Introduction - many small business start-ups are created by entrepreneurs who do not spend enough time developing an integrated marketing strategy. Some simply assume their business ideas or previous industry experience will allow them to successfully market their business. For the non marketer developing an integrated marketing strategy can be a daunting, woolly and wide ranging process. In their haste and urgency to start selling something some entrepreneurs do not bother to write down their marketing ideas in a formal marketing plan. This article summarises the issues involved in developing and implementing a marketing strategy...
What is a Marketing Strategy? -marketing strategy is fundamentally a business process that attempts to understand customer needs to develop a plan to organise the resources of a firm to meet those needs better than its competitors. For small businesses the importance of identifying and understanding the needs of a target market are critical. An integrated marketing strategy should define measurable objectives in many areas including product development, advertising, promotion, distribution and pricing. Any marketing strategy flows naturally from the overriding mission statement of the company. A mission statement is short written paragraph that aims to define the purpose of a company in terms of how it serves customer needs. It is an overriding vision to guide the objectives, direction and decision-making of the firm. It is possible to employ a third party marketing strategy consulting to help owners follow the logical process of developing a business marketing strategy.
Strategic Analysis - strategic analysis is concerned with analysing the inter-relationship between the various factors influencing a firms choice of strategy. The following are generally used to asses market conditions and a firms internal capabilities to exploit opportunities and deal with environmental threats:-
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Classify General Market Conditions - firms need to first assess the macro level of general uncertainty and dynamism in the target market, as well as the levels of non controllable political, economic, social and technological change factors. For instance, highly regulated financial services markets that require costly skills and high investments in new technologies, which may create to high a barrier for entry for small start-up firm. It also necessitates encouraging workers to be more creative and challenging in their day-to-day jobs.
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Identify Target Market it is fundamental to identify who the customer is and that their buying criteria is i.e. understand what your prospective customers needs and wants in your chosen marketplace. In particular you will need to understand maximum potential sales volumes, how many potential customers are in the chosen market and is the market growing and at what % rate. It is also important to find out what the average spend per customer per product, as well as the typical sales channels customers use to purchase. To find out these things market research must be undertaken to analyse the market environment in which entrepreneurs wish to compete in.
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Identify Specific Threats and Opportunities - in the immediate target market it is necessary to analyse the specific 'competitive forces' that create opportunities and threats. Firstly, the relative threat of new entrants into the target market will depend upon the amount of capital required for entry, the amount of legislation preventing start-up, the ability to access distribution channels (such as wholesalers) and the level of competitive rivalry. In markets with a high threat of new entrants any failure by a firm to differentiate their offerings from a competitor's substitute offering may prove disastrous. Secondly, the relative power of buyers and suppliers will also impact a firms choices. Buyer's relative negotiating power may be high in markets associated with high-volume low margin products, where there are many choices of alternative supply and fragmented number of small competitors. Conversely the power of suppliers will be high when the cost of switching suppliers is high (due to a dependency on complex or limited supply chains) makes it difficult to break out of a long term existing trading relationship. Thirdly, if there are alternative substitute products in the target market it will make it more difficult for firms to survive. Lastly, competitive rivalry can also be assessed in terms of the general life cycle of any given market. For instance, emerging technologies such as mobile computing may present high profit opportunities for innovators and high-growth start-ups, whereas traditional industrial and manufacturing markets could be viewed as 'cash cows' with lower, stable returns.
Types of Marketing Strategies -the output of the analysis undertaken should be a reality check when choosing a marketing strategy:-
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Price Based Strategy - in a difficult economic climate most firms price competitively in markets where consumers feel less confident and have less disposable income. Price-based strategies are adopted by small firms where owners accept the fact that the market is extremely price sensitive. There is little attempt to differentiate by added value and the focus of marketing activities is to get the message across that a cheap and convenient solution exists. The main aim of a price based strategy is to achieve a higher market share than competitors.
Some firms will attempt to offer low prices while continuing to market their products or services as still providing 'value for money'. Conversely for products and services that are marketed as being of superior quality (such as executive cars) then price becomes less of an issue. Industries with a high level of competition and lower margins will inevitably focus on price-based strategies as a means of competing. This strategy dictates that managers focus on the break even point for their business model and in particular keeping operating expenditure under control. New business start-ups inevitably do not want to overprice their offering before any brand loyalty has been established and naturally invest less time identifying uniqueness and more on local price competitiveness.
- Differentiation Strategy - a differentiation strategy aims to supply a product or service that is different or unique from a firm's competitors. The main aim is to convince buyers that their product or service is of better quality and value than alternative choices of similar price in the target market. Some target markets do not lend themselves well to a differentiation strategy where the product or services are regulated by legislation. For instance legal firms producing a standardised home buying report provide extremely similar services as their local competitors. Conversely in markets where there is a high degree of creativity and flexibility differentiation strategy can work extremely well. For instance in the fashion and footwear markets, a range of options are open for firms to position themselves to target specific segments using celebrities, emotive solutions, specific age groups, different distribution channels as well as special offers and discounts.
A differentiation strategy can either be achieved through investment in design innovation skills or through research and development, However most forms differentiate by relying on slick and convincing marketing. Firms without intellectual property almost inevitably have to use marketing to make their firm stand out from the crowd. A firms product may be simply another 'me too' product and yet if marketed in a professional way, buyers may perceive it as having some value when comparing it with alternatives. To pull off this card trick it is critical to have a thorough understanding of the customer needs and how buyers perceive value. People always talk about 'slick marketing' and 'clever advertising' and the importance of brand. They are simply describing a company successfully employing a differentiation strategy.
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Hybrid Strategy - if firms genuinely do have a lower cost base and truly understand customer needs then a hybrid strategy may be employed. However, quality and cost rarely go hand in hand and succeeding in convincing consumers that a low-cost good also has some unique value is always a difficult sell. If markets are traditionally mature with a small number of competitors then nimble start-ups can use a hybrid strategy to target specific niches within that market. This is particularly true in monopolistic and regulated markets that have recently been deregulated and privatised. In this situation new entrants can create their business model around a hybrid marketing strategy from day one where as larger firms find adapting to change more difficult.
The Marketing Plan - the implementation of a marketing strategy should result in the production of a Marketing Plan. This is a practical document containing measured actions that will ultimately lead to expected and increased sales. This plan should be closely associated with a firm's corporate strategy and take into account a firms mission statement. The marketing plan provides specific actions linked directly to the mission statement, marketing strategy and marketing and financial objectives of the firm. There is no fixed format for any marketing plan and its level of detail depends upon the size of the organisation and how sales driven and customer facing that organisation is. Most plans would aim to summarise the Strategic Analysis (see above) and the strategic marketing objectives. It should then have quantifiable marketing objectives for all elements of a firms marketing mix including products, place, price, promotion, physical environment, process and people ( these are commonly known as the 7 P's ). Lastly there must be some practical and useful measures of success or failure of the plan (otherwise it is just becomes an interesting one off academic exercise). Financial budgets and performance standards need to be set for sales, profitability, market share, cash flow, customer complaints, lost business and other key measures linked directly to the marketing objectives.