Commercial Strategy: Explained with Examples

A commercial strategy refers to a business’s plan or course of action to achieve its commercial objectives, such as increasing sales, expanding market share, entering new markets, improving profitability, or enhancing brand recognition.

It’s crucial that a company’s commercial strategy is grounded in a deep understanding of its market, customers, and competitors and aligns with the broader business strategy. Effective commercial strategies are often iterative, adapting to changes in the business environment or shifts in customer behavior and needs.

The commercial strategy encompasses several areas, including:

Product or Service Strategy

Product or service strategy, as part of the overall commercial strategy, involves understanding, planning, and executing how a company’s product or service will meet the needs and expectations of its customers while differentiating it from the competition. Here’s a breakdown of some of the key components of this strategy:

Unique Selling Proposition (USP): The USP defines what sets your product or service apart from the competition. It is the reason why customers should choose your product or service over others. It might be anything from superior quality, innovative features, price points, customer service, or your brand story.
Product or Service Development: This involves designing and developing your product or service to meet the needs of your target customers. It could include functionality, design, user experience, quality, or technological innovation. Regular updates, upgrades, or new product or service versions might also be part of this strategy.
Product or Service Lifecycle Management: This involves managing a product or service from conception through to its end-of-life. Understanding the different stages of a product or service’s lifecycle – introduction, growth, maturity, and decline – can help businesses plan effectively and maximize profitability at each stage.
Product or Service Portfolio Management: For companies offering multiple products or services, this involves strategically managing their portfolio to maximize profitability and market coverage. This can include deciding which products to invest in, which ones to retire, how to cross-sell or upsell, and how to manage cannibalization between products.
Product or Service Customization: This involves tailoring your product or service to meet the specific needs of different customer segments, which can be a powerful way to differentiate and create value. This might involve offering customizable features, modular products, or personalized services.
Value Proposition: Your value proposition clearly articulates the value your product or service offers customers. It communicates how your product solves customers’ problems, delivers specific benefits, and why it’s better than competing alternatives.

All these elements must align with the broader commercial strategy, which includes pricing, distribution, promotion, customer, and competitive strategies. Notably, a product or service strategy is dynamic; it must be dynamic and responsive to changes in market trends, customer needs, and competitive dynamics. Regular reviews and updates to the strategy are crucial to ensure it remains effective.

Product Development Strategy

Pricing Strategy

Pricing strategy is a critical component of a commercial strategy, as it directly impacts a company’s revenue and profitability and plays a significant role in shaping the perception of a product or service in the market. When developing a pricing strategy, a business must consider several factors:

Cost-based Pricing: This is a straightforward pricing strategy where the price of a product or service is determined by adding a profit margin to the cost of production. This strategy ensures that all costs are covered, and a profit is made with each sale. However, it does not consider the value perception of the product or service in the marketplace.
Value-based Pricing: This strategy sets prices primarily, but not exclusively, according to the perceived or estimated value of a product or service to the customer rather than according to the cost of the product or the historical prices. Companies that provide unique, high-quality products or services often use this pricing strategy.
Competitor-based Pricing: Here, the price of a product or service is determined by considering what competitors charge for similar products or services. Companies can price their offerings higher, matching, or lower than their competitors based on their unique selling proposition (USP) and market positioning.
Penetration Pricing: This strategy is used when a product or service is new. The price is initially set low to attract customers and gain market share, but it’s increased once the product becomes well established.
Skimming Pricing: This strategy involves setting high prices for a new product to maximize revenue from the segments willing to pay a high price. The price is lowered over time as the product moves through its lifecycle.
Dynamic Pricing: This strategy allows businesses to change prices in response to market conditions. It is commonly used in airlines, hospitality, and e-commerce industries. Dynamic pricing factors include demand, time of day, season, or customer behavior.
Psychological Pricing: This involves setting prices at a level that appeals to a customer’s emotional responses rather than rational responses, such as pricing at $9.99 instead of $10.00 to make the price seem lower.

A pricing strategy should not exist in a vacuum. It should consider the customer’s willingness to pay, the competitive landscape, market conditions, and the company’s overall commercial and business strategy. The right pricing strategy can enhance a product’s market position, support its value proposition, and drive business growth.

Types of Pricing Strategies: Explained with Examples

Distribution or Placement Strategy

A distribution or placement strategy, within the context of a commercial strategy, involves deciding how and where a company’s product or service will be made available to customers. It’s a crucial element of the marketing mix because it affects the customer’s access to the product and can significantly influence sales and profitability. Here are some key aspects of a distribution strategy:

Direct Distribution: This involves selling directly to customers, bypassing any middlemen. This can be done through a company’s stores, website, or sales team. This strategy gives companies complete control over the customer experience and often leads to higher profit margins, but it also requires more resources to manage.
Indirect Distribution: This involves selling through intermediaries, such as wholesalers, retailers, or distributors. These intermediaries take over the distribution and sometimes even the product promotion, allowing a company to reach a broader market with less effort and resources. However, it can also result in lower profit margins and less control over the customer experience.
Multi-Channel Distribution: This strategy involves using several different distribution channels simultaneously, such as selling directly via a company’s stores or website and distributing through third-party retailers or wholesalers. This can expand market reach, but it can also be complex to manage and may lead to channel conflict.
Selective Distribution: This involves selecting limited outlets in a specific geographical area to sell a product. It is often used when a manufacturer wants to maintain a certain product image and needs control over the placement and merchandising of the product.
Exclusive Distribution: This strategy involves selling a product only through one or very few outlets. For example, a luxury brand may choose to only sell its products through its own boutique stores to maintain an exclusive image.
Online Distribution: With the growth of e-commerce, online distribution has become increasingly important. This could involve selling through a company’s website, online retailers like Amazon, or digital marketplaces or platforms.
Physical Distribution Management: This involves managing the logistics of getting the product from the production site to the point of sale, including warehousing, transportation, inventory management, order processing, and customer service.

The choice of distribution strategy depends on many factors, including the nature of the product, customer preferences, competitive landscape, company resources, and the overall business and marketing strategy. It’s important to regularly review and adjust the strategy in response to changes in the market environment.

Distribution strategies in supply chain management

Promotion or Communication Strategy

A promotion or communication strategy, as a component of a commercial strategy, involves determining how a business will communicate its products or services to its target customers. It encompasses all the tools and channels used to deliver the company’s message and encourage customers to purchase its offerings. Here are some key elements of a promotional strategy:

Advertising: This includes paid non-personal communication through various media channels like television, radio, print media, online ads, outdoor ads, etc. It’s a powerful way to reach a broad audience and build brand awareness, but it can be expensive.
Public Relations (PR): PR involves managing a company’s image and reputation through media exposure, events, press releases, and other non-paid communication methods. It aims to create positive publicity and favorable public perception.
Sales Promotions: These are short-term tactics designed to stimulate quicker and greater purchases of a product or service. Examples include discounts, coupons, contests, free samples, buy one get one free offer, etc.
Personal Selling: This involves one-on-one communication between a sales representative and a prospective buyer to make a sale and build a customer relationship. It can be done face-to-face, over the phone, or via video call.
Direct Marketing: This involves communicating directly with targeted individual consumers to obtain an immediate response, usually through a purchase or inquiry. It can be done through mail, email, telemarketing, or direct response advertising.
Digital Marketing: This involves using digital channels to promote a product or service. It includes search engine optimization (SEO), pay-per-click advertising (PPC), social media marketing, content marketing, email marketing, and mobile marketing.
Content Marketing: This involves creating and distributing valuable, relevant, and consistent content to attract and retain a clearly defined audience and to drive profitable customer action. It can be done through blog posts, videos, infographics, webinars, podcasts, etc. Content Marketing in PR: All you need to Know
Social Media Marketing: This involves promoting a product or service through social media channels like Facebook, Instagram, Twitter, LinkedIn, etc. It can be a cost-effective way to reach a large audience and engage with customers.
Influencer Marketing: This strategy involves partnering with influential people or celebrities to promote your product or service. They can help reach your target audience and build trust for your brand.

The mix of promotional methods used will depend on the business’s goals, target audience, resources, and the nature of the product or service. It’s essential to have a cohesive and integrated communication strategy that delivers consistent brand messaging across all promotional activities. The impact of promotional activities should also be regularly measured and evaluated to adjust the strategy as needed.

What is a Marketing Mix? What are the 4Ps of Marketing?

Customer Strategy

A customer strategy, as part of the commercial strategy, involves understanding the needs and behaviors of your customers, deciding which customers to target, and designing a plan to attract, serve, and retain those customers. Here are some key components of a customer strategy:

Customer Segmentation: This involves dividing your customers into groups based on shared characteristics, such as demographics, psychographics, behaviors, or needs. Understanding these segments can help tailor your product offerings, marketing messages, and overall customer experience to meet their specific needs.
Target Market Selection: You must decide which segments to target after segmenting your market. This involves evaluating the attractiveness of each segment and the company’s ability to serve it effectively, considering factors such as market size, growth potential, profitability, competition, and alignment with the company’s capabilities and strategic goals.
Customer Acquisition Strategy: This involves developing a plan to attract new customers to your business. This could include marketing, sales, and business development initiatives. The strategies may differ for each target segment and require ongoing adjustments in response to market trends and competitive dynamics.
Customer Retention Strategy: Retaining existing customers is often more cost-effective than acquiring new ones. A retention strategy may include superior customer service, loyalty programs, regular communication and engagement, personalized offers, or quality enhancements.
Customer Experience (CX) and Service Strategy: This involves planning and managing all interactions a customer has with your brand to meet or exceed customer expectations and enhance customer satisfaction and loyalty. It includes every touchpoint from the initial contact to the sale and post-sale service.
Personalization Strategy: This involves tailoring your product offerings or marketing messages to meet the specific needs or preferences of individual customers or customer segments. With data and technology, companies can now deliver highly personalized customer experiences, enhancing customer satisfaction and loyalty.
Customer Relationship Management (CRM) Strategy: This involves using CRM systems and processes to manage interactions with existing and potential customers. It can help track customer information, manage sales and customer service activities, analyze customer behavior, and drive targeted marketing efforts.

Developing an effective customer strategy requires a deep understanding of your customers gained through market research, customer feedback, and data analysis. It should align with your product or service, pricing, distribution, and promotional strategies and support your business objectives. Like other aspects of a commercial strategy, it should be regularly reviewed and adjusted in response to changing customer needs and market conditions.

Customer Intimacy Strategy: Meaning & Examples

Competitive Strategy

As part of a commercial strategy, a competitive strategy is a planned and coordinated effort to gain an advantage over competitors in the marketplace. It determines how a business will compete, its goals, and what policies will be needed to meet those goals. Here are some key elements of a competitive strategy:

Competitor Analysis: This involves identifying your main competitors and analyzing their strategies, strengths, weaknesses, and market positions. Understanding your competitors can help you anticipate their moves, identify opportunities, and plan counter-strategies.
Differentiation Strategy: This strategy involves creating a product or service that is perceived as unique in some important way. The uniqueness could be based on product design, technology, brand image, customer service, or other attributes. A successful differentiation strategy can allow a company to charge a premium price and achieve higher profit margins.
Cost Leadership Strategy: This strategy involves becoming the lowest-cost producer in the industry. Cost leadership can be achieved through economies of scale, efficient operations, tight cost control, or other means. A company that achieves cost leadership can charge average industry prices and earn higher profits or undercut competitors’ prices to gain market share. What is a Cost leadership strategy | Explained with Examples
Focus or Niche Strategy: This strategy involves focusing on a narrow market segment or niche where you can meet customers’ needs better than your competitors. This could be based on geographic location, product attributes, customer demographics, or other factors. By deeply understanding and serving the needs of a specific niche, a company can achieve a strong market position and command higher prices. Niche marketing strategy: Explained with examples
Innovation Strategy: This strategy involves using innovation to gain a competitive edge. This could include product, process, business model, or other forms of innovation. Companies that consistently innovate can stay ahead of competitors and capture new market opportunities. Innovation Strategies: Explained with examples and framework
Growth Strategy: This strategy involves expanding the business to achieve a more significant market presence and scale advantages. Growth can be achieved through organic growth (e.g., increasing sales, adding new products, expanding geographically) or inorganic growth (e.g., mergers, acquisitions, strategic alliances).
Defensive Strategy: This strategy involves protecting a company’s market position and defending against competitive threats. This could include strengthening customer relationships, improving product quality, blocking competitors’ moves, or other actions.

An effective competitive strategy should align with the company’s internal capabilities and external market conditions and support its overall business objectives. It should also be flexible and adaptable, as competitive dynamics can change rapidly in today’s dynamic business environment.

Examples of commercial strategy

Commercial strategies will vary significantly from business to business, depending on the industry, business size, target audience, and more. Here are a few hypothetical examples of commercial strategies:

Technology Startups: A tech startup has developed a revolutionary AI-based software product. Their commercial strategy could include a product strategy focused on constant innovation and quick adaptation to technological changes or market demand. They might use a value-based pricing strategy, recognizing the unique value proposition of their product. The distribution strategy could be direct via their website and app stores. Their promotional strategy could include heavily emphasizing digital marketing, content marketing, and attending tech conferences. The customer strategy might focus on niche market segments that are early adopters of technology. Their competitive strategy could be differentiation and innovation.
Luxury Fashion Brand: A luxury fashion brand might have a product strategy centered around high-quality, exclusive designs and a limited product line. They likely adopt a value-based pricing strategy, aligning with the premium positioning of their brand. Their distribution strategy could involve exclusive distribution, selling only through their high-end boutiques or selected luxury department stores. The promotional strategy might include advertising in high-end fashion magazines, celebrity endorsements, and exclusive fashion shows. The customer strategy might focus on affluent customers who appreciate luxury and exclusivity. Their competitive strategy might involve differentiation based on quality, design, and brand prestige.
Discount Supermarket Chain: A discount supermarket chain’s product strategy might involve a wide range of products, including private label brands that offer good value for money. They would likely adopt a cost leadership pricing strategy, offering lower prices than competitors. The distribution strategy would involve selling through their physical stores in areas with high foot traffic. The promotional strategy might include weekly discount flyers, point-of-sale promotions, and loyalty programs. The customer strategy might focus on price-sensitive shoppers seeking good value for their money. Their competitive strategy might involve cost leadership and a focus strategy, targeting price-conscious consumers.

Commercial strategy of top brands

Apple Inc.: Apple’s commercial strategy is anchored by a product strategy emphasizing design, quality, and technological innovation. The company differentiates by providing sleek, user-friendly devices with seamless software-hardware integration. Their pricing strategy is premium, reflecting their products’ high value and unique attributes. Apple has a hybrid distribution strategy, selling through its own Apple Stores (both physical and online) and other retailers. Their promotional strategy uses a mix of product launch events, television and digital advertising, public relations, and collaborations. Apple’s customer strategy focuses on creating a high-end, unified brand experience across all touchpoints. Their competitive strategy is differentiation, focusing on innovation and customer experience.
Amazon: Amazon’s commercial strategy is based on offering a vast selection of products at competitive prices with convenience for the customer. Their dynamic pricing strategy uses advanced algorithms to adjust prices based on various factors. Amazon’s distribution strategy is direct, selling through its platform and delivering directly to the customers, although it also allows third-party sellers on its platform. Promotional activities often involve discounts, deals, and personalized recommendations. Their customer strategy prioritizes customer satisfaction with easy navigation, customer reviews, and exceptional customer service. Amazon’s competitive strategy hinges on cost leadership, a wide selection, and unmatched convenience.
Coca-Cola: Coca-Cola’s commercial strategy is built around its flagship product, Coke, and a wide portfolio of beverages to cater to different customer preferences. Its pricing strategy is designed to make its products affordable for average consumers. Coca-Cola products are distributed globally via direct store delivery, third-party distributors, and retailers. Their promotional strategy uses a mix of advertising, public relations, sales promotions, sponsorships, and digital marketing, often with an emotional appeal. Coca-Cola’s customer strategy focuses on creating moments of happiness for consumers. Their competitive strategy combines differentiation (based on unique taste and emotional branding) and market penetration.
Nike: Nike’s commercial strategy is anchored by a product strategy that combines performance, style, and cultural relevance. Nike’s pricing strategy varies, with a range of products from relatively affordable to premium. Their omnichannel distribution strategy sells through their stores, third-party retailers, and online platforms, strongly emphasizing direct-to-consumer sales. Nike’s promotional strategy involves advertising, sponsorships, celebrity endorsements, and community engagement. Their customer strategy aims to inspire and innovate for every athlete globally (and they declare everyone an athlete). Nike’s competitive strategy is differentiation, focusing on innovation, brand strength, and cultural influence.