What are marketing models? - The Strategy Story

Marketing models are theoretical or mathematical constructs that describe the reality of marketing situations, including consumer behavior, marketing mix strategy, and market performance. They serve as a framework for understanding and predicting consumer actions and guiding marketing decisions.

Each model has its strengths and weaknesses and applies to specific situations. Businesses often use a combination of models to develop their marketing strategies.

Marketing models typically fall into different categories depending on their focus, including:

Customer Analysis Models

In marketing, customer analysis models provide insight into consumer behavior, allowing companies better to tailor their products, services, and marketing efforts to meet customer needs. Here are a few common customer analysis models:

AIDA Model: This is a classic model in marketing that describes the stages a customer goes through in the purchasing process: Attention, Interest, Desire, and Action. Businesses can use this model to design their marketing strategies, aiming first to grab consumers’ attention, then pique their interest, then create a desire for the product or service, and finally, lead them to take action, i.e., make a purchase.
Customer Journey Map: This model represents the journey a customer goes through when interacting with a company, from the initial contact or awareness, through the engagement process, into long-term loyalty and advocacy. This map helps businesses understand customers’ experiences and emotions at each stage and allows them to identify opportunities to enhance the customer experience.
RFM (Recency, Frequency, Monetary) Model: This model is commonly used in database marketing and direct marketing to segment customers based on their purchasing behavior. Customers are scored based on when their last purchase was (recency), how often they purchase (frequency), and how much they spend (monetary). This segmentation allows businesses to target specific groups with tailored marketing strategies.
Maslow’s Hierarchy of Needs: This psychological model is often applied in marketing to understand consumer motivation. It suggests that consumers are driven to fulfill basic needs before moving on to more advanced ones. The five levels of needs are physiological, safety, love/belonging, esteem, and self-actualization. Marketers can use this model to position their products or services to appeal to these needs.
CLV (Customer Lifetime Value) Model: This model calculates the total revenue a business can expect from a single customer account. It considers a customer’s revenue value and compares it to the company’s predicted lifespan. Businesses use this model to identify significant customer segments that are the most valuable over time.

These models are designed to help businesses understand, predict, and influence consumer behavior, aiming to increase sales and customer loyalty.

Strategy Models

Strategy models in marketing are designed to provide a framework for businesses to plan and implement their marketing strategies effectively. Here are several common marketing strategy models:

Ansoff’s Matrix: This model offers four strategies for growth based on existing or new markets and products. The strategies include Market Penetration (existing products, existing markets), Market Development (existing products, new markets), Product Development (new products, existing markets), and Diversification (new products, new markets).
Porter’s Generic Strategies: Porter identified three strategic options for gaining a competitive advantage: Cost Leadership (offering lower prices than competitors), Differentiation (offering unique and superior value in terms of product quality, features, or services), and Focus (serving a narrow, specific market segment better than others).
Blue Ocean Strategy: This model suggests that companies can gain a high performance by creating a new, uncontested market space (a “blue ocean”) rather than competing with numerous competitors in an existing market space (a “red ocean”). This is done by innovating and adding unique product or service values.
BCG Matrix (Boston Consulting Group Matrix): This model helps companies analyze their product portfolio by categorizing products into four types based on market growth and market share: Stars (high growth, high share), Cash Cows (low growth, high share), Question Marks (high growth, low share), and Dogs (low growth, low share). This helps in deciding where to invest, discontinue or develop products.
SWOT Analysis: This tool is used to identify the Strengths, Weaknesses, Opportunities, and Threats related to a business or specific project. It helps in planning by clearly understanding the internal (strengths and weaknesses) and external (opportunities and threats) factors impacting the business.
Value Proposition Canvas: This model helps businesses design products and services that customers want. It involves understanding customers’ jobs (what they are trying to get done in their work or life), pains (things that annoy them before, during, or after trying to get a job done), and gains (outcomes and benefits they want to achieve).

These strategic models help marketers make effective strategic decisions and implement plans aligned with their business objectives and market conditions. The use of a specific model depends on a company’s specific situation, goals, and resources.

4Ps/7Ps Marketing Mix Models

The 4Ps and 7Ps of marketing, also known as the marketing mix, are a set of controllable variables that a company can adjust to influence customer response. These models are foundational tools in marketing, providing a framework for decision-making and strategy.

4Ps Marketing Mix Model: This model was proposed by E. Jerome McCarthy in the 1960s and includes the following:
- Product: The item or service being sold. This includes the design, features, branding, quality, and even product range. It’s about what value the product offers customers and how it meets their needs.
- Price: The cost of the product or service. Pricing strategies consider costs of production, competitor pricing, perceived value, and market conditions. It also includes decisions on discounting, credit terms, and other price-related tactics.
- Place: Where and how the product is distributed to the customers. This can refer to physical locations, distribution channels, logistics, market coverage, and even the Internet for online sales.
- Promotion: How customers are informed about the product. This includes advertising, public relations, sales promotions, social media, email marketing, SEO, content marketing, and more. The aim is to create demand and persuade potential customers of the product’s benefits.
7Ps Marketing Mix Model: Recognizing the importance of service-based industries and the shift towards customer-centric strategies, Booms and Bitner, in the 1980s, extended the 4Ps model to include three additional factors:
- People: All individuals directly or indirectly involved in the consumption of a service are an important part of the marketing process. For service-based businesses, employees’ skills, attitudes, and service mindset can significantly influence a customer’s experience.
- Process: Procedures, mechanisms, and flow of activities consumed by services are essential elements of the marketing strategy. This could involve the customer’s journey through a retail environment or how a service like home delivery works.
- Physical Evidence: This refers to the tangible components that facilitate or communicate the service. For instance, in a restaurant, the premises’ design, the staff’s appearance, and the food’s packaging all contribute to the overall customer experience.

Each ‘P’ is a lever that marketers can pull to influence demand and perception of their product or service in the marketplace. The right mix depends on the specific market conditions and the customers that a business is trying to reach.

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

Segmentation, Targeting, and Positioning (STP) Models

Segmentation, Targeting, and Positioning (STP) is a strategic approach in modern marketing. It is a model marketers use to identify potential customers, decide which ones they want to target, and how they want to position their product or service in the market. Here’s a deeper look at each component:

Segmentation: This is the process of dividing the market into distinct groups that have common characteristics or needs. These segments could be based on various factors like demographics (age, gender, income), geographic location, psychographics (lifestyle, values, personality), and behavior (loyalty, usage rate, benefits sought). The goal is to identify segments where consumers have similar needs and responses.
Targeting: After the market is segmented, the business must decide which segments to target. This decision is typically based on the segment’s attractiveness and how well it aligns with the company’s resources, objectives, and market strategy. Targeting strategies can be undifferentiated (targeting the whole market with one offer), differentiated (targeting several market segments with offers specially designed for each), concentrated (targeting a large share of one or a few smaller segments), or micromarketing (tailoring products and marketing programs to suit the tastes of specific individuals and locations).
Positioning: Once the target market is decided, the business must determine how to position its product or service to appeal to these consumers. This involves creating a marketing mix that will resonate with the target audience and differentiates the product from competitors. It’s how a company wants its product perceived in the market. Positioning can be based on specific product attributes, price, usage occasions, users, against a competitor, or away from competitors.

The STP model is a central component of marketing strategy. It helps businesses to focus their efforts on specific groups of consumers and align their products or services with market needs, ultimately aiming for a competitive advantage in the market. It’s a crucial tool for understanding where to allocate resources for the best return on investment.

Segmentation, Targeting & Positioning (STP) in marketing: Explained with Examples

Digital Marketing Models

Digital marketing models help businesses structure their online marketing strategies effectively. They provide a framework for using digital channels to reach marketing goals. Here are a few key digital marketing models:

RACE Model: RACE is an acronym for Reach, Act, Convert, Engage. This model provides a framework for managing and optimizing the customer journey from the first point of contact to conversion and ongoing engagement.
- Reach: This involves building awareness and driving traffic to your online properties from various sources.
- Act: This is the stage of interaction with the content, often on a website, where prospects are encouraged to take the next step toward conversion.
- Convert: This is where a lead, prospect, or visitor decides to purchase, subscribe, register, or engage with your business in some measurable way.
- Engage: This is where businesses focus on increasing customer lifetime value, repeat purchases, and ensuring customer retention.
SOSTAC Model: This is a strategic planning system used in marketing. It’s an acronym for Situation (where are we now?), Objectives (where do we want to be?), Strategy (how do we get there?), Tactics (the details of the strategy), Action (putting the plan to work), and Control (measuring, monitoring, and modifying).
5S Model: This model, proposed by Chaffey and Smith, provides a strategic look at digital marketing focusing on the customer experience. The 5S stands for Sell (achieving sales targets), Serve (adding value), Speak (dialogue with customers), Save (cost savings), and Sizzle (extend the brand online).
Honeycomb Model: This model is used to understand social media behavior by studying seven functional blocks: Identity, Conversations, Sharing, Presence, Relationships, Reputation, and Groups. This can help marketers determine how to interact with customers meaningfully on social media platforms.
Content Marketing Matrix: This framework helps marketers to visualize and improve their content marketing strategy, considering the content type and its purpose. The matrix has four quadrants: Entertain, Inspire, Educate, and Convince, allowing marketers to balance their content types to engage and convert their audience effectively.
Mobile Marketing ADAPT Framework: ADAPT stands for Audience (understand the mobile audience), Devices (understand the devices they use), Ambition (define what you want to achieve), Prioritize (activities that will help you achieve your ambitions), and Technology (understand the technology and how it can help). This model allows businesses to engage customers on mobile platforms effectively.

These models have unique strengths, and businesses often combine them, depending on their specific digital marketing needs and goals.

Brand and Product Portfolio Models

Brand and product portfolio models are used to manage a company’s array of products and brands to maximize value and growth potential. Here are a few commonly used models:

BCG Matrix (Boston Consulting Group Matrix): This model helps businesses analyze and plan their portfolio of products and brands. The matrix consists of four quadrants based on market growth and market share: Stars (high growth, high share), Cash Cows (low growth, high share), Question Marks (high growth, low share), and Dogs (low growth, low share). Companies should aim for a balanced portfolio, investing in Stars and Question Marks, using the cash from Cash Cows, and limiting the number of Dogs.
GE-McKinsey Matrix: Similar to the BCG Matrix, the GE-McKinsey Matrix evaluates business portfolios but uses market attractiveness (instead of market growth) and business unit strength (instead of market share) as dimensions. Each product or business unit is rated from 1 to 9 on each axis, allowing for a more nuanced evaluation. This matrix helps companies decide where to invest, develop, or divest.
Brand Portfolio Matrix: This model is a way to visually represent the brands in a company’s portfolio and their relationships with each other. Brands may be categorized based on their market role (cash generators, rising stars, etc.) and their interrelationships (stand-alone, endorsed, sub-brands). The optimal portfolio is balanced and leverages the strengths of each brand.
Product-Market Expansion Grid (Ansoff Matrix): This tool helps businesses decide their product and market growth strategy. The grid has four strategies based on existing or new products and markets: Market Penetration (existing products, existing markets), Market Development (existing products, new markets), Product Development (new products, existing markets), and Diversification (new products, new markets).
Product Life Cycle Model: This model describes the stages a product goes through from when it was first thought of until it finally is removed from the market: Introduction, Growth, Maturity, and Decline. Different cycle stages require different marketing, sales, and support strategies.

These models are essential for strategic decision-making in businesses with multiple products or brands. They help allocate resources, make investment decisions, manage risk, and leverage opportunities for growth.

Competitor Analysis Models

Competitor analysis models help businesses understand their position relative to market competitors. They allow companies to identify opportunities and threats, assess competitor strategies, and anticipate future moves. Here are a few commonly used models:

Porter’s Five Forces: This model, proposed by Michael Porter, analyzes an industry’s competitive forces to determine the level of competition. It considers five forces: the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products or services, and the rivalry among existing competitors.
SWOT Analysis: Standing for Strengths, Weaknesses, Opportunities, and Threats, this tool is often used to understand both internal (strengths and weaknesses) and external (opportunities and threats) factors affecting a business. When assessing competitors, companies look at their strengths and weaknesses to see where they can gain a competitive advantage. SWOT Analysis: Meaning, Importance, and Examples
Competitor Array: This model categorizes competitors based on two strategic dimensions critical to the industry. By plotting competitors on the array, businesses can identify strategic gaps or areas where they could outperform competitors.
Strategic Group Analysis: This analysis divides competitors in an industry into different groups based on key strategic dimensions (e.g., quality, price). By doing this, a company can identify direct competitors and understand potential threats from other groups. Strategic Group Analysis
Competitor Profiling: This approach involves creating a detailed profile of each competitor, including products, market share, marketing strategies, financial performance, strengths, and weaknesses. This profile can help in understanding competitors’ strategies and anticipating their actions.
Market Share Analysis: This model analyzes competitors based on their market share. Companies with a higher market share often have a competitive advantage due to economies of scale, but they may also be less agile than smaller competitors.

By applying these models, companies can obtain valuable insights into their competitive landscape, allowing them to develop effective strategies, identify potential threats, and find growth opportunities.