Introduction to Marketing - strategies for growth, transactional marketing and relationship marketing

by bukolabuki (student)

Bukola Akanni P1 Task 1

Growth strategies

There are four types of Growth Strategies which are:

Diversification
Product development
Market penetration
Market development

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Diversification: this is a strategy for a company that seeks to increase profitability through greater sales volume obtained from new products and new markets. Diversification is the riskiest of the four strategies presented in the Ansoff matrix. Going into an unknown market with an unfamiliar product offering means a lack of experience in the new skills and techniques required. Therefore, the company puts in a great uncertainty. Because of the high risks explained above, many companies attempting to diversify have led to failure. Although, there are a few good examples of successful diversification like:

Virgin Media moved from music production to travel then to mobile phones, broadband, internet and TV.
Walt Disney moved from producing animated films then to theme parks and vacations places.
Canon diversified from a camera-making company into producing an entirely new range of media equipment for movies and music.
Apple store moved from PC laptop to iPod Shuffles and touch first, second, third and fourth generation.

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Product development: this is a strategy that brings a new product to market to an existing market or modifying existing products so they appear new, and offering those products to current or new markets. Good exmples of Product Development could be:

Technology: Companies that can strategically identify opportunities to capitalize on technology to provide products and services more conveniently, less expensively and in new ways, can stay ahead of the curve and avoid the unfortunate situation of having their products and services become obsolete. A good example of this in recent years is the evolution of videotapes and then DVDs that could be rented at stores, to the mailing of DVDs to consumers in their homes and now to the move toward online rentals.
McDonalds is always within the fast-food industry, but frequently markets new burgers.

Customers need: this website also shows that, classic strategy for product development is simply focusing on customer needs.

Market penetration: This is a penetration that occurs when a company enters a market with current products. The best way to achieve this is by gaining part of their market share. Other ways include attracting non-users of your product or convincing current clients to use more of your product or service by advertising. Market penetration occurs when the product and market already exists. A market penetration strategy seeks to increase market share of the current product or services in the existing market. This strategy adopted by the firms to raise their sales revenue without making changes in the products or services. The other dimension of market penetration is the existing market which means firm already offering products or services to the customer but can forecast that the existing sales figures can be improved by working on marketing penetration strategy. Market penetration strategy can be implemented by offering sales, Increasing sales force, increase distribution and promotion of products, more expenditure in marketing and advertising activities will results in increasing sales. Examples are:

Pizza hut offering discounts to the customers at night to increase the sales and each customer purchase value.
Mobile service providers (Orange, T-mobile, Three network and Vodafone) offering low price packages to increase talk time of the customers.

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Pizza hut offering discounts to the customers at night to increase the sales and each customer purchase value.
Mobile service providers (Orange, T-mobile, Three network and Vodafone) offering low price packages to increase talk time of the customers.

Market development: This is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage. This is also a strategy for a current brand when it expands the potential market through new users or new uses. New users can be found in new geographic segments, new demographic segments, new institutional segments or new psychographic segments. Another way is to expand sales through new uses for the product. It is also possible for existing brands to find new uses for their products. For example,

If the target market for Coca-Cola is the US market for soft drinks, then when Coca-Cola took their products to Russia, that was an example of market development since the market potential for Coca-Cola increased.

Mica is a mineral that was originally used in industrial products. But today it's found in everything from pearlescent automobiles to sparkly cosmetics. So each producer of mica has expanded their market potential by finding new uses for the product.
Other examples of new uses for particular brands would be the standard examples of Chex cereal for party snacks, Heinz vinegar to clean windows and Tums for calcium.
Airtel promoting its services to penetrate in the Indian and Nigeria market.

Survival Strategies

Many businesses are often faced with having to develop strategies in able to survive. This could include downsizing the business to reduce costs of their product. It could mean coming out of less profitable markets, discontinuing less profitable lines and marking some employees redundant in order to balance the business.

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Branding: According to this website, brand is a name, term, design, symbol or any other feature one seller’s of good or services as to distinguish from those of other sellers. A brand can take many forms, including a name, sign, symbol, color combination or slogan. The word branding began simply as a way to tell one person's cattle from another by means of a hot iron stamp. The word brand has continued to evolve to encompass identity; it affects the personality of a product, company or service. For example, Tesco offers more cheaper product to attract their customers, and Barclays bank service offer to save the customers money but the question is that is there money safe and they are doing their best to keep their reputation save by producing good services. They offer lost of services such as:

Bank account - Bank accounts, Student and graduate accounts, Young persons accounts, Currency accounts
Savings - Regular saving, Savings Bonds, Instant access ISAs, Children's saving
Mortgage -
Investments
Credit cards
Fraud prevention
Travel services
Help and support about the bank

Buyer behavior is another thing in branding, this involves the psychological processes that consumers go through in recognizing needs, finding ways to solve these needs, making purchase decisions (e.g., whether or not to purchase a product and, if so, which brand and where), interpret information, make plans, and implement these plans (e.g., by engaging in comparison shopping or actually purchasing a product). This can sometimes affect the customer because are used to their previous product or they change to less profitable product and the company (Tesco) might loss some money.

Brand extension is a marketing strategy in which a firm marketing a product with a well-developed image uses the same brand name in a different product category. The new product is called a spin-off. Organizations use this strategy to increase and leverage brand equity (definition: the net worth and long-term sustainability just from the renowned name). An example of a brand extension is Jello-gelatin creating Jello pudding pops. It increases awareness of the brand name and increases profitability from offerings in more than one product category, but it can also lead to confusion and can adversely affect sales of existing products. Another example is Mars, has launched an ice-cream line as well as a soft drink under the Mars brand name. Cadbury's Milk Tray brand has been extended to desserts, leveraging the brand's association with creaminess.

Positioning is about the position a brand occupies in a market in the minds of consumers. Strong brands have a clear, often unique position in the target market.

Positioning can be achieved through several means, including brand name, image, service standards, product guarantees, packaging and the way in which it is delivered. In fact, successful positioning usually requires a combination of these things. For examples, in the chocolate bar market, Divine Chocolate (a social enterprise) successfully spotted that some consumers were prepared to pay a premium price for very high quality chocolate made from Fair-trade cocoa. Green & Black’s exploited the opportunity to sell premium chocolate made from organic ingredients. Both these brands successfully moved into the high quality or high price quadrant before too many competitors beat them to it. Another example is M&S have a quality product and Barclays bank have a safe secure for their customer.

Brand building according to John Bevan, is enhancing a brand’s equity directly through advertising campaigns and indirectly through promotions such as supporting causes or event sponsorship. When a brand or business go successfully it focuses on people’s mind but it can go wrong sometimes. For example AJWright went out of business in 2009 due to moderate-income families. These become a negative business.

Relationship Marketing is the marketing activities that are aimed at developing and managing trusting and long-term relationships with larger customers.

In relationship marketing, customer profile, buying patterns, and history of contacts are maintained in a sales database, and an account executive is assigned to one or more major customers to fulfil their needs and maintain the relationship.

Difference between Transactional marketing and relationship marketing

Essentially, transactional marketing focuses on getting the customer to buy a certain product and walk away like Tesco, whilst relationship marketing sees the sale as the first step in the building of a relationship like Barclays Bank. For example Tesco is Transactional marketing, it the perspective of luring the customer for a one off purchase, focuses strongly on price and short term benefits and product performance, with limited service. However, Relationship marketing such as Barclays Bank is all about generating repeated sales and customer interactions, thus focusing on bringing value to the customer, and assuring long term performance and service all aspect of quality become major concerns.

Relationship marketing brings customer centricity to the spotlight. This vision has implicit the fact that a customer does not buy a product, but instead buys a solution for a specific problem or need. By satisfying this need, a company has access to many other opportunities that the customer will have at some point. Therefore, if the company can build a relationship with the customer, find out who he/she is, what these needs will be, it will be able to gain a lot more than just a single sell but to come back.

Two illustrative approaches to the relationship and transaction approaches are Tesco and Barclays. Whereas Tesco tries to engage in relationship with its local customers resorting to loyalty programmes and such, Barclays bank lives under the creating relationship with their customer from current account to mortgage and insurance, this shows that it focuses on giving customers many opportunities, regardless of any past interactions. Both companies Tesco and Barclay’s bank use databases to record customer details.

Value of lifetime customer

According to this website, in marketing, customer lifetime value, lifetime customer value, or lifetime value is the net present value of the cash flows attributed to the relationship with a customer. The use of customer lifetime value as a marketing metric tends to place greater emphasis on customer service and long-term customer satisfaction, rather than on maximizing short-term sales.

Customer lifetime value has intuitive appeal as a marketing concept, because in theory it represents exactly how much each customer is worth in monetary terms, and therefore exactly how much a marketing department should be willing to spend to acquire each customer. In reality, it is difficult to make accurate calculations of customer lifetime value. The specific calculation depends on the nature of the customer relationship. Customer relationships are often divided into two categories. Magazine subscriptions and car insurance are examples of customer retention situations. The other category is referred to as customer migration situations. In customer migration situations, a customer who does not buy in a given period or from a given catalogue is still considered a customer of the firm because she may very well buy at some point in the future. In customer retention situations, the firm knows when the relationship is over. One of the challenges for firms in customer migration situations is that the firm may not know when the relationship is over as far as the customer is concerned.

Bibliography and References

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