marketing chapter 2 section 1

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L01: Today’s Organizations
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organization
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a legal entity that consists of people who share a common mission.
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offerings
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products, services, ideas create value for the organization and its customers by satisfying their needs and wants.
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2 types of organizations
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Business firms and non-profits
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Business firm
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privately owned organization that serves its customers to earn a profit so it can survice.
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Profit
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Total revenue – total expense = profit
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Nonprofit organization
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a nongovernmental organization that serves its customers but does not have profit as an organizational goal. instead its goals must be operational efficiency or client satisfaction must recieve sufficient funds above its expenses to continue operations. Examples seek to solve the practical needs of society.
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industry
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ex: computer industry, automobile industry, shoe industry
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strategy
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organizations have limited resources. although subject to debate, for us, strategy is an organization’s long-term course of action designed to deliver a unique customer experience while achieving its goals. all organizations set a strategic direction, and marketing helps to both set this direction and move the organization there
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structure of today’s organizations: corporate level
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where top management directs over all strategy for the entire organization
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top management
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the board of directors and senior management officers with a variety of skills and experiences that are invaluable to establishing overall strategy
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CEO
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the highest ranking officer in the organization and is usually a member of its board of directors. must possess leadership skills and expertise ranging from overseeing the organization’s daily operations to spearheading strategy planning efforts that may determine its very survival.
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CMO
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chief marketing officer, used to be called vice president of marketing. with an ability to think strategically, CMOs have increasingly important role in top management. most bring multi-industry backgrounds, cross-functional management expertise, analytical skills, and intuitive marketing insights to their job.
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SBUs
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strategic business units: some multimarket, multiproduct firms manage a portfolio or a group of businesses. each group is a subsidiary of an organization that markets a set of related offerings to a clearly defined group of customers. at the SBU level managers et a more specific strategic direction for their businesses to exploit value-creating opportunities.
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portfolio
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group of businesses
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subsidiary
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a division, or unit
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functional level
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each SBU has a functional level where groups of specialists actually create value for the organization. the term department generally refers to these specialized functions such as marketing and finance. at the functional level the organization’s strategic direction becomes its more specific and focused. just as there is a hierarchy of levels within an organization, there is a hierarchy of strategic directions set by managers at each level. a key role of the marketing department is to look outward, keeping the organization focused on creating value both for it and for customers. this is accomplished by listening to customers, developing and producing offerings and implementing marketing program activities
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cross-functional teams
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when developing marketing programs for new offerings or for improving existing ones, an organization’s senior management may form cross-functional teams which consist of a small # of people from diff. departments who are mutually accountable to accomplish a task or a common set of performance goals.
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Learning review: What is the difference between a business firm and a nonprofit organization?
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Learning review: What are examples of a functional level in an organization
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L02: Strategy in Visionary Organizations
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to be successful, today’s organizations must be looking _______. they must anticipate _______ events and respond quickly and effectively.
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forward, future
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a visionary organization must specify its foundation(explain) set a direction(explain) and formulate strategies(explain)
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foundation – why does it exist, direction – what will it do strategies – how will it do it.
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organizational foundation
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why does it exist: – philosophical reason for being – successful visionary organizations use this foundation to guide/inspire employees thru 3 elements: 1. core values 2. mission 3. organizational culture
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foundation- element 1: core values
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– the fundamental, passionate and enduring principles that guide its conduct over time. – a firm’s founders or senior management develop these principles, which are consistent with their essential beliefs and character. – core values capture the firm’s heart and soul and serve to inspire and motivate its stakeholders. – core values are timeless and should not change due to short-term financial, operational, or marketing concerns. – core values guide the organization’s conduct. to be effective, an organization’s core values must be communicated to and supported by its top management and employees if they are not just hollow words.
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foundation- element 2: mission
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– a statement of the organization’s function in society that often identifies its customers, markets, products and technologies. – often used interchangeably with vision, a mission statement should be clear, concise, meaningful, inspirational, and long-term. – ***a clear, challenging, and compelling picture of an envisioned future. – recently many organizations have added a social element to their mission statements to reflect an ideal that is morally right and worthwhile.
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foundation- element 3: organizational culture
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– an organization must connect with all of its stakeholders. thus an important corporate-level marketing function is communicating its core values and mission to them. – ex: medtronic has a rising figure mural at its headquarters. new employees recieve medallion depicting this rising figure on one side and the company’s mission statement on the other. – organizational culture: the set of values, ideas, attitudes, and norms of behavior that is learned and shared among the members of an organization.
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organizational direction:
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the organization’s foundation enables it to set a direction in terms of 1) the business it is in and 2) its specific goals
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1) business
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a business describes the clear, broad, underlying industry or market sector of an organization’s offering. to help define its business, an organization looks at the set of organizations that sell similar offerings. the organization can then begin to answer the questions “what do we do” or “what businesses are we in” “who are our customers and what do they need?” ex: railroads should have realized they were in the transportation business – with today’s increased global competition, many organizations are rethinking their business model. tech innovation is often the trigger for this business model change. ex: Barnes&Noble as e-book readers like Kindle and iPad appear.
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business model
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the strategies an organization develops to provide value to the customer it serves
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2) goals/objectives (interchangeable in this book)
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statements of an accomplishment of a task to be achieved, often by a specific time. ex: Netlix might set a goal of being the top provider of online movies by 2012. goals convert an organization’s mission and business into long- and short-term performance targets.
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Types of goals
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1. Profit 2. Sales 3. Market Share 4. Quality 5. Customer Satisfaction 6. Employee Welfare 7. Social responsibility Nonprofit (museums and hospitals) goals: 1. to serve customers as efficiently as possible. Government goals: 1. To serve the public good
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organizational strategies: how will we do it?
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convert foundation and direction into actual results. these organizational strategies vary in at least two ways, depending on 1) a strategy’s level in the organization and 2) the offerings an organization provides to its customers.
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variation by level
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moving down an organization involves creating increasingly specific detailed strategies and plans
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variation by offering
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organization strageies vary by the organization’s offering. the strategy will be far different when marketing a very tangible physical product, a serice, or an idea (a donation to the American Red Cross)
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Learning review: What is the meaning of an organization’s mission?
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Learning review: What is the difference between an organization’s business and its goals?
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L03: Tracking Strategic Performance with Marketing Dashboards
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marketing dashboard
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the visual computer display of the essential info related to achieving a marketing objective ex: a CMO wants to see daily what the effect of a new TV advertising campaign is on a product’s sales. the idea comes from the display of info on a car’s dashboard. a marketing manager glances at a graph or table and makes a decision it shows graphic displays of key performance indicators linked to its product line.
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data visualization
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today’s marketers use data visualization which presents info about an organization’s marketing metrics graphically so marketers can quickly 1) spot deviations from plans and 2) take corrective actions
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marketing metrics
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a measure of the quantitative value or trend of a marketing activity or result
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marketing plan
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a road map for the marketing activities of an organization for a specified future time period such as one year or five years. the planning phase of the strategic marketing process usually results in a marketing plan that sets the direction for the marketing activities of an organization.
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L04: Setting Strategic Directions
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To set a strategic direction, an organization needs to answer 2 difficult questions: (1) Where are we now? (2) Where do we want to go?
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Asking an organization where it is at the present time involves identifying its __________, ________, and __________.
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Competencies, customers, and competitors.
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Competencies
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Senior managers must ask the question: What do we do best? Core competencies: its special capabilities- the skills, technologies, and resources- that distinguish it from other organizations and provide customer value. Exploiting these competencies may lead to success. Competencies should be distinctive enough to provide a competitive advantage.
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competitive advantage
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a unique strength relative to competitors that provides superior returns
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Customers
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Lands’ End’s strategy must provide genuine value to its customers to ensure they have a satisfying experience.
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Competitors
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– In today’s global marketplace, the distinctions among competitors are increasingly blurred. ex: Lands’ End: catalog retailer –> clothing catalog retailers and also department stores, mass merchandisers, and specialty shops. all these retailers have websites to sell their offerings over the Internet, so there is a lot of competition out there.
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Two techniques to aid managers with setting a direction for the firm and allocating resources to move in that direction are (1) _______ and (2) _______.
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business portfolio analysis and diversification analysis
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1. Business Portfolio Analysis
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– a technique managers use to quantify performance measures and growth targets to analyze their firm’s SBUs as though they were a collection of separate investments. the purpose of the tool is to determine the appeal of each SBU or offering and then determine the amt. of cash each should receive. More than 75% of the largest US firms have used this analytical tool. – organizations locate the position of each SBU on a growth-share matrix. – vertical axis: market growth rate: the annual rate of growth of the SBU’s industry – horizontal axis: relative market share: the sales of the SBU divided by the sales of the largest firm in the industry. – an organization’s SBU’s often start as question marks and go counterclockwise to become stars, then cash cows, and finally dogs. – because an organization has limited influence on the market growth rate its main alternative is to try and change its relative market share. To do this management decides what future role each SBU should have and either injects or removes cash from it.
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Cash Cows
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SBUS that generate large amounts of cash, far more than they can invest profitably in themselves. They have dominant shares of slow-growth markets and provide cash to cover the organization’s overhead and to invest in other SBU’s.
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Stars
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SBUs with a high share of high-growth markets that may need extra cash to finance their own rapid future growth. When their growth slows they are likely to become cash cows.
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Question marks
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SBUs with a low share of high-growth markets. They require large injections of cash just to maintain their market share, much less increase it. The name implies management’s dilemma for these SBUs: choosing the right ones to invest in and phasing out the rest
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Dogs
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SBUs with low shares of slow-growth markets. Although they may generate enough cash to sustain themselves, they do not hold the promise of ever becoming real winners for the organization. Dropping SBUs that are dogs may be required, except when the relationship with other SBUs, competitive considerations, or potential strategic alliances exist.
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Kodak Example how over the past decades new technology and changing consumer tastes can challenge even industry leaders.
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Until 2000 Kodak relied on film for bulk of its revenues and profits. the appearance of digital cameras changed Kodak’s business forever as film sales began to evaporate.
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The primary strength of Business Portfolio analysis:
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forcing a firm to place each of its SBUs in the growth-share matrix suggests which SBUs will be cash producers and cash users in the future.
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Weaknesses of Business Portfolio analysis arise from:
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1) getting the needed information 2) incorporating competitive data into business portfolio analysis
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2. Diversification Analysis
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a technique that helps a firm search for growth opportunities from among current and new markets as well as current and new products. for any product there is both a current market (the firms existing customers) and a new market (the firm’s potential customers)
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4 Market-Product Strategies
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1. Market Penetration: Selling more B&J’s super-premium ice cream to americans 2. product development: selling a new product such as children’s clothing under the b&j’s brand to americans 3. market development: selling b&j’s super premium ice cream to brazilians for the first time 4. diversification: selling a new product such as children’s clothing under the b&j’s brand to brazilians for the first time
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1. Market penetration
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Marketing strategy to increase sales of current products in current markets.
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2. Market development
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Marketing strategy to sell current products to new markets.
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3. Product development
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Marketing strategy of selling new products to current markets.
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4. Diversification
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Marketing strategy of developing new products and selling them in new markets.
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Learning Review: What is the difference between a marketing dashboard and a marketing metric?
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Learning Review: What is business portfolio analysis?
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Learning Review: Explain the four market-product strategies in diversification analysis.
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L05: The Strategic Marketing Process
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After an organization assesses where it is and where it wants to go, other questions emerge, such as: 1. How do we allocate our resources to get where we want to go? 2. How do we convert our plans into actions? 3. How do our results compare with our plans, and do deviations require new plans?
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The 3 steps Planning phase of the strategic marketing process
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Step 1: Situation (SWOT) analysis Step 2: Market-product focus and goal setting Step 3: the marketing program
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1: Situation (SWOT) analysis
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analyzing where the firm or product has been recently, where it is now, and where is headed in terms of the organization’s marketing plans and the external forces and trends affecting it (Step 1).
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The SWOT analysis is based on an exhaustive study of 4 areas that form the foundation upon which the firm builds its marketing program:
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1. Identify trends in the organization’s industry. 2. Analyze the organization’s competitors. 3. Assess the organization itself. 4. Research the organization’s present and prospective customers.
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SWOT task:
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to translate the results of the SWOT analysis into specific actions that will help the firm grow. identify the critical strategy-related factors that impact the firm and build on vital strengths , correcting glaring weaknesses, exploiting significant opportunities, and avoid disaster-laden threats.
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2. Market-Product Focus and Goal setting
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Determining which products will be directed toward which customer (step 2) is essential for developing an effective marketing program (step 3) this decision is often based on market segmentation.
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markget segmentation
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aggregating prospective buyers into groups, or segments, that (1) have common needs and (2) will respond similarly to a marketing action. enables an organization to identify the segments on which it will focus its efforts – its target market segments – and develop specific marketing programs to reach each of them understanding the customer is essential
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goal setting
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goal setting involves specifying measurable marketing objectives to be achieved. 1. set marketing and product goals: chances of new product success are increased by specifying both market and product goals. based on their market research medtronic set the following goal: Market its pacemaker within 3 years, manufactured in china for the asian market. 2. select target markets: cardiologists and medical clinics performing heart surgery in china, india, and other asian countries. 3. find points of difference: high quality, long life, reliability, ease of use, low cost 4. position the product:(in customers minds) a medical device that is high quality and reliable with a long nine-year life
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points of difference
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characteristics of a product that make it superior to competitive substitutes.
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3. Marketing program
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activities in step 2 tell the marketing maneger which customers to target and which customers needs the firm’s product offerings can satisfy – the who and what aspects of the strategic marketing process. the how aspect – step 3 in the planning phase – involves developing the program’s marketing mix (the 4 P’s) and its budget. Product strategy: offer a champion brand heart pacemaker with features needed by asian patients price strategy: manufacture the champion to control costs so it can be priced below 1,000 USD – an affordable price for asian markets promotion strategy: introduce the champion at medical conventions across asia to demonstrate its many beneficial features place (distribution) strategy: search out, utilize, and train reputable medical device distributors across Asia to call on cardiologists and medical clinics. – Putting this program into effect requires the firm commit time and money to it in the form of a sales forecast and budget that must be approved by top management.
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Leaning review: What are the 3 steps of the planning phase of the strategic marketing process?
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Learning review: What are points of difference and why are they important?
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L06: The Implementation Phase of the Strategic marketing process
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the result of hundreds of hours spent in the planning phase of the strategic marketing process must now be implemented
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4 components of implementation phase
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1. obtaining resources 2. designing the marketing organization 3. developing planning schedules – members of the marketing department hold meetings to identify the tasks that need to be done, the time to allocate to each one, the people responsible, the deadline for their accomplishment. 4. executing the marketing plan
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a marketing strategy
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the means by which a marketing goal is to be achieved, usually characterized by a specified target market and a marketing program to reach it. the term implies both the end sought (target market) and the means to achieve it (marketing program) ex: seek to incease sales of digital cameras, digital picture frames, and ink-jet printers.
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marketing tactics
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detailed day-to-day operational decisions essential to the overall success of marketing strategies. ex: writing ads and setting prices for new lines of digital cameras
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Evaluation phase of the strategic marketing process
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seeks to keep the marketing program oving in the direction set for it. marketing manager must (1) compare results of marketing program with goals in the written plans to identify deviations and (2) act on these deviations- correcting negative and exploiting positive
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compare results with plans to identify deviations: what is the essence of evaluation
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comparing actual results with goals set
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the planning gap
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the difference between the projection of the path to reach a new goal and the projection of the path of the results already in place.
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ultimate purpose of the firm’s marketing program is:
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to fill in this planning gap
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acting on deviations
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when evaluations show the actual performance has failed to meet expectations, managers need to take corrective actions. ex: Exploiting a positive deviation – if kodak’s innovative digital products sell better than expeted, Kodak might try to move quickly to offer these to international customers- such as its digital photo printers for the German market ex: correcting a negative deviation – If panasonic is able to surpass kodak in global market share of digital cameras, kodak may need to reduce prices. kodak also might (1) develop more feature-laden digital camera using its proprietary sensor technologies that improve image quality to (2) launch a new aggressive global marketing program that integrates its digital camera images into its Kodak digital picture frame.
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Learning Review: What is the implementation phase of the strategic marketing process?
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Learning Review: How do the goals set for a marketing program in the planning phase relate to the evaluation phase of the strategic marketing process.
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