As defense contractors diversify into commercial markets to lessen their dependence on smaller Pentagon budgets, those that best understand marketing will succeed.
The U.S. defense industry is facing greater uncertainty in its core military markets than at any time since the Cold War ended, and maybe since the industry’s birth in the 1950s. As a result, even though most of the big business moves in the sector this year have been about divestiture and “deconglomeration,” the dominant trend going forward will be diversification.
Thompson explains that defense contractors will diversify outside: defense, the government, and the U.S.
Diversification is being pursued because of an increasingly demanding and cash-strapped government, decreasing threats and a weak economy. But to diversify beyond the finite government sphere where all potential customers are not immediately known, marketing will play a much larger role.
For many defense contractors, however, marketing is mistakenly associated only with high-profile tactics such as advertising and public relations.
In fact, marketing is much more than just promotional tactics. One of the best paradigms for understanding the role of marketing is “the 4 P’s of marketing.”
Popularized and widely used since the 1960′s, the 4 P’s are: Product, Price, Place and Promotion.
- Product – what is the product? Is it tangible or intangible? How is it different from what competitors are currently offering? When a product improvement is made in response to competitive pressures or customer demands, that is a marketing decision.
- Price – do you have premium pricing or do you compete on low price, attempting to make your margins on volume (generally a losing proposition, long-term). Pricing is one of the most crucial marketing considerations.
- Place – how is your product sold – in a geographic area, via the Internet? Internationally? Do you have in-house sales and distribution or do you rely on channel partners? How do your competitors distribute their product?
- Promotion – This is the most visible form of marketing and includes a growing number of tactics available to marketers. However, it’s not advisable to promote a product until the product, price and place are determined.
Click here to read the Forbes story by Loren Thompson “Defense Contractors Are Going To Go For The Civilian Market.”