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Objectives
At the end of the lesson the student shall be able to:
•
Identify and develop understanding the nature and scope of
marketing;
•
Define and discuss customer’s needs and wants;
•
Define different marketing concepts;
•
Illustrate and discuss the importance of marketing
It is also defined as the meeting of the minds between the seller and
the buyer to satisfy human needs and wants with profit on the part o0f the
marketer and the satisfaction of thee buyer for the money he spent. On the
bases of this view, marketing is an organization intervention and functions
that set the process of creating, communicating and delivering value to
customers.
•
Give, discuss and understand the goals of marketing and its social
effects;
From the academic point of view, marketing is the art and science of
creating tangible products or services and finding the market, getting and
retaining them to attain profitable operations. On one hand, it is a societal
process that marketers must communicate the sustainable value of the
product or service to its target market. It is a critical business process for
attracting customers to satisfy their needs and wants.
•
Develop student interest in marketing jobs; and
Customer Needs and Wants
•
Understand the new challenges in the field of marketing.
Need is one important component in the marketing of products. It is
the consumer’s desire for a particular product or service. The product or
service must have specific benefits that satisfy the functional or emotional
needs. On the other hand, basic needs are food, clothing, and shelter. We
cannot live without them and marketers must be able to provide them to
human population.
The Field of Marketing
Marketing is the creation and communication of value to
customers. It involves the customer’s maintenance of relationships that
should last for lifetime. It is the link between society’s material
requirements for its needs and wants. Marketing must satisfy human needs
and wants through the exchange process and the building of long-term
relationships.
Definition of Marketing
Through the decades, marketing has evolved various definition and
its meaning changes according to the views of the different marketing
gurus. Many view marketing as process or dynamic business activity that is
designed to plan and promote the delivery or satisfy needs and wants of the
potential and present market.
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Food can be processed in different tastes; styles and menus that
shall meet the human craving and satisfaction. Clothing could be designed
into different styles depending on people’s taste and social values. Shelters
are constructed differently depending on the capacity of the buyer to
finance his home. These needs are the marketer’s point of interest for
profit.
Wants are higher-level human needs as they appeal more to the
emotions. These are the social needs for recognition and the development
of higher social satisfaction is limitless. The development of technology and
different electronic gadgets are more of human wants. The marketers must
continuously improve technological inventions to sustain customer wants.
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Marketing Concepts
The philosophy of doing business is developed as people realized
that marketing is vital to the success of any marketing organization. The
marketing concept emphasizes customer orientation and coordination of
marketing activities to achieve the marketing goals and objectives. The
philosophy that “The customer is the boss”, rings over the minds of the
marketing people that customer satisfaction which is of paramount
consideration. While it is important to satisfy customer wants and needs,
this could only be achieved under the following marketing concepts.
1.
Marketing must be Customer Oriented.
The planning and operation must be directed towards customer orientation.
The whole marketing organization and its operating staff must be focused
on determining what will satisfy the needs and wants of the target
customers, the important link in the business operation.
2.
Marketing must be Coordinated Activities
Coordination activities must start in the product planning process, the
process. The product is the key element that the customer want to buy that
is worth his money. Price is another important component as customers
would like to get his money’s worth. The place of distribution must be
within his reach and the promotional activities must be appealing for him to
decide which product to purchase.
3.
Marketing must be able to achieve the Performance Target Goals
and Objectives.
Customer-oriented and coordinated marketing aims to achieve its profit,
objectives and goals. These goals and objectives hinge on the increase in
sales volume and customer’s patronage. When product planning, price,
promotion and distribution and properly coordinated, it will result in the
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most effective way of satisfying the customer’s needs and wants. The sales
volume and profit objective will be realized.
Factors for Developing Marketing Concepts
1.
Capturing Marketing Insights
The overall direction must focus on its vison and mission. The organizational
goals and objectives must be directed towards the creation of value to its
customers. These must be the inherent philosophy of the marketing
organization. The functional areas in the marketing organization must be
focused towards its ultimate set of tasks in the building of long lasting
relationship with its target market.
2.
Effective Financial Management System
This system in the procurement of quality and affordable materials for
processing of the product is a vital component in effective operation of the
marketing system. The competition in the market is based on affordable
quality products where labor and materials interplay in their production.
Financing the marketing program will develop effective sales program that
will bring in sustainable profitability.
3.
The Value of Human Resources
All business activities need human resources in their operation. The
employees must be committed in the production of quality products and
the delivery of quality service. They must develop work ethics and strong
commitment to the marketing efforts of the organization. Sustainable
development and progress rest with people who are willing to put all efforts
towards the organizational objective of quality products and service.
4.
The Production Process
The process must conform to standards in terms of product quality. The
race to economic profitability is the production of products that shall satisfy
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the customer’s wants and needs. The role of marketing is to sell more
products but it must conform to customer demand. Production may
produced so many products, yet they are useless inventory when they fail to
reach their target market. Marketing efforts will turn them into profitable
inventory.
5.
The Presence of Competitors
The marketing of products becomes interesting with the presence of
competitors. Marketing outfit must develop strategies in capturing their
target market and develop and sustained patronage. These marketing
strategies must develop customer loyalty to the brand or the product.
Product improvement and pricing strategies with sustained promotional and
advertising program are important components in the competitive market.
The Goals of Marketing and their Social Effects
1.
Maximize the Consumption of Goods
The Aggressive marketing strategies and policies had increased the
consumption of goods and services. The demand of the market is
tremendous. Sellers face many challenges on what products to offer. Buyers
want quality products at reasonable price and t the most convenient
location.
The marketing job is to stimulate greater product consumption.
Greater production requires consumption of material inputs and more
goods in the market that create more employment. More jobs are created
and more people enjoy economic wealth. Maximum consumptions
generates economic development for the nation.
2.
3.
Maximize Choice of Goods or Service
Some marketers believe that the goal of marketing is to maximize the
variety of the product in the market and provide consumers a wide
assortment of choices. The main objective is for customers to find the goods
that will satisfy their biological needs as well as their emotional and social
wants.
Development of new products needs research but that will mean time and
costs. Maximizing consumer choice entails cost as the economies of scale do
not operate in production of goods. The consumers has to spend time
studying the benefits of the production of goods. The consumer has to
spend time studying the benefits of the product, only to find out later that
the utility and functions are the same.
4.
Maximize the Quality of Life
The improvement of the quality of life is the target of marketing people.
New hand phones are created to communicate with various sectors of
society, friends and families. Easy communications access satisfies not only
social needs but also business requirements. Compu0terss and others
electronic gadgets bring pleasures to homes and enjoyment of the comfort
of living.
Maximize Consumer Satisfaction
The market demand is varied and customer satisfaction is the challenge of
the marketing organization. Measurement of customer satisfaction is
difficult. It embraces careful analysis of the market demand which varies
with the time and the social development of society.
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The customer may be satisfied with the product the marketing people
produce but it may create pollution to the environment. Plastics are good
packaging materials for consumer goods but they create flood and
environmental pollution. Cars and other vehicles using gas serve the
convenience of the riding public, but they create global warming that result
to environmental imbalance.
The quality of life is difficult to measure. Life satisfaction is more than the
physical comfort. The impact of electronic radiation has created health
problems among the many users of modern gadgets. People in the previous
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generations lived longer because they lived a simple life. They ate
unadulterated food and lived free from pollution and radiation.
The Careers in Marketing
Student in the field of business must make one of the most
significant decisions in the choice of a career plan if they would like a life of
prosperity and enjoyment. Their career decisions will influence their future
happiness, self-fulfillment and well-being. Before landing a serious
decisions, one must be able to look into the process of introspection. It is
the process of looking into oneself, honestly assessing what he really likes as
a chosen profession.
Introspection would mean finding out one’s personal wants and
needs such as;
1.
Money and financial stability
2.
Leisure and social surroundings
3.
Working in stable company or the government
4.
Living in simple and silent community
5.
Importance of social prestige and a career
6.
Dealing with pressures as source of challenge
7.
Tangible signs of fulfillment in the job
8.
Working alone or with groups of people
A deeper analysis of the above is to look into the student’s strengths and/ or
weaknesses. They must identify their goals in life. Their college program will
help them identify the career path they would like to choose. Their life
program will bee shaped by the personality they develop through time. A
marketing career poses so many challenges and pressures but the rewards
are tremendous and enjoyable.
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Their personal attributes and social upbringing are ingredients in any of the
career in marketing. Strategies shows that about one third of the total jobs
are in the field of marketing. Each of this chosen field needs personal
attributes and qualities that will make them successful in any of the
following fields.
1.
Personal Selling
This is the most common job in any community. It varies in depth depending
on the product being carried. It starts with the street vendor and extend to
selling aircraft and other valuable equipment and computers. There are
opportunities of earning higher income in the field of personal selling.
Salaries and allowances are for personal expenses, while commissions and
incentives are then incentives that drive one to seek more fortunes.
a.
Sales Representatives
They sell goods or services to ultimate consumers, business organizations,
or to middlemen. They are commonly found in insurance business, drug
companies, soft drinks and other beverages, wines and cigarettes and other
consumer items.
b.
Sales Support Representatives
The work is about assisting Sales Manager and staff in various trade shows,
sales training and other sales program of an organization. They also assist in
product development and distribution.
c.
Customer Service Representatives
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They assist customer in after sales, often handling customer complaints, or
giving information about the product or service. This job is most common in
appliances, machinery and equipment, or in other consumer goods.
d.
Assistant Store Manager
The position is of a sales management trainee handling staff sales clerk in
supermarkets, department stores or superstores. They supervise the
activities of the sales staff and arrangement of the store display.
e.
Research Trainee
He assists in the research activities of large organizations, gathering and
collecting data and information that may be needed by management in
preparing marketing plans and programs, report preparation and data
analysis.
While personal selling is rated low in the sales career among the white collar
jobs, the personal progress in terms of income is limitless depending on the
personal performance in the sales person. Personal selling requires a lot of
travelling and meeting different people. The social exposure will yield
tremendous dividends. His ascendancy to higher selling career depends on
ability and performance.
2.
Store Management
The next in rank among those new in field of marketing is store
management. This position is mostly common in smaller outlets where the
new marketing graduates are exposed to the rudiments of purchasing,
inventory control, and general supervision of the sales staff. Marketing
graduates who were working students on fast food chain stores before are
given the opportunity to take the management examination for sales
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management trainee and later promoted to the position of assistant store
manager.
3.
Logistic Management Purchasing
A purchasing agent is the business counterpart of the retail store buyer.
Those assigned in the purchasing or logistic functions buy materials for
manufacturing, office supplies and equipment or for resale to big
establishments. Larger organizations employ a lot buyers or purchasing
agents.
Graduates of marketing are potential agents or buyers. Positions along this
line need the qualities of honesty and integrity as they are exposed to
temptations of bribery and corruptions.
4.
Advertising Assistant
This requires graduates with artistic and creative ability and strong sense of
imaginations. Advertising agencies needs artists, copy writers,
photographers, layout designers, and printing artists in computers to create
various advertising materials for the organizations clients. Some also need
representatives for selling media ads to various marketing outlets. They
conduct related studies or advertising research program.
5.
Sales Promotion
Those employed under these marketing programs are required to have
imaginative minds to tie up the activities of personal selling and advertising.
Effective sales promotion requires creativity and imagination, coupled with
a sound knowledge of marketing fundamentals. It also deals with the design
of stored display, trade shows, and other company exhibits to attract new
and old customers. They are also engaged in the design of the premiums,
giveaways, contests, product sampling, and other sales promotional
activities.
6.
Marketing Research
Marketing students are trained in college in writing feasibility studies and
marketing research to expose them in this important field of marketing.
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Those employed in this area must have critical minds and acumen in
marketing analysis and trends. These position need an aptitude of precise
analytical work and quantitative skills. They must have the basic knowledge
of statistics and its application in the marketing research program.
7.
Product and Brand Management
Trainees along this line are responsible in assisting higher management in
the planning and development of new product. It entails product planning
and the development of marketing programs. They are trained in labelling,
packaging activities, and other product designs that will add product value
to its target clients. Product management involves pricing strategies,
physical distributions planning, and studies of legal issues. Studies of
competitors activities is one important aspect as the planning mode must
counter the threats of competitions in the market.
8.
Physical Distributions
They are related to the distributions of the product from the producer to
the direct consumer. They follow several stages from the manufacturing
plant to the warehouse and then to the different outlet of sales. Distribution
entail proper handling of the product in the warehouse, inventory control
system, and transportation management. They also require knowledge in
system approach and development of new distribution strategies that will
reduce cost in product movement.
9.
Public Relation
These positions are for marketing graduates with higher level of verbal and
written communication skills. They must have strong personality to project
the good image of the organizations. Public relation is valuable connections
between the marketing organizations and its various public. People are
responsible for telling the public about their company, products and
services, and the community programs. They answer adverse issues
confronting the company’s activities and require great knowledge of human
and public relations.
10.
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Consumer Affairs and Protection
Consumer awareness of their rights and protection on product usage and
warranties is increasing. Company needs college graduates in the field of
marketing who are computer literate and can handle customer’s complaints
either thru the telephone or in person. Customers must be answered
tactfully and promptly to keep their loyal patronage. One lost customer may
multiply a hundred fold. The evaluation of the marketing program must be
looked in deeper perspective due to the various attacks of market
exploitation. Marketing efforts must consider how it can satisfy its
customers, meet its own needs and wants, and serve the best interest of
the general public.
Challenges of Marketing in the New Generation
The changing global landscape poses challenges for marketing
people. The marketing strategies of the last decade may be obsolete in the
changing global economy. The world economy had changed from the world
power in America and Europe to the new progressive countries in the Asian
region that was not badly affected by the world’s recession. As a result of
this changing economic condition, countries are wrestling for economic
competitions.
Marketers has to face the following challenges;
1.
The Rapid Product Globalization
With the General Agreement in Tariff and Trade (GATT) among member’s
countries, products could freely enter in member countries with less tariff
or taxes, making global products available to many consumers. This allows
countries to expand their market coverage in production and marketing
resulting in the more complex marketing system. New marketing strategies
had had to evolve as small and big companies begin to compete in the
complex marketing environment.
2.
The Rapid Change in Global Economy
The purchasing power of the peso had changed overtime. The rising
population has not improved the economy of the people found no
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opportunity for gainful employment. In the last decade, wages have
increased, but the purchasing power has not coupled with the rising cost of
living. Marketing strategies had changed from big packaging of products
from bottles to small containers to sachets.
The advent of computers and more efficient system of production has
created loss of jobs to less skilled manpower contributing to
unemployment. While the country is less affected by these global shift in
economic condition due to employment opportunities abroad for OFW the
country has to content with the political and social problems in the local
scenario.
3.
Social Problems and Marketing Ethics
The environmental issues on pollution created by the introduction of new
products in the market are issues that need to be content with by marketing
people. The negligence of people in the proper discharge of garbage has
created flooding in all of Metro manila and other developing cities.
Disposing toxic waste in the environment created danger to the life of
people. Plastics or non-biodegradable materials are disposed in waterways
creating mass distractions due to floods.
The ethics on environmental pollution should place stricter demand on
marketing people to change some of their packing materials and these
involve additional cost that had to be passed on to consumer. Advertising
and promotional ethics has eroded some cultural and moral issues of the
Filipino and advocates of morale regenerations are up against this practice.
4.
The Changing Marketing Strategies
The advent of modern technologies in communication has changed the
marketing landscape. The distributions of the product has gone miles away
capitalizing on the modern system of telemarketing. The advent of speed
delivery system has changed the marketing system that consumers need to
go out of their comfort zone to enjoy products they want to eat or wear.
Buying and selling products through the internet could be done globally,
advertising and promotional activities have to reach cope with the changing
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marketing demand. They have to reach out to the other continent to sell
their products globally. With speed of communications network, products
could be in your doorsteps in a few days or hours. This major paradigm shift
is not the monopoly of large marketing organization but also the budding
entrepreneurs of the new generations.
MODULE: MARKETING PRINCIPLES AND STRATEGIES
Learning Competencies:
1.
2.
3.
4.
Define and understand marketing
Describe the traditional approaches to marketing
Discuss the goals of marketing
Identify and explain contemporary marketing
The concept of marketing connotes the cration go what is valuable to a
customer in the form of goods and services. Specifically, it is the process of
creating, producing, promoting, distributing, and selling a product/service at
a particular price. In simpe terms, marketing is continuously satisfying the
customer’ needs and wants at a profit.
Marketingis defined by the American Marketing Association as “the activity,
set of institutions, and processes for creating, communicating, delivering,
and exchanging offerings that have value for customers, clients, partners,
and society at large.”American Marketing Association,
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Marketing is the homework that managers undertake to assess needs,
measure their extent and intensity and determine whether a profitable
opportunity exists. Marketing continues throughout the product’s life,
trying to find new customers and keep current customers by improving
product appeal and performance, learning from product sales results and
managing repeat performance.
Marketing—A social and managerial process by which individuals and
groups obtain what they need and want through creating and exchanging
products and value with others. To explain this definition, we examine the
following important terms: needs, wants and demands; products and
services; value, satisfaction and quality; exchange, transactions and
relationships; and markets.
COR
E
MA
RKE
TIN
G
CON
CEP
T
MA
RKE
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TING PROCESS
Identify market
opportunities
classify and
define target
markets
Develop
marketing mix
efforts
Implement the
planned
marketing
efforts
The diagram illustrates the four main steps of the marketing process.
1. Identifying Market Opportunities- It is imperative to find out the
unfulfilled needs and wants of consumers that are still there to fill,
the segment of the population they come from, and how these
needs should be satisfied. A firm can identify market opportunities
by scanning both the internal and external environments. Scanning
the internal environment involves a quick review of the firm’s
present product line, its suppliers and distributors, and alliances and
affiliates. In this manner, the firm will be able to gauge its capacity
to create, produce and deliver the products/services which will
satisfy the consumers. The external environment, on the other
hand, refers to the economic, political, legal, and technological
forces that might affect the process of creation and production of
the firm’s products. The analysis of the internal and external
environment is summarized in the acronym SWOT which stands for
STRENGTHS, WEAKNESSES, OPPORTUNITIES and THREATS.
2. Classify and define target markets, - There should always be a
careful analysis of consumers. In relation to this, marketers should
be able to divide the markets into different segments. This means
segmenting the market into unique groups with distinct needs and
characteristics. From there, the company should come up with
plans and strategies that would target the chosen market segments.
For example, a shampoo manufacturer would develop a product
specifically for people who suffer from dandruff and for those who
would like to prevent it. In this scenario, what the manufacturer
wants is to produce an anti-dandruff shampoo. Likewise, a
shampoo manufacturer can come up with different variants of
shampoos to cater to more market segments. One variant could be
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developed for users with fine hair, another for falling hair, and one
more for frizzy hair.
3. Develop marketing mix efforts. Once the target market is
identified, the next task of the marketer is to develop strategies that
would elicit positive response for the product from the target
market. The marketing mix efforts include the following: product,
place, price, promotion, people, physical environment, process.
4. Implement the planned marketing efforts. Translating marketing
strategies into action plans require extensive market analysis.
Before its actual implementation, an action plan is first translated
into marketing plan.
Who Does Marketing?
The short answer to the question of who does marketing is “everybody!”
But that answer is a bit glib and not too useful. Let’s take a moment and
consider how different types of organizations engage in marketing.
For-Profit Companies
The obvious answer to the question, “Who does marketing?” is for-profit
companies like McDonald’s, Procter & Gamble (the makers of Tide
detergent and Crest toothpaste), and Walmart. For example, McDonald’s
creates a new breakfast chicken sandwich for $1.99 (the offering), launches
a television campaign (communicating), makes the sandwiches available on
certain dates (delivering), and then sells them in its stores (exchanging).
When Procter & Gamble (or P&G for
short) creates a new Crest tartar control toothpaste, it launches a direct
mail campaign in which it sends information and samples to dentists to offer
to their patients. P&G then sells the toothpaste through retailers like
Walmart, which has a panel of consumers sample the product and provide
feedback through an online community. These are all examples of
marketing activities. For-profit companies can be defined by the nature of
their customers. A B2C
(business-to-consumer) company like P&G sells products to be used by
consumers like you, while a B2B (business-to-business) company sells
products to be used within another company’s operations, as well as by
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government agencies and entities. To be sure, P&G sells toothpaste to other
companies like Walmart (and probably to the army, prisons, and other
government agencies), but the end user is
an individual person.
Other ways to categorize companies that engage in marketing is by the
functions they fulfill. P&G is a manufacturer, Walmart is a retailer, and
Grocery Supply Company (http://www.grocerysupply.com) is a wholesaler
of grocery items and buys from companies like P&G in order to sell to small
convenience store chains. Though they have different functions, all these
types of for-profit companies engage in marketing activities. Walmart, for
example, advertises to consumers.
Grocery Supply Company salespeople will call on convenience store owners
and take orders, as well as build in-store displays. P&G might help Walmart
or Grocery Supply Company with templates for advertising or special
cartons to use in an instore display, but all the companies are using
marketing to help sell P&G’s toothpaste. Similarly, all the companies
engage in dialogues with their customers in order to understand what to
sell. For Walmart and Grocery Supply, the dialogue may result in changing
what they buy and sell; for P&G, such customer feedback may yield a new
product or a change in pricing strategy.
Nonprofit Organizations
Nonprofit organizations also engage in marketing.
When a nonprofitorganization engages in marketing activities, this is
callednonprofit marketing. Some schools offer specific courses in nonprofit
marketing, and many marketingmajors begin their careers with nonprofit
organizations.
Individuals
If you create a résumé, are you using marketing to communicate the value
you have to offer prospective employers? If you sell yourself in an interview,
is that marketing? When you work for a wage, you are delivering value in
exchange for pay. Is this marketing, too? Some people argue that these are
not marketing activities and that individuals do not necessarily engage in
marketing. (Some people also argue that social marketing really isn’t
marketing either.) Can individuals market themselves and their ideas? In
some respects, the question is a rhetorical one, designed for academics to
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argue about in class. Our point is that in the end, it may not matter. If, as a
result of
completing this book, you can learn how to more effectively create value,
communicate and deliver that value to the receiver, and receive something
in exchange, then we’ve achieved our purpose.
Why Study Marketing?
Marketing Enables Profitable Transactions to Occur
Products don’t, contrary to popular belief, sell themselves. Generally, the
“build it and they will come” philosophy doesn’t work. Good marketing
educates customers so that they can find the products they want, make
better choices about those products, and extract the most value from them.
In this way, marketing helps facilitate exchanges between buyers and sellers
for the mutual benefit of both parties. Likewise, good social marketing
provides people with information and
helps them make healthier decisions for themselves and for others.
Of course, all business students should understand all functional areas of
the firm, including marketing. There is more to marketing, however, than
simply understanding its role in the business. Marketing has tremendous
impact on society.
Marketing Delivers Value
Not only does marketing deliver value to customers, but also that value
translates into the value of the firm as it develops a reliable customer base
and increases its sales and profitability. So when we say that marketing
delivers value, marketing delivers value to both the customer and the
company. Franklin D. Roosevelt, the U.S. president with perhaps the
greatest influence on our economic system, once
said, “If I were starting life over again, I am inclined to think that I would go
into the advertising business in preference to almost any other. The general
raising of the standards of modern civilization among all groups of people
during the past half century would have been impossible without the
spreading of the knowledge of higher standards by means of
advertising.”Famous Quotes and Authors, “Franklin D. Roosevelt Quotes
and Quotations,” referred to advertising, but advertising alone is insufficient
for delivering value.
Marketing finishes the job by ensuring that what is delivered is valuable.
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Marketing Benefits Society
Marketing benefits society in general by improving people’s lives in two
ways. First, as we mentioned, it facilitates trade. As you have learned, or will
learn, in economics, being able to trade makes people’s lives better.
Otherwise people wouldn’t do it. (Imagine what an awful life you would
lead if you had to live a Robinson Crusoe–like existence as did Tom Hanks’s
character in the movie Castaway.) In addition, because better marketing
means more successful companies, jobs are created. This generates wealth
for people, who are then able to make purchases, which, in turn, creates
more jobs.
The second way in which marketing improves the quality of life is based on
the value delivery function of marketing, but in a broader sense. When you
add all the marketers together who are trying to deliver offerings of greater
value to consumers and are effectively communicating that value,
consumers are able to make more informed decisions about a wider array of
choices. From an economic
perspective, more choices and smarter consumers are indicative of a higher
quality of life.
Marketing Costs Money
Marketing can sometimes be the largest expense associated with producing
aproduct. In the soft drink business, marketing expenses account for about
one-thirdof a product’s price—about the same as the ingredients used to
make the soft drinkitself. At the bottling and retailing level, the expenses
involved in marketing a drinkto consumers like you and me make up the
largest cost of the product.
Some people argue that society does not benefit from marketing when it
representssuch a huge chunk of a product’s final price. In some cases, that
argument isjustified. Yet when marketing results in more informed
consumers receiving agreater amount of value, then the cost is justified.
Marketing Offers People Career Opportunities
Marketing is the interface between producers and consumers. In other
words, it isthe one function in the organization in which the entire business
comes together.Being responsible for both making money for your company
and deliveringsatisfaction to your customers makes marketing a great
career. In addition, becausemarketing can be such an expensive part of a
business and is so critical to itssuccess, companies actively seek good
11
marketing people. At the beginning of eachchapter in this book, we profile a
person in the marketing profession and let thatperson describe for you what
he or she does. As you will learn, there’s a great variety of jobs available in
the marketing profession. These positions represent onlya few of the
opportunities available in marketing.
• Marketing research. Personnel in marketing research are responsible for
studying markets and customers in order to understand what strategies or
tactics might work best for firms.
• Merchandising. In retailing, merchandisers are responsible for
developing strategies regarding what products wholesalers should
carry to sell to retailers such as Target and Walmart.
• Sales. Salespeople meet with customers, determine their needs,
propose offerings, and make sure that the customer is satisfied. Sales
departments can also include sales support teams who work on
creating the offering.
• Advertising. Whether it’s for an advertising agency or inside a
company, some marketing personnel work on advertising. Television
commercials and print ads are only part of the advertising mix. Many
people who work in advertising spend all their time creating
advertising for electronic media, such as Web sites and their pop-up
ads, podcasts, and the like.
• Product development. People in product development are responsible for
identifying and creating features that meet the needs of a firm’s customers.
They often work with engineers or other technical personnel to ensure that
value is created.
• Direct marketing. Professionals in direct marketing communicate
directly with customers about a company’s product offerings via
channels such as e-mail, chat lines, telephone, or direct mail.
• Digital media. Digital media professionals combine advertising, direct
marketing, and other areas of marketing to communicate directly with
customers via social media, the Web, and mobile media (including texts).
They also work with statisticians in order to determine which consumers
receive which message and with IT professionals to create the right look and
feel of digital media.
• Event marketing. Some marketing personnel plan special events,
orchestrating face-to-face conversations with potential and current
customers in a special setting.
• Nonprofit marketing. Nonprofit marketers often don’t get to do
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everything listed previously as nonprofits typically have smaller
budgets. But their work is always very important as they try to change
behaviors without having a product to sell. A career in marketing can begin
in a number of different ways.
Entry-level positions for new college graduates are available in many of the
positions previously mentioned. A growing number of CEOs are people with
marketing backgrounds.
Traditional Marketing Approach
Traditional marketing is an umbrella term that covers the wide array of
advertising channels we see daily. These may include print media, billboard
and TV advertising, flyer and poster campaigns and radio broadcast
advertising. They are not necessarily outdated, however, research has
shown those companies that have abandoned simply using these channels,
and adopted contemporary marketing channels proposed in this article,
have remained prosperous and in fact seen an increase in leads, sales and
traffic to web content.
Traditional marketing theories include Ansoff's Matrix, a theory that
proposes products/services fall into one of four categories depending on
the market and the product released. New Product- New Market is
considered as diversification. This theory recommends that businesses
should try to diversify their product portfolio so as to spread risk amongst
their product range. An example of this would be when apple created the
first iPhone released in 2007. This product was new and introduced into a
new market. Apple soon reaped the benefits of introducing this hugely
popular phone. Their product range grew from accommodating for
designers on the Apple Mac, to mobile devices, tablet devices, watches and
beyond.
Another marketing theory that's considered to be traditional is the
marketing mix. Made up of the 7 P's. These include product, place, price,
promotion, people, physical environment, process.. All these components,
when combined, create a solid marketing proposal. However this theory as
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well as Ansoff's, can be drastically improved with the use of contemporary
marketing strategies.
Traditional Marketing seeks to pull customers to a product, whatever the
cost. It is, for this reason, considered to be fairly outdated as it does not
consider the customer they are selling to, more the market that the
company operates within. There are however channels that have developed
from traditional marketing, including digital, that aim for the same goal,
however, use more subtle and approachable mediums so as to capture their
target audience. This may include Pay-Per-Click Campaigns, social media
posts, search engine optimisation and email marketing.
Ansoff Matrix
Market Penetration is the safest of the four options. Here, you focus on
expanding sales of your existing product in your existing market: you know
the product works, and the market holds few surprises for you.
Product development- is slightly more risky, because you’re introducing a
new product into your existing market.
Market development- you’re putting an existing product into an entirely
new market. You can do this by finding a new use for the product, or by
adding new features or benefits to it.
Diversification-is the riskiest of the four options, because you are
introducing a new, unproven product into an entirely new market that you
may not fully understand.
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Contemporary Marketing Approach
Contemporary Marketing refers to theories that stress the importance of
customer orientation versus the traditional market orientation. They are
strategies that, when implemented, offer greater support for their client
base with a product range that varies depending on what the target market
desires. Rather than what the company wants them to have.
Products including the vast array of kitchen appliances with built in failure
components attracting their customer base back to them for further
purchases are an example of product orientation. Traditional marketing
theories are said to favour this ideology. Though somewhat devious, it is
most definitely effective. Attracting customers to their product range has
become more difficult because consumers have become more literate in
technology and, therefore, can research items before purchase. This allows
them to make a conscious and informed decision to avoid companies with
this ethos.
Contemporary marketing theories include Co-Creation. This theory suggests
creating a bridge between customer and business through gamification. A
practical example would be attracting customers through social media
content relevant to their needs or writing article blog posts that have useful
information. Research conducted by Harvard business school and London
school for business found that businesses that utilised the contemporary
marketing strategy and incorporating both co-creative and shared value
ideas, over the long run prospered far more than those companies who
hadn't chosen this avenue.
Another popular contemporary marketing theory is shared value. This
theory considers the market that the company is wanting to penetrate and
seeks to offer perks in said market. A successful example of this would
include Tesla. They have invested millions of dollars building charging
stations for electric cars across North America, Europe and Asia. The
stations can be used by many different branded electric cars. They have
actively tried to improve the market whilst simultaneously attract more
customers to them. For B2B companies, this may include creating events
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where companies in the same industry can be invited and discuss amongst
themselves offers they can give each other.
Overview of the Marketing Plan
The marketing plan is a summary of what the company or firm wants and
plans to do before launching a new product, or before re-launching
produc
t/servi
Executive Summary
ce. It
Present market Situation
is
compo
SWOT ANALYSIS
sed of
Marketing Objectives
the
followi
Marketing Strategies
ng
Marketing Programs in the Marketing Mix
eleme
nts
1. Executive Summary- it is a rundown of the programs and
recommendations particular to a product/service under study.
2. Present Market Situation- it is an account of the firm’s present
standing in the market and current or potential competitors. It also
identifies what the other competitors products are offering and
what the firm’s product intends to offer to be competitive in the
market.
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3. SWOT analysis- this analysis includes the company’s strength,
weaknesses, opportunities and threats.
4. Marketing Objectives should be SMART
5. Marketing Strategies- these strategies are based on the marketing
mix
6. Marketing Programs in the Marketing Mix
7. Budget- this refers to the financial aspects of the marketing plan,
which include the following: sales forecasts for a specific period of
time, costs projections, income statements, balance sheets, and
cash flow statements.
8. Controls- these are mechanisms that evaluate the marketing plan
and check the firm’s current performance. Controls provide
measures to be undertaken when certain strategies or programs of
the marketing plan do not work as expected.
MODULE 2: CONSUMER BEHAVIOR
OBJECTIVES:
1. Describe the personal and psychological factors that may influence what
consumers buy and when they buy it.
2. Explain what marketing professionals can do to influence consumers’
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behavior.
3. Explain how looking at lifestyle information helps firms understand
what consumers want to purchase.
4. Explain how Maslow’s hierarchy of needs works.
5. Explain how culture, subcultures, social classes, families, and reference
groups affect consumers’ buying behavior.
buyers behave—whether they influence you to make a purchase, buy
additional products, or buy nothing at all.
Consumer behavioris often called the psychology of marketing because it
analyzes how consumers select brands, products, and services based on
how they think or feel their environment influences them.
Factors that Influence Consumer behavior
Why do you buy the things you do? How did you decide to go to the college
you’re attending? Where do like to shop and when? Do your friends shop at
the same places or different places? Do you buy the same brands multiple
times or eat at the same restaurants frequently?
Marketing professionals that have the answers to those questions will have
a much better chance of creating, communicating about, and delivering
value-added products and services that you and people like you will want to
buy. That’s what the study of consumer behavior is all about. Consumer
behavior1 considers the many reasons—personal, situational, psychological,
and social—why people shop for products, buy and use them, sometimes
become loyal customers, and then dispose of them.
the study of consumer behaviour is an important part of the managerialist
approach to marketing. Underpinning this notion is the belief that if
academics and industrialists can come to a better understanding of why
people behave as they do, it should be possible to develop products which
have a better chance of success in the market place. Over and above the
interests of firms, there is a societal interest in seeking to understand
consumer behaviour.
Consumer behavior is influenced by many things, including environmental
and marketing factors, the situation, personal and psychological factors,
family, and culture. Businesses try to figure out trends so they can reach the
people most likely to buy their products in the most cost-effective way
possible. Businesses often try to influence a consumer’s behavior with
things they can control such as the layout of a store, music, grouping and
availability of products, pricing, and advertising. While some influences may
be temporary and others are long lasting, different factors can affect how
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1. Culture- it refers to consumers beliefs, traditions, mores, norms and
values acquired from the family and other institutions in the society.
Culture has a great influence on consumers’ preferences.
2. Social aspects- social aspects refer to the status and roles of people
in the society.
3. Personal factors- these include age, lifestyle, occupation, civil
status, religion, economic status,, and personality of the consumers.
4. Psychological factors- consumers’ buying patterns are largely
influenced by the following psychological factors: motivation,
perception, learning, beliefs, and attitudes. Consumers have
different preferences due to various psychological tendencies.
Low-Involvement Versus High-Involvement Buying Decisions and the
Consumer’s Decision-Making Process
The level of involvement reflects how personally important or interested you
are in consuming a product and how much information you need to make a
decision. The level of involvement in buying decisions may be considered a
continuum from decisions that are fairly routine (consumers are not very
involved) to decisions that require extensive thought and a high level of
involvement. Whether a decision is low, high, or limited, involvement varies
by consumer, not by product, although some products such as purchasing a
house typically require a high-involvement for all consumers. Consumers
with no experience purchasing a product may have more involvement than
someone who is replacing a product.
Consumers often engage in routine response behavior27 when they make
lowinvolvementdecisions—that is, they make automatic purchase decisions
based onlimited information or information they have gathered in the past.
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For example, ifyou always order a Diet Coke at lunch, you’re engaging in
routine responsebehavior. You may not even think about other drink
options at lunch because yourroutine is to order a Diet Coke, and you simply
do it. Similarly, if you run out of DietCoke at home, you may buy more
without any information search.
Abraham Maslow’s Hierarchy of Needs
Some low-involvement purchases are made with no planning or previous
thought.These buying decisions are called impulse buying28. While you’re
waiting to checkout at the grocery store, perhaps you see a magazine with
Angelina Jolie and BradPitt on the cover and buy it on the spot simply
because you want it. You might see aroll of tape at a check-out stand and
remember you need one or you might see a bagof chips and realize you’re
hungry or just want them. These are items that aretypically lowinvolvement decisions. Low-involvement decisions aren’tnecessarily
products purchased on impulse, although they can be.
By contrast, high-involvement decisions30 carry a higher risk to buyers if
they fail,are complex, and/or have high price tags. A car, a house, and an
insurance policyare examples. These items are not purchased often but are
relevant and importantto the buyer. Buyers don’t engage in routine
response behavior when purchasinghigh-involvement products. Instead,
consumers engage in what’s called extendedproblem solving31, where they
spend a lot of time comparing different aspects suchas the features of the
products, prices, and warranties.
High-involvement decisions can cause buyers a great deal of
postpurchasedissonance (anxiety) if they are unsure about their purchases
or if they had adifficult time deciding between two alternatives. Companies
that sell highinvolvementproducts are aware that postpurchase dissonance
can be a problem.Frequently, they try to offer consumers a lot of
information about their products,including why they are superior to
competing brands and how they won’t let theconsumer down. Salespeople
may be utilized to answer questions and do a lot ofcustomer “handholding.”
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Stages in the Buying Process
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them after a long, tiring workout? Previews atmovie theaters are another
example. How many times have you have heard about amovie and had no
interest in it—until you saw the preview? Afterward, you felt likeyou had to
see it.
Stage 2. Search for Information
Stage 1. Need Recognition
You plan to backpack around the country after you graduate and don’t have
aparticularly good backpack. You realize that you must get a new backpack.
You mayalso be thinking about the job you’ve accepted after graduation
and know that youmust get a vehicle to commute. Recognizing a need may
involve something assimple as running out of bread or milk or realizing that
you must get a newbackpack or a car after you graduate. Marketers try to
show consumers how theirproducts and services add value and help satisfy
needs and wants. Do you think it’sa coincidence that Gatorade, Powerade,
and other beverage makers locate theirmachines in gymnasiums so you see
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For products such as milk and bread, you may simply recognize the need, go
to thestore, and buy more. However, if you are purchasing a car for the first
time or needa particular type of backpack, you may need to get information
on differentalternatives. Maybe you have owned several backpacks and
know what you like anddon’t like about them. Or there might be a particular
brand that you’ve purchasedin the past that you liked and want to purchase
in the future. This is a great positionfor the company that owns the brand to
be in—something firms strive for. Why?Because it often means you will
limit your search and simply buy their brand again.If what you already know
about backpacks doesn’t provide you with enoughinformation, you’ll
probably continue to gather information from various sources.Frequently
people ask friends, family, and neighbors about their experiences
withproducts. Magazines such as Consumer Reports (considered an
objective source ofinformation on many consumer products) or Backpacker
Magazine might also helpyou. Similar information sources are available for
learning about different makesand models of cars.Internet shopping sites
such as Amazon.com have become a common source ofinformation about
products. Epinions.com is an example of consumer-generatedreview site.
The site offers product ratings, buying tips, and price
information.Amazon.com also offers product reviews written by consumers.
People prefer“independent” sources such as this when they are looking for
product information.However, they also often consult non-neutral sources
of information, suchadvertisements, brochures, company Web sites, and
salespeople.
Stage 3. Product Evaluation
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Obviously, there are hundreds of different backpacks and cars available. It’s
notpossible for you to examine all of them. In fact, good salespeople and
marketingprofessionals know that providing you with too many choices can
be sooverwhelming that you might not buy anything at all. Consequently,
you may usechoice heuristics or rules of thumb that provide mental
shortcuts in the decisionmakingprocess. You may also develop evaluative
criteria to help you narrow downyour choices. Backpacks or cars that meet
your initial criteria before theconsideration will determine the set of brands
you’ll consider for purchase.
Evaluative criteria are certain characteristics that are important to you such
asthe price of the backpack, the size, the number of compartments, and
color. Someof these characteristics are more important than others. For
example, the size ofthe backpack and the price might be more important to
you than the color—unless,say, the color is hot pink and you hate pink. You
must decide what criteria are mostimportant and how well different
alternatives meet the criteria.
Stage 4. Actual Purchase/ Product Choice and Purchase
With low-involvement purchases, consumers may gofrom recognizing a
need to purchasing the product.However, for backpacks and cars, you
decide which oneto purchase after you have evaluated
differentalternatives. In addition to which backpack or whichcar, you are
probably also making other decisions at thisstage, including where and how
to purchase thebackpack (or car) and on what terms. Maybe the backpack
was cheaper at one storethan another, but the salesperson there was rude.
Or maybe you decide to orderonline because you’re too busy to go to the
mall. Other decisions related to thepurchase, particularly those related to
big-ticket items, are made at this point. Forexample, if you’re buying a highdefinition television, you might look for a storethat will offer you credit or a
warranty.
Stage 5. Postpurchase Use and Evaluation
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At this point in the process you decide whether the backpack you purchased
iseverything it was cracked up to be. Hopefully it is. If it’s not, you’re likely
to sufferwhat’s called postpurchase dissonance34. You might call it buyer’s
remorse.Typically, dissonance occurs when a product or service does not
meet yourexpectations. Consumers are more likely to experience
dissonance with productsthat are relatively expensive and that are
purchased infrequently.You want to feel good about your purchase, but you
don’t. You begin to wonderwhether you should have waited to get a better
price, purchased something else, orgathered more information first.
Consumers commonly feel this way, which is aproblem for sellers. If you
don’t feel good about what you’ve purchased from them,you might return
the item and never purchase anything from them again. Or, worseyet, you
might tell everyone you know how bad the product was.
Companies do various things to try to prevent buyer’s remorse. For smaller
items,they might offer a money back guarantee or they might encourage
their salespeopleto tell you what a great purchase you made. How many
times have you heard asalesperson say, “That outfit looks so great on you!”
For larger items, companiesmight offer a warranty, along with instruction
booklets, and a toll-freetroubleshooting line to call or they might have a
salesperson call you to see if youneed help with product. Automobile
companies may offer loaner cars when youbring your car in for service.
Companies may also try to set expectations in order to satisfy customers.
Servicecompanies such as restaurants do this frequently. Think about when
the hostesstells you that your table will be ready in 30 minutes. If they seat
you in 15 minutes,you are much happier than if they told you that your
table would be ready in 15minutes, but it took 30 minutes to seat you.
Similarly, if a store tells you that yourpants will be altered in a week and
they are ready in three days, you’ll be muchmore satisfied than if they said
your pants would be ready in three days, yet it tooka week before they were
ready.
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Stage 6. Disposal of the Product
MODULE 3: CUSTOMER RELATIONSHIP MARKETING
There was a time when neither manufacturers nor consumers thought
much abouthow products got disposed of, so long as people bought them.
But that’s changed.How products are being disposed of is becoming
extremely important to consumersand society in general. Computers and
batteries, which leech chemicals intolandfills, are a huge problem.
Consumers don’t want to degrade the environment ifthey don’t have to,
and companies are becoming more aware of this fact.
Relationship marketing is a facet of customer relationship management
(CRM) that focuses on customer loyalty and long-term customer
engagement rather than shorter-term goals like customer acquisition and
individual sales. The goal of relationship marketing (or customer
relationship marketing) is to create strong, even emotional, customer
connections to a brand that can lead to ongoing business, free word-ofmouth promotion and information from customers that can generate leads
Take for example Crystal Light, a water-based beverage that’s sold in
grocerystores. You can buy it in a bottle. However, many people buy a
concentrated form ofit, put it in reusable pitchers or bottles, and add water.
That way, they don’t have tobuy and dispose of plastic bottle after plastic
bottle, damaging the environment inthe process. You have probably
noticed that most grocery stores now sell cloth bags consumerscan reuse
instead of continually using and discarding of new plastic or paper bags.
We define marketing management as the art and science of choosing target
markets and building profitable relationships with them. This involves
obtaining, retaining and developing customers through creating and
delivering and communicating superior customer value.
Other companies are less concerned about conservationthan they are about
planned obsolescence35. Plannedobsolescence is a deliberate effort by
companies to maketheir products obsolete, or unusable, after a period
oftime. The goal is to improve a company’s sales byreducing the amount of
time between the repeatpurchases consumers make of products. When
asoftware developer introduces a new version of product,it is usually
designed to be incompatible with olderversions of it. For example, not all
the formattingfeatures are the same in Microsoft Word 2007 and
2010.Sometimes documents do not translate properly whenopened in the
newer version. Consequently, you will bemore inclined to upgrade to the
new version so you canopen all Word documents you receive.Products that
are disposable are another way in whichfirms have managed to reduce the
amount of timebetween purchases. Disposable lighters are an example.Do
you know anyone today that owns a non-disposablelighter? Believe it or
not, prior to the 1960s, scarcelyanyone could have imagined using a cheap
disposablelighter. There are many more disposable products today than
there were in yearspast—including everything from bottled water and
individually wrapped snacks tosingle-use eye drops and cell phones.
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(http://searchcrm.techtarget.com/definition/relationship-marketing)
Relationship marketing involves creating, maintaining and enhancing strong
relationships with customers and other stakeholders. Increasingly,
marketing is moving away from a focus on individual transactions and
towards a focus on building value-laden relationships and marketing
networks. Relationship marketing is oriented more towards the long term.
The goal is to deliver long-term value to customers and the measure of
success is long-term customer satisfaction. Relationship marketing requires
that all of the company’s departments work together with marketing as a
team to serve the customer. It involves building relationships at many levels
– economic, social, technical and legal – resulting in high customer loyalty.
We can distinguish five different levels of relationships that can be formed
with customers who have purchased a company’s product, such as a car or a
piece of equipment:
1.
Basic. The company salesperson sells the product, but does not
follow up in any way.
2. Reactive. The salesperson sells the product and encourages the
customer to call whenever he or she has any questions or problems.
3. Accountable. The salesperson phones the customer a short time
after the sale to check whether the product is meeting the
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customer’s expectations. The salesperson also solicits from the
customer any product improvement suggestions and any specific
disappointments. This information helps the company continuously
to improve its offering.
4. Proactive. The salesperson or others in the company phone the
customer from time to time with suggestions about improved
product use or helpful new products.
5. Partnership. The company works continuously with the customer
and with other customers to discover ways to deliver better value.
SIX MARKET MODELS
1.
Customer Market: This market contains buyer, intermediates, final
customers and retailers. They are our final consumers for a product. So they
are the most important entity for any business. We need to retain them as
long as we can. We also need to attract new customers. Ultimately creating
brand loyal customers is our main goal. We can add more values to our
product.Customer Market directly influences an organization. If customers
are not satisfied with our product, we can not retain them. In case of Service
Marketing customers’ satisfaction is more crucial.
2.
Influence Market: Influence market includes stakeholders as well as
third parties. Customers who have bought our product must give feedback
to their friends, relatives and neighbors. For any organization these
customers are their influencers and when third party like supply partners
and retailers influence our customer to buy our product, they are called
value added influencers. They may be TV reporters, Shopkeeper, Article
writers, Analysts etc.
Sometimes our own competitors also act as our influencer. Their ads can
help an organization to add more customers and their promotional activities
can decline our sale.
3.
Referral Market: Referral marketing is when we buy something after
being referred by our friends and relatives. In general we can understand
this term as “Word of Mouth”. In case of Service Marketing, Referral
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marketing is very common. We can also find this in our daily life. We can get
hundreds of advises when we look for a doctor. Everyone in our family
would suggest a different Physician. So this is what Referral Marketing is.
So Referral Market can further be divided into 2 categories: Customer and
Non Customer Referral Markets. So this is the cheapest way of promotion
and effective too. So our main priority should be “Customer Satisfaction”.
4.
Supplier Market: Suppliers are like partners to an organization. They
do supply the crucial raw materials and parts. We need to develop an
strategic alliance with them. We need to maintain a good relation with them
as well.
5.
Employee/Recruitment Market: This market helps an organization
to keep the best people who can add values to the organization. They
should be talented, experienced, skilled and loyal. In IT industry the firm
needs innovative and skilled persons but in case of Service Markets firms
need skilled as well as experienced people. So we can say that people inside
the firm also affect the profitability. An organization always looks for
individuals with particular skills; who are highly productive, innovative, and
effective; and who share a given organization’s values.
6.
Internal Market: This kind of market applies to the customers and
employees within the organization. Actually there should be proper
harmony among the employee and suppliers and customers so that
organization can work together and achieve its mission.
Specifically in terms of relationship marketing, those within the
organizations must understand how the impact relationships between the
firm and other parties, do so in a way that reflects and supports the
organization’s long-term goals, and resolve conflicts of interest accordingly.
Payne, Adrian, David Ballantyne, and Martin Christopher (2005) summarize
this 6 Markets model as:
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(1) “Customer markets” include existing and prospective customers as well
as intermediaries like retailers, wholesalers;
(2) “Referral markets” include two main categories – existing customers
who recommend their suppliers to others, and referral sources, or
“multipliers”, such as an accounting firm who may refer work to a law firm;
(3) “Influencer markets” include financial analysts, shareholders, the
business press, the government, and consumer groups;
(4) “Employee markets” concerns with attracting the right employees to the
organization);
(5) “Supplier markets” include traditional suppliers as well as organizations
with which the firms has some form of strategic alliance); and
THE LOYALTY LADDER
This loyalty ladder is the heart of CRM.
Customer Relationship Marketers focus their
resources on moving their customers up the
loyalty ladder. This new view of marketing is
not merely a better way to practice marketing;
it will require fundamental changes in
marketing practice.
(6) “Internal markets” (the organization including internal departments and
staff (Christopher et al., 1991).
(https://topbullets.com/2013/09/11/six-markets-model-relationshipmarketing-crm/)
THE CUSTOMER RELATIONSHIP MARKETING REVOLUTION
Customer Relationship Marketing is not about an evolution of marketing
thought. CRM is a genuine revolution in how marketers manage their
brands. Each marketing wave has been swelled by its own agents of change.
Waves of Marketing Thoughts
Mass-marketing was facilitated by department stores and supermarket
chains—themselves the product of accelerated delivery systems—and by
patent-protecting legislation for national brands.
Targeted marketing got a boost from the demographic fractionization of
the “Me Generation,” from FM radio, specialty magazines, the birth of cable
TV and other fragmented media, and from a retail revolution in which malls,
filled with specialty stores, challenged department-store dominance.
Global marketing’s facilitators include legislation like NAFTA, the
development of a European Economic Union, the increased reliance on
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global manufacturing, the growing interdependency of financial markets,
the increasing accessibility and popularity of international travel, the
development of international media, and the advent of the satellite dish,
which allows anybody anywhere to pick off programming that isolationists
previously contained.
Customer Relationship Marketing -will make earlier agents of change look
inadequate. The key facilitator is technology available to marketers. CRM
weds the individual customer and technology in ways that are unique. These
fourth-wave relationships, propelled by a confluence of technological
advances, will themselves change at geometric rates.




one-to-one marketing
Database marketing
Integrated marketing
Interactivity
Service Marketing
Service marketing is marketing based on relationship and value. It may be
used to market a service or a product. With the increasing prominence of
services in the global economy, service marketing has become a subject that
needs to be studied separately. Marketing services is different from
marketing goods because of the unique characteristics of services namely,
intangibility, heterogeneity, perishabil­ity and inseparability.
Reference:http://www.yourarticlelibrary.com/marketing/service-marketingdefinition-features-and-problem-faced-in-marketing-services/32336/
A service is any activity or benefit that one party can offer to another which
is essentially intangible and does not result in the ownership of anything. Its
production may or may not be tied to a physical product.
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The American Marketing Association defines services as - “Activities,
benefits and satisfactions which are offered for sale or are provided in
connection with the sale of goods.
Reference:
http://www.managementstudyguide.com/definition-andcharacteristics-of-services.htm
CHARACTERISTICS of Service
Intangibility: Services are intangible and do not have a physical existence.
Hence services cannot be touched, held, tasted or smelt. This is most
defining feature of a service and that which primarily differentiates it from a
product. Also, it poses a unique challenge to those engaged in marketing a
service as they need to attach tangible attributes to an otherwise intangible
offering. Physical products in the store are widely displayed for customers
to see, feel, touch, weigh or sniff at before deciding whether or not to buy.
Comparing this with the choice of the service of say, an insurance policy.
You cannot touch, see or smell the products before choosing, although
clearly you can make some assessment based on past experience, word of
mouth, or even the location and decor of the insurance office. The
intangible nature of most services gives rise to special problems both for
suppliers and consumers.
2. Heterogeneity/Variabilityincrease control over the service; switch from
people to machine; reduce perceived risks. In the production and marketing
of physical products, companies have increasingly paid special attention to
ensuring consistency in quality, feature, packaging, and so on. More often
than not all customers can be sure that every bottle of Coke he/she buys,
even in a life-time of purchases, will not vary. The provision of services,
however, invariably includes a large measure of the “human element”Given
the very nature of services, each service offering is unique and cannot be
exactly repeated even by the same service provider. While products can be
mass produced and be homogenous the same is not true of services. eg: All
burgers of a particular flavor at McDonalds are almost identical. However,
the same is not true of the service rendered by the same counter staff
consecutively to two customers.
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3. Perishability: Services cannot be stored, saved, returned or resold once
they have been used. Once rendered to a customer the service is
completely consumed and cannot be delivered to another customer. eg: A
customer dissatisfied with the services of a barber cannot return the service
of the haircut that was rendered to him. At the most he may decide not to
visit that particular barber in the future. Perhaps of all the suggested
special characteristics of service products or classification of services, this is
one of the most difficult to appreciate. Why? Services are highly perishable
compared to physical products. But how could, for example, the services of
say, an airline be considered to be more perishable than, say, fresh food and
vegetable products?
The reason is that unlike most physical products, many services cannot be
stored. For example, if an airline does not sell all the seats on a particular
flight, then those seats or rather the sales revenue of filling of them would
have carried, has immediately and irreversibly gone.
Reference:http://www.entrepreneurshipsecret.com/5-majorcharacteristics-of-services/
4. Inseparability/Simultaneity of production and consumption: This refers
to the fact that services are generated and consumed within the same time
frame. Eg: a haircut is delivered to and consumed by a customer
simultaneously unlike, say, a takeaway burger which the customer may
consume even after a few hours of purchase. Moreover, it is very difficult to
separate a service from the service provider. Eg: the barber is necessarily a
part of the service of a haircut that he is delivering to his customer. A key
distinguishing feature of service marketing is that the service provision and
provider are inseparable from the service consumption and consumer. For
example, we cannot take a hotel room home for consumption; we must
“consume” this service at the point of provision. Similarly, the hairdresser
needs to be physically present for this service to be consumed.
Goods
Services
A physical commodity
A process or activity
Tangible
Intangible
Homogenous
Heterogeneous
Non-ownership
The final distinguishing feature of a service is that, unlike a physical product,
the consumer does not secure ownership of the service. Rather the
customer pays only to secure access to or use of the service. Again the hotel
room is a good example. Similarly, with banking services, although the
customer may be given a Cheque book, credit cards, etc, they serve only to
allow the customer to make use of what he or she is actually buying,
namely, bank services.
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Types of Services
1. Core Services: A service that is the primary purpose of the
transaction. Eg: a haircut or the services of lawyer or teacher.
2. Supplementary Services: Services that are rendered as a corollary
to the sale of a tangible product. Eg: Home delivery options offered
by restaurants above a minimum bill value.
Difference between Goods and Services
Given below are the fundamental differences between physical goods and
services:
Production and distribution are Production,
separation from their consumption consumption
processes
distribution
and
are
simultaneous
Can be stored
Cannot be stored
Transfer of ownership is possible
Transfer of ownership is not possible
Five gaps that cause unsuccessful delivery of Service
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1. Gap between consumer expectation and management perception—
Management does not always correctly perceive what customers want.
Hospital administrators may think patients want better food, but patients
may be more concerned with nurse responsiveness.
2. Gap between management perception and service-quality specification—
Management might correctly perceive customers’ wants but not set a
performance standard. Hospital administrators may tell the nurses to give
“fast” service without specifying it in minutes.
3. Gap between service-quality specifications and service delivery—
Employees might be poorly trained, or incapable of or unwilling to meet the
standard; they may be held to conflicting standards, such as taking time to
listen to customers and serving them fast.
4. Gap between service delivery and external communications—Consumer
expectations are affected by statements made by company representatives
and ads. If a hospital brochure shows a beautiful room but the patient finds
it to be cheap and tacky looking, external communications have distorted
the customer’s expectations.
5. Gap between perceived service and expected service—This gap occurs
when the consumer
misperceives the service quality. The physician may keep visiting the patient
to show care, but
the patient may interpret this as an indication that something really is
wrong.
Customer Service Strategy in the Philippines
Customer service is the act of taking care of the customer's needs by
providing and delivering professional, helpful, high quality service and
assistance before, during, and after the customer's requirements are
met. Customer service is meeting the needs and desires of any
customer. Some characteristics of good customer service include:
Characteristics of Good Customer Service
Promptness: Promises for delivery of products must be on time. Delays
and cancellations of products should be avoided.
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Politeness: Politeness is almost a lost art. Saying 'hello,' 'good
afternoon,' 'sir', and 'thank you very much' are a part of good
customer service. For any business, using good manners is appropriate
whether the customer makes a purchase or not.
Professionalism: All customers should be treated professionally, which
means the use of competence or skill expected of the professional.
Professionalism shows the customer they're cared for.
Personalization: Using the customer's name is very effective in
producing loyalty. Customers like the idea that whom they do business
with knows them on a personal level.
Reference:
http://study.com/academy/lesson/what-is-customer-servicedefinition-types-role-in-marketing.html
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STRATEGIC PLANNING
SWOT ANALYSIS- is a strategic planning tool that organizations can use to
identify the following:
Just like the luxury-goods makers in the prelude case, all companies need
strategies to meet changing markets. No one strategy is best for all
companies. Each company must find the way that makes most sense, given
its situation, opportunities, objectives and resources. Marketing plays an
important role in strategic planning. It provides information and other
inputs to help prepare the strategic plan. Strategic planning is also the first
stage of marketing planning and defines marketing’s role in the
organisation. The strategic plan guides marketing, which must work with
other departments in the organisation to achieve strategic objectives.
Strategic planning is important for organizations to make decisions on how
to utilize their resources in order to achieve their organizational goals.
Strengths (capitalize, internal factor)
Strategic planning is an organizational management activity that is used to
set priorities, focus energy and resources, strengthen operations, ensure
that employees and other stakeholders are working toward common goals,
establish agreement around intended outcomes/results, and assess and
adjust the organization's direction in response to a changing environment. It
is a disciplined effort that produces fundamental decisions and actions that
shape and guide what an organization is, who it serves, what it does, and
why it does it, with a focus on the future. Effective strategic planning
articulates not only where an organization is going and the actions needed
to make progress, but also how it will know if it is successful.
Reference:(http://balancedscorecard.org/Resources/Strategic-PlanningBasics)
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What advantages do you have that others don’t have (for example, skills,
certifications, education, or connections)?
What do you do better than anyone else?
What personal resources can you access?
Which of your achievements are you most proud of?
What values do you believe in that others fail to exhibit?
Are you part of a network that no one else is involved in? If so, what
connections do you have with influential people?
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Weaknesses (shore up, internal factor)
Opportunities (invest, secondary data)
What tasks do you usually avoid because you don’t feel confident doing
them?
What will the people around you see as your weaknesses?
Are you completely confident in your education and skills training?
What are your negative work habits/ study habits?
Do you have personality traits that hold you back in your field? For instance,
if you have to
conduct meetings
on a regular basis,
a fear of public
speaking.
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Threats (identify, secondary data)
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other activities.
THREE IMPORTANT PLANNING STRATEGIES
THE PLANNING PROCESS
Putting plans into action involves four stages: analysis, planning,
implementation and control.
Analysis. Planning begins with a complete analysis of the company’s
situation. Thecompany must analyse its environment to find attractive
opportunities and to avoidenvironmental threats. It must analyse company
strengths and weaknesses, as well ascurrent and possible marketing actions,
to determine which opportunities it can bestpursue. Analysis feeds
information and other inputs to each of the other stages.
Planning. Through strategic planning, the company decides what it wants to
do with eachbusiness unit. Marketing planning involves deciding marketing
strategies that will helpthe company attain its overall strategic objectives.
Marketing, product or brand plans areat the centre of this.
Implementation. Implementation turns strategic plans into actions that will
achieve thecompany’s objectives. People in the organisation who work with
others, both inside andoutside the company, implement marketing plans.
Control. Control consists of measuring and evaluating the results of plans
and activities,and taking corrective action to make sure objectives are being
achieved. Analysis providesinformation and evaluations needed for all the
The annual plan is a short-term plan that describes the current situation,
companyobjectives, the strategy for the year, the action programme,
budgets and controls. For anoil company, such as BP, this is about
maintaining profitability through the continuingMiddle East crises and
Europe’s continued slow growth. The annual marketing budget is prepared
together with its action program that will be implemented. The company
sets control mechanism as bases for performance evaluation. A shorttermplan that describes thecompany’s current situation,its objectives, the
strategy,action programme andbudgets for the year ahead,and controls.
The long-range plan describes the primary factors and forces affecting the
organization during the next several years. It includes the long-term
objectives, the main marketingstrategies used to attain them and the
resources required. This long-range plan is reviewedand updated each year
so that the company always has a current long-range plan. Thecompany’s
annual and long-range plans deal with current businesses and how to
keepthem going. For BP the long-range plan looks at future oil supplies and
strategies foremerging markets, such as China. Long range planning covers a
period of about five years or more. It is setting the company direction for a
longer period which shall be updated by the annual plan. Target goals and
objectives are futuristic in nature anticipating the company’s position in
marketing environment. Budgets and targets are set within the five year
level. A planthat describes the principalfactors and forces affectingthe
organisation during thenext several years, includinglong-term objectives,
thechief marketing strategiesused to attain them and theresources
required.
The strategic plan involves adapting the firm to take advantage of
opportunities in itsconstantly changing environment. It is the process of
developing and maintaining astrategic fit between the organisation’s goals
and capabilities and its changing marketing. It is the set of all planning
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activities that identifies its vision and mission, its company portfolio and
attendant strategies. Targets are set together with detailed strategies to
accomplish the specific objectives and goals. A planthat describes the
principalfactors and forces affectingthe organisation during thenext several
years, includinglong-term objectives, thechief marketing strategiesused to
attain them and theresources required.
THE THREE LEVELS IN STRATEGIC MARKETING PLANNING
1. Strategic Company Planning
It is defining the organization mission and vision, setting long range
goals, and formulation brand strategies to accomplish the goals.
The company planning framework sets the direction in all other
areas of the functional organization such as production, finance,
human resources, research and development and finally marketing.
4 Essential Steps in Company Strategic Planning
 Define the organizational mission
 Analyze the marketing situation
 Set the organizational objectives
 Define the suitable strategies to achieve the desired
objectives
2. Strategic Marketing Planning
It is the function of the higher management in setting the goals and
strategies of the marketing organization. It is the company’s wide
planning process that involved all other executives. It involves
round table discussions of the company’s direction and the
strategies shall be implemented
5 Steps in Marketing Planning
 Conduct situation analysis
 Develop specific marketing objectives
 Determine product positioning and establishing differential
advantage
 Select target market and measure market demand
 Design a strategic marketing mix
3. Strategic Annual Planning
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This is the process of making short term plans in an annual basis.
The strategic marketing plans prepared by top executives are now
developed in achievable levels in shorter period of one year.
Marketing managers in this level prepare annual budgets, prepare
target market analysis, and develop specific marketing strategies.
Michael Porter’s 5 Forces Model
Porter's Five Forces of Competitive Position Analysis were developed in
1979 by Michael E Porter of Harvard Business School as a simple framework
for assessing and evaluating the competitive strength and position of a
business organisation.
This theory is based on the concept that there are five forces that determine
the competitive intensity and attractiveness of a market. Porter’s five forces
help to identify where power lies in a business situation. This is useful both
in understanding the strength of an organisation’s current competitive
position, and the strength of a position that an organisation may look to
move into.
Strategic analysts often use Porter’s five forces to understand whether new
products or services are potentially profitable. By understanding where
power lies, the theory can also be used to identify areas of strength, to
improve weaknesses and to avoid mistakes.
The five forces are:
1. Supplier power. An assessment of how easy it is for suppliers to drive up
prices. This is driven by the: number of suppliers of each essential input;
uniqueness of their product or service; relative size and strength of the
supplier; and cost of switching from one supplier to another.
2. Buyer power. An assessment of how easy it is for buyers to drive prices
down. This is driven by the: number of buyers in the market; importance of
each individual buyer to the organisation; and cost to the buyer of switching
from one supplier to another. If a business has just a few powerful buyers,
they are often able to dictate terms.
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3. Competitive rivalry. The main driver is the number and capability of
competitors in the market. Many competitors, offering undifferentiated
products and services, will reduce market attractiveness.
4. Threat of substitution. Where close substitute products exist in a market,
it increases the likelihood of customers switching to alternatives in response
to price increases. This reduces both the power of suppliers and the
attractiveness of the market.
5. Threat of new entry. Profitable markets attract new entrants, which
erodes profitability. Unless incumbents have strong and durable barriers to
entry, for example, patents, economies of scale, capital requirements or
government policies, then profitability will decline to a competitive rate.
Reference: http://www.cgma.org/Resources/Tools/essential-tools/Pages/portersfive-forces.aspx?TestCookiesEnabled=redirect
threat of
new entrants
power of
suppliers
competitive
rivalry
power of
customers
FACTORS TO CONSIDER IN PREPARING ANNUAL PLANNING STRATEGIES
1. Analyze previous year performance- learning comes from
experience. The previous year performance must be analyzed in
terms of variances in the allocation of resources and the success or
failure in the implementation of the program objectives
2. Set Accurate Timelines- timing the season of the year is one
important factor to consider. The timing in the marketing industry
must consider the celebration of the different holidays such as
Christmas, new year, fiestas, wedding months, valentine’s Day or
many occasions in the local calendar.
3. Develop Distribution Strategies- after analyzing the past marketing
campaign, it is important that the marketing channels and
promotional programs be revised to provide a new twist in the
marketing campaign.
4. Create a Workable Financial Budget- The success of the marketing
efforts hinges on the proper allocation of funds. The expected
retrun on investment (ROI) must be more than the program
expenditure
METHODS OF FORECASTING DEMAND
threat of
substitutes
The cornerstone of successful marketing planning is forecasting accurately
the demand for the product. Demand forecasting is the establishment of
product sales in the future or a period of one year. It is the basis in the
development of strategic plans. It will serve as a guide in the preparation of
the annual marketing budget and in allocating material resources in the
production of the marketable goods.
Top-down approach- is the major activity of top management in
forecasting market demand based on the analysis of the total market
condition and analysis. Under this approach management has to:
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a.
b.
c.
d.
Develop a forecast of the general economic condition
Determine the total market potential
Measure the current market share, and
Forecast the projected product sales
Bottoms-up-approach- is the forecasting method wherein the management
get information directly from sales people who are in touch with customers
or the dealers and distributors of the product. Under this approach
management has to:
a.
b.
c.
d.
Get information form sales people who are exposed to the market,
Analyze the information based on previous sales,
Make reasonable and accurate estimates, and
Make a total sales forecast for a given period.
CHARACTERISTICS OF POTENTIAL BUYERS
1. INTEREST- it is the state of mind of the potential buyer who likes to
buy the product for his needs and wants. A customer who sees a
new hand phone is a potential buyer but he might not have at the
moment enough money to purchase the said item. Interest alone is
not enough to call him a buyer. Potential market is the set of
consumers who profess some level of interest for a particular
product or service.
2. Income or Money to Buy- potential buyers must have the money to
buy the product or service. Money is the most important
determinant for the customer to buy the product he wants for
himself or he must have enough income to own the product.
Income is the state or capacity to purchase the product either in
cash or instalment. Marketers could afford to vie out the product in
differed payments. Potential buyers must have the credit potentials
through their credit cards.
3. Access or Place of Distribution- the potential buyer must have
access to the goods or product he wanted.
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MARKETING RESEARCH AND INFORMATION SYSTEM
Objectives:
1.
2.
3.
4.
5.
6.
Define and discuss the need for marketing research;
Give the pars of marketing research projects;
Analyze the development of new research paradigm research project;
Develop and discuss the structure of marketing information system;
Define decision support system and its role for marketing professional; and
Give the role of market competitive intelligence in the marketing of products.
MARKETING RESEARCH
Managers cannot always wait for information to arrive in bits and
pieces from the marketingintelligence system. They often require
formal studies of specific situations. For example,Apple Computer
wants to know how many and what kinds of people or companies
willbuy its new ultralight personal computer.
Marketing research is the function linking the consumer, customer
and public to themarketer through information that is used to
identify and define marketing opportunitiesand problems, to
generate, refine and evaluate marketing actions, to monitor
marketingperformance, and to improve understanding of the
marketing process. Marketingresearchers specify the information
needed to address marketing issues, design the methodfor collecting
information, manage and implement the data collection process,
analyse theresults and communicate the findings and their
implications.Marketing researchers engage in a wide variety of
activities, ranging from analyses ofmarket potential and market
shares to studies of customer satisfaction and purchaseintentions.
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Every marketer needs research. A company can conduct marketing
research in itsresearch department or have some or all of it done
outside. Although most large companieshave their own marketing
research departments, they often use outside firms to do
specialresearch tasks or special studies. A company with no research
department will have to buythe services of research firms.
Marketing research has been variously defined but, essentially, it
relates to the collectionof information regarding actual and potential
customers in the market place together withthe analysis and
interpretation of these market data for use in management marketing
decisionmaking. Usually such decisions relate to the elements of the
marketing mix, i.e. to product,pricing, promotion and channels of
distribution decisions. The following are examples ofmarketing
research definitions:
the systematic and continuing study and evaluation of all factors
bearing on any businessoperation which involves the transfer of
goods from a producer to a consumer.(Delens, 1950)
the objective gathering, recording and analysing of all facts about
problems relatingto the transfer and sales of goods and services from
producer to consumer.(British Institute of Management, 1962)
the gathering and analysis of information to assist management in
making marketingdecisions. These decisions involve the manipulation
of the firm’s pricing, promotion,distribution and product variables.
(Wentz, 1972)
The marketing research process
Defining the problem and research objectives
The objective of most research project is to solve the problems
prevailing in the marketing environment. The researcher should state
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clearly the purpose of the study. It must include relevant information
and what information is needed and how it will be used to solve the
research problem.
Developing the research plan and design
The second step of the marketing research process calls for
determining the informationneeded, developing a plan for gathering
it efficiently and presenting the plan to marketingmanagement. The
plan outlines sources of existing data and explains the specific
researchapproaches, contact methods, sampling plans and
instruments that researchers will use togather new data.
Research Design
a. Exploratory research—Marketing research to gather
preliminary information that will help to better define
problems and suggest hypotheses. It can be performedusing
literature search, survey of people about their experiences
about the product and some case studies. Interviewing
people may provide information on their perceptions about
the product or provide vital information about the
relationship of some variables as to product acceptance in the
market.
b. Descriptive Research—Marketing research to better describe
marketing problems, situations or markets, such as the market
potential for a product or thedemographics and attitudesof
consumers. It is more rigid than exploratory research. It
seeks to describe issues related to future demands of a
particular product. It tries to determine the number of
population that uses the product or predict future demand.
The researcher must be able to define the population sample,
the scope of the project and the method of statistical analysis
to be used in coming up with the data or information. In
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short, it must define the questions of what, who, where,
when, why and how aspects of the research.
c. Causal Research-Marketing research to test hypothesesabout
cause-and-effect relationships. It seeks to fined cause and effect
between one or more variables affecting the market conditions.
This involved laboratory or field experiments.
Sampling Procedure and Research Instruments
1. Population
The researcher must identify the total population covered by
the study. He must be able to develop the questionnaires that
will give the best results and the correct information that will
answer the problems under consideration. The source of
information must be properly identified, either coming from
primary or secondary data.
Primary data are direct answers to the questions in the study
or direct observations conducted by the researcher. The
sources may come from internal company records or
comparative annual sales for a given period. Secondary data
are from different sources like previous research findings,
periodicals, company publications, economic journal, books
and publications, electronic sources and many more.
2. Development of Research Information
A situation analysis is the background investigation that helps
in refining the research problem. It includes interviewing
company officials or getting internal information that will aid
in making hypothesis for testing. A hypothesis is a tentative
supposition that the researchers would prove its validity or a
possible solution.
Data Gathering and Collecting Information
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A good marketing research is scientifically done and creatively
presented. It is a process that is based on controlled environment
with variables that are clearly identified. The creative marketing
research findings hardly come in because some people that serve as
population sample don’t usually give the correct information on what
they think about the product or service. Therefore, it is necessary
that the researcher come up with questionnaires that are easy to
answer and neutral enough to give the more accurate information.
Interpreting and Reporting the Findings
The researcher must analyze and report the findings to the
management. It must contain important information that will be
useful in making major decisions. It must contain important facts
rather than fancy statistical numbers or techniques. During the
presentation of data and findings the management may have various
questions that need further clarifications. It must be remembered
that the management may have various questions that need further
clarifications. It must be remembered that the management is the
ultimate decision maker on what to do with the research results.
The interpretation is the most important phase of the marketing
study. The best research is useless and meaningless if the
management accepts the results blindly as they many contain wrong
interpretations.
Conclusions and Recommendations
The final phase of any research project is the drawing of conclusions
based on the research findings and after carful interpellations with
the management. The research findings will probe very useful in
developing marketing strategy about product development, pricing,
market perceptions and other important marketing aspects.
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MARKETING INFORMATION SYSTEM
A marketing information system (MIS) consists of people, equipment
and procedures togather, sort, analyse, evaluate and distribute
needed, timely and accurate information tomarketing decision
makers.The information needed by marketing managers comes from
internal company records,marketing intelligence and marketing
research. The information analysis system then processesthis
information to make it more useful for managers.
Internal recordsinformation—Informationgathered from sourceswithin the
company toevaluate marketingperformance and to detectmarketing
problems andopportunities.Most marketing managers use internal records
and reports regularly, especially for makingday-to-day planning,
implementation
and
control
decisions.The
company’s
accountingdepartment prepares financial statements and keeps detailed
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records of sales, orders, costsand cash flows. Manufacturing reports on
production schedules, shipments and inventories.The sales force reports on
reseller reactions and competitor activities. The customer
servicedepartment provides information on customer satisfaction or service
problems. Researchstudies done for one department may provide useful
information for several others. Managerscan use information gathered from
these and other sources within the company to evaluateperformance and to
detect problems and opportunities.Information from internal records is
usually quicker and cheaper to get than informationfrom other sources, but
it also presents some problems. Because internal information wasintended
for other purposes, it may be incomplete or in the wrong form for
makingmarketing decisions. For example, accounting department sales and
cost data used forpreparing financial statements need adapting for use in
evaluating product, sales force orchannel performance. In addition, the
many different areas of a large company produce greatamounts of
information, and keeping track of it all is difficult. The marketing
informationsystem must gather, organise, process and index this mountain
of information so thatmanagers can find it easily and get it quickly.
Marketing intelligence is everyday information about developments in the
marketingenvironment that helps managers prepare and adjust marketing
plans. The marketingintelligence system determines the intelligence
needed, collects it by searching theenvironment and delivers it to marketing
managers who need it.Marketing intelligence comes from many sources.
Much intelligence is from the company’spersonnel – executives, engineers
and scientists, purchasing agents and the sales force. Butcompany people
are often busy and fail to pass on important information. The companymust
‘sell’ its people on their importance as intelligence gatherers, train them to
spot newdevelopments and urge them to report intelligence back to the
company.The company must also persuade suppliers, resellers and
customers to pass alongimportant intelligence. Some information on
competitors comes from what they say aboutthemselves in annual reports,
speeches, press releases and advertisements. The company canalso learn
about competitors from what others say about them in business
publications andat trade shows. Or the company can watch what
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competitors do – buying and analyzing competitors’ products, monitoring
their sales and checking for new patents.
Competitor intelligence—Information gatheredthat informs on what
thecompetition is doingoris about to do.
FUNCTIONS OF MARKETING INFORMATION SYSTEM
1. It must generate current reports and studies
2. It must integrate previous and new data
3. Data analysis must muse mathematical model
CONSUMER AND BUSINESS MARKETS
Consumer market—All theindividuals and householdswho buy or
acquire goodsand services for personalconsumption.
Consumer buying behaviour—The buyingbehaviour of final
consumers– individuals and householdswho buy goods and services
for personal consumption.
Consumers’ buying roles
Group members can influence purchases in many ways. For
example, men normally choosetheir own newspaper and women
choose their own tights. For other products, however, thedecisionmaking unit is more complicated with people playing one or more
roles:
1. Initiator. The person who first suggests or thinks of the idea of
buying a particular product or service. This could be a parent or
friend who would like to see a visual record of Anna’s holiday.
2. Influencer. A person whose view or advice influences the buying
decision, perhaps a friend who is a camera enthusiast or a
salesperson
3. Decider. The person who ultimately makes a buying decision or
any part of it – whether to buy, what to buy, how to buy or
where to buy.
4. Buyer. The person who makes an actual purchase. Once the
buying decision is made, someone else could make the
purchase for the decider.
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5. User. The person who consumes or uses a product or service.
Once bought, othermembers of Anna’s family could use her
camera.
Business Market
Business-to-business (B2B) markets differ from business-toconsumer (B2C)markets in many ways. For one, the number of
products sold in business marketsdwarfs the number sold in
consumer markets. Suppose you buy a five-hundred-dollarcomputer
from Dell. The sale amounts to a single transaction for you. But
think of all the transactions Dell had to go through to sell you that
one computer.Dell had to purchase many parts from many
computer component makers. It alsohad to purchase equipment
and facilities to assemble the computers, hire and payemployees,
pay money to create and maintain its Web site and advertise, and
buy
insurance and accounting and financial services to keep its
operations runningsmoothly. Many transactions had to happen
before you could purchase yourcomputer.
Each of those transactions needed a salesperson. Each of those
companies have amarketing department. Thus, there are a lot more
college marketing graduatesgoing into B2B companies than in B2C,
which is reason enough to spend some timestudying the subject.
There are other differences, too.
Business products can be very complex. Some need to be custom
built or retrofittedfor buyers. The products include everything from
high-dollar constructionequipment to commercial real estate and
buildings, military equipment, and billion-dollarcruise liners used in
the tourism industry. A single customer can account fora huge
amount of business.
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Not only can business products be complex, but so can figuring out
the buyingdynamics of organizations. Many people within an
organization can be part of thebuying process and have a say in
ultimately what gets purchased, how much of it,and from whom.
Having different people involved makes business marketing
muchmore complicated. And because of the quantities each
business customer is capableof buying, the stakes are high. For
some organizations, losing a big account can befinancially
devastating and winning one can be a financial bonanza.
Business-to-Consumer Markets
Markets: How They Compare
versus
Business-to-Business
The Demand for B2B Products
Even though they don’t sell their products to consumers like
you and me, B2Bsellers carefully watch general economic
conditions to anticipate consumer buyingpatterns. The firms
do so because the demand for business products is based on
derived demand. Derived demand1 is demand that springs
from, or is derived from,a source other than the primary buyer
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of a product. When it comes to B2B sales,that source is
consumers. If consumers aren’t demanding the products
produced bybusinesses, the firms that supply products to
these businesses are in big trouble.Fluctuating demand2 is
another characteristic of B2B markets: a small change
indemand by consumers can have a big effect throughout the
chain of businesses thatsupply all the goods and services that
produce it. Often, a bullwhip type of effectoccurs. If you have
ever held a whip, you know that a slight shake of the handle
willresult in big snap of the whip at its tip. Essentially,
consumers are the handle andbusinesses along the chain
compose the whip—hence the need to keep tabs on
endconsumers. They are a powerful purchasing force.
B2B buyers also keep tabs on consumers to look for patterns
that could create joint demand. Joint demand occurs when
the demand for one product increases thedemand for
another. For example, when a new video console like the Xbox
comesout, it creates demand for a whole new crop of video
games.
Types of B2B Buyers
Business buyers can be either nonprofit or for-profit
businesses. To help you get abetter idea of the different types
of business customers in B2B markets, we’ve putthem into
four basic categories: producers, resellers, governments, and
institutions.
Producers are companies that purchase goods andservices
that they transform into other products. Theyinclude both
manufacturers and service providers.Procter & Gamble,
General Motors, McDonald’s, Dell,and Delta Airlines are
examples. So are the restaurantsaround your campus, your
dentist, your doctor, and thelocal tattoo parlor. All these
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businesses have to buycertain products to produce the goods
and services theycreate. General Motors needs steel and
hundreds ofthousands of other products to produce cars.
McDonald’s needs beef and potatoes. Delta Airlinesneeds fuel
and planes. Your dentist needs drugs such asNovocain, oral
tools, and X-ray machines. Your localtattoo parlor needs
special inks and needles and a brightneon sign that flashes
“open” in the middle of the night.
Resellers are companies that sell goods and services produced by
other firmswithout materially changing them. They include
wholesalers, brokers, and retailers.Walmart and Target are two big
retailers you are familiar with. Large wholesalers,brokers, and
retailers have a great deal of market power. If you can get them to
buyyour products, your sales can exponentially increase.
Governments
Business-to-government (B2G) markets6, or
when companies sell to local, state, and federal governments,
represent a major selling opportunity, even for smaller sellers. In
fact, many government entities specify that their agencies must
award a certain amount of business to small businesses, minorityand women-owned businesses,
Who participates in the business buying process?
Who buys the goods and services needed by business
organisations? The decision-makingunit of a buying organisationis
called its buying centre, defined as all the individuals andunits that
participate in the business decision-making process. The buying
centreincludes all members of the organisation who play any of the
followingfive roles in the purchase decision process.
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1. Users. Members of the organisation who will use the product or
service. In many cases,users initiate the buying proposal and help
define product specifications.
2. Influencers. People who affect the buying decision. They often
help define specificationsand provide information for evaluating
alternatives. Technical personnel are particularlyimportant
influencers.
3. Buyers. People with formal authority to select the supplier and
arrange terms of purchase.Buyers may help shape product
specifications, but they play their most important role inelecting
vendors and in negotiating. In more complex purchases, buyers
might includehigh-level officers participating in the negotiations.
4. Deciders. People who have formal or informal power to select or
approve the finalsuppliers. In routine buying, the buyers are often
the deciders or at least the approvers.
5. Gatekeepers. People who control the flow of information to
others. For example,purchasing agents often have authority to
prevent salespersons from seeing users ordeciders. Other
gatekeepers include technical personnel and even personal
secretaries.
Types of B2B Buying Situations
A straight rebuy-- isa situation in which a purchaser buys the
same product in the same quantities fromthe same vendor.
Nothing changes, in other words. Post-purchase evaluations
areoften skipped, unless the buyer notices an unexpected
change in the offering suchas a deterioration of its quality or
delivery time.Sellers like straight rebuys because the buyer
doesn’t consider any alternativeproducts or search for new
suppliers. The result is a steady, reliable stream ofrevenue for
the seller. Consequently, the seller doesn’t have to spend a lot
of timeon the account and can concentrate on capturing other
business opportunities.Nonetheless, the seller cannot ignore
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the account. The seller still has to provide thebuyer with topnotch, reliable service or the straight-rebuy situation could be
jeopardized.If an account is especially large and important, the
seller might go so far as tostation personnel at the customer’s
place of business to be sure the customer ishappy and the
straight-rebuy situation continues. IBM and the management
consulting firm Accenture station employees all around the
world at theircustomers’ offices and facilities.
anew-buy selling situation occurs when a firm purchases a
productfor the first time. Generally speaking, all the buying
stages we described in the lastsection occur. New buys are the
most time consuming for both the purchasing firmand the
firms selling to them. If the product is complex, many vendors
and productswill be considered, and many RFPs will be
solicited.New-to-an-organization buying situations rarely
occur. What is more likely is that apurchase is new to the
people involved. For example, a school district ownsbuildings.
But when a new high school needs to be built, there may not
be anyone inmanagement who has experience building a new
school. That purchase situation isa new buy for those
involved.
A modified rebuy occurs when a company wants to buy the
same type of productit has in the past but make some
modifications to it. Maybe the buyer wantsdifferent
quantities, packaging, or delivery, or the product customized
slightlydifferently. A modified rebuy doesn’t necessarily have
to be made with the same seller,however. Your instructor may
have taught this course before, using a differentpublisher’s
book. High textbook costs, lack of customization, and other
factors mayhave led to dissatisfaction. In this case, she might
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visit with some other textbooksuppliers and see what they
have to offer. Some buyers routinely solicit bids fromother
sellers when they want to modify their purchases in order to
get sellers tocompete for their business. Likewise, savvy
sellers look for ways to turn straightrebuys into modified buys
so they can get a shot at the business. They do so byregularly
visiting with customers and seeing if they have unmet needs
or problemsa modified product might solve
Stages in the B2B Buying Process
1. A need is recognized. Someone recognizes that the organization
has a need that can be solved by purchasing a good or service. Users
often drive this stage, although others can serve the role of initiator.
2. The need is described and quantified. Next, the buying center, or
group of people brought together to help make the buying decision,
work to put some parameters around what needs to be purchased.
In other words, they describe what they believe is needed, the
features it should have, how much of it is needed, where, and so on.
3. Potential suppliers are searched for. At this stage, the people
involved in the buying process seek out information about the
products they are looking for and the vendors that can supply them.
Most buyers look online first to find vendors and products, then
attend industry trade shows and conventions and telephone or
email the suppliers with whom they have relationships. The buyers
might also consult trade magazines, the blogs of industry experts,
and perhaps attend Webinars conducted by vendors or visit their
facilities.
4. Qualified suppliers are asked to complete responses to requests
for proposal (RFPs). Each vendor that makes the cut is sent a
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request for proposal (RFP) which is an invitation to submit a bid to
supply the good or service. An RFP outlineswhat the vendor is able
to offer in terms of its product—its quality, price, financing,
delivery, after-sales service, whether it can be customized or
returned, and even theproduct’s disposal, in some cases. Good sales
and marketing professionals do morethan just provide basic
information to potential buyers in RFPs. They focus on thebuyer’s
problems and how to adapt their offers to solve those problems.
5. The proposals are evaluated and supplier(s) selected. During
this stage, the RFPs are reviewed and the vendor or vendors
selected. RFPs are best evaluated if the members agree on the
criteria being evaluated and the importance of each. Different
organizations will weigh different parts of a proposal differently,
depending on their goals and the products they purchase.
6. An order routine is established. This is the stage in which the
actual order is put together. The order includes the agreed-upon
price, quantities, expected time of delivery, return policies,
warranties, and any other terms of negotiation.
7. A post purchase evaluation is conducted and the feedback
provided to thevendor. Just as consumers go through an evaluation
period after they purchase goods and services, so do businesses.
The buying unit might survey users of the product to see how
satisfied they were with it.
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MARKET SEGMENTATION
Markets consist of buyers, and buyers differ in one or more ways.
They may differ in their wants, resources, locations, buying
attitudes and buying practices. Through market segmentation,
companies divide large, heterogeneous markets into smaller
segments that can be reached more efficiently with products and
services that match their unique needs. In this section we discuss
levels of market segmentation, and in the following six sections we
deal with the important topics of segmenting consumer markets,
segmenting business markets, segmenting international markets,
multivariate segmentation, developing market segments, and
requirements for effective segmentation.
Segmentation, involves breaking the market down into groups of
customers with similar characteristics in order to concentrate on
serving the needs of one or two groups really well rather than trying
to satisfy the mass market. involves an analysis of the nature and
composition of a market to identifygroups of potential buyers who
have similar needs or characteristics, or display similarbehaviour.
These groups are known as market segments. Each segment seeks a
unique setof benefits from the product or service purchased.
Segmentation is quite different from atotal market approach. For
example, it used to be common for many people to use a ‘family’
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medicated shampoo. While ‘family’ shampoos are still produced
their share progressivelyhas been taken away by others which have
been tailored to the needs of particular groupsof users.
Target marketing—Directinga company’s effort towardsserving one
or
more
groupsof
customers
sharingcommon
needs
orcharacteristics.
Market segmentation—Dividing a market intodistinct groups of
buyerswith different needs,characteristics or behaviour,who might
require separateproducts or marketingmixes.
Market targeting—Theprocess of evaluating eachmarket segment’s
attractivenessand selecting one ormore segments to enter.
Market positioning—Arranging for a product tooccupy a clear,
distinctiveand desirable place relativeto competing products in the
minds of target consumers.Formulating competitivepositioning for a
product anda detailed marketing mix.
Six Steps in Market segmentation, targeting, and positioning
Types of Market Segmentation (Levels of Market segmentation)
Mass marketing—Usingalmost the same product,promotion and
distributionfor all consumers. Companies initially employ mass
marketing when no specific market has been determined. This
particular strategy rests on the idea that a product can cater to
everyone, and thus generate higher profits with lesser costs.
Henry Ford epitomised this marketing strategy when he offered the
Model T Fordto all buyers; they could have the car ‘in any colour as
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long as it is black’. That cost Ford theworld market leadership that it
has never regained.The traditional argument for mass marketing is
that it creates the largest potential market,which leads to the
lowest costs, which in turn can translate into either lower prices or
higher
margins. However, many factors now make mass marketing more
difficult. For example, theworld’s mass markets have slowly
splintered into a profusion of smaller segments – from thoseliving
near the Arctic to the tropics; from the grey market to the gay
market. It is increasinglyhard to create a single product or
programmethat appeals to all of these diverse groups.
Theproliferation of advertising media and distribution channels has
also made it difficult topractise ‘one size fits all’ marketing.Not
surprisingly, many companies are retreating from mass marketing
and turning tosegmented marketing.
Segmenting markets----Adapting a company’sofferings so they
more
closely match the needsof one or more segments.
A company that practises segment marketing recognises that buyers
differ in their needs,perceptions and buying behaviours. The
company tries to isolate broad segments that makeup a market and
adapts its offers to match more closely the needs of one or more
segments.Segment marketing offers several benefits over mass
marketing. The company can marketmore efficiently, targeting its
products or services, channels and communications programmes
towards only consumers that it can serve best. The company can
also market more effectivelyby fine-tuning its products, prices and
programmes to the needs of carefully defined segments.And the
company may face fewer competitors if fewer competitors are
focusing on thismarket segment.
Unilever, for instance uses this method to pinpoint particular
market segments for its products. The company’s cream silk, for
example, targets people who are not satisfied with just shampooing.
To answer this need, the developers of Cream silk created a product
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variant that combines the functions of a shampoo and a
conditioner.
Niche marketing---- Adaptinga company’s offerings tomore closely
match theneeds of one or moresubsegments where thereis often
little competition.
Market segments are normally large identifiable groups within a
market – for example,luxury car buyers, performance car buyers,
utility car buyers and economy car buyers. Nichemarketing focuses
on subgroups within these segments. A niche is a more narrowly
definedgroup, usually identified by dividing a segment into
subsegments or by defining a groupwith a distinctive set of traits
who may seek a special combination of benefits. For
example,property developers have recognised a niche within the
grey market. Further segmenting thegrey market, the Palms runs
gay and lesbian retirement communities and Rainbow Visionruns
retirement homes for the same niche market. Whereas segments
are fairly large and normally attract several competitors, niches
aresmaller and normally attract only one or a few competitors.
Niche marketers have tounderstand their niches’ needs so well that
their customers willingly pay a price premium.For example, Ferrari
gets a high price for its cars because its loyal buyers feel that no
otherautomobile comes close to offering the product–service–
membership benefits as Ferrari.Niching offers smaller companies an
opportunity to compete by focusing their limitedresources on
serving niches that may be unimportant to, or overlooked by, larger
competitors.For example, Mark Warner succeeds by selling to
distinct holiday niches: all-inclusive family
watersports holidays in southern Europe to northern Europeans,
and no-kids holidays forolder people who want some peace and
quiet. However, large companies also practise nichemarketing. For
example, Nike makes athletic gear for aerobics, jogging and football,
but alsofor smaller niches such as fell running and street hockey.
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Micromarketing---- A form of target marketing in which companies
tailor their marketing programmes to the needs and wants of
narrowly defined geographic, demographic, psychographic or
behavioural segments. In practicing micromarketing, companies
pattern their marketing programs to suit a particular group of
people in specific location. For example, McDonalds offers products
that appeal to the palates of Latinos.
Segment and niche marketers tailor their offers and marketing
programmes to meet theneeds of various market segments. At the
same time, however, they do not customize their offers to each
individual customer. Thus, segment marketing and niche marketing
fall between the extremes of mass marketing and micromarketing.
Micromarketing isthe practice of tailoring products and marketing
programmes to suit the tastes of specificindividuals and locations.
Micromarketing includes local marketing and individual
marketing.
Local marketing
Local marketing involves tailoring brands and promotions to the
needs and wants of localcustomer groups – cities,
neighborhoods and even specific stores.Local marketing has
some drawbacks. It can drive up manufacturing and marketing
costsby reducing economies of scale. It can also create logistical
problems as companies try to meetthe varied requirements of
different regional and local markets. And a brand’s overall
image
may be diluted if the product and message vary in different
localities. Still, as companies faceincreasingly fragmented
markets, and as new supporting technologies develop, the
advantagesof local marketing often outweigh the drawbacks.
Local marketing helps a company to market more effectively in
the face of pronouncedregional and local differences in
community demographics and lifestyles. It also meets theneeds
of the company’s ‘first-line customers’ – retailers – who prefer
more fine-tunedproduct assortments for their neighborhoods. It
maintains local variety and color,but at a cost.
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Individual marketing—Tailoring products andmarketing
programs tothe needs and preferencesof individual
customers.In the extreme, micromarketing becomes individual
marketing – tailoring products andmarketing programmes to
the needs and preferences of individual customers.
Individualmarketing has also been labelled ‘markets-of-one
marketing’, ‘customised marketing’ and‘one-to-one marketing’.
New technologies are permitting many larger companies to
return to customized marketing. More powerful computers,
detailed databases, robotic production, and immediateand
interactive communication media such as email, fax and the
Internet – all have combinedto foster ‘mass customisation’.
Mass customisation is the ability to prepare on a mass
basisindividually designed products and communications to
meet each customer’s requirements.Consumer marketers are
now providing custom-made products in areas ranging from
hotel
stays and furniture to clothing and bicycles.The move towards
individual marketing mirrors the trend in consumer selfmarketing.Increasingly, individual customers are taking more
responsibility for determining whichproducts and brands to buy.
Consider two business buyers with two different
purchasingstyles. The first sees several salespeople, each trying
to persuade him to buy their product.The second sees no
salespeople but rather logs on to the Internet, searches for
informationon and evaluations of available products, interacts
electronically with various suppliers, usersand product analysts,
and then makes up her own mind about the best offer. The
secondpurchasing agent has taken more responsibility for the
buying process, and the marketer hashad less influence over her
buying
decision.Mass
customisation—Preparing
individuallydesigned products and
communication on a largescale.
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TYPES OF CONSUMER MARKET SEGMENTS (Segmenting
consumer markets)
There is no single way to segment a market. A marketer has to
try different segmentationvariables, alone and in combination,
to find the best way to view the market structure.
1. Demographic segmentation-Dividing the market into
groups based on demographic variables such as age, sex,
family size,family life cycle, income, occupation, education,
religion, race and nationality. Consumers can be segmented
according to age, gender, and economic status. Likewise,
products are segmented according to the age, gender, and
income of the buyers. Signature clothes, for instance, are
for high-income earners. In the same way there are clothes
specifically tailored for men and women. Nonetheless,
marketers also know that price is a factor often considered
by minimum wage earners whenever they buy clothes.
a. Life-cycle segmentation— Offering products or marketing
approaches that recognise the consumer’s changing needs at
different stages of their life. Life-cycle stage is important in
recreation markets. In the holiday market, for instance, Club 18–30
aims at young singles seeking the four Ss: sun, sand, sea and sex.
This boisterous segment does not mix well with the families that the
Club Mediterranean caters for. Children’s activities and all-day child
care are an important part of the latter’s provision. Meanwhile,
Saga Holidays caters for older people and keeps prices low by
offering off-peak holidays.
b. Ethnic segmentation—Offering products or marketing approaches that
recognise the special strengths or needs of an ethnic community. The multiethnic communities within Europe define market segments for all manner of
goods: clothes, music, cosmetics and many others. The communities also
nurture businesses that appear beyond their own ethnic boundaries.
c. Gender segmentation—Dividing a market into different groups based on
sex. Gender segmentation is usual in clothing, hairdressing, cosmetics and
magazines. Recently, marketers have noticed other opportunities for gender
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segmentation. For example, both men and women use most deodorant
brands. Procter & Gamble, however, developed Secret as the brand
specially formulated for a woman’s chemistry, and then packaged and
advertised the product to reinforce the female image. In contrast, Gillette’s
association with shaving makes its deodorant male oriented.
d. Income segmentation— Dividing a market into different income groups.
Income segmentation is often used for products and services such as cars,
boats, clothing, cosmetics and travel. Many companies target affluent
consumers with luxury goods and convenience services.
2. Geographic segmentation-Dividing a market into different
geographical units such as nations, states, regions, counties,
cities or neighborhoods. The market can be also divided
according to location. For example, firms selling airconditioners do not expect their product to do well in places
with cooler weather conditions like Baguio. In the same
way, there is no significant demand for mink coats in the
Philippines.
3. Psychographic segmentation-Dividing a market into
different groups based on social class, lifestyle or
personality
characteristics. Psychographic segmentation classified the
market population under these categories: personality,
values, hobbies and interests, opinion, and lifestyle. The
most common segment category targeted by marketers is
lifestyle. People acquire various lifestyle patterns as they go
through the different stages of their lives.
4. Behavioral segmentation-Dividing a market into groups
based on consumer knowledge, attitude, use or response to
a product.This refers to the consumers’ attitude towards a
product/service. Consumers who are first-time users of a
product/service usually show apprehension and concern
before and after purchasing it. For a guaranteed repeat
purchase, marketers should ensure that first-time users will
be satisfied with the product/service through word-of-
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mouth is motivated by their previous experience of
satisfaction.
a. Occasion segmentation— Dividing the market into
groups according to occasions when buyers get the idea
to buy, actually make their purchase, or use the
purchased item.
b. Benefit segmentation— Dividing the market into groups
according to the different benefits that consumers seek
from the product.
Business Market Segments(Segmenting business markets)
1. Type of Customer- the firm that caters to a variety of
customers may want to segment the market on the
basis of their type. Industries in still products will have
the volume of customers who are in housing and
condominium development or the car manufacturing
industries. Supplier of chicken products will have their
volume customers on the fast food chain.
2. Size of Customer- The size of the customers is measured
on the number of employees, the volume of sales, and
the size of the production facilities. It can also be
determined by the number of sales outlet or the extent
of sales distribution. The large size or big volume
customers may be serviced directly by company sales
representative, while small size consumers may be
serviced by appointed distributors.
3. The Purchasing Process- This has something to do with
supplier and buyer relationship where business
developed strategies on supply chain relationships. This
may involve competitive bidding strategies or
negotiated contracts. Some major industries develop
long term partnership with business supplier to enjoy
volume discounts and the delivery of quality materials.
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FACTORS OT CONSIDER IN EVALUATIONG MARKET SEGMENTS
1. THE CUSTOMER ECONOMIC INDEX- The type of customer will
determine the strategies that will be most effective to attract him to
the product being offered for sale. Lower income and middle
income groups would prefer fast food with reasonable price such as
Jollibee, McDonald, KFC, and other which are mostly seen in
crowded areas like malls and point of convergence. Higher income
groups and upper social class are mostly in fine dining restaurants.
2. THE MARKET SIZE AND GROWTH POTENTIAL- The market segment
must be large enough to attract business. It must have growth
potential as investment in terms of facilities and must be utilized for
a number of years as return on investments (ROI) is computed by its
utility. Big marketing company would target, those with higher
volume sales, high growth rate and high profit margin. Puregold will
target higher volume sales while small or a mini grocery will
concentrate on smaller market in a subdivision.
3. Structural Competitiveness and Competitors- The market may have
all the good potentials for investment. Yet we have to examine the
structural competitiveness as over saturated market may not vie the
expected ROI. We have also to examine the products being offered
in terms of quality and price. Product substitute limits the
potentials for higher sales volume. Customers will always try to find
bargains for their money.
4. THE COMPANY PROFILE AND OBJECTIVES- Finding the market with
the three other potentials for investment, the company must
examine its financial resources and capabilities in terms of
manpower expertise and skills to handle the market. It must be
fitted to the corporate objectives and goals for expansion and
investments. It must have the will power to outsmart the
competitors or possible competitors. The name of the game in
business is strong determination to succeed in the area of
operation.
CHARACTERISTICS OF EFFECTIVE SEGMENTATION
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Clearly there are many ways to segment a market, but not all
segmentations are effective.To be useful, market segments must
have the following characteristics:
 Measurability—The degree to which the size, purchasing power
and profits of a market segment can be measured. The size,
buying power and profiles of the segments need measuring.
Certain segmentation variables are difficult to measure.
 Accessibility—The degree to which a market segment can be
reached and served. This also refers to the distance between
the marketing organization and the prospective market
segment.
 Substantiality—The degree to which a market segment is
sufficiently large or profitable. A profitable market must have a
large number of prospective buyers. It must be composed of
the largest homogeneous group worth developing a marketing
program that will generate profitable business operation.
 Actionability—(action oriented process) The degree to which
effective programmes can be designed for attracting and
serving a given market segment. After determining the total
market segment potential, the marketer must be able to put
into action the designed marketing program as competitors may
take place before they make sensible action.
TARGET MARKET COVERAGE STRATEGIES (Segment strategy)
After evaluating different segments, the company must now decide which
and how manysegments to serve. This is the problem of target-market
selection. A target market consistsof a set of buyers who share common
needs or characteristics that the company decides toserve.
 Undifferentiated market—(Aggregate market) A market coverage
strategy in which a firm decides to ignore market segment differences
and go after the whole market with one offer.
Using an
undifferentiated marketing strategy, a firm might decide to ignore
market segment differences and go after the whole market with one
offer. This can be because there are weak segment differences or
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through the belief that the product’s appeal transcends segments. The
offer will focus on what is common in the needs of consumers rather
than on what is different.The company designs a product and a
marketing programme that appeal to the largestnumber of buyers. It
relies on quality, mass distribution and mass advertising to give
theproduct a superior image in people’s minds. Advertising and
promotions have to avoidalienating segments, and so are often based
on product features. An example of this is a burger store seen in most
accessible corner that caters only to passersby who feel hungry. Some
drawbacks of this strategy is the entrance of many competitors and the
changing product preference of most buyers who want variety
products. This marketing strategy can be limited to smaller companies
that concentrate on mass marketing.
 Differentiated marketing— (multiple market) A market-coverage
strategy in which a firm decides to target several market segments and
designs separate offers for each. Differentiated marketing typically
creates more total sales than does undifferentiated marketing. The
changing wants and needs of customers have developed marketing
strategies that cater to several market segments. This is the particular
example adopted by one fast food chain that offers a lot of choices for
its valued customers. Due to the variety of demands it bought several
competing fast food chains and controlled the fast food chain industry
under one corporate organization. The same is true with a beer
company that develops variety of products to serve changing taste of
beer drinkers.
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 Concentrated market—(single market)A market-coverage strategy in
which a firm goes after a large share of one or a few submarkets. A
third market-coverage strategy, concentrated marketing, is especially
appealing when company resources are limited. Instead of going after a
small share of a large market, the firm goes after a large share of one or
a few submarkets.This strategy involved the selection of one particular
segment within the total market. One example of this is the company
that specialized in pest control. The drawback lies when some
employees who learned the trade secrets retired or resigned and
developed the same or similar operation and captured the same limited
market. Another risk and limitation is the marketer puts all the eggs in
one basket and the market potential declined due to the entrance of a
competing team.
PRODUCT POSITIONING
Having segmented the market and decided on a targeting strategy,
the next stage is to create and maintain a clear and appropriate
positive image of the product or service in the minds of consumers.
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This helps to differentiate the product from current and potential
competing products. For example, Porsche is positioned in the
prestige segment of the car market with a differential advantage
based on performance while Volvo is positioned in the family
segment, where it has capitalized on its reputation for safety. In this
section the stages that are involved in the positioning process will
be considered.
Positioning is howconsumers perceive a product relative to the
competition. Companies want to havea distinctive image and
offering that stands out from the competition in the mindsof
consumers.
STAGES INVOLVED IN MARKET POSITIONING
There are stages involved in product positioning, each of which is
described below.
STAGE 1: IDENTIFY KEY PRODUCT CHARACTERISTICS
Marketing research data should be studied in order to select the key
product characteristics that members of the target market consider
most important when making purchasingdecisions. These features
may be tangible, e.g. colour, size, design, or intangible, e.g.
reputation or guarantees.
STAGE2: DRAW A PERCEPTUAL MAP
This is a useful tool by which the current brands available to a
market segment can be depicted visually. In its simplest form the
perceptual map consists of a grid that shows the two most
important attributes identified at Stage 1 placed at two axes on the
grid. Qualitative marketing research enables consumer perceptions
about the current brands to be plotted, so that the
organization can see at a glance where competition is most intense
and where there might be gaps in the market
STAGE 3: DECIDE ON A COMPETITIVE STRATEGY
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Perceptual mapping provides insights into appropriate competitive
actions and helps firmsto decide whether they should compete
head-on or position their products away fromcompetition.
Avoiding the completion: At first glance it seems evident
that a strategy to avoid the competition holds most potential.Even
when a quadrant on a perceptual map may indicate an area where
there is a gap in themarket, it may be difficult to enter. Sometimes,
firms which enter these segments mayexperience only short-term
profitability. This leaves them with the costly task of
repositioningthemselves if they wish to build their profit margins as
well as their sales revenue. However,in the example given, the costs
involved in stocking a wide range of goods may beincompatible with
sustaining a profitable low-price strategy.
Head-on-competition:This may be equally, if not more,
problematic. Unless the market is growing significantly,
there may be no room for extra supply without the profitability of
all firms suffering
badly. None the less, often, large and well financed firms are
reluctant to leave a segment
unchallenged and sometimes are willing to challenge a leader headon, e.g. sales growth in
Cadbury’s Caramel spawned ‘me too’ products in the form of Galaxy
toffee bars and Rolobars. Smaller firms with less financial backing
may be squeezed out or will fail to find afoothold unless their
product offering is demonstrably better than existing brands.
STAGE 4: DESIGN PRODUCT ATTRIBUTES AND ASSOCIATED IMAGERY
At this stage the features of the product should be designed, along
with the type of imageryto help the targeted customers identify the
benefits being offered to them. Features such asbrand name,
packaging, advertising themes, price levels and distribution outlets
are allimportant in creating this position in the mind of the
customer.
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STAGE 5: SUSTAIN A COMPETITIVE ADVANTAGE
Competitive advantage is gained when the firm establishes a market
position that sets itsproduct apart from competitors in the eyes of
its target market. In order for this advantageto be sustained,
marketing information must be kept up to date to ensure that the
needs ofthe target markets are being met more effectively and
efficiently than by competition.
How many differences to promote?
Unique selling proposition(USP)—The unique productbenefit that a
firmaggressively promotes in aconsistent manner to itstarget
market. The benefitusually reflects functionalsuperiority: best
quality, bestservices, lowest price, mostadvanced technology.
Emotional sellingproposition (ESP)—A nonfunctionalattribute that
has unique associationsfor consumers.
Overpositioning—A positioning error referringto too narrow a
picture ofthe company, its product or abrand being communicated
to target customers.
Confused positioning—Apositioning error that leavesconsumers
with a confusedimage of the company, itsproduct or a brand.
Implausible positioning—Making claims that stretchthe perception
of the buyerstoo far to be believed.
Underpositioning—A positioning error referringto failure to position
acompany, its product orbrand.
Criteria of effective Product Positioning
Not all brand differences are meaningful or worthwhile. Not every difference
makes a gooddifferentiator. Each difference has the potential to create
company costs as well as customerbenefits. Therefore, the company must
carefully select the ways in which it will distinguishitself from competitors. A
difference is worth establishing insofar as it satisfies the followingcriteria:
Important. The difference delivers a highly valued benefit to target buyers.
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Distinctive. Competitors do not offer the difference, or the company can
offer it in a moredistinctive way.
Superior. The difference is superior to other ways by which customers
might obtain the same benefit.
Communicable. The difference is communicable and visible to buyers.
Pre-emptive. Competitors cannot easily copy the difference.
Affordable. Buyers can afford to pay for the difference.
Profitable. The company can introduce the difference profitably.
MARKETING MIX
What is product?
A product is anything that a firm offers to customers (both consumers and
business buyers) for acquisition, use, or consumption. Consumer goods,
ideas, organizations, and people are examples of products and services.
Product is a systematic decision process of development relation to the
totality of its features and attributes including branding and packaging.
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Product has broad connotations that may refer to tangible or intangible
goods which we call service.
Supplement/augmented product-marketers offer supplements or add-ons to
entice consumers to make a repeat purchase of the product.
Product—anything that canbe offered to a market for attention, acquisition,
use or consumption that might satisfy a want or need. It includes physical
objects,services, persons, places,organizations and ideas.
Therefore, a product is more than a simple set of tangible features.
Consumers tend to seeproducts as complex bundles of benefits that satisfy
their needs. When developing products,marketers must first identify the
core consumer needs that the product will satisfy. They mustthen design
the actual product and finally find ways to augment it in order to create
thebundle of benefits that will best satisfy consumers.
Services are products that consist of activities, benefits or satisfactions that
are offered forsale that are essentially intangible and do not result in the
ownership of anything.
Product consists of the following:
1. Features- this refers to the product attributes which include
characteristics and its uniqueness that attract the attention of the customer
2. Functions- it refers to the usability of the product to satisfy the needs of
the costumers.
3. Benefits- it is a bundle of positive effects that the product gives the
customer.
Parts or Level of a Product
Center/core product- this refers to the primary reasons and motivations of
consumers for purchasing a product. The problem solving services or core
benefits that consumers are really buying when they obtain a product. For
example, a laptop can be used both at home and in the office.
Tangible/ actual product- this pertains to the physical qualities/features of a
product. A product’s parts, quality level, features, design, brand name,
packaging and other attributes that combine to deliver core product
benefits product planners must turn the core benefit into an actual product.
Actual products may have as many as five characteristics: a quality level,
product and service features, styling, a brand name and packaging. For
example, Sony’s cam camcorder is an actualproduct. Its name, parts, styling,
features, packaging and other attributes have all beencombined carefully to
deliver the core benefit – a convenient, high-quality way to
captureimportant moments.
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Supplement
the add-ons of a product
such as warranty, manner
of delivery, and credit
terms (installation,
delivery, warranty, after
sale service
Tangible
the characteristics of a
product such as size,
brand, name,
packaging, quality,
design and features
(brand name, quality,
packaging, features,
Center
the reason why
consumers buy a
product (core
benefit or
service)
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
Classification of Products (according to their durability and tangibility)
1. Durable products- are products used over an extendedperiod of time and
normally survive for many years. Examples are refrigerators, cars
andfurniture.

2. Non-durable products- are goods that are normally consumed quickly and
used on one or a few usage occasions, such as beer, soap and food
products.
3. Services- these are essential intangible goods that do not result in
ownership of anything but are necessary for human satisfaction. These are
bundles of activities, benefits, or form of satisfaction that is offered for sale
at specific location. Beauty salons, barber shops, massage parlors, and
home repairs are some examples.
Classification of Products (based on the types of customer that use them)
1. Consumer products- these are products bought by consumers for their
personal use and consumption. Most of these products are considered
basic goods, and consumers buy them most frequently. Marketers usually
classify these goods based on consumer shopping habits. Consumer
products include convenience products, shopping products, specialty
products and unsought products. Customers along this line could be found
in mini-grocery or corner stores in shopping malls buying goods like
detergents, canned goods, rice and many others. These goods are further
classified according to their use and features.
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Convenience goods/convenience goods- these are consumer
goods that are bought by final consumers for personal and daily

use. It may be in the form of actual products like batch soap,
baby diapers, newspapers and magazines. Convenience goods
are usually low priced, and marketers place them in many
locations to make them readily available when customers
need them.
Shopping Goods/shopping products- these are goods customers
have to spend some time to decide whether to buy them or not.
They compare the quality, price, style and suitability to other
items of the same kind. Also, it is a consumer product with
unique characteristics or brand identification for which a
significant group of buyers is willing to make a special purchase
effort.
Specialty Goods-A consumer product with unique
characteristics or brand identification for which a significant
group of buyers is willing to make a special purchase effort.
These are products with unique characteristics or it is identified
according to the brand. It is a consumer goods with unique
characteristics or brand identification for which a significant
group of buyers is willing to make a special purchase effort.
Examples include specific brands and types of car, high-priced
home entertainment systems and photographic equipment,
luxury goods, designer clothes and the services of medical or
legal specialists.
Unsought products-are consumer goods that the consumer
either does not know about or knows about but does not
normally think of buying. Most major new innovations are
unsought until the consumer becomes aware of them through
advertising. Classic examples of known but unsought goods are
life insurance, home security systems, funeral services and
blood donations. By their very nature, unsought goods require a
lot of advertising, personal selling and other marketing efforts.
It is a consumer product that the consumer either does not
know about or knows about but does not normally think of
buying.
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2. Industrial Goods/Industrial Products- these are products/services used for
the production of new products. Depending on their use, industrial goods
can sometimes be classified as consumer goods. Examples of industrial
goods include capital goods, raw materials, and repairs, supplies and
services. Thus the distinction between a consumer product and an
industrial product is based on the purpose for which the product is
purchased. If a consumer buys a lawnmower for home use, the lawnmower
is a consumer product. If the same consumer buys the same lawnmower for
use in a landscaping business, the lawnmower is an industrial product.
pencils) and repair and maintenance items (paint, nails, brooms). Supplies
are the convenience goods of the industrial field because they are usually
purchased with a minimum of effort or comparison. Business services
include maintenance and repair services (window cleaning, computer
repair)and business advisory services (legal, management consulting,
advertising)
Three groups of industrial products
Materials and parts are industrial goods that become a part of the buyer’s
product, through further processing or as components. They include raw
materials and manufactured materials and parts.
Raw materials consist of farm products (wheat, cotton, livestock, fruits,
vegetables) andnatural products (fish, timber, crude petroleum, iron ore).
Manufactured materials and parts include component materials (iron, yarn,
cement, wires)and component parts (small motors, tyres, castings).
Component materials are usuallyprocessed further – for example, pig iron is
made into steel, and yarn is woven into cloth.
Capital items are industrial products that help in the buyers’ production or
operations. They include installations and accessory equipment.
Installations consist of buildings (factories, offices) and fixed equipment
(generators, drill presses, large computer systems,lifts). Accessory
equipment includes portable factory equipment and tools (hand tools, lift
trucks) and office equipment (fax machines, computers, desks). These
products do not become part of the finished product. They have a shorter
life than installations and simply aid in the production process. Supplies and
services are industrial products that do not enter the finished product at all.
Supplies include operating supplies (lubricants, coal, computer paper,
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Product Decisions
Marketers are faced with product decisions which they need to make to
develop a product that can attract numerous consumers.
1. Product Attributes- these pertain to the quality, design, and features of a
product. The quality of a product refers to its performance and physical
condition. A quality product is a product that is in good order and condition
and performs well. Developing a product involves defining the benefits that
the product will offer. These benefits are communicated and delivered by
tangible product attributes, such as quality, features, style and design.
Decisions about these attributes are particularly important as they greatly
affect consumer reactions to a product.
We will now discuss the issues involved in each decision.
Product quality-The ability of a product to perform its functions; it includes
the product’s overall durability, reliability, precision, ease of operation and
repair, and other valued attributes.
Quality is one of the marketer’s major positioning tools. Quality has a direct
impact on product performance; hence, it is closely linked to customer
value and satisfaction. In the narrowest sense, quality can be defined as
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‘freedom from defects’. But most customer-centered companies go beyond
this narrow definition. Instead, they define quality in terms of customer
satisfaction. For example, Siemens defines quality this way: ‘Quality is when
our customers come back and our products don’t. This customer-focused
definition suggests that quality begins with customer needs, goes beyond
customer satisfaction and ends with customer retention.
Product style and design- Design is a broader concept than style. Style
simply describes the appearance of a product. A sensational style may grab
attention and produce pleasing aesthetics, but it does not necessarily make
the product perform better. In some cases, it might even result in worse
performance. For example, a chair may look great yet be extremely
uncomfortable. Unlike style, design is more than skin deep – it goes to the
very heart of a product. Good design contributes to a product’s usefulness
as well as to its looks.
2. Branding- a brand is a symbol, name, design, or the combination of all
three that makes a product distinct from its competitors. Brand—A name,
term, sign, symbol or design, or a combination of these, intended to identify
the goods or services of one seller or group of sellers and to differentiate
them from those of competitors.
A brand is a name or mark that is intended to identify the seller’s product
and differentiate it from the product of the competitors. A brand name
consists of letters, words, or numbers that can be read or verbalized. A
brand mark is the part of the brand that appears in the form of symbols
designed in distinctive lettering or colors.
Advantages of Branding






Brands make it easy to identify the product or service.
It assures the buyer that they get the same quality or products.
It reduces price comparison
It adds prestige to the product of the seller
It provides legal protection for the seller.
It helps in product market segmentation
Brand equity spells out the value of the brand in the market.
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Brand loyalty is developed as customers become aware on the quality of the
product compare with other brand in the market.
Selecting a Good Brand Name
a.
b.
c.
d.
e.
f.
It should suggest about the product or service
It must be easy to pronounce and to remember
It must be simple and short in one syllable
It must be distinct or different from others
It must be adaptable to new company product that may be added
It must be capable of registration and legal protection
Branding Strategies
 Producer’s Strategies- this strategy is employed by product
manufacturers’ that dominate the greater market due to the
superiority of their product.
 The middleman’s strategy- this strategy is commonly called as cobranding where the producer and sole distributor carry the brand
name of the manufacturer and that of the middlemen. Middlemen
may find it advantageous to market their own brand because it
increases their control over their target market.
3. Packaging- this refers to the appearance and design of a product’s
wrapper or container. Marketers weigh different factors when it comes to
packaging. In terms of appearance, they consider the size, weight, and type
of packaging material to be used on a product. Developing a good package
for a new product requires making many decisions. The first task is to
establish the packaging concept, which states what the package should be
or do for the product.
A package is the container or the wrapper of the product. Packaging is a
business function that must not be taken for granted. Package gives
significant and differential advantage over other products.
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The Vital Purpose of Packaging




To protect the product on its way to the customer
To provide protection after the product is purchased
It becomes part of the company’s trade marketing program.
It becomes part of the company’s marketing program
4. Labels- labels are attached to provide the consumers the necessary
information about the products. Other than the product manufacturer’s
name, labels also indicate the products; expiration date, nutritional
contents, and manufacturing location. Labels may range from simple tags
attached to products to complex graphics that are part of the package. They
perform several functions. At the very least, the label identifies the product
or brand, such as the name ‘Sunkist’ stamped on oranges. The label might
also grade the product, or describe several things about the product – who
made it, where it was made, when it was made, its contents, how it is to be
used and how to use it safely. Finally, the label might promote the product
through attractive graphics.
Types of Labels
Brand label- It is simply the brand alone that is applied to the product or
package. Clothing has labels that could be seen inside the collars. Others
are embroidered as in underwear, t-shirts, socks, etc.
A Descriptive label- it gives objective information about the product’s use/s
construction, care, performance and other pertinent features. They are
commonly found in food ingredients, medicines, canned goods and others.
Grade label-it identifies the product judge quality with letters, number or
words. It contains product expiry dates, the content values and other
features. Labels are regulated by the operation of labeling laws especially in
medicines, vitamins, milk and other related products.
Functions of Labels
1. The labels identify the product or brand in the market
2. They describe the product features and uses
3. They serve as an advertising medium with its colors and design
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4. They create lasting impression about product quality
5. Support services- Services that augment actual products. Marketers also
offer product support services to consumers. Extending support services is
a way for marketers to review and improve a product/service’s performance
and quality.
PRODUCT LIFE CYCLE
After launching the new product, the management challenge lies in making
sure that the product enjoys a long and healthy life. The new product is not
expected to sell forever, but the company will want to recover a decent
profit to cover all the effort and risk that went into launching it.
Management is aware that each product will have a life-cycle, although the
exact shape and length is not known in advance.
1. Product development begins when the company finds and develops a
new-product idea. During product development, sales are zero and the
company’s investment costs mount.
2. Introduction is a period of slow sales growth as the product is being
introduced in the market. Profits are non-existent in this stage because of
the heavy expenses of product introduction.
3. Growth is a period of rapid market acceptance and increasing profits.
4. Maturity is a period of slowdown in sales growth because the product has
achieved acceptance by most potential buyers. Profits level off or decline
because of increased marketing outlays to defend the product against
competition.
5. Decline is the period when sales fall off and profits drop.
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4. Management Strategy at Maturity Stage- the age of maturity is
investible. It is at this period when the product has to be modified,
design a new promotion strategy and add new product features.
5. Survival Strategy in the Declining Stage- the greatest challenge for
the marketing organization is to develop strategies when the
product begins to slow down in sales and profit is at the edge.
The Length of the Product life Cycle
The length of the product life cycle starts at the time of commercialization
and ends at the time of product decline. It may be for a period of weeks or
month in case of fashion clothing, to many decades in the case of household
appliances or electronic components. It varies form one product category
to another.
Circle Management Strategies
1. Early to Rise Strategy- it is the strategy where the marketing firm
plunges into the market at the early stage or during the
introductory period. This strategy aims to build a dominant market
position before any other marketing organization enters into the
market.
2. Delayed Strategy- some big organizations which have the capability
to outsmart other small marketing outfit believe in the delayed
strategy. This involves proving first that product investment will pay
off if the market is already proven to be profitable.
3. The Rising Market Status Strategy- the growth of the product in the
market should not be taken sitting down just counting the sales and
profits. Managers have to devise strategic plans and programs that
will sustain a bigger market share.
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Price
Price is the only element in the marketing mix that produces revenue; all
other elementsrepresent costs.
Price is the amount of money needed in order to acquire the product or
services from the marketer or the seller. It determines the value of the
goods or services. It is the amount or the sum of the values that consumer
exchange for the benefit or having or using product.
Price may involve more than money. It can be set in monetary or nonmonetary forms. It can be an exchange of goods or services or a
combination of monetary terms.
The price of a product or service will determine how consumers perceive it,
reflect on itsbrand positioning, influence the choice of marketing channel,
affect how it is promoted andhave an impact on the level of customer
service expected by target customers. The priceingredient of the marketing
mix will also affect the viability of the supplying organization.The concept of
pricing is complex and of fundamental importance to the
successfulimplementation of a marketing strategy.
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Pricing is one of the most important elements of the marketing mix, as it
affects profit,volume and share of the market and consumer perceptions.
Just as pricing plays a crucialrole in determining brand image, increasingly
companies are being judged on the transparencyand equity with which they
treat price as a marketing variable.
cars to compete with European luxury cars in the higher-income segment,
thisrequired charging a high price.
Examples of common objectives are sales survival, current profit
maximization objective, price for market-share leadership,price for quality
product, equity pricing
a. Sales survival- it is setting the price that is within the present market
competition due to oversupply and the changing market
preferences.
Factors to consider when setting prices
b. Current profit maximization objective- the firm estimates the
current market demand. When there is high demand, the price is
increased to get the most profit objective, increase in cash flow and
return on investment. Many companies use current profit
maximization as their pricing goal. They estimate what demand and
costs will be at different prices and choose the price that will
produce the maximum current profit, cash flow or return on
investment.
c. Price for Market Share Leadership- this objective refers to the
philosophy that the company with the higher share of the market
enjoys the higher percentage of profit. The bigger the sales volume,
the lower is the price as economies of scale operate in the system.
Internal factors affecting pricing decisions
Internal factors affecting pricing include the company’s marketing
objectives, marketing-mix strategy, costs and organization.
I.
Marketing objectives
Before setting price, the company must decide on its strategy for the
product. If the companyhas selected its target market and positioning
carefully, then its marketing-mix strategy,including price, will be
straightforward. For example, when Toyota decided to produceits Lexus
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d. Price for Quality Product- the company produces high quality of the
products in the market and command higher price to sustain
research and development cost. Customers who perceive quality is
not price conscious.
e. Equity Pricing- it is setting the price low to prevent competition
from entering the market. This will develop customer’s loyalty and
support of the middlemen. Price is set to attract more customers
and help other products survive competition.
II.
Marketing Mix Strategy
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A product’s base price is influenced considerably by the other ingredients in
the market mix. The cost of production and the quality of materials as
inputs affect the price of the product in the market. The other factors in the
making of the product such as labor cost, interest rates and overhead cost
are considered in setting price. These factor in the marketing mix are
important consideration in pricing decisions.
a. Product- the cost of the product is affected by the different
production inputs that are used to make it available for sale. The
product life cycle also affects the pricing decisions as price
adjustments are necessary in the course of its presence in the
market. Price adjustments would be necessary depending on the
stage of the product in its life cycle.
b. The channel of Distribution- the channels and types of middlemen
selected in the distribution of the product will influence the decision
of the internal marketing organization. The price for direct and
wholesale distributors will be different from the retailers, as the
wholesaler will be performing the other functions before the
product reaches customers. Each of these channels has to input
some percentage of the profit objective.
c. Promotions- The promotional and advertising are factors in pricing
decisions. The extent of these promotional activities and the
methods used to promote products it is end users must be
established before price is determined. If promotional and
advertising expenses will be on the part of the distributors, the price
index is lower.
d. Cost of the product- pricing of the product should also consider its
cost. The product’s total unit cost is made up of several types of
costs reacting differently to the changes in the quantity produced.
The following variables are important consideration:
1. The average cost per unit declines as production output
increases as the total fixed cost is spread over an
increasing number of units.
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III.
2. The average variable cost starts high for the first few
units of production and decreases or decline as
efficiency of production is realized.
3. The average total cost is the sum of the fixed cost and
the variable cost. When the variable and fixed costs
decreases, the price of the product becomes lower.
4. The marginal cost slopes down until the next unit is
produced. There is a relationship between the marginal
and the average total cost. The average variable cost is
increasing faster than the average fixed cost.
Cost
Costs set the floor for the price that the company can charge for its product.
Types of Cost
Fixed costs(also known as overheads)—Costs that do not vary with
production or sales level. For example, a company must pay each month’s
bills for rent, heat, interest and executive salaries, whatever the company’s
output. In many industries, such as airlines, fixed costs dominate. If an
airline has to fly a sector with few passengers on board it can only save on
the 15 per cent of its costs accounted for by cabin crew and passenger
service. All other costs, including flight crew (7 per cent), fuel (15 per cent)
and maintenance (10 per cent), are fixed.
Variable costs—Costs that vary directly with the level of production. These
are those, which vary according to the quantity produced. These costsare
incurred through raw materials, components and direct labor used for
assemblyor manufacture. Variable costs can be expressed as a total or on a
per-unit basis. Each personal computer produced involves a cost of
computer chips, wires, plastic, packaging and other inputs. These costs tend
to be the same for each unit produced, their total varying with the number
of units produced.
Marginal costs- involve the change that occurs to total cost if one more unit
is addedto the production total.
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Total costs—The sum of the fixed and variable costs for any given level of
production Management wants to charge a price that will at least cover the
total production costs at a given level of production. The company must
watch its costs carefully. If it costs the company more than competitors to
produce and sell its product, the company will have to charge a higher price
or make less profit, putting it at a competitive disadvantage
Pricing Method/Pricing Strategy
Pricing method or strategy is the route taken by the firm in fixing the price.
The method/strategy must be appropriate for achieving the desired pricing
objectives.
departments. In large companies, pricing is typically handled by divisional or
product line managers. In industrial markets, salespeople may be allowed to
negotiate with customers within certain price ranges. Even so, top
management sets the pricing objectives and policies, and it often approves
the prices proposed by lower level management or salespeople. In
industries in which pricing is a key factor (such as in aerospace, steel and
oil), companies will often have a pricing department to set the best prices or
help others in setting them. This department reports to the marketing
department or top management. Others who have an influence on pricing
include sales managers, production managers, finance managers and
accountants.
The Pricing Methods are the ways in which the price of goods and services
can be calculated by considering all the factors such as the product/service,
competition, target audience, product’s life cycle, firm’s vision of expansion,
etc. influencing the pricing strategy as a whole.
1. Cost-based pricing refers to a pricing method in which some
percentage of desired profit margins is added to the cost of the
product to obtain the final price. In other words, cost-based pricing
can be defined as a pricing method in which a certain percentage of
the total cost of production is added to the cost of the product to
determine its selling price.
2. Demand Based pricing the pricing decision is also depending on
demand and supply of the commodity.
3. Competition Oriented Pricing (Competition-based pricing) refers to
a method in which an organization considers the prices of
competitors’ products to set the prices of its own products. The
organization may charge higher, lower, or equal prices as compared
to the prices of its competitors
IV.
Organizational considerations
Management must decide who within the organization should set prices.
Companies handle pricing in a variety of ways. In small companies, prices
are often set by top management rather than by the marketing or sales
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The external factors in pricing strategy
I.
The Market Demand
The market forces are prime considerations in setting the price
of the product. While cost set the limit of price, the dictate of
the market sets the upper limit in the pricing strategy. The
freedom to set price is dictated by various variables prevailing in
the marketing environment.
Economists recognize types of market structure, each
presenting a different pricing challenge.
a. Pure competition-A market in which many buyers and
sellers trade in a uniform commodity – no single buyer or
seller has much effect on the going market price. A seller
cannot charge more than the going price because buyers
can obtain as much as they need at the going price. Nor
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would sellers charge less than the market price because
they can sell all they want at this price. If price and profits
rise, new sellers can easily enter the market. In a purely
competitive market, marketing research, product
development, pricing, advertising and sales promotion play
little or no role. Thus sellers in these markets do not spend
much time on marketing strategy.It is one of four market
structures in which thousands of firms each produce a tiny
Examples:
farm
commodities
(wheat,
soybean,
strawberries, milo), the stock market, and the foreign
exchange market, shampoo, cellphones, internet providers.
If market supply increases, the market price falls. Since each
firm is a price taker, it has no choice but to charge the lower
price for its product
b. Monopolistic competition-A market in which many buyers
and sellers trade over a range of prices rather than a single
market price. A range of prices occurs because sellers can
differentiate their offers to buyers. Either the physical
product can be varied in quality, features or style or the
accompanying services can be varied. Each company can
create a quasi-monopoly for its products because buyers
see differences in sellers’ products and will pay different
prices for them. Sellers try to develop differentiated offers
for different customer segments and, in addition to price,
freely use branding, availability, advertising and personal
selling to set their offers apart.
c. Oligopolistic Competition- A market in which there are
a few sellers that are highlysensitive to each other’spricing
and marketingstrategies.The product can be uniform (steel,
aluminium) or non-uniform (cars, computers). There are
few sellers because it is difficult fornew sellers to enter the
market. Each seller is alert to competitors’ strategies and
moves. Ifa steel company slashes its price by 10 per cent,
buyers will quickly switch to this supplier.The other steel
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makers must respond by lowering their prices or increasing
their services. Anoligopolist is never sure that it will gain
anything permanent through a price cut. In contrast,if an
oligopolist raises its price, its competitors might not follow
this lead. The oligopolistwould then have to retract its price
increase or risk losing customers to competitors.
d. Pure monopoly -A market in which there is a single seller
– it may be a governmentmonopoly, a private regulated
monopoly or a privatenon-regulated monopoly. The
example of pure monopoly is MERALCO that controls the
supply of electricity. To counter the pricing system the
government imposed regulations to regulate the price
among its customers.
e. Price Freedom- the seller dictates the price based on the
customers perceptions on value. They buy the product
because of its perceived quality features or other
characteristics that they find worth their money. The buyer
places the benefits above the product value.
f.
Price elasticity- the price will influence the demand
relationships. Price elasticity is the measure of the buyers
sensitivity of demand on the changes in price. It is
conditioned when the buyer perceives the product to high
quality, prestige or exclusiveness. This is the case of
branded shirts and other clothing apparels.
COMPETTITORS’ STRATEGY
Another external factor affecting the company’s pricing decisions is
competitors’ costs andprices, and possible competitor reactions to
the company’s own pricing moves. A consumerwho is considering
the purchase of a Canon camera will evaluate Canon’s price and
valueagainst the prices and values of comparable products made by
Nikon, Minolta, Pentax andothers.
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Competitors pricing strategy may be below or above the market.
The seller’s price may be set right at the market price to meet the
competition.
a. Pricing to Meet Competition
This competition is simple to carry out. The marketing
organization ascertains the competitor’s price after allowing
customary mark up for the middlemen and sets its own selling
price. These pricing strategies operate under a perfect
competition when there is an absence of product
differentiation. Buyers are well informed through advertising
and the seller has no discernible control over the selling price.
buying power of the market is at low level and price adjustment is
necessary to cope with economic situation.
B. GOVERNMENT REGULATION
Prices are regulated by the government in cases when it declares a
state of calamity to avoid manipulation of prices by the sellers. In
case of utilities such as water and electricity the government
intervene in the pricing of these social services.
PRICE STRATEGIC IMPLEMENTATION (New Product Pricing
Strategies)
b. Pricing Below Competition
A variation of market-based pricing is to set a price that is below
the level of the main competitor in the industry. It is done by
retailers who stress low mark up, high volume sales, and
employing few customer service.
The market strategy
employed by PureGold and Super Eight are concrete example of
this strategy which can be true in most consumer goods.
The implementation of pricing strategy is one of the basic
management functions that generates the desired profit objectives.
The firm’ readiness to sell the product would be effective if they
adopted price decisions that will sustain its operation. The pricing
decision is dependent on the factors prevailing in the marketing
environment. Careful analysis of the market condition must be
made to determine which pricing strategy will be implemented.
c. Pricing above competition
Producers and sellers sometimes set their price above the
prevailing market level. It works effectively when the product is
distinctive or when the sellers had acquired the reputation
above the competitors in the industry. This is the case with
some boutique and other fashion stores that set their price
differently according to their industry reputations.
Pricing strategies usually change as the product passes through its
life-cycle. The introductorystage is especially challenging. We can
distinguish between pricing a product that imitatesexisting products
and pricing an innovative product that is patent protected.A
company that plans to develop an imitative new product faces a
product-positioning
problem. It must decide where to position the product versus
competing products in terms of
ECONOMIC AND OTHER SOCIAL CONCERNS
Product Mix Pricing Strategies used by marketers
A. RECESSION
It is the state where the economic condition of the country is
affected by higher interest rate and inflation. It affects price as the
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1. Product Bundle Pricing-some firms offer their products in
bundles or promo packages. Shampoos, for example, are
packed together with conditioners: tomato sauce together with
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2.
3.
4.
5.
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pasta noodles; and milk together with coffee or biscuits. As
separate products, they are more expensive; however, when
packaged as one product, they cost less. Unilever and Procter
and Gamble are examples of firms that utilize this pricing
strategy.
By-product Pricing- some firms, instead of discarding the byproducts of their main products, sell them at relatively lower
prices. This strategy can give firms significant competitive
advantage by reducing the price of their main product and
recovering losses by selling its by-products. By employing this
strategy, firms can save money earn marked for the cost of
waste disposal. Chemical plants and petroleum companies that
have efficient solid and chemical waste management systems
usually apply this pricing strategy. Example petrol industry, or
sugar industry.
Optional pricing- firms that use this strategy offer their main
products at a lower price while placing additional charges to the
supplementary services that come with it. For example, most
telecommunication companies set a fixed price on their
postpaid plans. However, services such as calls to other
networks, text messaging to other networks and unlimited
internet access are not covered by some postpaid plans. To
avail themselves of these services, customers must pay
additional charges.
Captive Pricing or Premium Pricing- this involves charging
additional costs for the necessary adjuncts of a main products.
For example, after purchasing a television, the consumer cannot
avoid purchasing an antenna or speakers if he/she wants
maximum quality performance of the main product.
Product Line Pricing- this involves putting noticeable and
sufficient price gaps between particular products in a product
line in order to produce different product quality levels in the
minds of consumers. A firm that uses product line pricing must
know the distinct price differences of the products in the
product line. For example, what are the differences in the prices
of J&J baby powder, lotion, bath oil, and shampoo? In this
strategy, the pricing decision is based on the perceived value
derived by consumers form the slights differences in the prices
of products.
Another example is Samsung. It offers different smartphones
with different features at different prices
6. Customary Pricing- this is use for one price over an estimated
period. The price of the product is kept for a period unless the
prevailing condition in the market changes. It must consider the
market affordability in buying. Example: Candy bars of a certain
weight all cost a predictable amount-unless your purchase them
in an airport shop.
7. Variable Pricing- it is the condition when the price changes with
the fluctuation in demand and the difference is brought by the
entrance of a new product that offers different features. A
pricing strategy in which the price of a good or service may vary
based on region, sales location, date, or other factors. Variable
pricing strategies adjust product prices to achieve optimal
balances between sales volume and income per unit sold based
on the characteristics of different categories of points-of-sale.
Traditional examples include auctions, stock markets, foreign
exchange markets, bargaining, electricity, and discounts. More
recent examples, driven in part by reduced transaction costs
using modern information technology, include yield
management and some forms of congestion pricing.
8. One Price Policy- One price is charged to all customers buying
the product or service under similar conditions. A one-price
policy may also mean that prices are set and cannot be
negotiated by customers. A one-price policy is the opposite of a
variable pricing approach, in which prices may vary based on
location, promotional offers, method of payment, or other
factors.The entrepreneur will set one price for all products
available for sale even if there are differences in taste or design.
Variations of NESCAFE is an example.
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9. Flexible Pricing- pricing is based on customers’ ability to
negotiate or the buying power of the prospective consumers.
Method of selling where the prices are open to negotiations
between buyers and sellers, and allow for bargaining within a
certain range.
10. Odd pricing strategy- prices are set at levels below even values.
The sellers used odd numbers to attract customers to buy the
product. Odd pricing is a pricing method aimed at maximizing
profit by making micro-adjustments in pricing structure. It relies
on the assumption that consumers are calculation-averse and
will therefore only read the first digits of a price when making
their purchasing decision. According to this method, the
relevant information of any given price does not usually relate
to the last digits, but rather to the first digits, or in other words,
to the order of magnitude of the numbers. For example, the
price of P17.99 looks more like P17 and not like P18, products
are priced at P99.95, for children shirt, and P295 for a man’s
shirt. The odd pricing strategy relies on the fact that consumers
highly value their time when evaluating prices. There is an
increasing time cost associated with examining each additional
digit within any given number, which means that when
examining a price, the first digits carry more weight than the
last ones. We can define a relevance rate for each digit and
hence define the two concepts of “perceived price” and “true
price”.
11. Price for Quality- consumers believe that when the product is
priced higher than the other product it is more superior quality.
It is conditioning the mind of the consumers that when the
product is priced higher than that of the competing brand, the
product is guaranteed to be of high quality.
12. Leader Pricing- it is selling the product lower than the
competitors in order to gain consumer interest about the
product. Leader pricing is an aggressive step to win the respect
of the consumers and the competitors. The product must meet
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the standard quality requirements and the price is reasonable
for the buyer.
13. Multiple Unit Pricing- the firm offers discount to consumers for
buying in large quantities. Selling more products will generate
more profit. The objective is to prevent overstocking of goods
and maintain proper inventory level by selling in bulk. Profit
and growth are assured with sustained customer patronage.
Example Buy 2 get 1 free.
14. Unbundled Pricing- it is the opposite of the bundled pricing
strategy. The firm sells the product and makes a separate price
for the service component. There is a separate contract for the
service.
15. Geographic Pricing- this is the pricing strategy where the sellers
and the buyers are far from each other and shipping cost will be
an added value to the product. It is either the seller or the
buyer pays for shipping cost including insurance and other
incidental expenses.
a. FOB Factory- the buyer pays for all shipping cost and
other incidental charges including custom duties and
insurance that will cover the product while in transit. In
case of damage while on transit, the insurance pays for
the cost of damage.
b. Uniform Delivered pricing- Price that includes costs of
transport where a seller retains title until goods are
given to the customer.
c. Zone pricing- this is setting the price uniformly in one
specific area of delivery or operation. Same price is
charged for Metro Manila are and another set price for
other regions in the country
d. Base Point Pricing- the cost of transporting the goods is
computed based on the nearest buyer. The longer the
distance of delivery, the higher the percentage of
delivery cost. It may be computed on a per kilometer
basis
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e. Terms of Sale-when products are sold on cash basis,
discounts are given. When paid at a later date, interest
charges may be part of the price. Cash on delivery is
made when the product is paid upon receipt of goods.
PRICE ADJUSTMENTS
taken in this adjustment as it may affect customer loyalty and
continuous patronage.
5. Mark down- this is reduction from the original selling price due
to product obsolescence or competition in the industry. This
will avoid overstocking and sale of products that are nearing
expiry dates.
Competition and changes in the market condition need price
adjustments to keep the product moving in the shelf of the
middlemen. The changes in the production due to technological
advancement that brought about the economies of scale need price
adjustment to vie the customer more value for the product.
The changes in the price of raw materials and transportation cost
are factors that affect prices in the market. Products that don’t sell
in the shelf need adjustment in price to turn them into moving
inventory. Marketers cannot keep sitting down with the above
conditions or they will find themselves out in the cold.
1. List price- this is quoted price in customer catalogue, price tags,
and purchase orders. Sales people must have updated price list
so that when negotiations take place they are ready to answer
and make minor adjustments when necessary.
2. Escalation clauses- it is the provision in the contract of sale
which stipulates that price of the goods or product that allows
price adjustments before the product is delivered to the
customer. The price difference must be communicated to the
customer before delivery, stating the reasons for the price
increase or adjustments.
3. Surcharges- these are increase in price that are added to the
value of the product in the form of taxes or fees or price
adjustments due to some extra packaging or protection to keep
the product safe while in transit to the customer. It may cover
insurance protection.
4. Mark ups- this is the increase in price to the regular price due to
increase in market demand or due to increase in the price of
raw materials at a particular season of the year. Care must be
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PLACE
PLACE OF DISTRIBUTION AND RETAIL MARKETING
The nature of channels of Distribution
Marketing
channel(distribution
channel)—A
set
of
interdependentorganizations involved in theprocess of making a
productor service available foruse or consumption by
theconsumer or industrial user. They are set of pathways a
product or service follow after production
A Distribution Channel is a set of people and business
organization involved in the transfer of the title of a product
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form the producer to the ultimate consumers or to other
business users. The channel of distribution always includes
both the producer of goods and the final customer in its present
form. It includes the middleman as distributors, wholesalers,
and the retailers.
The distributor’s role within the marketing mix is getting the
product to its target market. The most important activity of the
distributor is arranging the transfer of the title of the product to
its target consumers. The distributors assume the warehousing
of the product, promoting and assuming the financial risk during
the distribution process.
The middlemen are business organizations that render service
related to the sale or purchase of the product. They are the
bridge between the producers or distributors to the customer in
the market. They take the position of the product and arrange
the transfer of title to the next customer.
Intermediaries- are the middlemen and signify those individuals
in the channels that either take title to take goods and sell at
profit. They are directly involved in process of flow of goods
from manufacturer to consumer.
Theobjective is to move the goods or services efficiently, with
the lowest possible number ofintermediaries between the
producer and the end user. Ideally, the producer aims to
exchangethe products directly with the consumer. However, as
the physical distance between the twoparties and the volume of
goods to be exchanged increases, it becomes necessary
forproducers to use the help of others to complete the
movement of the goods associated withthe transaction. These
are the intermediaries within the channels of distribution, or
the ‘value
chain’, as it is termed.
Value delivery network—A network made up ofthe company,
suppliers,distributors and customerswho ‘partner’ with
eachother to improve theperformance of the entiresystem.
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Channel level—A layer ofintermediaries that performssome
work in bringing theproduct and its ownershipcloser to the final
buyer.
Direct-marketing channel—A marketing channel thathas no
intermediary levels.For example, Avon and Tupperware sell
their products door-to-door or through home and office sales
parties.
Conventional distributionchannel—A channelconsisting of one
or moreindependent producers,wholesalers and retailers,each a
separate businessseeking to maximise its ownprofits, even at
the expenseof profits for the system asa whole
Types of Distribution Channel
1. Direct to the consumer
2. Distribution via retailers
3. Distribution via wholesalers and retailers
Classification of Middleman (Types of Intermediaries)
1. Merchant Middleman- the two important groups are the
wholesalers and retailers. They take position of the product and
handle the distribution until it reaches the consumers. They plan
and execute these essential functions of assorting and storing the
product before it is shifted to the customers.
a. Retailers- are firms or people that offer
products/services directly to consumers.
Sari-sari
stores and supermarkets are some popular and
common examples of retailers. In bigger retail outlets
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like supermarkets, products and placed on shelves and
freezers with corresponding product classification signs
for consumers to locate them easily. Some retailers, on
the other hand, expand their product line by purchasing
new products form a new set of wholesalers. For
example, SM Hypermarkets, which only carried or sold
grocery items initially, has recently started offering
baked goods and pastries in most of their branches.
b. Wholesalers- wholesaling refers to the practice of firms
of purchasing products in bulk from big suppliers and
manufacturers to sell them to retailers. Wholesalers
are the people in charge of purchasing products from
suppliers and selling them to retailers.
Many
wholesalers are classified as jobbers or middlemen
because they buy products in large quantities and sell
them to retailers or, occasionally, to end consumers.
Because they buy in bulk and directly from suppliers,
they get products for relatively lower prices.
2. The Agent Middleman (sales agents)- these are organizations or
persons who do not actually own the product of the producer or
title. They are middlemen who arrange the transfer of title form
producer to the consumers. They are the Real Estate Brokers, Real
Estate Salesman, Insurance Agents, Travel Agents and others.
3. Distributors- These are sales intermediaries who share willingness to
hold stock. Usually, distributors are linked to a single supplier for
each line carried. For example, in the car industry, Ford has a
network of distributors (or dealers) that provide showrooms (and
salesmen) as well as car servicing dedicated to the Ford range of
cars. The manufacturer contributes to the costs associated with the
running of the dealership. However, such distributor agreements
are becoming less rigorously maintained, so that some distributors
are beginning to carry cars for more than one car manufacturer,
which inevitably leads to conflicts of interests for all concerned.
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Factors Affecting the Channel of Distribution/Channel Constraints
1. Channel conflict— Disagreement among marketing channel
members on goals and roles – who should do what and for what
rewards.
Two Level of Conflicts
a. Horizontal conflict is conflict among firms at the same level of the
channel. For instance, Peugeot dealers in a particular geographic
territory may complain that the other dealers in the territory steal
sales from them by pricing too low or by selling outside their
assigned territories.
b. Vertical conflict is more common and refers to conflicts between
different levels of the same channel. For example, some personal
computer manufacturers created conflict with their high street
dealers when they opened online stores to sell PCs directly to
customers.
2. Market Consideration (customer characteristics)
a. The type of product- consumer products are served by most
wholesalers and retailers that could be found even in the
remote sector of the towns and cities. Business product on
the other hand reaches the market through dealers or
agents.
b. Number of potential customers- the wide potential market
for consumer products needs the services of more outlets
which are the middlemen in a supply chain. Business
products have few volume customers and they can utilize
their salespeople or distributors. The number of customers
that a producer targets influences the selection of the
intermediaries used within the supply channel.
c. Geographic concentration (geographical dispersion)- the
market for consumer goods is dispersed and spread all
throughout the various locations in the urban centers and in
the rural areas. It is impractical to use few outlets to serve
consumers needs. Business product users are mostly
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concentrated in urban centers and they can be serviced by
salespeople or dealers.
d. The volume of orders- consumer goods are ordered in big
volume while business products are less in volume but
higher in price per unit.
3. Product Consideration ( product characteristics)
a. Unit Value- the price attached to each unit of product
affects the amount of money available for distribution.
Products with low unit value are sold through indirect
channels while products with higher sales value are sold
through sales people.
b. Perishability-Products have differing degrees of perishability
that influence the type of storage and warehousing
required and the distance that such products can be moved.
Highly perishable products such as fresh food require
different warehousing conditions from products such as
vegetable oil, lubricating oil and toilet paper. Some products
need to have temperature controlled chilled or freezing
conditions; others are better stored at room temperature.
Safety of dangerous products also necessitates special
storage, e.g. petroleum and gaseous fuels.
c. Technical nature of the Product (SERVICE SUPPORT
REQUIREMENTS)- business product that is highly technical is
distributed directly to users. It provides pre-selling and post
selling services before the transaction is consummated.
4. Company characteristics
a. SIZE OF ORGANIZATION- The resources of the supplier of
the product, or service, influences the selection of the
channels of distribution. Such resources include finance, the
number of employees and thegeographical spread of the
organization’s operations.
b. PRODUCT MIX- The range of products that an organization
supplies affects the channel selection. The organization
supplying different product types to different markets, of
necessity, will be likely to operate more complex channel
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systems than the firm supplying a more limited range of
standard products
c. PAST CHANNEL MIX EXPERIENCE-The channel mix used
evolves over time and is influenced by the experience of
past practice.
If, traditionally, a product has been
distributed by a supplier using wholesalers and retailers,
and that system has worked effectively, then the supplier
will probably continue to use the same system. It is when
the system fails, or when the cost of using such channels
becomes excessive, or the competition becomes intense,
that suppliers consider alternative approaches.
Determining the Intensity of Product Distribution
The intensity of distribution refers to the different levels that the product
will pass through before it reaches the final consumers. There are many
possible degrees of intensity and management must make a choice of the
appropriate one that will make the product more accessible to the target
consumers.
 Intensive Distribution-Mass-market products have to be made available
in as many outlets as possible to ensure that consumers have the
convenience of being able to purchase the products whenever they
wish. This strategy is used for lower-priced convenience items, e.g.
confectionery, snack foods, tobacco and soap. Producers of these types
of goods use a range of outlets of varying status, including railway
kiosks, multiple high-street shops and retail superstores. Location
convenience is the priority in selecting these retail outlets.
 Selective Distribution-Rather than intensive distribution, producers may
select their preferred outlets to match their marketing strategies by
targeting particular market segments. For example, the producer of
digital cameras may select electrical goods retailers that are located in
prime shopping centres and in airport duty-free zones, rather than use
all the available electrical goods retailers. In this way, the digital camera
producer can concentrate efforts on retailers that perform best at
selling the cameras.
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 Exclusive Distribution-Should the producer have an exclusive range of
products, e.g. Omega watches or Gucci fashion clothes, it is appropriate
to distribute the products through exclusive retail outlets and to limit
the number of intermediaries handling the company’s goods or services.
Exclusive distribution is used when the producer wants to maintain
control over the service level offered. Frequently it involves exclusive
dealer arrangements in which the retailers agree not to carry competing
brands.
This leads to channel of distribution ‘shuffle’ whereby the nature and
responsibilities ofintermediaries within the network change to meet the
pressures imposed by users of thesystem. Increasingly, it is the retailers
within the network that have the dominant role withinthe channels of
distribution, or the value chain.
While, in principle, the choice of whether to use intensive, selective or
exclusivedistribution relates to the nature of the products or services being
marketed, and thedistribution methods appear to be mutually exclusive, yet
there are pressures to move towardsintensive intermediary coverage. Often
the user of exclusive and selective distribution isunder pressure to widen
the outlet coverage, especially in times of falling sales. However,the greater
coverage can reduce the image of exclusivity, thereby losing the
advantagesassociated with the established outlets. The situation has to be
monitored carefully to choosethe most appropriate outlet coverage.
Throughout the selection of the most effective distribution network, the
channel designhas to consider the demands of the manufacturer, i.e. the
need to move the goods or servicesfrom the location where they are
produced, through the intermediaries, to the consumer. Atthe same time
the pressures of the customer on the supplier of the goods or services
mustbe considered. Compounding this situation, the retailer places
pressures on the channelnetwork, obliging the supplier to meet the
retailer’s demands. The demands of all concernedmust be met.
In this way, channel design is affected by ‘push’ and ‘pull’ factors:
1. Push from the manufacturer pushing production on to customers
through the channel intermediaries.
2. Pull from customers exerting product stocking pressure on retailers
and manufacturers through the channel intermediaries.
3. Constraints come from retailers, e.g. stock specifications on
suppliers to match customer database information.
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Promotion
The nature of Sales Promotion
Promotion mix—The specificmix of advertising, personalselling, sales
promotionand public relations that acompany uses to pursue itsadvertising
and marketingobjectives.
Promotion planning is a systematic decision making relating to the whole
organization micro and macro environments that sustain information flow
to the customers.
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Promotion is an attempt to influence the buyer. It is widely used by a wide
range of organizations in both consumers and business market.
A company’s total marketing communications mix – also called its
promotion mix –consists of the specific blend of advertising, personal
selling, sales promotion, public relationsand direct marketing tools that the
company uses to pursue its advertising and marketingobjectives.
Five Main Promotional Tools:
Advertising. Any paid form of non-personal presentation and promotion of
ideas, goodsor services by an identified sponsor.
Personal selling. Personal presentation by the firm’s sales force for the
purpose of makingsales and building customer relationships.
Sales promotion. Short-term incentives to encourage the purchase or sale
of a product orservice. It is the process of persuading a potential customer
to buy the product. It is designed to be used as a strategy and tactics to
boost sales.
Public relations. Building good relations with the company’s various publics
by obtainingfavourable publicity, building up a good ‘corporate image’, and
handling or heading offunfavourablerumours, stories and events.
Direct marketing. Direct connections with carefully targeted individual
consumers bothto obtain an immediate response and to cultivate lasting
customer relationships – the useof telephone, mail, fax, email, the Internet
and other tools to communicate directly with specific consumers.
Each category in the promotions mix involves specific tools. For example,
advertisingincludes print, radio and television broadcast, outdoor and other
forms. Personal sellingincludes sales presentations, fairs and trade shows,
and incentive programmes. Salespromotion includes activities such as pointof-purchase displays, premiums, discounts,coupons, competitions, speciality
advertising and demonstrations. Direct marketing includescatalogues,
telephone marketing, fax, kiosks, the Internet and more. Thanks to
technologicalbreakthroughs, people can now communicate through
traditional media (newspapers, radio,telephone, television) as well as
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through newer types of media (fax machines, mobile phones,computers).
The new technologies have encouraged more companies to move from
masscommunication to more targeted communication and one-to-one
dialogue.
Purposes of Promotion
1. Promotion and Imperfect Competition- the local market for our
products to operates under a condition of imperfect competition. It
is characterized by product differentiation, emotional buying
behavior, and incomplete market information. Through promotion
the marketing firm strives to increase its market share and sales
volume at any given price.
2. Promotion and Marketing- promotion in product marketing serves
to inform, persuade and remind prospective customers about the
company and its products. The purpose of promotion is to
disseminate information and let the potential buyer know about the
product’s existence, its availability and price.
3. Promotion and Strategic Planning- the strategic approach in
marketing is a coordinated effort of all marketing executives who
have something to do with the product mix. Promotion is influenced
by how distinctive a product is and whether the price is abouve or
below the competition.
Factors Inluencing the Promotional Mix
1. Target Customer or Market
a. Readiness to buy the product- the target market is affected
by the following steps in the buying process:
i. Awareness-This can be attained by the ability to
capture the interest of the customers. For example,
when cellphone companies introduced its mobile
phone network, it began with an extensive ‘teaser’
advertising campaign to create name familiarity.
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ii. Knowledge- it is the process of assimilating the
information about the product or service of the
marketing organization. Example: At launch, of
mobile phones ads created knowledge by informing
potential buyers of the company’s service and
innovative features.
iii. Liking- it can be measured when the customers
begin to inquire about the benefits and features of
the product. If the audience looks unfavourably on
the brand, the communicator has to find out why,
and then resolve the problems identified before
developing a communications campaign to generate
favourable feelings.
iv. Preference- it is determined when the customers
ask about the price and the place where it could be
available.
v. Conviction- it is evaluated when the customers
make options and choices.
vi. Purchase- it is the ultimate degree of the
customer’s preference when he pays the product.
b. Geographic Scope of the Market- the area of marketing
operation is another factor to consider in promoting the
product to its target market. A small territory may require
the service of salesperson. The bigger the geographic area
more promotional activities are necessary to give the widest
information dissemination through advertising and
publicity.
c. Type of Customer- the customer can be classified in many
different ways. Market segmentation is determining
assortment of different types of market. The promotional
strategies therefore must match with the type of customer.
d. The concentration of the Market- the density of population
must be identified before any promotional activity be
implemented.
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2. The Nature of the Product
a. Unit Value- the product with lower sales value like
consumer goods,needs more advertising to penetrate the
target market. On the other hand, products with higher
value like housing units need more the services of
salesperson.
b. Degree of customization- customization is the desire of the
individual customer to have unique features for the product
he wants for himself. This is true in housing construction
where the services of the civil engineers and architects are
needed. Sales people are needed to complete the
transaction.
c. The need for pre-sale and post-sale service- the
promotional strategy under this category would be the
services of sale engineers for machineries and installations.
Advertising for this kind of product would not be necessary.
3. The Stage of Product Life Cycle
Promotional Strategies are influenced by the product’s life cycle. At
the introductory stage, the consumers products must have intensive
advertising and call of sales people to more dealers and retailers in
order that the product will be known and available in the market.
Promotion strategies that can be employed at each stage of the
Product Life Cycle are as follows:
Introduction
When a product is new the organisation's objective will be to inform
the target audience of its entry. Television, radio, magazine,
coupons etcmay be used to push the product through the
introduction stage of the life cycle. Push and Pull Strategies will be
used at this crucial stage.
Growth
As the product becomes accepted by the target market (at this
stage of the life cycle) the organisation will employ strategy to
increase brand awareness and customer loyalty.
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Maturity
At this stage of the life cycle the product will be experiencing
increased competition and will need persuasive tactics to encourage
consumers to choose their product over their rivals. Any differential
advantage/benefit will be need to be clearly communicated to the
target audience.
Decline
As the product reaches the decline stage of its life cycle, all
theorganisation can do is use strategy to remind consumers about
the product in a bid to slow the inevitable.
4. The Availability of Financial Resources
Big marketing organizations have the financial resources to back up
their products with intensive advertising. Advertising is one of the
most expensive strategies in the promotional mix. This could only
be possible if the organization has the fund to sustain advertising
strategy.
Promotion Through The Product Life Cycle
As products move through the four stages of the product life cycle
different promotional strategies should be employed at these
stages to ensure the healthy success and life of the product.
ADVERTISING
Important decisions in advertising
Marketing management must make four important decisions when
developing an advertising program.
1.
2.
3.
4.
I.
Setting Advertising Objectives
Setting the advertising budget
Developing advertising strategy
Evaluating advertising campaigns
Setting Advertising Objectives
Advertising Objectives-A specific communicationtask to be accomplished
witha specific target audienceduring a specific periodof time.
Source: http://www.learnmarketing.net/promotion.htm
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Advertising objectives can beclassified by primary purpose – whether the
aim is to inform, persuade or remind
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Possible Advertising Objectives
a. Informative advertising— Advertising used to inform consumers
about a new product or feature and to build primary demand.
b. Persuasive advertising—Advertising used to build selective demand
for a brand by persuading consumers that it offers the best quality
for their money. Some persuasive advertising has become
comparison advertising, in which a company directly or indirectly
compares its brand with one or more other brands
c. Reminder advertising—Advertising used to keep consumers thinking
about a product. For example, car firms might use reinforcement
advertising that depicts satisfied owners enjoying some special
feature of their new car.
a. Stage in the product life-cycle. A brand’s advertising budget often
depends on its stage in the product life-cycle. New products
typically need large advertising budgets to build awareness and to
persuade consumers to try the products. In contrast, mature brands
usually require lower budgets as a percentage of sales.
b. Market share. Market share also impacts the amount of advertising
needed. Because building the market or taking share from
competitors requires larger advertising spending than does simply
maintaining current share, low-share brands usually need more
advertising spending as a percentage of sales.
c. Competition and clutter. In a market with many competitors and
high advertising clutter, a brand must be advertised more heavily to
be noticed above the noise in the market.
d. Advertising frequency. When many repetitions are needed to
present the brand’s message to consumers, the advertising budget
must be larger.
e. Product differentiation. Undifferentiated brands – those that
closely resemble other brands in their product class (coffee, laundry
detergents, chewing gum, beer, soft drinks) – may require heavy
advertising to set them apart. When the product differs greatly from
those of competitors, advertising can be used to point out the
differences to consumers.
III.
Developing Advertising Strategy
Advertising strategy covers two major elements: creating the
advertising messages andselecting the advertising media.
II.
Setting the Advertising Budget
After determining its advertising objectives, the company next sets its
advertising budget foreach product.Here we describe some specific
factors that should be considered when setting theadvertising budget:
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 Creating the advertising messages-No matter how big the budget,
advertising can succeed only if commercials gain attention and
communicate well.
 The changing message environment
 Message Strategy-Message strategy statements tend to be plain,
straightforward outlines of benefits and positioning points that the
advertiser wants to stress. The advertiser must develop a
compelling creative concept – or ‘big idea’ – that will bring the
message strategy to life in a distinctive and memorable way.
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 Message execution-The advertiser now has to turn the ‘big idea’
into an actual ad execution that will capture the target market’s
attention and their interest. The impact of the message depends
not only on what is said, but also on how it is said. The creative
people must find the best style, tone, words and format for
executing the message.
 Different execution styles
 Slice of life. This style shows one or more people using the
product in a normal setting (e.g. the classic Persil laundry
detergent commercials which show the role of the mother
who knows she can rely on Persil to keep her family’s
washing clean, white and bright).
 Lifestyle. This style shows how a product fits in with a
particular lifestyle
 Fantasy. This style creates a fantasy around the product or
its use. For instance, many ads are built around dream
themes. Gap introduced a perfume named Dream. Ads
show a woman sleeping blissfully and suggest that the scent
is ‘the stuff that clouds are made of ’.
 Mood or image. This style builds a mood or image around
the product, such as beauty, love or serenity. No claim is
made about the product except through suggestion.
 Musical. The ad is built around a song or some well-known
music, so that emotional responses to the music are
associated with the product.
 Personality symbol. This style creates a character that
represents the product.
 Technical expertise. This style shows the company’s
expertise in making the product.
 Scientific evidence. This style presents survey or scientific
evidence that the brand is better or better liked than one or
more other brands. For years, Crest toothpaste has
usedscientific evidence to convince buyers that Crest is
better than other brands at fightingcavities.
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
Testimonial evidence or endorsement. This style features a
highly believable or likeable source endorsing the product.
It could be ordinary people saying how much they like a
given product or a celebrity presenting the product.
 Selecting the advertising Media
The advertiser must next decide upon the media to carry the message.
The main steps inmedia selection are: (1) deciding on reach, frequency
and impact; (2) choosing among chiefmedia types; (3) selecting specific
media vehicles; and (4) deciding on media timing.
 Deciding on reach, frequency and impact- To select media, the
advertiser must decide what reach and frequency are needed to
achieve advertising objectives. Reach is a measure of the
percentage of people in the target market who are exposed to the
ad campaign during a given period of time. For example, the
advertiser might try to reach 70 per cent of the target market during
the first three months of the campaign. Frequency is a measure of
how many times the average person in the target market is exposed
to the message. For example, the advertiser might want an average
exposure frequency of three. The advertiser must also decide on the
desired media impact – the qualitative value of a message exposure
through a given medium. For example, for products that need to be
demonstrated, messages on television may have more impact than
messages on radio because television uses sight and sound. The
same message in a national newspaper may be more believable
than in a local weekly. In general, the more reach, frequency and
impact the advertiser seeks, the higher the advertising budget will
have to be.
 Choosing among chief media types- The media planner has to know
the reach, frequency and impact of each of the major media types.
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The major media types are newspapers, television, direct mail,
radio, magazines, outdoor, and the Internet.
programmes or shows where the commercial should be broadcast.
Prime-time programmesare the favourites, but costs escalate with
the popularity of the programme
 Deciding on media timing
The advertiser must also decide how to schedule the advertising
over the course of a year.Suppose sales of a product peak in
December and drop in March. The firm can vary itsadvertising to
follow the seasonal pattern, to oppose the seasonal pattern, or to
be the sameall year. Most firms do some seasonal advertising. Some
do only seasonal advertising: forexample, many department stores
advertise – usually their seasonal sales – in specific periodsin the
year, such as Christmas, Easter and summer. Advertisers can also
ensure greaterefficiency in running their TV campaigns – in terms of
the number of television impactsand their price – by shifting TV
campaigns into cheaper months.
 Selecting specific media vehicles
Media vehicles—Specificmedia within each generalmedia type, such
as
specificmagazines,
television
showsor
radio
programmes.numerous stations and channels to choosefrom,
together with hundreds, even thousands, of programme vehicles –
the particular
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Finally, the advertiser has to choose the pattern of the ads.
Continuity means scheduling adsevenly within a given period.
Pulsing means scheduling ads unevenly over a given timeperiod.
Thus 52 ads could be either scheduled at one per week during the
year or pulsedin several bursts. The idea is to advertise heavily for a
short period to build awareness thatcarries over to the next
advertising period. Those who favour pulsing feel that it can be used
to achieve the same impact as a steady schedule, but at a much
lower cost. However, somemedia planners believe that although
pulsing achieves minimal awareness, it sacrifices depth
of advertising communications.
IV.
EVALUATING ADVERTISING
The advertising programme should regularly evaluate both the
communication impact andthe sales effects of advertising.
Measuring the communication effects of an ad or copy testing
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tells whether the ad is communicating well. Copy testing can be
done before or after an ad isprinted or broadcast. Before the ad
is placed, the advertiser can show it to consumers, ask how
they like it, and measure recall or attitude changes resulting
from it. After the ad is run, theadvertiser can measure how the
ad affected consumer recall or product awareness, knowledge
and preference.Copy testing—Measuringthe communication
effectof an advertisement beforeor after it is printed
orbroadcast.
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4. Sales force promotion— Sales promotion designed to motivate
the sales force and make sales force selling efforts more
effective, including bonuses, contests and sales rallies.
Setting Sales Promotion Objectives
Consumer promotions objectives
SALES PROMOTION
Sales promotion—Shorttermincentives to encouragepurchase or
sales of aproduct or service.Whereasadvertising offers reasons to
buy a product or service, sales promotion offers reasons thatwould
achieve immediate sales. It seeks to motivate the customer to buy
now.Sales promotion includes a wide variety of promotion tools
designed to stimulate earlieror stronger market response. These
tools are used by many organisations – manufacturers,distributors,
retailers, trade associations and non-profit institutions – and may be
targetedtowards the consumer or final buyer, business customers,
the trade or retailer and thecompany’s sales force.
(1) increase short-term sales;
(2) help build long-term marketshare;
(3) entice consumers to try a new product;
(4) lure consumers away from competitors’products;
(5) encourage consumers to ‘load up’ on a mature product; or
(6) hold and rewardloyal customers.
Types of Promotion
1. Consumer promotion—Sales promotion designed to stimulate
consumer purchasing, including samples, coupons, rebates,
prices-off, premiums, patronage rewards, displays, and contests
and sweepstakes.
2. Trade (or retailer) promotion—Sales promotion designed to
gain reseller support and to improve reseller selling efforts,
including discounts, allowances, free goods, cooperative
advertising, push money, and conventions and trade shows.
3. Business promotion—Sales promotion designed to generate
business leads, stimulate purchase, reward business customers
and motivate the salesforce.
Sales Force objectives
(1) get more sales force support for current or new
products; or
(2) stimulate salespeople to sign up new accounts.
Trade promotion objectives
(1) motivating retailers to carry new items andmore stock;
(2) inducing them to advertise the product and give it more shelf space; and
(3) persuading them to buy ahead.
Sales promotions are usually used together with advertising, personal
selling or other promotionmix tools. Consumer promotions are usually
advertised and can add excitement andpulling power to ads. Trade and sales
force promotions support the firm’s personal selling process.
Objectives, however, should be measurable. Rather than stating that the
promotion aims toincrease sales, the objective should be specific about the
level of increase, who the main targetsare and whether increased sales are
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expected to come from new triallists or from currentconsumers who are
loading up or bringing forward their purchase.
Price packs—Reducedprices that are marked bythe producer directly on
thelabel or package.
In general, sales promotions should be consumer relationship building.
Rather thancreating only short-term sales volume or temporary brand
switching, sales promotions shouldhelp to reinforce the product’s position
and build long-term relationships with customerrelationships. Increasingly,
marketers are avoiding the ‘quick fix’, price-led promotions infavour of
promotions designed to build brand equity.Even price promotions can be
designed to build customer relationships. Examples includeall the
‘frequency marketing programmes’, ‘loyalty card schemes’ and ‘clubs’ that
havemushroomed in recent years.
Premiums—Goods offeredeither free or at low cost asan incentive to buy a
product.
Consumer relationshipbuildingpromotions—Salespromotions that promote
theproduct’s positioning andinclude a selling messagealong with the deal.
Major Sales Promotion Tools
Many tools can be used to accomplish sales promotion objectives. The
promotion plannershould consider the type of market, the sales promotion
objectives, the competition and thecost-effectiveness of each tool.
Descriptions of the main consumer and trade promotiontools follow.
The main consumer promotion tools include samples, coupons, cash
refunds, price packs,premiums, advertising specialities, patronage rewards,
point-of-purchase displays anddemonstrations, and contests, sweepstakes
and games.
Consumer Promotion Tools
Samples—Offers to consumersof a trial amount ofa product.
Coupons—Certificates thatgive buyers a saving whenthey purchase a
product.
Cash refund offers (rebates)—Offers to refundpart of the purchase price ofa
product to consumers whosend a ‘proof of purchase’ tothe manufacturer.
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Advertising specialities—Useful articles imprintedwith an advertiser’s
name,given as gifts to consumers.
Patronage rewards—Cashor other awards for theregular use of a certain
company’sproducts or services.
Point-of-purchase (POP) promotions—Displays anddemonstrations that
takeplace at the point ofpurchase or sale.
Competitions, sweepstakes, lotteries and games—Promotions that
offercustomers the chance to winsomething – cash, goods ortrips – by luck
or extra effort.
(Reference: page 788)
Trade Promotion Tools
Trade promotion can persuade retailers or wholesalers to carry a brand,
give it shelf space,promote it in advertising and push it to consumers. Shelf
space is so scarce these days thatmanufacturers often have to offer price
discounts, allowances, buy-back guarantees or freegoods to retailers and
wholesalers to get on the shelf and, once there, to stay on it.
Manufacturers use several trade promotion tools. Many of the tools used
for consumerpromotions – contests, premiums, displays – can also be used
as trade promotions.Alternatively, the manufacturer may offer the
following:
straight discount off the list price on each casepurchased during a stated
period of time (also called a price-off, off-invoice or off-list).
Allowance—(1) Reduction inprice on damaged goods.(2) Promotional
money paidby manufacturers to retailersin return for an agreementto
feature the manufacturer’sproduct in some way.
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Free Goods--are extra cases of merchandise, to intermediariesthat buy a
certain quantity or that feature a certain flavour or size
Pushincentives – cash or gifts to dealers or their sales force to ‘push’ the
manufacturer’s goods.
speciality advertising items that carry the company’sname, such as pens,
pencils, coffee mugs, calendars, paperweights, matchbooks andmemo pads.
A sales contest is a contest for salespeople or dealers to urge their sales
force to increase theirefforts over a given period. Sales contests motivate
and recognise good company performers,who may receive trips, cash prizes
or other gifts. Sales contests work best when they are tiedto measurable
and achievable sales objectives (such as finding new accounts, reviving
oldaccounts or increasing account profitability) and when employees
believe they have an equalchance of winning. Otherwise, employees will not
take up the challenge.
Business Promotion Tools
Companies spend huge sums of money each year on promotion to industrial
customers.These business promotions are used to generate business leads,
stimulate purchases, rewardcustomers and motivate salespeople. Business
promotion includes many of the same toolsused for consumer or trade
promotions. Here, we focus on two of the main businesspromotion tools –
conventions and trade shows, and sales contests.
Convention and Trade Shows
Many companies and trade associations organise conventions and trade
shows to promotetheir products. Firms selling to the industry show their
products at the trade show. Vendorsreceive many benefits, such as
opportunities to find new sales leads, contact customers,introduce new
products, meet new customers, sell more to present customers and
educatecustomers with publications and audiovisual materials.
Trade shows also help companies reach many prospects not reached
through their salesforces. A high proportion of a trade show’s visitors see a
company’s salespeople for the firsttime at a show. Business managers face
several decisions, including which trade shows toparticipate in, how much
to spend on each trade show, how to build dramatic exhibits thatattract
attention, and how to follow up on sales leads effectively.
Sales Contests
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Developing the Sales promotion program
1. the marketer must decide on the size of the incentive.--The marketer
must ensure that the promotion genuinely offers extra value and
incentives to targets. Importantly, the promotion must not be
misleading, and the firm must have the ability to honour
redemptions. If not, the campaign could backfire, exposing the firm
to bad publicity which damages its reputation and brand image.
2. The marketer must also set conditions for participation. Incentives
might be offered to everyone or only to select groups. Conditions,
such as the proof of purchase or closing date of the offer, must be
clearly stated.
3. The marketer must then decide how to promote and distribute the
promotion programme itself.
4. The length of the promotion is also important.
5. The marketer also must decide on the response mechanism: that is,
the redemption vehicle to be used by the customer who takes part
in the promotion. Immediate reward – for example, a price
reduction, or a free gift attached to the product on offer – often
yields a higher response. If the incentive requires further action to
be taken by the consumer – for instance, to make another purchase
or to collect the required number of tokens in promotion packs and
then post these off to claim a gift or free product – the redemption
rate can be reduced.
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6. sales promotion tools should be pre-tested to find out whether they
are appropriate and of the right incentive size.
7. Companies should prepare implementation plans for each
promotion, covering lead time and sell-off time.
8. Evaluation is also very important
6. Development. Public relations with donors or members of nonprofit organisations to gain financial or volunteer support.
Public relations is used to promote products, people, places, ideas,
activities, organisationsand even nations. Trade associations have used
public relations to rebuild interest in decliningcommodities such as eggs,
apples, milk and potatoes. Even nations have used public relationsto attract
more tourists, foreign investment and international support. Companies can
use PRto manage their way out of crisis, as in the case of Johnson &
Johnson’s masterly use of publicrelations to save Tylenol from extinction
after its product-tampering scare.
PUBLIC RELATIONS
Public relations—Buildinggood relations with thecompany’s various
publicsby obtaining favourablepublicity, building up agood ‘corporate
image’,and handling or headingoff unfavourablerumours,stories and events.
Major
PRtools
include
press
relations,product
publicity,
corporatecommunications, lobbyingand counselling.
Another important mass-promotion technique is public relations. This
concerns buildinggood relations with the company’s various publics by
obtaining favourable publicity, buildingup a good ‘corporate image’ and
handling or heading off unfavourablerumours, stories andevents. Public
relations (PR) departments perform any or all of the following functions:
1. Press relations or press agency. Creating and placing newsworthy
information in the newsmedia to attract attention to a person,
product or service.
2. Product publicity. Publicising specific products.
3. Public affairs. Building and maintaining local, national and
international relations.
4. Lobbying. Building and maintaining relations with legislators and
government officials to influence legislation and regulation.
5. Investor relations. Maintaining relationships with shareholders and
others in the financial community.
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Major Public Relations Tools
1. News- PR professionals find or create favourable news about the
company and its products or people. Sometimes news stories occur
naturally. At other times, the PR person can suggest events or
activities that would create news.
2. Speeches-create product and company publicity. Increasingly,
company executives must field questions from the media or give
talks at trade associations or sales meetings. These events can
either build or hurt the company’s image.
3. Special Events-ranging from news conferences, press tours, grand
openings and firework displays to laser shows, hot-air balloon
releases, multimedia presentations and star-studded spectaculars,
or educational programmes designed to reachand interest target
publics.
4. Written Materials-to reach and influence their target markets.
These materials include annual reports, brochures, articles and
company newsletters and magazines.
5. Audio visual materials-such as films, slide-and-sound programmes
and video and audio cassettes, are being used increasingly as
communication tools.
6. Corporate-identity materials also help create a corporate identity
that the public immediately recognises. Logos, stationery,
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brochures, signs, business forms, business cards, buildings, uniforms
and even company cars and trucks make effective marketing tools
when they are attractive, distinctive and memorable.
7. Public Service Activities-campaigns to raise funds for worthy causes
– for example, to fight illiteracy, support the work of a charity, or
assist the aged and handicapped – help to raise public recognition.
8. Sponsorship is any vehicle through which corporations gain public
relations exposure. Corporate sponsorships have become an
important promotional tool for companies looking to lift their brand
image, or introduce new product lines or services.
9. Company’s website-can also be a good public relations vehicle.
Consumers and members of other publics can visit the site
forinformation and entertainment. Websites can also be ideal for
handling crisis situations. As more and more people look to the Net
for information, a ‘web’ of opportunity now unfolds for public
relations.
Main Public Relations Decisions
As with the other promotion tools, in considering when and how to use
product publicrelations, management should set PR objectives, choose the
PR messages and vehicles,implement the PR plan and evaluate the results.
1. Setting public relations objectivesThe objectives for public relations
are usually defined in relation to the types of news storyto be
communicated, the communication objectives to be achieved (for
instance, awarenesscreation, knowledge dissemination, generation
of specific publicity for target groups) andthe specific target
audiences.
2. Choosing public relations messages and vehicles -Message themes
for the public relations exercise should be aligned with the
organisation’sPR objectives. In some cases the choice of PR
messages and tools will be clear-cut. In others,the organisation has
to create the news rather than find it by sponsoring noteworthy
events.Creating events is especially important in publicising fundraising drives for non-profitorganisations. In the past, fund-raisers
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have created a large set of special events, rangingfrom art exhibits,
auctions and dinners, to marathons, walkathons and swimathons.
3. Implementing the public relations planThe PR campaign must be
implemented with care. For example, a great story is easy to
place,but, unfortunately, most stories are not earth shattering and
would not get past busy editors.Thus PR professionals have to
acquire a good feel for what media editors want to feature intheir
papers and magazines as well as establish good relationships with
them. They viewmedia editors as a market to be satisfied so that
editors will continue to use their stories.
4. Evaluating public relations resultsPublic relations results are difficult
to measure because PR is used with other promotion toolsand its
impact is often indirect. Ideally, the company should measure the
change in productawareness, knowledge and attitude resulting from
the publicity campaign. Assessing thechange requires measuring the
before-and-after-the-campaign levels of these measures.
5. Finally, like the other communications tools, public relations should
be blendedsmoothly with other promotion activities within the
company’s overall integratedmarketing communications effort.