A document which is most important to your business or to your organization is the Marketing plan. This marketing or business plan is made after a lot of strategic consideration. Without strategy, a company will not move forward in an orderly manner. It will not know its own position in the market as compared to its competitor and hence, the firm will not be able to derive a competitive advantage.
The importance of strategy is manifold but the most important aspect is competitive advantage. Because of marketing strategy, you are able to stay ahead of your competitors or at least you are able to beat the competitors who are below you in market standing. With good strategy, you might beat the top competitor as well.
This article mainly discusses the importance of Strategy with the following points.
1) Strategy helps long term planning
While you have to be prepared for the short term tactics, the main job of Strategy is to prepare you for a 3 year or 5 year or even a 10-20 year plan in some cases. When you plan for so many years down the line, you become creative and also you stand on the toes of your feet because your competitors don’t look so strong 10 years down the line nor will you be insecure about your business. You have a plan and you are now confident.
We have seen some fantastic innovation over the years. One of the recent ones is the Occulus rift which is deep into virtual reality. These innovations are possible only because the company which has invested time in it has looked at the possible futures and feels that such innovative products are well aligned with the direction the company is taking.
As a result, these products generally tend to be hits in the market because of the excellent long term planning gone in them. The importance of strategy lies in the fact that it GETS you to plan long term.
2) Strategy helps with sustainability and competitive advantage
I had written an excellent article on how to move up the competitive ladder. It literally tells you how to rank your competitors one by one and then overtake them on your ladder to success. Strategy has exactly that role.
When you are making your strategy, you look at where you are standing in the market currently and you plan down the line. As a result, you are increasing the sustainability of your business. You are planning for anything that does not work out well for you and you are also planning in case anything works out too well.
Similarly, because you know your core strengths, your vision and mission and because you know your direction forward, you will have a tremendous competitive advantage which you can build over the years. Look at the Apple vs Microsoft war going on since ages and you will see that each one of them has some trick up their sleeves each new year. And both of them have been sustainable and competitive because they have kept looking forward and kept planning their strategy.
3) Strategy helps in collecting input
Naturally, when you want to forecast the future as it will be 10 years down the line, you have to collect a lot of input. This input might be from various internal customers like stockholders, distributors, dealers or others. It might be from employees and it might also be from end customers.
This input is crucial. While most companies should collect such inputs periodically, the input collected when your future is at stake has a very high value because you will ask the right questions and you will actually analyse the data in depth.
4) Strategy helps in preparation for different markets and products
Both, products and markets are dynamic in nature. A product might have a certain competitor pop up very quickly who is taking away market share. On the other hand, a new market which the company is entering, might be very different from the previous markets where the company has established its hold.
In both the cases, Strategy can step in and play its role. Strategy is important because it will give you a guideline of the future targets of the company using which, the company can realign its marketing strategy for the product which is facing fire. It can also launch new product variants or new lines and lengths if the strategy allows.
Similarly looking at the strategy, the company can decide how much it wants to spend on a new market which is not responding as expected. What is the marketing budget available or how much time is available before the company expands to different markets? Looking at these things, the company can either throw money or time at the new market to conquer it. It is evident that the importance of strategy in this case lies in its enabling the decision making process.
5) Strategy protects against a sudden change in environment
Let us assume that you are a person who is well planned and well documented. So this week you had planned on getting 7 tasks done and next week you had 10 tasks in your diary / planner. What happens if someone gets ill or if some family emergency crops up?
You modify your schedule completely to fit this emergency and then you move on. Obviously you are not worried because you are a well planned guy. Imagine on the contrary, a person who does not plan but has 17 tasks at hand. He does not know when he will complete those tasks.
The first person is the person with a proper marketing strategy at hand. The second one is without a strategy or plan for himself or for his company. If the business environment suddenly changes, the first person is much more likely to respond rationalize and to adapt to the change in environment then the second person. The importance of strategy is in the fact that it helps you to adapt, whatever changes might be happening in the business environment. In fact, it is the job of strategy to anticipate these changes as much as possible and be ready with action plans for the same.
6) Strategy Optimizes and increases profits
One of the tasks assigned to the strategy department is to ensure price competitiveness while keeping an eye on margins. Besides doing that, Marketing strategy actually tightens up the complete process and operations of the organization, thereby contributing to a possibly increased profit and an increase revenue.
Strategy always has an eye on the future and it guides the organization in moving forward in a planned manner. The business itself exists to make profits. So we can definitely understand that strategy actually optimizes the organization for an increase in revenue and hence an increase in overall profits.
7) Strategy helps in improving Marketing communications
Because you are already analysing the markets, the customers and trying to implement the strategy as best as possible, it becomes easier for your marketing manager to design the communications strategy and the communications mix. It also becomes easier to choose the marketing vehicles to carry the message.
Another area where Marketing strategy is very affective is changing or upgrading the brand equity with the use of marketing communications. You know where your organization stands right now in the market. You also know where you want to go. The gap between is covered with the right marketing communications.
Many companies advertise because they see a fantastic improvement in their brand acceptance in the market once they actively start promoting and advertising their products. With the future strategy in mind, these communications can be optimized for long term impact.
Example – Adidas and Nike many a times launch their models with a lot of promotions and noise. All this is done AFTER the product placement in the store. Not, brands such as Adidas and Nike always have some designs available to launch but they plan them very well so that the market is always filled with the latest model. The same goes for Samsung or Apple which upgrades every year to the latest and also the marketing communications is very much aligned with the corporate objectives.
8) Strategy leads the organization with a single objective
The strategy for the organization is decided at the very top and then percolated down the line. The good thing about this is, that it aligns the complete organization with one objective. There is one hiccup here though. It is critical that after the strategy is made, the main points and the way forward be communicated down the line even to the executive levels.
You might filter the communication and you might give only selected information to the bottom most levels. But sharing such communications with internal employees is very important because it gives each of them an excellent vision of where the organization is heading. It also helps the decision making of each individual and even departments and groups collectively because they know what the organization wants from them.
9) Strategy helps with optimum utilization of resources
When you are planning to move your house from one place to another, you always plan well in advance. You get rid of the things you don’t need anymore or better yet, you might sell it at a good price. You will keep things which you need and you will completely reorganize the new home so that it is spick and span.
The same things apply to a company or a business. When you are making a strategy, you can get rid or reduce the resources being used which are not giving optimum results. Instead, you can use these resources in areas where there is a need for them. These resources might be people, equipment or any other thing which is redundant. With strategy, everything falls in the right place when you are planning right. And generally, you have to rinse and repeat every few months so that things are kept tight.
10) Strategy can help with gap analysis
A key factor in the growth of any organization is gap analysis. When we are trying to cater to our customers, there are numerous gaps which can arise from time to time. These gaps might be service gaps, expectation gaps or anything else. Because strategy keeps analysing the current performance of the firm, it also carries out gap analysis.
Think of it as a whole body checkup. Wherever there is something wrong, the doctor will suggest the right medicine. The same goes for gap analysis. It analyses gaps in the company and fills up those gaps with the proper action plans in place.
As you can see from the above 10 points, there are many reasons which justify the importance of strategy. In today’s day and age, looking forward and designing a strong strategy is the only way that certain companies can overtake their competition.