What’s your ‘Generic Strategy’?
To ground your marketing efforts, it’s important to think about your company’s underlying ‘generic strategy’.
Michael Porter, a leading expert on business strategy, derived a framework to study the effect that overall strategic focus has on the success of a company. The three main types of strategy that he examined were: Cost Leadership, Product Differentiation, and Segmentation. The first two are industry-wide, whereas Segmentation focuses on a specific market niche.
So what does this mean for marketing a small business? It means that you can’t be all things to all people, and if you try, you’re bound to fail. You’re probably thinking that this is a blinding flash of the obvious, but staying focused on your strategy is easier said than done.
Many companies become unfocused and get ‘stuck in the middle’.
You might be well positioned in a niche market, but what do you do when a competitor tries to undercut you on price? If you match the price, then are you now focused on Cost Leadership? That’s a big change in strategy and one that has killed more than a few companies.
Porter’s key message is that organizations that try to mix an match generic strategies are bound to fail. Identify your generic strategy and align all aspects of the organization around it.
Three Generic Strategies
- Cost Leadership
Two good examples of cost leadership are Wal-Mart and Dell. Both companies have focused all of their company efforts around providing a low cost product. Unless you’ve got the economies of scale of Wal-Mart or Dell, a cost leadership strategy is likely going to be hard to maintain.
In its pure sense, differentiation means providing a very focused set of product or services to a broad market. Apple could be considered to have a strategy of Differentiation. It has a relatively limited product line but a broad market reach.
Most companies are focused on a specific market segment (or set of segments) and lean towards either Cost Leadership or Differentiation within that segment. The important thing to remember is that if your generic strategy is Segmentation, then your ‘segment’ comes first, and your focus on Cost Leadership or Product Differentiation comes second.
What this all means for marketing
Your marketing must be consistent with your generic strategy. If you’re value proposition is a specialized set of products for a niche market segment, don’t focus your marketing message on price. If you’re value is in low total cost of ownership, don’t market a long product feature list.
Keep your marketing message simple and consistent. To help maintain that message, ask if your new advertising campaign or pricing strategy is consistent with your generic strategy. Unless the answer is a resounding ‘yes’, re-think your marketing efforts.
Further Reading: Competitive Strategy: Techniques for Analyzing Industries and Competitors by Michael E. Porter
Chris McPhee, MBA