A marketing strategy has a strong positive impact on profitability, here’s our small business guide to establishing and implementing one
Do I need a marketing strategy?
Making and using a marketing strategy has a strong positive impact on profitability. This is because small businesses that employ a marketing strategy tend to focus on their customers and markets, integrate their marketing responses and work out in advance where their profits will come from.
This briefing answers a range of questions people in small business often ask about marketing strategy:
- what is a marketing strategy?
- what’s the difference between marketing strategy and business strategy?
- where does the marketing mix fit in?
- what is a marketing plan?
- what information do I need and where do I get it?
- what should my marketing strategy consist of?
- how do I get started?
A marketing strategy defines objectives and describes the way you’re going to satisfy customers in your chosen markets. It does not have to be written down but it is easier to communicate to outsiders, like your bank manager or other investors, when it is.
A set of strategies found quite commonly in smaller businesses are growth strategies. One way to look at strategies to grow your business is through the way you will use products and markets or customers.
- Current product/current market
Market penetration is a strategy of increasing your share of existing markets. You might achieve this by raising customers’ awareness of your products and services or finding new customers.
- Current product/new market
Market development is a strategy of finding and entering new markets with your current product or service range. The new market could be a new region, a new country or a new segment of the market.
- New product/current market
Product development is a strategy for enhancing benefits you deliver to customers by improving your existing products and services or developing new ones.
- New product/new market
Diversification is a strategy that usually carries high costs and high risks. It often requires firms to adopt new ways of doing business and so has consequences far beyond simply offering new products/services in a new market. It is therefore usually a strategy to be adopted when other options are not feasible.
The marketing strategy focuses on markets and customers and is just one part of business strategy. Business strategy takes a broader view that includes other business functions such as manufacturing and operations, finance, quality, purchasing and supply chain, and information and communication technology. For example, a business objective may be to increase sales. Marketing objectives to achieve this would be to reach new customers, promote repeat buying among existing customers and launch new products.
The marketing mix is an important part of the marketing strategy and consists of the marketing ‘tools’ you are going to use. But marketing strategy is more than the marketing mix.
The marketing strategy sets your marketing goals, defines your target markets and describes how you will go about positioning the business to achieve advantage over your competitors.
The marketing mix, which follows from your marketing strategy, is how you achieve that ‘unique selling proposition’ and deliver benefits to your customers.
When you have developed your marketing strategy, it is usually written down in a marketing plan. The plan usually goes further than the strategy, including detail such as budgets. You need to have a marketing strategy before you can write a marketing plan. Your marketing strategy may serve you well for a number of years but the details, such as budgets for marketing activities, of the marketing plan may need to be updated every year.
The key in marketing strategy is to understand and match the capabilities of your firm to the opportunities available in the market. You will therefore need a range of information such as:
- Market data: data about the size and growth rate of the market, who potential customers are, what they buy, when they buy, from whom and through whom do they buy, etc
- Competitive data: data on who direct competitors are, their products, prices, etc. It also helps to identify indirect or potential competitors who may take you by surprise.
- Internal data: data within your business will help to assess the strengths and weaknesses of your product/service and its core capabilities.
Your business judgement will play a key part in deciding marketing objectives, target markets and suitable positioning strategies.
The constituent parts of a marketing strategy are based on a thorough and objective understanding of the current situation. They usually include:
- The scope of the business: the customer groups you serve, the benefits they are seeking and which you deliver, and the technology you use. This may provide you with what some companies call a ‘vision’ or ‘mission statement’, a set of words explaining what your business is about and where it is going.
- Marketing objectives: e.g. market share, sales or market share growth, market entry, increase awareness, etc.
- Target segments and positioning: the specific customer groups or segments you are targeting and your business’ position in those segments.
- Marketing mix: the products, price, place (distribution) and promotion that you are using as ‘marketing tools’ to deliver benefits to your customers and beat competitors.
- Implementation: includes action plans, budgets, timescales and resources.
The best marketing strategy is not going to help if it you cannot implement it. When you have finished your marketing strategy, it is worth checking that you have the operational capacity and processes capable of fulfilling the extra orders, delivering on time and providing any extra services reliably and efficiently.
In the early stages of your business, concentrate on the marketing mix (product, place, price and promotion) to plan and coordinate your marketing activities. When you start having to solve problems like these below, then that is the time to start thinking more about marketing strategy.
- my sales are declining
- my sales aren’t growing as fast as I would like
- we have just lost some key accounts to competitors
- I want to expand into a new region/market/country
- I think there is a market for a new product/service
- I wish I could get through to more customers just how good our product is
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