5 Strategic Marketing and Brand Management Flashcards
A company’s marketing strategy encompasses the following elements:
Which customers to target
Which geographical segments to target
Which products or services to sell and what customer needs they will satisfy
What competitive advantage will the company’s products and services have
Competitive advantage
Marketing strategy ultimately seeks to give the organisation competitive advantage. Competitive advantage is based on the value the company provides in terms of the quality of its products and services as well as its pricing, relative to competitors.
Product-market strategies
Ansoff’s matrix can be considered in relation to marketing strategies:
Market penetration – sales of existing products in existing markets by persuading current
customers to purchase more or persuading competitor’s customers to switch
Market development – sales of existing products in new markets – new market segments or
new distribution channels
Product development – introduction of new products to the existing market
Diversification – new products being sold into new markets
Segmentation
Market segmentation is the division of the market into homogenous groups of potential customers who may be treated similarly for marketing purposes.
Some companies adopt an undifferentiated approach to marketing, producing a single product aimed
at the whole customer base. However, marketing activity is likely to be most effective if it is aimed at particular market
segments, which can then be reached with a distinct marketing mix. There are various ways that markets can be segmented:
Geographical, perhaps between home and overseas
Demographic factors such as sex, age, income and social class
Social, cultural and personal factors (psychographic) including, occupation, economic circumstances, lifestyle, personality, education and beliefs and attitudes
Behavioural factors including benefits sought, what prompts the purchase, whether the customer likes buying new products, how likely customers are to switch, how the product is used
Segments targeted need to be large enough to be viable and profitable and the company needs to be
able to reach them.
Segments can be targeted in different ways.
Differentiated marketing – producing several versions of the product, each aimed at a different
market segment
Focused marketing – producing an ideal product for a single product sector
Positioning is the act of designing the company’s offer and image so that it occupies a distinct and valued place in the target customers’ mind.
To market effectively, a firm must decide how to position its product or service in the marketplace. It must decide where to compete and how to compete (what advantages is it going to offer).
Positioning is only likely to be successful if it has certain key elements:
Clarity – target market and differential advantage
Consistency – key differentiating factors must not keep changing
Credibility – customer must believe in the differentiating factor e.g. that the product is superior
Competitiveness – what is offered must be something that competitors cannot supply or match
The position of brands can be plotted in terms of perceived price and quality (x, y axis graph)
A firm’s pricing strategy will be influenced by its positioning and overall strategic objectives. A firm might use a discounting strategy to break into a market, and price cutting to increase market share when consumers are sensitive to price.
Generally rising prices may be caused by:
Excess demand for a product
Rising costs
Market research indicating consumers place a higher value on the product than the price suggests
Pricing strategies
Bundling and unbundling
Bundling means setting a single price for a number of products or services that tend to be bought
together. It can be used to effectively lower the price. Unbundling is effectively raising the price by
establishing a separate price for each product or service
Discounts
Discounts involve reducing the price of an item or a group of items (bulk discounting) by a certain
percentage. Discounts and promotions can be used to encourage consumers to buy specific items at a
specific time, but they are not usually means of repositioning the items or brand.
Customer loyalty programmes
Under loyalty schemes, customers are supplied with free or discounted goods or services, when they
redeem the credit they have accrued on their loyalty schemes.
Financial reporting implications
IFRS 15 Revenue from contracts with customers explains how and when revenues should be
recognised, including when the above incentives in sections 2.1 – 2.3 are used.
See chapter 21 for detail.
The marketing mix
The 7Ps
The marketing mix consists of seven Ps, the last three of which relate exclusively to service-based businesses.
Product – quality, performance, durability, style
Place – shops, website, catalogue
Promotion – free trials, coupons, buy one get one free deals, mailshots
Price – price skimming, price penetration, price discrimination, dynamic pricing
People – relationships with customers, chat bots
Process – the overall customer experience
Physical evidence – what the customer has to show for the experience e.g. a certificate or photograph
Customer relationship management
Databases
Database marketing is an interactive approach that builds a database of communications and interactions with customers and then uses individually addressable marketing media and channels to contact them further.
Data mining is the process of sorting through data to identify patterns and relationships between different items
Database marketing can be used as the basis for customer relationship analysis in various ways:
Identifying profitable customers using RFM analysis (Recency, Frequency, Monetary value of purchases)
Developing new customers (obtaining information from potential customers, modelling target markets)
Tailoring messages and offerings based on what customers have actually purchased
Big data
Big data analysis emphasises the importance of the volume and variety of data available, particularly on-line (online purchases, website browsing, social interactions). Effective analysis of big data can help organisations in:
Customer engagement – who customers are, where they are, what they want, how to contact them
Customer loyalty and retention – what factors influence loyalty and why customers continue to purchase
Marketing optimisation – spending money to best effect and targeting marketing in the right areas
Customer relationship management
Customer relationship management (CRM) is the use of database technology and ICT relationships to help an organisation develop, maintain and optimise long-term and mutually valuable relationships between itself and its customers.
The three key aspects of CRM are:
Acquisition – attracting initial purchases from customers
Retention – subsequent purchases, purchase of similar or next level of products or services
Extension – extending purchasing to other products or services
Web 2.0
Web 2.0 technologies enable users (customers, staff and suppliers) to interact with content and each
other, increasing opportunities for collaboration and the sharing of knowledge. They invite customer
feedback and customer participation in the creation of products or services, enabling better
innovation and a more customer-centric approach.
Important aspects of Web 2.0 can include:
Social networking
Blogs
Wikis
Instant messaging
Research has indicated that social media influences buying decisions significantly for some product categories and helps building relationships. Digital marketing and CRM
Brand management
Organisations need to understand what their brand is and how to strengthen it. Strong brands can influence customer choice and create loyalty, also attract employee talent.
Reasons for branding
Reasons may include a combination of some of the following:
Quick and concise product differentiation
Barrier to entry if entrant has to develop its own brand
Required for advertising
Readier acceptance by retailers
Reduces importance of price differentials
Enables piggybacking of other products
Facilitates market segmentation
