strategic marketing management, chapter 00 title pages

Strategic Marketing Management

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Dedication

This book is dedicated to the authors’ wives – Gillian and Rosie – and to Ben Gilligan

for their support while it was being written.

Acknowledgements

Our thanks go to Janice Nunn for all the effort that she put in to the preparation of the

manuscript.

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Strategic MarketingManagementPlanning, implementation and control

Third edition

Richard M.S. WilsonEmeritus Professor of Business AdministrationThe Business SchoolLoughborough University

and

Colin GilliganProfessor of MarketingSheffield Hallam Universityand Visiting Professor, Northumbria University

AMSTERDAM • BOSTON • HEIDELBERG • LONDON • NEW YORK • OXFORDPARIS • SAN DIEGO • SAN FRANCISCO • SINGAPORE • SYDNEY • TOKYO

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Elsevier Butterworth-HeinemannLinacre House, Jordan Hill, Oxford OX2 8DP200 Wheeler Road, Burlington, MA 01803

First published 1992Second edition 1997Reprinted 1998, 1999, 2001, 2003Third edition 2005

Copyright © 1992, 1997, 2005, Richard M.S. Wilson and Colin Gilligan. All rights reserved

The right of Richard M.S. Wilson and Colin Gilligan to beidentified as the authors of this work has been assertedin accordance with the Copyright, Designs and Patents Act 1988

No part of this publication may be reproduced in any material form (includingphotocopying or storing in any medium by electronic means and whetheror not transiently or incidentally to some other use of this publication) withoutthe written permission of the copyright holder except in accordance with theprovisions of the Copyright, Designs and Patents Act 1988 or under the terms ofa licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road,London, England W1T 4LP. Applications for the copyright holder’s writtenpermission to reproduce any part of this publication should beaddressed to the publisher

Permissions may be sought directly from Elsevier’s Science & Technology RightsDepartment in Oxford, UK: phone: (�44) 1865 843830, fax: (�44) 1865 853333,e-mail: [email protected]. You may also complete your request on-line viathe Elsevier homepage (www.elsevier.com), by selecting ‘Customer Support’ andthen ‘Obtaining Permissions’

British Library Cataloguing in Publication DataA catalogue record for this book is available from the British Library

Library of Congress Cataloguing in Publication DataA catalogue record for this book is available from the Library of Congress

ISBN 0 7506 5938 6

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Contents

Preface xi

Overview of the book’s structure xiii

1 Introduction 1

1.1 Learning objectives 3

1.2 The nature of marketing 3

1.3 The management process 7

1.4 Strategic decisions and the nature of strategy 11

1.5 The marketing/strategy interface 19

1.6 Summary 37

Stage One: Where are we now? Strategic and marketing analysis 41

2 Marketing auditing and the analysis of capability 43


2.2 Introduction 45

2.3 Reviewing marketing effectiveness 50

2.4 The role of SWOT analysis 53

2.5 Competitive advantage and the value chain 70

2.6 Conducting effective audits 71

2.7 Summary 75

3 Segmental, productivity and ratio analysis 77


3.2 Introduction 79

3.3 The clarification of cost categories 80

3.4 Marketing cost analysis: aims and methods 81

3.5 An illustration of segmental analysis 86

3.6 An alternative approach to segmental analysis 88

3.7 Customer profitability analysis 89

3.8 Marketing experimentation 101

3.9 The nature of productivity 102

3.10 The use of ratios 104

3.11 Analysing ratios and trends 107

3.12 Ratios and interfirm comparison 109

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3.13 A strategic approach 112

3.14 Summary 116

4 Market and environmental analysis 117


4.2 Introduction: the changing business environment

(or the new marketing reality) 119

4.3 Analysing the environment 120

4.4 The nature of the marketing environment 128

4.5 The evolution of environmental analysis 136

4.6 The political, economic, social and technological environments 139

4.7 Coming to terms with the industry and market breakpoints 149

4.8 Coming to terms with the very different future: the implications

for marketing planning 153

4.9 Approaches to environmental analysis and scanning 159

4.10 Summary 165

5 Approaches to customer analysis 167


5.2 Introduction 169

5.3 Coming to terms with buyer behaviour 170

5.4 Factors influencing consumer behaviour 174

5.5 The buying decision process 182

5.6 The rise of the new consumer and the implications for

marketing planning 188

5.7 Organizational buying behaviour 192

5.8 The growth of relationship marketing 202

5.9 Summary 214

Appendix: The drivers of consumer change 215

6 Approaches to competitor analysis 221



6.3 Against whom are we competing? 230

6.4 Identifying and evaluating competitors’ strengths and weaknesses 236

6.5 Evaluating competitive relationships and analysing how

organizations compete 241

6.6 Identifying competitors’ objectives 246

6.7 Identifying competitors’ likely response profiles 248

6.8 Competitor analysis and the development of strategy 250

6.9 The competitive intelligence system 251

6.10 The development of a competitive stance: the potential for ethical conflict 255

6.11 Summary 261

C O N T E N T Svi

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Stage Two: Where do we want to be? Strategic direction and strategic formulation 265

7 Missions and objectives 269



7.3 The purpose of planning 274

7.4 Establishing the corporate mission 277

7.5 Influences on objectives and strategy 290

7.6 Guidelines for establishing objectives and setting goals and targets 294

7.7 The development of strategies 310

7.8 Summary 313

8 Market segmentation, targeting and positioning 315



8.3 The nature and purpose of segmentation 318

8.4 Approaches to segmenting markets 323

8.5 Factors affecting the feasibility of segmentation 326

8.6 Approaches to segmentation 327

8.7 The bases for segmentation 328

8.8 Geographic and geodemographic techniques 330

8.9 Demographic segmentation 332

8.10 Behavioural segmentation 338

8.11 Psychographic and lifestyle segmentation 341

8.12 Approaches to segmenting industrial markets 345

8.13 Market targeting 347

8.14 Deciding on the breadth of market coverage 350

8.15 Product positioning 353

8.16 Summary 359

9 The formulation of strategy – 1: analysing the product portfolio 361



9.3 The development of strategic perspectives 363

9.4 Models of portfolio analysis 367

9.5 Market attractiveness and business position assessment 374

9.6 Criticisms of portfolio analysis 379

9.7 Summary 383

10 The formulation of strategy – 2: generic strategies and the significance

of competitive advantage 385



C O N T E N T S vii

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10.3 Types of strategy 387

10.4 Porter’s three generic competitive strategies 390

10.5 Competitive advantage and its pivotal role in strategic

marketing planning 396

10.6 Summary 423

11 The formulation of strategy – 3: strategies for leaders, followers,

challengers and nichers 425



11.3 The influence of market position on strategy 427

11.4 Strategies for market leaders 428

11.5 Marketing strategy and military analogies: lessons for market leaders 438

11.6 Strategies for market challengers 447

11.7 Strategies for market followers 461

11.8 Strategies for market nichers 463

11.9 Military analogies and competitive strategy: a brief summary 465

11.10 The inevitability of strategic wear-out (or the law of marketing

gravity and why dead cats only bounce once) 474

11.11 The influence of product evolution and the product life cycle

on strategy 478

11.12 Achieving above-average performance and excellence 484

11.13 Summary 489

Stage Three: How might we get there? Strategic choice 493

12 The strategic management of the marketing mix 495



12.3 Product decisions and strategy 497

12.4 What is a product? 498

12.5 The dimensions of product policy 500

12.6 Brand strategies 505

12.7 The development of new products 510

12.8 Pricing policies and strategies 515

12.9 Approaches to price setting 517

12.10 Deciding on the pricing objectives 518

12.11 Methods of pricing 520

12.12 Using price as a tactical weapon 522

12.13 Promotion and marketing communications 523

12.14 Distribution strategies and the distribution plan 528

12.15 Channel management 528

12.16 The ‘soft’ elements of the marketing mix 534

C O N T E N T Sviii

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12.17 Integrating the elements of the marketing mix 536

12.18 Summary 536

Stage Four: Which way is best? Strategic evaluation 539

13 Criteria of choice 549



13.3 Financial versus non-financial criteria; effectiveness

versus efficiency 553

13.4 Financial criteria 555

13.5 Non-financial criteria 565

13.6 Multiple criteria 576

13.7 Summary 585

14 Modelling approaches – 1 587



14.3 Cost–volume–profit analysis 593

14.4 Investment appraisal 610

14.5 Summary 624

15 Modelling approaches – 2 625



15.3 Allowing for risk and uncertainty 627

15.4 Matrix models 642

15.5 The marketing performance assessment model 648

15.6 Some other approaches to modelling 652

15.7 Summary 664

Stage Five: How can we ensure arrival? Strategic implementation and control 667

16 Problems to overcome 677



16.3 Pressures 680

16.4 Problems in the marketing subsystem 684

16.5 Problems of marketing feedback 688

16.6 Information adequacy 690

16.7 Cost problems 697

16.8 Marketing orientation 703

16.9 Planning orientation 711

C O N T E N T S ix

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16.10 Organizational issues 713

16.11 Summary 721

17 Management control – 1 723


17.2 Introduction to control 725

17.3 Control defined 726

17.4 Basic control concepts 728

17.5 Responsibility accounting 734

17.6 Approaches to control 747

17.7 Some behavioural factors 757

17.8 Summary 762

18 Management control – 2 765



18.3 Controls 767

18.4 Taking corrective action 798

18.5 Management reports 809

18.6 Summary 811

Bibliography 813

Index 853

C O N T E N T Sx

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Preface

In writing the first edition of this book in the early 1990s, we were motivated by a con-

cern to help improve the effectiveness of marketing practice. Twelve years and two edi-

tions later, our purpose is unchanged. In doing this, we have sought to address a

number of key questions that logically follow each other in the context of strategic mar-

keting management:

1 Where are we now?

2 Where do we want to be?

3 How might we get there?

4 Which way is best?

5 How can we ensure arrival?

The themes of planning, implementing and controlling marketing activities are

reflected in the answers to these questions – as offered in the eighteen chapters which

follow. The structure of the book is designed to take the reader through each of the

questions in turn. The sequencing of the chapters is therefore significant. We have

sought to build the book’s argument in a cumulative way such that it will provide

guidance in generating effective marketing performance within a strategic framework –

once the reader has worked through each chapter in turn.

Against this background we can specify the book’s aims as being:

➡ To make the readers aware of the major aspects of the planning and controlling of

marketing operations

➡ To locate marketing planning and control within a strategic context

➡ To demonstrate how the available range of analytical models and techniques might

be applied to marketing planning and control to produce superior marketing per-

formance

➡ To give full recognition to the problems of implementation and how these problems

might be overcome.

Since the appearance of the first edition in 1992, the marketing environment – and

therefore the challenges facing marketing planners and strategists – have changed in a

variety of often dramatic ways. Amongst some of the most significant of these changes

has been the emergence of what within this book we refer to as ‘the new consumer’ and

‘the new competition’. This new consumer is typically far more demanding, far more

discriminating, much less loyal and more willing to complain than in the past, whilst

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the new competition is frequently far less predictable and often more desperate than

previously. At the same time, the marketing environment has also been affected by a

series of unpredictable events (SARS and the Iraq war are just two of the more recent of

these), and by the emergence of new technologies and delivery systems. Together, these

changes have led to a new type of marketing reality which has major implications for

the marketing planning and strategy processes. The question of how marketing plan-

ners might respond or, indeed, have responded to the new marketing reality is there-

fore an underlying theme of this book.

In practice, many marketing planners have responded by focusing to an ever

greater degree upon short-term and tactical issues, arguing that during periods of

intense environmental change, traditional approaches to marketing planning and man-

agement are of little value. Instead, they suggest, there is the need to develop highly

sensitive environmental monitoring systems that are capable of identifying trends,

opportunities and threats at a very early stage, and then an organizational structure

and managerial mindset that leads to the organization responding quickly and cleverly.

Within this book we question these sorts of assumptions and focus instead upon

the ways in which the marketing planning process can be developed and managed

effectively and strategically. We therefore attempt to inject a degree of rigour into the

process, arguing that rapid change within the environment demands a more strategic

approach rather than less. We have also introduced a considerable amount of material

designed to reflect some of the areas that have emerged over the past few years and

that currently are of growing importance. The most obvious of these are e-marketing,

branding, the leveraging of competitive advantage and CRM.

It is not intended that this should be used as an introductory text: we have deliber-

ately assumed that readers will have had some prior exposure to marketing principles,

if not to marketing practice. The intended market of the book comprises the following

segments:

➡ Students reading for degrees involving marketing (especially MBA candidates and

senior undergraduates following business studies programmes)

➡ Students of The Chartered Institute of Marketing who are preparing for the

Marketing Planning paper in the CIM’s Diploma examinations

➡ Marketing practitioners who will benefit from a comprehensive review of current

thinking in the field of strategic marketing planning, implementation and control.

Richard M S Wilson

Colin Gilligan

P R E FA C Exii

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Overview of the book’s structure

1Introduction

Stage TwoWhere do we want to be?

Strategic direction and strategic formulation

Stage OneWhere are we now?

Strategic and marketing analysis

Stage ThreeHow might we get there?

Strategic choice

Stage FiveHow can we ensure arrival?

Strategic implementaion and control

Stage FourWhich way is best?Strategic evaluation

2Marketing

auditing and the analysis of

capability

3Segmental,productivityand ratioanalysis

4Market

andenvironmental

analysis

5Approachesto customer

analysis

6Approaches

tocompetitor

analysis

7Missions

andobjectives

8Market

segmentation,targeting andpositioning

9The

formulationof strategy

– 1

11The


– 3

10The


– 2

12The strategic management of

the marketing mix

14 Modellingapproaches

– 1

16Problems toovercome

17Management

control– 1

18Management

control– 2

15Modelling

approaches– 2

13Criteria

of choice

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Chapter 1Introduction

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strategic marketing management, chapter 00 title pages

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