It got me thinking about the process companies employ to create their marketing strategy. What is "Marketing Strategy"? Wikipedia define it as "a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage". I think this is a great definition and I want to explore each one of the key phrases in turn. Let's consider the Wikipedia definition once again.
The first phrase which caught my eye was that marketing strategy "allow(s) an organization to concentrate its limited resources". Whilst according to the Mindmetre's research, 57.1% of companies said they planned to boost their marketing budget in 2012, 18.6% said they intended to cut it. Whatever the budget may be, organisations need to ensure that they spend that money wisely - in other words invest it in a marketing strategy which is likely to give the highest return.
The second part of the phrase is "on the greatest opportunities". This is easier said than done! How do you know when you embark on your marketing strategy journey where the greatest opportunities lie? This is where a simple analysis of the profit you make from each of your customers/market sectors can really help. We may be tempted to create a marketing strategy which aims to increase the sales of our most popular product (let's call it Product 1). But say the Profit per Order on that particular sale is £65. We look at our profit analysis and find that Product 2 actually makes us more profit for each order we sell. We sell most of this product to the wholesale industry. So my question would be how many more companies are there in that market who might need this Product 2? If my market research identifies potential in this area, my marketing strategy might change to cash in on the "greatest opportunity". At this stage my marketing strategy can be quantified fairly easily. I know how many companies are in the same industry (above and beyond my existing client base). I can apply some results based statistics (ie conversion rates etc) to estimate how many companies in that market will buy that product. Then I simply multiply that number of companies by the profit per order and I have estimated the benefit of my marketing strategy.
Can Marketing Strategy increase Profit? This is where the Wikipedia definition and my own conflict. Wikipedia says that marketing strategy aims to "increase sales". I say good marketing strategy aims to increase not only sales but profit also. In the example I talked through above, it's fairly straightforward to estimate the profit you expect from your marketing efforts. However, there is a word of caution here. You get the profit calculation wrong, and you're in danger of formulating the wrong marketing strategy.
Can you really afford to waste money on ineffective marketing? By analysing your existing data first and turning that into good decision making information you will instantly see more profitable results from your marketing activities.
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Michelle Reynolds is an experienced consultant who helps business owners understand how to improve their profit. She focuses on return on investment, making sure her clients get value for money. She has 20 years experience working as a corporate Director responsible for the finance, commercial and IT functions, has managed successful turnaround projects and has worked with SMEs for the last 4 years. http://www.improve-your-profit.com
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