Slide 3

A benefit is some type of utility that a company and its products (and services) provide its customers.
Utility is the want-satisfying power of a good or service. Four major kinds of utility exist: form, time,
place, and ownership. Form utility is created when the firm converts raw materials into finished
products that are desired by the market. The other three utilities—time, place, and ownership—are
created by marketing. They are created when products are available to customers at a convenient
location when they want to purchase them, and facilities of exchange are available that allow for
transfer of the product ownership from seller to buyer.

Slide 4

Recall that marketing is charged not just with creating offerings that have value, but also with
communicating, delivering, and exchanging those offerings. When a firm communicates the value
proposition of its products to customers, the value message may include the whole bundle of benefits
the company promises to deliver, not just the benefits of the product itself.

Slide 5

A firm’s value proposition must be strong enough to move custom- ers past mere satisfaction and into a
commitment to a company and its products and brands for the long run. Such a commitment reflects a
high level of customer loyalty, which increases customer retention and reduces customer switching.

Customer loyalty almost always is directly related to the various sources of value the customer is
presently deriving from the relationship with the company and its brands. Except in situations of
monopoly (which creates forced loyalty), loyal customers by definition tend to also experience a high
level of satisfaction.

However, not all satisfied customers are loyal. If a competitor comes along with a better value
proposition, or if a value proposition begins to slip or is not effectively communicated, customers who
are presently satisfied become good candidates for switching to another company’s products.

Slide 7

Basically, the value chain concept holds that every organization represents a synthesis of activities
involved in designing, producing, marketing, delivering, and supporting its products. The value chain
identifies nine relevant strategic activities the organization can engage in that create/impact both sides
of the value equation: benefits and costs. Porter ’s nine value-creating activities include five primary
activities and four support activities.
Slide 8

1. Inbound logistics—how the firm goes about sourcing raw materials for production.

2. Operations—how the firm converts the raw materials into final products.

3. Outbound logistics—how the firm transports and distributes the final prod- ucts to the marketplace.

4. Marketing and sales—how the firm communicates the value proposition to the marketplace.

5. Service—how the firm supports customers during and after the sale.

Slide 9

The four support activities in the value chain are:

1. Firm infrastructure—how the firm is set up for doing business; are the internal processes aligned and
efficient.

2. Human resource management—how the firm ensures it has the right people in place, trains them,
and keeps them.

3. Technology development—how the firm embraces technology usage for the benefit of customers.

4. Procurement—how the firm deals with vendors and quality issues.

Slide 11

Marketing (Big M) serves as a core driver of business strategy. That is, an understanding of markets,
competitors, and other external forces, coupled with attention to internal capabilities, allows a firm to
successfully develop strategies for the future. At the functional or operational level, marketing (little m)
represents the specific programs and tactics aimed at customers and other stakeholder groups and
includes everything from brand image, to the message salespeople and advertisements deliver, to
customer service, to packaging and product features —in fact, all elements of operationalizing the
marketing mix and beyond.

Slide 12

Everyone in an organization, regardless of their position or title, must understand and support the
concept of customer orientation, which places the customer at the core of all aspects of the enterprise.
Firms who promote and practice a high level of customer focus are often referred to as customer-
centric organizations.

• To operationalize a customer-centric approach, all internal organizational processes and systems must
be aligned around the customer. A firm’s internal structure and systems cannot be allowed to become
an impediment to a customer orientation. Anyone who has ever placed a phone call for service and
been driven through a maze of phone transfers with a string of people (or machines) unable to help
knows how poor structure and systems can impact customer satisfaction and loyalty!
Slide 15

A great example of how these levels of planning fit together is General Electric. GE contains numerous
SBUs that compete in very different markets, from lighting to jet engines to financial services. CEO Jeff
Immelt oversees a corporate-level strategic plan to serve as an umbrella plan for the overall direction of
the corpo- ration, but the real action in marketing planning at GE is at the individual SBU level. Each GE
business has its own SBU-level strategic plan, and part of GE’s historical leadership culture has been to
turn SBU management loose to run their own businesses under their own plans, so long as they meet
their performance requirements and contribute satisfactorily to the overall corporate plan.

Slide 16

The concept of the BCG approach to portfolio analysis is to position each SBU within a firm on the two-
dimensional matrix shown in Exhibit 2.3. The competitive market-share dimension is the ratio of share
to that of the largest competitor. The growth dimension is intended as a strong indicator of overall
market attrac- tiveness. Within the BCG matrix you find four cells, each representing strategy
recommendations:

• Stars (high share, high growth): important to building the future of the busi- ness and deserving any
needed investment.

• Cash Cows (high share, low growth): key sources of internal cash generation for the firm.

• Dogs (low share, low growth): potential high cash users and prime candidates for liquidation.

• Problem Children, or Question Marks (low share, high growth): high cash needs that, if properly
nurtured, can convert into stars. 

For purposes of strategy development, the BCG matrix approach is seductively simple and has
contributed to decision making about internal cash generation and usage across SBUs. It has also
morphed in application downward to often be applied to product lines and product groups, which is
nominally possible so long as costs and returns can be properly isolated for investment decisions. But by
nature of simplicity, BCG ignores other important factors that should go into this decision making and
also ignores the viability of generating cash externally.

Slide 17

The GE Business Screen, shown in Exhibit 2.4, is a more realistic and complex portfolio model. It also
evaluates the business on two dimensions—market attractiveness and business position, which refers to
its ability to compete. The investment decision is again suggested by the position on a matrix. A business
that is favorable on both dimensions should usually be a candidate to grow. When both market
attractiveness and business position evaluations are unfavorable, the harvest or divest options should be
raised. When the matrix position is neither unambiguously

Slide 20

Strategy is like a road map to get the organization where it wants to go, based on good information
gathered in advance. The choice of which direction a firm should go ultimately boils down to a decision
by a firm and its managers. Strategy has two key phases: formulation (or development) and execution.
And it occurs at multiple levels in the firm: corporate level, SBU (or business) level, and functional level
(marketing, finance, operations, etc.). As we have discussed, the strategies developed and executed
at each of these levels must be aligned and directed toward the overall organizational mission and goals.

A firm’s generic strategy is its overall directional strategy at the business level.  Fundamentally, all firms
must decide whether they wish to (or are able to) grow, and if not, how they can survive through
stability or retrenchment. Exhibit 2.5 provides options for generic strategies for each of these three
directions. The choice of generic strategy is usually driven by resource capabilities of the firm, as well as
the competitive landscape. In the growth-oriented business culture in the United States, stockholders
and financial analysts are constantly interested in knowing a firm’s next growth strategy and can
become quickly disenchanted, even with firms that are growing but at a slower than predicted rate. Yet,
sometimes for reasons related to the competitive landscape or resource constraints, the best generic
strategy for a firm may not actually be growth but be stability or retrenchment instead. Interestingly,
the pressure to constantly achieve accelerated growth is much less intense in many business cultures
outside the United States.

Slide 21

Cost Leadership

• The organization strives to have the lowest costs in its industry and produces goods or services for a
broad customer base. Note the emphasis on costs not prices.

Differentiation

• The organization competes on the basis of pro- viding unique goods or services with features
that customers value, perceive as different, and for which they are willing to pay a premium.

Focus (or Niche)

• The organization pursues either a cost or differentiation advantage, but in a limited (narrow)
customer group. A focus strategy concentrates on serving a specific market niche.

Slide 22

Growth

• Organizations that do business in dynamic competitive environments generally experience pressure to

grow in order to survive. Growth may be in the form of sales, market share, assets, profits, or some
combination of these and other factors. Categories of growth strategies include:

Concentration—via vertical or horizontal integration. Diversification—via concentric or conglomerate

means.

Stability

• The strategy to continue current activities with little significant change in direction may be

appropriate for a successful organization oper- ating in a reasonably predictable environment.

It can be useful in the short term but potentially dangerous in the long term, especially if the
competitive landscape changes.

Retrenchment

• An organization in a weak competitive position in some or all of its product lines, resulting in poor
performance and pressure on management to quickly improve, may pursue retrenchment.

• Essentially, retrenchment involves pulling assets out of underperforming parts of the business and
reinvesting in aspects of the business with greater future performance potential.

Slide 24

Michael Porter identifies three primary categories of competitive strategy: low cost, differentiation, and
focus (or niche). Exhibit 2.6 describes each of these, and Exhibit 2.7 illustrates them further within a
matrix format. Porter ’s overarching premise is that firms must first identify their core competencies, or
the activities the firm can do exceedingly well. When these core competencies are superior to those of
competitors, they are called distinctive competencies. Firms should invest in distinctive competencies,
as they offer opportunity for sustainable competitive advantage in the marketplace, especially if the
competencies cannot be easily duplicated or usurped by competitors.

Slide 25

Prospector: Firm exhibits continual innovation by finding and exploiting new product and market
opportunities.

• Analyzer: Firm heavily relies on analysis and imitation of the successes of other organizations,
especially prospectors.

• Defender: Firm searches for market stability and production of only a limited product line

directed at a narrow market segment, focusing on protecting established turf.

• Reactor: Firm lacks any coherent strategic plan or apparent means of effectively competing; reactors
do well to merely survive in the competitive marketplace.

Slide 26

• Political, legal, and ethical. All firms operate within certain rules, laws, and norms of operating
behavior. For example, JetBlue has myriad regulations administered by the Federal Aviation
Administration, the National Transportation Safety Board, and the Transportation Security
Administration. In the airline industry, the regulatory environment is a particularly strong external
influence on firms’ marketing planning.
• Sociocultural/demographic. Trends among consumers and in society as a whole impact marketing
planning greatly. Many such trends are demographic in nature, including changing generational
preferences and the rising buying power of minority groups domestically and consumers in developing
nations in the global marketplace.38 Speaking of generational preferences, JetBlue jumped on the video
game trend among children and teens by providing in- seat games, much to the delight of parents who
no longer have to entertain the kids for the duration of the flight.

• Technological. Constantly emerging and evolving technologies impact business in many ways. The goal
is to try to understand the future impact of technological change so a firm’s products will continue to be
fresh and viable. JetBlue ordered a number of new downsized “regional jets,” planes that carry about 50
passengers and allow for entry into smaller, underserved markets. The airline is banking on these
attractive, comfortable new aircraft to provide a market edge over the competition.

• Economic. The economy plays a role in all marketing planning. Part of a marketing plan is a forecast
and accompanying budget, and forecasts are impacted by the degree to which predicted economic
conditions actually materialize.

Fuel prices are a major economic cost element for any airline. JetBlue was a pioneer in hedging against
rising fuel prices—that is, making speculative long- term purchase commitments betting on fuel prices
going up.

• Natural. The natural environment also frequently affects marketing planning. JetBlue’s highly
publicized winter weather fiasco at JFK airport in 2007 prompted immediate changes in the way the
company communicates with its customers. And on a broader scope, the concept of environmentally
friendly marketing, or green marketing, has been a growing trend in socially responsible companies.
Sustainability, which refers to business practices that meet humanity’s needs without harming future
generations, has evolved into a part of the philosophical and strategic core of many firms.

Slide 27

• Threat of new entrants. How strong are entry barri- ers based on capital requirements or other
factors? A cornerstone of JetBlue’s initial market entry suc- cess was the fact that it was exceptionally
well-capitalized. Not many new airlines are.

• Rivalry among existing firms. How much direct competition is there? How much indirect competition?
How strong are the firms in both categories? JetBlue’s industry contains a number of firms that are
much larger, but based on JetBlue’s unique value proposition few of them can deliver the same
customer experience that JetBlue can.

• Threat of substitute products. Substitutes appear to be different but actually can satisfy much or all of
the same customer need as another product. Will teleconferencing PC-to-PC (using products such as
Skype) reach a point in the near future such that business travel is seriously threatened, thus impacting
JetBlue and other airlines?
• Bargaining power of buyers. To what degree can customers affect prices or product offerings? So far,
JetBlue has not been in much head-to-head competition with Southwest, AirTran Airways, Frontier
Airlines, or other low- fare carriers in its primary markets. Should this change, passengers will have more
power to demand even lower fares and/or additional services from JetBlue. • Bargaining power of
suppliers. Suppliers impact the competitive nature of an industry through their ability to raise prices or
affect the quality of inbound goods and services. Jet fuel literally fires the airline industry’s economic
engine. Also, few manufacturers of commercial aircraft still exist. Both of these factors point to a
competitive environment with strong supplier power.

Slide 29

• Firm structure and systems. To what degree does the present organizational structure facilitate or
impede successful market-driven strategic planning? Are the firm’s internal systems set up and properly
aligned to effectively serve customers? David Neeleman had his organizational chart right on the
company Web site and talked openly about being a lean and mean operation. It’s hard to find much
evidence that JetBlue’s structure and systems offer impediments to its marketing planning.

• Firm culture. As discussed previously, successful marketing planning requires a culture that includes
customer orientation as a core value. If a firm’s culture does not value and support a customer
orientation and customer-centric approach to the overall business, marketing planning will likely
disappoint.

A close review of the communication with customers on JetBlue’s Web site provides evidence that
customer orientation is a core value at the company.

• Firm leadership. Of course, the CEO must believe in and continuously sup- port (financially and
otherwise) the structure, systems, and culture necessary for market-driven strategic planning. JetBlue’s
employee-friendly—and customer-friendly—approach epitomizes such leadership and commitment.

• Firm resources. Finally, internal analysis involves taking an honest look at all aspects of a firm’s
functional/operational-level resources and capabilities and how they play into the ability to develop and
execute market-driven strategies. Key resources for study are:

• Marketing capabilities.

• Financial capabilities.

• R&D and technological capabilities.

• Operations and production capabilities.

• Human capabilities.

• Information system capabilities.

 
Slide 31

Besides helping a marketing manager organize the results of a situation analysis, the SWOT analysis
template is also useful in beginning to brainstorm marketing strategies that might be appropriate
depending on which of four possible com- bination scenarios predominate in a firm’s situation: internal
strengths/external opportunities, internal strengths/external threats, internal weaknesses/external
opportunities, or internal weaknesses/external threats. During the situation analy- sis it is essential to
begin to critically and realistically examine the degree to which a firm’s external and internal
environment will impact its ability to develop market- ing strategy.

Slide 33

• Market penetration strategies involve investing in existing customers to gain additional usage of
existing products.

• Product development strategies recognize the opportunity to invest in new products that will
increase usage from the current customer base.

• Market development strategies allow for expansion of the firm’s product line into heretofore
untapped markets, often internationally.

• Diversification strategies seize on opportunities to serve new markets with new products

Slide 35

As pointed out earlier, strategy development is only part of marketing planning. The other part is
strategy implementation, including measuring results. The process of measuring marketing results and
adjusting the marketing plan as needed is called marketing control.

In a marketing plan, every strategy must include an implementation element. Sometimes these are
called action plans or programs. Each must discuss timing, assign persons responsible for various aspects
of implementation, and assign resources necessary to make the strategy happen. Forecasts and their
accompanying budgets must be provided. Then, appropriate metrics must be identified to assess along
the way to what degree the plan is on track and the strategies are contributing to achievement of the
stated marketing objectives

Slide 36

Contingency plans are often described in terms of a separate plan for a worst-case, best-case, and
expected- case performance against the forecast. That is, the implementation of the marketing
strategies would be different depending on how performance against the forecast actually materializes.
If better, the firm could quickly shift to a best-case implementation scenario. If worse, then the shift
would be to a worst-case scenario. Having these contingency plans in place avoids scrambling to decide
how to adjust marketing strategies when performance against a forecast is higher or lower than
expected.
Slide 37

1. Stay flexible. Don’t forget that marketing plans are not set in stone. Markets and customers change,
competitors do unexpected things, and the external environment has a nasty habit of creating
unexpected surprises. Great mar- keting managers understand when to adjust a plan. Nimble
organizations tend to be much more successful in their marketing strategies.

In his provocative book, The Rise and Fall of Strategic Planning, strategy expert Henry Mintzberg builds
the case that organizations sometimes spend so much time focused on planning for the long term that
they miss the opportunities presented by the next customer who walks through the door.

Mintzberg’s concern is valid and points to the need for viewing planning as an ongoing, organic process
in which managers exhibit flexibility and adaptability to changing market conditions. Marketing plans are
not written in stone— that is, after a plan is prepared myriad changes in the firm’s external and internal
environment may create a need for marketing managers to quickly alter their strategies in the
marketplace. The more nimble a company is in changing course to address new conditions as they arise,
the more successful its marketing strategies will be.

2. Utilize input, but don’t become paralyzed by information and analysis. Great marketing managers
value research and analytics, but also know when to move forward with action.

3. Don’t underestimate the implementation part of the plan. This is such a common mistake it is nearly
synonymous with poor marketing planning. The quality of the action plans and metrics often make or
break the success of the plan. Put another way, a good plan on paper is useless without effective
implementation.

4. Stay strategic, but also stay on top of the tactical. Remember that marketing has these two levels of
interrelated issues, and both the strategic and tactical elements have to be right for the plan to be
successful.

5. Give yourself and your people room to fail and try again. Marketing planning is by no means a
predictable science. It is more realistic to think of it as both science and art, and creativity and risk-
taking are to be rewarded. All great marketing managers have experienced both success and failures in
marketing planning. As in baseball, it’s not one or two times at bat but rather the long- term batting
average that separates the great from the average performer.