Marketing strategy refers to the overall plan that a company or organization uses to market its products or services. It aims to reach potential customers and persuade them to purchase a company's products or services.
Marketing strategy and consumer behavior are closely related. Consumer behavior includes everything from the initial consideration of a product or service to the final decision to purchase. Marketing strategy plays a crucial role in influencing consumer behavior. For example, a company targeting younger consumers may use social media marketing and influencer partnerships to reach this demographic. In contrast, a company targeting older consumers may use more traditional forms of advertising, such as TV commercials and print ads.
By understanding consumer behavior and using effective marketing strategies, companies can increase the likelihood that consumers will choose their products or services over those of their competitors. Without further ado, let's dive deep into the world of marketing strategy and consumer behavior.
Contents
- What is Marketing Strategy?
- Importance of Marketing Strategy
- Factors Affecting Marketing Strategy
- 7 Ps of Marketing Strategy
- Base of Marketing Strategy: Consumer Behavior
- Case Study
- Importance of Consumer Behavior in Marketing Strategy
- Thought Process of a Consumer
- Step 1: Need Recognition
- Step 2: Search for Information
- Step 3: Information Processing
- Step 4: Pre-Purchase Alternative Evaluation
- Step 5: Purchase
- Step 6: Post-Purchase Evaluation
- Overview of Consumer Behavior
- Marketing Strategies Based on Consumer Behavior
- Examples of Marketing Strategy
- Conclusion
What is Marketing Strategy?
A marketing strategy is a long-term plan for achieving a company's objectives by comprehending customer needs and forging an identifiable and long-lasting competitive advantage. This includes everything from deciding who the target audience is to selecting the channels one will use to communicate with them. With the help of a marketing strategy, one can specify how the business will position itself in the market, the kinds of products they will make, the strategic alliances they will forge, and the forms of advertising and promotion they will use. Any business that wants to succeed must have a marketing strategy.
Importance of Marketing Strategy
The above had as its goal a consumer-centered approach. Marketing's objective is to comprehend and influence consumer behavior to help the company meet its clients' and customers' needs. Customers look for goods that satisfy their needs at the appropriate time, at a fair price, and through their preferred channel. Businesses aim to help customers and increase their growth and loyalty. Marketing is the process that brings buyers and sellers together because a market is a place where they can conduct business. It is important to emphasize that company competition has replaced marketing strategy for the reasons mentioned above.
In other words, marketing strategy risks losing sight of the need to focus on consumer behavior and delving too deeply into concepts like game theory, in which one firm competes with another. One can think of marketing strategy as an iceberg: what is seen (firms competing) is the tip above the surface, but what is really happening that moves the iceberg is unseen (from other firms' points of view) below the surface (incentivizing consumers).
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Factors Affecting Marketing Strategy
People in marketing should be aware of Michael Porter and his monumental article and book about competitive strategy (Porter, 1979–1980). This is where marketing strategy became a discipline. The best marketing strategy will differ from business to business. Porter detailed factors creating competitive intensity. The factors are:
- The bargaining power of buyers means firms lose profit from influential buyers demanding lower prices. This means consumers are sensitive to price.
- The bargaining power of suppliers means firms lose profit due to potentially increased factor (input) prices. Suppliers only have bargaining power because a firm's margins are low. This is because a firm cannot raise prices. After all, consumers are sensitive to price.
- The threat of new entrants lowers profits due to new competitors entering the market. Again, consumers are sensitive to price and very informed about other firms' offerings.
- The intensity of rivalry causes lower prices because of the zero-sum game supplied by consumers. There are only a certain number of potentially loyal customers; if a firm gains one, then another firm loses that one.
- The threat of substitute products invites consumers to choose among the lower-priced products.
Based on these factors, a firm can ascertain the intensity of competition. The more competitive the industry is, the more a firm must be a price taker; that is, they have little market power, meaning little control over price. This affects the amount of profit each firm in the industry can expect. A firm can evaluate its strengths and weaknesses and decide how to compete. Porter did something brilliant: he devised three generic strategies based on the above. A firm can compete on costs (be a low-cost provider), differentiate, and focus on high-end products. The firm needs to create and adhere to a particular strategy. Often firms are diluted and do everything at once.
7 Ps of Marketing Strategy
The 7 Ps comprise the necessary marketing mix for a company to advertise a product or service. Since the 1960s, there have been only 4 Ps in marketing. Namely:
- Product: Features, differentiating qualities, and general excellence of the good or service being provided.
- Promotion: Promotion refers to the methods used to advertise the product through various channels.
- Price: Long-term pricing strategy for goods, including advertisements, discounts, and exclusive deals.
- Place: Where do consumers discover, research, and purchase products
But in 1981, Bernard H. Booms and Mary J. Bitner added 3 more Ps, which made marketing easier:
- People: Everybody who interacts both directly and indirectly with the target clients.
- Process: How to give customers the best possible experience while delivering the product.
- Physical evidence: Customers can be persuaded that a product is authentic via physical goods and experiences; in the case of digital products, this can include website visits, confirmation emails, testimonials, customer feedback, and more.
Product
To put it simply, the marketing mix product is what is being advertised. Aspects like quality, packaging, design, and brand are included when referring to a product. When creating a product, one must ensure that it meets the market's needs. The life cycle, which includes growth, maturation, and sales decline, must also be considered. One can win in this area by outperforming rivals in terms of the product quality they deliver to the target market.
Price
In the marketing mix, price refers to the amount of money the consumer is willing to spend. By definition, the price must be higher than the manufacturing cost, which determines profit or survival. As a result, price changes significantly impact product sales and demand, as well as the brand's perception. Customers who compare the prices of one brand to those of competitors may associate a lower price with low-quality items. However, overpricing may result in costs exceeding benefits. Thus, when determining the price, marketers should consider the product's value and various pricing techniques.
Place
As part of the marketing mix, place refers to the distribution and availability of goods to prospective buyers. No discussion of location would be complete without mentioning the target market. This component necessitates a comprehensive understanding of the target persona. Once one has mastered knowing the ins and outs of their target clients, one can uncover the most effective distribution methods.
Promotion
Beat the drums...!!
The promotional mix component of the marketing mix refers to who, what, and how. What is communicated, who receives it, how is that audience reached, and how often is it promoted? It employs strategies such as:
- Sales
- Advertisements
- Public relationships
- Emails
- Social media
- The promotion mix's meaning and principle are to increase brand awareness and sales.
People
Businesses rely on the people who manage them. As a result, having the right people is as essential as having the right products or services. This can be seen in employee performance, appearance, and customer service.
As a result, establishing what constitutes "appropriate people" for the company might be difficult, but it should include the following three factors:
- Genuine enthusiasm
- Exceptional service
- Be open to suggestions
Having the right teammates is an organizational benefit that influences market position.
Process
The method which presents products or services to clients is referred to as the process in the marketing mix. Sales funnels, distribution systems, and other methodical operations can ensure the business runs smoothly. However, to save money, one must also ensure that the procedure is well-organized.
Other examples include the order in which individuals complete activities, the quantity of inquiries received by salespeople, and how performance is recorded and assessed.
Physical evidence
Physical evidence is a must-have for the 7 Ps of marketing. It may be material or intangible, and one should provide proof of delivery. Product packaging, receipts, and customer service are all physical examples. The perception of a company's product in the marketplace is intangible physical proof.
Consistent branding across channels is a means to impact customers' views to the point that the brand is the first thing that comes to mind when they hear a word, sound, or phrase.
Consider who comes to mind when you think about fast pizza. Pizza Hut is a popular answer. Their existence in the marketplace is immediately noticeable. This is intangible physical evidence.
Base of Marketing Strategy: Consumer Behavior
Marketing drives financial results, and to be market-oriented, there must be a consumer-centric focus. All marketing activities are geared towards learning and understanding consumer behavior. Therefore, the marketing orientation is consumer-centric. However, just because marketing revolves around customer behavior, it does not mean one has to follow everything the customer says. This is because:
- The consumer's wants can be widely divergent.
- The consumer's wants contradict the firm's minimum needs.
- The consumer might not know what they want. It is marketing's job to learn, understand, and incentivize consumer behavior to a win-win position.
Objection from Product-Centric Marketers
To be fair, customer-centricity contradicts product managers' objectives. Instead, product managers concentrate on creating items and then finding customers to buy them. This works sometimes, but only occasionally. Contrary to popular belief, Chrysler's minivan approach is the model for product focus.
Case Study
According to legend, Chrysler CEO Lee Iacocca planned to design and manufacture the minivan, but market research revealed that it would not sell. The "halfway between a vehicle and a conversion (full-size) van" perplexed customers. Then Iacocca designed and built it. Everything else is history. The point is that buyers don't always know what they want, particularly when it comes to a brand-new product they've never used.
Importance of Consumer Behavior in Marketing Strategy
Consumer behavior is a critical aspect of marketing because it provides insight into the decisions and actions of consumers. By understanding consumer behavior, marketers can develop effective marketing strategies tailored to their target audience's needs and preferences. This can help businesses increase sales and build strong relationships with their customers. Additionally, understanding consumer behavior can help companies identify market trends and changes in consumer attitudes, which can inform product development and marketing efforts. In short, understanding consumer behavior is essential for creating successful marketing campaigns and building a successful business.
Marketers who can connect with consumers and shape their behavior will benefit from understanding buyers. This marketing strategy is crucial nowadays because, in the cutthroat global market, a person's ability to build a personal connection might be the difference between a sale and a waste of advertising money. The globe is smaller than it was a few decades ago in many ways, yet consumer behavior has only become more complex.
Thought Process of a Consumer
The journey from having an idea to purchase a product to actually purchasing it, is a long one. Consumers go through a number of steps before making the purchase. The process continues even after making the purchase. Let's take a deeper look at these steps:
Step 1: Need Recognition
This is a realization that there is a 'cognitive dissonance' between some ideal state and the current state. There is a lot of advertising around that needs arousal.
Step 2: Search for Information
Depending on whether the product requires limited or extensive engagement and the ability to decide, the consumer recalls what they have heard or know about it to infer.
Step 3: Information Processing
The consumer's next step is to process the information and facts they have. Unfortunately, most marketing messaging strategies prioritize positive brand recall, satisfaction from previous interactions, or emotional loyalty over information processing.
Step 4: Pre-Purchase Alternative Evaluation
After the information has been processed, the final critical comparison is: does the potential product have attributes the consumer considers greater than the consumer's standards? Given budgetary measures, what is the product likely to offer in terms of satisfaction after the consumer has decided it is above minimum qualifications?
Step 5: Purchase
The whole point of the marketing funnel is the purchase. The sale is the last piece.
Step 6: Post-Purchase Evaluation
Consumer decision-making continues after purchase. In general, it contrasts the actual pleasure with the benefits the consumer expected from eating the product.
Overview of Consumer Behavior
One can best understand consumer behavior by understanding the macroeconomics analysis of consumer problems. They are best summarized in three questions:
- What are consumers' preferences (in terms of goods/services)?
- What are consumers' constraints (allocating limited budgets)?
- Given limited resources, what are consumers' choices?
Now let's talk about general assumptions of consumer preferences. There are three such assumptions: completeness, transitivity, and non-satiation.
- Completeness: Completeness assumes that consumers have all the information they need to make an informed decision about the product and their desires.
- Transitivity: Transitivity assumes that if A happens, then B will also occur.
- Non-Satiation: Non-satiation assumes that if one person has X amount of something, it does not mean they will not want more options.
Marketing Strategies Based on Consumer Behavior
Stephan Sorger's Marketing Analytics (Sorger, 2013) briefly describes marketing strategies based on consumer behavior.
Defensive Actions
One can take the following actions to fend off competition:
- Bypass attack (the attacking firm expands into one of our product areas) and the counter is to constantly explore new areas.
- Encirclement attack (the attacking firm tries to overpower us with larger forces) and the counter is to message how our products are superior/unique and of more value. This requires constant monitoring of message effectiveness.
- Flank attack (the attacking firm tries to exploit our weaknesses), and the counter is to not have any flaws. This, again, requires monitoring and messaging about the uniqueness/value of our products.
- Frontal attack (the attacking firm aims at our strength) and the correct counter is to attack back in the firm's territory. This is a rarely used technique.
Offensive Actions
The following actions can be taken to lure in consumers:
- New market segments: this uses behavioral segmentation and incents consumer behavior for a win-win relationship.
- Go-to-market approaches: this learns about consumers' preferences in terms of bundling, channels, buying plans, etc.
- Differentiating functionality: this approach extends consumers' needs by offering product and purchase combinations that are most compelling to potential customers.
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Examples of Marketing Strategy
Now that we are familiar with marketing strategy, let us look at some of the top companies leading in marketing strategy:
- Nike: Tagline promoted value
- Spotify: Offer an alternative user experience
- Starbucks: Made coffee an experience and a lifestyle
- Red Bull: Put identity before products
- Sephora: Unique loyalty programs
- GoPro: User generated content
- Twitch: Niche-specific marketing
- Chipotle: Quirky contests
- Rainforest Alliance: Commitment towards the environment
- Nordstrom: Retargeted abandoned campaigns
Conclusion
Marketing strategy and consumer behavior are closely related concepts in business and marketing. A marketing strategy is a plan of action designed to achieve specific marketing goals, such as increasing sales, raising brand awareness, or entering a new market. This typically involves understanding the target audience and their needs and preferences, as well as analyzing competitors and the market as a whole.
On the other hand, consumer behavior refers to the actions and decisions made by individuals and households when they purchase and use goods and services. This includes factors such as their motivations, perceptions, attitudes, and values, as well as the various stages of the purchasing process, such as problem recognition, information search, evaluation of alternatives, and post-purchase evaluation.
Understanding consumer behavior is crucial for developing effective marketing strategies, as it helps businesses tailor their products, pricing, and messaging to the needs and preferences of their target audience. By analyzing consumer behavior, businesses can gain insight into what motivates consumers to purchase, what factors influence their decision-making process, and how they evaluate and compare different products and brands. This information can then be used to develop marketing strategies more likely to persuade consumers to purchase.
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