Marketing Strategy

Components of a Marketing Strategy

Creating a marketing strategy can be a challenging task. To develop an effective marketing strategy, it is essential to break the process down into steps. The components of a marketing strategy are as follows:

1. Mission & objectives - First, the organisation has to establish its mission, purpose, and objectives.

2. External analysis - The next step is conducting market research to gain insight into current external market conditions and the possible future direction of the market.

3. Internal analysis - The organisation then has to analyse its internal conditions - including its resources, strengths, weaknesses, opportunities, and threats.

4. Create marketing strategies - After analysing the internal and external environment, the organisation will understand how it may capitalise on these market factors to convey its purpose and reach its objectives.

In addition, three further considerations are important to note during the final stage of the process. Marketing strategies should be:

1. Aligned with overall corporate goals, objectives, and strategies,

2. Competitive - how is this strategy addressing an opportunity/gap competitors are not addressing?

3. Functional - how does the strategy impact the marketing mix elements?

It is also essential for organisations to assess strategic fit.

In other words, strategic fit examines how the organisation is closing the gap presented by the external environment with its capabilities.

Marketing Strategy Models

Now that we have learned the different components of a marketing strategy, let's look at the marketing strategy models on which this process is based.

PESTLE model

After understanding the company's objectives and mission, the second step of formulating a marketing strategy involves analysing the external environment. A common method of doing so is through a PESTLE analysis. PESTLE examines the political, economic, social, technological, legal, and environmental factors that may impact the organisation's external environment. To conduct a PESTLE analysis, marketers create a table (see Table 1 below) that outlines:

• A description of the event,

• The implications of the events for the firm,

• How likely it is for the event to happen,

• How important the event is for the organisation.

The table below shows an example of a PESTLE analysis for a fragrance company.

Table 1. Example PESTLE Analysis Fragrance Company, StudySmarter Originals

SWOT/TOWS model

A SWOT analysis outlines a company's strengths, weaknesses, opportunities, and threats. It is used to understand the external and internal environment of an organisation. It is a vital model for exploring strategic fit as it outlines the external environment's wants and needs and the organisation's capabilities.

A SWOT/TOWS matrix adds an increased strategic touch to the existing SWOT analysis. It shows how an organisation can use its strengths to benefit from certain opportunities, minimise threats, and overcome weaknesses. Table 2 below outlines the elements and quadrants of a SWOT/TOWS analysis.

Table 2. SWOT/TOWS Matrix, StudySmarter Originals

Porter's value chain & the strategic capability profile

Companies can also use Porter's value chain model and the strategic capability profile to analyse the internal environment. To create a strategic capability profile, the organisation can use the resource audit model to evaluate its resources, including its financial, human, physical, and intangible resources. Then, the strengths and weaknesses of the organisation's resources are assessed. An example of a strategic capability profile is as follows:

Table 3. Example Strategic Capability Profile, StudySmarter Originals

Porter's value chain takes a similar approach to assessing the company's resources; however, it goes into further detail. The value chain evaluates a company's primary activities and support activities. It is used to examine how the different activities of a firm interact to differentiate its value chain from competitors'. As companies may produce various products, they may have other value chains for each product line.

Figure 1. Porter's Value Chain, StudySmarter Originals

Types of Marketing Strategies

Let's now look at some marketing strategies companies may wish to pursue.

Customer value-driven marketing strategy

Nowadays, marketers take a more customer-centric marketing approach. Products and brands need to stand out from the competition by offering more excellent value for customers. To provide greater value, marketers need to understand customers' wants and needs by conducting market analysis. Companies cannot serve every market segment, so they must determine which ones are profitable. This is where market segmentation, targeting, and positioning come into play.

1. Market segmentation - Dividing a market into subgroups of customers based on their wants, needs, characteristics, and behaviours. Each subgroup (segment) should consist of relatively homogeneous customers; therefore, each segment should be heterogeneous.

   Segmentation can be demographic, geographic, behavioural, or psychographic.

2. Targeting - Once the company has divided the market into segments, it needs to choose which consumer groups are the most profitable. Selecting the most attractive market segment is known as targeting. Certain brands might decide to target the mass market, whereas others will target niche markets.

   For example, toilet paper brands like Andrex and Cottonelle target a broad range of customers. On the other hand, high fashion brands like Chanel or Valentino target their haute couture clothing to specific groups of high-income customers.

3. Differentiation and positioning - The final step includes deciding how to position the product to stand out from competitors' offerings. Positioning is concerned with establishing where the product stands concerning competitors' products. To do this, the company has to differentiate its product by offering superior value to customers in some way - e.g. added product features, higher quality, convenient packaging, quicker customer service, etc.

Relationship strategies

Similarly to how marketing has become more customer-centric, marketers have also started taking a more relationship-focused than a transaction-based approach to their marketing strategies. Creating long-standing relationships with customers and transforming occasional users into loyal customers is crucial in marketing, as one-time purchases do not lead to profitability.

Companies use relationship marketing to understand customer wants and needs changes before it is too late. The objective of relationship marketing is to create a loyal customer base. To do this, companies have to observe the stages of loyalty:

1. Switchers - these are consumers who have no loyalty to any particular brand. They look for variety and discounts.

2. Shifting loyalty - these consumers are loyal to a particular brand for a while but then switch to a different one during the next period.

3. Split loyalty - these consumers are split between two brands and will only buy one of the two selected brands at all times.

4. Brand loyalty - these consumers always opt for the same brand unless it is unavailable.

5. Brand insistence - these consumers only buy one particular brand. If the brand is unavailable, they will not purchase substitutes from a different brand.

By understanding the loyalty stages, companies can reward and bring added value to regular customers through loyalty schemes, discounts, special access to events or new products, etc.

Marketing Strategy Examples

Let's now take a look at some marketing strategy examples.

For example, Deliveroo's founder, Will Shu, noticed that there were many great restaurants in London, but only a few of them actually delivered food to customers' homes. After an unsuccessful attempt at creating the original version of Deliveroo, Shu decided to contact his developer friend to build the Deliveroo app, with a mission of bringing local restaurants to people's doors.² Deliveroo's founder saw the gap in the external environment that no one was addressing and successfully closed it by using his start-up's resources and capabilities to capitalise on this opportunity.

Another example of marketing strategy can be observed through Netflix. Netflix uses a relationship-based technique to engage frequently and effectively with customers. Using its vast stream offering and its successful algorithm, Netflix segments its customers based on their film and series preferences. The streaming service stays in touch with customers through regular emails about upcoming films/series, personalised recommendations, and community engagement (showing customers the most popular films/series other customers are currently watching). Although this is a one-way communication, Netflix creates long-term customer relationships by engaging them with its product.