Selecting Marketing Strategies

Selecting marketing strategies

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Marketing Strategies. Low cost versus differentiat

Low cost

Cheaper end of the market.

Aim is to offer products at a lower price than competitors in the market

The business must be able to reduce its own costs.

Differentiation

Make one product appear different/ superior to others on the market > encourage consumers to choose taht particular make or model when making purchasing decisions.

Invloves all elements of the marketing mix

Pricing will reflect exclusivity and superiority of the product.

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Is the context national or international

Increasingly likely to have an international aspect to the plans

Growth of e-commerce has enabled small to medium sized firms to attract customers from all around the worlf

Oppurtunities for large organisations should be even more attractive

Expansion of the EU will also encourage UK companies to think in an international rather than domestic context.

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Ansoff's Competitive Strategies

Presents the product and market choices available to a business.

Choice is the basis for developing a clear marketing strategy and the matrix allows managers to discuss the strategies for achieving corporate objectives thought the marketing function.

With every choice, comes an element of risk. Risk increases as the strategy moves away from the present product, present market option.

A business can select one of more strategies; market penetration, product development and diversification.

 

Products

Markets

Present

New

Present

Market penetration

Product development

New

Market development

Diversification

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Market Penetration

Market penetration: when a firm increases the sales of its current products to existing customers or attracts new customers from its competitors in the market.

This strategy involves using the elements of the marketing mix more effectively: Reducing prices to encourage customers to buy more or entice consumers from other brands in the market; increasing promotional spending to remind customers about the product rang; Launching a loyalty scheme; Increasing the activity of the sales force; Making small changes to the products on offer, for example a greater range of sizes or different levels of service; Giving customers a greater range of buying options by increasing the places from which the product can be purchased.

Lowest risk strategy because business has experience of the market and should know the characteristics of the customers well.

However, if the market is large, assuming that customers share similar characteristics and will all respond in the same way, it may be dangerous.

Up to date market research will be invaluable. 

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Product development

Product development: offering new and improved products to existing markets.

Higher risk. Refers to a significantly new product line.

May allow the company to utilise excess production capacity, response to a new product launch from a competitor, maintain the company’s reputation as an innovator, exploit new technology or protect overall market share.

take into consideration the size of the market and whether or not the business views in national or international terms

This can be clearly seen when you buy goods that have instruction leaflets in more than one language.

For example, this strategy may include:

·         Developing related products or services which market research has identified as being part of the buying decisions of customers

·         Introducing new models of existing products with significant modifications, new functions or services. 

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Market Development

Market development: finding new markets for existing products either by selling abroad or by indentifying a new segment of the domestic market

Aim is to increase the sales of the current product portfolio.

Strategies include:

  • ·         Targeting a different geographical area, including an overseas market

  • ·         Developing new sales channels, such as e-commerce, to attract a new audience

  • ·         Targeting a new consumer group with a different profile to existing customers.

Risky because the company will have little or no knowledge about the new market

Marketing costs will be high and time taken to achieve a profit in the new market might be considerable.

Potential gains make it increasingly attractive, particularly because it helps to spread risk: if one geographical market is suffering from poor economic growth, then another market may well be expanding rapidly, so the impact of economic slowdown on the business is reduced. 

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Diversification

Diversification: offering a new product in a new market. Little opportunity to use existing expertise or achieve significant economies of scale in the short term.

May be:  Related- some form of forward, backward or horizontal integration Or Unrelated- the highest risk strategy.

Strategies may include: A new technology developed by the R&D department of the business or bought from an inventor- if there is evidence of significant potential, the risk is reduced.

·         Buying an existing business in a completely different market

·         Targeting existing successful markets

Main benefit of the strategy is that risk is spread.

A company can also gain first mover advantage an in emerging market where there are very large profits to be made. In such circumstances, no company will have expertise or the advantage of economies of scale, so firms are competing on a ‘level playing field’.

 

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Entering international markets

This option will appeal to businesses where:

·         The Uk market is saturated

·         The Uk market is very competitive, driving down prices and therefore profits

·         There are opportunities to achieve economies of scale

·         The firm has excess capacity

·         The additional costs involved are relatively small

Deciding how to enter an overseas market will be a crucial part of the marketing strategy.

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Exporting from the UK

 

Method

Benefits

Drawbacks

Exporting from the UK

Accepting international orders, increasingly on an ecommerce website

Making regular visits to the target country to indentify customers, build relationships and complete sales negotiations

Supported by telephone and email sales

Relatively cheap

Not very complicated to set up

Can be withdrawn easily if does not work

Existing resources, e.g the sales force and the website can be used

Full control over marketing is retained

Distance may make it difficult to identify potential business opportunities

Bureaucracy may be complicated

Risk of non payment or delayed payment for goods, due to export problems causing cash flow difficulties

Language barriers may lead to high recruitment and training costs

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Opening an overseas operation

 

Method

Benefits

Drawbacks

Opening an overseas operation

New branch staffed by your own employees

Setting up a registered subsidiary in the new market, using locally recruited employees, covered by local company, employment and tax rules

Forming an alliance with a local business which is jointly owned

Chance to identify opportunities in the target market

Control of operations and the potential for expansion

Developing relationships with clients

Providing good after sales service

A joint venture means that the risk is shared

The local partner in the alliance provides important knowledge and experience

More expensive option, including the cost of the administration and management

Local company, employment and tax laws might be difficult to understand and local specialists may be needed

The brand name of the product or company may not be appropriate in the target market.

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Using an overseas sales agent

 

Method

Benefits

Drawbacks

Using an overseas sales agent

Acts on behalf of the business in the overseas market, making sales for which they receive a commission

 

The agents should have a lot of knowledge of the local market, and should be abel to indentify business opportunities

Recruitment, training and relocation costs are avoided

The agent should have local contacts saving a lot of time

The Uk company is still responsible for all transport costs and documentation

The standard of customer service is difficult to maintain because the agent may work for many companies

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A distributor

 

Method

Benefits

Drawbacks

A distributor

Buys the goods and sells them in the target market

The distributor is responsible for the transportation and all the paperwork that goes with this

If the distributor has an established reputation and contacts in the new market, the chances of a successful launch are greater

The marketing expenditure falls mostly on the distributor

The distributor may expect good discounts on the price and generous trade credit terms

Control of the marketing mix is passed over to the distributor

It is hard to give incentives to sell more of the product

Distributors may demand exclusive rights to sell a product which may reduce sales

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Assessing the effectiveness of marketing strategie

The most important consideration is whether or not the strategy helped/s the business to achieve its marketing objectives and thereby its corporate objectives

The strategy can be assessed in terms of the quadrants within Ansoff’s matrix. Has is achieved market penetration, product development, market development or successful diversification?

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