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Strategic Marketing:Planning and Control

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Strategic Marketing:Planning and ControlThird editionGraeme DrummondJohn EnsorRuth AshfordAMSTERDAM BOSTON HEIDELBERG LONDON NEW YORK OXFORDPARIS SAN DIEGO SAN FRANCISCO SINGAPORE SYDNEY TOKYOButterworth-Heinemann is an imprint of Elsevier

Butterworth-Heinemann is an imprint of ElsevierLinacre House, Jordan Hill, Oxford OX2 8DP30 Corporate Drive, Suite 400, Burlington, MA 01803, USAFirst edition 1999Second edition 2001Copyright 1999, 2001, 2008Published by Elsevier Ltd. All rights reserved.No part of this publication may be reproduced, stored in a retrieval system or transmittedin any form or by any means electronic, mechanical, photocopying, recording or otherwisewithout the prior written permission of the publisherPermissions may be sought directly from Elsevier’s Science & Technology RightsDepartment in Oxford, UK: phone ( 44) (0) 1865 843830; fax ( 44) (0) 1865 853333;e-mail: [email protected] Alternatively you can submit your request onlineby visiting the Elsevier web site at http://elsevier.com/locate/permissions, and selectingObtaining permission to use Elsevier materialNoticeNo responsibility is assumed by the publisher for any injury and/or damage to persons orproperty as a matter of products liability, negligence or otherwise, or from any use or operation of any methods, products, instructions or ideas contained in the material herein.British Library Cataloguing-in-Publication DataA catalogue record for this book is available from the British LibraryLibrary of Congress Cataloging-in-Publication DataA catalog record for this book is available from the Library of CongressISBN: 978-07506-8271-8For information on all Butterworth-Heinemann publicationsvisit our web site at books.elsevier.comTypeset by Charon Tec Ltd (A Macmillan Company), Chennai, Indiawww.charontec.comPrinted and bound in Slovenia

The strategic perspectiveAbout this chapterIntroductionWhat is strategy?Towards strategic managementChange – shaping strategyBalanced scorecard approachThe role of marketing within strategyWhat is marketing strategy?SummaryPart 1Strategic Analysis172External analysisAbout this chapterIntroductionScanningMacro-environmental analysisIndustry analysisCompetitor analysisProblems in identifying competitorsThe market analysisSummary192121222426293333343Competitive intelligenceAbout this chapterWhat is competitive intelligence?The CI cycleSources of competitive informationSummary3739394144454SegmentationAbout this chapterIntroductionWhy segment?The segmentation processConsumer behaviourConsumer segmentation criteria47494949505157

viContentsProfile variablesBehavioural variablesPsychographic variablesOrganisational/industrial segmentation techniquesOrganisational buyer behaviourThe Webster–Wind frameworkThe Sheth frameworkApproaches to organisational market segmentationSummary5866697373767681845Internal analysisAbout this chapterIntroductionOrganisational capabilitiesOrganisational assetsOrganisational competenciesInitial corporate wide internal auditThe internal marketing auditThe innovation auditAuditing toolsSummary8789899090929495961011076Developing a future orientationAbout this chapterIntroductionForecastingTrend extrapolationModellingIntuitive forecastingConsensus forecastingScenario planningMarket sensingStrategic questionsPeople 5127Part 27Formulation of StrategyStrategic intentAbout this chapterIntroductionMissionStatement of strategic intentNature of support for the mission statementGoals and objectivesHierarchy of objectivesLong-term versus short-term goalsThe balanced scorecardGap 6146

Contents8Strategy formulationAbout this chapterStrategy formulation – an overviewCompetitive advantageIdentifying sources of competitive advantageExperience and value effectsIndustry positionProduct and market strategiesStrategic wear-outDifficult market 9Targeting, positioning and brand strategyAbout this chapterIntroductionEvaluating market segmentsEstablishing organisational capabilityStrategic alignment of assets and competencies (targeting)The strategic nature of making target segment choicesPositioningPerceptual mappingPositioning alternativesCreating brand equityBrand valuationStrategic brand managementBrand name strategyCombined brand strategiesBrand extensionBrand stretchingBrand revitalisationBrand repositioningBrand 19519820120320520520620620820910Product development and innovationAbout this chapterThe strategic agendaThe nature of products and product developmentWhy do products fail?Managing innovationRisk and the innovation dilemmaSummary21121321321322022122322611Alliances and relationshipsAbout this chapterIntroductionAlliancesRelationship marketingDeveloping relationshipsSummary229231231231235237239vii

viiiContents12The strategic marketing planAbout this chapterCorporate and marketing plansCorporate planningMarketing plans: strategy or tactics?Why does planning matter?Barriers to successful planningThe structure of a strategic marketing planApproaches to marketing planningSummaryPart 3Strategic trategic implementationAbout this chapterImplementation: stressing the importanceSuccess versus failureFundamental principlesAssessing ease of implementationPeople, power and politicsInternal marketingApplying project management ontrolAbout this chapterIntroductionControl: the basic principlesWhat makes an effective control system?Management controlFinancial controlPerformance appraisalBenchmarkingControlling marketing 9Part 4Contemporary Issues in Strategic Marketing29115Customer relationship managementAbout this chapterIntroductionStrategic versus operational CRMWhat makes a strong relationship?Lifetime customer valueSummary29329529529929930130116Marketing ethics and strategic marketing decision makingAbout this chapterIntroductionPolitical philosophy and ethical decision making303305305305

ContentsEthical frameworksMoral reasoningPart 517Teaching strategic marketingProblem-based learningAbout this chapterWhat is problem-based learning?Applicability of PBL to strategic marketingWriting effective PBL problemsPBL tasks in the classroomExample of PBL for strategic marketingIndex307311315317319319321321322322325ix

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PrefaceThe aim of this text is to enable the reader to develop a sound theoreticaland practical understanding of marketing, planning and control.Although primarily written for those studying for the Chartered Instituteof Marketing Professional Diploma and Postgraduate Diploma professional marketing qualifications, this text is equally useful for industrypractitioners. This is not an introductory text to the subject of marketingplanning, but builds on the existing knowledge that students and practitioners already hold about the principles of the subject. The aim has beento provide a clear, concise guide to the tools, techniques and concepts necessary to undertake strategic marketing decisions.The text also covers contemporary issues by exploring current developments in marketing theory and practice including: Customer relationship managementEthics and strategic marketing decision makingThe concept of a market-led orientationA resource/asset-based approach to internal analysis and planningInnovation is a theme throughout the text, reflecting the growing importance of this issue, both in terms of its academic profile and current business practice. There is also an emphasis on developing a view of the futurethrough various forecasting techniques.This new edition also includes three new chapters which relate to CRM,ethics and problem-based learning approaches. Throughout this newedition new illustrative examples have been included to reinforce thematerial covered in each chapter.An instructor’s manual is available to academic staff adopting this text.This contains expanded versions of selected illustrative examples featured in the main text, new cases and a pack of lecture material. Information for students studyingfor the CIM qualificationsThe Chartered Institute of Marketing has continued to offer the ProfessionalDiploma in Marketing for a number of years (QCA level 6). The CIM alsostill offers Postgraduate Diploma in Marketing (QCA level 7) which waslaunched in 2004.

xiiPrefaceThe Marketing Planning syllabus, which is part of the ProfessionalDiploma stage is divided into four major areas:1234The marketing plan in its organisational and wider marketing contextMarketing planning and budgetingThe extended marketing mix and related toolsMarketing in different contextsThe CIM has designed their syllabus around the statements of marketingpractice, which were developed by the Standard Setting Body for marketing under the direction of the Chartered Institute of Marketing. Thesestatements identify the practical tasks that marketers undertake withintheir marketing career. These standards are available on the CIM website(www.cim.co.uk).This textbook includes important strategic theory, some of which is notspecifically included within the Marketing Planning syllabus, however,this does add further understanding for the student and thus goes beyondthis syllabus. Also it is not the intention of this text to cover the theory relating to the marketing mix elements, as this is available in most fundamental marketing texts. However, the Marketing Planning syllabus requirescandidates to be able to discuss the operationalisation of their marketingplanning decisions using the marketing mix and so students should ensurethat they have this knowledge also. Links with other papersThe Marketing Planning syllabus was developed to provide the key skillsand knowledge required by an operational marketing manager. This module replaced the ‘Marketing Operations’ module in the old CIM AdvancedCertificate. It aims to prepare marketers for practice at management leveland does consider operational issues as well as strategic marketing decisions. The general basis of this module is the marketing planning functionand the implications for the operational decisions. However, as manyorganisations today are small- or medium-sized businesses, the marketingplanning process is undertaken at a lower level of management than inlarger multi-national organisations as cited in many other text books.Therefore, the Marketing Planning module acts as a central base for theother CIM modules to build upon at the Professional Diploma (QCA level6) and also is very much required for Postgraduate Diploma (QCA level 7)underpinning theory for this higher level of study.This text will provide students with an understanding of the nature ofstrategic marketing decisions and the marketing decision process. Thistext covers key elements of the syllabus (such as forecasting, controlmechanisms and budgeting) which are not covered well in other textbooks on the market and so is of major benefit to all students studying forthis examination. Indeed, these are the areas of the syllabus which tendnot to be taught well and consequently students do not perform well in

Prefaceresponse to questions in this area. Therefore, this text offers a useful anddirected aid to this section of the Marketing Planning syllabus both forlecturers, students and practitioners.The Marketing Research and Information module, which is another ofthe CIM modules within the Professional Diploma, includes the management of information and this is important to understand in relation toinform the marketing planning. This unit offers knowledge to operationalise the concepts discussed in this text.The CIM Integrated Marketing Communications module within theProfessional Diploma offers understanding of customer dynamics, whichagain offers information to make marketing planning decisions discussedin this text.The final CIM Professonal Diploma module, Marketing Management inPractice, requires students to operationalise and illustrate their skills andtheir knowledge of marketing planning processes as discussed in this text.Therefore, this text can add value to the reading for this syllabus also.The CIM offer two assessment routes for the Professional Diploma syllabus, which are by examination or assignment. Any CIM centre at whichstudents are studying will be able to inform them of the assessment route,which will be offered at that centre. The CIM examination routeThe examination paper for the Marketing Planning module is in twoparts. Part A is a mini case study with three or four compulsory questionsand this is worth 50 per cent of the examination. Each element of the syllabus will be tested in some way in Part A. Part B of the paper is made upof four questions, of which candidates are required to answer two andeach question is worth 25 per cent of the paper.Part A is normally a mini case study (similar to the ones found in Chapter15 of this text) but it could also be an abstract of an article. Normally it willbe up to one or one and a half sides of A4. Students will be asked to analysethe material, make comments upon it and propose further actions.Therefore, it will be expected that candidates can illustrate their knowledgeand understanding of appropriate theory and apply their knowledge to thecase study. Normally the answers will be required in report format.Part B will contain four questions from across the syllabus, and will normally have two parts of one question. Students should be aware that insome questions two areas of the syllabus will be tested. These questionswill require students to understand marketing theories and concepts, ands