Management and Organizational Studies 2320A/B Chapter Notes - Chapter 2: Customer Retention, Operational Excellence, Marketing Mix
1 Oct 2018
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Chapter 2: Developing Marketing Strategies and a Marketing Plan
What is a Marketing Strategy?
• Identifies:
o (1) A firm’s target market
o (2) A related marketing mix
o (3) The bases upon which the firm plans to build a sustainable competitive
advantage
• A sustainable competitive advantage is an advantage over the competition that is not easily
copied and thus can be maintained over a long period of time
o Acts like a wall that the firm has built around its position in the market
o Makes it hard for competitors to contact customers inside
o If they have built a wall around an attractive target market, competitors will attempt
to break down this wall
• For Nike, its competitive advantage is its strong brand and strong and loyal customer base
o Establishing a sustainable competitive advantage is key to long-term financial
performance
• Four strategies that focus on aspects of the marketing mix to create and deliver value and
to develop sustainable competitive advantages:
o Customer excellence
▪ Involves a focus on retaining loyal customers and excellent customer service
o Operational excellence
▪ A focus on efficient operations and excellent supply chain management
o Product excellence
▪ Involves a focus on achieving high-quality products and effective branding
and positioning
o Locational excellence
▪ Involves a focus on good physical location and internet presence
Customer Excellence
• Achieved when a firm develops value-based strategies for retaining loyal customers and
provides outstanding customer service
Retaining Loyal Customers
• Having a strong brand, unique merchandise, and superior customer service all help solidify
a loyal customer base
• Having loyal customers is an important method of sustaining an advantage over competitors
o It means customers are reluctant to support competitive firms
o I.e. purchasing Nike apparel for all needs, even if Adidas goes on sale
• Viewing customers with a lifetime value perspective rather than on a transaction-by-
transaction basis is key to modern customer retention programs
o I.e. 100$ shoes= 10, 000$ after 100 pairs—must retain loyalty
• Can create emotional attachment through loyalty programs
o With these programs, companies can combine membership data with customer
purchase data to develop a deeper understanding of the customer
▪ Often use this data to tailor their offerings to better meet the needs of their
loyal customers
Customer Service
• Marketers may also build sustainable competitive advantage by offering excellent customer
service
• I.e. Starbucks employees greet customers in a friendly way and makes drinks consistently
• Though it may take a considerable amount of time and effort to build a reputation for
customer service, once a marketer has earned a good service reputation, it can sustain this
advantage for a long time
o Hard for competitors to develop a comparable reputation
Operational Excellence
• Another way to achieve a competitive advantage
o Through efficient operations, excellent supply chain management, and strong
relationships with their suppliers
• All marketers strive for efficient operations to get their customers the merchandise they
want, when they want it, in the required quantities, and at a lower cost than competitors
• Enables firms to provide customers with lower priced merchandise
• Achieve efficiencies by developing sophisticated distribution and information systems as
well as strong relationships with vendors
o Vendor relationships must be developed over the long-term
o Generally cannot be undermined by a competitor
• Firms with strong relationships may gain exclusive rights to
o Sell merchandise in a particular region
o Obtain special terms of purchase that are not available to competitors
o Receive popular merchandise that may be in short supply
Product Excellence
• Occurs by having products with high perceived value and effective branding and positioning
• Some firms have difficulty developing a competitive advantage through their merchandise
and service offerings, especially if competitors can deliver similar products/ services easily
• Can maintain a competitive advantage by investing in the brand itself, positioning the
product by using a clear brand image, and constantly reinforcing that image through
merchandise, service and promotion
Locational Excellence
• Particularly important for retailers and service providers
• Most people will not walk or drive very far when looking to buy a cup of coffee
• Sustainable because it is not easily duplicated
• Tim Hortons and Starbucks have developed a strong competitive advantage with their
location selection
o Have such a high density of stores in some markets that it is very difficult for a
competitor to enter a market and find good locations
Multiple Sources of Advantage
• A single strategy, such as low prices or excellent service, is often not sufficient to build a
sustainable competitive advantage
• I.e. WestJet provides customers with good value that meets their expectations, good
customer service and maintaining good customer relations
The Marketing Plan
• A written document composed of an analysis of the current marketing situation,
opportunities and threats for the firm, marketing objectives and strategies specified in
terms of the 4 P’s, action programs, and projected income statements
o 3 main phases: planning, implementation, control
• Most people do not have a written plan that outlines their objectives, but it is important
that everyone involved in implementing it knows what the overall goal is and how they
will be met
• Other stakeholders also want to know what the firm plans to do
• A written marketing plan provides a reference point for evaluating whether or not the
firm met its objectives
• Planning phase: where marketing executives and other top managers define the mission
and objectives of the business, and evaluate the situation by assessing how various
players, both inside and outside of the organization, affect the firm’s potential for
success
• Implementation phase: where marketing managers identify and evaluate different
opportunities by engaging in a process known as segmentation, targeting and
positioning
o They then develop and implement the marketing mix by using the 4 P’s
• Control phase: the part of the strategic marketing planning process when managers
evaluate the performance of the marketing strategy and take any necessary corrective
actions
• Not always necessary to go through the entire process for every evaluation
o I.e. a firm could evaluate its performance in step 5, then go directly to step 2 to
conduct a situation analysis without redefining its overall mission
Step 1: Define the Business Mission and Objectives
• The mission statement is a broad description of a firm’s objectives and the scope of
activities it plans to undertake
• Attempts to answer 2 main questions:
o What type of business are we?
o What do we need to do to accomplish our goals and objectives?
• I.e. Tim Horton’s mission is to deliver superior quality products and services to customers
and being the quality leader in what it does
• Marketing’s primary responsibility is to enhance the value of the company’s products for its
customers and other constituents, whether or not it seeks profit
• Often included in the mission statement is how the firm is building a sustainable competitive
advantage
Step 2: Conduct a Situation Analysis
• After developing its mission, the firm must perform a situation analysis, using SWOT
o In order to assess strengths and weaknesses (internal), and the external
environment in terms of opportunities and threats (external)
• Also includes an examination of market trends, customer analysis, and competitive analysis
• The firm should assess the opportunities and uncertainties of the marketplace due to
changes in cultural, demographic, social, technological, economic, and political forces
o CDSTEP
• A SWOT analysis is designed to help firms determine areas in which they are strong and
can compete, and areas where it is weak and vulnerable to competitive attacks
