Written by Christopher Melotti
How do you use Marketing to grow your business and achieve your goals?
Great question! With Marketing Strategy, Tactics, Marketing Content and Campaigns.
But to do that, you need to understand the principles behind the most common Marketing strategies. The reality is: there’s no definitive course of action as the “right approach to Marketing” is contextual to your situation.
However, I’m going to give you a good summary of a few basic marketing strategies you can use, or at the very least, be inspired by. Enjoy!
ABOUT THE AUTHOR
Christopher Melotti
Brand Comms Strategist, Marketing Advisor & Message Marketer Founder of Melotti Media
Christopher Melotti is a well-established and renowned Australian Marketing Professional who lives by the motto, “Continually challenge, consistently grow, constantly humbled, confidently show.”
Christopher founded, manages and is the Creative Director of Melotti Media Copywriting and Message Marketing Bureau, where he and his team work with a wide range of clients from Government, Medical and Education, to Marketing, Legal Firms, Finance and more.
Chris’ goal is not just to articulate brands and mastermind messaging strategy, but to demonstrate the potential that clear, consistent communications offer businesses. Everything Melotti Media does is about evolving marketing practise by providing superior, relevant value (entertainment and education) through proactive action.
Christopher Melotti is also a highly-sought Business Advisor and Marketing Consultant.
Christopher has won many prestigious awards for his work, the most notable being the Australian Business Champion’s Copywriting Business Of The Year 2022, Australian Achiever Awards 2021 National Winner for Marketing Services and the Chief Marketing Officer (CMO) of the Year award in 2017 (Australian Marketing Institute), and teaches a range of professional business marketing classes across Australia.
Chapter 1: Target Marketing
Let’s start with the foundational marketing strategy – target marketing.
Don’t skip over this. There’s lots to learn about how to master your target marketing strategy. Ok, let’s begin.
So, a company’s best strategy when deciding on their product offering is to segment the market into a group that will be called the target market.
I know it’s tempting to say, “we target everyone”, but that’s a way to spread yourself too thin. Targeting a specific customer persona and then niching your company is far more effective.
As a general rule, a mass market approach is simply too difficult and wasteful, especially in today’s modern environment which demands specialisation and personalisation. It’s far more effective and efficient to focus your energies on a particular group with similar characteristics and needs.
By doing so, your company can cater your business model to service this specific market more specifically and reap the most return.
Why should marketing focus on a specific target customer?
Through target marketing, your company can offer a tailored effort to meet the specific demands of a small segment, and in doing so, satisfy customers more directly without spreading resources too thin.
When it comes to purchasing behaviour, people today demand highly personalised content at all times, which means that your organisation must meet this - otherwise your competitors will.
What factors define a target market?
A segment can be divided by:
- Geography
- Demographics
- psychographic/lifestyle and behavioural factors.
Modern marketing practise tends to focus more on behavioural segmenting rather than simply geography, due to the way behavioural factors align more closely with buying decisions and customer choices.
Additional B2B target factors
There are additional segments when it comes to B2B segmenting, dividing into:
- operating variables (such as technology)
- purchasing behaviour
- situational factors
- size of operation
- industry and
- organisational characteristics.
The 3 Steps in Target Marketing
There are three major steps involved in target marketing:
- Segmentation: this is where the market is divided into partitions based on key characteristics and elements that are important to the organisation, such as age.
- Targeting: each partition is analysed based on how attractive, profitable and accessible they are, and then one or a combination are selected as the target market.
- Differentiation and Positioning: the organisation forms and executes a marketing communication plan to promote the unique features and benefits of their offering to the target market.
How Customer Segmentation works in Marketing
Your company can segment based on however you see fit, however, a highly appealing segment possesses the following characteristics:
- Measurable: easy to quantify for research and results
- Substantial: enough to provide profits and sufficient opportunities
- Accessible: low in obstacles to reach
- Differentiable: distinguishable enough from other segments
- Actionable: strategies are able to be formulated to take advantage of the segment
- Predictable: their behaviour is not sporadic or unmanageable.
How to Target a specific Customer Segment
Analysing segments to select one can be done in two main ways:
- Top-down, which starts with the organisation and its capabilities and then working out how to make the segment match.
- Bottom-up is analysing the segment and fitting the organisation to the segment.
Basically put, if a segment is highly attractive and the organisation has the strength to enter it, then it is a good segment. However, if the segment looks poor and your organisation isn’t capable, it should be avoided at all costs.
The areas in the middle are questionable and must be considered carefully.
How to set Product Positioning to a Customer Segment
In a segment, your company needs to position your product offering to how you want your customers to view it.
Positioning can primarily be done by articulating your company’s core messaging.
However, ultimately it is up to your customers to interpret and decide their feelings toward the brand based on all experienced stimuli from the market.
This is why I always say every company should be proactive with your positioning strategy, so you can lead the conversation rather than leaving positioning up to chance.
A good marketing strategy is to set your company’s positioning as clearly and consistently as possible to ensure customers within the target segment view your products, services and/or platforms as desirable.
Just make sure you set the right market positioning strategy before you launch your marketing tactics and content. Why? Because changing a position afterwards is difficult as positioning can become well ingrained.
This is why some brands use a ‘flank’ strategy, creating a sub or related brand in the same market with a different positioning, such as Toyota and Lexus in the car market.
What is a Market Positioning Strategy?
To choose a positioning strategy, your company must:
identify the relevant competitive advantages your product and your organisation possess
select the most desirable attribute from the viewpoint of the customer, and then
communicate this effectively with the target market.
This is where a strong Company Core Messaging Document can help you.
What is a competitive advantage?
A competitive advantage is a feature, attribute, brand or other factor that gives your product offering something more favourable than all of your competitors in the market.
The forms of competitive advantage come in the following:
- product differentiation (eg: greater performance, or design)
- service differentiation (eg: better training or delivery)
- image differentiation (eg: more desirable branding or events) or
- personnel differentiation (eg: superior skills and training).
The correct competitive advantages must be chosen to create a unique selling proposition tailored to your target market.
The criteria for deciding which competitive differences to promote depend on how important, communicable, superior, distinctive, profitable, affordable and pre-emptive these differences are in the eyes of the target market.
Ok, now let’s talk about how to set up your brand correctly to capitalise on your points of differentiation and competitive advantage to your target customers.
Chapter 2: Brand Strategy
Branding is a large part of marketing as it encompasses so many things.
While branding seems pretty self-explanatory, there are many definitions that must be clarified first and understood, before a strategy can be developed and marketing tactics be developed accordingly.
What is a brand?
A brand is a name, term, symbol, design or a combination of these used by an organisation to identify it as unique from others. It acts as an identity and signal, communicating many messages to the market.
A strong, clear and consistent brand requires a Brand Messaging Guidelines.
What is Brand Positioning?
Brand position comes from the way the market views and connects with a brand. The strength of this bond and the value that customers place on a brand is known as brand equity (discussed below).
What are brand elements?
Brand elements are all of the central components that make up your brand, such as the name, design, slogan, guidelines, and so on.
- A brand name specifically is the part of a brand that can be spoken or written, made up of words, letters and/or numbers.
- Secondary brand associations are all the related elements, such as celebrity endorsements and product reviews.
- A trademark, commonly associated with a brand, is the legal registration and recognition of an entire brand by an organisation which prevents the incorrect or unauthorised replication or utilisation of it.
- A service mark is the same as a trademark, however, specifically refers to a non-tangible service offering.
What is Brand Equity?
As mentioned above, the value customers place in a brand is known as a measure of brand equity.
Marketing tactics must focus on communicating specific brand-building messages to the market in order to shape strong branding.
Possessing a strong brand equity means a strong position within the market, as customers will seek an organisation and their brand out, associate it with the positioning intended, recommend it to others, share positive experiences on social media and develop and overall sense of loyalty.
Obviously, the reverse is true for negative brand equity too.
Brand equity develops in stages, from the bottom of the following triangle to the top.
The 5 Stages of Brand Equity
1. No Awareness
Obviously, when an organisation and brand is new, the market has absolutely no awareness of it. This means that brand equity is essentially zero. At this point, all Marketing tactics must be targeted toward an introductory message.
Remember, first impressions last, so it’s essential to get your positioning strategy right from the very start to avoid confusion in the market.
2. General Awareness
After the first stage is passed, there is a more general awareness, which is often referred to as ‘brand salience’.
Now, target customers can differentiate a brand from others, so the marketing tactics need to revolve around establishing a definable brand identity, which means ensuring that the positioning strategy from stage one, above, is being correctly adopted in the market.
3. Brand Meaning
Once the brand has gained some penetration into the target segments, Marketing must define what it actually means to people through both imagery and performance, which are the visual associations and product behaviours of a brand communicating the features and benefits to them.
4. Response
At this stage, the focus shifts towards how the target segments respond to your brand. In other words, how they feel or think about the brand.
Feelings and judgements are both the critical analysis and emotional connections that a brand has with the market, which communicate the personality of the brand. At this point, marketing strategy is focused on appealing to positive customer response.
5. Resonance
The pinnacle of brand equity is known as brand resonance. At this point, the brand has a strong relationship with the customer and spurs positive behaviour. The marketing strategy here is about fostering brand loyalty by focusing on what the brand is worth to a customer.
If you need help with any of these Brand Equity stages, seek Brand Consulting Services from an Australian Marketing Consultant (like me!).
Brand Development: How to develop your brand
There are two main approaches to developing a brand.
- An organisation can either utilise a high budget ‘above the line’ brand tactic and spend a lot of money on advertising to heavily communicate messages and increase awareness directly, or
- employ a low-budget brand strategy, instead relying on other communication channels, such as word-of-mouth, reputation, reviews, organisation social media posts, SEO and very obvious brand names.
It all depends on the current circumstances surrounding the organisation and market as to which approach or blend works best.
For example, there are big brands that invest heavily in expensive advertising to continuously remind people about their positioning, and then others who run free campaigns to encourage positive feedback so that other customers see. Then there are brands which are promoted via a mix of both, such as a paid banner campaign to promote a social media hashtag which then gets shared by advocates across the world.
What is the most effective way to develop a brand?
Well, the blend approach is the most utilised today and arguably the most effective, as it encourages customer participation, maximising involvement and reach to ensure the brand is well recognised and appreciated.
Today, it’s hard to capture your audience’s precious attention. Your brand needs to be innovative!
People are far more selective about obvious advertising (such as TV and radio ads) and prefer to engage with subtler promotional activities which offers them benefits on their terms, such as blogs, how-to videos and content marketing.
How to Choose a Brand Name
Depending on how your company decides to build your brand, the name itself can play a considerable role.
Brand name choice lies on a spectrum:
- Fictitious– such as Sony or Apple. The name is so obscure that it requires specifically teaching the market about what the product behind the brand is or does.
- Associative– names that allude slightly to their product’s function, but are conjured up on top, such as the Thermomix.
- Suggestive– brand names that are semi-descriptive but have a slight play on words, such as Fruitlious or Coca-Cola.
- Descriptive– such as Quick Copy or Pizza Hut. These names are quite obvious
The more fictitious end of the spectrum has the advantage of being unique and therefore easier to legally protect, however, an organisation must spend resources specifically teaching the market about themselves (which may not always be a negative).
The descriptive side offers a far more obvious name that signals the right kind of image when a customer hears it, however, because they are so run-of-the-mill, it can be difficult to differentiate and legally protect.
The goal of brand development is to increase brand equity so that the market pays attention and values a brand enough to generate popularity and sales.
Remember: a good brand name is strong, favourable, compatible with the product, unique and memorable.
What is a logo in branding?
A logo is the visual element of a brand, and can either be used with or without the name, depending on the knowledge of the target market. Logos can enhance or hinder a brand image, which is why it’s important for an organisation to ensure it is easily recognisable, memorable and matches the brand well.
How Brand Association works in Marketing
There are several other brand elements which partner with a brand and impact overall brand image and equity. These can be secondary associations, which include:
- The organisation itself and its umbrella branding (such as Nestlé’s Purina pet care sub-brand).
- The country of origin and its connotations (such as Italian wine or Swiss watches)
- Distribution channels (sold in nice stores, or particular outlets)
- Co-branding with other brands
- Characters (such as licencing and mascots)
- Celebrity endorsements
- Events and sponsorship associations
- Third-party sources (such as awards and product reviews)
- An associated slogan or jingle (to add more information or increase recall).
All of these branding elements combine together and can play a significant role in how the market values your brand.
How to extend your brand
Once your brand is established within a market, your company may choose to extend its use into different areas of the market.
There are four types of brand extension methods.
1. Line Extension:
Using the same product category and brand name, but adding different versions, such as different flavours or colours (for example Vanilla and Cherry Coke). This strategy widens the breadth of coverage a brand has within a segment.
2. Brand Extension:
Using the same brand, but targeting a new target category (such as Nike’s non-active clothing for urban, casual wear). An organisation will do this to introduce their current brand to a whole new set of customers previously not targeted.
3. Multi-branding:
Targeting the same category but introducing a completely new brand (Toyota and Lexus cars). This strategy allows an organisation to cover particularly different characteristics within a category, such as price point, without impacting or confusing the positioning of the original brand.
4. New Brand:
Entering a new product category and introducing a new brand name. This involves starting completely from scratch within a new segment.
Why would a company extend their brand?
There is a delicate balance when it comes to extensions of an organisation’s branding.
Growth into new categories is performed when a new opportunity presents itself and can therefore mean additional revenue; but there is always a high risk of spreading a brand too thin or confusing target markets.
The Marketing department must perform a lot of brand research when investigating options for expansion as they consume additional resources which can take its toll on the product, the brand and the organisation as a whole.
Chapter 3: Pricing Strategy
Pricing and customer value are closely linked.
- The value a customer places in a product and brand is indicated by how much they are willing to give up, usually in the form of money, to obtain it.
- The price is the monetary value set by an organisation at a level they believe is worthy of their offering. The ideal scenario is when the two are aligned.
However, if a customer wants a product, but the price is too high or too low, their value analysis of the trade is lower than the price set and they won’t make a trade.
If the price is closer to the customer’s value, then the customer may be pleased with the bargain or begrudgingly buy the expensive product, but suffer buyer’s remorse.
Pricing strategy is a very delicate balance that Marketers must get right.
Price is the only element of the marketing strategy mix that produces an income for an organisation in the form of revenue, and is also the easiest to adjust quickly, which is why organisations often alter it first to spur a customer response to their offering, over changing the product itself, its promotion, people or distribution methods.
Who should set the price of your company’s product?
It’s a very common argument with an organisation, where the accounting department may believe it is their responsibility, given that pricing involves monetary terms to cover costs and turn a profit.
This would be all well-and-good if the price was simply a recuperation of expenses for your company.
However, pricing strategy is not that simple: pricing of a product speaks volumes to consumers, and the business which ignores this link in favour of a simple accounting equation will do so at their detriment.
This is why the task of setting the final price should lie with the marketing department: because the consumer receives a whole lot of messaging from the setting of the price alone.
What does pricing strategy communicate to customers?
Your price signals to a customer what positioning and image your brand and product has.
If it is expensive, often people will use it as a surrogate indicator for a judge of quality. For example, this is most common in the wine industry, where higher-priced wines are often thought of immediately as better in consumption.
Therefore, your Marketing function should manage the price-setting tasks as pricing indicates much more than simply cost plus profit. It isn’t a simple equation- it takes the input of the department familiar with communicating with the target audience, because price is just another communication stream.
That’s not to say that the accountants should be cut out completely!
If the price is left to Marketers alone, this could cause the business not to reach its profitability targets. Both departments should enter the conversation and allocate a price which serves both purposes.
How Price impacts Demand
As can be expected, the price of a particular product directly impacts the amount of demand it receives from customers.
The actual relationship is known as the economic term of “price elasticity”. While in reality, nothing works as simply as economic models suggest, in general:
- product with a HIGH price elasticity of demand means that a change in price results in a large, corresponding change in quantity purchased. Luxury and nonessential products tend to be within this category, as a large price increase will greatly drop demand, and visa-versa
- a LOW price elasticity of demand means that a change in price will not greatly affect demand shifts – this is known as inelastic demand. Less substitutable products and essentials fall into these categories as, within reason, when price shifts, consumers still require them.
What’s the most common approach to Pricing Strategy?
A more realistic approach to price and demand prediction is more toward the idea of pricing points. For example, if the price is high and quantity is purchased for a luxury brand, and the price is suddenly dropped, initially, the demand would increase as consumers believe there is more value.
However, dropping the price further may then decrease demand, as consumers start to feel that the luxury brand is losing its exclusivity. This makes demand fall.
All of these types of factors must be taken into account by the marketing department when setting the price of their products.
Understanding The Pricing Perception Phenomena
As much as economic theory attempts to assume that consumers are rational and predictable, they just aren’t when it comes to purchasing.
The perceptions of value and price given by an individual consumer is so unpredictable that it takes marketing research to really delve into why consumers think and act as they do.
Take, for example, bridal products. Large organisations over-charge for pretty much everything to do with ‘the big day’ to give an air of premium, however the consumer is more than willing to pay as it’s more of an emotional purchase rather than a rational, ‘utility maximisation’ purchase. A bride doesn’t want a cheaper product, even if it is exactly the same as an expensive version, as they value feeling expensive and exclusive and therefore justify the high prices.
This is why the Virgin low-cost Bridal range failed, as brides saw the discounted items as cheap and skimping on a day that should be splurged on.
Pricing as a Customer Information Cue
As discussed before, price can be used as a surrogate indicator of quality, even if it’s not true. In the customers’ mind, a higher price raises expectations because the amount they have to trade for the product or service is high.
There are five main pricing strategy techniques when using pricing as a communicative device:
- Price Skimming – this refers to setting the price very high, thus skimming the very top of the market’s customers. This creates an aura of prestige and/or technologically advanced status, and is a good way to recuperate research and development costs, control initial demand and supply, as well as generate high profit. However, the product must justify this to be successful.
- Price Penetration – this is when a product’s price is set very low to attract high quantities of sales and obtain a large uptake in the market before a competitor.
- Yield Pricing – setting the pricing to manage exact quantities of purchasing. For example, if stock is perishable, the price may be discounted to increase numbers and then when supply is short, the price rises to manage this.
- Volume Pricing – setting a price to ensure high sale/bulk volume purchasing over profit per unit.
- Loss Leader – Pricing at a loss per unit to encourage impulse, related purchasing of other products in the same offering.
Pricing strategy all depends on your company’s overall marketing strategy, and should complement it to gain the best result.
Pricing and the Psychology of Consumption
There is a direct psychological relation between pricing/cost and the consumption rationale of a consumer.
How much they part with during a trade has a direct impact on their purchasing behaviour.
As a result, most organisations purposely do not draw attention to the price of their product, because it represents a cost to the consumer; in other words, they would much rather the consumer experience the benefit from the product’s value rather than them dwelling on how much they paid for it.
This makes sense, and is why some organisations offer testimonials, free trials, test drives, upfront bulk payments, season passes, bundling and so on.
However, as I mentioned previously, people aren’t always rational and sometimes, the constant reminder of cost is motivating for them.
Basically, a consumer who doesn’t utilise their purchase will actively make a decision to not rebuy it. This means that charging upfront could make them forget about the product (e.g.: a gym membership), and once they forget, they will not justify a repurchase, however smaller costs more regularly are more manageable in a consumer’s mind and the constant reminder stimulates motivation for consumption, and therefore repeat purchase.
This is where today’s subscription pricing for software (SaaS) comes from.
It all depends on your company’s product offering and pricing strategy as to what approach you take.
Pricing Based on Company Goals
There are different types of objectives of consideration when setting a price, aiming to achieve a particular goal.
1. Financial Pricing Objective
These are strictly about monetary goals, such as setting the price to achieve a gross profit margin of 23% or Return On Investment (ROI) by 12% this year.
2. Marketing Pricing Objective
These revolve around market and customer-focused goals, such as increasing market share, gaining more consumer awareness or increasing brand loyalty.
3. Societal Pricing Objective
Pricing is set by the organisation based on managing a societal rationale. For example, adding into the cost a donation to charity, or carbon offsetting.
Pricing Based on Your Overarching Company Strategy
There are different types of objectives of consideration when setting a price, aiming to achieve a particular goal.
- Does the marketing plan and current marketing mix support your proposed price
- Is the set price consistent with the expectations a typical person would have given the rest of the product’s attributes?
Pricing Based on Your Market
Pricing is also subject to the type of market the product exists in:
- In a monopoly, there is only one offering organisation, so excusing government regulation, pricing can be set at whatever they wish.
- In an oligopoly, where there are two to five large main players in the market, the strategy tends to be a lead-and-follow pricing strategy, basing price on the movements of the main competitors.
- In a perfect competition market, where the product is an identical commodity, the price solely depends on the supply and demand of the time.
- In a monopolistic competitive market, which is the typically normal market where many organisations are with a market offering substitutable yet differentiated products, pricing is set based more on each organisation’s marketing plan.
This is the market most companies are in, which is why pricing is so dependent on your overall Marketing strategy.
Pricing based on your Company’s Beliefs
Naturally, the upper management within an organisation decides who best to set the prices of all the elements within the product offering- this is known as the pricing process.
Typically, in smaller organisations, price is usually set by management but in larger organisations, it is set by product managers within the marketing team. The most important part is that the person or people who set the price must have well-informed insights into the customer and their perception of value. This will ensure they can make the best decision.
How Pricing Strategy affects the Concept of Customer Value
Customer value is total benefits over the total costs. A product’s costs include a lot of pricing considerations, such as the initial purchase price, maintenance and repair costs, ongoing fees, installation, training, financing and so on.
The benefits of your product, such as performance, features and quality, must outweigh all of the prices and costs to be worth the value to the customer.
Approaches to Setting your Price
There are three main approaches to setting a price.
1. Cost-Based Pricing
Basing the pricing barriers (such as the price floor- the lowest possible price), on how much the product costs to produce. Generally, if fixed costs are quite high, a part of the price is set lower to maximise the volume sold. If variable costs are high, price can be set to maximise the per-unit margin.
The issue, again, is that this pricing is based on internal measures, rather than on the target market, and could communicate the incorrect message to them. Still, the cost-based approach can be a background consideration.
2. Competition-Based Pricing
As the name suggests, this is basing it on however the competition prices and differentiating a product based on their pricing strategy. However, this assumes that the competitor has a good grasp on the target market.
3. Value-Based Pricing
This approach bases costs on what level of value the target market places on the product itself. Then, the organisation can employ a price skimming strategy (pricing at the top value), price penetration (pricing at the lowest value) or somewhere in between. This requires a bit of research to discover what attributes and expectations the customer values the most and pricing it on this.
In reality, there should be a blend of these Pricing Strategy approaches
The price ceiling (or the price point at which demand becomes zero) should be set at the top, and the price floor (or the price point at which profit becomes zero) should be established first. The Price ceiling represents customer perception of value and the price floor represents the consideration for product cost.
The price is then set in the middle, in between these points, with all factors such as marketing strategy, objectives, competitors and marketplace factors taken into consideration here to find the ideal price.
Marketing Price Strategy: The Value Based Approach
Basing pricing strategy on the target market is an obvious choice, given the impact price has in communicating with the target market. By starting with the customer’s value and working backward, a price can be settled on that will allow an organisation to best maximise the price per segment and manage customer value perceptions.
The Gift Economy: setting a product price as “free”
With technology increasing so rapidly, a ‘gift-economy’ also referred to often as a ‘free-love’ economy has emerged. This is where an organisation offers their main product for free and finds another solid revenue stream to gain profit from.
Search engines are a good example of this, where the search function is free, but the Google Ads service and other advertisements and services are paid for.
The issue with this is the consumers lose the perception of value when products, such as music and news) are available for free, online. This shift in mindset is a rapid game changer for a lot of organisations as consumers start to question why they are paying for specific products.
For example, years ago, customers would purchase a newspaper, because they saw the value as worth the money, however today, when news is so rapidly available online, they can no longer justify paying for it.
Today, organisations are creating business models where the customer doesn’t pay and then charge associated organisations for their access to these customers.
Think of YouTube or social media advertising.
The Freemium Pricing Technique
A freemium is when an organisation gives the basic level product to the consumer for free and then charges for the premium use of it.
This is very evident in free phone apps on smartphones, where the basic app is free to download and use, however the customer must pay to get the ad-free version or open up all of the service for them to use.
The Bait-and-Hook Pricing Technique
This is a pricing technique where the main product is free or extremely discounted, however, then the customer must purchase an expensive associated product to utilise the main product.
An example of this is office printers, where the printer is given for free, and the customer has to purchase the paper and print ink from the printer’s organisation.
Chapter 4: Distribution Strategy
Distribution is the fourth element in the marketing mix, dubbed as ‘Place’ in the Marketing Ps.
What is a Marketing Distribution Strategy?
Marketing Distribution strategy is everything involved with making the product offering available to the market. An organisation is faced with many options to get the product within reach of the target customer and that can be either through a channel or direct to market.
Today, distribution channels are getting shorter and shorter with technology, which means it’s becoming easier to ‘cut out the middleman’ to increase profits, maintain greater control and give the organisation direct contact with the customer.
The Strategic Value of Distribution Channels
Typically, companies can usually cover the information, promotion, contact, matching and negotiation activities of every customer transaction, however distribution can often be outside the scope and is therefore commonly outsourced, especially when in the form of a physical good.
Intermediaries specialise in the essential distribution duties and can also offer value-add services like storage and warranty support; so often, it makes strategic and financial sense for, for example, a manufacturing organisation to enlist the partnership of such intermediaries to complete the channel flow, so they can focus on what they do more effective and efficiently.
The issue is, intermediaries (like Woolworths and Coles) are starting to gain a lot of power given that the other organisation (such as Farmers) relies so heavily upon them to make any sales at all. These middle companies can make all kinds of demands and then threaten to stop supplying the market the organisation’s product should they not comply.
This is why some organisations attempt to shift the power using VMS, Vertical Marketing Systems.
What are Vertical Marketing Systems (VMS)?
A VMS is where one part of the channel either purchases or sets up their own distribution channel or intermediary in order to bypass powerful distributors and do it themselves.
The obvious advantage of a VMS is that power goes to your company and you gain far greater control over the whole channel, even if you still use your own AND use another distributor, as spreading the distribution means that the powerful intermediaries lose their monopolistic power.
The problem with a VMS is that it can be risky and costly to do as your company needs to learn to be a good distributor and retailer as well as a manufacturer. There is little use in setting up a VMS if the newly opened intermediaries do not have the right contacts or skill set to really compete with a specialised one.
Alternative Vertical Marketing Systems?
Apart from a straight VMS, above, there are two other slightly different VMS models:
- The first is a contractual VMS, where another intermediary is not technically owned, however they are contractually secured by the other organisation, such as what is done in franchising.
- The other is a weaker administrative VMS, where an intermediary is not technically owned or contracted to the other organisation, however both organisations work together as partners.
Distribution Strategy as an Intermediary
Whilst this topic can become focused on the manufacturer as the only central focus of a distribution channel, the intermediaries are large players in the channel themselves.
Is your company an intermediary?
Well, there are several intermediaries that have become very successful simply by finding manufacturers in a localised area and simply brought them together in one unified distribution model, creating a symbiotic relationship.
An example is a meal delivery service, where the service promotes all of the food and the delivery to the customer, the customer orders through them, and then the meal delivery service places orders with local restaurants and delivers the food.
Influences on Channel Marketing Strategy
The distribution strategy your company chooses depends on both external and internal factors.
- Internal factors include the organisation’s strategy, goals, objectives, resources, skillset, control and marketing mix.
- External factors include customers, the market environment, competitors and intermediaries.
As is normal from a marketing focus, the key is to keep customers as a focus for all marketing distribution activities.
Therefore, consider what benefits your customers seeking, what channels will provide the best access, which distribution strategy will position your product as the most appealing to audiences, and so on.
Marketing Distribution Strategy: Online Shopping
Online shopping is a very popular trend in modern distribution strategy and is extremely popular with people globally.
There are a few factors that impact online distribution strategies:
1. Political
- Certain taxes can be avoided
- Legislation and consumer protection
- Loss of physical store job
- Government focusing on online legislation and internet services (such as the NBN)
2. Economical
- Globalisation of economies and markets
- Increased competition as physical restrictions are removed
- Currency exchange rates
- More informed, price-conscious consumers
- Access to foreign products
- Cost advantages due to competitive pricing
3. Social
- Social media has become a norm in society
- Other demographics are becoming more involved
- Socially acceptable to be thrifty
- Time-poor customers have a need for convenience
- More accepting and tech-savvy demographics
- Self-image is important, so customers can easily share their purchases online
4. Technological
- Easier for all organisations to use and take advantage of
- Increase in accessibility
- Increased security on technology which increases buyer confidence
- More devices to access online shopping
- Big Data allows customers to be better catered to
- More advanced software to assist all stakeholders
5. Environmental
- The shortening of the supply chain could reduce environmental impact
- Less need for bricks and mortar stores
- Customers are more environmentally aware
- Less physical distance, reducing barriers to access
Marketing Distribution Strategy: Channel Levels
There are three main classifications of channel densities.
- Zero Level Distribution: where the manufacturer goes straight to the consumer direct, such as Dell computers.
- One Level Distribution: where there is only one intermediary in between the manufacturer and customer, such as booksellers and Amazon.
- Multilevel Distribution: where there are many intermediaries, such as wholesalers and retailers between the manufacturer and consumers. In a multilevel channel, the producer can sell in one straight line (i.e.: one wholesaler and then on to one retailer, then the customer) or through many different intermediaries in different industries (such as agents).
Marketing Strategy Distribution Intensity
Distribution intensity refers to all strategies an organisation has for getting products through the channel.
- Intensive distribution
Where an organisation sends their product through a large variety of intermediaries, channels and stores for maximum access to the market. This type is mainly for simple, inexpensive and easily transportable products that tend to be repeat or impulse buys, giving the consumer as much exposure and therefore opportunity for purchase as possible.
Typically, products that are intensively distributed are heavily promoted with low cost and high turnover. The quality can also be average or low in general.
2. Selective distribution
Where the organisation is slightly more selective about which channels they choose so as to not cut off all access to customers, but be more selective to give the product a different positioning to a commodity product.
This is for products, such as specialty retailers and branded stores, that are more on the specialty or higher end, and therefore restrict certain levels of access to create an aura of quality or provide more intimate customer service.
3. Exclusive distribution
Where an organisation has a very low number of channels and outlets. This is a very restricted distribution strategy for very high-end, high-involvement products and gives the perception of exclusivity and uniqueness.
Typically, products that are selectively or exclusively distributed are promoted exclusively, are priced high and the consumer will specifically seek the product as the quality and value are high.
How Distribution Marketing Strategy positions your company
All three distribution types position your company’s product, service or platform differently in the eyes of the consumer, hence why the channel strategy selected must be consistent with the marketing plan.
Obviously, this varies with product and industry type.
There are also two types of distribution marketing tactics to increase the flow of the distribution channel:
- Pull strategy
A marketing pull strategy is where a company advertises and conducts marketing efforts directly to the end consumer at the end of the channel, which increases their demand, ‘pulling’ products through the channel.
To use a pull marketing strategy, the distribution must be so there is enough access provided for consumers to get the maximum effect.
Pull marketing tactics, besides straight advertising, could include free samples, trials, demos, coupons, financing, discounts, specials and so on. Usually, these are quite successful as people will tend to take advantage of these types of bargains.
2. Push strategy
A marketing push strategy is when the organisation advertises and conducts marketing efforts directly at other intermediaries within the channel to encourage their demand, ‘pushing’ products through the channel.
Marketing tactics in a push marketing strategy involve incentivising intermediaries to encourage their demand, such as benefits to their sales forces, bulk discounts, financing and negotiation on marketing efforts to the end consumer.
Chapter 5: Communications and Messaging Strategy
Marketing is all about communications, messaging and positioning, in order to impress and convert customers.
That’s why promotion and advertising are the cornerstones of the marketing plan and marketing department, requiring a strategic plan to work out the best way to leverage marketing tactics to successfully promote a product.
What is “the Promotion Mix”?
The marketing promotion mix consists of:
- advertising
- personally selling
- sales promotion
- public relations and
- direct marketing.
It depends on the product, industry and market as to which of the promotions mix to use, however, usually a combination of two or more is the most effective way of communicating and sparking the interest of your target market.
Common marketing trends have blurred the lines between which promotion method works well, and consumers today require very tailored messaging for them to actually pay attention to the marketing activity itself.
“Same old” advertising is starting to get lost in the clutter, to be replaced by innovative and viral campaigns that engage consumers.
Marketing Consistency through Integrated Marketing Communications
Integrated Marketing Communications (IMC) is the approach where all marketing efforts utilised by your company from the promotion mix communicate a clear, consistent and compelling message about the product or organisation themselves.
Shifts in communication and message should be done slowly over time, rather than confusing the customers by promoting inconsistent messages. Your IMC strategy is a way that your company manages its entire portfolio of marketing communications.
The Whole Communication Offering
Every organisation is constantly communicating messages to the target market.
These marketing communication types include:
- Planned and deliberate messaging: via the promotion mix
- Product messaging: via the marketing mix (such as price, distribution, etc.)
- Service messaging: via interaction with the customers themselves
- Unplanned and uncontrollable messaging: via gossip, external publicity, reviews, rumours and other external environment buzz.
Your Integrated Marketing Communications (IMC) plan will ensure that an organisation presents a united, solid communication front to customers: this means the management of all contact points of an organisation and product (what is said in the promotional mix, confirmed by the unplanned messages, and performed via the product and service messages).
Elements in the Company Communication Process
All marketing messages follow a process:
- The sender creates the marketing message through concept development and creativity.
- The marketing message is then sent out via the medium chosen. At this point, it must also compete amongst what is known as ‘noise’- these are all of the conflicting messages and all other interference that can distract the target receiver.
- Once the message is received via the medium, the receiver must decode the creativity of the sender, which is heavily biased by their own perceptions, judgements and past experiences, to finally receive the message.
- After this, a response action is triggered, whether it be dismissal, negative, positive, purchase, and so on.
- Concluding the action, feedback from the receiver to the sender is sent, which must also go through the ‘noise’ or interference factor before the sender can use the data.
Different methods of the promotional mix approach this cycle in different ways.
For example, personally selling is effective because it completes the cycle entirely in almost one transaction, whereas Public Relations campaigns are slower and can experience high amounts of noise.
How to Develop Effective Marketing Communications
- Identify the target audience
- Determine the objectives and goals of the communicationi
- Design or encode the message creatively, catering to what would spark the interest of the target audience.
- Select appropriate channels
- Establish a budget for this message so as to determine the best use of resources
- Determine which elements of the promotional mix to utilise
- Track and measure results
- Manage the IMC system
- Collect data on this experience to improve the next message
This is where Strategic Business Communications can help you.
Marketing Message Reach and Frequency
When it comes to your marketing communication strategy, reach and frequency are the two main factors that must be decided upon.
- “Marketing reach” is all about the level of access to the target market. How many segments within the target market need to be accessed? What times? What demographics? Which media do they use?
- “Marketing frequency” is about how many messages go through those reach channels, above. If, for example, a magazine is the selected medium, then how many issues is the communication present in? How many times does the advertisement run on television? And so on.
There tends to be an “S”-shaped response curve that occurs between marketing frequency and effectiveness that all marketers must take into consideration.
- It is generally accepted that a low frequency of communications, such as between zero and three exposures, is not very effective at all.
- A medium frequency, above this, gains a high acceptance with the target market and thus is very effective (usually between three and ten rapid exposures).
- However, a high frequency starts to lose its effectiveness and can even become negative if the target market becomes saturated and over-exposed to the content.
How does Advertising Strategy work?
Advertising, also known as paid-promotion or ‘above the line’ marketing, is any communication message that is paid for by an organisation to a medium sponsor (such as a television station, Google, Facebook, a magazine, a bus shelter, a billboard, a radio station, and so on) that presents and promotes a product, non-personally.
Paid advertising does not involve a personal, one-on-one interaction.
Paid promotion campaigns offer your company almost complete control over your marketing message as you can purchase a space and advertise however you’d like, within reason. Advertising is usually the most expensive and competitive form however is extremely effective.
Marketers today face a lot of challenges with advertising as there is a lot of noise and consumers are starting to filter out the ‘same-old’ advertising thrown constantly at them.
As people are becoming more de-sensitised through over-exposure, marketers have to be far more creative to cater better and more effective messages to the target audience.
Marketers now tend to use different forms of advertising, such as ‘crowd-sourcing’, which is getting the target market actively involved in the advertising and creativity for a reward. This has a large uptake by a target market as they feel involvement is worth their attention.
Five Functions of Advertising
Effective advertising has five functions:
- Informing to persuade
- reminding
- adding value
- supporting company goals and
- establishing favourability
One message can perform one or a combination of all of these functions.
Favourability tends to be utilised more today – if a message is liked by an audience, it will tend to have more cut-through than an ad that rubs the audience the wrong way.
How Public Relations (PR) works
PR is known as ‘below-the-line’ marketing and involves creating good relationships with the organisation’s publics and stake-holders through favourable publicity, positive corporate and product image and managing or debunking unfavourable rumours, reviews and messages.
PR can be positive or negative, and can function as an outlet for information or promotion, depending on the context.
Unfortunately, PR isn’t always in control of the organisation. Whilst some forms can be intentional, such as a press release, sometimes PR can be written or circulated without the knowledge of the organisation. Organisations such as Greenpeace tend to use witty PR campaigns to gain momentum for the causes within the community.
This is where a Business Communications Coach can help you and your team.
Event Sponsorship Marketing
Event sponsorship is a form of PR marketing, where an organisation pays to be an official branded sponsor. This kind of PR allows for positive brand association with the event.
However, for this to be a success, it is important that the product ties in well with the event- it can be a waste if there is no leverage by the organisation. Just a brand at an event isn’t enough; there must be some related activity such as a stall at the event. A good sponsorship PR campaign capitalises by promoting the tie with the event.
Experiential Marketing Campaigns
A good way to gain positive PR is by letting customers try a brand or product as an experience so that they consume the brand in a favourable experience setting and then share this with the market. For example, wine tasting in a beautiful vineyard or sports drinks during a volleyball game on the beach.
Sampling is another similar example of this, where people are given access to free trials to promote the product and breakthrough distrust barriers.
Marketing via Sales Promotions
Sales promotion is a short-term incentive given to customers to spur and increase purchase behaviour, such as the push and pull strategies discussed above. These can come in the form of discounts, buy-one-get-one-free, coupons, lotteries, competitions and so on.
It is important, however, that an organisation avoids the sales promotion trap, which is over-incentivising to a point where the discount becomes the norm and the organisation can no longer remove the promotion.
Direct Marketing
This type of promotion began with physical mail marketing and has evolved to email and mobile phone marketing. Basically, it is any form of advertising that utilises interactive media to gain a measurable result and response at any location.
Unfortunately, direct marketing tends to bombard consumers, so a good ‘call to action’ together with something that sparks the interest and curiosity of the target market enough to get them to respond.
The Internet’s Role in Marketing
The internet is a fantastic resource for marketing efforts. It can perform the following functions for an organisation:
- Public relations
- Investor communication
- Customer service
- Prospect qualification
- Product sales
- Customer interaction and feedback
- Internal communication
- E-Commerce
It is very important that the use of the internet is consistent with the marketing strategy as it can perform so many simultaneous functions at once, all must be correctly utilised and managed to ensure a united front and message (a good IMC).
The internet’s use has shifted greatly from simple websites to completely out-of-the-box marketing efforts such as interactive social media campaigns, mobile device marketing and so on.
Chapter 6: Sustaining Value Strategy
Today, it’s not enough to simply promote and market to a target audience.
People now demand relationships in different forms prior to, during and after their purchases.
The relationships offered by an organisation are another channel of communication to consumers and therefore must also be managed just like all other elements of the marketing plan are.
What is Relationship Marketing (RM)?
Relationship Marketing (also referred to as Customer Relationship Marketing) is the marketing strategy that focuses on earning trust, fostering connections and sustaining value with customers throughout their whole experience with your company.
The characteristics of Relationship Marketing are:
- A long-term plan aimed at preserving the customer base
- Commitment and fulfilment of product and organisational promises
- Customer share-based, not market share-based
- Leveraging customer lifetime value
- Two-way communications dialogue
- Customisation by tailoring the offering to suit each customer
These relationships should be a company-wide mindset and must exist beyond one staff member, so that, should that staff member leave, the relationship is not destroyed.
A good relationship marketing strategy will build a positive reputation, keep customers happy and encourage repeat purchasing with strong word of mouth.
The Benefits and Disadvantages of Relationship Marketing
Relationship Marketing strategies can be both positive and negative depending on the type or method used, as well as the industry and product category.
Positives of Relationship Marketing Strategy
- It provides benefits for customers and suppliers
- Enhances brand loyalty and creates brand advocates
- Encourages direct contact with customers
- Allows for interaction and measurable feedback
Negatives of Relationship Marketing Strategy
- Resource demanding
- Unexpected demands
- Opportunity costs
Targeting the right customers for Relationship Marketing
Just like any other form of Marketing, it’s important to focus on the right segments.
If the target market, who are currently brand advocates via your RM program, change over time and your company wants to target a new segment, the newer segments may not wish to be associated with the previous segment. This is the case with some clothing brands- the brand develops a solid relationship with a young crowd, however as they get older and the brand wants to refocus on the new youth, they may see the other segment wearing that brand and not wish to be associated with it.
Of course, it can also be the other way around. Banks can secure the next generation if they have a good, long-term relationship with the parents and previous generations.
If your company’s Relationship Marketing program has found extreme loyalty with one segment, and you want to target a new segment, you may choose to create a different brand or line.
How to target customers for Relationship Marketing Strategies
An organisation has six main markets that they can build a relationship with:
- The customer target market themselves (i.e.: purchasers)
- Potential employees
- Suppliers
- Referrals
- Internals
- Influencers
Each has their benefits and characteristics. Just ensure that they’re aligned with your Marketing Objectives.
3 Types of Customer Behaviour Modes to Consider
Customer modes are the types of behaviours customers exhibit with their purchase, and determine the level of a relationship they want or expect.
Naturally, different customers have different views on different purchases, however, it is important for an organisation to correctly access the mode their target market is in, so as to best cater for their needs.
- Transactional Mode
All customers want is a quick exchange and no more than simple brand awareness so they know what their preference is. This tends to be with simple purchases such as a chocolate bar.
2. Active Relational Mode
The customer expects a relationship otherwise it will negatively impact their value and experience. For example, airlines, real estate, doctors, hotels, and so on.
3. Passive Relational Mode
Customers want a detached transactional mode until they deem it necessary to fall back into a relationship. For example, when a car is purchased, most customers don’t want a relationship until it needs a service, or they need help.
Depending on these customer behaviour modes, the potential for a good recovery strategy is high here. If a customer is unhappy, they can use the relationship to provide feedback, and if an organisation implements a good response, studies show brand loyalty is increased drastically.
The Scope of Customer Relationships
There is a continuum scale of how best to match a relationship marketing program with the customer behaviours outlined above.
If customers exhibit certain behaviours, then an appropriate Relationship Marketing program can be catered to their demands. Your company’s target customers will fit somewhere along this scale.
Transactional Mode End
- Customers have low anxiety over purchases
- Contact is seen as unnecessary
- Standard, low-investment products
- Customers purchase easily without a need for follow-up
Relationship Marketing (Active and Passive Relational modes) End
- High customer anxiety over purchase
- High degree of contact expected
- Confidence, social and special benefits are highly valued
- Customers wish to know that the organisation is there when they need them
Alternative Customer Retention Strategies
Besides Relationship Marketing, there are two other methods to retain customers:
- The first is to create exit barriers making it difficult to leave, such as long-term contracts or retainers. Whilst this is effective to an extent, it can create a resentment toward the brand.
- The second is loyalty schemes. These are gentler and more customer-friendly than solid exit barriers, rewarding customers for repeat purchases and getting them comfortable with the product offering.
Whilst these are effective in keeping customers with an organisation’s brand, competitors can come up with clever schemes to undermine these barriers, such as honouring the current loyalty scheme for a competing brand themselves.
An organisation needs to find the best combination to ensure they’re fostering a good relationship with their customers.
It takes customer satisfaction, trust and commitment to create customer loyalty, and if an organisation can’t successfully hit those three factors, their retention strategy will be weak.
How Customer Trust and Commitment works with Marketing
Customer satisfaction can be achieved with the marketing mix strategy. The other two elements, trust and commitment, derive from:
- Delivering on promises
- Customer care
- Recovery strategies
- Valued relationship
- Shared power (two-way communication channels)
- Avoidance of unethical or untasteful behaviour
- The open sharing of information
- Healthy and positive image/reputation
- Focusing on customer orientation
- Societal focus
- Green Marketing
Chapter 7: Next Steps – speak to a trusted Marketing Advisor
My name is Christopher Melotti and I offer energised business marketing consulting unlike anything you’ve experienced! customers.
I give your brand, business and team a vibrant dose of results-driven vigour aimed squarely at your goals.
Remember: your current “status-quo” or “same-same” has diminishing returns. You don’t want to be there. Let me reinvigorate your trajectory with my unique Australian business marketing advisory services.
Christopher Melotti
Your trusted Australian Message Marketing Strategist, Creative Consultant & Brand Comms Specialist for Businesses & Professionals who aspire to do great things and want to be renowned for it.
christophermelotti.com.au
chris@melottimedia.com.au
0415 522 521
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