CHAPTER 2

MARKETING STRATEGY AND TACTICS

The term strategy is used in reference to maneuvering troops into position before a battle. In
marketing, strategy outlines a company’s choice of the market in which it will compete and the
value it intends to create in this market. Accordingly, marketing strategy involves two key
components: the target market and the value proposition.
The term tactics is used in reference to the deployment of troops during the battle from their
initial strategic position. In marketing, tactics refer to a set of specific activities, also known as
the “marketing mix”, employed to execute a given strategy.
STRATEGY and TACTICS are the two key components defining a company’s business model.
Strategy identifies the market in which the company operates, defines the value exchanges
among the key market entities, and outlines the ways in which an offering will create value for
the relevant participants in the market exchange. Tactics, on the other hand, define the specific
activities employed to execute a given strategy by designing, communicating, and delivering
specific market offerings.
MARKETING STRATEGY: IDENTIFYING THE TARGET MARKET
The target market is the market in which a company aims to create and capture value. It is
defined by five factors: a) Customers whose needs the company aims to fulfill, b) competitors
that aim to fulfill the same needs of the same target customers, c) collaborators that work with
the company to fulfill customers’ needs, d) the company managing the offering, and the e)
context in which the company operates.
A. Customers are the entities (individuals or organizations) whose needs the company aims
to fulfill. In business-to-consumer markets, target customers are the individuals who are
typically the end users of the company’s offerings. In business-to-business markets,
target customers are other businesses that use the company’s offerings.
B. Competitors are entities that aim to fulfill the same need of the same customers as the
company does. Competitors are defined relative to customer needs, not merely based
on the industry within which they operate.
C. Collaborators are entities that work with the company to create value for target
customers. Collaboration involves outsourcing (rather than developing). Instead of
building or acquiring resources that are lacking, a company can borrow them by
partnering with entities that have these resources and can benefit from sharing them.
D. Company is the entity that develops and manages a given market offering. The company
can be a manufacturer that produces the actual goods being sold (Procter & Gamble), a
service provider (American Express), an entity engaged in brand building (Lacoste), a
media company (Facebook), or a retailer (Walmart).
 E. Context describes the environment in which the company operates. It is defined by five
factors:
1. Sociocultural context includes social and demographic trends, value systems,
religion, language, lifestyles, attitudes, and beliefs.
2. Technological context includes new techniques, skills, methods, and processes for
designing, manufacturing, communicating, and delivering market offerings.
3. Regulatory context includes taxes; import tariffs; embargoes; product specification;
pricing; communication regulations; and intellectual property laws.
4. Economic context includes economic growth, money supply, inflation, and interest
rates.
5. Physical context includes natural resources, climate, geographical location, and
health trends.
MARKETING STRATEGY: DEVELOPING A VALUE PROPOSITION
The value proposition defines the value that an offering aims to create for the relevant market
entities. The key to designing a meaningful value proposition is to understand the value
exchange defining the relationship among the different market participants – customers; the
company; its collaborators; and its competitors.
To illustrate, consider the relationship between a manufacturer, a retailer, and their customers.
The manufacturer (the company) partners with a retailer (the collaborator) to deliver offering to
target customers. Customers receive value from the product (created by the manufacturer) they
purchase as well as from the service (delivered by the retailer) involved in the buying process.
The retailer receives value from customers in the form of margins (the differential between the
buying and selling price).
THE MARKET VALUE PRINCIPLE
1. Customer value – is the worth of an offering to its customers; it is customers’
assessment of the degree to which an offering fulfills their needs.
2. Collaborator value – is the worth of an offering to the company’s collaborators; it is the
sum of all benefits and the costs that an offering creates for collaborators. Simply put,
the collaborator value proposition answers the question: Why would collaborators
choose the company’s offering instead of the competitive alternatives?
3. Company value – is the worth of the offering to the company; it is the sum of all benefits
and costs associated with an offering. The value of an offering is defined relative to the
company’s goal and the value of other opportunities that are available to the company.
The company value proposition answers the question: Why would the company choose
this offering instead of the alternative options?
MARKETING TACTICS: DESIGNING THE MARKET OFFERING
The market offering is the actual good that the company deploys in order to fulfill a particular
customer need. It is defined by seven (7) attributes:
1. The product – is a good that aims to create value for target customers. Products can be
both tangible and intangible. Products entitle customers to the rights to the acquired
good.
2. The service – is a good that aims to create value for its customers without entitling them
to ownership of this good (movie rental, appliance repair, medical procedures, and tax
preparation).
3. The brand – aims to identify the company’s products and services, differentiate them
from those of the competition, and create unique value beyond the product and service
aspects of the offering.
4. The price – is the amount of money the company charges its customers and
collaborators for the benefits provided by the offering.
5. Incentives – are tools that enhance the value of the offering by reducing its costs and/or
by increasing its benefits. Common incentives include volume discounts, price
reductions, coupon, rebates, premiums, bonus offerings, contests, and rewards.
Incentives can be offered to individual customers as well as to the company’s
collaborators (incentives given to channel partners).
6. Communication – informs the relevant market entities- target customers, collaborators,
and the company-about the specifics of the offering.
7. Distribution – involves the channels used to deliver the offering to target customers and
the company’s collaborators.