How to Identify Strategic Alternatives in Marketing

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  • 0:08 Strategic Marketing Directions
  • 0:57 Market Penetration
  • 2:05 Market Development
  • 3:15 Product Development
  • 4:10 Diversification
  • 4:48 Lesson Summary
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Lesson Transcript
Instructor: Jennifer Lombardo
Marketing managers must decide the type of strategic alternative that will be undertaken for their marketing plan. Managers can choose from four options to increase sales and profits.

E.Z. Baby

E.Z. Baby is a baby formula manufacturer that is reevaluating their marketing plan for the year. They have just completed a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats of the company) and are aware of the competitive environment. SWOT analysis is a strategic tool used to identify internal strengths and weaknesses of a company and its competition along with external opportunities and threats. The end result of the SWOT is that a company is aware of potential company opportunities. It also allows them to be cognizant of potential issues with competitors or changing market trends. E.Z. Baby's next step is to decide which strategic alternatives they would like to pursue for this year's marketing plan. E.Z. Baby's marketing team has four strategic directions to consider for planning.

Market Penetration

Many companies' first strategic alternative is to increase sales with their current customer base. E.Z. Baby could pursue a market penetration direction for this upcoming year. This is a marketing strategy that tries to increase market share among existing customers. The company's dilemma is how to get parents to buy more formula than they currently are purchasing. Traditionally, manufacturers use promotional deals with aggressive advertising to get consumers to purchase more of their product. It would be hard for E.Z. Baby to get their customers to buy more formula to increase the amount they give their babies. The company could offer deals on the larger formula product line to increase sales dollars. The FFF Fart-Free Formula is the company's best product, and they will promote stocking up on it to avoid running out and having a fussy baby. Companies such as candy manufacturers run candy sales special to increase the amount customers will buy and eat! Chocolate bags are on sale for $1.99 - stock up! Market penetration is the lowest of all of the strategies concerning risk.

Market Development

Another strategic direction E.Z. Baby could pursue is market development. This method is a marketing strategy that's based on attracting new customers to current products. E.Z. Baby wants to pursue this strategy by stealing away consumers from other formula manufacturers. They plan to accomplish this by sending free samples of their product to competitors' consumers with literature that explains why their formula is better for babies. They will also send coupons to competitors' customers with an offer for free formula for a week to get them to switch. The literature will explain the different varieties that E.Z. Baby offers and focus on how they have a formula that is directed for infants who need iron, are fussy, often spit up and have a milk intolerance. E.Z. Baby is known for their Fart-Free Formula. This will be the main product they will try to push and increase sales. Another example of market development is when companies offer free trials of their product to gain new customers. Cereal companies offer coupons on their boxes that say if you disliked their cereal you can get a full refund. This will increase the chance of a new consumer trying their product.

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