Part 1 Marketing StrategyChap. 1 Market-led strategic management

This chapter has sought to review the marketing concept and demonstrate its importance in providing a guiding approach to doing business in the face of increasingly competitive and less marketing environments. This approach we term market-led strategic management. Chapter 1 is a framework for developing a market-led approach.

Marketing is a simple specialised function in an organisation, it is a process of value creation (define, develop and deliver value) and deliver it to customers. And create a sustainable competitive advantage on the market for a long term.The successful organisation is customer-focused and not product or technological focused.Marketing is a concept of how business should run.

This first chapter sets the scene by the marketing concept and market orientation as the foundation of strategic marketing, the role of marketing in addressing stakeholders in the organisation and resource-based marketing strategy.

1.1 the marketing concept and market orientation

1.1.1 definition of marketing

Companies or organisations that take notice of customers expectations, wants and needs and gear themselves to satisfying them better than their competitors.Definition from Ferrell and Lucas (1987):Marketing is the process of planning and executing the conception, pricing, planning and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational objectives.

This process may or may not be managed by a marketing department. It leads to a model of mutually beneficial exchanges:

offersservices, products…

customers &providers satisfaction

ResponsesPurchses, support

Marketing has the most difficulty in defining its position in the organisation!Marketing involves the following: organisational culture: set of values and beliefs for the organisation to serve customers needs strategy: develop effective responses to changing market environments by defining market segments, and developing and positioning product offerings for targets.

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Providers goalsSurvivalFinancialSocialSpiritual

Customers goalsSolutionsBenefitsWell-being

tactics: concerned activities of product management, pricing, distribution and communications such as advertising, personal selling, publicity and sales promotion

1.1.2 market orientation

It is to translate the philosophy of marketing into reality, to achieve market orientation. Definition from Kohli and Jaworski (1990):Market orientation are activities toward developing an understanding of customers current and future needs. Components and context of market orientation are proposed: Customer orientation: understanding costumers well enough, create superior value for them competitor orientation: awareness of the short- and long term competitors interfunctional co-ordination: using all resources to create value for target customers organisational culture: linking employee and managerial behaviour to customer satisfaction long-term profit focus: as the overriding business objective

Maket-ledOrganisationalculture

There are substantial barriers to achieve market orientation. To overcome the barriers Webster developed an idea that weave the “fabric of the new marketing concept”It is useful to develop a marketing concept as you can see in the framework:

1.2 the resource based view of marketing

Marketing approaches:

product push marketing: activities on existing products and services and look for ways to encourage, or persuade customers to buy. This is an interpretation of the resource-based-view – we have a resource that we are good at producing and is different to competitors offerings. The key is to make customer want what we are good at.

customer-led marketing: Under this approach organisations chase their customers at all costs. The goal is to find what customers want and give it to them. This can become to a problem. The retailers react by giving customers more choice, heavy promotions and deals to stimulate purchases, and aggressive sales force targets. Customers get confused because of the over complex promotions.

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Customerorientation

InterfunctionalCo-ordination

competitororientation

Focus on theLong term

resource based marketing: companies base their marketing strategies on equal consideration of the requirements of the market and their abilities to serve it. This is taken in context of other market considerations such as competitors’ offerings and strategies.

Resource based marketing seeks a long term fit between the requirements of the markets and the abilities of the organisation to compete in it. The resource profile is not fix it has to be developed continuously to take advantage of new opportunities.

1.3 Organisational stakeholders

Why do they exist? The answer is to earn returns on their investments for shareholders and owners of the organisation. For other non profit organisations (like charities, faith based organisations, public services) is the answer to lie in the desire or to serve specific communities.

Motivations and expectations of the various stakeholder groups:

shareholders: there are two main types: a) the individuals who ties to the business, b) financial investors who are individuals or institutional, they want to maximise the long-term value of their investments, the long time shareholder value is driven many firms to make short term decisions, to maximise share price or dividends

employees: may also have long-term commitment to the firm. Their priorities are generally compensation (through wages and salaries), job satisfaction and security. These may be with the value of the firm to shareholders. Job loss may cause to increase the shareholder value.

managers: also get rewards in the form of salaries and prestige. Managerial success is measured by short term gains (in sales for example)

customers: are the ultimate source of shareholder value. The price and quality of offerings are very important. If customers are not prepared to pay the price the firm will not remain in business very long. Nowadays customer value creation must be balanced with other issues like Internet etc.

suppliers and distributors: also have a stake in the business. Suppliers serve to ensure the achievement of their own goals. Distributors are stakeholders too like franchises. They seek from predictabilities and continuity at satisfactory margins. (Vorhersagen und fortlaufende zurfriedenstellende Handelsspanne)

For non profit organisations the identification of stakeholders and their requirements are more complex.

owners: hard to identify and the interests are difficult to define. Like who owns the Catholic Church, or greenpeace? Hard to answer! Many may argue that the owners are those who support the organisation like the members…

customers: defined as those who attend to mass on Sundays, who seeks to serve.

employees: in the non profit sector employees do not receive financial rewards. Their prime motivators are not financial but satisfaction which they cherish or value.

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1.3.1 contribution of marketing to stakeholder objectives

Firms who adopting to market-oriented culture perform financially better than others. WHY? The effect of market oriented culture on firm activities and performance shows the following figure. The degree of market orientation is an embedded cultural aspect.

Market Marketing resource market performance financialOriented performanceCulture Assets customer satisfaction

Capabilities sales volume &Market share

High market orientation means that they are focused on their role in and contribution to creating superior customer value. For example a human resource management and training is directed toward customer awareness and service, reward structures are designed to encourage customer satisfaction. Fulfilled employees take pride in their jobs and give better service. Well developed marketing resources can lead to a market performance. Satisfied and well-motivated staff can make a significant contribution to creating satisfied customer and consequently increased sales volume and market share.Customer satisfaction leads to greater sales volume and market shares which leads to financial performance. Firms with higher market shares perform financially better.

Marketing’s contribution will be to develop strategies that deliver cash flows through successful new product launches, or creation of strong brands. The focus or marketing is on developing and protecting assets such as brands or market shares.It concentrate on the satisfying the needs of employee and manager stakeholders through providing security, compensation and job satisfaction. To achieve the profit and performance desires of the supply chain partners is through market success (partnership) which creates more stability and predictability in the supply and distribution chain.

1.4 Marketing fundamentals

Marketing principles serve to guide marketing thought and action.

Principle 1: Focus on the customerFinancial and social objects are best served by achieving a high degree of customer focus. The quality or services will be judged by the customers on the basis of how well their requirements are satisfied or fit for purpose. Basic questions for adopting a market-led approach:What business are we in? What business could we be in? What business do we want to be in? What must we do to get into or consolidate in that business?

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Principle 2: Only compete in markets where you can establish a competitive advantageKey task for any organisation

Principle 3: Customers do not buy productsThey buy what the product can do for them or the problem it solves. Customers are less interested in technical features or service than in what benefits they get from buying using or consuming the product or service. Mission of Marketing is to ensure that the organisation gears itself to solve customers’ problems, rather than exclusively promoting its own current solution. Retailers are defining categories around customers needs, not manufacturers’ brands. One common category is ready meal replacement. The challenge is to prove to the retailer what their products and brands add to the value of the category. Example: the manufacturer makes potato crisps; the retailer merchandises salty snacks; the customer buys lunch!

Principle 4: Marketing is too important to leave to the marketing department (even if there still is one)Marketing is everyone’s job in the organisation.

Principle 5: Markets are heterogeneousDifferent customers, sub-markets and segments; buy a car for cheap transport from a to b or for comfortable or save travel; different benefits requirementsPrinciple 6: markets and customers are constantly changingMarkets are dynamic and products have a limited life; need product and service improvement; customer expectations change;

Two main processes of improvement; innovation and changes in technology (which is a continuous process);

1.5 The role of marketing in leading strategic management

The role of marketing in the organisation can be: (that role is threefold)

identity and communicate customers want and need throughout the organisation

Identify the requirements of customers and communicate them effectively; who the customers are and what will give them satisfaction or create “customer delight”

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Customers expectations, wants and need must be understood and communicated

determine the competitive positioning to match the needs of the customers with company capabilities Various market segments and each have different requirements; decide

which target markets the organisations will seek to serve; two main sets of factors: first, how attractive the alternative potential targets are; second, how well the company can hope to serve potential target relative to the competition;

marshal all relevant organisational resources to deliver customer satisfactionImplementing the marketing strategy; no gaps between offer, design, production and delivery;

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