Marketing Strategies

It is often very difficult for companies to serve everyone, everywhere. Therefore, companies locate themselves in areas where they will most likely get the most profitable customers. Instead of just trying to take over an entire market, companies instead divide up the market (market segmentation), choose the best segments for them (market targeting), and then create strategies for how to best serve those particular market segments (differentiation and positioning).

Market Segmentation: There are numerous ways for companies to categorize their customers. They can be grouped based on geographic, demographic, and behavioral factors (Geographic = location; Demographic = gender, age, etc.; Behavioral = behaviors, attitudes). The process of dividing customers into these categories is called Market Segmentation.
Market Targeting: Once the company divides up the market, it can then pick which segment(s) it will go after. Again, companies have to do research to really see which segment will be the most profitable. For some companies this is easier to do than others, as in the Build-A-Bear case. Build-A-Bear realizes that their company can only be successful where there are children close by, and will therefore target them and open stores only where a large child demographic exists.
Market Differentiation and Positioning: Once the company chooses which market segment(s) to enter, it has to now decide if and how it will differentiate between each segment. Positioning is the process of arranging for the product to be where you want it in terms of the competitors, or why a customer would pay the extra money to have your product as opposed to another brand's. Differentiation is making your market offering different and hopefully better than your competitor's, so you have as much customer value as possible. Your goal here is to have your product be the one that's associated with the actual item. For example, if my mother asks me to buy a bottle of ketchup, I will assume she means Heinz because that's just what ketchup means. It's the same with all companies. If your product is the automatic name that comes to mind when the item is mentioned, it basically means that you have created superior customer value than your competition.

When analyzing a company's situation, marketers conduct what is called the SWOT analysis, which evaluates the company's Strengths, Weaknesses, Opportunities, and Threats. Strengths and weaknesses are within the company itself, while opportunities and threats are external, or not controlled by the company.
Once the basic SWOT analysis is done, the company can start forming its detailed marketing plan. This plan begins with an executive summary that briefly goes the company's goals and recommendations. Then, a more detailed SWOT analysis is presented, followed by the major objectives of the company, along with strategies of how to achieve them. The budget section and controls sections which are last, projects profit and loss, and outlines the controls that will monitor the progress of meeting these goals.

Just as every company has a CEO and CFO, many companies have now created a new position, CMO, or Chief Marketing Officer, to carry out the marketing plans and manage the Marketing Department in the company. Marketing control is the process of evaluating the results of the marketing plans and ensuring that the listed objectives are being achieved.

Build-A-Bear Case Analysis

I am giving you two options: 1) You have to build your own garage, costing you $5000 and a week's worth of time. 2) A professional builder will build it costing you the same $5000 but no time at all.

Which would you choose? I would choose the professional builder without even thinking twice about it. Why? Because I get the same product, done professionally, for the same amount of money, and not costing me any of my time (even though I then would not get the same satisfaction as I would if I did it myself).

Now go over to a three-year old and ask him/her the following question: Would you rather order a stuffed-animal online, or go to the store and make your own stuffed animal, making it look however you want? The answer of course will be the second choice, make it myself. Why? Ask the CEO of Build-A-Bear, Maxine Clark.

When children enter a Build-A-Bear store, they step into an imagination dreamland. They begin their "bear-making" process at a "Choose Me" station, where they can select any unstuffed animal that they find. Then, they fluff, stitch, dress, accessorize, and name their animals. Each child is creating a product that is unique and personalized to him/her. In fact, getting the stuffed animal at the end is not what the company is really selling. Build-A-Bear is selling an experience to each and every customer; the experience of personalized entertainment. So which child or parent would want to miss out on this opportunity, and instead buy a stuffed animal from Vermont Teddy Bear Co., for at least twice the amount?! 

Build-A-Bear will remain successful because of the way they build customer relationships. Build-A-Bear changes its huge assortment of accessories for the stuffed animals 11 times a year. They adapt to their customer audience, no matter what it takes. For example, when the Spiderman movie came out, Build-A-Bear added bear-size Spiderman costumes to the clothing line. Therefore, Build-A-Bear will not just be a fad like many other toys and dolls that go in and out. It will keep expanding and being successful because it adapts to its customers. Build-A-Bear understands its customers' needs, wants, and demands

The Mission Statement and Portfolio

Every company and organization should have a goal of what it wants to be, and a plan or strategy as to how to reach that goal: a mission statement. The way a company defines its mission, can make a difference as to how they are perceived by the public. A company's mission statement should not merely define what it does, but rather tell its customers what it does for them. The mission statement should be market-oriented. For example, Microsoft's goal is what the company tells its customers: "Your potential, our passion." Target's statement is "Expect more. Pay less." Mission statements can't be vague.
     Once the company has its mission statement, it has to then plan its business portfolio, which is the collection of businesses that make up the company. There are two steps in making this portfolio: 1) Analyzing the company's current portfolio and decide which businesses to invest in. 2) Shaping the future portfolio by making strategies for improving and resizing the company.

In analyzing the current business portfolio, the Boston Consulting Group (BCG) approach is pretty well-known in the business world. This approach uses the growth-share matrix, which evaluates a company based on its market growth rate and relative market share, (its piece of the pie). This matrix shows four types of SBU's (strategic business units) which can refer to either a whole division within the company or even just to a specific product. These categories are:

1) Stars, which are products that are high-growth and high-share, or products which are currently hard to maintain but ultimately become cash cows (the next category).
2) Cash cows, which are low-growth and high-share products. In other words, the market isn't that large, and the company has the largest piece of the pie within that market. These are the company's most profitable products and many times are used to support other SBU's that need investments.
3) Question marks, which are low-share and high-growth products. These require a lot of cash to maintain, some end up as stars while others are just not worth it for the company to keep and are therefore discontinued.
4) Dogs, which are low-growth and low-share products. These many times result when the company doesn't do sufficient research beforehand, They sometimes generate enough cash to survive, but obviously not as much as cash cows.
However, this approach doesn't always make sense for a company to take, as it is many times difficult to categorize every product or SBU into one of these four categories. Furthermore, these categories all define where the product is now, but says nothing about the future. Therefore, many companies instead customize their own approaches to evaluating their SBU's, and decentralize the strategic planning to division managers.

Growth and Downsizing


There are four main ways for a company to grow. Although they may sound complicated, they are really very simple to understand:

1) Market penetration- increasing the sales of an existing product without changing the product at all. This is usually done when the market is not yet saturated.
Example: Starbucks building stores on every corner.             
2) Market development- finding new markets for the company's current products.
Example: Starbucks opening stores in cities without them.
3) Product development- creating new products.
Example: Starbucks selling other products such as CD's in their stores.
4) Diversification- starting completely new businesses that have nothing to do with the existing ones.
Example: Starbucks opening up a car wash.


Many times companies find that they have too many products which are unprofitable, and therefore want to downsize. Downsizing is not necessarily a bad thing. It just means that the company is reducing its portfolio by getting rid of products that are not adding to the company's value. It's all part of strategy. Having more players on your basketball team doesn't do you any good if those players are bad at basketball. It's the same idea here: If a grocery store makes a product that doesn't drive in any profit, and even causes the store to lose money making it, it's not a bad thing for the company to discontinue making it.