Note on Marketing Strategy

Introduction

This note is the basic fundamental for developing an effective marketing strategy

  • The firm has only 2 key functions
    • Innovation
    • Marketing: Process by which a company creates value for its customers
      • Value is made by meeting customer needs
      • Define by customer benefits it provides
    • Rest all are details
  • The company captures the value of the benefits via Pricing
    • You are sustainable if you can create value and capture the same over a long period
    • Marketing strategy is about how you capture the value on a sustained basis

5C’s of Marketing

The 5c’s can are briefed below

  • Customer Needs: What needs do we seek to satisfy
  • Company Skills: What competence is needed to meet those needs
  • Competition: Who competes with us to meet those needs
  • Collaborators: Whom to partner with and how to engage with them
  • Context: Cultural, technological and legal limits and what is possible

Marketing

Elements of a Marketing Strategy

Marketing analysis

  • Customers
  • Company
  • Competitors
  • Collaborators
  • Context

Value Creation

  • Step 1: Market Segmentation
  • Step 2: Target market selection
  • Step 3: Product and Service Positioning

Capturing Value via Marketing Mix

We capture value via the 4P’s of Marketing

  • Product and Services
  • Place and Channels
  • Promotion
  • Pricing

Sustaining Value

  • Customer Acquisition
  • Customer Retention

Profitability

A successful marketing strategy ensures firms generate profit by capturing a portion of the value it provides to customers

Target Market Selection and Product Positioning

  • Identify the target markets that the company aims to serve. It is a key requirement before deciding on any marketing plan
  • Market of One: Customising marketing campaigns for individuals using technological tools and process
  • Key Questions to be answered
    • Q1: Which Potential buyers should we aim to serve
      • Determine the means to differentiate between customers via segmentation
    • Q2: How much customisation can be offered
      • Mass markets — Market Segments — Market Niches — Individuals

Segmentation

  • Focus to derive segmentation based on customer behaviour or relationship to a product
    • User Status: Non-user vs User
    • Usage Rate: Light, medium and heavy
    • Benefits Sought: Performance vs Price
    • Loyalty: None, moderate, strong, totally loyal
    • Attitude towards Product: Unsatisfied, satisfied, delighted
  • Aim to be clear on which segment you wish to target. Each needs to be marketed separately
  • When deciding on a market segment, consider the following:
    • Your strengths and weakness vs competitors within the customer’s purchase criteria
    • Your Corporate goals and fit of the segment with your goals
    • Resources required to market
    • Collaborators needed to market
    • Profitability from the segment

Positioning

  • Answer the question: If we pursue this segment, how do we approach it and how will be perceived
  • Typical Positioning Statement :
    • (Our Product / Brand) is (Single most important claim) among all (Competitive frame) because (single most important support)
  • Solving allows you to solve for the marketing mix. You can work out the tactical details via a good positioning statement

To read more about Positioning, you can refer to positioning

Marketing Mix

The set of activities compromising your marketing program

  • 12 Common Mix elements are
    • Product Planning
    • Pricing
    • Branding
    • Distribution
    • Personal Sales
    • Advertising
    • Promotions
    • Packaging
    • Display
    • Servicing
    • Physical Handling
    • Market Research
  • The marketing mix has been simplified into the 4Ps which are discussed below

Product

  • Define the total set of benefits that the customer obtains. Evaluate the possible points of differentiation from others
  • Product Planning Decisions:
    • Breadth: How many types of products will be offered
    • Length: How many types will be provided within a specific product for coverage across different price
    • Depth: How many variations within a given product type
    • Key questions to be answered
      • Are we able to satisfy needs profitably?
      • Can we differentiate when viewed as a total set of benefits?
      • Impact of product on other products
      • Impact on the company’s brand and reputation
  • Product Development Process
    • Opportunity Identification
      • Identify a customer problem that it can solve and focus to achieve product/market fit
    • Design & Testing
      • An iterative process to see how customers react to the product and make changes. You even undertake testing across different marketing mixes to see what works for each customer segment
    • Product Introduction
      • Where to launch and pace of launch
    • Lifecycle Management
      • Modifying products as per customer reactions and needs, which are dynamic

Place (Marketing Channels)

  • Means on how to go to market
  • Key Functions that a channel provides are:
    • Product Information
    • Product Customisation
    • Product Quality Assurance
    • Lot Size
    • Product Assortment
    • Availability
    • Customer Service
    • Logistics
  • All sets of activities need to be provided. Either you or your channel partner provides it, so bear in mind before removing anyone. Layer can be eliminated but not the task
  • Key Decisions to be made:
    • Channel Design
      • Go Direct by using a sales team or Indirect via a third party. You can opt for dual focussed on specific segments based on customer needs. Some may need direct as more customer education might be needed, high service levels and some indirect as some customers are well informed and require minimal service
      • Key considerations
        • Account Concentration: If few represent bulk, then direct. If spread over large customers, indirect
        • Degree of Control and Customer Service need. Some go direct as they can’t get access to partners who can support them
      • Focus on seeing how intense the presence is required based on maximal customer convenience or selective nature. Decide based on
        • Customer willingness to travel and search for good
        • Storage costs
        • Selling and market development costs involved
    • Channel Management: Day-to-day work to ensure that all partners feel aligned and avoid conflicts.
      • Policies
      • Procedures

Promotion: Marketing Communications

  • Set of ways in which to communicate with customers to foster awareness.
  • Effective plans involved personal selling efforts and non-personal ones such as ads, sales promotions and PR
  • Tasks and Tools: The 6M Model of Promotion:
    • Market - Whom are we addressing
    • Mission - Objective of communication
    • Message - What specific points need to be communicated
    • Media - How we will convey the message
    • Money - Expenses for the efforts
    • Measurement - How to measure impact
  • Key to understanding people involved in the purchase decision-making, their roles and current perceptions. Decision Making Unit(DMU) need to be developed and each DMU needs to be addressed in the promotion planning
  • Advertising is effective:
    • Create awareness
    • explain features
    • suggest usage
    • differentiate from others
    • Call to action
    • brand image
    • It is limited to closing the sale
  • Sales Promotion: Short-term inducement to generate action for the transaction to happen
    • DMU Promotions: Discounting to DMU for sale
    • Trade Promotions: Provided to partners to increase sales
    • Retail Promotions: Provided by partners to get sales
  • Public Relations: Non-Paid Communication efforts. You spend to carry the activity but no expenses on media
  • Personal Selling: It happens via Sales Personnel
  • Design of Communication Mix: Decide whether you want to use to Push - inducing intermediaries to sell or Pull - Making end consumers insist on buying
  • Construction of the marketing mix is a complex process due to the numerous options available currently. You must focus on what works and observe if you can get any advantage in the same
  • Refer to customer-communication to understand more about how to develop effective customer messaging

Pricing

  • The 3Ps i.e. Product, Place (Channel) and Promotion determine the customer’s perception of value in a competitive context, determining the max price for the customer
  • Effective pricing is about capturing some of the customer value to fund itself
  • Pricing Basis and Objective:
    • Cost acts as the floor on pricing. You can sell at a loss initially to gain shares but it is hard to increase prices at a later stage as earlier prices act as a reference point
    • Value varies across customers. Hence higher prices, lower sales and vice versa.
      • Skim Pricing: Charging high initially and reducing the price at a later stage
      • Penetration: Lower price since start to drive high sales. You lose some profit from certain customers but you avoid competition. Works best when
        • Customers are price sensitive
        • Economies of scale are needed
        • availability of capacity
        • high competitive threat
  • Each customer may place a different value so you can customise the price within legal constraints. You can do so by
    • Develop product line i.e. the soft and hardcover of a book
    • limited availability of lower prices or time bound of such prices
    • Vary basis observable customer characteristics
    • Vary basis volume
  • Price is dependent on how competition reacts. Price war is high when
    • High fixed but low variable cost
    • Little differentiation among the competition
    • slow growth
    • Economies of scale is important

Marketing Strategy Formulation

You analyse the basis of the 5c’s explained above

Customer Analysis

You undertake an in-depth understanding of customers by developing a decision-making-unit

  • Decision Making Unit
    • Who is involved
    • what is each person’s role?
  • 5 roles are identified in a DMU
    • Initiator - keen to solve a problem and stimulate the search for the product
    • Decider - who makes the choice
    • Influencer - provides inputs but not decision-maker
    • Purchaser - who undertakes the transaction
    • User - Consumes the Product
  • Second Key Area is Decision Making Process (DMP)
    • Is a search undertaken for info?
    • How search is done
    • Criteria used to evaluate alternatives
    • Importance for various attributes such as price and performance
    • How does each DMU interact
  • Other Key Considerations
    • Where the customer wishes to buy
    • How the product will be used
    • Usage frequency
    • How important the problem is

Company Analysis

Identify the capabilities and limits of the company to asses product/market fit

Competitive Analysis

Understand competitor’s objectives, strengths and strategies to develop differentiation possibilities

Collaborator Analysis

Understand your downstream trade partners and upstream suppliers, their cost and margins and nature with other competitors

Context Analysis

Understand the current structure of what key changes are happening across technology, legal and society. Products and services acquire value from their place in culture and this leads to the acquisition of economic value from customers

Performance Measurement

Once your plan is in place ensure you have defined the key metrics to ensure that the key objectives of the plan are being met

Customer Messaging

Messaging needs to be designed on 2 Parameters

  • SOCO - Single Overriding Communication Objective: The most important thing to communicate in your message.
  • SOCA - Single Overriding Communication Avoidance: The one thing that needs to be avoided at all costs in your message. It can be a weakness or problem or any liability

Your key message should revolve around SOCO and aim to bring all responses to this key objective in the end.

Marketing Owl

For words to have meaning, one must be able to defend them. Repetition should be avoided, and sentences should be concise and clear.

Marketing Own

  • Attributes: Describe yourself with impactful words. Pick adjectives that showcase your strengths and are memorable.
  • In Action: Give priority to what you want to communicate externally.

Iteratively define your company’s marketing strategy, as it is unique to each business and no universal guidelines exist.