Principles of Marketing

Module 4: Marketing Strategy

Marketing Strategy Mechanics

What you'll learn to do: explain the inputs and components of a marketing strategy

The company strategy and objectives provide direction for the whole company, but they don't specify how the company will get the most benefit from marketing resources and capabilities. That is the role of the marketing strategy. The marketing strategy defines how the company shapes its product, promotion, pricing, and distribution to provide unique value to its customers and to support the broader company goals.

Throughout this course we will delve more deeply into the strategies, tools, and processes that a marketer uses, but this module emphasizes the planning process itself. How does the marketing function create an effective plan and execute it successfully? That planning process is the focus of this module.

The specific things you’ll learn in this section include:

  • Identify the inputs to the marketing strategy
  • Describe how a marketing strategy optimizes the marketing mix
  • Discuss the role of budget, implementation, and evaluation in the marketing strategy

Inputs That Inform Marketing Strategy

To a great extent, developing the marketing strategy follows the same sequence of activities used to define the corporate strategy. The chief difference is that the marketing strategy is directly affected by the corporate strategy, as well as by the other functions within the organization. As a result, the marketing strategy must always involve monitoring and reacting to changes in the corporate strategy and objectives.

In order to be effective, a marketing strategy must capitalize on the resources at its disposal within the company, but also take advantage of the market forces that are outside the company. One way to assess these different factors, or inputs, is by conducting a situation analysis (also called a SWOT analysis). A SWOT analysis includes a review of the company's internal strengths and weaknesses and any external opportunities and threats that it faces. We will discuss the SWOT analysis and other strategic planning frameworks in more detail later in this module.

Centering on the Target Customer

The marketing strategy defines how the marketing mix can best be used to achieve the corporate strategy and objectives. The centerpiece of the marketing strategy is the target customer. While the corporate strategy may have elements that focus on internal operations or seek to influence external forces, each component of the marketing strategy is focused on the target customer.

Recall the following steps of determining who your target customer is:

  1. Identify the business need you will address, which will be driven by the corporate strategies and objectives;
  2. Segment your total market, breaking down the market and identifying the subgroup you will target;
  3. Profile your target customer, so that you understand how to provide unique value;
  4. Research and validate your market opportunity.

Focusing the marketing strategy on the target customer seems like a no-brainer, but often organizations get wrapped up in their own strategies, initiatives, and products and forget to focus on the target customer. When this happens the customer loses faith in the product or the company and turns to alternative solutions.

The Market Planning Process: vertical Flowchart with 7 layers. From top, Layer 1 “Corporate Mission” [highlighted in gold] points to Layer 2 “Situational Analysis” [blue], points Layer 3 “Internal Factors: Strengths & Weaknesses” and “External Factors: Opportunities & Threats” [blue], points to Layer 4 “Corporate Strategy: Objectives & Tactics” [blue]. Layers 2-4 are connected with gray lines, as one sub-unit. This points to Layer 5 “Marketing Strategy: Objectives & Tactics” [blue], to Layer 6, a graphic showing “Target Market” as the central piece of the 4 Ps surrounding it: Product, Price, Promotion, Place [all blue]. The final layer is “Implementation & Evaluation” [blue]. Layers 5-7 are connected with gray lines, as a second sub-unit.

Aligning Corporate and Marketing Strategies

As we discussed before, objectives can create alignment between the corporate and marketing strategies. If the corporate objectives are clearly defined and communicated, then they become a calibration tool for every step of the marketing planning process.

How would good corporate-level objectives inform the marketing strategy and objectives? Consider the following examples:

  1. Imagine completing a market segmentation process. You find a target market that will find unique value in your offering. The decision to pursue that target market will depend on whether that segment is large enough to support the corporate objectives for market growth.
  2. How many new products should the company launch this year? The answer should be informed by the corporate objectives for growth and profitability.
  3. The marketing function has identified a customer relationship management campaign that would create greater customer loyalty. Does the cost of the campaign and its expected returns align with the company objectives?

As you can see, company objectives provide important guidance to the marketing planning process. Likewise, marketing objectives ensure that the goals of the marketing strategy are defined, communicated, and measured.

Photo of a lone traveler pulling her suitcase, walking through brightly colored O'Hare Airport With a clear understanding of the corporate objectives, marketers must decide which strategies and tactics will best align with and support them.

This is rarely a simple decision. Markets are constantly changing, and buyer behavior is very complex. The marketer must evaluate all aspects of the marketing mix and determine which combination of product, price, promotion, and distribution will be most effective.

Decisions about the marketing-mix variables are interrelated. Each of the marketing-mix variables must be coordinated with the other elements of the marketing program. Consider, for a moment, a situation in which a firm has two product alternatives (deluxe and economy), two price alternatives ($6 and $3), two promotion alternatives (advertising and coupons), and two distribution alternatives (department stores and specialty stores). Taken together, the firm has a total of sixteen possible marketing-mix combinations. Naturally, some of them will be incompatible, such as the "deluxe" product and low price combination. Nevertheless, the organization must consider many of the possible alternative marketing programs. The problem is magnified by the existence of competitors. The organization must find the right combination of product, price, promotion, and distribution so that it can gain a differential advantage over its competitors. (All of the marketing mix elements will be discussed in more detail in other modules of the course.)

Recall that Southwest Airlines created a company strategy to expand its target market to include business travelers. One of its objectives was to grow revenue and market share to achieve specific targets by expanding into the business traveler market.

Which marketing strategies are needed to support such a corporate strategy? To answer that, Southwest had to investigate the four Ps:

  • Do we need new products that appeal to business travelers? (Product)
  • Are business travelers willing to pay a higher price point? (Price)
  • How will we communicate our offerings to business travelers? (Promotion)
  • How do business travelers book their travel? Are new distribution points needed? (Place)

As you can see, these questions about the four Ps are nicely aligned with Southwest's corporate strategy and objectives, but they're also connected to questions about the target customer: Who is the business traveler and how does he or she define value? The optimal marketing strategy will need to include a deep understanding of the target customer and specify how it offers unique value to that customer. Southwest did that in the ways described below:

Product Strategy

Created a series of programs that offer time savings and convenience for business travelers, who value those benefits above price.

Pricing Strategy

Created add-on services that provide business travelers with time savings and convenience at a total price that is higher than what leisure travelers pay for no-frills services, but is at or slightly below competitors' prices for business fares.

In each case, the marketing strategy supports the corporate strategy, focuses on providing unique value to the target customer, and incorporates the elements of the marketing mix that can be leveraged to deliver that value.


Photo of Times Square in New York City. At center are two large, lighted billboards advertising Panasonic and Yahoo.Even a well-designed marketing program that has been through a thorough evaluation of alternatives will fail if it's poorly implemented. Implementation involves the tactics used to execute the strategy. It might include such things as determining where to promote the product, getting the product to the consumer, and setting a commission rate for the salespeople.

The implementation process emphasizes the timely completion of tasks. Often marketing organizations have a project- or program-planning function that tracks the tasks that will be completed, the individual or team that will complete the tasks, the budget spent, and the results achieved. If the organization manages each element of the plan carefully, it can intervene if progress is falling behind, rather than waiting until it affects the objectives or strategy.

Today, the process for implementing, measuring, and adjusting marketing tactics is much faster and more quantitative than it has ever been. Take the following comparison: a store decides on a promotional tactic to hang a billboard on the freeway near the exit ramp to the store. The billboard company can provide estimates on the number of cars that will pass the billboard, but how many people will actually look at the billboard? How many will be within the target market? How many will take the exit? How many will continue driving, but remember and come back to the store at a later date? It is almost impossible to answer any of these questions with certainty.

If, on the other hand, the same store launches a promotional campaign on Facebook, it will gain much more visibility into who sees the ad and whether the ad is effective.  It can track who clicks on the ad, who buys after clicking, how often they come back, and what they buy in the future.

Developments like this have improved marketing tactics immensely by making it easier to measure impact and make adjustments that can be used a day, hours, or even minutes later.


Marketing-mix components must be evaluated as part of an overall marketing strategy. Therefore, the organization must establish a marketing budget based on the marketing effort needed to influence consumers. The marketing budget represents a plan to allocate expenditures to each of the components of the marketing mix. For example, the firm must establish an advertising budget as part of the overall marketing budget and allocate expenditures to various types of advertising media—television, newspapers, and magazines, e.g. A sales promotion budget should also be determined, allocating money for coupons, product samples, and trade promotions. Similarly, budgets are required for personal selling, distribution, and product development.

How much should be spent to promote the sale of a company's products? The answer hinges on the following: "What are we really trying to accomplish? What are our goals?" Subsequent discussion should focus on finding the best path around any obstacles, toward those identified goals. In other words, product promotion is just one aspect of the larger picture.

Too often, when marketers ask whether their budgets are adequate, the question is driven by how much their competitors are spending. Knowing how much others in the same industry are spending can be useful to a company whose performance lags behind the competition or to a company that suspects its expenditures are higher than they need to be. In general, though, knowing what others spend can lead to a counterproductive "keeping-up-with-the-Joneses" mentality. It also assumes that others know what they are doing.

Photo of a colorful lemonade stand set up in a cemetery. The discourage young woman running the stand is shown with her head in her hands. No marketing program is planned and implemented perfectly. Marketing managers will tell you that they experience many surprises during the course of their activities. In an effort to ensure that performance goes according to plans, marketing managers establish controls that help them evaluate results and identify needed modifications. Surprises occur, but marketing managers who have established sound control procedures can react to unexpected results quickly and effectively.

Marketing control involves a number of decisions—one is simply deciding which function to monitor. Some organizations monitor their entire marketing program, while others choose to monitor only a part of it, such as their sales force or their advertising program. A second set of decisions concerns the establishment of performance standards—for example, market share, profitability, or sales. A third set of decisions concerns how to collect information for making comparisons between actual performance and standards. Finally, to the extent that discrepancies exist between actual and planned performance, adjustments in the marketing program or the strategic plan must be made.

Once a plan is put into action, a marketing manager must still gather information on the effectiveness of the plan's implementation. Information on sales, profits, consumer reactions, and competitor reactions must be collected and analyzed so that a marketing manager can identify new problems and opportunities.

Return on the Marketing Investment

Increasingly, the single most important evaluation measure is the return on the marketing investment (or marketing ROI). Earlier in this module we learned that strategies define how an organization can best use its resources to achieve the mission. Measuring return on the marketing investment helps marketers understand whether their use of resources is yielding the most effective results.

Let's look at an example of marketing ROI.

Example: Marketing ROI

A retail store launches a campaign to increase online sales. The firm tracks the cost of setting up the online campaign, promotion costs, costs of the images and designs for the promotion, and staff time used to implement the campaign. These are the investments. Let's say the total marketing spending on the campaign is $10,000.

Next, the store tracks a range of metrics, including how many people view online promotions (page views), how many people click on promotions (click-throughs), and ultimately the number of resulting sales. Thanks to the campaign, the company sees an additional $100,000 in sales.

The marketing ROI can be calculated by taking the revenue generated ($100,000) and dividing it by the cost of the marketing budget invested ($10,000). In this case, the marketing ROI for the retail store's online campaign is 10.

Marketing ROI does not only focus on sales generated. Marketers may talk about spending per new customer acquired, increases in the lifetime value of the customer, increases in market share, or other metrics that are important to the strategy.

Why has marketing ROI become an important metric? Many marketing leaders have realized that they are better able to secure appropriate marketing budgets when they can point to tangible results. Managers who found themselves constantly responding to the question "What do we get from our marketing budget?" have learned that marketing ROI can provide a definitive answer.

In addition to the marketing ROI, there are many new technology-based marketing programs and tools that give marketers an enhanced ability to capture data and evaluate results in quantitative terms.

Example: Old Spice

The video below provides an excellent example of the evaluation of a marketing campaign:

Think about the following questions regarding the ad campaign in the video you just watched:

  • What were the goals of the campaign?
  • How did the target customer influence the campaign and the goals?
  • Was it successful?
  • What metrics were used to determine the success of the campaign?

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