Consumer Marketing Strategies Essentials
Market strategy is defined as an action plan for influencing customer choices and obtaining a market share. Marketing strategy focuses explicitly on the quest for long-run competitive and consumer advantage and is based on analysis of consumers, competitors, and other environmental forces. It is actually a statement of how a brand or product line plans on achieving its goals.
The marketing strategy is a framework made up of variables such as the segmentation of the market, identification of the target market, positioning, marketing mix elements, and expenditures, based on which strategic decisions can be made. It is made up of several essential factors such as targeting – meaning who the people to whom the products and services are going to reach are; positioning – pointing the way in which the marketer differentiates himself from his competitors; product/service attributes; marketing communications; pricing; distribution and customer service. Of these components, targeting and positioning are the two most critical elements.
According to Philip Kotler, marketing guru, if targeting and positioning are nailed, everything else falls into place. Targeting, the first step involves people and a real marketing strategy is one that caters to the needs of distinct groups of customers. All successful marketing strategies must revolve around the customer, and hence, targeting is one of the first issues to be considered in the marketing strategy.
Targeting is to know where to concentrate forces. It can be easily deduced logically that marketing should be aimed at groups of current and potential customers. But, deciding on the target market is difficult without segmentation. There is the presence of diversity in the market due to various factors. Customers can be divided in many ways to form subsets called segments. According to Grover and Srinivasan, a market segment is a group of consumers homogeneous in terms of the probabilities of choosing the different brands in a product class.
A few of the famous market segments can be described as follows: heavy, medium, light users; 18-to-49 year-old-women, 18-to-49 –year-old men, older women, older men; people who look like current customers, people who don’t; current buyers, non-users; five different benefit segments; five different personality segments; and six different attitude segments. In fact, according to a study by Laurie E. Loker and Richard R. Perdue, it has been found that benefit-based market segmentation studies are a viable means of determining vacation market segment. The possibilities are many when it comes to market segmentation.
Marketing segmentation can be done on the basis of geographic, demographic, and socio-psychological factors. It is essential for a segment to be large enough for it to be profitable; distinct sufficient to differentiate; homogeneous enough to prepare a marketing plan and measurable to determine the effectiveness of marketing. In their 1978 book Research for Marketing Decisions, Paul Green and Donald Tull set four essential criteria for market segmentation: the segments must exist in the environment; the details must be identifiable; the features must be reasonably stable over time, and one must be able to efficiently reach segments. For marketing strategy to succeed, segmentation has to be meaningful and appropriate.
Marketers can discover segments by looking at a combination of all possible market drivers such as:
- Category involvement: how important purchases in this category are to the buyer?
- Product preference motivators: what characteristics are most motivating?
- Product purchasing patterns: how frequently do they buy?
- Media habits: what do buyers watch, read, listen to?
- Sociographics: how strong is their ethnic affiliation and religiosity?
- Demographics: what are their income, age, and level of education?
- Psychographics: what are their lifestyle attitudes?
Effective targeting is achieved by finding the most efficient, scientific way of segmenting the market and to choose a target group based on its potential profit contribution. It is genuinely possible to calculate reasonably accurately, the potential profit possible within a segment by using both secondary and primary data.
For example, nearly two decades, the major gasoline brands were doing business complacently. However, competition grew during the mid-1990s, and many new low-price brands appeared in the market. Significant brands had to differentiate themselves to survive. It was then that Mobil Corporation (now ExxonMobil), undertook a large scale study of its existing customers and prospective ones.
The study results were reported in the Wall Street Journal. The study found five equal sized distinct consumer groups. Using different labels and figures, the results of the study can be interpreted as follows: Car Buffs are generally high-income, middle-aged men who drive 25,000 to 50,000 miles a year. They buy a premium gasoline with a credit card, and have a high lifestyle.
Loyalists are men and women with moderate to high incomes who are loyal to a brand and sometimes to a particular station. They frequently buy premium gasoline and pay in cash. Speedsters are upwardly mobile Gen Xers. They are constantly on the go, live in their cars and snack heavily from the convenience store. Soccer Moms are usually housewives who shuttle their children around during the day and use whatever gasoline station is based in town or along their route of travel.
Price Shoppers generally are not loyal either to a brand or to a particular station and rarely buy the premium line. They are frequently on tight budgets and efforts to woo them have been the basis of marketing strategies for years. Analysis of the data revealed that while Car Buffs and Loyalists represented only 38 percent of the population, they accounted for 77 percent of the potential profitability.
Once Mobil knew the target, it developed its own marketing strategy. It had the information as to whom to talk to and where to find them, how to communicate with them, in which media, about which products and services, at what price. Mobil targeted its marketing campaign called Friendly Serve towards the Car Buffs and the Loyalists. This Mobil campaign was characterized by clean restrooms, cappuccino in the convenience stores, a concierge to assist customers, and a Speedpass payment system.
Studies prove that stations that have implemented the Friendly Serve program have seen double-digit sales and profit increases. This example shows how segmentation can be used to frame marketing strategies. Ideally speaking, market segments with a potential for high sales, profits, growth, and a minimum of competition are the most attractive.
Though market segmentation has been around for a very long time, the significant advance in recent times has been that market researchers are using economic and behavioral theories and sophisticated analytical techniques in their search for better ways of identifying market segments and product differentiation opportunities. In fact, market segmentation has become more of a science than an art.
Having segmented a market, the task is then to determine which segments are profitable to serve. Depending on the type of segmentation they choose to follow, marketers can adopt various strategies: undifferentiated marketing strategies in which the marketer goes after the whole market with a product and the marketing strategy is intended to have mass appeal; differentiated marketing-in which the business operates in several segments of the market with offerings and market strategies tailored to each component; and concentrated marketing-in which the company focuses on only one or a few parts with the intention of capturing a large share of these segments.
Professor Theodore Levitt was the marketing guru, who, in the 1960s, wrote his path breaking article “Marketing Myopia” (Kermally, 2003). He was the first person to point out that a successful marketing strategy is one that revolved around the consumer. Levitt pointed out that business should be consumer oriented and not production oriented. He gave the example of two successful companies DuPont and Corning Glass Works, who based their marketing strategies on changing customer needs.
Levitt postulated the product lifecycle theory. This concept describes a product’s sales, profits, customers and competitors as having four stages: introduction, growth, maturity, and decline. According to Levitt, at the introduction stage, the demand for the product has to be ‘created’. The product is new and hence marketing strategy needs to be more aggressive. There needs to be detailed pricing and attractive advertising. Because of the uncertainties and the fatalities of many products at this stage, many organizations adopt what Levitt called ‘used apple policy’.
They instead follow other organizations than become the pioneers. At growth stage, the rate of sales increase accelerates and the product takes off. Competitors enter the market and brand differentiation begins to develop. The marketing efforts must be directed towards consumers to prefer specific brands. At the maturity stage, the market for the product becomes saturated. At this stage price competition becomes intense. The product is finely differentiated, and more efforts are put on customer services.
At a declining stage, most of the products tend to disappear from the market. Some producers form alliances and adopt various tactics to survive, and the production gets concentrated into fewer hands. Levitt urged managers to exploit the product life cycle. According to him, understanding and taking into consideration the product life cycle would enable companies to adopt active rather than reactive marketing strategies.
The product life cycle offers marketers the following benefits: they can assess the duration of the life cycles under different market conditions; they can be proactive in thinking about and coming up with the measures to extend the life of the product; they can plan their product investment strategies; they can anticipate changes in consumer buying behaviors and finally, they can plan their product mix. All of these are part of market strategizing. Thus understanding the product life cycle is vital to developing a market strategy.
Levitt wrote another trail blazing article in 1983 on the subject of globalisation. According to him, technology has facilitated common tastes and common demands, thus ‘homogenizing markets everywhere’. Technological advances have resulted in the creation of global markets and globally standardized products. Such global markets provide an opportunity for organizations to reap economies of scale in production, distribution and marketing. Homogenization of the markets also meant the end of multinational companies and the beginning of global companies.
The differences between the two are as follows: The multinational corporation operates in a number of countries taking into consideration local preferences and demand, making use of geographic segmentation. The global corporation operates as if the entire world is a single homogenized market, a single segment. This means selling standard products everywhere and selling them in the same way. Such standardization of products means achieving economies of scale and reduction of production costs. Such a strategy leads to achieving efficiency in production, distribution and marketing.
Levitt has cited the examples of global successes achieved by organizations such as McDonalds, Coca-Cola, Pepsi, Sony, Levi and Revlon. Globalization of markets does not mean the end of choice or market segments. Levitt argued that the global phenomenon meant the beginning of price competition for quality products aimed at larger global segments. According to some writers, organizations such as McDonalds and Coca-Cola, which are quoted by Levitt in his article, succeeded because they introduced an element of localization in their market and product mix. These organizations have followed ‘global localization’ strategies as opposed to pure global strategy as advocated by Levitt. Global localization or micro-marketing refers to the customization of marketing mix variables at the local level. Acting locally involves adapting sales promotion, distribution and customer service.
During the 1960s, the four elements of the marketing mix, the four Ps of marketing, namely product, place, price and promotion, were introduced by Neil Borden. These concepts served in the formulation of a marketing strategy based on segmentation and product life cycle. Knowing in what stage of the product life cycle a particular segment is, enables the marketer to work on the four elements of the marketing mix to formulate the marketing strategy.
Once a marketer has identified the financially optimal target group, the next step is positioning. In an increasingly crowded and fast paced environment, buyers tend to buy products and services that stand for something important or remembered for something significant. Positioning is a clear, powerful statement meant to lure customers and prospects towards the brand. A powerful positioning leads to a powerful brand. Through positioning, the company mentions certain attributes a company wants to offer buyers at a certain price to positively differentiate the product or brand from competitors.
It is a message to the target group, a particular segment. Examples of long-running positioning strategies for companies or brands include: Easy to use — Apple Exceptional; Performance for driving enthusiasts — BMW; Authentic, real, original — Coke; Guaranteed next-day delivery — Federal Express; Wholesome family entertainment — Disney and so on. At its core, positioning is the reason why people buy one product rather than another. Positioning is valuable because when you have it, the other marketing elements follow naturally: pricing, marketing communications and promotion, and distribution. In order to frame a winning positioning, one must be able to explore the segment investigating all the potential attributes and benefits that might motivate customers in a category. These include all the ways a business can differentiate itself: product, service, personnel, and image.
With respect to the segment chosen, to uncover these attributes and benefits, a company might do a category scan, exploratory research, personality assessment, social values analysis, emotional exploration, or some combination of all five. After marketers discover what motivates consumers and the perception of their products or services and those of competitors, they can create a list of potential positioning themes. Marketers then choose a message strategy that puts the product or service in the most positive light. From this point, advertising and marketing communications branch out. For example, facing deregulation, a tiny company called Green Mountain Power located in Burlington, Vermont, started to worry about competing with national power companies that could afford price cuts to attract customers.
The company knew it could not offer low prices. Hence it chose to look at other differentiating factors for power. The company discovered a significant number of customers wanted clean energy and would pay more for environmentally friendly power. Green Mountain created a powerful positioning statement, “Power provided by the raging rivers of North America, the prevailing winds, and the sun. No coal, no nuke, no kidding”. Although many companies use the low-price positioning, offering the lowest price only works in the long run when the company is in fact the category’s lowest-cost producer. Otherwise low pricing can drive the company toward bankruptcy.
There is no reason to limit the basis for segmentation to only one type of variable when many criteria actually determine buyers’ responses to the selling proposition. A segmentation scheme based on multiple dimensions, using separate segmentation schemes for each one, is often more useful and more flexible for planning marketing strategy and executing marketing tactics. Thus, marketers may consider different segmentations on a sample of buyers using different bases such as: stated needs, benefits, and amount spent in the category.
Market segmentation has taken on an increasingly important role in business strategy development. Thus, the top management is becoming more dependent on segmentation research during the strategic planning process. The technological capabilities to gather and manage massive amounts of data on customers and potential customers, along with the availability of many more targeted communications capabilities, ensure that there will be increasing demand for much more and much finer identification of target markets in most product and service categories. The massive use of the Internet and digitalization of information has opened up greater possibilities for target marketing.