Strategic Marketing Management

Dedication
This book is dedicated to the authors’ wives – Gillian and Rosie – and to Ben Gilligan for their support while it was being written.

Acknowledgements
Our thanks go to Janice Nunn for all the effort that she put in to the preparation of the manuscript.

Strategic Marketing Management
Planning, implementation and control
Third edition
Richard M.S. Wilson
Emeritus Professor of Business Administration The Business School Loughborough University
and

Colin Gilligan
Professor of Marketing Sheffield Hallam University and Visiting Professor, Northumbria University

AMSTERDAM • BOSTON • HEIDELBERG • LONDON • NEW YORK • OXFORD PARIS • SAN DIEGO • SAN FRANCISCO • SINGAPORE • SYDNEY • TOKYO

Elsevier Butterworth-Heinemann Linacre House, Jordan Hill, Oxford OX2 8DP 200 Wheeler Road, Burlington, MA 01803 First published 1992 Second edition 1997 Reprinted 1998, 1999, 2001, 2003 Third edition 2005 Copyright © 1992, 1997, 2005, Richard M.S. Wilson and Colin Gilligan. All rights reserved The right of Richard M.S. Wilson and Colin Gilligan to be identified as the authors of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988 No part of this publication may be reproduced in any material form (including photocopying or storing in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication) without the written permission of the copyright holder except in accordance with the provisions of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London, England W1T 4LP. Applications for the copyright holder’s written permission to reproduce any part of this publication should be addressed to the publisher Permissions may be sought directly from Elsevier’s Science & Technology Rights Department in Oxford, UK: phone: ( 44) 1865 843830, fax: ( 44) 1865 853333, e-mail: permissions@elsevier.co.uk. You may also complete your request on-line via the Elsevier homepage (www.elsevier.com), by selecting ‘Customer Support’ and then ‘Obtaining Permissions’ British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloguing in Publication Data A catalogue record for this book is available from the Library of Congress ISBN 0 7506 5938 6

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Contents

Preface Overview of the book’s structure 1 Introduction 1.1 1.2 1.3 1.4 1.5 1.6 Learning objectives The nature of marketing The management process Strategic decisions and the nature of strategy The marketing/strategy interface Summary

xi xiii 1 3 3 7 11 19 37 41 43 45 45 50 53 70 71 75 77 79 79 80 81 86 88 89 101 102 104 107 109

Stage One: Where are we now? Strategic and marketing analysis 2 Marketing auditing and the analysis of capability 2.1 2.2 2.3 2.4 2.5 2.6 2.7 Learning objectives Introduction Reviewing marketing effectiveness The role of SWOT analysis Competitive advantage and the value chain Conducting effective audits Summary

3 Segmental, productivity and ratio analysis 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 Learning objectives Introduction The clarification of cost categories Marketing cost analysis: aims and methods An illustration of segmental analysis An alternative approach to segmental analysis Customer profitability analysis Marketing experimentation The nature of productivity The use of ratios Analysing ratios and trends Ratios and interfirm comparison

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CONTENTS

3.13 3.14

A strategic approach Summary

112 116 117 119 119 120 128 136 139 149 153 159 165 167 169 169 170 174 182 188 192 202 214 215 221 223 223 230 236 241 246 248 250 251 255 261

4 Market and environmental analysis 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 Learning objectives Introduction: the changing business environment (or the new marketing reality) Analysing the environment The nature of the marketing environment The evolution of environmental analysis The political, economic, social and technological environments Coming to terms with the industry and market breakpoints Coming to terms with the very different future: the implications for marketing planning Approaches to environmental analysis and scanning Summary

5 Approaches to customer analysis 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 Learning objectives Introduction Coming to terms with buyer behaviour Factors influencing consumer behaviour The buying decision process The rise of the new consumer and the implications for marketing planning Organizational buying behaviour The growth of relationship marketing Summary

Appendix: The drivers of consumer change 6 Approaches to competitor analysis 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 Learning objectives Introduction Against whom are we competing? Identifying and evaluating competitors’ strengths and weaknesses Evaluating competitive relationships and analysing how organizations compete Identifying competitors’ objectives Identifying competitors’ likely response profiles Competitor analysis and the development of strategy The competitive intelligence system The development of a competitive stance: the potential for ethical conflict Summary

CONTENTS

vii

Stage Two: Where do we want to be? Strategic direction and strategic formulation 7 Missions and objectives 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 Learning objectives Introduction The purpose of planning Establishing the corporate mission Influences on objectives and strategy Guidelines for establishing objectives and setting goals and targets The development of strategies Summary

265 269 271 271 274 277 290 294 310 313 315 317 317 318 323 326 327 328 330 332 338 341 345 347 350 353 359 361 363 363 363 367 374 379 383

8 Market segmentation, targeting and positioning 8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 8.10 8.11 8.12 8.13 8.14 8.15 8.16 Learning objectives Introduction The nature and purpose of segmentation Approaches to segmenting markets Factors affecting the feasibility of segmentation Approaches to segmentation The bases for segmentation Geographic and geodemographic techniques Demographic segmentation Behavioural segmentation Psychographic and lifestyle segmentation Approaches to segmenting industrial markets Market targeting Deciding on the breadth of market coverage Product positioning Summary

9 The formulation of strategy – 1: analysing the product portfolio 9.1 9.2 9.3 9.4 9.5 9.6 9.7 10 Learning objectives Introduction The development of strategic perspectives Models of portfolio analysis Market attractiveness and business position assessment Criticisms of portfolio analysis Summary

The formulation of strategy – 2: generic strategies and the significance of competitive advantage 10.1 Learning objectives 10.2 Introduction 385 387 387

viii

CONTENTS

10.3 Types of strategy 10.4 Porter’s three generic competitive strategies 10.5 Competitive advantage and its pivotal role in strategic marketing planning 10.6 Summary 11 The formulation of strategy – 3: strategies for leaders, followers, challengers and nichers 11.1 11.2 11.3 11.4 11.5 11.6 11.7 11.8 11.9 11.10 11.11 11.12 11.13 Learning objectives Introduction The influence of market position on strategy Strategies for market leaders Marketing strategy and military analogies: lessons for market leaders Strategies for market challengers Strategies for market followers Strategies for market nichers Military analogies and competitive strategy: a brief summary The inevitability of strategic wear-out (or the law of marketing gravity and why dead cats only bounce once) The influence of product evolution and the product life cycle on strategy Achieving above-average performance and excellence Summary

387 390 396 423

425 427 427 427 428 438 447 461 463 465 474 478 484 489 493 495 497 497 497 498 500 505 510 515 517 518 520 522 523 528 528 534

Stage Three: How might we get there? Strategic choice 12 The strategic management of the marketing mix 12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 12.9 12.11 Learning objectives Introduction Product decisions and strategy What is a product? The dimensions of product policy Brand strategies The development of new products Pricing policies and strategies Approaches to price setting Methods of pricing

12.10 Deciding on the pricing objectives 12.12 Using price as a tactical weapon 12.13 Promotion and marketing communications 12.14 Distribution strategies and the distribution plan 12.15 Channel management 12.16 The ‘soft’ elements of the marketing mix

CONTENTS

ix

12.17 Integrating the elements of the marketing mix 12.18 Summary Stage Four: Which way is best? Strategic evaluation 13 Criteria of choice 13.1 Learning objectives 13.2 Introduction 13.3 Financial versus non-financial criteria; effectiveness versus efficiency 13.4 Financial criteria 13.5 Non-financial criteria 13.6 Multiple criteria 13.7 Summary 14 Modelling approaches – 1 14.1 Learning objectives 14.2 Introduction 14.3 Cost–volume–profit analysis 14.4 Investment appraisal 14.5 Summary 15 Modelling approaches – 2 15.1 Learning objectives 15.2 Introduction 15.3 Allowing for risk and uncertainty 15.4 Matrix models 15.5 The marketing performance assessment model 15.6 Some other approaches to modelling 15.7 Summary Stage Five: How can we ensure arrival? Strategic implementation and control 16 Problems to overcome 16.1 16.2 16.3 16.4 16.5 16.6 16.7 16.8 16.9 Learning objectives Introduction Pressures Problems in the marketing subsystem Problems of marketing feedback Information adequacy Cost problems Marketing orientation Planning orientation

536 536 539 549 551 551 553 555 565 576 585 587 589 589 593 610 624 625 627 627 627 642 648 652 664 667 677 679 679 680 684 688 690 697 703 711

x

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16.10 Organizational issues 16.11 17 Summary

713 721 723 725 725 726 728 734 747 757 762 765 767 767 767 798 809 811 813 853

Management control – 1 17.1 Learning objectives 17.2 Introduction to control 17.3 Control defined 17.4 Basic control concepts 17.5 Responsibility accounting 17.6 Approaches to control 17.7 Some behavioural factors 17.8 Summary

18

Management control – 2 18.1 Learning objectives 18.2 Introduction 18.3 Controls 18.4 Taking corrective action 18.5 Management reports 18.6 Summary

Bibliography Index

Preface

In writing the first edition of this book in the early 1990s, we were motivated by a concern to help improve the effectiveness of marketing practice. Twelve years and two editions later, our purpose is unchanged. In doing this, we have sought to address a number of key questions that logically follow each other in the context of strategic marketing management: 1 Where are we now? 2 Where do we want to be? 3 How might we get there? 4 Which way is best? 5 How can we ensure arrival? The themes of planning, implementing and controlling marketing activities are reflected in the answers to these questions – as offered in the eighteen chapters which follow. The structure of the book is designed to take the reader through each of the questions in turn. The sequencing of the chapters is therefore significant. We have sought to build the book’s argument in a cumulative way such that it will provide guidance in generating effective marketing performance within a strategic framework – once the reader has worked through each chapter in turn. Against this background we can specify the book’s aims as being: ➡ To make the readers aware of the major aspects of the planning and controlling of marketing operations ➡ To locate marketing planning and control within a strategic context ➡ To demonstrate how the available range of analytical models and techniques might be applied to marketing planning and control to produce superior marketing performance ➡ To give full recognition to the problems of implementation and how these problems might be overcome. Since the appearance of the first edition in 1992, the marketing environment – and therefore the challenges facing marketing planners and strategists – have changed in a variety of often dramatic ways. Amongst some of the most significant of these changes has been the emergence of what within this book we refer to as ‘the new consumer’ and ‘the new competition’. This new consumer is typically far more demanding, far more discriminating, much less loyal and more willing to complain than in the past, whilst

xii

P R E FA C E

the new competition is frequently far less predictable and often more desperate than previously. At the same time, the marketing environment has also been affected by a series of unpredictable events (SARS and the Iraq war are just two of the more recent of these), and by the emergence of new technologies and delivery systems. Together, these changes have led to a new type of marketing reality which has major implications for the marketing planning and strategy processes. The question of how marketing planners might respond or, indeed, have responded to the new marketing reality is therefore an underlying theme of this book. In practice, many marketing planners have responded by focusing to an ever greater degree upon short-term and tactical issues, arguing that during periods of intense environmental change, traditional approaches to marketing planning and management are of little value. Instead, they suggest, there is the need to develop highly sensitive environmental monitoring systems that are capable of identifying trends, opportunities and threats at a very early stage, and then an organizational structure and managerial mindset that leads to the organization responding quickly and cleverly. Within this book we question these sorts of assumptions and focus instead upon the ways in which the marketing planning process can be developed and managed effectively and strategically. We therefore attempt to inject a degree of rigour into the process, arguing that rapid change within the environment demands a more strategic approach rather than less. We have also introduced a considerable amount of material designed to reflect some of the areas that have emerged over the past few years and that currently are of growing importance. The most obvious of these are e-marketing, branding, the leveraging of competitive advantage and CRM. It is not intended that this should be used as an introductory text: we have deliberately assumed that readers will have had some prior exposure to marketing principles, if not to marketing practice. The intended market of the book comprises the following segments: ➡ Students reading for degrees involving marketing (especially MBA candidates and senior undergraduates following business studies programmes) ➡ Students of The Chartered Institute of Marketing who are preparing for the Marketing Planning paper in the CIM’s Diploma examinations ➡ Marketing practitioners who will benefit from a comprehensive review of current thinking in the field of strategic marketing planning, implementation and control. Richard M S Wilson Colin Gilligan

Overview of the book’s structure

1 Introduction Stage One Where are we now? Strategic and marketing analysis

2 Marketing auditing and the analysis of capability

3 Segmental, productivity and ratio analysis

4 Market and environmental analysis

5 Approaches to customer analysis

6 Approaches to competitor analysis

Stage Two Where do we want to be? Strategic direction and strategic formulation

7 Missions and objectives

8 Market segmentation, targeting and positioning

9 The formulation of strategy –1

10 The formulation of strategy –2

11 The formulation of strategy –3

Stage Three How might we get there? Strategic choice 12 The strategic management of the marketing mix Stage Four Which way is best? Strategic evaluation 13 Criteria of choice 14 Modelling approaches –1 Stage Five How can we ensure arrival? Strategic implementaion and control 16 Problems to overcome 17 Management control –1 18 Management control –2 15 Modelling approaches –2

Chapter

1

Introduction

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