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Types of Marketing Strategy by Philip Kotler

Today, the marketing function must play a much broader role as it addresses environmental concerns. Marketing has become a combination of activities that focus on strengthening and broadening the market for an organization’s products and services. In this report, we will discuss about types of marketing strategy by Philip Kotler.

The leading text in MBA marketing courses, this book has defined the marketing management role as a strategic business activity that creates and manages customer relationships. This is a new edition of the book in which the authors build on Kotler’s original work to present a more detailed and contemporary perspective of how marketing strategy is formulated, implemented, and evaluated.

Basic concepts of marketing

Simply put, marketing is managing profitable relationships, by attracting new customers by superior value and keeping current customers by delivering satisfaction. Marketing must be understood in the sense of satisfying customer needs. Marketing can be defined as the process by which companies create value for customers and build strong customer relationships to capture value from customers in return. A five-step model of the marketing process will provide the structure of this chapter.

Understanding the marketplace and customer needs

There are five different core customer and marketplace concepts.

  1. Customer needs, wants and demands. Human needs are states of felt deprivation and can include physical, social and individual needs. Wants are the form human needs take as they are shaped by culture and individual personality. Demands are human wants that are backed by buying power.
  2. Market offerings are a combinations of products, services and experiences offered to a market to satisfy a need or want. These can be physical products, but also services – activities that are essentially intangible. The phenomenon of marketing myopia is paying more attention to company products, than to the underlying needs of consumers.
  3. Value and satisfaction are key building blocks for customer relationships.
  4. Exchanges are the acts of obtaining a desired object form someone by offering something in return. Marketing consists of actions trying to build an exchange relationship with an audience.
  5. market is the set of all actual and potential buyers of a product or service. Marketing involves serving a market of final consumers in the face of competitors.

Designing a customer-driven marketing strategy

Marketing management is the art and science of choosing target markets and building profitable relationships with them. The aim is to find, attract, keep and grow the targeted customers by creating and delivering superior customer value. The target audience can be selected by dividing the market into customer segments (market segmentation) and selecting which segments to go after (target marketing). A company must also decide how to serve the targeted audience, by offering a value proposition. A value proposition is the set of benefits or values a company promises to deliver.

There are five alternative concepts that companies use to carry out their marketing strategy.

  1. The production concept: the idea that consumers will favour products that are available and highly affordable and that the organisation should therefore focus on improving production and distribution efficiency.
  2. The product concept: the idea that consumers will favour products that offer the most quality, performance, and features and that the organisation should therefore devote its energy to making continuous product improvements.
  3. The selling concept: the idea that consumers will not buy enough of the firm’s product, unless it undertakes a large-scale selling and promotion effort.
  4. The marketing concept: the idea that achieving organisational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do. It can be regarded as an “outside-in view”.
  5. The societal marketing concept is the idea that a company’s marketing decisions should consider consumer wants, the company’s requirements, consumers’ long-term interests and society’s long-term interests. Companies should deliver value in a way that maintains consumers and society’s well-being.

Constructing an integrated marketing plan

A marketing strategy outlines which customers it will serve and how it will create value. The marketer develops an integrated marketing plan that will deliver value to customers. It contains the marketing mix: the tools used to implement the strategy, which are the four Ps: product, price, place and promotion.

Building customer relationships

The first three steps all lead to this one: building profitable customer relationships. Customer relationship management (CRM) is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. The crucial part here is to create superior customer-perceived-value, which is the customer’s evaluation of the difference between all the benefits and all the costs of a marketing offer, in relation to those of competing offers and superior customer satisfaction, which is the extent to which a product’s perceived performance matches a buyer’s expectations. Customer delight can be achieved by delivering more than promised.

Customer relationships exist at multiple levels. They can be basic relationships or full partnerships and everything in between. In current times, companies are choosing their customers more selectively. New technologies have paved the way for two-way customer relationships, where consumers have more power and control. The marketing world is also embracing customer-managed relationships: marketing relationships in which customers, empowered by today’s new digital technologies, interact with companies and with each other to shape their relationships with brands. A growing part of this dialogue is consumer-generated marketing: brand exchanges created by consumers themselves, by which consumers are playing an increasing role in shaping their own brand experiences and those of other consumers.

Today’s marketers often work with a variety of partners to build consumer relationships. Partner relationship management means working closely with partners in other company departments and outside the company to jointly bring greater value to customers. These partners can be inside the company, but also outside the firm. The supply chain is a channel, from raw material to final product, and the companies involved can be partners through supply chain management.

Capturing customer value

The final step of the model involves capturing value. Customer lifetime value is the value of the entire stream of purchases that the customer would make over a lifetime of patronage. Companies must aim high in building customer relations, to make sure that customers are coming back. Good CRM can help increase the share of customer, the portion of the customer’s purchasing that a company gets in its product categories. Customer equity is the total combined customer lifetime values of all of the company’s customers. It is the future value of the company’s customer base.

When building relationships, it is important to build the right relationships with the right customers. Customers can be high- or low-profitable and short-term or long-term oriented. When putting these on two axes, a matrix of four terms appears.

  1. Butterflies are profitable, but not loyal and have a high profit potential.
  2. True friends are both profitable and loyal and the firm should invest in a continuous relationship.
  3. Barnacles are loyal, but unprofitable. If they can’t be improved, the company should try to get rid of them.
  4. Strangers are not loyal and unprofitable, the company should not invest in them.

Today’s world is moving and changing fast. The economic crisis resulted in an uncertain economic environment, where consumers are more careful when spending their money. The technology boom of the digital age leads to an increase in connectedness and information. It provides marketers with new ways to track customers and create products based on their needs. It brought a new way of communicating and advertising. The most dramatic change in technology is the Internet, a vast public web of computer networks that connects users of all types all around the world to each other and an amazingly large information repository.

Web 1.0 connects people with information, Web 2.0 connected people with people and the upcoming Web 3.0 puts information and people connections together into a more usable Internet experience. Because of globalisation, companies are now globally connected with their customers. Current times also involve more sustainable marketing practices, involving corporate ethics and social responsibility.

Types Of Marketing Plans And Strategies

1. Market Penetration Strategy

When a firm focuses on selling its current products to existing customers, it is pursuing a market penetration strategy. The marketing activities that will dominate in this type of marketing plan are those that emphasize increasing the loyalty of existing customers so that they are not vulnerable to loss to competitors, attracting competitors’ customers, increasing the frequency of product use, and converting nonusers into users.

Increasing awareness through marketing communications and increasing availability through expanded distribution are common marketing activities in this type of plan. Identifying new use occasions and new uses for a product may increase usage frequency or convert current nonusers into users. For example, the advertising campaign for orange juice that has the tagline “It’s not just for breakfast anymore” was an effort to expand usage. Price promotions might be used to encourage competitors’ customers to try the firm’s product if there is reason to believe that such a trial will result in repeat purchases. Loyalty programs can be very effective in retaining existing customers. This strategy reduces risk by relying on what the firm already knows well—its existing products and existing customers. It is also a strategy where investments in marketing should pay back more quickly because the firm is building on an existing foundation of customer relationships and product knowledge.

2. Market Development Strategy

The efforts to expand sales by selling current products in new markets are referred to as a market development strategy. Such efforts may involve entering new geographic markets, such as international markets. Creating product awareness and developing distribution channels are key marketing activities. Some product modification may be required to better match the needs of the local market. For example, as fast food restaurants have moved into international markets, they have often changed their menus to better match the food preferences of customers in local markets. Expanding into a new market with an existing product carries some risk because the new market is not well known to the firm and the firm and its products are not well known in the market. The return on marketing investments in such a strategy is likely to be longer than for a market penetration strategy because of the time required to build awareness, distribution, and product trial.

3. Product Development Strategy

Creating new products to sell to existing customers, a product development strategy, is a common marketing strategy among firms that can leverage their relationships with existing customers. For example, American Express has been able to leverage its relationships with its credit card customers to also sell travel-related services. Similarly, cable television companies have expanded their offerings into Internet and telephone services. Research and development activities play a dominant role in this strategy. The time required to develop and test new products may be long, but once a product is developed, creating awareness, interest, and availability should be relatively rapid because the firm already has a relationship with customers. A product development strategy is also riskier than a market penetration strategy because the necessary product may not be possible to develop, at least at a cost acceptable to customers, or the product developed does not match the needs of customers.

4. Diversification Strategy

A diversification strategy involves taking new products into new markets. This is really the creation of a completely new business. This is the riskiest of strategies and the strategy likely to require the most patience in waiting for a return on investment.

Contributed to Branding Strategy Insider by: David Stewart, President’s Professor of Marketing and Business Law, Loyola Marymount University, Author, Financial Dimensions Of Marketing Decisions.

Conclusion

Marketing strategy is a key component to the success of any firm, it decides on the reach and number of potential customers within the market.

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