Formulation of Functional Strategy: Marketing
Formulation of Functional Strategy: Marketing
Marketing Strategy Formulation
Financial Strategy Formulation
Production Strategy Formulation
Logistics Strategy Formulation
Research and Development Strategy Formulation
Human Resource Strategy Formulation
• Every business unit develops functional strategies for each major departments
which governs as to how each key activities of the business will be managed.
• Functional strategy provide support to overall business strategy and ensure
better performance in each functional area.
• Functional strategy operates below the SBU or Business level strategy.
• Within functional strategy there are many sub functional strategies.
• Functional strategies are needed because:
• They facilitate flow of strategic decisions to the different parts of an organization.
• They act as basis for controlling activities in different areas of business.
• They help bring harmony and coordination as they remain part of major strategies.
• Time spent by functional managers in decision making is reduced, as plan lays down
clearly what is to be done and policies provide framework in which decisions are made.
• Similar situations occurring in different areas are handled in consistent manner.
Marketing Strategy Formulation
• Marketing creates and sustains exchange relationships (buy / sell product or
service) ……. NEED, WANT, and DEMAND
• It involves different processes, functions, exchange, and activities.
• It is an immediate cause and effect of rapid economic growth, globalization,
technological upgradation and many other factors.
• The marketing variables requiring that affect the success and failure of
strategy implementation are:
• Distribution Network to be use – Exclusive dealership or multiple channels
• Amount and extent of Advertising, Media Planning – Newspaper, Radio, TV etc.
• Price leader or Price follower
• Offer Complete Warranty or Limited Warranty
• Reward Salesman on Straight Salary / Straight Commission / Combination of Both
• Deal with single Customer / Multiple Customers
Delivering Value to Customer
• The partnering of Marketing with other
departments in the organization besides chain of
its suppliers, distributors, and ultimately customers
will produce a value delivery network .
• To succeed in today’s competitive market
place, companies must be customer oriented
where by they are able to deliver great value to
• Market segmentation is important in this as
companies cannot satisfy all customers. They
choose the best market segment (Market
Targeting), and then develop and design strategies
to serve the target market better than competition
The Marketing Process– Marketing Mix Issues
• Product Strategy:
Specifying the exact product or service to be offered
• New or existing product? …for new or existing customers?
• Promotion Strategy
How the product or service is to be communicated to customers
• “Push” - spend $$$ on promotions and discounts to push products
• “Pull” - spend $ to build brand awareness so consumers will ask for it by name
• Channel or “Place” Strategy
Selecting the method for distributing the product or service
• Distribute through dealer networks or through mass merchandisers?
• Sell directly to consumers through own stores or through internet?
• Price Strategy
Establishing a price for the product or service
• “Skim pricing” (high) when you are a pioneer
• “Penetration pricing” (low) builds market shares
• “Dynamic pricing” (prices vary frequently) based on demand/availability
• Product is also the first variable in the marketing mix. Instruments that aim
at satisfaction of the prospective exchange party’s needs
• A product can be divided into three parts. The core product, the augmented
product and the tertiary product.
• Before deciding on the product component there are some questions which
you need to ask yourself.
• What product are you selling?
• What would be the quality of your product?
• Which features are different from the market (Size, Shape, Colour)?
• What is the USP of the product?
• Whether the product will be branded as sub brand or completely new?
• What are the secondary products which can be sold along with primary (Warranty,
• What is brand and how is product different from others?
• The price is the amount a customer pays for the product.
• Pricing of a product depends on a lot of different variables and hence it is
constantly updated. It is determined by a number of factors including
market share, competition, material costs, product identity and the
customer's perceived value of the product.
• Along with the above factors, there are also other things which have to be
taken in consideration when deciding on a pricing strategy. Competition can
be the best example.
• Thus based on these factors there are several pricing strategies, one of
which is implemented for the marketing mix. List Price, Discounts,
Allowances, Payment Period, Credit Terms, Skimming Pricing (High price at
introduction), Penetration Pricing (Low price at introduction)
• Place or distribution channel represents the location where a product can be
purchased. It can include any physical store as well as virtual stores on the
• Distribution has a huge affect on the profitability of a product.
• Channels of distribution are the routes through which the ownership of goods
flow on its way from the producer to the customer:
• Mode of Transport
• Warehousing and Storage
• Order Processing
• Inventory Control
• Channel Partners: Distributor, Super-stockist, Wholesalers, Retailers
• Promotion activities are meant to communicate and persuade the target market
to buy the company’s products. Promotion represents all of the communications
that a marketer may use in the marketplace.
• Promotion has five distinct elements – advertising, personal selling, public
relations, word of mouth and point of sale.
• Promotions are dependent a lot on the product and pricing decision. What is the
budget for marketing and advertising? What stage is the product in? If the
product is completely new in the market, it needs brand / product awareness
promotions, whereas if the product is already existing then it will need brand
• Promotions also decide the segmentation targeting and positioning of the
• A certain amount of crossover occurs when promotion uses the five principal
• Advertising : Advertising is non personal, flexible, dynamic method which covers any
communication that is paid for, from and cinema commercials, radio and Internet adverts
through print media and billboards.
• Personal Selling: Involves face to face interaction / oral communication of sales force with
the customer. Relationship management is key. In person selling, Telemarketing
• Publicity: Communicating with an audience by personal or non-personal media that are
not paid for delivering the message. Eg. Print media news, broadcast media news-
UTI,PTI, Reuters, annual reports, speeches by employees.
• Sales Promotion: Activities like discounts, contest, money
refunds, installments, fairs, exhibitions etc. Done periodically to get larger share of the
• Public relations are where the communication is not directly paid for and includes press
releases, sponsorship deals, exhibitions, conferences, seminars or trade fairs and events.
• Word of mouth is any apparently informal communication about the product by ordinary
individuals, satisfied customers or people specifically engaged to create word of mouth
Expanded Marketing Mix
• Physical Evidence: The environment in which the service is delivered, and where the firm
and customer interact, and any tangible components. Eg. buildings, equipment, signs and
logos, annual accounts and business reports, brochures, your website, and even your
• Process: The actual procedures, mechanisms, and flow of activities by which the service is
delivered – this service delivery and operating systems.
• People: All human actors who play a part in service delivery and thus influence the buyers'
perceptions; namely, the firm's personnel, the customer, and other customers in the
service environment. Services tend to be produced and consumed at the same moment,
and aspects of the customer experience are altered to meet the individual needs of the
person consuming it.
MARKET PENETRATION STRATEGY
(Stay in current markets with existing products)
INCREASE RATE OF PURCHASE/CONSUMPTION
ATTRACT RIVAL’S CUSTOMERS
BUY OUT RIVALS
CONVERT NON-USERS INTO CURRENT USERS
MARKET DEVELOPMENT STRATEGY
(Find new markets for current products)
ENTER NEW GEOGRAPHICAL MARKETS
FIND NEW USES FOR EXISTING PRODUCTS
FIND NEW TARGET MARKETS
PRODUCT DEVELOPMENT STRATEGY
(Develop new products for existing markets)
(Develop new products for new markets)
THE CUSTOMER-PRODUCT DECISION
• Marketing has a key role to play in strategic planning, because it is the job of
marketing management to understand and manage the links between the
business and the “environment”.
• Marketing planning is essential because Businesses operate in hostile and
increasingly complex environment. The ability of a business to achieve profitable
sales is impacted by dozens of environmental factors, many of which are inter-
• A marketing plan is useful to many people in a business. It can help to:
• Identify sources of competitive advantage
• Gain commitment to a strategy
• Get resources needed to invest in and build the business
• Inform stakeholders in the business
• Set objectives and strategies
• Measure performance
Dealing with Marketing Environment
• Deal with all P’s and Deal with all PESTL factors and their relationship
Marketing Strategy Techniques
• Social Marketing – Public campaign for prohibition of smoking.
• Augmented Marketing – Additional customer service and benefits
• Direct Marketing – Catalogue selling, Telecomputing, TV shopping
• Relationship Marketing – Maintaining strong value laden relationship with customers.
• Service Marketing – Banking, Retailing, Educational, Utilities etc.
• Person Marketing – Politicians, Film stars, Sports Persons etc.
• Organization Marketing – Change of peoples attitude towards organizations.
• Place Marketing – Business sites marketing, Tourism marketing etc.
• Enlightened Marketing – Customer oriented, innovative, value, sense of mission, and societal
• Differential Marketing - Target several market segment with different offer.
• Synchro Marketing – Ideal/Over capacity due to irregular demand
• Concentrate Marketing – Approach one market segment for large share
• Demarketing – Strategy to reduce demand temporarily. Buses crowded in morning / evening