Page 57 - Marketing Management

34 PART 1 UNDERSTANDING MARKETING MANAGEMENT

succeeding in economies marked by goods shortages where consumers are not fussy about quality,
features, or style—for example, basic staple goods in developing markets.
This traditional view will not work, however, in economies with many different types of people,
each with individual wants, perceptions, preferences, and buying criteria. The smart competitor must
design and deliver offerings for well-defined target markets. This realization inspired a new view of
business processes that places marketing at the beginning of planning. Instead of emphasizing making
and selling, companies now see themselves as part of a value delivery process.
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We can divide the value creation and delivery sequence into three phases. First, choosing the
value represents the “homework” marketing must do before any product exists. Marketers must
segment the market, select the appropriate target, and develop the offering’s value positioning. The
formula “segmentation, targeting, positioning (STP)”is the essence of strategic marketing. The sec-
ond phase is providing the value. Marketing must determine specific product features, prices, and
distribution. The task in the third phase is communicating the value by utilizing the sales force,
Internet, advertising, and any other communication tools to announce and promote the product.
The value delivery process begins before there is a product and continues through development
and after launch. Each phase has cost implications.

The Value Chain
Harvard’s Michael Porter has proposed the value chain as a tool for identifying ways to create more
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customer value. According to this model, every firm is a synthesis of activities performed to design,
produce,market,deliver,and support its product.The value chain identifies nine strategically relevant
activities—five primary and four support activities—that create value and cost in a specific business.
The primary activities are (1) inbound logistics, or bringing materials into the business; (2) opera-
tions, or converting materials into final products; (3) outbound logistics, or shipping out final
products; (4) marketing, which includes sales; and (5) service. Specialized departments handle the
support activities—(1) procurement, (2) technology development, (3) human resource management,
and (4) firm infrastructure. (Infrastructure covers the costs of general management, planning,
finance, accounting, legal, and government affairs.)
The firm’s task is to examine its costs and performance in each value-creating activity and look
for ways to improve it. Managers should estimate competitors’ costs and performances as
benchmarks against which to compare their own. And they should go further and study the “best
of class” practices of the world’s best companies. We can identify best-practice companies by con-
sulting customers, suppliers, distributors, financial analysts, trade associations, and magazines to
see whom they rate as doing the best job. Even the best companies can benchmark, against other
industries if necessary, to improve their performance. To support its corporate goal to be more
innovative, GE has benchmarked against P&G as well as developing its own best practices. 4
The firm’s success depends not only on how well each department performs its work, but also
on how well the company coordinates departmental activities to conduct core business processes. 5
These processes include:
• The market-sensing process. All the activities in gathering and acting upon information
about the market
• The new-offering realization process. All the activities in researching, developing, and
launching new high-quality offerings quickly and within budget
• The customer acquisition process. All the activities in defining target markets and prospecting
for new customers
• The customer relationship management process. All the activities in building deeper
understanding, relationships, and offerings to individual customers
• The fulfillment management process. All the activities in receiving and approving orders,
shipping the goods on time, and collecting payment
Strong companies are reengineering their work flows and building cross-functional teams to be
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responsible for each process. At Xerox, a Customer Operations Group links sales, shipping, installa-
tion, service, and billing so these activities flow smoothly into one another. Winning companies excel
at managing core business processes through cross-functional teams. AT&T, LexisNexis, and Pratt &
Whitney have reorganized their employees into cross-functional teams; cross-functional teams exist
in nonprofit and government organizations as well.
To be successful, a firm also needs to look for competitive advantages beyond its own opera-
tions, into the value chains of suppliers, distributors, and customers. Many companies today have