MARKETING STRATEGY
Marketing strategy is defined by
David Aaker
as a process that can allow an organization to concentrate its
resources on the optimal opportunities with the goals of increasing
sales and achieving a sustainable
competitive advantage.
[1]
Marketing strategy includes all basic and long-term activities in the
field of marketing that deal with the analysis of the strategic initial
situation of a company and the formulation, evaluation and selection of
market-oriented strategies and therefore contribute to the goals of the
company and its marketing objectives.
[2]
Developing a marketing strategy
Marketing strategies serve as the fundamental underpinning of
marketing plans designed to fill market needs and reach
marketing objectives.
[3]
Plans and objectives are generally tested for measurable results.
Commonly, marketing strategies are developed as multi-year plans, with a
tactical plan detailing specific actions to be accomplished in the
current year. Time horizons covered by the
marketing plan
vary by company, by industry, and by nation, however, time horizons are
becoming shorter as the speed of change in the environment increases.
[4] Marketing strategies are dynamic and interactive. They are partially planned and partially unplanned. See
strategy dynamics. Marketing strategy needs to take a long term view, and tools such as
customer lifetime value models can be very powerful in helping to simulate the effects of strategy on acquisition, revenue per customer and
churn rate.
Marketing strategy involves careful and precise scanning of the internal and external environments.
[5] Internal environmental factors include the
marketing mix and
marketing mix modeling, plus performance analysis and strategic constraints.
[6] External environmental factors include customer analysis,
competitor analysis,
target market
analysis, as well as evaluation of any elements of the technological,
economic, cultural or political/legal environment likely to impact
success.
[4] A key component of marketing strategy is often to keep marketing in line with a company's overarching
mission statement.
[7]
Once a thorough environmental scan is complete, a
strategic plan
can be constructed to identify business alternatives, establish
challenging goals, determine the optimal marketing mix to attain these
goals, and detail implementation.
[4]
A final step in developing a marketing strategy is to create a plan to
monitor progress and a set of contingencies if problems arise in the
implementation of the plan.
Marketing Mix Modeling
is often used to help determine the optimal marketing budget and how to
allocate across the marketing mix to achieve these strategic goals.
Moreover, such models can help allocate spend across a portfolio of
brands and manage brands to create value.
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 four types of market
dominance strategies:
- Leader
- Challenger
- Follower
- Nicher
According to
Shaw, Eric (2012). "Marketing Strategy: From the Origin of the Concept to the Development of a Conceptual Framework". Journal of Historical Research in Marketing., there is a framework for marketing strategies.
- Market introduction strategies
"At introduction, the marketing strategist has two principle strategies to choose from: penetration or niche" (47).
"In the early growth stage, the marketing manager may choose from two
additional strategic alternatives: segment expansion (Smith, Ansoff) or
brand expansion (Borden, Ansoff, Kerin and Peterson, 1978)" (48).
- Market maturity strategies
"In maturity, sales growth slows, stabilizes and starts to decline.
In early maturity, it is common to employ a maintenance strategy (BCG),
where the firm maintains or holds a stable marketing mix" (48).
- Market decline strategies
At some point the decline in sales approaches and then begins to
exceed costs. And not just accounting costs, there are hidden costs as
well; as Kotler (1965, p. 109) observed: 'No financial accounting can
adequately convey all the hidden costs.' At some point, with declining
sales and rising costs, a harvesting strategy becomes unprofitable and a
divesting strategy necessary" (49).
Early marketing strategy concepts were:
"In his classic
Harvard Business Review (HBR) article of the
marketing mix, Borden (1964) credits James Culliton in 1948 with
describing the marketing executive as a 'decider' and a 'mixer of
ingredients.' This led Borden, in the early 1950s, to the insight that
what this mixer of ingredients was deciding upon was a 'marketing mix'"
(34).
- Smith's "differentiation and segmentation strategies"
"In product differentiation, according to Smith (1956, p. 5), a firm
tries 'bending the will of demand to the will of supply.' That is,
distinguishing or differentiating some aspect(s) of its marketing mix
from those of competitors, in a mass market or large segment, where
customer preferences are relatively homogeneous (or heterogeneity is
ignored, Hunt, 2011, p. 80), in an attempt to shift its aggregate demand
curve to the left (greater quantity sold for a given price) and make it
more inelastic (less amenable to substitutes). With segmentation, a
firm recognizes that it faces multiple demand curves, because customer
preferences are heterogeneous, and focuses on serving one or more
specific target segments within the overall market" (35).
- Dean's "skimming and penetration strategies"
"With skimming, a firm introduces a product with a high price and
after milking the least price sensitive segment, gradually reduces
price, in a stepwise fashion, tapping effective demand at each price
level. With penetration pricing a firm continues its initial low price
from introduction to rapidly capture sales and market share, but with
lower profit margins than skimming" (37).
- Forrester's "product life cycle (PLC)"
"The PLC does not offer marketing strategies, per se; rather it
provides an overarching framework from which to choose among various
strategic alternatives" (38).
There are also corporate strategy concepts like:
"Although widely used in marketing strategy, SWOT (also known as
TOWS) Analysis originated in corporate strategy. The SWOT concept, if
not the acronym, is the work of Kenneth R. Andrews who is credited with
writing the text portion of the classic: Business Policy: Text and Cases
(Learned et al., 1965)" (41).
- Ansoff's "growth strategies"
"The most well-known, and least often attributed, aspect of Igor
Ansoff's Growth Strategies in the marketing literature is the term
'product-market.' The product-market concept results from Ansoff
juxtaposing new and existing products with new and existing markets in a
two by two matrix" (41-42).
- Porter's "generic strategies"
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. **
Product differentiation **
Cost leadership
-
- 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:
- Pioneers
- Close followers
- 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:
- Horizontal integration
- Vertical integration
- Diversification
- Intensification
These ways of growth are termed as organic growth. Horizontal growth
is whereby a firm grows towards acquiring other businesses that are in
the same line of business for example a clothing retail outlet acquiring
a food outlet. The two are in the retail establishments and their
integration lead to expansion. Vertical integration can be forward or
backward. Forward integration is whereby a firm grows towards its
customers for example a food manufacturing firm acquiring a food outlet.
Backward integration is whereby a firm grows towards its source of
supply for example a food outlet acquiring a food manufacturing outlet.
A more detailed scheme uses the categories:
Miles, Raymond (2003). Organizational Strategy, Structure, and Process. Stanford: Stanford University Press. ISBN 0-8047-4840-3.
- Prospector
- Analyzer
- Defender
- Reactor
- Marketing warfare strategies – This scheme draws parallels between marketing strategies and military strategies.
BCG's "growth-share portfolio matrix" "Based on his work with
experience curves (that also provides the rationale for Porter's low
cost leadership strategy), the growth-share matrix was originally
created by Bruce D. Henderson, CEO of the Boston Consulting Group (BCG)
in 1968 (according to BCG history). Throughout the 1970s, Henderson
expanded upon the concept in a series of short (one to three page)
articles in the BCG newsletter titled Perspectives (Henderson, 1970,
1972, 1973, 1976a, b). Tremendously popular among large multi-product
firms, the BCG portfolio matrix was popularized in the marketing
literature by Day (1977)" (45).
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