Marketing Strategies. Low cost versus differentiat
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.
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.
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.
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.
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.
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.
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.
· 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.
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’.
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.
Exporting from the UK
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
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
Opening an overseas operation
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.
Using an overseas sales agent
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
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
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?