Various marketing strategies - Case Study Example

Running head: Marketing Strategy Marketing Strategy (MKT301) ASSIGNMENT 2 Individual Academic Paper ___________ ________________________ ________________ Marketing Strategy Abstract This paper examines the various strategic approaches to marketing followed by present day commercial marketer in order to meet their sales and marketing objectives in today's fast changing markets. The discussion is supplemented by means of theoretical discussions of various marketing strategies and their implications for the marketer. The paper also takes up a live example drawn from airline industry which is a service industry and explains how appropriate marketing strategy was deployed to upgrade overall fortunes and recognition by the service provider. Introduction This paper has the objective to look at the process of strategic choice and analysis in marketing function of today's global organizations in relation to higher demand placed by competitive environments. Organizations strategize vis a' vis competition in order to gain market power and share with the final objective of earning higher ROI. This paper defines various kinds of marketing strategies with particular focus on cost leadership strategy and differentiation strategy. Drawing from a real life example of one market leader firm in airlines travel industry this work, attempts to find evidence if this firm could simultaneously follow both cost leadership and differentiation marketing strategies. If yes, then to what salubrious effects. Process of Competitive Marketing Strategic Choice and Analysis Stephen Haines' Centre for Strategic Management has built a new strategic planning system based on systems thinking and calls it the 21st Century Yearly Strategic Management System and Cycle. This system moves beyond planning into implementation. It includes a Plan-to Plan phase and a Plan-to-Implement phase. The steps include team building and leadership skill building as part of the planning. It also includes a parallel process whereby all key stakeholders are involved based on the premise that 'People support what they help create'. This is somewhat on the lines of internal marketing concept (e.g. Rafiq and Ahmed ,2000; Papasolomou-Doukakis, 2003; Gronroos, 2001; Berry, Conant, and Parasuraman, 1991; Meek, Meek & Ensor, 2002). This process starts with a Futuristic Environmental Scan and defines the ideal vision in terms of mission, values and end outcomes that the organization wishes to set for itself. Only after the statement of such Ideal Future a Current State assessment based on SWOT(Strengths, Weaknesses, Opportunities and Threats) is taken up to identify the gaps and make marketing strategies to close the gap(s).As a result of subscriber clients adopting this model it was found that clients began developing competitive edge and the organization was much clearer on what their competitive "positioning" in market place was and found themselves moving positively in that direction, to the delight of their customers(Haines,2004).Thus this process leans directly into the process of competitive marketing strategy making as it includes environmental scan both-present and future and enables movement in the desired direction. Types of Competitive Marketing Strategies The generic competitive marketing strategies and their standard objectives have abounded in literature and often include the following: (a) Overall Low-Cost Leadership Marketing Strategy: Its primary object is to find a sustainable cost advantage over rivals, using lower-cost edge as a basis either to under-price rivals and reap market share gains or earn higher profit margin by selling at going price. (b) Broad Differentiation Marketing Strategy: Its primary objective is to incorporate differentiating features that cause buyers to prefer firm's product or service over rival brands. Looking on the obverse side it implies that an organization must find ways to differentiate that creates value for buyers and that such ways should not be amenable to easy copying and matching by rivals. An important differentiation strategy is not to spend more than the chargeable price premium, ever to achieve differentiation. This is in fact the theoretical crux which clarifies the extent to which low cost leadership and broad/focused differentiation strategies can run in tandem. (c) Focused Low-Cost Marketing Strategy: In this strategy it is recognized that a particular product or service of the firm has lower costs than competing products or services in a market niche. Objective is to derive advantage by driving cost further down till targeted percentage of the market niche is captured. (d) Focused Differentiation Marketing Strategy: In this strategy the firm works to address its differentiation attempts to satisfy the needs of the customers of a specific market niche. The objective is to make one's product so non standardized so as to establish a separate and distinct identity for this product. (e) Best-Cost Provider Marketing Strategy: The chief object under this strategy to exploit the cost advantage associated with a particular feature or set of features/attributes of the product or service sold by the firm. It implies that product or service is positioned as a low cost alternative for particular features (e.g. quality, service, safety, performance, uses etc). Depending upon the SWOT analysis the firm has the option to strategize on the above lines. Cost Leadership versus Differentiation Prior to venturing into the specific study of one real life firms in a specific industry, theoretical grounding on how these marketing strategies are implemnted,enabling circumstances for success of chosen strategy and pitfalls in going over the board with a particular strategy become important. (a) Planning elements of Cost leadership strategy: The main elements considered by plans made under this essentially comprise of capturing the economies of scale and at the same time avoiding scale diseconomies. Rationalize and reduce costs of key resource inputs. Map and complete linkages with other activities in the value chain. Raise capacity utilization to best rated levels. Probe opportunities to outsource, share opportunities with other firms including vertical and horizontal integrations. Beneficial mergers and acquisitions can have cost cutting as a stated objective. Reorient operations to reduce slack and flab. Assess how much advantageous would it be for the firm to turn first-mover of a cost cut.Successfull low cost firms treasure austerity but invest on requisite scales on cost-saving improvements. Cost reductions may increase operational effectiveness. This can lead to a "new best practice" in the industry, which eventually might be adopted by competitors (Porter, 2001).Cost reduction, however, is not necessarily a long-term strategy; it may barely be a tactic (Porter, 1996). (b) In contrast in a differentiation strategy main planning elements concentrate on unique and appealing attributes of products or services on offer. They can be unique taste, consumer use, design and performance, prestige, superior service, more for customer's money, spare parts availability, special features, quality of manufacture, state of the art technology, market leader image etc.Here strategic plans work to make the product or service non standardized and unique. In general, a unique selling proposition (USP) is essential to differentiate products from competitors (Boyd et al., 2002). In order to be successful, a USP should propose a benefit to the customer, it needs to be unique in a way that it cannot be easily replicated by competitors, and it has to be strong enough to attract new customers (Kotler, 2003). Thus, "differentiation is one of the most important strategic and tactical activities in which companies must constantly engage. It is not discretionary"(Trout &Rivkin, 2000). (c) Low-cost strategy works to best impact when the product is standardized or well distributed and faces vigorous price competition. Modes of further differentiation have virtually got exhausted. Buyers foresee low switching costs and use products essentially in similar fashions. Even bulk buyers with substantial spending budgets enable play of effective low cost strategies. Whereas a differentiation strategy works perfectly when there are many ways to differentiate a product that have value to ingratiate customers; technological turn over is rapid with new breeds of products and product features cropping up frequently and customer needs and uses are diverse. Paucity of competition following a similar category of differentiation also makes a firm's own differentiation strategy to succeed. (d) Pitfalls of following a low-cost strategy include loss in total revenue as an over aggression in cutting price may not pull up volume sufficiently to increase total revenues. Then low-cost strategies are easily imitated by rivals and a cost cutting firm may become insensitive to differentiation opportunities and in fact may make itself immobile to introduce cost boosting differentiations having already consciously cut prices severely. Then a cheap product may connote low quality. Any technological change may open up cost cutting avenues for rivals as well. Differentiation strategies may not work with desired impact if differentiation is ill placed and does not differentiate on product features that buyers perceive as lowering their cost or enhancing their well-being. On the converse differentiation may exceed the requirements of the buyers and loose price premium. In such instances buyers are likely to complain of excessive premium. A gist of above discussion could be that a low-cost strategy can work well over a differentiation strategy when buyers are more or less satisfied with a standard product and do not see extra product attributes as worth paying additional premium. As Michael Hammer puts it, "MVA (More Value-Added) means that you give the customer more, perhaps far more, than you ever have before....You can visualize the principle of MVA as a ladder with your product at the bottom and the solution to your customer's problems at the top. The more help you provide your customers to fill that gap, the more value you add to them, which, of course, differentiates you from your competitors who are still scrambling around at the bottom of the ladder.... At the same time, your opportunity for margin and profit increase"(Hammer, 2001). Evidence of Cost Leadership and Differentiation Marketing Strategies in Airline Travel Industry The airline travel industry, due to the unique characteristics of services (i.e., intangibility, inseparability, lack of inventory, etc.), should be considered a model of a mature service sector. Such mature service markets are generally subject to dynamic marketing strategic moves from various market participants. Towards this end airline companies have experimented and tested various differentiation strategies to cover off and on board services, revenue yield techniques, operational efficiencies, and rationalizing labor force while maintaining labor relations. Yet, despite these attempts at differentiation most consumer studies of major US airlines have shown that consumer perception of airline travel in terms of service quality is standard and unvaried.(Rhoades and Waguespack, 2001). This has the implication that passengers see "switching costs" as meager between various airlines and can shift loyalty rather easily leading to intense price wars. This was the case particularly prior to the decade commencing 1990.Das and Reisel (1997) confirm the over-reliance on price competition and cost reductions as natural developments of a mature industry. In the decade of 1990s there was a marked turn around in the airline travel industry in that from being considered transportation air taxis, airlines had customers demanding customized traveling experience. It was a shift from seats turnover to differentiation. The environmental studies revealed that a large niche/segment of new breed of affluent and professional air travelers had emerged which could be targeted for air travel products quite non-standardized and differentiated and almost customized. These included investment bankers, corporation lawyers, entrepreneurs etc.They all wanted to save time as yet travel in highest comfort and were willing to pay the price. These consumers were altering their needs drawn from social change and sense of personal freedom. (Ariely and Levav 2000; Coulter et al. 2003; Ward and Reingen 1990; Carmon et al. 2003; ., Kozinets 2002; Thompson, Locander, and Pollio 1989)This niche was growing in size. Focused differentiation was the strategic need of the hour. Major global airlines were competing across countries for this meaty clientele. This paper takes the example of one major international airline viz. Singapore Airlines (SIA) and narrates its strategic marketing initiatives to address this niche. SIA was chosen because it is considered by those in the airline industry, travelers as well as its competitors, as one of the very best airlines in the world. Its beaming, lithe flight stewardess, outfitted in tight batik sarong kebaya marketed as the Singapore Girl, is a globally popular international service icon. It not only serves as an effective unique selling proposition for the airlines but has also earned substantial legacy differentiation leverage over similar icons of competing airlines.SIA assumed the new opportunity of niche differentiation efficiently and effectively as is explained below. The product/service differentiation visions and strategies of SIA render interesting insights in planning elements and offer comparative viewpoints into product/service differentiation for the industry as a whole. SIA is strategically positioned in the premium segment of the global airline industry on service, quality and value market parameters. "The airline industry is, by its very nature, a service industry. In a free market, the success or failure of an individual airline is largely dictated by the quality of the service it provides" (Harvard Business School, 1989).Its differentiation strategy began with the immense popularity of The Singapore Girl marketing icon. This icon evoked an awareness of warm Asian hospitality and courtesy's backed this up with its very efficient service standards and already had a winning combination on hand. However it ventured into a fairly elaborate differentiation strategy to address the changed needs of new clientele. This differentiation took the form of: the introduction of gourmet cuisine in-flight dining with vastly improved servings for economy class passengers as well, hiring top of the line culinary experts' panel to train chefs and execute quality checks with a future vision to make its in-flight food an industry benchmark, multi million dollar cabin revamp with first-class cabins coming with an ambience of a mini-suite in a luxurious hotel and details covering the entire distance from custom-built seats to cashmere blankets, launch of its Frequent Flyer Programme(FFP), KrisFlyer, as the bulk of SIA clientele are non-Singaporeans specific trainings were organized for SIA crews to enable them to be conversant with and make announcements in the languages of the countries to which they flew, a valet and porter service for passengers on ground zero, special lounge for its passengers at Changi airport, only steps away from immigration, wider and more reclining seats for business class passengers on the house champagne for economy class passengers-an industry first, The above quoted were the few attributes touched upon in niche differentiation introduced by SIA and they were consciously built on the premise to exclude cost cutting strategy and focus on improving service so as to quench all clientele needs. 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