Subject Code: 1.

5
Subject Name: Marketing for
Customer
Value

Faculty Name:
Dr. Noor Firdoos Jahan
Professor, Department of Marketing,
RVIM

Module 1
ESSENTIALS OF MARKETING
Importance of marketing, Core
marketing concepts, Company
orientation towards market place,
Marketing management tasks,
Marketing strategies and plans,
SWOT analysis, Marketing
environment, Competitive dynamics

What is
Marketin
g?

What Is Marketing?
A Philosophy
An Attitude
A Perspective
A Management
Orientation

A Set of Activities,
including:
Products
Pricing
Promotion
Distribution / Place

Definition Of Marketing

American Marketing
Association

AMA : Marketing is an organizational

function and a set of processes for
creating,
communicating,
and
delivering value to customers and for
managing customer relationships in
ways that benefit the organization and
its stakeholders.

Dr. Philip Kotler

Kotler : A social and managerial

process whereby individuals and
groups obtain what they need and want
through creating and exchanging
products and value with others.

Simply put
Marketing is the delivery of customer
satisfaction at a profit.

Goals
Attract new customers by promising
superior value and keep and grow current
customers by delivering satisfaction.

Core Marketing Concepts

What are Consumers

Needs, Wants, and Demands?
Needs - state of felt
deprivation including
physical, social, and
individual needs i.e
hunger
Wants - form that a
human need takes as
shaped by culture and
individual personality
i.e. bread
Demands - human
wants backed by
buying power i.e.

Five types of need

1. Stated needs

(the customer wants an

inexpensive car).

2. Real needs

(the customer wants a car, the

operating cost of which, not initial price, is low).

3. Unstated needs

(the customer expects

good service from the dealer).

4. Delight needs

(the customer would like the

dealer to include an onboard navigation system).

5. Secret needs

(the customer wants friends

to see him as a savvy consumer).

PRODUCTS / OFFERS / SATISFIERS /

RESOURCES

Anything that can be offered to

someone to satisfy a need or
want is a product .
Product refers to physical object
Services refer to intangible
object

What is Marketed?

Goods
Services
Events
Experiences
Persons
Places
Properties
Organizations

Who Markets?
Marketers and Prospects
A marketer is someone who seeks a
response-a attention, a purchase, a
vote, a donation from another party
called prospect. If two parties are
seeking to sell something to each
other, we call them both marketers.

WHAT IS MARKET ?

A market consists of all the

potential customers sharing a
particular need or want who
might be willing and able to
engage in exchange to satisfy
that need or want.

Key Customer Markets

Consumer Markets
Business Markets
Global Markets
Non Profit and Government Markets

Marketplaces,
Marketspaces and
Metamarkets

WHAT IS MARKETING ?
Marketing is the management
process which identifies,
anticipates, and supplies customer
requirements efficiently and
profitably.
In other words, it is the process of
understanding, creating, and
delivering profitable value to
targeted customers better than the
competition.

A SIMPLE MARKETING SYSTEM

Communication
Goods & Services

Market

Industry
Money

Information/Feedback

WHAT IS MARKETING MANAGEMENT ?

Marketing Management is the

analysis, planning,
implementation and control of
programs designed to create,
build and maintain beneficial
exchanges and relationships
with target markets for the
purpose of achieving
Organisational objectives.

VALUE AND SATISFACTION

Value is the customers estimate of the
Products capacity to satisfy a set of goals
Value is the ratio between what the
customer gets and what he gives (V=B/C)
Customer gets benefits & assume costs
Expectance=Performance (satisfied)
Customer Expectance>Performance (dis-satisfied)
Customer Expectance<Performance (Highly satisfied)

WHEN :Customer

Customer Value
Customer Value
The ratio of benefits to the sacrifice necessary
to obtain those benefits

Customer Value Requirements

Offer products that perform
Give consumers more than they expect
Avoid unrealistic pricing
Give the buyer facts
Offer organization-wide commitment in service and
after-sales support

Customer Satisfaction

Customer Satisfaction
The feeling that a product has met or exceeded
the customers expectations.

Maintaining Customer Satisfaction

Meet or exceed customers expectations

Focus on delighting customers

Provide solutions to customers problems

Cultivate relationships,
NOT one-time transactions

Relationship Marketing

Relationship Marketing
The name of a strategy
that entails forging long-term partnerships with
customers, both individuals and firms.

Relationship Marketing
Who are your customers

What do customers value

What do they want to buy

Requirements
Requirements
for
for
Building
Building
Relationships
Relationships

How do they prefer to interact

Building Long-Term Relationships

Customer-oriented personnel

Effective training programs

Empowered employees

Teamwork

The Concept of Exchange

Lamb : The idea that people give up something to receive
something they would rather have.
Kotler : The act of obtaining a desired object from someone by
offering something in return.
At
AtLeast
LeastTwo
TwoParties
Parties
Something
SomethingofofValue
Value
Necessary
NecessaryConditions
Conditions
for
forExchange
Exchange

Communication
Communicationand
andDelivery
Delivery
Freedom
FreedomtotoAccept
Acceptor
orReject
Reject
Desire
DesiretotoDeal
DealWith
WithOther
OtherParty
Party

Exchange may not take place even

if conditions are met;
An agreement must be reached; and
Marketing occurs even if exchange does
not take place.

IMPORTANCE OF
MARKETING - Society
1. Marketing helps to achieve, maintain
and raise the standards of living
-

Marketing is means through which

production and purchasing power are
converted into consumption.

Better marketing Mass production

Mass production Low cost

Low cost More buying power Higher

standard of living

2. Marketing Increases employment

opportunities
-

Marketing involves various functions /

sub-functions (Buying, Selling, Transport,
Warehousing, Financing, Risk
management etc)

These functions create need for different

specializations

About 30-40% population depends

directly or indirectly on marketing

3. Marketing increases national income

-

More purchasing power increase in

national income

4. Helps maintain economic stability &

development
-

By maintaining demand supply balance

5. Link between producer & consumer

6. Removes imbalance of supply &
demand by transferring surpluses
7. Helps create utilities of time, place &
possession

IMPORTANCE OF
MARKETING Business
Firms
1. Marketing Generates Revenue, by
generating sales & thereby profits
2. Marketing helps decision making
process (what, when & how much to
produce, store or transport)
3. Helps change management &
innovations

The Scope of Marketing

To prepare to be a marketer, you need
to understand:
what marketing is
how it works
what is marketed, and
who does the marketing.

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Marketing in Practice
Box 1.1: Improving CMO Success
1.

Make the mission and responsibilities clear.

2.

Fit the role to the marketing culture and structure.

3.

Ensure the CMO is compatible with the CEO.

4.

Remember that showpeople dont succeed.

5.

Match the personality with the CMO type.

6.

Make line managers marketing heroes.

7.

Infiltrate the line organization.

8.

Require right-brain and left-brain skills

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The New Marketing Realities

Major societal forces

Network information technology

Globalization
Deregulation
Privatization
Heightened competition
Industry convergence
Consumer resistance
Retail transformation
Disintermediation

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The New Marketing Realities

New Consumer Capabilities

A substantial increase in buying power

A greater variety of available goods and
services
A great amount of information about
practically anything
Greater ease of interacting, placing and
receiving orders
An ability to compare notes on products
and services
An amplified voice to influence public
opinion

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The New Marketing Realities

New Company Capabilities

Internet
Marketing research
Internal communication
External communication
Personalization of messages
Rewards and promotions
Mobile marketing
Personalization of products
Savings from using the internet
Online training products
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More companies can produce

individually differentiated goods

Company Orientation
Toward
the Marketplace

Given these marketing realities, what

philosophy should guide a companys
marketing efforts?
Increasingly, marketers operate
consistent with a holistic marketing
concept, Lets review the evolution of
earlier marketing ideas.

There are FIVE competing concepts

under which organizations conduct
their marketing activities:
The Production Concept
The Product Concept
The Selling Concept
The Marketing Concept
The Societal Marketing Concept

Marketing Management Philosophies

There are FIVE competing concepts under which organizations conduct
their marketing activities:

Production Concept

Focus on internal capabilities of the

firm.

Product Concept

Focus on Quality of the products of

the firm.

Selling Concept

Focus on aggressive sales techniques

and believe that high sales result in
high profits

Marketing Concept
Societal Marketing Concept

Focus on satisfying customer needs

and wants while meeting objectives
Focus on satisfying customer needs
and wants while enhancing individual
and societal well-being

(1) THE PRODUCTION CONCEPT

Company
Produce more & more

Produce
Sell

Practically sells itself

Consumers

THE PRODUCTION CONCEPT

Consumers will favour those

products that are widely
available and low in cost.
Therefore increase production
and cut down costs.
And build profit through volume.

(2) THE PRODUCT CONCEPT

Produce
Quality
Products
Sell

Practically sells itself,if

it gives most quality
for money
Consumers

Buyers admire well-made products and can

appraise product quality and performance.

THE PRODUCT CONCEPT

Consumers will favour those

products that offer the most
quality, performance, or
innovative features.
Therefore, improve quality,
performance and features.
This would lead to increased
sales and profits.

(3) SELLING CONCEPT

Consumers have normal tendency to

resist.
Produce
Sell it

Aggressive selling &

promotion efforts

Consumers

Making sales becomes primary function and

consumer satisfaction secondary .

THE SELLING CONCEPT

Consumers , if left alone , will not

buy enough of companys products.
Therefore, promote sales
aggressively.
And,build profit through quick
turnover.

(4) MARKETING CONCEPT

LOVE THE CUSTOMER , NOT

THE PRODUCT

Consumers

Learn what they

want(MR)

Produce it
Market it

Sell what they want(Satisfy

needs of customers)

THE MARKETING CONCEPT

The key to achieving

organizational goals consist in
determining the needs and wants
of target markets and delivering
the desired satisfactions more
effectively and efficiently than
competitors.
And build profit through customer
satisfaction and loyalty.

(5) THE SOCIETAL MARKETING

CONCEPT

It is Marketing Concept (+)

Societys well being.
Balancing of following three
considerations while setting marketing
policies :
-Customers want satisfaction
-Societys well being
Less toxic products
-Companys profits

More durable products

Products with reusable

or recyclable materials

Review: Marketing Management

Philosophies
Orientation

Focus

Production

What can we make or do best?

Sales
Sales

How can we sell more aggressively?

Marketing
Marketing

What do customers
want and need?

Societal
Societal

What do customers want and need, and

how can we benefit society?

Sales vs Market Orientation

Sales Orientation

Market Orientation

(1) Organization Focus

Inward fulfill organizations

needs.

Outward fulfill wants and

preferences of customers.

(2) What type of business

organization is in?

Selling goods and services.

Satisfying customers needs

and wants and delivering
superior value.

(3) To whom the product is

directed?

Everybody.

Specific groups of people.

(4) Firms primary goal

Achieve profit through

maximum sales volume.

Achieve profit through

customer satisfaction.

(5) Ways to achieve the

goal

Through intensive
promotion.

Through coordinated
marketing and interfunctional activities.

The Holistic Marketing

Concept
The Holistic Marketing Concept
recognizes that everything matters
in marketing, and that a broad,
integrated perspective is often
necessary.

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The Holistic Marketing Concept

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Relationship Marketing
Relationship Marketing
building mutually satisfying long-term
relationships
with key parties, in order to earn and
retain their business.

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Integrated Marketing
Integrated Marketing
Four Ps

Product

Price

Place

Promotion

These represent the

sellers view of
marketing tools.

SIVA

Solution: how can I solve my

problem?

Information: where can I learn more

about it?

Value: what is my total sacrifice to

get this solution?

Access: where can I find it?

Customer questions, corresponding to the

4Ps

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Integrated Marketing

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Internal Marketing
Internal Marketing ensuring that
everyone in the organization
embraces appropriate marketing
principles, especially senior
management

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Performance Marketing
Performance Marketing
Financial Accountability
Social Responsibility Marketing

Social Initiatives

Corporate social marketing

Cause marketing

Corporate philanthropy

Corporate community involvement

Socially responsible business practices

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Marketing Management
Tasks

Developing market strategies and plans

Capturing marketing insights

Connecting with customers

Building strong brands

Shaping market offerings

Delivering value

Communicating value

Creating long-term growth

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Marketing Management
Tasks
Marketing Memo: Marketers Frequently Asked Questions

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Functions of CMOs
Strengthening the brands
Measuring marketing effectiveness
Driving new product development
based on customer needs
Gathering meaningful customer
insights
Utilizing new marketing technology
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STATE OF DEMAND AND MARKETING

TASK
State of demand

Negative Demand
No Demand
Latent Demand
Falling Demand
Irregular Demand
Full Demand
Overfull Demand
Un-wholesome Demand

Marketing task

Conversional Mktg.
Stimulational Mktg.
Developmental Mktg.
Remarketing
Synchro-marketing
Maintenance Mktg.
Demarketing
Counter-marketing

Marketing Management
Tasks

1. Conversional Marketing
-

Used during negative demand

Customer dislikes the product

May even pay to avoid the product

It is a rare condition

e.g. Waste Water

2. Stimulational Marketing
-

Used during No demand

Customer is indifferent to the product

Task of converting no-demand into positive

demand

Connect the product with existing need

Create environment where need is felt

e.g. Mushrooms

3. Developmental Marketing
-

Used during Latent demand

Consumers share need for something which

does not exist

Opportunity for Marketer to develop a

product

e.g. Electronic cigarette

4. Remarketing
-

Used during fading demand

Consumers find either no use for the product

or better alternatives in the market

Marketers recreate the demand

e.g. Cinema halls

5. Synchro Marketing
-

Used during irregular demand

Seasonal products

Results in wasteful underutilization of

production capacity

Marketers attempt to streamline the demand

to meet supply capacity

e.g. Hotels at hill stations, flight tickets

during peak season

6. Maintenance Marketing
-

Used during robust demand

Established products

Does not need efforts to push supplies

Keep a watch on competition

Keep sharpening the saw

7. Demarketing
-

Used during overfull demand

Or when you want to exit certain business

Supply falls short of demand

Marketers discourage customers in choosing

certain products

8. Counter Marketing
-

Used when demand is considered

unwholesome

Like alcohol, drugs

Marketers try to destroy demand

Trends in Marketing

Developing Marketing
Strategies and Plans

Marketing and Customer Value

Marketing involves satisfying customers needs and
wants. The task of any business is to deliver customer
value at a profit while being socially responsible.
In a hypercompetitive economy with increasingly rational
buyers faced with abundant choices, a company can win
only by fine-tuning the value delivery process and
choosing, providing and communicating superior value.

3 Vs approach to
Marketing

London Business Schools

Nirmalya Kumar has put forth a 3
Vs approach to Marketing.

What is the Value Chain?

The value chain is a tool used for identifying and to create

more customer value because every firm is a synthesis of
primary and support activities performed to design, produce,
market, deliver, and support its product.

Value Chain Analysis

Core Business Processes

Market-sensing process
New-offering realization process
Customer acquisition process
Customer relationship management process
Fulfillment management process

Characteristics of Core Competencies

A source of competitive advantage
Applications in a wide variety of markets
Difficult to imitate

Holistic Marketing
Orientation and Customer
value
Key management questions
are:
Value exploration How a company identifies new
value opportunities?
Value creation How a company efficiently creates
more promising new value offerings?
Value delivery How a company uses its capabilities
and infrastructure to deliver the new value offerings
more efficiently?

Holistic Marketing sees itself as integrating the value

exploration, value creation, and value delivery activities
with the purpose of building long-term, mutually satisfying
relationships and co-prosperity among key stakeholders.

What is a Marketing Plan?

A marketing plan is the central instrument for
directing and coordinating the marketing effort. It
operates at a strategic and tactical level.

Levels of a Marketing
Plan
Strategic
Target marketing
decisions

Tactical
Product features
Promotion

Value proposition

Pricing

Analysis of

Sales channels

marketing
opportunities

Service

Marketing Plan Contents

Executive summary
Table of contents
Situation analysis
Marketing strategy
Financial projections
Implementation controls

Evaluating a Marketing
Plan
Is the plan simple?
Is the plan specific?
Is the plan realistic?
Is the plan complete?

What is Strategic Planning?

It is the managerial process that
helps to develop a strategic and
viable fit between the firms
objectives, skills, resources with the
market opportunities available. It
helps the firm deliver its targeted
profits and growth through its
businesses and products.

How to go about it?

Process of Marketing Strategic
Planning
Define the corporate mission
Establish strategic business units (SBUs)
Assign resources to each SBU
Assess growth opportunities

Corporate Mission
This seeks to embody the entire goals
of the organization and the objective of
its existence.
It seeks to provide a sense of purpose,
direction and opportunity
For e.g. e-bays mission:
to provide a global trading platform
where practically anyone can trade
practically anything.

Good Mission Statements

Focus on a limited number of goals
Stress major policies and values
Define major competitive spheres
Take a long-term view
Short, memorable, meaningful

Major Competitive Spheres

Industry
Products
Competence
Market segment
Vertical channels
Geographic

Rubbermaid Commercial Products, Inc.

Our vision is to be the Global Market Share
Leader in each of the markets we serve. We
will earn this leadership position by
providing to our distributor and end-user
customers innovative, high-quality, costeffective and environmentally responsible
products. We will add value to these products
by providing legendary customer service
through our Uncompromising Commitment
to Customer Satisfaction.

Motorola
The purpose of Motorola is to honorably
serve the needs of the community by providing
products and services of superior quality at a
fair price to our customers; to do this so as to
earn an adequate profit which is required for
the total enterprise to grow; and by doing so,
provide the opportunity for our employees and
shareholders to achieve their personal
objectives.

eBay

We help people trade anything on earth.

We will continue to enhance the online
trading experiences of allcollectors,
dealers, small businesses, unique item
seekers, bargain hunters, opportunity
sellers, and browsers.

Dimensions that Define a Business

Customer groups
Customer needs
Technology

Product Orientation vs. Market Orientation

Company

Product

Market

Missouri-Pacific
Railroad

We run a railroad

We are a peopleand-goods mover

Xerox

We make copying
equipment

We improve office
productivity

Standard Oil

We sell gasoline

We supply energy

Columbia Pictures

We make movies

We entertain
people

Establishing Strategic
Business Unit
SBU:
It is a company within a company
The business is differentiated from the
rest of the company
It has its own set of competitors
It is a separate profit centre

Characteristics of SBUs
Large companies normally manage quite different
businesses, each requiring its own strategy. GE has
classified its business into 89 strategic business units,
SBU has three characteristics:
It is a single business or collection of related
businesses
It has its own set of competitors
It has a manager responsible for strategic planning
and profitability

Assigning Resources to
Eachmodels
SBU
Several investment planning
provide ways to

make

investment decisions as follows:

The GE/McKinsey Matrix classifies each SBU by the extent of its
competitive advantage and the attractiveness of its industry.
Management can decide to grow, harvest or draw cash from, or
hold on to the business.
Another model, BCGs Growth-Share Matrix, uses relative market
share and annual rate of market growth as criteria to make
investment decisions, classifying SBUs as dogs, cash cows,
question marks, and stars.

The General Electrics (GE)

Model

This analyses

Long term industry attractiveness and

Business competitive strength

These factors are assigned weights /

ratings based on their perceived
importance
The business is rated on each of the
factors
A combined rating is determined (factor
importance rating combined with the
business rating on the factor)
Each business result is plotted on a 2dimensional matrix

Industry attractiveness Determinants

Market growth and size

Industry profitability
Seasonality
Porter's five forces
Technology & Capital requirements
Economies of scale
Emerging opportunities and weakness
etc

Competitive Strengths Determinants

Relative market share

Production capacity
Company Image
Profit margins
Technological capabilities
R & D strengths
Market and customer knowledge
Employee commitment
Etc.

GE Model Usage
The 9 cells of the matrix are grouped
into 3 broad categories:
The favorable category (1,2,3)
The organisation should build and grow
these businesses

The medium investment allocation

priorities (A,B,C)
These should simply be maintained no
expansion and no divesting

Businesses that are not doing well

(i,ii,iii)
These should be harvested and divested

The GE model
High

Medium
Industry/
market
attractivene
ss Low

Ii

iii

Strong

Average

Weak
Competitive Strengths

General Electrics Business Screen

High

Winners
A

Winners
B

C
Question
Marks

Industry Attractiveness

D
Winners
E
Medium

Average
Businesses
F
Losers

Losers
G
Low

Profit
Producers
Strong

Losers
Average

Weak

Business Strength/Competitive Position

Source: Adapted from Strategic

Management in GE, Corporate
Planning and Development, General
Electric Corporation. Used by
permission of General Electric
Company.

BCG Sections
Stars
Business with a high market share and
high growth rate
Generate huge sums of money
Require huge sums of money to cope
with growth
Cash Cows
Businesses with low growth but high
market share
Generate huge sums of money at low
cost
Are used to develop and promote new
businesses (they are milked)

BCG Sections Cont.

Dogs
Have low market share in an aged
industry
The strategy is, normally to sell them off.
Question marks (Fledglings)
Sometimes called problem children (they
need to be grown).
They generate low cash but need a lot to
tap the high growth rate.
They can be grown into stars, resources
allowing.
Too much commitment to question marks
can lead lead to liquidity problems.

SBU strategies

Build
Hold
Harvest
Divest

Assessing Growth Opportunities:

Ansoffs Product-Market Expansion Grid
Market penetration strategy
Market development strategy
Product development strategy
Diversification strategy

STRATEGIC BUSINESS
UNIT PLANNING PROCESS

Business Mission
Each business unit needs to define its specific within
the broader company mission. Thus, a televisionstudio-lighting-equipment company might define its
mission as, To target major television studios and
become

their

vendor

of

choice

for

lighting

technologies that represent the most advanced and

reliable studio lighting arrangements.

SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats

CONDUCT SWOT
Analysis for use in the
Marketing Planning
Process

SWOT analysis is a strategic planning technique that analyzes a

companys internal STRENGTHS and WEAKNESSES, and studies
OPPORTUNITIES and THREATS in the external sales environment.

Who to involve in a SWOT Analysis?

For those who want to improve the competitiveness of a
company, region or country.
People directly involved in various hierarchical levels of
decision making in an organization or business, or a wider
sample of actors if the SWOT analysis concerns a whole region
or nation. Representatives from a variety of stakeholders
groups should be involved, as they would bring in the analysis
their own particular perspectives. At least one expert in SWOT
analysis should take part or moderate the process.

WHEN SHOULD A SWOT

ANALYSIS BE
CONDUCTED?
SWOT analysis is done as part of the overall corporate
planning process in which financial and operational goals
are set for the upcoming year and strategies are created
to accomplish these goals.
When a company wants to get a picture of how the
company should position itself against competitors.
When seeking out new opportunities and forecasting
longer term opportunities
To help companies be better prepared for whatever it will
encounter in the external environment.

BENEFITS OF A SWOT
ANALYSIS
The main advantages of conducting a SWOT analysis:
Little or no cost
Anyone who understands your business can perform a SWOT
analysis
When you don't have much time to address a complex situation

Another advantage of a SWOT analysis is that it concentrates on the

most important factors affecting your business. Using a SWOT, you can:

understand your business better

address weaknesses
deter threats
capitalize on opportunities
take advantage of your strengths
develop business goals and strategies for achieving them.

FACTORS CONSIDERED
IN A SWOT ANALYSIS
Internal Factors
Changes in spending on other parts of the companys
marketing and promotional mix
Changes in what is happening in different territories or
markets
Changes in sales management practices
Changes in number of salespeople supervised by one
person
External Factors
Intensity of competition
Total market potential
Concentration of potential high-volume buyers
Geographic distribution of customers

PROCEDURES FOR
CONDUCTING A SWOT
ANALYSIS
Step 1 Information collection In the here and

now
List all strengths that exist now. Then in turn, list
all weaknesses that exist now. Be realistic but
avoid modesty!
You can conduct one-on-one interviews. Or get
a group together to brainstorm. A bit of both is
frequently best.
Youll first want to prepare questions that relate
to the specific company or product that you are
analyzing. Youll find some questions and issues
below to get you going.
When facilitating a SWOT search for insight
through intelligent questioning and probing

PROCEDURES FOR
CONDUCTING A SWOT
ANALYSIS (contd)
Step 2 What might be
List all opportunities that exist in the future.
Opportunities are potential future strengths.
Then in turn, list all threats that exist in the
future. Threats are potential future
weaknesses.
Step 3 Plan of action
Review your SWOT matrix with a view to
creating an action plan to address each of the
four areas.

Market Opportunity Analysis (MOA)

Can the benefits involved in the opportunity be
articulated convincingly to a defined target market?
Can the target market be located and reached with
cost-effective media and trade channels?
Does the company possess or have access to the
critical capabilities and resources needed to deliver
the customer benefits?
Can the company deliver the benefits better than
any actual or potential competitors?
Will the financial rate of return meet or exceed the
companys required threshold for investment?

Goal Formulation

Once the company has performed a SWOT analysis, it can proceed to

goal formulation, developing specific goals for the planning period.
Goals are objectives that are specific with respect to magnitude and
time. Most business units pursue a mix of objectives, including
profitability, sales growth, market share improvement, risk
containment, innovation, and reputation. The business unit sets
these objectives and then manages by objectives (MBO). For an MBO
system to work, the units objectives must meet four criteria:
Units objectives must be hierarchical
Objectives should be quantitative
Goals should be realistic
Objectives must be consistent

Strategic Formulation:
Porters Generic Strategies
Overall cost leadership. Firms work to achieve the
lowest production and distribution costs so they can
underprice competitors and win market share.
Differentiation. The business concentrates on
achieving superior performance in an important
customer benefit area valued by a large part of the
market.
Focus. The business focuses on one or more narrow
market segments,gets to know them intimately,
and pursues either cost leadership or differentiation
within the target segment.

Strategic Formulation :
Marketing Alliances
Product or service alliances One company
licenses another to produce its product, or two
companies jointly market their complementary
products or a new product.
Promotional alliances One company agrees to
carry a promotion for another companys product or
service
Logistics alliances One company offers logistical
services for another companys product.
Pricing collaborations One or more companies
join in a special pricing collaboration.

Programme Formulation and

Implementation

Once the business unit has developed its

principal strategies, it must work out detailed
support programs.
A great marketing strategy can be sabotaged
by poor implementation. If the unit has decided
to attain technological leadership, it must plan
programs to strengthen its R&D department,
gather technological intelligence, develop
leading-edge products, train the technical sales
force, and develop ads to communicate its
technological leadership.
Once the marketing programs are formulated,
the marketing people must estimate their costs.

Feedback and Control

As it implements its strategy, a firm needs to
track the results and monitor new
developments.
Some environments are fairly stable from year
to year. Other environments evolve slowly in a
fairly predictable way.
Still other environments change rapidly in major
and unpredictable ways.
Nonetheless, a company can count on one
thing: The marketplace will change; and when it
does, the company will need to review and
revise its implementation, programs, strategies,

The Marketing
Environment

Case Study
McDonalds Challenges and
Reactions
Challenges
Shifting consumer lifestyles
Low ratings of food and
service quality
Atmosphere not upscale
Image of being unclassy,
uncultured and uncool to
younger target markets

Marketing Initiatives
Focus on core competency of
consistent products and reliable
service
Upscale alternative including
McCafe and Bistro Gourmet
Healthier food options with
elimination of supersize and
introduction of Go Active! Adult
Happy Meal

The Marketing Environment

Marketing Environment:
The actors and forces outside marketing that
affect marketing managements ability to build
and maintain successful relationships with target
customers
Microenvironment
Includes the actors close to the company
Macroenvironment
Involves larger societal forces

Microenvironment
Actors
1. The company
2. Suppliers
3. Marketing

intermediaries
4. Customers
5. Competitors
6. Publics
3 - 141

Marketing must
consider other parts
of the organization
including finance,
R&D, purchasing,
operations and
accounting
Marketing decisions
must relate to
broader company
goals and strategies

Microenvironment
Actors
1. The company
2. Suppliers
3. Marketing

intermediaries
4. Customers
5. Competitors
6. Publics
3 - 142

Marketers must
watch supply
availability and
pricing
Effective partnership
relationship
management with
suppliers is essential

Microenvironment
Actors
1. The company
2. Suppliers
3. Marketing

intermediaries
4. Customers
5. Competitors
6. Publics

Help to promote, sell

and distribute goods to
final buyers
Include resellers,
physical distribution
firms, marketing
services agencies and
financial intermediaries
Effective partner
relationship
management is essential

3 - 143

Microenvironment
Actors

The five types of

customer markets

1. The company
2. Suppliers
3. Marketing

intermediaries
4. Customers
5. Competitors
6. Publics
3 - 144

Consumer
Business
Reseller
Government
International

Microenvironment
Actors
1. The company
2. Suppliers
3. Marketing

intermediaries
4. Customers
5. Competitors
6. Publics
3 - 145

Conducting
competitor analysis
is critical for success
of the firm
A marketer must
monitor its
competitors
offerings to create
strategic advantage

Microenvironment
Actors

A group that has an

actual or potential
interest in or impact
on an organization
Seven publics include:

1. The company
2. Suppliers
3. Marketing

intermediaries
4. Customers
5. Competitors
6. Publics
3 - 146

Financial
Media
Government
Citizen-action
Local
General
Internal

The Macroenvironment
Macroenvironmental Forces
Demographic
Economic
Natural

Technological
Political
Cultural

3 - 147

Demographic Environment
Demographic Environment:
The study of human populations in
terms of size, density, location, age,
gender, race, occupation and other
statistics

3 - 148

Demographic Environment
Changing age structure of the U.S.
population is the single most
important demographic trend
Baby boomers, Generation X, and
Generation Y are the key groups

3 - 149

Demographic Environment
Key Generations
Baby Boomers
Generation X
Generation Y

Born between 1946

and 1964
Represent 28% of the
population; earn 50%
of personal income
Many mini-segments
exist within the
boomer group
Entering peak earning
years as they mature

3 - 150

Demographic Environment
Key Generations
Baby Boomers
Generation X
Generation Y

Born between 1965

and 1976
First latchkey children
Maintain a cautious
economic outlook
Respond to socially
responsible companies
Will be primary buyers
of most goods by 2010

3 - 151

Demographic Environment
Key Generations
Baby Boomers
Generation X
Generation Y

Born between 1977

and 1994
72 million strong;
almost as large a
group as their baby
boomer parents
New products,
services, and media
cater to GenY
Challenging target for
marketers

3 - 152

Natural Environment
Natural Environment:
Involves the natural resources that are
needed as inputs by marketers or that
are affected by marketing activities

Trends
Shortages of raw materials
Increased pollution
Increased government intervention
3 - 153

Technological Environment
The most dramatic force shaping our
destiny
Rapidly changing force which creates
many new marketing opportunities but
also turns many existing products
extinct

3 - 154

Political Environment
Consists of laws, government agencies
and pressure groups that influence or limit
various organizations and individuals in a
given society
Legislation affecting businesses worldwide has
increased
Laws protect companies, consumers and the
interests of society
Increased emphasis on socially responsible
actions

3 - 155

Cause-Related Marketing
Marketers create link between brand and
charitable organization
Demonstrates social responsibility
Helps build positive brand image
Examples include General Mills Box Tops
for Education, Tang and Mothers Against
Drunk Driving, Eddie Bauer and local
schools

3 - 156

Cultural Environment
Made up of institutions and other
forces that affect a societys basic
values, perceptions, preferences and
behaviors.

3 - 157

Cultural Environment Includes

Marketing
peoplesManagement
views of
Themselves

Society

Identify with
brands for selfexpression

Patriotism on the
rise

Nature

Others

lifestyles of health
and sustainability
(LOHAS) consumer
segment

Recent shift from

me to we
society

Organizations

Universe

Trend of decline in
trust and loyalty to
companies

Includes religion
and spirituality

3 - 158

Responding to the
Marketing Environment

There are three kinds of companies:

those who make things happen,
those who watch things happen, and
those who wonder whats
happened.

3 - 159

Competitive Dynamics

What is Competitive Dynamics?

Competitive Dynamics
Total set of actions and responses of all firms
competing within a market.

Competitive Dynamics
Ongoing actions and responses taking place
between all firms competing within a market for
advantageous positions.

Model of Competitive Dynamics

1. Why Do Companies Launch New Competitive

Actions?/ Role of Competitive dynamics to gain
competitive advantage

Improve market position

Capitalize on growing demand
Expand production capacity
Provide an innovative new solution
Obtain first mover advantages

2. Threat Analysis
Threat Analysis
A firms awareness of its closest competitors and the
kinds of competitive actions they might be planning.

Competitor Analysis
Is the first step to understanding competitive rivalry
and identifying who your direct competitors are
Involves collecting competitive intelligence
Focuses on trying to predict competitors behavior
The question: To what extent are firms competitors?
2 components to assess
Market Commonality
Resource Similarity
Direct competitors have high market commonality & high
resource similarity

Market Commonality
Market Commonality
The number of markets with which the firm and a
competitor are jointly involved and the degree of
importance of the individual markets to each
Each industry composed of various markets which
can be subdivided into segments
Example: Automobile industry

Greater market commonality results in greater

rivalry
Firms may also compete against one another in
several or many product and geographic markets
Multimarket Competition

Firms with greater multimarket contact are less likely

to attack but more likely to respond when attacked

Resource Similarity
Resource Similarity
Extent to which firms tangible/intangible
resources are comparable to competitors
in type and amount.
Can result in similar strengths and
weaknesses and similar strategies being
pursued.
The more similar the types and amounts of
resources the more direct the competition
is between two firms.

3. 3 Drivers of
Competitive
Actions/Responses
Awareness
Extent competitors recognize degree of
mutual interdependence that results from
market commonality and resource similarity
Greatest when firms have highly similar
resources
Affects the extent to which the firm
understands the consequences of its
competitive actions and responses
A lack of awareness

3 Drivers of Competitive
Actions/Responses
Motivation

Firm's incentive to take action, or to

respond to a competitor's attack, as it
relates to perceived gains and losses
A firm is more likely to attack a rival with
whom it has low market commonality
Responses are more likely to occur when
market commonality is high

Ability

Firm's resources that allow competitive

action and flexibility to respond
Without available resources a firm lacks the
ability to respond

Drivers of Competitive Behavior

Awareness
Do managers understand the key
characteristics of competitors?
Motivation
Does the firm have appropriate
incentives to attack or respond?
Capability
Does the firm have the necessary
resources to attack or respond?

4. Types of Competitive actions:

Strategic VS Tactical
What are the strategic and tactical actions?
Strategic actions/responses: market-based moves
that signify a significant commitment of
organizational resources to pursue a specific
strategy
Difficult to implement and reverse

Tactical actions/responses: market-based moves

that involve fewer resources to fine-tune a strategy
that is already in place
Easier to implement and reverse

First Mover
Firms that take an initial competitive
action.
Generally possess the resources and
capabilities that enable them to be
pioneers in new products, new markets or
new technologies.
Can earn above average profits until
competitors respond
Gain customer loyalty, helping to create a
barrier to entry by competitors
Advantage depends upon difficulty of imitation

Second Mover
Firms that respond to a First Movers actions
Second Movers frequently imitate First Movers
Speed of response often dictates success
Should evaluate customers response before
moving
Fast Second Movers can capture some of
initial customers and develop some brand
loyalty
Avoid some of the risks associated with First
Move
Must possess necessary capabilities to imitate

Summary Of Movers
First Mover Incentives
Firm that takes an initial competitive action to
build or to defend its competitive advantages
or to improve its market position
Second Movers
Late Movers

Quality
Customer perception that the firm's goods or
services perform in ways that are important to
customers, meeting or exceeding expectations
Lower quality = lower attack/response likelihood

Organizational size and

competitive actions
Small firms
More likely to launch competitive actions
Are more flexible, nimble, and quicker
Initiate a greater variety of competitive
actions

Large firms
Initiate more competitive actions with more
strategic actions during a given period
Tend to limit the types of competitive actions
used

Actors Reputation
Actors Reputation

Actor: Firm taking an action or response

Reputation: positive or negative attribute ascribed by
one rival to another based on past competitive behavior

Firms are more likely to respond to market

leaders (firms with good reputations)
Past behavior is also a useful predictor of
future behavior
Firms are less likely to respond to a
company with a reputation for risky,
complex, and unpredictable behavior

Slow-Cycle Markets
Markets in which the firm's competitive
advantages are shielded from imitation for long
periods of time, and in which imitation is costly
Build a one-of-a-kind competitive advantage
which creates sustainability
Once a proprietary advantage is developed,
competitive behavior should be oriented to
protecting, maintaining, and extending that
advantage

Fast-Cycle Markets
Markets in which the firm's capabilities that contribute to
competitive advantages are not shielded from imitation
and where imitation is often rapid and inexpensive.
Competitive advantages are not sustainable in fast-cycle
markets.
Focus: learning how to rapidly and continuously
develop new competitive advantages that are superior to
those they replace (creating innovation ).
Continually try to move on to another temporary
competitive advantage before competitors can respond to
the first one.

Standard-Cycle Markets
Markets where firms competitive advantages are
moderately shielded from imitation and where
imitation is moderately costly.
Competitive advantages partially sustained as
quality is continuously upgraded.
Seek to serve many customers and gain a large
market share.
Gain brand loyalty through brand names.
Careful operational control / manage a consistent
experience for the customer.

Competitive Strategies/
Strategies to compete
Having a competitive advantage is
necessary for a firm to compete in the
market
But what is more important is whether the
competitive advantage is sustainable
A firm must identify its position relative to
the competition in the market
By knowing if it is a leader, challenger,
follower or nicher, it can adopt appropriate
strategies to compete

Strategies for Market

Leaders
Market Leaders objectives:
Expand the total market by
Finding new users
Creating new uses, and
Encouraging more usage

Protect its current market share by

Adopting defense strategies (see following slides)

Increase its market share

Note the relationship between market share and
profitability

Which strategy to use?

Depends on your answer to the
following:
Is it worth fighting?
Are you strong enough to fight?
How strong is your defense?
Do you have any choice but to
fight?

Defense Strategy
A market leader should generally adopt a
defense strategy
Six commonly used defense strategies

Position Defense
Mobile Defense
Flanking Defense
Contraction Defense
Pre-emptive Defense
Counter-Offensive Defense

Defense Strategy (contd)

Position Defense
Least successful of the defense
strategies
A company attempting a fortress
defense will find itself retreating from line
after line of fortification into shrinking
product markets. Saunders (1987)
e.g. Mercedes was using a position
defense strategy until Toyota launched a
frontal attack with its Lexus.

Defense Strategy (contd)

Mobile Defense
By market broadening and diversification
For marketing broadening, there is a need to
Redefine the business (principle of
objective), and
Focus efforts on the competition (the
principle of mass)
e.g. Legend Holdings, the top China PC
maker Legend has announced a joint venture
with AOL to broaden its business to provide
Internet services in the mainland

Defense Strategy (contd)

Flanking Defense:
Secondary markets (flanks) are the
weaker areas and prone to being
attacked
Pay attention to the flanks
e.g. San Miguel introduced a
flanking brand in the Philippines,
Gold Eagle, as a defense against
APBs Beerhausen

Defense Strategy (contd)

Contraction Defense
Withdraw from the most vulnerable
segments and redirect resources to
those that are more defendable
By planned contraction or strategic
withdrawal
e.g. Indias TATA Group sold its
soaps and detergents business units
to Unilever in 1993

Defense Strategy (contd)

Pre-emptive Defense
Detect potential attacks and attack
the enemies first
Let it be known how it will retaliate
Product or brand proliferation is a
form of pre-emptive defense e.g.
Seiko has over 2,000 models

Defense Strategy (contd)

Counter-Offensive Defense
Responding to competitors headon attack by identifying the
attackers weakness and then
launch a counter attack
e.g. Toyota launched the Lexus to
respond to Mercedes attack

Market Challenger
Strategies

The market challengers strategic

objective is to gain market share and
to become the leader eventually
How?
By attacking the market leader
By attacking other firms of the same
size
By attacking smaller firms

Market Challenger Strategies

(contd)
Types of Attack Strategies
Frontal attack
Flank attack
Encirclement attack
Bypass attack
Guerrilla attack

Frontal Attack
Seldom work unless
The challenger has sufficient firepower (a 3:1 advantage) and staying
power, and
The challenger has clear distinctive
advantage(s)

e.g. Japanese and Korean firms

launched frontal attacks in various
ASPAC countries through quality,
price and low cost

Flank attack
Attack the enemy at its weak
points or blind spots i.e. its
flanks
Ideal for challenger who does
not have sufficient resources
e.g. In the 1990s, Yaohan
attacked Mitsukoshi and Seibus
flanks by opening numerous
stores in overseas markets

Encirclement attack
Attack the enemy at many
fronts at the same time
Ideal for challenger having
superior resources
e.g. Seiko attacked on fashion,
features, user preferences and
anything that might interest the
consumer

Bypass attack
By diversifying into unrelated
products or markets neglected
by the leader
Could overtake the leader by
using new technologies
e.g. Pepsi use a bypass attack
strategy against Coke in China
by locating its bottling plants in
the interior provinces

Guerrilla attack
By launching small, intermittent
hit-and-run attacks to harass and
destabilize the leader
Usually use to precede a stronger
attack
e.g. airlines use short promotions
to attack the national carriers
especially when passenger loads
in certain routes are low

Which Attack Strategy should a

Challenger Choose?
Use a combination of several
strategies to improve market
share over time

Market-Follower Strategies
Theodore Levitt in his article,
Innovative Imitation argued that a
product imitation strategy might be
just as profitable as a product
innovation strategy
e.g.
Product innovation--Sony
Product-imitation--Panasonic

Market-Follower Strategies
(contd)
Each follower tries to bring distinctive advantages to

its target market--location, services, financing

Four broad follower strategies:
Counterfeiter: The best example of counterfeiting is
selling the originals via piracy. Where cloning involves
manufacturing of slightly altered products, counterfeiting
involves thieving and is a black market follower strategy
(which is illegal)
Cloner: Cloning makes advantage of the top brands
and makes same to same products. e.g. the IBM PC
clones
Imitator e.g. car manufacturers imitate the style of
one another
Adapter e.g. many Japanese firms are excellent
adapters initially before developing into challengers
and eventually leaders

Market-Nicher Strategies
Smaller firms can avoid larger
firms by targeting smaller
markets or niches that are of
little or no interest to the larger
firms
e.g. Logitech--mice
Microbrewers--special beers

Market-Nicher Strategies
(contd)
Nichers must create niches, expand
the niches and protect them
e.g. Nike constantly created new
niches--cycling, walking, hiking,
cheerleading, etc

What is the major risk faced by

nichers?
Market niche may be attacked by larger
firms once they notice the niches are
successful

Multiple Niching
[A] firm should `stick to its niching
but not necessarily to its niche. That
is why multiple niching is preferable
to single niching. By developing
strength in two or more niches the
company increases its chances for
survival.
Philip Kotler

Example of Nicher:
Challenger Superstore
Challenger Superstore is a discount retailer
of computers and accessories
It opened its first overseas store in Bangkok
at a cost of 90 million baht (S$3.7 million)
In October 2000, it closed its Bangkok store
after failing to pay rent amounting to
about 6 million baht
Discussion: Why do you think Challenger
failed in Thailand?

T.H.A.N.K Y.O.U F.O.R

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