A Five-Step Approach to Creating a Marketing Strategy
Simply put, customers are no longer a given—just because you make it, doesn’t mean anyone will buy it. In order to continue to thrive, companies must acquire and keep customers.
Because it is the only business function that deals directly with customers, marketing and sales has become an area of increasing focus for companies of all sizes. How should companies approach the process of marketing products and services? The process of marketing occurs in five steps:
- Step 1: Understanding the market climate and marketing strengths and weaknesses
- Step 2: Developing a marketing strategy
- Step 3: Building a marketing plan
- Step 4: Implementing the plan
- Step 5: Monitoring the success of the plan
Though this five-step-process may appear straightforward, many companies demonstrate a great deal of confusion about developing a marketing strategy.
In fact, many confuse solid marketing strategy with pure tactics, or what we like to call, "brand juice." Visual identity, clever tag lines, creative "essence" advertising, edgy names, well-designed Web sites, big ticket giveaway promotions, publicity buzz-making are all key ingredients in brand juice and elements of marketing, but they are supporting elements. To be effective, such supporting elements must be part of a more comprehensive plan.
Real marketing strategy provides a roadmap to creating and delivering true value to distinct groups of customers. All successful marketing strategies must begin and end with the customer—they cannot be an afterthought or taken as a given—so marketers must test their assumptions about their customers constantly.
What goes into a marketing strategy? A cohesive combination of:
- Targeting—to whom are you going to market your products and services?
- Positioning—how are you going to differentiate yourself from competitors?
- Product/Service Attributes—what attributes/features will the product/service have?
- Marketing Communications—how are you going to reach the target and with what message?
- Pricing—what price will you charge the target?
- Distribution—what channels will you use to sell the product or service?
- Customer Service—how will you manage additional customer needs?
Of these components, targeting and positioning are the two most critical elements. To paraphrase marketing guru Phil Kotler, if you nail the targeting and positioning, everything else falls into place.
The targeting decision — identifying the people you want to direct your marketing efforts towards — is one of the first issues a marketer considers.
Targeting is knowing where to concentrate forces. "To win a war you need to know where to attack," Dwight Eisenhower might have said to an audience of business managers. "We wouldn’t have brought the Nazis to their knees if we had landed the Allied forces at Calais instead of the beaches of Normandy."
Most marketers agree that focusing on subsets of current and potential customers is the most efficient way to develop a marketing program, but this immediately begs the question, which subset?
There are literally hundreds of thousands of different ways to divide customers into subsets, also called segments. Consider just a few of the popular market segmentations we have observed among a variety of businesses: heavy, medium, light users; 18-to-49 year-old-women, 18-to-49 –year-old men, older women, older men; people who look like current customers, people who don’t; current buyers, non-users; big customers — the largest 10 percent versus nine other customer size groups; five different benefit segments; five different personality segments; and six different attitude segments.
In this day and age of increasing personalization, some might even argue that the U.S. offers a number of potential target markets equal to the U.S. population.
We recommend marketers discover segments by looking at a combination of all possible market drivers such as:
- Category involvement: how important purchases in this category are to the buyer?
- Product preference motivators: what characteristics are most motivating?
- Product purchasing patterns: how frequently do they buy?
- Media habits: what do buyers watch, read, listen to?
- Sociographics: how strong is their ethnic affiliation and religiosity?
- Demographics: what is their income, age, and level of education?
- Psychographics: what are their lifestyle attitudes?
The key to nailing targeting is finding the most efficient, scientific way of segmenting the market and to choose a target group based on its potential profit contribution.
Don’t believe the hype that companies can’t evaluate target groups in terms of profit potential. Marketers can calculate with reasonable accuracy how much it will cost to reach people in a target group, how many will buy the product or service, and how much money they will give to one particular company using both secondary and primary data.
For example, for two decades the major gasoline brands were in a state of pax gasolina—they went comfortably about doing their business, market shares changing only slightly from one year to the next. True, there were periodic price wars and promotions characterized by giving away NFL glasses and selling discounted Coca-Cola, but nothing so substantial as to wake the industry up from a deep complacency.
By the mid-1990s, however, new low-price brands began showing up everywhere, and the major brands started to work hard to differentiate themselves, with an aim toward gaining more margin from the business. In that context, Mobil Corporation (now ExxonMobil), one of the most innovative marketers, commissioned a large-scale study to better understand its customers and prospects.
The study results, reported in the Wall Street Journal, form the basis for the Mobil Friendly Serve campaign. The study found five distinct consumer groups, all roughly the same size numerically. The labels and numbers have been changed to maintain confidentiality.
Car Buffs are generally high-income, middle-aged men who drive 25,000 to 50,000 miles a year. They buy a premium gasoline with a credit card, purchase sandwiches and drinks from the convenience store, and will sometimes wash their cars at the car wash.
Loyalists are men and women with moderate to high incomes who are loyal to a brand and sometimes to a particular station. They frequently buy premium gasoline and pay in cash.
Speedsters are upwardly mobile Gen Xers. They are constantly on the go, live in their cars and snack heavily from the convenience store.
Soccer Moms are usually housewives who shuttle their children around during the day and use whatever gasoline station is based in town or along their route of travel.
Price Shoppers generally are not loyal either to a brand or to a particular station and rarely buy the premium line. They are frequently on tight budgets and efforts to woo them have been the basis of marketing strategies for years.
Analysis of the data revealed that while Car Buffs and Loyalists represented only 38 percent of the population, they accounted for 77 percent of the potential profitability. Once Mobil knew the target, it knew whom to talk to and where to find them, how to communicate with them, in which media, about which products and services, at what price.
As the Journal reported: “These targets want classier snacks from the convenience store; human contact; quality products; top-notch, quick service; privileges for loyal users; attendants who recognize them; and a nationally available brand. They also want a reasonably competitive price, but that’s not the most important consideration.”
Mobil addressed the needs of these two groups with Friendly Serve — a marketing campaign characterized by clean restrooms, cappuccino in the convenience stores, a concierge to assist customers, and more recently a Speedpass payment system. Stations that have implemented the Friendly Serve program have seen double-digit sales and profit increases.
Clearly making the right targeting decision takes time — certainly more than the five minutes most marketers dedicate to it. Intuitively obvious target groups are rarely the most profitable so marketers that take the time to devise a market segmentation plan and discover the most profitable target will find themselves far ahead of the competition even this early in the marketing strategy process.
How to Nail Positioning
Once a marketer has identified the financially optimal target group, the next step is positioning. In an increasingly cluttered environment where buyers have very little time to ponder product decisions, products and services that stand for something important or remembered for something significant have an advantage.
A powerful positioning leads to a powerful brand. But positioning is a difficult concept because it embodies the value proposition — the bundle of benefits and attributes a company wants to offer buyers at a certain price to positively differentiate the product or brand from competitors.
It’s a message so clear, so succinct but so powerful that, once launched, it begins to move customers and prospects toward the brand. Most importantly, it is a message to the target group. Usually, the positioning is a one- or two-sentence statement — even a word — that captures the message a marketer wants to imprint in the minds of customers and prospects. It describes your product or service and how it is different from — and therefore better than — the competition’s.
Examples of long-running positioning strategies for companies or brands include:
- Easy to use—Apple Exceptional
- Performance for driving enthusiasts—BMW
- Softness—Charmin tissue
- Authentic, real, original—Coke
- Guaranteed next-day delivery—Federal Express
- Wholesome family entertainment—Disney
- Improves the quality of life—GE
- Strength—Hefty plastic bags
- Accepted everywhere—Visa
- For the youthful, hip generation—Pepsi
- Thrills and excitement for preteens and adults—Universal Studios Theme Park
- Nutritious, low-fat, low-calorie food—Healthy Choice
- Pure, clean, natural—Ivory Soap
- Good value for family meals—Taco Bell
At its core, positioning is the reason why people buy one product rather than another. They believe it offers greater value, strength, prestige, fun, safety or nutrition (or some combination of elements) than another product or service.
If marketers had unlimited time and a prospect’s undivided attention, they could tell him everything about the product or service.
But a company does not have endless time, and prospects are notoriously inattentive. The most any business can say are those few things prospects care about and will remember.
Marketers want to fix a succinct message in people’s heads to induce trial and use among prospective buyers or reinforce current purchasing among current customers. Positioning is valuable because when you have it, the other marketing elements follow naturally: pricing, marketing communications and promotion, and distribution.
As you segment a market, simultaneously investigate all potential attributes and benefits that might motivate customers in a category. These include all the ways a business can differentiate itself: product, service, personnel, image.
At this point the company does not know if any of them actually motivate behavior. The goal is to generate a long list of attributes and benefits that might form the basis for a powerful positioning strategy. These should represent both attributes and benefits of the product and tangible and intangible facets.
To uncover these attributes and benefits, a company might do a category scan, exploratory research, personality assessment, social values analysis, emotional exploration, or some combination of all five:
A category scan is a close review of all the attributes and benefits, tangible and emotional, that competitive brands in the category employ.
Exploratory research includes focus groups, in-depth interviews, or both. The focus groups do not produce the positioning, but rather ideas for the list of attributes and benefits. Marketers should not rely on the outcome of focus groups to make the final positioning decision.
Personality assessment is an analysis based on primary or secondary data on the key personality traits that potentially underlie behavior in the product or service category. Since there are literally thousands of potential personality traits, it takes an expert to provide some insight into which ones might be relevant in the product category and to select the measures of those relevant traits a study ought to include.
Social values analysis breaks social values and how they drive human behavior into eight categories. A marketer can establish how relevant each of these values is to consumers either directly, by measuring relevance in a research study, or indirectly, by inspecting secondary sources closely.
Emotional exploration looks at people’s psychological needs and how a particular product or service category addresses them. All of these techniques are just as appropriate for business-to-business as for consumer marketers and appropriate for both services and products
Finalizing the Positioning Decision
Like the targeting decision, the positioning decision is not one that should be made in a one-hour meeting. Since the items on the list become the elements of the brand’s positioning and the connecting threads of an entire strategy, the list must be as all encompassing and creative as possible.
Once a company has a list, management reduces it so it can go into a questionnaire to determine how motivating each of the attribute and benefit characteristics is to the market target and how buyers perceive competing brands on each of them. After marketers discover what motivates consumers and the perception of their products or services and those of competitors, they can rank-order a final list of category characteristics or potential positioning themes.
Now the task becomes a creative one. Marketers develop a message strategy that puts the product or service in the most positive light. From there the advertising and marketing communications people go to work.
For example, facing deregulation, a tiny company called Green Mountain Power (now Green Mountain Energy) located in Burlington, Vermont, started to worry about competing with national power companies that could afford price cuts to attract customers. The company could not become the low-cost provider.
Instead, it began to look at other differentiating factors for power. The company discovered a significant number of customers wanted clean energy and would pay more for environmentally friendly power. Green Mountain created a powerful positioning statement, “Power provided by the raging rivers of North America, the prevailing winds, and the sun. No coal, no nuke, no kidding.”
As the Green Mountain example illustrates, do not automatically select a low-price positioning even in a commodity category.
Although many companies use the low-price positioning, offering the lowest price only works in the long run when the company is in fact the category’s lowest cost producer. Otherwise the lowest-price positioning is not sustainable and will drive the company toward bankruptcy.
Formulating the remaining components of marketing strategy should reflect the needs, interests, habits, and behaviors of the target group and the motivating attributes of the positioning.
As emphasized throughout this tutorial, building a marketing strategy takes time. We often hear marketers say, “I don’t have time to do the research. I need to make a decision now!” They go on to make decisions based on intuition and gut-instinct about what they feel customers want.
Yet these same marketers somehow find the time to make the same decisions over again later when the marketing plan is not working. They make the same mistakes repeatedly, rather than try to get it right in the first place.
These marketers have learned the hard way that, while just about anyone can make a decision, not everyone can turn the decision into a sustainable competitive advantage and profits. Those that have discovered and sustained an advantage recognized the critical nature and inherent complexity of the components of marketing strategy.
Many tools and technologies exist today to help marketers make these complex decisions; all that’s required is the will to use them.