Marketing strategy Marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage. A marketing strategy should be centered around the key concept that customer satisfaction is the main goal. Marketing strategy is a method of focusing an organization’s energies and resources on a course of action which can lead to increased sales and dominance of a targeted market niche.
A marketing strategy combines product development, promotion, distribution, pricing, relationship management and other elements; identifies the firm’s marketing goals, and explains how they will be achieved, ideally within a stated timeframe. Marketing strategy determines the choice of target market segments, positioning, marketing mix, and allocation of resources. It is most effective when it is an integral component of overall firm strategy, defining how the organization will successfully engage customers, prospects, and competitors in the market arena.
Corporate strategies, corporate missions, and corporate goals. As the customer constitutes the source of a company’s revenue, marketing strategy is closely linked with sales. A key component of marketing strategy is often to keep marketing in line with a company’s overarching mission statement. Basic theory: 1. Target Audience 2. Proposition/Key Element 3. Implementation 4. A marketing strategy can serve as the foundation of a marketing plan. A marketing plan contains a set of specific actions required to successfully implement a marketing strategy.
For example: “Use a low cost product to attract consumers. Once our organization, via our low cost product, has established a relationship with consumers, our organization will sell additional, higher-margin products and services that enhance the consumer’s interaction with the low-cost product or service. ” 5. A strategy consists of a well thought out series of tactics to make a marketing plan more effective. Marketing strategies serve as the fundamental underpinning of marketing plans designed to fill market needs and reach marketing objectives.
Plans and objectives are generally tested for measurable results. 6. A marketing strategy often integrates an organization’s marketing goals, policies, and action sequences (tactics) into a cohesive whole. Similarly, the various strands of the strategy , which might include advertising, channel marketing, internet marketing, promotion and public relations can be orchestrated. Many companies cascade a strategy throughout an organization, by creating strategy tactics that then become strategy goals for the next level or group.
Each one group is expected to take that strategy goal and develop a set of tactics to achieve that goal. This is why it is important to make each strategy goal measurable. 7. Marketing strategies are dynamic and interactive. They are partially planned and partially unplanned. TYPES OF STRATEGIES Marketing strategies may differ depending on the unique situation of the individual business. However there are a number of ways of categorizing some generic strategies.
A brief description of the most common categorizing schemes is presented below: • Strategies based on market dominance – In this scheme, firms are classified based on their market share or dominance of an industry. Typically there are three types of market dominance strategies: 0 Leader 0 Challenger 0 Follower • Porter generic strategies – strategy on the dimensions of strategic scope and strategic strength. Strategic scope refers to the market penetration while strategic strength refers to the firm’s sustainable competitive advantage.
The generic strategy framework (porter 1984) comprises two alternatives each with two alternative scopes. These are Differentiation and low-cost leadership each with a dimension of Focus-broad or narrow. 0 Product differentiation 0 Market segmentation • Innovation strategies – This deals with the firm’s rate of the new product development and business model innovation. It asks whether the company is on the cutting edge of technology and business innovation. There are three types: 0 Pioneers 0 Close followers 0 Late followers • Growth strategies – In this scheme we ask the question, “How should the firm grow? There are a number of different ways of answering that question, but the most common gives four answers: 0 Horizontal integration 0 Vertical integration 0 Diversification 0 Intensification A more detailed scheme uses the categories: • • • • • Prospector Analyzer Defender Reactor Marketing warfare strategies – This scheme draws parallels between marketing strategies and military strategies. STRATEGIC MODELS Marketing participants often employ strategic models and tools to analyze marketing decisions.
When beginning a strategic analysis, the 3Cs can be employed to get a broad understanding of the strategic environment. An Ansoff Matrix is also often used to convey an organization’s strategic positioning of their marketing mix. The 4Ps can then be utilized to form a marketing plan to pursue a defined strategy. Marketing in Practice The Consumer-Centric Business There are a many companies especially those in the Consumer Package Goods (CPG) market that adopt the theory of running their business centered around Consumer, Shopper & Retailer needs.
Their Marketing departments spend quality time looking for “Growth Opportunities” in their categories by identifying relevant insights (both mindsets and behaviors) on their target Consumers, Shoppers and retail partners. These Growth Opportunities emerge from changes in market trends; segment dynamics changing and also internal brand or operational business challenges. The Marketing team can then prioritize these Growth Opportunities and begin to develop strategies to exploit the opportunities that could include new or adapted products, services as well as changes to the 7Ps.
Real-life marketing primarily revolves around the application of a great deal of common-sense; dealing with a limited number of factors, in an environment of imperfect information and limited resources complicated by uncertainty and tight timescales. Use of classical marketing techniques, in these circumstances, is inevitably partial and uneven. Thus, for example, many new products will emerge from irrational processes and the rational development process may be used (if at all) to screen out the worst non-runners.
The design of the advertising, and the packaging, will be the output of the creative minds employed; which management will then screen, often by ‘gut-reaction’, to ensure that it is reasonable. For most of their time, marketing managers use intuition and experience to analyze and handle the complex, and unique, situations being faced; without easy reference to theory. This will often be ‘flying by the seat of the pants’, or ‘gut-reaction’; where the overall strategy, coupled with the knowledge of the customer which has been absorbed almost by a process of osmosis, will determine the quality of the marketing employed.
This, almost instinctive management, is what is sometimes called ‘coarse marketing’; to distinguish it from the refined, aesthetically pleasing, form favored by the theorists. Market segment A market segment is a group of people or organizations sharing one or more characteristics that cause them to have similar product and/or service needs. A true market segment meets all of the following criteria: it is distinct from other segments (different segments have different needs), it is homogeneous within the segment (exhibits common needs); it responds similarly to a market stimulus, and it can be reached by a market intervention.
The term is also used when consumers with identical product and/or service needs are divided up into groups so they can be charged different amounts. These can broadly be viewed as ‘positive’ and ‘negative’ applications of the same idea, splitting up the market into smaller groups. The process of segmentation is distinct from targeting (choosing which segments to address) and positioning (designing an appropriate marketing mix for each segment).
The overall intent is to identify groups of similar customers and potential customers; to prioritize the groups to address; to understand their behavior; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. Revenues are thus improved. Improved segmentation can lead to significantly improved marketing effectiveness. Distinct segments can have different industry structures and thus have higher or lower attractiveness (Michael Porter).
With the right segmentation, the right lists can be purchased, advertising results can be improved and customer satisfaction can be increased leading to better reputation. Variables Used for Segmentation • Geographic variables 0 Region of the world or country, East, West, South, North, Central, coastal, hilly, etc. 0 Country size/country size : Metropolitan Cities, small cities, towns. 0 Density of Area Urban, Semi-urban, Rural. 0 Climate Hot, Cold, Humid, Rainy. • Demographic variables 0 age 0 gender Male and Female 0 family size 0 family life cycle 0 Education Primary, High School, Secondary, College, Universities. income 0 occupation 0 socioeconomic status 0 religion 0 nationality/race (ethnic marketing) 0 language • Psychographic variables 0 personality 0 lifestyle 0 value 0 attitude • Behavioral variables 0 benefit sought 0 product usage rate 0 brand loyalty 0 product end use 0 readiness-to-buy stage 0 buying center 0 profitability 0 income status • Technological segmentation variables 0 motivations 0 usage patterns 0 attitudes about technology 0 fundamental values 0 lifestyle perspective 0 standard of living 0 profit is there in business from the existing clients When numerous variables are combined to give an in-depth understanding of a segment, this is referred to as depth segmentation. When enough information is combined to create a clear picture of a typical member of a segment, this is referred to as a buyer profile. When the profile is limited to demographic variables it is called a demographic profile (typically shortened to “a demographic”). A statistical technique commonly used in determining a profile is cluster analysis. Other techniques used to identify segments are algorithms such as CHAID and regression-based CHAID and discriminated analysis. Alternatively, segments can be modeled directly from consumer preferences via discrete choice methodologies such as choice-based conjoint and MaxDiff. Positioning
Once a market segment has been identified (via segmentation), and targeted (in which the viability of servicing the market is determined), the segment is then subject to positioning. Positioning involves ascertaining how a product is perceived in the minds of consumers. This part of the segmentation process consists of drawing up a perceptual map, which highlights rival goods within one’s industry according to perceived quality and price. After the perceptual map has been devised, a firm would consider the marketing communications mix best suited to the product in question. Top-Down and Bottom-Up George S. Day describes model of segmentation as the top-down approach: You start with the total population and divide it into segments. He also identified an alternative model which he called the bottom-up approach.
In this approach, you start with a single customer and build on that profile. This typically requires the use of customer relationship management software or a database of some kind. Profiles of existing customers are created and analyzed. Various demographic, behavioral, and psychographic patterns are built up using techniques such as cluster analysis. This process is sometimes called database marketing or micro-marketing. Its use is most appropriate in highly fragmented markets. McKenna (1988) claims that this approach treats every customer as a “micro majority”. Pine (1993) used the bottom-up approach in what he called “segment of one marketing”. Through this process mass customization is possible.
Creating a market segment will allow you to set yourself apart from other compatives. Using Segmentation in Customer Retention Segmentation is commonly used by organizations to improve their customer retention programs and help ensure that they are: • • Focused on retaining their most profitable customers Employing those tactics most likely to retain these customers The basic approach to retention-based segmentation is that a company tags each of its active customers with 3 values: Tag #1: Is this customer at high risk of canceling the company’s service? (Or becoming a non-user) One of the most common indicators of high-risk customers is a drop off in usage of the company’s service.
For example, in the credit card industry this could be signaled through a customer’s decline in spending on his card. Tag #2: Is this customer worth retaining? This determination boils down to whether the post-retention profit generated from the customer is predicted to be greater than the cost incurred to retain the customer. Tag #3: What retention tactics should be used to retain this customer? For customers who are deemed “save-worthy”, it’s essential for the company to know which save tactics are most likely to be successful. Tactics commonly used range from providing “special” customer discounts to sending customers communications that reinforce the value proposition of the given service. Process for tagging customers
The basic approach to tagging customers is to utilize historical retention data to make predictions about active customers regarding: • • • Whether they are at high risk of canceling their service Whether they are profitable to retain What retention tactics are likely to be most effective The idea is to match up active customers with customers from historic retention data who share similar attributes. Using the theory that “birds of a feather flock together”, the approach is based on the assumption that active customers will have similar retention outcomes as those of their comparable predecessors. From a technical perspective, the segmentation process is commonly performed using a combination of predictive analytics and cluster analysis. Illustration of retention-based segmentation process: