MARKETING: THE STRATEGIC 3CS CONCEPT

To understand Marketing, we must learn their two interacting components: the Company
and the Market.

Exhibit 1-2: Two interacting components of Marketing

Marketing is the interacting of a company and its target market. The above equation
shows that both the company and its market are equally important. Satisfying one without
satisfying the other is not really marketing.

A marketer should always consider the strengths and weaknesses of his company in
serving the needs and wants of his market. He must therefore choose the market segment
where he can have a potential leader ship or at least a strong challenger role. Marketers should
balance between the company’s requirements for profits and his desired market share.

The Market, on the other hand is composed of two other interacting components:
Customers and Competition.

Exhibit 1-3: Two interacting components of a Market

The overriding objective of the company is not just to satisfy the needs and wants of his
customers but to do so profitably BETTER THAN his competition. Otherwise, his competition
will end up satisfying his customer better than him.
 Combining the three interacting and equally important components of Marketing will
produce the strategic 3Cs of the Marketing.

Exhibit 1-4: The strategic 3cs of Marketing

The key objectives of the 3cs of Marketing are as follows:

Exhibit 1-5: Key Objectives of the 3Cs of Marketing

3Cs Key Objective

1. Customers - to satisfy the needs, wants and expectations of the target customers.
2. Competition - to outperform competition.
3. Company - to ensure corporate health and profit.

The key objectives of reach of the 3Cs of marketing must be attained to be called marketing-
oriented. The output of Customer, Competition, and Company is collectively called key result
areas. These outputs are sales market shares, and profit, respectively as shown in exhibit 1-6.

Exhibit 1-6: Input and Output of Marketing

KEY RESULT AREA

A. Sales

Sales results from satisfying customer’s needs and wants, Marketing shares are an
effect from outperforming competition. Profit comes from having excess of sales excess of sales
over cost and expense in earning market shares.

B. Market Shares

Sales figures do not necessarily indicate how a firm is performing relative to its
competitors. Rather, changes in sales simply may reflect changes in the market size or
changes in economic conditions.

The firm's performance relative to competitors can be measured by the proportion of the
market that the firm is able to capture. This proportion is referred to as the firm's market
share and is calculated as follows:

Market Share    =    Firm's Sales  /  Total Market Sales

Sales may be determined on a value basis (sales price multiplied by volume) or on a

unit basis (number of units shipped or number of customers served).

While the firm's own sales figures are readily available, total market sales are more
difficult to determine. Usually, this information is available from trade associations and
market research firms.

Reasons to Increase Market Share

Market share often is associated with profitability and thus many firms seek to increase
their sales relative to competitors. Here are some specific reasons that a firm may seek
to increase its market share:

Economies of scale - higher volume can be instrumental in developing a cost

advantage.

Sales growth in a stagnant industry - when the industry is not growing, the firm still
can grow its sales by increasing its market share.
Reputation - market leaders have clout that they can use to their advantage.

Increased bargaining power - a larger player has an advantage in negotiations with

suppliers and channel members.

Ways to Increase Market Share

The market share of a product can be modeled as:

Share of Market =  Share of Preference  x  Share of Voice  x  Share of Distribution

According to this model, there are three drivers of market share:

 Share of preference - can be increased through product, pricing, and promotional

changes.
 Share of voice - the firm's proportion of total promotional expenditures in the
market. Thus, share of voice can be increased by increasing advertising
expenditures.
 Share of distribution - can be increased through more intensive distribution.

From these drivers we see that market share can be increased by changing the
variables of the Marketing Mix.

 Product - the product attributes can be changed to provide more value to the
customer, for example, by improving product quality.
 Price - if the price elasticity of demand is elastic (that is, > 1), a decrease in price
will increase sales revenue. This tactic may not succeed if competitors are willing
and able to meet any price cuts.
 Place - add new distribution channels or increase the intensity of distribution in
each channel.
 Promotion - increasing advertising expenditures can increase market share,
unless competitors respond with similar increases.

Reasons Not to Increase Market Share

An increase in market share is not always desirable. For example:

  If the firm is near its production capacity, an increase in market share might
necessitate investment in additional capacity. If this capacity is underutilized,
higher costs will result.
 Overall profits may decline if market share is gained by increasing promotional
expenditures or by decreasing prices.
 A price war might be provoked if competitors attempt to regain their share by
lowering prices.
 A small niche player may be tolerated if it captures only a small share of the
market. If that share increases, a larger, more capable competitor may decide to
enter the niche.
 Antitrust issues may arise if a firm dominates its market.

In some cases it may be advantageous to decrease market share. For example, if a firm
is able to identify certain customers that are unprofitable, it may drop those customers
and lose market share while improving profitability.

C. Profit

What Does Profit Mean?

A financial benefit that is realized when the amount of revenue gained from

a business activity exceeds the expenses, costs and taxes needed to sustain the
activity. Any profit that is gained goes to the business's owners, who may or may not
decide to spend it on the business.  

Calculated as:

Profit is the money a business makes after accounting for all the expenses. Regardless
of whether the business is a couple of kids running a lemonade stand or a publicly
traded multinational company, consistently earning profit is every company's goal.
 
The path toward profitability can be long. For example, online
bookseller Amazon.com was founded in 1994 and did not produce its first annual profit
until 2003. Many start ups and new businesses fail when the owners run out of capital to
sustain the business.

Profit Example
Buy & Hold Strategy

Other than flipping the properties for a quick profit, selling in a few years after realizing the
significant property appreciation, LEJON implements a Buy & Hold Strategy that many great
investors have used in the past. Meanwhile, using the strength of the property (as a result of
property appreciation over time, equity growth by paying down the debt and regular income) we
buy more properties and using them again some more properties.

Let’s consider a scenario of buying just one $1,000,000 property, assuming initial cash
investment of 25% ($250,000) and an average annual appreciation of 6%. In 25 years the
property is worth over $4,000,000 free of debt as the mortgage has been paid and still provides
monthly income! Over the period of 25 years, assuming an average payout to investors of 12%
per year of the initial $250,000, the original money will be returned back to the investors in 6
years. The next 19 years will return over 3 times (simple-not compounding return) of the original
investment. Even this, extremely conservative calculation, shows about 2,000% (20 times) total
return on your money.

If we keep the property, residual monthly income will be still in place, but now paying out huge
dividends due to the income increase over the years and debt free status. What better way to
secure your monthly income and to achieve financial freedom when you arrive to a golden age..
This is recognized as one of the most prudent RRSP strategies and should be a part of everyone’s
portfolio.