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two

developing
marketing strategies

and a marketing plan
eople can grab a cup of coffee

coffee should be a social experience.

LEARNING OBJECTIVES

virtually anywhere. Yet somehow

Many stores have overstuffed chairs or

LO1 Define a marketing strategy.

Starbucks, Dunkin’ Donuts, and

patio seating, as well as Wi-Fi access

LO2 Describe the elements of a
marketing plan.

McDonald’s have turned this common

and multiple electrical outlets for cus-

beverage into a market offering worth

tomers working on computers. Over

pursuing. To accomplish this transfor-

time, in addition to its brewed coffee and

mation, the three java giants have dis-

espresso drinks, the company added

tinguished themselves using varied

premade breakfast sandwiches, lunch

marketing strategies aimed at slightly

items, coffee-related merchandise and

different audiences. And thus the hum-

accessories, branded beverages (e.g.,

ble cup of coffee has become something

Tazo, Ethos Water),1 and books, music,

much, much more.

and films.

P

But the company has shifted away from
Starbucks. The international empire of

its European café ethos, increasingly cater-

more than 16,500 stores in 49 countries

ing to coffee drinkers on the run. Fewer

that is Starbucks Coffee Company was

Starbucks customers linger over coffee in

based on the idea that enjoying a cup of

continued on p. 26

LO3 Analyze a marketing situation using
SWOT analyses.
LO4 Describe how a firm chooses which
consumer group(s) to pursue with
its marketing efforts.
LO5 Outline the implementation of the
marketing mix as a means to
increase customer value.
LO6 Summarize portfolio analysis and
its use to evaluate marketing
performance.
LO7 Describe how firms grow their
business.

25

But the majority of the company’s profits now come from its coffee drinks. and low prices. which iced. McDonald’s. more Dunkin’ Donuts appeals to the “average joe” who demands a variety of coffee options at conveniently located stores.5 Dunkin’ Donuts positions itself as the coffee spot for the “average Joe. The company initiated its attack by improving its drip coffee and adding espresso drinks. the company con- other inexpensive coffees. McNuggets. McDonald’s Corp. With its nearly 9. is the most recent entrant into the coffee war.2 many take advan- those content to grab a cup at a tage of the store’s drive-up convenience store. Dunkin’ Donuts sells 52 varieties of donuts and other baked goods. This move came in response to the growing popularity of cold coffee drinks. Known better for its Big Macs. it plans to create value for customers by reinventing its founding success formula that emulated a European café—great cup-at-a-time made coffee and a comfortable atmosphere. of which it sells approximately 1 billion each year. which helps maintain the coffee flavor even when customers add milk. asking them to consider not just the price of their coffee but also its global impact and cost. Starbucks elected not to slash its prices to compete with McDonald’s and Dunkin’ Donuts though. Dunkin’ Donuts. successful business model. decaffeinated.3 To retain cold coffee customers. The company has also mounted a social responsibility advertising campaign that reminds consumers of its humanitarian and outreach programs. it has challenged Starbucks supremacy in the iced coffee drink market by introducing its own blended coffee drinks and fruit smoothies. stantly stresses that all coffee is not the same and that it uses the best beans. but it also keeps its Dunkin’ Donuts and McDonald’s.6 More recently.000 stores in 31 countries. justify expensive coffee. 26 SECTION 1 | Assessing the Marketplace McDonald’s is on the attack against both Dunkin’ Donuts and Starbucks for their share of the coffee market. Starbucks dozen different coffee customers found it harder to drinks. and ice. not like ice cream. and with low-calorie syrups. Dunkin’ windows. prices low.4 In addition. Starbucks improved its blended frappucino drinks by offering them with soy milk.” those customers who need breakfast and a caffeine hit on their way to work rather than Wi-Fi and a sunny place to sit for hours. including flavored.indd Page 26 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles Straddling this middle position be- continued from p. The company re- When these competitors rolled out cently rolled out an iced dark their iced beverages. The new blend is designed to appeal to men and attract the growing segment of coffee drinkers who want their coffee to taste like coffee. . and blended bever- helped create the opening for ages.gre2885x_ch02_024-047. sugar. Starbucks was in roast that is bolder than the midst of a massive restructuring. The chain further distinguishes itself by promoting its double-brewed coffee. When the econ- Donuts sells more than a omy plunged. instead. designed to return it to its earlier. 25 tween upscale coffee drinkers and the store.7 which deliver a healthy profit margin to vendors.

there are stores and restaurants that sell coffee and pastries in every neighborhood (not to mention coffeemakers in virtually every home) in which there is a Starbucks. even as it offers drinks Starbucks and Dunkin’ Donuts. are not particularly interested in the experience. warm social atmosphere and personal “baristas” willing to make their esoteric drinks. Establishing a competitive advantage means that the firm. This wall makes it hard for outside competitors to contact customers inside—otherwise known as the marketer’s target market.000 stores in has been careful not to appear too 117 countries. 26 By offering its drinks below competitors’ prices and in bucks shopper. sustainable competitive advantage something the firm can persistently do better than its competitors. A sustainable competitive advantage is an advantage over the competition that is not easily copied and thus can be maintained over a long period of time. other stores in the area could do the same. minimize competitive pressure. but by building high. A competitive advantage acts like a wall that the firm has built around its position in a market. in contrast. It increased visibility for its its advertising.10 ■ Establishing a competitive advantage means that the firm. McDonald’s. Dunkin’ Donuts. Thus. For these benefits. In existing coffee-drinking clientele. Many of the alternatives offer great coffee and pastries. Thus. if the marketer has built a wall around an attractive market.indd Page 27 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles marketing strategy a firm’s target and affluent than a typical Star- continued from p. and McDonald’s appeal to different target markets. advantages will erode because of these competitive forces. we start by discussing a marketing strategy. and method of obtaining a sustainable competitive advantage. establishing a sustainable competitive advantage is key to long-term financial performance. WHAT IS A MARKETING STRATEGY? A marketing strategy identifies (1) a firm’s target market(s). Of course. they have different marketing strategies. just because a firm implements an element of the marketing mix better than the competition. so the company the  more family-oriented atmosphere of its 32. McDonald’s hopes to lure customers away from upscale. Dunkin’ Donuts’ customers. When the wall is high. the others. Although the chains’ customers all seek a good cup of coffee and a pastry. as well as upsell some of its previously viewed as luxuries. Then we discuss how to do a marketing plan. Finally. would likely match the reduction. builds a wall around its position in the market. The chapter concludes with a discussion of strategies firms use to grow. In essence. it will be hard for competitors outside the wall to enter the market and compete for the firm’s target customers. an affordable price.gre2885x_ch02_024-047. Starbucks. which provides a blueprint for implementing the marketing strategy. If one of the competitors lowered its prices. or Dunkin’ Donuts. Starbucks attempts to reach those who also want a coffee-drinking experience that includes a nice. as well as the additional competition in the area. Over time. (2) a related marketing mix—its four Ps—and (3) the bases on which the firm plans to build a sustainable competitive advantage. McDonald’s offers a fine quality cup of coffee at a relatively low price. builds a wall around its position in the market. in effect. which outlines the specific actions a firm intends to implement to appeal to potential customers. it does not necessarily mean that the advantage is sustainable. LO1 Define a marketing strategy. In this chapter. They want a good-tasting cup of coffee at a fair price. in effect. people are willing to pay relatively high prices. but it adds the benefit of being available across the chain’s massive retail network and providing a more extensive food menu from which to choose. But McDonald’s target audience in general is less educated market. McDonald’s mainly new blended drinks by offering large fountain drinks for a dollar portrays its McCafé drinks as a 9 way to add fun to everyday life at 8 in the weeks around the introduction of the new beverages. and boost profits for a longer time. Building a Sustainable Competitive Advantage What about these different sellers’ respective marketing mixes provides sustainable competitive advantages? After all. CHAPTER 2 | Developing Marketing Strategies and a Marketing Plan 27 . If one company introduced a peppermint swirl cappuccino for the holiday season. marketers can sustain their advantage. marketing mix. thick walls. competitors will attempt to break down the wall. and they implement their marketing mixes (their four Ps) in very different ways. and they want to get in and out of the store quickly.

all advantages get eroded by competitive forces. strategies that focus on aspects of the marketing mix to create and deliver value and to develop sustainable competitive advantages. Viewing customers with a lifetime value perspective. Although it may take considerable time and effort to build a reputation for customer service. • Product excellence: Having products with high perceived value and effective branding and positioning. once a marketer has earned . and boost profits for a longer time. For instance. On every visit. With such programs.indd Page 28 02/11/11 11:10 AM user-f494 E X H I B I T 2 . it focuses on satisfying the customer who spends $25 per week.1:11 • Customer excellence: Focuses on retaining loyal customers and excellent customer service. humans are less consistent than machines. is key to modern customer retention programs. Customer Excellence Customer excellence is achieved when a firm develops value-based strategies for retaining loyal customers and provides outstanding customer service. Retaining Loyal Customers Sometimes.15 though consistency in this area can prove difficult. Customer service is provided by employees. Loyalty is more than simply preferring to purchase from one firm instead of another. loyal Dunkin’ Donuts patrons have such a strong attachment to its products that they would rather go without than go to McDonald’s. Once it identifies these customers. Using that purchase information.13 Marketers use several methods to build customer loyalty. Thus. and superior customer service all help solidify a loyal customer base. which constitute part of an overall customer relationship management (CRM) program. minimize competitive pressure. as we depict in Exhibit 2. There are four macro. For instance. loyal customers continue to shop at Dunkin’ Donuts even if Starbucks opens more convenient locations or provides a slightly superior assortment or slightly lower prices. Customer Service Marketers also may build sustainable competitive advantage by offering excellent customer service. prevail in many industries. • Locational excellence: Having a good physical location and Internet presence. In addition. establishing a sustainable competitive advantage is the key to positive long-term financial performance. having 28 SECTION 1 | Assessing the Marketplace /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles a strong brand. having loyal customers is. the methods a firm uses to maintain a sustainable competitive advantage help attract and maintain loyal customers. by analyzing their databases. Starbucks must attempt to ensure that every single barista greets customers in a friendly way and makes drinks consistently. 50 weeks a year. But what happens when a barista comes to work in a bad mood or simply forgets to add nutmeg to a drink? Firms that offer good customer service must instill its importance in their employees over a long period of time so that it becomes part of the organizational culture. thick walls. firms can identify members through the loyalty card or membership information the consumer provides when he or she makes a purchase. he’s a $12.gre2885x_ch02_024-047. for 10 years or more. rather than on a transaction-by-transaction basis. analysts determine which types of merchandise certain groups of customers are buying and thereby tailor their offerings to meet the needs of their loyal customers better. This customer isn’t a $2 customer. banks develop profiles of customers who have defected in the past and use that information to identify customers who may defect in the future. One such way involves developing a clear and precise positioning strategy. Another method of achieving customer loyalty creates an emotional attachment through loyalty programs. or overarching. • Operational excellence: Achieved through efficient operations and excellent supply chain and human resource management. 1 Macro Strategies for Developing Customer Value Operational excellence Locational excellence Customer value Customer excellence Product excellence Over time. firms can sustain their advantage. and invariably. More and more firms realize the value of achieving customer excellence through focusing their strategy on retaining their loyal customers. an important method of sustaining an advantage over competitors. Starbucks doesn’t think in terms of selling a single cup of coffee for $2.12 It means that customers are reluctant to patronize competitive firms. in and of itself. For instance. from airlines to hotels to movie theaters to retail stores. the firm can implement special retention programs to keep them. unique merchandise.14 These loyalty programs.500 customer. instead. for example. but by building high. For example.

firm’s focus on efficient operations and excellent supply chain management. they ensure good value to their customers. vendor relations must be developed over the long term and generally cannot be easily offset by a competitor. CHAPTER 2 | Developing Marketing Strategies and a Marketing Plan 29 .16 Furthermore. (2) obtain special terms of purchase that are not available to competitors. Operational Excellence Firms achieve operational excellence. to use the additional margin they earn to attract customers away from competitors Some firms develop a sustainable competitive advantage through operational excellence with efficient operations and excellent supply chain management. or (3) receive popular merchandise that may be in short supply. it can sustain this advantage for a long time. In addition. Like customer relationships. By so doing. when they want it.gre2885x_ch02_024-047. The supply chain for Netflix represented a remarkable innovation when the company first started: With its 50 high-tech distribution centers. and satisfy their customers’ needs. the second way to achieve a sustainable competitive advantage. Efficient Operations All marketers strive for efficient operations to get their customers the merchandise they want. in the required quantities. or visual presentations. and excellent human resource management (which yields productive employees). Netflix immediately sorts them for distribution to the next Singapore Airlines continues to provide new and innovative customer service offerings to stay ahead of its competition.17 When the DVDs arrive back at its facilities. because a competitor is hard pressed to develop a comparable reputation. and at a lower delivered cost than that of their competitors. Excellent Supply Chain Management and Strong Supplier Relations Firms achieve efficiencies by developing sophisticated distribution and information systems as well as strong relationships with vendors. excellent supply chain management. merchandise assortments. earn profitability for themselves. even if their prices are not lower than those of the competition.indd Page 29 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles customer excellence involves a operational excellence involves a focus on retaining loyal customers and excellent customer service. a  good service reputation. through their efficient operations. firms with strong relationships may gain exclusive rights to (1) sell merchandise in a particular region. by offering even better service. efficient operations enable firms either to provide their consumers with lower-priced merchandise or. strong relationships with their suppliers. it can get movies to 97 percent of its subscribers overnight.

Disney. Microsoft. If it doesn’t ring true to them. “The associates are the first customers we sell. especially if competitors can deliver similar products or services easily.indd Page 30 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles When Netflix receives DVDs from customers. Post Office doesn’t have to do so—which in turn earns Netflix a better shipping rate. Intel.gre2885x_ch02_024-047. However. The Case Study at the end of this chapter provides additional information about the methods Netflix has used to become a dominant player in the movie rental industry.18 [ Product Excellence Product excellence. Knowledgeable and skilled employees committed to the firm’s objectives are critical assets that support the success of companies such as Southwest Airlines.21 Therefore. have a flexible workweek. Nokia. for all those people who store their digital photographs on their computer and never print them. Post-It Notes. it’s impossible to communicate and inspire the customer. and promotion. McDonald’s. and Mercedes— are all leaders in their respective industries. JCPenney chairman and CEO Mike Ullman believes in the power of the employee for building a sustainable competitive advantage. Penney’s has dropped many of the traditional pretenses that defined an old-style hierarchical organization.19 He has said. Customers also have the option to receive videos instantly via their iPad. they are immediately sorted and shipped to the next customer. corporate headquarters. and so on. For instance. the company is well known for developing the first audio tapes. and The Container Store. occurs by providing products with high perceived value and effective branding and positioning.S. the third way to achieve a sustainable competitive advantage. at least in part because they have strong brands and a clear position in the marketplace. or computer. For example.20 For 3M. service. TV. Some firms have difficulty developing a competitive advantage through their merchandise and service offerings. Human Resource Management Employees play a major role in the success of all firms. Those who interact with customers in providing services for customers are particularly important for building customer loyalty. customer. Whole Foods. For instance. distinctive brand image. Texas. Toyota. and constantly reinforcing that image through their merchandise. IBM.” To build involvement and commitment among its employees. all employees are on a first-name basis. and customers know they can turn to 3M to solve their needs. innovation is the central rule of its corporate culture. Scotchgard. Employees who interact with customers in providing services for customers are particularly important for building customer loyalty. at the Plano. and may attend leadership workshops intended to build an executive team for the future. positioning their product or service using a clear. and it sorts its mailed bundles by zip code so the U. it spends approximately 6 percent of its sales on research and development. . others have been able to maintain their sustainable competitive advantage by investing in their brand itself. Bloomberg Businessweek’s top global brands—Coca-Cola. 30 SECTION 1 | Assessing the Marketplace ] GE.

| Developing Marketing Strategies and a Marketing Plan 31 . They have such a high density of stores in some markets that it makes it very difficult for a competitor to enter a market and find good locations. and projected or proforma income (and other financial) statements. product excellence by developing innovative products like Post-It Notes. But McDonald’s did not need to worry about finding new locations when it entered the coffee battle. and Dunkin’ Donuts carefully plan their marketing strategies to react to changes in the environment. Southwest has built a very high wall around its position as the value player in the airline industry. among other things. such as investors and potential investors. McDonald’s. A written marketing plan also provides a reference point for evaluating whether or not the firm has met its objectives. Locational Excellence product excellence marketing plan involves a focus on achieving high-quality products. its customers know not to have extraordinary expectations.” For example. By 2. List the four macro strategies that can help a firm develop a sustainable competitive advantage. and control. and projected or pro forma income (and other financial) statements. firms do need such a document.indd Page 31 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles 3M offers Post-It Photo Paper that can be stuck to any surface for others to see. action programs. the competition. get—on-time flights that are reasonably priced. locational excellence Locational Excellence is particularly important for retailers and service providers. At the same time. A competitive advantage based on location is sustainable because it is not easily duplicated. developing its unique capabilities in several areas. check yourself ✓ Multiple Sources of Advantage 1. Dunkin’ Donuts and Starbucks have developed a strong competitive advantage with their location selection. and how they expect to do it. By creating a marketing plan. opportunities and threats for the firm. A marketing plan is a written document composed of an analysis of the current marketing situation. firms like Starbucks. LO2 Describe the elements of a marketing plan.23 Although most people do not have a written plan that outlines what they are planning to accomplish in the next year. and their customers. opportunities and threats for the firm. its stores already appear nearly everywhere! a method of achieving excellence by having a strong physical location and/or Internet presence. THE MARKETING PLAN 3M has always provided customer value through. effective branding and positioning is key. It is important that everyone involved in implementing the plan knows what the overall objectives for the firm are and how they are going to be met. They don’t expect food service or seat assignments. marketing objectives and strategy specified in terms of the four Ps. a written document composed of an analysis of the current marketing situation. also want to know what the firm plans to do. implementation. Other stakeholders. But they do expect—and even more important.22 The three major phases of the marketing plan are planning. location.gre2885x_ch02_024-047. What are the various components of a marketing strategy? Southwest consistently has positioned itself as a carrier that provides good service at a good value—customers get to their destination on time for a reasonable price without having to pay extra for checked luggage. Many say “The three most important things in retailing are location. marketing objectives and strategy specified in terms of the four Ps. most people will not walk or drive very far when looking to buy a cup of coffee. action programs. CHAPTER 2 Effective marketing doesn’t just happen. location.

As indicated in Exhibit 2. depicted in Exhibit 2. E X H I B I T 2 . marketing executives. 2 The Marketing Plan Step 1: Business mission & objectives Planning phase Step 2: Situation analysis vSWOT implementation phase the part of the strategic marketing planning process when marketing managers (1) identify and evaluate different opportunities by engaging in segmentation. We also examine some specific strategies 32 SECTION 1 | Assessing the Marketplace Step 5: Evaluate performance using marketing metrics marketers use to grow a business.2. and positioning (see STP ) and (2) implement the marketing mix using the four Ps. Step 1: Define the Business Mission The mission statement. In Step 1 of the planning phase. They then are responsible for implementing the marketing mix using the four Ps (Step 4).gre2885x_ch02_024-047. targeting. the control phase entails evaluating the performance of the marketing strategy using marketing metrics and taking any necessary corrective actions (Step 5). Most firms want to maximize stockholders’ wealth by increasing the value of the firms’ stock and paying dividends. both in and outside the organization. We will first discuss each step involved in developing a marketing plan.3 for several mission statement examples. and positioning (STP) (Step 3). or redressing educational inequities.2. For instance. privately held firms frequently have other objectives. Starbucks explicitly recognizes that its quality coffee is as important as its impact on society.) Nonprofit organizations instead have nonmonetary objectives. affect the firm’s potential for success (Step 2). For the second step. In its mission statement. in conjunction with other top managers. marketing managers identify and evaluate different opportunities by engaging in a process known as segmentation. encouraging research. then go directly to Step 2 to conduct a situation audit without redefining its overall mission. (See Exhibit 2. a broad description of a firm’s objectives and the scope of activities it plans to undertake. (1) define the mission or vision of the business and (2) evaluate the situation by assessing how various players. Finally. it is not always necessary to go through the entire process for every evaluation (Step 5). affect the firm’s potential for success. In the implementation phase.24 attempts to answer two main questions: What type of business are we? What do we need to do to accomplish our goals and objectives? These fundamental business questions must be answered at the highest corporate levels before marketing executives can get involved. targeting. owners of small. like eliminating drunk driving. Finally. Then we consider ways of analyzing a marketing situation. as well as identifying and evaluating marketing opportunities. they evaluate the situation by assessing how various players. Step 3: Identify opportunities Segmentation Targeting Positioning Implementation phase Marketing strategy Step 4: Implement marketing mix Product Price Place Promotion control phase the part of the strategic marketing planning process when managers evaluate the performance of the marketing strategy and take any necessary corrective actions.25 However. a firm could evaluate its performance in Step 5. both in and outside the organization. define the mission and/ or vision of the business. we consider how the implementation of the marketing mix increases customer value.26 . such as achieving a specific level of income and avoiding risks. Control phase A marketing plan entails five steps. in conjunction with other top managers.indd Page 32 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles planning phase the part of the strategic marketing planning process when marketing executives.

in this example we might include Starbucks’ international reputation as a quality coffee purveyor. http://www. and Political forces (CDSTEP). Economic. support the victims of this violent crime. Sources: http://www. firms can anticipate and interpret change. Technological. drink. and freedom. Dunkin’ Brands goes beyond what people expect from a traditional quick service experience to deliver best-in-class menu items to eat. so they can allocate appropriate resources. McDonald’s wants to “be our customers’ favorite place and way to eat.” Our worldwide operations have been aligned around a global strategy called the Plan to Win centering on the five basics of an exceptional customer experience—People. and gourmet ice creams. uses a SWOT analysis that assesses both the internal environment with regard to its Strengths and Weaknesses and the external environment in terms of its Opportunities and Threats. because its footprint is worldwide. Starbucks aims to inspire and nurture the human spirit—one person.html. and prevent underage drinking. These factors are discussed in more detail in Chapter 4.org/About-us/About-us/Mission-Statement. Another key goal or objective often embedded in a mission statement is how the firm is building a sustainable competitive advantage. Because a company’s strengths (Exhibit 2. as outlined in Exhibit 2. Products. For more than 50 years. Price and Promotion. using a SWOT analysis that assesses both the internal environment with regard to its Strengths and Weaknesses and the external environment in terms of its Opportunities and Threats. whether in pursuit of a profit or not.27 Beyond the stores. We are committed to improving our operations and enhancing our customers’ experience.starbucks. Place. marketing managers find it helpful to perform SWOT analyses for competing firms. to encompass both its Dunkin’ Donuts and Baskin Robbins businesses.com/mcd/our_company/mcd_faq/student_research. Social. Consider how a corporation like Starbucks might conduct a SWOT analysis. it should assess the opportunities and uncertainties of the marketplace due to changes in Cultural. upper left) refer to the positive internal attributes of the firm. a broad description of a firm’s objectives and the scope of activities it plans to undertake. Although our discussion focuses on Starbucks. Demographic. which sell in grocery and What is the mission for a nonprofit organization like Mothers Against Drunk Driving (MADD)? CHAPTER 2 | Developing Marketing Strategies and a Marketing Plan 33 . Teach for America’s mission is to build the movement to eliminate educational inequity by enlisting our nation’s most promising future leaders in the effort. For all these firms. Dunkin’ Brands’ mission is to lead and build great brands. 3 Mission Statements MADD’s mission is to stop drunk driving. five million customers per day visit Starbucks worldwide. With this information.hudson.dunkinbrands. marketing is primarily responsible for enhancing the value of the company’s offering for its customers and other constituents. attempts to answer two main questions: What type of business is it? What does it need to do to accomplish its goals and objectives? situation analysis second step in a marketing plan.org/learn/ index.indd Page 33 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles mission statement E X H I B I T 2 . The Hudson Institute is a nonpartisan policy research organization dedicated to innovative research and analysis that promotes global security.com/about-us/company-information/mission-statement.cfm?fuseaction=mission statement.com/aboutus/. LO3 Analyze a marketing situation using SWOT analysis. like McDonald’s and Dunkin’ Donuts.gre2885x_ch02_024-047. Dunkin’ Brands’ mission statement is broader. we’ve been doing just that by leading the “Quick Quality” segment of the food and beverage industry. Additionally. one cup and one neighborhood at a time. prosperity. McDonald’s has the most global mission. such as Frappuccino® and Starbucks DoubleShot® drinks. Step 2: Conduct a Situation Analysis After developing its mission. http://www. http://www.4.org/mission/mission_and_approach.4. http://www. to sell its varied products. and the average customer visits 12–15 times per month. Starbucks can rely on its massive retail store network of 16. http://www. and enjoy.aboutmcdonalds. Furthermore.htm. a firm should perform a situation analysis.aspx.madd.000 locations worldwide in 50 countries.teachforamerica. Starbucks licenses its brands to business partners that produce ready-to-drink products.

which many customers didn’t like. ble practices may provide it an opportunity to appeal even more Yet every firm has its weaknesses. decalled into question one of its original and primary benefits to spite its expansion internationally.” Starbucks’ existing socially responsito bring other products to market. 34 SECTION 1 | Assessing the Marketplace . which adversely affected the store’s ambiance and the coffee’s flavor. In addition to such traditional growth. mostly untapped Chinese market offers a remarkable opportunity for enormous future growth. and the huge. including its support of grocery network. These varied and plentiful retail locations ers and beans.gre2885x_ch02_024-047. Starbucks started grinding its espresso beans in advance and using automatic espresso machines. lower right) represent the negative asattributes of the firm.29 Starbucks already has grown into an international brand but also has significant opportunities for much greater international expansion. market Strengths Weaknesses Strong brand identity Sensitive to changing global markets Global retail store network Price elastic target market Opportunities Threats New product categories Future sourcing sustainability Ronald McDonald house Customers nonacceptance of McCafe Strengths Weaknesses Strong regional brand identity Mass-market focused Loyalty program Franchise inconsistency Opportunities Threats Retail store growth in the U. As the consumer environment appears poised to represent a significant strength that the company can leverage become even more “green.28 Opportunities (Exhibit 2. Intense competition in the specialty and overall coffee market Global retail expansion Economic instability for franchisees fair-trade coffee and clean production conditions for coffee growconvenience stores. Starbucks continues to Starbucks’ strengths include a strong brand identity and a retail store and emphasize its social responsibility. most Starbucks retail locations consumers—the experience of watching their drinks being made by hand by a professional barista. lower left) pertain to positive aspects of the external environment. and Starbucks is no excepto environmentally conscious or green consumers.S. McDonald’s. Starbucks took decisive action to deal with these weaknesses by concentrating its training efforts on providing a more personal experience in the stores and tweaking some of its recipes. upper right) are negative Threats (Exhibit 2. 4 SWOT Analysis for Starbucks. tion.4. In 2009.4.4.indd Page 34 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles E X H I B I T 2 . For example. Starbucks’ precipitous growth has pects of the company’s external environment. It also added breakfast sandwiches. the most significant may be its ability to build its current brand and businesses. and Dunkin’ Donuts Starbucks Internal External McDonald’s Internal External Dunkin’ Donuts Internal External Environment Evaluation Positive Negative Stengths Weaknesses Strong brand identity Reliance on joint ventures and licensed stores Retail & grocery store network Rapid growth erodes customer experience Opportunities Threats Expansion in China Potential saturation of the U.S. $110 million of Starbucks’ $562 million in profits came from international business. Among Starbucks’ many opportunities. The weaknesses (Exhibit 2.

For instance. With STP. while other outlets like Dunkin’ Donuts and McDonald’s offer similar products at lower prices. Starbucks would be in real trouble.S. If U. Targeting After a firm has identified the various market segments it might pursue. Segmentation Threats to Starbucks’ marketing strategy and plan may include further downturns in the U. LO4 Describe how a firm chooses which consumer group(s) to pursue with its marketing efforts. which features the Cadillac Escalade and Infiniti QX56). who respond similarly to a firm’s marketing efforts. 5 Hertz Market Segmentation Segments Cars Offered Segment 1 Segment 2 Segment 3 Segment 4 Segment 5 Single people and couples wanting to have a bit of fun Business customers and families who prefer a luxurious side Environmentally conscious customers Families Commercial customers Fun Collection Prestige Collection Green Collection SUV/minivan & crossover Commercial Van/Truck Corvette ZHZ Infiniti QX56 Toyota Prius Toyota Rav 4 Chevrolet Camaro Cadillac Escalade Ford Fusion Ford Explorer CHAPTER 2 | Ford Cargo Van Developing Marketing Strategies and a Marketing Plan 35 . Perhaps even more pressing. such as a preference for style or a need to move possessions across town. potential adverse health effects of coffee. Green. environmentally conscious customers (Green collection of cars such as the Toyota Prius and Ford Fusion). and positioning that firms use to identify and evaluate opportunities for increasing sales and profits. some needs. wants. market segment a group of consumers who respond similarly to a firm’s marketing efforts. the next step is to identify and evaluate opportunities for increasing sales and profits using STP (segmentation. determines which of those segments it should pursue or target. the market into groups among Internet users. but it also applies psychological or behavioral factors. Targeting. wants. including the Corvette ZHZ and Chevrolet Camaro). competitors such as Peet’s Coffee and Caribou Coffee continue to pursue Starbucks’ position as the market leader. and most firms cannot satisfy the process of dividing everyone’s needs. some shop. income. a market that some observers suggest may be close to saturation. the car rental company (see Exhibit 2. whether because of economic conditions or shifts in the coffee market.30 Thus. Hertz uses a variety of demographics—gender. or characteristics— who therefore might appreciate products or services geared especially for them—is called market segmentation. to identify likely consumers of the Fun Collection and its commercial vans. The company also offers commercial vans for service customers. are in the United States. and SUV/Minivan collections. Prestige.gre2885x_ch02_024-047. and increased competition. age. The process of dividing the market into groups of customers with different needs.5). targeting. Some of the segments that Hertz targets include single people and couples wanting to have a bit of fun (Hertz’s Fun Collection. Let’s look at Hertz. and positioning). interests—to identify customers who might want the Fun. Step 3: Identifying and Evaluating Opportunities Using STP (Segmentation. Many types market of customers appear in any marsegmentation ket. Each of these therefore might appreciate groups might be a market segproducts or services geared ment consisting of consumers especially for them. targeting.indd Page 35 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles firm first divides the marketplace into subgroups or segments. it evaluates each segment’s attractiveness E X H I B I T 2 .S. business customers and families who prefer a luxurious ride (its Prestige Collection. and Positioning) After completing the situation audit. and finally decides how it should position its products and services to best meet the needs of those chosen targets. Starbucks also must keep abreast of any new research that suggests negative health effects from caffeine. some do of customers with different research online. and many characteristics—who may do all three. and families (SUV/Minivan collection). or look for entertainment. economy. the STP the processes of segmentation. demand were to drop.

g. A method of examining which segments to pursue is described in the Growth Strategies section later in the chapter. so the bulk of marketing mix variables so its marketing efforts for this busithat target customers have ness is directed toward that group. drinkers of caffeinated versus decaffeinated products). it targets Coke Zero to men and Diet Coke to women. Starbucks uses a variety of methods. and Cherry Coke. bottled drinks. Market positioning involves the process of defining the marketing mix variables so that target customers have a clear. including regular. the market leader in the car rental business.. Among its diet colas. a firm must evaluate each of its strategic opportunities. Fruitopia and Minute Maid for more health-conscious consumers.. coffees. and be able to enjoy their journey (e. pastries.indd Page 36 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles target marketing or targeting the process of evaluating the attractiveness of various segments and then deciding which to pursue as a market. business consumers).. Coke II. desirable understanding of what the product does or represents in comparison with competing products. distinctive.g. and cooler foods. when the firm decides which segments to pursue. a clear. college campuses versus shopping/business districts) and benefits (e. including geography (e. Cocain comparison with Cola.31 To segment the coffee drinker market. Firms typically are most successful when they focus on opportunities that build on their strengths relative to those of their competition. After determining which of those segments represent effective targets. desirable Soft drink manufacturers also understanding of what the divide their massive markets into product does or represents submarkets or segments. because men prefer not to be associated with diets.g. In Step 4 of the marketing Hertz targets several markets. it stresses that customers will get peace of mind when they rent from Hertz.. different types of Coke. while its “Prestige Collection” (right) appeals to its business customers and families who prefer a luxurious ride. leisure consumers) and reduce travel time (e. and decides which to pursue using a process known as target marketing or targeting.gre2885x_ch02_024-047. Its “Fun Collection” (left) appeals to single people and couples wanting to have fun. From our previous example. distinctive. it must determine how it wants to be positioned within those segments. Starbucks positions itself as a firm that develops a variety of products that match the wants and needs of the different market segments—espresso drinks. In its marketing communications. It also markets Sprite to those who don’t like dark colas. teas. Hertz positions itself as a quality car (and truck) rental company that is the first choice for each of its target segments. and Dasani bottled water for purists. makes several competing products. 36 SECTION 1 | Assessing the Marketplace . After identifying its target segments. Positioning Finally. for instance.g. Hertz realizes market that its primary appeal for the positioning involves SUV/Minivan collection centers the process of defining the on young families.

7 million views in the first month. Dove has attempted to harness the immense power of social media by engaging young women in the education and development of positive self-esteem. Social & Mobile Marketing [2. “Evolution” won one of the most prestigious advertising awards. Dove’s mission statement reads “to make more women feel beautiful every day by widening stereotypical views of beauty. promotion. it chose the Internet as its release platform for “Evolution” because it freed the advertising team from time constraints. how to do it. and place—for each product and service on the basis of what they believe their target markets will value. In the fourth step of the planning process. Dove invites consumers to join the Self-Esteem movement and participate in activities that help young women’s self-esteem. youth.34 The video demonstrated the distorted perception of beauty that resulted from advertising.000 views. the real action begins. marketers implement the actual marketing mix—product. Dove uses the Internet to promote the notion that beauty should not be defined by self-limiting stereotypes. The  marketers wanted to run a spot that was 74 seconds long.” This report demonstrated that popular beauty images in the United States were unattainable for most women. Even then.37 CHAPTER 2 | Developing Marketing Strategies and a Marketing Plan 37 .) LO5 Outline the implementation of the marketing mix as a means to increase customer value.” and its campaigns fit that ideal by spanning a broad spectrum of target markets. the image on the billboard gets altered by Photoshop. (See Social and Mobile Marketing 2. a model transforms from a normal-looking woman to a billboard pin-up after undergoing hours of makeup. the DOVE Campaign for Real Beauty began.gre2885x_ch02_024-047. leaving little room for anyone who fell outside these borders. upload videos. television only sold advertising spots in 30 or 60 second increments.S. /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles Step 4: Implement Marketing Mix and Allocate Resources When the firm has identified and evaluated different growth opportunities by performing an STP analysis. With the growth of the Internet and the younger demographics of its core customer base. take quizzes about their body image. and then reached 1. By talking about how to build self-esteem and recognizing the fallacies that exist in advertising images. the Grand Prix for viral marketing at Cannes. Dove hopes to improve the self-esteem and lives of everyone. In its ongoing efforts. Dove attempts to keep customers engaged with its brand by updating the campaign but following the same mission. the first day. and how many resources should be allocated to it.32 Let’s consider a timeline of its efforts: In 2003. and blond hair.1] Spreading Positive Self-Esteem Online In its efforts to build “brand evangelists” for its products. they make important decisions about how they will allocate their scarce resources to their various products and services.” In 2007.33 In 2006. The video ends with a tagline: “No wonder our perception of beauty is distorted. It has decided what to do.36 Women interact with the brand by making a “SelfEsteem bubble” that contains words and images that make them happy. use online editing tools. it prompted 40. At the same time. and U. Dove’s Movement for Self-Esteem has touched 7 million young women and expected to reach 15 million by 2015. developed in response to “The Real Truth About Beauty: A Global Report. and vote on one another’s submissions.indd Page 37 02/11/11 11:50 AM user-f494 plan. Dove kicked off its online Real Beauty campaign by posting its “Evolution” video on YouTube. In the online video. Internetsavvy target markets using innovative marketing campaigns. the firm implements its marketing mix and allocates resources to different products and services. price. Unilever’s Dove line of soaps and lotions has positioned itself to appeal to younger. The campaign was one of the most successful viral marketing campaigns ever.1. They prioritized thinness.35 According to Dove.

Many of these interactions take place at the company’s customer innovation centers.39 Because it remains constantly committed to providing useful. .” it allows its researchers to spend time pursuing their own interests—some of science’s most important discoveries occur during unrelated research. 3M continues to reinvest a significant percentage of its revenues in research. A new technology in aerospace.gre2885x_ch02_024-047. and companies like Hershey and Pitney Bowes are following suit. Price and Value Capture Recall that the second element of the marketing mix is price. it Amazon. a product that has helped change the traditional book business and the way people read books forever. velop products and services that customers perceive as valuable enough to buy. If profits fall. and leadership. a firm provides a product or a service. helps stimulate creative ideas about ways to combine or adapt existing science in one sector to provide solutions in another. and.40 Furthermore. dynamic. constitute the first of the four Ps. to enable customers to read anything they wanted to by downloading it onto this new mobile reading device.41 Corporate clients in particular are experts in their businesses. in return. Exposure to these technologies. in return. they know their demands better than anyone. and service. Adding Value [2.1 discusses how 3M creates value for its customers by creating new products for them. Value-based marketing requires that firms charge a price that customers perceive as giving them a good value for the product they receive. for example. could lead to a breakthrough in health care. Amazon. initiative. it gets money. ] [ A firm provides a product or a service. Adding Value 2. from health care and highway safety to office and pet care products. who has money for innovation. By interacting with these expert customers and combining their needs with its own broad range of technical expertise and infrastructure. Product and Value Creation Products. a struggling economy is a serious problem.38 Its product offering spans an incredible range of categories.com. An obvious but still rather uncommon approach to matching product development with customer needs is to involve customers in the process of innovation. and. it gets money. developed the first e-book reader. We have alluded to 3M and its well-known research and development efforts. 3M produces novel solutions to difficult challenges. value.com developed the first e-book reader. As part of the exchange process. Clearly.1] Innovation at 3M When a company pours billions of dollars into research and development. 3M has learned. firms attempt to decharacteristic. or ation of value. the Kindle. These innovation centers are so successful that 3M has opened nearly two dozen. 38 SECTION 1 | Assessing the Marketplace But these creative researchers cannot do it all on their own. right? Not so for 3M. new solutions to its customers. the Kindle. where visitors outline their business goals for 3M experts and tour the manufacturer’s core technologies. in line with 3M’s commitment to “value and develop our employees’ diverse talents. after all. or some combination thereof. This longtime innovator cites a multipronged mission that includes satisfying customers with “innovative technology and superior quality. or some combination thereof. metric a measuring Because the key to the success of system that quantifies a any marketing program is the cretrend. which include services.indd Page 38 02/11/11 11:53 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles products anything that is of value to a consumer and can be offered through a voluntary marketing exchange.” as well as earning “the admiration of all those associated with 3M worldwide” (among other goals). for example.

Starbucks stores are conveniently located near other retail stores and pedestrian traffic. Sony’s e-reader.gre2885x_ch02_024-047.43 Promotion and Value Communication The fourth and last P of the marketing mix is promotion. magazines. application usability. Apple’s iPad is the only e-reader that is also a multifunctional device with Internet browsing. price should be based on the value that the customer perceives. or the value proposition. It provides high quality coffee-based drinks and foods with good service to its customers. where to buy them. The larger Kindle has substantially more storage capacity. is important for a firm to have a clear focus in terms of what products to sell.000 titles for customers to choose from. it will not generate much volume. and the Internet. with over 500.7-inch display priced at $259 and $489. magazines. to make the product or service readily accessible when and where the customer wants it. Starbucks communicates its commitment to social responsibility and to providing customers high quality and excellent service via advertising and social media. Some are Amazon promotes its Kindle e-book reader in advertisements like this to communicate its attributes and value to its customers. If a price is set too low. sales forces. e-mail. Amazon’s Kindle comes in two sizes. Therefore. all are available in bricks and mortar stores. and what methods to use in selling them. the 6-inch display and the 9. and the like.com sells its Kindle through its website and is now also selling it in  Target so that customers can try it out before buying it. Let’s look at Starbucks’ four Ps. radio. and Apple’s iPad. the firm must be able. giving them a greater advantage from a pure reading point of view. A metric is a measuring system that quantifies Place and Value Delivery For the third P. it may result in lower-than-necessary margins and profits. a significant advantage worthy of promotion. CHAPTER 2 | Developing Marketing Strategies and a Marketing Plan 39 . Marketers communicate the value of their offering. Each of the e-readers is marketing its advantages.indd Page 39 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles Amazon’s Kindle e-books provide its customers with a good value—what they get for what they have to pay for it. All of the e-readers have their own e-bookstores where books. But pricing is the only activity that actually brings in money by influencing revenues. If a price is set too high. respectively.42 As the e-reader market expands with many competitors including Barnes & Noble’s Nook. partnering with media companies to gain exclusive or early access to certain content. place. Amazon currently has the largest e-bookstore (The Kindle Store). The drinks are priced from $2 to $5. after it has created value through a product and/or service. to their customers through a variety of media including television. and newspapers are available for sale and then instantly downloadable. Step 5: Evaluate Performance Using Marketing Metrics The final step in the planning process includes evaluating the results of the strategy and implementation program using marketing metrics. Amazon. and the pastries and sandwiches are $2 to $6.

dynamic.gre2885x_ch02_024-047. Understanding the causes of the performance. organizes its strategic business units by geography. a trend. If the corporate office lowers prices to get rid of merchandise and therefore profits suffer. However. sales associate productivity. Depending on the firm’s relative performance. Who Is Accountable for Performance? At each level of an organization. Perhaps the managers involved in setting the objectives aren’t very good at making estimates.indd Page 40 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles PROBLEMS CAN ARISE BOTH WHEN FIRMS SUCCESSFULLY IMPLEMENT POOR STRATEGIES AND WHEN THEY POORLY IMPLEMENT GOOD STRATEGIES. or characteristic. For example. for example. and energy costs. It’s usually unwise to use only one metric because it rarely tells the whole story. Typically. Financial Performance Metrics Some commonly used metrics to assess performance include revenues. but the profit realized on that merchandise (gross margin) would suffer as a result. sales are a global measure of a firm’s activity level. an attempt to maximize one metric may lower another. then it’s not fair to assess a store manager’s performance based on the resulting decline in store profit. they may need to be trained in forecasting. there are several relevant questions: How quickly were plans adjusted? How rapidly and appropriately were pricing and promotional policies modified? In short. using common financial metrics such as sales and profits. One approach is to compare a firm’s performance over time or to competing firms. which makes it hard to find a single metric to evaluate performance. expenses that affect several levels of the organization (such as the labor and capital expenses associated with operating a corporate headquarters) shouldn’t be arbitrarily assigned to lower levels. expenses. strategic business units (SBUs). They make it possible to compare results across regions. and profits that they can control. Actual performance may be different than the plan predicts because of circumstances beyond the manager’s control—like a global recession. If so. Clearly. The firm can determine why it achieved or did not achieve its performance goals with the help of these metrics. Managers must therefore understand how their actions affect multiple performance metrics. the profits from some products or services are used to fuel growth for others. a manager could easily increase sales by lowering prices. Problems can arise both when firms successfully implement poor strategies and when they poorly implement good strategies. and time periods. one of the largest tire firms in the world. a firm may wish to measure the relative level of sales and profits. or sales. In addition to assessing the absolute level of sales and profits. met. or was more severe or lasted longer than anticipated. Reasons performance may be above or below planned levels must be examined. Metrics are used to explain why things happened. or fell below the firm’s goals. and their analysis may indicate that the strategy (or even the mission statement) needs to be reconsidered. managers begin by reviewing the implementation programs. For instance. a relative metric of sales or profits is their increase Performance Objectives and Metrics Many factors contribute to a firm’s overall performance. . it may be appropriate to evaluate performance objectives based on sales. did the manager react to salvage an adverse situation. In the case of a store. enables firms to make appropriate adjustments. or did those reactions worsen the situation? Another method of assessing performance is to view the firm’s products or services as a portfolio. Thus. the business unit and its manager should be held accountable only for the revenues. Performance evaluations are used to pinpoint problem areas. 40 SECTION 1 | Assessing the Marketplace Goodyear. and to project the future. product lines. regardless of whether that performance exceeded. and profits. Assuming the recession wasn’t predicted.

9% Net Profit/Net Sales 19. Stars. such as their impact on the environment. However. as depicted in Exhibit 2.3 percent versus 13. and Asia 46 sales achieved by the Pacific Tire.8B $10. 6 Performance Metrics: Starbucks versus McDonald’s Starbucks44 45 McDonald’s 2009 2010 % Change Net Sales $9. firms are starting to report corporate social responsibility metrics in major areas. As this exhibit demonstrates. developed by the Boston Consulting Group (BCG).indd Page 41 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles strategic business unit (SBU) a division of E X H I B I T 2 .5% Net Profit/Net Sales 9% 13. Starbucks is growing at the fastest pace (53. The horizontal axis represents the relative market share. For example. LO6 Summarize portfolio analysis and its use to evaluate marketing performance. That is. Stars (upper left quadrant) occur in high-growth markets and are high market share products. is used in this application because it provides managers with a product’s relative strength. In addition. A product line.7B $24. their ability to diversify their workforce. Latin American Tire.5B $4. management evaluates the firm’s various products and businesses—its “portfolio”—and allocates resources according to which products are expected to be the most profitable for the firm in the future.3% 2. defined Europe. the firm itself that can be managed and operated somewhat independently from other divisions and may have a different mission or objectives. Portfolio Analysis In portfolio analysis. Goodyear is one of the accounted for by a specific largest tire firms in the world.7 is the market growth rate. or sales.g. while the top executives of a firm have control over all of the firm’s resources and resulting expenses. The metrics used to evaluate a firm vary depending on (1) the level of the organization at which the decision is made and (2) the resources the manager controls. particular market. It has share a measure of the four SBUs that are organized by product’s strength in a geography: North American Tire. Coke may compare itself to Pepsi).5% Note: Dunkin’ Donuts is a private company so the sales and profits are unavailable. Ethical and Societal Dilemma 2. a regional sales manager has control only over the sales and expenses generated by his or her salespeople. Market growth rate thus measures how attractive a particular market is. as the collective corporate consciousness of the importance of social responsibility grows. energy conservation initiatives. revenue. van. largest firm in the industry. or the annual rate of growth of the specific market in which the product competes. For percentage of a market example.49 The vertical axis in the matrix in Exhibit 2.9 percent for McDonald’s). One of the most popular portfolio analysis methods. ing its products on six continents in over 180 countries and with relative market sales of over $16 billion. stars often require a heavy resource investment in such things as promotions and new CHAPTER 2 | Developing Marketing Strategies and a Marketing Plan 41 . McDonald’s profit as a percentage of sales is much higher (20.47 The circles represent brands.9B 8. requires that firms classify all their products or services into a two-by-two matrix. product line groups of associated items. Each quadrant has been named on the basis of the amount of resources it generates for and requires from the firm.gre2885x_ch02_024-047. In general. It is usually discussed in units.6% Net Sales $22. and their policies on protecting the human rights of their employees and the employees of their suppliers. such as those that consumers use together or think of as part of a group of similar products.2% Net Profit $4.1B 6. market share or decrease over the prior year. and light truck while product competes.472B 53.8% $20. another line could be racing tires or aviation tires.5 percent versus 8. A special type of market share metric. Furthermore. though managers also can use it to analyze brands or even individual items. One line of growth of the specific product for Goodyear could be market in which the car. Clearly on the profits side. Portfolio analysis is typically performed at the strategic business unit (SBU) or product line level of the firm. market share is the percentage of a market accounted for by a specific entity48 and is used to establish the product’s strength in a particular market.8 percent).6). Let’s look at Starbucks’ sales revenue and profits (after taxes) and compare them with those of McDonald’s (Exhibit 2. in contrast. Middle East. is a group of products that consumers market growth may use together or perceive as rate the annual rate of similar in some way. SUV.8% 51. An SBU is a division of the firm itself that can be managed and operated somewhat independently from other divisions and may have a different mission or objectives. and African as the sales of the focal product divided by the Tire.7. a firm may compare its growth in sales or profits relative to other benchmark companies (e. compared to that of the largest firm in the industry. it is important to look simultaneously at multiple performance metrics..1 examines how Starbucks is working to tackle important societal issues. and their sizes are in direct proportion to the brands’ annual sales. sellentity.7B 9% Net Profit $894M $1. relative market share.

indd Page 42 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles ethical & societal dilemma [2. By Starbucks rates its own corporate social posting nutrition information in its stores. communities that believe its stores will 5  cents for each bottle of water sold in Starbucks also works to replace convenruin the historical ambiance of an area. about the average length that women and children walk to get drinking water stated purpose of TWI is to and environmental leadereach day.000 partners. suppliers from Starbucks has also launched a program exercise.51 To ensure it adds value to the broader sociLack of water is not the only health ety that makes up its macroenvironment. using .E. California. whether suppliers meet local suppliers.E. proval. tion suffer significant losses With regard to its focus in market share. Ethiopia. Starbucks itself attempts cent. In addition. wellness. For example.gre2885x_ch02_024-047. on its way to its goal of having “100% many cities. but not their purchase and Starbucks develops amounts. job. comduce the prevalence of obesity and diabe50 munity. Starbucks maintains ployees (whom the comits C. thereby aiding approximately 420. Starbucks not only offers The C.E. stronger relationships with Dunkin’ Donuts stores that suppliers. economic accountOn World Water Day. In just a few years. Thus far.A. In turn. from 77 percent to 81 perStarbucks sponsors three-mile walks in friendly practices.F.A.A. guidelines ingenerous health benefits clude a scorecard that packages but also has unrates coffee farmers acdertaken a Thrive Wellness cording to their product Initiative (TWI) for its quality. Furnipendent third party. infrastructure. and Kenya.F. Starsustainable building materials. their buying experience.F.E.1] programs around the world. and attracting other retailers the newest portion of the TWI is Kinetix. communicating this efforts along these socially information has prompted responsible dimensions. to use renewable energy and reduce its of our coffee certified or verified by an indeto symbolize and raise awareness about the negative impact on the environment. it formed a joint venture with Johnson Development Corporation (JDC) to develop urban coffee opportunities. Starbucks attempts to address historic preservation. To take the needs of local communities Starbucks Working to Make the Earth a Better Place 42 SECTION 1 | Assessing the Marketplace into consideration. By opening in diverse urban areas. Starbucks customers to customers feel good about lower their calorie intake. Starbucks stores to humanitarian water tional packaging with green alternatives. in La Mesa.52 on ethical sourcing and To address the health sustainable coffee producand welfare of its own emtion. As a memtimes experiences opposition from local bucks’ Ethos Water brand contributes ber of the Sustainable Packaging Coalition. 53 The ability. responsibility performance in five categoStarbucks attempts to aid in the effort to reries: ethical sourcing. ducers to engage in environmentally verified suppliers. environment. and urban revitalization concerns. On World Water Day. Starbucks somewalk to get drinking water each day. Starbucks sponsored walks to symbolize and raise awareness 145.A. both locally and post their nutrition informaglobally. For example. in countries such as Bangladesh.” average distance that women and children ture and fixtures in stores are made of On a more local level.000 people who lack consistent access. care for the well-being of ship. a Starbucks’ standards under the C. and diversity. just as it expects its coffee proamount of coffee that it purchased from safe drinking water. Starbucks overcame opposition by supporting local events and businesses. as well as a virtual online walk. apthat focuses on the needs of the more than sions with a personal trainer. program that offers classes on nutrition and program. In contrast. Its brand tes among it consumers. According to one equity improves in response to its proactive report. Farmer Equity) program. Third parties evaluate employees. as well as eight weeks of ses13 different countries gained C. (Coffee and pany calls “partners”). environmental. Starbucks increased the 1 billion people globally who lack access to Finally.F. to the area. worry facing people across the world. it has contributed $6 million to help solve the world’s water crisis. social responsibility. Starbucks helps stimulate economic growth in the areas by creating jobs.

7. In particular. But in practice. The development of the implementation plan might reveal that insufficient resources have been allocated to CHAPTER 2 | Developing Marketing Strategies and a Marketing Plan 43 . they perform the situation analysis. The firm might reduce support Dogs for the product and lose sales to the Cash cows LOW point that it abandons the product. Although they may generate enough resources to sustain themselves. For example. for instance. Another issue for marketers is the potential self-fulfilling prophecy of placing a product or service into a quadrant. In the case depicted in Exhibit 2. so that they can become stars. a situation analysis may uncover a logical alternative. develop the implementation plan. other measures easily could serve as substitutes to represent a product’s competitive position and the market’s relative attractiveness. HIGH Stars Question marks Although quite useful for conceptualizing the relative performance of products or services and using this inA formation to allocate resources. suppose a product is classified as a dog though it has the potential of being a question mark. That is. which might have become profitable if provided with sufficient resources. the firm hopes to turn it into a star. the company has deRelative market share LOW HIGH cided to stop making Brand B. Brand A.indd Page 43 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles E X H I B I T 2 . and. As their market trix approaches to achieve a more balanced approach to evalugrowth slows. thus. Because these the organizational hierarchy to negotiate with those above and products have already received heavy investments to develop below them to reach their final decisions. finally. Dogs. is currently a question mark. many firms start at lower management levels and Cash Cows. evaluate their performance and make adjustments. their high market share. That is. even though this alternative might not be included in the mission statement. For example. after they’ve defined the business mission. Dogs (lower right quadrant) are in low-growth markets and have relatively low market shares. allocate resources. many firms have tempered their use of maproduction facilities to fuel their rapid growth. set objectives. dogs are not destined for “stardom” and should be phased out unless they are Sequential The planning process as we have discussed it (refer again to Exhibit 2. Managers must decide whether to infuse question marks with resources generated by the cash cows. heavy generators of resources and become cash cows. Furthermore. the firm may decide to use the excess resources generated by Brand C to Strategic Planning Is Not fund products in the question mark quadrant. evaluate alternatives. stars will migrate from heavy users of resources to ating products and services and allocating their resources.2) suggests that managers follow a set sequence when they make strategic decisions. actual planning processes can move back and forth among these steps. they are often the most managerially intensive products in that they require significant resources to maintain and potentially increase their market share. the BCG approach. but by infusing it with resources. and others like it. which would mean that the mission statement would need to be revised. 7 Boston Consulting Group Product Portfolio Analysis needed to complement or boost the sales of another product or for competitive purposes. identify strategic opportunities. it is difficult to measure both relative market share and industry growth. or withdraw resources and eventually phase out the products. Cash cows (lower left quadrant) are in low-growth employ checks and balances to force managers at each level of markets but are high market share products. Instead of assigning allocation decisions to the top levels of the organization. is often difficult to implement in practice. Market growth rate A B C Question Marks. they have excess resources that can be spun off to those products that need it. Question marks (upper right quadrant) appear in high-growth markets but have relatively low market shares.gre2885x_ch02_024-047. Because of these limitations.

What tool helps a marketer conduct a situation analysis? 3. which may include the four major strategies shown in Exhibit 2. the marketer might consider not investing in the product at all. . such as increased advertising and additional sales and promotions. To penetrate its target market. video-gaming multitaskers who no longer accept plain video programming on their televisions. GROWTH STRATEGIES Firms consider pursuing various market segments as part of their overall growth strategies. What are the five steps in creating a marketing plan? 2. MTV provides a dedicated forum and blog so fans can discuss The Hills’ stars Kristin Cavallari and Lauren Bosworth. E X H I B I T 2 .8. check yourself ✓ 1. or intensified distribution efforts in geographic areas in which the product or service already is sold. 8 Market/Product and Services Strategies New Current Market Penetration Product Development Market Development Diversification MARKETS Current New PRODUCTS AND SERVICES 44 SECTION 1 | Assessing the Marketplace Market Penetration A market penetration strategy employs the existing marketing mix and focuses the firm’s efforts on existing customers. let’s look at some growth strategies that have been responsible for making many marketing firms successful. Let’s consider each of the strategies in detail.gre2885x_ch02_024-047.54 The rows in the exhibit distinguish those opportunities a firm possesses in its current markets from those it has in new markets. TV network MTV found that it needed new ways to engage its viewers. alternatively. In that case. whereas the columns distinguish between the firm’s current marketing offering and that of a new opportunity. A market penetration strategy generally requires greater marketing efforts. Such a growth strategy might be achieved by attracting new consumers to the firm’s current target market or encouraging current customers to patronize the firm more often or buy more merchandise on each visit. What is STP? LO7 Describe how firms grow their business.indd Page 44 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles a particular product for it to achieve its objective. the firm would need to either change the objective or increase the resources. The young audience to which MTV traditionally appeals now consists of text-messaging. Now that we have gone through the steps of the marketing plan.

domestic or international. many U.56 And thus. Kristin Cavallari and Product Development Brodie. and credit cards to cash. However. and language.S. Brazil. MTV encourages them to connect and debate about the drama between Heidi and Spencer. through alternative channels increase ratings for the show. Not only can viewers talk about The third growth strategy option. enjoy a competitive advantage in global markets—such as Mexico. in addition to producing and airing reality shows such as The to sandals. Therefore. including the United Kingdom. For exMarket Development ample. French fries to rice. in achieve such growth. including MTV. supply chains. American culture is widely emulated for consumer products. CHAPTER 2 | Developing Marketing Strategies and a Marketing Plan 45 . Since its founding in 1981. whether International expansion generally is riskier than domestic expansion because firms must deal with differences in government regulations. whether discovered that interactions with the audience domestic or international. firms. MTV has a virtual community (virtual. offers a new product or service to a firm’s current ucts they wear and download the music played during the target market. and language. to reach new market firm’s current target market. especially among young people. with niche sites in more than 20 countries. and India. and Audrina and Justin. cultural traditions. For example. constantly develops new pilots and show concepts to increase the amount of time viewers can spend watching MTV. marketing offering to reach new market segments. Europe. and design a “crib” in “Lauren Conrad’s Design studio. fashion trends from the United States have spread to young people in emerging countries. It is available in 440 million households in 150 countries and 28 languages. because of rising prosperity worldwide and rapidly increasing access to cable television that offers U. Japan.S. International expansion generally is riskier than domestic expansion because firms must deal with differences in government regulations. To Hills. Consider MTV’s dynamic lineup: The network 55 show. and Japan—because. Latin America. MTV’s The Hills’ target market is attracted to new MTV programming and online blogs. the network is working hard to develop existing marketing mix and strategy that employs the strategy that offers a new additional strategies and outlets to retain focuses the firm’s efforts on existing marketing offering product or service to a viewers.gre2885x_ch02_024-047.” and show formats. as well as to encourage them to spend existing customers. MTV has expanded well beyond the United States. athletic shoes Using a product development growth strategy. the global MTV generation prefers soft drinks to tea. China. MTV segments. supply chains. blog.com). and activities. programming. but they can buy the prodstrategy. shop to outfit that tent but also delivers culturally relevant content using local DJs avatar.mtv. each version of The Real World reality series and new series such as Jersey Shore and I’m Hustling the Hamptons repreA market development strategy employs the existing sent new programs designed to attract and retain existing viewers. more time interacting with its content. cultural traditions. MTV leveraged its existing media conwhich fans of the show may create an avatar.indd Page 45 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles market penetration strategy a growth market development strategy a growth strategy that employs the product development strategy a growth Thus. a product development the characters as if they were friends. By providing The Hills fans with a dedicated forum.

Its new series.gre2885x_ch02_024-047. introduces a new product or service to a market that currently is not served. Diversification opportunities may be either related or unrelated.60 ■ MTV creates new shows by pursuing a related diversification strategy. 46 SECTION 1 | Assessing the Marketplace .59 In contrast. formerly the lead character in Newlyweds. use the same distribution and/or management information system. on more positive social messages. The Hills. in an unrelated diversification. Unrelated diversifications do not capitalize on core strengths associated either with markets or with products. from consumer office supplies to orthodontic technologies. we find an excellent and successful example of unrelated diversification strategies: What began as a sandpaper products company now markets its products in six major business segments. because it stars popular television celebrities. the new business lacks any common elements with the present business. still should appeal to viewers of The Hills.. MTV develops new online products to engage consumers through more than 25 niche blogs. the last of the growth strategies from Exhibit 2. In a related diversification opportunity. and excessive youth culture (e. The Buried Life.indd Page 46 02/11/11 11:10 AM user-f494 /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles diversification strategy a growth related diversification unrelated diversification strategy whereby a firm introduces a new product or service to a market segment that it does not currently serve. as well as websites that it uses to dominate a greater share of viewers’ minds and time. and environmental issues that appeal to different segments in its target market. the current target market and/or marketing mix shares something in common with the new opportunity. MTV promises that consumers can share mobile content. Revisiting our example of the technology innovation company 3M. Nick Lachey. celebrities. or advertise in the same newspapers to target markets that are similar to their current consumers. a reality series that considers the efforts and struggles of students in a performing arts school in Cincinnati. My Super Sweet 16). These various MTV-branded niche sites pertain to social. educate themselves. the plotlines of the show revolve around how these stars help underprivileged groups. Thus. By visiting the sites. Dave Lingwood. they would be viewed as being very risky.8. and take action on important issues. MTV has pursued a related diversification by introducing TV series that focus. The sites further encourage viewers to get involved in real-world issues (not The Real World issues). political. The stars of The Buried Life. the firm might be able to purchase from existing vendors. instead of on wealth. such as digital disrespect through mobile technologies. and Jonnie Penn. Duncan Penn.58 In other words. now appears on Taking the Stage. Ben Nemtim. a growth strategy whereby the current target market and/or marketing mix shares something in common with the new opportunity. Along with its new TV series.57 Diversification A diversification strategy. a growth strategy whereby a new business lacks any common elements with the present business. are already popular MTV celebrities.g. However.

com/GrewalM3e 2. Which strategy is the riskiest? including quizzes. iPod downloads.indd Page 47 02/11/11 11:10 AM user-f494 check yourself /202/MHBR257/gre2885x_disk1of1/007802885x/gre2885x_pagefiles ✓ 1. What are the four growth strategies? CHECK IT OUT! mhhe. and video CHAPTER 2 | Developing Marketing Strategies and a Marketing Plan 47 . What type of strategy is growing the business from existing customers? for study materials 3.gre2885x_ch02_024-047.