Scope of Strategic Marketing Essay Example For Students

Scope of Strategic Marketing Essay Chapter 1 Scope of strategic marketing Marketing is a philosophy that leads to the process by which organizations, groups and individuals obtain what they need and want by identifying value, providing it, communicating it and delivering it to others. The core concepts of marketing are customers’ needs, wants and values; products, exchange, communications and relationships. Marketing is strategically concerned with the direction and scope of the long-term activities performed by the organization to obtain a competitive advantage. The organization applies its resources within a changing environment to satisfy customer needs while meeting stakeholder expectations. Implied in this view of strategic marketing is the requirement to develop a strategy to cope with competitors, identify market opportunities, develop and commercialize new products and services, allocate resources among marketing activities and design an appropriate organizational structure to ensure the performance desired is achieved. There is no unique strategy that succeeds for all organizations in all situations. In thinking strategically about marketing many factors must be considered: the extent of product diversity and geographic coverage in the organization; the number of market segments served, marketing channels used, the role of branding, the level of marketing effort, and the role of quality. It is also necessary to consider the organization’s approach to new product development, in particular, its position as a technology leader or follower, the extent of innovation, the organization’s cost position and pricing policy, and its relationship to customers, competitors, suppliers and partners. The challenge of strategic marketing is, therefore, to manage marketing complexity, customer and stakeholder expectations and to reconcile the in? uences of a changing environment in the context of a set of resource capabilities. It is also necessary to create strategic opportunities and to manage the concomitant changes required within the organization. In this world of marketing, organizations seek to maximize returns to shareholders by creating a competitive advantage in identifying, providing, communicating and delivering value to customers, broadly de? ed, and in the process developing long-term mutually satisfying relationships with those customers. Strategic Marketing Understanding marketing – antecedents The fundamental management issue in marketing is to determine a superior value position from the customer’s perspective and to ensure that, by developing a consensus throughout the organization, value is provided, communicated and delivered to the customer grou p. The core concepts of marketing are needs, wants and demands which directly affect the identi? cation and selection of relevant customer values re? cted in products, services and ideas that the organization provides, communicates and delivers in the form of exchanges to build long-term satisfactory relationships with customers (Figure 1. 1). Needs are the internal in? uences which prompt behaviour, e. g. biological needs refer to a person’s requirements for food, air and shelter while social needs refer to issues such as security, personal grati? cation and prestige. Wants are culture bound and may be satis? ed using a number of technologies, e. g. a teenager may listen to music on one of the rock radio stations or on DVDs played on a computer. Demand refers to the ability and willingness of a customer to buy a particular product or service which satis? es the want and the more latent need. A student may want a BMW but can afford only a bicycle. The organization may set out from the start or be established with those objectives or, more likely, as a result of trial and error and experience, the organization evolves into a position over time of being the desired source of value. The core concepts of marketing may be decomposed into a number of basic components: Identify and select the customer value Needs Wants Demands Provide, communicate and deliver customer value Products, services and ideas Exchange of values and relationship building Customers Figure Core concepts of marketing Scope of strategic marketing Provide the value – product planning – packaging – branding – pricing Communicate the value – advertising – personal selling – direct marketing – sales promotion Deliver the value – channels of distribution – logistics – servicing Successful organizations recognize value positions and ensure that learning occurs throughout the organization as a result of discovering the value position. Choosing the value position is one of the most important strategic decisions facing the organization. Once chosen, it the task of management to ensure that everyone in the organization directly contributes to delivering the chosen value. Marketing and sales orientations A sales emphasis is very different from a marketing emphasis in the organization. Four important areas where they differ separate the two approaches: organizational objectives, orientation, attitudes to segmentation and the perceived task facing marketing in the organization (Kotler 2002). A sales emphasis results in objectives which are aimed at increasing current sales to meet quotas and to derive commissions and bonuses. Little discrimination is made between products or customers in terms of pro? ts unless these differences are written into the incentives. In contrast, objectives with a marketing emphasis take pro? ts into account. Marketing objectives include an explicit consideration of product mixes, customer groups and different communications and ways of reaching the market in attempting to achieve pro? table sales and market shares at acceptable levels of risk. The selling and marketing orientations produce very different emphases in the organization. A selling orientation predominantly re? ects a production approach whereby something is produced and the task is to sell it thereby Strategic Marketing Market orientation Market research Product research and development Production Sales orientation Communications Sales Technology orientation Figure Alternative business orientation of the ? rm increasing consumption (Figure 1. 2). A focus on sales means a focus on individual customers rather than market segments or market classes. Such organizations are very knowledgeable about individual accounts and the variables which in? uence speci? c sales transactions but they are less interested in developing an approach to an entire segment of similar needs and wants in the market. A technology orientation is similar to a sales orientation except that the organization also engages in product research and development (Figure 1. 2). A marketing approach attempts to determine ways of offering superior value to the more pro? table segments without damaging individual customer relationships. A marketing approach re? cts an integrated approach based on research and feedback. Customer needs are ? rst evaluated through market research, an integrated marketing effort is developed to satisfy customers so that the organization achieves its goals, especially those affecting shareholders. This is a customer orientation and contrasts very bluntly with a narrow competitor orientation based on sales in which the organization by capit alizing on the weaknesses of vulnerable competitors or by removing its own competitive weaknesses attempts to obtain high sales and long-run pro? s (Figure 1. 3). In many situations marketing evaluates itself and presents its case to senior managers of the organization based on sales, ef? ciency or, worst of all, internal awards, not marketplace outcomes or ? nancial success. Senior managers deal with issues that involve the allocation of resources and how such allocation affects the return on investment. These hurdle rates are calculated differently from one organization to another but they need to be understood for a marketing programme to be effective and accepted. In a business world ominated by ? nancial considerations the ability of the organization to produce award-winning marketing programmes or attractive but fuzzy images in TV commercials is not of much value. Traditional marketing thinking assumes that the organization is in complete control of the marketplace, whereas in teraction and market integration are required. Scope of strategic marketing Customer orientation Identify needs and wants of potential customers Provide and communicate values to match customer needs Satisfied customers Long-run profits Competitor orientation Capitalize on weaknesses of vulnerable competitors Remove own weaknesses Win market position from competitors Attract customers from competitors Minimize loss of customers to competitors High sales Defend market position Source : Adapted from Alfred, R. Oxfenfeldt and William L. Moore (1983): ‘Customer or competitor: which guideline for marketing? ’ in Stewart Henderson Britt, Harper W. Boyd, Robert T. Davis and Jean Claude Larreche (eds), Marketing Management and Administrative Action, New York: McGraw-Hill. Figure Customer and competitor orientation in the organization Strategic marketing concept Marketing has been de? ned as the management function responsible for identifying, anticipating and satisfying customer requirements pro? tably. Marketing is, therefore, both a philosophy and a set of techniques which address such matters as research, product design and development, pricing, packaging, sales and sales promotion, advertising, public relations, distribution and after-sales service. These activities de? ne the broad scope of marketing and their balanced integration within a marketing plan is known as the marketing mix. A modi? cation of a de? ition of marketing by Doyle (2000) suggests that marketing is the management process that seeks to maximize returns to shareholders by creating a competitive advantage in providing, communicating and delivering value to customers thereby developing a long-term relationship with them. This de? nition clearly de? nes the objectives of marketing and how its performance should be evaluated. The speci? c cont ribution of marketing in the organization lies in the formulation of strategies to choose the right customer, build relationships of trust with them and create a competitive advantage (Doyle 2000, p. 35). A marketing strategy consists of an internally integrated but externally focused set of choices about how the organization addresses its customers in the context of a competitive environment. A strategy has ? ve elements: it deals with where the organization plans to be active; how it will get there; how it will succeed in the marketplace; what the speed and sequence of moves will be; and how the organization will obtain pro? ts (Hambrick and Fredrickson 2001, p. 50). The organization must identify the problem that its customers use its products and services to solve. It is also necessary to identify the bene? ts customers seek from using a product or service available in the market. A market consists Strategic Marketing of all the potential customers who share a particular need or want who might be willing and able to engage in exchange to satisfy that need or want. A marketing orientation helps to de? ne the organization’s business. Marketing is concerned with problem solving and customer bene? ts. The organization must be able to answer the following questions: What is the problem customers are trying to solve? What bene? ts do customers seek? How well does the organization’s product solve this problem and provide these bene? ts? A statement that the organization is in the movie business is not very useful. An organization is not in the movie business because that says nothing about customer needs. Some movie organizations assumed they were in the movie business when the entertainment business left them behind! Marketing is a philosophy that encourages the organization to ensure that the needs and wants of customers in selected target markets are re? cted in all its actions and activities while recognizing constraints imposed by society. This marketing concept ? rst received formal recognition in 1952 by one of its leading exponents, the General Electric Organization – the marketing concept: . . . introduces the marketing man at the beginning rather than at the end of the production cycle and integrates marketing into each phase of business. . . . marketing establishes . . . f or the engineer, the design and manufacturing man, what the customer wants in a given product, what price he is willing to pay and where and when it will be wanted. Marketing will have authority in product planning, production scheduling and inventory control, as well as in sales distribution or servicing of the product (General Electric Organization, New York, 1952, Annual Report, p. 21). Three aspects of this statement are interesting: the customer orientation; the pro? t orientation; and the emphasis on integrated organization effort. These three aspects are fundamental to the adoption of the marketing concept. Marketing means, therefore, being oriented to the needs of customers rather than emphasizing what is convenient to produce. Effective marketing requires that the organization analyses the needs that its products are supposed to satisfy. Customers do not buy ‘coffee’; they buy a warm stimulating drink or a unique caf? experience if it is Starbucks. Likewise, customers do not buy sisal; e they buy a material to make baling rope to tie things together or ? bre to serve as backing for a ? oor covering. The organization should realize that many alternative products may satisfy the needs identi? ed; there usually are many substitutes – for coffee include tea, cocoa, alcohol or soft drinks and for sisal include polypropylene ? re or polythene sheeting. The real lesson of a marketing philosophy is that better performing organizations recognize the basic and enduring nature of the customer needs they Scope of strategic marketing are attempting to satisfy. It is the technology of want satisfaction which is transitory (Anderson 1982, p. 23). The products and services used to satisfy customer nee ds and wants change constantly. The adoption of a marketing philosophy confers speci? c authority and responsibility within the organization in regard to the provision, communication and delivery of customer value. Marketing is concerned with all parts of the organization; it is more than a set of tools, it is an orientation which pervades the thinking of the organization as a whole. Internal marketing In addition to equipping the organization to cope with the outside world of customers and competitors, it is also necessary to train and motivate all staff within the organization to provide the appropriate level of service to customers. Internal marketing is very closely related to human resource management and the way in which the organization develops its own distinctive corporate culture. Public Health Nursing ( Phn ) EssayA fundamental service provided by the business system leader is to encourage and persuade other organizations in the business system to complete the full value mix for customers by attracting ‘follower’ or ‘imitator’ organizations and thereby prevent them from developing other emerging business systems. The multitude of decisions in the business system must complement each other to maximize their overall positive impact on value. Within this framework the organization must decide its overall product–market business system strategy which has two elements – decisions on product–market segments and decisions on positions to adopt within the business system itself Scope of strategic marketing Product? market and business system strategies Product? market segments Segment 1 Segment n Concentrate on key market segments Business system Production/operations Distribution Sales Concentrate on key business stages Service Customer Figure Generic product–market and business system strategies (Figure 1. 6). The organization’s resource base enables it to decide the appropriate positions on which to focus in the business system. Decisions regarding the relevant product–market segment to serve are discussed in Chapter 3 while decisions regarding the appropriate position in the business system to select are examined in Chapter 6. Sources of marketing advantage Sources of marketing advantage are reputation, brands, tangible assets, knowledge, customer service and people. To be worthwhile the marketing advantage must be sustainable. It must, therefore, be tangible, measurable and capable of providing competitive protection for some time. An illusory marketing advantage is one that is easily matched by competitors. The organization’s marketing advantage depends on how well it chooses its strategy: Concentrating on selected market segments. Offering differentiated products. Using alternative distribution channels. Using different manufacturing processes to allow higher quality at lower prices. Superior skills and resources, taken together, represent the ability of the organization to do more and better than its competitors. Superior skills are the distinctive capabilities of people in the organization that distinguish Strategic Marketing hem from people in competing organizations, e. g. superior marketing skills that lead to fewer product failures in the marketplace or superior selling and distribution skills which lead to fewer returns of unwanted products and improved customer satisfaction. Organizational resources and marketing capabilities Organizations are endowed with different amounts and types of resour ces and capabilities, which allow them to compete in different ways. Organizations which are better endowed have lower average costs than competitors and can provide products and services at lower cost or provide greater customer value. These resources are dif? cult to transfer among organizations because of transaction costs and because the assets may contain tacit knowledge (Teece et al. 1996, p. 15). Such resources and core capabilities of the organization, particularly those which involve collective learning and are knowledge based, are enhanced as they are applied (Prahalad and Hamel 1990). Resources and capabilities which are distinctive and superior, relative to those of rivals, may become the basis for competitive advantage if they are matched appropriately to market opportunities (Thompson Jr. nd Strickland 1996, pp. 94–5). These resources may, therefore, provide both the basis and direction for the growth of the organization itself, i. e. there may be a natural trajectory embedded in a organization’s knowledge base (Peteraf 1993, p. 182). Hence, the importance of studying the organization itself when attempting to predict its likely performance. Resources and capabilities determine the organi zation’s long-run strategy and are the primary source of pro? t. In an environment which is changing rapidly and where consumer tastes and preferences are volatile and myriad, a de? ition of the business in terms of what the organization is capable of doing may offer a more durable basis for strategy than a traditional de? nition, based solely on needs and wants of consumers. De? ning markets too broadly is of little help to the organization that cannot easily develop the capabilities to serve such a broad market. The organization’s ability to earn pro? ts depends on two factors: the success of the organization in establishing competitive advantage over rivals; and the attractiveness of the industry in which the organization competes. As was seen above, the two sources of competitive advantage are: the ability of the organization to reduce costs; and its ability to differentiate itself in ways that are important to customers. The ability to establish a cost advantage requires the possession of scaleef? cient plants, access to low-cost raw materials or labour and superior Scope of strategic marketing Relative value branding product/service technology marketing networks Relative costs scale economies process technology access to low-cost resources Market power firm size financial resources market share Barriers to entry branding price power patents Competitive advantage Profits Industry attractiveness Figure In? uence of resources on the pro? tability of the ? rm process technology. Differentiation advantages derive from brand reputation, proprietary and patented technology and an extensive marketing network covering distribution, sales and services. The attractiveness of an industry depends on the power the organization can exert over customers, rivals and others in the business system, which derives from the existence of market entry barriers. Market entry barriers are based on brands, patents, price and the power of competitive retaliation. These are resources which are accumulated slowly over time and a new entrant can only obtain at disproportionate expense (Grant 1991, p. 115). Other sources of market power such as price-setting abilities depend on market share which is a consequence of cost ef? ciency, organization size and ? nancial resources. Grant (1991) has integrated these ideas in a way which serves as a very convenient summary of this discussion (Figure 1. 7). Strategic marketing effectiveness Marketing’s role in strategic planning for the organization means identifying the optimal long-term positions that will ensure customer satisfaction and support. These optimal positions are determined largely by fundamental changes in demographic, economic, social and political factors (Anderson 1982, p. 24). Thus, strategic positioning is more likely to be guided by longterm demographic and socioeconomic research than by surveys of consumer attitudes, the hallmark of the market-driven organization. Value in marketing is a combination of product or service quality, reasonable or acceptable prices and responsive service. It is noteworthy that marketing value combines high quality with acceptable prices. It is not low quality products at low prices or high quality at high prices. Value in marketing means delivering on a whole range of promises to the customer. Strategic Marketing Marketing effectiveness is not necessarily revealed by current marketing performance. Good results and growing sales may be due to the organization being in the right place at the right time rather than having effective marketing management. This is frequently the situation during the entrepreneurial phase of an organization’s growth and development. The innovator frequently has considerable discretion in the market. At this stage the driving force is entrepreneurship rather than marketing. With acceptance of the product or service in the market and with the rise in competition which normally accompanies the acceptance of a new product or service, performance becomes more marketing-dependent. In a competitive environment, especially where customers have learned how to respond to various offerings, the situation changes. Improvements in marketing in the organization might improve results while another organization might have poor results in spite of excellent marketing planning. It depends on how well the organization matches its own resources against those of the competition to attract and hold the loyalty of customers. The marketing effectiveness of the organization in serving customers in the face of existing and potential competition is re? ected in the degree to which it exhibits ? ve major attributes of a marketing orientation: demonstrated customer philosophy integrated marketing orientation possesses adequate marketing information adopts a strategic orientation experiences a high level of operational ef? ciency. The performance of the organization on these individual attributes may be used to indicate which elements of effective marketing action need most attention. It should be recognized, however, that this evaluation provides general information only but has the merit of obtaining an approximate measure of the orientation of the organization. Key marketing success factors The organization attempts to convert skills and resources into superior market positions and thereby meet performance objectives. A knowledge of the key marketing success factors is essential to enable the organization to invest in markets and marketing to ensure performance objectives are attained. By identifying the key success factors the organization can dentify ways of obtaining the greatest improvement in performance for the least expenditure. The key success factors of any business are the skills and resources which exert Scope of strategic marketing the highest degree of leverage on market positions and future performance. Having identi? ed them, the organization attempts to selectively allocate resources towards these sources of leverage. The drivers of market posi tion advantage are the high leverage skills and resources that contribute most to lowering costs to or creating value for customers. Marketing focus on customers Marketing means identifying values desired by customers, providing them in some way, communicating these values to customer groups and delivering the value. Customer values refer to those bene? ts focused on solving customer problems and not merely on the products and services themselves. The focus is on the customer and on solving problems faced by the customer. This is an integrated longer-term view of marketing (Figure 1. 8). Seeking value from the customer’s perspective means building a long-term mutually pro? table relationship with customers instead of trying to maximize pro? s on each transaction. An emphasis on relationships rather than individual transactions focuses on the customer as the pro? t centre, not the product. It also means that attracting new customers is an intermediate objective in the process of maintaining and cultivating an existing customer base. This interactive approach views marketing as a continuous relationship with customers in contrast to the more traditional and almost adversarial view which is short term and focused on immediate sales. The ? rst sale to a customer is often very dif? cult, costs a lot and results in little or no pro? t. With a strong continuing relationship the customer becomes more pro? table. Such long-term relationships are established through the exchange of information, products, services and social contacts. In this way the organization–customer relationship is commercialized. The fundamental issue is to understand the customer’s perception of value and to determine a superior value position from this perspective and to ensure Identify and select customer value Integrated marketing effort Provide the value Communicate the value Deliver the value Customer satisfaction Achieve organizational goals Figure Integrated marketing orientation Strategic Marketing that, by developing a consensus throughout the organization, that value is provided and communicated to the customer group in selected markets. The role of marketing in the business system is: To understand the customer’s perception of value – identify the value the organization expects to provide. To determine a superior value position for the organization – provide the value expected. To determine the appropriate positioning and brand strategy – communicate the value. To distribute and price the product/service – deliver the value to the customer. References Anderson, Paul F. (1982), ‘Marketing, strategic planning and the theory of the ? rm’, Journal of Marketing, 46 (Spring), 15–26. Day, George (1994), ‘The capabilities of market-driven organizations’, Journal of Marketing, 58 (October), 37–52. Dickinson, Roger, Herbst, Anthony and O’Shaughnessy, John (1986), ‘Marketing concept and consumer orientation’, European Journal of Marketing, 20 (10), 18–23. Dierickx, I. and Cool, K. (1989), ‘Asset stock accumulation and sustainability of competitive advantage’, Management Science, 35, 1504–11. 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