What is important for the success of any company?
There are many different factors to consider, but they all come down to a few basic things:
- a company should know its customers, their needs and preferences;
- to produce a product in demand that “covers” the needs of customers;
- work better than competitors (in terms of quality or price, or better – in terms of both parameters);
- be able to convey information about the advantages of your product to consumers, it is good to do promotion.
What is a marketing strategy and why should a company have one?
A marketing strategy is a long-term strategic plan that defines three key points:
- Which needs of the clients the company will satisfy with the help of its products.
- What the company will do for successful competition in the market.
- How can a company get profit from it all?
Any company has limited resources and works in the market with a certain volume, “eternally unsatisfied consumers” and “evil competitors”. In the market there are opportunities in which the company can potentially achieve success (to get profit). In these conditions the company should competently use its internal resources to occupy the market share, receive clients and stable profit.
The strategy is a way to determine the priority directions of the company’s development and plan its activities. It helps:
- Optimal use of resources (financial, material, technological, etc.);
- prevent erroneous actions;
- increase the efficiency of work.
Types of marketing strategies
On the competitive edge:
- Differentiation strategy. Advantage over competitors due to higher product quality or special characteristics/functionality.
- Minimal costs. If a company can achieve lower costs than competitors, it can be used to attract consumers by setting the lowest price in the market.
- Focusing on costs. Minimizing costs per customer segment.
- Focusing on differentiation. Same as the differentiation strategy, only focused on one segment.
- Price leadership. It’s simple – you have to keep the prices as low as possible (if the costs allow it).
- Follow the competitor. Prices are at the level of average market prices.
- “Cream withdrawal”. Prices are higher than those of all competitors.
- Innovations. Creation and introduction to the market of an absolutely new product.
- Modification. Take already existing products that are in demand and create several options (with additional/improved features and capabilities).
- Withdrawal. Termination of production or sale of a specific product.
What are the goals of the marketing strategy?
Market strategies. This group is also called external program goals:
- to capture a certain market share;
- the goal of achieving the right number of customers;
- Sales volume.
Manufacturing – Objectives that are aimed at performing the actions necessary to achieve the goals of the first group – the market. For example, these may include plans to increase production capacity, ensure the necessary volume of production, and develop and implement technologies.
Organizational – Objectives for the organization of the management structure, enterprise management, recruitment, etc.
Financial – They indicate the financial indicators that the company should reach.
The basic and most important financial goals:
- The amount of costs;
- Gross profit;
- Net profit;
Stages of developing a marketing strategy
The process of developing a marketing strategy consists of three key stages:
- control (control of strategy implementation, evaluation and adjustment if necessary).
Market segmentation and definition of consumer interest. At this stage, the company needs to clearly define which market segment it will work with.
Selected segment should be accurately described here:
- Portrait of the target audience.
- Client needs. Well, when the company managed to find the needs of consumers, to meet which there are no products on the market (or those that are – insufficient quality).
- Which product the company can offer to consumers (goods or services).
Competitor analysis – Here it is necessary not only to evaluate the activity of other enterprises, but also the ability of the company to successfully compete with them. To determine the level of competition and to compare the company with them there is an excellent tool.
Market power of suppliers – This analysis allows us to determine how strong the market position of suppliers is.
Here’s what you need to pay attention to:
- Are there enough suppliers
- whether there are suppliers in the right regions (important for logistics);
- What are the prices of suppliers?
- What is the status of suppliers’ costs, whether they can reduce them, and whether there are factors that force suppliers to raise prices;
- the level of quality of the suppliers’ products;
- how many buyers suppliers have, whether there is competition for the supplier between them.
Market power of consumers
- Number of buyers and sellers. Are there any major players in the market.
- Are buyers sensitive to the price of your product? This largely depends on how profitable the industry is for buyers.
- What are the costs of a change in supplier? How easy it is for them to do so. The easier it is to change suppliers at a low cost, the less secure your company is.
- How important is quality, and how it affects the quality of your customers’ products or services.
- Whether your product allows customers to reduce costs or save.
- What about the competition in your industry now? Is there a leader and small players? Or the market is shared by a few equal companies. In the second case, the competition is more intense.
- What do your competitors do: do they use aggressive growth strategies, or just work quietly in a mature market?
- What about the growth rate of the industry: isn’t there a slowdown?
- Features of competitors’ products. Is it distinguished by something, are there any unique features or characteristics?
- How balanced is the supply and demand?
- Level of fixed costs in the industry. Are there any opportunities to reduce them?
Analysis of the appearance of new players
- Industry entry threshold: With relatively easy access to technology and equipment, the lower the minimum level of capital, the more likely new players are to emerge.
- Sales channels. How easy (or difficult) to build in a particular industry?
- How important is the brand to customers? How will brand change affect demand?
- What can existing companies do to drive new players out of the market?
- Is it possible for new players to get subsidies or bank loans?
- Are there any substitute products? Who produces them?
- Level of quality and functionality of substitute goods.
- What do consumers prefer?
- What is the cost of switching to a substitute product for consumers?
The central stage of developing the marketing strategy is the marketing plan.
That’s what’s important to work through at this stage:
- A way to fight against competitors. Here it is necessary to choose parameters on which the company has advantages over competitors. These may be the parameters of the product itself, or the company itself. These parameters should be used to define the development plan.
- Actions in target market segments. Gradual withdrawal from non-promising segments, and in segments with great potential – active actions (expansion of assortment, opening of new shops, etc.). If the company works with several segments – each of them should have its own development strategy.
- Marketing complex. Have not forgotten the classical theory (4P)? The final stage of planning. Here it is necessary to define actions which will help to realise strategy, on each element of a marketing mix: Product, Price, Place, Promotion. It is important to specify what needs to be done, what timeframes, what budget and who is responsible.
Any company doesn’t work in ideal conditions. Market conditions, balance of power, consumer and competitor behavior can change. Marketing strategy of the company should be flexible and respond to all these changes.
Marketing strategy is an important part of the overall strategy of the company. It helps to choose the perspective direction of business development, in which all the resources of the company will work at full capacity and bring effective results.
A good strategy will help:
- to increase the market share;
- to raise the level of sales;
- to get regular customers;
- outperform competitors and become a market leader;
- increase net profit of the company.