Marketing Strategy

If a question comes up in the exam about marketing strategy then straight away you should be thinking about exactly what this means in English. Basically what does a company have to do in order to make sure their product has a positive impact on their market?

When coming up with a marketing strategy it is important for a company to know exactly what it wants to achieve. For this to happen a company needs to have objectives, once it has done this a strategy can be worked out around these objectives. A marketing strategy therefore is the steps you take in order to meet your objectives.

Once a company has set up their objectives there are many ways in which it can develop its marketing strategy. One of these ways is through Product Differentiation.

Product Differentiation is an extremely important part of successfully marketing a product. As a result it will almost certainly play a significant role in successful marketing strategy.

 

The Definition of Product Differentiation: adapting a product in order to make it stand out, perhaps by giving it unique features or by branding it.

When thinking about implementing a marketing strategy a business needs to take into consideration how they are going to meet the needs of their user as well as their own objectives. As a result some areas of the marketing mix will need to be stressed above others in order to focus on particular benefits. For example if a company were looking to increase their market share they would need to focus on price and introduce a penetrative pricing scheme meaning low margin of profit on each sale but increasing market share for the product. Another example would be if a product were aimed at a particular target group for example women - then promotion would need to be focused on in order to ensure the advertising was effective at bringing in customers from the target demographic.

 

There were a few terms in that paragraph that probably need further explanation.

Marketing Mix - The elements necessary to successfully market a product, commonly known as ‘The Four P’s’ – Price, Place Product, Promotion. (However there are more, so don’t limit yourselves to these four and don’t forget about Planning.)

Once you’ve talked about how a company is going to deal with their product - hopefully talking about product differentiation and the marketing mix - then you need to start thinking about what kind of market the product would be aimed at. This is where you need to bring in knowledge about mass marketing and niche marketing.

 

We’ll start with definitions:

Mass Marketing- Devising a product with mass appeal and promoting it to everyone.

Niche Marketing - Tailoring a product to a particular segment of a larger market

 

Mass marketing is useful for the plain and simple reason that it appeals to a lot of people. This means that although your product is likely to be unoriginal, it will always have a solid base of customers because of its mass appeal. This includes products like crisps, chocolate, DVD’s etc.

Niche marketing on the other hand is very different. Niche Marketing focuses on a market segment or a subsection of a larger market and tailors a product to meet the needs of that segment. This can be more risky, your target market becomes smaller and far more concentrated however this enables a firm to get closer to their market and this could result in more sales due to a better knowledge of the firms’ customers and what they want from a certain product. 

 

Here is a breakdown of the advantages and disadvantages created by Mass and Niche Marketing,

 

Mass Marketing

Advantages: 

• Mass marketing is all about low cost production with an emphasis on large scale manufacture of goods. This provides opportunities for companies to benefit from economies of scale such as bulk buying etc.
• Production of a variety of different products sold in various different markets reduces the risks of an economic recession or fall in demand for a certain product.
• Mass production will greatly improve short term cash flow as manufacturing output is at extremely high levels, combating problems companies may face with working capital. (For example if a company were to withhold payment for a purchase of stock from your own company, it would be less damaging if your company is constantly making lots of sales.)
• Mass marketing can be beneficial to a product which is standardised and has a long  life span. (See Product Life Cycle)

Disadvantages: 

• Profit margins for a product which is mass produced and mass marketed will be lower in relation to differentiated products in a Niche marketplace. (Due to lack of Unique Selling Point.) This in turn increases the Break Even point for a product which is mass marketed.
• Companies who employ a mass marketing scheme are more likely to encounter diseconomies of scale including things such as lack of morale amongst staff.
• Mass marketing and large scale production may also create the problem of large, ineffective management structures which make communication between staff difficult and can hinder production due to its inability to respond to changing trends in the market.

 

Niche Marketing

Advantages: 

• If a firm was able to identify a viable and relatively untouched market segment where demand is growing, then the chances for that firm to become profitable in the short term are extremely high.
• The financial risks of niche marketing are balanced by the fact that investment need not be high and only small amounts of funding are required.
• A company which employs a niche marketing strategy is likely to have an effective management structure due to lower levels of staff and therefore lower levels of corporate bureaucracy, making decision making process much more streamlined and time-effective.
• Staff feel far more valued as they become specialists in a less competitive environment. Staff morale levels increase hence increasing productivity levels for the company.
• Companies operating in a Niche Market do not suffer from the same diseconomies of scale that larger companies must handle.

 

Disadvantages: 

• The expansion and growth of the firm depends solely on the expansion and growth of the market.  If a company cannot encourage a significant consumer interest in their product range then the long term profitability of the company is compromised.
• Small scale Niche operations are not able to benefit from the advantages of economies of scale which larger firms can enjoy.
• Niche markets are sometimes unstable and occasionally suffer from the ‘straw on fire’ effect which refers to the market merely being a temporary solution to what is essentially only a fad. This is extremely detrimental to a company’s profitability.
• Unless a firm operating in a Niche market can establish a strong and sustainable USP then the firm will face challenges from larger companies who diversify into the niche market with one of their product ranges. Control of a particular market segment will also be lost if the factor affecting demand is price, due to the fact that mass produced products are invariably cheaper.

 

Although this is mind-numbingly boring its worth getting learnt as it will most definitely be applicable to some aspect of your exam!

You’ll be happy to learn that the next few pages involve much less writing to give your eyes a well deserved break.