Profit Impact of Marketing Strategy

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    Profit impact of marketing strategy

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    This article includes alist of references, related reading orexternal links, but its sourcesremain unclear because it lacksinline citations. Pleaseimprovethis article by

    introducing more precise citations. (November 2011)

    Marketing

    Key concepts

    Product marketing

    Pricing Distribution

    Service Retail

    Brand management Account-based marketing

    Ethics Effectiveness Research

    Segmentation

    Strategy Activation

    Management Dominance

    Marketing operations

    Promotional contents

    Advertising Branding

    Underwriting spot Direct marketing Personal sales

    Product placement Publicity

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    Sales promotion Sex in advertising Loyalty marketing Mobile marketing

    Premiums Prizes

    Promotional media

    Printing Publication Broadcasting

    Out-of-home advertising Internet

    Point of sale Merchandise

    Digital marketing In-game advertising

    Product demonstration Word-of-mouth

    Brand ambassador Drip marketing

    Visual merchandising

    v t e

    The Profit Impact of Market Strategy (PIMS) database "yields solid evidence in support ofboth common sense and counter-intuitive principles for gaining and sustaining competitive

    advantage": Tom Peters and Nancy Austin. It was developed with the intention of providingempirical evidence of whichbusiness strategieslead to success, within particular industries. Data

    from the study is used to craft strategies instrategic managementandmarketing strategy. The

    study identified several strategic variables that typically influence profitability. Some of the mostimportant strategic variables studied were market share, product quality, investment intensity,

    and service quality, (all of which were found to be highly correlated with profitability).

    http://en.wikipedia.org/wiki/Sales_promotionhttp://en.wikipedia.org/wiki/Sales_promotionhttp://en.wikipedia.org/wiki/Sex_in_advertisinghttp://en.wikipedia.org/wiki/Sex_in_advertisinghttp://en.wikipedia.org/wiki/Loyalty_marketinghttp://en.wikipedia.org/wiki/Loyalty_marketinghttp://en.wikipedia.org/wiki/Mobile_marketinghttp://en.wikipedia.org/wiki/Mobile_marketinghttp://en.wikipedia.org/wiki/Premium_%28marketing%29http://en.wikipedia.org/wiki/Premium_%28marketing%29http://en.wikipedia.org/wiki/Prize_%28marketing%29http://en.wikipedia.org/wiki/Prize_%28marketing%29http://en.wikipedia.org/wiki/Printinghttp://en.wikipedia.org/wiki/Printinghttp://en.wikipedia.org/wiki/Publicationhttp://en.wikipedia.org/wiki/Publicationhttp://en.wikipedia.org/wiki/Broadcastinghttp://en.wikipedia.org/wiki/Broadcastinghttp://en.wikipedia.org/wiki/Out-of-home_advertisinghttp://en.wikipedia.org/wiki/Out-of-home_advertisinghttp://en.wikipedia.org/wiki/Internet_marketinghttp://en.wikipedia.org/wiki/Internet_marketinghttp://en.wikipedia.org/wiki/Point_of_salehttp://en.wikipedia.org/wiki/Point_of_salehttp://en.wikipedia.org/wiki/Promotional_merchandisehttp://en.wikipedia.org/wiki/Promotional_merchandisehttp://en.wikipedia.org/wiki/Digital_marketinghttp://en.wikipedia.org/wiki/Digital_marketinghttp://en.wikipedia.org/wiki/In-game_advertisinghttp://en.wikipedia.org/wiki/In-game_advertisinghttp://en.wikipedia.org/wiki/Product_demonstrationhttp://en.wikipedia.org/wiki/Product_demonstrationhttp://en.wikipedia.org/wiki/Word-of-mouth_marketinghttp://en.wikipedia.org/wiki/Word-of-mouth_marketinghttp://en.wikipedia.org/wiki/Brand_ambassadorhttp://en.wikipedia.org/wiki/Brand_ambassadorhttp://en.wikipedia.org/wiki/Drip_marketinghttp://en.wikipedia.org/wiki/Drip_marketinghttp://en.wikipedia.org/wiki/Visual_merchandisinghttp://en.wikipedia.org/wiki/Visual_merchandisinghttp://en.wikipedia.org/wiki/Template:Marketinghttp://en.wikipedia.org/wiki/Template:Marketinghttp://en.wikipedia.org/wiki/Template_talk:Marketinghttp://en.wikipedia.org/wiki/Template_talk:Marketinghttp://en.wikipedia.org/w/index.php?title=Template:Marketing&action=edithttp://en.wikipedia.org/w/index.php?title=Template:Marketing&action=edithttp://en.wikipedia.org/wiki/Business_strategyhttp://en.wikipedia.org/wiki/Business_strategyhttp://en.wikipedia.org/wiki/Business_strategyhttp://en.wikipedia.org/wiki/Strategic_managementhttp://en.wikipedia.org/wiki/Strategic_managementhttp://en.wikipedia.org/wiki/Strategic_managementhttp://en.wikipedia.org/wiki/Marketing_strategieshttp://en.wikipedia.org/wiki/Marketing_strategieshttp://en.wikipedia.org/wiki/Marketing_strategieshttp://en.wikipedia.org/wiki/Marketing_strategieshttp://en.wikipedia.org/wiki/Strategic_managementhttp://en.wikipedia.org/wiki/Business_strategyhttp://en.wikipedia.org/w/index.php?title=Template:Marketing&action=edithttp://en.wikipedia.org/wiki/Template_talk:Marketinghttp://en.wikipedia.org/wiki/Template:Marketinghttp://en.wikipedia.org/wiki/Visual_merchandisinghttp://en.wikipedia.org/wiki/Drip_marketinghttp://en.wikipedia.org/wiki/Brand_ambassadorhttp://en.wikipedia.org/wiki/Word-of-mouth_marketinghttp://en.wikipedia.org/wiki/Product_demonstrationhttp://en.wikipedia.org/wiki/In-game_advertisinghttp://en.wikipedia.org/wiki/Digital_marketinghttp://en.wikipedia.org/wiki/Promotional_merchandisehttp://en.wikipedia.org/wiki/Point_of_salehttp://en.wikipedia.org/wiki/Internet_marketinghttp://en.wikipedia.org/wiki/Out-of-home_advertisinghttp://en.wikipedia.org/wiki/Broadcastinghttp://en.wikipedia.org/wiki/Publicationhttp://en.wikipedia.org/wiki/Printinghttp://en.wikipedia.org/wiki/Prize_%28marketing%29http://en.wikipedia.org/wiki/Premium_%28marketing%29http://en.wikipedia.org/wiki/Mobile_marketinghttp://en.wikipedia.org/wiki/Loyalty_marketinghttp://en.wikipedia.org/wiki/Sex_in_advertisinghttp://en.wikipedia.org/wiki/Sales_promotion
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    different industries, it was hoped that the data could be drawn upon to provide other business, in

    the same industry, with empirical evidence of which strategies lead to increased profitability.The database continues to be updated and drawn upon by academics and companies today.

    Conclusions drawn by PIMS

    The original PIMS data survey led the PIMS project to identify 37 variables which account for

    the majority of business success. Two leading marketing texts differ slightly on which variablesare the most important, with Dibb, Simkin, Pride and Ferrell (p676) identifying:

    a strong market position high quality of product lower costs lower requirement for capital investment

    and Lanacaster, Massingham and Ashford (p535) citing:

    market share image investment intensity market growth life cycle stage marketing expense to sales ratio.

    While many of these seem obvious, PIMS has the advantage of providing empirical data that

    define quantitative relationships and back what some may consider to be common-sense.

    Participation in the PIMS study: cost and benefits

    PIMS evaluated businesses' market position and suggest possible strategies, based on the datagathered from participating companies. Businesses wishing to use the service provide detailed

    information, including details of their:

    competitors and market balance sheet assumptions about future sales.

    In return, PIMS provides four reports, described by Lancaster, Massingham and Ashford as:

    1. A 'Par' report - showing the ROI and cash flows that are 'normal' for this type of business,

    given its market, competition, technology, and cost structure.

    2. A 'Strategy Analysis' report, which computes the predicted consequences of each of several

    alternative strategic actions, judged by information in similar businesses making similar moves,

    from a similar starting-point and in a similar business environment.

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    3. A 'Report on Look-Alikes' (ROLA), which aimed at predicting the best combination of

    strategies for that particular company, by analysing strategically similar business more closely.

    4. An 'Optimus Strategy' report, which is aimed at predicting the best combination of strategies

    for that particular company, again based on the experiences of other businesses in 'similar'

    circumstances.

    A critique of PIMS

    Clearly, it could be argued that a database operating on information gathered in the period 1970 -

    1983 is outdated. However data continues to be collected from participating companies andPIMS argues that it provides a unique source of time-series data, the conclusions from which

    have proven to be very stable over time.

    It has also been suggested that PIMS is too heavily biased towards traditional, metal-bashingindustries, such ascar manufacturing; perhaps not surprising, considering the era in which the

    majority of the surveys were carried out. In reality, as of 2006, the 3,800+ businesses containedwithin the database includes data from the consumer, industrial and service sectors.

    It is also heavily weighted towards large companies, at the expense of small entrepreneurialfirms. This resulted from the data collection method used. Generally only larger firms are

    prepared to pay the consulting fee, provide the survey data, and in return have access to the

    database in which they can compare their business with other large businesses or SBUs.

    Mintzberg(1998) claims that because the database is dominated by large established firms, it ismore suitable as a technique for assessing the state of "being there rather than getting there".

    (page 99)

    A serious theoretical criticism has also been mentioned. An empirical correlation does notnecessarily imply cause. There is no way of knowing whether highmarket sharecaused the high

    profitability, or whether high profitability caused the high market share. Or even more likely, aspurious factor such as product quality could have caused both high profitability and high market

    share.

    Tellis and Golder (1996) claim that PIMS defines markets too narrowly. Respondents described

    their market very narrowly to give the appearance of high market share. They believe that this

    self reporting bias makes the conclusions suspect. They are also concerned that no defunct

    companies were included, leading to "survivor bias".

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