Marketing can contribute directly to improved performance and strategic success. Organizations define their marketing strategies based on the attractiveness of their industry, their target market segments, their customers relationships, their internal culture and influences from the wider external environment, and many other factors.
Marketing strategy and segmentation
Understanding customers and their purchasing decision-making process is an important component of marketing. Rather than offer the same marketing mix to vastly different customers, market segmentation makes it possible for organizations to tailor the marketing mix for specific target markets, thus better satisfying customer needs. It is critical to select the right segments and understand customer needs; macro and micro-segmentations might be needed.
There are different aspects of marketing that should be considered:
- Corporate level marketing: what business should we be in and what opportunities should we pursue?
- Business level marketing: who are the current and future competitor, how are we going to compete against the competition?
- Functional / operational level marketing: what is the ideal customer, how do we create and keep customers?
Porter’s generic forces help to identify and frame the main sources of competitive advantage for the three organisations:
- Advantage: low cost vs product / service uniqueness
- Scope: broad (industry wide) vs narrow (market segment)
With the following intersections:
- Cost leadership strategy: low cost + broad scope
- Focus strategy (low cost): low cost + narrow scope
- Focus strategy (differentiation): product uniqueness + narrow scope
- Differentiation strategy: product uniqueness + broad scope
However, Porter’s generic forces do not consider competitive advantage that can be gained with innovation, speed to market. Distribution, brands and growth options are also poorly covered. Useful information can be analysed with the Ansoff’s growth matrix:
- Existing vs new products / services
- Existing vs new markets
Customer relationships are central to exceeding customer expectations. This is because relationship building is process-intensive, requiring responsive, assured, empathetic service over time (5 quality gaps, Parasuraman et al., 1985, 1990):
- Customer gap: between customer expectations and customer perceptions
- Knowledge gap: between consumer expectation and management perception
- Policy gap: between management perception and service quality specification
- Delivery gap: between service quality specification and service delivery
- Communication gap: between service delivery and external communications
Internal and external customers are to be considered and a communication mix is critical to address the right target audience with the right message. For example, formal communications are usually made through written publications and/or announcements during special events. Both product and service oriented organisations use this approach. For service organizations, a lot of communication is done through the front facing people, on-site consulting teams, senior management and sales representatives who are interfacing daily with customers at all levels.
In a way, every organization is most likely to be in transaction mode first, aiming at starting new long term relationships. Even if the goal in the long run is to establish relationships, there still need to be transactions to start with. In addition, despite existing relationships, some customers may still want transactions to explore other alternatives.
Customer relationship management
In many organizations, Customer Relationship Management (CRM) is often characterized by the installation of enabling technology to manage relationships with customers, including the capture, storage and analysis of customer related information such as:
- Current framework of existing business strategy, organization, processes and technology
- Customer contact points and relevant customer information
- Account plans and opportunities
- Suitable performance measures
Communication to the external world is greatly facilitated by the internet and other forms of electronic media (CD, email, forums, electronic publications, etc.).
As suggested by Maister (2005):
The key first step is to recognize that romance and relationships work by earning and deserving what one wants to get back from the other party (…) Professionals need clients (and employees) to think of them as ‘us’
What are your thoughts?
- Master (2005) Do you really want relationships?: http://davidmaister.com/wp-content/themes/davidmaister/pdf/DoYouReallyWantRelationships.pdf
- Parasuraman, Zeithaml & Berry (1985) The Behavioural Consequences of Service Quality, Journal of Marketing, 60(Apr), 2: 31-46
- Parasuraman, Zeithaml & Berry (1990) Delivering Quality Service; BalancingCustomer Perceptions and Expectations, Free Press
This post was originally published on LinkedIn on 1 April 2015.