Marketing is carefully meshed with production, finance, research and development (R&D), purchasing, and other functions of the business so as to make the maximum contribution to company objectives. The marketing activities of industrial products are an integral part of the company’s total operating system. Therefore, it is useful to identify the major types of plans by which operations of an enterprise are directed. These may be designated as strategic, operational, logistical, and organizational.
A plan is a goal-directed system of action. A strategic plan is one which describes the allocation of a firm’s resources which the management believes will achieve the corporate mission with the greatest efficiency over the long run. Supporting the strategy and contributing to its implementation are plans for the operations, logistics and organization called for by the strategy. Together, these constitute a hierarchy of objectives, and plans to achieve them, which make up the guidance system of an enterprise.
Meaning of Strategy
The word strategy carries the connotation of a skillful plan. Some have more precisely defined a strategy as a complete plan. It is a set of directions which specifies which choices a firm will make in every situation. The term strategy is derived from strategic, a word which the Greeks used to describe what the commanding officer did in a military campaign. The military commander is charged with a mission and must allocate and position of forces under him in a way which offers the greatest probability of achieving it. Since the enemy is not likely to accommodate him by revealing what they plan to do, the commander must base his strategic decisions or assembled intelligence about the enemy, the terrain over which military operations will be conducted, and any other factors which have a bearing on the ability of his forces to function as well as those of the enemy.
But business is not warfare. The mission of a military commander is decided by his government. The mission of a military operation is generally to defeat the enemy. The mission of a business enterprise might be to move materials, or to supply mobile power, or to transmit, process, store, and retrieve information. However, these aims have to be refined and qualified in order to match between the capabilities of an enterprise and opportunities it seeks to exploit.
In a business sense, strategy defines products. It identifies the markets and market segments for which products are or will be designed, the means by which operations will be financed, and the emphasis which will be placed on the safety of capital against income. These are decisions which would change over time as environmental conditions of an enterprise change.
Marketing strategy is that part of the company’s strategic plan which deals with the development of its products and services, the stimulation’s of demand for them, the determination of their prices, and the makeup of channels through which they reach customers. Its major elements are product and service definition, promotion, pricing, and distribution.
- Product definition: Since a product is simply a bundle of properties. It should possess those properties which fit the needs of target markets. Due to the diversity of needs to penetrate and hold their markets, many industrial firms find it necessary to produce a number of product lines, i.e., a product mix. It must also be decided whether the company should be a leader or a follower. Another strategic consideration is whether the principal source of new products should be internal or external. Without a substantial commitment to research and development effort, few new products can be generated internally. For this reason many companies elect such alternatives as copying the unpatented products of other firms, negotiating royalty arrangements with them, purchasing outright the manufacturing and sales rights to products, or acquiring the companies which make them.
- Service definition: Service can be defined as any activity undertaken for the purpose of helping customers. Customer service is a core element in the strategic plan. What does fit into this concept are such activities as pre-scale engineering studies, technical consultation, and performance testing, as well as such conventional post-sale activities as financing, operator training, installation and maintenance.
- Promotion: Promotion is the function of inducing customers and prospective customers to buy the company’s products in quantities and at prices which yield satisfactory profits. Promotion involves decisions on at least three key issues: how to use advertising, to what extent personal selling should be employed, and the most effective way to supplement both with such supporting efforts as displays, trade shows, exhibitions and demonstrations.
- Pricing: Since price may seldom be the dominant factor in making a sale, long-range decisions regarding it need to be carefully integrated with decisions concerning the other four elements of strategic planning for marketing.
- Channels: The marketing channel is an extension of the manufacturing enterprise itself; channel strategy should embrace both the internal marketing units of a firm and the external intermediaries. It is particularly important that channel strategy recognize the emergence of new customer groups, impending changes in existing groups, and the impact of these on customer needs; although these factors are an issue in all elements of the strategic plan.
Formulating Marketing Strategy
The planning process is divided into several steps or stages. The divisions are not necessarily universal. Other writers and practitioners may prefer other breakdowns perhaps as good as or better than this one. It should also be recognized that the chronological implications of this sequence of steps found there is largely false. While carrying out the current plan, management must be preparing others for the future.
- Preliminary Analysis: The technical nature of most industrial goods complicates market planning For example, the demand for a material, component, supply item, or price of equipment may be changed profoundly and abruptly by changes in technology. The uncertainty of total demand for the individual firm is aggravated by the small number of large users which characteristics many industries. A shift in patronage by any one buyer can subtract heavily from the sales volume of one supplier and add substantially to that of another. The analysis which precedes the formulation of marketing strategy includes both the situation analysis and the analysis of potential markets.
- Choice of Strategy Components: The central problem in choosing the components of a marketing strategy is to find the combination of components which will produce the maximum net revenue. It involves the application of marginal analysis. But it is very difficult to forecast the results of any marketing action unless they can be measured. This is possible with direct mail advertising or promotional material designed to bring in orders. In spite of the lack of adequate means to forecast the results of marketing action, the marketing manager cannot avoid trying to do so. Recently, much has been devoted to improve both measurement and forecasting in this area.
Once management has accumulated some experience with estimates, it is often possible to predict outcomes with sufficient confidence to formulate strategies effectively.