3.2 Marketing strategy

Marketing strategy deals with pricing, selling, and distributing a product. Using a market development strategy, a company or business unit can (1) capture a larger share of an existing market for current products through market saturation and market penetration or (2) develop new markets for current products. Consumer product giants such as P&G, Colgate-Palmolive, and Unilever are experts at using advertising and promotion to implement a market saturation/penetration strategy to gain the dominant market share in a product category. As seeming masters of the product life cycle, these companies are able to extend product life almost indefinitely through ``new and improved ‘’ variations of product and packaging that appeal to most market niches, These companies also follow the second market development strategy by taking a successful product they market in one part of the world and marketing it elsewhere. Noting the success of their presoak detergents in Europe, for example, both P&G and Colgate successfully introduced this type of laundry product to North America under the trade names of Biz and Axion.

Using the product development strategy, a company or unit can (1) develop new products for existing markets or (2) develop new products for new markets. Church & Dwight has had great success by following the first product development strategy, developing new products to sell to its current customers in its existing markets. Acknowledging the widespread appeal of its Arm & hammer brand baking soda, the company has generated new uses for its sodium bicarbonate by reformulating it as toothpaste, deodorant, and detergent. Using a successful brand name to market other products is called line extension and it is a good way to appeal to a company’s current customers. Sara Lee Corporation (famous for its frozen cheesecake) has taken the same approach by putting the Sara Lee name on various food products, such as premium meats and fresh baked goods.

3.2 Marketing strategy

Arm & Hammer has successfully followed the second product development strategy by developing new pollution-reduction products (using sodium bicarbonate compounds) for sale to coal-fired electric utility plants-a very different market from grocery stores.

There are numerous other marketing strategies. For advertising and promotion, for example, a company or business unit can choose between ‘’push’’ and ‘’pull’’ marketing strategies. Many large food and consumer products companies in the United States and Canada have followed a push strategy by spending a large amount of money on trade promotion in order to gain or hold shelf space in retail outlets. Trade promotion includes discounts, in-store special offers. And advertising allowances designed to ‘’push’’ products through the distribution system. The Kellogg company decided a few years ago to change its emphasis from a push to a pull strategy, in which advertising ‘’pulls’’ the products through the distribution channels. The company now spends more money on consumer advertising designed to build brand awareness so that shoppers will ask for products. Research has indicated that a high level of advertising (a key part of a pull strategy) is beneficial to leading brands in market.

Other marketing strategies deal with distributions and pricing. Should a company use distributors and dealers to sell its products, or should it sell directly to mass merchandisers or even straight to the consumers via the Internet/using multiple channels simultaneously can lead to problems.

3.2 Marketing strategy

In order to increase the sales of its lawn tractors and mowers, for example, John Deere decided to sell the products not only through its current dealer network but also through mass merchandisers such as Home Depot to be a key competitor. The dealers were concerned that Home Depot’s ability to underprice them would eventually lead to their becoming little more than repair facilities for their competition and left with insufficient sales to stay in business.

When pricing a new product, a company or business unit can follow one of two strategies. For new-product pioneers, skim pricing offers the opportunity ‘’skim the cream’’ from the top of the demand curve with a high price while the product is novel and competitors are few. Penetration pricing in contrast, attempts to hasten market development and offers the pioneer the opportunity to use the experience curve to gain market share with a low price and then dominate the industry. Depending on corporate and business unit objectives and strategies, either of these choices maybe desirable to a particular company or unit. Penetration pricing is however, more likely than skim pricing to raise a unit’s operating profit in the long term. The use of the Internet to market goods directly to consumers allows a company to use dynamic pricing, a practice in which prices vary frequently based upon demand, market segment, and product availability.