Strategic Marketing

In order for an organization's marketing effort to be successful, it needs to be based on a strategic marketing plan to help ensure that the goals and objectives of the effort are appropriate to the needs of the marketplace. Strategic marketing (a subfunction of marketing) examines the marketplace to determine the needs of potential customers, the strategy and market position of the competitors, and attempts to develop a strategy that will enable the organization to gain or maintain a competitive advantage in the marketplace. There are a number of factors that should impact the development of a strategic marketing plan. These include internal factors such as the assets and skills of the organization and the organizational culture as well as external factors such as various market drivers, market or industry lifestyle, strategic windows, and the nature of the competition. An optimal strategic marketing plan will also follow a contingency approach that allows flexibility in meeting the unique set of factors that govern the marketplace and the organization's viability within.

No matter how good an organization's products or services, unless their value can be communicated to potential customers, the organization will fail in its mission. This communication is the responsibility of the marketing function within the organization. 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." The marketing function comprises two interrelated subfunctions. Strategic marketing examines the marketplace to determine the needs of potential customers and the nature of the competitors in the market and then attempts to develop a strategy that will enable the organization to gain or maintain a competitive advantage in the marketplace. Operational marketing is built on the foundation set by the strategic marketing function and implements various plans and strategies, including a development of the appropriate marketing mix, to attract customers and foster customer loyalty.

Methods for Product & Service Marketing

There a number of ways to market one's products or services, including advertising, direct response, sales promotions, and publicity. However, unless one understands the needs of the customer, the market, and the industry as well as the strengths and weaknesses of the competition, these approaches are unlikely to be successful. Strategic marketing helps an organization sharpen its focus and successfully compete in the marketplace. Strategic marketing is concerned with two components: the target market and the best way to communicate the value of one's product or service to that market.

The development of a viable marketing strategy depends on several key dimensions. First, as with any global strategy within the organization, a successful marketing strategy needs to be endorsed by top management within the organization. Marketing strategy is political in nature; powerful units within the organization may disagree on the best marketing strategy, and an accord may need to be negotiated. Marketing strategies may also be affected by organizational culture and the assumptions that this culture engenders. For example, if the organization has always marketed its widgets to business executives, it may fail to see the potential for marketing to lower-level personnel within the organization or even for personal use to adults or teenagers.

Factors That Impact Strategic Marketing Plan Development

As shown in Figure 1, there are a number of factors that should impact the development of a strategic marketing plan for the organization. The first of these consists of the assets and skills that the organization already possesses or can readily acquire. For example, if an organization has a significant programming department on the payroll, it would be feasible for it to make and market application software. However, if these personnel are too involved in other projects to work on a new software project and the organization cannot afford to hire additional programmers, starting a new software line would be inadvisable at best.

The second factor that must be considered when developing a marketing strategy is the market drivers. These are various political, economic, sociocultural, and technological forces that can influence the wants and needs of the consumer base. For example, the need to be able to handle increasing volumes of information and data has led to widespread use of information technology in many industries. Similarly, the need for a college education for an increasing number of jobs has led to a proliferation of for-profit institutions of higher education.

Market drivers, however, are not the only external force that shapes one's market strategy. The nature of the competition in the marketplace is also very important in determining whether or not a marketing effort will be successful. Virtually no business is without competition. When buying a computer, one must choose between Mac and PC. Most soft drinks on the market are manufactured by one of two companies that offer very similar products. There is 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 these businesses has its own market position and strives to retain its market share through marketing efforts. Part of the strategic marketing effort is to decide how best to differentiate oneself from the competition.

Another external factor that impacts how one can best position oneself in the market is the stage of the market or the industry life cycle. Some organizations excel, for example, at being the first on the market with an innovation or new product. Others excel at taking the innovation and adapting it to the needs of the marketplace (e.g., lower price, different features). In addition, there are various strategic windows that affect an organization's ability to successfully compete in the marketplace. A strategic window is a limited time period during which there is an optimal fit between the needs of the marketplace and the competencies of the organization. For example, as computer storage technology continues to evolve, the methods by which people store data and information change. Punch cards and magnetic tape gave way to 5.25-inch and 3.5-inch floppy disks. By the 2010s, most people were storing data and information on flash drives or in cloud storage, and computers were no longer made with floppy disk drives. The concept of using punch cards is as foreign and antiquated in most people's minds as using an abacus. Once the strategic window begins to close, it is typically best that the organization look for another opportunity.

Development of Competitive Strategy

To help meet their goals and objectives, many businesses develop a competitive strategy that will increase their competitive advantage. There are three generic approaches for competitive strategies: the provision of low-cost products or services, differentiation of products from those of the competition, and focus on the market niche.

Low-Cost Strategy

The goal of the low-cost strategy is to gain a larger market share. This is done by offering acceptable quality products or services at prices lower than those of the competition. The expectation in this strategy is that the organization will earn an acceptable return on investment by increasing volume of sales. The basic methods used in low-cost leadership strategies include reduction of overhead, reduction of buying or production costs, and focused marketing strategies. For example, a restaurant may reduce the price of wine with the intention of making up the shortfall in profits by selling more than they did at the higher price. Similarly, a big box store may use a combination of effective management and information technology practices to reduce operation costs in order to deliver the lowest possible prices on its merchandise.

Product Differentiation

A second generic approach to competitive strategy is product differentiation. In this approach, the business attempts to differentiate itself from its competitors by producing a product or offering a service that is perceived by customers to have unique features or characteristics that set it apart from similar offerings. This strategy attempts to build customer loyalty by offering something of value that is offered by no one else in the marketplace. In this strategy, keeping the price of the product or service down becomes less important because customers are frequently willing to pay more to get their favorite brand. Value can be a subjective quality, and brand loyalty is not necessarily sufficient to make this strategy successful; there is a point beyond which most customers are no longer willing to pay a premium price. However, if carefully managed, a differentiation strategy can be highly successful. For example, Merrill Lynch was able to differentiate itself from its competitors by offering integrated financial services to attract the most desirable investors. This strategy yielded not only a well-recognized and highly valued brand that differentiated Merrill Lynch from its competitors but also substantial customer loyalty and a competitive advantage in the marketplace.

Niche Marketing

Another generic approach to competitive strategy is niche marketing. In this approach, the organization seeks to gain a proportion of the total sales of a given type of product or service within the marketplace. This strategy requires concentration on one or more specific market segments based on characteristics such as buyer group, portion of a product line or market, or geographical area. For example, rather than marketing itself as a generalist, a management consulting firm might specialize in working with the telecommunications industry or only with businesses on the west side of metropolitan Chicago. A niche-market strategy is indicated in situations where the business believes that it can better serve a segment of the market than it can the entire market. In the example of the management consulting firm, the founding partners may have come out of the telecommunications industry and therefore may be more familiar with the nuances of that industry than they are with other industries. This approach puts the organization in a unique position, through a type of differentiation, to be better able to market to that focused segment than to the whole.

Consideration of Competitors in the Marketplace

To be successful, analysis of the marketplace needs to consider not only the needs of the customer base and the value that can be offered by the organization's product or service but also the state of the industry as a whole and the position of the organization's competition within that industry. As opposed to a market that can be defined as a group of customers with similar buying needs, an industry is a group of organizations (i.e., competitors) that offer similar products or services to the market. Different organizations offering similar products or services will not necessarily have the same window of opportunity. Therefore, it is important to understand how competing firms view the market in order to develop a strategic marketing plan that will yield a significant competitive advantage.

Factors That Influence Industries & the Competition within Them

There are several factors that influence industries and competition within industries. Government regulation can significantly influence the profitability of an industry. Within the parameters set by this factor, however, there are additional factors that influence how competition works within an industry. If a number of organizations all offer similar products or services, for example, competition within the industry will typically be more intense. This is illustrated by the famous marketing slogans of two car-rental agencies. "We're number one!" exclaimed Hertz. "We try harder!" rejoined Avis. Customers, too, can influence the nature of competition within an industry. If the industry becomes larger, it will become more attractive to new entrants offering the same product or service, and competition will tend to concomitantly increase. Similarly, new organizations that enter the industry may bring with them new products that change the nature of the industry. Of particular importance in this regard are new products that improve the relationship between price and performance (e.g., by offering the same quality for a lower price or more quality for the same price) and those produced by industries that earn high profits.

In some industries, a single customer dominates the industry; for example, the federal government is the primary procurer of military ships. This gives the customer more negotiating room for developing higher specifications, tighter deadlines, and lower costs. In addition, buyers can also exert pressure on an industry by searching for lower prices, higher quality, or additional features for a product or service. Organizations willing to meet these requirements will achieve a competitive advantage. However, suppliers can also have bargaining power that affects the competitiveness of an organization or industry. If there is only one or a limited number of suppliers for a component or material needed by the organization, it is the supplier and not the organization that will drive the price of that commodity.

Applications

Brian Smith performed a five-year research study with over 30 organizations and 100 individuals to determine the state of strategic marketing of pharmaceuticals, medical devices and equipment, and related products to physicians, clinicians, and other medical professionals or organizations. Among the questions he asked were why marketing strategy in this arena was of variable quality and how this condition could be improved. The end goal of the study was to develop a model of strategic marketing efforts to improve the marketing efforts within the medical marketplace.

Smith's research found that the optimal marketing strategy was dependent on the appropriate blend of three factors: rational planning processes, visionary command processes, and incremental processes. Using such a hybrid model to develop a marketing strategy tends to be more successful than developing a strategy based on any one of these factors alone. As discussed above, marketing strategy also needs to take into account both internal factors that are intrinsic to the organization (e.g., culture, assets) and external factors (e.g., competition, market stage). In fact, Smith recommends taking a contingency approach, in which the best marketing strategy is contingent on the state of these factors. For example, when introducing a new product or innovation to the market, one typically has to convince the customer of the need for and value of the product. However, once the market has assimilated that need, then a different marketing strategy is needed to communicate to the market that the organization's product is superior to (i.e., gives better value than) the similar product of the competition.

The implication of the contingency approach to strategic marketing is that there is no one best way to develop a marketing strategy or to market one's product or service. Rather, organizations need to be flexible in order to be able to successfully market their products or services within an environment that may include strong competition or unfavorable market conditions.

Smith found that the development of an optimal marketing strategy is best approached in five stages. First, the organization needs to assess the conditions of the market, in particular its complexity and turbulence. As shown in Figure 2, this analysis can help the organization determine what hybrid strategy is most likely to succeed in its particular situation. In addition, the marketing strategy needs to be congruent with the external market (macrocongruent) and with the organizational culture (microcongruent). By understanding and incorporating these factors into the marketing strategy, the organization can develop a hybrid strategy that will better help it communicate value to potential customers. The organization should next use various diagnostic tests to determine how well the strategy meets the goals of the organization within the marketplace. Based on the results of the tests, the strategy can be refined to better meet the goals of the organization before it is implemented.

There are a number of characteristics of Smith's approach that distinguish it from the more rigid approaches offered by many theorists. First, the model does not prescribe a single method for determining optimal marketing strategy; rather, it helps the organization make strategic marketing decisions based on the characteristics and needs of the situation in which it finds itself. Second, the model takes into account the existing culture of the organization and does not require a systemic change in order to be successful. This means that the development of a successful strategy is more likely to be both practical and possible and less likely to have unexpected consequences that could result from an attempt to implement a wholesale change to the organizational culture. Third, the contingency model advocates testing the strategy before wholesale implementation, supporting the development of a more refined model that will adequately take into account the needs of both the organization and the marketplace and is more likely to be successful in enabling the organization to reach its goals. These characteristics make the model more flexible, better able to meet the demands and needs of the marketplace, and more likely to be useful in helping organizations develop an optimal marketing strategy.

Terms & Concepts

Competitive Advantage: The ability of a business to outperform its competition on a primary performance goal, such as profitability.

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

Market Niche: A subsegment of a particular market whose needs are not being met 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, "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."

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 the mix to best position the product for success in the marketplace.

Marketing Plan: A plan that specifies the actions the organization intends to take to obtain customers for its proffered goods or services.

Organizational Culture: The set of basic shared assumptions, values, and beliefs that affect the way employees act within an organization.

Strategic Marketing: A subfunction of marketing that examines the marketplace to determine the needs of potential customers and the strategies of 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.

Bibliography

Amoako, G. K., & Dartey-Baah, K. (2012). An analysis of the impact of strategic marketing on profitability of rural banks: A case study of Dangme Bank. International Journal of Marketing Studies, 4(2), 150-156. Retrieved November 25, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=75333804&site=ehost-live

Dickinson, J. (2012). Symbiotic marketing: A network perspective. Journal of Management & Marketing Research, 11, 1-27. Retrieved November 25, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=83536053&site=ehost-live

Iyamabo, J., & Otubanjo, O. (2013). A three-component definition of strategic marketing. International Journal of Marketing Studies, 5(1), 16-33. Retrieved November 25, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=85797513&site=ehost-live

Mathur, M. (2013). Drivers of channel equity: Linking strategic marketing decisions to market performance. Marketing Review, 13(4), 393–414. Retrieved November 24, 2014, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=95749559

Papasolomou, I., Thrassou, A., Vrontis, D., & Sabova, M. (2014). Marketing public relations: A consumer-focused strategic perspective. Journal of Customer Behaviour, 13(1), 5–24. Retrieved November 24, 2014, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=99409506

Proctor, T. (2000). Strategic Marketing: An Introduction. New York: Routledge.

Senn, J. A. (2004). Information technology: Principles, practices, opportunities (3rd ed.). Upper Saddle River, NJ: Pearson/Prentice Hall.

Smith, B. (2003). Success and failure in marketing strategy making: Results of an empirical study across medical markets. International Journal of Medical Marketing, 3(4), 287-315. Retrieved June 25, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=10793964&site=ehost-live

Smith, B. (2004). Making marketing happen: How great medical companies make strategic marketing planning work for them. International Journal of Medical Marketing, 4(2), 129-142. Retrieved June 25, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=12483910&site=ehost-live

Suggested Reading

Anderson, D. W. (2012). Strategic marketing planning for the small to medium-sized business: Writing a marketing plan. New York: Business Expert Press. Retrieved November 25, 2013, from EBSCO Online Database eBook Collection. http://search.ebscohost.com/login.aspx?direct=true&db=nlebk&AN=493186&site=ehost-live

Rao, P. M. (2005). Sustaining competitive advantage in a high -- technology environment: A strategic marketing perspective. Advances in Competitiveness Research, 13(1), 33-47. Retrieved June 25, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=19196897&site=ehost-live

Sausen, K., Tomczak, T., & Herrmann, A. (2005). Development of a taxonomy of strategic market segmentation: A framework for bridging the implementation gap between normative segmentation and business practice. Journal of Strategic Marketing, 13(3), 151-173. Retrieved June 25, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=17941673&site=ehost-live

Vriens, M. (2003). Strategic research design. Marketing Research, 15(4), 21-25. Retrieved June 25, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=12249147&site=ehost-live

Weinstein, A. (2006). A strategic framework for defining and segmenting markets. Journal of Strategic Marketing, 14(2), 115-127. Retrieved June 25, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=20937022&site=ehost-live

Wiles, M. A., Morgan, N. A., & Rego, L. L. (2012). The effect of brand acquisition and disposal on stock returns. Journal of Marketing, 76(1), 38–58. Retrieved November 24, 2014, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=69539399