Strategic alternatives can be classified into four different categories. Practical strategic alternatives analysis is based on the strategy that can effectively mitigate marketplace threats and opportunities as well as brand weaknesses and strengths. The four marketing strategic alternatives categories include diversification, product development, market development, and market penetration. Companies can use these strategies as a blueprint to achieve their goals.
Market Penetration
Market penetration is typically the first strategy that most companies utilize. It is also the least risky strategy of the four. Market penetration is a marketing strategy aiming to grow existing consumers' market share. It involves company initiatives to build sales among its consumer base. The focus is mainly on increasing sales by increasing the frequency at which customers purchase or getting customers to buy products in larger volumes. An example of a market penetration strategy is when a restaurant tries to get its customers to consume desserts besides the main meal.
Market penetration strategy can be implemented through promotions to repeat customer discounts and advertising. This strategy may be effective for the brand, such as increased sales. However, it can result in a reduction in prices for similar products in the entire industry. Competitors often try to match product prices to maintain their market share. This strategy may also have little or no effect on the intended marketing goals.
Market Development
Market development is a marketing strategy that aims to attract new consumers to current products. This strategy mainly seeks to capture the untapped potential. It is the most widely used marketing strategy, especially when companies seek to dominate a new territory. Some of the implementations of the method include sending coupons, offers or free samples to competitors' customers. It is an initiative meant to lure customers into switching to products that may have better offers. Brands may also decide to expand their distribution to new geographical locations.
An example is how Dunkin' Donuts have tapped into new marketplaces by opening branches in new regions. This strategy enables a company to increase its revenue and support long-term growth. On the downside, the process may require a considerable capital investment for expansion. The strategy may also not pay off, and the company might have wasted a lot of resources on getting a new distributor.
Product Development
Product development is another strategic alternative that companies can use in marketing. Product development strategy entails creating new products to sell to the current market. Their approach allows marketers to capitalize on their current vendors, distributors, and salespeople. Marketers can also work with their existing buyers to gather knowledge of new products. This marketing strategy is widespread, especially amongst brands dealing with beauty products. Also, brands dealing with foodstuffs have effectively used this approach to introduce new products that enable them to be competitive.
A good example is how Dunkin' Donuts introduced gourmet coffees to compete with brands like Starbucks. This approach has been effective in helping companies win customers from their competitors. It also has health brands to enter new markets and achieve business goals. On the other hand, companies risk heavy financial losses if the new products do not do well in the market.
Diversification
Diversification is another strategic alternative used in marketing. Diversification increases sales through the creation of new products that target new markets. It is considered the riskiest strategy because it seeks untapped potential with new products. Therefore, companies place a lot of work on marketers in this case. Besides learning the latest products, marketers must also effectively understand the new customer base and competitors. An excellent example of a strategy is how Disney managed to diversify entertainment into the real estate and hospitality industries.
Therefore, although it is a risky venture, it is one of the most rewarding marketing strategies. It contributes to immense company growth and capital structure. It also promotes brand image and enables a company to stand out from its competitors. However, the strategy can cause heavy financial losses if it fails to tap into the intended market. Also, additional tax compliance and policies come with new products.
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