Marketing strategy is a way through which businesses try to achieve their goals in the shape of an increase in sales and getting an advantage over the competitors. An effective Marketing Strategy is one in which marketing goals, action sequences, and policies are combined. A good Marketing Strategy is always drawn from marketing research and is considered as the foundation of a marketing plan.
Types of Marketing Strategy
There are many types of marketing strategies, but basically, there are four, which are as under.
- Horizontal Integration Marketing Strategy
- Aggressiveness Strategies
- Market Dominance-Based Marketing Strategy
- Innovation-Based Marketing Strategy
Each one is discussed below.
Horizontal integration is based on the theory of ownership & control. Such an organization that tries to sell a single kind of product in various markets actually uses this strategy. For this purpose, a number of subsidiary companies are developed that are smaller in size. Each one of the subsidiary companies sells the product of the main organization to a specific market or geographical area. This whole process is referred to as horizontal integration.
In horizontal integration, the organization has many plants that produce similar products at different locations. Similarly, horizontal marketing is carried out as horizontal production. Horizontal integration includes the following.
Vertical integration is based on the theory that explains the style of ownership & control. There is one common owner for all the organizations that are combined in a hierarchical fashion. Different Types of Products are produced by each member of the hierarchy which is united to fulfill a common need. Vertical Integration is further divided into the following three forms.
- Awkward Vertical Integration, in which those subsidiaries are combined with the organization that provides inputs to the organization for the manufacturing of its product.
- Forward Vertical Integration, in which those subsidiaries are linked with the organization that markets, distributes, or even uses the product of the organization by them.
- Balanced Vertical Integration, in which those subsidiaries are combined with the organization that both distributes the product as well as provides the inputs.
The degree of aggressiveness provides the basis for categorizing the strategies of the business. The rating of aggressiveness strategies is based on product innovation, risk propensity, marketing assertiveness, speed of decision making, financial leverage, and measures of aggressiveness of the organization. Normally aggressiveness strategies are categorized as follows.
Prospector Strategy is the most aggressive strategy new markets stimulate new opportunities through expansion of the active programs. Additional market share is obtained by attacking competitors & developing new products vigorously.
The organization which adopts an aggressive prospector strategy shows a quick response against any market change with analysis or research. The new markets & new products provide a large portion of revenue for the organization. The market rejection & product failure risk is quite high. The sales are mainly due to sales promotion, advertising & personal selling.
Under this strategy, the organization does not pursue the market aggressively. In defender strategy, the organization searches for & maintains a safe & relatively stable market. To maintain a stable market, the organization adopts the following techniques.
- Keep prices low
- Lowering the advertising & other promotional costs
- Engage in vertical integration
- Offer better quality products
- Offer a limited range of products
In between defender & prospector, analyzer falls. Their mistakes are less than prospectors along with taking less risk. However, the commitment to stability is lower for the analyzer as compared to the defender. Many organizations are falling in the category of the analyzer by moving for a change as a second or a third entity in the industry. Hence these organizations increase the areas of their operations around the existing core competency areas.
The existing markets are mostly expanded rather than expanding quite new markets by the analyzer. Furthermore, a balanced portfolio of products is maintained by organizations in this category.
There is no proactive strategy for reactors. As the event occurs, the reactors react. Mostly the macro-environmental pressures force the reactors to show some response. There is not any sufficient direction or focus in the strategies of reactors. Since that is why these are less effective than the other ones.
Market Dominance Strategies
The market dominance strategies are classified on the following basis.
The market leader is an organization that has dominance in the industry. Especially the excessive distribution channels with the retailers & substantial market share are the advantages of the market leader. Mostly new innovations regarding the products & business models are started by the market leader.
Although the price or output is also affected by the market leader to some extent. In crafting this marketing strategy, the market leader is the most flexible in the industry. Following are some of the options that the market leader can avail of.
- New uses and users of the product for expansion of the market
- Increased usage of product on every occasion for expansion of the market
- New ideas for product development for securing an existing market share
- Improving customer service for securing an existing market share
- Improvement in effectiveness of distribution for securing an existing market share
- Cost reduction for securing an existing market share
- Targeting competitors for expanding market share
- Keep safety from the regulations of the government in the process of expansion of market share.
The organization which holds a strong position in the industry and employs an aggressive strategy in order to get market share is called the market follower. Mostly the market leader in the industry is targeted by the market challenger, but the smaller firms can also be attacked by it. However, the market challenger adopts the following fundamental principles.
- The strength of the targeting competitor is assessed by market challengers.
- A single competitor is targeted by the organization at one time.
- The weakness of the target is ascertained so that the weak point can be attached.
- The attack is kept in front and narrower.
- Also, the attachment is launched quickly & soon after which consolidation is made.
Moreover, the market challenger has the following options.
- Price cutting or price discounts
- Introduction of new products
- Improve services
- Line extensions
- Changing distribution channels
- Reduction in the quality of product
- Improvement in the quality of the product.
- Boosting the promotional activity
An organization that has a strong position in the industry, but tries to maintain that position is called the market follower. Following are some of the advantages associated with the marketing strategies of market followers.
- Avoiding expensive Research and Development failures
- Avoiding the risk of a bad business model
- Establishing best practices in advance
- The capitalization of the promotional activities of the market leader
- Reduction in the risk of being attacked by the competitors
- Saving money by avoiding war with the market leader
The market niche is mostly smaller size organizations that target one or more segments of the market. The focusing strategy is used by the market niche in which only one or two segments of the market are targeted by shaping the marketing mix to the specialized needs of those segments. In this way, the market niche much more effectively satisfies its target customers than other larger competitors. Therefore the main feature of the market niche is that it is smaller in size, which secures it from the attacks of competitors along with much larger in size that it can become profitable. Thus the competitive advantage is gained by the market niche through effectiveness rather than through efficiency.
Following are some of the characteristics of the market niche.
- High margins of profits are obtained through serving as a value-added organization
- A specific market segment is focused on the market niche
- Premium pricing strategy is used by market niche by marketing high-end products
- The operating expenses are reduced by less spending on advertising, R&D, and personal selling
The marketing strategies that are based on the new product development along with the innovating business model are called innovation strategies. So the organization that adopts this set of strategies is placed on the cutting edge of innovation & technology. Following are the kinds of organizations that adopt these strategies.
- Close Followers
- Late Followers
Besides the above-mentioned marketing strategies, there are some other important strategies that are also effectively employed by organizations.
Cost Leadership Strategy
In this type of marketing strategy, efficiency is emphasized in cost leadership strategy in which a large volume of standard products is manufactured by the organization. So the main aim of this strategy is to avail the benefits of economies of scale along with the effects of the experience curve.
However, this strategy is best suited to the organization which produces a basic product at a lower cost. Moreover in increased quantity for a large number of customers. Hence the cost is reduced by producing abundant quantities of product. So the requirement of this strategy is to have close access to the inputs like raw material & labor etc. Along with a sufficient portion of market share. Following are some of the benefits of this useful strategy
- Possession of engineering skills
- The manufacturing easement is focused on the design of the product
- Labor is closely supervised
- Cost is tightly controlled
- The quantitative targets provide the basis for incentives
- Inexpensive capital is accessed.
In this type of marketing strategy, the unique product is produced by the organization. Moreover, the organization offers unique features or benefits with its products that can be helpful in the provision of superior value to the customers.
Therefore, brand loyalty is enhanced by a reduction in the price elasticity of demand when customers consider the unrivaled & unequal features of the differentiated product. Thus the competition is insulated through product differentiation. Therefore the premium pricing strategy is effective for this category of products due to the higher costs.
So following are the requirements for effective implementation of this marketing strategy.
- The research & development Skills required to be stronger
- Stronger skills in product engineering
- Stronger skills of creativity and marketing
- The distribution channels should be effectively co-operated
- The subjective measures should provide the basis for incentives
- Creative & highly skilled people should be attracted
- The characteristics of the differentiating products can be communicated effectively
- There should be a strong emphasis on continuous improvement & innovation.
More From Business Study Notes:- Market Segmentation Strategies
Market Segmentation Strategies
Few market segments are selected & targeted in this marketing strategy by the organization and hence it is also called niche strategy or focus strategy. When the organization targets one or two segments by tailoring its marketing mix & efforts to the specialized needs of the targeted segments. Since then it can effectively satisfy those specialized needs of the targeted customers. In fact, the competitive advantage is obtained through effectiveness instead of through efficiency. Mostly smaller size organizations adopt this strategy.
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