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Overview This course module discusses the development of marketing strategies and plans. A key ingredient of the marketing management process is insightful, creative marketing strategies and plans that can guide marketing activities. Marketing has evolved way beyond production and sales. Marketing is now about delivering customer value through innovative and creative strategies while at the same time satisfying the consumers needs and wants. Objectives Upon completion of this module, you should be able to:
- Describe the ways marketing affects customer value.
- Demonstrate knowledge on how strategic planning is carried out at different levels of the organization
- Describe and formulate a marketing plan Pretest Answer the following questions based on your own opinion or personal view.
- How does marketing affect customer value?
- What is strategic planning?
- How is strategic planning carried out at the different levels of the organization?
- What is a marketing plan?
Learning Focus: (you may refer to the corresponding pdf file or ppt. presentations in the syllabus)
A. Strategy Mullins, Walker, Boyd and Larrèchè (2006:39) define strategy as a fundamental pattern of present and planned objectives, resource deployments and interactions of an organization with markets, competitors, and other environmental factors. Van der Walt, Strydom, Marx and Jooste (1996:541) define strategic marketing as the process involving the formulation of appropriate market strategies as inputs in business and corporate strategy. Examining strategic marketing implications involved in creating customer value is a key factor in strategic marketing. Table 2.1 adapted from Van der Walt, Strydom, Marx and Jooste (1996:541) outlines levels of strategy in large enterprises. Table 2.1 – Levels of Strategy Corporate Strategy deals with the allocation of resources between the various departments and business units in the enterprise and the profitable management of these resources. Business Strategy deals with the strategies of specific strategic business units (SBU‘s). All these strategies of the SBUs are combined into the corporate strategy. Market Strategy deals with marketing management‘s contribution to
Module 2 - Developing Marketing Strategies and Plans
formulating the business strategy Functional Strategy deals with the development of the departmental strategies at middle management level. Marketing and Customer Value Marketing involves satisfying consumers‘ needs and wants. The task of any business according to Kotler and Keller (2009:74) is to deliver customer value at a profit. The Value Delivery Process The traditional view of marketing according to Kotler and Keller (2009:74) is that the firm makes something and then sells it. Marketing will not work in economies where people face abundant choice. The new belief of marketing begins with the planning process. Figure 2.1 depicts the value delivery process. As indicated on Figure 2.1(b), value creation and delivery consists of three parts: Choosing the value (segment the market, define target market, develop ―offering )‖ Providing the value (product features, prices, and distribution channels) Communicating the value (sales force, advertising, and promotional tools) The Value Chain Michael Porter‘s Value Chain (Figure 2.2) identifies nine strategically relevant activities that create value and costs (five primary and four support activities).
Holistic Marketing can provide insight into the process of capturing customer value. Figure 2.3 shows the interaction between customers, company, collaborators, and value-based activities (value exploration, value creation, and value delivery) to create, maintain, and renew customer value (Kotler and Keller, 2009:78-79). Holistic marketing according to Kotler and Keller (2009:59) addresses three key management questions: Value exploration - identify new value opportunities Value creation - create more promising new value offerings Value delivery - deliver the new value offerings more efficiently Developing strategy requires the understanding of the relationships and interactions among these three spaces. 1)Value Exploration. Developing such a strategy according to Kotler and Keller (2009:79) requires an understanding of the relationships and interactions among three spaces: The customer‘s cognitive space (reflects existing and latent needs and includes participation, stability, freedom, and change). The company‘s competence space (broad versus focused scope of business and depth physical versus knowledge-based capabilities). The collaborator resource space (horizontal and vertical partnerships). 2) Value Creation. Marketer‘s need to identify new customer benefits from the customer‘s view. They therefore need to utilize core competencies and select and manage business partners from its collaborative networks. 3) Value Delivery - What Companies Must Become? Value delivery often requires an investment in infrastructure and capabilities. The company must become proficient at customer relationship management, internal resource management and business partnership management (Kotler and Keller, 2009:79). The Central Role of Strategic Planning
Successful marketing requires companies to have capabilities such as understanding customer value, creating customer value, delivering customer value, capturing customer value and sustaining customer value. Strategic planning according to (Kotler and Keller, 2009:79-80) calls for action in three areas: Managing a company‘s businesses as an investment portfolio. Assessing each business‘s strength by the market‘s growth rate and the company‘s position and fit in that market. Establish strategy. The marketing plan is the central instrument for directing and coordinating the marketing effort. The marketing plan operates on two levels: strategic and tactical. The strategic marketing plan lays out target markets and the value proposition. The tactical marketing plan specifies the product, promotion, merchandising, pricing, sales channels, and service. Figure 2.4 shows the strategic complete planning, implementation, and control process (Kotler and Keller, 2009:80). B. CORPORATE AND DIVISION STRATEGIC PLANNING By preparing statements of mission, policy, strategy and goals, headquarters establishes the framework within which divisions and business units prepare their plans. All corporate headquarters according to Kotler and Keller (2009:81) undertake four planning activities:
- Defining the corporate mission
- Establishing strategic business units (SBU‘s)
- Assigning resources to each SBU
- Assessing growth opportunities. 1) Defining the Corporate Mission. To define its mission, a company should address Peter Drucker‘s classic questions: What is our business? Who is the customer? What is of value to the customer? What will our business be? What should our business be? Mission statements are best when guided by a ―vision ‖that provides direction for the company.
The Ansoff grid is based on the following strategies: Market-penetration strategy (gain more market share) Market-development strategy (new markets for current products) Product-development strategy (new products for current markets) Diversification strategy (new products for new markets) Integrative Growth A business‘s sales and profits may be increased through backward, forward, or horizontal integration within its industry. Figure 2.7 provides an example of integrative growth. Company X, usually responsible for manufacturing items, acquires a supplier (Backward integration). It then uses its end product to open up its own retail outlet (forward integration). It also forms a joint venture with Company Y, a market research company (horizontal integration). Diversification Growth Diversification growth makes good sense when opportunities are found outside the present business and the company has the right mix of business strengths to be successful. Several types are possible:
- New products that have technological or marketing synergies with existing product lines.
- New products unrelated to the current industry.
- New businesses unrelated (Kotler and Keller, 2009:86). Downsizing and Divesting Older Businesses Companies must not only develop new businesses; they must also carefully prune, harvest, or divest tired old businesses in order to release needed resources and reduce costs. Weak businesses require a disproportionate amount of managerial time/talent (Kotler and Keller, 2009:87). Organization and Organizational Culture
Organizations according to Kotler and Keller, 2009:87).consist of: structures, policies and corporate culture, all of which can become dysfunctional in a rapidly changing business environment. Whereas structures and policies can be changed, the company‘s culture is difficult to change. Corporate culture is defined as ―the shared experiences, stories, beliefs, and norms that characterize an organization. ‖Sometimes corporate culture develops organically and is transmitted by the CEO‘s personality. C. BUSINESS UNIT STRATEGIC PLANNING Figure 2.8 shows the steps in the business unit strategic-planning process. Business Mission Each business unit needs to define its specific mission within the broader company mission. SWOT Analysis The aim of SWOT analysis according to Van der Walt, Strydom, Marx and Jooste (1996:547) is to identify a company‘s strengths, weaknesses, opportunities, and threats. It involves monitoring the external and internal marketing environment. External Environment (Opportunity and Threat) Analysis A business unit must monitor key macro-environment forces: Technology Demographic-economic Natural Technological Political-legal Social-cultural
Companies are discovering that there is a need for strategic partners if they hope to be effective. Many strategic alliances take the form of marketing alliances. These fall into the following four major categories: Product or service alliances Promotional alliances Logistic alliances Pricing collaborations. To keep strategic alliances thriving, corporations have begun to develop organisational structures for support and have come to view the ability to form and manage partnerships as core skills (called Partner Relationship Management, PRM). Program Formulation and Implementation A great marketing strategy can be sabotaged by poor implementation. Marketing must estimate its costs. In implementing strategy, companies must not lose sight of the multiple stakeholders involved and their needs. D. THE NATURE AND CONTENTS OF A MARKETING PLAN Each product level (product line, brand) must develop a marketing plan for achieving its goals. A marketing plan is a written document that summarizes what the marketer has learned about the marketplace and indicates how the firm plans to reach its marketing objectives. Marketing plans are becoming more customer and competitor orientated. The plan draws more input from all the business functions and is team developed. Structure of a Marketing Plan Contents of the marketing plan:
- Executive summary and table of contents.
- Situation analysis.
- Marketing strategy.
- Financial projections.
- Implementation controls. Learning Activities Case Study: Analyze or evaluate the following case. MARKETING SPOTLIGHT – NIKE Case Study: Kotler and Keller (2006: 68) Case Link: Nike Case Study Guide Questions:
- What have been the key success factors for Nike?
- Where is Nike vulnerable?
- What should it watch out for?
- What recommendations would you make to the senior marketing executives of NIKE?
- What should they be sure to do with their marketing?
Post test
Answer the following questions:
- Consider Porter‘s value chain and the holistic marketing orientation model. What implications do they have for marketing planning? How would you structure a marketing plan to incorporate some of their concepts?
- Discuss the advantage and disadvantage of corporate mission statements to marketing.
3. If strategy has to be continually revised in the light of experience, what is the point of planning at all? Would it
not be better simply to meet each problem as it arises, and hope for the best? Explain.
