Marketing strategy is not for the thin-skinned. Its primary purpose is to drive revenue by delivering value through developing need-driven consumer goods and services; and the organization as a whole is always counting on marketers to reach their revenue forecasts. But doing this isn’t as easy as it sounds since there is some amount of guesswork when it comes to marketing. Indeed, there is a tried-and-true way to give your products a better chance to succeed.
On average, it costs over five times more to acquire a new customer than it does to retain an existing customer and unfortunately for marketers, the more marketing information potential customers have access to, the more difficult it becomes for marketers to keep them happy. Nurturing brand loyalty has always been a difficult task, and with so many choices facing consumers in this globalized marketplace, brand switching has become all too easy for consumers to justify. Thus, developing new products are one of the keys to keeping customers engaged with the brand.
Unfortunately, the odds are quite good that a new product will fail within five years, and this is precisely why there is often so little joy in marketing; but this is also why branding is so important. The best brands connect with consumers on both emotional and rational levels. Appealing to both hemispheres of the brain makes for a stronger brand attachment, and high levels of affinity lead to loyalty. When compared to casual users, loyal customers tend to buy more, are less sensitive to price increases, tend to spread positive word-of-mouth, and are far easier to reach. Indeed, the brand is the key to distinguishing your products from those of competitors and to keeping customers.
So, About That Joy …
Metaphorically speaking, any modicum of joy that might be derived from marketing (at least initially) can be compared to the confidence that engineering students often have when they feel they have prepared well for an exam. Of course, the test might be impossible to pass regardless of preparation (after all it is engineering), but ultimately a well-prepared student will likely graduate on time. There is joy in planning. There is joy in being as prepared as possible. And there is a great deal of joy in making and marketing a successful product.
Marketing preparedness is derived from study and analysis, and this due diligence is a must before developing product, price, place (distribution) and promotion strategies (the Marketing Mix) for a new product. These strategies don’t appear from out of the ether, but in fact arise from conducting a thorough Situation Analysis followed by a SWOT Summary, revealing information that marketers should use to craft a proper marketing strategy. Indeed marketers can take solace in knowing that they have at least attempted to justify their strategies and tactics.
The following strategic planning model is broken into two parts. After beginning with a product idea that might be a strategic fit for a particular company in a particular market, it is wise to break the analysis into factors that can be controlled by the company and factors that cannot. The former comprise the internal analysis and the latter the external analysis. With regard to the SWOT Summary, the former can be translated into strengths and weaknesses (controllable) and the latter into opportunities and threats (uncontrollable). From the SWOT, we can develop our marketing mix.
An idea for a new nutritional supplement, for example, need not be very novel in nature. Generally speaking, the natural product market is both large enough and growing at a healthy enough clip so as to provide ample opportunities for a large number of relatively similar products to be offered across a broad range of retail channels. In many cases, it is the brand’s identity and image that differentiate the new product offering—far more than the content and function of the product itself. This is often the case in many large and mature industries (true innovations are few and far between), and the nutritional supplement sector has been flirting with maturity for quite some time. A robust, carefully constructed situation analysis should provide a nice check against any new product hypothesis, and is also the foundation of the strategic marketing plan—the very roadmap for marketing strategy.
Analyzing the Internal Marketing Environment
When conducting a situation analysis, it’s best for marketers to begin at the top with the organization’s mission, a statement of both purpose and scope. The mission should limit the range of, and set the focus for, the sorts of products a marketer might want to introduce and, for a smaller organization, it could even set the foundation for a brand’s strategy. A strong mission that unifies products under a common purpose is a strength. At this point, marketers should look at organizational demographics, an analysis that could include an organizational chart that in particular identifies the company’s marketing functions, as well as any other general corporate information (such as company size, location of operations, supply chains, and markets served) that might be of interest to the marketer. These factors might lead to any number of strengths and weaknesses when it’s time for the SWOT Summary.
Next comes a thorough assessment of the organization’s existing marketing mix, including the current strategies being employed. What are the company’s current products (if any) and how are they positioned, priced, distributed and promoted? Are they arranged under one or more brand names and/or product lines? Which have been the most successful? Which are near the end of their respective life cycles? Do these strategies represent strengths or weaknesses? How will the proposed new product fit within or change the existing framework? Next, a look at the organization’s financial condition in the form of an income statement will provide crucial information about the resources available for new product development and commercialization, as well as obvious strengths or weaknesses.
And what about the organization’s existing research and development efforts, if any? Does this new product idea fit within or outside of these efforts? Marketers should also look at production strategy, with particular attention to how and where products are currently being produced by the organization or its partners, as well as any internal technology being employed that could be considered an advantage or disadvantage. Obviously any proposed new products would fit within or in some way change this framework. For example, an existing manufacturing infrastructure that can handle added capacity for a need-driven new product is surely a strength and a lack thereof surely a weakness.
In reviewing these seven internal factors that affect the marketing environment, marketers can glean many strengths and weaknesses. Indeed, marketers can match strengths with the market opportunities identified in the upcoming external analysis, while organizational leaders can work on the internal exercise of converting weaknesses into strengths. But new product ideas should not only be considered within the context of what the organization is able to control, but even more importantly, within the context of the much broader external marketing environment.
Analyzing the External Marketing Environment
This second component of the situation analysis, sometimes called “environmental scanning,” can be a rather extensive exercise, and each of these nine factors is involved in identifying opportunities and threats in the external business environment. It’s always best to start at the top with an analysis of the industry and its major trends. Marketers should get numbers on both the industry size (revenue) as well as the growth rate over the past several years and any forward-looking forecasts. It is important to bear in mind that a product can be in more than one industry at once, as is the case with most supplements (e.g., natural products, nutritional supplements, immune support), and so data on all of these sectors will be helpful.
The next area of analysis is competitive in nature. Marketers should identify the top four or five competitors (products in the same category that meet a particular need, i.e., two skin care creams) and analyze each of them along the four elements in the marketing mix. Competitors then can be compared with the internal marketing mix analysis that we conducted previously for an “apples to apples” type of comparison. And don’t forget about substitutes for your product (those in a different category that meet the same need, i.e., a skin care nutritional supplement to replace the cream). Numerous opportunities and threats can be gleaned from this analysis, but remember that a substitute can sometimes be difficult to see on the horizon. Consider the irreparable damage a disruptive Netflix did to a complacent Blockbuster.
Now it’s time to analyze the consumers that have both the ability and the desire to buy a particular type of product, what we call market potential. This large group can be broken down into several smaller market segments that are markedly different from one another. The purpose of market segmentation is to define different groups of consumers so that marketing mix strategies and tactics can be targeted and positioned appropriately. One market segment might have a very different combination of demographics, geographics, needs, motivations, behaviors and attitudes than another group of potential customers, and therefore it might be prudent to target them accordingly. In addition, broad-based social trends should be identified, so that major societal drivers of attitudes and behavior can be assessed and provide marketers with a better idea of which trends are here to stay and which trends are likely to be short-lived fads.
The last five areas of the external analysis don’t require quite as much analysis as the first four. Marketers should analyze the political environment because politics leads to regulation, and a thorough analysis of the legal and regulatory environment is always a must. The roles of the FDA, FTC and other regulatory entities must be considered within the framework of marketing strategy and a number of opportunities and threats generally arise from such analysis. Economic data, such as GDP (gross domestic product) growth (or lack thereof), unemployment rates, and income growth tell the marketer a great deal about what people are able and willing to spend in the near future. Also, technological trends should be assessed to see if conditions in the external environment are ripe for marketers to address with new product ideas. The last area concerns the impact of Mother Nature on our marketing efforts. Conditions in the natural environment are especially important when natural ingredients are involved. For example, an echinacea shortage caused by massive flooding in regions where it is commonly sourced would certainly affect various aspects of marketing strategy.
The Marketing Mix
Once the objectively conducted situation analysis has been completed, marketers can then complete a subjective SWOT analysis/summary, offering opinions on what might translate into a strength or weakness (from the internal analysis) or what might be considered an opportunity or a threat (from the external analysis). Strengths should be matched with opportunities, threats avoided, and weaknesses can hopefully be eventually converted into strengths. Measureable marketing objectives such as revenue can be set and a budget for achieving those objectives. Once they know what mark they are trying to hit and how much money they have to spend to do so, marketers can then craft a marketing mix consisting of product, price, place and promotion strategies and tactics. The implementation period for the plan should be set (usually one year) and the results of executing the plan evaluated at that time to see what worked, what didn’t, and make changes for next time.
If you are new to the world of formalized strategic planning, then welcome to the hot seat. Developing a strategic marketing plan (a roadmap or blueprint for marketing strategy) is an absolutely necessary part of what marketers must do to maximize the likelihood of success, and it is very, very important to express this strategy in the form of a written plan, especially when it comes to new products. Don’t skip the steps. A robust analysis can alleviate much anxiety and justify marketing activities to the folks in the “C Suite” who sign the checks. There is no joy in failure, only in success. And there is no substitute for proper strategic marketing planning. NIE
Darrin C. Duber-Smith, MS, MBA, is a senior lecturer at the Metropolitan State University of Denver’s College of Business (since 2003) and has more than 30 years of specialized expertise in the marketing and management profession, including decades of work with natural, organic, and green/sustainable goods and services. He has published more than 90 marketing-related articles and book chapters in various publications and has presented at more than 50 executive-level events. A frequent media contributor as well as recipient of The Wall Street Journal’s (WSJ) In-Education Distinguished Professor Award in 2009 and WSJ’s Top 125 Professor Award in 2014, Duber-Smith is author of Cengage Learning’s “KnowNow! Marketing” blog at http://community.cengage.com/gecresource2/info/b/marketing. He can be reached at [email protected].
