1

Chapter 1: ‘Marketing – Creating

Customer Value and Engagement’
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Key terms
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Learning Objectives

After completing this chapter, students will be able to:

• Define marketing and outline the steps in
the marketing
process.
• Explain the importance of understanding the marketplace and
customers and identify the five core marketplace concepts.
• Identify the key elements of a
customer-driven
orientations that guidemarketing
marketing strategy.
strategy
• Discuss and
customer discussthe marketing
relationship management
identify strategies formanagement
creating value (CRM)
for and
capturingcustomers
value from customers in return. and
• Describe the major trends and forces that are changing the
marketing landscape in this age of relationships.
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What is Marketing?

The simplest of marketing is

definition and
customers managing profitable engaging
relationships. customer

The two-fold goal of marketing is to:

• attract new customers by promising superior value
• grow current customers by delivering satisfaction

→ Sound marketing is critical to the success of

every
organization: - large for-profit firms
- not-for-profit organizations
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What is Marketing?

You already know a lot about marketing — it is all around

you:
• products at your nearby shopping center
• ads that fill your TV screen and magazines
• imaginative websites and mobile phone apps
• blogs, online videos, and social media

→Today’s marketers reach you directly, personally, and

interactively. They want to become a part of your life
and enrich your experiences with their brands — to
help you live their brands!
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Perhaps the simplest definition of marketing is engaging customers and
managing
profitable customer relationships.

What is Marketing?

• Marketing is a process by which companies create

value for customers and build strong customer
relationships in order to capture value from
customers in return.

Discussion Question:
Please give examples of companies that are excellent at
marketing? How do they reflect this definition of
Marketing?
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The Marketing Process (5 Steps)

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The Marketing Process (5 Steps)

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Discussion question:
1) Give an example of a product (good or service) you have purchased
recently!
2) Tell us how that product satisfied a need, want or demand!

Understanding the Marketplace and Customer

Needs
• Human Needs are states of felt deprivation.
(e.g. physical needs for food, clothing, warmth, and safety; social
needs for belonging and affection; and
individual and self-expression)
knowledge needs for
• Wants are the form human needs take as they are shaped by
culture and individual personality.
• Demands are human wants that are backed by buying power.
→ Outstanding marketing companies go to great lengths to learn
about and understand their customers’ needs, wants, and
demands!
Example: Take Dennis Supermarket managers, who make regular
unannounced visits to stores in Zhengzhou, accompanied by local
moms and loyal Dennis shoppers!
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Understanding the Marketplace and

Customer Needs
• Customers’ needs and wants are fulfilled through
‘market offerings’ – some combination of products,
services, information, persons, places, or experiences
offered to a market to satisfy a need or want.

• Many sellers suffer from marketing myopia, the

mistake of paying more attention to the specific
products they offer than to the benefits and
experiences produced by these products.
(→ focusing only on existing wants and losing sight
of underlying consumer needs.)
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Understanding the Marketplace and

Customer Needs
→ Marketing experiences:
• More than just a sports bar, Buffalo Wild Wings mission
is to provide a total eating and social environment that
“fuels the sports fan experience” through in-store and
online engagement. → Smart marketers orchestrate
several services and products, thereby creating brand
experiences for consumers!
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Understanding the Marketplace and Customer

Needs
Marketing occurs when people decide to satisfy their
needs and wants through exchange relationships!
• Exchange is the act of obtaining a desired object from
someone by offering something in return.
• Marketing actions try to create, maintain, and grow
desirable exchange relationships with target
audiences involving a product, service, idea, or other
object. → Companies want to build strong relationships
by consistently delivering superior customer value!
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Understanding the Marketplace and Customer

Needs
A market is set of actual and potential buyers of a product or service!
→ Sellers must search for buyers, identify their needs, design good
market offerings, set prices for them, promote them, and store and
deliver them.
→ Marketing was traditionally carried out by sellers, the concept now
also includes consumers!
Consumers engage in marketing when:
• they search for products,
• interact with companies to obtain information, and
• make their purchases.
→ In addition to customer relationship management, companies must
also deal with customer-managed relationships as customers
are empowered and marketing is made a two-way affair.
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Marketing intermediaries are an individual or firm (e.g. agent, distributor, wholesaler,
retailer) that links producers to the final consumers. They help a firm to promote, sell,
and make-available a good or service or purchase and resale of the item.

Understanding the Marketplace and Customer

Needs
Here we see the main elements in a marketing system:
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Marketing intermediaries are an individual or firm (e.g. agent, distributor, wholesaler,
retailer) that links producers to the final consumers. They help a firm to promote, sell,
and make-available a good or service or purchase and resale of the item.

Understanding the Marketplace and Customer

Needs
Here we see the main elements in a marketing system:
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Understanding the Marketplace and Customer

Needs
• Marketing means managing marketsto bring
customer
about relationships.
profitable Activities such as
consumer research, productdistribution,
development,
pricing,
communication,
service are core marketing activities! and

→ Buyers also carry out marketing, thus, in addition to customer

relationship management, today’s marketers must also deal
effectively with customer-managed relationships.

Marketers are no longer asking only “How can we influence our

customers?” but also “How can our customers influence us?” and
even “How can our customers influence each other?”
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Designing a ‘Customer Value-Driven Marketing

Strategy’
→ Now that the company fully understands its consumers
and the marketplace, it must decide which customers
it will serve and how it will bring them value!

→ The marketing manager’s aim is to find, attract, keep,

and grow target customers by creating, delivering,
and communicating superior customer value.
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Discussion Question:
Describe a market segment you are a part of – chose a specific product such
as: cosmetics, computer games, clothing …

Designing a ‘Customer Value-Driven Marketing

Strategy’
→ To design a winning marketing strategy, the marketing manager
must answer two important questions:
• What customers will we serve (what is our target market)?
• How can we serve these customers best
(what is our value proposition)?

→ The company must decide how it will serve targeted

customers — how it will differentiate and position itself in the
marketplace!
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Designing a ‘Customer Value-Driven Marketing

Strategy’
• A brand’s value proposition is the set of benefits or
values it promises to deliver to customers to satisfy
their needs.
Discussion Question:
Evaluate following value propositions
in terms of how well the company
delivers on the proposition.
1. BMW promises “the ultimate
driving machine”
2. Facebook helps you “connect
and share with the people in your
life”
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Marketing management wants to design strategies that will build profitable
relationships with target consumers.

Designing a ‘Customer Value-Driven Marketing

Strategy’
• There are five alternative concepts under which
organizations design and carry out their marketing
strategies:
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Designing a ‘Customer Value-Driven Marketing

Strategy’

• Production concept: Consumers will favor products that are available

and
highly affordable!

→ Production concept still a useful philosophy in some situations: e.g. in the

highly competitive, price-sensitive Chinese market, home appliance maker
Haier dominates through low labor costs, high production efficiency, and
mass distribution!
→ Problem: the production concept can lead to marketing myopia and losing
sight of the real objective — satisfying customer needs and building
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Designing a ‘Customer Value-Driven Marketing

Strategy’

• Product concept: Consumers favor products that offer the most quality,
performance, and features.
→ Focus is on continuous product improvements. Product quality and
improvement are important parts of most marketing strategies. However,
focusing only on the company’s products can also lead to marketing
myopia.
Example: Manufacturers believes that if they can “build a better mousetrap, the world will beat a path
to their doors.” But they are often rudely shocked. Buyers may be looking for a better solution to a
mouse problem but not necessarily for a better mousetrap. The better solution might be a chemical
spray, an exterminating service, a house cat, or something else that suits their needs even better
than a mousetrap.
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Designing a ‘Customer Value-Driven Marketing

Strategy’

• Selling concept: Consumers will not buy enough of the firm’s products
unless the firm undertakes a large-scale selling and promotion effort.
→ The selling concept is typically practiced with unsought goods — those that
buyers do not normally think of buying, such as life insurance or blood
donations. These industries must be good at tracking down prospects and
selling them on a product’s benefits.
→ Such aggressive selling, however, carries high risks. It focuses on creating
sales transactions rather than on building long-term, profitable customer
relationships!
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Designing a ‘Customer Value-Driven Marketing

Strategy’

• Marketing concept: Know the needs and wants of the target markets and
deliver the desired satisfactions better than competitors.

→ Customer focus and value are the paths to sales and profits!
→ Instead of a product-centered make-and-sell philosophy, the marketing
concept is a customer-centered sense-and-respond philosophy. The
job is not to find the right customers for your product but to find the right
products for your customers.
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Selling concept: Consumers will not buy enough of the firm’s products unless the firm
undertakes a large-scale selling and promotion effort. Marketing concept: Know the needs
and wants of the target markets and deliver the desired satisfactions better than competitors.

Designing a ‘Customer Value-Driven Marketing

Strategy’
This slide contrasts the selling concept
and the Gets short-term sales with
marketing concept: little concern about
who
buys or why!

well-defined

Creates relationships with the right

customers based on customer
and satisfaction! value
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Selling concept: Consumers will not buy enough of the firm’s products unless the firm
undertakes a large-scale selling and promotion effort. Marketing concept: Know the needs
and wants of the target markets and deliver the desired satisfactions better than competitors.

Designing a ‘Customer Value-Driven Marketing

Strategy’
This slide contrasts the selling concept
and the
marketing concept:
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Designing a ‘Customer Value-Driven Marketing

Strategy’
Societal marketing: The company’s marketing decisions consider
consumers’ wants, the company’s requirements, consumers’ long-
run interests, and society’s long-run interests.
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Designing a ‘Customer Value-Driven Marketing

Strategy’
→ The societal marketing concept questions whether the pure marketing
concept overlooks possible conflicts between consumer short-run wants and
consumer long-run welfare. Is a firm that satisfies the immediate needs and
wants of target markets always doing what is best for its consumers in the long
run?

→ Societal marketing concept: Marketing strategy should deliver value to

customers in a way that maintains or improves both the consumer’s and
society’s well-being.
→ It calls for sustainable marketing, socially and environmentally responsible
marketing that meets the present needs of consumers and businesses while
also preserving or enhancing the ability of future generations to meet their
needs!

→ Companies should balance three considerations in setting

marketing their strategies:
company profits, consumer wants, and
interests! society’s
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Designing a ‘Customer Value-Driven Marketing

Strategy’
Discussion Questions:
• How does the societal marketing concept influence your
buying decisions, including brand selection and where
you make purchases?

• What companies can you identify with social marketing?

• What do these companies do that ties to the societal

marketing concept?
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Examples of Social Marketing in
Advertisements:

Designing a ‘Customer Value-Driven Marketing

Strategy’
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Examples of Social Marketing in
Advertisements:

Designing a ‘Customer Value-Driven Marketing

Strategy’
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Designing a ‘Customer Value-Driven Marketing

Strategy’
• The company’s marketing strategy outlines which
customers it will serve and how it will create value for
these customers.
• Next, the marketer develops an integrated marketing
program that will actually deliver the intended value to
target customers.
• The marketing program builds customer relationships by
transforming the marketing strategy into action!
• It consists of the firm’s marketing mix, the set of
marketing tools the firm uses to implement its marketing
strategy:
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Designing a ‘Customer Value-Driven Marketing

Strategy’
The marketing mix is comprised of a set of tools known a
the four Ps:
• Product
• Price
• Promotion
• Place
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Designing a ‘Customer Value-Driven Marketing

Strategy’
1. The business must identify the right product (or
service) to make the product both appealing and
distinctive!

→ To do this, it needs to understand

fully both its customers and its competitors!

“Don’t try to sell a Ferrariwhen the

customer wants a Nissan Micra!”
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Designing a ‘Customer Value-Driven Marketing

Strategy’
2. Having identified the right product to appeal to its target
market the business must set the right price!

The right price for a Versace handbag may be RMB

10,000! It is a great mistake to think that low prices or
special discounts are the path to business success!
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Designing a ‘Customer Value-Driven Marketing

Strategy’
3. Place is how to get your product
to the place where customers can be
persuaded to buy!

This may be a vending machine, or on a Walmart shelf, or

positioned just by the till at a newsagent (= prime position
for purchases bought on impulse)!

For service businesses, place may be online.

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Designing a ‘Customer Value-Driven Marketing

Strategy’
4. Marketing managers must identify the right way to
create the right image for the products and present it in
the right way (Promotion)! They must engage target
consumers, communicate about the offering, and
persuade consumers of the offer’s merits.

• This may be achieved by national TV advertising, but

specific markets can be reached at far lower costs by
more careful targeting (e.g. online advertising!).
• Promotion includes both media (TV, press, cinema,
radio) and other forms of promotion (including special
offers, public relations, direct mail, …)!
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Designing a ‘Customer Value-Driven Marketing

Strategy’
In a world dominated by services and online selling,
the traditional 4P’s (product, price, promotion, place) are
joined by people, process and the physical environment
(7P’s).
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Designing a ‘Customer Value-Driven Marketing

Strategy’
5. Anyone who comes into contact with your customers
will make an impression – and they can have a
profound effect – positive and negative – on customer
satisfaction! → The reputation of your brand rests in
your people’s hands. They must, therefore, be
appropriately trained, well motivated and have the right
attitude!
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Designing a ‘Customer Value-Driven Marketing

Strategy’
6. Process includes every practical aspect of the
customer experience, from phoning or trying to use the
website, to how effective the signage is in a store or
hotel, to waiting time at a supermarket checkout.

Do customers have to wait? Are they kept informed? Is the

service efficient?
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Designing a ‘Customer Value-Driven Marketing

Strategy’
7. Physical environment – however good an
advertisement my be, customers pick up clues about a
product or service from the physical environment!
Arriving to eat at a restaurant, a grubby carpet or didgy
smell might send customers scuttling away!

Online a potential customer may be interested in

purchasing, but need a clearer idea of exactly how the
dress might look on a person instead of a dummy! Here,
too, evidence of the physical environment is needed,
perhaps by the ability to take a 360° look or a video clip of
the dress.
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Designing a ‘Customer Value-Driven Marketing

Strategy’
The firm must blend each marketing mix tool into a
comprehensive integrated marketing program that
communicates and delivers the intended value to chosen
customers! = Ideal combination based on a balance
between cost and effectiveness!
• A good product poorly priced my fail!
• If the product is not available
following an advertising campaign, the
expenditure is wasted!
A successful mix us the one that succeeds in putting the
strategy into practice!
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‘Managing Customer Relationships’ and

‘Capturing Customer Value’
The first three steps in the marketing process
1. understanding the marketplace and customer needs,
2. designing a customer value-driven marketing strategy,
and
3. constructing a marketing program – all lead up
to the fourth and most important step:
4. building and managing profitable
customer relationships!
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‘Managing Customer Relationships’ and

‘Capturing Customer Value’
Customer relationship management (CRM) is perhaps
the most important concept of modern marketing!

• It involves managing detailed information about

individual customers and carefully managing customer
touchpoints to maximize customer loyalty.
Customer relationship management (CRM): The overall
process of building and maintaining profitable customer
relationships by delivering superior customer value and
satisfaction. It deals with all aspects of acquiring,
engaging, and growing customers!
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‘Managing Customer Relationships’ and

‘Capturing Customer Value’
• Satisfied customers are more likely to be loyal
customers and give the company a larger share of their
business.

• A customer buys from the firm that offers the

highest customer-perceived value – the customer’s
evaluation of the difference between all the benefits and
all the costs of a market offering relative to those of
competing offers!
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‘Managing Customer Relationships’ and

‘Capturing Customer Value’
• Customer satisfaction depends on the product’s perceived performance
relative to a buyer’s expectations.
→ If the product’s performance falls short of expectations, the customer is
dissatisfied.
→ If performance matches expectations, the customer is satisfied.
→ If performance exceeds expectations, the customer is highly satisfied or
delighted.

• Marketing companies go out of their way to keep important customers

satisfied. Higher levels of customer satisfaction lead to greater customer
loyalty, which in turn results in better company performance!

• Delighted customers not only make repeat purchases but also become
willing marketing partners and spread the word about their good
experiences to others!
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Customer-engagement marketing goes beyond just selling a brand to consumers.
Its goal is to make the brand a meaningful part of consumers’ conversations and
lives.

‘Managing Customer Relationships’ and

‘Capturing Customer Value’
Customer-Engagement Marketing – fosters
direct customer
continuous and involvement in shaping
conversations,
brand experiences, and community!
Starbucks is using online, mobile,
and social media to
targeting
refine their and to
customers engage more
interactively. deeply and
Discussion Question:
How have companies you know used Weibo, Wechat,
Twitter, Instagram, Snapchat, or other social networks for
marketing purposes?
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‘Managing Customer Relationships’ and

‘Capturing Customer Value’
• A growing form of customer-engagement marketing is
consumer-generated marketing.
• This happens through uninvited consumer-to-
consumer exchanges in blogs, video-sharing sites,
social media, and other digital forums.
• But increasingly, companies themselves are
inviting consumers to play a more active role in
shaping products and brand content. Some
companies ask consumers for new product and
service ideas (e.g. Starbucks!).
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‘Managing Customer Relationships’ and

‘Capturing Customer Value’
In addition to being good at customer relationship
management, marketers must also be good at partner
relationship management:
• working closely with others inside and outside the
company to jointly engage and bring more value to
customers!
• In today’s connected world, every functional area in
the organization can interact with customers!
• Marketers must also partner with suppliers, channel
partners, and others outside the company!
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‘Managing Customer Relationships’ and

‘Capturing Customer Value’
• Good customer relationship management creates
customer satisfaction. In turn, satisfied customers
remain loyal and talk favorably to others about the
company and its products.

• Keeping customers loyal makes good economic

sense. Loyal customers spend more and stay around
longer. → Research shows that it is five times cheaper to
keep an old customer than acquire a new one.
Conversely, customer defections can be costly. Losing a
customer means losing more than a single sale! → It
means losing the entire stream of purchases that the
customer would make over a lifetime of patronage.
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‘Managing Customer Relationships’ and

‘Capturing Customer Value’
Customer lifetime value is the value of the entire stream
of purchases that the customer would make over a lifetime
of patronage.
Example:
At Dennis supermarket in
Zhengzhou, the lifetime
revenue of a
RMB120,000. customer
average customer
about spends a is
RMB300
shops 50 weeksBecauseweek,the
a year, and
remains in the area for about
8 years, losing one customer
can be a significant loss! Customer loyalty and retention!
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Cross-selling: practice of selling an additional product or service to an existing
customer. Upselling: sales technique where a seller induces the customer to purchase
more expensive items, upgrades or other add-ons (=more profitable sale!).

‘Managing Customer Relationships’ and

‘Capturing Customer Value’
Good customer relationship management can help
marketers increase their ‘Share of customer’:
• The portion of the customer’s that
purchasing a
company gets in its product categories.
To increase share of customer, firms can offer greater variety to current customers or they can
create programs to cross-sell and up-sell to market more products and services to existing
customers. For example, Tianmao is highly skilled at leveraging relationships with its millions of
customers to increase its share of each customer’s spending budget!
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The ultimate aim of customer relationship management is to produce high
customer equity:

‘Managing Customer Relationships’ and

‘Capturing Customer Value’
Customer equity is the total combined customer
lifetime values of all of the company’s customers.
• It is a measure of the future
value of the company’s
customer base!
→ The more loyal the
profitable firm’s
customers,
higher its customer equity. the
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‘Managing Customer Relationships’ and

‘Capturing Customer Value’
We can classify customers into one of
groups,four relationship
according to their profitability and projected loyalty.
• Strangers show
potential profitability
low and little
projected loyalty.

• Butterflies are
profitable but not loyal.
potentially
藤壶科
• True friends both
are profitable and
loyal.
• Barnacles are highly loyal
but not very profitable.
→ Different types of customers require different engagement and relationship
management strategies! The goal is to build the right relationships with the right
customers!
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‘Managing Customer Relationships’ and

‘Capturing Customer Value’
We can classify customers into one of
groups,four relationship
according to their profitability and projected loyalty.
• Strangers show
potential profitability
low and little
projected loyalty.

• Butterflies are
potentially
profitable but not loyal.
• True are
friends and loyal.both
profitable

• Barnacles are highly loyal

but not very profitable.
→ Different types of customers require different engagement and relationship
management strategies! The goal is to build the right relationships with the right
customers!
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The Changing ‘Marketing Landscape’

The explosive in digital technology

fundamentally
growth has the way we
communicate, share information, access
changed liveentertainment,
– how
and shop. → Approximately 3.3 billion we people – 46% of
the world’s population – are now online! 64% percent of all
American adults now own smartphones; 71% of those
smartphones next to them when they sleep!
• Digital and social media marketing involves using
digital marketing tools such as web sites, social media,
mobile ads and apps, online videos, e-mail, and blogs
that engage consumers anywhere, at any time, via their
digital devices.
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The Changing ‘Marketing Landscape’

• In recent years, marketing has become a major part of

the strategies of many not-for-profit organizations (e.g.
colleges, hospitals, museums, zoos, foundations …).
→ Not-for-profits face stiff competition for support and
membership.
→ Sound marketing can help them attract members,
funds,
and support!
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The Changing ‘Marketing Landscape’

• As companies are redefining their customer

relationships, marketers are also taking a fresh look at
the ways in which they relate with the broader world
around them! Today, almost every company, large or
small, is touched by global competition.

• Marketers are reexamining their relationships with social

values and responsibilities and with the very Earth that
sustains us. As the worldwide consumerism and
environmentalism movements mature, marketers are
being called on to develop sustainable marketing
practices!
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So, What Is Marketing? Pulling It All Together

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So, What Is Marketing? Pulling It All Together

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Homework --- Chapter 1

Review questions:
1. Explain why it was important to
stretch the marketing mix from 4Ps to
7!

2. In your own words, outline each of the

three ‘new Ps’ within the marketing
mix!

• Please read Chapter 2 (pp. 62-

89)!
 62

Chapter 2: Marketing strategy: Partnering

to BuildCustomer Engagement,
Value, and Relationships
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Key terms
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Learning Objectives

After completing this chapter, students will be able to:

• Explain company-wide strategic planning and its four steps.
• Discuss how to design business
portfolios and develop
growth strategies.
• Explain marketing’s role in strategic planning and how
marketing works with its partners to create and deliver customer
value.
• Describe the elements of a customer value-driven marketing
strategy and mix, and the forces that influence it.
• List the marketing management functions, including the
elements of a marketing plan, and discuss the importance of
measuring and managing marketing return on investment.
 65
Strategic planning sets the stage for the rest of planning in the
firm!

Company-Wide Strategic Planning

Strategic planning is the process of developing and

maintaining a strategic fit between the organization’s goals
and capabilities, and its changing marketing opportunities.
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Company-Wide Strategic Planning

At the corporate level, the company starts the strategic

planning process by defining its overall purpose and
mission!
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Company-Wide Strategic Planning

 68
“At Xiaomi, we strive to create the highest quality products in lowest possible prices
in order to provide people access to the necessary tools and services that connect
them to the world, and ultimately, to their dreams!”

Company-Wide Strategic Planning

The mission statement is the

organization’s purpose; what it wants to accomplish
in the larger environment.
Xiaomi overall
Mission
Statement:

“Making quality
technology
accessible to
everyone”

→ Its marketing strategies and programs must support this mission!

 69
“At Xiaomi, we strive to create the highest quality products in lowest possible prices
in order to provide people access to the necessary tools and services that connect
them to the world, and ultimately, to their dreams!”

Company-Wide Strategic Planning

Forging a sound mission the

beginswith questions: following

• 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!
 70
“At Xiaomi, we strive to create the highest quality products in lowest possible prices
in order to provide people access to the necessary tools and services that connect
them to the world, and ultimately, to their dreams!”

Company-Wide Strategic Planning

A mission statement should:

• Not be myopic in product terms

• Be meaningful and specific
• Be motivating
• Emphasize the company’s strengths
• Contain specific workable guidelines
• Not be stated as making sales or profits
 71

Company-Wide Strategic Planning

This mission is then turned into detailed

supporting objectives that guide the entire
company!
 72

Company-Wide Strategic Planning

Next, headquarters decides what portfolio of businesses and

products is best for the company and how much support to give
each one.

In turn, each business and product develops detailed marketing and

other departmental plans that support the company-wide plan.
 73
The company needs to turn its mission into detailed supporting objectives for each
level of management. Each manager should have objectives and be responsible for
reaching them!

Company-Wide Strategic Planning

Setting Company Objectives and Goals

 74

Designing The Business Portfolio

• The business portfolio is the collection of businesses

and products that make up the company.

• Portfolio analysis is a major activity in strategic

planning whereby management evaluates the products
and businesses that make up the company.
 75
Strategic business unit (SBU): the single independent businesses of an organization
that formulate their own competitive strategies!

Designing The Business Portfolio

Strategic business units (SBU) can be a

Mercedes Benz Truck Division

• Company division

• Product line within a division

• Single product or brand

Apple TV
 76
When designing a business portfolio, it is a good idea to add and support products
and businesses that fit closely with the firm’s core philosophy and competencies.

Designing The Business Portfolio

• Analyzing the Current Business Portfolio

& strength of the SBU’s position

in that market or industry
 77
The best-known portfolio-planning method is the Boston Consulting Group
(BCG)
approach:

The BCG Matrix ( 波士顿矩

阵)
波士顿咨询公司
BCG matrix:
• A means of evaluating “strategic business units” on the
basis of (1) their business growth rates and (2) their
share of the market.

Dogs
瘦狗
Cash Cows
Stars 现金牛 Question marks
明星 问题
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Designing The Business Portfolio

Analyzing the Current Business Portfolio

波士顿矩阵

Stars are high-growth, high-share businesses or products

requiring heavy investment to finance rapid growth. They
will eventually turn into cash cows.
 79

Designing The Business Portfolio

Analyzing the Current Business Portfolio

Stars are high-growth, high-share businesses or products

requiring heavy investment to finance rapid growth. They
will eventually turn into cash cows.
 80

Designing The Business Portfolio

Analyzing the Current Business Portfolio

波士顿矩阵

• Cash cows are low-growth, high-share businesses or

products that are established and successful SBUs
requiring less investment to maintain market share.
 81

Designing The Business Portfolio

Analyzing the Current Business Portfolio

波士顿矩阵

• Question marks are low-share business units in high-

growth markets requiring a lot of cash to hold their share.
 82

Designing The Business Portfolio

Analyzing the Current Business Portfolio

波士顿矩阵

• Dogs are low-growth, low-share businesses and products

that may generate enough cash to maintain themselves
but do not promise to be large sources of cash.
 83

Designing The Business Portfolio

Problems with Matrix Approaches:

• Difficulty in defining SBUs and measuring market share
and growth
• Time consuming
• Expensive
• Focus on current businesses, not future planning

→ Many companies have dropped formal matrix methods in favor of more

customized approaches that better suit their specific situations!

→ Companies are placing responsibility for strategic planning in the hands of

cross-functional teams of divisional managers who are close to their
markets.
 84

Designing The Business Portfolio

Marketing needs to identify, evaluate, and select market opportunities

and establish strategies for capturing them. One useful device for
identifying growth opportunities is the product/market expansion
grid:

Market penetration - making more sales to current customers without

changing its original product such as by adding new stores in current
market areas to make it easier for customers to visit!
 85

Designing The Business Portfolio

Marketing needs to identify, evaluate, and select market opportunities

and establish strategies for capturing them. One useful device for
identifying growth opportunities is the product/market expansion
grid:

Market penetration - making more sales to current customers without

changing its original product such as by adding new stores in current
market areas to make it easier for customers to visit!
 86

Designing The Business Portfolio

Marketing needs to identify, evaluate, and select market opportunities

and establish strategies for capturing them. One useful device for
identifying growth opportunities is the product/market expansion
grid:

Market development – identifying and developing new markets for its

current products. Example: new demographic markets - perhaps new
groups such as seniors could be encouraged! or managers could
consider new geographic markets.
 87

Designing The Business Portfolio

Marketing needs to identify, evaluate, and select market opportunities

and establish strategies for capturing them. One useful device for
identifying growth opportunities is the product/market expansion
grid:

Product development – offering modified or new products to current

markets such as by moving into new product categories.
 88

Designing The Business Portfolio

Marketing needs to identify, evaluate, and select market opportunities

and establish strategies for capturing them. One useful device for
identifying growth opportunities is the product/market expansion
grid:

Diversification – starting up or buying businesses beyond its current

products and markets. Example: the company could acquire a
company that operates in different market segments with a different
product mix.
 89

The Diversification Strategy

Unrelated Diversification:
• Operating several businesses under one ownership that
are not related to one another.

Example:
Hunan Jinjian Cereals
湖南金健米业股份有限公司
• China’s first cereal producer to list on the
Shanghai Stock Exchange.
• Entered seven additional lines of business after
its initial public offering – “pharmaceutical
products”, “real estate”, “dairy production”,
 90

The Diversification Strategy

Related Diversification:
• An organization under one ownership operates separate
businesses that are related to one another.

博柏利
 91

Designing The Business Portfolio

Growth strategy: a corporate strategy that is used when

an organisation wants to expand the number of markets
served or products offered, either through its current
business(es) or through new business(es)
 92

Designing The Business Portfolio

Downsizing strategy:

• Downsizing is when a company must

prune, harvest,or divest
businesses that are unprofitable or that no longer fit the strategy.

A firm might want to abandon products or markets for a number of

reasons:
• The firm may have grown too fast or entered areas
where it lacks experience.
• The market environment might change, making some products
or markets less profitable.
• Some products or business units simply age and die.
 93
Departments: Human Resources, Research and Development, Sales & Marketing,
Production, Finance & Purchase, Accounting, IT …

Planning Marketing: Partnering to Build

Customer Relationships
Partnering with Other Company Departments

The marketing department alone cannot create superior

customer value! Under the company-wide strategic plan,
marketers must work closely with other departments to
form an effective internal company value chain.

• Value chain is a series of departments that carry out

value creating activities to design, produce, market,
deliver, and support a firm’s products.
 94
Departments: Human Resources, Research and Development, Sales & Marketing,
Production, Finance & Purchase, Accounting, IT …

Porter’s Internal Value Chain

 95

Planning Marketing: Partnering to Build

Customer Relationships
Partnering with Others in the Marketing System

More companies today are partnering with other members

to improve the performance of the customer value
delivery network:

• Value delivery network is made up of the company,

suppliers, distributors, and ultimately customers who
partner with each other to improve performance of the
entire system.
 96

Marketing Strategy and the Marketing Mix

1.
 97

Marketing Strategy and the Marketing Mix

 98

Marketing Strategy and the Marketing Mix

2.
 99

Marketing Strategy and the Marketing Mix

3.
 100

Marketing Strategy and the Marketing Mix

To find the best marketing strategy and mix, the company engages in marketing
analysis, planning, implementation, and control. Through these activities, the company
watches and adapts to the actors and forces in the marketing environment!
 101

Marketing Strategy and the Marketing Mix

Customer Value-Driven Marketing Strategy

• Marketing strategy is the marketing logic by which the

company hopes to create customer value and achieve
profitable customer relationships.
 102
Consumers can be grouped and served in various ways based on geographic,
demographic, psychographic, and behavioral factors.

Marketing Strategy and the Marketing Mix

Customer Value-Driven Marketing Strategy

The market consists of many types of customers,

products, and needs. The marketer must determine which
segments offer the best opportunities:

• Market segmentation is the division of a market into

distinct groups of buyers who have different needs,
characteristics, or behaviors and who might require
separate products or marketing mixes.

• Market segment is a group of consumers who respond

in a similar way to a given set of marketing efforts.
 103

Marketing Strategy and the Marketing Mix

Customer Value-Driven Marketing Strategy

A company should target segments in which it can profitably generate
the greatest customer value and sustain it over time:

• Market targeting is the process of evaluating each market

segment’s attractiveness and selecting one or more segments to
enter.

• Market positioning is the arranging for a product to occupy a

clear, distinctive, and desirable place relative to competing products
in the minds of target consumers.

• Differentiation begins the positioning process.

 104

Marketing Strategy and the Marketing Mix

Customer Value-Driven Marketing Strategy

Positioning:
• The L’Oréal group serves major segments of the beauty
market, and within each segment it caters to many sub-
segments.
• L’Oréal targets the larger segments through its major
divisions; further within these major divisions, L’Oréal
markets various brands that cater to customers of
different ages, incomes, and lifestyles.
 105

Marketing Strategy and the Marketing Mix

After determining its overall marketing strategy, the

company is ready to begin planning the details of the
marketing mix:

Developing an Integrated Marketing Mix

• Marketing mix is the set of controllable, tactical

marketing tools – product, price, place, and promotion –
that the firm blends to produce the response it wants in
the target market (→ generate demand for the
products!).
 106
The 4Ps can be redefined to the 4Cs to make them more customer
centric!

Marketing Strategy and the Marketing Mix

Customer solution Customer cost

Communication Convenience
 107
The 4Ps can be redefined to the 4Cs to make them more customer
centric!

Marketing Strategy and the Marketing Mix

Customer solution Customer cost

Product Price

Communication Convenience
Promotion Place
 108
The company first develops company-wide strategic plans and then translates
them into marketing and other plans for each division, product, and brand.

Managing the Marketing Effort

Managing the marketing process requires the four

marketing management functions – analysis, planning,
implementation, and control.
 109
The company first develops company-wide strategic plans and then translates
them into marketing and other plans for each division, product, and brand.

Managing the Marketing Effort

Managing the marketing process requires the four

marketing management functions – analysis, planning,
implementation, and control.
 110
Through implementation, the company turns the plans into
actions.

Managing the Marketing Effort

Managing the marketing process requires the four

marketing management functions – analysis, planning,
implementation, and control.
 111
Control consists of measuring and evaluating the results of marketing activities and
taking corrective action where needed.

Managing the Marketing Effort

Managing the marketing process requires the four

marketing management functions – analysis, planning,
implementation, and control.
 112
Finally, marketing analysis provides information and evaluations needed for all the
other marketing activities.

Managing the Marketing Effort

Managing the marketing process requires the four

marketing management functions – analysis, planning,
implementation, and control.
 113

Managing the Marketing Effort

• Company should analyze its markets and marketing environment to find

attractive opportunities and identify environmental threats.
• It should analyze company strengths and weaknesses as well as current
and possible marketing actions to determine which opportunities it can best
pursue.
→ Goal: Match the company’s strengths to
attractive opportunities in the environment,
 114

Managing the Marketing Effort

 115
Marketing planning involves choosing marketing strategies that will help the company
attain its overall strategic objectives. A detailed marketing plan is needed for each
business, product, or brand!

Managing the Marketing Effort

Market Planning — Parts of a Marketing Plan

 116

Market Planning — Parts of a Marketing Plan

 117
Executive summary: Brief summary of the main goals and recommendations of the
plan for management review, helping top management find the plan’s major points
quickly.

Managing the Marketing Effort

Market Planning — Parts of a Marketing Plan

 118
Current marketing situation: Describes the target market and the company’s position
in it, including information about the market, product performance, competition (incl.
their market positions), and distribution (e.g recent sales trends).

Managing the Marketing Effort

Market Planning — Parts of a Marketing Plan

 119
Threats and opportunities that the product might face, helping management to
anticipate important positive or negative developments that might have an impact on
the firm and its strategies!

Managing the Marketing Effort

Market Planning — Parts of a Marketing Plan

 120
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!

Managing the Marketing Effort

Market Planning — Parts of a Marketing Plan

 121
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, positioning, and marketing expenditure levels.

Managing the Marketing Effort

Market Planning — Parts of a Marketing Plan

 122
Action programs: How will marketing strategies be turned into specific action
programs? (What will be done? When will it be done? Who will do it? How much will it
cost?)

Managing the Marketing Effort

Market Planning — Parts of a Marketing Plan

 123
Budgets: 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.

Managing the Marketing Effort

Market Planning — Parts of a Marketing Plan

 124
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.

Managing the Marketing Effort

Market Planning — Parts of a Marketing Plan

 125
A brilliant marketing strategy counts for little if the company fails to implement it
properly!

Managing the Marketing Effort

Marketing Implementation

• Turning marketing strategies and plans

into marketing
actions to accomplish strategic marketing objectives
• Addresses who, where, when, and how!
 126

Measuring and Managing Return on Marketing

Investment
Return on Marketing Investment (Marketing ROI)

• Net return from a marketing investment

divided by
the costs of the marketing investment

→ Measurement of the profits generated by investments

in marketing activities!
 127
Marketing ROI = Net return from a marketing investment / costs of the marketing
investment

Measuring and Managing Return on Marketing

Investment
 128
Marketing ROI = Net return from a marketing investment / costs of the marketing
investment

Measuring and Managing Return on Marketing

Investment
 129

Homework --- Chapter 2

Review questions:
1. State two possible strengths and two
possible weaknesses of Haier.

2. Explain how Haier might tackle one of

those weaknesses!

3. Distinguish between a cash cow and

a rising star in the Boston Matrix.

• Please read Chapter 3 (pp. 90-

121)!