CHAPTER 2 | MARKETING PLANNING AND MANAGEMENT 59
Developing Market Offerings
In order to create value for target customers, collaborators, and company stakeholders, it is necessary
for a company to clearly identify the target market in which it will compete and to design an offering
that will deliver a meaningful set of benefits to target customers.14 These activities encompass the
two key components of a company’s business model: strategy and tactics.
Strategy involves choosing a well-defined market in which the company will compete and deter-
mining the value it intends to create in this market. Tactics, also called the marketing mix, make the
company’s strategy come alive: They define the key aspects of the offering developed to create value in a
given market. The tactics logically follow from the company’s strategy and reflect the way the company
will make this strategy a market reality. Tactics shape everything from the offering’s benefits and costs
to the means by which target customers learn about and buy the offering.
Strategy and tactics are fundamentally intertwined. A company’s strategy specifies the target mar-
ket and the value the company aims to create in this market, while the tactics detail the actual attributes
of the offering that will create value in the chosen market. Deciding on the specific tactical aspects of
an offering—its features, brand image, and pricing, and the means of promoting, communicating, and
distributing the offering—is not possible without understanding the needs of the target marketing and
the competing options that exist to fulfill these needs.
The key aspects of an offering’s strategy and tactics are discussed in more detail in the following
sections.
DEVELOPING THE MARKETING STRATEGY
Marketing strategy incorporates two key components: the target market in which the company will
compete and the value proposition for the relevant market entities—the company, its target customers,
and its collaborators. A carefully chosen target market and a well-crafted value proposition provide
the foundation of the company’s business model and serve as the guiding principles for determining
the tactical decisions that define the company’s offering.
Identifying the Target Market. The target market in which a company aims to create
and capture value comprises five factors: the customers whose needs the company intends to fulfill,
the competitors that aim to fulfill the same needs of the same target customers, the collaborators that
help the company fulfill the needs of customers, the company that develops and manages the offering,
and the context that will affect how the company develops and manages the offering.
These five market factors—the Five Cs—are visually represented in the 5-C framework as a set of con-
centric ellipses: Target customers are in the center, with collaborators, competitors, and the company
<< Kraft’s decision to
split into two companies,
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60 PART 1 | FUNDAMENTALS OF MARKETING MANAGEMENT
in the middle and the context on the outside (Figure 2.2). The central placement of target customers
in the 5-C framework reflects their defining role in the market. The other three market entities—the
company, its collaborators, and its competitors—work to create value for the target customers. Form-
ing the outer layer of the 5C framework is the market context, which defines the environment in which
customers, the company, collaborators, and competitors operate.
The Five Cs and the relationships among them are discussed in more detail in the following
sections.
• Target customers are the individuals or organizations whose needs the company plans to fulfill.
Target customers in business-to-consumer markets are typically the end users of the company’s
offerings, whereas in business-to-business markets, target customers are other businesses that
use the company’s offerings. Two key principles determine the choice of target customers: The
company and its collaborators must be able to create superior value for target customers relative to
the competition, and the target customers chosen should be able to create value for the company
and its collaborators.
• Collaborators work with the company to create value for target customers. A company should
base the choice of collaborators on the complementary resources they can offer to help the com-
pany fulfill customer needs. Collaboration involves outsourcing (rather than developing) the
resources that the company lacks but that it requires to create an offering that fulfills the needs
of target customers. Instead of building or acquiring resources that are lacking, a company can
gain access to necessary resources by partnering with entities that have them and can benefit
from sharing them. Collaborators can include suppliers, manufacturers, distributors (i.e., dealers,
wholesalers, and retailers), research-and-development entities, service providers, external sales
forces, advertising agencies, and marketing research companies.
• Competitors aim to fulfill the same needs of the same customers that the company is targeting.15
Companies should avoid falling prey to the myopic view of competition that defines their rivals
using traditional category and industry terms.16 A company should examine the main competi-
tors and their strategies by asking the following questions: What is each competitor seeking in the
marketplace? What drives each competitor’s behavior? This helps clarify the company’s position
since many factors are involved a competitor’s objectives, including its size, history, current man-
agement, and financial situation. For example, it’s important to know whether a competitor that
is a division of a larger company is being run for growth or for profits, or is just being milked.17
• The company develops and manages a given market offering. For organizations with diverse
strategic competencies and market offerings, the term company typically refers to the particular
business unit that manages a specific offering. Each strategic business unit can be viewed as a
separate company that requires its own business model. For example, GE, Alphabet (Google’s
parent company), and Facebook have multiple strategic business units.
• The context is the environment in which the company and its collaborators operate. It encom-
passes five factors. The sociocultural context is characterized by social and demographic trends, value
systems, religion, language, lifestyles, attitudes, and beliefs. The technological context consists of new
techniques, skills, methods, and processes for developing, communicating, and delivering market
offerings. The regulatory context includes taxes, import tariffs, and embargoes, as well as product
specification and pricing, communication regulations, and intellectual property laws. The economic
context is made up of economic growth, money supply, inflation, and interest rates. The physical
context comprises natural resources, geographic location, topography, climate trends, and health
conditions. Context can have a dramatic impact on a company’s ability to create market value.
FIGURE 2.2
Identifying the Target Market:
The 5-C Framework
Source: Alexander Chernev, Strategic Marketing
Management: Theory and Practice (Chicago, IL:
Cerebellum Press, 2019). Customers
Co
m
pa
ny
Collaborators
Context
Competitors
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CHAPTER 2 | MARKETING PLANNING AND MANAGEMENT 61
The 5-C framework, on the other hand, defines the market
based on customer needs rather than on the industry in
which the company competes. Accordingly, it defines
competitors in terms of their ability to fulfill customer
needs and create market value. The 5-C framework is not
concerned with whether the company and its competitors
operate within the same industry, which makes the
concept of substitutes superfluous because from a
customer’s point of view, substitutes are merely cross-
category competitors that aim to fulfill a particular need.
The Five Forces framework’s focus on industry
makes it particularly relevant for marketers analyzing the
competitive structure within a given industry. However,
the Five Forces approach has much less relevance when
it comes to analyzing an offering’s ability to create market
value. In this case, the 5-C framework is typically more
useful because of its customer focus and its market
perspective based on customer needs rather than on a
particular industry.19
The Five-C framework is similar to the Five Forces
framework originated by Michael Porter.18 The Five
Forces framework identifies industry competitiveness
according to five factors: the bargaining power of
suppliers, the bargaining power of buyers, the threat of
new entrants, the threat of substitutes, and rivalry among
existing competitors. These five factors jointly define
the competitive environment in which a firm operates.
The Five Forces framework suggests that competition
within an industry increases along with greater bargaining
power of suppliers and buyers, a higher threat of new
competitors and substitute products, and intensified
rivalry among existing competitors.
The Five Forces framework is similar to the 5-C
framework in that both are meant to facilitate analysis of
the market in which a company operates. The difference
between these frameworks is the way in which each
defines the market. The Five Forces framework analyzes
the competition in the market from an industry perspective.
The Five Cs and the Five Forces of Competition
Many recent developments—including the advancements in artificial intelligence, the initiation
of trade wars, global warming, and the coronavirus pandemic—have forced many companies to
completely rethink the way they operate and pivot their business models.
The key component of the target market is the selection of target customers, which determines all
other aspects of the market: This includes specifying the competition, choosing collaborators, defining
the company resources needed to develop a superior offering for customers, and outlining the context
in which the company will create market value. It follows that a change in target customers typically
leads to a change in competitors and collaborators, different resource requirements, and a change in
context factors. Because of its strategic importance, the choice of the right target customers is the
foundation for building a successful business model.
Developing a Value Proposition. A successful offering must create superior value not only
for target customers but also for the company and its collaborators. Accordingly, when developing
market offerings for the relevant entities in the market exchange, a company needs to consider all three
types of value: customer value, collaborator value, and company value.
• Customer value is the worth of an offering to its customers and hinges on customers’ assessment
of how well an offering fulfills their needs. The value that an offering creates for its customers is
based on three main factors: the needs of the target customers, the benefits customers receive and
the costs they incur when they purchase the company’s offering, and the benefits and costs of the
alternative means—competitive offerings—that target customers can use to fulfill their needs.
Thus, the customer value proposition should be able to explain why target customers would
choose the company’s offering instead of the available alternatives.
• Collaborator value is the worth of an offering to the company’s collaborators. It sums up all
benefits and costs that an offering creates for collaborators and reflects how attractive an offering
is to collaborators. The collaborator value proposition should explain why collaborators would
choose the company’s offering instead of competitive alternatives to achieve their goals.
• Company value is the worth of the offering to the company. The value of an offering is defined
relative to all benefits and costs associated with it, its affinity with the company’s goal(s), and the
value of other opportunities that could be pursued by the company—for example, other offerings
that the company could launch. Therefore, the company value proposition determines why the
company would choose this offering instead of selecting alternative options.
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62 PART 1 | FUNDAMENTALS OF MARKETING MANAGEMENT
The market value principle is also referred to as the 3-V principle because it underscores the
importance of creating value for the three key market entities—target customers, collaborators, and
the company itself. The market value principle defines the viability of a business model by posing three
sets of questions that must be addressed:
What value does the offering create for target customers? Why would target customers choose this
offering? What makes this offering superior to the alternative options?
What value does the offering create for the company’s collaborators (suppliers, distributors, and
co-developers)? Why would collaborators partner with the company instead of with other entities?
What value does the offering create for the company? Why should the company invest resources in this
offering rather than pursuing other options?
The need to manage value for all three of these market entities begs the question of which value
to prioritize. This requires the creation of an optimal value proposition that balances the value for
customers, collaborators, and the company. The term optimal value as used here means that the value of
the offering is connected across the three entities, such that it creates value for target customers and col-
laborators in a way that enables the company to achieve its strategic goals. The market value principle
optimizes customer, collaborator, and company value and is the basis of market success (Figure 2.3).
Failure to create superior value for any of the three market entities inevitably leads to an unsustainable
business model and dooms the business venture.
Consider the means that Starbucks uses to create market value. Customers receive the functional
benefit of a variety of coffee beverages and the psychological benefit of expressing their personality
by choosing a customized beverage, for which they deliver monetary compensation to Starbucks.
Collaborators (coffee growers) receive monetary payments from Starbucks for the coffee beans they
provide and derive the strategic benefit of having a consistent demand for their product; in return,
they invest resources in growing coffee beans that conform to Starbucks’ standards. Starbucks receives
revenues and profits from investing company resources in developing and offering its products and
services to consumers, in addition to deriving the strategic benefits of building a brand and enhancing
its market footprint.
DESIGNING THE MARKETING TACTICS
The market offering is the actual good that the company deploys in order to fulfill a particular cus-
tomer need. Unlike the target market and the value proposition, which reflect the company’s strategy,
the market offering reflects the company’s tactics—the specific way the company will create value in
the market in which it competes.
Marketing managers have seven tactics at their disposal to develop an offering that creates mar-
ket value: product, service, brand, price, incentives, communication, and distribution. Also called the
marketing mix, these seven attributes (also referred to as tactics or Ts) represent the combination of
activities required to transform the market offering’s strategy into reality (Figure 2.4).
The seven attributes that delineate the market offering are as follows:
• The product is a marketable commodity that aims to create value for target customers. Products
can be tangible (like food, apparel, and furniture) or intangible (like music and software). Pur-
chase of a product gives customers ownership rights to the acquired good. For example, with the
purchase of a car or a software program, the owner is granted all rights to the acquired product.
• The service also aims to create value for its customers, but it does so without entitling them to
ownership. Examples of services include appliance repairs, movie rental, medical procedures,
and tax preparation. At times, the same offering can be positioned as a product or a service.
FIGURE 2.3
The 3-V Market Value Principle
Source: Alexander Chernev, Strategic Marketing
Management: Theory and Practice (Chicago, IL:
Cerebellum Press, 2019).
Customer
value
The Optimal Value
Proposition
Company
value
OVP
Collaborator
value
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CHAPTER 2 | MARKETING PLANNING AND MANAGEMENT 63
This occurs, for example, when a software program can be offered as a product that gives purchas-
ers the rights to a copy of the program, or as a service that allows customers to lease the program
and temporarily receive its benefits.
• The aim of the brand is to identify the products and services produced by the company and dif-
ferentiate them from those of the competition, in the process creating unique value over and above
the product and service aspects of the offering. The Rolls-Royce brand identifies the cars manu-
factured by BMW subsidiary Rolls-Royce to differentiate these cars from those made by Bentley,
Maserati, and Bugatti, as well as to evoke a distinct emotional reaction from its customers, who
use the Rolls-Royce brand to call attention to their wealth and socioeconomic status.
• The price is the monetary charge that customers and collaborators incur to receive the benefits
provided by the company’s offering.
• Incentives are targeted tools designed to enhance the value of the offering by reducing its costs
or increasing its benefits. Incentives are typically offered in the form of volume discounts, price
reductions, coupons, rebates, premiums, bonus offerings, contests, and monetary and recogni-
tion rewards. Incentives can be directed to consumers or to the company’s collaborators—for
example, its channel partners.
• Communication apprises target customers, collaborators, and the company stakeholders of the
specifics of the offering and where to acquire it.
• Distribution encompasses the channel(s) used to deliver the offering to target customers and
company collaborators.
Again, a Starbucks example can illustrate these attributes. Starbucks’ product includes the variety of
beverage and food items available. The service consists of the assistance that Starbucks offers to custom-
ers before, during, and after purchase. The brand consists of the Starbucks name and logo, as well as the
associations it evokes in customers’ minds. The price is the amount of money that Starbucks charges
customers for its offerings. Incentives include promotional tools such as loyalty programs, coupons, and
temporary price reductions that provide additional benefits for customers. Communication consists of
the information Starbucks disseminates via advertising, social media, and public relations to inform
the public about its offerings. Distribution includes company-owned stores and company-licensed retail
outlets that deliver Starbucks’ offerings to its customers.
The seven marketing tactics—product, service, brand, price, incentives, communication, and
distribution—can be regarded as a process of designing, communicating, and delivering customer value. The
value-design aspect of the offering comprises the product, service, brand, price, and incentives, while
communication and distribution form the information-value and delivery-value aspects of the process
(Figure 2.5). Thus, even though the different tactical attributes play distinct roles in the value-creation
process, they optimize customer value across all three dimensions.
The value-creation process can be considered from the perspectives of both the company and the
customer. The company regards value creation as a process of designing, communicating, and delivering value;
however, the customer looks at the value-creation process from a different perspective, viewing it in
FIGURE 2.4
Marketing Tactics: The Seven Tactics
(7 Ts) Defining the Market Offering
Source: Alexander Chernev, Strategic Marketing Management:
Theory and Practice (Chicago, IL: Cerebellum Press, 2019).
Customer
value
Company
value
OVP
Collaborator
value
Product
Price Incentives
Communication Distribution
Service Brand
Tactics
Strategy
Market Offering
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64 PART 1 | FUNDAMENTALS OF MARKETING MANAGEMENT
terms of the attractiveness, awareness, and availability of the offering.20 Attractiveness reflects the benefits and
costs that target customers associate with the product, service, brand, price, and incentives aspects of the
offering. Awareness highlights the methods through which target customers are informed about the spe-
cifics of the offering. Availability consists of the ways in which target customers can acquire the offering.
THE SEVEN Ts AND THE FOUR Ps
The view of marketing tactics as a process of defining the seven key attributes of an offering can be
related to the widely popular 4-P framework. Introduced in the 1960s, the 4-P framework identifies
four key decisions that managers must make when designing an offering: the features to include
in the product, the price of the product, the best way to promote the product, and the retail outlets in
which to place the product. These four decision areas are represented by the Four Ps: product, price,
promotion, and place.
Because it is simple, intuitive, and easy to remember, the 4-P framework enjoys wide popularity.
However, because of that very simplicity, the 4-P framework has significantly limited relevance in the
contemporary business environment. One of its limitations is that it fails to distinguish between the
product and service aspects of the offering, which is a key drawback in today’s service-oriented busi-
ness environment, where a growing number of companies are switching from a product-based to a
service-based business model. Another important limitation of the 4-P framework is that it does not
regard the brand as a separate factor, instead viewing the brand as part of the product. The product and
brand are two distinct aspects of the offering, and each can exist independently of the other. In fact, a
growing number of companies outsource their product manufacturing so they can focus their efforts
on building and managing their brands.
Another area in which the 4-P framework comes up short is in its treatment of the term promo-
tion. Promotion is a broad concept that comprises two distinct promotional activities: incentives, which
include price promotions, coupons, and trade promotions, and communication, which encompasses
advertising, public relations, social media, and personal selling. Incentives and communication make
disparate contributions to the value-creation process: Incentives enhance an offering’s value, whereas
communication serves to inform customers about the offering but does not necessarily enhance the
offering’s value. The 4-P framework’s use of the term promotion to refer to both of these discrete activi-
ties can obscure the unique role that each plays in creating market value.
The limitations of the 4-P framework can be avoided by regarding the offering in terms of seven
factors—product, service, brand, price, incentives, communication, and distribution—instead of four.
The four Ps can be easily mapped onto the seven attributes of the 7-T framework: The first P (prod-
uct) comprises product, service, and brand; price remains the second P; the third P (promotion) is
expanded to incentives and communication; and distribution replaces the fourth P (place). Thus, the
7-T marketing mix represents a more refined version of the 4-P framework, offering a more accurate
and actionable approach to designing a company’s offering.
CREATING A MARKET VALUE MAP
The two key aspects of a company’s business model—strategy and tactics—can be represented as a
value map that defines the ways in which a company creates market value. The ultimate purpose of
the value map is to facilitate the development of a viable business model that can enable the company
FIGURE 2.5
Marketing Tactics as a Process
of Designing, Communicating,
and Delivering Customer Value
Source: Alexander Chernev, Strategic Marketing
Management: Theory and Practice (Chicago, IL:
Cerebellum Press, 2019). Value
Product
Price Incentives
Communication Distribution
Service Brand
Designing value
Communicating value Delivering value
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CHAPTER 2 | MARKETING PLANNING AND MANAGEMENT 65
to achieve market success. Thus, the market value map can be thought of as a visual representation
of the key components of a company’s business model and the ways in which they are related to
one another.
The market value map mirrors the structure of the business model and contains three key compo-
nents that define the company’s strategy and tactics—the target market, the value proposition, and the market
offering. The target market is, in turn, defined by the Five Cs—customers, collaborators, company, com-
petitors, and context—with customers playing the key role in defining the market. The value proposi-
tion then represents the three types of value that the company must create in the market: customer
value, collaborator value, and company value. Finally, the offering component of the market value map
delineates the seven key attributes—product, service, brand, price, incentives, communication, and
distribution—that represent the tactical aspect of a company’s business model. The components of the
market value map and the key questions defining each component are shown in Figure 2.6.
The value proposition component of the market value map is central to ensuring the viability
of the company’s business model. The market success of the company’s offering is determined by its
ability to create value for the three key entities: target customers, the company’s collaborators, and the
company itself. Because these entities have distinct needs and require different value propositions, the
marketing planning process can be better served by developing a separate value map for each entity.
Thus, in addition to having a single value map, managers might benefit from developing three value
maps: a customer value map, a collaborator value map, and a company value map.
These three value maps depict the distinct aspects of the company’s business model that concern
the key entities involved in the value-creation process. The customer value map captures the ways in
which the company’s offering will create value for its target customers and outlines the strategic and
tactical aspects of the customer-focused aspect of the company’s business model. The collaborator
value map delineates the strategic and tactical aspects of the ways in which the company’s offering
FIGURE 2.6
The Market Value Map
Source: Alexander Chernev,
Strategic Marketing Management:
Theory and Practice (Chicago, IL:
Cerebellum Press, 2019).
What customer need does
the company aim to fulfill?
Who are the customers with this need?
What are the key
features of the company’s product?
What are the key
features of the company’s service?
What are the key
features of the offering’s brand?
What is the
offering’s price?
What incentives
does the offering provide?
How will target
customers and collaborators become
aware of the company’s offering?
How will the offering
be delivered to target customers
and collaborators?
What other entities will
work with the company
to fulfill the identified customer need?
What are the company’s
resources that will enable
it to fulfill the identified customer need?
What other offerings aim
to fulfill the same need of
the same target customers?
What are the sociocultural,
technological, regulatory, economic,
and physical aspects of the environment?
What value does
the offering create for target customers?
What value does
the offering create
for the company’s collaborators?
What value does
the offering create for the company?
Strategy Tactics
Company Value
Collaborator Value
Customer Value
Target Market Market Offering
Customers Product
Service
Brand
Price
Incentives
Communication
Distribution
Collaborators
Company
Competition
Context
Value Proposition
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