Many of our clients ask us, "How can we make sure that our strategies are successful?" The famous quote from a Fortune 500 CEO states, "Strategies most often fail because they aren’t executed well." Virtually any business strategy can be successful if properly implemented. That means one can see two successful companies operating in a competitive market against each other, both having been successful relative to their other competitors. This is because they are implementing a very focused and precise strategy that is directed to the market segment that they are targeting.
There are three decision areas that are critical to successful strategy execution: marketing strategy, strategic behavior and marketing organization. We believe that once senior management commits to a business strategy, the execution of that strategy depends on making the appropriate marketing decisions.
(Please note: The following analysis reflects the compilation of a number of sources, papers and conversations I’ve been a part of over the years.)
There are four fundamental business strategies that each organization must choose from and then stick with.
Pioneer: The Pioneer’s primary goal is to identify and exploit new product and market opportunities by offering innovative products or by reviewing the markets from a different perspective.
Fast Followers: The Fast Followers imitate Pioneer’s successful product and market development efforts while maintaining a core of traditional products and customers. Fast Followers don’t have the first mover advantage of the Pioneers and thus must improve on the Pioneer’s offering. Followers can be as successful as early entrants if they’re committed to learning from the customers about their experience with the Pioneer’s offerings, and if they carefully follow the Pioneer’s strategic moves.
Cost Leader: The Cost Leaders are usually late entrants that engage in aggressive efforts to protect their market from competitors. They typically achieve cost leadership through comparisons of their value chain costs with those of competitors. They seek efficiency in many areas of the value chain, enabling them to offer low prices.
Customer Centric: The Customer Centrics create customer value by offering high-quality products supported by good service at lower prices than Pioneers, yet at higher prices than either Fast Followers or Cost Leaders. This enables them to play the spread, create value for buyers and achieve superior performance.
Once you determine what the most appropriate strategy will be for your organization, you must figure out how to make it successful.
Pioneer: The most successful Pioneers employ an aggressive marketing strategy. They’re customer-innovation-oriented, they’re patient, and they have a decentralized marketing organization with a higher proportion of marketing specialists.
Pioneers use an aggressive marketing strategy because they target innovators and early adopters. Of all strategy types, Pioneers are the most proactive in their product and/or market development efforts. They monitor a wide range of market conditions, making them heavy users of marketing research. They target early adopters with innovative products, and so they must educate customers and stimulate demand through advertising. Because their products are often "new to the world," they must provide high levels of service to help customers understand these innovative products either before or after the sale. It is important for Pioneers to be able to charge premium prices to recoup their investment in these activities.
Fast Followers: The most successful Fast Followers bridge the chasm between early adopter markets and early majority markets through mass marketing strategy. Fast Followers are customer- and competitor-oriented, and have no consistent profile of marketing organization.
As Fast Followers are concerned both with developing new products and venturing into new markets while protecting a stable core of products and markets, they must pursue a relatively broad market with a relatively broad product line. Fast Followers are able to use less advertising than Pioneers, since Pioneers have already created the awareness of the product category. Fast Followers typically use intensive distribution strategy and relatively little promotion in charging lower prices, while Pioneers induce switching. Successful Fast Followers also monitor competitors to understand their successes and failures, and to identify competitors’ product market development plans so that they will not be starting from too far behind. Avis Rent-A-Car System has successfully enjoyed a competitor-oriented philosophy embodied in the slogan "We try harder" to become the world’s second largest car rental company. By portraying itself as a follower, Avis focuses the attention of its employees on providing superior service. The approach has a dual benefit of creating a unique position in the minds of consumers who came to see No. 2 Avis as both a close rival of Hertz and distinctly separated from the rest of the car rental pack.
Cost Leaders: The most successful Cost Leaders are marketing minimizers. They are internal cost-oriented, place lower emphasis on product innovation, and have decentralized marketing organization. Marketing minimizers reduce risk by waiting until the product concept is proven in the marketplace before introducing their version. They pursue their market with adequate quality, low prices, and an intensive distribution strategy. They generally have the most focused product line and use fewer specialist marketing personnel. Cost Leaders defend their market from competitors by benchmarking their value chain’s costs against those of competitors. They seek to reduce cost in primary activities, such as logistics, operations, analyst’s sales and marketing, and in support activities, such as procurement, R&D, and administrative functions. Continuous improvement in operation enables the business to realize improvement as it drives down the learning curve.
Of course, this does not mean these firms ignore innovation. Rather, it means that process innovation that improves production efficiency takes precedence over product innovation. It does not mean that Cost Leaders ignore customers; it means their customer relations have a somewhat different focus. Michael Dell says, "We have a relentless focus on our customers … once we learn directly from our customers what they need; we work closely with partners and vendors to build and ship relevant technologies at a low cost."
Customer Centrics: The most successful Customer Centrics target narrow segments where they can develop closer relationships with customers and provide high-quality innovative products to those customers. However, they engage only in a moderate amount of systematic marketing research and do not typically charge prices as high as those of Pioneers. The distribution strategy is generally selective, and they use advertising moderately. Unlike their low-cost counterparts, Customer Centrics acquire and retain customers through attention to superior service, product quality or image. The most successful Customer Centric firms place a heavy emphasis on understanding customers. Successful Customer Centrics provide an outstanding service and/or high-quality products to a select set of customers who value and are willing to pay for both. Because services are ultimately delivered by customer contact personnel, it is imperative that these people are able to make decisions regarding customer relations without having to check with higher-level managers on every decision. Consequently, the best service-oriented firms decentralize organizations so that the front-line employees have substantial discretion. However, a set of formal policies and rules is important in Customer Centric firms to guide frontline marketers on how to react to and address potential customer relations issues.
Achieving a competitive advantage is the foundation for superior financial and marketing performance. The most important task for executives and managers is to match market-related decisions to your business strategy. Will following the ideas outlined here ensure success? The short answer is no! The slightly longer answer is that it will greatly enhance the probability of business success.
See our PDF on Marketing Strategies for Success