Marketing strategies and decision-making processes

Marketing Strategies and Decision Making

Summary and Analysis of Porter

According to Michael Porter, "operational effectiveness (OE) means performing similar activities better than rivals perform them," while strategic positioning means performing different activities than one's competitors, or performing similar activities in unique ways (Porter 1996, p.62) While it might always seem to be in an organization's interest to do things cheaply and better, the question is relative -- cheaper and better than what competing organizations, and what level of product value? And what does the target customer think is better -- is the customer price-sensitive, looking for convenience, or have unique needs? What are rivals NOT providing the customer?

Porter wrote his 1996 article when TQM, time-based competition, and benchmarking were the obsessions of American industry, as Americans strove to compete with Japanese manufactures by maximizing operational efficacy. In "the 1980s, with rivals operating far from the productivity frontier, it seemed possible to win on both cost and quality indefinitely," but without this luxury, hard strategic choices are required (Porter, 1996, p.63). Porter reminds the reader that Japanese companies often suffer low profit margins, as result of their emphasis on operations alone and insufficient concern about market segmentation. Ultimately, the "more benchmarking companies do, the more they look alike" to the consumer (Porter, 1996, p.64). Creating a successful and competitive marketing strategy is about being different (Porter, 1996, p. 64).

Take, for example, variety-based positioning, which does not mean offering more variety, necessarily. Rather, it means that the choice of product or service varieties rather than customer segments the company addresses is unique. Jiffy Lube International, for instance, has a value chain that "produces faster service at a lower cost" in contrast to standard auto repair shops that offer a wider range of services. This enables consumers to obtain oil changes from Jiffy Lube, and to go other repair shops for more complicated automotive services (Porter, 1996, p.66). A second basis for marketing positioning is that of serving most or all the needs of a particular group of customer, called "needs-based positioning," which "comes closer to traditional thinking about targeting a segment of customers" like Ikea's targeting of value-sensitive consumers (Porter, 1996, p.66).

A third and rarer basis for positioning is that of segmenting customers who are accessible in different ways, although their needs are similar to those of other customers (Porter 1996: 67). Porter calls this access-based positioning and cites Carmike Cinemas, which caters to small-town audiences as an example, and gives them value-priced movies but with less selection (and also less sophisticated offerings) a more recent example might be found online, in the form of cheaper online banking companies like INC that offer higher rates of interest to customers who already directly deposit their paychecks into an online account at rival, standard banks because INC does not have front-of-house expenses. "Serving small rather than large customers or densely rather than sparsely situated customers are other examples in which the best way to configure marketing, order processing, logistics, and after-sale service activities to meet the similar needs of distinct groups will often differ" (Porter, 1996, p.67).

But choosing a unique position, however, is not enough to guarantee a sustainable advantage. A competitor can reposition itself to match a superior performer by copycatting, like J.P. Penny did with Sears, or straddle customer segments in its marketing strategy" to match the benefits of a successful position while maintaining its existing position" like a luxury line offering a value line (such as Continental Airlines offering 'Continental Lite' (Porter, 1996, p.67). But there are always trade-offs, as straddling can create inconsistencies in image or reputation, dilute finite resources like labor and capital, and also from limits on internal coordination and control (Porter, 1996, p.67).

Porter's analysis remains useful to modern marketers because it stresses that an effective marketing campaign cannot merely be effective in the abstract, rather it must take into consideration the needs of the customer and also what rivals are providing the customer. Porter's analysis resonates with what O.E. Ferrell and Michael Hartline might call branding strategy, or communicating effectively to the consumer what is unique about one's product line. Difference is key -- one is not merely 'cheap' but the 'cheapest' or the 'cheapest at the highest quality' on the market.