TC YEDİTEPE UNIVERSITY INSTITUTE OF GRADUATE STUDIES IN SOCIAL SCIENCES PH.D. IN BUSINESS ADMINISTRATION PROGRAM
BUSS 611- Advanced Seminar in Strategic Management and Corporate Governance / Spring 2015
STRATEGIC MANAGEMENT TOOLS & TECHNIQUES:
Developing Your Marketing Strategy- Part 1/4
What is Marketing?
Sergio Zyman defines best-summarized description of marketing in 2004 in his book “Renovate Before You Innovate.” ; – Marketing success is to “sell more stuff, to more people, more often, for more money, more efficiently.”
What is Marketing Strategy?
Marketing strategy describes how a business meets the requirements of its market.
Marketing strategy includes all basic and long-term activities that deal with the analysis of the strategic initial situation of a company and the formulation, evaluation and selection of market-oriented decisions and therefore reach to company’s major objectives and goals with the execution of marketing mix.
An effective marketing strategy will help to define the overall direction and goals for marketing. Marketing strategy should articulate how company is going to deliver products or services in ways that will satisfy customers’ expectations and needs.
Early Marketing Strategy Concepts
Before marketing strategy developed as an offshoot of marketing management in the 1970s, even before marketing management emerged as a school of thought in the 1960s to replace the traditional approaches to marketing (Bartels, 1988; Sheth et al., 1988; Shaw and Jones, 2005), a few isolated concepts were developed in the 1950s literature that form the core of modern marketing strategy. These seminal concepts include: Borden’s (1957, 1964) expression of the “marketing mix,” Smith’s (1956) development of “product differentiation” and “market segmentation” as alternative marketing strategies, Dean’s (1951) conception of “skimming” and “penetration” as alternative pricing (that he extended to the whole marketing mix) strategies, and Forrester’s (1959) description of the “product life cycle (PLC).”
Elements of Marketing Strategy
The focus of Marketing strategy should be making sure that products and services meet customer needs and developing long-term and profitable relationships with those customers. To achieve this, company need to create a flexible strategy that can respond to changes in customer perceptions and demand. It may also help to identify whole new markets that successfully targeted.
A marketing strategy is composed of several interrelated elements, which also constitute 4Ps of Marketing Mix. E. Jerome McCarthy (McCarthy, J. 1960), was the first person to suggest the four P’s of marketing – price, promotion, product and place (distribution) – which constitute the most common variables used in constructing a marketing mix.
The Components of Marketing Strategy
- Product/Market Selection
Selection of the market and Product is the most important element. The decision of target market and the selection of product lines should be done by some critical marketing researches for a successful strategy.
According to companies’ mission and goals business may take 4 different market actions in product market; (The most well-known Igor Ansoff’s Growth Strategies- 1957)
- Develop new markets
- Expand existing markets
- Develop new products
- Enter new businesses
Market Penetration is the attempt to increase sales of current products in present markets. Some strategies to penetrate markets include: more aggressive marketing, increasing service to improve renewal rates, or attracting competitor customers directly.
Market Development is the effort to increase sales by selling current products into new markets. Firms may advertise to reach new target customers within a geographic region, or look to international markets for expansion.
Product Development refers to offering new or improved products to present markets. By working closely with your customers, you may find new and innovative ways to better satisfy your target market.
Diversification means opening completely new lines of business, with new products in new markets. Many organizations diversify their product mix to mitigate risks related to economic variables such as recessions.
Each tactic require different marketing strategies and different strategically actions.
After the selection of the market, company should define customers or target market and marketing managers need to start developing and implementing tactics to reach them.
One of the key elements of a successful target market analysis is the acknowledgement that existing and potential customers will fall into particular groups or segments, characterized by their “needs”. Identifying these groups and their needs through market research, and then addressing them more successfully than competitors, should be the focus of the strategy.
Forrester’s “Product Life Cycle (PLC)”- 1959
The product life cycle has 4 very clearly defined stages, each with its own characteristics that mean different things for business that are trying to manage the life cycle of their particular products.
Introduction Stage – This stage of the cycle could be the most expensive for a company launching a new product. The size of the market for the product is small, which means sales are low, although they will be increasing. On the other hand, the cost of things like research and development, consumer testing, and the marketing needed to launch the product can be very high, especially if it’s a competitive sector.
Growth Stage – The growth stage is typically characterized by a strong growth in sales and profits, and because the company can start to benefit from economies of scale in production, the profit margins, as well as the overall amount of profit, will increase. This makes it possible for businesses to invest more money in the promotional activity to maximize the potential of this growth stage.
Maturity Stage – During the maturity stage, the product is established and the aim for the manufacturer is now to maintain the market share they have built up. This is probably the most competitive time for most products and businesses need to invest wisely in any marketing they undertake. They also need to consider any product modifications or improvements to the production process, which might give them a competitive advantage.
Decline Stage – Eventually, the market for a product will start to shrink, and this is what’s known as the decline stage. This shrinkage could be due to the market becoming saturated (i.e. all the customers who will buy the product have already purchased it), or because the consumers are switching to a different type of product. While this decline may be inevitable, it may still be possible for companies to make some profit by switching to less-expensive production methods and cheaper markets.
The concept of market segmentation was first identified by Wendell R. Smith back in the 1950s. He was one of the first to recognize the importance of market segmentation, as shown in the following quote:
“Market segmentation is based upon developments on the demand side of the market and represents a rational and more precise adjustment of product and marketing effort to consumer or user requirements.” (Smith, 1956)
Markets may be segmented along several dimensions;
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