Chapter 2 Developing Marketing Strategies and a Marketing Plan What s a Marketing Strategy Marketing Strategy identifies 1 a firm s target market s 2 a related marketing mix its four Ps and 3 the bases on which the firm plans to build a sustainable competitive advantage A sustainable competitive advantage is an advantage over the competition that is not easily copied and thus can be maintained over a long period of time There are four macro or 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 is achieved when a firm develops value based strategies for retaining loyal customers and provides outstanding customer service o Retaining loyal customers by 1 developing a clear and precise positioning strategy 2 creating an emotional attachment through loyalty programs o Customer services consistency is key Operational excellence the second way to achieve a sustainable competitive advantage through their efficient operations excellent supply chain management and strong relationships with their suppliers Product excellence the third way to achieve a sustainable competitive advantage occurs by providing products with high perceived value and effective branding and positioning Location is particularly important for retailers and service providers The Marketing Plan A marketing plan is 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 Ps action programs and projected or pro forma income and other financial statements The three major phases of the marketing plan are planning implementation and control Step 1 Define the Business Mission The mission statement a broad description of a firm s objectives and the scope of activities it plans to undertake attempts to answer two main questions What type of business are we What do we need to do to accomplish our goals and objectives Step 2 Conduct a Situation Analysis After developing its mission a firm should perform a situation analysis using a SWOT analysis that assesses both the internal environment with regard to its Strengths and Weaknesses and the external environment in terms of its Opportunities and Threats In addition it should assess the opportunities and uncertainties of the marketplace due to changes in Cultural Demographic Social Technological Economic and Political forces CDSTEP Step 3 Identifying and Evaluating Opportunities Using STP Segmentation Targeting and Positioning o Segmentation a market segment consists of consumers who respond similarly to a firm s marketing efforts The process of dividing the market into groups of customers with different needs wants or characteristics who therefore might appreciate products or services geared especially for them is called market segmentation o Targeting After a firm has identified the various market segments it might pursue it evaluates each segment s attractiveness and decides which to pursue using a process known as target marketing or targeting o Positioning Market positioning involves the process of defining the marketing mix variables so that target customers have a clear distinctive desirable understanding of what the product does or represents in comparison with competing products Step 4 Implement Marketing Mix and Allocate Resources o Product and Value Creation Products which include services constitute the first of the four Ps o Price and Value Capture o Place and Value Delivery o Promotion and Value Communication Step 5 Evaluate Performance Using Marketing Metrics o Who Is Accountable for Performance o Performance Objectives and Metrics One approach is to compare a firm s performance over time or to competing firms using common financial metrics such as sales and profits Another method of assessing performance is to view the firm s products or services as a portfolio Depending on the firm s relative performance the profits from some products or services are used to fuel growth for others o Financial Performance Metrics Some commonly used metrics to assess performance include revenues or sales and profits In addition to assessing the absolute level of sales and profits a firm may wish to measure the relative level of sales and profits peers benchmarks o Portfolio Analysis In portfolio analysis management evaluates the firm s various products and businesses its portfolio and allocates resources according to which products are expected to be the most profitable for the firm in the future Portfolio analysis is typically performed at the strategic business unit SBU or product line level of the firm though managers also can use it to analyze brands or even individual items An SBU is a division of the firm itself that can be managed and operated somewhat independently from other divisions and may have a different mission or objectives A product line in contrast is a group of products that consumers may use together or perceive as similar in some way One of the most popular portfolio analysis methods developed by the Boston Consulting Group BCG requires that firms classify all their products or services into a two by two matrix In general market share is the percentage of a market accounted for by a specific entity and is used to establish the product s strength in a particular market It is usually discussed in units revenue or sales A special type of market share metric relative market share is used in this application because it provides managers with a product s relative strength compared with that of the largest firm in the industry The vertical axis is the market growth rate or the annual rate of growth of the specific market in which the product competes Market growth rate thus measures how attractive a particular market is Each quadrant in the matrix has been named on the basis of the amount of resources it generates for and requires from the firm Stars Stars upper left quadrant occur in high growth markets and are high market share products That is stars