reasons that performance may be above or below planned levels must be examined
o The manager should be held accountable only in the case of the inadequate sales force job or
setting inappropriate forecasts
- When it appears that actual performance is going to be below the plan because of circumstances
beyond the mangers control, the firm can take action to minimize the harm still

Performance Objectives and Metrics:

- Difficult to find a single metric to evaluate performance:
o One approach is to compare a firm’s performance over time or to competing firms, using
common financial metrics such as sales and profits
o Another approach is to view the firm’s products or services as a portfolio
 Profits from certain products/ services fuel the growth for others

Financial Performance Metrics:

- Revenues, sales, profits are commonly used metrics
- Manager can easily increase sales by lowering prices but the profit realized on that merchandise would
suffer as a result
- An attempt to maximize one metric may lower another
- Focusing too much on financial metrics could be deadly, especially if it means ignoring measures
reflecting labour safety
- Firm may wish to measure the relative level of sales and profits
o Increase or decrease over the prior year
o Firm may compare its growth in sales or profits relative to other benchmark companies
- Metrics used to evaluate a firm vary depending on
o 1. Level of the organization at which the decision is made
o 2. The resources the manager controls

Social Responsibility Performance Metrics:

- increasing number of companies reporting corporate social responsibility metrics
o impact on the environment, energy conservation initiatives etc.

Strategic Planning is Not Sequential:

- can move back and forth amoung the steps of
o Defined the business mission
o Perform the situation analysis
o Identify opportunities
o Evaluate alternatives
o Set objectives
o Allocate resources
o Develop implementation plan
o Evaluate their performance and make adjustments

Portfolio Analysis:
- Management evaluates the firm’s various products and businesses and allocates resources according
to which products are expected to be the most profitable for the firm in the future
 - Strategic Business unit: a division of the company that can be managed somewhat independently from
other divisions since it markets a specific set of products to a clearly defined group of customers
- Product line: a group of products that consumers may use together or perceive as similar in some way

Growth Strategies:

- Rows distinguish those opportunities a firm possesses in its current markets from those it has in new
markets
- Columns distinguish between the firms current marketing offering and that of a new opportunity

Market Penetration:
- Employs the existing marketing mix and focuses the firm’s efforts on existing customers
- Could be achieved by encouraging current customers to patronize the firm more often or buy more
merchandise on each visit or by attracting new consumers from within the firms existing target market
o Generally, requires greater marketing efforts
o Tim Horton’s roll up the rim

Market Development:
- Employs the existing marketing offering to reach new market segments, whether domestic or
international
o MTV targets older customers who were MTV viewers in their youth but are now attracted to
how’s that reminisce their teen years
o Offering people, a wrap with soup or salad

Product Development:
- Offers a new product or service to a firm’s current target market
- Tim Horton’s offering dark roast or lattes in addition to coffee

Diversification:
- Introduces a new product or service to a market segment that is currently not served
 o May be either related or unrelated opportunities:
 Related: current target market and/or marketing mix shares something in common with
the new opportunities
 Firm might not be able to purchase from existing vendors, use the same
distribution and/or management information system, or advertise in the same
newspapers to target markets that are similar to its current consumers
 Unrelated Diversification: new business lacks any common elements with the present
business
 Do not capitalize on core strengths associated with markets or with products
 Viewed as very risky
o Tim Hortons offering gluten free menu

- Market penetration is easiest to implement focusing on promoting existing products to existing

customers
- Market Development or product development marketers have experience with one element although
have to learn the other element
- Diversification requires marketers to go outside both their current products and markets and the risks
of making mistakes are much greater
-