The marketing strategies can be studied under the following heads: 1. Competitive Marketing Strategies 2. Market Challenger Strategies 3. Market Follower Strategies.
Some of the most popular and effective types of marketing strategies often employed are: 1. Affinity Marketing 2. Alliance Marketing 3. Ambush Marketing 4. Call to Action (CTA) Marketing
5. Close Range Marketing 6. Cloud Marketing 7. Community Marketing 8. Content Marketing 9. Cross-Media Marketing 10. Database Marketing 11. Digital Marketing 12. Direct Marketing 13. Diversity Marketing
14. Evangelism Marketing 15. Freebie Marketing 16. Free Sample Marketing 17. Guerrilla Marketing and a Few Others.
Types of Marketing Strategy
3 Types of Marketing Strategies – Competitive Marketing Strategies, Market Challenger Strategies and Market Follower Strategies
1. Competitive Marketing Strategies:
This category of marketing strategies may include the market leader strategies, total market expansion strategies, etc. The company can develop the market leader strategies in reference to the price, new products, distribution coverage and promotional intensity. The market leader may or may not be admired but other companies in the market acknowledge its dominance.
The market leader is at a point of challenge and imitation to the competing companies. The market leader company must keep constant vigil on the followers and should enjoy the legal monopoly in the market. It is common for the leading firms to have the challenges from the competing firms who watch closely to find the weaknesses of the leading firm.
The dominant firms always wants to remain first in the market in order to expand its area of operation, protect its existing market share, aggressive marketing campaigns and increase the market size continuously. The advantage of the total market expansion is generally tapped by the dominant company.
The company may look for new user segments for expanding the market, applying one of the best strategies out as under:
i. Market penetration strategy
ii. New user strategy
iii. Geographical expansion strategy.
One of the great successes in developing the new segment of users was accomplished by Enkey Foods Ltd of Mumbai with its natural orange juice as ready to serve beverage (RTS) branded as Onjuice a nourishing health drink. The company became more concerned with the health awareness among the class of people and their inclination to change the food habits.
The market survey showed that the customers are interested to have balanced and low calorie breakfast but are not able to find such stuff in the food market. The Enkey Foods Ltd developed an advertising campaign aimed at children and adults for depicting the need for strong body and balanced food. Markets can be expanded through discovering and promoting new uses for the product.
The Vaseline petroleum jelly was introduced in the market as a lubricant in machine shops during the initial days and over the years users have increased its perceived use value and now it is being used as a skin ointment, a healing agent and also for hair dressing.
The company should also play a defensive role to protect its business territory, image and market share from the competitors. Hence, a company should develop the defensive marketing strategies after it passes through the stage of growth. There are following defense strategies as exhibited in Table 8.2 that can be adopted by the company.
The market leaders may improve their profitability by increasing their market share. The key variables of profitability include market share, product quality, promotion, distribution performance, price, customer value and others. The decision on increasing the market share may have three major implications.
Firstly, it may provoke distrust action and the competitors may consider it as monopolist move.
Secondly, the increased market share may not necessarily boost-up the profit level as profit tends to fall after certain level of penetration in the market. However, the optimal market share should be considered by the company.
2. Market Challenger Strategies:
The market challenger company must define the strategic objectives of the company. It should have clearly defined objectives, firm decisions and attainable objectives for becoming a challenger company in the market. The strategic objective may increase the market share and lead to the territorial leadership in the business. The objective of the company which aims to be the challenger in the market should decide its objective, either subdue the competitor or reduce its share.
An aggressive company may choose to attack the market leader, weak financial base companies of its size and small and regional companies that are not performing well due to under-financing. Figure 8.6 exhibit the frontal attack and bypass strategies as the major defense strategies. The attack strategy needs to be developed with clear objectives.
The challenger company may pursue the following strategies for attacks:
i. Frontal or head-on attack
ii. Flanking attack
iii. Encirclement attack
iv. Bypass attack.
The challenger company should understand the strengths and weaknesses of the company to be attacked and the action areas should be the price, value added distribution, advertisement and point of purchase promotion, packaging, personal selling and the like. The flank attack may be directed by geographical and by segmental dimensions. The under-performing areas of the opponent may be sighted and penetrated to kill his brand in the region.
The segmental strategy of flanking attack is to identify the need spread of customers and serve the areas which are under served and isolated. The gaps in supply may be filled and level of satisfaction may be raised in those segments. In some cases it may be essential for the challenger company to discover the latent needs of the customer and attempt to satisfy them in order to be the leader in the segment.
The market challenger strategies are exhibited in Figure 8.6. The encirclement attack on the defending companies in the region may be aimed to encroach over some of the market segment through the comprehensive promotional schemes.
It is necessary for the aggressor to offer all that the defender is offering and sometimes more to satisfy the customers and channels in the region. The bypass attack is the most indirect of all market assault strategies. The company following this strategy may consider for diversification of products and services, new geographical markets and new technologies for process and product improvement.
The company which would like to choose the market follower strategy can come along the market leader and copy or improve the products for launching. The follower company may not overtake the leader but can achieve significant profits as it would be saving the expenses on R&D and innovation process. It has been observed in the competitive market that the runner-up companies feel more safe economically to be the follower of the leader than posing a challenge to the same.
The followers generally attempt to lower the prices and improve upon the customer services to draw the customers of the market leader. A market follower should acquaint himself with the strategies to hold the existing customers and win significant share of the new customers and bring distinctive advantages to the target segments.
The followers need to play in the market looking for safe positions as there always remains a threat from the challenger to call an attack on them. The market follower company should always keep its cost of production low and product quality and services high. Such companies should try to scan for new opportunities and enter the new segment whenever possible.
The followers should be active in making appropriate decisions and continuously define their growth path which does not provoke retaliation among the competitors. Table 8.3 exhibits the broad strategies for following the market leader successfully. The cloning strategy of the follower company emulates the leader’s products, logistics, promotional schemes and other important functional strategies.
It lives parasitically on the market leader’s built-in network and investments. The cloner company also attempts to knockoff the products and services of the market leader. Another category of Follower Company is imitator which attempts to copy some things from the leader but try to maintain product differentiation in terms of packaging, promotional schemes, pricing, etc.
Adapter companies may take the goods and services of the leader and adapt them. Such companies also improve the goods and services of the market leader. The adapter company avoids the segment confrontation with the market leader and sells the goods and service outside the vicinity of the market area of the leader.
What are the Most Popular and Effective Types of Marketing Strategies?
At the heart of any business strategy is a marketing strategy.
Businesses exist to deliver products that satisfy customers.
Marketing strategy is defined by David Aaker as a process that can allow an organization to concentrate its resources on the optimal opportunities with the goals of increasing sales and achieving a sustainable competitive advantage. Marketing strategy includes all basic and long-term activities in the field of marketing that deal with the analysis of the strategic initial situation of a company and the formulation, evaluation and selection of market-oriented strategies and therefore contribute to the goals of the company and its marketing objectives.
Marketing strategy outlines the manner in which the marketing mix is used to attract and satisfying the target market(s) and accomplish an organisation’s objectives.
Marketing strategy defines the broad principle by which the business unit expects to achieve its marketing objectives in a target market. It consists of basic decisions on total marketing expenditure, marketing mix and marketing allocation.
Marketing strategy describes how a business meets the requirements of its market.
The marketing strategy must enable a business to deliver its objectives. Markets are made up of customers with wants and needs. Market planners must provide products and services that are better than those which competitors offer. The organisation with the most effective marketing strategy should become the market leader.
Creating a Marketing Strategy:
To create a marketing strategy you must first find out about your environment through market research. Investigation into the 3G market in Japan first indicated that the ‘killer application’ would be video messaging. This has not proved to be the case. For example, Japanese consumers have been far more interested in music downloads. Market research by 3 showed that consumers are interested in the extensive range of 3G phone applications.
Marketing strategy covers all elements of the procedure that an organization uses to satisfy the market, such as research, promotion and advertising. The marketing strategy must enable a business to deliver its objectives.
Hutchison Whampoa’s objective is to be the market leader in providing 3G wireless communications. All aspects of 3’s market plan are tailored to achieving this. For example, the company’s advertising helps customers appreciate the benefits of 3G services and content.
Marketing is a strategy used by companies to communicate with the consumer and make him knowledgeable about the various features of their products and services. It is an essential part of attracting the target buyers to a particular product, and companies use various innovative or tried-and-tested techniques to stay ahead of their competitors and make their place in the market.
Here are some of the most popular and effective types of marketing strategies often employed:
1. Affinity Marketing – Also known as Partnership Marketing, this technique links complementary brands, thereby creating strategic partnerships that benefit both companies. While one adds value to existing customers by generating more income, the other builds new customer relationships.
2. Alliance Marketing – Here two or more entities come together to pool in their resources to promote and sell a product or service, which will not only benefit their stakeholders, but also have a greater impact on the market.
3. Ambush Marketing – This strategy is used by advertisers to capitalize on and associated themselves with a specific event without the payment of any sponsorship fee, thereby bringing down the value of sponsorship. It has sub-categories like direct or predatory ambushing or indirect ambushing by association, to name a few.
4. Call to Action (CTA) Marketing – CTA is a part of inbound marketing used on websites in the form of a banner, text or graphic, where it is meant to prompt a person to click it and move into the conversion funnel, that is, from searching to navigating an online store to converting to a sale.
5. Close Range Marketing (CRM – Also known as Proximity Marketing, CRM uses Bluetooth technology or Wi-Fi to promote their products and services to their customers at close proximity.
6. Cloud Marketing – This refers to the type of marketing that takes place on the internet, where all the marketing resources and assets are transferred online so that the respective parties can develop, modify, utilise and share them.
7. Community Marketing – This technique caters to the needs and requirements of the existing customers, as opposed to using resources to gather new consumers. This promotes loyalty and product satisfaction and also gives rise to word of mouth marketing among the community.
8. Content Marketing – In this case, content is created and published on various platforms to give information about a certain product or service to potential customers and to influence them, without making a direct sales pitch.
9. Cross-Media Marketing – As the name suggests, multiple channels like emails, letters, web pages etc. are used to give information about products and services to customers in the form of cross promotion.
10. Database Marketing – This utilizes and information from database of customers or potential consumers to create customised communication strategies through any media in order to promote products and services.
11. Digital Marketing – This strategy uses various digital devices like smartphones, computers, tablets or digital billboards to inform customers and business partners about its products. Internet Marketing is a key element in Digital Marketing.
12. Direct Marketing – This is a wide term which refers to the technique where organizations communicate directly with the consumer through mail, email, texts, fliers and various promotional materials.
13. Diversity Marketing – The aim of this strategy is to take into account the different diversities in a culture in terms of beliefs, expectations, tastes and needs and then create a customised marketing plan to target those consumers effectively.
14. Evangelism Marketing – It is similar to word-of-mouth marketing, where a company develops customers who become voluntary advocates of a product and who promote its features and benefits on behalf of the company’.
15. Freebie Marketing – Here a particular item is sold at low rates, or is given away free, to boost the sales of another complimentary item or service.
16. Free Sample Marketing – Unlike Freebie Marketing, this is not dependent on complimentary marketing, but rather consists of giving away a free sample of the product to influence the consumer to make the purchase.
17. Guerrilla Marketing – Unconventional and inexpensive techniques with imagination, big crowds and a surprise element are used for marketing something, a popular example being flash mobs.
By keeping in mind the distinctive features of the product, the demographics of the target consumer and their spending power, and the current strategies of existing companies, an effective marketing strategy may be successfully created.
4 Types of Marketing Strategies: Leader, Challenger, Follower and Nicher
Marketing strategies may differ depending on the unique situation of the individual business. However there are a number of ways of categorizing some generic strategies.
A brief description of the most common categorizing schemes is presented below:
Strategies based on market dominance – In this scheme, firms are classified based on their market share or dominance of an industry.
Typically there are four types of market dominance strategies:
According to Shaw Eric (2012) – Marketing Strategy, From the Origin of the Concept to the Development of a Conceptual Framework. Journal of Historical Research in Marketing, there is a framework for marketing strategies.
1. Market introduction strategies- At introduction, the marketing strategist has two principle strategies to choose from- penetration or niche.
2. Market growth strategies – In the early growth stage, the marketing manager may choose from two additional strategic alternatives, segment expansion (Smith, Ansoff) or brand expansion.
3. Market maturity strategies – In maturity, sales growth slows, stabilizes and starts to decline. In early maturity, it is common to employ a maintenance strategy (BCG), where the firm maintains or holds a stable marketing mix.
4. Market Decline Strategies- At some point the decline in sales approaches and then begins to exceed costs. And not just accounting costs, there are hidden costs as well; as Kotler observed, ‘No financial accounting can adequately convey all the hidden costs.’ At some point, with declining sales and rising costs, a harvesting strategy becomes unprofitable and a divesting strategy necessary”.
Early marketing strategy concepts were:
i. Borden’s “Marketing Mix”:
“In his classic Harvard Business Review (HBR) article of the marketing mix, Borden (1964) credits James Culliton in 1948 with describing the marketing executive as a ‘decider’ and a ‘mixer of ingredients.’ This led Borden, in the early 1950s, to the insight that what this mixer of ingredients was deciding upon was a “marketing mix”.
ii. Smith’s “Differentiation and Segmentation Strategies”:
“In product differentiation, according to Smith, a firm tries ‘bending the will of demand to the will of supply.’ That is, distinguishing or differentiating some aspect(s) of its marketing mix from those of competitors, in a mass market or large segment, where customer preferences are relatively homogeneous, in an attempt to shift its aggregate demand curve to the left (greater quantity sold for a given price) and make it more inelastic (less amenable to substitutes).
With segmentation a firm recognizes that it faces multiple demand curves, because customer preferences are heterogeneous, and focuses on serving one or more specific target segments within the overall market”.
iii. Dean’s “Skimming and Penetration Strategies”:
“With skimming, a firm introduces a product with a high price and after milking the least price sensitive segment, gradually reduces price, in a stepwise fashion, tapping effective demand at each price level. With penetration pricing a firm continues its initial low price from introduction to rapidly capture sales and market share, but with lower profit margins than skimming”.
iv. Forrester’s “Product Life Cycle (PLC)”:
“The PLC does not offer marketing strategies, per se; rather it provides an overarching framework from which to choose among various strategic alternatives”.
v. Andrews’ “SWOT Analysis”:
“Although widely used in marketing strategy, SWOT (also known as TOWS) Analysis originated in corporate strategy. The SWOT concept, if not the acronym, is the work of Kenneth R. Andrews who is credited with writing the text portion of the classic, Business Policy, Text and Cases”.
vi. Ansoffs “Growth Strategies”:
“The most well-known, and least often attributed, aspect of Igor Ansoffs Growth Strategies in the marketing literature is the term ‘product-market.’ The product-market concept results from Ansoff juxtaposing new and existing products with new and existing markets in a two by two matrix”.
vii. Porter’s “Generic Strategies”:
Porter generic strategies – strategy on the dimensions of strategic scope and strategic strength. Strategic scope refers to the market penetration while strategic strength refers to the firm’s sustainable competitive advantage. The generic strategy framework (porter 1984) comprises two alternatives each with two alternative scopes.
These are Differentiation and low-cost leadership each with a dimension of Focus-broad or narrow- (a) Product differentiation (b) Cost leadership (c) Market segmentation (d) Innovation strategies – This deals with the firm’s rate of the new product development and business model innovation. It asks whether the company is on the cutting edge of technology and business innovation. There are four types- (a) Pioneers (b) Close followers (c) Late followers (d) Growth strategies – In this scheme we ask the question, “How should the firm grow?”
There are a number of different ways of answering that question, but the most common gives four answers:
1. Horizontal integration
2. Vertical integration
These ways of growth are termed as organic growth. Horizontal growth is whereby a firm grows towards acquiring other businesses that are in the same line of business for example a clothing retail outlet acquiring a food outlet. The two are in the retail establishments and their integration lead to expansion. Vertical integration can be forward or backward.
Forward integration is whereby a firm grows towards its customers for example a food manufacturing firm acquiring a food outlet. Backward integration is whereby a firm grows towards its source of supply for example a food outlet acquiring a food manufacturing outlet. A more detailed scheme uses the categories proposed by Miles, Raymond (2003)-
Marketing Warfare Strategies – This scheme draws parallels between marketing strategies and military strategies.
viii. BCG’s “Growth-Share Portfolio Matrix”:
Based on his work with experience curves (that also provides the rationale for Porter’s low cost leadership strategy), the growth-share matrix was originally created by Bruce D. Henderson, CEO of the Boston Consulting Group (BCG) in 1968 (according to BCG history). Throughout the 1970s, Henderson expanded upon the concept in a series of short (one to three page) articles in the BCG newsletter titled Perspectives. Tremendously popular among large multi-product firms, the BCG portfolio matrix was popularized in the marketing literature by Day (1977).
Types of Marketing Strategy: Push and Pull Strategy
Marketing strategy helps to decide what kind of distribution channels a company ought to have. A company fighting for market share has to ensure that the goods are available at every possible retail outlet in an area. This is called intensive distribution. Small manufacturers find that they are able to fight large companies by simply making their goods available intensively to small retailers, while large companies are not able to do so as they rely on big distributors located in towns and urban areas.
Higher margins ensure that the retailers will push products of small companies, much to the disadvantage of large companies, who may have spent large sums of money over advertising and promotion. This is especially true for FMCG companies.
Intensive distribution implies the selling, of small lots to a very large number of retailers. Every nook and cranny of the market has to be covered. Since small retailers lack the ability to stock large quantities, companies doing intensive distribution must have the ability of supplying small lots on a frequent basis.
This calls for employing salesmen who go around supplying small lots to small retailers, collecting payments from them, and motivating them. The discount structure is also made to cater to the small retailer.
On the other hand, large companies may decide that the goods should be available all across the country through large showrooms or exclusive outlets. They do not spend their resources in catering to the small retailer but maintain stores in major towns and cities.
The assumption is that people will pick up their requirements from these stores, even if it means travelling some distance to get them. Strong brands follow this strategy, as also manufacturers of high-value goods. Such a strategy is known as extensive distribution.
In a nutshell, any company must ensure that:
i. Distribution channels must meet the company’s objectives.
ii. Channels are created to match with the brand perception created by advertising.
iii. It is aware of existing market trends and changes distribution strategies accordingly.
iv. The product receives due display and attention by all channel partners.
v. Consumers either find it easy to buy products or are willing to bear the small inconveniences in acquiring the company’s products.
To achieve the above, the company has to decide whether it wants to follow a push or pull strategy, and have the logistics to go with that.
i. Push Strategy:
Most FMCG companies follow a push strategy. The company has a sales force that visits wholesalers regularly and ensures that adequate stocks are maintained, and these wholesalers, in turn, use their sales force to ensure that retailers keep their stocks. This is called a push strategy.
ii. Pull Strategy:
Manufacturers of branded products use a pull strategy, relying on creating a consumer demand through advertising and promotion. In this strategy, the advertising has to be very persuasive, so that customers ask retailers for the product—the retailers, in turn, ensure that the company supplies it to them.
Pull strategy can be used by strong brands. However, even strong brands need to be available at the right place at the right time, otherwise the customer may make do with an alternative. So a pull strategy has to be supplemented with the logistics that can fully support the needs created by the pull.
Types of Marketing Strategy (With Examples)
Marketing is the most complex and challenging function performed by business firm. Marketing thinking starts well before production commences and ends only after rendering after-sale not only satisfaction but delight.
Prof. Harry L.Hanson says “Marketing is the process of discovering and translating consumer needs and wants into product and service specifications, creating demand for these products and services and then, in turn expanding this demand.”
Prof. Paul Mazur looks marketing as the creation and delivery of standard of living to the society. According to A.M.A. “marketing is the performance of business activities that direct the flow of goods and services from the producer to the customer.”
The Marketing Guru Prof. Philip Kotler says “Marketing is the analysis, planning, implementation, and control of programmes designed to bring desired exchanges with target audiences for the purpose of personal and mutual gain. It relies heavily on the adoption and coordination of product, price, promotion and place for achieving response.”
In India, marketing is a critical success area especially with the opening up of Indian economy and structural change in population. India is a highly competitive economy making a head way to reach new heights among the nations of the world. Marketing firms have sharpened their techniques and tools to not only to satisfy the customers but retaining the satisfied customers.
A company cannot commit the mistake of losing a customer. Customer is a milking cow or hen laying golden eggs. It pays to retain a customer because creating a new customer is almost 8 times costlier than retaining; a satisfied customer is the ambassador of the firm who creates other customer through word of mouth.
Speaking in terms of financial viability, today’s companies are aiming at maximum profit on time and investment (ROTI) than maximising return on investment (ROI) which was a conventional practice.
The marketing policies and strategies are bifurcated into three major areas on strategical decisions.
1. Selection of target market segment
2. Deciding on Appropriate Marketing Mix
3. Positioning Strategies
People have different needs and values and, therefore, the marketer cannot address himself to the total population while designing a market mix for a given product or service. Hence, every marketer knows that there is no such thing as a single market for any given product or service.
All markets are made up of segments and these segments are made up of sub- segments. This all happens because, consumer is unique in one respect that he is not like other person, but he is like others in some respects. Though market is aggregate of all existing and potential buyers for a product, these markets vary widely in their nature and character making them totally heterogeneous.
Hence, delimiting the given market for product is a must for effective tapping. This delimiting means dividing the total market into smaller blocks or units with more or less similar features. Such an attempt is market segmentation. Market segment is a group of buyers with homogeneous purchasing features.
One or more of these segments are then selected as a target market and a strategy is developed to reach the selected group. Such a strategy of the organisations is based on three market analysis approaches namely, product differentiation, market segmentation and market positioning.
Thus, market segment is a meaningful buyer group having similar wants. Therefore, segmentation is a consumer oriented marketing strategy. Market segment is the portion of the market defined on the basis of the shared characteristics of people it covers.
Market segmentation is a strategy that subdivides the target market into sub-groups of consumers with definable, distinct and homogeneous features with a view to develop and follow a distinct and differentiated marketing programs for each subgroup in order to enhance satisfaction to customers and profit to the marketer.
This segmentation process is two-fold namely- i. Identifying the viable segments or pockets of consumers and ii. Targeting specially designed programs towards them. There are three reasons as to why firms go in for market segmentation.
(i) Some markets are heterogeneous
(ii) Market segments respond differently to different promotional appeals and
(iii) Market segmentation is consistent with marketing concept.
Let us take the case of Hindustan Lever Limited which produces four types of shampoo as a part of product-line of health and beauty aids. The four types of shampoo meet two specific purposes.
These four types of shampoo are:
i. Sunsilk ‘Tonic’ for dry hair.
ii. Sunsilk ‘Lemon’ for greasy hair.
iii. Sunsilk ‘Beauty’ for normal hair.
iv. Sunsilk ‘Egg-protein’ for undernourished hair.
Each type has again, two variations namely, ‘regular’ and ‘dandruff control’.
From this, it is clear that company has eight segments. That is, the consumers for shampoo are divided into eight segments. This means increased consumer satisfaction and increased profits to the company. In essence, market segmentation is a method meant for maximising market response from limited marketing resources by accepting the differences in the response characteristics of the market in question.
“Product differentiation” and “market segmentation” are not one and the same, though they have crude resemblance. “Product differentiation” is an attempt to bend the demand to the will of supply. The market demand is adjusted to the supply conditions. That is, the manufacturers can exercise control over demand, prices and distribution through this tool.
Here, the organisation attempts to single out the market offering from the array of competitive goods in the market. If the firm succeeds in convincing that a given product is ‘different’ or better than the one available in the market, the consumers will be more inclined to buy the firm’s product than its competitors.
In product differentiation, colours, sizes, shapes brand names play vital role. This approach became very popular in 1920’s. However, its sway is so powerful that it is practiced even today as one of the ways to claim a piece of market.
As opposed to this, the “market segmentation” is bending the will of supply to the will of demand. It emphasizes the demand side. It is a question of adjusting product and market efforts to the needs of consumers.
That is, the marketing organisation tailors its offerings to fit carefully defined needs of specific groups of consumers, by dividing the public at large into specific sub markets. Once the market has been clearly identified, it becomes easier for an organisation to make a product to appear different from those of competitors.
Market segmentation appeared in 1950, along with new concept of marketing. It is most widely used approach in having hold over larger share of the market.
The segmentation bases are broadly two types namely ‘personal’ and ‘product’ or ‘consumer characteristics’ and ‘consumer response’.
“Personal” or “consumer characteristic” approach uses geographic, demographic and psycho graphic bases. On the other hand, “product” or “consumer response” approach uses benefits, usage, loyalty and occasion as the bases.
Although the present day theory of market segmentation seems clear, its practical application is not that simple. A successful segmentation involves a number of steps. The first is to define precisely the basis of segmentations that works. This step makes consumer motivational research mandatory.
A great deal of knowledge about the market is a must. The second step is the application of segmentation theory. It is to do with collection and analysis of data concerning each market segment. The third step is to apply the criteria of a good segmentation namely, its identification and measurement-its importance-economic accessibility-divergence in response to marketing effort and stability.
The fourth and last step is to develop action program to deliver the benefits that consumers want. This involves the development of marketing programs for both short and long run.
That way, every market can be segmented to some extent as the buyers are never alike. However, a firm may or may not wish to shape its marketing policies around these differences. To a marketer, in fact, three alternative market targeting strategies are open.
That is, in planning its marketing mix for a product or service, a company can choose either to confront the differences among consumers or to ignore them. If it ignores such differences, it is said to follow undifferentiated marketing in which a single marketing mix is used for the entire market.
On the other hand, if it segments the market on the basis of consumer differences, it can choose to practice either differentiated marketing in which a different market mix is used for each segment or concentrated marketing in which all or most of the marketing efforts are focused on one or a few segments.
This strategy puts forth one product and tries to draw in all buyers with one marketing program. The firm chooses not to recognise the different demand curves that make up the market. Instead, it treats market as an aggregate focusing on what is common in the needs of people rather than on what is different.
It is an attempt to design a product and market programme that appears to the broadest number of buyers. It relies heavily on product differentiation to protect itself from competition, mass channels, mass advertising and universal themes. It aims to endow the product with a superior image in people’s mind whether or not this is based on any real difference.
The best examples can be those of Coca, Cola Pepsi Cola and cigarettes. For many years, for instance Coca Cola meant only one thing to consumers. It was a patented soft drink available in single flavour and bottle size and shape. Its theme was “Things go better with Coca Cola.”
Similar was the case with Pepsi Cola. When the competition increased this competition followed different themes namely-Coca Cola to start with “Jo bhi ho jai Coca Cola enjoy” “Coca cola-yane thanda” or “Thanda Yane Coca Cola.” The arch rival namely Pepsi Cola had the theme “Dil Mange More.”
The latest is “Pepsi Ke Liye Hum Besharam.” In case of cigarettes, regardless of brands the size has been 2.75 inches and wrapped in a white paper and packed in a same soft container with aluminium foil. The ad theme has been “the pause that refreshes” or “made for each other.”
Undifferentiated marketing strategy is defended on the grounds of cost economies. A narrow product line, minimizes production- inventory- administrative-selling and distribution costs. Large- scale production makes available quantity discounts research and development costs lowered, providing the largest profit in short run.
In spite of these plus points, an increasing number of marketers have expressed strong doubts about the optionality of this strategy. The firm practicing undifferentiated marketing, typically develops a product market programme aimed at meeting requirements of the entire market.
When several firms in the industry do this, the result is hyper competition for the largest segment and under satisfaction of the buyers of smaller areas. This strategy is more vulnerable to competition than the other targeting strategies. Sometimes, appealing to the largest market results in what is known as “majority fallacy.”
Such an approach may provide the largest profits in the short-run; however, in the long-run, the market opportunities for the smaller segments do make undifferentiated target marketing quite vulnerable. The finest example of this kind is that of American car manufacturers.
American manufactures product only large cars while foreign firms from Germany and Japan capitalised on this smaller segment needing small cars. The successful company is one that cares for buyers of both small and large cars.
Differentiated marketing strategy is one under which a firm decides to operate in several or all segments of the market but designs separate products and marketing programs for each. That is, differentiated strategy involves a different marketing mix for each segment.
By tailoring their market offerings to many different segments, marketers hope to achieve additional sales and increased consumer identification with a brand or company name. Such firms work by long-standing rule of thumb. If a product is successful within a certain market segment, they move over to another product altogether too newly created segment leaving aside that that successful product.
The best example is that of General Motors of America that tries to produce car for every “purse-purpose and personality”. Similarly, the cereal companies carefully differentiate among the health conscious adults working women, fussy teenagers and sweet-toothed children while planning new cereals.
Each group has a cereal carefully designed especially for its needs, though the company name is always in the fore ground in ads and packaging. So is the case with soaps and shampoos.
In India Hindustan Lever Ltd., Godrej Limited, Proctor and Gamble India Ltd. and others have used this effectively. Even known tea companies Brooke Bond and Liptons took full advantage when they rested the roost.
By offering product and marketing variations, the firm hopes to attain higher sales and a deeper position within each market segment. It hopes that a deep position in several segments will strengthen the customers’ overall identification of the company with the wide range of product field.
It hopes for greater loyalty and repeat sales because, firm’s offerings are bent to the desires of customers than otherwise. Good many firms have moved out of undifferentiated marketing strategy to differentiated marketing strategy. The result is multiple product offerings and channels to reach out customers.
Thus, today Coca Cola is sold in different bottle sizes as well as in cans. So is the case with Pepsi Cola. Cigarettes are manufactured in a variety of lengths and filler-tips. Chevrolet is no longer a single style low priced car but a set of cars matched distinctly to different market segments varying in cost, size and features.
This greater willingness to customaries their products results in net increased total sales. At the same time, marketing and production costs increase. Thus, product modification costs, production cost, administration costs, inventory costs, promotion costs multiply. In view of this double sided effect, nothing can be said about its optimality. It is definitely sales oriented.
Both differentiated and undifferentiated marketing alternatives of segmentation strategies imply that the firm goes in for the whole market. However, good many firms see a third alternative namely, concentrated marketing strategy. This alternative becomes a must when the firm’s resources are limited.
Instead of going after a small share of a large market, the firm goes after a large share of one or two or a few sub-markets. Rather than pursuing the entire market or more of its segments—as is the case with the earlier two strategies—the concentrated marketing focuses on only one or a few segments. Put in another way, instead of spreading itself thin in many parts of market, it concentrates its forces to gain good market position in a few areas.
The world class examples are the Rolls Royce automobile company of England has appealed only to the wealthiest highest socially positioned automobile buyers. On the other hand, Volkswagen Company of Germany has not attempted to trade outside the low price range.
This practice is more popular with publishers of text and reference books. Some specialise at primary level, some at high school level and others at college level. Further, specialisation is also possible. For instance, Richard D. Irwin Incorporation has specialised in economics and business titles while John Wieley and Sons in mathematics and statistics.
The major advantage of concentrated marketing strategy is that the organisation can become a specialist in the needs of its selected market segment. This firm achieves a strong market position in a particular segment or segments it serves, owing to its greater and deeper knowledge of the segment’s needs and special reputation it acquires.
Further, it enjoys many operating economics because of specialisation in production, distribution and promotion. This enables savings in costs through large runs of a small number of products, at the same time, it has positive impact on advertising and distribution.
The firm can earn high rates of return on its investments provided the segment chosen is right. It is worth noting about the dangers of concentrated marketing. It involves tagging the company’s future growth to one segment of market and it means obvious risks.
Putting all eggs in a single basket restricts the growth opportunities and makes vulnerable particularly to a successful competitive attack or if there is a sudden dipping down and thus reducing its market share. Further, a firm that concentrates too much forgets or neglects other segments that are otherwise profitable.
The next immediate question is that of selecting an ideal segmentation strategy. While selecting a strategy, the following points deserve special attention which are suggested by Professor R. William Kotraba in his article “The Selection Chart” in Journal of Marketing of America.
These points are:
i. The Company Resources:
The financial resources at the command of the company dictate the choice of such strategy. Where the firm has limited financial resources, it is forced to go in for concentrated marketing as the realistic choice. On the other hand, implicitly of finance permits the firm to go in for either differentiated or undifferentiated marketing. It is the extent to which the company enjoys the financial leeway that dictates the choice.
ii. The Product Homogeneity:
Most of the consumers do not perceive differences in such basic commodities as salt, grapes, steel, gasoline and the like. Undifferentiated marketing strategy for such products is more natural than differentiated or concentrated strategies. On the other hand, products that are capable of great variations like sound gadgets, camera, and automobiles are more suited to concentrated or differentiated marketing strategies.
iii. The Product Life Cycle Stage:
When a firm introduces a new product, it releases one or two versions. The firm’s interest is to develop primary demand and, therefore, undifferentiated marketing seems more suitable strategy; or it may follow concentrated efforts to meet the requirements of a particular segment.
As the product moves through its life-cycle towards saturation stage, the firm starts to search harder for new and untapped needs in order to maintain or increase the sales level. Thus, through the mature stage of the product life cycle, the firm tends to pursue a strategy of differentiated marketing.
iv. The Market Homogeneity:
Market homogeneity refers to the degree to which the consumers are alike in their needs, preferences, and other characteristics. In such homogeneous markets, undifferentiated marketing strategy works well. On the other hand, heterogeneous markets warrant either concentrated or differentiated marketing strategy.
v. The Competitor’s Marketing Strategies:
This refers to what the firm’s competitors are doing. When competitors are practicing active segmentation, it is really hard for a firm to compete through undifferentiated marketing strategy. If so, it loses the battle. On the other hand, when competitors are practicing the undifferentiated marketing strategy, a firm often gains by practicing active segmentation.
vi. The Policy of the Government:
Every alert marketer gives weightage to the impact of governmental policy on his line or lines of activities. Government as the custodian of society may frame certain policies to protect and upholds the legitimate interests of the masses.
For instance, it is natural that the government goes in for public distribution system in cases of essential commodities. If the products or commodities controlled by the government, the marketer has no say than to accept the guidelines. This implies that he is to change, adopt his strategy much against his will and plan.
In a nut shell, it is clear that no particular strategy is superior to others always. That is shrewd marketer cannot rely on a particular strategy. As marketing is a dynamic entity, it is the changing conditions that warrant adopting a particular strategy. It is the scientific study of the set of changing circumstances that gives the way-out as to which is the best strategy under given circumstances.
The key to understand integrated marketing today, is to understand the implications of the word ‘strategy’. A ‘strategy’ is what you are going to’ do; a marketing strategy is the link between a product and the market; it provides the desired direction for allocating the marketing effort.
It is translated into an action plan through the tools of marketing management. These tools together are called as ‘marketing mix’. Individually, they are-product-price-promotion and place. It was professor N.H. Borden of Harvard Business School of America who introduced the concept of ‘marketing mix’.
In his words, it refers to two things- (i) a list of important elements or ingredients that make up this marketing program and (ii) the list of forces having bearing on the marketing operations.
According to professor Keeley and Lazor- “marketing mix is composed of a large battery of devices which might be employed to induce consumers to buy a particular product.” To borrow the words of Professor Philip Kotler, “the firm’s task is to find the best solution for its marketing decision variables, the settings constitute its marketing mix.”
According to Mr. Jerome McCarthy, an American expert, “marketing mix is the pack of four sets of variables namely, product variables, price variables, promotion variables and place variables.”
In other words, marketing mix is the blend or the compound of all the marketing efforts hovering round the four ingredients namely product, price, promotion and place. These ingredients are interrelated and all revolve round potential customer satisfaction as the focal point. It is the complex of mixes relating to inputs and resources utilised in marketing programme to attain the business objectives such as profit return on capital employed-sales volume-market share and so on.
A standard mix evolves from the creative blending of the ingredients so that product is offered to the market under the conditions most favourable to the attainment of marketing objectives. Marketing mix is a lucrative formula of modern marketing operations.
A marketing mix so evolved is not stagnant but changing in tunes and tones of changing internal and external forces. On one side, changes in respect of consumers, competition, trade and environment keep the marketing mix dynamic; on the other side, the elements within the marketing mix are constantly inter changing themselves; they are independent and mutually, supporting one another, thus reinforcing the dynamic nature of marketing mix.
Further, the dynamic nature of marketing mix is self- evident from the fact that each marketing firm has its unique marketing mix. Such inter firm deviation arises due to the differences in product lines, markets, the extent and nature of competition and the philosophy so associated.
The marketing mix variables constitute controllable variables. As against these internal controllable variables, we have behavioural and environmental variables which are uncontrollable. The behavioural variables are customer variables, competitive variables and trade variables.
‘Customer’ variables refer to the number of customers, their purchasing power, buying behaviour, personality traits and attitudes, the life-styles and needs. The ‘competitive’ variables refer to the structure of the industry, number, size and capacity of competitors, range of goods provided by competitors, extent of competition and substitute products available.
The ‘trade’ variables relate to the structure of trade, types of intermediaries, then number and the strength, trade policies, motivations and attitudes of intermediaries. In addition to these, we have environmental variables related governmental rules and regulations on products, prices, distribution controls on trade practices, economic conditions, level of technology, culture and traditions, law and politics and above all the public and the press.
The marketing mix of the business house emerges from within depending on these mix variables. In that sense, these mix variables are controllable, as they are internal to the enterprise where the marketing manager is at ease to choose, alter and control or regulate these variables.
On the contrary, behavioural and environmental variables the external and, hence, uncontrollable and therefore, the marketing manager is regulated by these variables instead of regulating them. It clearly demonstrates that the marketing manager is to adjust continually the marketing mix variables to the demand of un-controllable variables.
Making use of all these four mixes of the marketing mix is a tact, a knack a skillful work. Individually these four ingredients are important as they are co-equal, interdependent and essential. The point lies in their mix or blend-the unique way they are matched. It is a programme, a plan, a strategy where each component mix is to be so coordinated and integrated that it is acceptable to the forces of the environment.
The behavioural and environmental variables are continually charging warranting matching change in marketing mix. Changes in the marketing mix become necessary not only to counteract the maneuvers of the competitors, but also for catering to the needs of different customer segments.
Since, the market segments are quite diverse, any number of permutations and combinations of the marketing mix and mix elements are possible in the changing circumstances.
Market segmentation strategy and market positioning strategy are the facets of a single coin of segmentation strategy that identifies the customers to be targeted. The positioning strategy is concerned with selecting the marketing mix that is most appropriate to each target segment.
A given market for a company largely determines its competitors. The company must research the competitor’s positions and decides on its positioning and repositioning. That is why, in the process of product planning, it becomes an important task to ‘position’ the product to the right segment.
It is because, all products do not appear to all income groups, age-groups, resident groups, time phases alike. It is but natural that what is one’s tea is another’s poison. However, once the product is designed to meet the consumer needs, the exact position or space where it is to be positioned is to be determined.
Product positioning is a creative exercise with every existing product. Product positioning is not what you do to a product; it is what you do to the mind of a prospect. That is, it is the act of positioning the product in the mind of prospect.
As put by Prof. Philip Kotler, “positioning is the act of designing the company’s image and value offer so that the segment’s customer’s understand and appreciate what the company stands for in relation to its competitors.”
In the words of Mr. James L.Hesket “product positioning is a process of identifying the needs of market segments, product strength and weaknesses and the extent to which competing products are perceived to meet the consumer needs”.
It is an attempt to project different or refined or revised product image in the market than one that has been prevailing. It is the delicate task of relating a product to the market or a market segment. For instance, a two wheeler manufacturer might engineer the product to be safer, more accommodative or more fuel efficient than those of competitors.
A company which is to position or reposition its products, has atleast four options which can be used to its individual advantage.
The company might have an advertising claim earlier; now it can change it or it can be very much different from those made by computing firms.
Thus “Glindia’s (earlier glaxo) product Complain might have been introduced as a complete planned food”. Now it can be introduced as a “triple action food drink freshness in the morning—energy during the day and sound sleep during the night.” It can be an effective positioning option as it is different from earlier one and then those of competitors.
The company can pin-point the unique product features not highlighted by the company or the competing firms so far. The stag brand sun and rain umbrellas of Ebraham Kurrim and Sons of Bombay are famous in India and other neighbouring countries.
The company comes out with ‘folding’ umbrellas that take space of 6 x 2 inches almost like a pocket torch. Again, head grip umbrellas are introduced so that the users can better use their free hands.
The company may promote a product in the market segment which was untouched so far by it, its competitors. For example, Saffola cooking medium is the finest example of this kind which is designed for upper middle class and rich class for those people who high cholesterol in the blood and that ‘Saffola’ is free from ‘saturated’ fats that reduces such high level cholesterol.
It is possible to equalise the product price and quality by competitors through homogeneity. Such an attempt leads to oligopolistic type competition. Therefore, a price cut is an effort to increase sales in one followed by the competitors. However, new package design is the strongest shield against such an attempt.
Further, package of a product can be used in effort to extend the product life-cycle. Updating may help to give the pack a. more contemporary image. New package features are, perhaps, more important than product innovation itself, as it is an integral part of marketing strategy.
Thus, shampoo is now available in sachet—a small polythene packet. Now, costly coffee, face powder and so on are made available. This increased sales and package costs decreased thus resulting in more profits.
The steps in product positioning are three as advocated by marketing Guru Prof. Philip Kotler. These are- a. Identifying potential competitive advantages, b. Choosing the right competitive advantage, c. Signalling the competitive advantage.
Different Types of Marketing Strategies
All effective organizations have purpose and objectives to remain in business and they all aim to achieve these objectives and goals in a most effective manner by directing their resources and strengths. However, these resources and strengths must be channelized systematically and organized to devise an action plan called strategy.
Again, all effective and efficient organization not only have strategies to keep their market share, profitability and sales intact but also develop a strategy to grow in sales, profits and market share and develop new products and ways and means to improve customer satisfaction. This later action plan is called growth strategy.
The growth strategies could be decided by mapping opportunities available. These growth opportunities pertaining to record maximum gains from current opportunities available, are called intensive growth strategies.
Secondly, these growth opportunities could be achieved by using opportunities available through integration with other factors of the marketing system. This is called integrative growth opportunities. The third alternative strategy could be opportunities completely outside the present marketing system. This is called diversification growth strategy.
1. Intensive Growth Strategy:
Intensive growth strategy is useful for companies which can explore the opportunities available for their product in the existing market and exploit these opportunities.
The four major types of intensive growth opportunities possible are:
i. Market Penetration
ii. Market Development
iii. Product Development
iv. Product-market Development.
Market/Product Expansion Choices:
A frequently used approach to understanding growth is to analyse two key dimensions -market development and product development. These dimensions form the basis of the product/market expansion grid proposed by Ansoff (1957). Products and markets are each analysed in terms of their degree of novelty to an organization and growth strategies identified in terms of these two dimensions.
In this way, four possible growth strategies can be identified. These four growth options are associated with differing sets of problems and opportunities for a company. These relate to the resources required to implement a particular strategy, and the level of risk associated with each strategy. It follows, therefore, that what might be a feasible growth strategy for one organization may not hold good for another organisation.
The characteristics of the four strategies are described below:
i. Market Penetration Strategies:
This type of strategy focusses on growth on the existing product range by encouraging higher levels of take-up of a service among the existing target markets. In this way a food manufacturer serving the growing market for organic produce could-all other things being equal- grow naturally, simply by maintaining its current marketing strategy.
If it wanted to accelerate this growth, it could do this firstly by seeking to sell more products to its existing customer and secondly by attracting customers from its direct competitors. If the market was in fact in decline, the company could only grow by attracting customers from its competitors through more aggressive marketing policies and/or cost reduction programmes. This strategy offers the least level of risk to an organization — it is familiar with both its products and its customers.
ii. Market Development Strategies:
This type of strategy builds upon the existing product range which an organization has established, but seeks to find new groups of customers for them. In this way the organic foods manufacturer which had saturated its current market might seek to expand its sales to new geographical regions or overseas markets.
It could also aim its marketing effort at attracting customers from groups beyond its current age/income groups, for example- by targeting children with organically produced snacks. While the company may be familiar with the production side of its growth plans, it faces risks because it may have poor knowledge of different buyer behaviour patterns in the markets which it is attempting to enter, it may face even greater risk in developing a marketing strategy aimed at children, whose needs it has little previous experience of satisfying.
iii. Product Development Strategy:
As an alternative to selling existing products into new markets, a company may choose to develop new products for its existing markets. The organic food company may add new ranges of ready meals, or drinks for example. While the company minimizes the risk associated with the uncertainty of new markets, it faces risks resulting from lack of knowledge about its new products area.
Often a feature of this growth strategy is collaboration with a product specialist or a consultant who helps the organization produce the new products, leaving it free to market it effectively to its customers. Rather than setting up its own facility to produce ready and prepared meals, the organic foods company may leave the specialized task of doing this and undertaking quality controls to a more experienced food manufacturer.
iv. Diversification Strategy:
Here a company expands by developing new products for new markets. Diversification can take a number of forms. The company could stay within the same general product/ market area, but diversify into a new point of the distribution chain-for example- the organic food producer may move into retailing its products exclusively to wholesalers and retailers.
Alternatively, it might diversify into completely unrelated areas aimed at quite different market segments, for example- by offering residential cookery courses. Because the company is moving into both unknown markets and unknown product areas, this form of growth carries the greatest level of risk from a marketing management perspective.
2. Diversification Growth:
This strategy is employed by companies which find less opportunities in the existing market with existing or modified products. Therefore, they explore strategies to add new products through the acquisition of technology and manufacturing facilities. These new products will be marketed in new markets or to a new segment of customers. These days, large size companies are diversifying to new areas to maintain their growth and presence in various markets.
Diversification can be attempted with the following ideas:
i. New process technology for manufacturing superior or quality products.
ii. Fuel-efficient technology.
iii. Safe and reliable products.
iv. Customer-oriented products.
v. Eco-friendly products.
There are three broad types of possible diversification strategies:
a. Concentric Diversification:
This strategy consists of exploring opportunities to add new lines of business which have great semblance with the existing business, though the new business may be for different set of markets, e.g., diversifying into shampoo from existing business of hair oil.
b. Horizontal Diversification:
This strategy consists of companies exploring opportunities to add new products that could be marketed to its existing customer profile, though technologically it is not related to existing business, like companies in hair oil business diversifying into massage oil and personal products. Other examples of such diversification could be cigarette manufacturing companies going for manufacturing gas lighters or match boxes.
c. Conglomerate Diversification:
Consists of exploring opportunities seeking to add new products for new classes of customers as this may present a better viable opportunity and the new business will have no semblance of the existing market in terms of product – example being a cigarette company diversifying into paper and board or a soap and detergent company diversifying to manufacture ceramic tiles or a switchgear manufacturing company diversifying into cement and polyester business lines. These days many companies are diversifying into sunrise industries like electronics, communication, information technology entertainment, and fashion products.
3. Integrative Growth:
This strategy is useful only if the industry has good future growth. In this situation, the company can make use of its growth forecast by moving forward, backward or horizontally within the industry.
The integrative growth possibilities are:
i. Backward Integration:
The company’s products are manufactured with inputs like raw materials, utilities and packaging materials. Backward integration consists of taking control of partial or full control of the supply system. This would help in formulating strategies to control cost of product and level of supplies and this would give better control of the market. Cigarette, liquor and glass bottle manufacturers prefer using this strategy to a large extent.
ii. Forward Integration:
The products are marketed through distribution networks and retail outlets. Forward integration consists of seeking partial or full control of distribution and retail network. This would help in controlling distribution and consumer price and countering competition more effectively. But this strategy will essentially increase infrastructure of the marketing department and subsequent expenses. Thus, additional expenses should give higher sales revenue. Soft drink and fashion fabric companies go for this strategy also.
iii. Horizontal Integration:
This strategy consists of taking control of the competitive structure by controlling through acquisition or management control of some of its competitors. Multinational companies, because of their financial and marketing strength, can fully exploit opportunities through such acquisition management control. In India, Hindustan Lever, a member of Unilever, has acquired tea companies like Lipton Tea and Brook Bond, soap and hair oil company of Tata Oil Mills Co. (TOMCO), and Dollop ice-cream from Cadburys. However, it must be noted that acquisition of companies as a strategy may not be always successful.
4. Company Portfolio Plan and Analysis:
Every organization, at any point of time, consists of many activities, sub-activities, departments divisions, product lines brands etc. and all these constitute portfolio of business. The portfolio of business is also true of non-profit organizations, social organizations, service-oriented and industrial companies. Earlier, organizations used to give equal importance to all business units irrespective of their market share, profitability and sales demand.
However, in all business activities, not all products perform satisfactorily and some products thrive at the expense of few better performing products in the company. However, with increasing pressure on maintaining costs and sustaining profits, the companies have started reassessing their business operations of various divisions and units.
The management of organizations have started viewing their serious role of managing portfolio of business and take strategic decisions to enable businesses to build and grow, maintain status, phase down, phase out and drop altogether. Therefore, the top management’s job is to assess the business portfolios regularly in order to keep the overall health of the business intact in terms of profits, sales and market shares.
The objective of reviewing portfolio of businesses is to keep the company on its track by reducing loss making or poor performance businesses and strengthening the profitable units as well as adding new potentially good business and keeping the overall growth of the company.