Principles of Marketing: Chapter 2 Notes
Principles of Marketing: Chapter 2 Notes MKT 241N
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This 5 page Class Notes was uploaded by Lindsay Fialli on Tuesday October 4, 2016. The Class Notes belongs to MKT 241N at Salem State University taught by Timothy Goehlert in Fall 2016. Since its upload, it has received 7 views. For similar materials see Principles of Marketing in Business at Salem State University.
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Date Created: 10/04/16
Chapter 2: Developing Marketing Strategy and a Marketing Plan Marketing Strategy: identifies a firm's target market(s), a related marketing mix (its four Ps), and the bases on which the firm plans to build a sustainable competitive advantage Sustainable Competitive Advantage: an advantage over the competition that is not easily copied and can be maintained over a long period of time o Acts like a wall the firm has built around its position in a market Outside competitors can't contact marketing target market within the "wall" o Advantages will erode over time; not permanent Macro (overreaching) Strategies: focus on aspects of the marketing mix to create and deliver value and to develop sustainable competitive advantages o Customer Excellence: achieved when a firm develops value- based strategies for retaining loyal customers and provides outstanding customer service Customers are reluctant to patronize competitive firms Viewing customers with a lifetime value perspective, rather than on a transaction-by-transaction basis, is key to modern customer retention programs Build customer loyalty by providing target market with something unique Create an emotional attachment through loyalty programs Use purchase information to develop profiles Firms that offer good customer service must instill its importance in their employees over a long period of time so that it becomes part of the organizational culture o Operational Excellence: achieve a sustainable competitive advantage, through their efficient operations, excellent supply chain management, and strong relationships with their supplier Ensure good value to customers If their prices aren't lower than their competitors', they attract them away by offering even better service, merchandise assortments, or visual presentations Vendor relations must be developed over the long-term and generally cannot be easily offset by a competitor Firms with strong relationships may gain exclusive rights to: Sell merchandise in a particular region Obtain special terms of purchase that are not available to competitors Receive popular merchandise that may be in short supply o Product Excellence: to achieve a sustainable competitive advantage by providing products with high perceived value and effective branding and positioning Investing in their brand Position their product or service using a clear, distinctive brand image Constantly reinforcing that image through their merchandise, service, and promotion o Locational Excellence: having a good physical location and Internet presence Important for retailers and service providers Sustainable because it is not easily duplicated In most cases, a single strategy is not sufficient Marketing Plan: a written document composed of an analysis of the current marketing situation, opportunities and threats for the firm, marketing objectives and strategy specified in terms of the four Ps, action programs, and projected or pro-forma income statements o Major phases are planning, implementation, and control o Provides a reference point for evaluating whether or not the firm has met its objectives Steps of Marketing Plan 1 Planning Phase: defines the mission and/or vision of the business 2 Implementation Phase: identify and evaluate different opportunities 3 STP- process of segmentation, targeting, and positioning 4 Implement the marketing mix using the four Ps 5 Control Phase: entails evaluating the performance of the marketing strategy using marketing metrics and taking any necessary corrective steps Don't always need to go through the whole process Mission Statement: a broad description of a firm's objectives and the scope of activities it plans to undertake o Says what kind of business it is and what it needs to do to accomplish its goals and objectives Situation Analysis: uses SWOT analysis to assess internal and external environments o Also assesses opportunities and uncertainties of the marketplace due to changes in cultural, demographic, social, technological, economic, and political forces (CDSTEP) With this information, firms can anticipate and interpret change so that they can allocate appropriate resources o Strengths: positive internal attributes of the firm o Weaknesses: negative internal attributes of the firm o Opportunities: positive aspects of the external environment o Threats: negative aspects of the company's external environment STP Segmentation, Targeting, and Positioning (STP): process used to identify and evaluate opportunities for increasing sales and profit Market Segmentation: the process of dividing the market into groups of customers with different needs, wants, or characteristics- who therefore might appreciate products or services geared toward them Market Segment: a group consisting of customers who respond similarly to a firm's marketing efforts- with how the market satisfies everyone's needs Target Marketing (targeting): the process of evaluating the attractiveness of various segments and then deciding which to pursue as a market Market Positioning: the process of defining the marketing mix variables so that the target customers have a clear, distinctive, desirable understanding of what product does or represents in comparison with the competing products o A firm must then evaluate each of its strategic opportunities Firms attempt to develop products and services that customers perceive as valuable enough to buy Pricing is the only activity that actually brings in money and therefore influences revenue o The firm needs a clear focus of what products to sell, where to buy them, and what methods are used to sell them Firm must be able to make the product or service readily accessible when and where the customer wants it Integrated Marketing Communications (IMC): the promotion of the four Ps o Include advertising, personal selling, sales promotion, public relations, direct marketing, and online marketing using social media o Provides clarity, consistency, and maximum communicative impact Value Proposition: the unique value that a product or service provides to its customers and how it is better than and different from those of competitors Metric: a measuring system that quantifies a trend, dynamic, or characteristic o Used to explain why things happen and project the future o Tells firm why it didn't or did achieve performance goals o Enables firms to make adjustments At each level of an organization, the business unit and its manager should be held accountable only for revenue, expenses, and profits they can control o Expenses that affect multiple levels shouldn't be assigned to lower levels Performance evaluations are used to pinpoint problems areas The manager should be held accountable only in the case of the inadequate sales force job or setting inappropriate forecasts Compare a firm's performance over time or to competing firms using sales and profits o Or view firms products or services as a portfolio An attempt to maximize one metric might lower another o Must be aware of how actions affect different performance metrics Assess performance through revenues, sales, or profits The metrics used to evaluate a firm vary depending on the level of organization at which the decision is made and the resources the manager controls Portfolio Analysis: evaluating the firm's various products and businesses and allocating resources according to which products are expected to make the most profit Strategic Business Unit (SBU): a division of the firm itself that can be managed and operated somewhat independently from other divisions and may have a different mission or objectives o Where portfolio analysis is performed Product Line: a group of products that consumers may use together or perceive as similar in some way Market Share: the percentage of a market accounted for by a specific entity and is used to establish the product's strength in a particular market Relative Market Share: a product's relative strength compared with that of the largest firm in the industry Market Growth Rate: the annual rate of growth of the specific market in which the product competes o How attractive a particular market is Relative Market Share X Market Growth Rate High Low Stars Question Marks Cash Dogs Cows Stars: occur in high-growth market and are high market share products o Often require heavy resource investments o As market growth slows will become cash cows Cash Cows: low growth markets but high market share products o Already receive heavy investments to develop high market shares o Have excess resources that can be spun off to products that need it Question Marks: high growth rate market but low market shares o Require significant resources to maintain or increase their market shares o Managers must decide whether to infuse with resources generated by cash cows or withdraw resources and eventually phase out the product Dogs: low growth markets and low market shares o Not destined for "stardom" o Should be phased out unless need to boost sales of another product Difficult to implement in practice Difficult to measure both relative market share and industry growth Marketing Strategies Market Penetration Strategy: employs the existing marketing mix and focuses the firm's effort on existing customers o Requires greater marketing efforts, like increased advertising o Retaining customers we already have o Existing customers and existing product Market Development Strategy: employs the existing marketing offering to reach new market segments, whether domestic or international o International expansion is generally riskier than domestic expansion Firms must be deal with differences in government regulations, cultural traditions, supply chains, and language o Many firms enjoy competitive advantage in global markets o New customers and existing product Product Development Strategy: offers a new product or service to a firm's current target market o Existing customer and new product Diversification Strategy: introduces a new product or service to a market segment that currently is not served o New customer and new product Related Diversification: the current target market or marketing mix shares something in common with the new opportunity o Firm might be able to purchase from existing vendors, use the same distribution or management information system, or advertise to similar to their current customers Unrelated Diversification: the new business lacks any common elements with the present business o Do not capitalize on core strengths associated with markets or with products o Can be risky
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