SUMMARY. (Marketing strategy)

Choosing the right market target strategy for each product-market is an important decision that affects the total enterprise. This decision is central to properly positioning a firm in the marketplace. Sometimes a single target cannot be selected for an entire strategic business unit when the SBU contains different product-markets. Moreover, locating the firm's best differential advantage may first require a detailed analysis of several segments. Market target decisions integrate strategic planning and marketing strategy. Targeting decisions establish key guidelines for strategic planning and decisions about the positioning strategy used to design the marketing program. The targeting options include a single segment, selective segments, or extensive segments.

The positioning strategy blends together the product, distribution, price, advertising, and personal selling strategies that focus on meeting the needs of a market target. The result is an integrated strategy to achieve management's positioning concept objectives while gaining the largest possible competitive advantage. Shaping this bundle of strategies is a major challenge to marketing decision makers.

Building on an understanding of the market target and the objectives to be accomplished by the marketing program, positioning strategy matches the firms' capabilities to market target buyers' needs. Programming decisions consist of determining the amount of expenditure, deciding how to allocate these resources to the marketing program components, and making the most effective use of resources within each mix component. Several factors affect program strategy, including the market target, the competition, resource constraints, management's performance criteria, and the product life cycle. The positioning statement describes the desired positioning relative to the competition.

Central to the positioning decision is the relationship between the marketing effort and the market response. Positioning analysis is useful in estimating the market response as well as in evaluating competition and buyer preferences. Analysis methods include customer/competitor research, market testing, and positioning models. Using analysis information in combination with management judgment and experience, management selects a positioning strategy. The close tie between positioning and segmentation strategies makes coordination of these strategies essential. Finally, it is important to assess the feasibility of a positioning strategy under consideration.

Positioning management is concerned with moving the strategy for the product through the stages of the product-market life cycle. The strategic brand concept provides a useful framework for concept design elaboration, and fortification.

Situational factors have an important effect on marketing strategy selection. The choice process begins with product-market definition and analysis followed by market segment identification and analysis of industry structure and competition. Next, competitive advantage is evaluated for each market target under consideration. Finally, market targeting and positioning strategies are selected, taking into account the situational variables that may influence the strategies that are implemented.

This strategy choice process can be used to analyze any set of situational factors. Evaluation of market entry barriers is an important strategic issue in market entry analysis and in protecting an existing market position against competitive threats. The importance of barriers varies across different product-markets. Consideration of the advantages and limitations of early versus late market entry is important. Evaluation of several criteria is useful in strategy selection. Relevant criteria include sustainable competitive advantage; premises used in strategy analysis-skills, resources, and management commitment; cohesiveness of the strategy; evaluation of potential risks and contingencies if the strategy is implemented; the flexibility and adaptability of the strategy to changing conditions; and the value added by the strategy.

Marketing strategy is affected by various situational factors. This is illustrated by considering strategies for entering new, growth, and mature product-markets. Restructuring actions in mature markets are also examined and strategies for defending an existing market position against new entrants are discussed. Finally, the expanding importance of competing in international markets is considered and the dimensions of global competition are discussed. Strategies for competing in global markets are examined.

New product planning is a vital strategic activity in all companies. Companies that are successful in new product planning follow a formal process guided by effective organization structures for managing new products. Experience helps them to improve product planning over time. Their management styles are responsive to new product planning needs.

Steps in new product planning include strategy development, idea generation, screening and evaluation, business analysis, product development, marketing strategy development, market testing, and commercialization. The major organization options for managing new product planning are the new products committee, the new product/brand manager, the new product department, and the venture team.

Idea generation triggers planning for a new product. The idea is evaluated as it moves through the process, and new product planning expenses accumulate. There are various internal and external sources of new product ideas. Ideas can be generated by information search, marketing research, research and development, incentives, and acquisition. Screening, evaluation, and business analysis determine if a new product concept is sufficiently attractive to justify proceeding with development.

Development and testing change the product from a concept to a prototype. Product development transforms the concept into one or more prototypes. Use testing gains user reaction to the prototype. Manufacturing development determines how to produce the product in commercial quantities. Marketing strategy development begins during or at the completion of the product development stage. A complete marketing strategy must be formulated for a totally new product. Product-line additions, modifications, and other changes require a less extensive development of marketing strategy.

Completion of product and marketing strategy development moves the process to the market testing stage. At this point management often obtains some form of user reaction to the new product, providing market testing is feasible. Testing options include simulated test-marketing, scanner-based test-marketing, and conventional test-marketing. Testing of industrial products is less extensive than testing of consumer products, although frequently purchased nondurables can be tested. Commercialization completes the planning process, moving the product toward sales and profit performance objectives. A successful product may fail due to faulty implementation.

Product strategy, which sets the stage for selecting strategies for each of the remaining components of the marketing program, forms the leading edge of a positioning strategy. The product strategy must be matched to the right distribution, pricing, and promotion strategies. Product decisions are central to shaping both the corporate and the marketing strategy, and should be made within the guidelines of the corporate mission and objectives. Key product decisions for a strategic business unit include selecting the mix of products to be offered, deciding how to position an SBU's product offering, choosing a branding strategy, and developing and implementing strategies for the products in the portfolio. An important product decision is establishing priorities for each product in the portfolio.

Branding strategy involves selecting a strategy from several options, including private branding, corporate branding, product-line branding, specific product branding, and combination branding. Brand identification in the marketplace offers a firm an opportunity to gain a strategic advantage through brand extension and licensing.

A strategic analysis of existing products helps to establish priorities and guidelines for managing the product portfolio. Methods include the analysis of the product life cycle, portfolio screening, positioning analysis, and financial analysis.

Management must decide for each product whether (1) a new product should be developed to replace or complement the product, (2) the product should be improved (and, if so, how), or (3) the product should be eliminated. These decisions and the activities necessary to carry them out form the core of product planning in an enterprise. Product strategy alternatives for existing products include cost reduction, product alteration, marketing strategy changes, and product elimination. Product mix modification may also be part of a firm's product strategy.

Most successful corporations have found that some individual or or­ganizational unit should be assigned responsibility for product planning. Approaches that are used range from a committee to a product planning department.

Finally, the improvement of product quality to effectively compete in global markets requires the development of an organizational philosophy and management process for improving quality. Quality is the responsibility of everyone in the organization. Competitive advantage in the 1990s depends importantly on the success of a company in achieving product-quality improvement and cost reduction.

The channel of distribution connects the producer with the end-users of the firm's goods or services. One or more levels of the channel may link the user and producer. A strong channel network is an important way to gain competitive advantage. Distribution channels provide access to market targets. The choice between company distribution to end-users and the use of intermediaries is guided by end-user needs and characteristics, product characteristics, and financial and control considerations.

Manufacturers must select the type of channel to be used, deter­mine distribution intensity, design the channel configuration, and man­age various aspects of channel operations. Channels are either conventional or vertical marketing systems (VMS). The VMS is the dominant channel for consumer products, and is increasing in importance for business and industrial products. In a VMS, one firm owns all organizations in the channel, a contractual arrangement exists between organizations, or one channel member is in charge of channel administration. Channel decisions also include the intensity of distribution and the channel configuration design. Channel management includes implementing the channel strategy and coordinating channel operations.

Selecting a channel strategy begins when management decides whether to manage the channel or to assume a participant role. Strategic analysis identifies and evaluates channel alternatives. Several factors should be evaluated, including access to the market target, channel functions to be performed, financial considerations, and legal and control constraints. The channel strategy establishes several guidelines for price and promotion strategies.

International channels of distribution are similar in structure to those found in the United States and other countries. Important variations exist in channels of different countries due to the stage of economic development, government influence, and industry practices. Strategic alliances offer one means of gaining access to the existing channels of a company operating in a country of interest to firm.

Important strategic trends are occurring in distribution channels, creating both opportunities and threats for participants. These include the emergence of new distribution concepts, the expanding importance of channel power, the explosive growth of direct marketing channels, and increased emphasis on distribution productivity.

Price strategy receives considerable direction from the decisions management makes about the product mix, branding strategy, and product quality. Distribution strategy also influences the choice of how price will work in combination with advertising and sales force strategies. Price, like other marketing program components, is a means of generating market response.

Two important trends are apparent in the use of price as a strategic variable. First, companies are designing far more flexibility into their strategies in order to cope with the rapid changes and uncertainties in the turbulent business environment. Second, price is more often used as an active rather than passive element of corporate and marketing strategies. This trend is particularly apparent in the retail sector, where aggressive low-price strategies are used by firms such as Toys 'R' Us and Sears. Assigning an active role to price does not necessarily require low prices relative to competition—companies may use relatively high prices.

The strategic importance of price demonstrates how product, distribution, price, and promotion strategies must fit together into an integrated strategy of program positioning. Analyzing the pricing situation is necessary to develop a price strategy for a mix or line of products, or to select a price strategy for a new product or brand. Underlying strategy formulation are several important strategic activities, including analyses of the product-market, cost, competition, and legal and ethical considerations. These analyses indicate the extent of price flexibility. Price strategies are classified according to the firm's price relative to the competition and how active promotion of price will be in the marketing program. Pricing decisions for new products should consider price positioning alternatives and the extent to which price may be used as an active element in the marketing program. Price policies and structure must also be determined for new products.

Pricing approaches for products include high-active, high-passive, low-active, and low-passive strategies. Variations within the four categories occur. In many industries, market leaders establish prices that are followed by other firms in the industry. Several special pricing considerations include price segmentation, distribution channel pricing, product life cycle pricing, and price and quality relationships. The determination of specific prices may be based on costs, competition, and/or demand influences.