Strategic marketing partners
Strategic planning is the process of developing and maintaining a strategic fit between the organisation’s goals and capabilities and its changing marketing opportunities. It is the base for the long term planning of the firm. At a corporate level, the firm starts defining the company’s mission. A mission statement is a statement of the organisation’s purpose. The mission leads to a hierarchy of goals.
Based on this, the management must plan the business portfolio: the collection of businesses and products that make up the company. Portfolio analysis is the process by which management evaluates the products and businesses that make up the company. The first step is identifying the strategic business units (SBU) that are vital to the company. The well-known model of the Boston Consulting Group (BCG) sorts the SBUs into a growth-share matrix, leading to four types of SBUs:
- Stars: high growth and high share units, in need of investment.
- Cash cows: low-growth, high share units, producing cash.
- Question marks: low-share units, in high-growth markets. Require cash, but can turn out to be unprofitable.
- Dogs: low-growth, low-share units, which are not very profitable.
After the units are classified, the company should determine in which units to build share, hold share, harvest the profits or divest the SBU.
Designing the business portfolio also means looking at future businesses. The product/market expansion grid is a portfolio-planning tool for identifying company growth opportunities through:
- Market penetration: company growth by increasing sales of current products to current market segments without changing the product.
- Market development: company growth by identifying and developing new market segments for current company products.
- Product development: company growth by offering modified or new products to current market segments.
- Diversification: company growth through starting up or acquiring businesses outside the company’s current products and markets.
Companies also need strategies for downsizing, which means reducing the business portfolio by eliminating products or business units that are not profitable or that no longer fit the company’s overall strategy.
Marketing provides a philosophy, input and strategies for the strategic business units. Besides customer relationship management, marketers must also invest in partner relationship management to form an effective value chain: the series of internal departments that carry out value-creating activities to design, produce, market, deliver and support a firm’s products. When trying to create customer value, a firm must go beyond the internal value chain and partner up with others in the value delivery network. The value delivery network is the network composed of the company, its suppliers, its distributors and ultimately its customers who partner with each other to improve the performance of the entire system.
Marketing strategy is the marketing logic by which the company hopes to create customer value and achieve profitable customer relationships. The company must choose which customers to serve and how to serve them. This process involves four steps:
- Market segmentation: dividing a market into distinct groups of buyers who have different, needs, characteristics or behaviour and who might require separate products or marketing programmes. A market segment is a group of consumers who respond in a similar way to a given set of marketing efforts.
- Market targeting is the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.
- Positioning is arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the minds of consumers.
- Differentiation is actually differentiating the market offering to create superior -customer value.
The marketing mix is the set of tactical marketing tools: product, price, place and promotion, that the firm blends to produce the response it wants in the target market. Product refers to the combination of goods and service the firm offers. Price is the amount the customer pays to obtain the product. Place refers to the availability of the product. Promotion relates to the activities that communicate the benefits of the product.
Managing the marketing process requires four marketing management functions. The first is marketing analysis, starting with a SWOT analysis. A SWOT analysis is an overall evaluation of the company’s strengths (S – internal capabilities), weaknesses (W – internal limitations), opportunities (O – external factors that can be profitable) and threats (T – external factors that might challenge the company). Secondly, marketing planning involves choosing the right marketing strategies. Third is marketing implementation: turning marketing strategies and plans into marketing actions to accomplish strategic marketing objectives. And finally, there is marketing control: measuring and evaluating the results of marketing strategies and plans and taking corrective action to ensure that the objectives are achieved. Operating control refers to checking the performance against the annual plan, while strategic control involves looking at the match between strategies and opportunities.
Nowadays, marketers need to back up their spending by measurable results. The return on marketing investment (marketing ROI) is the net return from a marketing investment divided by the costs of the marketing investment. The marketing ROI measures the profits generated by investments in marketing activities and can be a helpful tool, but is also difficult to measure.