Marketing Models

Marketing models, and their use, have evolved over the years to provide a better understanding of a business. A clearer understanding, or view, of a business improves the decision making process and increases confidence in future success. Most marketing books describe marketing models and how to use them, the purpose of this Clinic is to indicate which models might be useful in which circumstances and to provide insight into the philosophy of using models and getting a benefit from them.

In many companies marketing models are used solely by senior management. Yet companies will not enjoy the full benefits unless most staff can share in the improved understanding models bring to a business and the improved communications which should result from there use.

As an example, a company in South Africa had marketing problems and convened a meeting of General Regional Managers to discuss them. The quality of communications was not very good due to their wide mix and level of skills. The directors decided to use a SWOT analyses as the basis for discussing and planning the next years resource and training, but differences of opinion existed as to marketing strategy. My contribution was to identify problems and give talks on Ansoff’s Market/Product growth matrix and Porters Portfolio Management matrix.

I was pleased how quickly the Regional Managers picked up the models and used them in communicating their ideas. Moreover, they applied the models in different ways to that originally envisaged. Whilst there were problems with product and market development conflicts, the biggest problem was the means of distribution. The Regional Managers quickly sorted their areas into Porters model of Cash Cows, Rising Stars, Problem Children and Dogs and devised strategies for each.

What happened was that a way of looking at the business had been found which made understanding it easy. Because everyone was involved, the quality of communications improved dramatically. The company has never looked back. The lesson I learnt was that models and tools should not be confined to the few, but should involve as many staff as reasonable.

Though not strictly a model, but more of a tool, the objective of a SWOT is to analyse the strengths and weaknesses of a company on the one hand and the opportunities and threats of the market in which the company operates, on the other hand. Therefore, a SWOT is a four quadrant matrix of strengths and weakness (internal attributes), and opportunities and threats (external attributes). Those participating in a SWOT will decide the key attributes but may disagree as to whether an attribute should be in one quadrant or the other, however, an attribute may be classified in two quadrants.

SWOT’s are useful in think tanks. SWOT’s can be applied to a company, division, product or service. They are a means of viewing a situation (a snap shot in time) and of getting as many people as reasonable involved in the thinking process.

Michael Porters Product Portfolio Management matrix divides products, services (or divisions - if you wish) into four categories. Those generating cash (Cash Cows), those that will produce cash once they are established (Rising Stars)(but are currently consumers of cash whilst getting established), those which could become Rising Stars or Cash Cows but require management input, expertise or other resources in order to become so (Problem Children), and Dogs which are consumers of cash and for which no profitable future can be seen. Dogs can be other peoples Cash Cows and so could be sold off, producing cash. However, the important thing is that having recognised a Dog, a decision must be made before it consumes any more cash (unfortunately old dogs are often a favourite pet).

The objective of product portfolio management is to achieve a balanced portfolio of products so the company has Cash Cows now and in the future.

Ansoffs’ Product - Market growth matrix is used where a company has to decide how to increase sales. The safest option is to adopt a market penetration strategy of gaining more usage from existing customers and gaining customers from competitors. A slightly higher risk may to adopt a market development strategy of gaining new channels and geographic areas. Of higher risk is a product development strategy of producing new products, or different versions or quality levels of existing products, but still selling them to existing markets. The highest risk is a diversification strategy where new products are developed for new markets. If this is to radical - the risks will be much the same as starting a new company.

To summarise a model in a paragraph is an insult to the authors, but I hope this brief description of popular models inspires you to pick up that marketing book and read it with a new perspective. You do not have to use a model in exactly the way the book says - you can use it in any way you like, provided it helps give a clearer view of what is happening in your business.

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