Approaches to Building an Effective Marketing Strategy

Nowadays, concept of marketing represents usually an organized and systematic sales process, in which working process (from prognosis to warehousing and advertising) is united and coordinated. This was an effective procedure which has been working well enough before the economic crisis crushed. Majority of companies haven’t thought deeply enough about their business process, customers, business competition etc. After the crisis they had to face new reality: deterioration in the business and even withdrawal from the market and closing of firms.

Many can say that each event happens for objective reasons, such as: reduction of population's purchasing power, rising of primary costs, shortage of working capital, and unavailability of credit. Hence, there is no such a marketing system that could change the situation, which, in general, is truth.

Other may object and claim that after the crisis they had an opportunity to improve their position on the market, increase production and sales, and their financial position became much more stable. Therefore, the current level of marketing development is enough for a particular firm, it meets the current needs and there is no necessity to make radical changes. This is also truth. However, both of these assumptions are self-deception, because they are only particular cases of business life.

Business is a process which turns such a particular type of resources as knowledge into economic values. The purpose of business is to create a consumer that is to attract an independent external subject who is able to choose a product and ready to pay for it. If we take a look from the inside, it is hard to figure out what makes the buyer pay. Accordingly, we should look at any business from the outside. By doing so, you can proceed to the selection of direction and means for reaching your goal.

Moreover, business is a complex system, stable development of which depends not only on what is happening inside, but to a greater extent on what is happening around. Strategic marketing helps to use company’s resources efficiently and in balanced manner considering the changes in the external environment.

Demand plays a central role in strategic marketing . Consumer rarely buys what manufacturer is intended to sell. That is consumer pays not for the good itself but for the satisfaction. Yet no one can produce and sell satisfaction as such, the best one can do is to sell means for its achievement. Therefore, customer satisfaction is the only criterion for the evaluation of marketing strategy effectiveness.

Effective marketing strategy starts with the research. According to Western experts, budgets of marketing researches have recently grown 3-4 times average. This is an objective requirement, since it is impossible to turn company’s knowledge into economic value without having accurate and complete information. Market research should answer the following questions: "Who buys this product?", "Where do people buy this product? ", and "What is this product bought for?" This is the only way to achieve complete understanding of whom and how can the company serve and what needs can it satisfy.

What should a firm study?

First of all, a firm should study the consumers. It should be clear what a consumer wants, why does s/he wants it, how often does s/he wants it, and how does s/he uses it. A good example is recent studies of consumption of beverages in cans. The demand for the drinks in cans has started to decrease sharply for the past few years. Despite all the vivid advantages of tin cans, consumers prefer drinks in glass bottles. The reason for the phenomenon was a firm conviction in customers that the drinks in cans contain metal impurities from the package due to which they have off-flavours and are unhealthy. As a result, manufacturers of tin cans have joined forces and developed a program of activities aimed to change attitude in consumers and increase demand for beverages in tin cans.

What else should be studied?

Competitors, of course. This should be done in order to respond to their plans for capturing your share of the market in time.

Suppliers: to find the cheapest and qualitative components.

Intermediaries: so that the largest part of the market margin remains in your "pocket".

If we talk about global factors that should be considered by any entrepreneur or director, political and legal factors must be marked out as the most important among those to be studied. It is so, because it is necessary to be prepared to changes in political climate and law and be ready to address the officials appropriately.

Few weeks earlier this year the Federal Security Service, Ministry of Internal Affairs, State Customs Committee, the Tax Police and other agencies conducted the “Import” Special Operation in Russia. The result of this operation was a slight increase in prices of computers and household appliances and closure of some firms operating on this market. But strategically-minded businessman has “crossed himself” long time ago as he was prepared to the fact that sooner or later "shadow" imports would be "rolled up" and he would need to go on living somehow.

Technological factors should be studied in order to implement advanced technologies timely and be always ready implement innovations. The next example is a case from recent practice. A firm, well known on its market, is booming. It gets interested in the further development of own possibilities. The firm develops films, prints photos, and sells photo equipment and accessories. There were no vivid reasons for worries provided that the business was going so well so far. Yet firm owners were concerned about the processes of photography and printing technologies development. Digital technologies are being used more and more in this sphere. Businessmen themselves believe that ordinary printed-out photos will be used actively for at least another 5-7 years, but now they are already thinking about prospects and opportunities for their business. This is an example of strategic approach and thinking.

Socio-economic factors should be studied in order to be prepared for rise or fall of prices on markets or another banking crisis, while long-term plans for business expansion through the construction and other capital investments are not coincided with the beginning of negative demographic changes in the region or population migration.

All this information should not settle a dead load in computers and minds of your employees. It should be analyzed and conclusions should be drawn. It is carried out by different methods, such as:

· analysis of business and product portfolios,

· analysis of the situation, and

· analysis of the chosen strategy influence on the level of profitability and the ability to generate cash (PIMS - the Profit Impact of Market Strategy).

As a result of this analysis you can identify opportunities and risks on the market, as well as strengths and weaknesses of your business.

Strategic analysis will help you to understand why your direct competitor, who was building computers some six months ago, have suddenly decided to change the point of application of own forces and opened, for example, a network of nursing houses.

Let’s suppose that the socio-demo-graphics is in norm and there are no preconditions for the opening of funeral homes. You decided not to change your business area and to remain the builder and seller of computers. It is good that your business have already had a higher profit margin than those of your competitors and been technologically more advanced. A withdrawal of some competitors from the market offers you new opportunities.

There is a well-known folk wisdom which states: “In Russia they harness long yet ride fast.” However, it is important to implement the entire “harness” procedure correctly for what you can reach depends on it. In our case segmentation and positioning will help. Everyone has heard about it, someone has use it but few do it right. Yet there can be any marketing strategy without this stage.

As it is known, all people wear clothes. Let’s suppose that at one of the fashion shows you’ve met and got a chance to talk with representatives of leading fashion houses of France. Many of French fashion designers were impressed by your success in business, by the way you overcome difficulties and are consequent in you decisions. Some of them have decided to open you a decent credit line for supply of their clothes. Some firms can only dream about such terms. You, as an owner of “factories, newspapers, ships, etc,” can hardly rely on your target customer to be any inhabitant of Russia who uses clothes in everyday life. In order to use this new opportunity, the first thing you should think about is whom you can sell these “works of art” to, whose needs can these clothes satisfy, and what these needs are. Effective segmentation can help to estimate which part of the target market will allow your company to fulfil its potential completely.

Having learnt your consumer, it’s too early to calm down. Further, it is important to determine how your proposal differs from those of your competitors. How can you “hook” a target segment on a market? It's time to think how a customer perceives your product or service and how it differs from those of your competitors. These questions should be answered during the process of positioning.

At the beginning of Perestroika, one of Moscow-based companies has achieved impressive success. They had dozens of shops not only in Moscow but all over the Russian Federation with well-adjusted system of relationships with suppliers, wide goods range, and pricing policy with respect to competitors. However, over the years the competition on the market has been growing and they needed more actions to keep their consumers. The company claimed that its target market is a provided buyer who has a taste for life and consumption experience. Firm’s range basis was equipment by well-known manufacturers such as Bosch, Siemens, AEG, Philips, Sony, Pioneer, Panasonic and so on. Firm’s shops were similar to those of other firms. This did not satisfy buyers. Firm’s business was going worse and worse. Their hopes for the fact that “they already know us” and “we are not worse than others” did not justify. As a result, you won’t find this company’s shop anywhere in Moscow or other cities. The firm couldn’t offer its clients anything outstanding that would make it differ from competitors and, as a result, it became an outsider and had to withdraw from the market. If the company’s management had carried out strategic analysis timely and positioned its services appropriately, the result would’ve been different nowadays.

Accurate positioning will save your company lots of money, time and staff’s efforts in future. Proper positioning allows your firm to enjoy effective marketing mix.

Marketing mix is a set of marketing tools (4 P) that are used by a company to solve marketing challenges on the target markets. The entire instrument is usually divided into four areas:

· product,

· price ,

· promotion, and

· sales (merchandising).

Marketing mix is one of the most challenging issues for many companies. It requires lots of attention, time and money. The most brilliant marketing mix cannot be always the same, as everything around and inside a firm is constantly changing which requires different goods range, new prices and ads, change of intermediaries and suppliers, etc.

A good example of effective assortment policy can be assortment structure changes in one of the trading network in Moscow after the crisis. Before the crises these stores have been a favourite place of purchase for a secured Muscovites who lived in new areas, where are these shops had been built. Basis of the goods range was well-known world western brands. Share of locally produced goods was little. After the crisis the situation has changed radically. The share of goods produced in Russia has increased sharply, but the company has not changed its principles: quality control of products, requirements for the organization of supply and packaging remained the same. As a result majority of buyers who got accustomed to high quality of products, polite and professional staff, cleanness, convenient location of goods on the shelves, and wide range of goods continue to do shopping in this retail network. Of course, buyers’ behaviour has somehow changed and the number of purchased products decreased, yet desire to consume qualitative products remained.

Brand policy is a part of assortment policy. Effective use of trademarks can help a firm to achieve its goods recognition, optimize expenses on advertising and promotion, and make intermediaries active promoters of its products on the market. It should be clear that a brand can appear only after thorough analysis of products or services positioning on the market.

For instance, quality analysis of Procter&Gamble and Unilever carried out by different consumer advocacy groups reviled that their products do not posses any unique features. Nevertheless, the prices of their goods are 1,2-2 times higher than of those from similar companies. In this case higher price is the result of effective brand and promotion policies.

Arrangement of sales and cooperation with intermediaries who sell the products are the most challenging tasks for enterprises directors and core specialists. There are a lot of reasons for this. First of all, distribution is arranged by particular subjects of market relations that are firms, storehouses, dealers, distributors, transportation utilities, and so on. Each of them can either help you to settle problems or create more. When planning sales, you have to deal with a complex task which aim is the overall target market coverage with minimal expenses.

Usually there is a direct relation between distribution control level of company’s goods and expenditures on its functioning. Let’s suppose that AvtoVAZ has decided to control distribution of its products on its own. In this case, it would have to open storehouses in all regions of the country, arrange delivery and storage of cars, create retail chain, hire and train staff, and so on. As the result, total costs on production and distribution of cars would’ve been too high and there would’ve been need in keeping large management staff and, consequently, inefficient goods range management, increase in prices, decrease of sales volume, unsatisfied consumers, and loss of competitive positions on the market.

When personal computers have just appeared on the market, IBM management decided to arrange its own retail network hoping that the product would be new on the market for a long time. However, rapid technological development of computer equipment caused decrease in prices and margin which made IBM to give up own retail network and accept the concept of their computers distribution by dealers.

Why has Internet trading been developing so fast for the recent years? It is so, because it reduces transportation costs and helps to communicate with each customer personally. From the one hand, this provides unlimited access to information about market needs. From the other hand, the number of intermediaries reduces without any damage to the quality of services and sales costs growth.

Promotion

Product promotion and pricing can be called “marketing ambulance.” Both of them can be easily changed: you make decision, prepare necessary documents, and appropriate budget. However, use of different ways of products’ promotion is successful only if the target market is appropriately chosen, information about consumption capability and behavior of target market is collected, the product is manufactured, and cooperation with intermediaries is established. In this case you can proceed to the planning of advertising campaign and PR activity. Mistakes can cost a lot. Choice of advertising should be very accurate and appropriate to the target market and other aspects of marketing mix.

Last autumn you could’ve seen a large advertisement hoarding along Kashirskoye highway where in the very centre “Legpromprogres Corp.” was written with large letters and shops addresses and range (shoes and uniform) was placed below it with small hardly visible letters. Any incompetent person could hardly understand what is being advertised: a firm, shoes, clothes or something else. Let’s take Nike’s advertisement hoardings as a contrasting example with the company’s logo and name which you could’ve come across along highways in Moscow some few years ago. The impression these two types of advertising made on people was completely different. Moreover, the funds which “Legpromprogres Corp.” appropriated for advertisement hoarding could’ve been used more efficiently.

Efficiency of marketing strategy depends mostly on pricing policy. You should take into consideration product’s net value, prices of your competitors, and consumer’s paying capacity. The main aim of pricing is company’s maximum profit.

After crisis of 1997-1998 in Russia a lot of Turkish travel agencies had to lower prices for Russian tourists as they have been the main source of income at many resorts. Difficult political situation and terrorist acts threat on behalf of Kurdistan Workers Party discouraged Western tourists from coming to Turkey. Yet this didn’t frighten Russian tourists.

Furthermore, efficiency of marketing strategy depends on the way marketing service is arranged at a company, on the goals it has and the way of their achievement. Challenges are met by the specialists thus their proficiency level is extremely important. Sometimes marketing is considered to be half art and half reality. Efficiency of marketing strategy depends also on information availability, i.e. marketing quality directly depends on information quality. Marketing functions should be integrated with other systems of a company.

There are thousands means of control in the world. However in marketing control should be carried out according to management personnel needs in information. Control indicators should be precise, easily measurable, and forecasted. All marketing plans and programs should be transformed into money equivalent (budget) with indication of a timeline.

What is the essence of marketing strategy efficiency? It is a satisfied consumer. If you know that your consumer is satisfied and sales volume and market share growth shows this and your staff tells you about this, this means that you are approaching your objectives. It also shows that each of your employee completes his/her tasks, is on his/her place, and your plans are realistic.

Author: S. Lekomtsev