11.2 Creating a Marketing Strategy

What Is Marketing Strategy?

Marketers use a number of different “tools” to develop the products or services that meet the needs and wants of their customers, provide excellent value for the customers, and satisfy those customers. Marketing strategy is really five different components of marketing. These components are traditionally called “the Four Ps” of marketing; however, this chapter includes an additional component "People" to create a new total of Five Ps. They are the methods, tools, and processes used by marketers to develop and market products. In Chapter 12, we will analyze an additional P, "Packaging" but will continue to refer to these components as "Five Ps." These five tools are also called “the marketing mix.” These are the 5Ps:

• Product: Something offered in exchange and for which marketing actions are taken and marketing decisions made. Products can be goods (physical things such as smartphones) or services (such as the telecommunications that must be used for a smartphone to work) or ideas (such as the thought that being constantly connected through telecommunications is absolutely crucial in today’s society). All products have both tangible and intangible aspects.
• Price: Something given in exchange for a product. Price may be monetary or nonmonetary (such as waiting in long lines for a restaurant or giving blood at the local blood bank). Price has many names, such as rent, fees, charges, and others.
• Place: Some method of getting the product from the creator of the product to the customer. Place includes a myriad of important tasks: transportation, location, supply chain management (managing each entity that deals with the product in its route to the buyer), online presence, inventory, and atmospherics (how the office, store, or website looks).
• Promotion: Methods for informing and influencing customers to buy the product. Promotion includes several different components: traditional advertising, sales promotion, public relations, personal selling, social media, and e-commerce. Promotion is often mistaken for marketing because it is the most visible part of marketing; however, marketing encompasses much more than just promotion.
• People: Methods of utilizing organization employees to support the marketing strategies of the company. All products have both tangible and intangible aspects. People (as a marketing strategy) are crucial to the development of the product’s intangible aspects.

Marketers utilize the tools of marketing strategy to develop new products and sell them in the marketplace. But marketers cannot create products in isolation. Marketers must understand and consider all aspects of the external environment in order to create marketing programs (plans) that will be successful in the current market and in future markets. Thus, many organizations assemble a team of specialists to continually collect and evaluate environmental information, a process called environmental scanning. The goal in gathering the environmental data is to identify current and future market opportunities and threats.

Companies in high-tech industries understand the importance of environmental scanning to monitor rapidly changing consumer interests. After the emergence of PCs, processor speeds have grown exponentially alongside a convergence of technologies. The digital industry (manufacturers of computers and smartphones, as examples) has converged with the entertainment industry (such as radio, streaming, and the internet). This convergence is already creating great opportunities for new products—more wearable technologies such as fitness rings or home appliances with smartphone integration—that are not affiliated with companies in the digital or tech industries.

One clear winner in this new world so far is Apple, which has leveraged its computer platform to make it easy and fashionable for consumers to become experts in the digital age. Apple has capitalized on this through the development of iPhones, iPads, and the Apple Watch. Apple sells more iPads per year than it does Macbooks, and over 200 million iPhones. Microsoft is a top competitor in this business, as is HP (Hewlett-Packard). Both companies offer strong competition to Apple and are investing in AI and how it is transforming the industry. Another competitor to watch is Samsung. Samsung's advantage over Apple is its diverse business model in providing products to consumers but also participating in business-to-business relationships by selling components to other companies, with Apple being one of them. Finally, the device-free streaming services such as Amazon Music, Pandora, and Spotify have provided competition to Apple while helping to restore profitability to the music industry.³

In general, six categories of environmental data shape most marketing decisions:

• Cultural/social forces: Includes such factors as the buying behaviors of specific cultures and subcultures, the values of potential customers, the changing roles of families, and other societal trends such as employees working from home and flexible work hours
• Demographic forces: Includes such factors as changes in the ages of potential customers (e.g., baby boomers, millennials, Gen Z), birth and death rates, and locations of various groups of people
• Economic forces: Includes such factors as changing incomes, unemployment levels, inflation, and recession
• Technological forces: Includes such factors as advances in AI and computer technology
• Political and legal forces: Includes such factors as changes in laws, regulatory agency activities, and political movements
• Competitive forces: Includes such factors as new and shifting competition from domestic and foreign-based firms

Defining the Target Market

Marketers develop the information about the environment to get a clear picture of the total market for the product, including environmental factors. Once the marketers understand the various environmental factors, specific target markets must then be chosen from the total market. Marketers focus on providing value for a well-defined target market or target markets. The target market is the specific group of customers (which could be organizations or individual consumers) toward which a firm directs its marketing efforts. Monster Energy Drinks targets people 18 to 34 years old and those interested in gaming, extreme sports, or fitness. Williams Sonoma has several different brands, each geared toward a distinct target market: Pottery Barn for upscale home furnishings; its specialty stores, West Elm, Mark and Graham, and Rejuvenation, that specialize in jewelry and other accessories; and home improvement and furnishings that are affordable and sustainable. These target markets are all part of the overall retail market for housewares and lifestyle. Identifying a target market helps a company focus its marketing efforts on those who are most likely to buy its products or services. Concentrating on potential customers lets the firm use its resources efficiently. Examples of the target markets for Marriott Hotel Brands’ lodging alternatives are shown in Table 11.1.

Creating a Competitive Advantage

A competitive advantage, also called a differential advantage, is a set of unique features of a company and its products that are perceived by the target market(s) as significant and superior to those of the competition. Competitive advantage is the factor that causes customers to patronize a specific firm and not the competition. There are four types of competitive advantage: cost, product differentiation, service differentiation, and niche.