Welcome to the Marketing Strategy Toolkit!
Hello future business leaders! This chapter is one of the most exciting parts of Business Studies. Why? Because marketing strategy is how businesses connect with customers and ultimately make sales.
It's not just about flashy adverts; it's about having a detailed plan (a strategy!) that ensures the right product reaches the right person, at the right price, at the right time. Think of this chapter as learning how to build the perfect plan to sell anything!
Don't worry if some terms sound complicated—we'll break down the strategy into four easy-to-manage pieces, known as the Marketing Mix (the famous 4 Ps).
Quick Review: The Purpose of Marketing
Before we build a strategy, we need to remember the goal: satisfying customer needs and wants profitably.
- Need: Something essential for survival (e.g., food, shelter).
- Want: Something desirable but not essential (e.g., a specific brand of smartphone, a luxury car).
A successful strategy helps the business achieve its objectives, such as:
1. Increasing sales revenue.
2. Gaining Market Share (the percentage of total sales in the market controlled by one company).
3. Building Brand Loyalty (customers keep coming back).
1. Step One: Finding Out What Customers Want – Market Research
You cannot create a great strategy without knowing your customers. This is where Market Research comes in. It's the process of gathering, analysing, and interpreting information about a market.
1.1 Primary (Field) Research
This is new information collected directly by the business for a specific purpose. Think of it as being a detective looking for fresh clues!
- Example: A new café hands out questionnaires to people in the street to ask what kind of coffee they prefer.
Advantages of Primary Research:
- The data is up-to-date and specific to the business’s needs.
- Data is gathered directly from the target market.
Disadvantages of Primary Research:
- It can be expensive (paying staff to interview, printing costs).
- It takes a lot of time to collect and analyse the data.
Methods of Primary Research:
1. Surveys/Questionnaires: Asking questions to a large number of people.
2. Focus Groups: A small group of people (e.g., 8-10) who discuss a product or idea with a moderator.
3. Observations: Watching customer behaviour (e.g., how long they spend looking at a display).
4. Interviews: Detailed, one-on-one conversations.
1.2 Secondary (Desk) Research
This is information that already exists and has been collected by someone else (e.g., government, magazines, other businesses). Think of it as checking old files in an archive.
- Example: A business reads a government report on population changes (demographics) to decide where to open a new shop.
Advantages of Secondary Research:
- It is usually cheap or free (e.g., using internet data).
- It is quick to access and compare data.
Disadvantages of Secondary Research:
- The data might be out-of-date.
- The information might not be exactly what the business needs (it was collected for a different purpose).
Methods of Secondary Research:
1. Internal Data: Sales records, customer complaints.
2. External Data: Government statistics, market reports, newspapers, internet articles.
Key Takeaway: Good market research reduces risk. It tells the business *if* their product is even wanted before they spend money producing it.
2. Step Two: Dividing the Market – Market Segmentation
Do you think a 7-year-old child and a 70-year-old adult want the same things? Definitely not!
Market Segmentation is when a business divides the entire market into smaller groups (segments) of consumers who have similar characteristics and needs.
This allows the business to focus its limited resources (money and time) on the customers most likely to buy the product.
Common Ways to Segment a Market:
1. Demographic Segmentation (Who are they?)
Dividing the market based on measurable characteristics of the population.
- Examples: Age, Gender, Income Level, Family Size, Ethnicity.
- Analogy: Selling baby food focuses on segments with young children. Selling retirement homes focuses on older segments.
2. Geographic Segmentation (Where are they?)
Dividing the market based on location.
- Examples: Country, Region, Climate (e.g., hot vs cold), Urban vs Rural.
- Analogy: A company selling heavy winter coats would focus its efforts geographically in cold countries.
3. Psychographic Segmentation (What do they think?)
Dividing the market based on lifestyle, values, attitudes, and personality traits.
- Examples: Health-conscious people, adventure seekers, environmentalists.
- Analogy: A business selling organic, sustainable products targets segments who value ethics and the environment, regardless of their age or location.
Quick Trick: Marketing Strategy aims to find the Target Market—the specific segment the business wants to sell to. If you target everyone, you target no one!
3. Step Three: The Marketing Mix (The 4 Ps)
Once the research is done and the target market is identified, the business creates its comprehensive plan using the Marketing Mix. This is the blend of Product, Price, Place, and Promotion.
Memory Aid: Remember the 4 Ps! They are the core tools you use to attract customers.
3.1 P: Product Strategy (What are we selling?)
This includes the physical good or intangible service, its design, quality, name (branding), and packaging.
Key Product Concepts:
- Unique Selling Point (USP): This is what makes your product different and better than the competition. Example: "We deliver in 30 minutes, or your pizza is free."
- Branding: Giving the product a memorable identity (name, logo, design). Good branding builds loyalty and allows the business to charge higher prices.
The Product Life Cycle (PLC)
Every product goes through stages from birth to eventual decline. Understanding the PLC helps a business plan its marketing actions and manage its product portfolio.
- Introduction: Product is brand new, sales are low, and costs are high (heavy promotion needed).
- Growth: Sales rapidly increase, profits start to rise, and competitors begin to enter the market.
- Maturity: Sales peak and then flatten out. Competition is intense. The business focuses on extension strategies (e.g., new flavours, minor redesigns) to maintain interest.
- Decline: Sales and profits fall consistently. The product is either withdrawn or sold to a smaller niche market.
Did you know? "Extension strategies" like releasing a 'Diet' or 'Zero Sugar' version of a drink are used during the Maturity stage to stop the product from going into Decline!
3.2 P: Price Strategy (How much should we charge?)
Pricing is difficult because if it's too high, customers won't buy. If it's too low, the business won't make a profit.
Main Pricing Methods:
-
1. Cost-Plus Pricing: Calculating the total cost of producing the product and then adding a percentage mark-up for profit.
Formula idea: Cost + % Profit = Price. - 2. Competitive Pricing: Setting a price that is similar to competitors' prices. This is common in saturated markets (e.g., petrol stations).
- 3. Penetration Pricing: Setting a very low price when a new product is launched to quickly attract customers and gain market share. Once customers are loyal, the price might be increased. (Often used for subscriptions or new snacks.)
- 4. Price Skimming: Setting a very high price when a new product (usually technological) is launched. The high price 'skims' maximum revenue from early adopters before competitors enter the market. The price is lowered later. (Think of a new iPhone launch.)
- 5. Psychological Pricing: Setting the price just below a whole number to make it seem cheaper (e.g., $9.99 instead of $10.00).
3.3 P: Place Strategy (Where will customers find it?)
Place (also known as Distribution) is about getting the product from the manufacturer to the final consumer. The path the product takes is called the Channel of Distribution.
A business needs to choose the most effective channel to reach its target market.
Common Channels of Distribution:
1. Direct Selling (Producer to Consumer): E.g., a farmer selling vegetables directly at a market stall or an online store selling its own branded clothes.
2. One Intermediary (Producer to Retailer to Consumer): E.g., a clothes factory selling clothes directly to a chain store like Zara, which then sells to you.
3. Two Intermediaries (Producer to Wholesaler to Retailer to Consumer): This is the traditional route. The Wholesaler buys in bulk from the producer, breaks the bulk down, and sells smaller quantities to independent Retailers.
Why use a Wholesaler? They reduce storage costs for both the producer and the retailer.
3.4 P: Promotion Strategy (How will customers know about it?)
Promotion involves communicating information about the product to consumers to persuade them to buy it.
Types of Promotion:
- Above-the-line Promotion (ATL): Using mass media channels where the company pays for communication (e.g., TV, radio, newspapers, cinema, online banner ads). It reaches a wide audience but is expensive.
- Below-the-line Promotion (BTL): Direct methods of communication or sales efforts aimed at specific individuals or groups (e.g., direct mail, sales promotions, public relations).
Common Methods (BTL and ATL):
1. Advertising: Creating and placing messages through media (TV, social media, print).
2. Sales Promotions: Short-term incentives to encourage a purchase (e.g., "Buy one, get one free," discounts, free samples).
3. Public Relations (PR): Managing the business's reputation (e.g., press releases, sponsoring a local charity event).
4. Social Media/Online Communication: Highly targeted and often low cost.
Don't forget: The ultimate goal of promotion is to increase consumer awareness and boost sales.
4. Final Strategy Check – Consistency
The most important part of a marketing strategy is ensuring all 4 Ps work together perfectly. They must be consistent.
Example: If a company sells a luxury product (Product P), it must use a high price (Price P), only sell through exclusive boutiques (Place P), and advertise in high-end magazines (Promotion P).
A mistake would be selling a luxury product at a very high price (Price) but promoting it using cheap leaflets (Promotion). The strategy would collapse!
Quick Review: Your Marketing Strategy Checklist
A strong strategy requires you to:
1. Know your market (Research).
2. Know your ideal customer (Segmentation).
3. Have the right Product (Is it branded? Does it have a USP?).
4. Choose the right Price (Can you skim, or must you penetrate?).
5. Ensure the right Place (Can customers easily find it?).
6. Communicate effectively (Promotion) while making sure all 4 Ps are consistent!
You've successfully mastered the framework for market success! Keep practicing these concepts with real-world examples.