Exhibit

Key Elements of Marketing Strategy Formulation

Market Introduction Strategy

Thus, marketing strategy is the creation of a unique and valuable position, involving a different set of activities. Thus, development of marketing strategy requires choosing activities that are different from rivals.

The concept of strategic marketing may be illustrated with reference to the introduction by Gillette Company of a new shaving product, Mach 3, in April 1998.1 For some time, Gillette had faced slow growth in its razor's division, partly because Schick, its smaller rival, had recently launched a new razor of its own. Investors had begun to fret about slowing growth and lackluster sales at Gillette. This threatened its basic business, that is, razor and blades market, in which it had 71% of the North American and European market. Apparently, Gillette needed a new marketing strategy to protect its razor and blades territory. Looking around, Gillette decided to introduce a new razor that its research laboratory had been developing and that was ready to be launched. Gillette had an unusual approach to innovation. Most companies tweaked their offerings in response to competition or demand. Gillette launched a new product only when it had made a genuine technical advance. To make the Mach 3, Gillette had found a way to bond diamond-hard carbon to slivers of steel. The time was on Gillette's side. It needed something revolutionary to strengthen its market position, and its research laboratory had a unique product ready to be launched. Gillette delineated the following marketing strategy:

• Market (where to compete)—Gillette decided to introduce Mach 3 throughout the U.S. on the same day.

• Means (how to compete)—Gillette decided to offer Mach 3 as a premium product that was priced 35% more than SensorExcel, which itself was 60% more expensive than Atra, its predecessor. Gillette reasoned: "People never remember what they used to pay. But they do want to feel they are getting value for money."

• Timing (when to compete)—Gillette decided to introduce the new product before its CEO, Mr. Al Zein, retired. Mr. Zein's ability to communicate had been a hit on both Wall Street and in the company. Much of the Gillette's recent success was attributed to Mr. Zein, and the company wanted Mach 3 to adequately settle in a dominant position before Mr. Zein retired.

Gillette's Mach 3 strategy emerged from a thorough consideration of the strategic three Cs. First, market entry was dictated by customers' willingness to adopt new products in the toiletry field. Eight years ago, Gillette was losing its grip on the razor market to cheap throwaways. Sensor, which replaced Atra razor, saved the company. The company was hopeful that the Mach 3 would have a similar effect. Second, the decision to enter the market was based on full knowledge of the competition, which included its own substitute products, such as Sensor and Atra shavers, as well as companies like Schick. The company was more concerned about its own products competing with Mach 3, and, therefore it ran down stocks of its Sensor and Atra shavers ahead of Mach 3's launch. Third, Gillette's strength as an aggressive successful marketer of packaged goods with its vast experience in shaving products business and adequate financial resources (Gillette spent over $750 million in developing Mach 3) properly equipped it to enter the market. Finally, the environment (in this case, a trend toward acceptance of technologically advanced products; Mach 3 was covered by 35 patents) substantiated the opportunity.

This strategy seems to have worked well for Gillette. In nine months ending 1998, Gillette shaving products sales were up 28%. And yet, the company has to introduce the product in Europe (with 71% market) as well as in developing countries (Latin America, where the company has 91% market for blades, and India with 69% of the market).

Inasmuch as Gillette did not tailor its product to local peculiarities, it was able to achieve vast economies of scale in manufacturing. The economies of scale were mirrored on the distribution side as well. The company usually broke into new markets with razors and then jumped into batteries, pens, and toiletries through the established sales channels.

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Responses

  • rosanna folliero
    What is marketing strategy formulation?
    2 years ago

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