Company and Marketing Strategy

a:
Ww
3: In the first chapter, we explored the marketing process marketing mix, and manage their marketing programs. Finally, we
1-­ by, which companies create value for customers to look at the important step of measuring and managing marketing
c.> capture value from them in return. In this chapter, we return on investment (marketing ROI).
<tw
:ea: dig\deeper into steps two and three of that process: First, let's look at Starbucks, a good company and a good
oc. designing customer value-driven marketing strategies marketing strategy story. Starbucks met with enormous early
and constructing marketing programs. First, we look at the orga­ success by focusing not just on coffee but on the coffee-drinking
nization's overall strategic planning, which guides marketing strat­ experience. The company has since taken a bumpy ride from
egy and planning. Next, we discuss how, guided by the strategic boom to bust and back to boom again. Along the way, it learned
plan, marketers partner closely with others inside and outside that good marketing strategy means more than just growth,
the firm to engage customers and create. value for them. We sales, and profits. It means skillfully engaging customers and
then examine marketing strategy and planning-how marketers creating value for them. At its core, Starbucks doesn't sell just
choose target markets, position their market offerings, develop a coffee, it sells "The Starbucks Experience."

STARBUCKS' MARKETING STRATEGY: Delivering "The Starbucks Experience"

drew a host of competitors. It seemed that every rival-from
ore. than 30 year.s ago, Howard Schultz transformed

:.•..·.·".......
. ,.' . . {r'(•.'..
". ~,
the U.S. coffee industry by bringing a European- independent coffeehouses to fast-food restaurants--was ped­
c ',t ;: style coffeehouse to America. He believed that
M .
dling its own brand of premium coffee.
. \. " people needed to slow down-to "smell the cof­ To maintain its phenomenal growth in the increasingly
fee" and to enjoy life a little more. The result was Starbucks, overcaffeinated marketplace, Starbucks brewed up an ambi­
founded with a whole new strategy for engaging customers tious growth strategy. It opened new stores at a breakneck pace,
and creating customer value. seemingly everywhere. For example, one three-block stretch
Starbucks didn't sell just coffee, it sold lithe Starbucks in Chicago contained six of the trendy coffee bars. In New
Experience"-"an uplifting experience that enriches people's York City, there were two Starbucks in one Macy's store. In
lives one moment, one human fact, cramming so many stores so
being, one extraordinary cup of close together caused one satirical
coffee at a time." Starbucks gave publication to run this headline:
customers what it calls a "third "A New Starbucks Opens in the
place"-a place away from home Restroom of Existing Starbucks." .
and away from work. At Starbucks, The company also blanketed the
the smells, the sound of beans country with Starbucks kiosks
grinding, watching baristas blend and coffee stands in everything
and brew the brand's specialty cof­ from Target stores and sup~rmar~
fees-all became as much or more kets to hotel lobbies, and1service
a part of the customer experience as the coffee itself. businesses from airlines to car dealerships proclaimed,' "We
Over the next two decades, customers flocked to Starbucks proudly serve Starbucks coffee."
cafes. By 2007, some 15,000 Starbucks stores dotted the nation The more Starbucks grew, however, the more it drifted
and globe, and the company's sales and profits rose like steam away from the core mission and values that had made it so suc­
off a mug of hot java. However, Starbucks's enormous success cessful. The company's almost obsessive focus on growth for
 38 PART 1 I Defining Marketing and the Marketing Process
growth's sake began to take a toll on the prized Starbucks
Experience. Far from its roots as a warm and intimate cof­
feehouse, Starbucks began to evolve into more of a caffeine
filling station. More and more, the premium brand found
itself competing with the likes of-gasp!-McDonald's for
many of the same customers.
Founder Howard Schultz, who had stepped down· Discuss how to design bush
.as CEO in 2000, expressed concern. In a 2007 memo to
Starbucks management, Schultz lamented that the com­ DeSigning the Business Portf(
pany's push for growth had "led to the watering down of
the Starbucks Experience" and that Starbucks was "losing Explain marketing's role in s
its soul." Schultz was right that something was wrong. By to create and deliver custorr
early 2008, when Schultz reassumed his role as Starbucks Planning Marketing: Partneril
president and CEO, the company found itself in hot water.
For the first time ever, the average number of transactions
Describe the elements of a c
per U.S. ~tore fell off and same-store sales growth slowed. that influence them.
Within just the previous two years, Starbucks's stock had More than just coffee, Starbucks sells "The Starbucks Experience,"
tumbled nearly 80 percent. According to one analyst, liThe one that "enriches people's lives one moment, one human being, one Marketing S,trategy and the M
extraordinary cup of coffee at a time!'
financial vultures circled. Obituaries were drafted."
Associated Press
Instead ofpresiding over the brand's demise, however, List the marketing managem
"''',
Schultz reacted quickly to restore its luster. He cooled the pace Starbucks purchased Teavana-a specialty tea retailer with more and discuss the importance I
of Starbucks's growth, closed underperforming locations, and than 400 locations in North America. Schultz sees the Teavana Managing the Marketing Effor
replaced most of the company's top executives. Most impor­ acquisition as pivotal to Starbucks's renewal and reinvention.
tant, Schultz laid plans to reestablish the brand's core mission Tea is "a $90 billion global category, ripe for innovation," he
and values and to refocus the company on giving customers says. "We're going to do for tea what we've done for coffee."
the authentic Starbucks Experience. "As we grew rapidly and Starbucks's renewal extends the Starbucks Experience well
I had phenomenal success," Shultz announced, "we started to beyond employee relearning, new products, and innovative
r-~----~~~~--­
I
Author Company-wide strategic
Comment planning guides marketing Company·'
lose sight of our focus on the customer and our commitment to stores formats. Over the past decade, as much as any brand,
strategy and planning, Like marketing
continually and creatively enhance the Starbucks Experience." Starbucks has built customer engagement and brand community strategy, the company's broader strategy Marketing J

Starbucks needed to shift its focus back to customers-to through digital and mobile platforms, Its highly successful mobile must also be customer focused.
Each company I
"reignite the emotional attachment with cust0D:1ers." payments app, My Starbucks Rewards loyalty program, and pre­ most sense give:
To emphasize the. point, at a cost of $30 million, Schultz paid Starbucks Cards now give Starbucks "a direct, real-time, per­ focus of strateg
transported 10,000 Starbucks store· managers to New Orleans sonalized, two-way digital relationship with its customers," says Strategic planning . tween the organ
The process of developing and Strategic pi,
for a morale-building reorientation. A short time later, the company's chief digital officer, The Starbucks Rewards mobile
maintaining a strategic fit betwe~n the . ally prepare am
Starbucks dranlatically closed all of its U.S. locations for three payment app has more than 11 million active users, and mobile
organization's goals and capabilities and range planS dea
hours to conduct nationwide employee training on the basics of payments account for 20 percent of all U.S. in-store. transactions, its changing marketing opportunities, contrast, the stra
producing satisfying customer experiences. Today, a rejuvenated Starbucks is once again fully engaged
its constantly ch,
Those early actions began a process of continual renewal with customers and delivering the one-of-a-kind Starbucks At the corp
by which Starbucks has reignited the Starbucks customer ex­ Experience. And once again, sales and profits are really perking, ing its overall F
perience through new products, innovative store formats, and Every· week, Starbucks serves more than 70 million customers into detailed SU'
new platforms for engaging customers. Beyond improvements face-to-face in 23,500 stores in 70 countries. Over the past six years, decides .what pc
in its signature coffee, products, Starbucks has developed new revenues have almost doubled and profits have shot up fivefold. much support b
products that taketh,€!, Starbucks Experience into new areas. The\moral of the Starbucks story: Good marketing strat­ marketing and c
marketing plaru
For example, a feW: years ago, Starbucks successfully launched· egy means keeping your eye squarely on delivering customer
ports company
Via, an instant c?ffee that's as good at home as fresh-brewed is value. The objective isn't just growth or sales or profits; it's
opportunities.
in stores. More recently, Starbucks added Fizzio to its menu­ engaging customers in a meaningful way and creating value
freshly carbonated and handcrafted sodas in classic flavors. for them. If a company takes care of customer engagement and
The company is also experimenting with new store for­ value, good performance will result. ''It's not just about ringing Defining aMa
q-tats, such as the new high-end Starbucks Reserve Roastery a register and performing a task," says Schultz. "It's also about An organization I
and Tasting Room in Seattle that's part cafe, part shrine,and creating an emotional, enduring relationship and connection Forging a sound
part working roastery. Schultz describes the new interactive with our ... customers. At our core, we celebrate the interaction .is .the customer?
store as "Niketown meets Apple meets Starbucks"-think of it be~een us and our customers through the coffee experience. sounding questic
as the Starbucks Experience on steroids. In another big move, , Life happens over coffee."l Successful comp.
completely..
/
 CHAPTER 21 Company and Marketing Strategy 39

. Explain company-wide strategic planning and its four steps.

Company-Wide Strategic Planning: Defining Marketing's Role (pp 40-42)

Explain marketing's role in strategic planning and how marketing works with its partners

to create and deliver customer value.

Planning Marketing: Partnering to Build Customer Relationships (pp 48-49)

Describe the elements of a customer value-driven marketing strategy and mix and the forces
that influence them.
Marketing Strategy and the Marketing Mix (pp 50-55)

List the marketing management functions, including the elements of a marketing plan,
and discuss the importance of measuring and managing marketing return on investn,ent.
Managing the Marketing Effort and Marketing Return on Investment (pp 55-60)

I
Author Company-wide strategic
Conunent planning guides marketing
f----o
(ompany·Wide Strategic Planning: Defining
strategy and planning. Like marketing
strategy, the company's broader strategy
Marketing's Role .
must also be customer focused. Each company must find the game plan for long-run survival and growth that makes the
most sense given its specific situation, opportunities, objectives, and resources. This is. the
focus of strategic planning-the process of developing and maintaining a strategic fit be­
Strategic planning tween the organization's goals and capabilities and its changing marketing opportunities..
The process of developing and Strategic planning sets the stage for the rest of planning in the firm. Companies usu~
maintaining a strategic fit between the ally prepare annual plans, long-range plans, and strategic plans. The annual and long­
organization's goals and capabilities and range plans deal with the company's current businesses and how to keep them going. In
its changing marketing opportunities. contrast, the strategic plan involves adapting the firm to take advantage of opportunities in
its constantly changing environment.
At the corporate level, the company starts the strategic planning process by defin­
ing its overall purpose and mission (see Figure 2.1). This mission is then turned
into detailed supporting objectives that guide the entire company. Next, headquarters
decides what portfolio of businesses and products is best for the company and how
much support to give each one. In tum, each business and product develops detailed
marketing and other departmental plans that support the company~wide plan. Thus,
marketing planning occurs at the business-unit, product, and market levels. It sup­
ports company strategic planning with more detailed plans for specific marketing
opportunities.

Defining aMarket-Oriented Mission

An organization exists to accomplish something, and this purpose should be clearly stated.
Forging a sound mission begins with the following questions: What is our business? Who
is the customer? What do consumers value? What should our business be? These simple­
sounding questions are among the most difficult the company will ever have to answer~
Successful companies continuously raise these questions and answer them carefully and
completely.
 40 I
PART 1 Defining Marketing and the Marketing Process

~,FIGURE I 2;1 Business unit, product,

MissioI
Corporate level and market level
Steps in Strategic
sian stateml
Planning
lines. Instea
Defining
Setting company Designing Planning marketing intends to '\0\
the company objectives the business and other functional

~~~~m~is~si~o~n~~~~
and goals portfolio strategies Finally,
should not I
value for C1;
r----~~
experience 1.
like the marketing
strategy, the broader itself as just
company strategy must one that "en
be customer focused. and needs 01
bywhichevi

Many organizations develop formal mission statements that answer these questions. Setting Co
Mission statement A mission statement is a statement of the organization'S purpose-what it wants to, The compan
A statemert of the organization's accomplish in the .larger environment. A clear mission statement acts as an "invisible level of man,
purposeiwhat it wants to accomplish in hand" that guides people in the organization. ing them. Fo
the larger environment. Some companies define their missions myopically in product or technology terms
("We make and sell furniture" or "We are a chemical-processing firm"). But mission state­
ments should be market oriented and defined in terms of satisfying basic customer needs.
Products and technologies eventually become outdated, but basic market needs may last
forever. For example, social scrapbooking site Pinterest doesn't define itself as just an on­
line place to post pictures. Its mission is to give people a social media platform for collect­
ing, organizing, and sharing things they love. And Microsoft's mission isn't to create the
world's best software, technologies, and devices. It's to "empower every person and every
I1. organization on the planet to achieve more." Q,z Table 2.1 provides several examples of
product-oriented versus market-oriented business definitions.2

9.: Table 2.1 I Product- versus Market-Oriented Business Definitions

Company Product~Oriented Definition Market~Oriented Definition

Apollo Pharmacy . We sell medicines. We bring the healthcare of international standards within the
reach of every individual. 3 @)Apollo Pharmacy's overall mission is to be a
Big Bazar We run a hypermarket to sell household "/sse sasta aur achha kahi nahl" (It doesn't get cheaper or "Pharmacy that brings healthcare of international
standard within the reach of every individual."
merchandise.. better than this). ,
Facebook We are an online social network. We connect people around the world and help them share beauty; mom &
important moments in their lives. through its OVt
cines, ore ane
Ufe Insurance We sell life insurance "Zindagi ke sath bhi, zindagi ke bad bh/" (With life, after life).
. It's Prescriptiol
Corporation of India
It is a convenie
NASA We explore outer space. We reach for new heights and reveal the unknown so that what 24-hour Phann
we do and learn will benefit all humankind. These are
Revlon We make cosmetics. We sell lifestyle and self-expression; success and status; must then be I
memories, hopes, and dreams.
Phatmacy, it IT
also sells medi
Ritz-Carlton We rent rooms. We create "The Ritz-Carlton experience"-a memorable stay various catego:
Hotels & Resorts that far exceeds guests' already-high expectations. and orc In ad
Starbucks We sell coffee and snacks. We sell "The Starbucks Experience," one that enriches people's vitamins and 81
lives one moment, one human being, one extraordinary cup of etc. In this way
coffee at a time.
term objectives

Walmart We run discount stores. We deliver low prices every day and give ordinary folks the
chance to buy the same things as rich people. "Save Money. Designing
Live Better." Guided by the
plan its busine
 CHAPTER 21company and Marketing Strategy 41
Mission statements should be meaningful and specific yet motivating. Too often, mis­
sion statements are written for public relations purposes and lack specific, workable guide­
lines. Instead, they should emphasize the company's strengths and tell forcefully how it
intends to win in the marketplace .
. Finally, as we discovered in the chapter-opening Starbucks story, a company's mission
should not be stated as making more sales or profits; profits are only a reward for creating
value for customers. Instead, the mission should focus on customers and the customer
experience the firm seeks to create. For example, Ritz-Carlton Hotels & Resorts doesn't see
itself as just renting out rooms. It's on a mission to create "The Ritz-Carlton Experience,"
one that "enlivens the senses, instills well-being, and fulfills even the unexpressed wishes
and needs of our guests./I Ritz-Carlton follows up this mission with specific steps of service
by which every employee can help to turn the mission into reality.4

Setting Company Objectives and Goals

The company needs to turn its broad mission into detailed supporting objectives for each
level of management. Each manager should have objectives and be responsible for reach­
ing them. For example, most Indians know Apollo Pharmacy as a chain of retail pharma­
cies selling prescription, and over-the-counter medicines, personal· care
products, and a host of convenience and other items. But Apollo Pharmacy
has a much broader mission.~.1 It views itself as a "pharmacy of interna­
tional standards," one that is "bringing healthcare within the reach.of every
individual." The company's motto: "Promise beyond prescription."s
Apollo Pharmacy's broad mission leads to a hierarchy of objectives,
including business objectives and marketing objectives. Apollo Pharmacy's
overall business objective is to increase access, and improve the quality of
healthcare. It does this through the products it sells at its retail pharmacies
and by taking a more active role in overall health-care management through
"achievement and maintenance of excellence in education, research and
healthcare for the benefit of humanity".
. However, such activities are expensive and must be funded through
improved profits, so improving profits'becomes another major objective for

PHARMACY .. '. .
Apollo Pharmacy. Profits can be improved by increasing sales or by reduc­
ing costs. Sales can be increased by improving customer engagement and
A Promise Beyond Prescriptions raising the company's share of the health-care market. These goals then
become the company's current marketing objectives.
Marketing strategies and programs must be developed to support these
Qi Apollo Pharmacy's overall mission is to be a
"Pharmacy that brings healthcare of international marketing objectives. To increase customer engagement, sales, and market
standard within the reach of every individual." share, Apollo Pharmacy has reshaped and broadened its lines of products
and services. For example, it sells several product lines like personal care,
beauty, mom & baby, nutrition, health care, Holland & Barrett and a range of its own brnads
through its over 2,500 outlets in key locations. All these outlets are well stocked with medi­
cines, OTC and FMCG products, and manned by competent staff with computerized system.
It's Prescription Reminder service makes it easier to manage customer's repeat prescriptions.
It is a convenient way to save his time, and is simple to arrange his medicines. Through their
24-hour Pharmacies, Apollo Pharmacy also provides Customer Care any time of the day. ,
These are Apollo Pharmacy's broad marketing strategies. Each marketing strategy
must then be defined in greater detail. For example, to sustain the rapid growth of the
Phatmacy, it must add more and more brands to its merchandise. To boost its growth, it
also sells medicines through internet. Apollo Pharmacy has more than 4000 products in
various categories like Vitamins and supplements, baby care, personal care, health foods
and OTe. In addition to this, it sells more than 400 Apollo Brand Products in categories like
vitamins and supplements, health food, oral care, skin care, personal care, baby care, OTC,
etc. In this way, Apollo Pharmacy'S broad mission is translated into a set of specific short­
term objectives and marketing plans.

Designing the Business Portfolio

Guided by the company's mission statement and objectives, management now must
plan its business portfolio-the collection of businesses and products that make up the
42 PART 1 IDefining Marketing and the Marketing Process
Business portfolio company. The best business portfolio is the one that best fits the company's strengths
The collection of businesses and and weaknesses to opportunities in the environment.
products that make up the company. Most large companies have complex portfolios of businesses and brands. Strategic
and marketing planning for such business portfolios can be a daunting but critical
2.1 ESPN: Skillfully
task. For example, ESPN's brand portfolio consists of more than 50 business enti­
ties, ranging from multiple ESPN cable channels to ESPN Radio, ESPN.com, ESPN
Brand PQrtfolio
The Magazine, and even ESPN Zone sports-themed restaurants. In turn, ESPN is just
one unit in the even more complex portfolio of its parent company, The Walt Disney When,you think about ESPN, you
Company. Through skillful portfolio management, however, ESPN has built a cohe­ probably think of it as a cable 1V
sive brand, unified powerfully under its mission to serve sports enthusiasts "wher­ network,or a magazine, or maybe'
ever sports are watched, listened to, discussed, debated, read about, or played" (see a website. ESPN is all of those
Real Marketing 2.1). things. But. over the years, ESPN
Business portfolio planning involves two steps. First, the company must analyze its has grown to become a huge and
current business portfolio and determine which businesses should receive more, less, or no complex brand portfolio consisting
investment. Second, it must shape the future portfolio by developing strategies for growth of more than 50 different entitles. Thanks to
and downsizing. skillful portfolio management, however, ESPN
is much more than just a haphazard collec­
tion of media entities. Instead. it's an immer­
Analyzing the Current Business Portfolio sive brand experience-a meaningful part of
customers' lives. ESPN is synonymous with
Portfolio analysis The major activity in strategic planning is business portfolio analysis, whereby manage­ sports entertainment, inexorably linked with
The process by which management ment evaluates the products and businesses that make up the company. The company will customers' sports memories, realities, and
evaluates the products and businesses want to put strong resources into its more profitable businesses and phase down or drop anticipations.
that make up the company. its weaker ones. In 1979. entrepreneur Bill Rasmussen took
Management's first step is to identify the key businesses that make up the com­ a daring leap and founded the round-the­
pany, called strategic business units (SBUs). An SBU can be a company division, a clock sports network ESPN (Entertainment
product line within a division/or sometimes a single product or brand. The company ESP
and Sports Programming NetWOrk). Despite
It's c
next assesses the attractiveness' of its various SBUs and decides how much support many early skeptics-seriously. a 24-hour
ente
each deserves. When designing a business portfolio, it's a good idea to add and sup­ sports network?-ESPN is now a multibil­ men
port products and businesses that fit closely with the firm's core philosophy and lion-dollar sports empire and a "can't-live­
Mike V
competencies. without-it" part of the daily routines of hun­
The purpose of strategic planning is to find ways in which the company can best dreds ?f millions of people worldwide. Today,
ESPN IS as much recognized and revered as Overseas,
use its strengths to take advantage of attractive opportunities in the environment. For
iconic megabrands such as Coca-Cola. Nike, radio pro~
this reason, most standard portfolio analysis methods evaluate SBUs on two impor­ extends it
tant dimensions: the attractiveness of the SBU's market or industry and the strength Apple, and Google. No matter who you are
XM, digit,
of the SBU's position in that market or industry. The best-known portfolio-planning chances are good that ESPN has touched
Tuneln,aJ
method was developed by the Boston Consulting Group, a leading management con­ you in some meaningful way. And no matter
Online: E
sulting firm.6 what the sport or where, ESPN seems to be
of 19 U.S
everywhere at once.
ESPN.con
Here's a brief summary of the incredible turenearly
Growth-share matrix
A portfolio-planning method that
The Boston Consulting Group Approach variety of .entities tied together as part of the
ESPN portfolio:
than 7 billi
ESPN ace
evaluates a company's SBUs in terms of Using the now-classic Boston Consulting Group (BCG) approach, a company classifies sports acti
all its SBUs according to the growth-share matrix, as shown in ~. Figure 2.2. On Television: With its Signal flowing into al­
market growth rate and relative market tals of its t,
most 92 million U:S. households, at an in­
share. ' the vertical axis, market growth rate provides a measure of market attractiveness. On the dustry-topping cost of $6.60 per household
dio.com is
line sports
per month ESPN is by far the most-sought
are downlc
g. FIGURE I 2.2 cable n?twOrk in the U.S. Additionally; ESPN
per year.
The BeG Growth-Share Matrix Star Question mark I~ternatlonal serves fans through 24 interna­
tional networks in 61 countries on all seven With ac
o The company must continents. In India, ESPN is the home of vision. radii
decide hew much it will the Cricket, Football, Kabaddi, F1, Tennis, supply of r
Under the classic BeG portfolio planning approach, invest in each product Hockey. Badminton. Boxing, and more. This But ESPN I
the company invests lunds from mature, successful
o or business (SBIJ). For
list grows every year as ESPN continues to ing mobile
products and businesses (cash cows) to support each SBU, It must
decide whether to build, outbid the major broadcast networks to cap­ strategy. in
promising products and businesses in laster-growing ture the rights to major sports events. Year
markets (stars and question marks), hoping to tum hold, harvest, or divest. around mot
!hem Into future cash cows. after year, viewers have named ESPN their ESPN deliv
favorite channel.
major U.S. ~
o time scores
Radio: Sports radio is thriving, and ESPN

Radio is the largest sports radio network

video-on-dE
broadcasting' more than 9,000 hours of
lead the S1=
content annually to 20 million listeners
and averagE
through nearly 500 affiliates in the U.S. alone.
tal strategy I
Relative market share
 CHAPTER 21 Company and Marketing Strategy 43

2.1 ESPN: Skillfully Managing a Complex

Brand Portfolio

When you think about ESPN, you

probably think of it as a cable 1V.

network, or a magazine, or maybe

a website. ESPN is all of those

things. But. over the years, ESPN

has grown to become a huge and.

complex brand portfolio consisting

of more than 50 different entities. Thanks to

skillful portfolio management, however, ESPN
is much more than just, a haphazard collec­
tion of media'entities. Instead, it's an immer­
sive brand experience-a meaningful part of'
customers' lives. ESPN is synonymous with
sports entert~inlTlent, inexorably linked with
customers' sports memories, realities, and
anticipations.
In 1979, entrepreneur Bill Rasmussen took
a daring leap and founded the round-the~
clock sports network ESPN (Entertainment . ESPN is much more than just ahaphazard collection of media entities.
and Sports Programming Network). Despite It's a skillfully managed brand portfolio that delivers an immersive sports
many early skeptics-seriously, a 24-hour entertainment experience, inexorably linked with customers' sports
sports network?-ESPN is now a multibil­ memories, realities, and anticipations.
lion-dollar sports empire and a "can't-live­ Mike Windle/Stringer/Getty Images
without-it" part of the daily routines of hun­
dreds of millions of people worldwide. Today,
Overseas, ESPN has radio and syndicated and mobile destination for major ESPN chan­
ESPN is as much recognized and revered as radio programs in 11 countries. ESPN Radio nels, and ESPN3, a multi-screen live 24/7
iconic megabrands such as Coca-Cola, Nike, extends its reach even further through Sirius online sports network available at no cost to
Apple, and Google.No matter, who you are, XM, digital distributors Slacker Radio and tens of millions of homes that receive their
chances are good that ESPN has touched Tune In, and its own ESPNRadio.com. high-speed intemet connection from an affili­
you in some meaningful "'fay. And no matter Online: ESPN Digital Media is composed ated service provider.
what the sport or where, ESPN seems to be of 19 U.S. websites, including the flagship
everywhere at once.
Publishing: When ESPN first published
ESPN.com. These digital destinations cap­
ESPN The Magazine in 1998, critics gave
Here's a brief summary of the incredible ture nearly 82 million unique visitors and more
it little chance against mighty Sports Illus­
variety of entities tied together as part of the than 7 billion minutes of usage every month.
trated. Yet with its bold look, bright colors,
ESPN portfolio: ESPN accounts for 30 percent of all online
and unconventional format, the ESPN pub­
sports activity, more than the combined to­
Television: With its signal flowing into al­ lication now serves more than 16.5 million
tals of its .two closest competitors. ESPNRa­
most 92 million U:S. households at an In­ readers per issue. Digital-only consumption
dio.com is the world's most-listened-to on­
dustry-topping cost of $6.60 per househOld of ESPN The Magazine is soaring, where­
line sports destination. And ESPN's Podcasts
per month ESPN is by far the most-sought . as a relatively stagnate Sports Illustrated
are downloaded more than 302 million times
cable network in the U.S. Additionally, ESPN is struggling to make the shift to a digital
per year.

Intemational serves fans through 24 interna­ world.

With access to its own content from tele­

tional networks in 61 countries on all seven vision, radio, and print, ESPN has ,a plentiful
Even More: As if all this weren't enough,
continents. In India, ESp,N is the home of ESPN also manages events, including the
supply of material to feed its digital efforts.
the Cricket, Football, Kabaddi, F1, Tennis, X Games, the ESPYs, college bowls, and
But ESPN also leads the game in the explod­
Hockey, Badminton, Boxing, and more. This NCAA basketball games in the U.S. It also
list grows every year as ESPN continues to ing mobile arena. It employs a "mobile first" develops ESPN-branded consumer produCts
outbid the major broadcast networks, to cap­ strategy, in which it orients all of its websites
and services, including DVDs, video games,
ture the rights to major sports events. Year around mobile, thus optimizing performance. apparel, and even golf schools. If reading all

after year, viewers have named ESPN their ESPN ,delivers mobile sports content via all this makes you hungry, you may be n~ar an

favorite channel. major U.S. wireless providers-including real­ ESPN Zone, which includes a sports-themed

time scores, stats, late-breaking news, and

restaurant, interactive games, and sports­
Radio: Sports radio is thriving, and ESPN related merchandise sales. You'll now find
Radio is the largest sports radio network, video-an-demand. Its mobile sites and apps '
ESPN content in airports and on planes, in
broadcasting more than 9,000 hours of lead the sports category in unique visitors
health clubs, and even on gas station video
content annually to 20 million listeners and average audience per minute. The digi­
panels.
through nearly 500 affiliates in the U.S. alone. tal strategy has led to WatchESPN, an online
44 PART 1 I Defining Marketing and the Marketing Process

All this translates ,into annual revenues of to forego traditional cable options in favor of consumers everywhere, ESPN means sports. Problems 'I:
$10.8 billion,. making ESPN more important to other means of streaming sports content, Tech savvy, creative, and often irreverent, ized strategi
its parent The Walt Disney Company than the look for ESPN to reach them through non­ the well-managed, ever-extending yet care­
be difficult, I
Disneyland and Disney World theme parks cable "over-the-top" technologies. ESPN is fully integrated brand portfolio continues to
defineSBUs
combined. And ESPN accounts for more than on a crusade to know when,where, and un­ build meaningful customer engagement and
classifying Cl
half of Disney's total operating income. der what conditions fans will reach for which experiences. If it has to do with your life and
What ties this huge collec~ion of ESPN device, and to provide the most seamless, sports-large or small-ESPN covers it for Because
entities together? The brand's customer­ high-quality experience for them. ' you, anywhere you are, 24/7. Perhaps the favor of mOl
focused mission: It wants to serve sports It's no surprise, then, that sports fans company should rename ESPN to stand for unlike forme
enthusiasts "wherever sports are watched, around the world love their ESPN. To Every Sport Possible-Now. atcompanyi
listened to, discussed, debated, read about, companies al
or played." ESPN has a philosophy known teams of clivi
as "best available screen." It knows that Sources: Matthew Ingram. 'When Will ESPN's Subscriber Numbers Rnally Hit Bottom?" Fortune, November 24, agers have r:
2015, http://fortune,coml2015/11/24/espn-subscriber-numbersl; Anthony Kosner, "Mobile Rrst: How ESPN Delivers meetchangir
when fans are at home, they'll watch the big
to the Best Available Screen," Forbes, January 30,2012. www'(orbes.comlsiteslanthonykosner/2012101!301mobile­
60-inch flat-screen. But during the morning Portfolic
first-how-espn-de/ivers-to-the-best-avai/ab/e-screen/21; Derek Thompson, "The Global Dominance of ESPN: The
hours, smartphones light uP. more. During Atlantic. August 14. 2013, www.theatlimtic.comlmagazineiarchiVel2013109Ithe-most-valuable-networkl3094331; giant ~8,681 (
the day, desktops dominate, and in the eve­ Usa Richwine and Lehar Maan, "ESPN Casts Shadow Over 'Star Wars' Success at Disney," Reuters, February 9, dozens of cOl
ning, tablet activity. increases. And as more 2016. www.reuters.comlarticlelus-walt-disney-resu~s-idUSKCNOVI24S; and information from http://espnmediazone.
young "P0rd-cutting" cable subscribers begin comlus/espn-inc-fact-sheet/ and www,espncom. www.espn.in accessed September 2016 and September 2017.

horizontal axis, relative market share serves as a measure of company strength in the market.
, The growth-share matrix' defines four types of SBUs:

1. Stars. Stars are high-growth, high-share businesses or products. They often need
heavy investments to finance their rapid growth. Eventually their growth will slow
down, and they will tum into cash cows.
2. Cash cows. Cash cows are low-growth, high-share businesses or products. These es­
tablished and successful SBUs need less investment to hold their market share. Thus,
they produce a lot of the cash that the company uses to pay its bills and support other
SBUs that need investment.
3. Question marks. Question marks are low-share business units in high-growth markets.
fI)lJ1laghlatio£l atwork
They require a lot of cash to hold their share, let alone increase it. Management has
to think hard about which question marks it should try to build into stars and which
should be phased out. !JManaging the business portfolio
4. Dogs. Dogs are low-growth, low-share businesses and products. They may gen-:
Godrej
erate enough cash to maintain themselves but do not promise to be large sources
of cash. Marketin
company. Ma
The 10 circles in the growth-share matrix represent the company's 10 current
lay down str,
SBUs. The company has two stars, two cash cows, three que~tion marks, and three Product/market expansion grid portunities is
dogs, The area of each circle is proportional to theSBU's dollar sales. This company A portfolio-planning tool for identifying apply Hhere
is in fair shape, although not in good shape. It wants to invest in the more promising company growth opportunities through industry quill
question marks to make them stars and maintain the stars so that they will become market penetration, market development. Mahindn
cash cows as their markets mature. Fortunately, it has two good-sized cash cows. product development. or diversification: in many vert
Income from these cash cows will help finance the company's question marks, stars,
nents, constn
and dogs. The company should take some decisive action concerning its dogs and its
finance and iJ
question marks.
pitality, logist
Once it has classified its SBUs, the company must determine what role each will
dustry which
play in the future. It can pursue one of four strategies for each SBU. It can invest more
Two Wheelen
in the business unit to build its share. Or it can invest just enough to hold the SBU's share
and Duro SCOt
at the current level. It can harvest the SBU, milking its short-term cash flow regardless of Market penetration
First, Mal
the long-term effect. Finally, it can divest the SBU by selling it or phasing it out and using Company growth by increasing sales
penetration­
the resources elsewhere. of current products to current market
segments without changing the product. growth throug
As time passes, SBUs.change their positions in the growth-share matrix. Many SBUs
tising, pricing,
start out as question marks and move into the star category if they succeed. They later
Market development two-wheeler IT
become cash cows as market growth falls and then finally die off or tum into dogs toward
Company growth by identifying and network and tl
the end of the life cyde. The company needs to add new products and units continuously
developing new market segments for Second,1"I
so that some of them will become stars and, eventually, cash cows that will help finance
current company products. fying and dev
otherSBUs.
 CHAPTER 21 Company and Marketing Strategy 45
Problems with Matrix Approaches. The BCG and other formal methods revolution­
ized strategic planning. However, such centralized approaChes have limitations: They can
be difficult, time consuming, and costly to implement. Management may find it difficult to
define SBUs and measure market share and growth. In addition, these approaches focus on
classifying current businesses but provide little advice for future planning.
Because of such problems, many companies have dropped formal matrix methods in
favor of more customized approaches that better suit their specific situations. Moreover,
unlike former strategic planning efforts that rested mostly in the hands of senior managers
at company'headquarters, today's strategic planning has been decentralized. Increasingly,
companies are placing responsibility for strategic planning in the hands of cross-functional
teams of divisional managers who are close to their markets. In this digital age, such man­
agers have rich and current data at their fingertips and can adapt their plans quickly to
meet changing conditions and events in their markets. ',
Portfolio planning can be challenging. For example, consider the Godrej Group, the
giant ~8,681 crores industrial conglomerate operating with a broad portfolio of products in
dozens of consumer and business markets?
Most consumers know the Godrej Group for its home ap~
pliances, furniture and personal care brands. But that's'
. just the beginning, for the Godrej Group.. f!I Other com­
pany units-such as Chemicals, Electrical and Electronics
Material Handling, Motors, Security Solutions, Vending,
Infotech., Aerospace, Green Building and Consultancy
Solutions. and others-offer products and services rang­
ing from soaps and hair colours to aerospace systems for
India's missions to the Moon and Mars.

Developing Strategies for Growth and

Downsizing

Beyond evaluating current businesses, designing the

business portfolio involves finding businesses and
products the company should consider in the future.
Companies need growth if they are to compete more
effectively, satisfy their stakeholders, and attract top
~) Managing the business portfolio talent. At the same time, a firm must be careful not to
Godrej make growth itself an objective. The company's objec­
tive must be to manage "profitable growth."
Marketing has the main responsibility for achieving profitable growth for the
company. Marketing needs to identify, evaluate, and select market opportunities and
lay down strategies for capturing them. One useful device for identifying growth op­
Product/market expansion grid portunities is the product/market expansion grid, shown in !J Figure 2.3.8 We
A portfolio-planning tool for identifying apply it here to the Mahindra Group who entered the highly competitive two-wheeler
company growth opportunities through industry quite recently-in 2008. 9 .
market penetration, market development, Mahindra is not a new name to the Indian customers. They have a strong presence
product development, or diversification. in many' verticals including aerospace, automotive, agribusiness, aftermarket compo­
nents, construction equipment, consulting services, defense, energy, farm equipment,
finance and insurance, industrial equipment, information technology, leisure and hos­
pitality, logistics, real estate, retail, and two wheelers. They entered the two-wheeler in­
dustry which is largely dominated by Hero, Honda and Bajaj brands in 2008. Mahindra
Two Wheelers currently sells the Centuro and Mojo motorcycles and the Gusto, Rodeo
and Duro scooters. to
Market penetration
First, Mahindra inight consider whether' the company' can achieve deeper market
Company growth by increasing sales
penetration-making more sales' ill its current product lines and markets. It can spur
of current products to current market
growth through marketing mix improvements-'..:adjustments to its product design, adver­
segments without changing the product
tising, pricing, and distribution efforts. For example, Mahindra, being a new entrant in the
Market development two-wheeler market would like to increase the sells of its brands by expanding its dealership
Company growth by identifying and network and thereby reaching out to as many customers as possible.
developing new market segments for Second, Mahindra might consider possibilities for market development-identi­
current company products. fying and developing new markets for its current products. Mahindra can review new
46 PART 1 I Defining Marketing and the Marketing Process

(,l,FIGURE 12.3
The Product/Market Expansion Grid
Existing
products
New
products I
Author Marketing can't go it alone
Comment in creating customer value. Plannin
/~---~ \
~arket
Existi,n g :
Product Through diversification, companies
Under the company-wide strategic plan,
Relatior

l
Companies can grow by developing new markets penetration can grow by starting or buying marketing must work closely with other
for existing products, For example, Under
I' ,

' markets development

businesses outside their current departments to form an effective internal Thecompar
Armour recently stepped up its marketing to
women consumers and is eXP9J1ding rapidly in
- ____
•• __ :--­
Market
;1.// product/markets, For example,
Under Armour has entered the digital
company value chain and with other
companies in the marketing system
ate and its (
Inte~:tional ma~:~~_. __~______ J ~:kets· development Diversification ~, perscnal heanh and fitness market by to create an extemal value delivery takes place.
acquiring three fitness app companies, ing, purchai
~twOrk that jointly serves customers,
,,'''' work togeth
Marketi
marketing p
demographic markets. !,l For instance, the company might look at stepping up its market­ pany strateg
ing to women consumers, with new products and a women-focused promotion campaign tionships wi
Mahindra can also pursue new geograpllical markets. For example, the brand has a presence planners by
in 17 countries across Asia, Africa, Middle East and Central America. It can pursue these potential to I
markets for higher sales. designs strati
Product development Third, Mahindra can consider product development-offering modified or new keting's task
Company' growth by offering modified or products to current markets. For example, the company based on its experience of last Custom!
new products to current market segments. nine years of marketing two-wheelers and studying the competitive product portfolio, for success. :
can undertake modifications to its existing product range or even develop an altogether it alone cann
new brand basedon the specific market requirements. It will launch an altogether new partner in at
product only if it is convinced about the market potential. ship managem
Diversification
Company growth through starting up
Finally, Mahindra,canconsider diversification-starting up or buying businesses
outside of its current products and markets. For example, Mahindras have recently ac­
I, work closely
value chain th,
or acquiring businesses outSide the
company's current products and markets.
quired a 51"/" stake in Peugeot Motorcyc1es(PMTC), part of the Euro 54 billion Peugeot
S.A. (PSA) Group based in France. PMTC, a key player in urban mobility in Europe for I panies in the
network. We r
the last 116 years, is the oldest motorised two-wheeler manufacturer and offers one of the delivery neh\
most comprehensive range of scooters and mopeds, from 50 cc to 400 ce. This acquisition
would enable Mahindra to have access to Peugeot's product range as well as technology
and of course, the market. When diversifying, companies must be careful not to overex­ Partnering
tend their brands' positioning. Value chain Each compan
Companies must develop not only strategies for growing their business portfolios but The series of internal departments that chain.12 That
also strategies for downsizing them. There are many reasons that a firm might want to aban­ carry out value-creating activities to
market, deliv(
don products or markets. A firm may have grown too fast or entered areas where it lacks design, produce, market, deliver, and
how well eacl
experience. The market environment might change, making some products or markets support a firm's products ..
ments coordin
less profitable. For example, in difficult economic times, many firms prune out weaker, Forexamj
less-profitable products and markets to focus their more limited resources on the strongest shoppers with
ones. Mahindra, for example, discontinued the manufacturing of its 110 cc motorcycle play an impOI
Stallio which was launched in October 2010 and was considered as the most fuel efficient chandise at tn
bike at that time. Due to slow 'sales growth, Mahindra decided to discontinue the brand and assist sho
from February 2011. 11 Finally, some products or busi­ delivers value
ness units simply age and die. However,
. When a firm finds brands or businesses that are ments. Big Baz
unprofitable or that no longer fit its overall strategy, ing departrnen
it must carefully prune, harvest, or divest them. For cost. It's infom
example, over the past several years, P&G has sold ing in each sto!
off dozens of major brands worldwide-from Crisco, ment must pro
Folgers, Jif, and Pringles to Duracell batteries, Right Acompan~
Guard deodorant, Aleve pain reliever, CoverGirl and well each grouF
Max Factor cosmetics, Wella and Clairol hair care nates the activit
products, and its lams and other pet food brands-al­ prices from sup
lowing the company to focus on household care and marketing can't
beauty and grooming products. And in recent years, Ideally, thE
GM has pruned several underperforming brands value for const
from its portfolio, including Oldsmobile, Pontiac, misunderstand
Saturn, Hummer, and Saab. Weak businesses usu­ when marketin
ally require a disproportionate amount of manage­ do a poorer job
!JStrategles for Growth: Mahlndra diversified in the twc.i~wheeler seg~ent . ment attention. Managers should focus on promising disrupt produc
in 2008. It might consider whether the company can achieve deeper growth opportunities, not fritter away energy trying other departme
market penetration-making more sales in its product lines and markets. to salvage fading ones.
/

(
 CHAPTER21 Company and MarketingStrategy 47
I
Author Marketing can't go it alone
Comment in creating customer value.
Planning Marketing: Partnering to Build Customer
Under the company-wide strategic plan,
marketing must work closely with other
Relationships
departments to form an effective internal The company' s strategic plan establishes what kinds of businesses the company will oper­
company value chain and with other ate and its objectives for each. Then, within each business unit; more detailed planning
companies in the marketing system
takes place. The major functional departments in each unit-marketing, finance, account­
to create an external value delivery
network that jOintly serves customers.
ing, purchasing, operations, information systems, human resources, and others-must
work toge~her to accomplish strategic objectives.
Marketing plays a key role in the company's strategic planning in several ways. First,
marketing provides a guiding philosophy-the marketing concept-that suggests the com­
pany strategy should revolve around creating customer value and building profitable rela­
tionships with important consumer groups. Second, marketing provides inputs to strategic
planners by helping to identify attractive mark~t opportunities and assessing the firm's
potential to take advantage of them. Finally, within individual business units, marketing
designs strategies for reaching the unit's objectives. Once the unit's objectives are set, mar­
keting's task is tohelp carry them out profitably.
Customer engagement and value are the key ingredients in the marketer's forinula
for SUccess. However, as noted in Chap~er I, although marketing plays a leading role,
it alone cannot produce engagement and superior value for customers. It can be only a
partner in attracting, engaging, and growing customers. In addition to customer relation­
ship management, marketers must also practice partner relationship management. They must
work closely with partners in other company departments to form an effective internal
value chain that serves customers. Moreover, they must partner effectively with other com­
panies in the marketing system to form a competitively superior external value delivery
network. We now take a closer look at the concepts of a company value chainand avriJue
delivery network. .

Partnering with Other Company Departments

Value chain Each company department can be thought of as a link in the company's internal value
The senes of internal departments that chain.12 That is, each department carries out value-creating activities to design, produce,
carry out value-creating activities to market, deliver, and support the firm's products. The firm's success depends not only on
design, produce, market, deliver, and how well each department performs its work but also on how well the various depart­
support a firm's products. I
ments coordinate their activities.
For example, Big Bazar's goal is to create customer value and satisfaction by providing
shoppers with the products they want at the lowest possible prices. Marketers at Big Bazar
play an important role. They understand what the customers want and procure the mer­
chandise at the lowest possible prices. They prepare advertising and merchandising plan
and assist shoppers with customer service. Through this and other activities, Big Bazar
delivers value to the customers.
However, the marketing department needs help from the comp<l.ny's other depart­
ments. Big Bazar's ability to offer the right products at low prices depends on the purchas­
ing department's skills in developing the needed suppliers and buying from them at low
cost. It's information technology department must tell them about which products are sell~
ing in each store arid which brands are selling faster than the others: It's operations depart­
ment must provide effective, efficient, low-cost merchandise handling.
A company's value chain is orily as strong as its weakest link. Success depends on how
well each group performs its work of adding customer value and on how the company coordi­
';1
nates the activities of various functions. At Big Bazar, if purchaSing can't obtain the lowest
prices from suppliers or if the operations can't distribute merchandise atthe lowest costs, then
marketing can't deliver on it's promise of lower prices.
Ideally, then, a company's different functions should work in harmony to produce
value for consumers. But, in practice, interdepartmental relations are full of conflicts and
misunderstandings.. The marketing d~artment takes the consumer's point of view. But
when marketing tries to improve customer satisfaction, it can cause other departments to
do a poorer job in their terms. Marketing department actions can increase purchasing costs,
disrupt production schedules, increase inventories, and create budget headaches. Thus,
other departments may resist the marketing department's efforts.
48 I
PART 1 Defining Marketing and the Marketing Process

Yet marketers must find ways

to get all departments to "think con­
sumer" and develop a smoothly func­
tioning value chain. One marketing
r adapts to tJ
each activil

expert puts it this way: "Engaging (ustome

customers today requires commit­ To succeed
ment from the entire company. We're They must
all marketers now.,,13 Thus, whether greater vall
you're an accountant, an operations tomerneed
manager, a financial analyst, an IT spe­ Comp.
cialist, or a human resources manager, ket-at lea:
you need to understand marketing­ consumers
and your role in creating customer serve somE
value. market, chi
segments. '
Partnering with Others in the positioning.
Marketing System MarketSe
In its quest to engage customers and The market
create customer value, the firm needs determine 1
to look beyond its own internal value served in Vi
chain and into the value chains of Market segmentation
factors. The
its suppliers, its distributors, and, Dividing a market into distinct groups
needs, chari
ultimately, its customers. Consider of buyers who have different needs,
~tThe value chain: Big Bazar'S "Chunauti (challenge) to offer the lowest prices" will not be
mixes is cal
McDonald's. People do not swarm to characteristics, or behaviors and who
possible without the contributions from employees working in all the companydepartments. might require separate marketing
Every •
McDonald's only because they love useful. For
strategies or mixes.
the chain's hamburgers. Consumers and high-ir
flock to the McDonald's system, not only to its food products. Throughout the world, Market segment A market
McDonald's finely tuned value delivery system delivers a high standard of QSCV-qual­ A group of consumers who respond in of marketir
ity, service, cleanliness, and value. McDonald's is effective only to the extent that it suc­ a similar way to a given set of marketing most comIa
cessfully partners with its franchisees, suppliers, and others to jointly create" our custom­ efforts. care mainly
ers' favorite place and way to eat." difficult to]
. More companies today are partnering with other members of the supply chain­ Companies
suppliers, distributors, and, ultimately, customers-to improve the performance of the ket segmenl
Value delivery network
customer value delivery network. Competition no longer takes place only between
A network composed of the company,
individual competitors. Rather, it takes place between the entire value delivery network
suppliers, distributors, and, ultimately,
created by these competitors. Thus, Ford's performance against Toyota depends on the
customers who partner with each other
quality of Ford's overall value delivery network versus Toyota's. Even if Ford makes the !" FIGURE I 2.4
to improve the performance of the entire
Managing Marketing.Strategies Marketin(
best cars, it might lose in the marketplace if Toyota's dealer network provides a more intermediari
system in delivering customer value.
customer-satisfying sales and service experience. and the Marketing Mix

i I
r~~~----------·--------~
Author Now that we've set
Comment the context in terms of
.Marketing Strategy and the Marketing Mix
company-wide strategy, it's time The strategic plan defines the company's overall mission and objectives. Marketing's role
to discuss customer value-driven is shown in ~j! Figure 2.4, which summarizes the major activities involved in managing a
marketing strategies and programs. customer-driven marketing strategy and the marketing mix.
Consumers are in the center. The goal is to create value for customers and build prof­
Marketing strategy itable customer relationships. Next comes marketing strategy-the marketing logic
The marketing logic by which the by which the company hopes to create this customer value and achieve these profitable
company hopes to create customer . relationships. The company decides which customers it will serve (segmentation and tar­ Marketing strategy Involves two key questions:
value and achieve profrtalble customer geting) and how (differentiation and positioning). It identifies the total market and then Which customers will we selVe (segmentation
relationships. and targe~ng)? and How will we create value
divides it into smaller segments, selects the most promising segments, and focuses on serv­ for them (differentiation and positioning)?
ing and satisfying the customers in these segments. Then the company designs amarketing
program-the IOUf Ps-that delivers the
Guided by marketing strategy, the company designs an integrated marketing mix made Intended value to targeted consumers.
up of factors under its control-product, price, place, and promotion (the four Ps). To find
the best marketing strategy and mix, the company engages in marketing analysis, plan­
ning, implementation, and control. Through these activities, the company watches and
SuppliE

 CHAPTER 2\ Company and Marketing Strategy 49

adapts to the actors and forces in the marketing environment. We will now look briefly at
each activity. In later chapters, we will discuss each one in more depth.

Customer Value-Driven Marketing Strategy

To succeed in today's competitive marketplace, companies must be customer centered.
They must win customers from competitors and then engage and grow them by delivering
greater value. But before it can satisfy customers, a company must first understand cus­
tomer needs and wants. Thus, sound marketing requires careful customer analysis.
Companies know that they cannot profitably serve all consumers in a given mar­
ket-at least not all consumers in the same way. There are too many different kinds of
consumers with too many different kinds of needs. Most companies are in a position to
serve some segments better than others. Thus, each company must divide up the total
market, choose the best segments, and design strategies for profitably serving chosen
segments. This process involves market segmentation, market targeting, differentiation, and
positioning.

Market Segmentation
The market consists of many types of consumers, products, and needs. The marketer must
determine which segments offer the best opportunities. Consumers can be grouped and
served in various ways based on geographic, demographic, psychographic, and behavioral
Market segmentation factors. The process of dividing a market into distinct groups of buyers who have different
Dividing a market into distinct groups
needs, characteristics, or behaviors and who might require separate marketing strategies or
of buyers who have different needs,
mixes is called market segmentation.
characteristics, or behaviors and who
Every market has segments,but not all ways' of segmenting a market are equally
might require separate marketing
useful. For example, Disprin would gain little by distinguishing between low-income
strategies or mixes.
and high-income pain-relief users if both respond the same way to marketing efforts.
Market segment A market segment consists of consumers who respond in a similar way to a given set
A group of consumers who respond in of marketing efforts. In the car market, for example, consumers who want the biggest,
a similar way to a given set of marketing most comfortable car regardless of price make up one market segment. Consumers who
efforts. care mainly about price and operating economy make up another segment. It would be
difficult to make one car model that was the first choice of consumers in both segments.
Companies are wise to focus their efforts on meeting the distinct needs of individual mar­
ket segments.

9,' FIGURE 12.4

Marketing Competitors
Managing Marketing Strategies intermediaries
and the Marketing Mix

At Its core', marketing

Is all about creating
customer value and
profitable customer
relationships,

Marketing strategy involves two key questions:

Which customers will we serve (segmentation
and targeting)? and Hew will we create value
for them (differentiation and positioning)?
Then the company designs amarketing
program-the four Ps-that delivers the
intended value to targeted consumers,

Suppliers
50 I
PART 1 Defining Marketing and the Marketing Process

Market Targeting
Market targeting After a company has defined its market segments, it can enter one or many of these seg­
Evaluating each market segment's ments. Market targeting involves evaluating each market segment's attractiveness and 2.2 DuckDuckGo: ~
attractiveness and selecting one or more selecting one or more segments to enter. A company should target segments in which it can
segments to serve. profitably generate the greatest customer value and sustain it over time. Competitor
A company ,vith limited resources might decide to serve only one or a few special seg­
ments or market niches. Such nichers specialize in serving customer segments that major
competitors overlook or ignore. Forexample, McLaren sold only 1,653 of its very-high­ Google dominates the online search but the n
performance cars last year but at very high prices-such as its 570S model at $180,000 or with its massive global market reduce Sl
a made-to~or,der FI model starting at an eye~popping $980,000. Most nichers aren't quite share. It employs more than 60,000 result link
so exotic. Profitable low-cost airline Indigo avoids direct competition with larger major employees in 50 different countries. provides
airline rivals by targeting smaller markets and new fliers. And small online-search start-up Two other giants-Microsoft's Bing of zero-c
and Yahoo!-combine for another search re
DuckDuckGo thrives among privacy-minded users in the shadows of search giants Google
34 percent of the U.S. market. That generally
and Microsoft's Bing (see Real Marketing 2.2).
leaves a precious 2 percent sliver of the mar­ "It's our j
Alternatively, a company might choose to serve several related segments-perhaps ket for dozens of other search engines trying
those with different kinds of customers but with the same basic wants. Manyavar, a retail Instant Ar
to get a foothold. What's more, Google and get where
outlet selling ethnic wear for special occasions like marriages and festivals offer only one the other search giants have deep pock~ The In:
type of clothing for men as well as women. Or a large company (for example, car compa­ ets from their non-search businesses, letting so good i
nies such as Honda and Ford) might decide to offer a complete range of products to serve them spend abundantly to hold and grow by Googl,
all market segments. market share. So how does a small search Google SE
Positioning Most companies enter a new market by serving a single segment; if this proves suc­ engine wannabe compete against global the great,
Arranging for a product to occupy a clear, cessful, they add more segments. For example, Nike started with innovative running powerhouses? The best answer: It doesn't­ of blue lin
distinctive,and desirable place relative shoes for serious runners. Large companies eventually seek full market coverage. Nike at least not directly. Instead, it finds a unique ing a min
to competing products in the minds of now makes and sells a broad range of sports apparel and equipment for just about anyone market niche and runs where the big dogs or displayi,
target consumers. and everyone in about every sport. It designs different products to meet the special needs don't. China (5,5
of each segment it serves. Enter DuckDuckGo, a plucky search en­ facts abou
gine start-up that's carving out its own special DuckDl
market niche. Instead of battling Google and Answers al
Market Differentiation and Positioning other giants head-on, DuckDuckGo provides just on thir
a customer benefit that the market leaders the deep aJ
After a company has decided which market segments to enter, it can't-privacy. Then it energizes its unique growing, aJ
must determine how to differentiate its market offering for each niche with brand personality and user com­ developers.
targeted segment and what positions it wants to occupy in those munity. One look at DuckDuckGo's icon-a vides additi
segments. A product's position is the place it occupies relative to quirky bow-tied duck-gives you the sense a Wikipedic
competitors' products in consumers' minds. Marketers want to that, like the small locomotive in the classic
develop unique market positions for their products; If a product children's story, this might be "the little engine
is perceived to be exactly like others on the market, consumers that COUld." .
would have no reason to buy it. DuckDuckGo isn't just surviving in its
Positioning is arranging for a product to occupy a clear, niche, it's exploding. The company is still
distinctive, and desirable place relative to competing products in comparatively tiny-it averages about 3 billion
the minds of target consumers. Marketers plan positions that dis­ searches a year compared with Google's
tinguish their products from competing brands and give them the more than 1.2 trillion. But DuckDuckGo's
greatest advantage in their target markets. daily search volume has surged nearly tenfold
,BMW promises "Sheer driving pleasure"; Coca-Cola wants in just the past three years, whereas Google's
you to "Taste the feeling"; Pepsi says "Live for now." Del Monte is volume growth has lagged a bit. .'
"Bursting with Life". When Gabriel Weinberg first I~unched
Such deceptively simple statements form the backbone of a DuckDuckGo eight years ago,- most people
product's marketing strategy. For example, from its founding, questioned his sanity.. How couid a small
upstart challenge the likes of mighty Google?
Jet Airways has positioned itself as a full service airline offering the
But, rather than simply mimicking. Google,
lAM
JETA1RWAYS if
highest standards of quality and service. It aims at offering highest
standard of service and promises to provide the fliers with one of
Weinberg went a different direction, develop­
ing a quality search engine with a key dif­
the finest experiences across the skies. 14 ferentiating feature. DuckDuckGo now posi­
In positioning its brand, a company. first identifies possible tions itself strongly on "Smarter Search. Less
customer value differences that provide competitive advantages Clutter. Real Privacy."
on which to build the position. A company can offer greater cus­ DuckDuckGo focuses only on search. It
'lJet Airways is a full-service airline and promises the finest tomer value by either charging lower prices' than competitors offers a streamlined, clutter-free, custom­
experience of flying. It distinguishes itself from the other competitors (like Indigo or Spice Jet, for. example) ,or offering izable user interface with far fewer spon­
competing airlines on the basis of its service - both on the Niche
more benefits to justify higher prices like Jet Airways. But if the sored ads. As with other search engines,
ground and in-flight that offers the finest experience to the eng in
company promises greater value, it must then deliver that greater a DuckDuckGo query returns link-by-link thew
fliers.
search results based on third-party sources, DuckDu
 CHAPTER 2\ Company and Marketing Strategy 51

2.2 DuckDuckGo: Google's Tiniest, Fiercest

Competitor

Google dominates the online search but the results are filtered and reorganized to come up with ideas about what the answers
with its massive global market reduce,spam. And beyond the usual search­ should be, suggest sources, and even de­
share. It employs more than 60,000 result links, for many searches, DuckDuckGo velop answers themselves. "DuckDuckGo is
employees in 50 different countries. provides direct "Instant Answers" in the form a search engine driven by community-you're
Two other giants-Microsoft's Bing of zero-click information boxes above the on the teaml" says the company. "We're not
and Yahoo!-combine for another search results. "When you do a search, you just servers and an algorithm. We're so much
34 percent of the U.S. market. That generally want an answer," says Weinberg. more."
leaves a precious 2 percent sliver of the mar­ "It's our job to try to get an answer." With Still, even though DuckDuckGo had
ket for dozens of other search engines trying Instant Answers, DuckDuckGo can "help you Instant Answers long before Google,
to get a foot~old. What's more, Google and get where you want to go in fewer clicks." Google's response illustrates a typical
the other search giants have deep pock­ The Instant Answer feature is a good one, nicher dilemma. Market leaders usually have
ets from their' non-search businesses, letting so good in fact that it has now been copied huge resources and can quickly copy the
them spend 'abundantly to hold and grow by Google and Bing. For example, run a start-up's most popular features. "At any
market share. \So how does a small search Google search for "davinci" or "how long is point," notes one analyst, "the Googles or
engine wannabe compete against global the great wall" and along with the familiar list Facebooks or Apples of the world can' just
powerhouses? The best answer: It doesn't­ of blue links you'll get a white box contain­ mimic what made you different, siam-dunk­
at least not directly. Instead, it finds a unique ing a mini-biography of Leonardo Da Vinci ing your shattered dreams into the waste bin
market niche and runs where the big dogs or displaying the length of the Great Wall of of tech history."
don't. China (5,500.3 miles) and other interesting Fortunately for DuckDuckGo, it has one
Enter DuckDuckGo, a plucky search en­ facts about it. crucial differentiator that the Googles of
gine start-up that's carving out its own special DuckDuckGo would tell you that its Instant the world simply can't mimic. Real privacy.
market niche. Instead of battling Google and Answers are often better. Its answers rely not Google's entire model is built around person-­
other giants head-on, DuckDuckGo provides just on third-party data sources but also on alization for customers and behaviorally tar­
a customer benefit that the market leaders the deep and diverse knowledge of its active, geted marketing for advertisers. That requires
can't-privacy. Then it energizes its unique growing, and loyal community of users and collecting and sharing data about users and
niche with brand personality and user com­ developers. DuckDuckGo's community pro­ their searches. When you search on Google,
munity. One look at DuckDuckGo's icon-a vides additional power behind its searches. In the company knows and retains in detail who
quirky bow-tied duck-gives you the sense a Wikipedia-like fashion, DuckDuckGo users
< •
you are, what you've searched for, and when
that, like the small locomotive In the classic
children's story, this might be "the little engine
that could."
DuckDuckGo isn't just surviving in its
niche, it's exploding. The company is still
comparatively tiny-it averages about 3 billion
searches a year compared with Google's
more than 1.2 trillion. But DuckDuckGo's
daily search volume has surged nearly tenfold
in just the past three years, whereas Google's
volume growth has lagged a bit.
When Gabriel Weinberg first launched
DuckDuckGo eight years ago, most people
questioned his sanity. How could a small
upstart challenge the likes of mighty Google?
But rather than simply mimicking Google,
Weinberg went a different direction, develop­
ing a quality search engine with a key dif­
ferentiating feature. DuckDuckGo now posi­
tions itself strongly on "Smarter Search. Less
Clutter. Real Privacy."
DuckDuckGo focuses only on search. It
offers a streamlined, clutter-free, custom­
izable user interface with far fewer spon­ Niche marketing: DuckDuckGo thrives in the shadows of giant search
sored ads. As with other search engines, engine competitors by giving its user community something the Googles of
a DuckDuckGo query retums link-by-link the world can't mimic-real privacy.
search results based on third-party sources, Duck Duck Go, Inc.
52 I
PART 1 Defining Marketing and the Marketing Process

you've searched. It then integrates your on­ positioning. But today, he adds, "It's become the Googles and Bings of the world-it
line identity and data with its services. obvious why people don't want to be tracked." doesn't even try. Then again, given the depth
By contrast, DuckDuckGo is specifically How does DuckDuckGo make· money? of consumer engagement and loyalty that
designed to be less invasive and less creepy Last year, Google made 90 percent of its DuckDuckGo engenders in its own small cor­
than its competitors. DuckDuckGo doesn't $74.5 billion of revenue from search-related ner of the online search market, Google and
know who you are. It doesn't log user IP advertising, and most of that business in­ the other giants may find it difficult to compete
addresses or use cookies to track users volved large-scale, behaviorally targeted ad­ with DuckDuckGo for privacy-minded users.
over time or other online locations. Users vertising that relies on the very tracking tools DuckDuckGo is currently the nation's 11th­
don't have accounts. In fact, DuckDuckGo that DuckDuckGo shuns. However, even most-popular search engine based on unique
doesn't. even save user search histories. without tracking users, smaller DuckDuckGo monthly visitors. And as privacy grows in im­
Perhaps most important, when users click on can be profitable. It simply focuses on the portance, so will DuckDuckGo.
DuckDuckGo's search results links, the linked other part of Google's business-delivering That's what niche marketing is all
websites don't receive any information gener­ contextual search ads based on the topic of about-a well-defined brand engaging a fo­
ated by the search engine. As one privacy ad­ the search itself. So when users search for cused customer community with meaning­
vocate puts it, "DuckDuckGo is a solid search "curved OLED TVs," DuckDuckGo shows ads ful brand relationships that even large and
engine that lets you surf the web without and links for TV manufacturers and retailers resourceful competitors can't crack. Smart
leaving behind a bunch of bread crumbs for who've paid for the associated key words. niching has made DuckDuckGo "Google's
Uncle Sam or anyone else to follow. . .. The Thus, in many ways, DuckDuckGo' is tiniest, fiercest competitor," says the analyst.
sites you visit are being kept at arm's length." David to Google's Goliath. But unlike David, "Our vision is Simple," says DuckDuckGo.
So DuckDuckGo has become the pre­ DuckDuckGo isn't out to slay the giant. It "To give you great. search results without
ferred search engine for people concemed knows that it can't compete head-on with tracking you."
about online privacy, and that's a fast-growing
group. "If you look at the logs of people's
search sessions, they're the most personal Sources: ·comScore Releases February 2016 U.S. Desktop Search Engine Rankings; March 16,2016, _WWW.
thing on the internet," Weinberg says. "Unlike comscore.com/lnsights/Rankings/comScore-Releases-January-2016-US-Desktop~Search~E~gine-Rankings;
Facebook, where you choose what to post, "DuckDuckGo Direct Queries per Day," https:llduckduckgo.comltrafflc.html, accessed July 2016; John Paul
Trtlow, "Inside DuckDuckGo, Google's Tiniest, Fiercest Competitor," Fast Company, February 20, 2014, WWW.
with search you're typing in medical and fi­
fastcompany.coml30266981inside-duckduckgo-googles-tinies/-(ierces/-competitor; Susan Adams, "The Founder
nancial problems and all sorts of other things."
of DuckDuckGo Explains Why Challenging Google Isn·t Insane; Forbes. February 19, 2016. www.forbes.com/
Today,more and more people are thinking siteslforbestreptalksl2016/02/1 g/the-founder-of-duckduckgo-explains-how-to-gel -cuslomers-before-yoiJ-have-a­
about the privacy implications of their search product-and-why:chalienging-google-isnt-insaneJ#5899487d593c; "Top 15 Most Popular Search Engines-March
histories. "It was extreme atthe time," says 2016," www.eblzmba.comlarticleslsearch-engines.accessedJuly2016;andhttps:llduckduckgo.comlabout.
Weinberg· of DuckDuckGo's eany priv~cy accessed September 2016.
":,."~.,,,,, '~~'

Differentiation value. Thus, effective positioning begins with differentiation-actually differentiating the
Actually differentiating the market offering·
company's ~arket offering to create superior customer value. Once the company has cho­
to create superior customer value.
sen a desired position, it must take strong steps to deliver and communicate that position
to target consumers. The company's entire marketing program should support the chosen
positioning strategy.

Developing an Integrated Marketing Mix

After determining its overall marketing strategy, the company is ready to begin Planning the
Marketing mix
details of the marketing mix, one of the major concepts in modem marketing. The nlarketing
The set of tactical marketing tools­
mix is the set of tactical marketing tools that the firm blends to produce the response it wants
product, price,place, and promotion­
in the target market. The marketing mix consists of everything the firm can do to engage con­
that the firm blends to produce the
sumers and deliver customer value. The many possibilities can be collected into four groups
response it wants in the target market.
of variables-the four Ps. ~'Figure 2.5 shows the marketing tools under each P.
• Product means. the goods-and-services combination the company offers to the target
market. Thus, a. Tata TIago consists of nuts and bolts, spark plugs, pistons, head­
lights, and thousands of other patts. Tata Motors offers several Tago models and
dozens of optional features. The car comes fully serviced and with a comprehensive
warranty that is as much a part of the product as the tailpipe.
• Price is the amount of money customers must pay to obtain the product. For exam­
ple, Tata Motors calculates suggested retail prices that its dealers might charge for
. each TIago. But Tata Motors dealers may rarely charge the full sticker price. Instead,
they may negotiate the price with each customer, offering discounts, trade-in allow­
ances, and credit terms. These actions adjust prices for the current competitive and
 CHAPTER 21 Company and Marketing Strategy 53
~) FIGURE I 2.5
The Four Ps of the Marketing Mix Product Price

Variety List price

Quality Discounts

Design Allowances

Features Payment period

Brand name Credit terms

Packaging
Services ..
The marketing mix-or the
four Ps-consis1S of tactical
marketing tools blended into
an Integrated program that .
actually engages target
customers and delivers the
Intended customer value,
Promotion Place
.Advertising Channels
Personal selling
Coverage
Sales promotion
locations
Public relations
Inventory
.1 Direct and digital' Transportation
Logistics

economic situations and bring them into line with the buyer's perception of the car's
value. .
• Place includes company activities that make the product available to target consum­
ers. Tata Motors partners with a large body of independently owned dealerships
that sell thecompany's many different models. TataMotorsselects its dealers care­
fully and strongly supports them. The dealers keep an inventory of Tata' Motors
automobiles, demonstrate them to potential' buyers, negotia'te prices, close sales, .
and service the cars after the sale.
• Promotion refers to activities that communicate the merits of the product and persuade
target customers to buy it. Tata Motors spends huge amount on advertising to tell
consumers about the company and its many products. Dealership salespeople assist
potential buyers and persuade them that Tata vehicles the best cars for them. Tata' and
its dealers offer special promotions-:-sales, cash rebates, and low financing rates-as
added purchase incentives. And Tata motors' Facebook, Twitter, YouTube, Instagram,
and other social media platforms engage consumers with the brand and with other
brand fans.
An effective marketing program blends the marketing mix elements into an integrated
marketing program designed to achieve the company's marketing objectives by engaging
consumers and delivering value to them. The marketing mix constitutes the company's
tactical tool kit for establishing strong positioning in target markets.
Some critics think that the four Ps may omit or underemphasize certain important
activities. For example, they ask, "Where are services? Just because they don't start with a
P doesn't justify omitting them./I The answer is that services, such as banking, airline, and
retailing services, are products too. We might call them service products."Where is package
ing?" the critics might ask. Marketers 'would answer that they include packaging as one of
many product decisions. All said, as Figure 2.5 suggests, many marketing activities that
might appear to be left out of the marketing mix are included under one of the four Ps. The
issue is not whether there should be four, six, or ten Ps so much as what framework is most
helpful in designing integrated marketing programs.
There is another concern, however, that is valid. It holds that the four Ps concept
takes the seller's view of the market,not the buyer's view. From the buyer's viewpoint,
in this age of customer value and relationships, the four Ps might be better described as
the four As: 15 '. .
54 PART 1 I Defining Marketing and the Marketing Process
)
Four Ps Four As

Product Acceptability
Price Affordability
Place Accessibility
Promotion Awareness

Under this more customer-centered framework, acceptability is the. extent to which

the product exceeds customer expectations; affordability the extent to which customers are
willing and able to pay the product's price; accessibility the extent to which customers can
readily acquire the product; and awareness the extent to which customers are informed
about the product's features, persuaded to try it, and reminded to repurchase. The four
As relate closely to the traditional four Ps. Product design influences acceptability, price
affects affordability, place affects accessibility, and promotion influences awareness.
Marketers would do well to think through the four As first and then build the four Ps on
that platform. -'_"

I
. Author So far we've focused on'
Comment the marketing in marketing t--- Managing the Marketing Effort and Marketing Return
management. Now,let's tum to the
managem.ent. on Investment
Managing the Marketing Effort
In addition to being good at the marketing in marketing management, companies also need
to pay attention to the management. Managing the marketing process requires the five mar­
keting management functions shown in ~i Figure 2.6--analysis, planning, implementation,
organization, and control. The company first develops company-wide strategic plans and
then translates them into marketing and other plans for each division, product, and brand.
Through implementation and organization, the company turns the plans into actions.
Control consists of measuring and evaluating the results of marketing activities and taking
corrective action where needed. Firi.ally, marketing analysis provides the information and
SWOT analysis evaluations needed for all the other marketing activities.
An overall evaluation of the company's
strengths (8), weaknesses rN), Marketing Analysis
opportunities (0), and threats 0).
Managing the marketing function begins with a complete analysis of the company's situ­
ation. The marketer should conduct a SWOT analysis (pronounced "swat" analysis), by
~IGURE 12.6 which it evaluates the company's overall strengths (5), weaknesses (W), opp~rtunities (0),
Managing Marketing: Analysis,
Planning, Implementation, and
Control

Analysis

Planning
Develop strategic
plans
Implementation
and
Organization
Measure results
W,'II ,,,.; ~""
by looking at how
l
'--li
The first part of the Carry out the i marlleters manage
chapter dealt with plans
this-{Jeveloplng _.• Evaluate results ! those strategies
company-wide and and plans-how they .
;1 implement marketing •
marketing strategies
and plans. Develop marketing strategies and
programs and evaluate
I
plans
the results. •
-----)
~~~r'"""~6
 CHAPTER 21 Company and Marketing Strategy 55
q. FIGURE 12.7

SWOT Analysis: Strengths (S),

(
Weaknesses (W), Opportunities (0),
;]~Weakne'sses 'ii , Hang on to this figure! SWOT analysis
and Threats en Internal
may h'elpa;company
that Internal limitations that may
interfere with a company's
(pronounced 'swat" analysis) is a
widely used tool for conducting a
Internal reac~ ,its objectives ability to achieve its situation analysis. You'll find yourself
.----"~,
: objectives' using it a lot In the future, especially
The goal of SWOT analysis Is to • k\,J,«h ',i
when analyzing business cases.
match the company's strengths to
~?==--==-=-=-==~?~~~==~==--~~.
attractive opportunities in the
Opportunities , t

r environment while eliminating

External factors that the
External
or overcoming the weaknesses
company may be able to
and minimizing the threats.
exploit to its advantage
'f."'/<'

and threats (T) (see !!'Figure 2.7). Strengths include internal capabilities, resources, and
positive situational factors that may help the company serve its customers and achieve its
objectives. Weaknesses include internal limitations and negative situational factors that
may interfere with the company's performance. Opportunities are favorable factors or
trends in the external environment that the company may be able to exploit to its,advan~
tage. And threats are unfavorable external factors or trends that may prese~t chall~nges to
performance.
The company should analyze its markets and marketing environment to find attrac­
tive opportunities and identify threats. It should analyze company strengths and weak­
nesses as well as current and possible marketing actions to determine which opportunities
it can best pursue. The goal is to match the company's strengths to attractive opportunities
in the environment while simultaneously eliminating or overcoming the weaknesses and
minimizing the threats. Marketing analysis provides inputs to each of the other marketing
management functions. We discuss marketing analysis more fully in Chapter 3.

Marketing Planning
Through strategic planning, the company decides what it warits to do with each business
unit. Marketing planning involves choosing marketing strategies that will help the com­
pany attain its overall strategiC objectives. A detailed marketing plan is needed for each
business, product, or brand. What does a marketing plan look like? Our discussion focuses
on product or brand marketing plans.
g, Table 2.2 outlines the major sections of a typical product or brand marketing
plan. (See Appendix 1 for a sample marketing plan.) The plan begins with an executive
summary that quickly reviews major assessments, goals, and recommendations; The main
section of the plan presents a detailed SWOT analysis of the current 'marketing situation
as well as potential threats and opportunities. The plan next states major objectives for the
brand and outlines the specifics of a marketing strategy for achieving them.
A marketing strategy consists of specific strategies for target markets, positioning,
the marketing mix, and marketing expenditure levels. It outlines how the company in­
tends to engage target customers and create value in order to capture value in return. In
this section, the planner explains how each strategy responds to the threats, opportuni­
ties, and critical issues spelled out earlier in the plan. Additional sections of the market­
ing plan layout an action program for implementing the marketing strategy along with
the details of a supporting marketing budget. The last section outlines the controls that
will be used to monitor progress, measure return on marketing investment, and take
corrective action.

Marketing implementation Marketing Implementation

Turning marketing strategies and plans Planning good strategies is only a start toward successful marketing. A brilliant marketing
Into marketing actions to accomplish strategy counts for little if the company fails to implement it properly. Marketing imple­
strategic marketing objectives. mentation is the process that turns marketing plans int~ marketing actions to accomplish

\
56 PART 1 I Defining Marketing and the Marketing Process
Q; Table 2.21 Contents of a Marketing Plan '
Section

Executive summary Presents abrief summary of the main goals and recommendations of the plan for management
review, helping top management find the plan's major pOints quickly.
Current marketing situation Describes the target market and the company's position in it, including information about the
market, product performance, competition, and distribution. This section includes the following:
" ,

• A market description that defines the market and major segments and then reviews customer

needs and factors in the marketing environment that may affect customer purchasing.

• A product review that shows sales, prices, and gross margins of the major products in the

product line.

• A review of competition that identifies major competitors and assesses their market positions
and strategies for product quality, pricing, distribution, and promotion.
• A review of distribution that evaluates recent sales trends and other developments in major

distribution channels.

Threats and opportunities Assesses major threats and opportunities that the product might face, helping management to
analysis anticipate important positive or negative developments that might have an impact on the firm and
its strategies.
Objectives,and issues States the marketing objectives that the company would like to attain during the plan's term and
, discusses key issues that will affect their attainment.
Marketing strategy Outlines the broad marketing logic by which the business unit hopes to engage customers, create
customer value, and build customer relationships, plus the specifiCS of target markets, position­
ing, and marketing expenditure levels. How will the company create value for customers in order
to capture value from customers in retum? This section also outlines specifiC strategies for.each
marketing mix element and explains how each responds to the threats, opportunities, and critical
issues spelled out earlier in the plan.
Action programs Spells out how marketing strategies will be turned into specific action programs that answer the
following questions: What will be done? When will it be done? Who will do it? How much will it
cost?
Budgets· Details a supporting marketing budget that is essentially a projected profit-and-Ioss statement.
It shows expected revenues and expected costs of production, distribution, and marketing. The
difference is the projected profit. The budget becomes the basis for materials buying, production
scheduling, personnel planning, and marketing operations.
Controls Outlines the controls that will be used to monitor progress, allow management to review
implementation results, and spot products that are not meeting their goals. It includes measures
of return on marketing investment.

strategic marketing objectives. Whereas marketing planning addresses the what and why of
marketing activities, implementation addresses the who, where, when, and how.
Many managers think that "doing things right" (implementation) is as important
as, or even more important than, Ud0p'g the right things" (strategy). The fact is that both
are critical to success, and companies can gain competitive advantages through effective
implementation. One firm can have essentially the same strategy as another yet win in the
marketplace through faster Of better execution. Still, iniplementation is dUficult-it is often
easier to think up good marketing strategies than it is to carry them out.
In an increasingly connected world, people at all levels of the marketing system must
work together to implement marketing strategies and plans. At Larsen & Toubro, for exam­
ple, marketing implementation for the company's construction, power, heavy engineering,
electrical & automation, valves, hydrocarbon engineering, metallurgical & material han­
dling, shipbuilding, construction & mining machinery, EWAC Alloys, technology services,
Metro rail, and realty businesses and industrial equipment requires day-to-day decisions
 CHAPTER 21 Company and Marketing Strategy 57
and actions by thousands of people both inside and outside the organization. Marketing
managers make decisions about target segments, branding; product development, pricing,
promotion, and distribution. They talk with engineering about product design, with manu­
facturing about production and inventory levels, and with finance about funding and
cash flows. They also connect with outside people, such as advertising agencies to plan ad
campaigns and the news media to obtain publicity support. The sales force urges and sup­
ports independent L&T dealers and large retailers in their efforts to convince residential,
agricultural, and industrial customers that "It's all about Imagineering."

Marketing Department Organization

The company must design a marketing organization that can carry out marketing strategies
and plans. If the company is very small, one person might do all the research, selling, ad­
vertising, customer service, and other marketing work. As the company expands, however,
a marketing department emerges to plan and carry out
marketing activities. In large companies, this depart­
ment contains many specialists-product and market
managers, sales managers and salespeople, market
researchers, and advertising and social media experts,
among others.
To head up such large marketing organizations,
many companies have now created a chief marketing
officer (or CMO) position. This person heads up the
company's entire marketing operation and represents
marketing on the company's top management team.
The CMO position puts marketing on. equal footing
with other "C-level" executives, such as the chief op­
erating officer (COO) and the chief financial officer
(CFO). As a member of top management, the CMO's
role is to champion the customer's cause--to be the
"chief customer officer." To that end, British Airways
even went so far as to rename its top marketing posi­
.tion as Director of Customer Experience}6,
C») Marketers must continually plan their analysis, implementation, and Modem marketing departments can be ar­
control activities.
PressmasterlAdobe Photo
ranged in several ways. The most common form of
marketing organization is the functional organization,
under. which different marketing activities are headed by a functional specialist-a
sales manager, an advertising manager, a marketing research manager, a customer
service manager, or a new product manager. A company that sells across the country
. o r internationally often uses a geographic organization, assigning sales and marketing
people to specific countries, regions, and districts. Companies with many very different
products or brands often create a product management organization. For companies' that
sell one product line to many different types of markets and customers who have differ­
ent needs and preferences, a market or customer management organization might be best.
Large companies that produce many different products flowing into many different
geographic and customer markets usually employ some combination of the functional,
geographic, product, and market organization forms.
Marketing organization has become an increasingly important issue in recent years.
More and more, companies are shifting their brand management focus toward customer
management-moving away from managing only product or brand profitability and to­
ward managing customer profitability and customer equity. They think of themselves not
as managing portfolios of brands but as managing portfolios of customers. And rather
than managing the fortunes of a brand, they see themselves as managing customer-brand
engagement, experiences, and relationships.

Marketing control
Measuring and evaluating the results
Marketing Control
of marketing strategies and plans and Because many surprises occur during the implementation of marketing strategies and
taking corrective action to ensure that the plans, marketers must practice constant marketing control-evaluating results and tak­
objectives are achieved. ing corrective action to ensure that the objectives are attained. Marketing control involves
58 PART 11 Defining Marketing and the Marketing Process
four steps. Management first sets specific marketing goals. It then measures its perfor­
mance in the marketplace and evaluates the causes of any differences between expected
and actual performance. Finally, management takes corrective action to close the gaps
between goals and performance. This may require changing the action programs or even
changing the goals.
Operating control involves checking ongoing performance against the annual plan
and taking corrective action when necessary. Its purpose is to ensure that the company
achieves the salesl profits, and other goals set out in its annual plan. It also involves
determining the profitability of different products, territories, markets, and channels.
Strategic control ,involves looking at whether the company's basic strategies are well
matched to itsoppcirtunities. Marketing strategies and programs can quickly become
outdated, and each company should periodically reassess its overall approach to the
marketplace.

\
/
I
Author Measuring marketing
Measuring and Managing Marketing Return on Investment
Comment return on investment has
become a major emphasis, But Itcan , Marketing managers must ensure that their marketing dollars are being well spent. In the
difficult For example. a prime time past, many marketers spent freely on big, expensive marketing programs and flashy ad­
on IV during an important cricket vertising campaigns, often without thinking carefully about the financial returns on their
match reaches more than 100 million
consumers but maycost morethan
spending. Their goal was often a general one-to "build brands and consumer preference."
.~ 25 lakh (2.5 million) 17 for 10 seconds They believed that marketing produces intangible creative outcomes, which do not lend
'of airtime. How do you measure the themselves' readily to measures of productivity or return.
return on such an investment in terms, However, those free-spending days have now been replace'd by a new era of market­
of sales. profits. and building customer ing measurement and accountability. More than ever, today's marketers are being held
engagement and relationships? ' accountable for linking .their strategies and tactics to measurable marketing performance
, "

outcomes. One, important marketing performance measure is marketing return on

Marketing return on investment investment (or marketing ROI). Marketing ROI is the net return from a marketing invest­
(marketing ROI) ment divided by the costs of the marketing investment. It measures the profits generated
The net return from a marketing by investments in marketing activities.
investment divided by the costs of the Marketing ROJ can be difficult to measure. In measuring financial ROI, both the R
marketing investment. and the I are uniformly measured in dollars. For example, when buying a piece of equip­
ment, the productivity gains resulting from the purchase are fairly straightforward. As
of yet, however, there is no consistent definition of marketing ROI. For instance, returns
such as engagement, advertising, and brand-building impact aren't easily put into dollar
returns.
A company can assess marketing ROJ in terms of standard marketing performance
measures, such as brand awareness, sales, or market share. Many companies are assem­
bling such measures into marketing dashboards-meaningful sets of marketing performance
measures in a single display used to monitor strategic marketing performance. Just as
automobile dashboards present drivers with details on how their cars are performing, the
marketing dashboard gives marketers the detailed measures they need to assess and adjust
their marketing strategies. For example, VF Corporation uses a marketing 'dashboard to
track the performance of its more than 30 lifestyle apparel brands-including Wrangler,
Lee, The North Face, Vans, Nautica, 7 For All Mankind, Timberland, and others. VF's
marketing dashboard ,tracks brand equity and trends, share of voice, market share, online
sentiment, and marketing ROI in key markets wor~dwide, not only for VF brands but also
for competing brands.1 8
Increasingly, however, beyond standard performance measures, marketers are using
customer-centered measures of marketing impact, such as customer 'acquisition, customer
engagement, customer experience, customer retention, customer lifetime value, and cus­
tomer equity.. These measures capture not only current marketing performance but also
future performance resulting from stronger customer'relationships. !, Figure 2.8 views
marketing expenditures as investments that produce returns in the form of more profit­
able customer relationships.1 9 Marketing investments result in improved customer value,
engagement, and satisfaction, which in turn increase customer attraction and retention.
This increases individual customer lifetime values and the firm's overall customer equity.
Increased customer equity, in relation to the cost of the marketing investments, determines
return on marketing investment.
 CHAPTER 21 Company and Marketing Strategy 59
Q, FIGURE I 2.8
Marketing investments
Marketing Return on Investment
Source: Adapted from Roland T. Rust, Katherine
N. Lemon, and Valerie A. Zeithaml, "Return on
Marketing: Using Consumer Equity to Focus
Marketing Strategy," Joumal ofMarketing,
January 2004, p. 112. Used with permission.

Beyond measuring marketing return on Investment

In terms of standard performance measures such
as sales or market share, many companies are
using customer relationship measures, such as
customer satisfaction, engagement, retention, and
equity. These are more difficutt to measure but
current and future perfomnance.

As one chief ~arketing officer says, "You have to be able to move on to those deeper
engagement metrics, which show that for the money that I'm spending,here are the vari­
ous programs that are working in terms of driving engagement with customers and ulti­
matel,y driving purchase behavior and revenue."zo

Reviewing and Extending the Concepts

OBJECTIVES REVIEW A'ND KEY TERMS

realistic, specific, motivating, and consistent with the market

Objectives Review environment. The mission is then :transformed into detailed
In Chapter 1, we defined marketing and outlined the steps in supporting goals and objectives, whic;h, in turn guide decisions
the marketing process, In this chapter, we examined company­ about the business portfolio, Then each business and product
wide strategic planning and marketing's role in the organization. unit must develop detailed marketing plans in line with the
Then we looked more deeply into marketing strategy and the , company-wide plan.
marketing mix and reviewed the major marketing management
functions. So you've now had a pretty good overview of the fun­ OIlJECTIVE 2-2 Discuss ho~ to design business

damentals of modern marketing. '

portfolios
,--
and
"
develop
. growth strategies. (pp 42-48)

OBJECTIVE 2-1 Explain company-wide strategic Guided by the company's mission statement and objectives,
management plans its business portfoliO, or the collection of '
planning and its four steps. (pp4()-42)
businesses and products that make up the company, The firm
Strategic planning sets the stage for, the rest of the company's wants to produce a business portfolio that best fits its strengths
planning. Marketing contributes to strategic planning, and the and weaknesses to opportunities in the environment. To do this,
overall plan defines marketing's role in the company. it must analyze and adjust its current business portfolio and de­
Strategic planning involves developing a strategy for long­ velop growth and downsizing strategies for adjusting the future
run survival and growth. It consists of four steps: (1) defining portfolio. The company might use a formal portfolio-planning
the company's mission, (2) setting objectives and goals, (3) ,method. But many companies are now designing more-custom­
designing a business portfolio, and. (4) developing functional ized portfolio-planning approaches that better suit their unique
plans. The company's mission should be market oriented, situations.