The Contributions of Marketing To Strategic Management

The Contributions of Marketing To Strategic Management

Introduction

Strategic management occurs at the corporate and business unit levels, while marketing is concerned with the external environment (Hofer, 1975). Marketing, therefore, contributes to strategic management at the business unit and environmental analysis level (Abell, 1980). According to Dhalla and Yuspeh (1976), marketing concepts like positioning, marketing segmentation and product life cycle have helped define the external environment and assisted organizations in the choice of strategy. Marketing, therefore, tries to satisfy consumers to achieve the firm’s objectives using the firm’s available resources. This is achieved through the 4P’s of marketing, i.e. price, promotion, place, and offering the right product (Cox, 1967).

Marketing developed around the time the planning school was taking shape. This is because the planning school like marketing advocated for the concept that if you offer the right product at the right price, then that was the organization’s strategy (Biggadike, 1981).

Contributions

Customer – Focus

When in the mid-1950s, the environment started changing, the focus shifted to the customer (Kotler, 1976). Strategy marketing, therefore, moved from aligning the customer to the business to aligning the company to the customer. The marketing concept helped organizations move from concentrating on internal considerations to the consideration of the external environment (Levitt, 1965). According to Hofer (1975), the more the organization moved it’s focus to the customer, the more the gap between the organization and it’s strategy narrowed. While strategic management had offered a trade-off between the long term view and short time view of the organization and between a financial and marketing performance, the marketing concept was very clear in its direction. The customer and the long term view should be allocated resources as they were the drivers of the organization (Wind, 1978). General Electric developed the marketing concept as a response to an environment that was changing and therefore, organizations had grown too big and too diverse to use profit as the only objective. There was, therefore, need to shift to customer needs (Hunt, 1976).

Market Segmentation and Positioning

Marketing segmentation is the subdividing of a market into the different definable subset of customers (Kotler, 1976). The subdividing is according to their needs, how they purchase a product, how they use that product and the frequency of use. Positioning, on the other hand, is the firm’s decision to serve a segment with products that are targeted to the customer needs. The two, therefore, seek to analyze the external environment and inform strategic decision making (Dhalla & Yuspeh, 1976). The firm uses this strategy to determine whether to use expansion or defence strategies in the respective market. To assist in the segment the market, marketers first ask the questions, how do customers define the environment; how do they perceive the competitor’s products and what are the trends. This then helps the organization know which segments of the market they will serve (Hofer, 1975).

According to Kotler (1976), marketers examine six aspects of a proposed segment: Measurability is the measure of the number of buyers in a segment. The number of potential consumers in a segment should warrant segmentation. Accessibility is the ability of the business to reach the business segment through an elaborate route to market. The marketing segment should be reachable by the firm’s distribution channels. Substantiality is the profitability of the segment, while defensibility is the ability to share costs between the segment and ensure cost-benefit across segments. Durability is the longevity of the business segment to warrant the investment from the business while competitiveness has the advantage to compete and serve the chosen segment.

Product Life Cycle

According to the Boston Consulting Group (1970), the most critical factor in determining a firm’s appropriate business strategy is the stage of the product life cycle. Different approaches work in the different product cycles, and a strategy that works in one of the cycles may not work in another product cycle. Increasing vertical integration is, for example, in the mature stage but may not be appropriate in the growth stage (Dhalla & Yuspeh, 1976). Product Life Cycle enabled managers to be all-rounded and become agile in their thinking. The marketing product life concept clearly illustrates the planning model emphasis on analyzing trends and using that to forecast future performance. Product Life Cycle also enables predict how a strategy may have to be changed as the organization reviews it’s strategy (Hofer, 1975).

A product in a particular life stage can be renewed and given a prolonged life span. This is done by going into a new segment or increasing usage of the product (Kotler, 1976).

Figure 1: Product life cycle: Source: (Dhalla & Yuspeh, 1976)

According to Hofer (1975), the product life cycle contains four distinct stages: Introduction, growth, maturity and decline.

Introduction stage

At the introduction stage, the organization uses different marketing strategies: Rapid skimming where the organization launches a product at a high price and a high promotional spend, slow skimming where the organization launces the product at a high price and a low promotional spend, rapid penetration where an organization launches a product at a low price with a high promotion and slow penetration where the organization launces the product with a low price and minimal promotion.

The aim of the organization at the introduction stage is to establish a clear brand traction, establish the right distribution channels to market your products, provide samples and trials to potential consumers and ensure the correct pricing.

Product growth stage

At the product growth stage, the organization seeks to increase profits and gain market share. The strategies at the growth stage are to improve product quality, adding new features and usage to increase market share. It is also to enter new market segments, keep profits as competitive as possible, increase distribution channels to cope with marketing demand and ensure product preference beyond just product awareness. At the product growth stage, the organization sees rapidly rising sales, profits and market share. The strategies should, therefore, seek to maximize these opportunities (Kotler, 1976).

Product Maturity Stage

At this stage, the market is saturated, and the organization needs different strategies to prolong the life cycle of its products (Hofer, 1975). The organization, therefore, pursues two strategies: Market modification where the organization enters new market segments, redefines target markets, wins over competitor customers and converts non-users into the category. Product modification where the organization improves the product’s features, quality, pricing and differentiates its products from the others in the same category.

Product decline stage

At this stage, there is a decline in the organization’s sales and profits (Biggadike, 1981). This is caused by changing customer preferences, technological advances and alternatives in the market. The strategies for an organization at this stage are reducing the promotional spend, reducing the number of distribution outlets, implementing price downs, increasing usage of the product, harvesting the product before finally divesting it.