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Lesson - Strategic Marketing and the Market Environment

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Strategic Marketing and the Market Environment Let us briefly examine the role of strategic marketing in the contemporary organisation. Marketing is the discipline associated with identifying the needs and wants of a target set of customers, and then creating market offerings to satisfy those customer needs and wants. In today's customer-centric world strategic marketing means pleasing the customer at every opportunity. Your market offering may be a product, a service or a combination of both to meet the particular business need of the customer. The last category is often referred to as a solution, and is an increasingly important part of strategic sales and marketing in commercial environments (B2B sales) today.

Read more about strategic marketing at: http://www.lead-edge.co.uk/stratmkt/stratmkt.html

In today's complex business environment, market offerings are often solutions. Solutions can comprise products, services and consulting. Solution selling calls for a totally customer-centric approach. By offering a solution to the customer you are offering them a total package; a complete solution to their unique needs. Furthermore you are really forming a strategic partnership with your customer; one that could be a 'win win' scenario for both customer and vendor. Although not directly involved in solution selling, every marketer needs to be aware of the strategic role of solution selling in today's B2B environment. Solution sales are at the top of the value chain, and by pursuing this market there are potentially big and long-term competitive gains to be made. Marketers, therefore, have to be fully aware of the potential for their organisations of this market. Gain a background to solution selling at: http://www.mikebosworth.com/index.asp?page=home

Strategic marketing is about pleasing the customer. This entails the following steps: Step 1: Developing a clear strategic vision. Step 2: Conducting an audit of the internal and external marketing environment. Step 3: Analysing the marketing environment information. Step 4: Strategic planning. Step 5: Monitoring and control.

In Unit 1 Marketing and Corporate Strategy we emphasised the role of marketing in developing a clear strategic vision (step 1). In this unit we shall focus on the internal and external audit and analysing the marketing environment information (steps 2-3). In the Unit 4 on Market Planning and Market Management Market Segment Strategies and Plans we shall cover aspects of step 4, as well as step 5. Overview of Market Environment Strategy, certainly from a classical perspective, is about asking the questions:

Where are we now? Where do we want to be? How do we get there?

Understanding the internal and external factors affecting competitiveness addresses the question 'where are we now?' It is a logical starting point. Factors influencing demand (and hence the market environment) can be categorised as controllable and uncontrollable factors.

Figure 2.1.1 - Influences on demand

Uncontrollable factors tend to be external factors over which the organisation has no influence. Nevertheless, an organisation must carefully assess these factors to avoid threats and pitfalls, as well as to exploit market opportunities. We shall examine how to assess these external factors later in this unit. Controllable factors, on the other hand, are those factors that an organisation can define so as to gain competitive advantage. These factors are often referred to as the marketing mix. Marketing Mix The American Marketing Association Definition of marketing is: 'The process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.' Marketing is then about having the 'right market offering at the right time, place and price' in order to please the customer. The foundations of marketing are based on what is referred to as the 5Ps or the marketing mix; the controllable factors that influence demand:

Product Price Promotion Place People Back Next

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In the marketing context, what do you think the following components of the marketing mix refer to?

Product Price Promotion Place People

By 'Product' we mean the product concept or market concept. The market concept may well be a product, but can also be a service or a solution. Finding the right product concept is a key marketing function. 'Price' refers to the pricing decisions that are made to optimise price competitiveness in the marketplace. It is finding the price that the customer is willing to pay. 'Promotion' refers to the methods by which the market offering is communicated to potential customers. 'Place' refers to the 'where and who' in selling. Where you will market and who will deliver your product/services/ solution to your customers. It includes decisions on market coverage, demographics, geographical coverage, and distribution channels. 'People' was added later to the marketing mix, as the key role of people came to be recognised. particularly in the services industries. 'People' really refers to customer service; specifically, how well your staff (in particular, customer-facing staff) serves the requirements of customers. This element of the marketing mix should not be under-estimated, because when we talk about markets we are really talking about people. When we create marketing plans we are designing ways to effectively communicate with people.

With the increasing dominance of the services sector in many western economies, the 5 Ps has been expanded to be the 7 Ps for the services sector. The two additional Ps are:

Process. Physical Evidence.

Process is now a vital element in any marketing strategy, and refers to how the service/solution is delivered. By physical evidence we mean the ability to communicate the benefits of your service to potential customers. It is that which the customer can sense physically that contributes to their perception of the service. These latter two Ps are vital when marketing services and solutions. With rapid changes in the business environment, and, in particular, as a result of the pervasive influence of the

Internet, the term marketing has come to mean other things. However, it should be noted that the foundations of marketing remain largely the same, but the vehicles for marketing are changing. In particular, the age of the Internet, with accessibility to new technologies, is providing new opportunities for market promotion, market reach and distribution. It is also providing vendors with the electronic infrastructure and tools for rapid customer responsiveness and improved service.

Marketing Mix Analysis is the discipline of analysing individual components of the mix to quantify their effectiveness. What are the advantages of such a disciplined approach? What of the interdependence of the marketing mix variables? Explain.

Marketing Mix Analysis quantifies the impact and benefit, expressed as incremental unit sales, of each marketing mix element; such as advertising, promotions, pricing, distribution, and product innovation. This result is a measurable understanding of the net return on investment for each marketing mix element. In turn, these individual ROI numbers guide future marketing investment decisions and make each marketing activity fully accountable. Marketing mix analysis also provides a clear understanding of the marketing strengths and weaknesses of competitors. The benefit is obvious - it provides a company with the intelligence to formulate specific strategies and tactics that exploit competitors' weaknesses. At the same time, it helps companies to conserve energy and resources by avoiding activities that play into their competitor's market strengths. Although it is extremely useful to understand the effectiveness of each of the marketing mix variables independently, it should be noted that the variables are indeed inter-dependent. For example, it is neither practical nor appropriate to focus initially upon the first element - product - and then move systematically through all other variables without appreciating that each factor has an interdependence with the others.

The marketing mix variables are a set of interdependent variables which need to be managed both tactically and strategically within the constraints imposed by the organisation's environment.

The digital age provides an ever-expanding array of technologies, devices, channels, forms of content and modes of interaction for the marketing mix; especially in advertising, PR and sales promotion. For companies these developments provide new opportunities but also some challenges. Research the recent trends, opportunities and challenges in advertising, personal selling, PR, sales promotion and packaging by reading the following articles: Managing Marketing Communications : http://jobfunctions.bnet.com/whitepaper.aspx?docid=84443 Introduction to the Promotion Mix: http://www.tutor2u.net/business/marketing/promotion_mix.asp Mass Marketing Unplugged: How Advertising Jumped Out of Your TV and Into Your Hand http://www.accenture.com/Global/About_Accenture/Business_Events/By_Industry/Communications/ gcf07_mass_marketing.htm

Invitation Marketing: Using Customer Preferences to Overcome Ad Avoidance http://www.accenture.com/Global/Research_And_Insights/Outlook/By_Alphabet/InvitationAvoidance Study Shatters Internet Marketing Myths: http://accenture.tekgroup.com/article_display.cfm?article_id=3657 Are Your People Ready to Sell? http://www.accenture.com/Global/Services/By_Industry/Communications/ Access_Newsletter/Article_Index/AreSell_old.htm Next we turn our attention to the organisation's environment; internal and external.

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The Internal and External Environment To understand the market environment, an organisation needs to audit both its internal and external environment. The internal and external environment is the key input to the development of product strategies. (Note that we are using 'product' in a generic sense, and it can be a product, service or solution.)

Contrast the external environment and internal environment. Why are both environments crucial to an organisation's strategy?

The external environment is also referred to as the macro-environment. Macro-environmental analysis is the study of the influence of political, economic, socio-cultural, technological and legal influences on your markets. Macroenvironmental analysis enhances strategic planning by raising management awareness of the impact of external influences through industry and market analysis. It focuses attention on the primary influences of strategic change and provides time to anticipate opportunities and develop responses to change. In essence, it acts as an early warning system. The necessity for macro-environmental analysis increases when organisations are large, have diverse product lines and require large investments. Also when they face complex and turbulent markets, and experience a high propensity to competitive threats. By internal environmental factors we mean those factors that are internal to the organisation that influence its strategy. Factors such as organisational culture, knowledge, competences, organisational capability and strategic relationships fall into this category. Internal environmental factors define an organisation's efficiency. Obviously the more efficient an organisation is, the more able it is to compete in the marketplace - particularly if the company is 'playing' in a very price-competitive market. The more distinctive and relevant its organisational capabilities, the more desirable it is in the marketplace.

Figure 2.1.2 - Environment and product strategies Key decisions which managers make are decisions about the product-market mix, the positioning of the product and 'branding'. These decisions result from the simultaneous analysis and interpretation of the external and internal environments. Crucial aspects of the external environment affect decisions about the marketing mix relating to consumers, competitors and the product life cycle. Internally, strengths and weaknesses in such functions as manufacturing and operations, human resources, finance, marketing, and research and development all relate to and affect decisions about the product.

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