Unit 3: Marketing Strategies
STRATEGY AND PLANNING:
Philip Kotler said of planning that it was deciding in the present what to do in the
It involves both the determination of a desired future and the steps necessary to bring
Three levels of planning have been identified:
a) Corporate or visionary planning: Mission and structure for evaluating and
allocating resources to business
b) Business planning: Long-range planning for positioning the company and its
products to best serve its target markets.
c) Functional planning: Marketing planning which is generally annual planning
involving specific goals and plans over one year.
Strategic Planning for Marketing (Adapted from Gilligan & Fifield, 1997)
Strategy & strategic levels:
"Strategy" can be used to describe the means of achieving an objective; or
"Strategy" can be used to describe an approach, stance or long-term plans. So
"strategic planning" means a higher level of planning.
Wilson, Gilligan and Pearson in Strategic Marketing Management, readily admit that
there is no standard definition of "strategy", but highlight three "levels" of strategy:
Corporate strategy – dealing with the allocation of resources throughout the entire
organisation, covering all of the various businesses or divisions
Business strategy – which exists at the individual business or division level and is
concerned with the question of competitive positioning
Functional-level strategy – which is limited to the actions of specific functions within
Strategies are formulated as a response to the various factors in the company's environment
– and these may come from both external and internal sources.
Nature of the competition and the products which are on offer in the marketplace
Political, economic, social and technological pressures
Needs and requirements of the buyers
Changes which are, or are likely to be, taking place in the environment
Size and power of the company
Availability of resources
Current and past practices
Expectations of stakeholders
Position of the firm in the marketplace
Nature of the firm's business (leader/follower)
Managerial stance and attitude (aggressive/or not)
Organisational Stance and Positioning
Managerial stance and attitude can have a big influence on strategy formulation.
Organisations can be categorised as being any one of the following:
These are innovative companies who are regularly first into the marketplace with new
They tend to be powerful companies who will have major market shares and the
benefit of abundant resources.
They must adopt strategies which will:
Protect their current market share by using the mix, or
Encourage current customers to use more, or
Attract and retain new users and/or customers, or
Redesign the product/service for new and existing users, or
Introduce new products to new markets.
Companies can carry out these strategies by adopting a stance of:
Innovation – always being in front of the competition
Fortification – activities aimed at keeping the competition down
Confrontation – aggressive promotion, price wars
Harassment – pressure on distributors, criticising competition
These are the companies who do not invest heavily in research and development (R
& D) but "copy" what the leaders do.
This type of company will never get the initial major market share, but they do not
have to invest money in development or in making the target market "aware", as the
leaders will have already done this
Followers are often referred to as "me-too" marketers in that they do not come up
with original ideas or practices
These types of organisation are those that are, to one extent or another, providing a
"specialised" product offering.
They will have some kind of USP (unique service proposition) which they can offer to
Niche marketers are often left alone by the market leaders
(a) Direct Challenge – Differential Advantage:
This is a high-risk strategy but one with potentially high pay-off.
Such a policy requires sufficient working capital and management determination to
last out a long campaign
(b) Direct Attack – Distinctive Competence:
Removing the distinctive competence from the market leader by innovation is
extremely effective providing that the advantages are valued by the target market
and communicated effectively.
A classic example is Xerox, who took the copying market away from 3M by
introducing a better process.
(c) Direct Attack – Market Share:
Introducing the smaller firms strongly in the market can build market share very
quickly – providing that it is possible to retain
Normally there will be loss of trade as old brands change to the new, but the
promotional stimulus may well shake a few percentage points from the market leader
in exchange for what is lost.
(d) Flank Attack:
This involves the location of a position which is not open and which it is possible to
occupy and hold.
When segmentation analysis reveals a niche that is not being served, it is first
necessary to ask why. If the answer is not "because it is untenable" then it becomes
available as an attack base from which to build market presence and share.
An encirclement attack endeavours to overwhelm a competitor by simultaneous
attack on every front: an expensive strategy, but one extremely difficult (and
expensive) to resist.
Casio's approach to the calculator market is a typical example of encirclement. They
overwhelmed the opposition by a constant stream of ever better, ever cheaper
products until they achieved dominance.
The most indirect assault involves broadening a resource base over a period whilst
avoiding confrontation until strategically prepared.
In 1971 Colgate was underdog to Proctor and Gamble; by 1976 it was well placed in
75% of its markets, and out of contact with P & G in the remainder.
A relatively small competitor cannot attack aggressively on a broad front but can
choose where and when to hit in the knowledge that the big competitor is likely to be
slow in response.
Profits are therefore taken before response comes – by which time the smaller firm is
This is unlikely to defeat the market leader but it can take a substantial amount of
profits from the market.
The Hoppa buses introduced in UK cities have become a serious nuisance to the
established major companies operating traditional buses on fixed routes.
(a) Position Defence:
Based upon a clear positioning that is established over years of effort (as the Mars
Bar has been), a position defence consists of flexible consolidation.
Promotional innovation is needed to keep the product alive, healthy and active in the
minds of its customers and consumers.
An innovative leader will usually have massive cost advantages and be able to
withstand sustained attack
(b) Pre-emptive Defence
Nestlé are past masters at this type of market strategy – from comparatively few
production lines they now produce many branded versions of the same canned milk,
and not all are intended to be market leaders.
This is an aggressive response to an attack in order to prevent loss of market share.
Responses involve using mix elements.
When Cadbury's attacked Mars they were immediately faced with an overwhelming
counter-offensive. They withdrew from the confrontation.
(d) Mobile Defence
This is good marketing policy even without the threat of an attacker on the horizon
because it involves constant moving, through innovation, market broadening and
diversification into new territory.
It requires a willingness to "go where no-one has gone before"
Richard Branson and his Virgin Empire exemplify the entrepreneurial approach to
growth through mobility.
(e) Flanking Defence
The American car giants exemplify failure in attempts to erect effective flank
Alert to the threat from Japan, which was focused on small cars, they attempted to
protect their overall position with hastily designed American compacts.
These were no competition for the very efficient Japanese competition, and the
flanking defence turned out to be a major distracter
(f) Contraction Defence
Pulling back to a position of strength to be better able to mount a counter-attack is
sometimes a good policy.
The British motor-cycle industry contracted before each successive wave of
Japanese imports until there was no effective British motor cycle left.
The marketing strategy is the means of achieving the corporate objectives.
It gives messages to the stakeholders, or publics. It says:
"This is where we are going", and
"When we will get there", and
"This is our stance".
Types of Marketing Strategy
One of the most fundamental issues which a company must decide on is the type of
marketing strategy, or approach, that they will adopt.
There are three basic marketing strategies which any company can follow:
Here there is a standard, unchanged product and a standard, unchanged marketing
This strategy can reduce costs (e.g. marketing, production) but will encounter
wastage in promotional activity and possibly in distribution.
Here the company segments its markets and offers modified products to different
The marketing mix elements will also be modified to suit the requirements of the
Here the total marketing effort is aimed at one market segment.
This strategy is really aimed at the exploitation of a limited market area and tends to
be used by those companies who have highly specialised products. It is "niche
marketing" by another name.
It is common for organisations with a diverse product range to use a combination of
all three strategies for different parts of their product mix
Corporate objectives relate to the entire organisation and are essentially longer term
and broad in their coverage.
Objectives should be SMART:
Specific – Measurable – Achievable – Realistic – Timed.
These overall corporate objectives will represent the expectations of senior
management and other important stakeholders, and may be expressed in either
quantitative or qualitative terms.
Quantitative objectives (in terms of numbers) can relate to money, percentages,
periods of time, output figures, etc. Examples are:
"To achieve 5% year-on-year growth in profit after tax for the next five years."
Qualitative objectives (in terms of "ideals") can relate to service levels to be
achieved, image, position, ethics, etc.
The following is an excerpt from a statement of objectives published in the annual
statement of a police force in northern England:
"Within five years, or as soon as is practicable, to have a police force which:
Is more open, relaxed and honest with ourselves and the public;
Is more aware of our environment, sensitive to change and positioning ourselves to
respond to change;
Is more closely in touch with our customers, puts them first and delivers what they
want quickly, effectively and courteously;
Is the envy of all other forces."
Nature and Purpose of Marketing Objectives
Marketing objectives, in exactly the same way as corporate objectives, can be
expressed in either qualitative or quantitative terms, e.g.
"To increase market share by 5% each year for the next five years."
"To be recognised as the leading supplier of pre-packed meals to the airline
industry by the end of 1999."
The main purpose of marketing objectives is to achieve the corporate objective(s).
Over and above that prime function, marketing objectives should give direction
Defining Marketing Objectives
Gilligan et al, in Strategic Marketing Management (1992) present two published viewpoints
of researchers who have identified possible marketing objectives:
(a) McKay (1972)
McKay suggested that there were only three possible marketing objectives:
To enlarge the market
To increase market share
To improve profitability.
(b) Gultinan and Paul (1988)
Gultinan and Paul argued that six objectives should be given consideration:
Market share growth
Market share maintenance
Cash flow maximisation
Establishing an initial market position.
Gilligan et al then go further to suggest that the supportive thinking for both of these
viewpoints can be said to reflect the thinking of Ansoff on marketing objectives.
(c) Ansoff (1968)
Ansoff argued that marketing objectives can only ever be about:
And that products and markets are either
This means that, according to Ansoff, marketing objectives should always be expressed in
terms of existing or new products or markets – or a combination of all four factors, as
expressed in the following model.
Factors Influencing Marketing Objectives
The influences on marketing objectives can be related to the external and internal
The external environment:
A rapidly changing environment
Uncertainty on competitive activity or actions
Changes taking place in technology, in particular internet based technologies such as
SMS, downloads, broadband etc
Different patterns of population or buying behaviour
Recessionary economics, etc.
The internal environment:
Unrealistic corporate objectives
Poor planning skills
Narrow viewpoint of the planners
Lack of resources
Fear of failure to achieve limiting creativity
Lack of knowledge of the market environment, etc.
Maintaining the Competitive Edge
Every company that is in business for a reasonable length of time must do something
better than its competitors – at least in the opinion of a number of customers.
That something better may involve various factors, ranging from location and delivery
to product performance and marketing.
Service industries need to consider how competitive advantage is gained through the
delivery of the service and how process improvements can be made to add value
So what can the marketing manager do to maintain the competitive edge?
(a) Product/Service Quality
(g) Physical Evidence
Benefits of Marketing Objectives
Providing marketing objectives are defined clearly and communicated correctly, they can
bring many advantages:
They give a clear direction to the personnel involved
They can create unity
They allow for measurement of achievement
They can reduce risk
They can improve decision-making
Problems in Formulating Marketing Objectives
Despite the fact that so many advantages can be gained, it is a sad fact that many
organisations find it almost impossible to define good marketing objectives. There can be
several reasons for this.
Fear of Failure
Lack of Knowledge
MODELS FOR FORMULATING MARKETING STRATEGIES
Ansoff claimed that in marketing we can only ever be talking about products and
markets, and that these can only be old, or existing, and new, or potential.
Thus marketers have:
Existing products which they can sell to existing markets
Existing products which they can sell to new markets
New products which they can sell to existing markets
New products which they can sell to new markets
Strategy 1: Market Penetration (same product/same market)
This strategy will be appropriate when a market is growing and not yet saturated.
Penetration can be achieved by:
Attracting non-users of a product
Increasing the usage, or purchasing rate, of existing customers.
Strategy 2: Market Development (same product/new market)
This strategy is often found when a regional business wishes to expand or if new
markets are emerging because of changes in consumer habits.
It can also occur when a new use has been discovered for an existing product.
Strategy 3: Product Development (new product/existing market)
With this strategy an organisation develops new products or services to appeal to its
existing markets. It may simply be a product "refinement", e.g. change of packaging
or taste, etc.
Product development is most prevalent when branding exists. Promotional aspects
will emphasise the added qualities of the "new" product and link it specifically to the
security of, and confidence in, the brand. This strategy builds on customer loyalty and
the benefits to be gained by purchase.
Strategy 4: Diversification (new products/new market)
This strategy is sometimes introduced so that a company does not become too
dependent on its existing SBUs.
It can be a form of "insurance" against potential disasters that could occur in the
event of drastic environmental changes.
Diversification means catering for market sectors which are also new to the firm. If a
new product is developed for the existing market it is Product Development and not
(a) Diversification by Integration
This involves the acquisition of some other enterprise in the chain of distribution
between the manufacturer and the customer. It can be either "forward" or "backward"
This is the acquisition of another organisation which has a feature that is desired, i.e.
the acquired organisation may be using similar materials or components for which
they have a monopoly of supply.
(b) Diversification by Conglomeration
This strategy moves the firm away from its existing product-market situation into an
entirely new area in order to satisfy a primary objective.
Quite often this is done as a short-term activity
For example, a company that produces garments may reap instant profits if it invests
oil on the open market.
This type of activity can also be part of a longer-term strategy to spread risks.
Ansoff's model as applied to Coca Cola, who use all four strategies (adapted from Evans
and Berman (Marketing, 1990)).
(a) Market Penetration
More adults used in commercials – "You can't beat the feeling" theme
Price discount and promotions (fun caps) to existing customers
Increasing sales through fast-food outlets
Strengthened distribution network
(b) Market Development
Greater emphasis on China, Eastern Europe, South America, Middle East, Africa
Appeal to men with Diet Coke
Changing image of soda from children to "family"
(c) Product Development
Manufacturer of water treatment and conditioning equipment
Acquiring Columbia Pictures, Embassy Communications
Licensing company name for clothing range
Ansoff's model is not perfect as it does not cover everything.
It takes no account of any environmental factors
It does not give any room for judgement on profitability
It can inhibit the creativity of planners
Porter's Generic Strategy Model
Michael Porter is a widely quoted authority. This model claims that there are only three
main strategies which a business can follow:
Strategy 1: Cost Leadership:
Company aims to produce in large quantities, at the lowest cost possible and sell at
Capitalise on economies of scale and keep prices to a minimum.
Attract price-sensitive buyers
Strategy 2: Differentiation:
This strategy involves offering some unique selling (service) proposition (USP)
that the competition do not have.
Prices may not be too important to buyers
Customers become brand or product loyal
For example smokers preferring specific brands or fashion designer companies etc.
Another example could be that of a fashion company producing a diverse range of
clothes to suit different requirements for different target sectors (military uniforms/
work wear / leisure).
Strategy 3: Focus:
The company aims at very select market sectors and will be charging higher prices or
offer special USPs.
The company can concentrate on its key products for specific targets
Acquire a reputation for being "specialist"
They are, to some effect, niche marketers, e.g. Rolex watches, Rolls Royce cars
Portfolio Analysis Models
(a) Boston Consultancy Group Matrix (BCG)
Using the variables of market share and market growth rates, planners can plot
their products/SBUs onto a grid which will then suggest certain strategies that can be
Boston Consultancy Group Matrix
• Knowing the age (stage) of the product in the market is not as simple as it sounds.
• To analyze this Boston Consulting Group (BCG) from the USA developed a well
known product portfolio which relates market growth to market share
• It is sometimes called Boston Matrix and ties closely with the product life cycle
• The matrix places products into four categories
• Products with low market share in low growth markets
• They do not generate cash; rather they tend to have high cash burn rate
• The most common strategy for dogs is to divest-this involves selling of the product or
• The best example is low growth market of video recorders-overtaken in the
technology and sales stakes by the DVD player
• Products with the high share of a low growth market
• These are often mature markets with well established products
• At this stage the product needs fresh injections of capital for example advertising and
• The generated funds are possibly used to support other products
• Also known as question mark & wild cats
• Products with low share of a high growth market
• They consume marketing resources and generate little income.
• They may, because the market is growing, become the stars or cash cows of the
future if they can gain greater market share
• Increased marketing expenditures and attempting to build product awareness and
brand image may be needed.
• Products in high growth markets with a relatively high market share
• Stars often generate high amounts of income, but may need protecting from
• Market leadership may not have been established in these markets, and companies
will be fighting for market share and brand loyalty
• Nokia 3210 was a star product during the rapid growth period in the mobile phone
• After positioning all products (SBUs) on the BCG matrix, the company must decide if
it has a balanced portfolio. (Too many of any one type means it is unbalanced.)
• Strategies suggested by the BCG matrix can be one of four:
Build – (for Question Marks) to increase share, even if it means giving up short-term profit
Hold – (for strong Cash Cows) to preserve share
Harvest – (for weak Cash Cows where the future is dim or for Question Marks and Dogs) to
increase short-term cash flow regardless of long-term effects
Divest – (Dogs and Question Marks draining resources) to sell off, liquidate or delete an
SBU or a product.
BCG Matrix: Cash Position for Products
Changes in Product/SBU Position
The solid arrow shows the ideal route for any product, or SBU and the dotted line
shows the possible route a Cash Cow can take.
Because the BCG plots the current position of an SBU, or product, it can be used
periodically to assess any changes in position. It can also be used to project future
positions, either likely or preferred.
Two products are shown as "planned" and two as "forecast". For "planned" positions,
strategists will be taking the initiative in one way or another; for "forecast" positions,
defensive or remedial action may be necessary.
In either case it will be the marketing mix which is used to achieve the desired
General Electric Business Matrix (GE)
The GE matrix is an improvement on the previous models
It takes into account not only the nature of the market, but also the capabilities of the
SBUs are assessed in terms of the Attractiveness of the Industry and the
Business Strengths of the company.
Typical aspects which are taken into account are:
Planner will give a score to each of the factors under consideration and then the total
is taken as the point at which the SBU is placed on the grid.
General Electric Business Matrix
Here circles represent the overall market sales whereas BCG circles represent the
income for the company only.
The share held by the company is then shown as a proportion of the circle.
We can see the characteristics of various products in a company's portfolio. The
company has major shares in three markets:
i) A highly attractive market, with a large overall market potential revenue; the company
has high business strengths. The company is in a very strong position with this
ii) A market which is viewed as being mid position in attractiveness but the company
has high business strengths. The overall market income is not major, in terms of
the other SBUs, but activity could generate further interest which could increase
the attractiveness of the market. Given the share held, this SBU could potentially
be a future high earner for the company.
iii) A market which is not seen as being highly attractive coupled with the fact that the
company does not have any high degree of business strength in that field. The
fact that the company has such a major share of the overall market may indicate
that the competition has withdrawn because of costs incurred, or some other
reason, and the company has acquired share by default rather than activity. The
market may be lucrative in terms of potential earnings but not attractive in terms
of size – hence the classification as a "medium – attractive market".
Strategic options for SBUs placed on the GE matrix cover three types of marketing
management activity. Each strategy covers three of the nine cells as shown in Figure
General Electric Matrix Strategies
i) Investment for Growth
This is a strategy for use with strong products in markets with high or medium
attractiveness (similar to BCG Stars), where the company also has high or medium
Full resources should be used: innovations, product-line extensions, product/brand
advertising, intensive distribution, good price margins, etc.
Profitability expectations would be high.
ii) Manage Selectively for Earnings
Strong position in weak market (like BCG Cash Cow); company uses marketing to
Moderate position in moderate market; company can identify underserved segments
and invest on a selective basis.
Weak position in attractive market (like BCG Question Mark); company must decide
whether to increase investment, concentrate on the niche(s), acquire another
business or trim off activities.
Here the SBUs are similar to BCG Dogs. The strategy can be to minimise marketing
activities and concentrate on selected products rather than the whole range.
They can divest products from the range, closing down or deleting an SBU which is
seen as non productive or to have little future. Profits are "harvested" because
investments are minimal.
The idea of gap analysis links up with portfolio analysis, which asks if you are offering
the right products to the specific market segment.
Markets change and it is usually necessary to change with them.
For example the home music industry, this has gone from records to tapes and then
to compact discs in a fairly short time.
If you run a company that is still making records there is going to be a big gap to fill!
New Product Development
New Market Development
However, in order to develop marketing strategy, it is important for marketers to
evaluate the quality of services and a tool for doing this is call 'GAP'.
The GAP model identifies four levels of potential differences in expectations versus
GAP 1 Difference between Customer Expectations and Managements Perception of
GAP 2 Difference between management's perception of customer expectations and the
GAP 3 Difference between the service specification and the delivered service
GAP 4 Difference between what is the communicated to customers and what is delivered to
Measuring Customer Expectations
One of the difficulties with measuring customer expectations and perception of a
service is that the customers may value different aspects of a service
For example, of an airline customers may value the friendliness of the staff, the
punctuality of the flight or the ease of check-in etc.
The SERVQUAL model, therefore, provides us with a model for evaluating customer
expectations. SERVQUAL assesses five dimensions of a service:
(i) Providing services as communicated
(ii) Customer complaint handling
(iv) Getting things right first time
(v) Keeping accurate records.
(i) Customer communication about delivery
(ii) Promptness of response
(iii) Willingness to assist customers
(iv) Readiness to respond to requests from customers.
(i) Employees who instil confidence with customers
(ii) Customers feeling safe during the transaction
(iii) Courteousness of employees
(iv) Knowledge of employees
(i) Individual attention to customers
(ii) Caring attitude of employees
(iii) Understanding needs of customers
(iv) Acting in best interests of customers
(v) Convenience of delivery.
(i) Standard of equipment
(ii) Standard of facilities
(iii) Appearance of employees
(iv) Standard of materials