OBJECTIVES:  As you study this lesson, you should:

• begin to think strategically, assessing how to align those attributes you can control to the best environment for them
• be able to see marketing as an element of strategy
• develop ideas about how a marketing strategy might be developed as an integrated whole
• begin to think about marketing from a geographer's perspective
• develop (on your own)  general principles and specific ideas for moving customers or clients from lower to higher levels of "the customer hierarchy"

THINKING  STRATEGICALLY
(useful in any organizational or even personal context,not only profit-seeking corporations):

STRATEGY:  decisions that match one's assets (what one controls) to one's environment (what one cannot control).

CORPORATE  STRATEGY:  decisions about which "lines of business" one operates in.

BUSINESS STRATEGY:  decisions that position oneself within a line of business.

FUNCTIONAL or OPERATIONAL STRATEGY:  the set of interlocking, component tasks and decisions that support a given business strategy --

PRODUCTION
FINANCE
MARKETING:  creating an optimal match between the product and its potential users.

FIVE  COMPONENTS  OF  A  MARKETING  STRATEGY
all components should support one another -- should reflect a consistent idea of the product and its characteristics

One: Placeor placement

Who is the target market?
Where is the target market?
What does the target market want or need?

regression analysis of market-specific consumption (or consumption per capita) of the target product, as a function of local income (or income per capita) is a quick way to tell whether a particular target market is

• likely to be already saturated (consuming as much or more than the norm, given its income level) or is
• likely to grow.

• If the demand change is proportional to the change in per capita income, the income elasticity is 1.  If the demand change is less than or more than proportional to changes in income, the income elasticity is < or > 1.
• This can be estimated by graphing or statistically relating total sales per capita against per-capita income across different markets (cross-section comparison) or across time in one market (time-series comparison).
• This can then be used to project per capita demand in a potential market based on projections of that market’s per capita income.

• If the usage gap is positive and large, then a given company might be able to increase its sales in that location merely by increasing local awareness of the benefits of the product in general:  it’s more important to enlarge the market than to fight for share of the small existing market.

Can the basic product or service be modified to be more attractive to the target market?
Consider the cost of adaptation.
Consider the price premium that a more appropriate product can receive.
The adaptation could be in the location of the product or service.

Three: Pricing for the target market, considering:

The costs of product adaptation
The willingness-to-pay in the particular market (which may be geographically variable)
The degree of competition in the particular market (which may be geographically variable)

Four: Promotion

Informing the potential customer of your product

Providing incentives for the potential customer to become a customer (image enhancement), or
for the customer to become a repeat customer (repeat-purchase discounts (“frequent-buyer” plans)

Logistical issues:  Production where?  Sales facilities where?  what geographic and “break-bulk” steps?
Organizational issues:  middlemen?

TARGETING  POTENTIAL  CUSTOMERS
We can identify our target market based on supply considerations, based on attributes of attractive markets, or considering supply (whom can we supply less expensively?) and demand (who really wants our product?).

Targeting based on supply characteristics
What customers could be served at relatively low marginal costs?

• Geographically, within an existing service area (Case 1 for this class)
• In production terms (whether agriculture, manufacturing, or services), what are the additional uses or sources of demand of your current product line?

Targeting based on demand characteristics

Geographically, based on characteristics of currently profitable market areas

Think about the country selection in international marketing:  what countries are similar to the domestic market, or to some especially profitable foreign market?

We can use similar rationales at the local scale, as we will in Case 2.

What characteristics are important?

For consumer goods and services, household income, income per capita, taste preferences, size of houses, degree of mobility,…
For industrial goods, industrial sector (explain SIC and NAICS), typical production scale, sources of competitive advantage (cost vs. quality)

This requires geographic data about your current customers (characterize customers by country, by region, or by neighborhood), as well as data about companies or households by geographic area (country, region, neighborhood).

Note, however, that it is people, governments, or companies, not areas, that actually purchase your good or service.

This requires

1) sales data about your current customers (how much, how often, how recently?)
2) general attributes of your current customers (incomes, sex, age, tastes, occupations;  industry, scale, competitive advantage), and
3) a source for analogous data about other household, individuals, governments, or businesses., so you can target those with the characteristics of your best current customers.

Which attributes?  You want attributes that:

• are relevant to your product
• vary significantly between your better and your not-so-good customers
• you can access for people (households, firms) who are not current customers.

Sometimes, the best basis for such information (or such inferences) about potential household or individual clients is geographic inference based on demographic characteristics reported by Government census for small areas such as Census block groups or Census tracts — or compiled into ZIP code areas by private data providers:

• Household age distributions by neighborhood
• Percent of households with children
• Median incomes
• Occupational distributions of employed residents
• Educational attainment of adults
• Ethnicity
• Rates of home ownership
• House values or rent levels

Competitively, based on characteristics of the customers of your most profitable competitors.

Identify your competitors’ customers through:

• Their published information
• On-site customer spotting (license plates, observation of visible attributes)
• Survey your own customers regarding their other purchasing
• Focus groups

Compare the profiles of your customers with the profiles of their customers

Identify how you can compete better for their customers:

Product adaptation?
Pricing?
Promotion?  (including targeted discounting)
Distribution?
Location?

Based on supply anddemand characteristics
Who and where are the most likely customers for your current product mix in or near your current market areas?

• n.b. much international marketing:  first organized exporting from American companies is often into Canada, and from Canadian companies is often into the US.
• n.b. Case 1.