Come up with and describe a loyalty program to enhance sales of your two grocery services. Include takeaways from the readings for this week that inspired the features and design of your loyalty program.
Part 7: Managing the Marketing Organization for Long-Term SuccessIn this chapter, we will address the following questions: 1. What factors should a company review before deciding to enter global markets? (Page 276) 2. What are the major ways of entering foreign markets? (Page 278) 3. To what extent must the company adapt its marketing to each foreign market? (Page 279) 4. What are the keys to effective internal marketing? (Page 282) 5. How can companies be socially responsible marketers? (Page 283)Managing Marketing Responsibly in the Global EconomyMarketing Management at PatagoniaPatagonia, maker of high-end outdoor clothing and equipment, has always put environmental issues at the core of what it does. Company founder Yvon Chouinard actively promotes a post-consumerist economy in which goods are “high quality, recyclable, and repairable.” Under Chouinard’s leadership, Patagonia ran a full-page ad in the New York Times headlined “Don’t Buy This Jacket.” Below a photo of the retailer’s R2 jacket was text explaining that despite its many positive features, the jacket still imposed many environmental costs (using 135 liters of water and 20 pounds of carbon dioxide to manufacture). The ad concluded by promoting the Common Threads Initiative asking consumers to engage in five behaviors: (1) reduce (what you buy); (2) repair (what you can); (3) reuse (what you have); (4) recycle (everything else); and (5) reimagine (a sustainable world). With $400 million in worldwide annual sales, Patagonia is always trying to find better environmental solutions for everything it does and makes.1Healthy long-term growth for a brand requires holistic marketers to engage in a host of care-fully planned, interconnected marketing activities and satisfy a broad set of constituents and objectives, especially if they seek growth outside domestic markets. In this chapter, we Chapter 18A Framework for Marketing Management,Sixth Edition, by Philip T. Kotler and Kevin Lane Keller. Published by Prentice Hall.Copyright © 2016 by Pearson Education, Inc.ISBN: 978-1-323-26960-2 276 Part 7 Managing the Marketing Organization for Long-Term Successconsider how firms expand into global markets, how they use internal marketing, and how they address social responsibility, sustainability, and ethics.Competing On a Global BasisMany companies have been global marketers for decades—firms like Shell and Toshiba. But global competition is intensifying in more product categories as new firms make their mark on the international stage. In a global industry, competitors’ strategic positions in major geographic or national markets are affected by their overall global positions.2 A global firm operates in more than one country and captures R&D, production, logistical, marketing, and financial advantages not available to purely domestic competitors.To sell overseas, many successful global U.S. brands have tapped into universal consumer values and needs—such as Nike with athletic performance. Global marketing extends beyond products. Services represent the fastest-growing sector of the global economy and account for two-thirds of global output, one-third of global employment, and nearly 20 percent of global trade. For a company of any size or type to go global, it must make a series of decisions (see Figure 18.1).FIGURE 18.1 Major Decisions in International MarketingDeciding whetherto go abroadDeciding whichmarkets toenterDeciding howto enter themarketDeciding onthe marketingprogramDeciding onthe marketingorganizationA Framework for Marketing Management,Sixth Edition, by Philip T. Kotler and Kevin Lane Keller. Published by Prentice Hall.Copyright © 2016 by Pearson Education, Inc Chapter 18 Managing Marketing Responsibly in the Global Economy 277Deciding Whether to Go AbroadSeveral factors can draw companies into the international arena. Some international markets present better profit opportunities than the domestic market. A firm may need a larger cus-tomer base to achieve economies of scale or want to reduce its dependence on any one market. Sometimes a firm decides to counterattack global competitors in their home markets, or it sees its customers going abroad and requiring international service.Before making a decision to go abroad, the company must also weigh several risks. First, the company might not understand foreign preferences and could fail to offer a competitively attractive product. Second, it might not understand the foreign country’s business culture or how to deal effectively with foreign regulations. Third, it might lack managers with international experience. Finally, the other country might change its commercial laws, devalue its currency, or undergo a political revolution and expropriate foreign property.Deciding Which Markets to EnterIn deciding to go abroad, the company needs to define its marketing objectives and policies. What proportion of international to total sales will it seek? Most companies start small when they venture abroad. Some plan to stay small; others have bigger plans. Typical entry strategies are the waterfall approach, gradually entering countries in sequence, and the sprinkler approach, entering many countries simultaneously. Increasingly, firms—especially technology-intensive firms or online ventures—are born global and market to the entire world from the outset.The company must also choose the countries to enter based on the product and on factors such as geography, income, population, and political climate. Competitive considerations come into play too. It may make sense to go into markets where competitors have already entered to force them to defend their market share as well as to learn from them how they are marketing in that environment. Getting a toehold in a fast-growing market can be a very attractive option even if that market is likely to soon be crowded with more competitors.3Many companies prefer to sell to neighboring countries because they understand them bet-ter and can control their entry costs more effectively. Also, given more familiar language, laws, and culture, many U.S. firms prefer to sell in Canada, England, and Australia rather than in larger markets such as Germany and France. Companies should be careful, however, in choosing markets according to cultural distance. Besides overlooking potentially better markets, they may only superficially analyze real differences that put them at a disadvantage.4In general, a company prefers to enter countries that have high market attractiveness and low market risk and in which it possesses a competitive advantage. Also, regional economic integration—the creation of trading agreements between blocs of countries—has intensified in recent years. This means companies are more likely to enter entire regions at the same time.Deciding How to Enter the MarketThe broad choices in entering a market are indirect exporting, direct exporting, licensing, joint ventures, and direct investment, shown in Figure 18.2. Each succeeding strategy entails more commitment, risk, control, and profit potential.•□Indirect and direct export. Companies typically start with indirect export, working through independent intermediaries, and may move into direct export later because this order of entry requires less investment and less risk. Many companies use direct or indirect exporting to “test the waters” before building a plant overseas. Successful companies adapt their Web A Framework for Marketing Management,Sixth Edition, by Philip T. Kotler and Kevin Lane Keller. Published by Prentice Hall.Copyright © 2016 by Pearson Education, Inc.ISBN: 978-1-323-26960-2 278 Part 7 Managing the Marketing Organization for Long-Term Successsites to provide country-specific content and services to their highest-potential international markets, ideally in the local language.•□Licensing. The licensor issues a license to a foreign company to use a manufactur-ing process, trademark, patent, trade secret, or other item of value for a fee or royalty. The licensor gains entry at little risk; the licensee gains production expertise or a well-known product or brand name. The licensor, however, has less control over the licensee than over its own production and sales facilities. If the licensee is very successful, the firm has given up profits, and if and when the contract ends, it might find it has created a competitor.•□Joint ventures. Foreign investors may join local investors in a joint venture company in which they share ownership and control, sometimes desirable for political or economic reasons. However, the partners might disagree over investment, marketing, or other poli-cies. One might want to reinvest earnings for growth, the other to declare more dividends. Joint ownership can also prevent a multinational company from carrying out specific manufacturing and marketing policies on a worldwide basis.•□Direct investment. The ultimate form of foreign involvement is direct ownership: The foreign company can buy part or full interest in a local company or build its own manu-facturing or service facilities. One advantage is that the firm secures cost economies FIGURE 18.2 Five Modes of Entry into Foreign MarketsJointventuresDirectinvestmentIndirectexportingLicensingCommitment, Risk, Control, and Proﬁt PotentialDirectexportingA Framework for Marketing Management,Sixth Edition, by Philip T. Kotler and Kevin Lane Keller. Published by Prentice Hall.Copyright © 2016 by Pearson Education, Inc. Chapter 18 Managing Marketing Responsibly in the Global Economy 279through cheaper labor or raw materials, government incentives, and freight savings. Also, the firm strengthens its image in the host country because it creates jobs. In ad-dition, it deepens its relationship with the government, customers, local suppliers, and distributors. Another advantage is retaining full control over its investment, with the ability to develop manufacturing and marketing policies that serve its long-term inter-national objectives. Finally, the firm ensures its access to the market in case the host country insists that locally purchased goods must have domestic content. The main dis-advantage is exposure to risks like blocked or devalued currencies, worsening markets, or expropriation. Note that, rather than bringing their brands into certain countries, many companies choose to acquire local brands for their brand portfolio.Deciding on the Marketing ProgramCompanies must decide how much to adapt their marketing strategy to local conditions.5 At one extreme is a standardized marketing program worldwide, which promises the lowest costs; Table 18.1 summarizes some pros and cons. At the other extreme is an adapted marketing pro-gram in which the company, consistent with the marketing concept, believes consumer needs vary and tailors marketing to each target group.Most products require at least some adaptation because of global differences.6 The best global brands are consistent in theme but reflect significant differences in consumer behavior, brand development, competitive forces, and the legal or political environment. Oft-heard—and sometime modified—advice to marketers of global brands is to “Think Global, Act Local” so brands will be relevant to consumers in every market. Warren Keegan has distinguished five product and communications adaptation strategies (see Figure 18.3).7Product Strategies Straight extension introduces the product in the foreign market with-out any change, a successful strategy for consumer electronics, among other products. Product adaptation alters the product to meet local conditions or preferences, developing a regional version of its product, a country version, a city version, or different retailer versions. Product TABLE 18.1 Globally Standardized Marketing Pros and ConsAdvantagesEconomies of scale in production and distributionLower marketing costsPower and scopeConsistency in brand imageAbility to leverage good ideas quickly and efficientlyUniformity of marketing practicesDisadvantagesIgnores differences in consumer needs, wants, and usage patterns for productsIgnores differences in consumer response to marketing programs and activitiesIgnores differences in brand and product development and the competitive environmentIgnores differences in the legal environmentIgnores differences in marketing institutionsIgnores differences in administrative proceduresA Framework for Marketing Management,Sixth Edition, by Philip T. Kotler and Kevin Lane Keller. Published by Prentice Hall.Copyright © 2016 by Pearson Education, Inc.ISBN: 978-1-323-26960-2 280 Part 7 Managing the Marketing Organization for Long-Term Successinvention creates something new. It can take two forms: backward invention (reintroducing earlier product forms well adapted to a foreign country’s needs) or forward invention (creating a new product to meet a need in another country). When they launch products and services glob-ally, marketers may need to change certain brand elements.8 Even a brand name may require a choice between phonetic and semantic translations.9Global Communication Strategies Changing marketing communications for each local market is a process called communication adaptation. If it adapts both the product and the com-munications, the company engages in dual adaptation. Consider the message. The company can use one message everywhere, varying only the language and name. Or it can use the same message and creative theme globally but adapt the execution. Another approach, which Coca-Cola and Goodyear have used, consists of developing a global pool of ads from which each country selects the most appropriate. Finally, some companies allow their country managers to create country-specific ads, within guidelines. Personal selling tactics may need to change too.Price Multinationals selling abroad must contend with price escalation, raising the price to cover the added cost of transportation, tariffs, middleman margins, and the risk of currency fluctuations so it can earn the same profit. Pricing choices include setting a uniform price in all markets, a market-based price in each market, or a cost-based price in each market. Many multinationals are plagued by the gray market, which diverts branded products from autho-rized distribution channels either in-country or across international borders. Dealers in the low-price country buy and ship the goods to another country to take advantage of price differ-ences. Multinationals try to prevent gray markets by policing distributors, raising their prices to lower-cost distributors, or altering product characteristics or service warranties for different countries.10Counterfeit Products As companies develop global supply chain networks and move pro-duction farther from home, the chance for corruption, fraud, and quality-control problems rises.11 Sophisticated overseas factories seem able to reproduce almost anything. Fakes take a big bite of the profits of luxury brands such as Hermès, LVMH Moët Hennessy Louis Vuitton, and Tiffany, but faulty counterfeits can literally kill people. Cell phones with counterfeit batteries, fake brake pads made of compressed grass trimmings, and counterfeit airline parts pose safety risks to consumers. Toxic cough syrup in Panama, tainted baby formula in China, and fake teeth-ing powder in Nigeria have all led to the deaths of children in recent years.12FIGURE 18.3 Five International Product and Communication StrategiesDo Not ChangeProductAdaptProductProductCommunicationsDevelop NewProductStraightextensionProductadaptationProductinventionCommunicationadaptationDo Not ChangeCommunicationsAdaptCommunicationsDualadaptationA Framework for Marketing Management,Sixth Edition, by Philip T. Kotler and Kevin Lane Keller. Published by Prentice Hall.Copyright © 2016 by Pearson Education, Inc. Chapter 18 Managing Marketing Responsibly in the Global Economy 281Distribution Taking a whole-channel view of distribution, there are three links between the seller and the final buyer (see Figure 18.4). When multinationals first enter a country, they pre-fer to work with local distributors with good local knowledge, but friction often arises later.13 Distribution channels across countries vary considerably, as do the size and character of retail units. Large-scale retail chains dominate the U.S. scene, but much foreign retailing is in the hands of small, independent retailers. Markups are high, but the real price comes down through hag-gling. Breaking bulk remains an important function of intermediaries and helps perpetuate long channels of distribution, a major obstacle to the expansion of large-scale retailing in developing countries. Although large retailers are increasingly moving into new global markets, some have had mixed success abroad.Country-of-Origin Effects Country-of-origin perceptions are the mental associations and beliefs triggered by a country. Government officials want to strengthen their country’s image to help domestic marketers that export and to attract foreign firms and investors. Marketers want to use positive country-of-origin perceptions to sell their products and services. Global market-ers know that buyers hold distinct attitudes and beliefs about brands or products from different countries.14 The mere fact that a brand is perceived as successful on a global stage—whether it sends a quality signal, taps into cultural myths, or reinforces a sense of social responsibility—may lend credibility and respect.15FIGURE 18.4 Whole-Channel Concept for International MarketingFinalbuyersSellerChannelsbetweennationsSeller’sinternationalmarketingheadquartersChannels withinforeign nationsA Framework for Marketing Management,Sixth Edition, by Philip T. Kotler and Kevin Lane Keller. Published by Prentice Hall.Copyright © 2016 by Pearson Education, Inc.ISBN: 978-1-323-26960-2 282 Part 7 Managing the Marketing Organization for Long-Term SuccessMarketers must look at country-of-origin perceptions from both a domestic and a foreign perspective. Patriotic appeals underlie marketing strategies all over the world, but they can lack uniqueness and even be overused, especially in economic or political crises. As international trade grows, consumers may view certain brands as symbolically important in their own cultural identity or as playing an important role in keeping jobs in their own country.Internal MarketingMarketing succeeds only when all departments work together to achieve customer goals: when engineering designs the right products, finance furnishes the right amount of funding, pur-chasing buys the right materials, production makes the right products on the right schedule, and accounting measures profitability in the right ways. Such interdepartmental harmony can only truly coalesce, however, when senior management clearly communicates a vision of how the company’s marketing orientation and philosophy serve customers. Internal marketing em-phasizes that satisfying customers is the responsibility of all employees, not just those in the marketing department.Let’s look at how marketing departments are being organized, how they can work effec-tively with other departments, and how firms can foster a creative marketing culture across the organization.16Organizing the Marketing DepartmentModern marketing departments can be organized in a number of different, sometimes overlap-ping ways: functionally, geographically, by product or brand, by market, or in a matrix.•□Functional organization. In the most common form of marketing organization, functional specialists (such as the marketing research manager) report to a marketing vice president who coordinates their activities. The main advantage is administrative simplicity. This form also can result in inadequate planning as the number of products and markets increases and each functional group vies for budget and status.•□Geographic organization. A company selling in a national market often organizes its sales force (and sometimes its marketing) along geographic lines.17 Some companies are adding area market specialists (regional or local marketing managers) to support sales efforts in high-volume markets.•□Product- or brand-management organization. Companies producing a variety of prod-ucts and brands often establish a product- (or brand-) management organization. This does not replace the functional organization but serves as another layer of management. A group product manager supervises product category managers, who in turn supervise specific product and brand managers. This makes sense if the company’s products are quite dif-ferent or there are more than a functional organization can handle. Other alternatives are product teams, assigning two or more minor products to one manager, and category man-agement (focusing on product categories to build the firm’s brands).•□Market-management organization. When customers fall into different user groups with distinct buying preferences and practices, a market-management organization is desirable. Market managers supervise several market-development managers, market specialists, or industry specialists and draw on functional services as needed. Market managers are staff, with duties like those of product managers. This organization shares many advantages and disadvantages of product-management systems. Many companies are reorganizing along market lines and becoming market-centered organizations. When A Framework for Marketing Management,Sixth Edition, by Philip T. Kotler and Kevin Lane Keller. Published by Prentice Hall.Copyright © 2016 by Pearson Education, Inc. Chapter 18 Managing Marketing Responsibly in the Global Economy 283customers have diverse and complex requirements, a customer-management organization, which deals with individual customers rather than the mass market or market segments, may be appropriate.18•□Matrix-management organization. Companies that produce many products for many markets may adopt a matrix organization employing both product and market managers. However, this is costly and can create conflicts about authority and responsibility. Some corporate marketing groups assist top management with overall opportunity evaluation, provide divisions with consulting assistance on request, help divisions that have little or no marketing, and promote the marketing concept throughout the company.Relationships with Other DepartmentsUnder the marketing concept, all departments need to “think customer” and work together to sat-isfy customer needs and expectations. Yet departments define company problems and goals from their own viewpoints, so conflicts of interest and communications problems are unavoidable. The marketing vice president or the CMO must usually work through persuasion rather than through authority to coordinate the company’s internal marketing activities and coordinate marketing with finance, operations, and other company functions to serve the customer. Many companies now focus on key processes rather than on departments because departmental organization can be a barrier to smooth performance. They appoint process leaders, who manage cross-disciplinary teams that include marketing and salespeople.Building a Creative Marketing OrganizationMany companies realize they’re not yet really market and customer driven—they are product and sales driven. Transforming into a true market-driven company requires, among other ac-tions: (1) developing a company-wide passion for customers; (2) organizing around customer segments instead of products; and (3) understanding customers through qualitative and quan-titative research. Although it’s necessary to be customer oriented, it’s not enough. The orga-nization must also be creative. The answer is to build a capability in strategic innovation and imagination. This capability comes from assembling tools, processes, skills, and measures that let the firm generate more and better new ideas than its competitors.19 See “Marketing Insight: The Marketing CEO” for concrete actions that will improve marketing capabilities.Socially Responsible MarketingEffective internal marketing must be matched by a strong sense of ethics, values, and social re-sponsibility.20 The most admired—and most successful—companies in the world abide by high standards of business and marketing conduct that serve people’s interests, not only their own. Procter & Gamble has made “brand purpose” a key component of the company’s marketing strat-egies, with award-winning cause programs such as Tide laundry detergent’s “Loads of Hope.”21 This differentiation is only one rationale for investing in corporate social responsibility. Another is to build a bank of public goodwill to offset potential criticisms. In addition, companies need to understand the social pressures and opportunities facing their companies as they make decisions about investing in social responsibility.Corporate Social ResponsibilityRaising the level of socially responsible marketing calls for making a three-pronged attack that relies on proper legal, ethical, and social responsibility behavior.A Framework for Marketing Management,Sixth Edition, by Philip T. Kotler and Kevin Lane Keller. Published by Prentice Hall.Copyright © 2016 by Pearson Education, Inc.ISBN: 978-1-323-26960-2 284 Part 7 Managing the Marketing Organization for Long-Term SuccessLegal Behavior Organizations must ensure every employee knows and observes relevant laws.22 For example, it’s illegal for salespeople to lie to consumers or mislead them about buy-ing a product. They may not offer bribes to influence a B-to-B purchase. Their statements must match advertising claims, and they may not obtain or use competitors’ technical or trade secrets through bribery or industrial espionage. They must not disparage competitors or competing products by suggesting things that are not true.Ethical Behavior It’s not always easy to draw a clear line between normal marketing practice and unethical behavior. Some issues can generate controversy or sharply divide critics, such as acceptable marketing to children.23 Of course, certain business practices are clearly unethical or illegal. These include bribery, theft of trade secrets, false and deceptive advertising, exclusive dealing and tying agreements, quality or safety defects, false warranties, inaccurate labeling, price-fixing or undue discrimination, and barriers to entry and predatory competition.Companies must adopt and disseminate a written code of ethics, build a company tradition of ethical behavior, and hold their people fully responsible for observing ethical and legal guide-lines. The general distrust of companies among U.S. consumers is evident in research showing the percentage of those who view corporations unfavorably is almost 40 percent.24The Marketing CEOWhat steps can a CEO take to create a market- and customer-focused company? 1. Convince senior management of the need to be-come customer focused. The CEO personally ex-emplifies strong customer commitment and rewards those who do likewise. 2. Appoint a senior marketing officer and marketing task force. The marketing task force should include the CEO; C-level executives from sales, R&D, purchas-ing, manufacturing, finance, and human resources; and other key individuals. 3. Get outside help and guidance. Consulting firms have considerable experience helping companies adopt a marketing orientation. 4. Change the company’s reward measurement and system. As long as purchasing and manufac-turing are rewarded for keeping costs low, they will resist accepting some costs required to serve custom-ers better. As long as finance focuses on short-term profit, it will oppose major investments designed to build satisfied, loyal customers. 5. Hire strong marketing talent. The company needs a chief marketing officer who not only manages the marketing department but also gains respect from and influence with other C-level executives. 6. Develop strong in-house marketing training pro-grams. Design marketing training programs for cor-porate management, divisional managers, marketing and sales personnel, manufacturing personnel, and others. 7. Install a modern marketing planning system. The planning format will require managers to think about the marketing environment, opportunities, competitive trends, and other forces as they prepare strategies—and hold them accountable for performance. 8. Establish an annual marketing excellence recog-nition program. Business units that believe they’ve developed exemplary marketing plans should submit a description of their plans and results. Reward winning teams and share winning ideas across the company. 9. Shift from a department focus to a process-outcome focus. Appoint process leaders and cross-disciplinary teams to reengineer and implement key fundamental processes.10. Empower the employees. Encourage and reward employees for new ideas and empower them to settle customer complaints.marketing insightA Framework for Marketing Management,Sixth Edition, by Philip T. Kotler and Kevin Lane Keller. Published by Prentice Hall.Copyright © 2016 by Pearson Education, Inc. ISBN: 978-1-323-26960-2 286 Part 7 Managing the Marketing Organization for Long-Term SuccessCause-related marketing could backfire, however, if consumers question the link between the product and the cause or see the firm as self-serving and exploitive.37 To avoid backlash, some firms take a soft-sell approach to their cause marketing. Most firms choose causes that fit their corporate or brand image and matter to their employees and shareholders.38Social MarketingCause-related marketing supports a cause. Social marketing by nonprofit or government orga-nizations furthers a cause, such as “say no to drugs” or “exercise more and eat better.”39 Different types of organizations conduct social marketing in the United States. Government agencies include the Centers for Disease Control and Prevention and the U.S. Environmental Protection Agency. Nonprofit organizations include the American Red Cross, the United Way, and the American Cancer Society.While social marketing uses a number of different tactics to achieve its goals, the planning process follows many of the same steps as for traditional products and services (see Table 18.2). Social marketing programs are complex; they take time and may require phased programs or actions. Marketers should evaluate program success in terms of their objectives, measuring cri-teria like incidence of adoption, speed of adoption, continuance of adoption, low cost per unit of adoption, and absence of counterproductive consequences.Executive SummaryWhen deciding whether to go abroad, a company needs to define its international marketing objectives and policies, weigh the risks, decide which and how many countries to enter, and determine the mode of entry (indirect exporting, direct exporting, licensing, joint ventures, or direct investment). Each succeeding strategy entails more commitment, risk, control, and profit TABLE 18.2 The Social Marketing Planning ProcessWhere Are We?•□Choose program focus.•□Identify campaign purpose.•□Conduct an analysis of strengths, weaknesses, opportunities, and threats (SWOT).•□Review past and similar efforts.Where Do We Want to Go?•□Select target audiences.•□Set objectives and goals.•□Analyze target audiences and the competition.How Will We Get There?•□Product: Design the market offering.•□Price: Manage costs of behavior change.•□Distribution: Make the product available.•□Communications: Create messages and choose media.How Will We Stay on Course?•□Develop a plan for evaluation and monitoring.•□Establish budgets and find funding sources.•□Complete an implementation plan.