Strategic marketing and marketing management

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Strategic marketing focuses on choosing the right products for the right growth markets at the right time. It may be argued that these decisions are no different from those emphasized in marketing management. However, the two disciplines approach these decisions from different angles. For example, in marketing management, market segments are defined by grouping customers according to marketing mix variables. In the strategic marketing approach, market segments are formed to identify the group(s) that can provide the company with a sustainable economic advantage over the competition. To clarify the matter, Henderson labels the latter grouping a strategic sector. Henderson notes: A strategic sector is one in which you can obtain a competitive advantage and exploit it. . . . Strategic sectors are the key to strategy because each sector’s frame of reference is competition. The largest competitor in an industry can be unprofitable in that the individual strategic sectors are dominated by smaller competitors.

Afurther difference between strategic marketing and marketing management is that in marketing management the resources and objectives of the firm, however defined, are viewed as uncontrollable variables in developing a marketing mix. In strategic marketing, objectives are systematically defined at different levels after a thorough examination of necessary inputs. Resources are allocated to maximize overall corporate performance, and the resulting strategies are formulated with a more inclusive view. As Abell and Hammond have stated: A strategic market plan is not the same . . . as a marketing plan; it is a plan of all aspects of an organization’s strategy in the market place. A marketing plan, in contrast, deals primarily with the delineation of target segments and the product, communication, channel, and pricing policies for reaching and servicing those segments - the so-called marketing mix. Marketing management deals with developing a marketing mix to serve designated markets. The development of a marketing mix should be preceded by a definition of the market. Traditionally, however, market has been loosely defined. In an environment of expansion, even marginal operations could be profitable; therefore, there was no reason to be precise, especially when considering that the task of defining a market is at best difficult. Besides, corporate culture emphasized short-term orientation, which by implication stressed a winning marketing mix rather than an accurate definition of the market. To illustrate how problematic it can be to define a market, consider the laundry product Wisk.

The market for Wisk can be defined in many different ways: the laundry detergent market, the liquid laundry detergent market, or the prewash- treatment detergent market. In each market, the product would have a different market share and would be challenged by a different set of competitors. Which definition of the market is most viable for long-term healthy performance is a question that strategic marketing addresses. A market can be viewed in many different ways, and a product can be used in many different ways. Each time the product-market pairing is varied, the relative competitive strength is varied, too. Many businesspeople do not recognize that a key element in strategy is choosing the competitor whom you wish to challenge, as well as choosing the marketing segment and product characteristics with which you will compete. Strategic marketing differs from marketing management in many respects: orientation, philosophy, approach, relationship with the environment and other parts of the organization, and the management style required. For example, strategic marketing requires a manager to forgo short-term performance in the interest of long-term results. Strategic marketing deals with the business to be in; marketing management stresses running a delineated business. For a marketing manager, the question is: Given the array of environmental forces affecting my business, the past and the projected performance of the industry or market, and my current position in it, which kind of investments am I justified in making in this business? In strategic marketing, on the other hand, the question is rather: What are my options for upsetting the equilibrium of the marketplace and reestablishing it in my favor? Marketing management takes market projections and competitive position as a given and seeks to optimize within those constraints. Strategic marketing, by contrast, seeks to throw off those constraints wherever possible. Marketing management is deterministic; strategic marketing is opportunistic. Marketing management is deductive and analytical; strategic marketing is inductive and intuitive.

THE PROCESS OF STRATEGIC MARKETING: AN EXAMPLE The process of strategic marketing planning, may be illustrated with an SBU (health-related remedies) of the New England Products Company (a fictional name). Headquartered in Hartford, Connecticut, NEPC is a worldwide manufacturer and marketer of a variety of food and nonfood products, including coffee, orange juice, cake mixes, toothpaste, diapers, detergents, and health-related remedies. The company conducts its business in more than 100 countries, employs approximately 110,000 people, operates more than 147 manufacturing facilities, and maintains three major research centers. In 1998 (year ending June 30), the company’s worldwide sales amounted to $37.3 billion.

Corporte Strategy

    In 1991, the company’s strategic  plan established the following goals:
    •  To strengthen significantly the company’s core businesses (i.e., toothpaste,  diapers,
   and detergents).
    •  To view health care products as a critical engine of growth.
    •  To boost the share of profits from health-related products from 20 percent to  30
   percent over the next decade.
    •  To divest those businesses not meeting the company’s criteria for profitability  and
   growth, thus providing  additional resources to achieve other objectives.
    •  To make an 18 percent return on total capital invested.
    •  To a great extent, to depend on retained earnings for financing growth.
    This  above strategy rested on the five factors, that feed into
   corporate strategy:
    • Value system - always to be strong and influential in marketing, achieving  growth
   through developing and acquiring  new products for specific niches.
    • Corporate publics - the willingness of NEPC stockholders to forgo  short-term profits
   and dividends in the interest of  long-term growth and profitability.
    • Corporate resources - strong financial position, high brand recognition,  marketing
   powerhouse.
    • Business unit performance - health-related remedies sales, for example,  were higher
   worldwide despite recessionary  conditions.
    • External environment - increased health consciousness among consumers.

Business Unit Mission The mission for one of NEPC’s 36 business units, health-related remedies, emerged from a simultaneous review of corporate strategy, competitive conditions, customers’ perspectives, past performance of the business unit, and marketing environment. The business unit mission for health-related remedies was delineated as follows:

    •  To consolidate operations by combining recent acquisitions and newly developed
   products and by revamping old  products.
    •  To accelerate business by proper positioning of products.
    •  To expand the product line to cover the entire human anatomy.
    The  mission for the business unit was translated into the following objectives and
   goals:
    •  To invest heavily to achieve $5.3 billion in sales by 2003, an increase of 110  percent
   over $2.8 billion in 1998.
    •  To achieve a leadership position in the United States.
    •  To introduce new products overseas as early as possible to preempt competition.
    Marketing  objectives for different products/markets emerged from these overall
   business unit objectives. For  example, the marketing objectives for a product to
   combat indigestion were  identified as follows:
    •  To accelerate research to seek new uses for the product.
    •  To develop new improvements in the product.

Marketing Strategy Marketing objectives, customer and competitive perspectives, and product/market momentum (i.e., extrapolation of past performance to the future) form the basis of marketing strategy. In the case of NEPC, the major emphasis of marketing strategy for health-related remedies was on positioning through advertising and on new product development. Thus, the company decided to increase advertising support throughout the planning period and to broaden research and development efforts. NEPC’s strategy was based on the following rationale. Consumers are extremely loyal to health products that deliver, as shown by their willingness to resume buying Johnson & Johnson’s Tylenol after two poisoning episodes. But while brand loyalty makes consumers harder to lure away, it also makes them easier to keep, and good marketing can go a long way in this endeavor. The company was able to enlarge the market for its indigestion remedy, which experts thought had hit maturity, through savvy marketing. NEPC used television advertising to sell it as a cure for overindulgence, which led to a 30 percent increase in business during 1993–98. As NEPC pushes further into health products, its vast research and technological resources will be a major asset. NEPC spends nearly $1 billion a year on research, and product improvements have always been an important key to the company’s marketing prowess. The overall strategy of the health-related remedies business unit was determined by industry maturity and the unit’s competitive position. The industry was found to be growing, while the competitive position was deemed strong. With insurers and the government trying to drive health care costs down, consumers are buying more and more over-the-counter nostrums. Advertisers are making health claims for products from cereal to chewing gum. As the fitness craze exemplifies, interest in health is higher than ever, and the aging of the population accentuates these trends: people are going to be older, but they are not going to want to feel older. Thus the health-related remedies industry has a significant potential for growth. NEPC is the largest over-the-counter remedies marketer. As shown in the list below, it has products for different ailments. The company’s combined strength in marketing and research puts it in an enviable position in the market.

• Skin - NEPC produces the leading facial moisturizer. NEPC also leads the teenage acne treatment market. Work is now underway on a possible breakthrough antiaging product.

• Mouth - After being on the market for 28 years, NEPC’s mouthwash is the market leader. Another NEPC product, a prescription plaque-fighting mouthwash, may go over the counter, or it may become an important ingredient in other NEPC oral hygiene products.

• Head - An NEPC weak spot, its aspirin, holds an insignificant share of the analgesic market. NEPC may decide to compete with an ibuprofen-caffeine combination painkiller.

• Chest - NEPC’s medicated chest rub is an original brand in a stable that now includes cough syrup, cough drops, a nighttime cold remedy, and nasal spray. Other line extensions and new products are coming, but at a fairly slow pace.

• Abdomen - The market share for NEPC’s indigestion remedy is up 22 percent in the last three years. Already being sold to prevent traveler’s diarrhea, it may be marketed as an ulcer treatment. NEPC also dominates the over-the-counter bulk laxative market. New clinical research shows that its laxative may reduce serum cholesterol.

• Bones - NEPC orange juice has a 10 percent share of the market. Orange juice with calcium is now being expanded nationwide and could be combined with a low-calorie version.

Briefly, these inputs, along with the business unit’s goals, led to the following business unit strategy: to attempt to improve position, to push for share.

Portfolio Analysis. The marketing strategy for each product/market was reviewed using the portfolio technique (see Article 10). By positioning different products/markets on a multifactor portfolio matrix (high/medium/low business strength and high/medium/low industry attractiveness), strategy for each product/ market was examined and approved from the viewpoint of meeting business unit missions and goals. Following the portfolio analysis, the approved marketing strategy became a part of the business unit’s strategic plan, which, when approved by top management, was ready to be implemented. As a part of implementation, an annual marketing plan was formulated and became the basis for operations managers to pursue their objectives.

Implementation of the Strategic Plan. Afew highlights of the activities of the health-related remedies business unit during 1998–2003 show how the strategic plan was implemented.

• Steps were taken to sell its laxative as an anticholesterol agent.

• The company won FDA permission to promote its indigestion remedy to doctors as a preventive for traveler’s diarrhea.

• Company research has shown that its indigestion remedy helps treat ulcers. Although some researchers have disputed this claim, the prospect of cracking the multibillion dollar ulcer treatment market is tantalizing.

• The company introduced its orange juice brand with calcium. The company sought and won the approval of the American Medical Women’s Association for the product and put the group’s seal on its containers.