Marketing Strategy

Based on First Principles and Data Analytics

Robert W. Palmatier, Shrihari Sridhar

• Publisher: Bloomsbury Academic
• Year: 2020
• Print ISBN: 9781352011463
• eBook ISBN: 9781350305281
• Edition: 2
• Topic: Business
• Subtopic: Marketing
• Index: Business

Marketing Strategy offers a unique and dynamic approach based on four underlying principles that underpin marketing today: All customers differ; All customers change; All competitors react; and All resources are limited. The structured framework of this acclaimed textbook allows marketers to develop effective and flexible strategies to deal with diverse marketing problems under varying circumstances. Uniquely integrating marketing analytics and data driven techniques with fundamental strategic pillars the book exemplifies a contemporary, evidence-based approach. This base toolkit will support students' decision-making processes and equip them for a world driven by big data. The second edition builds on the first's successful core foundation, with additional pedagogy and key updates. Research-based, action-oriented, and authored by world-leading experts, Marketing Strategy is the ideal resource for advanced undergraduate, MBA, and EMBA students of marketing, and executives looking to bring a more systematic approach to corporate marketing strategies. New to this Edition:
- Revised and updated throughout to reflect new research and industry developments, including expanded coverage of digital marketing, influencer marketing and social media strategies
- Enhanced pedagogy including new Worked Examples of Data Analytics Techniques and unsolved Analytics Driven Case Exercises, to offer students hands-on practice of data manipulation as well as classroom activities to stimulate peer-to-peer discussion
- Expanded range of examples to cover over 250 diverse companies from 25 countries and most industry segments
- Vibrant visual presentation with a new full colour design

Chapter 1 MARKETING STRATEGY: A FIRST PRINCIPLES APPROACH

LEARNING OBJECTIVES

• Define marketing strategy.

• Recognize similarities and differences between corporate and marketing strategy.

• Explain why marketing strategy is important to a firm’s success.

• Understand the complexity underlying each First Principle.

• Explain the logic behind the First Principle approach to marketing strategy.

• Review major approaches for managing each marketing principle.

• Outline key inputs and outputs for each marketing principle.

• Understand how to integrate the four Marketing Principles of marketing strategy.

INTRODUCTION

The marketing discipline keeps changing, and in this process, managers are overwhelmed by a huge range of analysis tools, processes, and research techniques that suggest ways to evaluate business topics and implement new marketing strategies (e.g., customer centricity, big data, net promoter scores). After the success of each new startup firm, a flood of articles follows, offering unique marketing insights into how to duplicate its results (e.g., Freemium pricing! Crowdsourcing! Big data!). Although many of these new approaches offer some value, a marketing strategist is left with unanswered questions:

1 When should I use each specific approach?

2 How does each new marketing approach improve my firm’s performance?

3 Which approaches are worth my firm’s time and investment to implement?

But instead of answering these questions, a lot of marketing strategy books try to apply their preferred structures to new techniques. They often contain different chapters detailing each of the 4Ps of the marketing mix (product, price, place, promotion), then suggest ways to deal with competitors or execute specific marketing tasks (segmenting, branding) according to these 4Ps. It is a functional or task perspective on marketing strategy, and it describes various frameworks and processes that managers can use, across different marketing domains. But it offers little overall guidance on when to use the various frameworks, how they work, which ones are most valuable, or how they all fit together.

First Principles: The fundamental concepts or assumptions on which a theory, system, or method is based.¹

This book takes a very different approach to marketing strategy. Rather than adding complexity, we seek simplicity. We argue that managers can make marketing decisions by trying to solve four underlying problems or complexities that all organizations face when designing and implementing their marketing strategies. These four problems represent the most critical hurdles to marketing success; they also define the organization for this book. We refer to them as the First Principles of marketing strategy, because they reflect the foundational assumptions on which marketing strategy is based.² In short, marketing strategists’ most critical decisions must address the following First Principles of marketing strategy:

1 All customers differ.

2 All customers change.

3 All competitors react.

4 All resources are limited.

Simple, right? This First Principle approach to marketing strategy also is unique, because its main goal is to align existing analysis tools, processes, and research techniques with traditional frameworks and insights on the marketing mix (4Ps), competitors, and marketing tasks. We then use this alignment to suggest tactics for “solving,” or at least addressing, the problems represented by the First Principles. By organizing the varied discussions around four fundamental principles, we present every decision within its meaningful context, which includes its impact on other decisions. This view and context establish a guiding purpose for strategic marketing efforts.

For example, segmentation and customer centricity both attempt to deal with a First Principle: All customers differ. The First Principle approach gives marketing strategists a diverse toolbox, instead of requiring them to learn how to use unique tools (or techniques), that they can apply to deal with a broad range of marketing challenges. The guiding framework can address various marketing problems. Conceptually, the application is similar to using Newton’s laws of motion (i.e., First Principles of physics) to solve various physics problems, rather than learning different steps to deal with each problem.

This chapter therefore begins with a short, historical overview and definition, to place marketing strategy in an appropriate temporal context and set the boundaries of the domain, relative to corporate strategy. We offer arguments for why marketing is so critically important to a firm’s success and provide evidence for why managers should invest the time and effort to develop effective marketing strategies. In turn, we present the logic behind the First Principle approach to marketing strategy. With an overview of each of the four First Principles, we prepare readers to dive deeper into the concepts, analyses, and decisions addressed in the rest of this book. Finally, this chapter integrates the four First Principles of marketing strategy and suggests how they fit together in a natural sequence, which organizations can use to develop effective marketing strategies.

Brief History and Definition of Marketing Strategy

To appreciate the First Principle approach to marketing strategy, we first have to define marketing strategy: What are its key elements and its scope? We note five key elements that have been identified as its conceptualizations have evolved over time:

1 Decisions and actions

2 Differential advantages over competitors

3 Sustainability

4 Ability to enhance firm performance

5 Customer perspective.

Next, we trace how these five elements have emerged over time, resulting in our current definition of marketing strategy. The strategy concept arose from a military context, where a strategy represents the pursuit of situational superiority over an enemy. Carl von Clausewitz, in On War (1832, p. 196), describes strategy as follows: “Consequently, the forces available must be employed with such skill that even in the absence of absolute superiority, relative superiority is attained at the decisive point.”³ From these military roots, the notion of using resources skillfully, to create decisive positions of superiority over competitors, began to be applied in business in the 1950s and 1960s. Various forces (e.g., rapid, unpredictable changes in customer, competitor, technical, and economic environments) were beginning to challenge the “lumbering corporations” of the time, whose vast size limited their operational flexibility and dexterity. They needed a new way of thinking. The result was what often is described as “formal strategic planning”. A typical definition of business strategy from the 1960s described “the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.”⁴ Management scholars and practitioners from this era retained two elements of military strategy, focused on how decisions and actions could lead to differential advantages over opponents (or competitors).

Over the next few decades, a couple of necessary elements also entered the definition, to make it possible to apply the strategy concept more appropriately to a business: the need to make the advantage sustainable and the idea that the objective of any business strategy is to enhance firm performance.⁵ Even more recently, marketing strategists have suggested a refined view, the sustainable differential advantage and its objective should be evaluated from the perspective of the customer, or “strategy from the outside-in.”⁶

Source: Getty Images/Cultura RF

Each individual customer is an independent, decision-making entity, and the customer ultimately determines a marketing strategy’s success or failure.

According to this viewpoint, an effective long-term strategy must create value for the customer, because the customer ultimately determines the strategy’s success or failure. Working backward from a desired position, such that the firm enjoys some advantage among customers, it can craft its strategy purposefully. This effort continues to make the desirable position a reality. It also establishes a workable business model that provides attractive returns to the firm. In contrast with this customer-centric view, economists tend to take an industry-level perspective, and management scholars often adopt a firm-centric perspective.⁷ But a marketing strategy cannot be limited to pursuing the firm’s goals (e.g., the needs of shareholders, managers, and employees/stakeholders); it must include the goals of customers, as another key stakeholder. Any strategy that fails to generate customer value ultimately is unsustainable. Therefore, a customer-centric perspective represents a key difference between a corporate strategy and a marketing strategy.

The shift in focus, to incorporate the customer’s perspective explicitly, also has occurred through a natural, long-term progression. Academics and managers continue to search for ways to explain firms’ performance by using smaller and smaller units of analysis. They have moved from a focus on industries, to firms, to individual customers. Each new level of analysis provides another set of variables that can e...

Table of contents

• Cover
• Titlepage
• Copyright
• Brife Contents
• Long Contents
• List of Figures
• List of Tables
• List of Examples
• List of Data Analytics Techniques and Worked Examples
• List of Analytics Driven Cases and Case Exercises
• List of Abbreviations
• Author Biographies
• Acknowledgments
• Preface
• Overview of First Principles of Marketing Strategy
• Tour of the Book
• Tour of the Website
• 1 Marketing Strategy: A First Principles Approach
• PART 1 ALL CUSTOMERS DIFFER
• PART 2 ALL CUSTOMERS CHANGE
• PART 3 ALL COMPETITORS REACT
• PART 4 ALL RESOURCES ARE LIMITED
• References
• Index