The Strategic Planning Gap
Marketing Management is a classic marketing textbook. In it, Philip Kotler covers the basics of marketing including marketing strategy, marketing insights, customer relationship management, designing market offerings, delivering value through distribution channels, customer relationship management, and managing long term growth.
When discussing marketing strategy development, Kotler introduces the strategic planning gap: an assessment of the difference between projected and desired sales. Various growth strategies can be employed to bridge the gap. In addition to evaluating growth strategies, downsizing or terminating existing businesses must be considered in relation to meeting sales and revenue objectives.
Bridging the gap
There are several ways to bridge the gap: intensive growth (identifying further growth opportunities within existing businesses); integrative growth (building or acquiring businesses that are related to current businesses); and diversification growth (adding businesses that are unrelated to existing businesses). For intensive growth opportunities, businesses should review four types of growth and their associated marketing strategies:
Some options for intensive growth include identifying new customer groups within existing sales areas, developing additional distribution channels, or selling in new markets, such as those in other countries. The product-market expansion table below (aka Ansoff growth matrix) is a helpful tool to evaluate various options, starting with existing markets and products and eventually reviewing market expansion.
Several intensive growth strategies are profiled in the presentation below based on Ansoff’s growth matrix. If intensive growth is insufficient, companies must look to integrative growth strategies.
This Inc. magazine article considers intensive growth strategies from the perspective of a “ladder” of increasing risk.
After examining intensive growth strategies, the next step is to consider integrative growth strategies. Integrative growth typically involves backward, forward, or horizontal integration with an industry. Horizontal integrations result in buying competitors, often smaller ones. Backward integrations reach into the value chain to acquire suppliers. Forward integration involves buying distribution channels in the front of the value chain closest to the customer. Acquiring or establishing partnerships with suppliers, distributors and competitors are common integrative growth strategies.
Integrative growth present their own challenges as merging business models, internal processes, and cultures can often go awry. There are large costs to combing organizations and their associated channels, partners, and customer bases.
Diversification growth can be achieved through several strategies. A concentric strategy would involve offering a new product or service to a different group of customers. A horizontal strategy would involve selling related new products to existing customers. Finally, a conglomerate strategy would consist of creating an entirely new set of products or services.
Disney, for example, branched out from being an animated film producer to licensing characters, becoming a broadcaster with its own cable channel, and publishing books under a separate brand.
Changes in marketing
In this video, Kotler shares his high level perspective on how the definition of marketing has changed over the years:
Kotler says the mantra of marketing is: “Create, Communicate, and Deliver Value to a Target market at a Profit”. “Create value” equates to product management; “communicate value” is brand management (communicating excitement and differentiation) and “deliver value” is customer management. He goes on to talk about the changes in each of these disciplines.
Product management once consisted of making things based on an internal viewpoint and then asking sales and marketing to “get rid of it.” Today companies like Procter and Gamble connect with scores of scientists outside their walls to solve problems. Product development is no longer about closed doors. P&G will tap resources anywhere in the world to solve problems. For example, P&G found someone to help them print on potato chips, which required a multi-disciplinary approach to be successful. Today, this type of open innovation leverages outside experts and resources to create new products and services.
Brand management used to be packaging, name, and logo. Brand management now is a promise and inspires everything a company does do. Today, brand management defines the way you act. It is emotional. Previously, it used to be going after the consumer’s mind and heart. Now, says Kotler, we want not only mind- and heart-share, we also want spirit share. A share of something more than just narrow interests. As a result, customers often choose civic and caring firms (i.e., corporate social responsibility).
Customer management no longer consists of simply having a database of customers to be reached through direct mail and on-line campaigns. Now, companies want to co-create products and advertising through open innovation.
Originally published in 1967 and now in its 15th edition, Marketing Management is a classic textbook for marketers. The latest edition is updated with current case studies and stories from Zipcar, Chipotle, salesforce, and other modern brands.
Weighing in at nearly 800 pages, this book covers all aspects of marketing, from marketing strategy, market research, distribution channels, and branding to pricing, marketing communications, packaging, and supply chain.
Each chapter is well organized and contains summaries, case studies, theory, and applications.