Marketing Strategy

Abstract

One of the ways that an organization can improve its return on investment for marketing is to base its marketing activities on a well-considered, empirically-based strategy for its unique situation. Among the factors that should be considered in the development of this strategy are the assets and skills possessed by the organization, the drivers of the particular market, the nature of the competition, the stage of the life cycle of the industry or market, and any strategic windows that affect the organization's ability to successfully compete in the marketplace. Marketing strategies tend to focus on providing lower cost products or services than or differentiating their offerings from those of their competition, or by focusing on a market niche. Two examples of industries that have had to change their marketing strategies in response to the changing demands of the marketplace include the automotive industry and the pharmaceutical industry.

"Build a better mousetrap," the saying goes, "and the world will beat a path to your door." However, as all too many established businesses with new products, entrepreneurs with better mousetraps, and Internet hopefuls have found through bitter experience, if the world does not know that the new mousetrap is, indeed, better or that it is available, it is unlikely that a path will be beaten to one's door. Further, marketing is much more than getting the world out. Both our snail mail and e-mail boxes tend to overflow with advertisements for products we may or may not want, most of which are unsolicited. To send out a flyer announcing one's better mousetrap is unlikely to bring one the success desired. In addition, different types of products require different marketing strategies. For example, an advertisement for a new walker is much more likely to yield positive results if placed in the AARP Magazine (which has a target audience of people 50 years of age and older) than in Seventeen Magazine. Similarly, readers of Sports Illustrated are more likely to pay attention to an advertisement for sporting goods than are readers of Ladies Home Journal. In each of these examples, the cited marketing effort is probably doomed to failure because it is not reaching potential buyers. Further, many businesses find that a single approach to marketing is insufficient for attracting customers. Even if an advertisement is placed in an appropriate magazine, for example, it is unlikely to reach other potential customers who do not read that magazine. Part of successfully marketing a product is to determine the target market that one wishes to reach and then determine the right marketing mix to get the target market to purchase one's goods or services.

To improve the return on investment that an organization receives from its marketing efforts, it needs to develop a marketing strategy. This is a plan of action to help the organization reach its goals and objectives. A good business strategy is based on the rigorous analysis of empirical data, including market needs and trends, competitor capabilities and offerings, and the organization's resources and abilities.

Factors to Consider when Developing a Marketing Strategy

Each organization needs to develop its own marketing plan based on a number of factors. Although there is no such thing as a one-size-fits-all marketing strategy, there are a number of factors that should impact the development of a unique strategy for an organization or product line and the development of a concomitant strategic marketing plan (see Figure 1).

• First, one needs to consider the assets and skills that the organization already possesses or that it can readily acquire. For example, if an organization has a significant engineering department, it would be feasible for it to work on new projects that require engineering skills. However, if these personnel are already involved in other work and are not free to work on a new engineering project and the organization cannot afford to hire additional engineers, starting a new hardware line would be inadvisable at best.
• In addition, one needs to consider the market drivers when developing a marketing strategy. These are the various political, economic, sociocultural, and technological forces that may influence the wants and needs of the consumer base. For example, a technological force that has influenced the way that many people do business in recent years is information technology. Advances in this area have led to the need for businesses to be able to handle increasing volumes of information and data and the widespread use of information technology in many industries.
• In addition to market drivers, another external factor that one must also take into account is the nature of the competition in the marketplace so as to determine whether or not a marketing effort will be successful. Even businesses that start as innovators in their field soon find themselves with competition. For example, when buying a computer, one may choose between a Mac and a PC. Similarly, most soft drinks on the market are manufactured by one of two companies that offer very similar products. There are also a variety of choices available when deciding where to fill up one's car, yet most of the fuels available at the pump are virtually the same. Each of the businesses within these industries has its own market position and strives to keep its market share through marketing efforts. Part of their strategic marketing efforts is to decide how best to differentiate themselves from the competition.
• Another external factor that impacts how a business can best position oneself in the marketplace is the stage of the market or the industry life cycle. Some organizations excel as innovators, for example, being the first on the market with an innovation or new product. Other organizations excel at taking the innovation and adapting it to the needs of the marketplace (e.g., lower price, different features).
• Further, there are often various strategic windows that can affect an organization's ability to successfully compete in the marketplace. These are limited time periods during which there is an optimal fit between the needs of the marketplace and the competencies of the organization. For example, advances in computer technology have been accompanied by advances in data storage methods; although cassette tapes for data backup were innovative in their time, that time has passed. A new type of tape backup for home computers would be unlikely to meet success because the strategic window for that type of device (and type of home computer) has passed.

Applications

Competitive Strategy

Once goals and objectives have been set, most businesses develop a competitive strategy to help them meet these goals and to increase competitive advantage. The three basic approaches for developing a competitive strategy are to focus on:

• The provision of low cost products or services;
• Differentiation of products from those of the competition; and
• Focus on the market niche.

Although there are generic approaches to developing marketing strategies, in order to be successful, a business's strategy needs to revolve around the nature of competition in the marketplace, stage of the market or industry life cycle, impact of market drivers, assets and skills that the organization possesses or can readily acquire, opening and closing of strategic windows, as well as other factors regarding the nature of the product or service being marketed. For example, if two companies are competing in the marketplace to sell virtually identical items, they will more than likely need different competitive strategies. One of the companies may have a longer track record for the excellence of its products or customer service while the other company may offer the product at a substantially lower price. Each marketing strategy, therefore, would be crafted to take advantage of relative strong points while downplaying the advantages of the other company's offering or exploiting its weaknesses.

To better illustrate how these factors are taken into account in developing a successful marketing strategy, case studies of two familiar industries are presented. Each of these industries has had to change its marketing strategy as market conditions have changed. The first of these case studies regards the changing business model for the automotive industry with the increase of vehicle leasing and the resultant influx of pre-owned vehicles. The second case study regards the pharmaceutical industry and how its marketing strategy has changed to meet rising research and development costs and the changing sophistication of consumers.

Marketing Strategy in the Automotive Industry

Much has changed both about automobiles and the marketing strategies used to sell them since Henry Ford produced the first Model T. America once seemed to be the preferred country of origin for automobiles whether they were rugged pickup trucks or high end luxury vehicles. Today, however, there is increasing competition for the automobile market. Vehicles produced in other countries (or even headquartered in other countries with manufacturing plants in the United States) have become known for better gas mileage, lower price tags, and environmental responsibility. Old methods of advertising vehicles with the "bigger is better philosophy" have, therefore, become passé. Another trend in the automotive industry that came into its own in the 1990s is the leasing of automobiles as a popular alternative to purchasing a vehicle, particularly among people who want to have the latest edition of a vehicle or who want to be safeguarded against unforeseen repair costs. Not only does this change the way that many people "purchase" cars, it also means that dealers need to be able to deal with the high return rate of slightly used vehicles that have been previously leased. To deal with such new demands of the marketplace, the automotive industry was forced to adopt a new business model and marketing strategy.

Petiti (2008) describes the way in which the Lexus learned to adjust to the changing paradigm of car ownership. With the upsurge in leased vehicles, there was a concomitant upsurge in the number of used cars that need to be resold by automotive dealers. To deal with the necessity of selling these gently used vehicles, the automotive industry developed certified pre-owned sales programs. Far from offering potential customers the same type of used vehicle that had traditionally been offered, the certified pre-owned vehicle program offered customers real value by reducing the risk and stigma typically associated with the purchase of used car. However, marketing efforts were necessary in order to convince the public at large that the greater value of certified pre-owned vehicles warranted a greater price. In addition, automotive dealers found that buyers looking for certified pre-owned luxury vehicles have different characteristics and need to be marketed to in different ways than customers buying traditional used vehicles.

To determine the best marketing strategy for this new type of used vehicle, several steps were taken. First, the potential of the marketplace for pre-owned vehicles was assessed. When the certified pre-owned vehicle programs were first put into effect, there were no secondary data to determine the needs of the marketplace or to develop a new strategy for sales in this area. Therefore, the auto industry assumed that the buyers of certified pre-owned vehicles had the same characteristics as the buyers of other used vehicles. However, when taking this approach, Lexus found that they did not achieve the number of sales that they expected. To better understand the needs of the marketplace and the characteristics of potential buyers, Lexus commissioned a research study to provide data with which they could build a better marketing strategy. Among the things learned from this study was that pricing was not an important factor in the decision to purchase a pre-owned luxury vehicle until later in the process. In this way, the buyers of pre-owned luxury vehicles were more closely aligned with the buyers of new vehicles than with the buyers of traditional used vehicles. The research results also helped Lexus identify which segments of the marketplace were most likely to purchase certified pre-owned luxury vehicles so that they could appropriately tailor their marketing strategy. It was additionally found that buyers of pre-owned luxury vehicles do not shop in the same ways as the buys of used vehicles in general, but tend to shop for brands and models rather than looking at the entire panoply of used vehicles. Further, approximately two-thirds of those shopping for certified pre-owned luxury vehicles did at least part of their shopping on the Internet. This helped Lexus better determine where to spend its marketing budget for a greater return on investment.

After the characteristics and shopping patterns of potential customers for certified pre-owned luxury vehicles was determined, Lexus then needed to transform their marketing model so that it better reflected the behavior of actual buyers rather than the assumptions and preconceptions of the industry. As a result of their new marketing strategy, Lexus dealers and salespersons saw a 30 percent increase in the sales of certified pre-owned vehicles.

Marketing Strategy in the Pharmaceutical Industry

In mid-century America, pharmaceutical companies did not advertise to the great mass of lay persons. As new drugs came out, they were marketed directly to physicians through advertisements and the efforts of pharmaceutical sales representatives. Times, however, have changed, and the marketing strategy of the pharmaceutical industry has changed with them. One can now see advertisements for various drugs for Alzheimer's disease, premenstrual dysphoric disorder, and clinical depression during prime time on television. This is due in part to the defining of various symptoms that were once considered a natural part of life or not seen as a specific syndrome or disease, the greater willingness of the public to take medication to solve what our ancestors would have considered to be minor symptoms, and the demands of both the public and the health care industry to find chemical solutions to these new problems. Although this would seem to be an advantage for the pharmaceutical industry by creating increased demand for new products, the development costs for bringing a new drug to market is estimated to have increased from approximately $54 million in the 1970s to approximately $800 million at the turn of the millennium (Kvesic, 2008). Given such high research and development costs, it is important, therefore, for pharmaceutical companies to increase their return on investment. As a result, they needed to develop a better marketing strategy to deal with the new realities of pharmaceuticals in the twenty-first century. One of the ways in which this was done was through a new emphasis on life-cycle management.

Life-Cycle Management

There are a number of ways in which to manage the life cycle of a pharmaceutical. One of the ways in which the industry did this was to develop a strategy to maximize brand loyalty. When a new drug is introduced to the market, it is typically under patent, during which time the company has the sole right to manufacture and sell the drug. However, once the patent expires, companies are free to make a generic version of the drug, often for a significantly lower price. This tends to eat into the profit margin of the original company. To help retain as much of the market share as possible even after the expiration of a patent, therefore, pharmaceutical companies tend to try to increase brand loyalty so that customers are reluctant to switch to a generic drug even when it is significantly less expensive. Another approach to managing the life cycle of a pharmaceutical after patent expiration is to reformulate the drug or launch a second generation version of the drug. For example, the manufacturers of an innovative medication first introduced in the 1990s could add an analgesic to the formula and market it under a new name.

Another way in which the problem of life-cycle management in the pharmaceutical industry has been approached is through the use of fixed-dose combinations. Pharmaceutical companies can potentially extend the period of drug exclusivity by combining products in new ways for the treatment of diseases that were not previously obvious. Pharmaceutical companies can also release their own generic version of a drug when the patent is expiring, thereby helping to maintain its customer base. Similarly, a pharmaceutical company can lower the price on the brand-name drug once the patent expires in order to be more competitive against other manufacturers of generic formulations. Yet another approach is to develop over-the-counter versions of a drug that was once available by prescription only. Legal options for keeping patent exclusivity are another approach to life-cycle management that has been successfully used by pharmaceutical companies in some situations. Finally, a pharmaceutical company is best advised to cut both marketing and research expenses and sell the product or license its manufacture once the patent expires. By strategically using some or all of these approaches, pharmaceutical companies are better able to remain competitive in today's changed marketplace and maximize their return on investment.

Conclusion

A marketing strategy is a plan of action to help the marketing function of an organization reach its goals and objectives. A good strategy is based on the rigorous analysis of empirical data, including market needs and trends, competitor capabilities and offerings, and the organization's resources and abilities. This means that one's marketing strategy is not static, but must change based on the changing needs and expectations of the marketplace as well as changes in the competition's marketing strategy. In addition, a good marketing strategy is not generic, but must take into account market drivers, the assets and skills of the organization, any strategic windows in the marketplace, the nature of one's competition, and the stage of the market or industry life cycle. By taking these factors into account in the development of a strategic marketing plan, an organization can be better prepared to succeed in the marketplace and gain or maintain a greater market share than its competitors.

Terms & Concepts

Advertising: Non-personal communication used by a business to persuade prospective customers to buy their goods or services. Advertising may be done through any number of media including television or radio; newspapers, magazines, or other publications; direct mail; billboards; catalogs; or the Internet.

Business Model: The paradigm under which an organization operates and does business in order to accomplish its goals. Business models include consideration of what the business offers of value to the marketplace; building and maintaining customer relationships; an infrastructure that allows the organization to produce its offering; and the income, cash flow, and cost structure of the organization.

Competitive Strategy: A plan of action by which a business attempts to increase its competitive advantage.

Market Niche: A sub-segment of a particular market in which the consumers' needs are not being met and on which an organization focuses its efforts.

Market Share: The proportion of total sales of a given type of product or service that are earned by a particular business or organization.

Marketing: According to the American Marketing Association, marketing is "an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders" (2007).

Marketing Mix: The combination of product, price, place, and promotion that is used to get a product into the hands of the consumer. One of the primary tasks of marketing is to optimize this mix to best position the product for success in the marketplace.

Marketing Plan: A plan that specifies the actions that the organization intends to take to obtain customers for its proffered goods or services. The marketing plan is an organization's marketing strategy (including such things as pricing, budget, specification of target markets) and intelligence about competitors.

Return on Investment (ROI): A measure of the organization's profitability or how effectively it uses its capital to produce profit. In general terms, return on investment is the income that is produced by a financial investment within a given time period (usually a year). There are a number of formulas that can be used in calculating ROI. One frequently used formula for determining ROI is (profits -- costs) ÷ (costs) × 100. The higher the ROI, the more profitable the organization.

Secondary Analysis: A further analysis of existing data typically collected by a different researcher. The intent of secondary analysis is to use existing data in order to develop conclusions or knowledge in addition to or different from those resulting from the original analysis of the data. Secondary analysis may be qualitative or quantitative in nature and may be used by itself or combined with other research data to reach conclusions.

Strategic Marketing: The sub-function of marketing that examines the marketplace to determine the needs of potential customers, the strategy of the competitors in the market, and attempts to develop a strategy that will enable the organization to gain or maintain a competitive advantage in the marketplace.

Strategy: In business, a strategy is a plan of action to help the organization reach its goals and objectives. A good business strategy is based on the rigorous analysis of empirical data, including market needs and trends, competitor capabilities and offerings, and the organization's resources and abilities.

Target Market: The people or businesses to whom the entrepreneur wishes to sell goods or services.

Bibliography

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Kvesic, D. Z. (2008). Product lifecycle management: Marketing strategies for the pharmaceutical industry. Journal of Medical Marketing, 8 (4), 293-301. Retrieved February 12, 2009, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=35054499&site=ehost-live

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LaPointe, P. (2012). Measuring Facebook's impact on marketing. Journal of Advertising Research, 52 (3), 286-287. Retrieved November 20, 2013 from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=79983641&site=ehost-live

Leonidou, L. C., Katsikeas, C. S., Fotiadis, T. A., & Christodoulides, P. (2013). Antecedents and consequences of an eco-friendly export marketing strategy: The moderating role of foreign public concern and competitive intensity. Journal of International Marketing, 21 (3), 22-46. Retrieved November 20, 2013 from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=90269468&site=ehost-live

Petersen, J. Andrew, Kushwaha, T., & Kumar, V. (2015). Marketing communication strategies and consumer financial decision making: The role of national culture. Journal of Marketing, 79(1), 44–63. Retrieved Dec. 3, 2015, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=100279006&site=ehost-live&scope=site

Pettit, R. (2008). Learning from winners: How research drove a new model for the automotive industry. Journal of Advertising Research, 48 (4), 583-590. Retrieved February 12, 2009, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=35651393&site=ehost-live

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Suggested Reading

Bell, S. S., & Carpenter, G. S. (1992). Optimal multiple-objective marketing strategies. Marketing Letters, 3 (4), 383-393. Retrieved February 12, 2009, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=7595206&site=ehost-live

Burgelman, R. A. & Siegel, R. E. (2008). Cutting the strategy diamond in high-technology ventures. California Management Review, 50 (3), 140-167. Retrieved February 12, 2009, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=32129034&site=ehost-live

Dahlström, P., & Edelman, D. (2013). The coming era of 'on-demand' marketing. Mckinsey Quarterly, (2), 24-39. Retrieved November 20, 2013 from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=87315649&site=ehost-live

Kotler, P., & Armstrong, G. (2015). Principles of Marketing. Boston, MA: Pearson.

Rajamäki, H. (2008). Anticipating and managing the challenges of biotechnology marketing. Journal of Commercial Biotechnology, 14 (3), 225-231. Retrieved February 12, 2009, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=32776742&site=ehost-live

Richards, T. J. & Padilla, L. (2009). Promotion and fast food demand. American Journal of Agricultural Economics, 91 (1), 168-183. Retrieved February 12, 2009, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=36034592&site=ehost-live

Wallström, Ä., Karlsson, T., & Salehi-Sangari, E. (2008). Building a corporate brand: The internal brand building process in Swedish service firms. Journal of Brand Management, 16 (1/2), 40-50. Retrieved February 12, 2009, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=33885559&site=ehost-live

Weinstein, A. (2004). Strategic target marketing. In Handbook of market segmentation: Strategic targeting for business and technology firms (3rd ed.), p. 133-154. New York: Routledge.

Wind, Y., Sharp, B., & Nelson-Field, K. (2013). Empirical generalizations: New laws for digital marketing: How advertising research must change. Journal of Advertising Research, 53 (2), 175-180. Retrieved November 20, 2013 from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=88284642&site=ehost-live