The most critical elements of any business are the business model, the marketing strategy and the resultant marketing plan that is developed to achieve established goals. A business can have great products or services but unless it can precisely identify its potential clients, differentiate itself from its competitors, clearly target the correct message to them as cost effectively as possible and then motivate them to purchase, it will not achieve its true objectives.
It is essential for all business people to realize that having an office, plant, equipment, stock and staff does not make a business. You only have a real business when customers buy your product or service and your net income exceeds your gross expenses.
In any business, there are only 5 drivers. These are:
- Product / service / technology
- Business strategy
- Funding
- Customer need
- Marketing strategy
All businesses have a product / service / technology, some have a proven business model, some have a business strategy, few differentiate themselves clearly from their competitors, and most usually have some level of funding. None of these elements is sufficient to make a business.
In too many instances it is the two elements that really
make the business, understanding the customer’s need
and a quality marketing strategy, that is lacking.
This is the reason why the majority of traditional and web businesses fail. It has nothing to do with the idea, product, service or price.
Too many business people complain that lack of funding is the reason for their failure. This didn’t seem to affect Hewlett and Packard, working from their garage with $635.00, or Gates, Bulmer and Wojack sharing a motel room in Albuquerque with no money!
The business model, marketing strategy and resultant plan is far more important than the financial plan or the production schedule of a business.
Marketing is creating solutions (be they products or services) that address customer’s needs, providing them in the form the customer most readily relates to, at the most convenient purchase point, at a price where perceived value is in excess of purchase price.
It is also critical for business people to realize that marketing and sales are totally different disciplines. Too often the two are regarded as interchangeable. The marketing strategy can only be developed after obtaining a thorough understanding of the total market environment in which you are operating. Sales are but one element of the implementation of the marketing plan developed from the marketing strategy.
What is marketing?
To understand the difference between marketing and the disciplines that comprise it, let’s take a building analogy. The marketing strategy is the architectural design. The walls, doors, windows, etc., are the elements within the design. The elements inside the marketing framework include advertising, public relations, sales, sales promotion (both consumer & trade), cause tie-ins, direct marketing, direct response, merchandising, strategic business relationships, sponsorship, hospitality, sampling, customer service and added value.
The following provides a brief description of each of these marketing disciplines.
Advertising:
The placement of a message to reach the target market. This can be print, broadcast, signage, on-line or offline.
Public Relations:
Generally third party stories, articles or segments favorably mentioning the product/service in order to positively influence potential customers.
Sales:
The act of motivating potential clients to purchase your product or service. Usually, irrespective of the technique used to communicate the information, the sale is ‘closed’ by personal communication of some type.
Sales Promotion:
This is using a promotion, often tied into an event, to incentivate either the trade (distributor or retailer) or the customer.
Cause tie-in:
Identifying the business or product with a cause or charity to demonstrate to a potential client that you share their values in order to solicit goodwill and ultimately a sale.
Direct Marketing:
Delivering the sales message direct to the potential customer by email, post, telephone, magazine subscription, data base of targeted users, other.
Direct Response:
An advertisement that uses proven techniques; added value, risk reversal, limited offer, price reductions, to motivate potential buyers to respond immediately by phone, Internet or mail.
Merchandising:
The use of branded merchandise to drive brand awareness or brand equity depending on the application, through provision with the product (with or without charge), or as stand alone item.
Strategic Relationships:
Association with businesses that target a similar market segment to maximize customer benefit, increase reach and frequency or minimize communication costs.
Sponsorship:
Underwriting the cost (either in cash or kind) of an activity in return for visible association with the activity and the opportunity to use any of the marketing techniques listed here to impact the activities supporters. Creates the impression that the company and the supporters have shared values.
Hospitality:
Providing business customers or consumers with the opportunity to attend events as the company’s guest. This creates goodwill with the guest, quality “face time”, and creates a subconscious obligation to reciprocate with a purchase.
Sampling:
Providing a free gift of the product to encourage use and /or repurchase.
Customer Service:
Providing the customer the absolute utmost in assistance, advice, respect, courtesy and rapid addressing of issues at every point of interaction with the company.
Added Value:
Increasing the customer experience at every interaction. This can be in the form of training, information, assistance, gifts etc.
Each of these elements is a discipline unto itself but is also part of the marketing strategy. A marketing strategy usually contains a combination of these disciplines in a balance that obtains the optimum results. The selection of specific disciplines to be utilized within a strategy, and the weight of each, depends on the objectives being sought, the type of product, the target market and relative costs of execution.
Supply and demand verses demand & supply
Traditionally, most products have been produced as a result of an idea rather than customer need. As a result, for decades we have had products being pushed down the supply chain from manufacturer to shelf, relying on mass advertising and strong sales personnel to sell it.
However, the past twenty years have seen a fragmentation of the market place due to an explosion in the number of communication vehicles, clutter, globalization and increased competition.
At the same time consumers have reduced attention spans, are increasingly cynical, have greatly increased choice and are more informed.
As a consequence, we have entered a ‘demand and supply’ economy.
Customers, whether business or consumer,
require solutions specifically designed
to address their particular requirements.
An increasing number of businesses anticipate customer demand and supply it. This trend is evidenced by the rapid increase in customized product, everything from your choice of ingredients at the noodle bar to a customized vehicle from Toyota, from the website.
Anticipating customer need requires a thorough understanding of the complete market place and its underlying trends.
The marketing audit vision, market analysis, SWOT
It is important to the success of a business to conduct a financial audit. It is equally important to conduct a marketing audit. This is a thorough evaluation of how you are performing with respect to your customers, the marketplace and your competitors.
This entails evaluating the complete market environment. The elements to consider are:
(i) The business vision
What is the vision for your business or for particular products? For example;
- Do you wish to be local, statewide, national or international? If international, which markets do you want to target? Once this is determined, a complete market audit must be conducted for each market.
- Is this growth to be achieved organically or through acquisitions / mergers?
This vision can incorporate positioning, sales, profitability, customer service, market, penetration and products.
The determination of a clear vision enables management to develop pro-active operational plans and allows for the filtering of opportunities based on an agreed strategic direction.
These objectives should have a time frame for achievement, usually established as short and long term, 12 months and 36 months respectively. These principles must be shared with, and understood by, everyone in the business. This then becomes the yardstick by which company progress and performance is measured.
(ii) Market and environmental analysis
This is an evaluation of the external factors and trends likely to impact on your business in the foreseeable future. These external factors can include:
• Economic.
What effect will the economy have on your product or service?
- Socio Demographic.
What effect will the social, behavioral and demographic trends have on your product or service? - Technology.
How will technology effect your business / service?
• Politics & Legislation.
Are there political or legislative influences that may affect your business?
- Physical/Geographic.
Do either of these elements have an influence on the expansion of your market, perhaps for example, distribution?
. Industry Trends.
What are the overall industry trends both in your local market and internationally? Will international trends have the same influence in your market?
. Competitors.
Who are your competitors, what is their market share, how does their business operation differ from yours, how are they marketing their products, what are their price points? What is their likely reaction in response to your business initiatives? - Customers.
Who is your customer? What are your customer segments? Where are they? Consumer behavior is driven by significant social paradigms such as perceptual age versus biological age, wealth creation, lifestyle quality, and time saving lifestyle, working dynamics among others. You need to understand as much as possible about your customer’s behavior and motivations.
• Changes.
What are the changes taking place, or likely to take place, in your industry? What steps are you taking to address this change?
The marketing audit will provide valuable, up to date information on customer needs, purchase motivators, how, where and when they purchase, the primary and secondary benefits being sought, and the positioning and strategies of your competitors.
Your challenge as a result of this marketing audit is to create
a distinct point of difference from your competitors
that impacts directly on the potential customer’s hot button.
You must give potential customers a clear reason to purchase your product rather than that of your competitors.
You should regularly conduct a marketing audit to enable you to keep ahead of the changing and evolving marketplace and the initiatives undertaken by your competitors.
(iii) SWOT analysis (Strengths, Opportunities, Weaknesses, and Threats)
A SWOT analysis is an honest appraisal of the strengths and weaknesses of your business and the opportunities and threats that challenge you.
All areas of your business should be considered, including:
• Company image and position
• Management staff
• Corporate culture
• Financial resources
• Products / Services
• Market situation and trends
• Physical resources
• Government policies
Strengths and weaknesses are generally elements that are internal to the business, things you can directly control. Opportunities and threats are generally external to the business, things you have little to no control over.
This is a highly objective and critical analysis of the capacity of your business, product, marketing and personnel in terms of key strengths and weaknesses.
Depending on your requirements you can analyze each element of your business separately or as one.
For example:
Strengths May include exceptional personnel, financial position, performance record, efficient organizational structure, flexibility, product quality, brand equity, quality of research and expertise of consultants.
Weaknesses May include current performance, personnel qualifications, experience or attitude, lack of brand awareness, lack of competitive advantage, high manufacturing cost, low return on capital, poor market intelligence, strength of the competitors, lack of direction, poor management culture.
Opportunities Can include company stability, financial strengths, competition in disarray, trends, strategic alliances, global knowledge, cost containment, technological advances.
Threats May include market trends, competitor performance, experience, market segment retraction, decline in demand, potential acquisition, and product affordability.
When evaluating your personnel in general, or a specific team, e.g. the marketing team, considerations may be:
Strengths Qualifications, experience, enthusiasm, contacts.
Weaknesses Lack of experience and knowledge, lack of planning, poor communication skills, responsibilities exceed resource capabilities, lack of performance measuring program, lack of empowerment.
Opportunities Leadership, develop communication strategy, training.
Threats Lack of strategy and leadership, lack of success culture and team relationships.
Preparing a SWOT analysis is usually done in a freewheeling brainstorming session with the whole team and is often very laborious, lively and tense. Most people do not like to have their weaknesses, or that of the organization for which they are responsible or a part of, exposed and analyzed, however an honest SWOT can really provide a clear picture of the current organization and the priority of the steps that need to be taken moving forward.
Often, it will take research and objective analysis by an independent organization to really develop the SWOT. We have experienced many instances where an internal SWOT is carried out, resulting in a few entries in each column, usually more strengths and opportunities than threats and weaknesses. When our marketing team completes the task there are often a couple of dozen entries in each.
Conclusion
A highly thought out marketing strategy is the key to any successful business. A good product or service at an acceptable price and a good business plan will get you nowhere if it doesn’t fulfill a potential customer need and is presented to them in a cost efficient way that motivates a purchase.
The key to creating a good marketing strategy is a probing, totally honest investigation of the market in which you operate, all of the factors that can influence your business, your competitors, your internal team and your potential customers.
We have a great deal of success with “Think Tanks” which we organize for corporations. We assemble a group, usually 10-12 of the leaders in various fields of endeavour with 2 or 3 experts in the field the client is involved in. A few days prior to the session, all attendees receive a detailed brief. Depending on the product or service, the group will contain experts in various forms of advertising and promotion, marketing, finance, media, web, corporate structure, taxation and so on.
What follows is a 10 hour, no-holds barred, session. At the end of it all we create a business model, marketing strategy and plan. More often than not, the end result is significantly different than the view taken into the meeting. It takes honest, no restrictions debate to ensure a business is on the right track.
Once this ‘audit’ is in place you are in a position to begin to develop the marketing strategy.
Remember:
“If I had eight hours to cut down a tree, I would spend six hours sharpening the axe”
Abraham Lincoln
Skate to where the puck is going to be, not where it is.
Wayne Gretsky
If you would like to contact me for any reason, I am always available on [email protected]. And don’t forget … it doesn’t matter where in the world you are. We spend 10 days a month in the US, 10 days in Australia and 10 days in London. We would love to hear from you.