Topic 1: Theoretical realms of marketing and the marketing function

Question 1

What is marketing?

Answer 1

According to Kotler and Armstrong (2016), marketing is engaging customers and managing profitable customer relationships. The twofold goal of marketing is to attract new customers by promising superior value and to keep and grow current customers by delivering satisfaction. According to Kotler and Armstrong (2016), marketing is the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return.

Question 2

What is the marketing process?

Answer 2

This is a fivve-step model of the marketing process:

1. Understanding the marketplace and customer needs and wants.
2. Dresign a customer value-driven marketing strategy.
3. Constrct an integrated marketing program that delivers superior value.
4. Build profitable relationships and create customer delight.
5. Capture value from customers to create profits and customer equity.

P. T. Kotler and G. Armstrong, Principles of marketing (Pearson, 2016; 16th edition)

Question 3

What are the core customer and marketplace concepts?

Answer 3

1. Needs, wants and demands
2. Market offerings (products, services and experiences).
3. Value and satisfaction
4. Exchanges and relationships
5. Markets

Question 4

What are needs?

Answer 4

Human needs are states of felt deprivation. They include basic physical needs such as food, clothing, warmth, safety, social needs for belonging and affection, and individual needs for knowledge and self-expression.

Question 5

What are wants?

Answer 5

Wants are the form human needs take as they are shaped by culture and individual personality. Wants are shaped by one’s society and are described in terms of objects that will satisfy those needs. For example, an American needs food but wants a Big Mac, while a person in New Guinea needs food but wants taro.

Question 6

What are demands?

Answer 6

These are human wants that are backed by buying power. Given their wants and resources, people demand products and services with benefits that add up to the most value and satisfaction.

Question 7

What are market offerings?

Answer 7

These are a combination of products, services, information or experiences offered to a marketig to satisfy and need or a want. These are not limited to physical products as they can also include services.

More broadly, market offerings also include other entities such as persons, plaes, organizations, information and ideas.

Question 8

What is marketing myopia?

Answer 8

Marketing myopia is the mistake of paying more attention to the specific products a company offers than to the benefits and experiences produced by these products.

Smart marketers look beyond the attributes of the products and services they sell. By orchestrating several services and products, they create brand experiences for consumers.

Question 9

How does a customer get value and satisfaction?

Answer 9

Customers form expectations about the value and satisfaction that various market offerings will deliver and buy accordingly. Satisfied customers buy again and tell others about their good experiences. Dissatisfied customers often switch to competitors and disparage the product to others.

Marketers must be careful to set the right level of expectations. If they set expectations too low, they may satisfy those who buy but fail to attract enough buyers. If they set expectations too high, buyers will be disappointed. Customer value and customer satisfaction are key building blocks for developing and managing customer relationships.

Question 10

What is exchange?

Answer 10

Exchange is the act of obtaining a desired object from someone by offering something in return. Marketing consists of actions taken 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.

In the broadest sense, the marketer tries to bring about a response to some market offering. The response may be more than simply buying or trading products and services. A political candidate, for instance, wants votes; a church wants membership; an orchestra wants an audience; and a social action group wants idea acceptance.

Question 11

What is a market?

Answer 11

A market is the set of actual and potential buyers of a product or service. These buyers share a particular need or want that can be satisfied through exchange relationships.

Marketing means managing markets to bring about profitable customer relationships. However, creating these relationships takes work. Sellers must search for and engage buyers, identify their needs, design good market offerings, set prices for them, promote them, and store and deliver them. Activities such as consumer research, product development, communication, distribution, pricing, and service are core marketing activities.

Although we normally think of marketing as being carried out by sellers, buyers also carry out marketing. Consumers market when they search for products, interact with companies to obtain information, and make their purchases.

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?”

Question 12

What are the main elements in a marketing system?

Answer 12

Each party in the system adds value for the next level. The arrows represent relationships that must be developed and managed. Thus, a company’s success at engaging customers and building profitable relationships depends not only on its own actions but also on how well the entire system serves the needs of final consumers. Walmart cannot fulfill its promise of low prices unless its suppliers provide merchandise at low costs. And Ford cannot deliver a high-quality car-ownership experience unless its dealers provide outstanding sales and service.

Question 13

What is marketing management?

Answer 13

Marketing management is the art and science of choosing target markets and building profitable relationships with them.

The marketing manager’s aim is to find, engage, keep, and grow target customers by creating, delivering, and communicating superior customer value.

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

Question 14

How does a company decide whom it will serve?

Answer 14

The company does this by dividing the market into segments of customers (market segmentation) and selecting which segments it will go after (target marketing). Ultimately, marketing managers must decide which customers they want to target and on the level, timing, and nature of their demand. Simply put, marketing management is customer management and demand management.

Question 15

How does a company choose a value proposition?

Answer 15

The company must decide how it will serve targeted customers – how it will differentiate and position itself in the marketplace. A brand’s value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs. Such value propositions differentiate one brand from another. They answer the customer’s question, “Why should I buy your brand rather than a competitor’s?” Companies must design strong value propositions that give them the greatest advantage in their target markets.

Question 16

What are the five alternative concepts under which organizations design and carry out their marketing strategies?

Answer 16

1. Production concept
2. Product concept
3. Selling concept
4. Marketing concept
5. Societal Marketing concept

Question 17

What is the production concept?

Answer 17

This is the idea that consumers will favor products that are available and highly affordable; therefore, the organization should focus on improving production and distribution efficiency.

However, although useful in some situations, the production concept can lead to marketing myopia. Companies adopting this orientation run a major risk of focusing too narrowly on their own operations and losing sight of the real objective – satisfying customer needs and building customer relationships.

Question 18

What is the product concept?

Answer 18

This is the idea that consumers will favor products that offer the most quality, performance, and features; therefore, the organization should devote its energy to making continuous product improvements.

However, focusing only on the company’s products can also lead to marketing myopia.

Question 19

What is the selling concept?

Answer 19

This is the idea that 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. The aim often is to sell what the company makes rather than making what the market wants. It assumes that customers who are coaxed into buying the product will like it. Or, if they don’t like it, they will possibly forget their disappointment and buy it again later. These are usually poor assumptions.

Question 20

What is the marketing concept?

Answer 20

This is a philosophy in which achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do.

Under the marketing concept, 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.

Question 21

What is the societal marketing concept?

Answer 21

This is the idea that a company’s marketing decisions should consider consumers’ wants, the company’s requirements, consumers’ long-run interests, and society’s long-run interests.

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’s best for its consumers in the long run? The societal marketing concept holds that 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.

Even more broadly, many leading business and marketing thinkers are now preaching the concept of shared value, which recognizes that societal needs, not just economic needs, define markets.

Question 22

What should a company’s marketing strategy outline?

Answer 22

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.

Question 23

The major marketing mix tools are classified into four broad groups, called the four Ps of marketing. Name them.

Answer 23

Product (To deliver on its value proposition, the firm must first create a need-satisfying market offering)

Price (It must then decide how much it will charge for the offering)

Place (How it will make the offering available to target consumers)

Promotion (It must engage target consumers, communicate about the offering, and persuade consumers of the offer’s merits)

Question 24

What is customer relationship management?

Answer 24

This is 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.

Question 25

What is customer-perceived value?

Answer 25

This is the customer’s evaluation of the difference between all the benefits and all the costs of a marketing offer relative to those of competing offers.

Question 26

What is customer satisfaction?

Answer 26

This is the extent to which a product’s perceived performance matches a buyer’s expectations. Outstanding marketing companies go out of their way to keep important customers satisfied. Most studies show that higher levels of customer satisfaction lead to greater customer loyalty, which in turn results in better company performance. Smart companies aim to delight customers by promising only what they can deliver and then delivering more than they promise. Delighted customers not only make repeat purchases but also become willing marketing partners and “customer evangelists” who spread the word about their good experiences to others.

Question 27

What are some customer relationship levels and tools?

Answer 27

• A company with many low-margin customers may seek to develop basic relationships with them.
• In markets with few customers and high margins, sellers want to create full partnerships with key customers.
• Beyond offering consistently high value and satisfaction, marketers can use specific marketing tools to develop stronger bonds with customers. For example, many companies offer frequency marketing programs that reward customers who buy frequently or in large amounts.
• Other companies sponsor club marketing programs that offer members special benefits and create member communities.

Question 28

What is customer-engagement marketing?

Answer 28

This is making the brand a meaningful part of consumers’ conversations and lives by fostering direct and continuous customer involvement in shaping brand conversations, experiences, and community.

Today’s consumers are better informed, more connected, and more empowered than ever before. Newly empowered consumers have more information about brands, and they have a wealth of digital platforms for airing and sharing their brand views with others. Thus, marketers are now embracing not only customer relationship management, but also customer-managed relationships, in which customers connect with companies and with each other to help forge their own brand experiences.

Greater consumer empowerment means that companies can no longer rely on marketing by intrusion. Instead, they must practice marketing by attraction – creating market offerings and messages that engage consumers rather than interrupt them. Hence, most marketers now augment their mass-media marketing efforts with a rich mix of online, mobile, and social media marketing that promotes brand–consumer engagement and conversation.

Question 29

What is consumer-generated marketing?

Answer 29

These are brand exchanges created by consumers themselves – both invited and uninvited – by which consumers are playing an increasing role in shaping their own brand experiences and those of other consumers.

Question 30

Companies can classify customers according to their potential profitability and manage their relationships with them accordingly. What are the four relationship groups?

Answer 30

1. Butterflies: potentially profitable but not loyal. There is a good fit between the company’s offerings and their needs. However, a company can enjoy them for only a short while and then they’re gone. Efforts to convert butterflies into loyal customers are rarely successful. Instead, the company should enjoy the butterflies for the moment. It should create satisfying and profitable transactions with them, capturing as much of their business as possible in the short time during which they buy from the company. Then, it should move on and cease investing in them until the next time around.
2. True friends: both profitable and loyal. There is a strong fit between their needs and the company’s offerings. The firm wants to make continuous relationship investments to delight these customers and nurture, retain, and grow them. It wants to turn true friends into true believers, who come back regularly and tell others about their good experiences with the company.
3. Barnacles: highly loyal but not very profitable. There is a limited fit between their needs and the company’s offerings. Barnacles are perhaps the most problematic customers. The company might be able to improve their profitability by selling them more, raising their fees, or reducing service to them. However, if they cannot be made profitable, they should be “fired.”
4. Strangers: not profitable or loyal.

Question 31

What is partner relationship management?

Answer 31

This involves working closely with partners in other company departments and outside the company to jointly bring greater value to customers.

Question 32

What is customer lifetime value?

Answer 32

This is the value of the entire stream of purchases a customer makes over a lifetime of patronage. Good customer relationship management creates customer satisfaction. In turn, satisfied customers remain loyal and talk favorably to others about the company and its products.

Question 33

What is share of customer?

Answer 33

This is the portion of the customer’s purchasing that 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.

Question 34

What is customer equity?

Answer 34

This is the total combined customer lifetime values of all of the company’s current and potential customers. The ultimate aim of customer relationship management is to produce high customer equity. As such, it’s a measure of the future value of the company’s customer base. Clearly, the more loyal the firm’s profitable customers, the higher its customer equity. Customer equity may be a better measure of a firm’s performance than current sales or market share. Whereas sales and market share reflect the past, customer equity suggests the future.

Question 35

What is digital and social media marketing?

Answer 35

This is the use of digital marketing tools such as Web sites, social media, mobile apps and ads, online video, e-mail, and blogs to engage consumers anywhere, at any time, via their digital devices.

Question 36

What are sustainable marketing practices?

Answer 36

These are ways that companies seek to profit by serving immediate needs and the best long-run interests of their customers and communities.

Caring capitalism: setting themselves apart by being civic minded and responsible. They build social and environmental responsibility into their company value and mission statements.

Question 37

In summary, what is marketing?

Answer 37

Marketing is the process of engaging customers and building profitable customer relationships by creating value for customers and capturing value in return.

The first four steps in the marketing process create value for customers. In the final step, the company reaps the rewards of its strong customer relationships by capturing value from customers. Delivering superior customer value creates highly satisfied customers who will buy more and buy again. This helps the company capture customer lifetime value and greater share of customer. The result is increased long-term customer equity for the firm.

Finally, in the face of today’s changing marketing landscape, companies must take into account three additional factors. In building customer and partner relationships, they must harness marketing technologies in the new digital age, take advantage of global opportunities, and ensure that they act sustainably in an environmentally and socially responsible way.

Question 38

Define marketing and outline the steps in the marketing process.

Answer 38

Marketing is the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return. The marketing process involves five steps. The first four steps create value for customers. First, marketers need to understand the marketplace and customer needs and wants. Next, marketers design a customer-driven marketing strategy with the goal of getting, keeping, and growing target customers. In the third step, marketers construct a marketing program that actually delivers superior value. All of these steps form the basis for the fourth step, building profitable customer relationships and creating customer delight. In the final step, the company reaps the rewards of strong customer relationships by capturing value from customers.

Question 39

Explain the importance of understanding the marketplace and customers and identify the five core marketplace concepts.

Answer 39

Outstanding marketing companies go to great lengths to learn about and understand their customers’ needs, wants, and demands. This understanding helps them to design want-satisfying market offerings and build value-laden customer relationships by which they can capture customer lifetime value and greater share of customer. The result is increased long-term customer equity for the firm.

The core marketplace concepts are needs, wants, and demands; market offerings (products, services, and experiences); value and satisfaction; exchange and relationships; and markets. Wants are the form taken by human needs when shaped by culture and individual personality. When backed by buying power, wants become demands. Companies address needs by putting forth a value proposition, a set of benefits that they promise to consumers to satisfy their needs. The value proposition is fulfilled through a market offering, which delivers customer value and satisfaction, resulting in long-term exchange relationships with customers.

Question 40

Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide marketing strategy.

Answer 40

To design a winning marketing strategy, the company must first decide whom it will serve. It does this by dividing the market into segments of customers (market segmentation) and selecting which segments it will cultivate (target marketing). Next, the company must decide how it will serve targeted customers (how it will differentiate and position itself in the marketplace).

Marketing management can adopt one of five competing market orientations. The production concept holds that management’s task is to improve production efficiency and bring down prices. The product concept holds that consumers favor products that offer the most in quality, performance, and innovative features; thus, little promotional effort is required. The selling concept holds that consumers will not buy enough of an organization’s products unless it undertakes a large-scale selling and promotion effort. The marketing concept holds that achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors do. The societal marketing concept holds that generating customer satisfaction and long-run societal well-being through sustainable marketing strategies is key to both achieving the company’s goals and fulfilling its responsibilities.

Question 41

Discuss customer relationship management and identify strategies for creating value for customers and capturing value from customers in return.

Answer 41

Broadly defined, customer relationship management is the process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. Customer-engagement marketing aims to make a brand a meaningful part of consumers’ conversations and lives through direct and continuous customer involvement in shaping brand conversations, experiences, and community. The aim of customer relationship management and customer engagement is to produce high customer equity, the total combined customer lifetime values of all of the company’s customers. The key to building lasting relationships is the creation of superior customer value and satisfaction.

Companies want to not only acquire profitable customers but also build relationships that will keep them and grow “share of customer.” Different types of customers require different customer relationship management strategies. The marketer’s aim is to build the right relationships with the right customers. In return for creating value for targeted customers, the company captures value from customers in the form of profits and customer equity.

In building customer relationships, good marketers realize that they cannot go it alone. They must work closely with marketing partners inside and outside the company. In addition to being good at customer relationship management, they must also be good at partner relationship management.

Question 42

Describe the major trends and forces that are changing the marketing landscape in this age of relationships.

Answer 42

Dramatic changes are occurring in the marketing arena. The digital age has created exciting new ways to learn about and relate to individual customers. As a result, advances in digital and social media have taken the marketing world by storm. Online, mobile, and social media marketing offer exciting new opportunities to target customers more selectively and engage them more deeply. Although the new digital and social media offer huge potential, most marketers are still learning how to use them effectively. The key is to blend the new digital approaches with traditional marketing to create a smoothly integrated marketing strategy and mix.

The Great Recession hit American consumers hard, causing them to rethink their buying priorities and bring their consumption back in line with their incomes. Even as the post-recession economy has strengthened, Americans are now showing an enthusiasm for frugality not seen in decades. Sensible consumption has made a comeback, and it appears to be here to stay. More than ever, marketers must now emphasize the value in their value propositions. The challenge is to balance a brand’s value proposition with current times while also enhancing its long-term equity.

In recent years, marketing has become a major part of the strategies for many not-for-profit organizations, such as colleges, hospitals, museums, zoos, symphony orchestras, foundations, and even churches. Also, in an increasingly smaller world, many marketers are now connected globally with their customers and marketing partners. Today, almost every company, large or small, is touched in some way by global competition. Finally, today’s marketers are also reexamining their ethical and societal responsibilities. Marketers are being called on to take greater responsibility for the social and environmental impacts of their actions.

Question 43

What is strategic planning?

Answer 43

This is the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities.

Question 44

What is a mission statement?

Answer 44

A mission statement is a statement of the organization’s purpose – what it wants to accomplish in the larger environment. Mission statements should be market oriented and defined in terms of satisfying basic customer needs. Mission statements should be meaningful and specific yet motivating. It should focus on customers and the customer experience the company seeks to create.

Question 45

What is a business portfolio?

Answer 45

This is the collection of businesses and products that make up the company.

Question 46

What are the two steps in business portfolio planning?

Answer 46

First, the company must analyze its current business portfolio and determine which businesses should receive more, less, or no investment. Second, it must shape the future portfolio by developing strategies for growth and downsizing.

Question 47

What is portfolio analysis?

Answer 47

This is the process by which management evaluates the products and businesses that make up the company.

Management’s first step is to identify the key businesses that make up the company, called strategic business units (SBUs). An SBU can be a company division, a product line within a division, or sometimes a single product or brand. The company next assesses the attractiveness of its various SBUs and decides how much support each deserves. When designing a business portfolio, it’s a good idea to add and support products and businesses that fit closely with the firm’s core philosophy and competencies.

The purpose of strategic planning is to find ways in which the company can best use its strengths to take advantage of attractive opportunities in the environment. For this reason, most standard portfolio analysis methods evaluate SBUs on two important dimensions: the attractiveness of the SBU’s market or industry and the strength of the SBU’s position in that market or industry.

Question 48

What is the Boston Consulting Group (BCG) approach of portfolio plannng?

Answer 48

Using the BCG approach, a company classifies all its SBUs according to the growth-share matrix. On the vertical axis, market growth rate provides a measure of market attractiveness. On the horizontal axis, relative market share serves as a measure of company strength in the market.

The growth-share matrix defines four types of SBUs:

1. Stars. Stars are high-growth, high-share businesses or products. They often need heavy investments to finance their rapid growth. Eventually their growth will slow down, and they will turn into cash cows.
2. Cash cows. Cash cows are low-growth, high-share businesses or products. These established and successful SBUs need less investment to hold their market share. Thus, they produce a lot of the cash that the company uses to pay its bills and support other SBUs that need investment.
3. Question marks. Question marks are low-share business units in high-growth markets. They require a lot of cash to hold their share, let alone increase it. Management has to think hard about which question marks it should try to build into stars and which should be phased out.
4. Dogs. Dogs are low-growth, low-share businesses and products. They may generate enough cash to maintain themselves but do not promise to be large sources of cash.

The circles in the growth-share matrix represents the company’s SBUs. The areas of the circles are proportional to the SBU’s dollar sales.

Once it has classified its SBUs, the company must determine what role each will play in the future. It can pursue one of four strategies for each SBU. It can invest more in the business unit to build its share. Or it can invest just enough to hold the SBU’s share at the current level. It can harvest the SBU, milking its short-term cash flow regardless of the long-term effect. Finally, it can divest the SBU by selling it or phasing it out and using the resources elsewhere.

Question 49

What is a growth-share matrix?

Answer 49

This is a portfolio-planning method that evaluates a company’s SBUs in terms of market growth rate and relative market share.

Question 50

What are some problems faced with matrix approaches?

Answer 50

They can be difficult, time consuming, and costly to implement. Management may find it difficult to define SBUs and measure market share and growth. In addition, these approaches focus on classifying current businesses but provide little advice for future planning. Because of such problems, many companies have dropped formal matrix methods in favor of more customized approaches that better suit their specific situations. Moreover, unlike former strategic planning efforts that rested mostly in the hands of senior managers at company headquarters, today’s strategic planning has been decentralized. Increasingly, companies are placing responsibility for strategic planning in the hands of cross-functional teams of divisional managers who are close to their markets.

Question 51

What is a product/market expansion grid?

Answer 51

This is a portfolio-planning tool for identifying company growth opportunities through market penetration, market development, product development, or diversification.

Question 52

What are the components of the product/market expansion grid?

Answer 52

1. Market penetration
2. Market development
3. Product development
4. Diversification

Question 53

What is market penetration?

Answer 53

This is company growth that comes about by increasing sales of current products to current market segments without changing the product.

Question 54

What is market development?

Answer 54

This is company growth that comes about by identifying and developing new market segments for current company products.

Question 55

What is product development?

Answer 55

This company growth that comes about by offering modified or new products to current market segments.

Question 56

What is diversification?

Answer 56

This is company growth that comes about through starting up or acquiring businesses outside the company’s current products and markets.

Question 57

What are some reasons for downsizing?

Answer 57

• 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. In difficult economic times, many firms prune out weaker, less-profitable products and markets to focus their more limited resources on the strongest ones.
• Finally, some products or business units simply age and die.

Question 58

How does marketing play a key role in the company’s strategic planning?

Answer 58

1. First, marketing provides a guiding philosophy – the marketing concept – that suggests the company strategy should revolve around creating customer value and building profitable relationships with important consumer groups.
2. Second, marketing provides inputs to strategic planners by helping to identify attractive market opportunities and assessing the firm’s potential to take advantage of them.
3. Finally, within individual business units, marketing designs strategies for reaching the unit’s objectives. Once the unit’s objectives are set, marketing’s task is to help carry them out profitably.

Question 59

What is a value chain in marketing?

Answer 59

These are the series of internal departments that carry out value-creating activities to design, produce, market, deliver, and support a firm’s products.

Question 60

What is the value delivery network?

Answer 60

This is the network made up of the company, its suppliers, its distributors, and, ultimately, its customers who partner with each other to improve the performance of the entire system.

Question 61

What is marketing’s role in the strategic plan?

Answer 61

Question 62

What is marketing strategy?

Answer 62

This is the marketing logic by which the company hopes to create customer value and achieve profitable customer relationships. The company decides which customers it will serve (segmentation and targeting) and how (differentiation and positioning). It identifies the total market and then divides it into smaller segments, selects the most promising segments, and focuses on serving and satisfying the customers in these segments.

Question 63

What are the components of the integrated marketing mix designed by the comapny, guided by the marketing strategy?

Answer 63

These are product, price, place, and promotion (the four Ps). 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.

Question 64

What are the components of the customer value-driven marketing strategy?

Answer 64

1. Market segmentation
2. Market targeting
3. Differentiation
4. Positioning

Question 65

What is market segmentation?

Answer 65

This is the process of dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors, and who might require separate products or marketing programs.

Question 66

What is a market segment?

Answer 66

A market segment is a group of consumers who respond in a similar way to a given set of marketing efforts.

Question 67

Wat is market targeting?

Answer 67

This is the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.

Question 68

What is positioning?

Answer 68

This is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. Marketers plan positions that distinguish their products from competing brands and give them the greatest advantage in their target markets. In positioning its brand, a company first identifies possible customer value differences that provide competitive advantages on which to build the position. A company can offer greater customer value by either charging lower prices than competitors or offering more benefits to justify higher prices. But if the company promises greater value, it must then deliver that greater value.

Question 69

What is differentiation?

Answer 69

This is the process of actually

Question 70

What is marketing mix?

Answer 70

This is the set of tactical tools that the firm blends to produce the response it wants in the target market. These tools are:

1. Product (the goods-and-services combination the company offers to the target market)
2. Price (the amount of money customers must pay to obtain the product)
3. Place (includes company activities that make the product available to target consumers)
4. Promotion (activities that communicate the merits of the product and persuade target customers to buy it)

Question 71

The 4Ps concept has been described as taking the seller’s point of view of the market. What are the four Cs that take the buyer’s view point?

Answer 71

1. Product —-> Customer solution
2. Price —-> Customer cost
3. Place —-> Convenience
4. Promotion —-> Communication

Question 72

Managing the marketing process requires the five marketing management functions. Name them.

Answer 72

1. Analysis
2. Planning
3. Implementation
4. Organization
5. Control

Question 73

Managing the marketing function begins with a complete analysis of the company’s situation. The marketer should conduct a SWOT analysis. What is a SWOT analysis?

Answer 73

This is an overall evaluation of the company’s strengths (S), weaknesses (W), opportunities (O), and threats (T). The company should analyze its markets and marketing environment to find attractive opportunities and identify threats. It should analyze company strengths and weaknesses as well as current and possible marketing actions to determine which opportunities it can best pursue. The goal is to match the company’s strengths to attractive opportunities in the environment, while simultaneously eliminating or overcoming the weaknesses and minimizing the threats. Marketing analysis provides inputs to each of the other marketing management functions.

Question 74

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. What does a marketing plan look like?

Answer 74

A marketing strategy consists of specific strategies for target markets, positioning, the marketing mix, and marketing expenditure levels. It outlines how the company intends to engage target customers and create value in order to capture value in return. In this section, the planner explains how each strategy responds to the threats, opportunities, and critical issues spelled out earlier in the plan. Additional sections of the marketing plan lay out an action program for implementing the marketing strategy along with the details of a supporting marketing budget. The last section outlines the controls that will be used to monitor progress, measure return on marketing investment, and take corrective action.

Question 75

What is marketing implementation?

Answer 75

This is the process that turns marketing plans into marketing actions to accomplish strategic marketing objectives. Whereas marketing planning addresses the what and why of marketing activities, implementation addresses the who, where, when, and how.

Question 76

Describe how modern marketing departments can be arranged.

Answer 76

1. The most common form of marketing organization is the functional organization. Under this organization, different marketing activities are headed by a functional specialist – a sales manager, an advertising manager, a marketing research manager, a customer service manager, or a new product manager.
2. A company that sells across the country or internationally often uses a geographic organization. Its sales and marketing people are assigned to specific countries, regions, and districts. Geographic organization allows salespeople to settle into a territory, get to know their customers, and work with a minimum of travel time and cost.
3. Companies with many very different products or brands often create a product management organization. Using this approach, a product manager develops and implements a complete strategy and marketing program for a specific product or brand.
4. For companies that sell one product line to many different types of markets and customers who have different needs and preferences, a market or customer management organization might be best. A market management organization is similar to the product management organization. Market managers are responsible for developing marketing strategies and plans for their specific markets or customers. This system’s main advantage is that the company is organized around the needs of specific customer segments. Many companies develop special organizations to manage their relationships with large customers.
5. Large companies that produce many different products flowing into many different geographic and customer markets usually employ some combination of the functional, geographic, product, and market organization forms.
6. More and more, companies are shifting their brand management focus toward customer management – moving away from managing only product or brand profitability and toward managing customer profitability and customer equity. They think of themselves not as managing portfolios of brands but as managing portfolios of customers. And rather than managing the fortunes of a brand, they see themselves as managing customer-brand engagement, experiences, and relationships.

Question 77

What is marketing control?

Answer 77

This is the process of measuring and evaluating the results of marketing strategies and plans and taking corrective action to ensure that the objectives are achieved. Marketing control involves four steps.

1. Management first sets specific marketing goals.
2. It then measures its performance in the marketplace
3. It then evaluates the causes of any differences between expected and actual performance.
4. Finally, management takes corrective action to close the gaps between goals and performance. This may require changing the action programs or even changing the goals.

• Operating control* involves checking ongoing performance against the annual plan and taking corrective action when necessary. Its purpose is to ensure that the company achieves the sales, profits, and other goals set out in its annual plan. It also involves determining the profitability of different products, territories, markets, and channels.
• Strategic control* involves looking at whether the company’s basic strategies are well matched to its opportunities. Marketing strategies and programs can quickly become outdated, and each company should periodically reassess its overall approach to the marketplace.

Question 78

What is Marketing Return on Investment (Marketing ROI)?

Answer 78

This is the net return from a marketing investment divided by the costs of the marketing investment. Marketing ROI can be difficult to measure. In measuring financial ROI, both the R and the I are uniformly measured in dollars. A company can assess marketing ROI in terms of standard marketing performance measures, such as brand awareness, sales, or market share. Many companies are assembling such measures into marketing dashboards – meaningful sets of marketing performance measures in a single display used to monitor strategic marketing performance. The marketing dashboard gives marketers the detailed measures they need to assess and adjust their marketing strategies.

Increasingly, however, beyond standard performance measures, marketers are using customer-centered measures of marketing impact, such as customer acquisition, customer engagement, customer retention, customer lifetime value, and customer equity. These measures capture not only current marketing performance but also future performance resulting from stronger customer relationships. Marketing investments result in improved customer value, engagement, and satisfaction, which in turn increases customer attraction and retention. This increases individual customer lifetime values and the firm’s overall customer equity. Increased customer equity, in relation to the cost of the marketing investments, determines return on marketing investment.

Question 79

Explain company-wide strategic planning and its four steps.

Answer 79

Strategic planning sets the stage for the rest of the company’s planning. Marketing contributes to strategic planning, and the overall plan defines marketing’s role in the company.

Strategic planning involves developing a strategy for long-run survival and growth. It consists of four steps: (1) defining the company’s mission, (2) setting objectives and goals, (3) designing a business portfolio, and (4) developing functional plans. The company’s mission should be market oriented, realistic, specific, motivating, and consistent with the market environment. The mission is then transformed into detailed supporting goals and objectives, which in turn guide decisions about the business portfolio. Then each business and product unit must develop detailed marketing plans in line with the company-wide plan.

Question 80

Discuss how to design business portfolios and develop growth strategies.

Answer 80

Guided by the company’s mission statement and objectives, management plans its business portfolio, or the collection of businesses and products that make up the company. The firm wants to produce a business portfolio that best fits its strengths and weaknesses to opportunities in the environment. To do this, it must analyze and adjust its current business portfolio and develop growth and downsizing strategies for adjusting the future portfolio. The company might use a formal portfolio-planning method. But many companies are now designing more-customized portfolio-planning approaches that better suit their unique situations.

Question 81

Explain marketing’s role in strategic planning and how marketing works with its partners to create and deliver customer value.

Answer 81

Under the strategic plan, the major functional departments – marketing, finance, accounting, purchasing, operations, information systems, human resources, and others – must work together to accomplish strategic objectives. Marketing plays a key role in the company’s strategic planning by providing a marketing concept philosophy and inputs regarding attractive market opportunities. Within individual business units, marketing designs strategies for reaching the unit’s objectives and helps to carry them out profitably.

Marketers alone cannot produce superior value for customers. Marketers must practice partner relationship management, working closely with partners in other departments to form an effective value chain that serves the customer. And they must also partner effectively with other companies in the marketing system to form a competitively superior value delivery network.

Question 82

Describe the elements of a customer value-driven marketing strategy and mix and the forces that influence it.

Answer 82

Customer value and relationships are at the center of marketing strategy and programs. Through market segmentation, targeting, differentiation, and positioning, the company divides the total market into smaller segments, selects segments it can best serve, and decides how it wants to bring value to target consumers in the selected segments. It then designs an integrated marketing mix to produce the response it wants in the target market. The marketing mix consists of product, price, place, and promotion decisions (the four Ps).

Question 83

List the marketing management functions, including the elements of a marketing plan, and discuss the importance of measuring and managing marketing return on investment.

Answer 83

To find the best strategy and mix and to put them into action, the company engages in marketing analysis, planning, implementation, and control. The main components of a marketing plan are the executive summary, the current marketing situation, threats and opportunities, objectives and issues, marketing strategies, action programs, budgets, and controls. Planning good strategies is often easier than carrying them out. To be successful, companies must also be effective at implementation – turning marketing strategies into marketing actions.

Marketing departments can be organized in one way or a combination of ways: functional marketing organization, geographic organization, product management organization, or market management organization. In this age of customer relationships, more and more companies are now changing their organizational focus from product or territory management to customer relationship management. Marketing organizations carry out marketing control, both operating control and strategic control.

More than ever, marketing accountability is the top marketing concern. Marketing managers must ensure that their marketing dollars are being well spent. In a tighter economy, today’s marketers face growing pressures to show that they are adding value in line with their costs. In response, marketers are developing better measures of marketing return on investment. Increasingly, they are using customer-centered measures of marketing impact as a key input into their strategic decision making.