www.freebookslides.com 7e R KE TIN M A T H E C O RE G Roger A Kerin Steven W Hartley www.freebookslides.com MARKETING: THE CORE www.freebookslides.com www.freebookslides.com MARKETING: THE CORE Seventh Edition Roger A Kerin Southern Methodist University Steven W Hartley University of Denver www.freebookslides.com MARKETING: THE CORE, SEVENTH EDITION Published by McGraw-Hill Education, Penn Plaza, New York, NY 10121 Copyright © 2018 by McGraw-Hill Education All rights reserved Printed in the United States of America Previous editions © 2016, 2013, 2011, and 2009 No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning Some ancillaries, including electronic and print components, may not be available to customers outside the United States This book is printed on acid-free paper LMN/LMN 21 20 19 18 17 16 ISBN 978-1-259-71236-4 MHID 1-259-71236-2 Chief Product Officer, SVP Products & Markets: G Scott Virkler Vice President, General Manager, Products & Markets: Michael Ryan Vice President, Content Design & Delivery: Betsy Whalen Managing Director: Susan Gouijnstook Brand Manager: Meredith Fossel Director, Product Development: Meghan Campbell Marketing Manager: Elizabeth Schonagen Lead Prodect Developer: Kelly Delso Product Developer: Kelly I Pekelder Digital Product Analyst: Kerry Shanahan Director, Content Design & Delivery: Terri Schiesl Program Manager: Mary Conzachi Content Project Managers: Christine Vaughan and Danielle Clement Buyer: Susan K Culbertson Design: Matt Diamond Content Licensing Specialists: DeAnna Dausener and Lori Hancock Cover Image: © Francisco Diez Photography/Getty Images Compositor: Aptara®, Inc Typeface: 10/12 STIXMathJax Printer: LSC Communications All credits appearing on page or at the end of the book are considered to be an extension of the copyright page Library of Congress Cataloging-in-Publication Data Names: Kerin, Roger A., author | Hartley, Steven William, author Title: Marketing : the core / Roger A Kerin, Southern Methodist University, Steven W Hartley, University of Denver Description: Seventh Edition | Dubuque: McGraw-Hill Education, [2018] | Revised edition of Marketing, 2016 Identifiers: LCCN 2016045002| ISBN 9781259712364 (alk paper) | ISBN 1259712362 (alk paper) Subjects: LCSH: Marketing Classification: LCC HF5415 K452 2018b | DDC 658.8—dc23 LC record available at https://lccn.loc.gov/2016045002 The Internet addresses listed in the text were accurate at the time of publication The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites mheducation.com/highered www.freebookslides.com WELCOME! n, big data, binge-watching, bile, digital, viral, gamificatio mo ial, soc as h suc s ase phr centricity, value proposition, Do words and brand storytelling, customery, log hno tec ble ara we , ngs If they do, you already have Internet of Thi familiar or interesting to you? nd sou lity abi tain sus or g, sin world These topics are native adverti newest topics in the business the of e som ut abo g rnin lea learn about during the next a great start to ing concepts and tools you’ll erg em and new ny ma the re to provide a textbook just a few of dy of marketing It is our pleasu stu r you ake ert und you as s several month to this exciting discipline! rketing we know you have to facilitate your introduction l introduction to studying ma ma for t firs r you be y ma , or possibly as an employee While this ting as a consumer, a volunteer rke ma of rld wo the to re osu the role of marketing in our important exp vide important perspectives on pro s nce erie exp se the of All t activities as reference in a business encourage you to use your pas We ies nom eco bal glo and rketing practices In addition, local, national, ding of our marketplace and ma tan ers und g stin exi r you on ld you navigate the many new points and bui r future career aspirations as you ut abo k thin l wil you t we hope tha ounter ticularly exciting We believe marketing topics you will enc ke this edition of our book par ma ting le, rke ma of s ect asp The new ts into the content, writing sty k have given us many insigh boo tic this ma ting dra wri the s As nce g erie learnin our past exp terials that lead to effective ma g rtin e po hav sup tion and ula es, reg rcis and hnology, examples, exe global competition, digital tec , ues val you er lls ski sum ate to to-d ted upchanges rela give you the most ted the new perspectives to ting is taken place, we have integra ting the complexities of marke sen Our approach to pre nal sio fes pro ting rke ma a will need as ensions: based on three important dim s with many exceptional stue benefited from interaction hav we s sor fes pro As ent Engagem our approach to teaching and insights have contributed to ir The s tor truc ins and , ers of the essential elements of our dents, manag rts as textbook authors One effo our to tly, uen seq sub , grated, and timely materials learning and rning through engaging, inte lea ive act to nt me mit com a rcises, and in-text links to approach is ilding Your Marketing Plan exe Bu g, blo tive rac inte an , ies of our engagement model In-class activit examples of the components few a t jus are es pag b We online ads and a leadership role in the ed on a commitment to taking bas o als is ch roa app r Ou p practices in marketing This Leadershi ideas, principles, theories, and new of on tati sen pre and our discipline accelerates and development ore, as the pace of change in bef r eve n tha now ant ort that exposure to leadingis more imp nal marketing We are certain itio trad of ect asp ry eve ost cs, and marketing metrics influences alm ics, social media, data analyti eth as h suc ics top to ted rela edge material ders in their jobs and careers can help students become lea ng tools have magnified the logies and innovative teachi hno tec al ion cat edu w Ne n rnSmart, and SmartBook, for Innovatio our approach Connect, Lea of s ect ” asp p shi der lea and the “anytime and anywhere engagement tive platform that embraces rac inte imand ual ital vis dig the a e sed vid rea example, pro videos and inc addition, we have provided new styles of today’s students In a approaches to learning edi ltim to facilitate mu ials ter ma t oin erP Pow and t s in 11 languages, we have pact of the tex s, and 19 international edition tion edi U.S us vio pre the Through m students and instructors We dback we have received fro fee tic ias hus ent the by d exciting discipline with you been gratifie ty to share our passion for this uni ort opp this e hav to ited are very exc tion of Marketing: The Core! Roger A Kerin today Welcome to the 7th edi Steven W Hartley v www.freebookslides.com PREFACE Marketing: The Core utilizes a unique, innovative, and effective pedagogical approach developed by the authors through the integration of their combined classroom, college, and university experiences The elements of this approach have been the foundation for each edition of Marketing: The Core and serve as the core of the text and its supplements as they evolve and adapt to changes in student learning styles, the growth of the marketing discipline, and the development of new instructional technologies The distinctive features of the approach are illustrated below: Rigorous Framework A pedagogy based on the use of learning objectives, learning reviews, learning objectives reviews, and supportive student supplements High-Engagement Style Easy-to-read, highinvolvement, interactive writing style that engages students through active learning techniques Marketing, 7/e Personalized Marketing A vivid and accurate description of businesses, marketing professionals, and entrepreneurs—through cases, exercises, and testimonials—that allows students to personalize marketing and identify possible career interests Pedagogical Approach Traditional and Contemporary Coverage Comprehensive and integrated coverage of traditional and contemporary marketing concepts Integrated Technology The use of powerful technical resources and learning solutions, such as Connect, LearnSmart, SmartBook, www.kerinmarketing.com, and in-text video links Marketing Decision Making The use of extended examples, cases, and videos involving people making marketing decisions The goal of the 7th edition of Marketing: The Core is to create an exceptional experience for today’s students and instructors of marketing The development of Marketing: The Core was based on a rigorous process of assessment, and the outcome of the process is a text and package of learning tools that are based on engagement, leadership, and innovation in marketing education vi www.freebookslides.com ENGAGEMENT The members of this author team have benefited from extraordinary experiences as instructors, researchers, and consultants, as well as the feedback of users of previous editions of Marketing: The Core—now more than one million students! The authors believe that success in marketing education in the future will require the highest levels of engagement They ensure engagement by facilitating interaction between students and four learning partners—the instructor, other students, businesses, and the publisher Some examples of high-engagement elements of Marketing: The Core include: In-Class Activities and Digital In-Class Activities. These activities are designed to engage students in discussions with the instructor and among themselves They involve surveys, online resources, out-of-class assignments, and personal observations Each activity illustrates a concept from the textbook and can be done individually or as a team Examples include: Designing a Candy Bar, Marketing Yourself, Pepsi vs Coke Taste Test, and What Makes a Memorable TV Commercial? In addition, digital in-class activities have been added to selected chapters These activities focus on the use of web resources and the marketing data they can provide students Interactive Website and Blog (www.kerinmarketing.com). Students can access recent articles about marketing and post comments for other students The site also provides access to a Marketing: The Core Twitter feed! Building Your Marketing Plan. The Building Your Marketing Plan guides at the end of each chapter are based on the format of the Marketing Plan presented in Appendix A On the basis of self-study or as part of a course assignment, students can use the activities to organize interactions with businesses to build a marketing plan Students and employers often suggest that a well-written plan in a student’s portfolio is an asset in today’s competitive job market vii www.freebookslides.com LEADERSHIP The popularity of Marketing: The Core in the United States and around the globe is the result, in part, of the leadership role of the authors in developing and presenting new marketing content and pedagogies For example, Marketing: The Core was the first text to integrate ethics, technology, and interactive marketing It was also the first text to develop custom-made videos to help illustrate marketing principles and practices and bring them to life for students as they read the text The authors have also been leaders in developing new learning tools such as a three-step learning process that includes learning objectives, learning reviews, and learning objectives reviews; and new testing materials that are based on Bloom’s learning taxonomy Other elements that show how Marketing: The Core is a leader in the discipline include: Chapter 16: Using Social Media and Mobile Marketing to Connect with Consumers. Marketing: The Core features a dedicated chapter for social media and mobile marketing This new environment is rapidly changing and constantly growing The authors cover the building blocks of social media and mobile marketing and provide thorough, relevant content and examples The authors discuss major social media platforms such as Twitter, Facebook, LinkedIn, and YouTube They explain how managers and companies can use those outlets for marketing purposes Also discussed in Chapter 16 are methods of measuring a company’s success with social media and mobile marketing This chapter is one of many ways Marketing: The Core is on the cutting edge of the field Applying Marketing Metrics. The Applying Marketing Metrics feature in the text delivers two of the newest elements of the business and marketing environment today—performance metrics and dashboards to visualize them Some of the metrics included in the text are: Category Development Index (CDI), Brand Development Index (BDI), Price Premium, Sales per Square Foot, Same-Store Sales Growth, Promotion-to-Sales Ratio, and Cost per Thousand (CPM) Impressions The feature is designed to allow readers to learn, practice, and apply marketing metrics Color-Coded Graphs and Tables. The use of color in the graphs and tables enhances their readability and adds a visual level of learning to the textbook for readers In addition, these color highlights increase student comprehension by linking the text discussion to colored elements in the graphs and tables New Video Cases. Each chapter ends with a case that is supported by a video to illustrate the issues in the chapter New cases such as Coppertone, Mall of America, and GoPro, and recent cases such as Amazon, Taco Bell, and Chobani Greek Yogurt provide current and relevant examples that are familiar to students viii www.freebookslides.com INNOVATION In today’s fast-paced and demanding educational environment, innovation is essential to effective learning To maintain Marketing: The Core’s leadership position in the marketplace, the author team consistently creates innovative pedagogical tools that match contemporary students’ learning styles and interests The authors keep their fingers on the pulse of technology to bring real innovation to their text and package Innovations such as in-text links, a Twitter feed, hyperlinked PowerPoint slides, and an online blog augment the McGraw-Hill Education online innovations such as Connect, LearnSmart, and SmartBook In-text Links. You can see Internet links in magazine ads; on television programming; as part of catalogs, in-store displays, and product packaging; and throughout Marketing: The Core! These links bring the text to life with ads and videos about products and companies that are discussed in the text These videos also keep the text even more current While each link in the text has a caption, the links are updated to reflect new campaigns and market changes In addition, the links allow readers to stream the video cases at the end of each chapter You can simply click on the links in the digital book or use your smartphone or computer to follow the links Twitter Feed and Interactive Blog. Visit www.kerinmarketing.com to participate in Marketing’s online blog discussion and to see Twitter feed updates You can also subscribe to the Twitter feed to receive the Marketing Question of the Day and respond with the #QotD hashtag Connect, LearnSmart, and SmartBook Integration. These McGraw-Hill Education products provide a comprehensive package of online resources to enable students to learn faster, study more efficiently, and increase knowledge retention The products represent the gold standard in online, interactive, and adaptive learning tools and have received accolades from industry experts for their Library and Study Center elements, filtering and reporting functions, and immediate student feedback capabilities In addition, the authors have developed book-specific interactive assignments, including auto-graded applications based on the marketing plan exercises Innovative Test Bank. Containing almost 5,000 multiple-choice and essay questions, the Marketing: The Core Test Bank reflects more than two decades of innovations The Test Bank includes two Test Item Tables (located in the Instructor Resources) for each chapter that organize all the chapter’s test items by Bloom’s three levels of learning against both (1) the main sections in the chapter and (2) the chapter’s learning objectives In addition, a number of “visual test questions” for each chapter reward students who have spent the effort to understand key graphs and tables in the chapter ix www.freebookslides.com Future 240 E 220 43 200 180 160 140 D 120 100 80 60 Actual sales revenues from 2000 to 2005 Actual sales revenues from 2005 to 2015 Planning Gap 40 20 C B A 2000 2002 2004 2005 2006 2008 2010 2012 2014 2016 Comparing Results with Plans to Identify Deviations At the end of its fiscal year, which is September 30, Apple begins the evaluation phase of its strategic marketing process Suppose you are on an Apple task force in late 2005 that is responsible for making plans through 2015 You observe that extending the 2000–2005 trend of Apple’s recent sales revenues (line AB in Figure 2–11) to 2015 along line BC shows an annual growth in sales revenue unacceptable to Apple’s management Looking at potential new products in the Apple pipeline, your task force set an aggressive annual sales growth target of 25 percent per year—the line BD in Figure 2–11 This would give sales revenues of $42 billion in 2010 and $130 billion in 2015 This reveals a gray wedge-shaped gap DBC in the figure Planners call this the planning gap, the difference between the projection of the path to reach a new sales revenue goal (line BD) and the projection of the path of a plan already in place (line BC) The ultimate purpose of the firm’s marketing program is to “fill in” this planning gap—in the case of your Apple task force, to move its future sales revenue line from the slow-growth line BC up to the more challenging target of line BD This is the essence of evaluation: comparing actual results with goals set To reach aggressive growth targets in sales revenues, firms like Apple must continuously look for a new BCG SBU or product cash cow or star Acting on Deviations When evaluation shows that actual performance differs from expectations, managers need to take immediate marketing actions—exploiting positive deviations and correcting negative ones Comparing the explosion in Apple’s actual sales revenues from 2006 to 2015 (line BE in Figure 2–11) to its target sales revenues (line BD) shows Apple’s rare, world-class ability to both generate and anticipate consumer demand and commercialize new technologies for its revolutionary offerings Let’s consider some of its marketing actions: CHAPTER 2 Developing Successful Organizational and Marketing Strategies Apple logos: Left: © Mickey Pfleger/LIFE Images/Getty Images; Right: © Jerome Favre/Bloomberg via Getty Images; Computer: Source: Apple Inc Past Annual sales revenues ($ billions) FIGURE 2–11 The evaluation phase of the strategic marketing process requires that the organization compare actual results with goals to identify and act on deviations to fill in its “planning gap.” The text describes how Apple is working to fill in its planning gap www.freebookslides.com ● ● Exploiting a positive deviation Favorable customer reactions to Apple’s iPhone (2007) and its iPad (2010) enable it to sell the products globally and to introduce improved versions and models, such as the iPad mini (2012) and the Apple Watch (2015) Correcting a negative deviation As Apple’s desktop PCs became dated, it moved aggressively to replace them with new iMacs and MacBooks Also, Apple refreshed its MacBook Air and MacBook Pro lines of laptops (2013) As we saw earlier in the BCG business portfolio analysis of the four Apple product lines, the firm has several stars and cash cows to fill in its planning gap We shall explore Apple’s market-product strategies in more detail later in Chapters 8 and learning review 2-10 What is the implementation phase of the strategic marketing process? 2-11 How the goals set for a marketing program in the planning phase relate to the evaluation phase of the strategic marketing process? LEARNING OBJECTIVES REVIEW LO 2-1 Describe three kinds of organizations and the three levels of strategy in them An organization is a legal entity that consists of people who share a common mission It develops offerings (goods, services, or ideas) that create value for both the organization and its customers by satisfying their needs and wants Today’s organizations are of three types: for-profit organizations, nonprofit organizations, and government agencies A for-profit organization serves its customers to earn a profit so that it can survive A nonprofit organization is a nongovernmental organization that serves its customers but does not have profit as an organizational goal Instead, its goals may be operational efficiency or client satisfaction A government agency is a federal, state, county, or city unit that provides a specific service to its constituents Most large for-profit and nonprofit organizations are divided into three levels of strategy: (a) the corporate level, where top management directs overall strategy for the entire organization; (b) the strategic business unit level, where managers set a more specific strategic direction for their businesses to exploit value-creating opportunities; and (c) the functional level, where groups of specialists actually create value for the organization LO 2-2 Describe core values, mission, organizational culture, business, and goals Organizations exist to accomplish something for someone Core values are the organization’s fundamental, passionate, and enduring principles that guide its conduct over time The organization’s mission is a statement of its function in society, often identifying its customers, markets, products, and technologies Organizational culture is a set of values, ideas, attitudes, and norms of behavior that is learned and 44 shared among the members of an organization To answer the question, “What business are we in?” an organization defines its “business”—the clear, broad, underlying industry category or market sector of its offering Finally, the organization’s goals (or objectives) are statements of an accomplishment of a task to be achieved, often by a specific time LO 2-3 Explain why managers use marketing dashboards and marketing metrics Marketing managers use marketing dashboards to visually display on a single computer screen the essential information required to make a decision to take an action or further analyze a problem This information consists of key performance measures of a product category, such as sales or market share, and is known as a marketing metric, which is a measure of the quantitative value or trend of a marketing activity or result Most organizations tie their marketing metrics to the quantitative objectives established in their marketing plan, which is a road map for the marketing activities of an organization for a specified future time period, such as one year or five years LO 2-4 Discuss how an organization assesses where it is now and where it seeks to be Managers of an organization ask two key questions to set a strategic direction The first question, “Where are we now?” requires an organization to (a) reevaluate its competencies to ensure that its special capabilities still provide a competitive advantage; (b) assess its present and prospective customers to ensure they have a satisfying customer experience—the central goal of marketing today; and (c) analyze its current and potential competitors from a global perspective to determine whether it needs to redefine its business www.freebookslides.com LO 2-5 Explain the three steps of the planning phase of the strategic marketing process An organization uses the strategic marketing process to allocate its marketing mix resources to reach its target markets This process is divided into three phases: planning, implementation, and evaluation The planning phase consists of (a) a situation (SWOT) analysis, which involves taking stock of where the firm or product has been recently, where it is now, and where it is headed and focuses on the organization’s internal factors (strengths and weaknesses) and the external forces and trends affecting it (opportunities and threats); (b) a market-product focus through market segmentation (grouping buyers into segments with common needs and similar responses to marketing programs) and goal setting, which in part requires creating points of difference (those characteristics of a product that make it superior to competitive substitutes); and (c) a marketing program that specifies the budget and actions (marketing strategies and tactics) for each marketing mix element LO 2-6 Describe the four components of the implementation phase of the strategic marketing process The implementation phase of the strategic marketing process carries out the marketing plan that emerges from the planning phase It has four key components: (a) obtaining resources; (b) designing the marketing organization to perform product management, marketing research, sales, and advertising and promotion activities; (c) developing schedules to identify the tasks that need to be done, the time that is allocated to each one, the people responsible for each task, and the deadlines for each task—often with an action item list and Gantt chart; and (d) executing the marketing strategies, and the associated marketing tactics, that contribute to the firm’s overall success. LO 2-7 Discuss how managers identify and act on deviations from plans The evaluation phase of the strategic marketing process seeks to keep the marketing program moving in the direction that was established in the marketing plan This requires the marketing manager to compare the results from the marketing program with the marketing plan’s goals to (a) identify deviations or “planning gaps” and (b) take corrective actions to exploit positive deviations or correct negative ones LEARNING REVIEW ANSWERS 2-1 What is the difference between a for-profit and a nonprofit organization? Answer: A for-profit organization is a privately owned organization that serves its customers to earn a profit so that it can survive A nonprofit organization is a nongovernmental organization that serves its customers but does not have profit as an organizational goal Instead, its goals may be operational efficiency or client satisfaction 2-2 What are examples of a functional level in an organization? Answer: The functional level in an organization is where groups of specialists from the marketing, finance, manufacturing/operations, accounting, information systems, research and development, and/or human resources departments focus on a specific strategic direction to create value for the organization 2-3 What is the meaning of an organization’s mission? Answer: A mission is a clear, concise, meaningful, inspirational, and long-term statement of the organization’s function in society, often identifying its customers, markets, products, and technologies It is often used interchangeably with vision 2-4 What is the difference between an organization’s business and its goals? Answer: An organization’s business describes the clear, broad, underlying industry or market sector of an organization’s offering An organization’s goals (or objectives) are statements of an accomplishment of a task to be achieved, often by a specific time Goals convert an organization’s mission and business into long- and short-term performance targets to measure how well it is doing 2-5 What is the difference between a marketing dashboard and a marketing metric? Answer: A marketing dashboard is the visual computer display of the essential information related to achieving a marketing objective Each variable displayed in a marketing dashboard is a marketing metric, which is a measure of the quantitative value or trend of a marketing action or result 2-6 What is business portfolio analysis? Answer: Business portfolio analysis is a technique that managers use to quantify performance measures and growth targets to analyze their firms’ SBUs as though they were a collection of separate investments The purpose of this tool is to determine which SBU or offering generates cash and which one requires cash to fund the organization’s growth opportunities 2-7 Explain the four market-product strategies in diversification analysis Answer: The four market-product strategies in diversification analysis are: (1) Market penetration, which is a marketing strategy to increase sales of current products in current markets There is no change in either the basic product line or the markets served Rather, selling more of the product or selling the product 45 CHAPTER 2 Developing Successful Organizational and Marketing Strategies The second question, “Where we want to go?” requires an organization to set a specific direction and allocate resources to move it in that direction Business portfolio and diversification analyses help an organization this Managers use business portfolio analysis to assess the organization’s strategic business units (SBUs), product lines, or individual products as though they were a collection of separate investments (cash cows, stars, question marks, and dogs) to determine the amount of cash each should receive Diversification analysis is a tool that helps managers use one or a combination of four strategies to increase revenues: market penetration; market development; product development; and diversification www.freebookslides.com at a higher price generates increased sales (2) Market development, which is a marketing strategy to sell current products to new markets (3) Product development, which is a marketing strategy of selling new products to current markets (4) Diversification, which is a marketing strategy of developing new products and selling them in new markets This is a potentially high-risk strategy because the firm has neither previous production nor marketing experience on which to draw in marketing a new product to a new market 2-8 What are the three steps of the planning phase of the strategic marketing process? Answer: The three steps of the planning phase of the strategic marketing process are: (1) Situation analysis, which involves taking stock of where the firm or product has been recently, where it is now, and where it is headed in terms of the organization’s marketing plans and the external forces and trends affecting it To this, an organization uses a SWOT analysis, an acronym that describes an organization’s appraisal of its internal Strengths and Weaknesses and its external Opportunities and Threats (2) Market-product focus and goal setting, which determine what products an organization will offer to which customers This is often based on market segmentation—aggregating prospective buyers into groups or segments that have common needs and will respond similarly to a marketing action (3) Marketing program, which is where an organization develops the marketing mix elements and budget for each offering 2-9 What are points of difference and why are they important? Answer: Points of difference are those characteristics of a product that make it superior to competitive substitutes—offerings the organization faces in the marketplace They are important factors in the success or failure of a new product 2-10 What is the implementation phase of the strategic marketing process? Answer: The implementation phase carries out the marketing plan that emerges from the planning phase and consists of: (1) obtaining resources; (2) designing the marketing organization; (3) defining precise tasks, responsibilities, and deadlines; and (4) executing the marketing program designed in the planning phase 2-11 How the goals set for a marketing program in the planning phase relate to the evaluation phase of the strategic marketing process? Answer: The planning phase goals or objectives are used as the benchmarks with which the actual performance results are compared in the evaluation phase to identify deviations from the written marketing plans and then exploit positive ones or correct negative ones FOCUSING ON KEY TERMS business p 30 business portfolio analysis p 35 core values p 29 diversification analysis p 37 goals (objectives) p 30 market segmentation p 39 market share p 31 marketing dashboard p 32 marketing metric p 32 marketing plan p 31 marketing strategy p 42 marketing tactics p 42 mission p 29 objectives (goals) p 30 organizational culture p 30 points of difference p 39 profit p 26 situation analysis p 38 strategic marketing process p 38 strategy p 26 SWOT analysis p 38 APPLYING MARKETING KNOWLEDGE (a) Using Southwest Airlines as an example, ex- plain how a mission statement gives it a strategic direction (b) Create a mission statement for your own career What competencies best describe (a) your college or university and (b) your favorite restaurant? Compare the advantages and disadvantages of Ben & Jerry’s attempting to expand sales revenues by using (a) a product development strategy or (b) a market development strategy Select one strength, one weakness, one opportunity, and one threat from the Ben & Jerry’s SWOT analysis shown in Figure 2–7 Suggest an action that a B&J marketing manager might take to address each factor 46 What is the main result of each of the three phases of the strategic marketing process? (a) planning, (b) implementation, and (c) evaluation Parts of Tasks and in Figure 2–10 are done both concurrently and sequentially (a) How can this be? (b) How does it help the students meet the term paper deadline? (c) What is the main advantage of scheduling tasks concurrently rather than sequentially? The goal-setting step in the planning phase of the strategic marketing process sets quantified objectives for use in the evaluation phase What does a manager if measured results fail to meet objectives? Exceed objectives? www.freebookslides.com BUILDING YOUR MARKETING PLAN keting Plan.” Then write a 600-word executive summary for the Paradise Kitchens marketing plan using the numbered headings shown in the plan When you have completed the draft of your own marketing plan, write a 600-word executive summary to go in the front of your own marketing plan VIDEO CASE your marketing plan by (a) writing your mission statement in 25 words or less, (b) listing three nonfinancial goals and three financial goals, (c) writing your competitive advantage in 35 words or less, and (d) creating a SWOT analysis table Draw a simple organization chart for your organization IBM: Using Strategy to Build a “Smarter Planet” “‘Smarter Planet’ is not an advertising campaign, it’s not even a marketing campaign, it is a business strategy,” explains Ann Rubin, Video 2-5 vice president of advertising IBM Video Case at IBM kerin.tv/cr7e/v2-5 The “Smarter Planet” strategy is based on the idea that the next major revolution in the global marketplace will be the instrumentation and integration of the world’s processes and infrastructures, generating unprecedented amounts of data The data captured and analyzed in industries such as banking, energy, health care, and retailing will allow IBM to help businesses be more efficient, productive, and responsive THE COMPANY Using Chapter and Appendix A as guides, focus VALUES, MISSION, AND STRATEGY Recently, IBM initiated a project to facilitate online discussions of key business issues among 50,000 employees to identify common themes and perspectives According to Sam Palmisano, former CEO of IBM, “We needed to affirm IBM’s reason for being, what sets the company apart, and what should drive our a ctions as individual IBMers.” The results were three underlying values of IBM’s business practices: (1) dedication to e very client’s success, (2) innovation that matters—for our company and for the world, and (3) trust and personal responsibility in all relationships These values now come to life at IBM in its “policies, procedures, and daily operations,” explains Palmisano IBM’s core values also help to define its mission, or its general function in society In clear, concise, inspirational language, IBM’s mission statement is: Founded in 1911, IBM has a history of innovation and focus on customers The blue covers on its computers, blue letters in the IBM logo, and dark blue suits worn by IBM salespeople led to the now popular company ● nickname, “Big Blue.” Today, it has more than 380,000 employees in more than 170 countries Forbes magazine ranks IBM as the fifth most valuable brand in the world The company is a leading developer of new business technologies, receiving more ● than 5,000 patents each year Some of its well-known inventions include the automated teller machine (ATM), the hard disk drive, the magnetic stripe card, relational databases, and the Universal Product Code (UPC) In addition, IBM recently gained attention for its artificial intelligence program called Watson, which challenged two Jeopardy! game show champions and won! According to Virginia Rometty, the current CEO of IBM, “IBM is an innovation company.” © Peter Probst/Alamy At IBM, we strive to lead in the invention, development, and manufacture of the industry’s most advanced information technologies, including computer systems, software, storage systems, and microelectronics We translate these advanced technologies into value for our customers through our professional solutions, services, and consulting businesses worldwide The mission, and the values it represents, helps define the organizational culture at IBM Executives, managers, and all employees create the culture through the strategies they select and the detailed plans for accomplishing them 47 CHAPTER 2 Developing Successful Organizational and Marketing Strategies Read Appendix A, “Building an Effective Mar- www.freebookslides.com IBM’s strategies are based on its assessment of fundamental changes in the business environment First, IBM sees global changes such as fewer trade barriers, the growth of developing economies, and increasing access to the World Wide Web These changes necessitate a new type of corporation that IBM calls the “globally integrated enterprise.” Second, IBM foresees a new model of computing that includes computational capability in phones, cameras, cars, and other appliances and allows economic, social, and physical systems to be connected This connectivity creates a “smarter planet.” Finally, IBM predicts a growing demand for technological solutions that help organizations measure and achieve specific outcomes As a result, IBM began to shift from commoditybased businesses such as PCs and hard disk drives, to “customizable” businesses such as software and services The change in IBM was so substantial that it has described its plan in a document called the 2015 Road Map The Map describes four strategic opportunities: (1) growth markets such as China, India, Brazil, and Africa, (2) business analytics and optimization, (3) cloud and smarter computing, and (4) the connected, “smarter” planet These opportunities suggest a strategy that delivers value through business and IT innovation to selected industries with an integrated enterprise The overarching strategy that highlights IBM’s capabilities is called “Building a Smarter Planet.” BUILDING A SMARTER PLANET The Smarter Planet initiative is designed for clients who value IBM’s industry and process expertise, systems integration capability, and research capacity A smarter planet, while global by definition, happens on the industry level It is driven by forward-thinking organizations that share a common outlook: They see change as an opportunity, and they act on possibilities, not just react to problems John Kennedy, vice president of marketing, explains, “‘A Smarter Planet’ actually surfaced from observing what was happening in our clients They were looking to take the vast amount of data that was being generated inside their companies and looking to better understand it.” To IBM, “smart” solutions have three characteristics They are instrumented, they are intelligent, and they are interconnected Millions of digital devices, now connected through the Internet, produce data that can be turned into knowledge through advanced computational power IBM believes that this knowledge can help reduce costs, cut waste, improve efficiency, and increase productivity for companies, industries, and cities 48 Source: IBM Corporation Since introducing the Smarter Planet strategy, IBM has collaborated with more than 600 organizations around the globe The success of the strategy is evident in the broad range of industries where “smart” solutions are being implemented They include banking; communications; electronics, automotive, and aerospace; energy and utilities; government; health care; insurance; oil and gas; retailing; and transportation Each industry has reported a variety of applications In a study of 439 cities, for example, smart solutions such as ramp metering, signal coordination, and accident management reduced travel delays by more than 700,000 annually, saving each city $15 million A study by the U.S Department of Energy found that consumers with smart electric meters cut their power usage and saved 10 percent on their power bills Retailers who implemented smart systems to analyze buying behavior, merchandise assortment, and demand were able to cut supply chain costs by 30 percent, reduce inventory levels by 25 percent, and increase sales by 10 percent THE BUILDING A SMARTER PLANET MARKETING PLAN Marketing and communications professionals at IBM have developed the marketing plan for IBM’s Smarter Planet strategy The general goal is to describe the www.freebookslides.com needed We felt like we could go out there and influence the world for the better.” IBM recently celebrated its 100th anniversary! Its record of success is testimony to the resilience of a business model that encourages long-term strategies that can say “Welcome to a Smarter Planet.”42 Questions What is IBM’s Smarter Planet business strategy? How does this strategy relate to IBM’s mission and values? Conduct a SWOT analysis for IBM’s Smarter Planet initiative What are the relevant trends to consider for the next three to five years? How can IBM communicate its strategy to companies, cities, and governments? What are the benefits of the Smarter Planet initiative to (a) society and (b) IBM? How should IBM measure the results of the Smarter Planet strategy? Chapter Notes 1 “Our Values,” from Ben & Jerry’s website, http://www benjerry.com/values, April 3, 2015; and “Ice Cream History Revealed! What Was Ben & Jerry’s First Ice Cream Flavor?” BusinessWire, November 15, 2011, http://www businesswire.com/news/home/20111115007275/en/IceCream-History-Revealed!-Ben-Jerry%E2%80%99s-Ice# VR8B7J50yM8 2 Nick Craig and Scott Snook, “From Purpose to Impact,” Harvard Business Review, May 2014, pp 105–11; Joe Van Brussel, “Ben & Jerry’s Become B-Corp Certified, Adds Credibility to Impact Investing Movement,” Huffington Post: Business, October 23, 2012, http://www.huffingtonpost.com /2012/10/23/ben-and-jerrys-b-corp-impactinvesting_ n_2005315.html; and “What Are B-Corps?” B-Corporation website, see http://www.bcorporation.net/what-are-b-corps 3 “Global Ice Cream,” press release posted at www.marketresearch.com, October 10, 2014 4 Roger Kerin and Robert Peterson, Strategic Marketing Problems: Cases and Comments, 13th ed (Upper Saddle River, NJ: Prentice Hall, 2013), p 140 5 “Introducing Forbes’ 30 Under 30 Social Entrepreneurs, Class of 2015,” www.forbes.com, January 5, 2015; Richard Murphy and Denielle Sachs, “The Rise of Social Entrepreneurship Suggests a Possible Future for Global Capitalism,” www.forbes.com, May 2, 2013; and http://www.teachforamerica.org 6 For a discussion on how industries are defined and offerings are classified, see the Census Bureau’s Economic Classification Policy Committee Issues Paper #1 (http://www.census gov/eos/www/naics/history/docs/issue_paper_1.pdf ), which aggregates industries in the NAICS from a “productionoriented” view; see also the American Marketing Association 49 definition at https://www.ama.org/resources/Pages/ Dictionary.aspx?dLetter=I 7 W Chan Kim and Reneé Mauborgne, “Blue Ocean Strategy: From Theory to Practice,” California Management Review 47, no (Spring 2005), p 105; and Michael E Porter, “What Is Strategy?” Harvard Business Review, November–December 1996, p 8 The definition of strategy reflects thoughts appearing in Porter, “What Is Strategy?” pp 4, 8; a condensed definition of strategy is found on the American Marketing Association website https://www.ama.org/resources/Pages/Dictionary aspx?dLetter=S; Gerry Johnson, Kevan Scholes, and Richard Wittington, Exploring Corporate Strategy (Upper Saddle River, NJ: Prentice Hall, 2005), p 10; and Costas Markides, “What Is Strategy and How Do You Know If You Have One?” Business Strategy Review 15, no (Summer 2004), p 9 Frank Holland, “Tomorrow’s CMO Will Be Plugged into the Entire Marketing Cycle,” Adweek, January 9, 2015, p 1; George S Day and Robert Malcolm, “The CMO and the Future of Marketing,” Marketing Management, Spring 2012, pp 34–43; Gordon Wyner, “Getting Engaged,” Marketing Management, Fall, 2012, pp 4–9; Christine Moorman, “Ten Trends from the CMO SurveyTM,” Marketing Management, Fall 2012, pp 15–17; John Kador, “The View from Marketing: How to Get the Most from Your CMO,” Chief Executive, July–August 2011, pp 60–61; Jessica Shambora, “Wanted: Fearless Marketing Execs,” Fortune, April 15, 2011, p 27; Roger A Kerin, “Strategic Marketing and the CMO,” Journal of Marketing, October 2005, pp 12–13; and The CMO Council: Biographies of Selected Advisory Board Members, www.cmocouncil.org/advisoryboard.php CHAPTER 2 Developing Successful Organizational and Marketing Strategies company’s view of the next era of information technology and its impact on business and society The execution of the plan includes messaging from IBM leaders, an advertising campaign, an Internet presence, and public relations communications In addition, IBM measures and tracks the performance of the marketing activities The importance of the Smarter Planet strategy was first communicated through a message from the top Palmisano prepared a “Letter from the Chairman” for the annual report His message was a powerful statement Smarter Planet, according to Palmisano, “is not a metaphor It describes the infusion of intelligence into the way the world actually works.” IBM also used a print and television advertising campaign to add detail to the general message The ads focused on the ability to improve the world now, with IBM’s help “I think what’s different about Smarter Planet,” says Ann Rubin, “is that it was not inward facing, it was looking out at what the world www.freebookslides.com 10 Taken in part from Jim Collins and Morten T Hansen, Great By Choice (New York: HarperCollins Publishers, 2011); and Jim Collins and Jerry I Porras, Built to Last: Successful Habits of Visionary Companies (New York: HarperCollins Publishers, 2002), p 54 11 Collins and Porras, Built to Last: Successful Habits of Visionary Companies, p 73; Patrick M Lencioni, “Make Your Values Mean Something,” Harvard Business Review, July 2002, p 6; Aubrey Malphurs, Values-Driven Leadership: Discovering and Developing Your Core Values for Ministry, 2nd ed (Grand Rapids, MI: BakerBooks, 2004), p 31; and Catherine M Dalton, “When Organizational Values Are Mere Rhetoric,” Business Horizons 49 (September–October 2006), p 345 12 Collins and Porras, Built to Last, pp 94–95; and Tom Krattenmaker, “Write a Mission Statement That Your Company Is Willing to Live,” Harvard Management Communication Letter, March 2002, pp 3–4 13 “About Southwest,” Southwest Airlines, https:// www.southwest.com/html/about-southwest 14 “Mission and Values,” The American National Red Cross, http://www.redcross.org/about-us/mission 15 “About the FTC,” Federal Trade Commission, https:// www.ftc.gov/about-ftc, August 11, 2016 16 See https://www.southwest.com/html/about-southwest; http://www.redcross.org/about-us/mission; and https:// www.ftc.gov/about-ftc 17 Theodore Levitt, “Marketing Myopia,” Harvard Business Review, July–August 1960, pp 45–56 18 Nu Yang and Rich Kane, “10 Newspapers That Do It Right,” Editor & Publisher, March 2015, pp 52–67; and Nu Yang, “Calling All Newspapers,” Editor & Publisher, January 2015, pp 34–40 19 Jim Milliot, “E-books Gained, Online Retailers Slipped in 2014,” Publishers Weekly, March 30, 2015, pp 4–5; and Jeffrey A Trachtenberg, “What’s Barnes & Noble’s Survival Plan?” The Wall Street Journal, April 18, 2014, p B1 20 Laura Stevens, “UPS Launched New Ad Campaign,” The Wall Street Journal, March 8, 2015; and “UPS Abandons ‘We Love Logistics’ in Favor of ‘United Problem Solvers,’” Supply Chain 24/7, March 10, 2015, www.supplychain247.com 21 Andrew McAfee and Erik Brynjolfsson, “Big Data: The Management Revolution,” Harvard Business Review, October 2012, pp 61–68 22 The definition is adapted from Stephen Few, Information Dashboard Design: The Effective Visual Communication of Data (Sebastopol, CA: O’Reilly Media, Inc., 2006), pp 2–46 23 Koen Pauwels et al., Dashboards & Marketing: Why, What, How and What Research Is Needed? (Hanover, NH: Tuck School, Dartmouth, May 2008) 24 Few, Information Dashboard Design; Michael T Krush, Raj Agnihotri, Kevin J Trainor, and Edward L Nowlin, “Enhancing Organizational Sensemaking: An Examination of the Interactive Effects of Sales Capabilities and Marketing Dashboards,” Industrial Marketing Management, July 2013, pp 824–35; Bruce H Clark, Andrew V Abela, and Tim Ambler, “Behind the Wheel,” Marketing Management, May–June 2006, pp 19–23; Spencer E Ante, “Giving the Boss the Big Picture,” BusinessWeek, February 13, 2006, pp 48–49; and Dashboard Tutorial (Cupertino, CA: Apple Computer, Inc., 2006) 25 Few, Information Dashboard Design, p 13 26 Mark Jeffery, Data-Driven Marketing: The 15 Metrics Everyone in Marketing Should Know (Hoboken, NJ: 50 27 28 29 30 31 32 33 34 35 36 37 John Wiley & Sons, 2010), Chapter 1; Michael Krauss, “Balance Attention to Metrics with Intuition,” Marketing News, June 1, 2007, pp 6–8; John Davis, Measuring Marketing: 103 Key Metrics Every Marketer Needs (Singapore: John Wiley & Sons [Asia], 2007); and Paul W Farris, Neil T Bendle, Phillip E Pfeifer, and David J Reibstein, Marketing Metrics, 2nd ed (Upper Saddle River, NJ: Wharton School Publishing, 2010) David Burrows, “Too Many Metrics: The Perils of Training Marketers to Calculate ROI,” Marketing Week, September 11, 2014, p 42; Art Weinstein and Shane Smith, “Game Plan,” Marketing Management, Fall 2012, pp 24–31; Alexander Chiang, “Special Interview with Stephen Few, Dashboard and Data Visualization Expert,” Dundas Dashboard, July 14, 2011; Stephen Few, Now You See It (Oakland, CA: Analytics Press, 2009), Chapters 1–3; and Jacques Bughin, Amy Guggenheim Shenkan, and Mark Singer, “How Poor Metrics Undermine Digital Marketing,” The McKinsey Quarterly, October 2008 The now-classic reference on effective graphic presentation is Edward R Tufte, The Visual Display of Quantitative Information, 2nd ed (Cheshire, CT: Graphics Press, 2001); see also Few, Information Dashboard Design, Chapters 3–5 George Stalk, Phillip Evans, and Lawrence E Shulman, “Competing on Capabilities: The New Rules of Corporate Strategy,” Harvard Business Review, March–April 1992, pp 57–69; and Darrell K Rigby, Management Tools 2007: An Executive’s Guide (Boston: Bain & Company, 2007), p 22 Kerin and Peterson, Strategic Marketing Problems, pp 2–3; and Derek F Abell, Defining the Business (Englewood Cliffs, NJ: Prentice Hall, 1980), p 18 Robert D Hof, “How to Hit a Moving Target,” BusinessWeek, August 21, 2006, p 3; and Peter Kim, Reinventing the Marketing Organization (Cambridge, MA: Forrester, July 13, 2006), pp 7, 9, and 17 Adapted from The Experience Curve Reviewed, IV: The Growth Share Matrix of the Product Portfolio (Boston: The Boston Consulting Group, 1973) See also https://www bcgperspectives.com/content/classics/strategy_ the_product_portfolio (registration and login required for access) Roger A Kerin, Vijay Mahajan, and P Rajan Varadarajan, Contemporary Perspectives on Strategic Marketing Planning (Boston: Allyn & Bacon, 1990), p 52 See the Apple press release library at http://www.apple com/pr/library/ Joseph Palenchar, “Apple Watch the One to Watch,” The Week in Consumer Electronics, March 16, 2015, www.twice.com Parmy Oson, “Apple’s U.S iPhone Sales Surpass Android for First Time in Years,” Forbes.com, February 4, 2014, p 2-2; and “Worldwide Smartphone Growth Forecast to Slow from a Boil to a Simmer as Prices Drop and Markets Mature, According to IDC,” press release, December 1, 2014, International Data Corporation (IDC), http://www.idc.com/getdoc.jsp? containerId=prUS25282214 Jack Linshi, “5 Charts That Show Why the iPad’s Fifth Birthday Is Bittersweet,” www.time.com, April 6, 2015; “The State of the Tablet Market,” TabTimes Weekly, April 10, 2015, http://tabtimes.com/resources/the-state-ofthe-tablet-market/; and Larry Magid, “Apple’s Tablets Selling Well but Market Share Slips While Samsung Grows,” Forbes, May 1, 2013, http://www.forbes.com/sites/ www.freebookslides.com Swire, “An Empirical Comparison of Standardized Portfolio Models,” Journal of Marketing, Spring 1983, pp 89–99; and J Scott Armstrong and Roderick J Brodie, “Effects of Portfolio Planning Methods on Decision Making: Experimental Results,” International Journal of Research in Marketing, Winter 1994, pp 73–84 41 H Igor Ansoff, “Strategies for Diversification,” Harvard Business Review, September–October 1957, pp 113–24 42 IBM: This case was written by Steven Hartley Sources: Jessi Hempel, “IBM’s Super Second Act,” Fortune, March 21, 2011, pp 114–24; Bruce Upbin, “IBM Plays Jeopardy!” Forbes, January 17, 2011, pp 36–37; Kurt Badenhausen, “The World’s Most Valuable Brands,” Forbes, May 13, 2015; Jeffrey M O’Brien, “IBM’s Grand Plan to Save the Planet,” Fortune, May 4, 2009, pp 84–91; IBM 2009 Annual Report; IBM 2010 Annual Report; Samuel J Palmisano, “Our Values at Work on Being an IBMer,” IBM website, see http://www.ibm.com/ibm/values/us; and “Welcome to the Decade of Smart,” IBM website, http:// www.ibm.com/smarterplanet/us/en/events/sustainable_ development/12jan2010/files/palmisano_decadeofsmart12jan2010.pdf 51 CHAPTER 2 Developing Successful Organizational and Marketing Strategies larrymagid/2013/05/01/apples-tablet-market-shareslips-and-samsunggrows 38 Don Reisinger, “iPod History: 10 Milestones in the Wearable Music Player’s Evolution,” eWeek, October 31, 2014, p 1-1; James Hall, “MP3 Players Are Dead,” Business Insider, December 26, 2012, http://www.businessinsider com/mp3-players-are-dead-2012-12; Zak Islam, “Smartphones Heavily Decrease Sales of iPod, MP3 Players,” Tom’s Hardware, December 31, 2012, http://www.tomshardware.com/news/SmartphonesiPod-MP3-Players-Sales, 20062.html 39 “iPad Revenue as a Share of Apple’s Total Global Revenue,” Statista, www.statista.com/statistics/253655/ipad-revenue-asshare-of-apples-total-revenue/, accessed April 3, 2016; “iPhone Sales Share of Apple’s Total Revenue Worldwide,” Statista, www.statista.com/statistics/253649/iphone-revenueas-share-of-apples-total-revenue/, accessed April 3, 2016. 40 Strengths and weaknesses of the BCG technique are based on Derek F Abell and John S Hammond, Strategic Market Planning: Problem and Analytic Approaches (Englewood Cliffs, NJ: Prentice Hall, 1979); Yoram Wind, Vijay Mahajan, and Donald Appendix www.freebookslides.com A Building an Effective Marketing Plan “If you have a real product with a distinctive point of difference that satisfies the needs of customers, you may have a winner,” says Arthur R Kydd, who has helped launch more than 60 start-up firms “And you get a real feel for this in a well-written marketing or business plan,” he explains.1 This appendix (1) describes what marketing and business plans are, including the purposes and guidelines in writing effective plans, and (2) provides a sample marketing plan ● MARKETING PLANS AND BUSINESS PLANS After explaining the meanings, purposes, and audiences of marketing plans and business plans, this section describes some writing guidelines for them and what external funders often look for in successful plans Meanings, Purposes, and Audiences A marketing plan is a road map for the marketing actions of an organization for a specified future time period, such as one year or five years.2 No single “generic” marketing plan applies to all organizations and all situations Rather, the specific format for a marketing plan for an organization depends on the following: ● 52 The target audience and purpose Elements included in a particular marketing plan depend heavily on (1) who the audience is and (2) what its purpose is A marketing plan for an internal audience seeks to point the direction for future marketing activities and is sent to all individuals in the organization who must implement the plan or who will be affected by it If the plan is directed to an external audience, such as friends, banks, venture capitalists, or crowdfunding sources like Kickstarter ● for the purpose of raising capital, it has the additional function of being an important sales document So it contains elements such as the strategic focus, organizational structure, and biographies of key personnel that would rarely appear in an internal marketing plan The elements of a marketing plan for each of these two audiences are compared in Figure A–1 The kind and complexity of the organization A neighborhood restaurant has a less detailed marketing plan than Apple, which serves international markets The restaurant’s plan would be relatively simple and directed at serving customers in a local market In Apple’s case, because there is a hierarchy of marketing plans, various levels of detail would be used—such as the entire organization, the strategic business unit, or the product/ product line The industry Both the restaurant serving a local market and Apple, selling electronic devices globally, analyze elements of their industry However, their geographic scopes are far different, as are the complexities of their offerings and, hence, the time periods likely to be covered by their plans A oneyear marketing plan may be adequate for the restaurant, but Apple may need a five-year planning horizon because product development cycles for complex, new electronic devices may be many years In contrast to a marketing plan, a business plan is a road map for the entire organization for a specified future period of time, such as one year or five years.3 A key difference between a marketing plan and a business plan is that the business plan contains details on the research and development (R&D)/operations/manufacturing activities of the organization Even for a manufacturing business, the marketing plan is probably 60 or 70 percent of the entire business plan For firms like a small restaurant or an auto repair shop, their marketing and business plans are virtually identical The elements of a business plan www.freebookslides.com Marketing plan Element of the plan Business plan For internal For external For internal For external audience audience audience audience (to direct (to raise (to direct (to raise the firm) capital) the firm) capital) 53 Executive summary Description of company Situation analysis Market-product focus Marketing program strategy and tactics R&D and operations program Financial projections Organization structure 10 Implementation plan 11 Evaluation Appendix A: Biographies of key personnel Appendix B, etc.: Details on other topics Figure A–1 Elements in typical marketing and business plans targeted at different audiences typically targeted at internal and external audiences appear in the two right-hand columns in Figure A–1 The Most-Asked Questions by Outside Audiences Lenders and prospective investors reading a business plan or a marketing plan that is used to seek new capital are probably the toughest audiences to satisfy Their mostasked questions include the following: Is the business or marketing idea valid? Is there something unique or distinctive about the product or service that separates it from substitutes and competitors? Is there a clear market for the product or service? Are the financial projections realistic and healthy? Are the key management and technical personnel capable, and they have a track record in the industry within which they must compete? Does the plan clearly describe how those providing capital will get their money back and make a profit? Rhonda Abrams, author of books on writing business plans, observes, “Although you may spend five months preparing your plan, the cold, hard fact is that an investor or lender can dismiss it in less than five minutes If you don’t make a positive impression in those critical first five minutes, your plan will be rejected.”4 While her comments apply to plans seeking to raise capital, the first five questions listed above apply equally well to plans prepared for internal audiences Writing and Style Suggestions There are no magic one-size-fits-all guidelines for writing successful marketing and business plans Still, the following writing and style guidelines generally apply:5 ● Use a direct, professional writing style Use appropriate business terms without jargon Present and future tenses with active voice (“I will write an effective marketing plan”) are generally better than past tense and passive voice (“An effective marketing plan was written by me”) APPENDIX A Building an Effective Marketing Plan Strategic plan/focus www.freebookslides.com ● ● ● ● ● ● ● Be positive and specific to convey potential success At the same time, avoid superlatives (“terrific,” “wonderful”) Specifics are better than glittering generalities Use numbers for impact, justifying projections with reasonable quantitative assumptions, where possible Use bullet points for succinctness and emphasis As with the list you are reading, bullets enable key points to be highlighted effectively Use A-level (the first level) and B-level (the second level) headings under the numbered section headings to help readers make easy transitions from one topic to another This also forces the writer to organize the plan more carefully Use visuals where appropriate Photos, illustrations, graphs, and charts enable massive amounts of information to be presented succinctly Shoot for a plan 15 to 35 pages in length, not including financial projections and appendices An uncomplicated small business may require only 15 pages, whereas a high-technology start-up may require more than 35 pages Use care in layout, design, and presentation Use 11- or 12-point type (you are now reading 10.5-point type) in the text Use a serif type (with “feet,” like that you are reading now) in the text because it is easier to read, and sans serif (without “feet”) in graphs and charts like Figure A–1 A bound report with a nice cover and a clear title page adds professionalism These guidelines are used, where possible, in the sample marketing plan that follows SAMPLE FIVE-YEAR MARKETING PLAN FOR PARADISE KITCHENS, INC To help interpret the marketing plan for Paradise Kitchens, Inc that follows, we will describe the company and suggest some guidelines for interpreting the plan.6 Background on Paradise Kitchens, Inc Randall and Leah Peters have more than 40 years of food industry experience for General Foods and Pillsbury with a number of diverse responsibilities With these backgrounds and their savings, they co-founded Paradise Kitchens, Inc to produce and market a new line of high-quality frozen chili products Interpreting the Marketing Plan The following marketing plan, based on an actual Paradise Kitchens plan, is directed at an external audience (see Figure A–1) For simplicity, let us assume it is early 2017, the Peters have company data through 2016, and they are developing a five-year marketing plan through 2021 Some details and dates have been altered, but the basic logic of the plan has been kept Notes in the margins next to the Paradise Kitchens plan fall into two categories: Substantive notes are in blue boxes These notes explain the significance of an element in the marketing plan and are keyed to chapter references in this textbook Writing style, format, and layout notes are in red boxes and explain the editorial or visual rationale for the element A word of encouragement: Writing an effective marketing plan is hard but also challenging and satisfying work Dozens of the authors’ students have used effective marketing plans they wrote for class in their interviewing portfolio to show prospective employers what they could and to help them get their first job 54 www.freebookslides.com Color-Coding Legend Seen by many experts as the single most important element in the plan, the two-page Executive Summary “sells” the plan to readers through its clarity and brevity For space reasons, it is not shown here, but the Building Your Marketing Plan exercise at the end of Chapter asks the reader to write an Executive Summary for this plan The Company Description highlights the recent history and recent successes of the organization The Strategic Focus and Plan sets the strategic direction for the entire organization, a direction with which proposed actions of the marketing plan must be consistent This section is not included in all marketing plans See Chapter The qualitative Mission statement focuses the activities of Paradise Kitchens for the stakeholder groups to be served See Chapter 55 Red boxes give writing style, format, and layout guidelines FIVE-YEAR MARKETING PLAN Paradise Kitchens,® Inc Table of Contents Executive Summary Company Description Paradise Kitchens,® Inc., was started by co-founders Randall F Peters and Leah E Peters to develop and market Howlin’ Coyote® Chili, a unique line of single serve and microwavable Southwestern/Mexican style frozen chili products The Howlin’ Coyote line of chili was first introduced into the Minneapolis–St Paul market and expanded to Denver two years later and Phoenix two years after that To the Company’s knowledge, Howlin’ Coyote is the only premium-quality, authentic Southwestern/Mexican style, frozen chili sold in U.S grocery stores Its high quality has gained fast, widespread acceptance in its targeted markets In fact, same-store sales doubled in the last year for which data are available The Company believes the Howlin’ Coyote brand can be extended to other categories of Southwestern/ Mexican food products, such as tacos, enchiladas, and burritos Paradise Kitchens believes its high-quality, high-price strategy has proven successful This marketing plan outlines how the Company will extend its geographic coverage from markets to 20 markets by the year 2021 Strategic Focus and Plan This section covers three aspects of corporate strategy that influence the marketing plan: (1) the mission, (2) goals, and (3) core competency/sustainable competitive advantage of Paradise Kitchens Mission The mission of Paradise Kitchens is to market lines of high-quality Southwestern/ Mexican food products at premium prices that satisfy consumers in this fast-growing food segment while providing challenging career opportunities for employees and above-average returns to stockholders APPENDIX A Building an Effective Marketing Plan The Table of Contents provides quick access to the topics in the plan, usually organized by section and subsection headings Blue boxes explain significance of marketing plan elements www.freebookslides.com The Goals section sets both the nonfinancial and financial targets—where possible in quantitative terms—against which the company’s performance will be measured See Chapter Lists use parallel construction to improve readability—in this case a series of infinitives starting with “To ” Photos or sample ads can illustrate key points effectively, even if they are not in color as they appear here A brief caption on photos and sample ads ties them to the text and highlights their reason for being included 56 52 Goals For the coming five years Paradise Kitchens seeks to achieve the following goals: ∙ Nonfinancial goals To retain its present image as the highest-quality line of Southwestern/Mexican products in the food categories in which it competes To enter 17 new metropolitan markets To achieve national distribution in two convenience store or supermarket chains by 2017 and five by 2018 To add a new product line every third year To be among the top five chili lines—regardless of packaging (frozen or canned)—in one-third of the metro markets in which it competes by 2018 and two-thirds by 2020 ∙ Financial goals To obtain a real (inflation-adjusted) growth in earnings per share of percent per year over time To obtain a return on equity of at least 20 percent To have a public stock offering by the year 2018 Core Competency and Sustainable Competitive Advantage In terms of core competency, Paradise Kitchens seeks to achieve a unique ability to (1) provide distinctive, high-quality chilies and related products using Southwestern/Mexican recipes that appeal to and excite contemporary tastes for these products and (2) deliver these products to the customer’s table using effective manufacturing and distribution systems that maintain the Company’s quality standards To translate these core competencies into a sustainable competitive advantage, the Company will work closely with key suppliers and distributors to build the relationships and alliances necessary to satisfy the high taste standards of our customers Source: Paradise Kitchens, Inc To help achieve national distribution through chains, Paradise Kitchens introduced this point-of-purchase ad that adheres statically to the glass door of the freezer case www.freebookslides.com To improve readability, each numbered section usually starts on a new page (This is not done in this plan to save space.) The Situation Analysis is a snapshot to answer the question, “Where are we now?” See Chapter The SWOT analysis identifies strengths, weaknesses, opportunities, and threats to provide a solid foundation, which is the springboard to identify subsequent actions in the marketing plan See Chapter Each long table, graph, or photo is given a figure number and title It then appears as soon as possible after the first reference in the text, accommodating necessary page breaks This avoids breaking long tables like this one in the middle Short tables or graphs are often inserted in the text without figure numbers because they don’t cause serious problems with page breaks Effective tables seek to summarize a large amount of information in a short amount of space Situation Analysis This situation analysis starts with a snapshot of the current environment in which Paradise Kitchens finds itself by providing a brief SWOT (strengths, weaknesses, opportunities, threats) analysis After this overview, the analysis probes ever-finer levels of detail: industry, competitors, company, and consumers SWOT Analysis Figure shows the internal and external factors affecting the market opportunities for Paradise Kitchens Stated briefly, this SWOT analysis highlights the great strides taken by the company since its products first appeared on grocers’ shelves Figure Internal Factors SWOT Analysis for Paradise Kitchens Strengths Weaknesses Management Experienced and entrepreneurial management and board Small size can restrict options Offerings Unique, high-quality, high-price products Many lower-quality, lower-price competitors Marketing Distribution in three markets with excellent consumer acceptance No national awareness or distribution; restricted shelf space in the freezer section Personnel Good workforce, though small; little turnover Big gap if key employee leaves Finance Excellent growth in sales revenues Limited resources may restrict growth opportunities when compared to giant competitors Manufacturing Sole supplier ensures high quality Lack economies of scale of huge competitors R&D Continuing efforts to ensure quality in delivered products Lack of canning and microwavable food processing expertise External Factors Opportunities Threats Consumer/Social Upscale market, likely to be stable; Southwestern/Mexican food category is fast-growing segment due to growth in Hispanic American population and desire for spicier foods Premium price may limit access to mass markets; consumers value a strong brand name Competitive Distinctive name and packaging in its markets Not patentable; competitors can attempt to duplicate product; others better able to pay slotting fees Technological Technical breakthroughs enable smaller food producers to achieve many economies available to large competitors Competitors have gained economies in canning and microwavable food processing Economic Consumer income is high; convenience important to U.S households More households “eating out,” and bringing prepared take-out into home Legal/Regulatory High U.S Food & Drug Administration standards eliminate fly-by-night competitors Mergers among large competitors being approved by government APPENDIX A Building an Effective Marketing Plan 57 ... Influence 11 1 Culture and Subculture Influences 11 3 Learning Objectives Review 11 5 Learning Review Answers 11 6 Focusing on Key Terms 11 7 Applying Marketing Knowledge 11 7 Building Your Marketing. .. Answers 310 Focusing on Key Terms 310 Applying Marketing Knowledge 310 Building Your Marketing Plan 311 Video Case 11 : Carmex (B): Setting the Price of the Number One Lip Balm 311 12 MANAGING MARKETING. .. of Marketing Research? ?17 4 What Is Marketing Research?? ?17 4 The Challenges in Doing Good Marketing Research? ?17 4 Five-Step Marketing Research Approach? ?17 4 Step 1: Define the Problem? ?17 5 Set the