Marketing strategy starts with the setting of marketing objectives. Marketing objectives are medium to long term targets intended to provide a sense of direction for the marketing department. Examples include:
Increase brand recognition-important for new entrants to a market or for existing businesses operating in a market.
Increase market share-boost profits and revenues
Broaden product range to improve market standing-the business may use an asset led approach by using an existing brand name to develop new products
To break into a new market-a business may choose this objective if sales in existing markets are static or falling.
- The business’s corporate objectives-both objectives should be interrelated.
- The size and type of the firm-large firms possessing a high degree of market power may set expansive and aggressive objectives.
- The financial position-a business that is profitable or has strong cash flow may be able to engage in the necessary research and development that will enable challenging marketing objectives to be set
- The possession of a USP- may set objectives reflecting an expectation of substantial increase in market share and brand recognition
- Operations- capacity, quality, flexibility
- HR- motivated focuses staff, skills
- Business Culture- a market orientated business is constantly looking for ways to meet customer needs, a production orientated business may result in setting objectives that are unrealistic
- The business’s position in the market-a dominant business may be able to break into new market segments and build upon its existing brand image.
- The expected response of competitors
- The state of the economy- key determinant in demand, e.g. recession may thwart objectives to increase market share.
- Technological change- rapid technological change, shortening product life cycles and creating great opportunities for innovation.
- Polictical- Expansion of the EU offers more opportunities, new legislation can restrict objectives.
- Social- e.g. ageing population, changes in attitudes, tastes and fashion
Reasons for, and the value of, marketing analysis
There are two types of approaches to this type of decision making:
Decisions based on hunches or instinct-it is possible for managers to take major marketing decisions, such as whether to introduce a new product, based entirely upon instinct. This means that management team concerned conducts little or no research and relies upon its knowledge and understanding of the market.
Scientific marketing decisions-actions of competitors, consumers, suppliers and governments can all have an impact on markets, as can changes in taste and fashion. It is important to gather as much evidence as possible before making major marketing decisions.
Using hunch or instinct might be a valid approach to decision making in a market that regularly experiences rapid change, however guesswork is risky. The analysis of a market is an expensive exercise but possible less so than a making a major error in for example, forecasting consumer demand.
Analysis of trends
A trend is the underlying pattern of growth or decline within a series of data. This enables the firm to plan production to meet the demands of the market fully.
Extrapolation analyses the past performance of a variable such as sales and extends this into the future. Establishing the pattern of historic data can help the business to predict what is to happen next. Extrapolation is:
- Easy to carry out
- May be inaccurate as it assumes that the future will be similar to the past
- Not suitable in an environment that is subject to rapid change
- Moving averages are a series of calculations designed to show the underlying trend within a series of data.
- The use of moving averages should smooth out the impact of random variations in data and longer term cyclical factors.
- By predicting trends, firms are able to forecast future sales.
Correlation is a statistical technique used to establish the extent of the relationship between two variables. It can be important as:
It can show the extent of a relationship between key variables
It can be presented on a graph
It provides information to assist managers in decision making
Collecting market data
Information technology is useful to business as a mean of collecting market research data, e.g. consumers’ online spending is simple for firms to record and analyse, revealing spending patterns.
A number of supermarkets and other retailers use loyalty cards, one purpose of these cards is to encourage customer loyalty and therefore repeat purchases. However they also enable businesses to collect data on customer purchases and to relate this to personal data they hold on these customers. In this way, they are able electronically to analyse the types of people who purchases particular products, allowing for better focused advertising campaigns.
Analysing Market Data
Data that are collected electronically can be analysed using IT, they can be presented cheaply and quickly in different formats to ensure all the messages the data contain are understood.
Difficulties in analysing marketing data
Marketing data can give the wrong message for a number of reasons:
Samples can be too small or unrepresentative
Some industries are subject to rapid change
Delays between gathering data and presenting the results to mangers may mean that the market has already changed
Major changes in the external environment effect the decision of purchases. A rise in interest rates may lead to consumers delaying or abandoning their decision to purchase.
Type of market strategies
Low cost vs. differentiation
A low cost marketing strategy offers a business a way of attracting customers. It can be used by businesses that are late entrants to the market and do not have an established brand name or customer base and can be highly effective if demand for a product is price elastic. However it does require the business to have a low cost base and to be able to maintain or reduce its cost levels when established competition begins to respond.
An alternative option is differentiation. This means that a business makes it products separate and distinct form those of competitors. It can encourage brand loyalty and the opportunity to charge higher prices as demand is likely to become more price inelastic.
Ansoffs product market matrix assists businesses in evaluating themselves and the market in which they operate by considering the relationship between marketing and the overall corporate strategy. The matrix considers products and market growth and analyses the degree of risk attached to the range of options open to the business. The key findings in of Ansoffs matrix include:
Staying with what you know represents little risk
Moving into new markets with new products is a high risk strategy
Assessment is made of the value of each option
A strategy of market penetration means that a business has chosen to market existing products to its existing customers more strongly. By doing this, the business avoids the expense and time involved in developing new products or investigating and analysing unfamiliar markets. As a result the strategy can be implemented relatively quickly and cheaply.
However, it may be that the market is saturated and therefore the only way to increase sales is by taking customers away from competitors. A policy of market penetration can necessitate heavy expenditure on promotion and some flexibility in pricing decisions.
This involves a business targeting its existing product range at potential customers in a new market. This means that the product remains the same but it is marketed to a new audience. New markets could be overseas or possible a different segment.
This strategy is classed as medium risk because the product is unchanged and the business’s managers are presumably familiar with their strengths and weaknesses. It also avoids the need for developing new products which can be costly and time consuming. However the product may not be accepted in the new markets or they may need expensive modifications.
This strategy means that a new product is marketed to a business’s existing customers. The business develops and innovates a new product offerings to replace or supplement existing ones.
The advantages of this approach are that the business knows its customers and is in contact with them already, making it easier to conduct market research and promote new products. The business may also have a strong brand name that it can attach to its new products. The downside of this strategy is that the business may engage in producing and selling products in which it has little expertise and so may be vulnerable to the actions of more established businesses in the market. This strategy is medium risk.
This is where a business’s marketing strategy is to sell completely new products to new customers. Related diversification means that a business remains in a market or industry with which it is familiar. Unrelated diversification is where it has no previous industry or market experience. This is a high risk strategy as the business lacks experience of the product and the customer base it is targeting. As a consequence it will have greater need of market analysis.
How to assess the effectiveness of marketing strat
The best way to assess the effectiveness of a particular marketing strategy is to compare it to the marketing objectives that were set prior to its implementation if these objectives have been fulfilled, the strategy can be deemed to have been successful. Another key means of judgement is to assess the extent to which the marketing strategy has enabled the business to achieve its corporate objectives. Other measures can be applied as well. It may be that a successful marketing strategy will results in other business copying it.
Developing and implementing marketing plans
Marketing planning involves developing the tactics necessary to implement the marketing strategy e.g.:
Establishing targets for marketing
Coordinating the different elements of the mix
Deciding on an overall budget
A marketing plan is a document setting out the strategy that a business will use to achieve its marketing objectives. The plan will include the following:
Elements of the marketing mix
A marketing plan for a large organisation might bring together a number of separate marketing plans for individual goods and services.
A marketing budget is the amount of money that a business allocates for expenditure on marketing activities over a period of time. These activities will include advertising, public relations, sales promotions and market research.
The size of budget depends on:
- The financial position of the business
- The actions of competitors
- The business’s marketing objectives
- Good forecasting is a key component of business success. Forecasts contain:
- Sales of products
- Costs for the forthcoming accounting period
- Cash flow
- Key economic variables
Internal and external influences
Finance available to the business. Access to larger funds allows a business to set more challenging marketing objectives and more extensive promotional campaigns.
Operational issues. Available operational resources will act as a constraint. E.g. the businesses productive capacity will determine the number of markets it can operate in
Issues in implementing marketing plans
Marketing plans may be important for a business that has recently started trading or for one considering change, such as entering a new market. However, marketing plans do not always work quite as intended.
Benefits of marketing planning
- Plans help give a sense of direction to all employees
- Managers can compare their achievement with the plan and take the necessary action
- Encourages managers to think ahead and to weigh up the options available as well as threats and opportunities.
- Effective marketing plans establish targets that are realistic and achievable
Potential problems in marketing planning
- Time consuming/uses resources. In a rapidly changing marketplace, this might not be the optimal approach as fast decision making is vital
- Plans might cause managers to be inflexible