4 Strategic Decision-Making Tools For Marketers

I love strategic frameworks, matrixes, boxes, and grids. It helps me to harness my fluctuating thoughts, gut feelings and whatever comes to my mind while working on an important project.

Ideas without action useless. In that sense each tool should give us a clear direction.

Today I’m sharing with you my 2 cents about 4 strategic decision-making tools which I consider must-know for any marketer, especially for those who are engaged to strategy-building process.

1. SWOT

SWOT is the most popular yet the most underrated tool among its own kind. It is used for situational assessment, but do we do it correctly?

Based on my personal experience at work and university, only few people really know that strengths & weakness are internal and opportunities & threats are external factors. So, “increasing our sales 30%” either doesn’t belong to SWOT’s “O” box or it is simply wasn’t articulated correctly. “Hunting bankrupting competitor’s premium customers which eventually might increase our sales 30%” is much more solid statement.

Another issue with SWOT is that, most people are utilizing it just to decorate presentations. However, if rightly used it can illuminate a clear direction of your next moves.

As seen at the table below there are four strategic directions that can be derived from a simple SWOT. For example, you should go offensive when your strength matches the untapped opportunity at the market. Say you have a best-in-class digital team and the e-commerce is the hot thing on the market. Bingo! Your #1 strategy for 2023 must be “full focus on e-commerce”.

Sceptics might ask why should we opt for defensive strategy when our weakness matches the opportunity. Here is the answer: if there is an opportunity on the market and you can’t seize it because of your weaknesses then your competitors will surely capture it and use against you. So better be prepared.

2. THE ANSOFF MATRIX

The Ansoff Matrix used to help in planning and evaluating growth initiatives. In particular, the tool helps stakeholders conceptualize the level of risk associated with different growth strategies.

What kind of growth strategies should we develop? Well, it depends.

When you‘re looking to grow the share of your existing product/service in the existing market it is called market penetration. It is the least risky strategy considering your knowledge about the product and market on top of existing relationships. Decreasing prices to attract new customers within the market segment, acquiring a competitor in the same market, increasing marketing efforts and streamlining distribution processes are typical execution strategies.

Another strategy — market development — is the second least risky option because it does not require significant investment in R&D or product development. Rather, it allows a management team to leverage existing products and take them to a different market. Here, marketers should cater to a different customer segment in order to enter a new domestic and/or foreign markets.

The highest risk entailing strategy in the Ansoff Matrix is diversification. Diversification itself has two versions:

1. Related Diversification. Where there are potential synergies that can be realized between the existing business and the new product and market. For example a producer of leather shoes might decide to produce leather car seats.
2. Unrelated Diversification. Where it’s unlikely that any real synergies will be realized between the existing business and the new product and market.

3. PESTEL ANALYSIS

A PESTEL analysis is a strategic framework commonly used to evaluate the business environment in which a firm operates. Personally for me it plays a role of checklist. While assessing the new market I want to make sure that each and every box checked before jumping into action.

Here is the checklist for your reference:

• Political: trade tariffs, conflicts, taxation, fiscal policies, corporate taxation, free trade disputes, antitrust and anti-competition issues etc.
• Economic: inflation rate, disposable income, unemployment rate, interest rates, foreign exchange rates, economic growth patterns etc.
• Social: religion and ethics, buying habits, demographics, health, media, brand preferences, education, lifestyle trends, consumer beliefs etc.
• Technological: automation, patents, licensing, information technology, R&D, technology infrastructure (like 5G, IoT, etc.), cyber security etc.
• Environmental: weather, geographical location, carbon footprint, climate change impacts, extreme weather events, natural resources etc.
• Legal: employment laws, regulatory bodies, industry regulation, consumer protection laws, protection of intellectual property etc.

4. BCG MATRIX

The BCG matrix, developed by the Boston Consulting Group, is a gold standard for a company with a big portfolio to assess its product lines regularly to see which product is profitable and which is making losses.

At different intersections of market growth rate and relative market share we have dogs, question marks, stars and cash cows.

Dogs hold a low market share and operate in a slowly growing market. They generate low or negative cash return and may require regular cash injections — thus in general, they are not worth investing in. Unless a dog has some other strategic aim, it should be liquidated.

Question marks have high growth potential but a low market share. This makes their future to be doubtful. With the right strategies and investments, they can become cash cows and ultimately stars taking into account their high growth rate. But they have a low market share so wrong investments can downgrade them to dogs even after lots of investment.

Stars are leaders in the category since they have a significant market share and a high growth potential. They ensure the cash flow today and in the future. These stars become cash cows that hold huge market shares in a low-growth market when the market matures. Such cows are milked to fund other innovative products to cultivate new stars.

Cash cows are products with significant ROI but operating in a matured market which lacks innovation and growth. These products generate more cash than it consumes. Usually, these products finance other activities in progress — including stars and question marks — to convert into cash cows.

Companies should take advantage of sales volume and leverage the availability of cash cows in their portfolio in order to maintain a strong market position and defend their market share.

Now, at the end of the article I recall a conversation with my friend which happend a couple of years ago. Knowing my affection to the strategic frameworks he was trying hard to prove me that all of those tools are futile when I had just explained him a famous 5 whys technique. We had quite a lengthy argument topped with ifs, buts, elses yet the compromise point wasn’t in sight. He had a problem for my every solution. Long story short, I told him exactly the following: Look, none of those tools won’t work if you don’t want them to. I use them properly and it yields a result. If not, I return back to study more. Sometimes conviction helps.

So, the moral of the story is if you want them to work, they will. If you use them properly they will clear the brain fog and indicate the right course of action.