Lecture 2 (Part 1) : Eighteenth Edition, Global Edition

Principles of Marketing
Eighteenth Edition, Global Edition
Lecture 2 (Part 1)
Company and Marketing Strategy
Partnering to Build Customer
Engagement, Value, and
Relationships
Copyright © 2021 Pearson Education Ltd.

Learning Objectives
2.1 Explain company-wide strategic planning and its four steps.
2.2 Discuss how to design business portfolios and develop
growth strategies.
2.3 Explain marketing’s role in strategic planning and how
marketing works with its partners to create and deliver
customer value.
2.4 Describe the elements of a customer value-driven marketing
strategy and mix and the forces that influence them.
2.5 List the marketing management functions, including the
elements of a marketing plan, and discuss the importance of
measuring and managing marketing return on investment.

Learning Objective 1
Explain company-wide strategic planning and its four steps.

Company-Wide Strategic Planning
(1 of 4)
Strategic planning is the process of developing and
maintaining a strategic fit between the organization’s goals
and capabilities, and its changing marketing opportunities.
Figure 2.1 Steps in Strategic Planning

(2 of 4)
The mission statement is the organization’s purpose; what
it wants to accomplish in the larger environment.
CV S Health’s overall mission is to be a “pharmacy
innovation company,” one that is “helping people on their
way to better health.” Its marketing strategies and programs
must support this mission.

(3 of 4)
Product- versus Market-Oriented Business Definitions
Company Product-Oriented Definition Market-Oriented Definition
Starbucks We sell coffee and snacks. We sell “The Starbucks Experience,” one that enriches
people’s lives one moment, one human being, one
extraordinary cup of coffee at a time.
Instagram We are a social networking app We help people capture and share the world’s moments.
for posting photos and videos.
Home Depot We sell tools and home repair and We empower consumers to achieve the homes of their
improvement items. dreams.
Sephora We are a beauty products retailer. We sell lifestyle and self-expression by helping
customers to unlock their beauty potential.
Ritz-Carlton Hotels & We rent rooms. We create “The Ritz-Carlton experience”—a memorable
Resorts stay that far exceeds guests’ already-high expectations.
Walmart We run discount stores. We deliver low prices every day and give ordinary folks
the chance to buy the same things as rich people. “Save
Money. Live Better.”

(4 of 4)
Setting Company Objectives and Goals
• Business objectives
– Build profitable customer relationships
– Invest in research
– Improve profits
• Marketing objectives
– Increase market share
– Create local partnerships
– Increase promotion

Real Marketing 2.1: Airbnb’s Mission
Airbnb's mission is to help create a world where you can
belong anywhere and where people can live in a place,
instead of just traveling to it.

Discuss how to design business portfolios and develop
growth strategies.

Designing The Business Portfolio
The business portfolio is the collection of
businesses and products that make up the
company.
Portfolio analysis is a major activity in strategic

planning whereby management evaluates the
products and businesses that make up the
company.
Mars Inc. is not only the world’s number-one candy

maker; it is also a world-leading pet nutrition and
health-care company.
DRB-HICOM is another example–it does not only

distribute cars (Proton, an automotive industry), but
also provides services such as hospitality (Holiday
Inn Glenmarie Kuala Lumpur), postal/courier (Pos
Malaysia), banking (Bank Muamalat) and others.
A strategic business unit (SBU) can be a:
• Company’s division
• Product line within a division
• Single product or brand
…that operates as an independent entity, but
has to report directly to the HQ of the
organisation. It is big enough to have its own
support functions such as HR, Marketing,
R&D etc.

Procter & Gamble’s SBUs (Portfolio of Brands)

Figure 2.2 The BCG Growth-Share
Matrix

The BCG Growth-Share Matrix
Apple?

The BCG Growth-Share Matrix
McDonald’s?

(3 of 8)
Analyzing The Current Business Portfolio
• Identify strategic business units (SBU s)

• Assess the attractiveness of its various SBU s
• Decide how much support each SB U deserves

Growth-Share Matrix
• Evaluates a company’s SBUs in terms of market growth
rate and relative market share
• Problems with Growth-Share Matrix
– Difficult, time consuming, and costly
– Difficult to define and measure
– Provides little advice for future planning

Figure 2.3 The Product/Market Expansion Grid

Developing Strategies for Growth and Downsizing
Strategies for growth: To maintain its incredible growth,
Starbucks has brewed up an ambitious, multipronged growth
strategy.
In only three decades,

Starbucks has grown at an
astounding pace from a small
Seattle coffee shop to an over
$22 billion powerhouse with
more than 27,000 retail stores
in more than 75 countries.

Downsizing
• Products or business units that are unprofitable or no
longer fit the company’s overall strategy
• Reasons to abandon products or markets
– Rapid growth of the company
– Lack of experience in a market
– Change in market environment
– Decline of a particular product

Explain marketing’s role in strategic planning and how
marketing works with its partners to create and deliver
customer value.

Planning Marketing: Partnering to
Build Customer Relationships (1 of 3)
Partnering with Other Company Departments
Partnering with Others in the Marketing System
Value chain is a series of
departments that carry out value
creating activities to design,
produce, market, deliver, and
support a firm’s products.
Value delivery network is made
up of the company, suppliers,
distributors, and ultimately
customers who partner with each
other to improve performance of
the entire system.
Describe the elements of a customer value-driven marketing
strategy and mix and the forces that influence them.

Marketing Strategy and the Marketing
Mix (1 of 7)
Customer Value-Driven Marketing Strategy
Marketing strategy is the marketing logic by which the
company hopes to create customer value and achieve
profitable customer relationships.

Mix (2 of 7)

Mix (3 of 7)
Market segmentation is the division of a market into distinct groups of buyers who have
different needs, characteristics, or behaviors and who might require separate products or
marketing mixes. Market segment is a group of consumers who respond in a similar way
to a given set of marketing efforts.
Market targeting is the process of evaluating each market segment’s attractiveness and
selecting one or more segments to enter.
Market positioning is the arranging for a product to occupy a clear, distinctive, and
desirable place relative to competing products in the minds of target consumers.
Differentiation begins the positioning process.

Mix (5 of 7)
Positioning is arranging for a product to occupy a clear, distinctive, and desirable
place in consumer’s mind, relative to competing products from competing brands
and give them the greatest advantage in their target markets.

28
Uber’s Brand Positioning Statement

• To (Target audience): anyone just about anywhere with a credit
card and smartphone who needs a local ride,
• Uber is the (Frame of reference): next-generation taxi service

• That (Point of difference): provides a simpler, more convenient
and higher quality transportation experience than conventional taxis
• Because (Reason to believe): our app makes hailing and paying

for a ride easy, convenient and reliable, and our personal vehicles
feel less commercial/industrial.

Apple’s Brand Positioning Statement

Mix (6 of 7)
Developing an Integrated Marketing Mix
Marketing mix is the set of controllable, tactical marketing
tools—product, price, place, and promotion—that the firm
blends to produce the response it wants in the target market.

Mix (7 of 7)
Figure 2.5 The Four Ps of the Marketing Mix

List the marketing management functions, including the
elements of a marketing plan, and discuss the importance of
measuring and managing marketing return on investment.

Managing the Marketing Effort (1 of 4)
Figure 2.6 Manging Marketing: Analysis, Planning,
Implementation, and Control

Figure 2.7 S W O T Analysis: Strengths (S), Weaknesses
(W), Opportunities (O), and Threats (T)

Market Planning—Parts of a Marketing Plan
• Executive summary
• Marketing situation
• Threats and opportunities
• Objectives and issues
• Marketing strategy
• Action programs
• Budgets
• Controls

Marketing Implementation
• Turning marketing strategies and plans into marketing
actions to accomplish strategic marketing objectives
• Addresses who, where, when, and how

Measuring and Managing Return on
Marketing Investment
Return on Marketing Investment (Marketing RO I)
• Net return from a marketing investment divided by the costs of the
marketing investment
• Measurement of the profits generated by investments in marketing
activities

Principles of Marketing
Eighteenth Edition, Global Edition
Lecture 2 (Part 2)
Analysing the Marketing
Environment

Learning Objectives
3.1 Describe the environmental forces that affect the
company’s ability to serve its customers.
3.2 Explain how changes in the demographic and economic
environments affect marketing decisions.
3.3 Identify the major trends in the firm’s natural and
technological environments.
3.4 Explain the key changes in the political and cultural
environments.
3.5 Discuss how companies can react to the marketing
environment.

MICROSOFT: Adapting to the Fast-
Changing Marketing Environment
“Microsoft has undergone a
dramatic transformation to better
align itself with the new digital
world. More than just making the
software that makes PCs run,
Microsoft now wants to empower
every person and every
organization on the planet to
achieve more, regardless of what
device or operating system they
use.”
MUST-READ:
Inside the transformation of IT at Microsoft (May 21, 2021)
A Company’s Marketing Environment
The marketing environment includes the actors and forces
outside marketing that affect marketing management’s ability
to build and maintain successful relationships with target
customers.

Describe the environmental forces that affect the company’s
ability to serve its customers.

The Microenvironment and
Macroenvironment
Microenvironment consists of the actors close to the
company that affect its ability to serve its customers—the
company, suppliers, marketing intermediaries, customer
markets, competitors, and publics.
Macroenvironment consists of the larger societal forces
that affect the microenvironment—demographic, economic,
natural, technological, political, and cultural forces.

The Microenvironment (1 of 8)
Figure 3.1 Actors in the Microenvironment

The Company
In designing marketing plans, marketing management takes

other company departments into account.
• Top management
• Finance
• Research and development (R&D)
• Information technology
• Purchasing
• Operations
• Human resources
• Accounting

Suppliers
• Provide the resources to produce goods and services
• Treat as partners to provide customer value
Suppliers: Giant furniture
retailer IKEA doesn’t just buy
from its suppliers. It involves
them deeply in the process of
delivering the trendy but
simple and affordable home
furnishings to create a better
everyday life for its
customers.

Marketing Intermediaries Partnering with
intermediaries: Apple
Marketing intermediaries provides its retail partners
are firms that help the with much more than phones
company to promote, sell, and smartwatches. It also
and distribute its goods to pledges technical support.
final buyers.

Marketing Intermediaries
• Resellers (distribution channel firms that help the company find customers
or make sales to them.)
• Physical distribution (firms help the company stock and move goods
from their points of origin to their destinations.)
• Marketing services agencies (marketing research firms, advertising
agencies, media firms, and marketing consulting firms that help the company
target and promote its products to the right markets.)
• Financial intermediaries (banks, credit companies, insurance
companies, and other businesses that help finance transactions or insure
against the risks associated with the buying and selling of goods.)

Competitors
Firms must gain strategic advantage by positioning their
offerings strongly against competitors’ offerings in the minds
of consumers.

Publics Publics: NatWest shows its
Any group that has an actual or commitment to its local community by
potential interest in or impact on an giving generously to local charities,
organization’s ability to achieve its community groups, and social
objectives enterprises.
• Financial publics
• Media publics
• Government publics
• Citizen-action publics
• Local publics
• General public
• Internal publics

Customers
• Consumer markets
• Business markets
• Reseller markets
• Government markets
• International markets

The Macroenvironment
Figure 3.2 Major Forces in the Company’s
Macroenvironment

Explain how changes in the demographic and economic
environments affect marketing decisions.

The Demographic and Economic
Environments (1 of 6)
The Demographic Environment
• Demography is the study of human populations—size,
density, location, age, gender, race, occupation, and other
statistics.
• Demographic environment involves people, and people
make up markets.
• Demographic trends include changing age and family
structures, geographic population shifts, educational
characteristics, and population diversity.

• Baby Boomers – born 1946 to 1964

• Generation X – born between 1965 and 1980
• Millennials – born between 1981 and 1996
• Generation Z – born between 1997 and 2012
• Generation Alpha – born after 2012

Generational marketing is important in segmenting people
by lifestyle or life stage instead of age.
Generational marketing: Baby

boomers and millennials are
now moving over to make room
for younger Generation Alpha.

Working remotely: Apps like Slack
• The changing American family let people working remotely
collaborate anywhere and
• Geographic shifts in population
everywhere through the internet and
• A better-educated, more white-collar, mobile devices.
more professional population
• Increasing diversity

Targeting consumers with
disabilities: Toyota’s “Start
Your Impossible” campaign
included ads highlighting
inspirational real-life stories of
athletes who overcame
mobility challenges, such
Paralympic gold medalist
alpine skier Lauren
Woolstencroft.

The Economic Environment
Economic environment: Consumers adopted a new back-to-
basics sensibility in their lifestyles and spending patterns. To
serve the tastes of these more financially frugal buyers,
companies like Target are emphasising the “pay less” side of
their value propositions.

Identify the major trends in the firm’s natural and
technological environments.

The Natural and Technological
The Natural Environment
The natural environment is the physical environment and the
natural resources that are needed as inputs by marketers or
that are affected by marketing activities.
Trends in the Natural Environment

• Growing shortages of raw materials
• Increased pollution
• Increased government intervention
• Developing strategies that support environmental
sustainability
The Natural Environment
Environmental sustainability
involves developing strategies
and practices that create a world At LG Electronics, we believe we
have a shared responsibility to
economy that the planet can
protect our planet for future
support indefinitely. generations. Our commitment to
sustainability ensures that we
strive for minimal environmental
impact while staying faithful to the
values of our customers, business
partners, employees and
communities.

The Technological Marketing technology: Disney
Environment takes full advantage of digital
technology in creating magical
• Most dramatic force in
customer experiences at its
changing the marketplace
Walt Disney World Resort.
• New products, opportunities
• Concern for the safety of new
products

INDUSTRY 4.0
Trends of the future: 2025 and beyond
• 10% of people will be wearing clothes connected to the internet
• 80% will have unlimited (sponsored) backup space in the cloud
• There will be one trillion sensors connected to the internet
• 80% of the world’s population will have Internet presence
• The first automobile entirely produced with a 3D printer
• 90% of world’s population will own a smart phone
• 10% of all vehicles on the roads will be driverless
• More than 50% of home appliances will be connected to internet
• More rides will be made on shared cars than on private cars
Source: World Economic Forum 2015
MUST-READ:
Marketing for Industry 4.0 Challenges

The future of food marketing and retailing
and delivery in the 4th industrial age
Store without check-outs…

• Amazon has opened a grocery store in Seattle. Perhaps the most
surprising aspect is that this is an online retailer moving into bricks
and mortar.
• At Amazon Go, shoppers can walk in, choose the items they want
and just walk out. No queuing, no check-outs, no scanning, and no
card swiping. Just grab and go.
• As customers enter the store, they swipe their smartphone. The

Internet of Things-inspired Amazon Go then uses all manner of
sensors and technologies to identify what products have been taken
from the shelves and then adds them to a bill on the customer’s
phone. Simple!

How Does AmazonGo Work?

Explain the key changes in the political and cultural
environments.

The Political-Social and Cultural
The Political and Social Environment
Legislation regulating business is intended to protect
• companies from each other
• consumers from unfair business practices
• the interests of society against unrestrained business
behavior

The Political and Social Environment
• Increased emphasis on ethics
and socially responsible
Cause-related marketing: Ben & Jerry’s
actions
three-part “linked prosperity” mission
• Cause-related marketing drives it to make fantastic ice cream
(product mission), manage the company
for sustainable financial growth (economic
mission), and use the company “in
innovative ways to make the world a
better place” (social mission). Both Ben &
Jerry’s and its products are “Made of
Something Better.”

The Cultural Environment
The cultural environment consists of institutions and other
forces that affect a society’s basic values, perceptions, and
behaviours.

Cause-Related Marketing: Linking
Brands, Consumers, and Causes
Aerie’s #AerieREAL campaign
pledges that it will use only
unretouched images and
videos of real women in its ads
and other marketing content.
The cause of body positivity
and inclusivity is an integral
part of the brand’s identity.

The Cultural Environment
Core beliefs and values are persistent and are passed on
from parents to children and are reinforced by schools,
religious centres, businesses, and government.
Secondary beliefs and values are more open to change and
include people’s views of themselves, others, organisations,
society, nature, and the universe.

The Cultural Environment Catering to the natural, organic,
Shifts in Secondary Cultural Values and ethical products trend:
Unilever’s Love Beauty and Planet
• People’s views of themselves brand has one goal: “To make you
more beautiful and give a little love
• People’s views of others
to our planet.”
• People’s views of organisations
• People’s views of society
• People’s views of nature
• People’s views of the universe

Discuss how companies can react to the marketing
environment.

Responding to the Marketing
Environment
Views on Responding
• Uncontrollable
– React and adapt to forces in the environment
• Proactive
– Take aggressive actions to affect forces in the
environment
• Reactive
– Watch and react to forces in the environment

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Principles of Marketing

Eighteenth Edition, Global Edition

Copyright © 2021 Pearson Education Ltd.

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Figure 2.1 Steps in Strategic Planning

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Portfolio analysis is a major activity in strategic

Mars Inc. is not only the world’s number-one candy

DRB-HICOM is another example–it does not only

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• Identify strategic business units (SBU s)

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In only three decades,

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Uber’s Brand Positioning Statement

• Uber is the (Frame of reference): next-generation taxi service

• Because (Reason to believe): our app makes hailing and paying

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In designing marketing plans, marketing management takes

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