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Marketing strategy positioning
Marketing Strategy Positioning Marketing strategy positions are outlined by the author, who presents guidelines for identifying and evaluating alternative strategies, as an aid for management decision making.
DAVID W. CRAVENS
David W. Cravens is a faculty member in Business Administration at the University o f Tennessee.
Marketing strategy positioning provides an essential frame of reference for ,guiding management decisions. Rapid environmental changes, shifts in buyer preferences, new products and services, and increased competition demand that firms continually monitor their strategy positioning to capitalize on new opportunities and avoid potential pitfalls. An understanding of the concept of strategy positioning and its implications for marketing decision making is important for several reasons. First, changes in the marketing environment, both nationally and internationally, are increasing at a rapid rate, thus making strategy development significant to the success of an organization. Second, strategy positioning analysis yields important guidelines for marketing decision making and provides a basis for effectively linking corporate and marketing strategy. Third, appropriate shifts in marketing strategy must be based Note: A more comprehensive discussion of this topic by the author, Gerald E. Hills and Robert B. Woodruff will appear in Marketing Decision Making: Concepts and Strategy, to be published in 1976.
DECEMBER 1975
upon a thorough understanding of a firm's present positioning. Consider, for example, the impact of energy shortages, in combination with a severe economic downturn in the mid-1970s, upon prevailing marketing strategies of many firms. Or consider the implications of the shift in the $1 billion hosiery market from panty hose to knee-highs, and the associated decrease in the size of the market which, in 1974, reduced profit margins, intensified price competition, generated claims of false advertising, and stimulated efforts for product differentiation and quality improvement. 1 Another example is the Wurlitzer Co., which had become an American institution over the past several decades, but in 1974 announced its decision to phase out of the jukebox business in the United States. These are but a few illustrations of chan~ng conditions that directly influenced marketing strategies. The challenge to top management and marketing decision makers is t o : analyze market-product position(s) currently occupied by the firm 1. "The New Sag in Pantyhose," Business Week, 14 December 1974, pp. 9 8 - 1 0 0 .
53
DAVID W. CRAVENS
identify desirable shifts in strategy positions, and avoid being forced into undesirable positions by external forces such as the government determine how and when to accomplish desired shifts or whether to retain existing positions. Decisions can be facilitated by guidelines for strategy positioning that match different degrees of market-product maturity. This article examines the major types of marketing management decisions, reviews the concept of strategy positioning, discusses alternative marketing strategies, and presents an approach for analyzing shifts in such strategies.
CONCEPT OF STRATEGY POSITIONING
54
An enterprise's corporate goals delineate market-product boundaries which guide marketing decisions. Contrast, for example, the corporate mission of a multi-market-product firm such as General Electric with the single market-product orientation of the Wm. Wrigley Jr., Co. General Electric serves a variety of consumer, industrial and institutional users with a wide range of products. The Wrigley company manufactures chewing ,gum for a mass consumer market. Such differences in overall purposes and goals largely determine the nature and scope of marketing activities of various firms.
Marketing Decision Areas Within the ~fidelines of the corporate mission, marketing decisions must be made in three major areas. They include an analysis of the marketing environment to identify opportunities and constraints; a market opportunity analysis to select target markets; and the design, implementation and control of marheting strategy to accomplish objectives in target markets. Environmental analysis identifies, monitors and, where possible, predicts the impact
of external forces, including economic conditions, technology, social change and government. Market analysis examines relevant markets to select specific target areas where the firm has the most favorable advantage over existing and/or potential competition. Marketing strategy encompasses the design, implementation and management over time of the total marketing effort as it relates to the product, channels of distribution, price, advertising and sales force.
Determinants of Strategy Position A firm entering a new market with a new product or service faces a substantially different marketing challenge than one operating in an existing market with a line of established products. Thus, an essential first step in the marketing management decision process is an assessment of the marketing strategy positions already occupied by the company, or an assessment of the new situations into which it might move. Variations in the maturity of markets and products, coupled with the base of experience of a given firm, will substantially affect the specific activities of the marketing manager with regard to environmental analysis, target market selection and marketing strategy design and management over time. Central to the need for strategy position analysis is a recognition of market-product dynamics. Clearly, the first half of the '70s has amply demonstrated that change will be a central element to be contended with in management decision making in the future. Within a general framework of societal change, certain possibilities suggest the need for ongoing marketing strategy analysis. For instance, modifications in a firm's marketing p r o ~ a m may have to be made as its products move through different stages in the product life cycle. Contrast Polaroid's initial entry into the instant photography market with its recent introduction of the SX-70 camera. Firms may also decide to move into new
BUSINESS HORIZONS
Marketing Strategy Positioning
FIGURE 1 Alternative Marketing Strategy Positions
New Venture Strategy
~o
Growth Strategy
MarketDeve°Pi 55
markets. Consider, for example, Texas Instruments' move a few years ago into consumer markets, with electronic calculators. Further, possible market-product gaps may offer new or expanded opportunities. Recall Lear Jet's move into the commercial jet aircraft market several years ago as a result of an assessed product gap. Changing environmental conditions such as energy shortages, inflation, international political unrest and declining birth rates may pose both opportunities and threats for particular industries and individual firms. Thus, marketing strategy position analysis is an essential frame of reference for the variety of specific marketing management decisions which must be made in an enterprise.
DECEMBER 1975
POSITIONING ALTERNATIVES A firm's marketing strategy position is affected both by the prevailing market-product situations pursued by the firm, and by factors b e y o n d the control of the firm, such as market-product life cycles, environmental forces and competition. An array of possible marketing strategy positions is shown in Figure 1. ~ Examples of market-product situations which illustrate different marketing 2. Related uses of product-market variations to array strategy positions are discussed in the following: H. Igor Ansoff, Corporate Strategy (New York: McGraw-Hill, 1965), pp. 122-38. David T. Kollat, Roger D. Blackwell and James F. Robeson, Strategic Marketing (Holt, Rinehart and Winston, 1972), pp. 21-23. John W. Humble, How to Manage by Objectives (New York: American Marketing Association, 1973), p. 75.
DAVIDW. CRAVENS
strategy positions are shown in Table 1. The five alternatives are admittedly arbitrary since a continuum of possible variations exists. Yet, this division seems appropriate in terms of characterizing the essential differences as they affect marketing decisions. Each strategy position will be described briefly.
Balancing Strategy In a balancing strategy position, a firm seeks to balance revenue-cost flows to achieve desired profit and market share targets. Both existing markets and products are typically at mature levels, and competition is well estabfished. Management has accumulated a broad base of knowledge and experience about familiar markets and products. Relationships between functional areas of the firm are well established.
56
The focus of environmental analysis is on monitoring external influences to identify possible opportunities and threats. For example, an analysis of income trends, population growth and regulatory flexibility in the early 1960s, in combination with an assessment of market opportunities, precipitated movement of progressive commercial banks from balancing strategies toward market retention, market development, and, in some cases, growth strategies. Of course, environmental analysis should not imply that strategy shifts are always desirable. Market opportunity analysis within a balancing strategy is aimed at refining the firm's knowledge of its markets. Market segmentation strategies may often be appropriate to enable the firm to concentrate its efforts upon certain groups of product end-users, thus achieving advantage over competition through specialization. Consider, for example, American Motors' pursuit of the small car segment of the automobile market. Typically, a balancing strategy position necessitates setting clear priorities for subgroups of customers within a firm's aggregate market.
A firm's marketing program is well developed in this strategy p o s i t i o n - o n l y modest changes are normally made from year to year in advertising and personal selling methods. Distribution channels are established, as are pricing strategies. Emphasis is upon control as opposed to planning. Efficiency in the use of resources is critical since market growth is likely to be modest and competition for new customers is keen. Monitoring of product performance should be an ongoing activity to identify products which should be dropped.
Market Retention Strategy This position relates to a situation in which a product is being modified or a market is being expanded; thus, it is a logical extension from a balancing strategy position, triggered by management's desire to improve corporate performance or to sustain historical sales and profit levels. It probably is the most typical strategy position occupied by established firms. Marketing activities and decisions are similar to those in balancing strategy positions, although the market opportunity analysis and marketing program design must take into account the firm's movement b e y o n d existing market-product situations. For example, information about product modifications must be communicated to the firm's target markets. End-users in expanded markets must be reached through existing distribution channels or new channel intermediaries must be added to the firm's system.
Market Development Strategy Pursuit of this strategy may extend an enterprise b e y o n d existing market-product capabilities, and is likely to require realignments of organizational relationships and procedures. Additional financial resources and personnel are often required. Market development is a major undertaking, and is unlikely to fit
BUSINESS HORIZONS
Marketing Strategy Positioning
TABLE1 Illustrations of Firms Occupying Alternative Strategy Positions
Balancing Strategy Strategy position occupied by railroads, electric utilities and various other mature industries Holiday Inn's provision of motel services to its existing markets
Market Retention Strategy Annual model changes of appliance manufacturers aimed at retaining market share Introduction by Kentucky Fried Chicken of ribs to their food line Modification of styles and models by automobile manufacturers
Market Development Strategy Procter & Gamble's development of "Pringles" potato chips Efforts of public transportation firms to lure people away from use of the automobile through modification of services Movement of the large aluminum companies into automobile and beverage can markets for their products Growth Strategy Offering (at a fee) first run movies on T.V. private channels in hotels and motels Texas Instruments' move into consumer electronic calculator markets Design and marketing of a low premium $1 million umbrella personal liability insurance policy for individuals New Venture Strategy Polaroid's introduction of the original Land camera Xerox's pioneering development and marketing of copying equipment Initial publication and marketing of Playgirl magazine neatly into existing operational patterns. New markets or new product commitments present key analysis and design uncertainties for marketing management. Careful assessment of the feasibility of pursuing this strategy should be made in terms of environmental influences, market potential, competitive situation, and financial viability.
Growth Strategy A ~ o w t h strategy moves the firm into higher levels of uncertainty than any of the three
DECEMBER 1975
previously described strategy positions. Either a new product or new market is involved, in combination with a market expansion or product modification. Major new resources are needed to pursue this strategy, and a variety of new operating relationships must be established. Knowledge of prospective markets is crucial, indicating a possible need for acquiring information through marketing research and intelligence activities. Market segmentation may be difficult, due to lack of market experience and information.
57
DAVIDW. CRAVENS
In this strategy position, design of the marketing program presents a major challenge to marketing management. Assuming the firm occupies other strategy positions, it is doubtful that the growth strategy can be launched from the firm's existing marketing program base. The magnitude and deployment of resources among the various components of the marketing mix must be carefully planned; changes during the initial stages of program implementation may be necessary. For certain market-product situations, program implementation may occur in stages, for instance, by geographical area. This allows the gathering of market response information which can be useful in guiding subsequent efforts in other areas. Also, the use of marketing resources is not as "fine t u n e d " as, for example, in a market retention strategy position.
mm'ket gains some maturity and a sufficient degree of stability so that similar customers can be identified. Design of the marketing program presents a major challenge in that the relative effectiveness of marketing elements in influencing target customers is difficult to determine. Experimentation may be necessary, such as using test marketing by consumer products firms. The program desigu involves major strategy decisions with respect to the type and intensity of distribution, the role of price in the marketing effort, and the relative importance of advertising and personal selling. Since these decisions may require modification over time, major changes in the marketing mix should be viewed as normal rather than exceptional in a new venture strategy position. Initial revenue-cost relationships may be unfavorable during the period that the firm is seeking to build market acceptance.
New Venture Strategy
IMPLICATIONS OF POSITIONING
The new venture strategy position represents a totally new undertaking by the enterprise. While decision making uncertainties and risks are at the highest level, the opportunities for success are typically very attractive. Direct competition often is not present. Established firms use various organizational approaches to cope with the overall management task of planning and implementing a new venture. The team concept has become popular in recent years. If the venture promises to be sufficiently large, a separate division may be established. For example, the Carborundum Co., in seeking to enter the pollution control market in the early 1970s, used this approach. The market in a new venture situation is often not well defined. Refinements in management's understanding of customer characteristics and behavior must be developed over time, since a very limited base of historical experience frequently exists. Segmentation strategies often need to be deferred until the
Analyses of the strategies pursued by many successful business firms indicate that managements seek to move firms away from balancing situations into positions where there are more favorable advantages over competition. New product/service development activities are widely used for this purpose. Similarly, continual searching for new and/or expanded market opportunities represents an alternative or complementary strategy shifting mechanism. Yet, continued shifting may be neither feasible nor desirable. A company particularly must avoid being shifted by uncontrollable factors into less preferable situations.
58
Multiple Positions Firms often occupy multiple marketing strategy positions. In cases where the positions are widely separated, different marketing ap-
BUSINESS HORIZONS
Marketin,a* Strate,gy Positioning
proaches may be appropriate. For example, a firm may pursue a new venture strategy for a particular market-product combination, and at the same time occupy a market retention strategy position. The characteristics and decision-making demands of widely separated strategy positions may vary sigmificantly. Attempting to launch a growth strategy via a marketing organization built around a balancing strategy is a clear mismatch of capabilities and needs. Many firms at their inception face new venture strate~es. Few, if any, maintain this position for any length of time, although mature firms may undertake new ventures for specific market-product opportunities. Over time a new venture situation will inevitably shift into one of the other positions, since market-product life cycles mature. Similarly, a firm upon reaching a balancing situation may seck to occupy other strategy positions, and move away from the balancing strategy.
Marketing Decisions Marketing decisions vary substantially depending upon the strategy, position(s) occupied by a firm. For example, market segmentation may be difficult and unnecessary in a new venture situation. However, effective segmentation of a product or brand level market in a balancing strategy may be essential to achieving profit objectives. Positioning analysis provides guidelines for analyzing the environment, the market opportunity and the marketing p r o ~ a m design, implementation and control. Similarly, the experience and qualifications of the marketing staff may vary according to strategy positions. For example, a marketing manager in a new venture situation should be a good planner with a strong entrepreneurial orientation. In a balancing strategy the chief marketing executive needs skills in analyzing and controlling resources, and the capacity to make tough
DECEMBER 1975
retrenchment decisions when needed, such as sales force reductions and/or changes in deployment.
STRATEGY POSITION ANALYSIS Considering the various strategW positions that may occur and the variety of controllable and uncontrollable influences, the need for strategy positioning analysis is clear. However, the determination of the need for strategy position shifts is not exclusively a marketing management decision; it should inw)lve executives from the various functional areas. Nevertheless, because the marketing function is linked to the firm's markets in particular and to the external environment in general, the chief marketing executive must play a piw)tal role in strategy position analysis. A strategy position shift may be called for due to: pending environmental threats unsatisfactory performance in the present position(s) and limited possibilities for improvement the identification of a potentially promising opportunity, such as a new product idea management's desire to broaden the firm's market-product base to provide a more stable revenue and profit flow innovations suggested by an ag~essive, ~ o w t h - o r i e n t e d management ~ o u p . These are the influences which lead to consideration of strategy positioning changes. Of course, the result of this assessment may be a decision to remain in the present strategy position. If management desires to change or supplement an existing stragegy, however, feasible alternatives must be identified and evaluated.
Identifying, Evaluating Alternatives The most promising "alternative market-product positions should be identified, taking into consideration present position(s) and the
59
DAVIDW. CRAVENS
FIGURE 2 Illustrative Multiple Strategy Positions New Venture Strategy Growth Strategy Market Development Strategy
~"
Market Retention Strategy Balancing Strategy
(a) Fragmented Multiple Strategy •
60
(b) Major Shift Multiple Strategy
(c) Extension Multiple Strategy
Designates a marketing strategy position occupied by the firm.
feasibility of moving into another position. Consider, for example, the three alternative multiple strategy positions shown in Figure 2. In the fragmented multiple strategy position (a), a firm's management capabilities and resources are spread over several market-product combinations. Movement toward market retention would extend the firm into yet another strategy position. Strate~es of several of the multi-market-product conglomerates of the 1960s resembled fragmented strategy patterns. Some encountered serious problems, including bankruptcy, as a result of overextending financial and management resources. Though a fragmented multiple strategy is not necessarily inappropriate, its use involves significant implications which should be recognized. Movement to adjacent positions from an existing extention multiple strategy position (c) is often more feasible than either the fragmented or major shift multiple strate~es (a and b). The fragmented and extention multiple strategies represent quite different
alternatives, and Table 2 outlines characteristics of them both. After management has determined feasible alternative strategy position shifts, each should be assessed in terms of potential contribution to profits and other corporate goals, and in terms of competition, resource needs, impact upon current operations and risks. Depending upon the firm's existing strategy position and the alternatives being evaluated, certain areas of assessment may be more important than others. Management must weigh the various relevant criteria and arrive at a composite ranking of the alternatives. If only one possible strategy shift is considered, then it must be assessed in terms of whether moving toward it promises to make an acceptable contribution to the firm's goals.
Selection and Implementation After selecting a new strategy position, specific plans must be developed to guide the implementation process. Our earlier ex-
BUSINESS HORIZONS
~larketing Strategy Positioning
TABLE 2 Characteristics of Fragmented and Extention Multiple Strategy Positions
Fragmented Multiple Strategy
Extension Multiple Strategy
Adds to the demands upon possibly already overtaxed financial and managerial resources
The addition of a strategy position becomes a logical extension from the firm's existing market-product positions
Provides the firm with market-product situations at various life cycle stages
Multiple strategy tends to position the firm in a relatively narrow market-product maturity range
Enables extension to additional strategw positions from a wide range of possibilities
Options for additional strategy positions are relatively limited
Extension from an existing marketproduct conbination provides certain of the same advantages of an extension multiple strategy
It is normally possible to pursue another strategy position with modest changes in existing organization and marketing program
Management must acquire a broad base of information about its markets and products
amination of the characteristics of the various strategy positions provides ,guidelines for the marketing planning task with regard to environmental analysis, market target selection and marketing program design. Of course, the planning task should span the enterprise, since all areas of the firm will be involved in varying degrees, depending upon the particular market-product situation selected. For example, expanding the market of an existing product or service would place primary demands upon the marketing function. Alternatively, a new venture strategy would call upon the resources and capabilities of the entire firm. Though marketing managers intuitively recogmize differences in the various marketproduct situations confronting them, con-
DECEMBER 1975
By concentrating in a limited range of market product situations, management can gain a strong, specialized base of knowledge and experience
siderable insight into the marketing task can be gained by determining a firm's marketing strategy position. Through analysis of current position and evaluation of possible shifts, a sound basis can be developed for making needed changes. Perhaps most important, strategy position analysis provides clear support for the chief marketing executive when substantial resource increases are needed to implement a top management decision to pursue new market-product opportunities. By focusing upon the variations in environmental analysis, selection of market targets and marketing program management resulting from different market-product situations, an attempt has been made to give direction to the marketing decision maker.
DAVID W. CRAVENS
David W. Cravens is a faculty member in Business Administration at the University o f Tennessee.
Marketing strategy positioning provides an essential frame of reference for ,guiding management decisions. Rapid environmental changes, shifts in buyer preferences, new products and services, and increased competition demand that firms continually monitor their strategy positioning to capitalize on new opportunities and avoid potential pitfalls. An understanding of the concept of strategy positioning and its implications for marketing decision making is important for several reasons. First, changes in the marketing environment, both nationally and internationally, are increasing at a rapid rate, thus making strategy development significant to the success of an organization. Second, strategy positioning analysis yields important guidelines for marketing decision making and provides a basis for effectively linking corporate and marketing strategy. Third, appropriate shifts in marketing strategy must be based Note: A more comprehensive discussion of this topic by the author, Gerald E. Hills and Robert B. Woodruff will appear in Marketing Decision Making: Concepts and Strategy, to be published in 1976.
DECEMBER 1975
upon a thorough understanding of a firm's present positioning. Consider, for example, the impact of energy shortages, in combination with a severe economic downturn in the mid-1970s, upon prevailing marketing strategies of many firms. Or consider the implications of the shift in the $1 billion hosiery market from panty hose to knee-highs, and the associated decrease in the size of the market which, in 1974, reduced profit margins, intensified price competition, generated claims of false advertising, and stimulated efforts for product differentiation and quality improvement. 1 Another example is the Wurlitzer Co., which had become an American institution over the past several decades, but in 1974 announced its decision to phase out of the jukebox business in the United States. These are but a few illustrations of chan~ng conditions that directly influenced marketing strategies. The challenge to top management and marketing decision makers is t o : analyze market-product position(s) currently occupied by the firm 1. "The New Sag in Pantyhose," Business Week, 14 December 1974, pp. 9 8 - 1 0 0 .
53
DAVID W. CRAVENS
identify desirable shifts in strategy positions, and avoid being forced into undesirable positions by external forces such as the government determine how and when to accomplish desired shifts or whether to retain existing positions. Decisions can be facilitated by guidelines for strategy positioning that match different degrees of market-product maturity. This article examines the major types of marketing management decisions, reviews the concept of strategy positioning, discusses alternative marketing strategies, and presents an approach for analyzing shifts in such strategies.
CONCEPT OF STRATEGY POSITIONING
54
An enterprise's corporate goals delineate market-product boundaries which guide marketing decisions. Contrast, for example, the corporate mission of a multi-market-product firm such as General Electric with the single market-product orientation of the Wm. Wrigley Jr., Co. General Electric serves a variety of consumer, industrial and institutional users with a wide range of products. The Wrigley company manufactures chewing ,gum for a mass consumer market. Such differences in overall purposes and goals largely determine the nature and scope of marketing activities of various firms.
Marketing Decision Areas Within the ~fidelines of the corporate mission, marketing decisions must be made in three major areas. They include an analysis of the marketing environment to identify opportunities and constraints; a market opportunity analysis to select target markets; and the design, implementation and control of marheting strategy to accomplish objectives in target markets. Environmental analysis identifies, monitors and, where possible, predicts the impact
of external forces, including economic conditions, technology, social change and government. Market analysis examines relevant markets to select specific target areas where the firm has the most favorable advantage over existing and/or potential competition. Marketing strategy encompasses the design, implementation and management over time of the total marketing effort as it relates to the product, channels of distribution, price, advertising and sales force.
Determinants of Strategy Position A firm entering a new market with a new product or service faces a substantially different marketing challenge than one operating in an existing market with a line of established products. Thus, an essential first step in the marketing management decision process is an assessment of the marketing strategy positions already occupied by the company, or an assessment of the new situations into which it might move. Variations in the maturity of markets and products, coupled with the base of experience of a given firm, will substantially affect the specific activities of the marketing manager with regard to environmental analysis, target market selection and marketing strategy design and management over time. Central to the need for strategy position analysis is a recognition of market-product dynamics. Clearly, the first half of the '70s has amply demonstrated that change will be a central element to be contended with in management decision making in the future. Within a general framework of societal change, certain possibilities suggest the need for ongoing marketing strategy analysis. For instance, modifications in a firm's marketing p r o ~ a m may have to be made as its products move through different stages in the product life cycle. Contrast Polaroid's initial entry into the instant photography market with its recent introduction of the SX-70 camera. Firms may also decide to move into new
BUSINESS HORIZONS
Marketing Strategy Positioning
FIGURE 1 Alternative Marketing Strategy Positions
New Venture Strategy
~o
Growth Strategy
MarketDeve°Pi 55
markets. Consider, for example, Texas Instruments' move a few years ago into consumer markets, with electronic calculators. Further, possible market-product gaps may offer new or expanded opportunities. Recall Lear Jet's move into the commercial jet aircraft market several years ago as a result of an assessed product gap. Changing environmental conditions such as energy shortages, inflation, international political unrest and declining birth rates may pose both opportunities and threats for particular industries and individual firms. Thus, marketing strategy position analysis is an essential frame of reference for the variety of specific marketing management decisions which must be made in an enterprise.
DECEMBER 1975
POSITIONING ALTERNATIVES A firm's marketing strategy position is affected both by the prevailing market-product situations pursued by the firm, and by factors b e y o n d the control of the firm, such as market-product life cycles, environmental forces and competition. An array of possible marketing strategy positions is shown in Figure 1. ~ Examples of market-product situations which illustrate different marketing 2. Related uses of product-market variations to array strategy positions are discussed in the following: H. Igor Ansoff, Corporate Strategy (New York: McGraw-Hill, 1965), pp. 122-38. David T. Kollat, Roger D. Blackwell and James F. Robeson, Strategic Marketing (Holt, Rinehart and Winston, 1972), pp. 21-23. John W. Humble, How to Manage by Objectives (New York: American Marketing Association, 1973), p. 75.
DAVIDW. CRAVENS
strategy positions are shown in Table 1. The five alternatives are admittedly arbitrary since a continuum of possible variations exists. Yet, this division seems appropriate in terms of characterizing the essential differences as they affect marketing decisions. Each strategy position will be described briefly.
Balancing Strategy In a balancing strategy position, a firm seeks to balance revenue-cost flows to achieve desired profit and market share targets. Both existing markets and products are typically at mature levels, and competition is well estabfished. Management has accumulated a broad base of knowledge and experience about familiar markets and products. Relationships between functional areas of the firm are well established.
56
The focus of environmental analysis is on monitoring external influences to identify possible opportunities and threats. For example, an analysis of income trends, population growth and regulatory flexibility in the early 1960s, in combination with an assessment of market opportunities, precipitated movement of progressive commercial banks from balancing strategies toward market retention, market development, and, in some cases, growth strategies. Of course, environmental analysis should not imply that strategy shifts are always desirable. Market opportunity analysis within a balancing strategy is aimed at refining the firm's knowledge of its markets. Market segmentation strategies may often be appropriate to enable the firm to concentrate its efforts upon certain groups of product end-users, thus achieving advantage over competition through specialization. Consider, for example, American Motors' pursuit of the small car segment of the automobile market. Typically, a balancing strategy position necessitates setting clear priorities for subgroups of customers within a firm's aggregate market.
A firm's marketing program is well developed in this strategy p o s i t i o n - o n l y modest changes are normally made from year to year in advertising and personal selling methods. Distribution channels are established, as are pricing strategies. Emphasis is upon control as opposed to planning. Efficiency in the use of resources is critical since market growth is likely to be modest and competition for new customers is keen. Monitoring of product performance should be an ongoing activity to identify products which should be dropped.
Market Retention Strategy This position relates to a situation in which a product is being modified or a market is being expanded; thus, it is a logical extension from a balancing strategy position, triggered by management's desire to improve corporate performance or to sustain historical sales and profit levels. It probably is the most typical strategy position occupied by established firms. Marketing activities and decisions are similar to those in balancing strategy positions, although the market opportunity analysis and marketing program design must take into account the firm's movement b e y o n d existing market-product situations. For example, information about product modifications must be communicated to the firm's target markets. End-users in expanded markets must be reached through existing distribution channels or new channel intermediaries must be added to the firm's system.
Market Development Strategy Pursuit of this strategy may extend an enterprise b e y o n d existing market-product capabilities, and is likely to require realignments of organizational relationships and procedures. Additional financial resources and personnel are often required. Market development is a major undertaking, and is unlikely to fit
BUSINESS HORIZONS
Marketing Strategy Positioning
TABLE1 Illustrations of Firms Occupying Alternative Strategy Positions
Balancing Strategy Strategy position occupied by railroads, electric utilities and various other mature industries Holiday Inn's provision of motel services to its existing markets
Market Retention Strategy Annual model changes of appliance manufacturers aimed at retaining market share Introduction by Kentucky Fried Chicken of ribs to their food line Modification of styles and models by automobile manufacturers
Market Development Strategy Procter & Gamble's development of "Pringles" potato chips Efforts of public transportation firms to lure people away from use of the automobile through modification of services Movement of the large aluminum companies into automobile and beverage can markets for their products Growth Strategy Offering (at a fee) first run movies on T.V. private channels in hotels and motels Texas Instruments' move into consumer electronic calculator markets Design and marketing of a low premium $1 million umbrella personal liability insurance policy for individuals New Venture Strategy Polaroid's introduction of the original Land camera Xerox's pioneering development and marketing of copying equipment Initial publication and marketing of Playgirl magazine neatly into existing operational patterns. New markets or new product commitments present key analysis and design uncertainties for marketing management. Careful assessment of the feasibility of pursuing this strategy should be made in terms of environmental influences, market potential, competitive situation, and financial viability.
Growth Strategy A ~ o w t h strategy moves the firm into higher levels of uncertainty than any of the three
DECEMBER 1975
previously described strategy positions. Either a new product or new market is involved, in combination with a market expansion or product modification. Major new resources are needed to pursue this strategy, and a variety of new operating relationships must be established. Knowledge of prospective markets is crucial, indicating a possible need for acquiring information through marketing research and intelligence activities. Market segmentation may be difficult, due to lack of market experience and information.
57
DAVIDW. CRAVENS
In this strategy position, design of the marketing program presents a major challenge to marketing management. Assuming the firm occupies other strategy positions, it is doubtful that the growth strategy can be launched from the firm's existing marketing program base. The magnitude and deployment of resources among the various components of the marketing mix must be carefully planned; changes during the initial stages of program implementation may be necessary. For certain market-product situations, program implementation may occur in stages, for instance, by geographical area. This allows the gathering of market response information which can be useful in guiding subsequent efforts in other areas. Also, the use of marketing resources is not as "fine t u n e d " as, for example, in a market retention strategy position.
mm'ket gains some maturity and a sufficient degree of stability so that similar customers can be identified. Design of the marketing program presents a major challenge in that the relative effectiveness of marketing elements in influencing target customers is difficult to determine. Experimentation may be necessary, such as using test marketing by consumer products firms. The program desigu involves major strategy decisions with respect to the type and intensity of distribution, the role of price in the marketing effort, and the relative importance of advertising and personal selling. Since these decisions may require modification over time, major changes in the marketing mix should be viewed as normal rather than exceptional in a new venture strategy position. Initial revenue-cost relationships may be unfavorable during the period that the firm is seeking to build market acceptance.
New Venture Strategy
IMPLICATIONS OF POSITIONING
The new venture strategy position represents a totally new undertaking by the enterprise. While decision making uncertainties and risks are at the highest level, the opportunities for success are typically very attractive. Direct competition often is not present. Established firms use various organizational approaches to cope with the overall management task of planning and implementing a new venture. The team concept has become popular in recent years. If the venture promises to be sufficiently large, a separate division may be established. For example, the Carborundum Co., in seeking to enter the pollution control market in the early 1970s, used this approach. The market in a new venture situation is often not well defined. Refinements in management's understanding of customer characteristics and behavior must be developed over time, since a very limited base of historical experience frequently exists. Segmentation strategies often need to be deferred until the
Analyses of the strategies pursued by many successful business firms indicate that managements seek to move firms away from balancing situations into positions where there are more favorable advantages over competition. New product/service development activities are widely used for this purpose. Similarly, continual searching for new and/or expanded market opportunities represents an alternative or complementary strategy shifting mechanism. Yet, continued shifting may be neither feasible nor desirable. A company particularly must avoid being shifted by uncontrollable factors into less preferable situations.
58
Multiple Positions Firms often occupy multiple marketing strategy positions. In cases where the positions are widely separated, different marketing ap-
BUSINESS HORIZONS
Marketin,a* Strate,gy Positioning
proaches may be appropriate. For example, a firm may pursue a new venture strategy for a particular market-product combination, and at the same time occupy a market retention strategy position. The characteristics and decision-making demands of widely separated strategy positions may vary sigmificantly. Attempting to launch a growth strategy via a marketing organization built around a balancing strategy is a clear mismatch of capabilities and needs. Many firms at their inception face new venture strate~es. Few, if any, maintain this position for any length of time, although mature firms may undertake new ventures for specific market-product opportunities. Over time a new venture situation will inevitably shift into one of the other positions, since market-product life cycles mature. Similarly, a firm upon reaching a balancing situation may seck to occupy other strategy positions, and move away from the balancing strategy.
Marketing Decisions Marketing decisions vary substantially depending upon the strategy, position(s) occupied by a firm. For example, market segmentation may be difficult and unnecessary in a new venture situation. However, effective segmentation of a product or brand level market in a balancing strategy may be essential to achieving profit objectives. Positioning analysis provides guidelines for analyzing the environment, the market opportunity and the marketing p r o ~ a m design, implementation and control. Similarly, the experience and qualifications of the marketing staff may vary according to strategy positions. For example, a marketing manager in a new venture situation should be a good planner with a strong entrepreneurial orientation. In a balancing strategy the chief marketing executive needs skills in analyzing and controlling resources, and the capacity to make tough
DECEMBER 1975
retrenchment decisions when needed, such as sales force reductions and/or changes in deployment.
STRATEGY POSITION ANALYSIS Considering the various strategW positions that may occur and the variety of controllable and uncontrollable influences, the need for strategy positioning analysis is clear. However, the determination of the need for strategy position shifts is not exclusively a marketing management decision; it should inw)lve executives from the various functional areas. Nevertheless, because the marketing function is linked to the firm's markets in particular and to the external environment in general, the chief marketing executive must play a piw)tal role in strategy position analysis. A strategy position shift may be called for due to: pending environmental threats unsatisfactory performance in the present position(s) and limited possibilities for improvement the identification of a potentially promising opportunity, such as a new product idea management's desire to broaden the firm's market-product base to provide a more stable revenue and profit flow innovations suggested by an ag~essive, ~ o w t h - o r i e n t e d management ~ o u p . These are the influences which lead to consideration of strategy positioning changes. Of course, the result of this assessment may be a decision to remain in the present strategy position. If management desires to change or supplement an existing stragegy, however, feasible alternatives must be identified and evaluated.
Identifying, Evaluating Alternatives The most promising "alternative market-product positions should be identified, taking into consideration present position(s) and the
59
DAVIDW. CRAVENS
FIGURE 2 Illustrative Multiple Strategy Positions New Venture Strategy Growth Strategy Market Development Strategy
~"
Market Retention Strategy Balancing Strategy
(a) Fragmented Multiple Strategy •
60
(b) Major Shift Multiple Strategy
(c) Extension Multiple Strategy
Designates a marketing strategy position occupied by the firm.
feasibility of moving into another position. Consider, for example, the three alternative multiple strategy positions shown in Figure 2. In the fragmented multiple strategy position (a), a firm's management capabilities and resources are spread over several market-product combinations. Movement toward market retention would extend the firm into yet another strategy position. Strate~es of several of the multi-market-product conglomerates of the 1960s resembled fragmented strategy patterns. Some encountered serious problems, including bankruptcy, as a result of overextending financial and management resources. Though a fragmented multiple strategy is not necessarily inappropriate, its use involves significant implications which should be recognized. Movement to adjacent positions from an existing extention multiple strategy position (c) is often more feasible than either the fragmented or major shift multiple strate~es (a and b). The fragmented and extention multiple strategies represent quite different
alternatives, and Table 2 outlines characteristics of them both. After management has determined feasible alternative strategy position shifts, each should be assessed in terms of potential contribution to profits and other corporate goals, and in terms of competition, resource needs, impact upon current operations and risks. Depending upon the firm's existing strategy position and the alternatives being evaluated, certain areas of assessment may be more important than others. Management must weigh the various relevant criteria and arrive at a composite ranking of the alternatives. If only one possible strategy shift is considered, then it must be assessed in terms of whether moving toward it promises to make an acceptable contribution to the firm's goals.
Selection and Implementation After selecting a new strategy position, specific plans must be developed to guide the implementation process. Our earlier ex-
BUSINESS HORIZONS
~larketing Strategy Positioning
TABLE 2 Characteristics of Fragmented and Extention Multiple Strategy Positions
Fragmented Multiple Strategy
Extension Multiple Strategy
Adds to the demands upon possibly already overtaxed financial and managerial resources
The addition of a strategy position becomes a logical extension from the firm's existing market-product positions
Provides the firm with market-product situations at various life cycle stages
Multiple strategy tends to position the firm in a relatively narrow market-product maturity range
Enables extension to additional strategw positions from a wide range of possibilities
Options for additional strategy positions are relatively limited
Extension from an existing marketproduct conbination provides certain of the same advantages of an extension multiple strategy
It is normally possible to pursue another strategy position with modest changes in existing organization and marketing program
Management must acquire a broad base of information about its markets and products
amination of the characteristics of the various strategy positions provides ,guidelines for the marketing planning task with regard to environmental analysis, market target selection and marketing program design. Of course, the planning task should span the enterprise, since all areas of the firm will be involved in varying degrees, depending upon the particular market-product situation selected. For example, expanding the market of an existing product or service would place primary demands upon the marketing function. Alternatively, a new venture strategy would call upon the resources and capabilities of the entire firm. Though marketing managers intuitively recogmize differences in the various marketproduct situations confronting them, con-
DECEMBER 1975
By concentrating in a limited range of market product situations, management can gain a strong, specialized base of knowledge and experience
siderable insight into the marketing task can be gained by determining a firm's marketing strategy position. Through analysis of current position and evaluation of possible shifts, a sound basis can be developed for making needed changes. Perhaps most important, strategy position analysis provides clear support for the chief marketing executive when substantial resource increases are needed to implement a top management decision to pursue new market-product opportunities. By focusing upon the variations in environmental analysis, selection of market targets and marketing program management resulting from different market-product situations, an attempt has been made to give direction to the marketing decision maker.