What’s it: Asset-led marketing is a marketing philosophy in which a company should base its marketing strategy on its core competencies, not purely on what customers want. The company leverages its core competencies to innovate, drive efficiency and develop quality products and customer responsiveness.
Why did the company adopt it? Meeting what all customers in the market need and want can be very expensive. Costs can soar due to expensive research costs, and companies must spend acquiring new resources to succeed in market-oriented strategies, which can lead to losses. Therefore, basing marketing strategies on the company’s existing resources and capabilities is a good alternative to choose.
However, the asset-lead approach does not completely ignore the needs and wants of consumers. Rather, the company does not seek to satisfy all consumers in all markets all the time.
So, the urge to offer the best to consumers is not purely because of market demands. Instead, the company considers its core competencies such as innovation and brand image and utilizes them to produce products. It also requires market research. Thus, this strategy requires a match between the company’s internal strengths and market demands.
How does asset-led marketing work
Let’s assume you’re running a company. Focus on core competencies overcomes weaknesses in market orientation. Under market orientation, your company prioritizes customer satisfaction in developing and marketing products. You identify trends in consumer needs through market research. From that information, you develop an appropriate marketing mix.
Such approaches are often expensive and require significant resources. In addition, consumer tastes vary widely more than what can be exploited with your company’s existing assets.
In addition, consumer needs and wants continue to change from time to time. And, often, your company isn’t flexible enough to adapt to it all. For example, you have met customer requirements in the past. However, now the product is failing due to changing tastes and preferences of consumers. And, the product is no better than competitors’ offerings. But, they are one step ahead of your company in adapting to changing consumer tastes.
Due to such reasons, efforts to continuously adapt to changing demands and market competition become very complex. As a result, it can make your company lose focus.
What is meant by “asset.”
As I’ve explained, building an edge with a market-oriented strategy is often expensive and requires your company to constantly adapt. Alternatively, you can develop a strategy around core competencies. It becomes a way for your company to be more focused and produce the best.
What are the core assets and competencies we discussed so far?
Assets represent the resources your company owns, which flow economic benefits to your company. Meanwhile, competence is formed from the resources and capabilities of your company.
- Resources represent specific assets to support cost advantage or differentiation, as Porter articulates through his generic strategy. It may relate to human capital, physical assets such as production technology, or non-physical assets such as brand equity, patents, and your company’s reputation.
- Capabilities represent your company’s ability to utilize these assets effectively. It is immersed in company routines such as management style and organizational agility. And, it is more difficult for competitors to imitate than resources because it is not documented.
Capabilities and resources make up your company’s core competencies if they meet the following requirements:
- Valuable – your company’s resources and capabilities contribute to creating value through both differentiation and cost advantage.
- Rare – not many companies own it; maybe only your company owns it.
- Costly to imitate – other companies cannot imitate what your company has or if they do, they have to incur significant costs, and therefore, it is not economical to imitate.
- Non-substitutable – what your company has is hard to replace with other alternatives, so the threat of substitution is minimal.
Then, by leveraging core competencies, your company strives to meet consumer demands. For example, you can also leverage your customer knowledge to develop quality products around your core competencies. You are also constantly innovating. So, asset-led marketing requires your company to focus on your core competencies rather than focus on market tastes and preferences and then adjust the strength of your resources.
This approach also doesn’t require you to completely ignore customer demands. It is equally important. But, instead of focusing your efforts on what your customers like, you choose to compromise it with what you have. In other words, you consider what internal strengths you have to meet the needs of your customers.
For example, your company has deep customer knowledge through existing customer relationship management. You can use it to develop new products tailored to the competencies your company has.
Who adopts this approach?
Asset-led marketing is usually suitable for larger companies. This is because they have been successful in specific markets and are trying to leverage their core competencies into new markets to expand their business size and make more money.
Several well-known global companies are adopting this approach. For example, Coca-Cola uses its strong brand reputation and extensive distribution network to launch various product variants such as Diet Coke and Coke free Coke.
Apple and Microsoft also develop products around their core products. In addition, both utilize their know-how, knowledge, and reputation to continuously improve existing products and explore other related products.
Later, Levi Strauss also used this approach. Instead of going into other businesses that are not its core competence, the company limits its products to clothing. However, the company is leveraging its resources and capabilities to offer a wider variety of clothing than ever before.
Why are some companies not adopting an asset-based approach?
Asset-led marketing depends on the match between the company’s core competencies and market requirements. If the two match, it can lead to a competitive advantage over competitors. The company continues to innovate with its products and offer the best. On the other hand, consumers welcome it with pleasure. In fact, they are willing to queue to buy new products released by the company, as in Apple products.
However, not all companies have such blessings. They identify market opportunities. But, it does not match their core competence. So, they make more efforts to meet the market’s demands and adjust their resources by adopting a market-based approach.
Then, the asset-led approach also carries risks. For example, changing consumer tastes and preferences and dynamic competition often make past core competencies irrelevant to market demands. Moreover, companies also lack systematic market planning by collecting data about consumers and competition through market research.