AMS Rev (2015) 5:78–90 DOI 10.1007/s13162-015-0073-9
THEORY/CONCEPTUAL
Strategic marketing, marketing strategy and market strategy Rajan Varadarajan 1
Received: 4 October 2015 / Accepted: 20 October 2015 / Published online: 27 November 2015 # Academy of Marketing Science 2015
Abstract In the lead article of this issue, Hunt (2015) provides an exposition of how the resource-advantage (R-A) theory undergirds the sixteen foundational premises of marketing strategy advanced in Varadarajan (Journal of the Academy of Marketing Science, 38 (2), 119-140, 2010). Hunt notes that RA theory and its three foundational strategies, and the sixteen foundational premises of marketing strategy complement each other in securing the theoretical foundations of the field of strategic marketing. Building on Hunt’s article, this commentary provides additional insights into issues fundamental to the field of strategic marketing and R-A theory, and the foundational premises of marketing strategy and R-A theory. The commentary also provides a retrospective and prospective discussion of the domain of strategic marketing, definition of marketing strategy, issues fundamental to the field of strategic marketing, and the foundational premises of marketing strategy that I had proposed in my above referenced article. In the context of theory development, empirical research and organization of the cumulative body of knowledge in the field of strategic marketing, I highlight the conceptual distinction between marketing strategy and market strategy. Keywords Strategic marketing . Marketing strategy . Market strategy . Marketing theory . Resource advantage theory
* Rajan Varadarajan
[email protected] 1
Texas A&M University, 4112 TAMU, College Station, TX 77843-4112, USA
Introduction Hunt (2015) addresses the question of how the resource advantage (R-A) theory relates to the sixteen foundational premises of marketing strategy advanced by Varadarajan (2010). He notes that R-A theory and its three foundational strategies, and the sixteen foundational premises of marketing strategy complement each other in securing the theoretical foundations of the strategic marketing field. In addition to providing insights into the R-A theory underpinnings of the foundational premises of marketing strategy, Hunt’s article also explores how R-A theory explains the issues delineated in Varadarajan’s article as fundamental to the field of strategic marketing. Against this backdrop, the objectives of this commentary are to provide: (1) a retrospective on certain events that were instrumental in my initiating a study that culminated in my above referenced article, (2) additional insights into certain important issues addressed in Hunt’s above referenced article, and (3) a prospective discussion of some of the issues addressed in my above referenced article. In reference to the last of the above stated objectives, I propose certain revisions to the statement of the domain of strategic marketing, schematic representation of the domain of strategic marketing, definition of marketing strategy, issues fundamental to strategic marketing, and the foundational premises of marketing strategy that are presented in an earlier article (Varadarajan 2010). Additionally, in the context of theory development, empirical research and organization of the cumulative body of knowledge in the field of strategic marketing, I highlight the conceptual distinction between marketing strategy and market strategy.
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Strategic marketing and marketing strategy – domain, definition, fundamental issues and foundational premises: a retrospective In the BConclusion^ section of his article, Hunt (2015) states: BStrategic marketing suffers from an identity problem because of its longstanding lack of clarity and consensus as to its theoretical foundations, its nature, and its scope. Varadarajan’s (2010) proposals contribute to resolving strategic marketing’s identity problem by articulating (1) a suggested domain statement for the field (what is inside and what is outside strategic marketing?), (2) a suggested definition of the field’s key construct (what is Bmarketing strategy^?), (3) a delineation of the fundamental issues of the field (what does strategic marketing theory and research seek to explain?), and (4) a set of sixteen foundational premises (what represents the field’s basic knowledge?). Because all of his proposals are thoughtful, respectful of the literature, and closely reasoned, they could, and hopefully will, prove seminal for further developing the strategic marketing field.^ This section provides a retrospective of certain events that motivated me to undertake a research study that culminated in my above referenced article1. In a 1997 call for papers for a special issue of the Journal of Marketing on Fundamental Issues and Directions for Marketing, four questions were delineated as fundamental issues that underlie the field of marketing: (1) How do customers and consumers really behave? (2) How do markets function and evolve? (3) How do firms relate to their markets? (4) What are the contributions of marketing to organizational performance and societal welfare? (Day and Montgomery 1997). It occurred to me that a similar delineation of issues fundamental to strategic marketing would be beneficial from the standpoint of stimulating debate and discussion among strategic marketing scholars concerning the boundaries of the field. Indeed, strategic marketing’s identity crisis was a shared concern of a number of scholars in the field during the 1980s and 1990s. In their introduction to the special issue, as validation for the questions they delineate as fundamental issues to the field of marketing, Day and Montgomery (1999) cite a seminal article by Hunt (Hunt 1983). In this article, Hunt describes marketing science as the behavioral science that seeks to explain exchange relationships by focusing on four inter-related sets of fundamental explananda: (1) the behaviors of buyers directed at consummating exchanges, (2) the
1 See Hunt (2012) for an insightful retrospective on six key events/ experiences that influenced the development of the structure, foundational premises, and models of the resource-advantage theory (R-A theory) of competition.
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behaviors of sellers directed at consummating exchanges, (3) the institutional framework directed at consummating and/or facilitating exchanges, and (4) the consequences on society of the behaviors of buyers, the behaviors of sellers and the institutional framework directed at consummating and/or facilitating exchanges. Influenced by the writings of Hunt (1983), Day and Montgomery (1997, 1999) and Mankiw (1997), I began to work on a research project with the following as its focus: domain of strategic marketing as a specialized field of study in marketing, definition of marketing strategy, issues fundamental to strategic marketing as a field of study, and foundational premises of marketing strategy. The impetus for BFoundational Premises of Marketing Strategy^ as a research objective was an article published in a 1997 issue of the Fortune magazine (Norton 1997). Included in the article was an exhibit titled, BTen Principles of Economics,^ with the following footnote: BSome things about which most economists seem to be in agreement.^ The ten principles, excerpted from a textbook on economics that was published in 1997 (Mankiw 1997) are as follows: (1) People face tradeoffs. (2) The cost of something is what you give up to get it. (3) Rational people think at the margin. (4) People respond to incentives. (5) Trade can make everyone better-off. (6) Markets are usually a good way to organize economic activity. (6) Governments can sometimes improve market outcomes. (8). A country’s standard of living depends on its ability to produce goods and services. (9) Prices rise when the government prints too much money. (10) Society faces a short-run tradeoff between inflation and unemployment. It occurred to me that, along similar lines, compilation of a list of statements pertaining to marketing strategy on which there is likely to be a high level of consensus among the community of strategic marketing scholars would make an incremental contribution to the literature. In an attempt to draw on the knowledge base of subject matter experts, in 1998, I elicited the views of a sample of fellow strategic marketing scholars (who were members of the American Marketing Association Marketing Strategy Special Interest Group) on the domain of the field of strategic marketing and issues fundamental to it. While the domain statement for the field of strategic marketing, the schematic representation of the domain of the field, and issues fundamental to the field that are advanced in Varadarajan (2010) are largely based on literature insights, the insights shared by fellow strategic marketing researchers were also influential in shaping my thinking. Furthermore, as discussed in the next two sections, they complement and/or corroborate the perspectives advanced in my above referenced article.
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Domain of the field of strategic marketing The first open-ended question that I had posed to strategic marketing scholars in my mail survey was the following concerning the domain of the field of strategic marketing: What do you view as the general domain of marketing strategy and major substantive areas within its domain? As might be noted, the question is worded in reference to marketing strategy as the field of study. It was only later that I gravitated toward, began to use, and advocated the use of the term Bstrategic marketing^ to refer to the field of study, and Bmarketing strategy^ to refer to an organizational construct central to the field. The terms that I had proposed for the field of study and an organizational construct central to the field were influenced by the use of the term Bstrategic management^ in the management discipline to refer to a specialized field of study, and Bcorporate strategy^ and Bbusiness strategy^ to refer to two organizational constructs central to the field2. A synthesis of the responses of a sample of 36 strategic marketing educators to the above question is presented below. &
& & & & & &
&
The study of organizational and inter-organizational issues that impact on a business’ ability to design and deliver products that are valued by customers, and provide a competitive advantage and an acceptable return to the firm. The discipline of creating and sustaining offerings of superior value to customers in a competitive marketplace. The study of strategies that businesses use to create value for customers. The study of value-creation processes for the entities involved in a transaction. The study of decisions and actions that impact on a business’ relationship with customers, competitors and channel members. The study of assets, competencies, processes, and routines involved in a business’ interactions with customers and marketing intermediaries. The leveraging of distinctive competencies and resources made available to the marketing function in an organization to achieve sustainable competitive positional advantages. The pursuit of customer advantage by anticipating and meeting customers’ needs.
Given the open-ended nature of the questions, there was considerable variance in response style, wording, and length across respondents as well as within respondents to individual 2 An encouraging sign of the receptivity of the marketing academic community to the use of the term strategic marketing to refer to the field is a recent call for papers for a special issue of the European Journal of Marketing titled, BStrategic Marketing: New Horizons in Theory and Research.^ See: http://www.emeraldgrouppublishing.com/products/ journals/call_for_papers.htm?id=6007#sthash.b7Cg
questions. As noted earlier, each of the summary statements concerning the domain of the field presented in this section are a synthesis of multiple overlapping responses. Therefore, the order in which they are stated should not be construed as reflecting either the relative frequency of specific responses or any other indication of their relative importance.
Issues fundamental to strategic marketing As noted earlier, Hunt (1983) characterizes marketing science as the behavioral science that seeks to explain exchange relationships by focusing on four inter-related sets of fundamental explananda. Day and Montgomery (1999) enumerate four questions as fundamental issues that underlie the field of marketing. Schendel (1991) delineates the following five questions as issues fundamental to strategy: (1) Why do firms differ? (2) How do firms behave? (3) How does the policy making process affect policy outcomes? (4) What is the role of the corporate headquarters in multi-business firms? (5) What explains international success and failure of firms? Meyer (1991, p. 828) notes that strategy is crystallized around one definitive research question, namely, BWhat causes certain firms to outperform their competitors on a sustained basis?^ Teece et al. (1997) note that the question fundamental to the field of strategic management is, BHow do firms achieve and sustain competitive advantage?^ Against this backdrop, I proposed the following as issues fundamental to strategic marketing in Varadarajan (2010, p. 132): (1) What explains differences in the marketing behavior of competing businesses in the marketplace? (2) What explains differences in the marketplace and financial performance of competing brands/product lines/businesses? The second open-ended question that I had posed to strategic marketing scholars in my mail survey was the following concerning issues fundamental to the field of strategic marketing: Given your construal of the general domain of marketing strategy, what do you view as some issues fundamental to this field? Please phrase your response in the form of questions (e.g., why do ...; how do ...; what is ...: what explains ...; when does ...: is ...). The first column in Table 1 provides a synthesis and summary of the responses of 36 strategic marketing educators. As highlighted in the second column of Table 1, the perspectives of fellow strategic marketing scholars on issues fundamental to the field lend credence to BWhat explains (marketing) behavior of firms^ and BWhat explains performance of firms^ as issues fundamental to field of strategic marketing. Specifically, the why, how, what and when of (a) firm behavior, (b) firm performance, (c) performance consequences of firm behavior, and (d) firm behavior conducive to superior firm performance. For instance, consider the following issue stated in the first column in Table 1 (Issue # 1): BWhat explains the choice of
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Table 1
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Perspectives on issues fundamental to strategic marketing: firm behavior and firm performance underpinnings
Perspectives on issues fundamental to the field1
Firm behavior and firm performance underpinnings of perspectives
1. What explains the choice of alternative competitive marketing strategies by businesses in an industry? 2. Understanding, explaining and predicting competitive behavior
1. What explains differences in the marketing behaviors of competitors – theory?
3. How do various elements of the marketing mix, individually and in combination, impact on business / product / brand performance? 4. How does marketing strategy contribute to a business’ sustainable competitive advantage? 5. How does marketing strategy create economic value? 6. Optimal allocation of marketing resources
2. What explains differences in the marketing behaviors of competitors – theory? 3. Relationship between marketing behavior and performance – theory. 4. Relationship between marketing behavior and performance – theory. 5. Relationship between marketing behavior and performance – theory. 6. Relationship between marketing behavior and performance – theory.
7. How to compete and where to compete?
7. What specific marketing behaviors (how to compete) and market behaviors (where to compete) should a firm engage in – theory? 8. How can (when should) a business accelerate market penetration? 8. Context and marketing behavior: Under what conditions is a specific behavior conducive to superior firm performance – theory? 9. How can (when should) a business pursue preemptive defense?
9. Context and marketing behavior: Under what conditions is a specific behavior conducive to superior firm performance – theory?
10. When do (should) firms cannibalize their own product offerings? 10. Context and marketing behavior: Under what conditions is a specific behavior conducive to superior firm performance – theory? 11. When do (under what conditions do) strategic alliances maximize 11. Context and marketing behavior: Under what conditions is a specific consumer utility? behavior conducive to maximizing consumer utility – theory? 12. How do (should) businesses incorporate competitors’ and 12. Embeddedness of marketing behavior: What are some factors in which the customers’ perspectives in marketing strategy decisions? marketing behavior of firms is embedded – theory? 13. How does (should) the marketing function interact with other 13. Inter-dependencies between a firm’s marketing behavior and its behavior in functional areas to create sustainable competitive advantage and other functional areas – theory. superior business performance? 14. How do firms learn about markets? 14. Organizational learning – theory. 15. Theoretical foundations of strategic marketing. 15. What are the fundamental precepts of the field of marketing strategy – theories, principles, concepts, constructs, premises, axioms, maxims, etc.? 16. What are the principles of marketing strategy? 16. Theoretical foundations of strategic marketing. 17. What is the theoretical basis for distinguishing marketing strategy 17. Theoretical foundations of strategic marketing. from business strategy? 18. What is the strategic role of marketing in organizations? 18. Theoretical foundations of strategic marketing. 19. How is competitive equilibrium reached over time? 19. Theoretical foundations of strategic marketing. 20. Creation, managing and leveraging of: brand equity, customer 20. A purpose of marketing strategy (Foundational premises of equity / customer relationship equity, channel equity / channel marketing strategy) relationship equity, market knowledge and marketing knowledge. 1
A synthesis of the responses of 36 strategic marketing researchers to the following question: Given your construal of the general domain of marketing strategy, what do you view as some issues fundamental to this field? Please phrase your response in the form of questions (e.g., why do …; how do …; what is …; what explains …; when does …; is …)
alternative competitive marketing strategies by businesses in an industry?^ The issue is more succinctly restated in the second column as follows: BWhat explains differences in the marketing behaviors of competitors?^ It concerns explanation of a marketing phenomenon (i.e. theory). Consider next, Issues # 8, 9 and 10 in the first column of Table 1. As highlighted in the second column of Table 1, the common thread underlying all three of the issues is the contextual nature of a firm’s marketing behavior (i.e., the organizational and environmental conditions under which a specific behavior is likley to lead to superior firm performance). In addition to issues relating to firm behavior, firm performance, performance consequences of firm behavior, and behavior conducive to
superior performance under specific organizational and environmental conditions, as summarized in the second column of Table 1, the theoretical foundations of strategic marketing were also viewed by the respondents as issues that are fundamental to the field3.
3
Although the second column of Table 1 is discussed in the section titled, BA Retrospective,^ it is a recent addition to an earlier version of the table (a single column table), and was developed after being invited by the editor of the AMS Review to submit a commentary on Hunt’s (2015) article. The second column provides corroborating evidence in support of, BWhat explains (marketing) behavior?^ and BWhat explains performance?^ as issues fundamental to strategic marketing.
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R-A theory underpinnings of strategic marketing Although Hunt (2015) primarily focuses on the R-A theory underpinnings of the foundational premises of marketing strategy that are advanced in Varadarajan (2010), he also reviews and comments on the domain of the field of strategic marketing and issues fundamental to strategic marketing that are proposed in the above referenced article by Varadarajan. This section elaborates on the sections of Hunt (2015) pertaining to issues fundamental to strategic marketing and the foundational premises of marketing strategy.
Issues fundamental to strategic marketing and resource-advantage theory Hunt (2015) notes that the R-A theory can provide a theoretical grounding for the issues that are delineated in Varadarajan (2010, p. 132) as fundamental to strategic marketing. Although the issues fundamental to the field are stated as two separate questions, they are inter-related. A firm’s performance is a consequence of it engaging in a particular strategic behavior under specific organizational, competitive and environmental conditions. Differences in firm performance among competitors are a consequence of differences in their strategic behaviors, organizational conditions and environmental conditions. The ability of a firm to engage in specific strategic behaviors is enabled by (constrained by) its comparative advantage (comparative disadvantage) in resources (i.e., organizational conditions). In R-A theory (Hunt 2015), resources are defined as Bthe tangible and intangible entities available to the firm that enable it to produce efficiently and/or effectively a market offering that has value for some market segment(s).^ Resources are broadly classified as financial, physical, legal, human, organizational, informational, and relational. R-A theory posits that a firm, by effectively leveraging its comparative advantage in resources to compete in the marketplace achieves competitive positional advantage (s), and thereby, superior financial performance. Depending on the nature and scope of its comparative advantage in resources, a firm will be able to achieve either (1) a position of competitive superiority along the cost dimension and competitive parity along the differentiation dimension, or (2) a position of competitive parity along the cost dimension and competitive superiority along the differentiation dimension, or (3) positions of competitive superiority along the cost and differentiation dimensions. In order for a firm to be able achieve competitive positional advantage (s), comparative advantage in resources (having better resources) and effectively leveraging these resources (making better use of the resources) are necessary conditions. Extant literature on the resource-based view of the firm and R-A theory provide insights into the ongoing competition for
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comparative advantage in resources, comparative advantage/ disadvantage in resources of competing firms being a state at a given point in time, and the leveraging of comparative advantage in resources for competitive positional advantage (s) in the marketplace. For instance, Conner (1991) points out that distinctiveness (competitive differentiation advantage) or low cost (competitive cost advantage) of a firm’s product offering are tied directly to the distinctiveness of the inputs (i.e., resources) that are used to produce the product. Conner further notes that a firm’s ability to attain and hold on to profitable market positions (sustainability of competitive positional advantages) depends on its ability to gain and defend advantageous positions in underlying resources important to production and distribution. Along similar lines, Hunt (2015) notes that competition for comparative advantages in resources (and the resulting comparative advantage in resources) will yield a firm marketplace positions of competitive advantage in some market segment(s) and, thereby, superior financial performance. Although in R-A theory, relative resource cost and relative resource produced value represent the dimensions of the competitive position matrix (see: Hunt 2015, Figure 2), the discussion here is presented in reference to relative cost and relative differentiation. In this regard, Hunt (2015) notes: BHowever, many researchers—including, it appears, Varadarajan (2010)—routinely use Bdifferentiation strategy^ to mean something similar to what R-A theory identifies as the Bsuperior value^ strategy.^ In reference to ambiguity in literature concerning the meaning of Bdifferentiation^ in the context of Bdifferentiation strategy,^ Hunt (2015, Footnote # 4) notes: BIndeed, if researchers do not mean a Bsuperior value^ strategy when they recommend a Bdifferentiation^ strategy, it is unclear what they do mean. Surely, they do not mean that firms should simply make their products different, as the word Bdifferentiation^ might literally imply.^ El ab or at ion o f th e co nt ex t i n w hi ch th e te rm Bdifferentiation^ is used can be found in some sources. For instance, Coyne (1983) highlights the centrality of differentiation in respect of important product attributes (and relatedly, the associated customer benefits) to competitive differentiation advantage. He notes that in order for a firm’s product offering to have a competitive (differentiation) advantage in the marketplace, (1) customers must perceive a consistent difference in important attributes between the product offering of the firm and those of its competitors, (2) the difference must be a direct consequence of a capability gap between the firm and its competitors, and (3) both the difference in important attributes and the capability gap must be enduring over time. Porter (1996) notes that competitive cost advantage is the result of a business performing specific activities more efficiently than competitors, and competitive differentiation advantage is the result of a business’ choice of activities to perform and the manner in which they are performed, relative to competitors. From an R-A theory perspective, depending on
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the nature and scope of a firm’s comparative advantage in resources, effectively leveraging them can enable a firm to achieve: (1) a position of competitive superiority along the cost dimension by performing specific activities more efficiently than its competitors, or (2) a position of competitive superiority along the differentiation dimension by performing specific activities differently compared to its competitors, and/ or different activities compared to its competitors, or (3) positions of competitive superiority along both the cost and differentiation dimensions by performing certain activities more efficiently than its competitors, and certain other activities differently compared to its competitors. It might be appropriate to point out that relative to the scope of R-A theory, the scope of the foregoing discussion on the R-A theory underpinnings of issues fundamental to strategic marketing is limited. For instance, Hunt’s (2015) definitions of superior value strategy, lower costs strategy and synchronal strategy refer to identifying, acquiring, developing, and deploying specific kinds of resources as the goal. However, the discussion here essentially focuses on the competitive advantage outcomes of deploying resources (i.e., effectively leveraging comparative advantage in resources). Furthermore, the focus is limited to differences in comparative advantage in resources of competing firms and their performance at a given point in time. However, in the Schematic of the Resource-Advantage Theory of Competition, Hunt (2015; Figure 1) notes: BCompetition is the disequilibrating, ongoing process that consists of the constant struggle among firms for a comparative advantage in resources that will yield a marketplace position of competitive advantage and, thereby, superior financial performance. Firms learn through competition as a result of feedback from relative financial performance Bsignaling^ relative market position, which, in turn signals relative resources.^ The italicized words in the above quote (not in the original source) serve to highlight the dynamic perspective of competition, competitive position and comparative advantage in resources in R-A theory.
Foundational premises of marketing strategy and resource-advantage theory Hunt (2015) provides a detailed exposition of how R-A theory illuminates, informs, extends, and grounds the sixteen foundational premises advanced in Varadarajan (2010). The discussion relating to the sixteen premises are organized as follows: (1) purpose premises and R-A theory, (2) differentiation strategy premises and R-A theory, (3) cost advantage strategy premises and R-A theory, and (4) strategic diversity premises and R-A theory. Table 2 provides further elaboration and/or clarification in respect of some of the premises (i.e., Hunt’s exposition of the R-A theory underpinnings of the foundational premises of marketing
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strategy). The sixteen foundational premises (Varadarajan 2010) are stated in the first column of the table. Excerpts from Hunt (2015) concerning the R-A theory underpinnings of the premises are presented in the second column. Further elaboration and/or clarification in regard to some of the premises and/or their R-A theory underpinnings is presented in the third column.
Strategic marketing, performance and R-A theory Explaining variance in performance at various levels such as at the firm level, business unit level, product level and brand level has been a long-standing and major focus of research in the field of strategic marketing. Early research in strategic marketing (as well as strategic management) was primarily focused on explaining differences in performance at the firm level and organizational units within the firm such as individual businesses in the firm’s portfolio on the basis of differences in competitive strategy variables. In the industrial organization (IO) economics literature, the focus was on explaining variance in performance at the industry level on the basis of differences in industry structure variables. The structure-conduct-performance (SCP) paradigm posits that industry structure factors (e.g., industry concentration, entry barriers, exit barriers, and bargaining power of customers and suppliers) influence business conduct (strategy) and performance. In subsequent research in strategic marketing and strategic management, modeling performance as a function of competitive strategy variables, industry structure variables and unobservables were among the refinements and enhancements in attempts to gain better insights into determinants of performance. Extant strategy literature also shows an evolution toward ultimate explanations from proximate explanations. Consider for instance, the following explanations advanced in literature in support of a positive relationship between market share and profitability that are reviewed in Bharadwaj and Varadarajan (2005): (1) Efficiency explanation: All else being equal, on average, high market share businesses will be more profitable than low market share businesses as a result of the cost advantage of the former due to scale effects and experience effects. (2) Market power explanation: All else being equal, on average, high market share businesses will be more profitable than low market share businesses as a result of their ability to (a) exercise market power to obtain inputs from suppliers at lower costs, (b) extract more favorable terms from channel members, and (c) set prices rather than be price takers. (3) Product quality association explanation: All else being equal, on average, high market share businesses will be more profitable than low market share businesses because of the propensity of customers to view the relative market share standing of competing brands as an indicator of their relative quality, and the
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Foundational premises of marketing strategy (Varadarajan 2010)
R-ATheory Underpinnings of foundational premises Comments (Hunt 2015)
Marketing Strategy Purpose Premises
Marketing Strategy Purpose Premises and R-A The- Elaboration and/or Clarification ory BThe first six premises, though stated in strictly The term Bpremises^ is used in Varadarajan 2010) in positive terms, appear to be best viewed as the following context. Based on their knowledge positive reports of the normative of the subject matter, a majority of strategic recommendations of those in the strategic marketing researchers are likely to be in marketing field. For example, the first premise agreement with the statement. That is, there is may be restated, with no apparent loss of content, likely to be a high level of consensus among as Bthe field of strategic marketing (typically or strategic marketing researchers concerning the most frequently) recommends that managers in face validity of the statement. organizations should pursue marketing strategies In addition to the size of a firm’s channel members that will facilitate an organization to achieve and base and channel relationship equity, and number sustain a competitive advantage in the of marketing alliance partners and alliance marketplace.^ The other five premises may be relationship equity that seem to be the focus of similarly restated with no apparent loss of relationship marketing literature, brand equity and content.^ (Hunt 2015) the size of a firm’s end user customer base, and BSpecifically, creating market-based, relational customer relationship equity also constitute major assets is squarely within relationship marketing classes of market-based relational assets. In strategy (Figure 3), which has the following addition to market knowledge that seems to be the strategic imperative: Bto achieve competitive principal focus in market orientation literature, advantage and, thereby, superior financial marketing knowledge and marketing skills are performance, firms should identify, develop, and major classes of market-based intellectual assets. nurture an efficiency-enhancing, effectiveness enhancing portfolio of relationships^. Also, creating market-based intellectual assets is a key part of market orientation strategy (Figure 3) and its strategic imperative: Bto achieve competitive advantage and, thereby, superior financial performance, firms should systematically (1) gather information on present and potential customers and competitors and (2) use such information in a coordinated way across departments to guide strategy recognition, understanding, creation, selection, implementation, and modification. (Hunt 2015) BTherefore, financial performance as an objective is not mentioned in his Bpurposes^ premises because the six marketing purposes, taken collectively, are intended to promote the firm’s financial performance objectives (as well as to promote competitive positional advantages, specific customer responses, and marketplace performance objectives).^ (Hunt 2015).
1. A purpose of marketing strategy is to facilitate an organization to achieve and sustain a competitive advantage in the marketplace. 2. A purpose of marketing strategy is to create market-based relational assets and market-based intellectual assets for the organization. 3. A purpose of marketing strategy is to enable an organization to establish and nurture mutually beneficial exchange relationships with customers. 4. A purpose of marketing strategy is to modify/ influence/shape the affect, cognition and behaviors of customers and consumers in ways that are conducive to their acquisition, possession and consumption of specific product offerings of an organization. 5. A purpose of marketing strategy is to identify and leverage new points of differentiation. 6. A purpose of marketing strategy is to enhance the salience of non-price criteria vis-à-vis or viceversa in buyers’ choice decisions.
Differentiation Strategy Premises
Differentiation Strategy Premises and R-A Theory
Elaboration and/or Clarification
7. A business can enhance the importance of non- A superior value strategy is an effectiveness strategy. See section titled, BIssues Fundamental to Strategic price criteria relative to price in the brand choice Marketing and Resource-Advantage Theory,^ in A lower costs strategy is an efficiency strategy. A decision process of buyers by segmenting the the text of the article. synchronal strategy is an efficiency/effectiveness market into homogenous subgroups, developing strategy (Hunt 2015). differentiated product offerings responsive to the BHowever, many researchers—including, it appears, needs of individual market segments, and disVaradarajan (2010)—routinely use tinctively positioning its offerings relative to Bdifferentiation strategy^ to mean something competitors’ product offerings. similar to what R-A theory identifies as the 8. Differentiation implies heterogeneity in supply. Bsuperior value^ strategy^ (Hunt 2015). 9. Heterogeneity in demand is not a necessary condition in order for a strategy of differentiation to be effective in the marketplace. Heterogeneity in demand can either be a pre-existing state of the marketplace, or a consequence of heterogeneity in supply and the marketing efforts of competing businesses designed to stimulate heterogeneity in demand.
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Table 2 (continued) Foundational premises of marketing strategy (Varadarajan 2010)
R-ATheory Underpinnings of foundational premises Comments (Hunt 2015)
10. The range of options available to a business for BIndeed, if researchers do not mean a Bsuperior pursuing a strategy of differentiation encompasses value^ strategy when they recommend a all non-price criteria that buyers either currently Bdifferentiation^ strategy, it is unclear what they factor into the brand choice decision process or do mean. Surely, they do not mean that firms can be influenced to factor into the brand choice should simply make their products different, as the decision process. word Bdifferentiation^ might literally imply.^ 11. All else being equal, a business can enhance its (Hunt 2015, Footnote # 4). financial performance through pursuit of a strategy of differentiation when the incremental cost of differentiation per unit is lower than the price premium that a unit of a differentiated product will command in the marketplace relative to an undifferentiated product. 12. Holding all other factors constant, those dimensions of differentiation for which the incremental cost of differentiation is lower than the incremental price premium that such differentiation is likely to command in the marketplace constitute feasible avenues for differentiation. Cost Advantage Strategy Premises
Cost Advantage Strategy Premises and R-A Theory Elaboration and/or Clarification
13. A sustainable competitive cost advantage (being BFurthermore, as an extension of premise 13, R-A theory provides a second necessary condition for the lowest cost producer) is a necessary condition Bcompeting on price over the long-run.^ This in order for a business to be able to compete on the condition is that lower resource costs associated basis of price over the long-run. 14. Competitive cost advantage does not imply being with the lower prices must, at the minimum, prothe lowest priced offering in the marketplace, but duce a market offering valued as Bgood enough^ possessing the ability to compete on price and for the targeted consumers.^ constraining the ability of competitors from (Hunt 2015). competing on the basis of price over the long-run. Strategy Diversity Premises Strategy Diversity Premises and R-A Theory In a single business firm, strategic diversity at the firm level and business unit level are the same. 15. In an industry, there will be more than one means Firms and their strategies differ because: (1) However, in a multi-business firm, individual intraindustry firm resources are heterogeneous to achieving a desired end. Thus, different businesses in the firm’s portfolio compete in difand imperfectly mobile, (2) each firm is a unique competitors in an industry will be able to achieve ferent industries against different sets of competientity in time and space because of its history, (3) and sustain comparable levels of superior tors and serve different groups of customers. Strafirms may target different market segments, and performance by pursuing different strategies. tegic diversity in a multi-business firm at the busi16. There will be differences in the marketing (4) firms differ in their capabilities (Hunt 2015). ness unit level refers to differences in the marketing strategies (i.e., heterogeneity or diversity in strategies of specific businesses in the firm’s portmarketing strategy) pursued by competitors in an folio vis-à-vis their competitors. Understandably, industry. The marketing strategies pursued by no factors such as each firm being unique in time and two competitors in an industry are likely to be space because of its history and differences in firm identical. At the margin, there will be differences level capabilities will impact on strategic diversity in the strategies pursued. at the business unit level.
propensity of risk-averse customers to patronize the product offering of the market share leader. A logical follow-up question that was the focus of large body of research in strategy literature was, BWhat enables a business to achieve a high market share in the first place?^ In this vein, the progress from proximate explanations toward ultimate explanations can be seen in the evolution of strategy literature (albeit, oversimplified) encompassing the following linkages: Heterogeneity across firms in resources and heterogeneity in the ability of firms to effectively deploy rare, valuable, non-
imitable and non-substitutable resources→Competitive position of cost and/or differentiation advantage in the marketplace→Marketing Performance→Financial Performance The resource-based view (RBV) of the firm (Barney1991; Conner 1991), the capabilities-based view (CBV) of the firm (Teece et al. 1997; Eisenhardt and Martin 2000), and the resource-advantage (R-A) theory (Hunt and Morgan 1995; Hunt 1997; Hunt 2000) provide valuable insights into the above linkages. The three research streams (i.e., the IO perspective of performance; the competitive strategy perspective of performance; and the RBV/CBV/R-A theory perspective of
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performance) should however be viewed as complementary, since each provides only a partial explanation of the variance in performance.
Strategic marketing and marketing strategy – domain, definition, fundamental issues and foundational premises: a prospective view This section provides an overview of certain revisions and modifications that may be appropriate in regard to the domain, definition, fundamental issues and foundational premises related statements that I had advanced in my earlier article (Varadarajan 2010). The recognition of the need for these revisions is attributable to a number of factors. They include further reflection on the issues addressed in the article in the aftermath of (1) using the article as an assigned reading in a doctoral seminar on strategic marketing research and a master’s level elective on product innovation that I have been teaching (and, as a result, having read and reread the article a few times), (2) reading of books and journal articles on myriad issues pertaining to strategic marketing, and (3) research in progress.
Domain of strategic marketing For greater clarity, with minor revisions, the domain of strategic marketing advanced in Varadarajan (2010, p. 126) can be stated as follows: The domain of strategic marketing is the study of organizational, inter-organizational and environmental phenomena which are of crucial importance to organizations from the standpoint of their long-term performance, and concerned with (1) the behaviors of organizations in the marketplace in their interactions with consumers, customers, competitors and other external constituencies in the context of the creation, communication and delivery of products that offer value to customers in exchanges with organizations, and (2) the general management responsibilities of the marketing function in organizations that align with its boundary spanning role.4 Schematic representation of the domain of strategic marketing Figure 1 presents a revision of the schematic representation of the domain of strategic marketing presented in The use of the terms Bcrucial choices^ and Bcrucial decisions^ in reference to a firm’s strategic marketing decisions in this paper and in Varadarajan (2010) draws on Day’s (1984, p. 3) discussion concerning the strategic role of marketing in organizations. He notes: BAs a general management responsibility, marketing embraces the interpretations of the environment and the crucial choices of customers to serve, competitors to challenge, and the product characteristics with which the business will compete.^
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Varadarajan (2010, Figure 1, p. 124). Here, Box 1 (Theoretical Foundations) serves to highlight the centrality of concepts, constructs, principles, premises, axioms, theories, frameworks, models, frameworks, propositions, hypotheses, etc. to the understanding of strategic marketing related organizational, interorganizational and environmental phenomena. Also, in the revised schematic representation, market strategy (Box 2) and marketing strategy (Box 3) are highlighted as distinct organizational constructs that are central to the field of strategic marketing. However, in light of space considerations, representative organizational, inter-organizational and environmental phenomena pertaining to marketing strategy only are delineated in Boxes 4 to 7 and 9 to 12. A brief discussion on the conceptual distinction between market strategy and marketing strategy follows.
Market strategy and marketing strategy In Varadarajan (2010), Table 2, pp. 131–132, the constituent elements of a business’ marketing strategy are broadly classified as (1) precursors to the customer interfacing layer, and (2) the customer interfacing layer. Precursors to the customer interfacing layer of marketing strategy is conceptualized as a firm’s crucial decisions that in a natural sequence, would precede its decisions pertaining to the customer interfacing layer of marketing strategy. They include an organization’s choice of markets to serve, mode of market entry, and order of market entry. Consider for instance the question of Bhow to enter a market.^ Of the alternative entry strategies (e.g., internal development, acquisition and strategic alliance), under certain environmental and organizational conditions, entering into a strategic alliance with a firm that possesses complementary skills and resources may be the course of action that is most conducive for the focal firm to achieve superior performance. Strategic alliance as mode of market entry, by enhancing the ability of the focal firm to offer to its customers a superior product offering relative to those of its competitors, may enable it to achieve superior performance. However, the response of the customers is to the attributes of the superior product offering and not to the strategic alliance. Even under a scenario of the strategic alliance taking the form of dual branding of the product offering (i.e., the product being promoted with the brand names of both alliance partners), the decision pertaining to how to enter the market (internal development, acquisition or strategic alliance), is a precursor to the question of what branding strategy (dual branding versus single brand name) would engender greater affective, cognitive and/or behavioral responses in consumers (i.e., the customer interfacing dimension of marketing strategy). Customer interfacing layer of marketing strategy is conceptualized as an organization’s crucial decisions underlying its marketing actions that have the potential to engender affective, cognitive and/or behavioral responses from customers. That is,
AMS Rev (2015) 5:78–90 3. Marketing Strategy Content4 • Competitive Behavior • Cooperative Behavior • Collusive Behavior
4. Marketing Strategy Context Marketing strategy at the firm level, business unit level, product class level, product category level, brand level, etc.
5. Marketing Strategy Environment Internal Organizational Environment • Market Orientation • Organizational Culture and Climate • Organizational Learning • Market and Marketing Knowledge Management External Environment • Web 1.0, 2.0, … Technologies • Triple Bottom Line Perspective on Firm Performance – People, Planet and Profit • Corporate Social Responsibility •…
6. Marketing Strategy Process,5 Strategy Formulation Process Strategy Content Strategy Implementation
87 1. Theoretical Foundations • Concepts, Constructs, Principles, Premises, Axioms, … • Theories, Frameworks, Models, Propositions and Hypotheses (Explanation of Phenomena)
A. Organizational, interorganizational and environmental phenomena of importance from the standpoint of the long-term performance of organizations, and concerned with the: • Behaviors of organizations in the marketplace in their interactions with consumers, customers, competitors and other external constituencies in the context of creation, communication and delivery of products that offer value to customers in exchanges with organizations. • General management responsibilities of the marketing function in organizations aligned with its boundary spanning role.
Processes6
7. Core Marketing • Value Creation • Value Communication • Value Delivery
8. Empirical Foundations • Methods, Metrics and Analysis
2. Market Strategy Content Choice of Markets in Which to Compete: Geographic market scope, market types scope and market segments scope3 Mode of Entry into Market: Internal development, acquisition, joint venture / strategic alliance Order of Entry into Market: Market pioneer, early follower, late entrant
12. Intra-Organizational Horizontal Interfaces • Marketing Strategy R&D Strategy • Marketing Strategy Manufacturing Strategy • … 11. Intra-Organizational Vertical Interfaces • Distinctive and overlapping domains of marketing strategy, business strategy and corporate strategy • Influence of business and corporate strategy on marketing strategy • Influence of marketing strategy on business and corporate strategy • Locus of decision making for marketing strategy • …
10. Inter-Organizational Horizontal Interfaces • Strategic Marketing Alliances • Multi-point (multi-market and multi-product) competition • … 9. Inter-Organizational Vertical Interfaces • Marketing Strategy Cooperation and Coordination with Suppliers • Marketing Strategy Cooperation and Coordination with Intermediate Customers (Channel Members) • …
Fig. 1 Domain of Strategic Marketing: A Schematic Representation 1. Adapted from Varadarajan (2010), Fig. 1, p. 124 2. The issues delineated in the figure are representative of the domain of strategic marketing as a field of study. 3 Geographic Market Scope: Global, multi-country, country, region of a country, etc. Market Types Scope: Business-to business market, business-to-consumer market, business-to-business and business-to consumer markets, etc. Market Segments Scope: All market segments, subset of market segments, specific market segment, etc. 4 The nature and scope of marketing strategy content has evolved and continues to evolve. For instance, marketing strategy in an Internet-enabled market environment and social media environment are relatively recent additions to the scope of marketing strategy content. At an earlier point in time, the
scope of behaviors of organizations in the marketplace would generally have been construed to mean behaviors targeted at consumers, customers, competitors and other external constituencies. In an Internet-enabled market environment, the scope of behaviors of organizations in the marketplace also encompasses interactive behaviors between the organization and specific external constituencies. 5 Although for ease of exposition, the marketing strategy process is shown as a linear sequence, in reality, it is iterative. For example, firms routinely make changes in strategy content in the aftermath the outcomes of implementation. 6 See Srivastava et al. (1999) for a discussion on core business processes that create value for customers – product development management process, supply chain management process and customer relationship management process.
elements of behavior of the firm in the marketplace that are primarily directed at consumers with the objective of engendering specific affective, cognitive and/or behavioral responses in them. Brand name, product attributes, price, distribution, advertising, and sales promotion are listed as illustrative of the customer interfacing layer of marketing strategy. Guided by these considerations, strategic marketing decisions were broadly classified in Varadarajan (2010) as decisions that are precursors to the customer interfacing layer of marketing strategy, and the customer interfacing layer of marketing strategy. However, as summarized in Table 3, the terms, Bmarket strategy^ and Bmarketing strategy^ more aptly capture the essential nature of the dimensions of firm behavior enumerated in these sections. Although some extent of iteration is conceivable, in the logical of sequence of decisionmaking in organizations, market strategy decisions can be expected to precede marketing strategy decisions.
What is market strategy? What is marketing strategy? What is the conceptual distinction between market strategy and marketing strategy? These are important questions to the field of strategic marketing. Any conceptualization of market strategy should build on and relate to the meaning of the terms Bmarket^ and Bstrategy.^ Likewise, any conceptualization of marketing strategy should build on and relate to the meaning of the terms Bmarketing^ and Bstrategy.^ For instance, in an article on the definition of social innovation, Phills Jr et al. (2008) note that in order to define social innovation more clearly, one must first take a closer look at what innovation means, and what social means. When evaluated on the basis of the above criteria, the limitations of some of the proposed conceptualizations of marketing strategy in literature are evident. Consider for instance, the conceptualization of marketing strategy as concerned with Bwhere to compete^ and Bhow to compete^ (Jain 2000). Here, the strategic questions of
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AMS Rev (2015) 5:78–90 Market strategy and marketing strategy: an overview
Market strategy: some key issues
Related market strategy constructs
Where to compete?
Target Market Strategy Geographic market (s) to serve Market segment (s) to serve Market type (s) to serve: business-to-business market and/or business-to-consumer market
How to enter a product-market?
Market Entry Strategy Internal development versus joint venture / strategic alliance versus acquisition
When to enter a product-market?
Order of Market Entry/Market Entry Timing Strategy First-mover vs. early follower vs. late entrant
What should be the relative emphasis on?
Alternative product-market growth strategies Market penetration strategy (promoting present products in present markets) vs. market development strategy (promoting present products in new markets)
What is the overarching strategy? How to exit a product-market?
Acquiring new customers versus retaining present customers Market driving (shaping / influencing / modifying the market environment) vs. market driven strategy (adaptively responding to the market environment) Market Exit Strategy Spin-off versus sell-off versus phase out
Marketing strategy: some key issues How to compete?
Related marketing strategy constructs Brand Strategy Single brand strategy versus multi-brand strategy Branding Strategy New brand name versus brand name in the firm’s brand portfolio. Introduction of a new product (entry into a new product category) with an existing brand name in the firm’s brand portfolio versus with a new brand name. Channel Strategy Single versus multi-channel strategy Online versus online and offline Distribution (intensity) Strategy Intensive versus selective versus exclusive distribution Positioning Strategy Positioning of a firm’s product offering relative to the positioning of its competitors’ product offerings Positioning of a firm’s offerings in individual market segments relative to the positioning of its offerings in the other market segments Pricing Strategy Market penetration price strategy versus market skimming price strategy Product Line Strategy Broad versus narrow product line
How should total marketing effort be allocated? How should promotion effort be allocated? Promotion Strategy Predominantly pull strategy (allocation of a larger percent of promotion effort to the pull elements of the promotion mix – advertising and consumer sales promotion) versus predominantly push strategy (allocation of a larger percent of promotion effort to the push elements of the promotion mix – personal selling and trade sales promotion). What is the overarching strategy? Primary demand stimulation (increasing the size of the market for a product) vs. selective demand stimulation strategy (increasing the firm’s share of the market) What should be the relative emphasis on? Radical versus incremental innovations Development of variety extension new products, replacement new products, competitive substitute new products, new to the firm new products, and new to the world new products.
Bwhere to compete^ and Bhow to compete^ pertain to market strategy and marketing strategy, respectively.
A review of literature points to Profit Impact of Market Strategy (PIMS) data based research as one of the early
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literature streams to use the term Bmarket strategy.^ However, in PIMS data-based research, market strategy is used in the same context as business strategy, competitive strategy, or competitive business strategy in the strategy literature. In a large body of PIMS data-based research, business performance is modeled as a function of industry structure variables, competitive position variables and competitive strategy variables. For instance, in the model presented in Buzzell and Gale 1987 (Exhibit 2–3, p. 28), pricing, R&D spending, new product introductions, change in relative quality and variety of goods/services, marketing expenses, distribution channels and relative vertical integration are modeled as Bstrategy and tactics^ related variables. In the model which is referred to as the BPIMS Competitive Strategy Paradigm,^ the terms, market strategy and competitive strategy appear in tandem (i.e. Profit Impact of Market Strategy Competitive Strategy Paradigm). Against this backdrop, a definition of market strategy and revisions to the definition of marketing strategy advanced in Varadarajan (2010) are proposed in the next two sections. Market strategy – definition Market strategy refers to a firm’s crucial decisions concerning markets to serve, mode of market entry and order of market entry. Markets to serve encompasses a firm’s crucial decisions concerning geographic markets to serve (e.g., country markets and specific geographic regions within chosen country markets), market types to serve (e.g., businessto-business-market and business-to-consumer market), and market segments to serve within specific geographic markets and specific types of markets. Alternative modes of market entry include internal development, acquisition, and joint venture / strategic alliance. Order of market entry related alternatives include first-mover, early follower and late entrant. Marketing strategy – definition Marketing strategy is defined in Varadarajan (2010), p. 128 as follows: BAn organization’s integrated pattern of decisions that specify its crucial choices concerning markets to serve and market segments to target, marketing activities to perform and the manner of performance of these activities, and the allocation of marketing resources among markets, market segments and marketing activities toward the creation, communication and delivery of a product that offers value to customers in exchanges with the organization and thereby enables the organization to achieve specific objectives.^ Conceptualization of market strategy as encompassing a firm’s crucial choices concerning markets to serve, mode of market entry, and timing of market entry, and defining marketing strategy as encompassing an organization’s crucial choices concerning markets would imply a conceptual overlap between the two definitions. In light of the above, the following definition of marketing strategy is proposed: BMarketing strategy refers to an organization’s integrated pattern of decisions that specify its crucial choices
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concerning marketing activities to perform and the manner of performance of these activities in the chosen markets and market segments, and the allocation of marketing resources among markets, market segments and marketing activities toward the creation, communication and delivery of a product that offers value to customers in exchanges with the organization and thereby enables the organization to achieve specific objectives.^ There are virtues to defining a construct at a high level of specificity as well as at a high level of abstraction. In the latter vein, marketing strategy can be defined as follows: Marketing strategy refers to an organization’s crucial decisions that specify its pattern of behavior in the marketplace pertaining to the creation, communication and delivery of products that offer value to customers in exchanges with the organization and thereby enable the organization to achieve specific objectives. Understandably, when a construct is defined concisely, from the standpoint of construct operationalization, there is a need to elaborate on specific words and phrases in the definition. For example, the phrase Bcrucial decisions that specify its pattern of behavior in the marketplace,^ in the proposed definition of marketing strategy can be elaborated as meaning, Ban organization’s crucial choices, such as those pertaining to marketing activities to perform and the manner of performance of these activities in the chosen markets and market segments, and the allocation of marketing resources among markets, market segments and marketing activities.^ All else being equal, a definition of marketing strategy that concisely states its essential nature may be preferable.
Issues fundamental to strategic marketing In Varadarajan (2010), p. 133, an issue fundamental to marketing is stated as follows: BWhat explains differences in the marketplace performance and financial performance of competing brands/product lines/businesses?^ In recent years, there have been calls for firms to move away from a singular focus on financial performance toward a triple bottom line orientation – people (social performance), planet (environmental performance) and profit (financial performance). Relatedly, there has also been a movement by a growing number of firms toward a triple bottom line orientation. Against this backdrop, rather than stating an issue fundamental to strategic marketing in specific reference to marketplace and financial performance, it may be appropriate to state the issue in reference to performance broadly construed, along the following lines: What explains differences in performance of competing brands/product lines/businesses? The importance of a triple bottom line orientation is also highlighted in the proposed revised schematic representation of the field of strategic marketing (see: Fig. 1. Box 5 – Marketing Strategy Environment).
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Premises On the one hand, the foundational premises of marketing strategy that are presented in Varadarajan (2010), p. 134 are characterized as generalizing across products, markets and time horizons. That is, they hold for all types of products (e.g., goods, services, experiences, places, etc.) and markets (e.g. business-to-business market, business-to-consumer market, etc.), and time horizons (e.g., pre-Internet market environment and Internet enabled market environment). At the same time, it should also be borne in mind that marketing strategy conducive to superior performance is contingent upon internal organizational factors and external environmental factors. That is, all else being equal, Type A marketing strategy (as opposed to Type B or Type C marketing strategy), when pursued by Type P firms (as opposed to by Type Q or Type R firms), under Type C environmental conditions (as opposed to Type Y or Type Z environmental conditions) will lead to superior firm performance (see: Abell 1978).
Conclusion Hunt (2015) concludes his article by highlighting the need for an ongoing conversation on issues of importance to the field of strategic marketing and the potential of such conversation to enrich the field. In this regard, Hunt alludes to the social impact of the marketing strategies of firms. In a societal environment characterized by a growing awareness of the environmental sustainability imperative, from a social impact of marketing strategy perspective, an issue of importance to society and marketing that merits the attention of strategic marketing scholars is how firms can concurrently pursue a larger market footprint and a smaller environmental footprint. Debate and discussion on the conceptual distinction between marketing strategy and market strategy and the centrality of both to the field of strategic marketing is another issue that has the potential to contribute to the enrichment of the field.
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