Principles of Marketing Chapter 5 Managing The Marketing Effort

PRINCIPLES OF MARKETING
Senior High School – Accountancy, Business and Management (ABM) Specialized Subject
CHAPTER 5 MANAGING THE MARKETING EFFORT
Lesson 1: Market Analysis

In today’s fast-paced business world, the ability to effectively manage the marketing process from beginning to end has become an
extremely important competitive advantage. Successful companies know how to adapt to a continuously changing marketplace through market
analysis and planning and careful management of the marketing process.
THE MARKETING PROCESS

Marketing is an ongoing business process that consists of four distinct stages which are analysis, planning, implementation, and control.
1. Analysis – entails the gathering qualitative and quantitative data about the company’s products and possible markets.
2. Planning – involves constructing strategies that the company can put into action to attain results in the target market.
3. Implementation – the success or failure depends more or less on the work prepared in the analysis and planning stages.
4. Control – company needs to be responsive of changing market conditions, competitors and customers and fine-tune the marketing
strategies for that reason.
THE MARKET ANALYSIS

A successful firm is the one which monitors and manages efficiently various forces living in its immediate and external environment.
These forces which affect its ability to produce, promote, distribute, and deliver products and services to customers constitute the marketing
environment of the firm. SWOT analysis and Porter’s Five Forces Model are two ways to analyze the marketing environment of a firm.
SWOT Analysis
The SWOT Analysis is a tool used in strategic planning to identify and ultimately, prioritize the organization’s strengths, weaknesses,
opportunities and strengths. The process involves a brainstorming session where participants create a list for each of these areas based on
previously gathered data and information. Once the lists are created, a ranking process is used to prioritize the items so that the top items in
each category can be used to provide basis for the development of objectives, strategies and tactics. SWOT is an analytical framework that can
help a company face its greatest challenges and find its most promising new markets.
1. Strengths represent those specific characteristics of the business that offer an advantage over its competitors.
2. Weaknesses are characteristics that limit performance and could represent an obstacle in achieving objectives.
3. Opportunities include external conditions that could help improve performance or that can be capitalized upon or exploited.
4. Threats indicate external conditions and situations that could hinder performance, so ways of defending against them can be explored.
Source: Principles of Marketing by Prof. Angelita Ong Camilar-Serrano, DBA Prepared by: Mc Gill Contreras
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Using SWOT, the company can estimate whether its objectives are attainable or not, given the internal and external circumstances.
The first two letters in the acronym, S and W, refer to internal factors, which mean the resources and experience readily available to
the firm. Examples of areas typically include:
1. Financial resources – funding, sources of income, and investment opportunities

2. Physical resources – company’s location, facilities and equipment
3. Human resources – employees, volunteers and target audiences
4. Access to natural resources, trademarks, patents and copyrights
5. Current processes – employee programs, department hierarchies and software systems
External forces influence and affect every company, organization and individual. Whether these factors are connected directly or
indirectly to an opportunity or threat, it is important to take note of and document each one. External forces are normally combined in a
mnemonic called PESTLE. It gives bird’s eye view of the whole environment from many different angles that one wants to check and keep track
of while contemplating on a certain idea/plan.
Porter’s Five Forces Model
Michael Porter developed his Five Forces Model and introduced it to the world in 1980 in his first book, “Competitive Strategy.” The
model provides a basis for companies engaged in strategic planning to consider the critical forces that are impacting it.
1. Supplier Power is represented by their ability to determine the terms and price of supply and will increase if there are fewer suppliers
than buyers, if the organization is not a key customer for the supplier, or if their industry is not attractive for suppliers.
2. Buyer Power refers to the pressure that customers exert on companies to obtain high quality products and services at lower prices.
Buyer power increases when there are few buyers and many sellers in the field, or when products are not significantly differentiated
and can be easily substituted.
3. Profitable markets are more likely to attract new entrants, especially if there is considerable profit to be earned and barriers to entry
are low.
4. Substitute Products are viable, alternative choices of products or services that the customer can make which meet the same needs as
the original product.
5. Intensity of competitive rivalry is the major determinant of competitiveness of the industry for most companies. If an industry is easily
accessible to new entrants or if it is easy for customers to choose substitute products, it can be said that competitive rivalry is likely to
be high.
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Ansoff’s Opportunity Matrix
The Ansoff Opportunity Matrix was created by Igor Ansoff as a way to create growth strategies for corporations based on markets and
products. According to Ansoff, there are four possible combination:
1. Marketing Penetration – this growth strategy uses current products and current markets with the goal to increase market share.
2. Market Development – this growth strategy uses existing products to gain new markets.
3. Product Development – this growth strategy uses new products in the existing market.
4. Diversification – this strategy makes totally new opportunities for the company by creating new products and new markets.
The Boston Consulting Group Model
Back in 1968, a witty gentleman from Boston Consulting Group, Bruce Henderson, created this chart to help organizations with the task
of analyzing their product line or portfolio. The matrix assesses products on two dimensions.
1. Relative Market Share – higher corporate market share results in higher cash returns.
2. Market Growth Rate – high market growth rate reflects higher earnings and sometimes profits but it also consumes lots of cash, which
is used as investment to stimulate further growth.
Analyzing products in this way provides useful insight into the likely opportunities and problems with a particular product. Products are
classified into four distinct groups:
1. Stars – function in high growth industries and maintain high market share. Stars are both cash generators and cash users. They are the
primary units in which the company should invest its money, because stars are projected to become cash cows.
Strategies that could be applied: vertical integration, horizontal integration, market penetration, market development,
product development.
2. Cash Cows – are the most money-making brands and should be “milked” to provide as much as cash as possible. The cash gained from
“cows” must be invested into stars to sustain their further growth.
Strategies that could be applied: product development, diversification, divestiture, retrenchment.
3. Question Marks – are the brands that need much closer consideration. They hold low market share in fast growing markets spending
large amount of cash and acquiring losses. It has potential to get market share and become a star, which would soon after become cash
cow.
Strategies that could be applied: market penetration, market development, product development, divestiture.
4. Dogs – hold low market share in contrast to competitors and function in a slowly growing market. Generally, they do not merit investing
in because they produce small or negative cash returns. Although this is not all the time the fact.
Strategies that could be applied: retrenchment, divestiture, liquidation.
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Four strategies can be pursued:
1. Build – the objective here is to increase market share, even forgoing short-term earnings to achieve this objective if necessary. Building
is appropriate for question marks whose market shares must grow if they are to become stars.
2. Hold – the objective in a hold strategy is to preserve market share, an appropriate strategy for strong cash cows if they are to continue
yielding a large positive cash flow.
3. Harvest – the objective here is to increase short-term cash flow regardless of long-term effect. Harvesting involves decision to withdraw
from a business by implementing a program of continuous cost retrenchment. The hope is to reduce costs faster than any potential
drop in sales, this boosting cash flow. This strategy is appropriate for weak cash cows whose future is dim and from which more cash
flow is needed. Harvesting can also be used with question marks and dogs.
4. Divest – the objective is to sell or liquidate the business because the resources can be better used elsewhere. This is appropriate for
dogs and question marks that are dragging down company profits.
The General Electric Model
The General Electric (GE) Model was developed by GE with the help of McKinsey & Company, a consulting firm. The model identifies
the market position and profitability of different businesses based on their market attractiveness and business strengths. This is a more advanced
version of BCG Matrix.
The attractiveness of a market is demonstrated by how advantageous it is for a company to enter and compete within this market. It is
based on various factors like the size of the market and the rate at which it is growing, the possibility of profit, the number of competitors within
the industry and their weaknesses. There are several factors which can help conclude attractiveness, namely:
1. Market Size
2. Market Growth
3. Market Profitability
4. Pricing Trends
5. Competitive Intensity/Rivalry
6. Overall Risk of Returns in the Industry
7. Opportunity to Differentiate Products and Services
8. Segmentation
9. Distribution Structure (like retail, direct, wholesale)
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Business strengths help decide whether a company is capable enough to compete in the given market(s). Here are the factors to reflect
on in business strengths which include:
1. Strength if Assets and Competencies

2. Relative Brand Strength
3. Market Share
4. Customer Loyalty
5. Relative Cost Position (cost structure compared with competitors)
6. Distribution Strength
7. Record of Technological or Other Innovation
8. Access to Financial and Other Investments
Lesson 2: Marketing Implementation and Control

A clear strategy and well-thought-out supporting programs may be useless if the firm fails to implement them carefully. However,
prior to implementation, the target market must be clearly identified and positioning has to be determined. This will set the stage to crafting a
strategically balanced combination of the four Ps to ensure success f marketing plan.
TARGET MARKET AND POSITIONING

Positioning is a marketing concept that outlines what a business should do to market its product or service to its customers. In
positioning, the marketing department creates an image for the product based on its intended audience.
The best start for any positioning analysis is gaining a thorough knowledge of a product or service’s target market. This is the group of
people or business that will best benefit from the use of the product or service.
Positioning in Advertisements
Advertisements usually the initial places businesses position themselves. A cosmetics marketing department, for example, must
determine who they are targeting and what consumer need is being met. If the intended target is teenagers, the person in the ad might be one
of a celebrity teenager who teaches girls how to battle acne with the use of these cosmetics.
Positioning in Sales Locations

Reaching the customer is not merely a matter of advertising. It is also an issue of selecting the exact channels for distribution. If a
majority of the target market lives in an urban area with only public transportation accessible to them, having the product in rural areas where
a private automobile is required for transportation would not equal sales success.
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Positioning through Price

There is usually a large amount of research in the psychology of pricing in marketing. Basically, the price of an item informs the buyer
more concerning the item than most understand. Many link a higher price with higher quality and the contrary with a lower price.
THE MARKETING MIX

The four P’s are a tried-and-true formula for an effective marketing plan. The reason the 4 P’s were developed decades ago was to
determine a specific recipe or “marketing mix” that will satisfy both the needs of the customer and the retailer’s needs.
The marketing mix is the set of controllable, tactical marketing tools that a company uses to create a preferred reaction from its
target market. It consists of everything that a company can do to persuade demand for its product.
Each of the four Ps has its own tools to share to the marketing mix:
1. Product – variety, quality, design, features, brand name, packaging, services

2. Price – list price, discounts, allowance, payment period, credit terms
3. Place – channels, coverage, assortments, locations, inventory, transportation, logistics
4. Promotion – advertising, selling, sales promotion, public relations
An effective marketing strategy joins the 4 Ps of the marketing mix. It is planned to meet the company’s marketing objectives by
giving its customers with value. The 4 Ps of the marketing mix are related, and blended to ascertain the product’s position within its target
markets.
Part of marketing is communicating to customers what the company has to offer and why it is special and superior to alternatives.
The product element is most obvious in the offering, since the product is what customers pay for.
When companies promote, they also have to strategize about who to target with their messages. The main customer group becomes
the target customers of the marketing campaign.
Definitely, the promotion deals with the real process of creating and distributing messages about the brand and products. Under the
promotion umbrella, companies have to decide what messages and formats to use to persuade their target customers to buy.
Generally speaking, the marketing mix permits to understand how to build and sell value to the customers. Eventually, customers buy
what they recognize is the best value for their money in a buying situation.
MARKETING IMPLEMENTATION
Implementation is vital to effective management of the marketing process. Marketing implementation is the process that turns
marketing plans into action assignments and ensures that such assignments are executed in a manner that accomplishes the plan’s stated
objectives.
Whereas strategy addresses the why of marketing activities, implementation addresses the who, where, when and how. Strategy and
implementation are closely related in that one layer of strategy implies certain tactical implementation assignments at a lower level.
The plan must be adapted to market conditions and propose a budget for marketing activities. In order to be effective, a marketing
plan has to be consistent with the overall strategy of the company.
Kotler considers that implementation of marketing is “the process that turns marketing plans into action plans and provides support
for these plans to be executed in such a way as to achieve the objectives of the marketing plan”. Implementation of marketing plans by the
marketing manager calls for the development of certain actions such as:
1. Communication with subordinates to guarantee operational action plans.

2. Giving guidance and action guidelines
3. Supplying operational resources
4. Close watch of persons in-charge for implementation
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There are four identified set if skills for implementing marketing programs:
1. Diagnostic Skills – there are times when marketing programs do not fulfill expectations. For instance, marketers should know whether
the low sales rate was the result of poor strategy or poor implementation. If the cause is due to implementation, the marketer has to
dig deeper what went wrong.
2. Identification of Company Level – implementation problems can occur at three levels. These levels are the marketing function, the
marketing program, and the marketing policy level.
3. Implementation skills – in order to implement programs successfully, marketers require other skills which are apportioning skills for
budgeting resources, organizing skills to grow an effective organization, and interaction skills to encourage to get things completed.
4. Evaluation Skills – marketers also need monitoring skills to appraise the results of marketing actions.
The skills required to implement a marketing plan for nonprofit organizations are similar as those considered necessary for profitable
organizations.
MARKETING CONTROL
Monitoring and evaluation are activities intended for the assessment of marketing activities to recognize the efficiency of the
marketing plan. There are four types of marketing control needed by companies:
Annual-Plan Control
The purpose of annual-plan control is to make certain that the company gets the sales, profits, and other goals creates in its annual
plan. The heart of annual-plan control is the four-step management by objectives (MBO) process in which management:
1. Sets monthly or quarterly goals
2. Monitors the company’s marketplace performance
3. Determines the causes of serious performance deviations and
4. Takes corrective action to close the gaps between goals and performance
This control model relates to all levels of the organization. Each period, top management reviews and interprets performance results
at all levels, using these five tools:
1. Sales Analysis – consists of measuring and evaluating actual sales in relation to goals, using two specific tools:
a. Sale-variance analysis – measures the relative involvement of different factors to a gap in sales performance
b. Micro-sales analysis – looks at specific products, territories, and other elements, that failed to generate expected sales.
2. Market-Share Analysis – company sales do not expose how well the company is performing relative to competitors. To do this,
management needs to track its market share. Overall market share is the company’s sales expressed as a percentage of total market
sales. Relative market share can be stated as market share in relation to the largest competitor.
3. Marketing Expense-to-Sales Analysis – this is a key ratio because it permits management to be confident that the company is not
spending excessively to realize sales goals.
4. Financial Analysis – Management utilizes financial analysis to spot the factors that have an effect on the company’s rate of return on
net worth. In order to perk up its return on net worth, the company must enlarge its ratio of net profits to its assets or increase the
ratio of its asset to its net worth.
5. Market-based Scorecard Analysis – companies must also get ready with two market-based scorecards that reveal performance and
give likely early warning signals of problems.
a. A customer-performance scorecard – records how well the company is performing on such customer-based measures as
new customers, dissatisfied customers, lost customers, target market awareness, target market preference, relative product
quality, and relative service quality.
b. A stakeholder-performance scorecard – tracks the satisfaction of constituencies who have a serious interest in and influence
on the company’s performance such as employees, suppliers, banks, distributors, retailers and stockholders.
Profitability Control
Successful companies also evaluate the profitability of their products, territories, customer groups, segments, trade channels, and order sizes.
This information aids management to establish whether any products or marketing activities must be prolonged, condensed, or removed.
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Efficiency Control
Presume a profitability analysis discloses meager profits for some products, territories, or markets. This is when management must inquire
whether there are more efficient ways to manage the sales force, advertising, sales promotion, and distribution in connection with these
marketing entities.
Strategic Control
From time to time, companies need to undertake a critical review of overall marketing goals and effectiveness. Each company should
periodically reassess its strategic approach to the marketplace with the following reviews:
1. The Marketing-Effectiveness Review – marketing effectiveness is seen in the extent to which a company or division shows the five key
attributes of marketing orientation:
a. Customer philosophy – providing customers’ needs and wants
b. Integrated marketing organization – combining marketing with other important departments
c. Adequate marketing information – performing timely, fitting marketing research
d. Strategic orientation – creating formal marketing plans and strategies and
e. Operational efficiency 0 utilizing marketing resources effectively and flexibly
Regrettably, most companies and divisions achieve in the fair-to-good range only on measures of marketing effectiveness.
2. The Marketing Audit – companies that find out marketing weakness must assume a marketing audit. A marketing audit is a
comprehensive, systematic, independent, and periodic examination of a company’s or business units in terms of marketing
environment, objectives, strategies, and activities with a view to determining problem areas and opportunities and recommending a
plan of action to improve the company’s marketing performance.
The marketing audit checks six major components of the company’s marketing situation, which are:
a. The macroenvironment and task environment
b. Marketing strategy
c. Marketing organization
d. Marketing systems
e. Marketing productivity and
f. Marketing function (the 4 Ps)
The marketing audit has the following four characteristics:
a. Comprehensive – the marketing audit covers all the most important marketing activities of a business, not just a few trouble
spots.
b. Systematic – the marketing audit is an orderly assessment of the organization’s macro- and micromarketing environment,
marketing objectives and strategies, marketing systems, and specific activities.
c. Independent – a marketing audit can be performed in six-means: self-audit, audit from across, audit from above, company
auditing office, company task force audit, and outsider audit.
d. Periodic – on average, marketing audits are started only after sales have curved down, sales force confidence has dropped,
and other problems have taken place.
Highly successful companies also perform marketing excellence reviews and ethical social responsibility reviews to gain an outside-in
perspective on their marketing activities.
3. The Marketing Excellence Review – this best known excellence review rates a firm’s performance in connection to the best marketing
and business practices of high performing businesses.
4. The Ethical and Social Responsibility Review – additionally, companies necessitate to evaluate whether they are truly practicing
ethical and socially responsible marketing. Business success and continually satisfying customers and other stakeholders are closely
attached to adoption and implementation of high standards of business and marketing conduct.
Effective control of the marketing process ultimately depends on accurate, timely, and complete information about markets, demand,
and the marketing environment.
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PRINCIPLES OF MARKETING

CHAPTER 5 MANAGING THE MARKETING EFFORT

Lesson 1: Market Analysis

THE MARKETING PROCESS

THE MARKET ANALYSIS

1. Financial resources – funding, sources of income, and investment opportunities

Porter’s Five Forces Model

Ansoff’s Opportunity Matrix

The Boston Consulting Group Model

Four strategies can be pursued:

The General Electric Model

1. Strength if Assets and Competencies

Lesson 2: Marketing Implementation and Control

TARGET MARKET AND POSITIONING

Positioning in Sales Locations

Positioning through Price

THE MARKETING MIX

1. Product – variety, quality, design, features, brand name, packaging, services

1. Communication with subordinates to guarantee operational action plans.

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