Sound strategy is fundamental to business success.Strategy is the formula by which the major marketing variables (advertising, positioning, product, promotion, pricing, distribution, etc.) are integrated, energized, and optimized. Most businesses struggle with strategy and planning, primarily because senior executives are often “too close” to their businesses and get lost in the forest of day-to-day minutiae and industry mythology. The development of an optimal strategy is a complex undertaking and typically involves a number of research steps and analyses.
Good qualitative research is always the starting point for strategy research. The purposes of qualitative research (focus groups, depth interviews, ethnography) are to identify the critical strategy variables, explore the decision process, understand buyer motivations, identify sources of influence and authority, explore brand identity and brand perceptions, and understand the language, meanings, and symbols related to strategy formulation.
Segmentation analysis is usually conducted as an early step in strategy development to help identify optimal target-market segments from multiple perspectives: demography, lifestyle, attitudes, shopping behavior, media usage, and geographic patterns. Additionally, the analysis examines market structures and brand images. Factor analysis, cluster analysis, and other multivariate statistical techniques are important parts of the analysis. Market segmentation analyses help define worthwhile market segments and help generate hypotheses about strategies to attack these segments.
This is an integral part of the strategy development process. Understanding competitive strengths and weaknesses is fundamental to the development of sound strategy alternatives. The nature of the industry determines the benchmarking methods. For the consumer packaged goods industry, head-to-head product testing and head-to-head advertising testing are tried and true benchmarking methods. For durable goods, product “clinics” are the preferred method. In a product clinic, all of the major brands are assembled in one location, and prospective buyers of those products are recruited to view, examine, and compare the different brands. For services industries, mystery shopping is often used for benchmarking.
Sales Analysis and/or Marketing-Mix Modeling
Companies typically have reams of historical sales and marketing data that can be analyzed as part of the strategy development process. Basic sales analysis is the starting point. An analytical database can also be assembled of data related to the major marketing variables (ad spending, promotion spending, pricing, sales, etc.), and this data can serve as the inputs to marketing-mix modeling. The goal is to measure the influence of all marketing inputs on sales and profits.
Typically, marketing-mix modeling involves the use of multiple regression techniques to help explain or predict the optimal mix of marketing variables. Regression is based on a number of inputs (or independent variables) and how these relate to an outcome (or dependent variable) such as sales or profits. Once the model is built and validated, the input variables (advertising, promotion, etc.) can be manipulated to determine the net effect of different marketing inputs on a company’s sales or profits. With or without marketing-mix modeling, the analysis of historical sales data is almost always a part of the strategy development process. When marketing-mix modeling is not feasible or applicable, then choice modeling becomes the recommended method of determining the optimal mix of marketing variables.
Discrete choice, volumetric choice, and conjoint models are analytical methods used to determine the optimal combination of marketing variables?through simulation of consumers' real-world purchasing decisions. Carefully controlled experiments are set up so that consumers are simply asked to choose how many of each product they would buy, given predetermined sets of realistic conditions (i.e., scenarios). The brands are presented visually (including 3D simulation), if possible, in the context of advertising, pricing, packaging, features, promotion, and other variables. These choice-modeling experiments are used to optimize the elements of strategy (determine the optimal price, optimal positioning, optimal mix of services, etc.).
The choice-modeling experimental design is tailored to the specific objectives, constraints, and variables of each strategy project. Customization is the key to success because every category/brand has critical idiosyncrasies. The resulting data are used to create a DecisionSimulator??in which potential sets of marketing variables, product features, and marketing conditions can be evaluated to derive optimal strategies under changing market and competitive conditions.
Strategy Concept Testing
Based on the qualitative research, benchmarking, sales analyses, marketing mix modeling, and choice modeling, strategy concepts are developed. These strategy concepts are then tested to determine the very best strategy. The method of testing varies by industry and product category, ranging from a simple concept test to elaborate sets of controlled test markets.
Once a strategy enters the implementation phase, it is important to track the unfolding of that strategy as it affects customers, the trade, and (sometimes) employees. Also, strategy has a tendency to wobble off course over time, another reason for long-term strategy monitoring. The strategy monitoring system is custom-designed for the individual company and its industry. It is usually based upon periodic telephone or Internet surveys among the key target audiences.
Very often, brand image and brand equity are important factors in a company’s strategy. For these cases, Decision Analyst’s Brand Equity Monitor? is recommended since it measures relative brand preference based on all aspects of the brand, including both rational and emotional perceptions, customer service, brand images, and availability in the marketplace. The Brand Equity Monitor? is custom-designed for each client to accurately reflect the brand’s competitive environment and product/service category.
Strategy Research Services
Decision Analyst is a leading global marketing research and analytical consulting firm. For more information on Strategy Research, please contact Jerry W. Thomas, President/CEO, by emailing him at email@example.com, or by calling 1-800-ANALYSIS (262-5974) or 1-817-640-6166.