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Chapter 2: Marketing Strategy Planning For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill The Marketing Management Process Whole-Company Strategic Management Planning Adjust Plans As Needed Control Marketing Plan(s) and Program Marketing Planning Implement Marketing Plan(s) and Program Exhibit 2-4 2-9 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Target Marketing vs. Mass Marketing TARGET MARKETING Marketing mix is tailored to fit specific target customer(s) MASS MARKETING Vaguely aims at "everyone" with the same marketing mix For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Marketing Strategy Planning The Marketing Mix C Exhibit 2-5 2-10 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill The Four Ps of the Marketing Mix Product Place C Price Promotion Exhibit 2-7 2-11 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Strategy Decision Areas Organized by the Four Ps Product Place Promotion Price Physical Goods Service Features Benefits Quality Level Accessories Installation Instructions Warranty Product Lines Packaging Branding Objectives Channel Type Market Exposure Kinds of Middlemen Kinds and Locations of Stores How to Handle Transporting and Storing Service Levels Recruiting Middlemen Managing Channels Objectives Promotion Blend Salespeople Kind Number Selection Training Motivation Advertising Targets Kinds of Ads Media Type Copy Thrust Who Prepares? Sales Promotion Publicity Objectives Flexibility Level over PLC Geographic Terms Discounts Allowances Exhibit 2-8 2-12 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill The Marketing Plan Marketing plan: a written statement of a marketing strategy and the time related details for carrying out the strategy. Spells out, in detail: What marketing mix is to be offered To what target market For how long What resources (costs) are needed at what rate What results are expected For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Marketing Program Marketing program: blends all of the firm's marketing plans into one "big" plan— which is an integrated part of the wholecompany strategic plan Program requires an effective "building up" process A good program must be based on good plans Each plan must be carefully developed Each plan is based on a marketing strategy For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Marketing Objectives Should Be in Writing Objectives must be clearly defined & quantitatively measured Measures should be taken at regular intervals Measures must be useful to managers Measures should be linked to rewards Measures should directly relate to tactical and strategic goals of the firm For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Profits, Revenues & Costs Marketing Concept – meet the needs of the target market at a profit (C1, pg 16). Profits = Total Revenues – Total Costs What are Revenues? What are Costs? For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Revenues Total Revenues = price x quantity sold Example: Price = $10 a unit. 50 Units sold Total Revenues = 50 x $10 = $500 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Revenues Most companies sell multiple products and revenues are summed across products sold Example: Company sells Product A & Product B Product A price = $10; B = $20 Units Sold A = 50; B = 100 What is the total revenue? For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Total Revenue ($10 x 50) + ($20 x 100) = $2,500 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Costs Total Costs = Fixed Costs + Variable Costs Fixed Costs = Costs that do not change over some time period or level of production Variable Costs = costs that change when units produced or sold changes For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Costs Example Movie Theater monthly rent = $4,000 Monthly Utilities = $1,000 Labor Costs = $3,000 if avg. number of people go to the movies = $2,000 if people going to the movies is 25% below average = $5,000 if people going to the movies is 50% greater than average What are fixed costs? Variable Costs? For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Movie Theater Costs Fixed Costs = $5,000 Variable Costs = $2,000; $3,000 or $5,000 depending on attendance For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Customer Equity & Differentiation Customer Equity = is the expected earnings stream (profitability) of a firm’s current and prospective customers over some period of time (pg 43). Differentiation = means that the marketing mix is distinct from and better than what is available from a competitor (pg 50) For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Only 3 Ways A Firm Increase Profits 1] Sell more units at the same price (if selling above costs) 2] Lower costs while maintaining price and quantity sold 3] Meet target market needs better than competitors and successfully charge a higher price For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Companies that are highly profitable May have higher or lower costs per unit than competitors May sell more or fewer units than competitors May have a higher or lower price than competitors We judge marketing success by profits – NOT costs, units sold, price or total revenues ALONE For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Competitive Advantage Competitive advantage: the firm has a marketing mix that the target market sees as better than a competitor's mix A better marketing mix offers target customers better customer value Note: customers who are not in the target market may not see the marketing mix as offering better value Requires that the firm: understand current competitors' offerings anticipate competitors' likely plans monitor effects of changes in competition REALLY understand the target customers' needs For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Marketing Strategy Planning Process Narrowing down to focused strategy with screening criteria Customers Company S. W. O. T. Segmentation & Targeting Product Place Target Market Differentiation & Positioning Price Promo Competitors External Market Environment Exhibit 3-1 3-3 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Types of Opportunities Four Basic Types of Opportunities Present Products Present Markets New Markets New Products Market Penetration Product Development Market Development Diversification Exhibit 3-2 3-4 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Examples of Different Types of Opportunities Market Penetration Arm & Hammer promotes new uses of its baking soda Market Development Marriott Hotels target families for weekend "getaways" to rent rooms filled by business travelers during the week Product Development Microsoft develops a new version of its Windows operating system to appeal to the people who bought an earlier version but now want more features Diversification RJR, the cigarette producer, adds baked goods to its product line to appeal to new customers For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Considering International Opportunities 3-5 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill