Marketing Strategy and the Marketing Mix
The strategic plan defines the company’s overall mission and objectives. Marketing’s role is shown in
Figure 2.4, which summarizes the major activities involved in managing a customer-driven marketing strategy and the marketing mix.
Figure 2.4
Managing Marketing Strategies and the Marketing Mix
Consumers are in the center. The goal is to create value for customers and build profitable customer relationships. Next comes marketing strategy—the marketing logic by which the company hopes to create this customer value and achieve these profitable relationships. The company decides which customers it will serve (segmentation and targeting) and how (differentiation and positioning). It identifies the total market and then divides it into smaller segments, selects the most promising segments, and focuses on serving and satisfying the customers in these segments.
Guided by marketing strategy, the company designs an integrated marketing mix made up of factors under its control—product, price, place, and promotion (the four Ps). To find the best marketing strategy and mix, the company engages in marketing analysis, planning, implementation, and control. Through these activities, the company watches and adapts to the actors and forces in the marketing environment. We will now look briefly at each activity. In later chapters, we will discuss each one in more depth.
Customer Value–Driven Marketing Strategy
To succeed in today’s competitive marketplace, companies must be customer centered. They must win customers from competitors and then engage and grow them by delivering greater value. But before it can satisfy customers, a company must first understand customer needs and wants. Thus, sound marketing requires careful customer analysis.
Companies know that they cannot profitably serve all consumers in a given market—at least not all consumers in the same way. There are too many different kinds of consumers with too many different kinds of needs. Most companies are in a position to serve some segments better than others. Thus, each company must divide up the total market, choose the best segments, and design strategies for profitably serving chosen segments. This process involves market segmentation, market targeting, differentiation, and positioning.
Market Segmentation
The market consists of many types of consumers, products, and needs. The marketer must determine which segments offer the best opportunities. Consumers can be grouped and served in various ways based on geographic, demographic, psychographic, and behavioral factors. The process of dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors and who might require separate marketing strategies or mixes is called market segmentation.
Every market has segments, but not all ways of segmenting a market are equally useful. For example, Tylenol would gain little by distinguishing between low-income and high-income pain-relief users if both respond the same way to marketing efforts. A market segment consists of consumers who respond in a similar way to a given set of marketing efforts. In the car market, for example, consumers who want the biggest, most comfortable car regardless of price make up one market segment. Consumers who care mainly about price and operating economy make up another segment. It would be difficult to make one car model that was the first choice of consumers in both segments. Companies are wise to focus their efforts on meeting the distinct needs of individual market segments.
Market Targeting
After a company has defined its market segments, it can enter one or many of these segments. Market targeting involves evaluating each market segment’s attractiveness and selecting one or more segments to enter. A company should target segments in which it can profitably generate the greatest customer value and sustain it over time.
A company with limited resources might decide to serve only one or a few special segments or market niches. Such nichers specialize in serving customer segments that major competitors overlook or ignore. For example, McLaren sold only 1,653 of its very-high-performance cars last year but at very high prices—such as its 570S model at $180,000 or a made-to-order FI model starting at an eye-popping $980,000. Most nichers aren’t quite so exotic. Profitable low-cost airline Allegiant Air avoids direct competition with larger major airline rivals by targeting smaller, neglected markets and new fliers. Nicher Allegiant “goes where they ain’t.” And small online-search start-up DuckDuckGo thrives among privacy-minded users in the shadows of search giants Google and Microsoft’s Bing (see Real Marketing 2.2).
Alternatively, a company might choose to serve several related segments—perhaps those with different kinds of customers but with the same basic wants. Gap Inc., for example, targets different age, income, and lifestyle clothing and accessory segments with five different store and online brands: Gap, Banana Republic, Old Navy, Athleta, and INTERMIX. The Gap store brand breaks its segment down into even smaller niches, including Gap, GapKids, babyGap, GapMaternity, and GapBody.11 Or a large company (for example, car companies such as Honda and Ford) might decide to offer a complete range of products to serve all market segments.
Most companies enter a new market by serving a single segment; if this proves successful, they add more segments. For example, Nike started with innovative running shoes for serious runners. Large companies eventually seek full market coverage. Nike now makes and sells a broad range of sports apparel and equipment for just about anyone and everyone in about every sport. It designs different products to meet the special needs of each segment it serves.
Market Differentiation and Positioning
After a company has decided which market segments to enter, it must determine how to differentiate its market offering for each targeted segment and what positions it wants to occupy in those segments. A product’s position is the place it occupies relative to competitors’ products in consumers’ minds. Marketers want to develop unique market positions for their products. If a product is perceived to be exactly like others on the market, consumers would have no reason to buy it.
Positioning: Southwest’s positioning as “The LUV Airline” is reinforced by the colorful heart in its new logo and plane redesign. Southwest has “always put Heart in everything it does.”
Southwest Airlines Co.
Positioning is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. Marketers plan positions that distinguish their products from competing brands and give them the greatest advantage in their target markets.
BMW promises “Sheer driving pleasure”; Subaru is “Confidence in motion.” Coca-Cola wants you to “Taste the feeling”; Pepsi says “Live for now.” Del Monte is “Bursting with Life”; Cascadian Farm products are “Certified Organic. Guaranteed Delicious.” At Panera, you’ll find “Food as it should be”; at Wendy’s, “Quality Is Our Recipe.”
Such deceptively simple statements form the backbone of a product’s marketing strategy.
For example, from its founding, Southwest Airlines has positioned itself as “The LUV Airline,” a positioning recently reinforced by the colorful heart in its new logo and plane graphics design. As recent Southwest advertising affirms, “Without a heart, it’s just a machine.” The airline has “always put Heart in everything it does.”
In positioning its brand, a company first identifies possible customer value differences that provide competitive advantages on which to build the position. A company can offer greater customer value by either charging lower prices than competitors or offering more benefits to justify higher prices. But if the company promises greater value, it must then deliver that greater value. Thus, effective positioning begins with differentiation—actually differentiating the company’s market offering to create superior customer value. Once the company has chosen a desired position, it must take strong steps to deliver and communicate that position to target consumers. The company’s entire marketing program should support the chosen positioning strategy.
Developing an Integrated Marketing Mix
After determining its overall marketing strategy, the company is ready to begin planning the details of the marketing mix, one of the major concepts in modern marketing. The marketing mix is the set of tactical marketing tools that the firm blends to produce the response it wants in the target market. The marketing mix consists of everything the firm can do to engage consumers and deliver customer value. The many possibilities can be collected into four groups of variables—the four Ps.
Figure 2.5 shows the marketing tools under each P.
Figure 2.5
The Four Ps of the Marketing Mix
Product means the goods-and-services combination the company offers to the target market. Thus, a Ford Escape consists of nuts and bolts, spark plugs, pistons, headlights, and thousands of other parts. Ford offers several Escape models and dozens of optional features. The car comes fully serviced and with a comprehensive warranty that is as much a part of the product as the tailpipe.
Price is the amount of money customers must pay to obtain the product. For example, Ford calculates suggested retail prices that its dealers might charge for each Escape. But Ford dealers rarely charge the full sticker price. Instead, they negotiate the price with each customer, offering discounts, trade-in allowances, and credit terms. These actions adjust prices for the current competitive and economic situations and bring them into line with the buyer’s perception of the car’s value.
Place includes company activities that make the product available to target consumers. Ford partners with a large body of independently owned dealerships that sell the company’s many different models. Ford selects its dealers carefully and strongly supports them. The dealers keep an inventory of Ford automobiles, demonstrate them to potential buyers, negotiate prices, close sales, and service the cars after the sale.
Promotion refers to activities that communicate the merits of the product and persuade target customers to buy it. Ford spends nearly $2.5 billion each year on U.S. advertising to tell consumers about the company and its many products.12 Dealership salespeople assist potential buyers and persuade them that Ford is the best car for them. Ford and its dealers offer special promotions—sales, cash rebates, and low financing rates—as added purchase incentives. And Ford’s Facebook, Twitter, YouTube, Instagram, and other social media platforms engage consumers with the brand and with other brand fans.
An effective marketing program blends the marketing mix elements into an integrated marketing program designed to achieve the company’s marketing objectives by engaging consumers and delivering value to them. The marketing mix constitutes the company’s tactical tool kit for establishing strong positioning in target markets.
Some critics think that the four Ps may omit or underemphasize certain important activities. For example, they ask, “Where are services? Just because they don’t start with a P doesn’t justify omitting them.” The answer is that services, such as banking, airline, and retailing services, are products too. We might call them service products. “Where is packaging?” the critics might ask. Marketers would answer that they include packaging as one of many product decisions. All said, as Figure 2.5 suggests, many marketing activities that might appear to be left out of the marketing mix are included under one of the four Ps. The issue is not whether there should be four, six, or ten Ps so much as what framework is most helpful in designing integrated marketing programs.
There is another concern, however, that is valid. It holds that the four Ps concept takes the seller’s view of the market, not the buyer’s view. From the buyer’s viewpoint, in this age of customer value and relationships, the four Ps might be better described as the four As:13
| Four Ps | Four As |
|---|---|
| Product | Acceptability |
| Price | Affordability |
| Place | Accessibility |
| Promotion | Awareness |
Under this more customer-centered framework, acceptability is the extent to which the product exceeds customer expectations; affordability the extent to which customers are willing and able to pay the product’s price; accessibility the extent to which customers can readily acquire the product; and awareness the extent to which customers are informed about the product’s features, persuaded to try it, and reminded to repurchase. The four As relate closely to the traditional four Ps. Product design influences acceptability, price affects affordability, place affects accessibility, and promotion influences awareness. Marketers would do well to think through the four As first and then build the four Ps on that platform.