HOW A COMPANY’S RESOURCES CAN BE ALLOCATED IN A WAY CONSISTENT WITH ITS MARKETING OBJECTIVES (PART 2)
Companies that achieve total market domination have all of the resources, including the personnel, the products, and the vision that are necessary to develop a world-class business. And they have a detailed step-by-step plan of how they can use those resources to achieve their business objective. Providing all of the resource needed to achieve total market domination is an obvious priority, but many factors may make it difficult for your company to do this. For example, if your company lacks the personnel resources that it needs to market all of its products effectively, it will need to prioritize the products and marketing activities that are most likely to help it achieve its sales objectives.
Step 5: Evaluate your product sales
Gaining market share is an important step on the path to total market domination. A difference of ten percent points in market share is typically accompanied by a difference of about five points in return on investment. So the average rate of return for business units with shares of more than 40percent is two and half times the average for those with shares of ten percent or less. However, increasing sales is not a foolproof path to success. Many companies increase their sales at the expense of their profit margin. And that can be a path to bankruptcy.
Is the sales volume of your products rising, remaining constant, or falling?
Most products have a product life of five years. If a mature product’s sales are on a downtrend, it is usually wise to invest as little of your company’s marketing resources as possible to maintain your product’s market share. And if your product is losing money, it is usually wise to stop marketing the product as soon as possible. However, when your product’s sales are increasing, your company might benefit from investing additional marketing resources to increase its product’s market share.
Do you have a process in place to weed out unprofitable product?
It is easier for companies to launch new products than to kill existing products because most companies have no systematic procedure for identifying and eliminating products that have failed to gain market momentum or that are only marginally profitable. Continuing to market unsuccessful products can depress your company’s overall level of profitability, tie up limited resources, and hinder your company’s ability to pursue new business opportunities. Nevertheless, most companies continue to increase the number of products that they sell until they run into financial problems.
Are you maximizing your company’s profits?
Your company should test the prices of its products periodically to ensure that your company maximizes its profits. Sales people rarely believe that their company can raise prices without “destroying” their product’s marketability. However, customers are often willing to pay premium prices for quality products.
Step 6: evaluate your company’s use of integration strategies
As markets mature, companies often implements product and marketing integration strategies to help leverage their competitive position.
Forward product integration refers to integrating the components or products that your company builds into a larger system that can enable it to address new markets.
Backward product integration refers to producing component or subassemblies that can alternately be purchased from other suppliers. Backward integration can enable your company to increase the value that it adds to its products, but it can lead to a loss of the specialization that differentiates your company and may be part of its competitive advantage.
Forward marketing integration refers to eliminating external distribution and support channels
Complete or “turnkey” solutions can help your company gain a competitive advantage by making it easier for your customers to solve their problems.
Step 7: Align your marketing strategy with your company’s objectives
Companies that fail to develop clear marketing objectives often develop complicated or prohibitively expensive marketing strategies that are difficult or impossible to implement. And companies that fail to track the success of specific marketing strategies often create new marketing strategies that are as unsuccessful and short-lived as the strategies that they are replacing.
The only way to avoid these problems is to invest the time needed to develop clear marketing objectives, to track the outcome of each marketing strategy, and to take any corrective action that is necessary to re-engineer unsuccessful marketing strategies to achieve your sales objectives.
Real World Problems
Although it is of obvious value to align your marketing strategy with your corporate objectives, it may actually be very difficult to realize this goal.
You may not have access to the market intelligence you need to make informed decisions.
Many companies, for example, do not have a marketing information system in place to track market trends and competitors’ strategies.
You may assume incorrectly that your market or distribution channel is stable or is changing in a particular direction
Many companies fail to stay abreast of emerging technologies that will impact their market. For example, many distribution companies do not have an internet strategy.
You may assume incorrectly that your views or policies are shared and are being implemented by all of the personnel in your organization
Many senior managers, for example, have little or no contact with their company’s sales representatives. They don’t know what they are thinking about, they don’t know what they are feeling, and most importantly, they don’t know what they know about their products, their company, and their market.
You may distribute your company’s resources evenly between different marketing groups, distribution channels, or production teams, rather than allocating your resources where they will maximize your company’s profitability.
Many companies, for example, espouse a philosophy of rewarding their most productive employees but base employee advancement and compensation on seniority rather than productivity.
The Bottom Line: Are your company’s resources allocated in a way that is consistent with achieving its marketing objectives?
If your sale and marketing team does not have all of the resources that it needs to move business forward, it will waste time and it will lose business to better-prepared competitors. By identifying your company’s short-term and long-term objectives, you can develop strategies that enable your company to allocate its marketing resources wisely. And by evaluating where your company’s products are in their life cycle and using market and product integration strategies, you can position your company and your company’s sales strategies to win market share.
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