Strategy formulation involves the identification of alternative strategies, a review of the merits of each

of these options and then selecting the strategy that has the best fit with a company’s trading
environment, its internal resources and capabilities. Companies should be realistic about what their
strategies can achieve and must base digital strategies on sound logic and thorough analysis.
Strategies are agreed to be most effective when they support specific business objectives – e.g.
increasing the online contribution to revenue, or increasing the number of online sales enquiries. A
useful technique to help align strategies and objectives is to present them together in a table, along
with the insight developed from situation analysis which may have informed the strategy.

Table 4.5 shows how objectives, strategies and performance indicators can be mapped to produce this
logical and connected flow of activity. Here different digital marketing strategies are grouped
according to whether they support customer acquisition, conversion and retention. Alternatively, they
can relate to Reach, Interaction, Conversion and Engagement (as shown in Preface Figure P1) .
Digital marketing strategy formulation typically involves making adjustments to marketing strategy to
take advantage of the benefits of online channels rather than wholescale changes.

Porter (2001) attacks those who have suggested that the Internet invalidates well-known approaches to
strategy. He says: Many have assumed that the Internet changes everything, rendering all the old rules
about companies and competition obsolete. That may be a natural reaction, but it is a dangerous one
[resulting in] decisions that have eroded the attractiveness of their industries and undermined their
own competitive advantages. The key strategic decisions for digital marketing are the same as
strategic decisions for traditional marketing. They involve selecting target customer groups and
specifying how to deliver value to these groups. Segmentation, targeting, differentiation and
positioning are all key to effective digital marketing.

For us, the main thrust of digital marketing strategy development is taking the right decisions on the
selective targeting of customer groups and different forms of value delivery for online channels. But
rather than selective development of online propositions, a common strategic option is to replicate
existing offline segmentation, targeting, differentiation and positioning in the online channels. While
this is a relatively easy strategic approach to implement, the company is likely to lose market share
relative to more nimble competitors that modify their approach for online channels. An example of
where companies have followed a ‘do-nothing strategy’ is grocery shopping, where some have not
rolled out home shopping to all parts of the country or do not offer the service at all. In the United
Kingdom, Morrisons is a latecomer to the online market and has struggled to make an impact as the
most enthusiastic adopters of online channels have already formed relationships with more proactive
online grocery brands, such as Tesco.com and Sainsbury. Morrisons will face a tough time trying to
win back market share online in the future. As mentioned at the start of the chapter, we should
remember that digital marketing strategy is a channel marketing strategy and it needs to operate in the
context of multichannel marketing. It follows that it is important that the digital marketing strategy
should:

● be based on objectives for online contribution of leads and sales for this channel;

● be consistent with the types of customers that use and can be effectively reached through the
channel; ● support the customer journey as they select and purchase products using this channel in
combination with other channels;

● define a unique, differential proposition for the channel;

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● specify how we communicate this proposition to persuade customers to use online services in
conjunction with other channels;

● manage the online customer lifecycle through the stages of attracting visitors to the website,
converting them to customers and retention and growth.

● be consistent with the types of customers that use and can be effectively reached through the digital
communications channels and targeted using online tactical marketing segmentation. Furthermore,
digital marketing strategy development involves reappraising a company’s approach to strategy based
on familiar elements of marketing strategy. We believe there are nine important decisions to consider:
● Decision 1: Market and product development strategies.

● Decision 2: Business and revenue models strategies.

● Decision 3: Target marketing strategy.

● Decision 4: Positioning and differentiation strategy (including the marketing mix).

● Decision 5: Customer engagement and social media strategy.

● Decision 6: Multichannel distribution strategy.

● Decision 7: Multichannel communications strategy.

● Decision 8: Online communications mix and budget.

● Decision 9: Organisational capabilities and governance (7S framework). The first four decisions are
concerned with fundamental questions of how an organisation delivers value to customers online and
which products are offered to which markets online. The next four decisions are more concerned with
the mix of marketing communications used to communicate with customers across multiple channels.