Marketing management Chapter 22 pptx

Over the years, marketing has evolved as it has grown from work done by the sales depart-ment into a complex group of activities spread through the organization.6 Because simple sales

3 How can companies be

responsible social marketers?

4 How can a company improve its marketing implementation skills?

5 What tools are available to help companies monitor and improve their marketing activities?

ORGANIZATION

An ad for L'Oreal Paris

Healthy long-term growth for a brand requires that the marketing organization be managed properly Holistic marketers must embrace the complexity of marketing by engaging in a host of care- fully planned, interconnected marketing activities.1 Consider L'Oreal

• M B

695

'Oreal, the world's most successful cosmetic company, has

experi-enced almost two decades of double-digit profit growth The

century-old $15.3 billion company has leveraged its cultural

her-itage and Parisian origins to sell products that make its customers feel

spe-cial Higher-than-average R&D expenditures have led to numerous

break-throughs and a strong technological reputation Innovative products and sexy

endorsers such as supermodel Claudia Schiffer, singer Beyonce Knowies, and

actress Heather Locklear have enabled L'Oreal to sustain a premium pricing

strategy and justify the enticing slogan, "Because You're Worth It." Although

French actress Catherine Deneuve is one of the official company faces,

L'Oreal does not offer just one type of beauty in its marketing The company

has skillfully acquired local cosmetics brands, such as Maybelline and Soft

Sheen-Carson, and given them a facelift before exporting them around the

world CEO Lindsay Owen-Jones notes: "It's a very carefully crafted portfolio

each brand is positioned on a very precise market segment which

over-laps as little as possible with others."2

Successful holistic marketing requires effective relationship marketing,

inte-grated marketing, internal marketing, and socially responsible marketing

Previous chapters addressed the first two topics and the strategy and tactics of

marketing.3 In this chapter, we consider internal and socially responsible

mar-keting and how marmar-keting should be administered and conducted responsibly

In our discussion, we look at how firms organize, implement, evaluate, and

con-trol marketing activities W e also discuss the increased importance of social

responsibility W e begin by examining changes in how companies conduct

mar-keting today

Trends in Marketing Practices

Chapters 1 and 3 describe some important changes in the marketing macroenvironment, such as globalization, deregulation, technological advances, customer empowerment, and market fragmentation In response to this rapidly changing environment, companies have restructured their business and marketing practices in some of the following ways:

s Reengineering Appointing teams to manage customer-value-building processes and

break down walls between departments

u Outsourcing Greater willingness to buy more goods and services from outside domestic

or foreign vendors

m Benchmarking Studying "best practice companies" to improve performance

a Supplier partnering Increased partnering with fewer but better value-adding suppliers

B Customer partnering Working more closely with customers to add value to their

operations

a Merging Acquiring or merging with firms in the same or complementary industries to

gain economies of scale and scope

a Globalizing Increased effort to "think global" and "act local."

a Flattening Reducing the number of organizational levels to get closer to the customer

a Focusing Determining the most profitable businesses and customers and focusing on

them

m Accelerating Designing the organization and setting up processes to respond more

quickly to changes in the environment

m Empowering Encouraging and empowering personnel to produce more ideas and take

more initiative

The role of marketing in the organization is also changing.4 Traditionally, marketers have played the roles of middlemen, charged with understanding customer needs and transmit- ting the voice of the customer to various functional areas in the organization In a networked enterprise, every functional area can interact directly with customers Marketing no longer has sole ownership of customer interactions; rather, marketing needs to integrate all the customer-facing processes so that customers see a single face and hear a single voice when they interact with the firm

C I S C O

Founded in 1984 by two Stanford University computer scientists, Cisco initially built its business on routers and switches to provide end-to-end network solutions Throughout the 1990s, Cisco fully embraced the Web in its business strategy, going so far as to include the company vision on all employee badges: "The Internet changes the way we work, live, play, and learn." By the end of the decade, however, the company found that placing all

its internal and external business operations online was unwieldy and counterproductive To ensure harmony in

its sprawling Web-based strategy, Cisco applied newly introduced Web technology to ensure a unified Internet,

• intranet, and extranet The company's goals: "One site many views into the company"5

: : : Internal Marketing

Internal marketing requires that everyone in the organization buy into the concepts and

goals of marketing and engage in choosing, providing, and communicating customer value

Over the years, marketing has evolved as it has grown from work done by the sales

depart-ment into a complex group of activities spread through the organization.6 Because simple

sales departments were unable to conduct important functions such as marketing research,

new-product development, advertising, sales promotion, and customer service, firms began

to create marketing departments When conflict arose between marketing and sales

depart-ments, many firms merged the two

A company can have an excellent marketing department, however, and yet fail at

market-ing Much depends on how other company departments view customers If they point to the

marketing department and say, "They do the marketing," the company has not implemented

effective marketing Only when all employees realize that their jobs are to create, serve, and

satisfy customers does the company become an effective marketer.7 "Marketing Memo:

Characteristics of Company Departments That Are Truly Customer-Driven" presents a

mea-surement tool that can be used to evaluate which company departments have fully

embraced the importance of being customer-driven.8

Many companies are now focusing on key processes rather than departments because

departmental organization is viewed as a barrier to the smooth performance of

fundamen-tal business processes To achieve customer-related outcomes, companies appoint process

leaders who manage cross-disciplinary teams Marketing and sales people spend an

increas-ing percentage of their time as process team members As a result, marketincreas-ing personnel may

have a solid-line responsibility to their teams and a dotted-line responsibility to the

market-ing department The marketmarket-ing department is also responsible for trainmarket-ing marketmarket-ing

per-sonnel, assigning them to new teams, and evaluating their overall performance

Let's look at how marketing departments are being organized, how they can work

effec-tively with other departments, and how firms can foster a creative marketing culture within

the entire organization

Organizing t h e M a r k e t i n g D e p a r t m e n t

Modern marketing departments may be organized in a number of different, sometimes

overlapping ways:9 functionally, geographically, by product or brand, by market, in a matrix,

by corporate/division

FUNCTIONAL ORGANIZATION The most common form of marketing organization

con-sists of functional specialists reporting to a marketing vice president, who coordinates their

activities Figure 22.1 shows five specialists Additional specialists might include a customer

service manager, a marketing planning manager, a market logistics manager, a direct

mar-keting manager, and an Internet marmar-keting manager

The main advantage of a functional marketing organization is its administrative

simplic-ity It can be quite a challenge to develop smooth working relations, however, within the

marketing department.10 This form also can lose its effectiveness as products and markets

increase A functional organization often leads to inadequate planning for specific products

J Advertising and sales promotion manager

Sales manager

Marketing research manager

New-products manager

and markets Products that are not favored by anyone are neglected Then, each functional group competes with others for budget and status The marketing vice president constantly has to weigh the claims of competing functional specialists and faces a difficult coordination problem

GEOGRAPHIC ORGANIZATION A company selling in a national market often organizes its sales force (and sometimes other functions, including marketing) along geographic lines The national sales manager may supervise four regional sales managers, who each supervise six zone managers, who in turn supervise eight district sales managers, who supervise ten salespeople

Several companies are now adding area market specialists (regional or local marketing

managers) to support the sales efforts in high-volume markets One such market might be

They spend time meeting customers and listening to their problems

They welcome the involvement of marketing, manufacturing, and other departments on each new project

They benchmark competitors' products and seek "best of class" solutions

They solicit customer reactions and suggestions as the project progresses

They continuously improve and refine the product on the basis of market feedback

They proactively search for the best suppliers rather than choose only from those who solicit their business They build long-term relations with fewer but more reliable high-quality suppliers

They do not compromise quality for price savings

They invite customers to visit and tour their plants

They visit customer factories to see how customers use the company's products

They willingly work overtime when it is important to meet promised delivery schedules

They continuously search for ways to produce goods faster and/or at lower costs

They continuously improve product quality, aiming for zero defects

They meet customer requirements for "customization" where this can be done profitably

They study customer needs and wants in well-defined market segments

They allocate marketing effort in relation to the long-run profit potential of the targeted segments

They develop winning offerings for each target segment

They measure company image and customer satisfaction on a continuous basis

They continuously gather and evaluate ideas for new products, product improvements, and services to meet customers' needs

They influence all company departments and employees to be customer-centered in their thinking and practice

They have specialized knowledge of the customer's industry

They strive to give the customer "the best solution."

They make only promises that they can keep

They feed back customers' needs and ideas to those in charge of product development

They serve the same customers for a long period of time

They set a high standard for service delivery time and they meet this standard consistently

They operate a knowledgeable and friendly customer service department that can answer questions, handle complaints, and resolve problems in a satisfactory and timely manner

They prepare periodic "profitability" reports by product, market segment, geographic areas (regions, sales territories), order sizes, and individual customers

They prepare invoices tailored to customer needs and answer customer queries courteously and quickly

They understand and support marketing expenditures (e.g., image advertising) that represent marketing investments that produce long-term customer preference and loyalty

They tailor the financial package to the customers' financial requirements

They make quick decisions on customer creditworthiness

They disseminate favorable news about the company and they "damage control" unfavorable news

They act as an internal customer and public advocate for better company policies and practices

They are competent, courteous, cheerful, credible, reliable, and responsive

Miami, Florida, where 46 percent of the households are Latino The Miami specialist would

know Miami's customer and trade makeup, help marketing managers at headquarters adjust

their marketing mix for Miami, and prepare local annual and long-range plans for selling all

the company's products in Miami

Improved information and marketing research technologies have spurred

regionaliza-tion Data from retail-store scanners allow instant tracking of product sales, helping

compa-nies pinpoint local problems and opportunities Retailers themselves strongly prefer local

programs aimed at consumers in their cities and neighborhoods To keep retailers happy,

manufacturers now create more local marketing plans

Companies that have shifted to a greater regional marketing emphasis are McDonald's,

which now spends about 50 percent of its total advertising budget regionally; American

Airlines, which realized that the travel needs of Chicagoans and Southwesterners are very

different in the winter months; and Anheuser-Busch, which has subdivided its regional

mar-kets into ethnic and demographic segments, with different ad campaigns for each Some

companies have to develop different marketing programs in different parts of the country

out of necessity because their brand development varies so much

P A C E

In 1947, a young Texan named David Pace had a passion for producing the freshest-tasting picante sauce

Experimenting with ingredients and bottling techniques, the final product he produced—a special blend of

toma-toes, onions, and jalapenos and a unique production process—became Pace Picante Sauce Over time, the

com-pany launched Pace salsa before being acquired by the Campbell Soup Comcom-pany in 1994 Pace's historical

strength, however, is west of the Mississippi The brand registers only single digits in market share in the

Northeast The vast disparity in regional strengths has led to tailored marketing programs in different parts of the

country Pace's trailgating tour, blending cowboy-style chuckwagon cooking and tailgate barbecuing, coincides

with its rodeo event sponsorship and appeals to the core customer base; New England promotions are designed

for trial and market penetration.11

5RAND-MANAGEMENT ORGANIZATION Companies producing a variety

of products and brands often establish a product- (or brand-) management organization

The product-management organization does not replace the functional organization, but

serves as another layer of management A product manager supervises product category

managers, who in turn supervise specific product and brand managers

A product-management organization makes sense if the company's products are quite

different, or if the sheer number of products is beyond the ability of a functional

organiza-tion to handle Kraft has used a product-management organizaorganiza-tion in its Post division, with

separate product category managers in charge of cereals, pet food, and beverages Within

the cereal-product group, Kraft has had separate subcategory managers for nutritional

cere-als, children's presweetened cerecere-als, family cerecere-als, and miscellaneous cereals

Product and brand management is sometimes characterized as a hub-and-spoke

sys-tem The brand or product manager is figuratively at the center with spokes emanating out

to various departments (see Figure 22.2) Some of the tasks that product or brand managers

may perform include:

• Developing a long-range and competitive strategy for the product

• Preparing an annual marketing plan and sales forecast

• Working with advertising and merchandising agencies to develop copy, programs, and

campaigns

• Increasing support of the product among the sales force and distributors

E Gathering continuous intelligence on the product's performance, customer and dealer

attitudes, and new problems and opportunities

a Initiating product improvements to meet changing market needs

The product-management organization has several advantages The product manager

can concentrate on developing a cost-effective marketing mix for the product; he or she can

react more quickly to new products in the marketplace; the company's smaller brands have

a product advocate However, this organization has some disadvantages too:

I FIG 22.2

The Product Manager's Interactions

(a) Vertical Product Team

(b) Triangular Product Team

(c) Horizontal Product Team

m Product and brand managers become experts in their product area but rarely achieve tional expertise They vacillate between acting as experts and having to defer to real experts

func-a The product mfunc-anfunc-agement system often turns out to be costly One person is func-appointed to manage each major product or brand and soon managers are appointed to manage even minor products and brands

a Brand managers normally manage a brand for only a short time Short-term involvement leads to short-term planning and plays havoc with building long-term strengths

s The fragmentation of markets makes it harder to develop a national strategy from quarters Brand managers must increasingly please regional and local sales groups, resulting

head-in a transfer of power from markethead-ing to sales

E Product and brand managers cause the company to focus on building market share rather than building the customer relationship Yet the customer relationship, not the brand, may be the primary lever for value creation

A second alternative with a product-management organization is to switch from product

managers to product teams There are three types of potential product-team structures:

verti-cal product team, triangular product team, and the horizontal product team (see Figure 22.3) The triangular and horizontal product-team approaches are favored by those who advo- cate brand-asset management They believe that each major brand should be run by a

brand-asset management team (BAMT) consisting of key representatives from major

func-tions affecting the brand's performance The company is comprised of several BAMTs which periodically report to a BAMT Directors Committee, which itself reports to a Chief Branding Officer This is quite different from the way brands have traditionally been handled

A third alternative for product-management organization is to eliminate product ager positions for minor products and assign two or more products to each remaining man- ager This is feasible where two or more products appeal to a similar set of needs A cosmet- ics company does not need separate product managers for each product because cosmetics serve one major need—beauty A toiletries company needs different managers for headache remedies, toothpaste, soap, and shampoo, because these products differ in use and appeal

A fourth alternative for product-management organization is to introduce category

man-agement, in which a company focuses on product categories to manage its brands Procter &

Gamble, pioneers of the brand-management system, and several other top firms have made

a significant shift in recent years to category management.12,13,14

A print ad spells out the services Dow Corning can provide for customers Dow Corning uses a horizontal product team organization Teams consist of from five

to eight people, and each team manages

a specific product, market, and process

P&G cites a number of advantages to a category-management structure By fostering

internal competition among brand managers, the traditional brand-management system

created strong incentives to excel, but also much internal competition for resources and a

lack of coordination Whereas a smaller share category might have become relatively

neglected before (e.g., in product categories such as "hard surface cleaners"), the new scheme

was designed to ensure that all categories would be able to receive adequate resources

Another rationale for category management is the increasing power of the trade Because

the retail trade has tended to think in terms of product categories and the profitability

derived from different departments and sections of their stores, P&G felt it only made sense

for it to deal with the trade along similar lines Retailers such as Wal-Mart and regional

gro-cery chains such as Dominick's have embraced category management themselves as a

means to define a particular product category's strategic role within the store and to address

such operating issues as logistics, the role of private-label products, and the trade-offs

between offering product variety and avoiding inefficient duplication

Category management is not a panacea It is still a product-driven system Colgate has

moved from brand management (Colgate toothpaste) to category management (toothpaste

category) to a new stage called "customer-need management" (mouth care) This last step

finally focuses the organization on a basic customer need.15

MARKET-MANAGEMENT ORGANIZATION Many companies sell their products to

differ-ent markets Canon sells its fax machines to consumer, business, and governmdiffer-ent markets

U.S Steel sells its steel to the railroad, construction, and public utility industries When

cus-tomers fall into different user groups with distinct buying preferences and practices, a

market-management organization is desirable A market manager supervises several

mar-ket managers (also called marmar-ket-development managers, marmar-ket specialists, or industry

specialists) The market managers draw on functional services as needed Market managers

of important markets might even have functional specialists reporting to them

Market Managers

Home Industrial Menswear Women's wear furnishings markets Rayon

Acetate Product

Managers NVl o n

Orion Dacron

Market managers are staff (not line) people, with duties similar to those of product agers Market managers develop long-range and annual plans for their markets Their perfor- mance is judged by their market's growth and profitability This system carries many of the same advantages and disadvantages of product-management systems Its strongest advantage

man-is that the marketing activity man-is organized to meet the needs of dman-istinct customer groups rather than being focused on marketing functions, regions, or products Many companies are reor-

ganizing along market lines and becoming market-centered organizations Xerox has

con-verted from geographic selling to selling by industry, as have IBM and Hewlett-Packard

In a customer-management organization, companies can organize themselves to

under-stand and deal with individual customers rather than with the mass market or even market segments

MATRIX-MANAGEMENT ORGANIZATION Companies that produce many products ing into many markets may adopt a matrix organization DuPont was a pioneer in develop- ing the matrix structure (see Figure 22.4)

flow-r~ D U P O N T

Before being spun off, DuPont's textile fibers department consisted of separate product managers for rayon, acetate, nylon, orlon, and dacron; and separate market managers for menswear, women's wear, home furnish- ings, and industrial markets The product managers planned the sales and profits for their respective fibers They asked market managers to estimate how much of their fiber they could sell in each market at a proposed price Market managers, however, were generally more interested in meeting their market's needs than pushing a par- ticular fiber In preparing their market plans, they asked each product manager about the fiber's planned prices and availabilities The final sales forecast of the market managers and the product managers should have added

• up to the same grand total

Companies like DuPont can go one step further and view the market managers as the main marketers, and their product managers as suppliers The menswear market manager, for example, would be empowered to buy textile fibers from DuPont's product managers or,

if DuPont's price is too high, from outside suppliers This system would force Dupont uct managers to become more efficient If a DuPont product manager could not match the

prod-"arm's-length pricing" levels of competitive suppliers, then perhaps Dupont should not tinue to produce that fiber

con-A matrix organization would seem desirable in a multiproduct, multimarket company The rub is that this system is costly and often creates conflicts There is the cost of support- ing all the managers There are also questions about where authority and responsibility should reside

Matrix management gained advocates because companies provide the context in which

a matrix can thrive—flat, lean team organizations focused around business processes that cut horizontally across functions.16

CORPORATE-DIVISIONAL ORGANIZATION As multiproduct, multimarket companies grow, they often convert their larger product or market groups into separate divisions The divisions set up their own departments and services This raises the question of what mar-

F I G 2 2 4 |

Product- /Market-Management Matrix

System

keting services and activities should be retained at company headquarters Divisionalized

companies have reached different answers to this question:

s No Corporate Marketing Some companies lack a corporate marketing staff They do not

see any useful function for marketing at the corporate level Each division has its own

mar-keting department

a Moderate Corporate Marketing Some companies have a small corporate marketing staff

that performs a few functions, primarily (1) assisting top management with overall

opportu-nity evaluation, (2) providing divisions with consulting assistance on request, (3) helping

divisions that have little or no marketing, and (4) promoting the marketing concept

through-out the company

B Strong Corporate Marketing Some companies have a corporate marketing staff that, in

addition to the preceding activities, also provides various marketing services to the

divi-sions, such as specialized advertising services, sales promotion services, marketing research

services, and sales administration services

Regardless of how formalized corporate marketing is, certain activities must occur within

the organization in a "top-down" fashion Webster sees the role of marketing at the corporate

level as:17

1 To promote a culture of customer orientation and to be an advocate for the customer in

the deliberations of top-management strategy formulators

2 To assess market attractiveness by analyzing customer needs and wants and competitive

offerings

3 To develop the firm's overall value proposition, the vision and articulation of how it

pro-poses to deliver superior value to customers

Relations w i t h Other Departments

In principle, all business functions should interact harmoniously to pursue the firm's overall

objectives In practice, however, interdepartmental relations are often characterized by deep

rivalries and distrust Some conflict stems from differences of opinion as to what is in the

company's best interests, some from real trade-offs between departmental well-being and

company well-being, and some from unfortunate stereotypes and prejudices

In the typical organization, each business function has a potential impact on customer

satisfaction Under the marketing concept, all departments need to "think customer" and

work together to satisfy customer needs and expectations The marketing department must

drive this point home The marketing vice president, or CMO, has two tasks: (1) to

coordi-nate the company's internal marketing activities and (2) to coordicoordi-nate marketing with

finance, operations, and other company functions to serve the customer

Yet, there is little agreement on how much influence and authority marketing should

have over other departments Typically, the marketing vice president must work through

persuasion rather than authority Other departments often resist changing their ways of

working to fulfill the customer's interests Inevitably, departments define company

prob-lems and goals from their viewpoint, so conflicts of interest are unavoidable Breakdowns in

communication further exacerbate the problem Consider the following potential negative

reactions that marketing can receive from different functional groups

B Engineering comes into conflict with marketing executives when the latter want several

models produced, often with product features requiring custom components Engineers

often think of marketing people as inept technically, as continually changing priorities, and

as not fully credible or trustworthy

a Purchasing Executives see marketing executives pushing for several models in a product

line, which requires purchasing small quantities of many items rather than large quantities

of few items They think that marketing insists on too high a quality for materials and

com-ponents They also dislike marketing's forecasting inaccuracy, which causes them to place

rush orders at unfavorable prices or to carry excessive inventories

a Financial Executives suspect that marketing forecasts are self-serving They think

mar-keters are too quick to slash prices to win orders, instead of pricing to make a profit They

claim that marketers "know the value of everything and cost of nothing."

m Accountants see marketing people as lax in providing sales reports on time They dislike

the special deals salespeople make with customers because these require special accounting

procedures Credit officers evaluate potential customers' credit standing and deny or limit credit to the more doubtful ones They think marketers will sell to anyone, including those from whom payment is doubtful

Companies need to develop a balanced orientation in which marketing and other tions jointly determine what is in the company's best interests Solutions include joint sem- inars to understand each others' viewpoints, joint committees and liaison personnel, per- sonnel exchange programs, and analytical methods to determine the most profitable course

func-of action.18

Perhaps the best solution is for marketing to periodically propose & function-to-function

meeting with departments where greater understanding and collaboration is warranted Even if each function indulges in stereotypical charges and complaints about the other, such

a meeting can lead to a clearing of the air and a basis for a more constructive collaboration Each department needs to understand the operating logic of the other departments When departments work together toward common goals, marketing is more effective

r - P R O C T E R & G A M B L E

With 19 of their 20 largest brands gaining share and a stock price that doubled, Procter & Gamble was clearly

on a roll during 2002-2004 Organic growth in core businesses provided much of the impetus P&G's new uct hit rate, defined in terms of when returns exceeded the cost of capital, was 70 percent to 90 percent Although this extraordinary performance was due to many factors, close interactions between marketing and 7,500 R&D personnel worldwide was critical To facilitate interaction, problems and solutions are posted on an internal Web site and "communities of practice" dedicated to particular expertise (e.g., "whiteners") meet fre- quently Joint collaboration between different units of P&G has produced such diverse products as Crest Whitestrips teeth whiteners, lams Dental Defense tartar-fighting pet food, and Olay Daily facials cleansing cloths

prod-Mr Clean AutoDry carwash system was designed with input from R&D experts who worked on the Pur water

B purification and Cascade automatic dishwasher powder brands.19

Building a C r e a t i v e M a r k e t i n g O r g a n i z a t i o n

Many companies are beginning to realize that they are not really market- and driven—they are product-and-sales driven Companies such as Baxter, General Motors, Shell, and J.R Morgan are attempting to transform themselves into true market-driven com- panies This will require:

customer-1 Developing a company-wide passion for customers

2 Organizing around customer segments instead of around products

3 Developing a deep understanding of customers through qualitative and quantitative research

The payoffs are considerable Two researchers recently concluded: "We found that the more aggressive a company's customer-focused strategy, the higher its productivity Those with a customer focus were almost 7 percent more productive than their competitors."20

The task is not easy It will not happen as a result of the CEO making speeches and urging every employee to "think customer." The change will require a change in job and depart- ment definitions, responsibilities, incentives, and relationships See "Marketing Insight: The Marketing CEO" for actions a CEO can take to improve marketing capabilities

Although it is necessary in a hypercompetitive economy that an organization be customer-oriented, it is not enough The organization must also be creative Companies today copy each others' advantages and strategies with increasing speed Differentiation gets harder to achieve, let alone maintain Margins fall when firms become more alike The only answer is for the firm to build a capability in strategic innovation and imagination (see

"Marketing Insight: Fueling Strategic Innovation") This capability comes from assembling tools, processes, skills, and measures that will enable the firm to generate more and better new ideas than its competitors.21

Companies must watch trends and be ready to capitalize on them Motorola was

18 months late in moving from analog to digital cellular phones, giving Nokia and

Ericsson a big lead Barnes Si Noble was late in recognizing online ordering of books and

music, giving Amazon the lead Nestle was late in recognizing the trend toward houses such as Starbucks Coca-Cola was slow in recognizing beverage trends toward fruit-flavored drinks such as Snapple, energy drinks such as Gatorade, and designer water

coffee-MARKETING INSIGHT THE MARKETING CEO

What steps can a CEO take to create a market- and

customer-focused company?

1 Convince Senior Management of the Need to Become

Customer-Focused: The CEO personally exemplifies strong

customer commitment and rewards those in the organization

who do likewise For example, former CEOs Jack Welch of GE

and Lou Gerstner of IBM are said to have spent 100 days a year

visiting with customers, in spite of their many strategic, financial,

and administrative burdens; and IBM's top 470 executives are

personally responsible for more than 1,300 customer accounts

2 Appoint a Senior Marketing Officer and Marketing Task

Force: The marketing task force should include the CEO; the

vice presidents of sales, R&D, purchasing, manufacturing,

finance, and human resources; and other key individuals

3 Get Outside Help and Guidance: Consulting firms have

con-siderable experience in helping companies move toward a

mar-keting orientation

4 Change the Company's Reward Measurement and System:

As long as purchasing and manufacturing are rewarded for

keeping costs low, they will resist accepting some costs required

to serve customers better As long as finance focuses on

short-term profit, it will oppose major investments designed to build

satisfied, loyal customers

5 Hire Strong Marketing Talent: The company needs a strong

marketing vice president who not only manages the marketing

department but also gains respect from and influence with the

other vice presidents A multidivisional company would benefit

from establishing a strong corporate marketing department

10

Develop Strong In-house Marketing Training Programs: The

company should design well-crafted marketing training grams for corporate management, divisional general managers, marketing and sales personnel, manufacturing personnel, R&D personnel, and others GE, Motorola, and Accenture run these programs

pro-Install a Modern Marketing Planning System: The planning

format will require managers to think about the marketing ronment, opportunities, competitive trends, and other forces

envi-These managers then prepare strategies and sales-and-profit forecasts for specific products and segments and are account- able for performance

Establish an Annual Marketing Excellence Recognition Program: Business units that believe they have developed exem-

plary marketing plans should submit a description of their plans and results The winning teams would be rewarded at a special ceremony The plans would be disseminated to the other busi- ness units as "models of marketing thinking." Such programs are carried on by Accenture, Becton-Dickenson, and DuPont

Shift from a Department Focus to a Process-Outcome Focus: After defining the fundamental business processes that

determine its success, the company should appoint process leaders and cross-disciplinary teams to reengineer and imple- ment these processes

Empower the Employees: Progressive companies encourage and

reward their employees for coming up with new ideas They also empower them to settle customer complaints in order to save the customer's business IBM, for example, lets its frontline employees spend up to $5,000 to solve a customer problem on the spot

brands The company is now fiercely playing catch-up, using innovation to challenge

these category leaders with Fruitopia noncarbonated fruit beverage, POWERade energy

drink, and Dasani water

P O W E R A D E

Challenging leader Gatorade in the energy drink market has been a tough task After introducing several

innovations subsequent to its launch in 1990, such as sports cap packaging and offbeat flavors, Coca-Cola

found its POWERade brand was stagnating by the end of the decade Relaunched in 2001, the brand was

positioned on the basis of active consumer lifestyles as "Fuel for Life" to distinguish it from sports-focused

Gatorade The logo was completely revamped to feature a snake-like "P," and the product was reformulated

with B vitamins Ads themed "Very Real Power" showed athletes doing seemingly impossible feats by virtue

of realistic special effects Innovation has continued to drive a turnaround in sales In the summer of 2003,

the company introduced special edition Martix Reloaded POWERade with a custom-shaped package and

new flavor to create a tie-in with the blockbuster movie franchise Other special editions tied to the

Olympics, NASCAR, and NHRA followed September 2004 saw the launch of sourberry-flavored POWERade

FLAVA23, backed by an integrated marketing program that featured a DC Comics depiction of NBA star and

POWERade spokesman LeBron James.22

Market leaders tend to miss trends when they are risk-averse, obsessed about

protect-ing their existprotect-ing markets and physical resources, and more interested in efficiency than

innovation

: : : Socially Responsible Marketing

Effective internal marketing must be matched by a strong sense of social responsibility.23

Companies need to evaluate whether they are truly practicing ethical and socially ble marketing Several forces are driving companies to practice a higher level of corporate social responsibility: rising customer expectations, changing employee expectations, gov- ernment legislation and pressure, investor interest in social criteria, and changing business procurement practices.24

responsi-Business success and continually satisfying the customer and other stakeholders are closely tied to adoption and implementation of high standards of business and marketing conduct The most admired companies in the world abide by a code of serving people's interests, not only their own

Business practices are often under attack because business situations routinely pose tough ethical dilemmas The issues are complicated: It is not easy to draw a clear line between normal marketing practice and unethical behavior At the same time, certain busi- ness practices are clearly unethical or illegal These include bribery or stealing trade secrets; false and deceptive advertising; exclusive dealing and tying agreements; quality or safety defects; false warranties; inaccurate labeling; price-fixing or undue discrimination; and bar- riers to entry and predatory competition

FUELING STRATEGIC I N N O V A T I O N

Professor Stephen Brown of Ulster University has challenged a

num-ber of fundamental assumptions underlying the marketing concept

He thinks that marketers make too much of researching and

satisfy-ing consumers, and as a result, risk lossatisfy-ing marketsatisfy-ing imagination and

significant consumer impact Here are his criticisms:

1 If marketers pay too much attention to what consumers say they

need or want, marketers will simply make products similar to those that already exist Consumers normally start from what they know, not from what might be possible For example, they might say they want a smaller cellular phone but would not ask for one that includes a Palm Pilot or voice recognition It is the marketer's job to

go beyond what customers say they want

2 The marketing concept assumes that consumers have clear

goals and pursue them rationally But consumers are buffeted by all kinds of forces Many respond to hyped products and stories

Therefore marketers need skills beyond APIC—analysis, ning, implementation, and control Marketers need to be able to create dramas, new realities, artificial scarcities, celebrations, and the like

plan-3 The marketing concept implies that marketers must be submissive

to customers, and go all out to please them Any suggestion that marketers might "play" with the customer, even manipulate the public, is taboo Yet some of the greatest marketers of the past, such as P.T Barnum, teased the public, overdramatized offerings, and yet the public loved it Why should the customer be dominant and the marketer always be submissive?

How can companies build a capability for strategic innovation? Here

are some approaches:

Hire some marketers who are unusually creative to ance the majority who do marketing by the textbook These peo- ple may be more unconventional, more rule-breaking, more risk- taking, and even more argumentative, but their ideas will at least present a challenge

counterbal-Train your employees in the use of creativity techniques, ing group techniques (brainstorming, synectics) and individual techniques (visualization, attribute listing, forced relationships, morphological analysis, mind-mapping)

includ-List observable trends such as longer working hours, single parents, and new life styles, and tease out their implications for your firm List unmet needs and imagine new offerings or solutions: how to help people lose weight, stop smoking, relieve stress, meet oth- ers, and so on

Set up rewards and prizes for new ideas Run a "best idea" petition once a month Give a cash reward, extra vacation time, or travel awards to those who come up with the best ideas

com-Senior managers should take small sets of employees out to lunch

or dinner once a week to discuss ideas they might have on ing the business Sometimes take them into new settings, such as a wrestling match, a drug rehabilitation center, a poor neighborhood Set up groups of employees to critique the company's and com- petitors' products and services Also have them critique the com- pany's cherished beliefs and consider turning them upside down Occasionally hire creative resources from outside the firm Many large advertising agencies, such as Leo Burnett, run a creativity service for clients

improv-Sources: For more on Brown's views, see Stephen Brown, Marketing—The Retro Revolution (Thousand Oaks, CA: Sage Publications, 2001) For more on

creativity, see Michael Michalko, Cracking Creativity: The Secrets of Creative Genius (Berkeley, CA: Ten Speed Press, 1998); James M Higgins, 101

Creative Problem Solving Techniques (New York: New Management Publishing Company, 1994); and all of the books by Edward DeBono

Today companies that do not perform ethically or well are at greater risk of being exposed,

thanks to the Internet In the past, a disgruntled customer might bad-mouth a manufacturer

or merchant to 12 other people; today he or she can reach thousands of people on the Internet

Microsoft, for example, has attracted scores of anti-Microsoft sites, including Hate Microsoft

and Boycott Microsoft Well-managed PR campaigns can also have an effect The Rainforest

Action Network launched a punishing PR campaign in 1997 to stop The Home Depot from

selling old-growth lumber After two years of bad publicity and resistance to new store

loca-tions, The Home Depot agreed to have its suppliers work with environmental and forestry

groups to certify that its wood products are not from endangered areas.25

C o r p o r a t e Social Responsibility

Raising the level of socially responsible marketing calls for a three-pronged attack that relies

on proper legal, ethical, and social responsibility behavior

LEGAL BEHAVIOR Society must use the law to define, as clearly as possible, those practices

that are illegal, antisocial, or anticompetitive Organizations must ensure that every employee

knows and observes any relevant laws For example, sales managers can check that sales

rep-resentatives know and observe the law, such as the fact that it is illegal for salespeople to lie to

consumers or mislead them about the advantages of buying a product Under U.S law,

sales-people's statements must match advertising claims In selling to businesses, salespeople may

not offer bribes to purchasing agents or others influencing a sale They may not obtain or use

competitors' technical or trade secrets through bribery or industrial espionage Finally,

sales-people must not disparage competitors or competing products by suggesting things that are

not true Every sales representative must understand these laws and act accordingly.26

ETHICAL BEHAVIOR Companies must adopt and disseminate a written code of ethics, build

a company tradition of ethical behavior, and hold its people fully responsible for observing

eth-ical and legal guidelines.27 A 1999 poll by Environics International, a public opinion research

firm, found that 67 percent of North Americans are willing to buy or boycott products on

ethi-cal grounds In response to heightened consumer sensitivity on the topic, KPMG's 1999 survey

of 1,100 global companies found that 24 percent produce annual "sustainability" reports.28

)CIAL RESPONSIBILITY BEHAVIOR Individual marketers must practice a "social

con-science" in specific dealings with customers and stakeholders.29 Increasingly, people say

that they want information about a company's record on social and environmental

respon-sibility to help decide which companies to buy from, invest in, and work for.30 Table 22.1 lists

1 Johnson & Johnson

This Fetzer ad reinforces the company's

commitment to social responsibility

David Breashears is an author, filmmaker,

and world-renowned climber who has

ascended Everest several times

companies who receive high marks for social responsibility Fetzer Vineyards is one pany that has fully embraced social responsibility

com-F E T Z E R V I N E Y A R D S

The sixth-largest winery in the United States and winner of many product-quality awards, Fetzer has transformed its business according to the triple bottom line—measuring corporate success by social and environmental impact as well as profit and loss Every one of the 2,000 acres owned by Fetzer is certified as organic and the vineyards are designated a "zero waste" business by the state of California Its philosophy even extends to product packaging To spare trees, labels are made from a plant fiber known as kenaf and printed with soy-based inks; the corks aren't san- itized with chlorine; and the cases are made from recycled cardboard The winery uses alternative solar and biodiesel energy sources, and broke with convention by providing extensive programs and benefits for part-time workers as well as full-time employees Even though it belongs to the highly competitive wine industry, Fetzer believes that busi- ness and social progress should go hand-in-hand Its financial and marketing success has led the Wine Institute, a trade group for the California wine industry, to introduce the first statewide sustainable wine-growing practices.31

Deciding how to communicate corporate attitudes and behaviors toward social ity can be difficult Corporate philanthropy, for example, poses problems.32 Merck, DuPont, Wal-Mart, and Bank of America are examples of firms that have donated $100 million or more

responsibil-to charities in a year Although companies can be credited for good deeds, the deeds can be ily overlooked if not publicized and easily resented if the company is seen as being exploitative

eas-or fails to live up to a "good guys" image.33 Philip Morris Company's $250 million ad campaign touting its charitable activities was met with skepticism because of its negative corporate image

Socially Responsible Business Models

The future holds a wealth of opportunities for companies.34 Technological advances in solar

energy, online networks, cable and satellite television, biotechnology, and

telecommunica-tions promise to change the world as we know it At the same time, forces in the

socioeco-nomic, cultural, and natural environments will impose new limits on marketing and

busi-ness practices Companies that are able to innovate new solutions and values in a socially

responsible way are the most likely to succeed.35

Many companies such as The Body Shop, Stonyfield Farms, and Smith and Hawken are

giving social responsibility a more prominent role Actor Paul Newman's homemade salad

dressing has grown to a huge business.36 The Newman's Own brand is on additional

prod-ucts such as pasta sauce, salsa, popcorn, and lemonade, and is sold in eight countries The

company has given away all its profits—$150 million—to educational and charitable

pro-grams such as the Hole in the Wall Gang camps Newman created for children with serious

illnesses Another example of a company with social responsibility at the core of its business

model is Working Assets

W O R K I N G A S S E T S

Working Assets was established in 1985 to help people support causes through everyday activities like talking

on the phone Every time a customer uses one of Working Assets' donation-linked services (Long Distance,

Local, Wireless, Credit Card, or Online), the company donates a portion of the customer's bill to nonprofit groups

Working Assets donates at least 1 percent of annual revenues to charity and lets customers vote on which

non-profit groups receive money To date, $40 million has been raised by the company for causes including

Greenpeace, Oxfam America, Rainforest Action Network, Human Rights Watch, Planned Parenthood, Stand for

Children, and Doctors Without Borders, among many others The customers addressed in the company's clever

tagline "We make your voice heard" are people who identify themselves as supporters of progressive causes

Working Assets' corporate idealism has had a favorable effect on the bottom line Revenue shot up from $2

mil-lion in 1991 to roughly $300 milmil-lion in 2003.37

Cause-Related M a r k e t i n g

Many firms are blending their corporate social responsibility initiatives with their marketing

activities.38 Cause-related marketing is marketing that links the firm's contributions to a

designated cause to customers' engaging directly or indirectly in revenue-producing

trans-actions with the firm.39 Cause marketing has also been called a part of corporate societal

marketing (CSM) which Drumwright and Murphy define as marketing efforts "that have at

least one non-economic objective related to social welfare and use the resources of the

com-pany and/or of its partners."40 They also include other activities such as traditional and

strategic philanthropy and volunteerism as part of CSM

Cause-related marketing began in earnest in the 1980s Many observers credit

American Express with raising awareness of the mutual benefits of cause-related

market-ing through its 1983 campaign to help restore the Statue of Liberty By donatmarket-ing a penny

for every credit card transaction and a dollar for each new card issued, American Express

gave $1.7 million to the Statue of Liberty — Ellis Island Foundation In the process,

trans-actions for American Express rose 30 percent, and new cards issued increased by 15

per-cent during this period

Cause-related marketing comes in many forms Tesco, a leading U.K retailer, has

created a "Computers for Schools" program: Customers receive vouchers for every

10 pounds spent, which can be donated to the school of their choice; the school can

then exchange the vouchers for new computer equipment Dawn, the top dishwashing

liquid in the United States, launched a campaign highlighting the fact that the product's

grease-cleaning power had an unusual side benefit—it could be used to clean birds

caught in oil spills A Web site, www.saveaduck.com , outlines its financial donations and

educational program Nike is the title sponsor of the Nike 26.2 Women's Marathon in San

Francisco, whose proceeds go to the Leukemia and Lymphoma Society In addition, Nike

works with more than 60 Indian tribes to help combat Type 2 diabetes by giving

sneak-ers to patients who have their blood tested for diabetes British Airways has a

particu-larly successful and highly visible program

- B R I T I S H A I R W A Y S

British Airways partnered with UNICEF and developed a cause-marketing campaign called Change for Good Passengers on British Airways flights are encouraged to donate leftover foreign currency from their travels The scheme is simple: Passengers deposit their surplus currency in envelopes provided by British Airways, which collects the deposits and donates them directly to UNICEF British Airways advertises its program during an in- flight video, on the backs of seat cards, and with in-flight announcements The company also developed a tele- vision ad that featured a child thanking British Airways for its contribution to UNICEF Because Change for Good can be directly targeted to passengers and can produce immediate results, it does not require extensive adver- tising or promotion and is highly cost-efficient Since 1994, almost $40 million has been raised and distributed around the world.41

CAUSE MARKETING BENEFITS AND COSTS A successful cause marketing program can produce a number of benefits: improving social welfare; creating differentiated brand posi- tioning; building strong consumer bonds; enhancing the company's public image with gov- ernment officials and other decision makers; creating a reservoir of goodwill; boosting inter- nal morale and galvanizing employees; and driving sales.42

By humanizing the firm, consumers may develop a strong, unique bond with the firm that transcends normal marketplace transactions.43 Some of the specific means by which cause marketing programs can build brand equity with consumers include: (1) building brand awareness, (2) enhancing brand image, (3) establishing brand credibility, (4) evoking brand feelings, (5) creating a sense of brand community, and (6) eliciting brand engage- ment.44 Liz Claiborne has exhibited strong commitment to its cause

- L I Z C L A I B O R N E

In 1991, at a time when domestic violence was often a taboo or "hot potato" issue, Liz Claiborne developed its Women's Work program against domestic violence, now dubbed, "Love Is Not Abuse." Prior to starting the campaign, the company had conducted research which revealed that 96 percent of its customers believed domestic violence was a problem and 91 percent of those same customers would have a positive opinion of a company that started an awareness campaign about the issue The major fund-raising event is an annual charity shopping day every October

at Liz Claiborne stores across the United States The company donates 10 percent of sales to local domestic violence organizations Liz Claiborne also contributes proceeds from the sale of T-shirts, jewelry, and other products related

to the campaign Additionally, the company pays for public service campaigns that appear on television, radio, boards, and bus shelters and distributes awareness posters, brochures, and mailings Over the years, Liz Claiborne has also sponsored workshops, surveys, celebrity-endorsed awareness campaigns, and other events.45

bill-The danger, however, is that the promotional efforts behind a cause-related marketing program could backfire if cynical consumers question the link between the product and the cause and see the firm as being self-serving and exploitative.46 For example, Bristol-Meyers Squibb (BMS) supports the Tour de Cure, which funds diabetes research and prevention

On the official Web page of the tour, the BMS logo includes the statement that BMS is "A leader in Type 2 Diabetes Care." This potentially profitable connection between the sponsor and the event may lead some consumers to view BMS's support for the Tour de Cure as opportunistic.47

A number of decisions must be made in designing and implementing a cause ing program, such as how many and which cause(s) to choose and how to brand the cause program

market-)SING A CAUSE Some experts believe that the positive impact on a brand from cause-related marketing may be lessened by sporadic involvement with numerous causes For example, Cathy Chizauskas, Gillette's director of civic affairs, states: "When you're spreading out your giving in fifty-dollar to one-thousand-dollar increments, no one knows what you are doing It doesn't make much of a splash."48

Many companies choose to focus on one or a few main causes to simplify execution and maximize impact One of the more focused cause marketers is McDonald's Ronald McDonald Houses in more than 20 countries offer more than 5,000 rooms each night to

families needing support while their child is in

the hospital Ronald McDonald House program

has provided a "home away from home" for

nearly 4 million family members since its

beginning in 1974

Limiting support to a single cause, however,

may limit the pool of consumers or other

stake-holders who could transfer positive feelings

from the cause to the firm In addition, many

popular causes already have numerous

corpo-rate sponsors Reportedly, over 300 companies,

including Avon, Ford, Estee Lauder, Revlon, Lee

Jeans, Polo Ralph Lauren, Yoplait, Saks, BMW,

and American Express, currently associate

themselves with breast cancer as a cause in

some way.49 As a consequence, the brand may

find itself "lost in the shuffle," overlooked in a

sea of symbolic pink ribbons

Opportunities can potentially be greater with

"orphan causes"—causes such as diseases that

afflict less than 200,000 people.50 Another option

is overlooked diseases, such as pancreatic

can-cer, which is the fourth-deadliest form of cancer

behind skin, lung, and breast and yet has

received little or no corporate support

Most firms tend to choose causes that fit their corporate or brand image and matter to

their employees and shareholders LensCrafters' Give the Gift of Sight program is a family of

charitable vision care programs that has provided free vision screenings, eye exams, and

glasses to more than 3 million needy people throughout North America and in developing

countries around the world All stores are empowered to deliver free glasses in their

com-munities In addition, Give the Gift of Sight sponsors two traveling Vision Vans targeting

chil-dren in North America as well as monthly two-week optical missions overseas

The LensCrafters Give the Gift of Sight program in action

BRANDING THE CAUSE MARKETING PROGRAM There are three potential options for

branding a cause marketing program:

1 Self-branded: Create Own Cause Program The firm takes ownership of a cause and

develops an entirely new organization to deliver benefits associated with the cause The

newly created self-branded cause could be branded with the parent brand or an

individ-ual product brand The Ronald McDonald House Charities and the Avon Breast Cancer

Crusade are classic examples of self-branded cause entities

2 Co-branded: Link to Existing Cause Program The firm partners with an existing cause

Typically, the identification of the brand affiliation with the cause is only in the form of

its designation as a sponsor or supporter—the actual involvement is not branded as a

program in anyway Currently, co-branding relationships with causes are the most

pop-ular type of activity An example is Sealy's sponsorship of NASCAR's Victory Junction

Gang Camp, which involves the donation of beds to an auto-racing-themed camp for

children with life-threatening illnesses

3 Jointly Branded: Link to Existing Cause Program In this hybrid approach, firms partner

with an existing cause but explicitly brand the program that links to the cause An example

of this is The Rocky Mountain Challenge, an organized three-day benefit bike ride, which is

sponsored by the bike retailer Colorado Cyclist to provide funds for the Tyler Hamilton

Foundation for MS, a charity established by the Tour de France cyclist (and University of

Colorado graduate)

Co-branding with an existing cause is a means for firms to complement their existing brand

image with specific associations that are "borrowed" or "transferred" from a cause

Self-branding can be useful when a firm is trying to augment existing consumer associations via

emotional and imagery appeals Joint branding may permit the best of both worlds by

estab-lishing a strong connection with an existing cause but maintaining a distinct identity at the

same time

Co-branding: NASCAR racer Kyle Petty and his wife Pattie created the Victory Junction Gang Camp

in Randelman NC for special kids Here they receive a check from Nextel for $1 million

"Marketing Memo: Making A Difference" provides some tips from a top cause market- ing firm

Social M a r k e t i n g

Some marketing is conducted to directly address a social problem or cause Cause- related marketing is done by a company to support a cause Social marketing is done by a nonprofit or government organization to fur- ther a cause, such as "say no to drugs" or "exer- cise more and eat better."51 The need for social marketing is evident: Consider the following recent facts and figures from 2002

• An estimated 1 million teens became nant

preg-• 5-10 million adolescent girls and women struggled with eating disorders

u More than 16,000 people were killed in alcohol-related crashes

n More than 3,000 children and teens died from gunshot wounds

More than 5,000 people on waiting lists for organ transplants died

Social marketing is a global phenomenon that goes back for years In the 1950s, India started family planning campaigns In the 1970s, Sweden started social marketing cam- paigns to turn the country into a nation of nonsmokers and nondrinkers In the 1970s, the Australian government ran "Wear Your Seat Belt Campaigns." In the late 1970s, the Canadian government launched campaigns to "Say No to Drugs," "Stop Smoking," and "Exercise for Health." In the 1980s, the World Bank, World Health Organization, and Centers for Disease Control and Prevention started to use the term and promote interest in social marketing Some notable global social marketing successes include these:

& Oral rehydration therapy in Honduras significantly decreased deaths from diarrhea in small children under the age of 5

• Social marketers created booths in marketplaces where Ugandan midwives sold ceptives at affordable prices

contra-m Population Communication Services created and promoted two extremely popular songs

in Latin America, "Stop" and "When We Are Together," to help young women "say no."

• The National Heart, Lung, and Blood Institute successfully raised awareness about lesterol and high blood pressure, which helped to significantly reduce deaths

cho-A number of different types of organizations conduct social marketing in the United States Government agencies include the Centers for Disease Control and Prevention, Departments of Health, Social and Human Services, Department of Transportation, and the U.S Environmental Protection Agency Literally hundreds of nonprofit organizations are involved with social marketing, including the American Red Cross, the World Wildlife Fund, and the American Cancer Society

B O Y S & G I R L S C L U B O F A M E R I C A

Known as "the positive after-school place for kids," the Boys & Girls Club of America serves more than

6 million youngsters annually in 3,400 club locations The children's time in the program is spent on such activities as sports, recreation, and fitness, as well as on schoolwork, and even on programs centered on character development, leadership, and life skills Distinguished alumni of the Boys & Girls Club include Bill Cosby, Brad Pitt, and Denzel Washington In a little over a decade, the organization built a roster of corpo- rate partners to help provide programs and services for its members The Crest Cavity Free Zone improves

dental health of underserved children; Club Tech uses a $100 million cash and in-kind grant from Microsoft

to place computers and software in clubs; and Blockbuster's support of the Boys & Girls Clubs' National Kids

Day promotion has generated millions in funding.52

Choosing the right goal or objective for a social marketing program is critical Should a

family planning campaign focus on abstinence or birth control? Should a campaign to fight

air pollution focus on ride-sharing or mass transit? Social marketing campaigns may have

objectives related to changing people's cognitions, values, actions, or behaviors The

follow-ing examples illustrate the range of possible objectives

Cognitive campaigns

• Explain the nutritional value of different foods

B Explain the importance of conservation

One of the most accomplished cause marketing consulting firms is

Boston's Cone, Inc It offers the following perspectives on the current

state of cause marketing and how it should best be practiced:

With new vigor, consumers, customers, employees, investors

and communities are closely watching how companies behave

in relation to them and to society Influential groups such as

Business for Social Responsibility, Dow Jones Sustainability

Index, Fortune magazine and others are judging companies

based on a complex series of global standards Business

prac-tices such as governance, philanthropy, sourcing, the

environ-ment, employee relations and community relations have moved

from behind the scenes to center stage For executives today,

appropriately defining, executing and communicating corporate

social responsibility (CSR) has never been more important

To help execute and communicate CSR more effectively, Cone offers

the following considerations:

Define CSR for your company Make sure that your senior

exec-utives are all talking about the same thing CSR includes a broad

range of complex internal and external business practices

Although they are vital components of the CSR mix, corporate

philanthropy and community relations don't define CSR alone

Build a diverse team The development and execution of CSR

strategies require a collaborative, concerted team effort Create a

decision-making task force that integrates and brings together a

range of expertise and resources, including marketing, public

affairs, community relations, legal, human resources,

manufac-turing and others Put a formal process in place to approach CSR

strategy development, ongoing implementation and continuous

improvement

Analyze your current CSR-related activities and revamp

them if necessary Do your due diligence at the outset to

under-stand CSR gaps and risks specific to your company Research

industry examples and cull best practices from leading case

stud-ies Make sure to consider global trends, as Europe is far

advanced of the U.S

Forge and strengthen NGO relationships The more than

300,000 non-governmental organizations (NGO) around the world are a powerful force on corporate policies and behavior, serving as both advocates and loud critics Forge sincere part- nerships with organizations that can offer you independent, unbi- ased insight into and evaluation of your CSR activities; provide expertise on social issues and developing global markets; and offer access to key influentials

Develop a cause branding initiative Create a public face for

your citizenship activities through a signature Cause Branding tiative that integrates philanthropy, community relations, market- ing and human resources assets ConAgra Foods, Feeding Children Better program, for example, is a multi-year initiative cre- ated to feed millions of hungry children through innovative part- nerships, grant-making, employee volunteerism and education and awareness This program recently earned ConAgra Foods the U.S Chamber of Commerce's Corporate Citizenship Award

ini-Walk your talk Critics often assert that companies exploit CSR

as a PR smokescreen to conceal or divert attention from rate misdeeds and blemishes Before introducing any new CSR initiative or drawing attention to good corporate behavior, make sure that your company is addressing stakeholder expectations of CSR at the most basic level

corpo-Don't be silent Not only do Americans expect businesses to

behave socially, the majority want companies to tell them how they are doing so An overwhelming majority also say they prefer

to find out about CSR activities from a third-party source, ularly the media

partic-Beware Greater public awareness for your corporate citizenship

record can be double-edged Claims of socially responsible behavior, even sincere ones, often invite public scrutiny Be pre- pared Even if your company is not ready to proactively commu- nicate about your CSR activities, be ready to respond to public inquiries immediately Don't let the threat of public scrutiny keep you mute, though More often than not, silence regarding CSR issues is translated as indifference, or worse, inaction

Sources: Cone Buzz, April 2004 See also, Carol L Cone, Mark A Feldman, and Alison T DaSilva, "Cause and Effects," Harvard Business Review (July

Action campaigns

a Attract people for mass immunization

B Motivate people to vote "yes" on a certain issue

B Motivate people to donate blood

B Motivate women to take a pap test

Behavioral campaigns

a Demotivate cigarette smoking

B Demotivate hard-drug usage

m Demotivate excessive consumption of alcohol

Value campaigns

B Alter ideas about abortion

B Change attitudes of bigoted people

Social marketing may employ a number of different tactics to achieve its goals.53 The social marketing planning process follows many of the same steps as the process for tradi- tional products and services (see Table 22.2) Some key success factors in developing and implementing a social marketing program include:

B Study the literature and previous campaigns

a Choose target markets that are most ready to respond

B Promote a single, doable behavior in clear, simple terms

B Explain the benefits in compelling terms

a Make it easy to adopt the behavior

B Develop attention-grabbing messages and media

• Consider an education-entertainment approach Given the complexity and challenges of the issues involved with social marketing, it is important to take a long-run view Social marketing programs take time and may involve a

T A B L E 2 2 2 [

Social Marketing Planning Process Where Are We?

n Determine program focus

a Identify campaign purpose

B Conduct an analysis of Strengths, Weaknesses, Opportunities, and Threats (SWOT)

B Review past and similar efforts

Where Do We Want to Go?

a Select target audiences

m Set objectives and goals

E Analyze target audiences and the competition

How Will We Get There?

a Product: Design the market offering

H Price: Manage costs of behavior change

a Distribution: Make the product available

• Communications: Create messages and choose media

How Will We Stay on Course?

B Develop a plan for evaluation and monitoring

• Establish budgets and find funding sources

• Complete an implementation plan

series of phased programs or actions For example, take the sequence of actions that have

been involved in discouraging smoking: cancer reports, labeling of cigarettes, banning

ciga-rette advertising, education about secondary smoke effects, no smoking in homes, no

smok-ing in restaurants, no smoksmok-ing on planes, raissmok-ing taxes on cigarettes to pay for antismoksmok-ing

campaigns, states suing cigarette companies

The actual success of the social marketing program must be evaluated in terms of the

program objectives Criteria might include the following: high incidence of adoption, high

speed of adoption, high continuance of adoption, low cost per unit of adoption, and no

major counterproductive consequences

' I'. Marketing Implementation

Table 22.3 summarizes the characteristics of a great marketing company A marketing

com-pany is great not by "what it is," but by "what it does."54 Marketing implementation is the

process that turns marketing plans into action assignments and ensures that such

assign-ments are executed in a manner that accomplishes the plan's stated objectives.55

A brilliant strategic marketing plan counts for little if it is not implemented properly

Consider the following example:

A chemical company learned that the customers were not getting good service from

any of the competitors The company decided to make customer service its

strate-gic thrust When this strategy failed, a postmortem revealed a number of

imple-mentation failures The customer service department continued to be held in low

regard by top management; it was understaffed; and it was used as a clumping

ground for weak managers Furthermore, the company's reward system continued

to focus on cost containment and current profitability The company had failed to

make the changes required to carry out its strategy

Strategy addresses the what and why of marketing activities; implementation addresses

the who, where, when, and how Strategy and implementation are closely related: One layer

of strategy implies certain tactical implementation assignments at a lower level For

exam-ple, top management's strategic decision to "harvest" a product must be translated into

spe-cific actions and assignments

Thomas Bonoma identified four sets of skills for implementing marketing programs:

1 Diagnostic skills -When marketing programs do not fulfill expectations, was it the result

of poor strategy or poor implementation? If implementation, what went wrong?

2 Identification of company level - Implementation problems can occur in three levels:

the marketing function, the marketing program, and the marketing policy level

3 Implementation skills - To implement programs successfully, marketers need other

skills: allocating skills for budgeting resources, organizing skills to develop an effective

organization, and interaction skills to motivate others to get things done

4 Evaluation skills - Marketers also need monitoring skills to track and evaluate

market-ing actions.56

• The company selects target markets in which it enjoys superior advantages, and exits or avoids markets

where it is intrinsically weak

• Virtually all the company's employees and departments are customer- and market-minded

• There is a good working relationship between marketing, R&D, and manufacturing

• There is a good working relationship between marketing, sales, and customer service

• The company has installed incentives designed to lead to the right behaviors

a The company continuously builds and tracks customer satisfaction and loyalty

a The company manages a value-delivery system in partnership with strong suppliers and distributors

• The company is skilled in building its brand name(s) and image

• The company is flexible in meeting customers' varying requirements

| T A B L E 2 2 3 |

Characteristics of a Great Marketing Company

Companies today are striving to make their marketing operations more efficient and their return on marketing investment more measurable (see Chapter 4) Marketing costs can amount to 20 to 40 percent of a company's total operating budget Companies recognize the high amount of waste in many practices: too many meetings lasting too long, undue time spent in looking for documents, delays in receiving approvals, and difficulties in coordinat- ing vendor partners

Most marketing departments use a limited number of unconnected technology tools such as e-mail, spreadsheets, project management software, and customer databases But unconnected tools cannot deal with the increasingly complex nature of business, the increased number of collaborators, and the global scope of operations Companies use information technology to improve the management of their marketing resources They need better templates for marketing processes, better management of marketing assets, and better allocation of marketing resources Certain repetitive processes can be automated

This drive is going under such names as marketing resource management (MRM), enterprise

marketing management (EMM), and marketing automation systems (MAS).57

Several software companies now offer software packages to help companies better age their marketing processes, assets, and resources The packages are customized so differ- ent marketing managers—vice president of marketing, product and brand managers, field sales managers, marketing communications managers—can do their planning, implemen- tation, and control

man-Marketing resource management (MRM) software provides a set of Web-based tions that automate and integrate such activities as project management, campaign man- agement, budget management, asset management, brand management, customer relation- ship management, and knowledge management The knowledge management component consists of process templates, how-to wizards, and best practices

applica-The software packages are Web-hosted and available to users with passwords applica-They add

up to what some have called desktop marketing in that marketers can find whatever

infor-mation and decision structures they need on their computers The computer will host a dashboard on which marketers can manage their activities In the next few years, MRM soft- ware will enable marketers to greatly improve spending and investment decisions, bring new products to market more quickly, and reduce decision time and costs

m Almost half of the companies failed to compare their prices with those of the

competi-tion, to analyze their warehousing and distribution costs, to analyze the causes of returned merchandise, to conduct formal evaluations of advertising effectiveness, and to review their sales forces' call reports

@ Many companies take four to eight weeks to develop control reports, which are ally inaccurate

occasion-Table 22.4 lists four types of marketing control needed by companies: annual-plan control, profitability control, efficiency control, and strategic control Chapter 4

described how companies can use marketing metrics to analyze marketing plans and their profitability Annual-plan control aims to ensure that the company achieves the sales, profits, and other goals established in its annual plan The heart of annual-plan control is management by objectives Four steps are involved (see Figure 22.5) First, management sets monthly or quarterly goals Second, management monitors its perfor- mance in the marketplace Third, management determines the causes of serious perfor- mance deviations Fourth, management takes corrective action to close the gaps between goals and performance

This control model applies to all levels of the organization Top management sets annual sales and profit goals that become specific goals for lower levels of management Each prod-

T A B L E 2 2 4 I Types of Marketing Control

Type of Control Prime Responsibility Purpose of Control A p p r o a c h e s

I Annual-plan control Top management To examine whether the planned • Sales analysis

Middle management results are being achieved • Market share analysis

a Sales-to-expense ratios

• Financial analysis

• Market-based scorecard analysis

II Profitability control Marketing controller To examine where the company is Profitability by:

making and losing money • product

Marketing controller spending efficiency and impact • sales force

of marketing expenditures a advertising

• sales promotion

• distribution

IV Strategic control Top management To examine whether the company • Marketing-effectiveness

Marketing auditor is pursuing its best opportunities rating instrument

with respect to markets, products, • Marketing audit and channels a Marketing excellence review

a Company ethical and social responsibility review

uct manager is committed to attaining specified levels of sales and costs; each regional

dis-trict and sales manager and each sales representative is also committed to specific goals

Each period, top management reviews and interprets the results

Efficiency Control

Suppose a profitability analysis reveals that the company is earning poor profits in

cer-tain products, territories, or markets Are there more efficient ways to manage the sales

force, advertising, sales promotion, and distribution in connection with these marketing

entities?

Some companies have established a marketing controller position to improve marketing

efficiency Marketing controllers work out of the controller's office but specialize in the

mar-keting side of the business At companies such as General Foods, DuPont, and Johnson &

Johnson, they perform a sophisticated financial analysis of marketing expenditures and

results They examine adherence to profit plans, help prepare brand managers' budgets,

measure the efficiency of promotions, analyze media production costs, evaluate customer

and geographic profitability, and educate marketing personnel on the financial implications

of marketing decisions.58

SALES FORCE EFFICIENCY Sales managers need to monitor the following key indicators

of efficiency in their territories:

a Average number of calls per salesperson per day

a Average sales call time per contact

a Average revenue per sales call

a Average cost per sales call

a Entertainment cost per sales call

Goal Setting

Performance Measurement

Performance Diagnosis

n Percentage of orders per 100 sales calls

• Number of new customers per period

E3 Number of lost customers per period

ES Sales force cost as a percentage of total sales

When a company starts investigating sales force efficiency, it often finds areas for ment General Electric reduced the size of one of its divisional sales forces after discovering that its salespeople were calling on customers too often When a large airline found that its salespeople were both selling and servicing, they transferred the servicing function to lower- paid clerks Another company conducted time-and-duty studies and found ways to reduce the ratio of idle-to-productive time

improve-ADVERTISING EFFICIENCY Many managers believe it is almost impossible to measure

what they are getting for their advertising dollars; but they should try to keep track of at least the following statistics:

a Advertising cost per thousand target buyers reached by media vehicle

a Percentage of audience who noted, saw, or associated and read most of each print ad

• Consumer opinions on the ad's content and effectiveness

E Before and after measures of attitude toward the product,

a Number of inquiries stimulated by the ad

a Cost per inquiry

Management can take a number of steps to improve advertising efficiency, including doing

a better job of positioning the product, defining objectives, pretesting messages, using puter technology to guide the selection of media, looking for better media buys, and doing posttesting

com-SALES PROMOTION EFFICIENCY Sales promotion includes dozens of devices for

stimu-lating buyer interest and product trial To improve sales promotion efficiency, management should record the costs and sales impact of each promotion Management should watch the following statistics:

• Percentage of sales sold on deal

a Display costs per sales dollar

H Percentage of coupons redeemed

• Number of inquiries resulting from a demonstration

A sales promotion manager can analyze the results of different promotions and advise uct managers on the most cost-effective promotions to use

prod-DISTRIBUTION EFFICIENCY Management needs to search for distribution economies in

inventory control, warehouse locations, and transportation modes It should track such measures as:

• Logistics costs as a percentage of sales

• Percentage of orders filled correctly

H Percentage of on-time deliveries

• Number of billing errors

Management should strive to reduce inventory while at the same time speeding up the to-delivery cycle That both can be done simultaneously is shown by Dell Computer

order-.— D E L L

A customer-customized computer that is ordered from Dell's Web site at 9:00 A.M on Wednesday can be on the delivery truck by 9:00 P.M Thursday In that short period, Dell electronically orders the computer components from its suppliers' warehouses Equally impressive, Dell gets paid electronically within 24 hours while Compaq,

• supplying its computers to retailers, receives payment days later

One problem is that distribution efficiency declines when the company experiences strong

sales increases Peter Senge describes a situation in which a strong sales surge causes the

company to fall behind in meeting delivery dates (see Figure 22.6).59 This causes customers

to bad-mouth the company and eventually sales fall Management responds by increasing

sales force incentives to secure more orders The sales force succeeds, but once again the

company slips in meeting delivery dates Management needs to identify the real bottleneck

and invest in more production and distribution capacity

Strategic C o n t r o l

From time to time, companies need to undertake a critical review of overall marketing goals

and effectiveness Each company should periodically reassess its strategic approach to the

marketplace with marketing effectiveness reviews and marketing audits Companies can also

perform marketing excellence reviews and ethical/social responsibility reviews

THE MARKETING EFFECTIVENESS REVIEW A company's or division's marketing

effec-tiveness is reflected in the degree to which it exhibits the five major attributes of a marketing

orientation: customer philosophy, integrated marketing organization, adequate marketing

information, strategic orientation, and operational efficiency (see "Marketing Memo:

Marketing Effectiveness Review Instrument") Most companies and divisions receive scores

in the fair-to-good range.60

THE MARKETING AUDIT The average U.S corporation loses half of its customers in five

years, half of its employees in four years, and half of its investors in less than one year

Clearly, this points to some weaknesses Companies that discover weaknesses should

under-take a thorough study known as a marketing audit.61 A marketing audit is a comprehensive,

systematic, independent, and periodic examination of a company's or business unit's

mar-keting environment, objectives, strategies, and activities with a view to determining

prob-lem areas and opportunities and recommending a plan of action to improve the company's

marketing performance

Let us examine the marketing audit's four characteristics:

1 Comprehensive-The marketing audit covers all the major marketing activities of a

busi-ness, not just a few trouble spots It would be called a functional audit if it covered only

the sales force, pricing, or some other marketing activity Although functional audits are

useful, they sometimes mislead management Excessive sales force turnover, for

exam-ple, could be a symptom not of poor sales force training or compensation but of weak

company products and promotion A comprehensive marketing audit usually is more

effective in locating the real source of problems

2 Systematic - The marketing audit is an orderly examination of the organization's

macro-and micromarketing environments, marketing objectives macro-and strategies, marketing

sys-tems, and specific activities The audit indicates the most-needed improvements, which

are then incorporated into a corrective action plan involving both short-run and

long-run steps to improve overall effectiveness

3 Independentf- A marketing audit can be conducted in six ways: self-audit, audit from

across, audit from above, company auditing office, company task force audit, and

outsider audit Self-audits, in which managers use a checklist to rate their own

opera-tions, lack objectivity and independence.62 The 3M Company has made good use of a

corporate auditing office, which provides marketing audit services to divisions on

request.63 Generally speaking, however, the best audits come from outside

consul-tants who have the necessary objectivity, broad experience in a number of industries,

some familiarity with the industry being audited, and the undivided time and

atten-tion to give to the audit

4 Periodic - Typically, marketing audits are initiated only after sales have turned down,

sales force morale has fallen, and other problems have occurred Companies are thrown

into a crisis partly because they failed to review their marketing operations during good

times A periodic marketing audit can benefit companies in good health as well as those

in trouble

A marketing audit starts with a meeting between the company officer(s) and the

market-ing auditor(s) to work out an agreement on the audit's objectives, coverage, depth, data

Management Increases Sales Incentives

Sales fall

Sales surge

Delivery Delay

Insufficient production and distribution capacity

Perceived need to improve delivery time

No or Late Action Taken

Used by permission of Doubleday, a division

of Bantam Doubleday Dell Publishing Group, Inc

MARKETING MEMO MARKETING EFFECTIVENESS REVIEW INSTRUMENT

(Check One Answer to Each Question)

Customer Philosophy

A Does management recognize the importance of designing the company to serve the needs and wants of chosen markets?

0 Management primarily thinks in terms of selling current and new products to whomever will buy them

1 Management thinks in terms of serving a wide range of markets and needs with equal effectiveness

2 Management thinks in terms of serving the needs and wants of well-defined markets and market segments chosen for their run growth and profit potential for the company

long-B Does management develop different offerings and marketing plans for different segments of the market?

0 No 1 Somewhat 2 To a large extent

C Does management take a whole marketing-system view (suppliers, channels, competitors, customers, environment) in planning its business?

0 No Management concentrates on selling and servicing its immediate customers

1 Somewhat Management takes a long view of its channels, although the bulk of its effort goes to selling and servicing the ate customers

immedi-2 Yes Management takes a whole marketing-systems view, recognizing the threats and opportunities created for the company by changes in any part of the system

Integrated Marketing Organization

D Is there high-level marketing integration and control of the major marketing functions?

0 No Sales and other marketing functions are not integrated at the top and there is some unproductive conflict

1 Somewhat There is formal integration and control of the major marketing functions but less than satisfactory coordination and cooperation

2 Yes The major marketing functions are effectively integrated

E Does marketing management work well with management in research, manufacturing, purchasing, logistics, and finance?

0 No There are complaints that marketing is unreasonable in the demands and costs it places on other departments

1 Somewhat The relations are amicable, although each department pretty much acts to serve its own interests

2 Yes The departments cooperate effectively and resolve issues in the best interest of the company as a whole

F How well organized is the new-product development process?

0 The system is ill-defined and poorly handled

1 The system formally exists but lacks sophistication

2 The system is well structured and operates on teamwork principles

Adequate Marketing Information

G When were the latest marketing research studies of customers, buying influences, channels, and competitors conducted?

0 Several years ago 1 A few years ago 2 Recently

H How well does management know the sales potential and profitability of different market segments, customers, territories, products, channels, and order sizes?

0 _ Not at all 1 _ Somewhat 2 _ Very well

I What effort is expended to measure and improve the cost-effectiveness of different marketing expenditures?

0 Little or no effort 1 Some effort 2 Substantial effort

Strategic Orientation

J What is the extent of formal marketing planning?

0 Management conducts little or no formal marketing planning

1 Management develops an annual marketing plan

2 Management develops a detailed annual marketing plan and a strategic long-range plan that is updated annually

K How impressive is the current marketing strategy?

0 The current strategy is not clear

1 The current strategy is clear and represents a continuation of traditional strategy

2 The current strategy is clear, innovative, data-based, and well reasoned

L What is the extent of contingency thinking and planning?

0 Management does little or no contingency thinking

1 Management does some contingency thinking but little formal contingency planning

2 Management formally identifies the most important contingencies and develops contingency plans

Operational Efficiency

M How well is the marketing strategy communicated and implemented?

0 _ Poorly 1 _ Fairly 2 _ Successfully

N Is management doing an effective job with its marketing resources?

0 No The marketing resources are inadequate for the job to be done

1 Somewhat The marketing resources are adequate but they are not employed optimally

2 Yes The marketing resources are adequate and are employed efficiently

0, Does management show a good capacity to react quickly and effectively to on-the-spot developments?

0 No Sales and market information is not very current and management reaction time is slow

1 Somewhat Management receives fairly up-to-date sales and market information; management reaction time varies

2 Yes Management has installed systems yielding highly current information and fast reaction time

Total Score

The instrument is used in the following way The appropriate answer is checked for each question The scores are added—the total will be

somewhere between 0 and 30 The following scale shows the level of marketing effectiveness:

0-5 = None 11-15 = Fair 21-25 = Very good 6-10 = Poor 16-20 = Good 26-30 = Superior

Source: Philip Kotler, "From Sales Obsession to Marketing Effectiveness," Harvard Business Review (November-December 1977): 67-75 Copyright © 1977

by the President and Fellows of Harvard College; all rights reserved

sources, report format, and time frame A detailed plan regarding who is to be interviewed,

the questions to be asked, the time and place of contact, and so on is prepared so that

audit-ing time and cost are kept to a minimum The cardinal rule in marketaudit-ing auditaudit-ing is: Do not

rely solely on company managers for data and opinions Customers, dealers, and other

out-side groups must also be interviewed Many companies do not really know how their

cus-tomers and dealers see them, nor do they fully understand customer needs

The marketing audit examines six major components of the company's marketing

situa-tion The major questions are listed in Table 22.5

THE MARKETING EXCELLENCE REVIEW Companies can use another instrument to rate

their performance in relation to the best practices of high-performing businesses The three

columns in Table 22.6 distinguish among poor, good, and excellent business and marketing

practices Management can place a checkmark to indicate its perception of where the

busi-ness stands The resulting profile exposes weakbusi-nesses and strengths, highlighting where the

company might make changes to become a truly outstanding player in the marketplace

: : : The Future of Marketing

Top management has recognized that past marketing has been highly wasteful and is

demanding more accountability from marketing "Marketing Memo: The Major Marketing

Weaknesses" summarizes the major deficiencies that companies have in marketing, how to

spot these deficiencies, and what to do about them

Going forward, there are a number of imperatives to achieve marketing excellence

Marketing must be "holistic" and less departmental Marketers must achieve larger influence in

the company if they are to be the main architects of business strategy Marketers must

contin-uously create new ideas if the company is to prosper in a hypercompetitive economy Marketers

must strive for customer insight and treat customers differently but appropriately Marketers

must build their brands through performance, more than through promotion Marketers must

go electronic and win through building superior information and communication systems

In these ways, modern marketing will continue to evolve and confront new challenges

and opportunities As a result, the coming years will see:

H The demise of the marketing department and the rise of holistic marketing

• The demise of free-spending marketing and the rise of ROI marketing

T A B L E 2 2 5 Components of a Marketing Audit

Part I Marketing Environment Audit

Macroenvironment

A Demographic What major demographic developments and trends pose opportunities or threats to this company? What actions has the company

taken in response to these developments and trends?

B Economic What major developments in income, prices, savings, and credit will affect the company? What actions has the company been

tak-ing in response to these developments and trends?

C Environmental What is the outlook for the cost and availability of natural resources and energy needed by the company? What concerns have

been expressed about the company's role in pollution and conservation, and what steps has the company taken?

D Technological What major changes are occurring in product and process technology? What is the company's position in these technologies?

What major generic substitutes might replace this product?

E Political What changes in laws and regulations might affect marketing strategy and tactics? What is happening in the areas of pollution

control, equal employment opportunity, product safety, advertising, price control, and so forth, that affects marketing strategy?

F Cultural What is the public's attitude toward business and toward the company's products? What changes in customer lifestyles and values

might affect the company?

Task Environment

A Markets What is happening to market size, growth, geographical distribution, and profits? What are the major market segments?

B Customers What are the customers' needs and buying processes? How do customers and prospects rate the company and its competitors on

reputation, product quality, service, sales force, and price? How do different customer segments make their buying decisions?

C Competitors Who are the major competitors? What are their objectives, strategies, strengths, weaknesses, sizes, and market shares? What

trends will affect future competition and substitutes for the company's products?

D Distribution and What are the main trade channels for bringing products to customers? What are the efficiency levels and growth potentials of Dealers the different trade channels?

E Suppliers What is the outlook for the availability of key resources used in production? What trends are occurring among suppliers?

F Facilitators and What is the cost and availability outlook for transportation services, warehousing facilities, and financial resources? How effective Marketing Firms are the company's advertising agencies and marketing research firms?

6 Publics Which publics represent particular opportunities or problems for the company? What steps has the company taken to deal

effec-tively with each public?

Part II Marketing Strategy Audit

A Business Mission Is the business mission clearly stated in market-oriented terms? Is it feasible?

B Marketing Objectives Are the company and marketing objectives and goals stated clearly enough to guide marketing

and Goals planning and performance measurement? Are the marketing objectives appropriate, given the company's competitive position,

resources, and opportunities?

C Strategy Has the management articulated a clear marketing strategy for achieving its marketing objectives? Is the strategy convincing? Is

the strategy appropriate to the stage of the product life cycle, competitors' strategies, and the state of the economy? Is the pany using the best basis for market segmentation? Does it have clear criteria for rating the segments and choosing the best ones? Has it developed accurate profiles of each target segment? Has the company developed an effective positioning and mar- keting mix for each target segment? Are marketing resources allocated optimally to the major elements of the marketing mix? Are enough resources or too many resources budgeted to accomplish the marketing objectives?

com-Part III Marketing Organization Audit

A Formal structure Does the marketing vice president have adequate authority and responsibility for company activities that affect customers'

satis-faction? Are the marketing activities optimally structured along functional, product, segment, end-user, and geographical lines?

Are there any problems between marketing and manufacturing, R&D, purchasing, finance, accounting, and/or legal that need attention?

Part IV Marketing Systems Audit

Is the marketing planning system well conceived and effectively used? Do marketers have decision support systems available? Does the planning system result in acceptable sales targets and quotas?

Are the control procedures adequate to ensure that the annual plan objectives are being achieved? Does management periodically analyze the profitability of products, markets, territories, and channels of distribution? Are marketing costs and productivity periodically examined?

Is the company well organized to gather, generate, and screen new-product ideas? Does the company do adequate concept research and business analysis before investing in new ideas? Does the company carry out adequate product and market testing before launching new products?

PART V Marketing Productivity Audit

Do any marketing activities seem to have excessive costs? Can cost-reducing steps be taken?

Part VI Marketing Function Audits

What are the company's pricing objectives, policies, strategies, and procedures? To what extent are prices set on cost, demand, and competitive criteria? Do the customers see the company's prices as being in line with the value of its offer? What does management know about the price elasticity of demand, experience-curve effects, and competitors' prices and pricing policies?

To what extent are price policies compatible with the needs of distributors and dealers, suppliers, and government regulation? What are the company's distribution objectives and strategies? Is there adequate market coverage and service? How effective are distributors, dealers, manufacturers' representatives, brokers, agents, and others? Should the company consider changing its distribution channels?

What are the organization's advertising objectives? Are they sound? Is the right amount being spent on advertising? Are the ad themes and copy effective? What do customers and the public think about the advertising? Are the advertising media well chosen? Is the internal advertising staff adequate? Is the sales-promotion budget adequate? Is there effective and sufficient use

of sales-promotion tools such as samples, coupons, displays, and sales contests? Is the public relations staff competent and creative? Is the company making enough use of direct, online, and database marketing?

What are the sales force's objectives? Is the sales force large enough to accomplish the company's objectives? Is the sales force organized along the proper principles of specialization (territory, market, product)? Are there enough (or too many) sales man- agers to guide the field sales representatives? Do the sales-compensation level and structure provide adequate incentive and reward? Does the sales force show high morale, ability, and effort? Are the procedures adequate for setting quotas and evaluat- ing performance? How does the company's sales force compare to competitors' sales forces?

T A B L E 2 2 6 |

The Marketing Excellence Review:

Best Practices

Product-Driven Market-Driven Market-Driving Mass-Market Oriented Segment Oriented Niche Oriented and Customer Oriented Product Offer Augmented Product Offer Customer Solutions Offer

Average Product Quality Better Than Average Legendary Average Service Quality Better Than Average Legendary End-Product Oriented Core-Product Oriented Core-Competency Oriented Function Oriented Process Oriented Outcome Oriented Reacting to Competitors Benchmarking Competitors Leapfrogging Competitors Supplier Exploitation Supplier Preference Supplier Partnership Dealer Exploitation Dealer Support Dealer Partnership Price-Driven Quality-Driven Value-Driven Average Speed Better Than Average Legendary

Vertically Integrated Flattened Organization Strategic Alliances Stockholder-Driven Stakeholder-Driven Societally-Driven

a The demise of marketing intuition and the rise of marketing science,

a The demise of manual marketing and the rise of automated marketing

• The demise of mass marketing and the rise of precision marketing

To accomplish these changes and become truly holistic with marketing, a new set of skills and competencies is needed Proficiency will be demanded in areas such as:

E3 Customer relationship management (CRM)

B Partner relationship management (PRM)

ca Database marketing and data-mining

• Contact center management and telemarketing

• Public relations marketing (including event and sponsorship marketing),

s Brand-building and brand-asset management

a Experiential marketing

a Integrated marketing communications

n Profitability analysis by segment, customer, channel

It is an exciting time for marketing In the relentless pursuit of marketing superiority and dominance, new rules and practices are emerging The benefits of successful twenty- first-century marketing are many, but will only come with hard work, insight, and inspi- ration The words of nineteenth-century American author Ralph Waldo Emerson may never have been more true: "This time like all times is a good one, if we but know what to

do with it."

MARKETING MEMO

A number of "deadly sins" signal that the marketing program is in

trouble Here are ten deadly sins, the signs, and some solutions

Deadly Sin: The company is not sufficiently

market-focused and customer-driven

Signs: Poor identification of market segments, poor prioritization of

market segments, no market segment managers, employees who

think it is the job of marketing and sales to serve customers, no

train-ing program to create a customer culture, no incentives to treat the

customer especially well

Solutions:

Use more advanced segmentation techniques, prioritize segments,

specialize the sales force, develop a clear hierarchy of company

val-ues, foster more "customer consciousness" in employees and

com-pany agents, make it easy for customers to reach the company and

respond quickly to any communication

Deadly Sin: The company does not fully understand

its target customers

Signs: Latest study of customers is three years old, customers are

not buying your product like they once did, competitors' products are

selling better, high level of customer returns and complaints

Solutions: Do more sophisticated consumer research, use more

analytical techniques, establish customer and dealer panels, use

customer relationship software, do data mining

Deadly Sin: The company needs t o better define and

monitor its competitors

Signs: The company focuses on near competitors, misses distant

competitors and disruptive technologies, no system for gathering and

distributing competitive intelligence

Solutions: Establish an office for competitive intelligence, hire

competitors' people, watch for technology that might affect the

com-pany, prepare offerings like competitors'

Deadly Sin: The company does not properly manage

relationships with stakeholders

Signs: Employees, dealers, and investors are not happy; good

sup-pliers do not come

Solutions: Move from zero-sum thinking to positive-sum thinking;

do a better job of managing employees, supplier relations,

distribu-tors, dealers, and investors

Deadly Sin: The company is not g o o d at finding new

opportunities

Signs:

The company has not identified any exciting new opportunities for

years, the new ideas the company has launched have largely failed

The marketing plan format does not have the right components, there

is no way to estimate the financial implications of different strategies, there is no contingency planning

Solutions:

Establish a standard format including situational analysis, SWOT, major issues, objectives, strategy, tactics, budgets, and controls; ask marketers what changes they would make if they were given 20 per- cent more or less budget; run an annual marketing awards program with prizes for best plans and performance

Deadly Sin: Product and service policies need

t i g h t e n i n g

Signs: Too many products and many are losing money, the

com-pany is giving away too many services, the comcom-pany is poor at selling products and services

cross-Solutions: Establish a system to track weak products and fix or

drop them, offer and price services at different levels, improve processes for cross-selling and upselling

Deadly Sin: The company's brand-building and communications skills are weak

Signs: The target market does not know much about the company,

the brand is not seen as distinctive, the company allocates its budget

to the same marketing tools in about the same proportion each year, there is little evaluation of the ROI impact of promotions

Solutions:

Improve brand-building strategies and measurement of results, shift money into effective marketing instruments, require marketers to estimate the ROI impact in advance of funding requests

Deadly Sin: The company is not organized for effective and efficient marketing

Signs: Staff lacks twenty-first-century marketing skills, bad vibes

between marketing/sales and other departments

Solutions: Appoint a strong leader and build new skills in the

mar-keting department, improve relationships between marmar-keting and other departments

Deadly Sin: The company has not made maximum use of technology

Signs: Minimal use of the Internet, outdated sales automation

sys-tem, no market automation, no decision-support models, no ing dashboards

market-Solutions: Use the Internet more, improve the sales automation

system, apply market automation to routine decisions, develop formal marketing decision models and marketing dashboards

Source: Philip Kotler, Ten Deadly Marketing Sins: Signs and Solutions (Hoboken, NJ: John Wiley & Sons, 2004)

SUMMARY : : :

The modern marketing department has evolved through

the years from a simple sales department to an

organiza-tional structure where marketing personnel work mainly

on cross-disciplinary teams

2 Modern marketing departments can be organized in a

number of ways Some companies are organized by

func-tional specialization, while others focus on geography and

regionalization Still others emphasize product and brand

management or market-segment management Some

companies establish a matrix organization consisting of

both product and market managers Finally, some

compa-nies have strong corporate marketing, others have limited

corporate marketing, and still others place marketing only

in the divisions

3 Effective modern marketing organizations are marked by a

strong cooperation and customer focus among the

com-pany's departments: marketing, R&D, engineering,

pur-chasing, manufacturing, operations, finance, accounting,

and credit

4 Companies must practice social responsibility through their legal, ethical, and social words and actions Cause marketing can be a means for companies to productively link social responsibility to consumer marketing programs Social marketing is done by a nonprofit or government organization to directly address a social problem or cause

5 A brilliant strategic marketing plan counts for little if it is not implemented properly Implementing marketing plans calls for skills in recognizing and diagnosing a problem, assessing the company level where the problem exists, implementation skills, and skills in evaluating the results

6 The marketing department has to monitor and control marketing activities continuously Efficiency control focuses on finding ways to increase the efficiency of the sales force, advertising, sales promotion, and distribution Strategic control entails a periodic reassessment of the company and its strategic approach to the marketplace using the tools of the marketing effectiveness and market- ing excellence reviews, as well as the marketing audit

Marketing D e b a t e Is Marketing M a n a g e m e n t a n Art or a S c i e n c e ?

Some marketing observers maintain that good marketing is

something that is more than anything an art and does not lend

itself to rigorous analysis and deliberation Others strongly

agree and contend that marketing management is a highly

dis-ciplined enterprise that shares much in common with other

business disciplines

Marketing D i s c u s s i o n

How does cause or corporate societal marketing affect your

personal consumer behavior? Do you ever buy or not buy any

Take a position: Marketing management is largely an artistic exercise and therefore highly subjective versus Marketing management is largely a scientific exercise with well- established guidelines and criteria

products or services from a company because of its mental policies or programs? Why or why not?

Microsoft was founded in 1975, when Bill Gates dropped out of Harvard at

age 19 to work with high school friend Paul Allen on a version of the BASIC

programming language After moving the company from Albuquerque to

Seattle in 1979, Gates and Allen began writing operating system software

What has happened to the company since its founding is a well-known and

oft-told story Here are a few of the key strategies that enabled Microsoft

to achieve such remarkable growth in the very competitive computer

industry

Product Innovation: Microsoft achieved early success because of a single

product innovation In 1980, IBM gave Microsoft a contract to write the

operat-ing system for its new PCs, which led to the creation of Microsoft Disk Operatoperat-ing System (MS-DOS) Because other computer manufacturers wanted compatibil- ity with IBM machines, Microsoft was soon adopted as the standard PC operat- ing system

Brand-Extension Strategy: Microsoft used its strong brand name to launch new software products such as Microsoft Word, Microsoft Office, and Microsoft Internet Explorer In 1989, Microsoft became the world's largest soft- ware seller, boasting the broadest array of software products and applications

as well as the highest profit margin in the industry (close to 25 percent) Launching a new product under a strong existing brand name gives the new

product instant recognition and credibility with much less advertising outlay

Microsoft currently has the second most valuable brand (worth $103 billion)

behind Proctor and Gamble

Heavy Advertising: As the company matured and sought new avenues for

growth, it increased both product and brand advertising In 1994, the company

made two major moves: It hired the head of marketing and advertising from

Procter & Gamble, and it developed its first global advertising campaign The

campaign doubled the company's ad budget to $100 million, and the following

year that figure ballooned to $200 million for the Windows 95 launch Today,

Microsoft routinely spends $50 million to market a single product The company

recently spent $150 million to promote its newest version of Microsoft Office

Its ads emphasize the latent potential to achieve more when customers use

Microsoft products with campaigns entitled, "Yes You Can," "Software for the

Agile Business," and "Realize Your Potential."

Competitive Toughness: Microsoft's aggressive competitive practices

enabled it to establish a leadership role in many product categories, but they

also led to legal battles Microsoft settled an antitrust lawsuit from the U.S

Justice Department over claims that it had limited consumer choice and stifled

competition in part by bundling software, such as Internet Explorer, with its

operating system Similar lawsuits in Europe, Japan, and with various U.S State

Attorneys General are pending Given how Microsoft supplanted IBM in the

industry that IBM created, many potential business partners in media,

technol-ogy, and communications are now wary of Microsoft

Product Expansion: Microsoft quickly expanded its business beyond

oper-ating systems The company moved from desktops to servers, from desktops to

portables, and into consumer electronics After overcoming its initial reluctance

to embrace the Internet, Microsoft developed the Internet Explorer Web browser

as an answer to Netscape and the Web portal Microsoft Network (MSN) to

com-pete with Yahoo! and AOL MSN is the second-largest Internet service provider,

but it has only about one-third the subscribers of leader AOL Expanding into

media, Microsoft formed a joint venture with NBC to create the cable station

MSNBC, which features news, financial, and talk-show programming The pany rolled out a video game console called Xbox intended to compete with advanced game systems from Sony and Nintendo

com-Product Integration: Microsoft uses integration between its products to boost

cross-selling The company's enterprise software integrates with its desktop ware, and its desktop Windows platform integrates with its PocketPC PDA platform

soft-A wristwatch with Microsoft software can receive messages from the desktop sion of Microsoft Outlook Microsoft recently gave away copies of its newest Microsoft Office Suite to enterprise clients Every time users of the free copy tried

ver-to access some of the more innovative collaborative features of Office, they got a notice telling them that they needed Microsoft Exchange Server (an expensive enterprise product that helps Microsoft solidify its hold on the customer), Microsoft is continuing on the path of deeper integration Its NET (pro- nounced "dot-net") concept is designed to merge Windows with the Internet directly Microsoft Net will allow multiple devices—PCs, wireless phones, pagers, digital cameras, PDAs, and other "smart devices"—to work together over Web connections with unprecedented ease The company is also working

on its Trustworthy Computing initiative to help increase the security of ers and prevent unauthorized access to files and computers; meanwhile, it con- tinues to expand in new ways with forays into online music sales, search engines, and cell phones

comput-Discussion Questions

1 What have been the key success factors for Microsoft?

2 Where is Microsoft vulnerable? What should it watch out for?

3 What recommendations would you make to senior marketing executives going forward? What should the company be sure to do with its marketing?

Sources: "What's In a Name?" Forbes, April 19, 2004, p 59; Adam Lashinsky,

"Shootout in Gadget Land," Fortune, November 10, 2003, p 74; Morag Cuddeford Jones, "IT'S a Lifestyle for Nick Barley at Microsoft," Brand Strategy, March 2004,

pp 18-19

NOTES : : :

1 Keith Fox, Katherine Jocz, and Bernard Jaworski, "A Common

Language," Marketing Management (May/June 2003): 14-17

2 Richard Tomlinson, "L'Oreal's Global Makeover," Fortune,

September 30, 2002, pp 141-146; "The Colour of Money," The

Economist, March 8, 2003, p 59; Sarah Ellison and John

Carreyrou, "An Unlikely Rival Challenges L'Oreal in Beauty

Market," Wall Street Journal, January 9, 2003, pp Al, A6

3 For additional updates on the latest academic thinking on

mar-keting strategy and tactics, see Kellogg on Marmar-keting, edited by

Dawn Iacobucci (New York: Wiley, 2001), and Kellogg on

Integrated Marketing, edited by Dawn Iacobucci and Bobby

Calder (New York: Wiley, 2003)

4 Frederick E Webster Jr., Alan J Malter, and Shankar Ganesan,

"Can Marketing Regain Its Seat at the Table?" Marketing Science

Institute Report No 03-113; Marketing Science Institute,

Cambridge, MA

5 Fox, Jocz, and Jaworski, "A Common Language," pp 14-17

6 For a broad historical treatment of marketing thought, sec

D G Brian Jones and Eric H Shaw, "A History of Marketing

Thought," in Handbook of Marketing, edited by Barton A Weitz

and Robin Wensley, 2002, London: Sage Publications, pp 39-65

7 Frederick E Webster Jr., "The Changing Role of Marketing in the

Corporation," journal of Marketing (October 1992): 1-17 Also see

Ravi S Achrol, "Evolution of the Marketing Organization: New

Forms for Turbulent Environment," Journal of Marketing [October

1991): 77-93; John R Workman Jr., Christian Homburg, and Kjell Gruner, "Marketing Organization: An Integrative Framework of

Dimensions and Determinants," Journal of Marketing (July 1998):

21-41 For some contemporary perspectives, see Special Issue

1999 of Journal of Marketing Fundamental Issues and Directions

for Marketing

8 For an excellent account of how to convert a company into a

market-driven organization, see George Day, The Market-Driven

Organization: Aligning Culture, Capabilities, and Configuration to the Market (New York: The Free Press, 1989)

9 Frederick E Webster Jr., "The Role of Marketing and the Firm," in

Handbook of Marketing, edited by Barton A Weitz and Robin

Wensley, 2002, London: Sage Publications pp 39-65

10 Frank V Cespedes, Concurrent Marketing: Integrating Product,

Sales, and Service (Boston: Harvard Business School Press, 1995);

and Frank V Cespedes, Managing Marketing Linkages: Text, Cases,

and Readings (Upper Saddle River, NJ: Prentice Hall, 1996)

11 < www.pacefoods.com >

12 Zachary Schiller, "The Marketing Revolution at Procter &

Gamble," BusinessWeek, July 25, 1988, pp 72-76; Laurie

Freeman, "P&G Widens Power Base: Adds Category Managers,"

Advertising Age

13 Michael J Zenor, "The Profit Benefits of Category Management,"

journal of Marketing Research, 31 (May 1994): 202-213

14 Gerry Khermouch, "Brands Overboard," Brandweek, August 22,

1994, pp 25-39

15 For further reading, see Robert Dcwar and Don Shultz, "The

Product Manager, an Idea Whose Time Has Gone," Marketing

Communications (May 1998): 28-35; "The Marketing Revolution

at Proctor & Gamble," BusinessWeek, July 25, 1988, pp 72-76;

Kevin T Higgins, "Category Management: New Tools Changing

Life for Manufacturers, Retailers," Marketing News, September 25,

1989, pp 2, 19; George S Low and Ronald A Fullerton, "Brands,

Brand Management, and the Brand Manager System: A Critical

Historical Evaluation," Journal of Marketing Research (May 1994):

173-190; Michael J Zanor, "The Profit Benefits of Category

Management," Journal of Marketing Research (May 1994):

202-213

16 Richard E Anderson, "Matrix Redux," Business Horizons

(November-December 1994): 6-10

17 Frederick E Webster Jr., "The Role of Marketing and the Firm," in

Handbook of Marketing, edited by Barton A Weitz and Robin

Wensley, 2002, London: Sage Publications, pp 39-65

18 Benson P Shapiro, "Can Marketing and Manufacturing Coexist?"

Harvard Business Review (September-October 1977): 104-114

Also see Robert W Ruekert and Orville C Walker Jr., "Marketing's

Interaction with Other Functional Units: A Conceptual

Framework with Other Empirical Evidence," Journal of Marketing

(January 1987): 1-19

19 Patricia Sellers, "P&G: Teaching an Old Dog New Tricks," Fortune,

May 31, 2004, pp 167-180

20 Erik Brynjolfsson and Lorin Hitt, "The Customer Counts,"

Information Week, September 9, 1996

21 Gary Hamel, Leading the Revolution (Boston: Harvard Business

School Press, 2000)

22 Kenneth Hein, "Rohan Oza," Brandweek, April 8, 2002, p 36;

"POWERade Scores with LeBron," Brandweek, August 18, 2004

23 William L Wilkie and Elizabeth S Moore, "Marketing's

Relationship to Society," in Handbook of Marketing, edited by

Barton A Weitz and Robin Wensley 2002, London: Sage

Publications, pp 1-38

24 "Special Report: Corporate Social Responsibility," The Economist,

December 14, 2002, pp 62-63

25 Don Tapscott and Anthony Williams, "What? Now We Flave to

Make a Profit and Be Ethical, Business 2.0, February 2002, p 30

26 For further reading, see Dorothy Cohen, Legal Issues in Marketing

Decision Making (Cincinnati, OH: South-Western, 1995)

27 Shelby D Hunt and Scott Vitell, "The General Theory of

Marketing Ethics: A Retrospective and Revision," in Ethics in

Marketing, edited by John Quelch and Craig Smith (Chicago:

30 Ronald J Alsop, "Perils of Corporate Philanthropy," Wall Street

Journal, January 16, 2002, p Bl; Ronald J Alsop, The 18 Immutable Laws of Corporate Reputation: Creating, Protecting, and Repairing Your Most Valuable Asset (New York: Free Press, 2004)

31 Paul Dolan, True to Our Roots: Fermenting a Business Revolution

(New York: Bloomberg Press, 2003); Alison Overholt, "The Good

Earth," Fast Company, December 2003, pp 86-88

32 Michael E Porter and Mark R Kramer, "The Competitive

Advantage of Corporate Philanthropy," Harvard Business Review

34 See Philip Kotler and Nancy Lee, Corporate Social Responsibility:

Doing the Most Good for Your Company and Your Cause (New

York: John Wiley, 2005)

35 For a discussion of some public health marketing issues and opportunities, see Michael L Rothschild, "Carrots, Sticks, and Promises: A Conceptual Framework for the Management of

Public I Iealth and Social Issue Behaviors," Journal of Marketing

63 (October 1999): 24-37

36 Jennifer Barrett, "A Secret Recipe for Success," Newsweek,

November 3, 2003, pp 48-49; Paul Newman and A E Hotchner,

Shameless Exploitation in Pursuit of the Common Good: The Madcap Business Adventure by the Truly Oddest Couple

(Waterville, ME: Thorndike Press, 2003)

37 Todd Wallack, "Conscience Calls," San Francisco Chronicle,

September 21, 2000; < www.workingassets.com >

38 Hamish Pringle and Marjorie Thompson, How Cause Related

Marketing Builds Brands (New York: John Wiley & Sons, 1999);

Christine Bittar, "Seeking Cause and Effect," Brandweek,

November 11, 2002, pp 19-24; "Marketing, Corporate Social Initiatives, and the Bottom Line," Marketing Science Institute

Conference Summary, MSI Report No 01-106, 2001

39 Rajan Varadarajan and Anil Menon, "Cause-Related Marketing: A Co-alignment of Marketing Strategy and Corporate Philanthropy,"

Journal of Marketings (1988): 58-74

40 Minette Drumwright and Patrick E Murphy, "Corporate Societal

Marketing," in Handbook of Marketing and Society, edited by

Paul N Bloom and Gregory T Gundlach (Thousand Oaks, CA: Sage Publications, 2001), pp 162-183 See also, Minette Drumwright, "Company Advertising with a Social Dimension:

The Role of Noneconomic Criteria," Journal of Marketing 60

(October 1996): 71-87

41 < www.britishairways.com >

42 Pat Auger, Paul Burke, Timothy Devinney, and Jordan J Loviere,

"What Will Consumers Pay for Social Product Features?" Journal

of Business Ethics 42 (2003): 281-304

43 C B Bhattacharya and Sankar Sen, "Consumer-Company Identification: A Framework for Understanding Consumers'

Relationships with Companies," Journal of Marketing 67 (April

2003): 76-88; Sankar Sen and C B Bhattacharya, "Does Doing Good Always Lead to Doing Better? Consumer Reactions to

Corporate Social Responsibility," Journal of Marketing Research

38, no 2 (2001): 225-244; Dennis B Arnett, Steve D German, and Shelby D Hunt, "The Identity Salience Model of Relationship

Marketing Success: The Case of Nonprofit Marketing," Journal of

Marketing&l (April 2003): 89-105

44 Stephen Hoeffler and Kevin Lane Keller, "Building Brand Equity

through Corporate Societal Marketing," Journal of Public Policy

and Marketing21, no 1 (Spring 2002), pp 78-89 See also, Special

Issue: Corporate Responsibility, Journal of Brand Management 10,

nos 4-5 (May 2003)

45 Pringle and Thompson, How Cause Related Marketing Builds

Brands; <www.loveisnotabuse.com >

46 Mark R Forehand and Sonya Grier, "When Is Honesty the Best

Policy? The Effect of Stated Company Intent on Consumer

Skepticism," Journal of Consumer Psychology 13, no 3 (2003):

349-356; Dwane Ilal Dean, "Associating the Corporation with a

Charitable Event Through Sponsorship: Measuring the Effects on

Corporate Community Relations," Journal of Advertising 31, no 4

(2002): 77-87

47 Steve Hoeffler, Paul N Bloom, and Kevin Lane Keller, "Achieving

Social Change Through Corporate Societal Marketing:

Incorporating a Consumer Orientation into CSR Programs,"

work-ing paper, Kenan-Elagler School of Business, University of North

Carolina at Chapel Hill, 2004

48 Alsop, The 18 Immutable Laws of Corporate Reputation: Creating,

Protecting, and Repairing Your Most Valuable Asset, p 125

49 Susan Orenslein, "The Selling of Breast Cancer," Business 2.0,

February 2003, pp 88-94; H Meyer, "When the Cause Is Just,"

Journal of Business Strategy (November-December 1999): 27-31

50 Christine Bittar, "Seeking Cause and Effect," Brandweek,

November 11, 2002, pp 18-24

51 Philip Kotler, Ned Roberto, and Nancy Lee, Social Marketing:

Improving the Quality of Life (Thousand Oaks, CA: Sage, 2002)

52 < www.causemarketingforum.com >

53 See Rothschild, "Carrots, Sticks, and Promises: A Conceptual

Framework for the Management of Public Health and Social Issue

Behaviors," pp 24-37

54 For more on developing and implementing marketing

plans, see H W Goetsch, Developing, Implementing, and

Managing an Effective Marketing Plan (Chicago: NTC Business

Books, 1993)

55 Ibid

56 Thomas V Bonoma, The Marketing Edge: Making Stategies Work

(New York: The Free Press, 1985) Much of this section is based on Bonoma's work

57 C Marcus, "Marketing Resource Management: Key Components,"

Gartner Research Note, August 22, 2001

58 Sam R Goodman, Increasing Corporate Profitability (New York:

Ronald Press, 1982), ch 1 Also see Bernard J Jaworski, Vlasis Stathakopoulos, and II Shanker Krishnan, "Control

Combinations in Marketing: Conceptual Framework and

Empirical Evidence," Journal of Marketing (January 1993):

57-69

59 Peter M Senge, The Fifth Discipline: The Art and Practice of the

Learning Organization (New York: Doubleday Currency, 1990),

ch 7

60 For further discussion of this instrument, see Philip Kotler, "From

Sales Obsession to Marketing Effectiveness," Llarvard Business

Review (November-December 1977): 67-75

61 Philip Kotler, William Grcgor, and William Rodgers, "The

Marketing Audit Comes of Age," Sloan Management Review (Winter 1989): 49-62; Frederick Reichheld, The Loyalty Effect

(Boston: llarvard Business School Press, 1996) discusses attrition the Figures

62 Useful checklists for a marketing self-audit can be found in

Aubrey Wilson, Aubrey Wilson's Marketing Audit Checklists (London: McGraw-Hill, 1982); Mike Wilson, The Management of

Marketing (Westmead, England: Gower Publishing, 1980) A

mar-keting audit software program is described in Ben M Enis and Stephen J Garfein, "The Computer-Driven Marketing Audit,"

Journal of Management Inquiry (December 1992): 306-318

63 Kotler, Gregor, and Rodgers, "The Marketing Audit Comes of Age,"

pp 49-62

::: SONIC MARKETING PLAN EXERCISES

The Marketing Plan:

An Introduction

As a marketer, you'll need a good marketing plan to

pro-vide direction and focus for your brand, product, or

company With a detailed plan, any business will be

bet-ter prepared to launch a new product or build sales for

existing products Nonprofit organizations also use

mar-keting plans to guide their fundraising and outreach

efforts Even government agencies put together

market-ing plans for initiatives such as buildmarket-ing public

aware-ness of proper nutrition and stimulating area tourism

The Purpose and Content

of a Marketing Plan

Unlike a business plan, which offers a broad overview of

the entire organization's mission, objectives, strategy,

and resource allocation, a marketing plan has a more

limited scope It spells out how the organization's

strate-gic objectives will be achieved through specific

market-ing strategies and tactics, with the customer as the

start-ing point It is also linked to the plans of other

depart-ments within the organization Suppose a marketing

plan calls for selling 200,000 units annually The

produc-tion department must gear up to make that many units,

the finance department must have funding available to

cover the expenses, the human resources department

must be ready to hire and train staff, and so on Without

the appropriate level of organizational support and

resources, no marketing plan can succeed Although the

exact length and layout will vary from company to

com-pany, a marketing plan usually contains the sections

described in Chapter 2 Smaller businesses may create

shorter or less formal marketing plans, whereas

corpora-tions frequently require highly structured marketing

plans But to ensure correct implementation, every part

of the plan must be described in considerable detail

Sometimes a company will post its marketing plan on an

internal Web site, which allows managers and employees

in different locations to consult specific sections and

collaborate on additions or changes

The Role of Research

To develop successful strategies and action programs,

marketers need up-to-date information about the

envi-ronment, the competition, and the market segments to

be served Often, analysis of internal data is the starting

point for assessing the current marketing situation,

sup-plemented by marketing intelligence and research

investigating the overall market, the competition, key

issues, and threats and opportunities As the plan is put

into effect, marketers use advertising and other forms of

research to measure progress toward objectives and identify areas for improvement if results fall short of pro- jections Finally, marketers use marketing research to learn more about their customers' requirements, expec- tations, perceptions, and satisfaction levels This deeper understanding provides a foundation for building com- petitive advantage through well-informed segmenting, targeting, and positioning decisions Thus, the market- ing plan should outline what marketing research will be conducted and how the findings will be applied

The Role of Relationships

The marketing plan shows how the company will lish and maintain profitable customer relationships In the process, however, it also shapes a number of internal and external relationships

estab-First, it affects how marketing personnel work with one another and with other departments to deliver value and satisfy customers Second, it affects how the compa-

ny works with suppliers, distributors, and strategic alliance partners to achieve the objectives listed in the plan Third, it influences the company's dealings with other stakeholders, including government regulators, the media, and the community at large All these rela- tionships are important to the organization's success

From M a r k e t i n g Plan

t o M a r k e t i n g A c t i o n

Companies generally create yearly marketing plans, although some plans cover a longer period Marketers start planning well in advance of the implementation date to allow time for marketing research, thorough analysis, management review, and coordination between departments Then, after each action program begins, marketers monitor ongoing results, compare them with projections, analyze any differences, and take corrective steps Because of inevitable and sometimes unpredictable environmental changes, marketers must

be ready to update and adapt marketing plans at any time Some marketers also design contingency plans For effective implementation and control, the market- ing plan should define how progress toward objectives will

be measured Managers typically use budgets, schedules, and performance standards for monitoring and evaluating results With budgets, they can compare planned expendi- tures with actual expenditures for a given week, month, or other period Schedules allow management to see when tasks were supposed to be completed—and when they were actually completed Performance standards track the outcomes of marketing programs to see whether the com- pany is moving toward its objectives Some examples of performance standards are: market share, sales volume, product profitability, and customer satisfaction

A1

S a m p l e Marketing Plan for Sonic

The Executive Summary is for

senior managers who must

review and approve the

mar-keting plan

The Executive Summary is an

overview of the market

opportu-nity and strategy for meeting

needs of targeted market

segments

The Executive Summary

includes marketing and

finan-cial objectives and expected

results

The Situation Analysis focuses

on market definition and the

current capability of the

com-pany to serve the market

This section takes you inside the sample marketing plan for Sonic, a hypothetical start-up company The company's first product is the Sonic 1000, a multifunction personal digital assistant (PDA), also known as a handheld computer Sonic will be competing with palmOne, Hewlett-Packard, and other well-established rivals The annotations explain more about what each section of the plan should contain

1.0 Executive Summary

Sonic is preparing to launch a PDA product, the Sonic 1000, in a maturing market Despite the dominance of PDA leader palmOne, we can compete because our offering combines exclusive features at a value-added price We are targeting specific segments in consumer and business markets, taking advantage of opportunities indicated by demand for easy-to- use, wireless-enabled PDAs with expanded communications functionality

The primary marketing objectives of this plan are to achieve first-year U.S market share

of 3 percent and unit sales of 240,000 The primary financial objectives are to achieve year sales revenues of $60 million, keep first-year losses to less than $10 million, and break even early in the second year

first-2 0 Situation Analysis

Sonic, founded 18 months ago by two entrepreneurs with experience in the PC market, is about to enter the PDA market dominated by palmOne Overall PDA sales have slowed and profitability has suffered The emergence of multifunction PDAs and advanced cell phones has increased competitive pressures Estimated market size for multifunction PDAs and cell phones is S63.7 billion, with 50% growth expected within 4 years To gain market share in this environment, Sonic must carefully target specific market segments

Market Summary includes size,

needs, growth, and trends

Description of targeted

seg-ments provides context for the

marketing strategies and

action programs discussed

later in the plan

SUMMARY Sonic's market consists of consumers and business users who need to conveniently store, communicate, and exchange information on the go Segments being targeted during the first year include professionals, students, corporations, entrepre- neurs, and medical users Exhibit 1 shows how the Sonic 1000 addresses the needs of target-

ed consumer and business segments

PDA purchasers can choose between models based on two different operating systems created by Palm and Microsoft Sonic licenses the market-dominant Palm system because thousands of software applications and hardware peripherals are compatible with this sys-

E X H I B I T 1 I Needs and Corresponding Features/Benefits of Sonic PDA

Targeted Segment Customer Need

Professionals • Stay in touch while on the go

• Record information while on the go

• Perform many functions without earryinc multiple gadgets

• Express style and individuality

a Input and access critical data on the go

• Use for proprietary tasks

• Organize and access contacts, schedule details

a Update, access, and exchange medical records

Corresponding Feature/Benefit

• Wireless e-mail to conveniently send and receive messages from anywhere; cell phone capability for voice communication from anywhere

• Voice recognition for no-hands recording

u ' Compatible with numerous applications and peripherals for convenient, cost-effective functionality

• Case wardrobe of different colors and patterns allows users to make a fashion statement

u Compatible with widely available software

• Customizable to fit diverse corporate tasks and networks

• No-hands, wireless access to calendar and address book to easily check appointments and connect with contacts

o No-hands, wireless recording and exchange of information to reduce paperwork and increase productivity

tem Product proliferation and increased competition have resulted in lower prices and

lower profit margins Lower prices are helping sales of PDAs in the lower end of the

con-sumer market, but at the expense of gross margins Customers with first-generation PDAs

are reentering the market by buying newer, high-end multifunction units

2 2 S T R E N G T H S , W E A K N E S S E S , O P P O R T U N I T I E S , A N D T H R E A T ( S W O T ) A N A L Y S I S

Sonic has several powerful strengths on which to build, but our major weakness is lack of

brand awareness and image The major opportunity is growing demand for multifunction

PDAs that deliver communication-specific benefits We also face the threat of ever-greater

competition and downward pressure on pricing

Strengths Sonic can build on three important strengths:

1 Innovative product Sonic 1000 includes a voice recognition system that simplifies usage

and allows hands-free operation It also offers features such as built-in cell phone

func-tionality, wireless communication, and MP3 capabilities

2 Compatibility Our PDA can work with the hundreds of Palm-compatible peripherals

and applications currently available

3 Pricing Our product is priced lower than competing multifunction models—all of which

lack voice recognition—which gives us an edge with price-conscious customers

Weaknesses By waiting to enter the PDA market until the initial shakeout and

consolida-tion of competitors has occurred, Sonic has learned from the successes and mistakes of

oth-ers Nonetheless, we have two main weaknesses:

1 Lack of brand awareness Sonic has not yet established a brand or image in the

market-place, whereas palmOne and other rivals have strong brand recognition This is an area

we will address with promotion

2 Heavier weight To accommodate the multifunction features, the Sonic 1000 is slightly

heavier than most competing models To counteract this, we will emphasize our

multi-function features and value-added pricing, two important competitive strengths

Opportunities Sonic can take advantage of three major market opportunities:

1 Increasing demand for multiple communication methods The market for wireless

Web-enabled PDAs with cell phone functionality is projected to grow faster than the

market for nonwireless models There are more users with PDAs in work and

education-al settings, which is boosting primary demand Also, customers who bought entry-level

models are now trading up

2 Add-on peripherals More peripherals, such as digital cameras and global positioning

systems, are available for the Palm operating system Consumers and business users who

are interested in any of these peripherals will see the Sonic 1000 as a value-priced device

able to be conveniently and quickly expanded for multiple functions

3 Diverse applications The wide range of Palm-compatible software applications

avail-able for home and business use allows the Sonic PDA to satisfy communication and

information needs

Threats We face three main threats at the introduction of the Sonic 1000:

1 Increased competition More companies are entering the U.S PDA market with models

that offer some but not all of the features and benefits provided by Sonic's PDA

Therefore, Sonic's marketing communications must stress our clear differentiation and

value-added pricing

2 Downward pressure on pricing Increased competition and market-share strategies are

pushing PDA prices down Still, our objective of seeking a 10% profit on second-year

sales of the original model is realistic, given the lower margins in the PDA market

3 Compressed product life cycle PDAs seem to be reaching the maturity stage of their

life cycle more quickly than earlier technology products We have contingency plans

to keep sales growing by adding new features, targeting additional segments, and

adjusting prices

Market trends must be ered as the company develops its marketing strategies

consid-Strengths are internal ties that can help the company reach its objectives

capabili-Weaknesses are internal ments that may interfere with the company's ability to achieve its objectives

ele-Opportunities are areas of buyer need or potential interest

in which the company might perform profitably

Threats are challenges posed

by an unfavorable trend or development that could lead to lower sales and profits

Increased entry of established computer and cell phone companies has pressured industry participants to continually add features and cut prices Competition from specialized devices for text and e-mail messaging, such as Blackberry devices, is also a factor Key competitors:

i paltnOne has had financial struggles because of the need to reduce prices for competitive

reasons Its acquisition of I Iandspring boosted its product development strength and expanded its product mix As the best-known maker of PDAs, palmOne has achieved distribution in nearly every channel, including distribution by U.S cell phone service carriers At present, palmOne products lack some of the voice recognition software standard in the Sonic 1000

I Hewlett-Packard targets business markets with its iPAQ Pocket PC devices, many with

wireless capabilities to accommodate corporate users For extra security, one model allows access by fingerprint match as well as by password HP enjoys excellent distribution, and its products are priced from below S300 to more than $600

: Garmin's iQue 3600 was the first PDA with built-in global position system (GPS)

capabil-ity Priced at $589, its mapping software and verbal commands eliminate the need for an automotive device Garmin's PDA uses the Palm operating system and has other unique functions, such as a digital voice recorder for brief memos

• Dell's PDA model is priced starting at $199 However, this product is larger than

compet-ing palmOne products, and it lacks wireless functionality as a standard feature New, mer models are expected at regular intervals from this low-cost competitor, which markets directly to customers

slim-Samsung is one of several manufacturers that have married cell phone capabilities with

multifunction PDA features Its i500 uses the Palm operating system, provides speedy e-mail and MP3 downloads, plays video clips, and offers PDA functions such as address book, cal- endar, and speed dial

Despite strong competition, Sonic can carve out a definite image and gain recognition among targeted segments Our licensing arrangement with Cellport Systems allows us to provide the exclusive feature of voice recognition for hands-off operation, a critical point of differentiation for competitive advantage Exhibit 2 shows a selection of competitive PDA products and prices

I The Sonic PDA 1000 offers the following standard features:

n Voice recognition for hands-free commands and communication

n Built-in cell phone functionality

• Wireless Web access and e-mail capabilities

• MP3 music downloading and player capabilities

• Full organization and communication functions, including calendar, address book, memo pad, Internet browser, e-mail program, and text and instant messaging programs

n Connectors to accommodate all palmOne-compatible peripherals

E X H I B I T 2 | Selected PDA Products and Pricing

PalmOne Tungsten C PDA functions, wireless capabilities, color screen, tiny keyboard, wireless capabilities $499

Handspring Treo 270 PDA and cell phone functions, color screen, tiny keyboard, speakerphone capabilities; no expansion slot $499

Garmin iQue 3600 PDA functions, global positioning system technology, voice recorder, expansion slot, MP3 player $589

Sony Clie PEG-NX73V PDA functions, digital camera, tiny keyboard, games, presentation software, MP3 player, voice recorder $499

Competition identifies key

competitors, describes their

market positions, and provides

an overview of their strategies

Product Offering summarizes

main features of the

compa-ny's products