Rajagopal. Marketing Dynamics: Theory and Practice
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Marketing Dynamics: Theory and Practice
APPENDIX A
Explanation for the strategies reaching beyond customer satisfaction
T - Truth
Trust and solid relationships are built on telling the truth. Companies must maintain this principle
both with internal and external customers. It is imperative that this value is represented in everything
a company does. We have seen how the lack of solid ethics can crumble even the largest of companies.
R - Responsibility
Trust is built when everyone within an organization realizes what their responsibilities are and
that they are held accountable for them. Choose to schedule reviews quarterly for every member of
the company to make sure they are aware of their responsibilities. Take ownership of mistakes and
be diligent to find ways to make corrections.
U - Unselfishness
Trust is built when employees devote their time and talent in the workplace and do it, unselfishly.
Customers appreciate the employee who goes out of their way to satisfy the customer. Customers
don’t appreciate hearing how badly the employee wants to go home, or how they didn’t get a break,
or how awful their schedule is.
S - Security
Trust is built on a feeling of security. Good lighting in the parking lot and store entrance, rooms
fitted with doors that lock, employees that handle ringing up a sale with accuracy, and alarm systems
that are visible are all ways to make the customer feel safe in your place of business. Employees
want to feel a sense of job security and that they are appreciated for the job they do.
T - Teamwork
Trust is built when everyone within the organization feels a sense of ownership. How well do
your employees work together? Are they willing to go out of their way to help each other out? Do the
managers roll up their sleeves to help when the workload is overwhelming? Is there a reward system
in place that encourages employees to want to excel? Most importantly, are there cheerleaders
within the organization to keep the momentum going when times are tough?
S
trategy can be defined as a rational set of time-sequenced actions aimed at gaining a sustainable
advantage over competition and improving position with customers. Strategy answers what and
where questions concerning your business. It is a shared vision describing what the organization
should be in the future and where it is going, not how it will get there. Strategy is the framework
managing the “how” choices which determine the future nature and direction of the organization. It
focuses on accomplishing maximum and enduring positive differentiation as opposed to the competition
in meeting customer values. The choices guided by strategy relate to the entire range of the
organization’s products or services, market, principal capabilities, growth rate, return from and allocation
of resources. Perhaps most importantly, strategies identify critical issues that are the changes,
modifications and additions to the organization’s structure and systems, to its capabilities and resources’.
to its information needs and management that result from setting strategy.
Strategic marketing is a bridge between the marketing management and marketing and interplays
with three forces in the markets-customer, competition and corporate entities. The marketing strategy
synchronizes the functional activities among the 3Cs and helps in building the distinctive strengths in
the corporate houses to deliver better customer values. An effective marketing strategy should
include a clear definition of market, an appropriate match between the corporate strengths and
market needs and competitive performance. A good balance of these attributes would build a successful
marketing strategy and justifies the role of marketing in an organization. The Table 9.1 exhibits the
marketing interplays at various levels in the business environment.
Chapter
STRATEGIC MARKETING
9
CHAPTER FOCUS
• To understand the concept of marketing strategy,
• To acquaint with the marketing screening process and strategic
marketing planning, and
• Building comprehension on the issues of strategic marketing and
marketing management.
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Marketing Dynamics: Theory and Practice
Table 9.1 Role of Marketing in Different Levels of Organizations
Level of organization Basic roles Identification
Product/Market Formulate, implement Marketing management
control and evaluate specific
marketing programs
Corporate Provide interplay between Corporate marketing
customer and competitive
perspective for developing an
effective blend of strategy
Business Unit Develop need based Strategic marketing
approaches to direct the
present and future course of
marketing activity for the unit
Marketing strategy in terms of the three Cs is an endeavor to satisfy the customer needs in a
given business environment by building the corporate strengths and competitive advantages. The
strategy is oriented towards long terms goals and perceived as a tool to develop relationship between
the corporate and customer ends. Marketing strategy is to achieve maximum positive competitive
differentiation that is other than the rival activities to satisfy the customer needs.
Concept of marketing strategy may be illustrated with reference to the case of Emerson
Company. Emerson makes basic products essential to a variety of industries, such as
refrigerator compressors, pressure gauges, and garbage disposals. What distinguishes this
St. Louis, MO Company from the herd is its dazzling record of 36 uninterrupted years of
increased earnings, without significant price increases, since the mid 1980s. During the
highly competitive 1980s, Emerson staunchly endured the challenges of low-cost Brazilian,
Korean, and Japanese competitors.
Several factors contributed to Emerson’s success: (1) Management recognized early that
low-cost, aggressive competitors would remain permanent part of the global scene and
would intensify into the next decade. (2) Management exerted the discipline to secure cost-
efficient operations at every level of the organization. (3) Management demonstrated the
flexibility to focus on growth markets and exit those segments with little chance of turning a
profit, such as defense and construction, and niche businesses such as gardening tools. (4)
It realized that cost cutting was only one part of the success equation to sustain growth; the
other, that strategic marketing planning should function as the operating system for managing
both long-term objectives and day-to-day operations. To make the planning system work,
Emerson company has followed the following strategy:
• Periodically surveys all employees to assure input and participation from every functional
area of the business. Such input permits additional strategy options to surface that can be
evaluated, refined, and implemented.
• Identifies customer’s problems early, while they are still manageable, enameling marketing
and sales to take immediate action.
Strategic Marketing
341
• Keeps vigilant watch on troublesome competitors so that managers loose no time in redirecting
their efforts where needed.
• Tracks sales growth, new product development, and market expansion as the benchmarks to
monitor the plan.
A single example sums up Emerson’s accomplishments: ten years ago a Japanese plant could
offer temperature sensors for washing machines for 20%below Emerson’s price. Today,
Emerson’s costs are below the Japanese, and the company has regained the market shares.
Rigorous planning, then, is at the heart of Emerson’s system for managing growth.
FOCUS OF STRATEGIC MARKETING
A large number of the rapid growth firms present written business plans
1
for strategy implementation.
The written plans enable CEOs to manage more critical business functions, grow faster and achieve
a higher proportion of revenue from new products and services than those whose plans are unwritten.
Additionally, written business plan helps growing firms to increase their revenues faster over their
competitors than those without a written plan. The major advantages and issues associated with
strategic marketing planning are as under:
• Strategy is a major focus for higher revenues and profits- and to hatch new products,
expand existing business, and create new markets.
• Business strategy is the single most important management issue and will remain so for
the next five years.
• Democratize the strategy process by handing it over to teams of line and staff managers
from different disciplines.
• Create networks of relationships with customers, suppliers, and rivals to gain greater
competitive advantage.
A company may use strategic marketing planning to identify long-term opportunities and manage
day-to-day operations. Strategic marketing planning is an essential instrument to grow present markets,
spot growth markets, recognize new product innovation, and stay alert to new opportunities. The
Figure 9.1 exhibits the key areas of strategic management and the process thereof.
Situation Analysis
Marketing plan process begins with a situation analysis of a specific product or market. Whereas
the strategies plans look ahead three to five years, the situation analysis requires that you look back
three to five years to obtain a historical perspective of business. The situation analysis is divided into
three parts: marketing mix analysis, market background, and competitor analysis. For marketing mix
analysis, objectively and factually write sales and unit volume by product, analyze pricing and access
promotion and distribution. Market background deals with the nature of audience, human factor, the
image you convey, what customers think of product, and the frequency of its use. The examination of
1 According to Cooper & Lybrand’s 1998 Trendsetters Barometer survey about two-thirds of the fast
growing companies had written marketing plans.
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Marketing Dynamics: Theory and Practice
the background permits you to think
extensively about marketplace and
customers. The third part also per-
mits you to analyze competitors in
detail.
Marketing Opportunities
After you have analyzed the
situation, the next step is to evalu-
ate opportunities. Surprisingly, man-
agers often neglect this part of the
process. This planning step is ex-
ceedingly important, since the
whole purpose of conducting the
situational analysis is to
expose opportunities. Opportunities
are voids or gaps in a product, a
market, or a service that can be filled to satisfy customer needs and wants. This stage of marketing
plan is best achieved by incorporating the input of various functional managers from manufacturing,
R&D, product development, finance and sales. Brainstorming is a useful technique for identifying
opportunities. For example, consider the features and benefits of product. Study the situation analy-
sis, including competitive intelligence, and allow the ideas to flow. Do not attempt to judge them- just
record them as they emerge. The probability is that you will record 90% to 95% of them, form a new
product, or render a new service.
Marketing Objectives
Third step in the marketing plan is to work out primary and functional marketing objective. First,
develop primary quantitative objective, such as sales in dollars and units, market shares, gross
margins, return on investment, return on assets, and any other quantitative information required by
the organization. Second, develop functional objectives as they pertain to product, packaging, services,
pricing, promotion, and distribution. These functional areas are commonly referred to as the marketing
mix . It should be evident that the marketing mix is a key part of the marketing plan in that it
represents the controllable factors you can employ to achieve the primary financial and volume
objectives. The marketing mix also helps you identify sources of competitive problems and, in turn,
suggests possible solutions or strategies.
Strategies and Action Plans
On the basis of marketing objectives, you can now develop the strategies and action plans that
translate those objectives into action. Unless you can support objectives with firm action plans, they
are useless. They are no more than good intentions until you develop the strategies and tactics that
will make them happen. Thus, for each objective, develop a strategy and a tactic action plan. Further,
each strategy should include details about what is going to happen, when it is going to happen, and
who is responsible for carrying out the action.
Figure 9.1 Paradigm of strategic marketing
management
•Mission
• Strategic direction
Areas of expertis e, next fiv e years of
business, categories of customers planning
for, customer services, technology and
product innovations, change management
• Objectives
Market expansion, sales, brand extension,
market share, returns on investment
•Growthstrategies
Corresponding strategiesto objectives,
internaland external strategies
• Business portfolio
Plan breakup, long term growth, alternative
st rat egies , opportunity analysis and targeting
Strategic
plan
Long term Short term
Annual
plan
Mission
Strategic
direction
Objectives
Growth
strategies
Biusiness
portfolio
Situation
analysis
Marketing
opportunities
Marketing
Objectives
Strategies &
Action plans
Budgeting&
Control
•Mission
• Strategic direction
Areas of expertis e, next fiv e years of
business, categories of customers planning
for, customer services, technology and
product innovations, change management
• Objectives
Market expansion, sales, brand extension,
market share, returns on investment
•Growthstrategies
Corresponding strategiesto objectives,
internaland external strategies
• Business portfolio
Plan breakup, long term growth, alternative
st rat egies , opportunity analysis and targeting
Strategic
plan
Long term Short term
Annual
plan
Mission
Strategic
direction
Objectives
Growth
strategies
Biusiness
portfolio
Situation
analysis
Marketing
opportunities
Marketing
Objectives
Strategies &
Action plans
Budgeting&
Control
Strategic Marketing
343
Financial Controls and Budgets
This step in financial plan involves the financial controls, budgets, and variance reports that
translate into numbers for the actions that you have stated in the previous steps (see chapter 3, under
Financial Resources Analysis).
Combinations of the long-term strategic and annual marketing plans form a total strategic marketing
plan for any level of an organization, from corporate management down to product line manager.
Further, for every major product and market described in the business portfolio, you should develop
a specific annual tactical marketing plan. Thus, you combine a long-term strategic viewpoint with a
one-year tactical framework to create action- something that the strategic plan by itself could not
accomplish and for which the marketing plan alone is too narrow a perspective for today’s competitive
environment.
STRATEGIC MARKETING SCREENING PROCESS
The following screening process will help the managers to zero-in on visible prospects for growth.
Once identified and prioritized it can be converted into long-term and short-term marketing objectives,
strategies, and tactics.
1. Present Markets: To identify the best opportunities for expanding present markets, it
is necessary to investigate the emerging businesses or acquire new users for product.
Determining how to displace competition should be thought of which is particularly
significant move in no-growth markets. Increase product usage by current customers
and redefine market segments where there are changes in customers buying patterns.
Work jointly with customers on innovation ideas to reformulate or repackage the product
according to their specific need. Identify new uses (applications) of the products and
services and reposition the product to create a more favorable perception over rival
products. The investigation should be carried where to expand into new or unserved
market riches.
2. Customers: The distribution channels need to be assessed to identify the best opportu-
nities for expanding, improvement or expansion in the customer base. Refine the prod-
uct pricing policies to match market share objectives. Enrich communications, includ-
ing advertising, sales promotion and publicity and deploy the sales force to target new
customers with high potential. Enhance customer service, including technical services
and complaint handling. Identifying the changes in trade buying practices, where the
buying process may have shifted from manufacturer to distributor or to end-user makes
the marketing strategy good for effective implementation.
3. Growth Markets: Targeting the key geographic locations, specifying which markets
or user groups represent, the greatest long-term potential is required to identify the
major growth markets.
4. New product Development: To give priority to “hot” candidates for new product and
services development that will impact on immediate and long-range opportunities, the
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Marketing Dynamics: Theory and Practice
company should focus on new products that can be differentiated and that have the
potential for an extended life cycle. Search for ways to diversify into new or related
products, product lines, and/or new items or features. The techniques to modify products
by customer groups, distribution outlets, or individual customer applications should be
examined and initiate the work on improving packaging to conform to customer’s
specifications and to distinguish product from rivals. Simultaneously there is a need to
establish new value-added services.
5. Targets of opportunity: Innovative attitude and entrepreneurial thinking would develop
the focus on areas outside current market segment or production line not included in
the other categories. However, strategic directions or mission statements need to be
referred as a guideline to assess how far a company can realistically diversify from its
core business and still retain its vitality.
STRATEGIC DIRECTIONS
To begin with the strategic marketing planning process the managers should think of strategic direction
as the mission or vision statement of the company, business unit, product line, or individual product. It
is the long-range philosophy of a business unit. It reflects a strategic vision of what product or
business can become in the long run. Strategic directions may be considered by a firm in reference
to the following issues.
• What are distinctive areas of expertise?
• What business should you be in over the next three to five years or long term?
• What types of categories of customers will you serve?
• What customer functions are you likely to satisfy as you see the market evolve?
• What technologies will you see to satisfy customer/ market needs?
• What changes are taking place in the markets, consumer behavior, competition, environment,
culture and the economy?
Point of this exercise is that the responsibility for defining a strategic direction no longer belongs only
to the upper management. Managers from various departments- marketing, product development,
manufacturing, finance and sales – contribute to the overall strategic direction of a business by asking,
“What business should I be in for my individual product?” The major work in this area of strategic thinking
is attributed to Theodore Levitt, of the Harvard Business School, in his classic article, “Marketing Myopia”.
Using the railroad as a prime example, Levitt shows how the railway system declined in use as technology
advanced, because managers defined their product too narrowly. He explains that to continue growing,
companies must determine customer’s needs and wants and not rely simply on the longevity of their
products. According to Levitt, a myopic view is based on the following four beliefs that begin in a manager’s
mind and permeate an organization: (1) growth is guaranteed by an expanding and affluent population; (2)
there is no competitive substitute for the company’s major products; (3) excessive belief in mass production
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and rapidly declining units coats as output rises; (4) preoccupation with a product that lends itself to
experimentation, manufacturing cost improvement. The Figure 9.1 illustrates the strategic marketing planning
process for an organization. A strategic direction for one of Dow Chemicals agriculture herbicide products
formally reads, “Chemical control of brush on right-of- way.” This product driven orientation was too “myopic”
and came across more as a product definition than a strategic vision. When revised to reflect a border market
driven focus that would drive future product and market development, it reads
Provide high-quality products and services to meet vegetation management goals on
right-of-way, industrial, municipality and aquatic /wetland sites at a profit. Products and
services may include chemical, mechanical, application, distribution, consultation and
establishment of desirable vegetation.
Analyze how expansive the statement is and how it defines potential and product/markets
development. In other words, it summarizes a vision. In another example, Becton Dickinson, a health
care firm, originally described the strategic direction for one of its hypodermic needles as, “Our
strategic direction is to be the leading manufacturer of hypodermic products for the health care
field.” Here, too, this narrow focus of good intentions was broadened to provide a forward-looking
orientation. The revamped statement read as - Our strategic direction is to meet the needs of
consumers and health care providers for drug-delivery devices by offering a full line of
hypodermic products and products systems. Our leadership position will be maintained through
acquisition to provide alternative administration and monitoring systems.
Guided by such a statement, managers could expand their vision and direct the product line into
innovative product systems, technologies, and ultimately expand their holds on existing markets and
launch into new markets. Four critical planning steps for managers to observe in this process area
are as follows:
Step1: Strategic Direction
It is necessary to define the scope of company, business unit and product line. In order to
establish the strategic direction the competency of business unit, profile of customers to be
served in future, required technology and competition need to be reviewed be the firm.
Step 2: Objectives and Goals
As illustrated in the auto parts and the electric utility cases, indicate the performance
expectations such as sales, profits and other quantitative objectives. Also managers need
to list non-quantitative objectives, including upgrading distribution channels, building specialty
products, upgrading field services, and launching new or upgrading old products.
Step 3: Growth Strategies
Select strategies to reach objectives. These relate to product positioning, product quality,
distribution, pricing, packaging, value-added services, and customer/technical services.
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Marketing Dynamics: Theory and Practice
Step 4: Business Portfolio
Based on the previous three sections, develop a product and market portfolio strategy that
defines the following:
• Existing products into existing markets.
• Existing products into new markets (Westinghouse focused on law enforcement markets).
• New products into existing markets.
• New products into new markets.
Strategy on product marketing may be developed in many ways to better position existing products
in the prevailing markets. Development of such strategies may be categorically described as:
• Market penetration to position existing products in new markets
• Market development to introduce new products into existing markets.
• Product development to introduce at new products for new markets, and
Diversification as a guideline for sustainable market growth for ling term.
STRATEGIC MANAGEMENT
Strategic marketing delineates 3Rs emphasizing the right products for right growth markets at
right time. These issues are also highlighted in the marketing management but from a different
perspective. The resources of the firm are identified as uncontrollable variables of the marketing
mix in the process of marketing management while the strategic marketing systematically defines
all the variables and examines its necessary inputs to maximize the corporate performance. Stra-
tegic marketing is a plan of all aspects of the strategy of an organization in the market place unlike
a simple marketing plan that deals with so-called marketing-mix.
2
Strategic marketing differs from
marketing management, in many areas like orientation, core philosophy, approach, and relationship
of business organization with various environmental variables. One of the prominent differences
between the strategic marketing and marketing management is the temporal framework. This
process deals with long range planning and the decisions thereof would have long-term implica-
tions. The inductive and intuitive attributes dominate the strategic marketing process while mar-
keting management is largely oriented towards analytical examination of the associated marketing
factors and its implementation. The strategic marketing advocates the democratic decision making
process which is defined as bottom-up approach while in the marketing management, the flow of
directions are from top-down to make decisions. The Figure 9.2 exhibits many points of differ-
ences between the strategic management and marketing management. In the strategic manage-
ment process environment is considered as ever changing and dynamic. On the contrary the
marketing management assumes that the environment is constant for effective implementation.
However, occasional changes are noted in the marketing management. The continuous search of
2 Derek F Abell and John S. Hammond: Strategic Market Planning, Prentice-Hall, Englewood Cliffs, New
Jersey, 1979 PP 1-16
Strategic Marketing
347
opportunities is one of the major fo-
cuses of strategic marketing and is
aimed to explore the opportunities for
optimizing its business goals in the
long run. However, an ad-hoc search
is conducted in the marketing man-
agement process to find new oppor-
tunities. The marketing management
has a narrow profit center approach,
while the strategic marketing pursues
broad objectives of achieving syn-
ergy between different components
of organization, both horizontally and
vertically. The strategic marketing
activity requires high degree of cre-
ativity and originality in the approach.
The implementation, control and monitoring skills are preferred in the marketing management activ-
ity unlike the strategic marketing. Strategic marketing needs a proactive perspective, and the mar-
keting management requires the reactive perspectives for effective leadership .
A division of Cargill Corp. developed its strategic direction that would take it from a commodity
type business of egg production to a value-added, broader definition:
We will be a leading marketer of quality, value-added egg based food products serving
primarily the food service industry. We will be a least-cost producer and a leader in
developing and implementing innovative products and processes to meet the needs of an
evolving marketplace.
Statement reflects a clear and pragmatic vision that moved the division away from its orientation
of just dealing with fresh egg production to one of going to the next step by preparing and packaging
ready-to-use egg-based products for all types of institutions. These statements are no more word
play. Rather they have a practical application in creating a workable mental set whereby managers
can envision how a product line or business might expand over the next three to five years. In turn,
the statements help shape objectives, strategies, and a portfolio of products and markets. If you view
the basic product as railroad cars traveling on parallel tracks down a path, the result is a short-sighted
business condition that, in turn, confines products, services, and market development on a narrow
dimensions. Redefined as a transportation company, however, the strategic vision includes transportation
of all types- air, water, space, and diverse forms of transportation still unknown. Since railroads
company owns land on either side of the tracks, a transportation viewpoint can conceivably include
laying underground pipe to transport food, fluids, chemicals, and power lines.
This type of expansive strategic thinking is not limited to the private sector of profit-making
corporations. It applies equally well to the public sector. Consider the March of Dimes Defect
Foundation, an organization that was originally dedicated to the cure of Polio. Fortunately, polio is no
longer a serious threat. Dose that situation mean that March of Dimes is out of business and can
serve no useful functions? Not at all. By redefining its mission, or strategic direction as birth defects,
Figure 9.2: Major difference between strategic
marketing and marketing manageemnt
Marketing
manage men t
Strategic
marketing
Action oriented
Existing opprtunities
Non-product variables
Stable environment
Reactive behaviour
Day -to-day
manage men t
Marketing department
Low diversification
Profit objective
Analysis oriented
New opportunities
Product -market
Dynamic environment
Pro -active behaviour
Long -range management
Cross functional
organization
High diversification
Customer satisfaction
Marketing
manage men t
Strategic
marketing
Action oriented
Existing opprtunities
Non-product variables
Stable environment
Reactive behaviour
Day -to-day
manage men t
Marketing department
Low diversification
Profit objective
Analysis oriented
New opportunities
Product -market
Dynamic environment
Pro -active behaviour
Long -range management
Cross functional
organization
High diversification
Customer satisfaction