‘Strategy’ is arguably an overused word. In marketing terms, its use should be restricted to important decisions that will have a major effect on the future of the organisation. Strategic marketing decisions are concerned primarily with ensuring the effectiveness of the marketing organisation in the competitive struggle. Effectiveness is about ‘doing the right things’, whereas efficiency is about ‘doing things right’. Corporate strategy is a broader concept than strategic marketing, incorporating, for example, issues to do with finance, human resources and manufacturing or service operations, as well as marketing matters. Forecasting and budgeting are logical components of the strategic market planning process, but should not be taken for the process itself.
Consumer behaviour is the study of the processes and factors that lie behind private consumption decisions. A good understanding of consumer behaviour principles enables the marketer to design more effective marketing strategies. Determinants of consumer behaviour can be classified as individual (inner-determinants) or social. Inner-determinants of consumer behaviour are needs and motives, perception, learning and memory, attitudes, and personality. Social determinants of consumer behaviour are culture, social class, social and group influences, and influence, persuasion and involvement. Models of consumer behaviour aim to identify the stages through which a consumer passes on the way from identifying a need through to making a purchase and consuming a product or service. The field of consumer behaviour is by no means static, and a number of recent trends in the field – e-shopping, globalisation, variety seeking, lifestyle shopping, deviant consumer behaviour and economic psychology – have been highlighted as being of relevance to the strategic marketing planner.
An understanding of organisational buying behaviour is fundamental to the development of effective business-to-business marketing strategy. Two principal approaches to the analysis of organisational buying processes have been identified. The first focuses on the decisionmaking process going on within the buying organisation. The aim is to identify what the stages are in the buying process, who is involved at each stage and what criteria are employed to select between competing offerings. By understanding these factors, the business-to-business marketer will be in a position to develop an effective marketing mix. The second approach focuses on the interactions that take place between buying and selling organisations. In this approach, each individual transaction can only be understood in the context of the broader relationship between the buying and selling organisations. The prior experience that the firms have of each other will influence their ability to do business together. By understanding the ways in which businesses, and people within business, interact with each other, the business-to-business marketer will be in a position to develop a coherent strategy for each customer relationship. It seems that, in recent years, trends in the business environment have favoured the development of a less confrontational approach to purchasing that encourages partnerships with key suppliers. This suggests that there might be a general trend in favour of marketing strategies based on relationships, rather than an impersonal marketing mix. However, business-to-business markets are very diverse. Both relationship strategies and marketing mix strategies are likely to be of use, depending upon conditions experienced in a particular market. The more complex the product, the longer the purchasing cycle, and the more that demand is concentrated in the hands of a small number of buyers, the more likely it is that a relationship-based strategy will be appropriate.
An understanding of the marketing environment is a necessary basis for marketing strategy development. The marketing environment can be conveniently classified into the competitive environment and the macroenvironment. Underlying any analysis of the competitive environment should be an appreciation of the way in which the market economy works. Understanding the fundamental forces of demand and supply within a market or industry is an important component of environmental analysis. The competitive environment is often further analysed using a ‘five forces’ approach – direct rivalry, new entry threat, threat from substitutes, power of suppliers, power of buyers. Radical suggestions that the Internet would revolutionise competition across a wide range of industries have not yet proved to be true. However, the Internet has had a substantial effect on the competitive environment of some industries, and will have a progressively wider and deeper impact on the competitive environment. While it is clearly essential to have a sound grasp of the competitive environment in order to develop an effective marketing strategy, the resource-based view of the firm emphasises that it is through the control of valuable resources that the firm will achieve a sustainable competitive advantage.
There are a number of different classification tools that can be used to analyse the macroenvironment, most of which are elaborations on the basic political, economic, social and technological (PEST) framework. A more comprehensive framework than PEST, such as DEEPLIST (demographic, economic, environmental, political, legal, informational, social, technological), reduces the likelihood that an important issue will be forgotten just because there is no ‘box’ for it. In this chapter we selected three key environmental issues for in-depth treatment – macroeconomic factors, demographic change and the ‘green’ environment – since these are wide-ranging issues that will affect the marketing environment of most organisations in one way or another. A key element of any environmental analysis is the allocation of priorities to environmental factors. This can be done by assessing the clarity and the seriousness (based on likelihood, impact and urgency) of those factors.
In this chapter we have discussed eight Key Concepts that are of use in analysing the current situation of the organisation and in deciding what it will set out to achieve. The marketing planning process provides an overview of the steps involved in developing a strategic marketing plan. Gap analysis, objective setting and value-based marketing are means by which the organisation can clarify exactly what it intends to achieve. The SWOT matrix can be used as a bridge between analysis and strategy formulation, since it is both a succinct method of summarising the marketing audit, and a tool for generating strategic options. The experience effect and economies of scale are potential sources of competitive advantage, and in the next chapter we will see how they can be used to underpin marketing strategies. Sales variance analysis and discounted cash-flow analysis are technical procedures that can be useful in analysing the effectiveness of our chosen marketing strategies. Value-based marketing and customer value analysis focus attention on the importance to marketing strategy of understanding the value that key stakeholders derive from owning or doing business with the company.
In this chapter and the last we have investigated a wide range of analytical tools that have been developed to assist in the process of developing marketing strategy. We know that formal methods of marketing planning are associated with above-average company performance, and it is reasonable to suppose that there is causal effect at work, that is, marketing planning helps bring about improved performance. It follows that familiarity with the tools described in these chapters can enable the marketing manager to make a more effective contribution to his or her firm. However, marketing strategy and planning should not simply become an obsession with the application of formal tools and techniques. In strategic marketing, we use formal methods of analysis to assist in the process of decision-making, not as a substitute for the judgement of the professional marketer. Thoughtful application of these tools is likely to improve company performance.
The idea that there is a spectrum of exchange behaviour between discrete transactions and relational exchange is the basis for relationship marketing strategies. Long-term exchange relationships between buyers and sellers do exist, and management action can be taken to develop and manage these relationships. Some researchers have suggested that buyer–seller relationships might develop through a series of well-defined stages, so that we can think of a relationship having a life cycle. Relationship marketing strategies are based on the idea that exchange transactions need not always be initiated by the seller (the stimulus response model) and that the relationship can be an appropriate focus for marketing activity, rather than the transaction. Many definitions of relationship marketing have been suggested, and there is no one definition that has achieved widespread acceptance. The implementation of relationship marketing requires that attention be paid to culture change, internal marketing and patterns of remuneration, as well as the development of a sophisticated customer database. Loyalty-based marketing focuses on the customer as an asset, and calculates the discounted present value of the customer as a key input into the marketing planning process.The implementation of relationship marketing strategies will be affected by the nature of the market concerned, since relationship strategies mean rather different things in consumer goods markets, consumer services markets and business-to-business markets. Relationship marketing has been subject to a number of critiques, including unclear definition, ‘change the name and do the same’ and invasion of consumer privacy. When implemented purely as a technological solution, and without due care for consumer sentiment, relationship marketing in consumer markets can be counterproductive and destructive of trust and commitment.
Electronic marketing is currently the subject of a rapidly growing number of published articles, discussion papers, dissertations and books. Although it is not possible to include everything in a single chapter such as this one, we have attempted to provide readers with a useful overview of this fascinating field. Marketing strategists will do well to remember that e-marketing is still a young field of enquiry: ‘The use of the Internet as a means of satisfying partner exchange needs is just starting to be explored and it will be sometime before we, as marketers, have exhausted all the possibilities’ (Nicovich and Cornwell, in Richardson, 2001, p. 157).
Consumer and business services exhibit different characteristics when compared with consumer goods and business-to-business goods. They possess an intangible nature, vary in service quality, are perishable, are inseparable in that the service consumer and provider tend to produce and consume interactively, and service ownership is not transferred to the consumer. Correspondingly, because of these differences, services require a different approach to marketing, focusing on tangibilising their intangibility through the demonstration of physical evidence, the maintenance of consistent levels of service quality, the management of service yield through a combination of balancing supply capacity, pricing, market segmentation and demand, and managing existing and new customer relationships. Stressing the benefits of non-ownership is a particularly useful approach to marketing the rental and leasing of goods, for example car leasing, or new computer systems. This chapter has presented the enhanced marketing mix for services: people, process and physical evidence, developed to stress the importance of the employees delivering a service and the process by which they do so and the evidence that they provide of that service. The increasing movement towards measuring service quality has been explained and the key means by which service providers can measure the gaps between service received and that expected. This chapter has presented the key means by which service businesses segment consumer and business-to-business service markets using customer-related and product-related approaches and finally, we outlined how recent research has indicated the relative importance of customer retention over acquisition and the means by which we might evaluate our customer relationships.
International marketers face a range of risks in countries around the world, all of which should be investigated and assessed before entering the market. Generally speaking, the higher the level of risk, the greater the likely cost of getting involved in that market. Some additional costs that might be incurred include the need to purchase political risk insurance, the need to purchase forward contracts in currency markets to manage the potential of exchange rate volatility, much higher delivery costs given infrastructure problems, and the much longer time frame needed to see a return on your investment. Given language, cultural and other barriers, companies can find it difficult to assess the impact that any of these risk factors might have on their investment abroad, even after they have done a thorough analysis. To reduce the impact and level of risk, many companies begin their foreign marketing ventures in countries that are geographically and culturally similar, in lead markets with a pool of sector knowledge and skilled workers, get as much assistance as they can from private and public trade organisations, or take on a local partner with experience and expertise in the sector. While it remains difficult to assess and plan for all the potential risks and challenges that might occur over time even if the company has taken a long-term planning approach, the opportunities in today’s ever-growing and integrating global trade environment are simply too great for companies to miss.
Since few students will have the chance to practise their strategic marketing skills on a real organisation, case studies provide a valuable opportunity to test what you have learnt in a realistic marketing situation. Case study analysis can be tackled using a problem-solving approach. This begins with the careful formulation of the underlying problem, moves on to the generation and evaluation of alternative solutions and concludes with the selection of a preferred solution. The underlying problem must be differentiated from the symptoms that are used to diagnose it. Similar symptoms (such as loss of market share or unprofitable sales) can be the result of different underlying problems. The concepts and models of strategic marketing can be used to assist at all stages of the case analysis process. Case study presentations and reports provide the opportunity to practise important management communications skills. Whatever the medium of communication used, there must be a clear link from the problem diagnosed to the analysis that is conducted, and conclusions must be demonstrably based on evidence and analysis.