And the Three Are...
I know, I questioned it too: only three strategies? That’s right, the key word is “STRATEGY.” There are many, many tactics, but only three strategies. This is a very simple concept and you’ve implemented at least one of them if you sell goods or services. They may be employed via conscious effort but sometimes it happens almost by serendipity.
For those whose dirty minds are wandering, please bring them back. A penetration strategy is simply entering a new market or multiple new markets. It can be a new geographic market, demographic market or even a new psychographic market. By default, new products follow a penetration strategy as they are just breaking into a new market, regardless of what it is. As they grow, they may want to continue penetration (minds out of gutters please) and expand into new geographic areas.
New products typically test regionally or decide to stay in a defined geographic area, and then go (and grow) from there. The beer category is a good example of penetration strategy, particularly with the explosion of Craft beer. If you are a Craft beer aficionado, and even if you’re not, you’ve noticed an increasing number of beer brands in supermarket, liquor store and convenience store coolers. Is penetration strategy always a good idea? Maybe not. We point to beer again.
Craft beer that penetrates/grows too much is in danger of becoming mainstream and losing its perception as a Craft beer. Case in point – Samuel Adams. They still market an excellent brew and have a deep product line, but have lost their “craft credibility” to an extent because they are now a large brewer and may be considered mainstream (funny how perception is everything). They are losing share to smaller Craft brews and have possibly hurt their brand.
The objective of a buy-rate strategy is to convince consumers to purchase and use a product more frequently. This often involves discovering new benefits and uses for the product, and informing consumers about those additional uses. The first example that comes to mind is Arm and Hammer Baking Soda.
This product is designed for and used in recipes to make baked goods rise. Then it was discovered, among a long list of other uses, that baking soda deodorizes refrigerators and freezers. The company marketed the product as such and now even has a product line extension that addresses this need. They also recommended how often the box of baking soda should be changed (every 30 days), but were challenged by consumer groups who contended that it was unnecessary and just a ploy to sell more product. We’ll call that buy rate strategy gone bad. As with a penetration strategy, proceed with caution.
Share of Requirements
Share of requirements is all about customer loyalty. It has to do with how much of a particular brand a consumer purchases within a category. It is an important metric because buy rate can be
deceptive. Let’s say you buy a Coke every day. To the Coca Cola Company, you seem to be an ideal consumer. They may even use you as the model consumer and develop the marketing mix around you. What they will not know if they don’t measure it, is that you are also consuming 2 Pepsis a day. So Coke’s share is 33% compared to Pepsi’s 66% - not an ideal consumer at all. How do companies go about increasing share of requirements? It typically involves some sort of loyalty program or another type of sales promotion. You need go no further than the airlines as an example of an industry that is all about trying to obtain the greatest share of wallet through their loyalty programs.
Get it Done
So when you’re looking to build sales, consider these three and decide which is most appropriate for your product or service in the current stage of the product life cycle. Then develop tactics to achieve the strategy, and, most importantly, go out and do it.