Marketing Strategy Theories

Marketing strategy indicates the company's approach to marketing. Marketing theories, in turn, shape the manager's frame of mind regarding the market. Many organizations seek to become marketing-driven. In a marketing-driven company, all decisions are made based on a marketing philosophy, and marketing is the job of everyone in the company. Given the small number of employees and their direct contact with customers, this approach is even more important for small companies.

Market segmentation is dividing a market into groups based on similarities. Market segmentation theory contends that there are different groups of people with different purchasing habits. Market segmentation requires tailoring products for the needs of specific customers. There are different types of market segmentation. Geographic segmentation is probably the most common type of segmentation. Consumer preferences along geographic regions provide a basis for geographic specialization. For example, a sauce producer may market its picante sauce to the southwestern United States. Demographic segmentation is probably the earliest application of the segmentation concept. For example, online music sales are directed to the youth market. Segmentation based on price, distribution channel and lifestyle are other ways to divide the market.

Relationship marketing seeks to build long-term relations with customers in order to retain them. This approach views customers as the most important asset of the company. Relationship marketing rests on two major activities. First, the company should attract customers by offering high-quality goods or services. Second, the customer base should be retained by methods such as assigning individual account managers, offering excellent customer service and increasing product variety.

A brand is a distinguishing name or symbol that is intended to differentiate the product. Brands influence customer behavior and provide sustained revenues for the company. Brand equity is the added value attributed to a product by the consumers. Sources of brand equity can guide marketing decisions. As a result, managers need to fully understand the sources of brand equity. The concept of brand is based on brand knowledge in the mind of customers. Brand knowledge is all the thoughts, feelings, perceptions and experiences linked to the brand. Brand awareness and brand image are the two elements of brand knowledge. Brand awareness is consumers' ability to recall the brand, while brand image is their perceptions of the brand. Free association is a simple way to extract brand knowledge. In this method, the researcher asks the customer what a specific brand conjures up in her mind or what a specific brand means to her.

Market orientation is a philosophy of doing business. It places the customer at the center of the business and asserts that all departments of the company should focus on satisfying some chosen needs of the customer. Marketing involves deciding what to produce in the first place. Marketing indicates the target customer, distribution channels and pricing strategy. Market orientation is based on two assumptions: each department in the company makes decisions based on customer needs, and all departments coordinate efforts based on customer needs.