What is Marketing Strategy?

Once you have a clear view of the market thanks to a proper Market Segmentation, you need to start thinking about where you want to be: which is your desired Market Positioning.

You need to define your Marketing Strategy.

The Marketing Strategy is not a goal itself: it is all the practices that lead to a solid Market Positioning coherent with your Product.

You can’t achieve any Market Positioning with any product; your Product, your desired Positioning and your brand name must be coherent.

 

For example: It would be almost impossible that an unknown low quality mass-produced car could be positioned as a luxury car. The message would not be coherent and nobody would “trust” this positioning.

  • Both your Product and how it’s Perceived n are your main pillars: you may want top high-margin Clients, but if your product is not perceived as something luxurious, you will never have these clients.

 

All the potential Marketing strategies must be coherent with the product you offer as well as the value perceived by the Client.

 

Before talking about Marketing Strategy, you have to understand the difference between Perceived and Real value.

Then, we’ll share with you the two main Marketing strategies you can carry out.

 

But first of all, let’s explain when you should develop a Marketing Strategy:

When to develop a Marketing Strategy

You should always have a Marketing Strategy.

  • Some of the biggest Market failures are due to a lack of strategy when defining new products.

 

In order you to understand how important having a proper Marketing Strategy is, we’ll give you an example:

New Coke vs Pepsi Strategy failure example

You may not know what “New Coke” is, or was.

 

In the 80’s, Pepsi started an aggressive Marketing campaign against Coca-Cola doing blind taste tests.

These taste tests gave as result that people liked Pepsi more than Coke. From a purely taste point of view.

 

What did Coca-Cola do?

They launched the “New Coke”: a renewed-taste Coke for beating Pepsi.

But Coca-Cola failed miserably: Nobody liked this new taste.

 

What happened?

With this new product Coca-Cola had changed its Marketing Strategy from a sentimental-bond strategy with its customers (the values associated to Coca-Cola)… to a simply taste Strategy. They had gold and were looking for silver.

 

The “New Coke” was suddenly removed; Coca-Cola had learned the lesson.

 

* As a curiosity, Warren Buffet bought millions of Coca-Cola stocks during this crisis when they were sunk.

As you can see, even the biggest and more prestigious companies commit mistakes when defining their marketing strategies so imagine what could happen if they didn’t have any strategy at all.

 

Now, we’ll explain what to focus on first: your product and its Value:

Perceived and Real value

This is one of the most important and confusing things we have explained so far but don’t worry, we’ll try to explain it as simple as we can.

 

First of all, we have to establish the difference between Price and Value:

Difference between Price and Value

The Value of something is how useful or important it is for a given purpose.

  • For example:
    • Porsche has more value than a Tata since it has:
      • More horsepower, torque… and general specifications.
      • Better materials.
      • Makes the owner feel better since it means high social status, etc.
    • A 1000 sqm house at the city-center have more value than a 20 sqm flat in the middle of nowhere.
      • It has more space.
      • It is close to everything, etc.

 

The Price of something is the amount of resources you need to acquire it.

Keep in mind that Value and Price don’t always have a direct correlation: There are same-price products with very different value.

  • The Brand plays an important role in these last situations.

 

Usually the price is something where a company has “less power” than it would like, so, the main “modifiable variable” is the Value of the product offered to the customer.

And there are two values every product has:

  • The Perceived value.
  • The Real value.

Perceived Value

The Perceived value can be understood as the way in which a customer perceives a product compared to other products with similar characteristics.

 

The perceived value is something subjective to the client: it is him the one that judges if it is “high or low” compared to the alternatives he has.

SUV Example:

If you wanted to buy a SUV, you would probably have between 3 and 5 options in mind.

You would consider your options within the same “quality and price” range so their perceived-value would be similar (according to your needs and budget).

Real-Value

It is what the client is really getting for what he is paying.

This value is important for the Seller: the lower the Real-Value and the higher the Perceived-Value the more margin the company will obtain.

SUV Example:

 

 

Following the previous example, imagine that although one of those SUVs had the same price, its components were much cheaper.

  • The company would be obtaining a higher margin.
    • And you wouldn’t know.

 

Its Perceived Value would be the same compared to the rest, but its Real Value would be lower.

The Real Value would be lower, because the client is getting a bad Quality/Price product, compared to the other options.

  • The price may be the same, but its quality is lower.

Usually, Real Values are reduced in products with a well-established brand image:

  • Luxury products.
  • High-end cars.
  • etc.

In these products, the client extra-pays for the brand.

Be careful! As we said before, this section can be very confusing.

  • High Perceived values but Low Real values means that the company is selling you something that is not that good compared to what you could get from a similar-price-range product.
    • So its actual price is high. Here is the common confusion.

 

  • Perceived Value means nothing but what the customer is “feeling” according to his options and preferences.
    • If it is high, he feels that compared to the rest it is a good option.

 

  • Real Value takes into account what you are really getting. The customer rarely knows about this value, just the company who is selling the product.
    • If it is high, means that (for this kind of product) the value obtained by the client is high.
    • If it is low means that (for this kind of product) the value obtained by the client is reduced.
      • So it is an expensive product if we think about its Price/Quality ratio.

 

Lets see it with one example:

Louis Vuitton price and value - Example

 

You probably know Louis Vuitton: one of the leading luxury companies in the world.

  • They easily charge $1.500 for a simple bag.

 

We could argue about their strategy: if they charge them artificially in order to maintain the “luxury” brand-image or not (of course, they do)…

Let’s simply check the price of one of its best selling products:

The “Brazza wallet”: $620.

For a Louis Vuitton lover, this price is not that high, compared to the rest of their catalogue.

This product is the easiest way of becoming a Louis Vuitton owner.

 

So, although the price is high (undoubtedly) some customers can perceive it as “not that high” since it is one of the most exclusive brands in the world.

  • The company is using its luxury image to offer “affordable” products with enormous margins.

 

And there is where they make real money: with High Perceived and Low Real Values.

 

Now that you understand these Value-Price differences, let’s talk about the two main Marketing Strategies:

  • The Penetration Strategy.
  • The Profitability Strategy.

Penetration Strategy

The main goal of a Penetration strategy is to “enter” a market, whatever the cost.

 

It can be summed up as: “First, ensure everyone knows and gets your product and then, try to make a profit“.

 

*Note: Differentiating between your product and your marketing strategy is a common mistake:

  • You could never sell a “luxury product” with a mass advertising strategy.
  • You should never sell a cheap-low-quality product using an exclusive market positioning since you would never get a margin from it.

It is mainly employed with low-margin products that are massively produced.

You can use this strategy to “catch” your clients and then, offer them something better at a fair price and a reasonable margin for you.

HBO Marketing Strategy Example

Think about what HBO does: they offer you 1 month of free subscription and releases the new Game of Thrones season a little longer than the period of time offer as well as other good quality content (True Detective, Westworld…).

 

They first make sure everybody “chop the hook” with a low Price strategy (and High Perceived Value) and then they try to keep you hooked at higher prices.

Although this Strategy seems sometimes attractive, it has an important drawback:

  • Once you Brand is associated to “low margin” products, it is difficult to move through a Profitability Strategy.

 

So, before picking this option think about what you offer now and where would you like to be in the future.

 

Profitability Strategy

The main goal of a Profitability strategy is to seek profits since the beginning.

 

It is a good strategy for high Perceived Value products: you start with high prices and margins, offering high quality standards since the very beginning.

 

As we mentioned before: there must be absolute coherence between your Marketing Strategy and your Product.

If you choose to develop a more discrete strategy that looks for pure profitability, your potential customers should perceive your product as exclusive.

Important disadvantages of the Profitability Strategy:

  • You need a strong Brand, and it is very difficult to get it even for well-established companies.
  • Even having a reasonably-strong Brand, it requires time to build the proper Campaigns, Market Analysis…

So think about this before jumping into a pure Profitability strategy.

 

* In the “Branding” page (within this section) we explain the importance of Brands and how to build them properly by following just 5 steps. 

* Also, in the “4P Marketing Mix” page, we explain the most important factors you should focus on when developing your Marketing Strategy. 

If you have not visited these pages yet, we encourage you to do so.

Summarizing

Before starting to develop complex marketing strategies, you must focus in your product:

  • What you have and what you can offer.

 

Do you have a strong brand that allows you to set high prices on your products? Or maybe you have to “play” with your Perceived Values in order to increase your clients?

 

And never forget the most important thing: Your product, your price strategy and your marketing strategy must be coherent.

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