Competitive Benefits By Applying the Marketing Equation

Marketing is a proven way to gain competitive advantages in the market. However, this only succeeds with compelling arguments for the benefits. The customer must feel a benefit. The marketing equation provides a framework for developing a suitable strategy. Almost every marketing manager has been asked at least once in their professional life to create a marketing concept or, which is a little more demanding, a marketing strategy for their company. 

Such a “project” is much easier to tackle if one has a reasonable action framework, i.e. a structure that lists the required marketing process step by step, breaking it down into its most important phases and, at the same time, creates the prerequisites for optimizing the desired marketing goals.

Value Creation and Competitive Advantage as Basic Ideas of the Marketing Equation

And it is precisely this requirement that gave rise to the marketing equation. Your idea is based on two fundamental considerations. This involves, on the one hand, the representation and analysis of the marketing value chain and, on the other hand, the awareness that competitive advantage is decisive for the existence of a company. Already the most important marketing theorist of the 20th century, the American Wroe Alderson asserted that “no company enters a market if it does not have the hope of being able to offer some advantage to its customers”.

The two poles of the marketing equation

The central aim of marketing is to align the benefits of one’s business with the needs of existing and potential customers. The determining factors for these advantages are the product and service portfolio, special skills, know-how and innovative strength, in short, the professional or technical competitive advantages and, therefore, the acquisition potential of the company. 

However, this competitive advantage (in itself) is ultimately irrelevant

The most important thing is that the competitive advantage is also perceived by customers. Only market acceptance guarantees sustainable profit. This gap between competitive advantage per se and competitive advantage rewarded by the market must be bridged. At the same time, the two poles between which the added value chain of marketing must be classified are also indicated. Optimizing the marketing process inevitably leads to closing this gap.

Elements and Structure of the Marketing Equation

A prerequisite for the desired optimization is that the marketing process is broken down into its process phases: segmentation, positioning, communication, sales or distribution, acquisition and support and that these are each assigned to a customer criterion to optimize. Accordingly, the following equation can be derived regarding the identity relationship.

Competitive advantage honoured = competitive advantage (in itself) Customer benefit Customer perception Customer proximity Customer acceptance Customer satisfaction.

No mathematical-deterministic interpretation of concepts

However, this is not a deterministic mathematical interpretation of the term “equation”. The objective is instead the idea of ​​a balance (and an identity) to be established between the competitive advantage itself and the competitive advantage rewarded by the customer. In other words, the idea behind this concept is that balance can be achieved by adding the process-oriented phases towards the customer’s criteria. To illustrate this balancing relationship, the following figure shows a scale.

With the marketing equation, a practice-oriented approach has been developed, which does not make a (more theoretical) separation between strategy and mix but represents a process model and a framework for the targeted planning of measures and the corresponding use of resources. Based on the marketing equation, decisive action parameters and value factors are visible for each process phase.

The marketing equation as a working basis for developing a strategy

Since today, more and more strategic topics for the market pass through the marketers mentioned at the beginning and are handled by specially created personnel departments, strategy consultants, internal consultants, work groups or even by the management itself, the marketing equation offers a solid working basis, especially for these target groups.