Marketing Management. Zdenek Linhart, linhart@pef.czu.cz, Czech University of Agriculture, Faculty of
Economics and Management, Prague, Czech Republic ................................................................................ 4
Training and project presentation ................................................................................................................. 5
How to use this study text .............................................................................................................................. 5
1.
MARKETING IDEA, MARKET, AND PROCESS DEVELOPMENT ................................................. 6
Study Aim ....................................................................................................................................................... 6
Process Objectives: ....................................................................................................................................... 6
The Role of Marketing in Today’s Organisations.......................................................................................... 6
A PHILOSOPHY AND AN ACTIVITY ...................................................................................................................... 7
Philosophy: Core Concept of Marketing ....................................................................................................... 7
Activity: Marketing Management concepts: .................................................................................................. 7
THE MARKETING ENVIRONMENT, CONSUMER STUDIES ...................................................................................... 8
The Marketing Environment .......................................................................................................................... 8
Consumer Markets and Buying Behaviour .................................................................................................... 9
Cultural ....................................................................................................................................................... 10
Organisational Markets and Buying Behaviour .......................................................................................... 10
THE MARKETING CHAIN – TRADE MARKETING VS. MARKETING MANAGEMENT .............................................. 12
Supply chain characteristics ........................................................................................................................ 12
MARKET RESEARCH, INFORMATION SOURCES, METHODS ................................................................................ 17
Delphi studies .............................................................................................................................................. 17
Continuous research (longitudinal design) ................................................................................................. 18
Documentation: Output, process, responsibility ......................................................................................... 18
Classification of collected data ................................................................................................................... 19
INTRODUCTION TO CASE STUDY ....................................................................................................................... 20
New Food Product Development Guidelines ............................................................................................... 20
Project Stage 1: Preliminary research ........................................................................................................ 20
Project stage 2 (A) - secondary research: What information is required? .................................................. 21
Primary research: Discuss your product idea with experts ........................................................................ 21
Feasibility of production ............................................................................................................................. 21
Project stage 2 (B): Product development to commence in: …………………….. . ...................................... 22
Sensory analysis to be carried out in shops of in the University? ............................................................... 22
Project Stage 3: Gather completed questionnaires, evaluate, analyse and tabulate ................................... 22
Develop your marketing strategy from this information and the secondary information gathered: ........... 22
Project Stage 4: Commercialisation ............................................................................................................ 22
Project Stage 5: Preparation of financial accounts .................................................................................... 23
Projects to be written up and original unbound to be submitted to: ……………….. (name) on or before:
………… (date) ............................................................................................................................................ 23
The Projects will be assessed under the following Headings ...................................................................... 23
Conditions and Projecting Facilitation ....................................................................................................... 23
Sensory Test Method .................................................................................................................................... 24
Class Participation Questions ..................................................................................................................... 31
2.
MARKETING MANAGEMENT AND BUSINESS STRATEGY ........................................................ 34
Aim............................................................................................................................................................... 34
Objectives: ................................................................................................................................................... 34
MODELS OF STRATEGIC PLANNING .................................................................................................................... 34
Strategic Planning and the Marketing Management Process ..................................................................... 34
RELATION BETWEEN MARKETING PLANNING AND CORPORATE STRATEGIC PLANNING ...................................... 36
Research Like Approach: Model of corporate planning ............................................................................. 37
Mission ........................................................................................................................................................ 37
Creating and integration of initiatives ........................................................................................................ 37
Market Segmentation, Targeting and Positioning ....................................................................................... 38
Generation of Alternatives - Segmentation ..................................................... Error! Bookmark not defined.
Major segmentation types and indices for consumer markets ..................................................................... 40
Positioning by Semantic Differential ........................................................................................................... 40
Principal terms for selection and processing of segmentation criteria ....................................................... 43
Selection of Qualitative or Quantitative Approach ..................................................................................... 44
Data Collection and Processing Techniques: Primary, Secondary ............................................................. 45
Objectives – targeting .................................................................................................................................. 41
1
Targeting Growth of Company .................................................................................................................... 42
2.3 COMPONENTS OF MARKETING PLAN ........................................................................................................... 47
The Marketing Planning Process ................................................................................................................ 47
2.4 THE MARKET AUDIT – SWOT .................................................................................................................... 48
Methodology connecting strategical marketing management and marketing programs ............................. 50
2.5 METHOD OF ASSESSMENT ........................................................................................................................... 50
Final exam questions ................................................................................................................................... 51
Class participation based questions: ........................................................................................................... 52
Control of skills: .......................................................................................................................................... 52
3.
OPERATIONAL MARKETING ............................................................................................................. 53
Aim: ............................................................................................................................................................. 53
Objectives: ................................................................................................................................................... 53
3.1 DIFFERENT MARKETING PLANS DEPENDING ON MARKETING MIX CHARACTERISTICS AND STRATEGY OF THE
FIRM .................................................................................................................................................................. 53
Examples of marketing plans ....................................................................................................................... 54
Practical rules helping to incorporate strategies into marketing plans and programs ............................... 54
3.2 ROLES AND FUNCTIONS OF MARKETING MIX COMPONENTS ......................................................................... 55
Planning of features of marketing mix ......................................................................................................... 55
Marketing Strategies in Different Stages of the Product Life Style ............................................................. 57
Corrections of marketing mix based on measured values ........................................................................... 59
Price ............................................................................................................................................................ 59
Place: The Relation of Logistics to Trade Marketing Activities .................................................................. 63
Decisions and design of distribution channel .............................................................................................. 65
Promotion: (1)advertising, (2) sales promotion, (3) publicity, (4)personal selling .................................... 67
Communication and Promotion-Mix Decisions .......................................................................................... 67
Advertising Decisions .................................................................................................................................. 68
Sales Promotion and Publicity Decisions .................................................................................................... 68
3.3 NEW PRODUCTS IN THE CONTEXT OF THEIR DEVELOPMENT, TEST AND COMMERCIALISATION................ 70
Product, Brand, Packaging, and Services Decisions .................................................................................. 70
Product ........................................................................................................................................................ 72
Product classifications ................................................................................................................................ 73
The New product Development Process ...................................................................................................... 74
Decisions about product .............................................................................................................................. 76
3.4 IMPLEMENTATION OF MARKETING PLANS IN TERMS OF ORGANISATIONAL STRUCTURES, MARKET
OPERATIONS, AS WELL AS MONITORING AND CONTROL ..................................................................................... 81
Services: In/External Consistency of Modules ............................................................................................ 83
The modern marketing department evolved through several stages ............................................................ 84
3.5 CONTROL .................................................................................................................................................... 86
3.3 Control of skills: .................................................................................................................................... 86
4.
INTERNATIONAL MARKETING AND MARKETING ORGANISATION .................................... 88
Study Aim: ................................................................................................................................................... 88
Process Objectives ....................................................................................................................................... 88
Definition of international marketing .......................................................................................................... 88
4.1 DEVELOPMENT OF STUDENT CAPACITY TO IDENTIFY, EVALUATE, SELECT AND ACCESS POTENTIAL
INTERNATIONAL MARKETS ................................................................................................................................ 88
Proactive and reactive motives for market identification ............................................................................ 88
Evaluation criteria and trends enhancing capacity to handle a change of sales subjects, objects, markets,
organisation, and finance ............................................................................................................................ 89
Problem to select an international market .................................................................................................. 91
Delivery design: Buyer / Seller Relationships ............................................................................................. 96
Key Factors Determining Buyer/Seller Relationship .................................................................................. 97
4.2 POTENTIAL LEGISLATIVE, POLITICAL AND ECONOMICAL ISSUES THAT INFLUENCE INTERNATIONAL
MARKET DEVELOPMENT .................................................................................................................................... 99
Market Potential .......................................................................................................................................... 99
Company Quality Issues ............................................................................................................................ 100
International Trade Policy and Legal Issues ............................................................................................. 101
Incorporation of New entrants into Strategies for Development of International Markets ....................... 102
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4.3 UNDERSTANDING TO THE ‘GLOBAL MARKET’ AND THE ‘GLOBAL ORGANISATION’ IN RELATION TO AN
INTERNATIONAL MARKETING STRATEGY ....................................................................................................... 103
Adding Value in Each Step of Internationalisation ................................................................................... 103
Process Ordered Planning Decisions: ...................................................................................................... 106
Marketing project management - sales/finances/production ..................................................................... 107
Control system for processes of marketing programs design .................................................................... 108
Project items for documentation in company ............................................................................................ 109
Implementation of International Marketing Strategy into Marketing Strategy of Company ..................... 110
4.4 METHOD OF ASSESSMENT ......................................................................................................................... 110
5.
PRESENTATION OF MARKETING PLAN FOR SELECTED PRODUCT OR SERVICE ......... 111
Aim............................................................................................................................................................. 111
Objectives .................................................................................................................................................. 111
Course Format........................................................................................................................................... 111
Course content ........................................................................................................................................... 111
Method of Assessment ................................................................................................................................ 111
Recommended Reading.............................................................................................................................. 111
Final Exam Questions Proving Skills of Participant ................................................................................. 111
COMMUNICATION AND DOCUMENTATION ISSUES AND SKILLS ....................................................................... 112
Non-verbal communication ....................................................................................................................... 112
Listening .................................................................................................................................................... 113
Interviewing ............................................................................................................................................... 114
Communication in groups or teams ........................................................................................................... 115
Written communication.............................................................................................................................. 116
Why written communications? ................................................................................................................... 116
Effective writing......................................................................................................................................... 117
Completeness ............................................................................................................................................. 120
Appropriateness ......................................................................................................................................... 120
Dynamism .................................................................................................................................................. 121
Developing of writing plan ........................................................................................................................ 121
2. Audience analysis .................................................................................................................................. 122
3. Thought organisation ............................................................................................................................ 122
4. Researching your subject....................................................................................................................... 122
5. Constructing and editing the first draft ................................................................................................. 123
6. Reconstructing the final draft ................................................................................................................ 124
Letters and memos ..................................................................................................................................... 124
Summary .................................................................................................................................................... 127
1.6 DESIGNING A MARKETING INTELLIGENCE WHILE WORKING WITH DATABASES: SIGNIFICANCE OF PRACTICAL
PROCESSES FOR STRATEGY .............................................................................................................................. 128
a. Consequent process ............................................................................................................................... 128
a.1 Example of using consequent processes during supply and demand development .............................. 129
b. Contradictory processes ........................................................................................................................ 129
c. Specialisation of staff /entrepreneurs on developmental/risk challenges or line managers/businessman
on sustainability......................................................................................................................................... 130
c.1 Difficulties of corporate implementation ............................................................................................. 130
d. Transformation of matter relations to information one or reverse ........................................................ 131
d.1 Motivation to responsibility for final result ......................................................................................... 131
d.2 Selection of resulting value .................................................................................................................. 132
1.6 SYNERGY OF CONNECTED PHILOSOPHY AND ACTIVITY .............................................................................. 133
Project cycle: ............................................................................................................................................. 133
Documentation of Project Cycle: .............................................................................................................. 133
ACTIONS ......................................................................................................................................................... 134
PITFALLS ......................................................................................................................................................... 135
6.
LITERATURE ......................................................................................................................................... 137
3
Marketing Management
Zdenek Linhart, linhart@pef.czu.cz, Czech University of Agriculture, Faculty of
Economics and Management, Prague, Czech Republic
Language corrections: Billy Crawford
The following study text is composed of five parts. Each part enables independent entry first
broadening, and consequently deepening your marketing methodology. Specific incentives
should be recognised and processed into added value for customers.
Scheme 0-1: Continuity of marketing methodology among parts of this study text
1st part:
Philosophy of
consumers and
actions of
organisations
on markets SENZITIVITY
2nd part:
Databases of
corporations,
companies in
target market
segment VOLUMES
Marketer’s position
3rd part:
Improvements
of product,
place, price,
promotion –
RE/PRO/
ACTIONS
4th part: Your
project for new
market and
selfsufficiency INDICES
5th part:
Your
methods
and criteria
anywhere –
DOCUMMENTATION
Prognosis,
plans,
implementation of
projects
Awarding of credits to a project group members
Mark for examination is awarded based on a one page list of criteria
proving the value of an individual part contributing to the group project
Each part shows the alternative methodological approaches simplifying the way to the final
marketing effect. Besides this study text the additional reports, articles, and cases can be
found at readings.doc to provide a student with detailed information helping him/her to solve
an individual assignment. Schemes, empty application forms, questions and a glossary serve
the same purpose. It is expected that student will compose the information needed for a
particular assignment by connecting information from all these parts of study texts. Fast and
precise recognition of incentives is made possible by separate glossaries (using ctrl F).
4
Training and project presentation
A project is assigned to a group of students representing marketers serving companies as
supplier, middleman, researcher and promoter. Training ensures proper understanding of the
different interests of all project participants (Scheme 0-1 for left to right). The presentation
has to prove that these interests were not only recognised but fulfilled in synergy (Scheme 0-1
from right to left and file exam.doc).
How to use this study text
The aim of this study text is to develop perception, understanding and exploitation of different
situations, which managers need to solve. Firstly, a project topic will be found to be
interpreted and implemented to target groups. Secondly, the value of this topic should be
improved based on proper selection of parameters measuring the effect of actions between
initial and desired state. This process uses the following incentives and connects the following
processes:
- consequent
- contradictory
- development (alternatives)/decline (risk) or sustainability based
- transforming matter to information or reverse
- simplifying of more difficult (contradictory) to easier (consequent) or desirable
alternatives (sustainability, developmental, decline) solutions
Thirdly, this process declaring a project value must be perceived as advantageous by suppliers
and customers. Perception of the competitive advantage of this project is based on processes,
the validity which is confirmed by description of the accompanying data collection and
information processing techniques.
5
1. Marketing idea, market, and process development
Study Aim
To provide students with an understanding of marketing concepts - their evolution and
relevance for modern business practice.
Process Objectives:
1. To give an understanding of marketing philosophy (core concept of marketing) and
marketing activities (marketing management concepts).
2. To show components and importance of the marketing environment and consumers for
business profitability (It is the task of businesses to attract customers by a better offer then
competitors do).
3. To introduce students to the idea of the marketing chain and its players (product and stores
chain).
4. To present market research as an activity linking a firm with consumers and the
environment through information (confirmation of changes in marketing mix further, in
development of future demand and creation of buffer knowledge about competitors and
alternative solutions for periods of implementation or crisis).
The Role of Marketing in Today’s Organisations
Marketing has its origins in the fact that humans are creatures of needs and wants. Needs
and wants create a state of discomfort in people, which is resolved through acquiring
products to satisfy these needs and wants. Since many products can satisfy a given need,
product choice is guided by the concept of value and expected satisfaction.
These products are obtainable in several ways: self-production, coercion, begging and
exchange. Most human society works on the principle of exchange, which means that people
become specialists in the production of particular products and trade them for the other
things they need. A market is a group of people who share a similar need.
Marketing encompasses those activities that represent working with markets, that is, trying
to actualise potential exchanges.
Marketing management is the conscious effort to achieve desired exchange outcomes with
target markets. The marketer’s basic skill lies in influencing the level, timing, and
composition of demand for a product, service, organisation, place, person, or idea.
Five alternative philosophies can guide organisations in carrying out their marketing
activity. The production concept holds that consumers will favour products that are
affordable and available, and therefore management’s major task is to improve production
and distribution efficiency and bring down prices. The product concept holds that consumers
favour quality products that are reasonably priced, and therefore little promotional effort is
required.
The selling concept holds that consumers will not buy enough of the company’s products
unless they are stimulated through a substantial selling and promotion effort. The marketing
concept holds that the main task of the company is to determine what a chosen se of
customers’ needs, wants, and preferences are and to adapt the company to deliver the desired
satisfactions. The societal marketing concept holds that the main task of the company is to
generate customer satisfaction and long-run consumer and societal wellbeing as the key to
satisfying organisational goals and responsibilities.
6
Interest in marketing is intensifying as more organisations in the business sector, the nonprofit sector, and the international sector recognise how marketing contributes to improved
performance in the marketplace.
A Philosophy and an Activity
Mission: To give an understanding of marketing philosophy (core concept of marketing) of
consumers and marketing activities (marketing management concepts) of competitors.
Philosophy: Core Concept of Marketing
The philosophy is related to langer perspective of customer and supplier. Activities are related
to operational issues of buyer and salesman. Both extremes are connected by chained terms of
the core marketing concept. Arrows without text are showing a change of philosophy into
capability to act successfully. Arrows (Scheme 1-1) with text show activities of independent
marketer. Windows with text show states and process of growing maturity of dependent
persons: customer and salesman. All these activities are manageable through production,
product and selling concept – see further.
Scheme 1-1: Core marketing concept
Customer
Buyer
Needs
Value
Wants
Costs
Demand
Salesman
Supplier
First and
last sale
Exchange
Marketing
First sale
Transaction
Satisfaction
Marketers
Relationship
Repeated sales
Target segment, market share,
turnover
Corporate strategy, marketing
programs
Increasingly managers have had to turn to consumer research for answers to a most important
questions about any market - those shown below - called ”Seven Os” of the marketplace:

What constitutes the market?
Occupants

What does the market buy?
Objects

Why does the market buy?
Objectives

Who participates in the buying?
Organisation

How does the market buy?
Operations

When does the market buy?
Occasions

Where does the market buy?
Outlets
Activity: Marketing Management concepts:
The development of modern marketing ideas occurred in the frame of marketing management
concepts:
7

Production/product concept
marketing myopia: selling: marketing, social marketing
Company orientation towards marketplace:
 Production: quality for average customer, low costs, widely available products.
 Product: high quality for targeted market segment, higher price, special delivery.
 Marketing myopia:
 Selling concept: highest possible turnover, aggressive selling and promotion, stored
products over capacity of buyers and market. Full storage must be sold even with loss
at first during crisis. Loss will be repaid during market recovery period. Penetration
program should destroy decissive competitors and repay investments (losses).
 Marketing concept: Organisational goals are set according to needs, and wants of target
market so as to deliver satisfaction effectively and efficiently.
 Social marketing concept: Marketing’s role is either set by employees of organisation
or is adopted by business, non-profit sector (consumers organisations), or international
sector to represent the customer needs.
Marketing concept developed into marketing management and trade marketing concepts.
Trade marketing destroyed many product chains dominated by producers supplying trade
firms. Trading firms evolved into branded trade chains with the image of best shopping. The
production and product concept evolved into branded products with the image of progress.
The Marketing Environment, Consumer Studies
Mission: To show components and importance of the marketing environment and consumers
for business profitability. It is the task of business to gain customers from competitors using
environmental opportunities or threads as a laverage.
The Marketing Environment
The marketing environment is the place the company must start in searching for
opportunities and monitoring threats. It consists of all the actors and forces that affect the
company’s ability to transact effectively with a target market. We can distinguish between
the company’s microenvironment and macroenvironment.
The company’s microenvironment consists of the actors in the company’s immediate
environment that affect its ability to serve its markets, specifically, the company itself,
suppliers, market intermediaries, customers, competitors, and public. The company itself
consists of several influential departments, all of which have an influence on marketing
management’s decision making. Suppliers, through their influence on the cost and
availability of needed inputs, also have an influence on marketing decisions. The company
converts these supplies into useful products and services and uses marketing intermediaries
(middlemen, physical distribution facilitators, marketing service agencies, financial
intermediaries) to help it find customers and deliver the goods. The target market itself may
consist of consumers, producers, resellers, or government agencies, here or abroad. In
carrying out its marketing task, the company faces several types of competitors: desire
competitors, generic competitors, product-form competitors, and brand competitors.
The company also has to deal with various public that have an actual or potential interest in
or impact on the company’s ability to achieve its objectives: financial, media, government,
8
citizen action. Local, general, and internal public strive for the same objectives makeing up
the company’s microenvironment.
The company’s macroenvironment consists of six major forces impinging on the company:
demographic, economic, physical, technological, political/legal, and socio/cultural. The
demographic environment shows a world-wide explosive population growth, a U.S. birthrate slowdown, an ageing U.S. population, a changing American family, a rise of non-family
households, geographical population shifts, and a more-educated and white-collar
population. The economic environment shows a slowdown in real-income growth, continued
inflationary pressure, changing savings and debt patterns, and changing consumerexpenditure patterns. The physical environment shows impending shortages of certain raw
materials, increased energy costs, increased pollution levels, and increasing government
intervention in natural resource management. The technological environment exhibits
accelerating technological change. The political/legal environment shows substantial
business regulation, strong government agency enforcement, and the growth of publicinterest groups. The socio/cultural environment shows long-run trends toward selffulfilment, immediate gratification, the easy life, informal and open relationships, and more
secular orientation.
Model buyer’s behaviour helps you to understand what to find first and what to modify then
to reach the final effect.
Table 1-1: Model of Buyer’s behaviour
Outside stimuli
Buyer’s black box
Marketing Environmental Buyer
characteristics
Product
Economic
Cultural
Price
Technological Social
Place
Political
Personal
Promotion Cultural
Psychological
Buyer’s decision
Buyer decision process
Problem recognition
Information search
Evaluation
Decision
Post-purchase
behaviour
Product choice
Brand choice
Dealer choice
Purchase timing
Purchase amount
3.
2.
1.
3.
1.
2.
Explain how to use a model. See proposed order of steps in last two rows. Do not waste
stimuli nor motivational incentives where an increase of turnover is not maximal.
Consumer Markets and Buying Behaviour
Markets have to be understood before marketing plans can be developed. The consumer
market buys goods and services for personal consumption. It is the ultimate market for which
economic activities are organised. The market consists of many sub-markets, such as black
consumers, young adult consumers, and elderly consumers. The buyer’s behaviour is
influenced by four major factors: cultural (culture, subculture, and social class), social
(reference groups, family, and roles and statuses), personal (age and life-cycle stage,
occupation, economic circumstances, lifestyle, and personality and self-concept), and
psychological (motivation, perception, learning, and beliefs and attitudes). All of these
provide clues as to how to reach and serve the buyer more effectively. Before planning its
marketing, a company needs to identify its target consumers and the type of decision process
9
they go through. While many buying decisions involve only one decision maker, other
decisions may involve several participants, who play such roles as initiator, influencer,
decider, buyer, and user. The marketer’s job is to identify the other buying participants, their
buying criteria, and the amount of influence they have on the buyer. The marketing program
should be designed to appeal to and reach the other key participants as well as the buyer.
The amount of buying deliberateness and the number of buying participants increase with the
complexity of the buying situation. Marketers must plan differently for four types of
consumer buying behaviour: complex buying behaviour, dissonance-reducing buying
behaviour, whether the consumer has high or low involvement in the purchase, and whether
there are many or few significant differences among the brands. In complex buying
behaviour, the buyer goes through a decision process consisting of problem recognition,
information search, evaluation of alternative, purchase decision, and post-purchase behaviour.
The marketer’s job is to understand the buyer’s behaviour at each stage and what influences
are operating. This understanding allows the marketer to develop a significant and effective
marketing program for the target market.
Scheme 1-2: Factors of consumer’s buying behaviour:
Cultural
Social
Culture
Subculture
Reference
Personal
groups
Age and life cycle stage
Psychological
Occupation
Motivation
Economic circumstances
Perception
Life style
Learning
Personal and self-concept
Beliefs and attitudes
Family
Roles and
BUYER
statuses
Social class
Factors of consumers’ and customers’ behaviour differ. But both are helping to find a
difference of particular market segment.
Organisational Markets and Buying Behaviour
The organisational market consists of all the individuals and organisations that buy goods
for purposes of further production, resale, or redistribution. Organisations are a market for
raw and manufactured materials and parts, installations, accessory equipment, and supplies
and services. Producers buy goods and services for the purpose of increasing sales, cutting
costs, or meeting social and legal requirements.
Compared with the consumer market, the producer market consists of fewer buyers, larger
buyers, and more geographically concentrated buyers. The demand is derived, relatively
inelastic, and more fluctuating, and the purchasing is more professional. Industrial buyers
make decisions that vary with the buying situation or buyclass. Buyclasses include three
10
types: straight rebuys, modified rebuys, and new tasks. The decision-making unit of a
buying organization, the buying center, consists of persons who play any of five roles: users,
influencers, buyers, deciders, and gatekeepers. The industrial marketer needs to know: Who
are the major participants? In what decisions do they exercise influence? What is their
relative degree of influence? and What evaluation criteria does each decision participant
use? The industrial marketer also needs to understand the major environmental,
organisational, interpersonal, and individual influences operating in the buying process. The
buying process itself consists of twelve stages called buy-phases: problem recognition,
general need description, product specification, supplier search, proposal solicitation,
supplier selection, order-routine specification, supplier search, proposal solicitation, supplier
selection, order-routine specification, and performance review. As industrial buyers become
more sophisticted, industrial marketers must upgrade their marketing capabilities. The
reseller market consists of individuals and organisations that acquire and resell goods
produced by others. Resellers have to decide on their assortment, suppliers, prices, and
terms.
They face three types of buying situations: new items, new vendors, and new terms. In small
wholesale and retail organisations buying may be carried on by one or a few individuals: in
larger organisations, by a whole purchasing department. In a modern supermarket chain, the
major participants include buyers from headquarters, storewide buying committees, and
individuals with different responsibilities for standard items, the buying process, and
routines for reordering and renegotiating contracts.
The government market is a vast one that annually purchases $476 billion worth of products
and services - for the pursuit of defence, education, public welfare, and other public needs.
Government buying practices are highly specialised and specified, with open bidding and/or
negotiated contracts characterising most of the buying. Government buyers tend to fill out
more forms, require more signatures, and respond more slowly in placing orders.
Scheme 1-3: Factors of industrial buyer’s buying behaviour
Environmental
Level of demand
Organisational
Economic outlook
Objectives
Interpersonal
Cost of money
Policies
Authority
Individual
Rate of
Status
Age, Income
technological change Procedures
Empathy
Education
Political and
Job position
regulatory
Organisational
development
structures
Persuasiveness
BUYER
Personality
Risk attitudes
The closer factors are to buyer the more important they are, but even so, they are rarely
distinguishable. Factors are more easily recognisable but less important for buyer if they are
further from buyer, shown in a pattern of concentric circles. How do you select and collect
research items proving significance of results for a marketing project?
11
The marketing chain – Trade Marke ting Vs. Marketing Management
Mission: To introduce the idea of marketing chain and its players (product and stores chain) to
students.
Ttwo contradicting marketing processes compete for incentives: marketing management and
trade marketing.
Scheme 1-4: Competing marketing approaches
Products
Marketing
management
approach
Trade
marketing
approach
Goods
Marketing management is adopted by the manufacturer. Trade marketing is a further step to
implement marketing principles behind the gate of a manufacturing company. Trade
marketing is drawing and supporting information, understanding, quality, and delivery with
other departments: sales, customer service, logistics, finance, marketing management, and
product development. Trade marketing:
- forms consumer marketing through a chosen channel of distribution
- accounts for customers requirements
- focuses all elements of marketing on customer needs (e.g. retailer)
Trade marketing must be a business culture. Properly focused, it adds success and value. All
sectors of a company must understand the need for trade marketing.
Supply chain characteristics
The supply chain consists of a flow of materials from material providers, through factories
and wholesale and retail distribution networks to customers. These flows are characterised by
varying supply lead times and service levels. They also consist of a flow of information
(„demand signals“ or orders) from customers through manufacturers to suppliers. These are
characterised by variability in volume and in reorder/repurchase frequency. There are also
parallel flows of cash and promotion (information).
However, a supply chain is really a network of chains with shared /common modes, rather
than a single chain. Each such chain (network) consists of a series of buffers linked by supply
and demand signals. These buffers exist to cover demand uncertainty and supply inflexibility,
but amplify noise (variability and uncertainty).
Thus, it is essential to understand:
- Stock policies at all locations in the chain
- The number of independent decision points
- Factory and supply constraints
- Lead time and replenishment cycles
- Replenishment algorithms and forecasting techniques
- Impact of trading terms / minimum order policies
- Promotion effects
In brief:
- view entire chain!
12
-
get as close as possible to customer!
The following schemes show how to find partners among trade chain participants wha are
claiming the power. Partnership can use co-operation and individual involvement when
reaching the best value. Also motives and techniques are mentioned for this purpose.
Scheme 1-5: Conflicts and power in distribution systems
Scheme 1-6: Co-operation in distribution systems
13
Scheme 1-7: Objectives
- which objective for whom?
14
- which value, costs, satisfaction?
- how to facilitate exchange, transaction,
relationship?
Seek where and how to satisfy them!
Scheme 1-8: Customer value and salesman exchange propositions:
Exchange = dealer profitability + franchise value +
innovative product + station management
technology + advertising and promotion
Request
Customer ‘Very satisfied survey’
fulfilment time
New customer acquisition
Market share
KnowledgeConvenience
Customer retentionable
Personal
adviser
Responsive
Value = Product/Service Attributes + Image + Relationship
Functionality
Quality Price
Time
Satisfaction (buying experience) = speedy + helpful +
recognition of loyalty
Scheme 1-9: Options of place and distribution linking
- options
15
Shop
Channel
Goods
Special
Exclusive
Special
Shopping
Selective
Shopping
Intensive
Convenient
Convenient
Scheme 1-9: Final decision and design of place and distribution linking
Shop 1
Shop 2
Shop 3
Shop n
Middleman
Supplier 1
Supplier 2
Supplier 3
Supplier m
Scheme 1-10: Approaches and new trends in marketing channels design
- Proactivity (direct marketing based: fair price system,
multilevel marketing),
- Programming (franchising, VMS, HMS),
- Conventional distribution (marketing mix based)
Thus, any of on-going dialogue in physical distribution should address:
- The validity of assumptions (full pallet handling / proportion of order picking, drop
configurations)
- Future depot locations
- The long term acceptability of load utilisation, pallet configurations / dimensions
- Any automation planned – common material handling methods?
- The mutual position on automatic identification, pallet recognition, case recognition
- Any customer collection requirements / policies
- Opportunities for alternative delivery methods /equipment and flexibility to change
schedules
- A direct and frank exchange of performance standards
Many of discutable items of the distribution system design can be solved in advance by
research and development.
16
Market Research, Informati on Sourc es, Methods
Marketing research confirms further changes in the marketing mix, in development of future
demand and creating of buffer knowledge about competitors and alternative solutions for
period of implementation or crisis. The information gained has value for the user (if s/he is
capable to understand it in spite of conflict with his/her actual experience and conviction) and
scientific value. Depending on the method used, the information is a compromise between its
costs and user value.
Market research has been defined as "the systematic gathering,
recording, analysis and interpretation of data on problems relating to
the market for, and the marketing of, goods and services".
Desk research and field research
Data gathering may be considered under two headings: desk research
and field research. Desk research (also known as secondary or
bibliographical research) involves the location and examination of
available (usually published) data of relevance to the research project.
Field research (also known as primary or original research) involves obtaining information
form informants by means of interviews, questionnaires, etc. As a method of information
collection it is inevitably many times more expensive than the comparatively simple desk
research.
Mission: To present market research as an activity linking the firm with consumers and
environment through information.
Delphi studies
This type of research approach clearly aims at qualitative rather than quantitative measures by
aggregating the information of a group of experts. It seeks to obtain answers from those who
possess particular in-depth expertise instead of seeking of average responses of many with
only limited knowledge.
The area of concern may be future developments in the international trading environment or
long term forecasts for market penetration of new products. Typically, 10-30 informants are
selected and asked to identify the major issues in the area of concern. They are also requested
to rank their statements according to importance and explain the rationale behind the ranking.
Next, the aggregated information is returned to all participants, who are encouraged to state
clearly their agreements or disagreements with the various rank orders and comments.
Statements can be challenged and then, in another round, participants can respond to
challenges. After several rounds of challenge and response, a reasonably coherent consensus
is developed.
One drawback of the technique is that it requires several steps, and therefore months may
elapse before information is obtained. However, the emergence of e-mail may accelerate the
process. If done properly, the Delphi method can provide insightful forecast data for the
international information system of the firm.
Scheme 1-11: Research process of Delphi technique
Experts
Processed
answers
Experts
Dis/agreements
Challenges
coherent consensus
17
Continuous research (longitudinal design)
A longitudinal design differs from ad-hoc research in that the sample or panel remains the
same over time. In this way, a longitudinal study provides a series of pictures which give an
in-depth view of developments taking place. The panel consists of a sample of respondents,
who have agreed to provide information at specified intervals over an extended period.
There are two major types of panels:
- Consumer panels. These provide information on their purchases over time. For example, a
grocery panel would record the brands, pack sizes, prices, and stores used for wide range
of supermarket brands. By using the same household over a period of time, measures of
brand loyalty and switching can be achieved together with a demographic profile of the
type of person or household who buys particular brands.
- Retailer panels. By gaining the co-operation of retail outlets, sales of brands can be
measured by laser scanning the bar codes on goods as they pass the checkout. Although
brand loyalty and switching cannot be reached without the comparison of data from both
panels, which gives more precise forecasts.
All the research process, as well as other marketing and implementation processes, must be
documented.
Documentation: Output, process, responsibility
Management uses standards, methods and assessments to find and gain its objectives.
Standards set up the output, methods the process, and assessments the responsibility.
Organisations use bylaws, company’s policy manuals, successive limiting policy by
hierarchical level, procedures, rules, programs, and budgets. You can find principles of all of
these elements in ISO 9000 family standards helping implement and operate quality
management systems.
Methods managers use, have different origins, purposes, and reliability. Methods help to gain
objective in limited time with limited resources. A necessary level of reliability emerges when
relations among management responsibility, resource management, product realisation,
measurement analysis and improvement are continuously improved from customer’s
requirements to customer’s satisfaction. Documentation clarifies these principles preventing
failures.
Documentation enables communication of intent and consistency of action. It is therefore a
necessary element within a quality management system. Its use contributes to:
A) achievement of product and quality improvement:
- definitions, measuring, analysing
- objectives assessment
- search for procedures
- guidelines for implementation
- finding of better points for measuring, verification, and analysing
- standardisation of changes
Example: Guideline+: New product development based on experiments or data from database
B) provision of appropriate training;
C) ensured repeatability and trace-ability;
D) provision of objective evidence;
E) evaluation of effectiveness of the system
- Do they know and document a process?
18
-
Do they assign responsibility properly?
Do they use and maintain procedures?
Are both the process and results efficient?
The production of documentation should not be and end in itself but should be a value-added
activity. There are several types of documentation used in quality management systems:
a) documents that provide consistent information, both internally and externally, about
the organisation’s quality management system; such documents are referred to as quality
manuals;
b) documents that describe how the quality management system is applied to a specific
product, project or contract; such documents are referred to as quality plans;
c) documents that provide consistent information about how to perform activities; such
documents are referred to as procedures;
d) documents that provide objective evidence of activities performed or results achieved;
such documents are referred to as records.
Each organisation determines the extent of documentation required and the process of using
it.
Classification of collected data
Statistical principles and procedures are valid while selecting and processing data. Multiple
options should be decided based on following tables 1-2 and 1-3.
Table 1-2: Data collection
- whole
population
- partial
accidental simple accidental selection
selection
Selection from layers, from the whole population
Selection from groups accidentally chosen from whole
population
intended
quota based which is precisely designeted part of population
Concentrated on extremely important parts
Table 1-3: Data classification
- Secondary research
Sources
Inside of firm
Outside of firm
- Primary research
Forms
Written
Phone
Personal
-- panel
Consumer
Household
Individuals
Retail
In/direct questions
Tactics
19
-- survey
Opened/closed questions
Fully/partially or unstructured
Interview
Topic - size
Special (monothematic)
Multi-thematic
Participation of observer
With participation
Without participation
-- observation
Place
Laboratory
field
-- experiment
Laboratory
Field
Trade
Wholesale
Retail
You should be able to assign suitable research methodology to the problem you have selected.
Further details are appended to a next chapter.
Introduction to Case Study
Whom and what data would you select about:
- supplier (retired man, enthusiastic person, worker, outsourcing entrepreneur, pushing
criminal)
- creditor (production, innovation, resource, cross-border or gaps bridging oriented)
- customer (self, product chain, or knowledge seeking)?
Which data would you choose to describe what you seek to be sure that you get what you
want? We are testing some software for this purpose. What would you recommend that we
use for data gathering and processing for marketing purposes?
New Food Product Development Guidelines
Project groups should be notified not later than:
Each overall Project Group will consist of students from a complementary specialisation.
Food project ideas to be developed and submitted by: ……………… for appraisal, to:
……………………. (name), room No.: ……….. e-mail: …………………
Project Stage 1: Preliminary research
Up to the end of week: ……………..
Talk to experts in food marketing (university staff) and in the retailing (supermarkets),
wholesaling, catering sectors etc.
20
Product development e.g. Guideline + demo and team members, equipment suppliers etc. Will
you decide on new processes or products? Can the preliminary product idea be made?
Food enterprises: What new products are there on the market? Conduct a survey of local
retailers.
Observe supermarket shelves: What is new concerning consumer trends or new products on
the Czech market?
Project stage 2 (A) - secondary research: What information is required?
Up to the end of week: ……………..
Sources: National statistical reports, Czech Chamber of Commerce etc.
Quantify the market e.g. Size and value; diploma theses of students from previous years show
you information resources. Check consumer trends.
Food magazines: Check libraries for relevant journals. The first overview can be made
through Internet librarian catalogues: http://www.tady.cz/rizeni/strana2.htm, or
http://www.uzpi.cz/index.htm, or http://www.foodandbeveragejournal.com/
Expected results: Development of product idea. Can the product be made? Examine the
technological processes required.
Primary research: Discuss your product idea with experts
Prepare questionnaire to find information on your product idea.
Consumer questionnaires answering what do they think of your product?
Retailer questionnaires; will the retailer stock the product and what margin does s/he expect?
Catering questionnaires?
Reference: Hague, P. And Jackson, P., (1987). Do your own market research. Kogan Page.
Draft and distribute 100-150 questionnaires before: ………………. (date). Where will you
distribute them (on the food fair Salima?) and who are your target respondents? Each student
in the group should distribute and gather a sufficient number of questionnaires.
Feasibility of production
Can Food Technology make the proposed product to customer specifications?
What will it cost to make it and is the customer prepared to pay this price?
21
Project stage 2 (B): Product development to commence in: …………………….. .
To be carried out in parallel to stage 2(A) From …………. Till …………… Progress report
required on ………………….. (date) from each group
Arrange time and dates with Food Technology laboratory staff and students to carry out trials.
Marketing Management students to be actively involved in R & D.
What ingredients, flavours, textures are required?
Sensory analysis to be carried out in shops of in the University?
Results of taste panel questionnaire to be tabulated and analysed
What information did you get from the taste panel? Are modifications necessary?
Result: Product formulation to target customer requirements
Project Stage 3: Gather completed questionnaires, evaluate, analyse and
tabulate
Period: ………
What information have you generated and how will you respond to this information? What
modifications are necessary? Do you need to develop your product technically or review your
marketing decisions?
Develop your marketing strategy from this information and the secondary
information gathered:
Target market, the marketing mix, competitors, market size, structure and trends.
Project Stage 4: Commercialisation
Period: ………
Investigate various options available to commercialise the project e.g. joint venture, franchise,
own company etc.
Assess production process requirements:
What equipment is needed and at what costs? Equipment options: Purchase, lease, hire.
Production options: Own production, Sub-contracting, Joint venture
Distribution: Own distribution, Agent, Distributor. Do you need frozen / chilled distribution?
22
Knowing all the above mentioned, contact food companies with compatible products(1),
processes(2) or distribution(3) systems that may be interested in your project to form a joint
venture or agreement.
Can your firm receive a grant aid? From where? PHARE, SAPARD, etc.
Project Stage 5: Preparation of financial accounts
Period: ………..
The information from the previous stages is integrated in the preparation of the final accounts:
e.g. Sales estimates will be based on research carried out by the group and estimates from
trade publications. For example salaries, wages, rent, lighting may be dependent on the route
chosen for commercialisation
Projects to be written up and submitted to: ……………….. (name) on or before:
………… (date)
The Projects will be assessed under the following Headings
1. Executive Summary
2. Primary Research
3. Secondary Research
4. Target Market
5. Product Positioning
6. Pricing Strategy
7. Promotional Strategy
8. Distribution
9. Proposals for the Future of the Product/Project
10. Production
11. Commercialisation
12. Sales Forecast
13. Cashflow
14. Profit and Loss
15. Balance Sheet
16. Notes to the Accounts
17. Presentation
18. Innovativeness
Orders of all activities demanded by project assessment are expected to be delivered, at least.
The more original work is appended the better.
Conditions and Projecting Facilitation
1. Project groups: group members possibly from courses Management of Distribution
Channels, Marketing Management, Management, Project Management, Strategy
Management, Marketing II
23
2. Liaison person to be nominated
3. Review Old Projects: Room E301 from, further peflab H:\\common\Linhart\MM or PP or
MSc or RDS
4. Access to facilities: Monday till Thursday 0700-1100 and 1300-1500, on Friday 07001100
5. Phone: Public, E-mail: CZU computer laboratories, Photocopying: PEF Reprostudio
6. Ownership of the project: All members of Group/Food Firms
7. Accountancy Tutorials: CZU PEF curricula
8. Length 120 pages Max
9. Submission Date:
10. Submit: Original unbound
11. Presentation:
Sensory Test Method



Discrimination/Difference Test
Ranking
Scaling
Consumer preference tests
Difference tests
Ranking
Scaling
Discrimination/Difference tests


-
Difference tests are the simplest and most sensitive form of product testing
They are used to determine:
whether or not a difference in some specific attribute exists between two samples
if one sample is preferred to another
However, they cannot be used to determine how large the difference or preference is
between samples
Application of Difference tests
-
Routine quality control
Monitoring the effects of change in production (e.g. effect of ingredient substitution,
process modifications, changes in raw material suppliers)
These tests are often used as the first step in a more complex sensory evaluation process,
with a difference between samples indicating the need for further testing
Commonly Used Difference Tests





Paired comparison
two samples compared, one to be selected (1-tailed)
where preference is asked either sample can be correct (2-tailed)
Triangle test
only one response can be correct
Difference to reference/control
duo-trio
multiple comparison
24
Example of a Paired Comparison Test
-
-
A paired comparison test was run to evaluate the effect of storage on the flavour of soup
powder. A control sample (A) was compared with a sample which had been subjected to
long-term storage (B). After reconstitution, the samples were coded with three digit
random numbers and presented to a panel of twelve. Six of the panellists were instructed
to taste B first. The panellists were asked „Can you detect a difference in flavour between
two samples?“ Nine of twelve panellists answered „YES“ to this question. Did storage
have a significant effect on the flavour of the soup powder?
Using a one-tailed binominal table, the minimum number of correct responses needed to
establish a significant difference at the 5% probability level (i.e. p<0.05) from 12
judgements is 10. Thus, storage had no significant effect on the flavour of the soup
powder.
Ranking Procedures
-
Three or more samples, presented at the same time, are arranged in order of intensity or
degree of some attribute e.g. “Rank A, B and C in order of increasing sweetness?”
Unbiased serving procedure (i.e. coded samples, interval between tasting, order of
presentation etc..) should be followed
Number of samples should be no more than 4-6
Gives no information on the size of the differences between samples
Ranking Analysis of Data
-
Rank positions are totalled and differences between totals are tested for significance using
Critical Rank-Sum Difference tables
If the difference between pairs of rank totals is larger than the tabulated value, the pair of
samples are significantly different at the chosen significance level
Scaling procedures
-
A scale may be defined as “the instrument used by panellists to make explicit their
perception”
In other words a scale is the “ruler” with which a panellist measures the size of a sensory
attribute
Allows the size of sensory attributes in different samples to be measured
Scaling – Types of Scale


-
Verbal – words used to divide the scale
Numerical – uses numbers
Line / unstructured
The arrangement of scale “anchors” may be:
unipolar – scale begins “no”/”0” and ends with “very”, “extremely”, “9”, etc..
bipolar – scale begins and ends with extremes e.g. extremely soft to extremely hard
(however, incorrect to design a scale that reads “extremely sour to extremely sweet” –
since sourness and sweetness are two different attributes)
May be objective or subjective
25
Scheme 1-12: Unipolar verbal scale (5) point for saltiness

none

weak

moderate

very

extremely
Scheme 1-13: Unipolar verbal scale (9 point) for bitterness









none
slight
moderate
very
Scheme 1-14: Bipolar verbal comparative scale (5 point) for extreme
sweetness



much less
slightly less the same
than standard than standard as standard


slightly more much more
than standard than standard
Scheme 1-15: Unipolar numerical scale (9 point) for rancidity:
0
1
2
3
4
absent
slightly
extremely
Scheme 1-16: Unipolar line scales
5
6
moderately
not sweet
7
very
8
very sweet
___|________________________________________________________|_____
no smoothness
extremely smooth
___|________________________________________________________|_____
no roughness
extremely rough
Scheme 1-17: Bipolar line scale
___|__________________________________________________________|____
extremely smooth
extremely rough
Scheme 1-18: “Relative to standard” line scale
___|__________________________________________________________|__
much less
just like
much more
than standard
standard
than standard
Scheme 1-19: Food action scale (9 point)







I would eat this food every opportunity I had
I would eat this food very often
I would frequently eat this food
I like this and would eat it now and then
I would eat this if available but would not go out of my way
I don’t like it but would eat it occasionally
I would hardly ever eat this
26
Scheme 1-20: Smile scale
Sensory test example: Quantitative Descriptive analysis of Cheese
-
Also concerned with: flavour (taste and odour), texture, appearance, noise
Panel identifies all (or some) of these attributes in typical products
Vocabulary of descriptive terms developed and defined – all assessors contribute
Scales defined – line scales anchored at each end with extremes of attribute intensity
Several training sessions
Evaluate real samples
Overall results based on mean scores of individual panellists
Statistical analysis of Variance and multivariate methods (e.g. Principal components
analysis)
Descriptive vocabulary for cheese odour
-
Pungent – Physically penetrating sensation in the nasal cavity. Sharp smelling or tasting,
irritant
Caramel – Dairy caramel, toffee that has been made with sugar or melted further
Silage – Sweet, fermented silage aroma, reminiscent of farmyard
Sweaty / sour – The aromatics reminiscent of perspiration generated foot odour. Sour,
stale, slightly cheesy, moist, stained or odorous with sweet
Fruity – The aromatic blend of different fruity identities
Mouldy – The combination of aromatics associated with moulds. They are usually earthy,
dirty, stale, musty and slightly sour
Dairy sweet – The aromatics associated with sweetened cultured dairy products such as
fruit yoghurt
Sweet – Blend of sweet aromas
Creamy – The smell associated with creamy/milky products
Descriptive vocabulary for flavour
-
Buttery – Of the nature or containing butter
Caramel – Dairy caramel toffee that has been made with sugar or melted further
27
-
Dairy sweet – Taste associated with sweetened cultured dairy products such as fruit
yoghurt. Fruity sweet taste
Rancid – Sour milk, fatty, oxidised, having a rank, unpleasant taste or smell characteristic
of oil and fats when no longer fresh
Mushroom – Organic. The aromatics associated with raw mushrooms
Oily – Oily, fatty, greasy, taste of any kind
Mouldy – The combination of aromatics associated with moulds. They are usually earthy,
dirty, stale, musty and slightly sour
Nutty – The non-specific nut aromatic that is characteristic of several different nuts, e.g.
peanuts, hazelnuts, pecans
Smoky – The penetrating aromatic of charred wood. Tainted by exposure to smoke
Soapy – Detergent like, similar to when the food is tainted with cleansing agent
Silage – Sweet, fermented flavour, reminiscent of farmyard
Processed – Taste of plastic, packing, shallow. To taste artificial. Made by melting,
blending and frequently emulsifying other cheeses
Sweet – Fundamental taste sensation of which sucrose is typical
Salty - Fundamental taste sensation of which sodium chloride is typical
Acidic – Sour, tangy, citrus-like, the fundamental taste sensation of which lactic acids and
citric acids are typical
Bitter – Chemical-like, disprin, aspirin. Taste sensation of which caffeine and quinine are
typical
Pepper – Taste of black pepper, producing a burning, hot sensation at the sides of the
tongue
Burnt-aftertaste – Flavour similar to burned beef, Bovril-aftertaste
Astringent – Mouth-drying, harsh. The complex of drying, puckering and shrinking
sensation in the lower cavity causing contraction of the body tissue
Strength – Intensity or concentration of flavour, ranging from blend, tasteless, to a
concentrated intense flavour
Balanced – Mellow smooth, clean. In equilibrium, well arranged or disposed, with no
constituent lacking or in excess, nothing standing out
Table 1-4: Some Examples of Consumer Problems Relating to Food
Physiological
Sensory
Activities
Buying and
usage
Weight: fattening Taste: bitter –
Meal planning:
Portability: eat
Psychological/S
ocial
Serve to
28
– empty calories
bland - salty
Hunger: filling – Appearance:
still hungry after colour –
eating
unappetising shape
Thirst: doesn’t
quench the thirst
– makes one
thirsty
Consistency /
Texture: tough –
dry – greasy
Health:
Decomposition:
indigestion – bad melts – spoils –
for teeth – keeps separates
one awake
acidity
forget – get tired
of it
away from home company: won’t
– take it in –
serve to guests –
carried lunch
too much last
minute
preparation
Storage: run out Portion control: Eating alone:
– package won’t not enough in a effort when I
fit
package – creates cook for myself
leftovers
– depressing
when prepared
just for one
Preparation: too Availability: out Self-image:
much trouble too of season – not in made by a lazy
many pots/pans – supermarket
cook – not
never turns out
served by a good
mother
Cooking: burns – Spoilage: gets
sticks
mouldy – goes
sour
Cleaning: makes
a mess in oven –
smells in
refrigerator
Costs: expensive
– takes expensive
ingredients
Table 1-5: Quantitative descriptive scores for cheese odour
1
2
3
4
5
6
7
8
9
10
Pungent
40.4 33.1 20.5 18.3 51.3 22.1 52.7 52.8 47.4 54.9
Caramel 22.2
Sweaty
48.1
Sweat
22.2
Creamy
21.6
Fruity
19.9
Mouldy
6
Silage
10.1
Dairy
23.5
sweet
F ratio
16.9
11.6
18.7
6.4
4.2
14.1
86.1
56.1
2.51
P
0.00
0.00
0.00
0.01
0.02
0.00
0.00
0.00
0.05
Table 1-6: Quantitative descriptive scores for cheese flavour
1
2
3
4
5
6
7
8
9
10 F ratio
Buttery
33.6 42.2 29.3 28.1 31.2 61.5 27.8 29.5 26.1 27.8 10
………
….. ….. … … ….. ….. ….. ….. …. ….. …..
… …
P
0.01
….
Principal components analysis
- Allows a multi-dimensional data matrix to be simplified without substantial loss of
information
29
-
-
The method does so by calculating components describing as much of the variance
between cheeses as possible
The results are displayed as 2-dimensional plots. Cheese scores show the relationship
between cheeses, and the score of each cheese on each component is determined by the
loadings of the descriptive vocabulary
To interpret the analysis, both scores and loadings must be viewed together
Chart 1-1: Cheese scores on principal components 1 and 2
Tetilla
PC2 9
Blue Shopshire
6
3
Mahon
0
Appenzeller
Cambozola
Wensleydale
Gruyere
-3
Fontina
Ambassedeur
Chaumes
-6
Tetilla
-9
-10
X-expl: 27%, 18%
-5
0
5
10
PC1
Chart 1-2: Cheese loadings on principal components 1 and 2
0.4
PC2
mottling
acidic astringent
strength
salty mouldy
0.2
crumby
colour
mouldy
grainy
mouthcoat
smoky
chalky
bitter mushroom
fruity
pepper openness
burnt
0
firmness
sweet
nutty
pungent
rancid
caramel
sweet
soapy sweaty
caramel
silage
moist
chewy
buttery
slimy
-0.2
daisweet
creamy
softness
oily smooth
processed
oily
balance
rubbery
shiny
-0.4
-0.3
-0.2
-0.1
0
0.1
0.2
0.3
Use of Sensory Analysis and Preference Measures
30
-
-
Statistical procedures exist which can be used to relate the preference expressed by a
panel of “naive” consumers to a sensory profile generated by a trained panel - preference
mapping
The most desirable product characteristics can be identified and quantified
New products can be developed to fill a “niche” in the market
The acceptability of existing products may be improved
Chart 1-4: Relationship between composition, flavour perception and consumer preference
7
Cpd
2
Moistur
e
Cpd
8
p
H
bitter
Cpd
1,4,5
Cpd
6
8
acidi
c
FAA
Salty 6
Cpd
7
FDM 2
1. Premium Cheddar
4
5
2. Medium mature
Fat
Cheddar
Fruity 3
MNFS
buttery
3. Vegetarian
Cheddar
Cpd
1 creamy
4. Mild Cheddar
3
5. Mature Cheddar
6. Farmhouse
Cheddar
7. Light CheddarClass type
Participation Questions
8. Vintage Cheddar
Table 1-7: Multiple choice test from terms of first lecture
A
B
C
1 A system of needs which includes physiological needs, the need for satisfaction, the need
for belonging and love, the need for esteem, and the need for self-actualisation
Market
Hierarchy of needs
Exchange
2 The most visible markets, which consist of individual customers who buy products for
their own use or for use by other members of their households
Consumer markets
Industrial markets
Competitive advantage
3 A relation among the various amounts of a product that buyers would be willing and able
to purchase at possible alternative prices during a given period of time, all other remaining
the same
Core benefit
Utility
Demand
4 A model which assumes that consumers judge a limited number of product attributes, that
the attributes vary in importance to the consumer, and that strength in one area
compensates for weakness in another
Compensatory decision rule
Compensatory model
Non-compensatory model
5 The process by which an individual acquires the skills needed to function in the
marketplace as a consumer
Compensatory decision rule
Conjunctive decision rule Consumer socialisation process
6 The markets on which products are tailored for specific industries
31
Vertical markets
Service market
Horizontal markets
7 A given percentage change in price results in an identical percentage change in the
quantity demanded
Total market potential
Total market demand
Unitary demand
8 The usefulness given when something of value is received at the time it is wanted
Time utility
Marketing concept
Social marketing
9 Marketing programs including product conception (and development), pricing decisions,
promotion of the product, and distribution to consumers
Societal marketing orientation Marketing mix
Social marketing
10 Anything that elicits or accelerates a physiological or psychological activity
Stimulus
Motivation
Special incentives
11 The collective term for people who participate in purchase decisions
High involvement decisions
Low involvement decisions
Buying centre
1 All the things, abilities and believe/everything that one generation of a society transmits to
2 the next
Culture
Consumer behaviour
Countercultures
1 A category made up of people who share similar opportunities, economic positions,
3 lifestyles, attitudes and behaviours
Social class
Subcultures
Group
1 A household consisting of two or more persons living together who are related by
4 marriage or birth
Family household
Family life cycle
Family orientation
1 Preferred patterns of living as expressed in a person‘s activities, interests, and opinions,
5 taken as a whole
Learning
Family procreation
Lifestyles
1 All marketing efforts directed at buyers for formal institutions, including industrial,
6 service, reseller, government, and not-for-profit groups
Organisational markets
Organisational marketing Organisational buying behaviour
1 The organisation method which is based on customer groups, such as departments
7 responsible for marketing to each segment
Customer profile
Customer types organisation Buy-phase concept
1 A process in which marketers establish full-scale production, set prices, lay out a
8 distribution network, and make final promotion plans to introduce the product in all its
markets
Customer types organisation Organisational buying behaviour Commercialisation
1 The concept that very few calls on any account tend not to have any effect on sales until
9 the level of calls reaches a certain level
Threshold effect
Marketing research
Stimulated test marketing
2 The procedure of environmental forecasting by a group of experts who are solicited
0 anonymously and asked to predict the likelihood and time of occurrence of significant
events
Focus group
Experimental method
Delphi technique
21 What research market?
Core marketing concept Marketing management concepts Data selection
22 What is the difference between product and goods?
Distance from market
Buying patterns
Attached services
Check in glossary whether answers (1bacb5cacab10acaaa15cbbca20cba) are correct.
32
1. What is the difference between product and goods (Describe the difference for consumer,
customer, market and kind of marketing)?
2. What will determine the selection of your project topic: copying (fraud), crisis, penetration
or marketing (defend a topic of project you have selected against different marketing
concepts: production, product, selling, marketing and societal marketing concept)?
3. How to reduce a volume of marketing research (when and how to use experts, secondary
data and primary research)?
Students compose groups and select a project topic during first seminar. Further, they list
questioned experts, places where data about target segment will be collected and opened
questions of preliminary research.
Proposed structure of a group report from a first seminar:
Group members:
Topic:
Reasoning
Data:
Methods:
33
2. Marketing Management and Business Strategy
Aim
To provide students with an understanding to conflict of marketing and business strategy.
To provide students with an understanding of methodology of market segmentation targeting
and positioning simplifying improvement of target market and business profitability.
To enable students to plan strategically.
Objectives:
1. To enable students a range of strategic marketing planning models.
2. To relate marketing planning to overall corporate strategic planning.
3. To present components of a marketing plan
4. To present basis of the marketing audit and SWOT analysis.
Models of strategi c p lanning
There are different models of planning, which further differ in time and after the place for
which they are developed.
Strategic Planning and the Marketing Management Process
Management is the entrepreneurial agent that interprets market needs and translates them
into profitable products and services. To do so, management utilises a strategic planning
process and a marketing management process.
The strategic planning process consists of steps taken at the corporate headquarters level to
develop long-run strategies for survival and growth. The strategic planning process consists
of defining the company’s mission, objectives, and goals, portfolio plans, and new-business
plans. A clear statement of company mission provides employees with a shared sense of
opportunity, direction, significance, and achievement. It should define the company’s
business domain in terms of customer groups, customer needs, and technologies. Strategic
planning then calls for developing specific objectives, such as sales volume, sales growth,
market share, profitability, and innovation to support the company mission. These objectives
should be hierarchical, quantitative, realistic, and consistent.
Strategic planning must then define, for each strategic business unit (SBU) in the company’s
portfolio, whether that SBU will be built, maintained, harvested, or terminated. Use is made
of such tools as BCG’s growth/share matrix of GE’s multi-factor portfolio matrix to evaluate
the future of the company’s various businesses.
To fill a strategic planning gap between expected sales and desired sales, the company has
the develop a new-business plan. The company can generate relevant opportunities by
considering intensive growth opportunities within its present product-market scope (such as
market penetration, marketing system (such as backward, forward, and horizontal
integration, and finally, diversification growth opportunities outside of its marketing system
(such as, concentric, horizontal, and conglomerate diversification).
Within each business, marketing management must develop marketing data for strategic
planners to use, develop marketing plans based on the agreed-upon objectives of the
business, and carry them out. In fact, the marketing management process consists of five
steps: analysing market opportunities. researching and selecting target markets, developing
marketing strategies, planning marketing tactics, and implementing and controlling the
marketing effort.
34
As the first step, analysing market opportunities, marketing personnel make careful
observations about the changing marketing environment and acquire a deep understanding
of how consumer markets and organisational markets arrive at their buying decisions.
The second step, researching and selecting target markets, requires marketing personnel to
engage in formal marketing research and data collection, careful measurement of market
size and future sales and profits, and careful segmentation of the market so that the most
attractive market segments can be selected and proper positions taken by the company in
each market segment.
The third step, developing marketing strategies, calls for marketing personnel to master the
marketing planning process and the new-product development process and also requires
them to prepare to change strategies during the product life cycle, and as the company’s
market position changes, as the economic climate changes, and as global opportunities open
or close.
The fourth step, planning marketing tactics, calls on marketing personnel for fine tuning the
marketing-mix elements of product, price, place and promotions so that they are cost
effective in reaching the marketing objectives.
The fifth step, implementing and controlling the marketing effort, calls for developing a
marketing organisation, staffing it, assigning responsibilities for implementing all the
activities in the plan, monitoring the plan’s performance in the marketplace, and taking
corrective action when it is warranted. The overall marketing game plan should be reviewed
from time to time through the instrument known as the marketing audit.
Models and approaches to strategic planning are based on listed targets, processes and records
showing biases from standards. Targets, processes and records are sorted in databases for
different purposes. We can distinguish three kinds of markets from the point of view of
conditions for communication:
- Consumers’ markets and marketing, where one marketer broadcasts a message, using
advertising and sales promotion, to millions of consumers who buy according to habits or
experiment based on feelings
- Industrial markets and marketing, where approximately 5 suppliers deliver goods to one
company, which becomes supplier of other 5 customers. All participants are professionals
and communication begin and almost finish before the first sale was made
- Budgetary markets and marketing, where entitled persons buy for organisations they
represent. Tenders are necessary to avoid gossips from corruption.
We can distinguish other four different kinds of markets from point of view of needs
discovery and satisfaction:
- American, which discover and satisfy needs slightly better then competitors
- Japanese, which develop advanced technical features of goods overcoming all consumer
expectations
- food, where experts know consumers‘ needs much better and delight them by new
product development
- services, where trained servicing person must distinguish and satisfy needs
We can distinguish four kinds of markets from point of view of used marketing methods:
- market observation
- marketing process planning
- marketing mix adaptation
- scientific information processing
We can distinguish three kinds of marketing from the point of view of implementation and
budgeting of company:
35
-
differentiation (own brands of supplier) keeps up the quality of product or brand and
purchase marketing services in the case that his own costs or time of product or brand
manager should be higher or longer
- focusing (private labels of marketer) pushes down prices of products and through a
volume of sales control supplier further, satisfying priorities of buyers (low price, choice)
improving their loyalty
- low cost (budget fighter) argue by parity, percentage of sales, rewarding tasks reaching
objectives.
We can distinguish six kinds models of strategical planning from point of view of who and
how they are originated and implemented:
- discovery and satisfaction of needs through market segmentation, targeting and product
positioning approach (STP marketing – 85 % success)
- increase of internal functional strengths of product together with speed, innovativeness,
stability, competitiveness or global reach of market changes (62% success)
- technological superiority (51 % success) –
example: pet food
Scheme 2-1: How to use PLC?
- top management support or corporate
 As a tool for:
governance (43 % success)
 Planning
- Structure of product organisation, which is
 Forecasting
derived from findings of control or results
 Control
(suggestions) of external marketing services
 Critics of PLC
(13% success)
 Variable curves
 Duration is not predictable
 Assessment of the life cycle stage can be It is useful to contradict four apporaches, two
methodologies and two concepts. Two
wrong
methodologies bring (segmentation, targeting
 S- shaped, fashion, …
(STP) and positioning; product life cycle (PLC))
 Cycle- sales- profits
data and two concepts (low costs, differenciation
 Variable life cycles – duration not
and focusing for company; speed innovativeness,
predictable
sustanability, competitiveness and global
 Wrong assessment of the life cycle
advantage for market) create standards for
evaluation of measured data.
Consequently, the promotion should conclude the whole chain of marketing activities.
Relation between marketing planning and corporate s trategic
planning
Marketing strategies have to bring effect in real time. Marketing strategies are listed for
company orientation (low costs, differentiation, focusing) and market orientation (speed,
innovativeness, durability, competition, and global advantage). Contrary, strategic
management of company emphasizes analytical process to ensure lasting competitive
advantage, which is based on internal resources or quality systems.
36
Scheme 2-2: Shifts among alternative markets
Product
market
Service
marketing
Information
s’ market
Corporate strategies of claimants,
salesman, innovators, suppliers,
politicians and local authorities
Property
market
Company strategy:
low costs,
differentiation,
focusing (Kotler,
chapter 2)
Innovation
s‘ market
Marketing strategies: speed, innovativness, stability,
competitive and global advantage (Kotler, chap. 11-15)
Corporate planning connects actions in firms and on market better than specialised strategies
and plans of indivudual firms.
Research Like Approach: Model of corporate planning
Corporation associates companies to balance suppliers’ power with market power. Further,
the Kotler’s corporate planning process is described. Read and connect terms as stages of
corporate planning process from top down eventually, from left to right.
Table 2-1: Process and items of corporate planning
Planning
Corporate planning
Division planning
Business planning
Product planning
Implementing
Organising
Implementing
Controlling
Measuring results
Diagnosing results
Taking corrective action
Mission
The process of corporate planning is very complex because each stage of it is run
independently and paralel with all other stages. The process is co-ordinated from the
beginning by top managers and from the end by bottom managers. Therefore, some central
point of understanding must be created. And it is called “mission statement". Judgements will
be derived from this point on and creating of new and implementing or co-ordination of
independent activities will also begin at this point.
Creating and integration of initiatives
The agreement on the mission statement and the new corporate plan must be based on
generating and selecting the best alternatives. Consequently, alternatives must be ordered
based on their importance and followed by actions. Read the process from left to right as a
chain of actions following each other.
Table 2-2: Generation, and restriction of individual activities under corporate plan
Corporate mission Strategic business
Corporate portfolio
Corporate new
unit identification
evaluation and strategy business plan
37
It is almost impossible to expect that alternatives will be generated by an individual or
company because they tend to marginalise existing alternatives and stick to the most
promising one.
Scheme 2-3: Performance indices of proposers for corporation or business
Manufacturing:
Top Management
Service:
conformance
delivery
flexibility
productivity
customer
Time can be saved by investments (defensive strategy), or responsibility of skilled people
(offensive strategy). Once corporate planning strategy (offensive) is accepted the authors of
alternatives must be evaluated according to criteria which are shown in the area between
customer and company. Authors of alternatives must be selected and allowed to operate there
first. It means that selection, evaluation and training of people who can generate and improve
alternatives until they are selected or denied as necessary for corporate planning, is a long
term process even if it is supported (Scheme 2-3 on right side).
Market Segmentation, Targeting and Positioning
Sellers can take three approaches to a market. Mass marketing is the decision to mass
produce and mass distribute one product and attempt to attract all kind of buyers. Product
differentiation is the decision to produce two or more market offers differentiated in style,
features, quality, sizes, and so on and designed to offer variety to the market and distinguish
the seller’s products from competitors` products.
Target marketing is the decision to distinguish among the different groups that make up a
market and to develop corresponding products and marketing mixes for each target market.
Sellers today are moving away from mass marketing and product differentiation toward
target marketing because the latter is more helpful in spotting market opportunities and
developing effective products and marketing mixes. The key steps in target marketing are
market segmentation, market targeting, and product positioning. Market segmentation is the
act of dividing a market into distinct group of buyers who might merit separate products
and/or marketing mixes. The marketer tries different variables to see which reveal the best
segmentation opportunities. For consumer marketing, the major segmentation variables are
geographic, demographic, psychographic, and behavioural. Industrial markets can be
segmented by end use, customer size, geographical location, and product application. The
effectiveness of the segmentation analysis depends upon arriving at segments that are
measurable, accessible, substantial, and actionable.
Next, the seller has to target the best market segment(s). To do this, the seller must first
evaluate the profit potential of each segment.
Then the seller must decide how many segments to cover. The seller can ignore segment
differences (undifferentiated marketing), develop different market offers for several
segments (differentiated marketing), or go after one or a few market segments (concentrated
marketing). The market coverage decision will be influenced by such factors as company
38
resource, product and market homogeneity, product life-cycle stage, and competitive
marketing strategies.
Market targeting then defines the company’s competitors. The company researches the
competitors` positions and decides whether to position its offer next to some competitor or
go after a hole in the market. If the company positions its basic offer next to a competitor it
must seek further differentiation through other marketing variables. Its product-positioning
strategy will then enable it to take the next step, namely, planning the details of the
marketing mix.
Segmentation – generationg of alternatives
Segmentation may be based on a variety of market or customer characteristics
(geographic, demographic, buyer behaviour, etc.). Geographic segmentation is naturally
of special importance to international marketing strategy.
Authors of future alternatives (marketers) use segmentation methodology for this purpose.
Segments are parts of market with the same readiness of consumers to buy. It is possible to
find these places by criteria of different kinds of segmentation (geographical, demographical,
psychographical and behavioural).
Scheme 2-4: Market Segmentation Targeting - Positioning
Why market segmentation?
 Many buyers
 Widely scattered
 Heterogeneous requirements
Stages of marketing approach:
 Mass marketing
 Production
 Distribution
 Promotion
 Product differentiated marketing
 Variety to buyer
 Target marketing
 Market Segmentation
 Market Targeting
 Product Positioning
Scheme 2-5: Market Segmentation
 Bases
 Geographic
 Demographic (Variables: Age, sex,
income, ...)
 Psychographic (Variables: Social class,
life style, personality, ...)
 Behavioural segmentation (Variables:
Occasions, benefits sought, usage rate, ...)
 requirements for effective segmentation
 Measurability
 Accessibility
 Substantiality
 Actionablity
 Target Marketing
 Analysis of profit long run potential
 Segments selection
39
Major segmentation types and indices for consumer markets
Table 2-3: Examples of segmentation types and indices for consumer markets
Geographic:
Region
Pacific, Mountain, West North Central, …
Country size
A,B,C,D
City
Under 5,000; 5,000-20,000; 50,000-100,000; 100,000-250,000; 250,000500,000; 500,000-1,000,000; 1,000,000-4,000,000; over 4,000,000
Density
Urban, suburban, rural
Climate
Northern, southern
Demographic
Age
Under 6, 6-11, 12-19, 20-34, 35-49, 50-64, over 65
Sex
Male, female
Family size
1-2, 3-4, 5+
Family life cycle Young, single; young, married, no children; young, married, youngest child
under 6; young, married , youngest child 6 or over; older married, with
children; older married no children under 18; older, single; other
Income
Under 10,000; 10,000-15,000; 15,000-20,000; 20,000-25,000; 25,00030,000; 30,000-50,000; 50,000 and over
Occupation
Professional and technical managers; managers, officials, and proprietors;
clerical, sales, craftspeople, foremen; operatives; farmers; retired; students;
housewives; unemployed
Education
Grade school or less; some high school; high school graduate; some
college; college graduate
Religion
Catholic, Protestant, Jewish, other
Race
White, Black, Oriental
Nationality
American, British, Czech
Psychographic
Social class
lower lowers, upper lowers, working class, middle class, upper middles,
lower uppers, upper uppers
Lifestyle
Straights, swingers, longhairs
Personality
Compulsive, gregarious, authoritarian, ambitious
Behavioural
Occasions
Rural occasion, special occasion
Benefits
Quality, service, economy
User status
Nonuser, ex-user, potential user, first-time user, regular user
Usage rate
Light user, medium user, heavy user
Loyalty status
None, medium, strong, absolute
Readiness stage Unaware, aware, informed, interested, desirous, intending to buy
Attitude toward Enthusiastic, positive, indifferent, negative, hostile
product
Targeting
Three alternative kinds of targeting are open to any marketer.
Undifferentiated marketing. With a strategy of undifferentiated marketing, a company
offers a standard product and endeavours to attract the largest possible number of
buyers with a standard marketing programme. It hopes in this way to minimise both its
product or/and its marketing costs.
40
Differentiated marketing. With a strategy of differentiated marketing, a company
segments its market. It still operates in all or several segments of the market but
modifies both products and marketing programmes to achieve maximum customer
appeal within each segment. This naturally increases both production and marketing
costs, but the company hopes to more than recover its additional expenditure as a result
of increased market response.
Concentrated marketing.
With a strategy of concentrated marketing, a company devotes its whole marketing effort to
one market segment, or to a very few segments, i.e. the segments it believes will prove most
profitable, and designs its products and marketing programme accordingly. The aim is
maximum exploitation of a very limited market area, and the strategy is likely to appeal most,
of course, to companies with limited resources.
Targeting of research objectives
Scheme 2-10: Segment selection
 Possible market coverage
strategies
 Undifferentiated
 Differentiated
 Concentrated
 Factors of market coverage
strategy choice
 Company resources
 Product homogeneity
 Product life-cycle stage
 Market homogeneity
 Competitive marketing strategies
-
Scheme 2-11: Product positioning
(The product and marketing mix is
designed after its place in consumer’s
mind is clear)
 position the product in the market
segment
 rearrange the marketing mix
 establish your position
 reposition the product
 find other segments
Targeting follows after the segmentation base is clear.
Segments are targeted based on the following
principles:
- undifferentiated targeting recognises differences
between segments but decides to sell in all of them
differentiated targeting delivers special goods to segments which need them the most
concentrated targeting selects one segment and satisfies all its needs by broad assortment
of goods and services
total targeting satisfy all segments according to their needs.
Criteria for selection of targeted segments should be:
- specified by the needs of target market (tasks, costs, income, profit)
- results oriented (market growth, market share growth, turnover growth, income growth)
- quantitative (numbers, mile stones, balancing of reached and desirable results)
- time restricted (year, season, action)
Selected simplification criteria:
- acquisition of means and selection of methods of information processing
- measurability of results
- finding of critical point in which a switch to another alternative is necessary
- synergy of all participants
- prioritising of the list of parallel actions.
41
Targeting of Company Growth
Segments can be selected based on the actual position of the company or project proposer.
The worse the conditions, the higher the differentiation of the target segment. The growth
potential of a selected segment should be reviewed from the point of view of its intensive,
integrative and diversificative potential.
Table 2-6: Major classes of growth opportunities
Intensive growth
Integrative growth
Market penetration
Backward integration
Market development
Forward integration
Product development
Horizontal integration
Diversification growth
Concentric diversification
Horizontal diversification
Conglomerate diversification
Positioning by Semantic Differential
Positioning can be done by many approaches. One of them is semantic differential.
Chart 2-1: Customer Perceptions and Preferences
O – Preferred / Ideal restaurant, A – Competitor A, B – Competitor B
Criteria
Preferences
Food – freshness
Same day fresh
Frozen / preserved
|____O________________A______________B__|
Food – natural
Natural
Processed
|____O________________A______________B__|
Food / local
Local and unique
Cosmopolitan
|_____________________O_____________AB__|
Cooking time
Under-cooked
Over-cooked
|_____________________OB____________A___|
Cooking – sauces
Few and light
Many and heavy
|__O______B___________________________A_|
Décor
Intimate
Impersonal
|_A_________________B__________O________|
Price
Capital city, international
Local, provincial
|_A___________________O_____B___________|
Hygiene
Hospital like
Dirty
|___________________B__O________A_______|
Armed with information such as the above, the marketing organisation next decides how to
position its own product in the market. Chose whether choose to:
a. introduce new products or services to fill ‘gaps’ in the market;
b. alter the position of an existing product or service;
c. alter buyers’ perceptions of the market by
- introducing new criteria
- changing the importance they attribute to existing criteria.
42
Chart 2-2: Modified Customer Perceptions and Preferences
O – Preferred / Ideal restaurant, A – Competitor A, B – Competitor B, X – “New” Restaurant
Criteria
Preferences
Food – freshness
Same day fresh
Frozen / preserved
|__X_O___________A________B__________________|
Food – natural
Natural
Processed
|_X__O___________A____________B________|
Food / local
Local and unique
Cosmopolitan
|____O______X_______AB_________________|
Cooking time
Under-cooked
Over-cooked
|__O_____X__________B___A______________|
Cooking – sauces
Few and light
Many and heavy
|__O______B___________________________A_|
Décor
Intimate
Impersonal
|_____A_______O____________X_____B______|
Price
Capital city, international
Local, provincial
|___________A_____X________O_____B______|
Hygiene
Hospital like
Dirty
|_______________X___O__B__A_____________|
Service – language Several
Local only
Ability
|__O______________________________X_A_B_|
Connect points of competitors by line to better see their different positions.
Principal terms for selection and processing of segmentation criteria
Each research begins when thinking about categorisation of data.
Scheme 2-6: Categorisation of data for assessment of market potential in a country
Internal data
Secondary
data
Firm general data
(firm-context):
- Size
- Product lines
- Financial
situation, etc.
Macroeconomic
data for country
B:
- GNP
- Stability of
currency
- Inflation,
Problem: Is there a marketetc.
for the
firm’s product A in country B?
If yes, how large is it and what is the
possible market share for the firm?
Strengths-weaknesses profile
(benchmarking) compared to
main competitors:
- Corporate level
- Product line level (SBU
level)
- Specific product level
-Primary
Etc. data
End customers:
- Buying
behaviour
- Thread of
using
substitute
products
- Consumptio
n patterns
External
data
Industry:
- growth
patterns of
sectors
- Analysis of
imports
- Characterist
ics of
competition
Etc.
Competitors
Specific strategies
Intermediaries:
- Purchasing
behaviour
- Financial
capabilities
- Access to
distribution
channels
- Etc.
43
Selection of Qualitative or Quantitative Approach
The approach helps to select the most important among existing interests or needs. The
simplest is to satisfy need in the moment it emerged because that time it is the easiest
recognisable. Large amount of conflicting issues without distinguished importance must be
simplified. Suitable method of simplification is a quantitative method or skill person using
qualitative method).
Scheme 2-7: The ‘trade-off’ in the choice between quantitative and qualitative research
Quantitative research
Variable no.
1 2 3 4 5 . . . .
1
Qualitative research
Variable no.
1 2 3 4 5 . . . .
1
2
2
3
Respondent
3
Respondent
4
4
The approach
shifting recognition and solutions. to the responsibility of individuals is, in EU
.
programs, called subsidiarity. Researchers call it qualitative research. The contrary approach,
where data
using law of large numbers, is called
. are collected and processed centrally
.
quantitative research.
.
.
Table 2-4: Quantitative versus qualitative research
Comparison
dimension
Objective
Quantitative research (e.g. a
postal questionnaire research)
To quantify the data and
generalise the results from the
sample to the population of
interest
Descriptive and/or casual
Type of
research
Flexibility in
Low (as a result of a
research design standardised and structured
questionnaire: one way
communication)
Sample size
Large
Choice of
Representative sample of the
respondents
population
Information
Low
per respondent
Data analysis Statistical summarisation
Ability to
High
replicate with
same result
Qualitative research (e.g. a focus group
interview or the case method)
To gain an initial and qualitative
understanding of the underlying reasons
and motives
Exploratory
High (questions can be changed during the
personal interview: two way
communication)
Small
Persons with considerable knowledge of
the problem (key informants)
High
Subjective, interpretative
Low
44
Interviewer
requirements
Time
consumption
during the
research
No special skills required
Special skills required (an understanding of
the interaction between interviewer and
respondent)
Design phase: high (formulation Design phase: low (no “exact” questions
of questions must be correct)
are required before the interview)
Analysis phase: low (the
Analysis phase: high (as a result of many
answers to the questions can be “soft” data)
coded)
Data Collection and Processing Techniques: Primary, Secondary
Processed data brought evidence of some facts. But facts are not sufficient to manage the
process. Therefore, questions of process design must be answered. Firstly, questions of the
research process design.
Table 2-5: Strengths and weaknesses of three contact methods
Questions/questionnaire
Mail
Phone
Personal
Flexibility (ability to clarify problems) Poor
Good
Excellent
Possibility of in-depth information (use Fair
Fair
Excellent
of open-ended questions)
Use of visual aids
Good
Poor
Good
Possibility of a widely dispersed sample Excellent
Excellent
Good
Response rates
Poor
Good
Good
Ask sensitive questions (anonymity of Good
Poor
Fair
respondent is assumed)
Control of interviewer (no interviewer Excellent
Fair
Poor
bias
Speed of data collection
Poor
Excellent
Good
Costs
Good
Excellent
poor
The research process is costly. Therefore, simplification and correction of each wrong step is
needed. Secondary research is used as the first research step because it is cheap compared to
previous by mentioned primary research.
Scheme 2-8: Groupings of external secondary data sources
GEOGRAPHIC
LEVEL
International / global data sources
Global
Regional
Country
Pacific
/ Asia
Africa
North
Ameri
ca
South
Ameri
ca
Easter
n
Europe
Wester
n
Europe
Japan Australia China etc.
45
Above mentioned principles must be translated to tasks for individual researchers to gain
objectives and prove their validity through process consistency.
Scheme 2-9: Primary data collection: research design
Research problem / objectives
Determine the information requirements
Research approaches
Observation
Surveys
Experiments
Contact methods
Mail
Phone
Personal
Sampling plan
Sampling unit
Sampling procedure
Sample size
Sampling plan
Design of questionnaire
Formulation of questions
Pretesting / data collection / data analysis
Each time the researcher uses all above mentioned steps he gets more data. He can handle it in
databases or use it intuitively to adapt a new research process when a new incentive appears
or the situation changes. This behavioural method is also called Delphi.
46
Headlines of announcements about implementation of marketing strategy
Target Market
Positioning
Product line
Price
Distribution outlets
Salesforce
Service
Advertising
Sales promotion
Research and development
Marketing research
These announcements about strategy are used by people implementing the marketing mix.
Consequent lists of actions completing each element of the marketing mix are called
marketing programs. An announcement summarising all actions and their results for creditors,
participants and managers of company of suppliers is called a marketing plan.
2.3 Components of Marketing Plan
The main purpose of a structure of headlines of Marketing plan is to convince creditors,
participants supplying services and suppliers of the product that it is mutually beneficial to cooperate during the implementation period.
I. Executive summary
II. Current marketing situation
III. Opportunity and issue analysis
IV. Objectives
V. Marketing strategy
VI. Action programmes
VII. Projected profit-and-loss statement
VIII. Controls
Reviewers begin to read a marketing plan from objectives up and down. The value of
objectives is derived above the chapter IV. objectives. Results of actions and their
implementability is described below point IV. Both value and proposed actions are
continuously compared and updated during a planning process.
The Marketing Planning Process
Not all companies use formal planning, and not all companies that use it use it well. Yet
formal planning can confer several benefits, including more systematic thinking, better coordination of company efforts, sharper objectives, and improved performance measurement,
all of which hopefully lead to improved sales and profits. Planning in companies seems to
evolve through a budgeting-system stage, annual planning stage, long-range planning stage,
and strategic planning stage. Even the term “marketing plan” has several uses. It turns out
that marketing input is necessary in formulating various company plans, including the
corporate plan, divisional plans, product-line plans, brand plans, market plans,
product/market plans, and functional plans.
The contents of marketing plans vary from company to company but at a minimum should
contain an executive summary, current marketing situation, opportunity and issue analysis,
47
objectives, marketing strategy, action programs, projected profit-and-loss statement, and
controls.
In order to plan effectively, marketing managers must understand the key relationship
between types of marketing-mix expenditures and their sales and profit consequences.
These relationships are captured in a profit equation and a sales equation. Profit optimisation
planning calls for finding the profit-maximising plan. It involves determining the optimal
marketing expenditure level, marketing mix, and marketing allocation.
2.4 The Market Audit – S WOT
Market audit or SWOT analysis should inform about turnover or market share which should
be reached over time. Further, more process items should be described for fast recognition
and compensation of biases. Market audit is efficient only if important items are listed.
SWOT analysis lists important items for control but these are not connected with process.
Therefore, it is useful to create a project process chart.
48
Scheme 2-12: Strategical project assessment
What is our business?
What will it be?
What should it be?
Determine mission and set objectives
EXTERNAL ANALYSIS
ANALYSIS
Customers,
Segments, motivation, needs
INTERNAL
Performance,
ROI, market share, product quality
costs, product portfolio analysis
Asses position of each Strategic Business Unit
Competition
Identity, size, costs, strengths
Strategic Options
Past strategy and problems, organisation
capabilities, constraints, financial resources
Environment
Technology, economics, government, raw materials
Develop Product/Service Strategies for Each SBU
Implementation
Oriented
Check Point:
Strategic
Information
Systems
Select Target
Market Segments
Position Product/
Service Relative
to Other products
Design Marketing Mix
Pricing
Promotion
Product Lines
Channels of Distribution
Forecast Sales and Profits for Target Market Segment
Information Processing
Oriented Check Point:
Revise Strategies and
Tactics if Forecast Not
Consistent with Objectives
Implement Marketing Plan
Review and Monitor Programme
49
Methodology connecting strategical marketing management and marketing
programs
Segmentation, targeting and positioning connect marketing analyses and design – see content
of Kotler: Marketing Management. STP concept connects three parts of the book from chapter
9 to 24. Marketing strategies and programs must be made for each targeted segment
separately.
Table 2-7: Marketing methodology of Kotler
Analysing
Researching and Designing
marketing
selecting target
marketing
opportunities
markets (Chapter strategies
(Chapter 4-8)
9-10)
(Chapter 11-15)
Planning
marketing
programmes
(Chapter 16-24)
Organising,
implementing
and controlling
marketing effort
(Chapter 25-26)
Each part of Marketing Management book (Kotler) can begin independently. Attach to each
part of marketing methodology proposed actions in your project. Explain how you simplify
the methodology by skipping and deepening certain parts of it. For example, you can skip
secondary research in case you do not seek data for implementation where secondary data is a
very relevant source of information about competitors. You must deepen data about idea
development in this case. Further, you can select from options of data collection and
processing and education of experts to define clearly that the target market will be obtained
either from competitors or by growth of total market.
2.5 Method of A ss essment
Methods of assessments and control are connecting knowledge obtained in each chapter of
this study text. Thus, strategical control (2nd chapter) follows marketing of experts (1st
chapter) and precedes control of capability of traders (3rd chapter). Strategic control ensures
the balance of understanding and implementation of marketing methodology (Table 2-6).
Table 2-8: Training tools for understanding and implementation of marketing management
methodology
Me1st chapter
2nd and 5th chapter
3rd and 4th chapter
thodo- and
logy professional
level
UnDelphi
STP and PLC indices for Consistency of plans for firm, market, mix,
dermethod.
both product and market programs, changes on different levels of
stand- Project
Headlines informing
demand
ing
assessment. about implementation of Tools for recognition (lists of failures,
Preliminary both strategy and plan
consequent procedures, scenarios)
research
Imple DocumProducts and markets
Objectives of trade marketing (Table 3-4,5),
-men- mentation,
organisation,
assessment and control of customer services,
tation sensory,
technological
budgeting, assessment of geographical
longitudinal superiority, top
markets, control indices for new product
research
management support,
development process, personal assignments,
design
growth targets
financing, key economic indices for
marketers (Table 4-3), exploitation of
cultural variables (Table 4-4) and
consistency of actions during new market
entry (Table 4-5)
50
Understanding of marketing methodology grows from left to right and from top down.
Capability to use marketing management grows from right to left (Table 2-8). Just in time
understanding and management is shown in column of first chapter through expert
knowledge. Second and fifth chapter have the pivotal position for accessing and stabilising
future demand by setting objectives for marketing management of external marketing services
and middleman. Column of third and fourth chapter shows opportunities for competition and
advantage on actual markets using mostly trade marketing skills.
Assignment: Read all chapters of this study text to the extent to be able to fill tables 3-4, 5,
and 4-4,5 and 6 and assign strategy to suppliers of marketing services and other suppliers and
middlemen. Specify the position of your project by using other tables and schemes. Thus your
decision making will be faster next time.
Final exam questions
How to get a segment in non-market environment?
How marketing evolved?
Which marketing concepts do you know?
What is a core marketing concept?
How to structure a project documentation?
How to design research?
How to select data?
Which data to select?
How to process data to marketing mix and control?
- see objectives and unit content terms of this lecture.
Exercise: What might be included in the mission statement for a company?
Answer: Well, there would probably be something like:
- providing a good service
- promoting the social and economic betterment
- promoting the notion of mutual benefit, or perhaps
- promoting the idea of people-centred development.
What can we say about mission statements?
- they should be a source of inspiration for those to whom they apply
- they tend to be broad
- they tend to not lay down quantified targets.
So mission statements are more about stating the philosophy of the organisation.
How do you select a target segment for your project?
Why a customer buys from you and not from other competitors (agents, chains, global
companies, local firms)?
Clarify relation between marketing plans for market, company and corporation
Clarify growth objectives and strategies for the marketing plan of your firm!
When the corporation is unavoidable?
When to just stick to cosmetic changes of marketing mix and not plan strategically?
Does it make sense to balance strategies and actions? And, if yes, then how?
Why to use visual process databases (for example Aperture software)?
51
Class participation based questions:
- explain why both short-term and strategic planning are essential to service co-op survival
and growth
- give examples of the some of the main short-term and strategic planning tasks within the
service co-op
- explain how planning decisions are made within service co-op and evaluate to what extent
planning decisions are based on member participation
- explain the respective roles of the Board, the manager and the general members in both
short-term and strategic planning.
Control of skills:
Discussion skills. Capacity to develop a marketing plan for own organisation.
Value: Strategic analyses of a business of student’s choice is 10% of the course.
What segmentation criteria do you know?
How to combine segmentation criteria during targeting?
How to use segmentation criteria for planning of marketing programs?
When to concentrate your effort on market of products, services or property?
Which additional analyses do you need after your plan is complete?
52
3. Operational Marketing
Aim:
 To provide students with an understanding of marketing mix, its contribution to the
marketing plan and its implementation
Objectives:
1. to present different marketing plans depending on Marketing Mix characteristics and
strategy of the firm;
2. to enable students to identify the role and function of individual components of Marketing
Mix;
3. to present New Products in the context of their Development, Test and Commercialisation
4. to describe the implementation of marketing plans in terms of organisational structures,
market operations, as well as monitoring and control
3.1 Different mark eting plans depending on Marketing Mix
characteristics and strategy of the firm
Marketing plans, company strategies and composition of marketing mix are three
complementary approaches compensating their own biases and thus increasing validity of
project results.
Scheme 3-1: Increasing of representatives of results and raw data from three sources
Marketing plan
(turnover, market
share)
Marketing mix and programs (reach, frequency,
durability and repayment rate of effects)
Company plan (profit,
procedures, records)
Marketing mix is very pragmatic. Small changes of product, price, promotion and place are
made first and evaluated and corrected again and again. Product and brand managers are
usually responsible for this activity because their decision making is based on long lasting
experience.
Professionals recommend following steps connecting marketing strategy with marketing mix:
- improve quality/features
- enter new market segments
- new distribution channels
- advertising shift
- low prices at right time
Solve dilemma between high market share and current profit.
53
Examples of marketing plans
Marketing plans of firm (company strategies: low cost, differentiation and focusing) should be
implemented into marketing programs through marketing mix by:
- ordering marketing actions of (external) marketing services seeking important differences
in reviews of panels (push-pull data) http://www.acnielsen.com/,
http://www.nielsenmedia.com/, http://www.nielsen-netratings.com/,
- own product and brand management through life cycle stages – see further
- participation in product or trade chains – see trade marketing and marketing management
- market oriented production in shortest marketing chain (producer – retailer) through
certain form of vertical or horizontal integration – see integrative and diversificative
growth
- accepted mix of someone else’s accidental position in perfect competition (integrator of
chain, management of corporation, marketing co-operative or market leader) – see service
marketing
- example of method unifying perception of needs between consumer and supplier in shown
in readings Jan-Benedict E.M. Steenkamp, J-B., H., van Trijp, C.M.: QUALITY
GUIDANCE: A CONSUMER-BASED APPROACH FOR PRODUCT QUALITY
IMPROVEMENT
Listed references show where to seek more information. Further, references to some
marketing plans are listed. Plans related with strategies and marketing programs have to be
created in accordance with logic presented here in examples of Boston matrix, Ansoff matrix,
and product life theory. Based on facts gained by these methods the marketing mix can be
designed.
The following three examples show real plans or planning methodology which is so big that it
is not possible neither useful to copy it here:
- You can find an example of plan of corporation in readings file „Titan Controls
Corporation Planning“.
- Assignment of new product development marketing plan of company was shown in first
lecture.
Key questions integrating alternatives and plans are following:
- what to develop and how
- what to maintain and how
- what to close down and how
Self control of planners helps to reduce over abundance and tailor proper proposals.
Practical rules helping to incorporate strategies into marketing plans and
programs
Boston matrix shows how to select best strategical alternatives based on their market share
and market growth.
Table 3-1: Matrix for portfolio selection of actual demand drivers
high
Star
Problem child
Market
growth
Cash cow
Dogs
low
High
Market share
low
54
The higher the growth, the higher importance of product development in marketing mix. The
lower the market share, the higher importance of image and promotion (big companies are
trusted).
Ansoff matrix helps to select proper orientation of marketing programs depending on maturity
of product and market.
Table 3-2: Ansoff matrix for portfolio selection of future demand drivers
Product
Mature
New
Mar- Mature
Penetration
Product development
ket New
Market development
Diversification
Penetration to keeps low prices. The a skimming period occurs when invested money is
repaid. Inbetween, cCompetitors are sold for one third of their real estate price. Penetration
investment is about half of the property of all competitors on the market, because when their
loans reach this point, banks stop further financing and it is possible to buy them a for third of
their price. Global companies have an advantage because local competitors usually do not
consider their retained property behind a border. Whoever does not have such advantages has
to start with something new (markets and/or products) or diversify into some kind of services.
PLC = Product Life Cycle is another way to select
the most important alternatives to work out in
plans and programs. Scheme 4 shows three
different ways to increase efficiency of PLC
theory. Firstly, a shape of life cycle curve should
be forecasted from strategical point of view.
Secondly, each stage of PLC should be improved.
Thirdly, PLC’s should support each other to
maintain growth trend of firm. View from outside
can forecast kind of life cycle curve and assign
proper actions to facilitate marketing mix in its
different stages. Marketing mix, converted into
marketing programs must design proper actions
ensuring efficiency of all three approaches.
Scheme 3-2: Marketing Strategies in
Different Stages of Product Life
Cycle
 Stages in sales history
 S-shaped curve
 Cycle - sales- profit
Marketing strategies for 4 stages
introduction, growth, maturity, and
decline to
 maximise profit
 indicate opportunities
3.2 Roles and functions of marketi ng mix components
Planning of features of marketing mix
Marketing programs are actions which fill the idea of proposed marketing mix either more or
less successfully. Therefore, it is necessary to plan actions of marketing programs properly
and check their implementation by push (from production) and pull (from market) feed back.
Production shouldn‘t push stronger than market pulls. Push/pull data can be extracted from
time series of data about market (prices for goods and sold volumes).
Scheme 3-4 sets precisely the elements of marketing mix based on previously chosen strategy
for the period of introduction. Similarly, scheme 3-6 clarifies the growth phase of life cycle,
scheme10 for the phase of maturity and scheme 3-7 for the phase of decline.
It is possible to use a marketing triangle to set up marketing mix besides the life cycle curve
method mentioned above. Customer, competitor and company of supplier are placed in the
corners of this marketing triangle (Scheme 3-3).
55
Customer: No cost for distribution and promotion
should be spent and high price charged if s/he
knows or wants the product. And reverse.
Competitors: Are they many and serious? If yes,
price should be low or product should be
cancelled.
Company: Is it powerful? If yes, new segments
should be opened.
Scheme 3-4: Introduction stage
 Product before and after the first
distribution
 Technical problems
 Distribution problems
 Reluctance
 Profit is negative or low
 Distribution and
 promotion expenses
 Competitors
 None or few
 Variety
 Small
 Price
 High
 Customers
 Innovators
 Marketing strategies
 Rapid skimming
 Slow skimming
 Rapid penetration
 Slow penetration
Scheme 3-6: Maturity stage
 Sales
 Peak
 Costs
 Low per customer
 Profit
 High
 Competitors
 Many, some leave
 Customers
Majority
Scheme 3-3: Marketing triangle
Customer
Competitors
Company
Scheme 3-5: Growth Stage
 Sales
 Rapid climb
 Competitors
 Many enter
 Product
 New features
 New distribution outlets
 Price
 High, fall slightly
 Promotion
 High level
 Profit
 Increase
 Customers
 Early adopters
Scheme 3-7: Decline stage
Why product declines?
 Technology
 Taste shifts
 Competition increase
 Results:
 Overcapacity
 Price cuts
 Profit erosion
 Sales
 Decline
 Costs
 Low per customer
 Profit
 Decline
 Customers
 Laggards
 Competitors
 Decline
56
Above mentioned description of alternatives for design of marketing mix demonstrate its
changes along the product life cycle. We never know how long each stage of life cycle will
be. Therefore, it is necessary to be ready to use any of well known techniques after any of
patterns of life cycle stage is recognised.
Marketing Strategies in Different Stages of the Product Life Style
Every new product when launched goes through a product life-cycle market with changing
problems and opportunities. The sales history of many products follow an S-shaped curve
made up of four stages. The introduction stage is marked by slow growth and minimal
profits as the product is pushed into distribution. The company has to decide during this
stage between the four strategies of rapid skimming, slow skimming, rapid penetration, or
slow penetration. If successful, the product enters a growth stage marked by rapid sales
growth and increasing profits. During this stage, the company attempts to improve the
product, enter new market segments and distribution channels, and reduce its prices slightly.
There follows a maturity stage in which sales growth slows down and profits stabilise. The
company seeks innovative strategies to renew sales growth, including market, product and
marketing-mix modification. Finally, the product enters a decline stage in which little can be
done to halt the deterioration of sales and profits.
The company’s task during this period is to identify the truly weak products, develop for
each one a strategy of continuation, focusing, or milking, and finally phase out weak
products in a way that minimises the hardship to company profits, employees, and
customers.
Not all products pass through an s-shaped PLC. Some products show a cycle-recycle shape,
others a scalloped shape. Some investigators have discovered over a dozen PLC shapes,
including those describing styles, fashions, and fads, as well as the international product life
cycle. PLC theory has been criticised on the grounds that companies cannot predict the
shapes in advance, or know what stage they are in within a given shape, or predict the
duration of the stages. Also, PLCs are the result of chosen marketing strategies rather than of
an inevitable sales history that is independent of the chosen marketing strategies.
Product life-cycle theory must be complemented by a theory of market evolution. The theory
of market evolution holds that new markets crystallise when a product is created to satisfy
an unmet need. The innovator usually designs a product for the mass market. Competitors
enter the market with similar products leading to market expansion.
The market undergoes increasing fragmentation until some firm introduces a powerful new
attribute that consolidates the market into fewer and larger parts.
This stage does not last, because competitors copy the new attributes. There is a cycling
back and forth between market reconsolidating based on innovation and fragmentation based
on competition. The market may ultimately terminate upon the discovery of a superior new
product form.
Companies must try to anticipate new attributes that the market wants. Profits go to those
who introduce new and valued benefits early. The search for new attributes can be based on
empirical work, intuition, dialectical reasoning, or needs-hierarchy reasoning.
Market-evolution theory shifts marketers` attention form specific brand PLCs to the
evolution of the overall market. Each brand tells only a limited story about the opportunities
and evolution of the market. Successful marketing comes through creatively visualising the
market’s evolutionary potential.
57
Table 3-3: Guide to market maturity
Maturity
Embryonic
Growth
stage factor
1. Growth
Normally much Sustained growth
rate
greater than
above GNP. New
GNP (on small customers. New
base)
suppliers. Rate
decelerates toward end
stage
2.
Hard to define Greater percentage of
Predictabilit accurately.
demand is met and
y of growth Small portion
upper limits of demand
potential
of demand
becoming clearer.
being satisfied. Discontinuities, such
Market
as price reductions
forecasts differ based on economies of
widely
scale, may occur
3. Product
Specialised
Rapid expansion
line
lines to meet
proliferation needs of early
customers
4. Number Unpredictable Reaches maximum.
of
New entrants attracted
competitors
by growth and high
margins. Some
consolidation begins
toward end of stage
5. Market
Unstable.
Increasing stability.
share
Shares react
Typically, a few
distribution unpredictably
competitors emerging
to
as strong
entrepreneurial
insights and
timing
6. Customer Trial usage with Some loyalty. Repeat
stability
little customer usage with many
loyalty
seeking alternative
suppliers
7. Ease of
entry
Normally easy.
No one
dominates.
Customers’
expectations
uncertain. If
barriers exist,
More difficult. Market
franchises and/or
economies of scale
may exist, yet new
business is still
available without
directly confronting
Mature
Declining
Approximately
equals GNP
Declining
demand.
Market shrinks
as users’ needs
change
Potential well
defined.
Competition
specialised to
satisfy needs of
specific segments
Known and
limited
Proliferation slows
or ceases
Lines narrow
as unprofitable
products
dropped
Entrenched
New entrants
positions
unlikely.
established. Further Competitors
shake-out of
continue to
marginal
decline
competitors
Stable with a few
Highly
companies often
concentrated or
controlling much of fragmented as
industry
industry
segments
and/or is
localised
Well developed
Extremely
buying patterns with stable.
customer loyalty.
Suppliers
Competitors
dwindle and
understand purchase customers less
dynamics and it is
motivated to
difficult for a new
seek
supplier to win over alternatives
accounts
Difficult. Market
Little or no
leaders established. incentive to
New businesses
enter
must be ‘won’ from
others
58
they are usually
technology,
capital or fear
of the unknown
8.
Plays an
Technology important role
in matching
product
characteristics
to market
needs. Frequent
product
changes
competition
Product technology
vital early, while
process technology
more important later in
this stage
Process and material
substitution focus.
Product
requirements well
known and
relatively
undemanding. May
be thrust to renew
industry via new
technology
Technological
content is
known, stable
and accessible
Corrections of marketing mix based on measured values
It is easy to correct composition of marketing mix when previously described processes and
patterns were measured. Each bias can be corrected. Recommended corrections are shown in
the following schemes.
Scheme 3-8: Steps keeping company
Schemes 12, 13, 14 a 15 demonstrate how to
growing
prevent decline stage and how to correct
 Improve quality/features
methodology of strategic, life cycle and
 Enter new market segments
company planning.
 New distribution channels
 Advertising
 Low prices at right time
Dilemma: High Market Share or High
Current Profit?
Example of role and function of packaging is
shown in the article of readings called „Ten
ways to packaging“. Other article informs
Scheme 3-9: How to plan the decline stage?
about outsourcing options or price setting for
 Identify weak products by Boston/GE
packaging.
matrix
 Increase investment
 Hold investment level
Price
 Drop product
Price is always changing. Three main
 Brand product sales decline
activities of pricing are following:
 Production is not always in the decline
1. setting the price (especially before the
stage
product introduction) consists of the
following steps:
 Selecting the pricing objective (survival, maximum current profit, maximum current
revenue, maximum sales growth, maximum market skimming, product-quality leadership)
 Determining demand by following methods and steps:
a. setting factors affecting price sensitivity
- Unique-value effect: Buyers are less price sensitive when the product is unique
- Substitute-awareness effect: Buyers are less price sensitive when less aware of substitutes
- Difficult-comparison effect: Buyers are less price sensitive when they cannot easily
compare the quality of substitutes
59
b.
c.

a.
b.


a.
b.
c.
Total-expenditure effect: Buyers are less price sensitive the lower the ratio of expenditure
to income
End-benefit effect: Buyers are less price sensitive the less the expenditure is to the total
costs of the end product
Shared-cost effect: Buyers are less price sensitive when part of the cost is borne by
another party
Sunk-investment effect: Buyers are less price sensitive when the product is used in
conjunction with assets previously bought
Price-quality effect: Buyers are less price sensitive when the product is assumed to have
more quality, prestige or exclusiveness
Inventory effect: Buyers are less price sensitive when they cannot store the product
methods of estimating demand schedules
price elasticity of demand
Estimating costs is done as follows:
Respecting types of costs
Respecting cost behaviour as a function of accumulated production
Analysing prices and offers of competitors
Selecting a pricing method like:
Mark-up pricing
Target return pricing
Perceived value pricing
Scheme 3-10: Product positions along the price performance curve
Relative price
Lower value
Premium
Good
Average
Commodity
Economy
0
d.
e.

a.
b.
c.
d.
Average value
on Price
Performance
Curve
Higher value
Relative product quality
Going rate pricing
Sealed-bid pricing
Selecting the final price using some or combination of following methods:
psychological pricing
the influence of other marketing-mix elements on price
company pricing policies
impact of price on other parties
60
2. adapting the price (your decision about the price change to win over competitors) consists
of the following steps and options:
 Geographical pricing
 Price discounts and allowances
a. cash discounts
b. quantity discounts
c. functional discounts
d. seasonal discounts
e. allowances
 Promotional pricing
a. Loss-leader pricing (discount of branded goods generates traffic in shop)
b. Special-event pricing
c. Cash rebates
d. Low-interest financing
e. Warranty and service contracts
f. Psychological discounting
 Discriminatory pricing
a. Consumer segment pricing
b. Product-form pricing
c. Image pricing
d. Location pricing
e. Time pricing
 Product mix pricing
a. Product –line pricing
b. Optional-feature pricing
c. Captive-product pricing
d. Two-part pricing
e. By-product pricing
f. Product-bundling pricing
3. initiating and responding to price changes (implementation of your decision or reducing
damages resulting from decision of competitors) consists of the following steps:
 Initiating price cuts, you should be careful of:
- Low-quality trap
- Fragile-Market share trap
- Shallow pockets trap
Example: Analysing the marketing mix alternatives facing a firm in an economic recession:
Company A appliances are perceived to be a higher quality and higher prices than company
B’s appliances. The perceived positions of the two brands are shown in figure (a) along the
dimensions of perceived value and price. Note that the two brands lie on the same value to
price line. This means that consumers feel that they would get approximately the same value
per dollar whether they bought brand A or B. Those who want more total value would by A if
they could afford it. Those who want to spend less would buy B.
61
Scheme 3-11: Perceived value (quality) of product during decline of purchase power
Perceived value
Perceived value
Perceived value
A
A
A
B
B
Price (a)
Price (b)
Price (c)
Circle of dots in Figure (a) represent the preferences of potential buyers for value / price
combinations. Buyers whose preferences are nearest to A will buy A; the same goes for B.
Clearly each brand has a substantial market and both are likely to enjoy good market shares.
An economic recession now occurs. It shifts buyer preferences toward a cheaper appliance B see figure (b). The number of buyers who are willing to buy the higher pricede appliance
diminishes. If company A does nothing about this, its market share will shrink.
Company A must identify alternatives and choose among them – remember example of Porte
against Skoda

a.
b.
c.
d.

a.
b.
c.
d.
e.
f.
g.



a.
b.
c.
d.
e.
Initiating price increases
Adoption of delayed quotation pricing
Use of escalator clauses
Unbundling of goods and services
Reduction of discounts
Preventing price increases
Shrinking the amount of product instead of increasing the price
Substituting less-expensive materials or ingredients
Reducing or removing product features to reduce costs
Reducing or removing product services
Using less expensive packaging material or promoting larger package size
Reducing the number of sizes and models offered
Creating new economy brands
Customers’ reactions to price changes
Competitors’ reactions to price changes
Responding to price changes:
Maintain price
Raise perceived quality
Reduce price
Increase price and improve quality
Launch low-price fighter line
62
Place: The Relation of Logistics to Trade Marketing Activities
Within the trading environment, logistics also is an „enabler“, linking category management
(that is the development of strategies and policies for mutual profitable growth of the product
category), trade relations and customer marketing (creating the environment for working
together), and customer service (satisfying the operational needs of customers and focusing on
efficiency).
Scheme 3-12: Trade marketing activities
Category
management
Logistics
Customer service
Trade relations
Table 3-4: Project management goals of trade marketing
Purchase
Production
Finance
Bulk purchase
of materials
Long
production
runs
Broad product
range
Tighter credit
control
4 day delivery
Unit loads
Table 3-5: Customer service tuning
Importance to retailer
Low
Medium
High
Elements
Marketing
Logistics
Performance
Poor
Satisfactory Good
Delivery
speed
On-time
delivery
Information
on order status
Stockouts
Flexibility
Order
completeness
Damage rate
-------- company
- - - key competitor
63
Scheme 3-13: Decisions about distribution channel
Estimate / forecast:
- target market
- product(s)
- sales
- profit
Distribution policy alternatives:
- Direct sales
- Using intermediary (agent, importer or other)
Investment required in
own sales organisation?
Operating expense
(annually) of own sales
operation?
Sales volume and profit
estimate if own
organisation is used?
Other considerations:
- long-term plans
- market size and
growth
- company image
- customer service
needs
- control
- legal requirements
No
Are suitable
intermediaries available?
Comparison
Costs of using
intermediary (commission
rate, supporting services)?
Comparison
Sales volume and profit
estimate if intermediary is
used?
Comparison
Other considerations:
- flexibility desired
- other commitments
- market limitations
- legal requirements
Decision
64
Total distribution costs (TDC)
TDC = TC + FC + CC + IC + HC + PC + MC
TC = transport costs
FC = facility costs
CC = communication costs
IC = inventory costs
HC = material handling costs
PC = protective packaging costs
MC = distribution management costs
Decisions and design of distribution channel
Selection criteria for distributive channels:
1. Channel availability
2. Sales volume
3. Operating costs
4. Investment required
5. Personnel
6. Risk
7. Control
8. Flexibility
Scheme 3-14: Distribution mission cutting across functional boundaries
Purchasing
Production
Sales Marketing
TransportationEtc.
Mission A
Mission B
Mission C
Table 3-6: Factors making for stability in relationships between multiple retailers and their
suppliers in the UK
Factor
Role
Directions of change
1. High and
Stability important where regular
Becoming more probable as quality
consistent
delivery of major range items
increasingly used as competitive
quality
required, and with items difficult to weapon by major multiples
manufacture, or where high quality,
hygiene standards mandatory
2. Need for
More likely to be achieved when
Becoming major factor as:
flexible
suppliers well adapted to working
(a) ‘Just in time’ delivery systems
response
with retailer, i.e., within the context
introduced and lower stockholding
of long-term working relationship.
by retailers (all sectors)
More significant for delivery of
(b) fashion changes more frequent and
goods in continuous demand
flexible quicker response required
(groceries) than for bi-annual
by manufacturers (clothing)
seasonal ordering (clothing)
3. Joint
Most critical with retailers with pro- Large retailers have buying teams and
65
product
development
work
required
active approaches towards new
product development work. This is a
function of (a) size of retailer, (b)
market niche sought. The more
precisely targeted retailer’s
marketing concept, the larger the
retailer, the greater the degree of
product differentiation, the more
significant this factor becomes
Most critical with products requiring
specialist distribution into stores,
e.g., meats, fresh fish, and some
chilled food
Most critical goods ordered
continuously
4. Specific
delivery
systems
required
5. Frequent
contact
through
frequent
ordering
6. Wide
This increases the costs of changing
supply ranges suppliers because of the greater
required from complexity of business
a limited
number of
suppliers
7. High
physical
degrees of
product
differentiatio
n
8. Strong
manufacturer
brands
When difficult to replicate product
retailer is more likely to stay with
same supplier
expect considerable interaction between
themselves and their suppliers: set-up
costs are high encouraging stability.
However, some retailers using
interaction to encourage more proactive approaches by manufacturers
Probably becoming less important as
third party distribution systems have
grown particularly in specialist areas
In the future the development of
computerised systems which link
retailers and manufacturers with
different technologies may make
switching between supply sources easier
Becoming less important for
distribution reasons in some sectors
with increased availability of third party
distribution. Still significant in sectors
where demand related products and
where manufacturer performs a product
assembly role for retailers
Products with special effects and
designs (some areas of fabrics and
furnishing)
Retailer will wish to stock these
lines
Own-label developments have affected
non-promotion-supported manufacturer
brands, but have not significantly
eroded the market shares of
manufacturer brand leaders
9. Number of When few alternative sources of
International sourcing of higher value
suppliers
supply, degree of stability higher but products such as clothing increased the
this will depend on intensity of
number of sources of supply and
competition among these suppliers reduced need for stability as long as
point 2 not relevant. Overall, very
variable developing on manufacturing
sector involved
Definition of Quality:
- The customer’s judgement, not yours
- Include both the product and associated services
- Not absolute, but relative to competitors
- Doesn’t include a price
66
Promotion: (1)advertising, (2) sales promotion, (3) publicity, (4)personal selling
The communication process to target customer is the following: 1. Sender, 2. Receiver, 3.
Encoding, 4. Decoding, 5. Message, 6. Media, 7. Response, 8. Feedback, 9. Noise
Communication and Promotion-Mix Decisions
Marketing communications is one of the four major elements of the company’s marketing
mix. marketers must know how to use advertising sales promotion, publicity, and personal
selling to communicate the products existence and value to the target customers. The
communication process itself consists of nine elements: sender, receiver, encoding,
decoding, message, media, response, feedback, and noise.
Marketers must know how to get through to the target audience in the face of the
audience’s tendencies toward selective attention, distortion, and recall.
Developing the promotion program involves eight steps. The communicator must first
identify the target audience and its characteristics, including the image it carries of the
product. Next the communicator has to define the communication objective, whether it is
to create awareness, knowledge, liking, preference, conviction, or purchase. Then a
message must be designed containing an effective content, structure, format, and source.
Then communication channels - both personal and non-personnel - must be selected. Next
the total promotion budget must be established. The promotion budget must be divided
among the main promotional tools. The communicator must then monitor to see how much
of the market becomes aware and tries the product and is satisfied in the process. Finally
all of the communications must be managed and co-ordinated for consistency, good timing,
and cost effectiveness.
Scheme 3-15: Communication model
3rd media mix
message
Advertising displays
Media
4th message
timing while
broadcasting
2nd message encoding
Receiver
Source = sender
9th Noise = 1-8 Feedbacks
6th message
perception,
decoding
1st message
(copy strategy)
Marketing manager
Purchase
7th message –
image, loyalty
Consumer response
A purchase is a consequence of a long process of completing information where noise is
compensated by feedbacks. Control evaluates the efficiency of each specific message. For
example the decoding do not occurs if perception overcome Attention (stimuli), Distortion
(twist), and Recall (fraction). Note: Problem marked by number is followed by the name of
technique reaching solution in brackets.
67
Steps of promotion program:
1. Identify characteristics of the target audience, product, image etc.
2. Define objective (consumer readiness stage): awareness (i), knowledge (ii), liking (iii),
preference (iv), conviction (v), purchase (vi), two step flow (impersonal) for opinion
leaders (vii) and (personal for less active) gate keepers (viii)
3. Design message with effective: content (i), structure (ii), format (iii), source (iv)
4. Channels: personal (i), impersonal (ii)
5. Promotion budget: affordable (i), percentage of sales (ii), competitive – parity method
(iii), objective and task method (iv)
6. Monitor: awareness (i), knowledge (ii), liking (iii), preference (iv), conviction (v),
purchase (vi)
7. Set up promotion mix: advertising (i), sales promotion (ii), publicity (iii), personal selling
(iv)
8. Measure results of promotion: readiness (i), image (ii), loyalty (iii)
9. Correct: consistency (i), timing (ii), cost effectiveness (iii), DAGMAR – defining
advertising goals for measured results (iv)
Advertising Decisions
Advertising - the use of paid media by a seller to communicate persuasive information about
its products, services, or organisation - is a potent promotional tool. American marketers
spend over $61 billion annually on advertising and it takes many forms (national, regional,
local; consumer, industrial, retail; product, brand institutional; etc.) designed to achieve a
variety of objectives (immediate sales, brand recognition, preference, and so on).
Advertisers’ decision making is a five-step process consisting of objectives setting, budget
decision, message decision, media decision, and campaign evaluation. Advertising should
establish clear goals as to whether the advertising is supposed to inform, persuade or remind
buyers. The advertising budget can be established on the basis of what is affordable, as a
percentage budget of sales, on the basis of competitors` expenditures, or on the basis of
objectives and tasks: and more advanced decision models are available.
The message decision calls for generating messages, evaluating and selecting among them,
and executing them effectively. The media decision calls for defining the reach, frequency,
and impact goals, choosing among major media types, selecting specific media vehicles, and
the sales effects of advertising, before, during and after the advertising.
Sales Promotion and Publicity Decisions
Sales promotion covers a wide variety of short term incentive tools--coupons, premiums,
contests, buying allowances -- designed to stimulate consumer markets, the trade, and the
organisation’s own sales force. Sales promotion expenditures have been growing at a faster
rate than advertising in recent years. Sales promotion calls for establishing the sales
promotion program, and evaluating the results.
Publicity -- which is the securing of free editorial space or time -- is the least utilised of the
major promotion tools, although it has great potential for building awareness and preference
in the marketplace. Publicity involves establishing the publicity objectives, choosing the
publicity messages and vehicles, and evaluating the publicity results.
Table 3-7: Promotion mix characteristics, results, and process
68
Advertising
= The use of paid
media by seller to
communicate
persuasive
information about its
products, services or
organisation
Indices:
1. Public
presentation
2. Persuasiveness
3. Amplified
expressiveness
4. impersonality
Results and criteria:
A. Efficient = reach
B. Numerous =
frequency
Low cost price …
impact goals
Process:
1. Budget decision
2. Generating
messages:
evaluating (i),
selecting (ii),
executing (iii)
3. Defining the reach
of media:
frequency (i),
impact goals (ii),
media types (iii),
media vehicles
(iv), scheduling
(v)
4. Campaign
evaluation: before
(i), during (ii),
after (iii)
Personal selling
= interpersonal
relations between
salesperson and buyer
Indices:
1. Two or more
persons
relationship
2. Cultivation
3. response
Results:
A. Greater long term
commitment
B. Effective
Alternatives:
1. door to door
2. travelling
salesman
3. representatives
4. agents
5. opinion leaders
Sales promotion
= price tags, shop
windows, booklets on
shop shelves and
other arrangement in
shop and in front of it
to inform customer
about goods
Indices:
1. Communication
2. Incentive
3. invitation
Publicity
Great potential to
build awareness and
preferences in the
market-place.
Repositioning
products and defining
them
Indices:
1. High credibility
2. Off guard
3. Dramatising
Results:
A. Short run
B. Quicker response
C. Not effective for
long term
preference
Planning S.P.:
1. Establish the S.P.
objectives
2. Select the tools
3. Develop the
program (BtoB)
4. Pre-test the
program
5. Implement and
control
6. Evaluate the result
Results:
A. Underused
B. Afterthought
result:
Combination with
other elements
Planning P.R.:
1. P.R. objectives
2. Appropriate
messages and
vehicles
3. Evaluate P.R.
results
Activities of P.R.:
1. press relations
2. product publicity
3. corporate
communications
4. lobbying
5. counselling
Scheme 3-16: Conceptual model of “Salesperson-Buyer” Dyadic Relationship
69
Start: SalespersonCustomer Relationship
Salesperson
Role Requirements
and Characteristics
Customer
Personal
Characteristics
Personal
Characteristics
Role Requirements
and Characteristics
Personal
Affiliation
Needs and expectations
Adjustment
Needs and expectations
Choice of strategy
Negotiation
Choice of strategy
Adapt
Adapt
Exchange
Stop
3.3 New Products in the context of thei r Development, Te st and
Commercialisation
Why new product development?
- high failure rate
- high budget
- internal development structure
- databases
- experiments
- research
Product, Brand, Packaging, and Services Decisions
The product is the first and the most important element of the marketing mix. Product
strategy calls for making co-ordinated decisions on product mixes, product lines,
individual products, and service products.
70
Each product offered to customers can be looked at on three levels. The core product is the
essential service that the buyer is really buying. The tangible product is the features,
styling, quality, brand name, and packaging that constitute the tangible product.
The augmented product is the tangible product plus the various services accompanying it,
such as warranty, installation, service maintenance, and free delivery.
Several schemes have been proposed for classifying products. For example, all products
can be classified according to their durability (non-durable goods, durable goods, and
services). Consumer goods are usually classified according to consumer shopping habits
(convenience, shopping, speciality, and unsought goods). Industrial goods are classified
according to how they enter the production process (materials and parts, capital items, and
supplies and services).
Most companies handle more than one product. Product mix can be described as having a
certain width, length, depth, and consistency. The four dimensions of the product mix are
the tools for developing the company’s product strategy. The various lines making up the
product mix have to be periodically evaluated for profitability and growth potential. The
company`s better lines should receive disproportionate support; weaker lines should be
phased down or out; and new lines should be added to fill the profit gap.
Each product line consists of product items, which should be evaluated. The product line
manager should study the sales and profit contributions of each item in the product line as
well as how the items are positioned against competitors’ items.
This provides information needed for making several product-line decisions. Line
stretching involves the question of whether a particular line should be extended downward,
upward, or both ways. Line filling raises the question of whether additional items should
be added within the present range of the line. Line modernisation raises the question of
whether the line needs a new look and whether the new look should be installed piecemeal
or all at once. Line featuring raises the question of which items to feature in promoting the
line. Line pruning raises the question of how to detect and remove a weaker product items
from the line. Companies have to develop brand policies for the individual product items in
their line. They must decide whether to brand at all, whether to do manufacturing or
private branding, what quality they should build into the brand, whether to use family
brand names or individual brand names, whether to extend the brand name to new
products, whether to put out several competing brands, and whether to reposition any of
the brands.
Physical products require packaging decisions to create such benefits as protection,
economy, convenience, and promotion. Marketers have to develop a packaging concept
and test it functionally and psychologically to make sure it achieves the desired objectives
and is compatible with public policy. Physical products also require labelling for
identification and possible grading, description, and promotion of the product. U.S. laws
require sellers to present certain minimum information on the label to inform and protect
consumers. Companies have to develop customer services that are desired by customers
and determine the effective level at which each service should be provided, and the form of
each service.
The service mix can be co-ordinated by a customer-service department that handles
complaints and adjustments, credit, maintenance, technical service, and customer
information. As the United States moves increasingly toward a service economy, marketers
need to know more about marketing service products.
Services are activities or benefits that one party can offer to another that are essentially
intangible and do not result in the ownership of anything. Services are intangible,
inseparable variable, and perishable. Service industries lag behind manufacturing firms in
adopting and using marketing concepts, but a strong interest is now emerging.
71
Scheme 3-17: New product development or acquisition (me too)?
New to
the
company
20 %
new
product
lines
26 %
improvements
Cost reduction
10%
New to the world
26% additions
to existing
product line
7%
10%
Repositioning
0
New to the market
Product
The benefits of product are expressed in concentric circles.
Scheme 3-18: Layers of hotel service
Core
benefit:
„rest and
sleep“
Generic
product:
„building,
front desk,
rooms
Expected
product:
„clean
bed, soap,
towels“
Augmented product
(distinguishing from
competitors): „TV,
shampoo, fresh
flowers, express
checkout, fine dining
and room service“
looking at the
buyer’s consumption
system
Potential
product
(possible
evolution):
“unexpected
surprises
treating
guest in a
special way“
When a producer keeps or wants to keep products always close to potential level, then it is
useful to think about establishing product brand. When a producer solves first of all, problems
at product core level, then the market is handling raw materials (farm products, natural
products) and manufactured materials and parts (materials - parts). Generic level markets
include installations and fixed equipment (capital items). Expected and augmented product
level is dependent on the offer of a supplying firm (supplies and services).
72
Product classifications
Scheme 3-19: New market development
A. Market Modification to increase its
volume
1. Expand the number of users
 Convert non-users
 Enter New segments
 Win competitor’s customers
2. Increase the usage rate
 More frequent use
 More usage per occasion
 New uses for product
B. Product Modification - Relaunch
 quality improvement
 Features improvement
 Style improvement
C. Marketing Mix Modification
1. Price cuts
 Lower price
 Special pricing
 Volume discounts
 Easier credit terms
2. Distribution
 More products in existing outlets
 New outlets penetrated
 New distribution channels
3. Promotion
 Advertising
 Increase expenses for advertising
 Change message
 Change media mix
 Change timing, frequency, size
 Sales Promotion
 Rebates, gifts, displays, etc.
 Personal selling
 Number/quality
 Revise sales territories
 Incentives
4. Services
 Speed up delivery
 Expand technical assistance
 More credit, etc.
Marketing mix modifications are highly
imitable!
A. According to durability – tangibility
I.
Non-durable goods: tangible,
consumed in one or few uses, ex. Milk,
beer, soap, cheese. Strategies:
- available in many outlets
- small mark-up
- much advertisement
II.
III.
-
Durable goods: tangible, survive many
uses, ex. Refrigerators, cars, machines,
clothing. Strategies:
personal selling – service
higher margins
guaranties
Services: activities, benefits,
satisfactions from sale, ex. Haircuts,
repairs, insurance. Strategies:
more quality control
supplier credibility
C. Consumer goods classification (based on
consumer shopping habits):
I.
Convenience goods
II.
Shopping goods
a. homogeneous: Price is more important
b. heterogeneous: Style is more important
III.
Speciality goods
C. Industrial goods. Goods bought by
organisations
Development of complex products can be
simplified and costs of development reduced
by shifting of decision making from
experiments with new product to experiments
with ideas, which are gradually developed and
tested.
73
The New product Development Process
Organisations are increasingly recognising the necessity and advantages of developing new
products and services. Their current offerings face the end of their life spans and must be
replaced by newer products.
New products, however, can fail. The risks of innovation are as great as the rewards. The
key to successful innovation lies in developing better organisational arrangements for
handling new-product ideas and developing sound research and decision procedures at each
stage of the new-product-development process.
The new-product-development process consists of eight stage. idea generation, idea
screening, concept development and testing, marketing strategy development, business
analysis, product development, market testing, and commercialisation, The purpose of each
stage is to decide whether the idea should be further developed or dropped.
The company wants to minimise the chances that poor ideas will move forward and good
ideas will be rejected. With regard to next products, consumers respond at different rates,
depending on the consumer’s characteristics and the products characteristics. Manufacturers
try to bring their new products to the attention of potential early adopters, particularly those
with opinion-leader characteristics.
Table 3-8: Stages and costs of new product development
Stage
Number of
Pass ratio
Cost per product Total costs
ideas
idea
Idea screening
64
1:4
1000
64000
Concept test
16
1:2
20000
320000
Product
8
1:2
200000
1600000
development
Test marketing
4
1:2
500000
2000000
National launch
2
1:2
5000000
10000000
Idea screening criteria:
- business analysis: sales estimation, costs – profit estimation
- drop - go ahead
- objectives: profit or sales
- know-how
- resources
- philosophy
Concept development – testing:
- physical characteristics
- position in the market
- concept testing
Product development:
- prototype
- functional tests
- consumer tests
Market testing:
- brand name, packaging
- consumer reaction to
 buying
 using
 repurchasing
74
- effectivity of promotional campaign
- size of the market
National launch:
- size, structure, behaviour
- positioning, sales, market share
- profit goal for first year
- price, distribution
- marketing budget
- long-run sales
- long term marketing mix
Commercialisation:
- yes or not
- manufacturing facilities
- marketing introduction
- costs
- when
- where
- to whom
- how
Scheme 3-20: Shop selection criteria
Scheme 3-21: Approach of customers to new product
Money
0
Students Unemployed
Time 0

Employed Retired

2,5; 13,5; 34
34
Early Majority
16;
Late Majority
Laggards
Early Adopters
Innovators
Table 3-9: Hierarchy of Attribute Importance across Product Categories
Importanc Preserves Bakery
Cereals
Dairy
Soups
Toiletries
e
1
Brand
2
Brand
Health
Health
Health
Variety
Brand
Quality
Brand
Price
3
Price
4
Variety
Size
5
Freshness Price
Brand
Size
Price
Variety
Variety
Brand
Quality
Price
Quality
Price
Health
Size
Variety
Fresh
meat
Quality
Presentati
on
Variety
Brand
Price
Variety
Product development should ensure satisfaction of needs. Experts know mature products on
mature markets much better than consumers. Therefore, experts are required to develop
products usually – remember examples of Guideline + or Dexters from a lecture.
75
Decisions about product
A new product can be selected from review of length, broadness, and deepness of lines by
seeking new segment where product fits into consistency gap and it is possible to sell for
higher price.
Table 3-10: Measuring product line
Deepness (sum of
items in one column)
Milk
1,5%
3,5%
Acidofil
Broadness (sum of columns)
Butter
Cheese
II. quality
boiled
I. quality
Chimozin based
With plant oil
Fungi based
Length (total sum of items)
There are four ways to increase the business:
- widening product mix – add new product lines
- lengthen product lines – full line company
- deepen product mix – add more product variations
- pursue more or less line consistency
Remember example of jogurt for clerical staff.
a.
-
Product length decisions:
target: Profit increase if line length is too short (add items) or too long (drop items)
length depend on company objectives (full line), not always on profit
longer lines support growth of market share contrary to shortening lines, which contribute
to higher profitability
b. Product line modernisation decisions:
- piecemeal approach
- fast change approach
c.
-
Product attribute decisions:
quality level (low, average, high, superior) depend on target market
product feature (differentiation)
product style (design) adds distinctiveness
d. Brand decisions:
- Why the branding since it involves costs (brand name, brand mark, trade mark, copy right,
generic products) of packaging, labelling, legal protection, risk? Because of:
 easier for sale
 legal protection
 attracts loyal / profitable set of customers
 helps market segmentation
 builds corporate image (size, quality of company)
- Brand sponsor decision helping to win in a battle of brands:
 brand owned by manufacturer
 licensed brand name (Dior)
 private brand (middleman)
Supermarket chains are typical examples of private label. Once they produce their own
product, they can build their own label on it.
76
Scheme 3-22: Own-label percentage of total grocery value 1991
UK
30
Germany
23
Switzerland
23
France
20
Sweden
20
Belgium
18
Denmark
18
Netherlands
18
Austria
11
Spain
7
Italy
7
Norway
3
Portugal
1
Scheme 3-23: Percentage of sales, 1988 (More own-label means more profits)
Profitability of private label, %
12
Sainsbury
Asda
10
Marks + Spencer
Gateway
8
Tesco
6
Carrefour
4
Euromarche
2
Penetration of private label, %
20
40
60
80
100
77
Scheme 3-24: Average percentage of advertising investment and private label penetration
1987-90
Advertising investment
% total market value
Private label penetration
% market value
Cereals
10
Cleaners
8
Coffee
11
8
Jam
7
Low-fat spread
5
Soft drinks
5
Tea
5
Yogurt
2
Cider
0.7
Wine
0.5
13
47
6
20
26
39
1.9
Fish




15
36
26
61
Family brand decision:
Individual brand names (Tide, Bold, Dash, Dreft) and its advantages:
Product acceptance / reputation
Production of lower quality product without diluting brand name (Seiko – Pulsar)
Blanket family name (Mona, Heinz, Philips) and its advantages:
less introduction costs
good name = strong sales
Separate family names ( Sears: appliances, clothing, home installations)
Company brand names – individual product names (Kellogg’s)
Brand name qualities:
- suggesting product benefits
- suggesting product qualities
- easy to pronounce, recognise, remember
- distinctive
Packaging – labelling decisions:
78
Role of packaging is more or less important depending on product:
- protection and
- marketing function (5th P)
Packaging = The activities of designing – producing the container or wrapper for product
Packaging as marketing tool. Why?
- self service shops
- consumer affluence
- company brand image
- innovation opportunities
Packaging decisions:
1. Packaging concept (function):
– Protectional aspects
 climatic conditions
 handling
 time in distribution chain
 consumer usage rate
– Visibility – promotional aspects:
 size
 costs
 local preferences
 legal requirements
 recognition
 literacy
– Novel dispensing - packaging design:
 size
 shape
 materials
 colour
 brand mark
 text
2. Labelling:
Function:
- identification of product / brand
- description of product
- promotion of product
Requirements:
- government regulations
- language
Shape:
- simple tag
- elaborated graphical design
- brand name / information
Design development tests:
- engineering
- visual
- customs tests
79
Table 3-11: New product Failures: Reasons and Safeguards
Failure Reason
Elaboration
Suggested Safeguard
1. Market too
Insufficient demand for this Market is defined and rough potential
small
type of product
estimated in the opportunity identification
and concept test phase
2. Poor match for Company capabilities do
Opportunities are matched to company’s
company
not match product
capabilities and strategic plans before
requirements
development is begun
3. Not new/not
A poor idea that really
Creative and systematic idea generation.
different
offers nothing new
Also, early consumer check to see how idea
is perceived
4. No real benefit Product doesn’t offer better In the design stage, perceived benefits of
performance
concepts as well as benefits from actual
product use are tested
5. Poor
Perceived attributes of the Use of perceptual mapping and preference
positioning /
product are not unique or
analysis to create well positioned products
understanding of superior
consumer needs
6. Inadequate
Products fail to generate
Assessment of trade response in pre-test –
support from
expected channel support
market phase
channel
7. Forecasting
Overestimation of sales
Use of systematic methods in design, preerror
test and test phase to forecast consumer
acceptance
8. Competitive
Quick and effective
Good design and strong positioning to preresponse
copying by competitors
empt competition. Quick diagnosis of, and
response to, competitive moves
9. Change in
Substantial shift in
Frequent monitoring of consumers’
consumer’s tastes consumer preference before perceptions and preferences, during
product is successful
development and after introduction
10. Changes in
Drastic change in key
Incorporation of environmental factors in
environmental
environmental factor
opportunity analysis and design phases.
constraints
Adaptive control
11. Insufficient
Poor profit and high costs Careful selection of markets, forecasting of
return on
sales and costs, and market-response
investment
analysis to maximise profits
12. Organisational Intra-organisational
Multifunctional approach to new product
problems
conflicts and poor
development to facilitate intramanagement practices
organisational communication.
Recommendations for a sound and informal
organisational design
80
3.4 Implementation of marketing plans in terms of organi sational
structures, market operations, as well as monitoring and
control
Marketing control is the natural sequel to marketing planning, organisation, and
implementation. Companies need to carry out four types of marketing control.
Annual-plan control consists of monitoring the current marketing effort and results to
make sure that the annual sales and profit goals will be achieved. The main tools are
sales analysis, market-share analysis, marketing expense-to sales analysis, financial
analysis, and customer-attitude tracking. If under-performance is detected, the
company can implement several corrective measures, including cutting production,
changing prices, increasing sales-force pressure, and cutting fringe expenditures.
Profitability control calls for determining the actual profitability of the firm’s
products, territories, market segments, and trade channels.
Marketing-profitability analysis reveals the weaker marketing entities, although it
does not indicate whether the weaker units should be bolstered or phased out.
Efficiency control is the task of increasing the efficiency of such marketing activities
as personal selling, advertising, sales promotion, and distribution. Managers must
watch certain key ratios that indicate how efficiently these functions are being
performed and must also introduce resources to improve performance.
Strategic control is the task of making sure that the company’s marketing objectives,
strategies, and systems are optimally adapted to the current and forecasted marketing
environment.
One tool, known as the marketing-effectiveness rating instrument, profiles a
company’s or a division’s overall marketing effectiveness in terms of customer
philosophy, marketing organisation, marketing information, strategic planning, and
operational efficiency., Another tool, known as the marketing audit, is a
comprehensive, systematic, independent, and periodic examination of the
organisation’s marketing environment, objectives strategies, and activities. The
purpose of the marketing audit is to determine marketing problem areas and
recommend a corrective short-run and long-run action plan to improve the
organisation’s overall marketing effectiveness.
A growing number of companies have established marketing controller positions to
monitor marketing expenditures and develop improved financial analyses of the
impact of these expenditures.
81
Scheme 3-25: Terms, biases, contradictions and new methods
Marketing variables: research and project development
Philosophy,
consumer, future
demand
Research:
- Terminology ,
classification
- work with experts in
different processes,
situations on markets
Marketing strategies:
PTS (speed), NPD
(innovativeness), PLC
(life), CLFN
(competition), global
Marketing mix,
programs
New
independent
marketer
presentation
Actual activity and demand of
contradictory business concepts
Project topic for group:
- new product
- target segment
1st stage preliminary
research assignment:
- Turnover, market
share
- experts
2nd A,B stage research design:
- sales
- supply
- secondary
- primary
- questionnaire
- observation
3rd stage: Field work,
order, of:
- tabulation
- confirmation
- discovery
Organisations:
- Suppliers (marketing
management)
- retailers and
wholesalers (trade
marketing)
Strategic planning models:
- Segmentation, targeting,
positioning
- functional strengths
- technological superiority
- corporate governance
 market
 corporate
 company
- product organisation
Implementation and control
New market entry
program
4th stage: Commercialisation: low costs, differentiation, focusing, new plan (own,
private?) or marketing research, below and above the link services, brand, agent?
management?
82
Table 3-12: Preparation of accounts and the control process in 5th stage
Sorted order Facts form STP:
of
- intentions and
marketing
motives
strategies
- perceptions and
proactivity
… no. PTS
Outsourced
deliveries ensuring
function of
marketing mix and
(actions) programs
… no. NPD
Name:
Assignment:
Name:
Assignment:
Name:
Assignment:
Name:
Assignment:
… no. PLC
… no. of
competitive
… no. of
global
Name:
Assignment:
Table 3-13: Project management process
Goal setting
Performance
measurement
What do we want to
What is happening
achieve?
Own added value to
the process of
strategy assessment
and
commercialisation
Implementation of
improvement
plans?
Sorted order of
company
strategies
… no. Low
costs
… no.
Differentiation
Marketing data
delivery?
Performance
diagnosis
Why it is happening
… no.
Focusing
Corrective actions
What should we do
about it?
Services: In/External Consistency of Modules
1. Front service – servicing the customer/inhabitant


Focus on recruiting and education of staff/middlemen
Criteria assessment: request fulfilment time, safety, sanitary conditions, helpfulness,
recognition of loyalty, share of segment, mystery shopper rating
2. Contact with the back offices


Project plan is necessary to split the main task
Criteria assessment: functionality, quality, price, time, dealer profitability vs. potential,
dealer satisfaction survey
3. Entrepreneurial framework of the growth of the projected levels

Criteria assessment: environmental factors, channel member specific factors, channel
leader power base, power dependence, power over channel issues and decisions,
members’ desire to influence, leadership of the exercise of power, tolerance to power
exercising
83
4. Superstructure co-ordination

Criteria assessment: Financial (ROI = Accounts receivable – operating expenses),
customer (satisfaction), internal business process: (rework), learning and growth
(employees morale, suggestions)
5. Criteria of Cohesion
Criteria assessment: coercive threads / terms of trade / motivators / customer ‘very satisfied’
survey, market share, new customer acquisition, customer retention
The modern marketing department evolved through several stages
It started as a sales department, and later this department took on ancillary functions, such as
advertising and marketing research. As the ancillary functions grew in importance, many
companies created a separate marketing department to manage these other marketing
activities. But the heads of sales and marketing often disagreed, and eventually the two
departments were merged into a modern marketing department headed by a marketing vicepresident. A modern marketing department, however, does not automatically create a
modern marketing company unless the other officers accept and practice a customer
orientation.
Modern marketing departments are organised in a number of ways. The most common form
is the functional marketing organisation in which marketing functions are headed by
separate managers reporting to the marketing vice-president. Another form is the product
with functional specialists to develop and achieve their plans. Another form is the market
management organisation in which major markets are assigned to market managers, who
work with functional specialists to develop and achieve their plans. Some large companies
use a product management and market management organisation.
Finally, multidivisional companies usually operate a corporate marketing department and
divisional marketing departments, with some variations as to the division of tasks.
Marketing must work smoothly with the other functions in a company. In its pursuit of
customers` interests, marketing may come into conflict with R&D., engineering, purchasing,
manufacturing, inventory, finance, accounting, credit, and other functions. These conflicts
can be reduced when the company president commits the company to a customer orientation
and when the marketing vice-president learns to work effectively with the other officers.
Acquiring a modern marketing orientation requires presidential support, a marketing task
force, outside marketing consulting help, a corporate marketing department, in-house
marketing seminars, marketing talent hired from the outside and promoted inside and a
market-oriented marketing-planning system.
Those responsible for the marketing function must not only develop effective marketing plans
but also implement them successfully. Marketing implementation is the process of turning
plans into action assignments describing who does what, when and how. Effective
implementation requires skills in allocating monitoring, organising, and interacting at the
level of marketing functions, programs, and policies.
84
Scheme 3-26: Service organisation
Organization models
SEKCTOR DIVIDED
TASK DIVIDED
SECTOR
SECTOR
SECTORS
SECTOR
FRONT
BACK LAND
INTEGRATED
FRONT
BAKLAND
DECENTRALIZED
1
GROUPS OF
SPECIALISTS
SECTORS
2
3
BACK LAND
FRONT
BACK LAND
FRONT
Table 3-14: Forms of control, purpose, responsibility and indices
Type of
Prime
Purpose of Control
Control
Responsibility
To examine whether the
I. Annual-plan Top management
Middle management planned results are being
control
achieved
II. Profitability Marketing controller
control
III. Efficiency
control
Line and staff
management
Marketing controller
IV. Strategic
control
Top management
Marketing auditor
Approaches
Sales analysis
Market-share analysis
Sales-to-expense ratios
Financial analysis
Attitude tracking
To examine where the
Profitability by: product,
company is making and territory, customer,
losing money
group, trade channel,
order size
To evaluate and improve Efficiency of: sales
the spending efficiency
force, advertising, sales
and impact of marketing promotion, distribution
expenditures
To examine whether the Marketing-effectiveness
company is pursuing its rating instrument
best opportunities with
Marketing audit
respect to markets,
products and channels
Other control criteria follow:
Profitability control:
1. Methodology
2. Best corrective action
3. Direct versus full costing
85
Efficiency control:
1. Sales-force
2. Advertising
3. Sales promotion
4. distribution
Strategic control:
1. Marketing effectiveness rating review
2. The marketing audit:
- environment
- strategy
- organisation
- systems
- productivity
- function
Table 3-15: Life cycle of value development
Choose the Value
Provide the Value
Communicate the
Value
Customer Market Value Product Servic Pricing Sourc Distrib Sales Sales Adver
segmentati selectio positi develop e
makin ing
uting force prom tising
on value
n/ focus oning ment
develo g
servici
otion
needs
pment
ng
A growing number of companies has established marketing controller position to monitor
expenditures and develop improved financial analyses of the impact of these expenditures
3.5 Control
Adapt marketing mix for different strategies: PTS, NPD, PLC, CLFN, global
When and why the substitution of price and promotional incentives would be better?
Explain connection between features of both selected target segment and marketing programs
(actions)!
Design a copy strategy!
Distinguish between potential and competitive advantage of your product
Write an article for journal about your product after prior consultation with journalist!
3.3 Control of skills:
Class Participation
TASK
You are working with the sales department of a
 meat processing plant
 dairy plant
 a fruit and vegetables trading company.
Mr. X is a purchase manager for company delivering on international markets and he has
made it known that he wants to buy:
 20 t of meat
 10 t of cheese
 20 t fruit
86
Your organisation is quite eager to do business and is in position to supply the quantities
wanted. However Mr. X also wants a statement that you can deliver at a certain quality level
according to food laws of country Y. Admittedly until now you have mainly dealt with the
local market. Still you think a deal could be interesting.
Questions:
1. What are present procedures concerning quality in your production chain?
2. What could you guarantee concerning quality to Mr. X now and in the future?
3. Do you think this would satisfy Mr. X?
Project: Develop a marketing mix strategy for a product or service of your choice.
87
4. International Marketing and Marketing Organisation
Part four repeats all previously mentioned while implementing it on foreign market.
Study Aim:
 to provide student with an understanding of International Markets
 to facilitate student evaluation of international markets in relation to market size, potential
and marketing environment
Process Objectives
1. Development of student capacity to identify, evaluate, select and access potential
international markets
2. To increase student awareness of potential legislative, political and economical issues that
influence international market development (http://www.oecd.org)
3. Gain an understanding of the ‘Global Market’ and the ‘Global Organisation’ in relation to
an International Marketing Strategy
Definition of international marketing
Although "international marketing" is a common enough expression among marketers,
there is no generally accepted formal definition. It is perhaps best regarded as a
shorthand expression for the special international aspects of marketing. An appropriate
formal definition of international marketing however, might be: the marketing of
goods and services across national frontiers, and the marketing operations of an
organisation that sells and/or produces within a given country when: that organisation
is part of, or associated with, an enterprise which also operates in other countries: and
there is some degree of influence on or control of that organisation’s marketing
activities from outside the country in which it sells and/or produces.
It is in this sense that the expression, “international marketing”, is i.e. covering the
whole gamut of international marketing operations, from indirect export on the one
hand to the marketing operations of multinational companies on the other.
4.1 Development of student capacity to identify, evaluate, select
and access potential international markets
Student should understand that his/her project can either ask for commitment or use a
command customer. It depends on whether a global openness is used to suppress competitors
or environmental changes are proposed to gain supporters.
Proactive and reactive motives for market identification
It is difficult to forecast what will happen on foreign markets. Therefore, it is best to inspect
internal motives and seek to determine whether they are proactive or reactive. It is
recommended to develop the capability to be proactive. There is no point in determining a
course of action concerning a problem after the problem has been solved or no longer exists.
88
Table 4-1: Major motives for starting export
Proactive motives
Profit and growth goals
Managerial urge
Technology competence/unique product
Foreign market opportunities/market information
Economies of scale
Tax benefits
Reactive motives
Competitive pressure
Domestic market: small and saturated
Overproduction/excess capacity
Unconsolidated foreign orders
Extended sales of seasonal products
Proximity of international
customers/psychological distance
Albaum, 1994, p. 31
Knowing motives, it is essential to use them. Practically, it means to choose the simplest start
for the design of the future entry program. The best is to combine targeted geographical
markets with commitment to internationalise and internal strengthen the global company.
Scheme 4-1: Importance of strategies over environmental impulses in globalisation period
Proactive
motives
Global organisation: Identify, evaluate, select
international marketing strategy for global markets
Efficiency
Command
customer
Reactivity to
environmental
changes
Commitment to a
strategy of
internationalisation,
diversification in
supply chain
Perceptions and proactivity
to environmental changes
Problem to
produce
Problem to sell
and become
global
Global
organisations
Moving proactivity curve up (Scheme 4-1) the command customer gets over environmental
problems using skills of both proactive marketers and opportunities of global market place.
Evaluation criteria and trends enhancing capacity to handle a change of sales
subjects, objects, markets, organisation, and finance
The major International marketing decisions: When a company
contemplates marketing abroad, or expanding existing international
marketing activity, management faces five major decisions:
89
-
The international marketing decision, i.e. the initial and fundamental decision on
whether or not to market (or expand) abroad
The market selection decision, i.e. determination of which market(s) to enter
The market entry decision, i.e. determination of the most appropriate methods of
entry into those markets, e.g. exporting, licensing, manufacture abroad
The marketing mix decision, i.e. planning and implementing a marketing mix
appropriate to the market environment.
The organisation decision, i.e. determining the appropriate organisation structures
Trends should be evaluated before the evaluation of markets and criteria of processes.
Scheme 4-2: Incremental change (a) and strategic drift
(a)
Amount of change
Amount of change
Time
(b)
Time
Environmental
change
Strategic change
Table 4-2: Internationalisation of the firm: an incremental approach
Mode of
No regular
Independent
Foreign direct investment
operation /
(sporadic) export representatives
Foreign sales
Foreign
Market (Country)
(export modes)
subsidiary
production and
sales subsidiary
Market A
Increasing
Increasing market commitment
Market B
geographic
Market C
diversification
Market D
Increasing internationalisation
…….
Market N
Internal strengths must be made irreversible. The best way how to do it is to code it into the
organisational structure. But first, the ordered list or scheme of important factors for design of
the new structure must be made.
Scheme 4-3: Dimensions of internationalisation
90
Foreign operation methods – How: Agents, subsidiaries,
licencing, franchising, management contracts
Markets – Where:
Political /cultural/
physical distance
differences
Sales objects – What:
Goods, services,
know-how, systems
Organisational
capacity
Organisational
structure, export
department, international
division
Finance
Personnel International skills, and
experience; training
Knowing main strengths and having them built into structure, the next step is to find an
initiator and the cultural patterns in the target region of foreign market. It usually makes no
sense to target a whole foreign market in the initial period because local competitors can
discover and copy above mentioned strengths of the entering global company:
commercialisation methods, sales objects, in/direct stimuli, organisation and personnel.
Problem to select an international market
There are several approaches to solving the problem of an international market entry:
a. Overcoming the legal protection of domestic competitors
b. Internationalisation pattern of the firm as a sum of target country patterns
91
Table 4-3: An example of an international marketing budget for a manufacturer exporting
consumer goods
International
Europe
AmeAsia/Pacific
Other
Total
Marketing budget
rica
Year: ____
B – Budget
UK
Germa France USA
Japan
Korea markets World
figures
ny
A - actual
B A B A B A B A B A B A B A B A
Net sales (gross
sales less trade
discounts,
allowances etc.)
/ Variable costs
= Contribution 1
/ Marketing
Costs:
Sales costs
(salaries,
commissions for
agents, incentives,
travelling,
training,
conferences)
Consumer
marketing costs:
(TV commercials,
print, radio, sales
promotion)
Trade marketing
costs (fairs,
exhibitions, instore promotions,
contributions for
retailer
campaigns)
= Total
contribution 2
(marketing
contribution)
On a short term (one-year) basis, the export managers or country managers are responsible for
maximising the actual figures for each country and minimising their deviation from budget
figures. The international marketing manager /director is responsible for maximising the
actual figure for the total world and minimising its deviation from the budget figure. Cooperation is required between country managers and international marketing manager /
director to co-ordinate and allocate the total marketing resources in an optimum way.
Sometimes certain inventory costs and product development costs may be also included in the
total marketing budget.
92
a.
-
Level of commitment to foreign operations:
low (e.g. export via agent)
middle (e.g. sharing distribution channels with partners)
high (e.g. foreign investment)
b. Forecasting and exploitation of environmental changes
Extreme examples for evaluation of market size for:
- automatic washers
U.K. ………………………. 25%
Italy ………………………. 67%
- freezers
France …..………………… 13%
Germany ………………….. 31%
- vacuum cleaners
Italy ……………………….. 29%
The Netherlands …………… 99%
- dish washers
U.K. ………………………. 4%
Italy ……………………….. 10%
Time
Scheme 4-4: Entry order to target markets
A
B
Market 1
C
A
Market 2
B
Market 3
B
A
B
C
Market n
It is important to start on the biggest and simplest accessible markets with one (A) entry
program. Getting stronger the next entry program of the company for remaining markets can
be designed (B).
Initiators have key importance for success of foreign market penetration. There are different
schools to evaluate the environment and initiator’s role in it. They can be based on different
theories: theory of organisations, transaction economics theory, and power fields analysis in
networks.
93
Knowing main initiators it is necessary to use proper methods to get the foreign market.
Scheme 4-5: Responsibility, place and goals of research
Number of markets under consideration
Consider market accessibility (desk research in home country)
Consider profitability (desk research at home)
Consider market size (desk research at
home)
Steps in
reverse order
optionally
Desk research abroad
Field (omnibus) survey
abroad
Initial field research
abroad
Main field
research
Marketing
plan
Market
entry
94
Scheme 4-6: Getting support from suppliers of marketing research
KIPLINGS QUESTION BATTERY










WHAT
WHY
WHERE
WHY
WHEN
WHY
HOW
WHY
WHO
WHY










are we doing and
is it done
is the task carried out and
there
do we solve the task and
do we do it at this time
do we solve the task an
do we do it in this way
is responsible for the task and
this person/group/department
Table 4-4: Matrix relating cultural variables to marketing functions
Cultural
variables
Marketing functions
Product
Price
Promotion
Distribution
Research
Material
culture
Language
Aesthetics
Education
Religion
Political
attitudes and
values
Social
organisation
Expectations
of products in
selected shop
Question:
You are going to sell confectionery in the form of sweets and chocolates. You find market for
them in the main West African markets. What factors would you take into account when repackaging them for these markets?
95
Factors encouraging adaptation:
- consumer tastes, especially in foodstuffs
- purchasing power
- level of technical skills
- maintenance standards
- local labour costs
- different conditions of using products
Delivery design: Buyer / Seller Relationships
Delivery design depends on the knowledge of its specifics and implementation of lists of
process items.
There are alternative approaches and new trends in marketing channel design:
- Proactivity (fair price system, multilevel marketing),
- Programming (franchising, VMS, HMS),
- Conventional distribution (perfect competition and marketing mix)
Buyer / Seller Relationships are essential for each of these three options
Buyer / Seller Relationships
- Industry
- -Concentration and size distribution of firms
- - Intensity and nature of competition
- -- Price VS. non price competition
- - Traditions and Norms
- -- UK VS. NL Lamb
-
Company
- Relative size of buyer/supplier
- Relative familiarity
- Familiarity of supplier cost structures
- Organisational structure
-- Centralised VS. Decentralised
-- Buyer
Individual
- Preferred interaction style
- Relative familiarity
- Preferred importance of transaction
- Risk aversion
Dealing with Co-operative Buyers
- High degree of loyalty expected by buyer
-- Price – fair
-- Service levels
-- Quality
-- Innovation and development
- Supplier achieves cost reductions through streamlining made possible by co-operation
-- High degree of personal contact/relationship building
--- Difficulty in retailing due to personnel movement
96
-
--- Identify key persuaders
- Loyalty – significant barrier to entry without U.S.P.
Dealing with Command Buyers
- Low marketing costs – resources satisfying buyer’s needs
- Efficiency and flexibility in production
- Meet buyer’s whims and fancies
Key Factors Determining Buyer/Seller Relationship
-
Interaction strategies influence interaction mechanisms
- Appropriateness of interaction strategies under various trading conditions
Types of interaction strategies
- Competitive - independent actors both playing the market
- Co-operative - interdependent actors
- Command – skewed balance of power
Key variables affecting strategy choice
- Product characteristics
- Buyer characteristics
- Seller characteristics
Product
- Frequency of purchase
-- Greater frequency = greater interdependence = command/co-operative
--- J.I.T. delivery
- Switching costs
-- Costs associated with changing suppliers
--- Site visits / due diligence / interruption of supply
--Human capital specific investments
--- Modus operandi
- Product complexity
-- Manufacturing complexity
-- Specification complexity (R+D, Trial periods)
-- Functional complexity
-- Application complexity
-- Commercial complexity
Some manufacturers sell and deliver their products direct to the user, e.g. many industrial
goods manufacturers. Many companies, however, sell through middlemen, who perform a
variety of functions connected with the marketing of the product. Such companies seek to link
together the set of marketing intermediaries most appropriate to their profit and other
objectives. Such a set of marketing intermediaries is known as the marketing channel or the
channel of distribution. The most obvious example of such a channel is the producerwholesaler- retailer distribution system adopted for many consumer goods.
97
Scheme 4-7: Alternatives of distribution policy for export and international or global
marketing
Domestic
production
Indirect
export
Export houses
Direct
export
International
trading
companies
Marketing
subsidiary
Branch office
Distributor
Buying offices
of local
customers
Agent
International
trading
companies
Co-operative
exporting
Border of domestic
country
Sales direct to
customers
Border of foreign
country
Export houses
The Directory of British Export Houses defines an export house as
"any company or firm, not being a manufacturer, whose main activity
is the handling or financing of British export trade and/or
international trade not connected with the U.K.". There are from 700
to 800 export houses in the U.K., and between them they handle
perhaps 20 per cent of Britain's export trade.
The operations of these export houses are difficult to define in view of the flexibility which is
their most marked characteristic.
98
Table 4-5: Matrix for comparing alternative methods of market entry
Evaluation criteria Indirect Direct Marketing Local
Licen- Joint
Owned
export
export subsidiary assembly sing
venture operation
No. of markets
Market penetration
International
market learning
Control
Marketing costs
Profits
Investments
Administration
Foreign problems
Flexibility
Risk
4.2 Potential legislati ve, political and economical issues that
influence interna tional market development
Market Potential
Scheme 4-8: Levels of market demand
Total population = 100 %
Market potential 10 % =100 %
Available market 40 %
Qualified available market 20 %
Served market 10 %
Penetrated market 5 %
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Company Quality Issues
Scheme 4-9: HETEROGENEOUS PRODUCTS = UNIQUENESS
PERCEIVED BY CUSTOMER
Consumer Market:
Convenience Shopping
Speciality Goods
high uniqueness
Industrial Market:
Routine
No
Low
Leverage
Bottle neck
High
Yes
Low
Low cost strategy
Differentiation strategy
Strategic Products
high uniqueness
bottle neck for customer
High financial leverage
Low quality perception
High quality perception
Triangles below show points of an offer design. Squares and rectangulars are showing
different posts of suppliers and customers.
Scheme 4-10: CUSTOMER ORDER DECOUPLING POINT
SUPPLIER
CUSTOMER
Early entrance - Early exit:
make to order
time
Early entrance - Late exit:
moving from
Late entrance - Late exit:
make to stock
to
time
time
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Scheme 4-11: TECHNOLOGY STRATEGY
FLOW SHOP:
A
B
C
D
PRODUCT 1
C
B
A
D
PRODUCT 2
A
C
D
PRODUCT 3
Consequent relations are efficient, fast, but
inflexible
JOB SHOP:
A
A
A
Job shop supplying half made products and
components is not very efficient neither fast
but very flexible.
B
B
B
GROUP TECHNOLOGY:
A
B
A
C
D
C
C
C
B
D
D
D
D
Group technologies combines advantages and
disadvantages of previous two systems
Table 4-6: Priority for either efficiency or other strategies
Variable
Environmental facts
Efficiency importance
high
low
High price
heterogeneous product
x
homogenous product
x
Competitors
few
x
many
x
Demand
high
x
low
x
International Trade Policy and Legal Issues
International trade provides attractive opportunities for sales increase by incorporating
marketing issues, but it also carries a number of risks. Some of the most serious problems
include fluctuation in exchange rates, foreign trade regulations, unstable foreign government,
and piracy of trade secrets by outsiders.
Trade barriers: Economists all agree that trade among countries increases wealth. However,
politicians have found that regulations that protect domestic industries from outside
competition are popular with people.
 Tariffs and quotas: There are basically two types of restrictions that countries use to keep
unwanted products out and protect domestically produced goods.
 One of them is a tariff or tax on imports which are expressed as a percentage (from
nuisance 2 % to prohibitory 50%) of the value of the goods and is added to selling prices.
 The second one is quota as an absolute limit on the number of certain items that can be
imported.
 Another class of export restriction is the non-tariff barrier. These often take the form of
technical specifications or inspection procedures that make it difficult or impossible to
move goods across borders.
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The period of general loosening of trade restrictions in the world economy in past 60 years,
because of GATT/WTO activities, is actively opposed now not only by governments but even
by world-wide network of NGOs. The important issue is ecology.
Currency exchange problems: the possibility for serious exchange losses is so high that some
small firms avoid foreign trade altogether. More experienced companies have learned to
hedge their financial positions in the futures markets to reduce currency exchange problems.
Companies can avoid the sales effects of currency fluctuations by building plants in major
foreign markets. An even more serious problem occurs when trading with country whose
currency is not readily convertible. One solution is to accept payments only in hard currency.
However, some countries have limits on the amount of these currencies. Some companies use
convertible points which have stable rates for different currencies. You have to be imaginative
in the way you arrange for payment.
Unstable governments: Some governments change frequently. New governments often
modify the rules that determine how business is conducted. The most extreme action is
nationalisation. Restrictions on the transfer of currencies and revisions on tariffs and quotas is
the other case.
Several countries have formed economic communities such as EU, Nafta, and Cefta for
example. Unions can take form of a customs union, which is free trade area (no tariffs facing
the members), that imposes a uniform tariff for trade with non-member nations. The next
form is an economic union in which all members would operate under the same trade policies.
Economic environment: Three characteristics reflect a foreign country’s attractiveness as an
export market. The first is the size of the country’s population. The second is the country’s
industrial structure (subsistence, raw material exporting, industrialising). The third economic
characteristic is the country’s income distribution: (1) very low incomes, (2) mostly low
incomes, (3) very low and very high incomes, (4) low, medium and high incomes, and (5)
mostly medium incomes.
Cultural factors: Foreign customers often operate on different concepts of time, space, and
etiquette. Thus before you create a marketing plan for international market, you need to find
out how these customers think about and use your product.
Factors encouraging standardisation:
- Economy of scale
- Development costs
- Stock costs
- Components
- Technological content
- Consumer mobility
- Market homogeneity
- Home country image
Incorporation of New entrants into Strategies for Development of International
Markets
Entering new markets means to get them from competitors. Being in the position of a global
company the situation should be easier. Global companies are usually stronger than states in a
penetrated sector. But small and medium (SME) entrepreneurs are becoming a new factor.
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Therefore, the intended strategy of global company must be deliberated to use emergent
strategies of SMEs’ and gain realised strategy with synergy effect for both sides. And
contrary. It is better to give up intended strategy if synergy effect will not happen.
Scheme 4-12: Global synergy gained by opening entrepreneurial space
Deliberate
strategy
Intended
strategy
Unrealised
strategy
Realised
strategy
Emergent strategies
Source: Mintzberg, 1987
Therefore, intended strategy of global company has to include the following steps:
- select target foreign markets
- decide whether to enter or not
- prepare entry program
- implement entry program
- maximise potential of newly occupied market
Intended strategy of global company is not far from nicher’s strategy. The only difference is
that nicher has no choice. Therefore, a global company has to forecast future gains and enter
only these markets where it can overcome the speed of environmental change by the one
gained from its strategy.
4.3 Understandi ng to the ‘Gl obal Market’ and the ‘Global
Organisation’ in relation to an International Marketing Strategy
Adding Value in Each Step of Internationalisation
Scheme 4-13: Process of entering international markets
Deciding
whether to go
abroad
Deciding
which markets
to enter
Deciding
how to enter
the market
Deciding on
the marketing
program
Deciding on
the
marketing
organisation
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Steps to exporting: Step1 - Preparations:
(1) First considerations
 Why do you want to export?
 Do your employees agree with you?
 Is export meeting company’s objectives and strategy?
 Policy decision: Go/Don’t go).
(2) Export Project Group
 Appointment of employees - project manager, marketing sales officer, production staff
 Assignment: Is the company export oriented and what marketing opportunities in export
countries are profitable?
 Export audit: S/W in relation to export
 Export project group report
Step 2 - Research:
(1) export product (line)
 new assignment for EPG (export project group) - Feasibility study of export activities for
the company
 Analyse company’s product mix - advantages, capacity to produce, extra costs
 Select potential products
(2) export countries
 analyse export countries - political risk, financial risk, GNP, number of population
 opportunities and threats - strength of competitors, import duties, product requirements
(3) product/market combinations
 select most promising countries
 market research - segmentation/geographical areas, situation of competitors
 output - possible product/market combinations and profitability
(4) profitability - decision: Go/Don’t go
(5) discharge Export Project Group
Step 3 - Entry strategy:
(1) Appoint Export Project Manager
(2) Direct or indirect entry strategy
 Advantages of direct strategy:
 direct contacts with customers
 independence
 profit is not shared
 Disadvantages
 higher risk
 more investments
 restricted knowledge
 Direct entry strategies
 business exhibitions/shows
 salesman
 sales office
 take-over
 Indirect entry strategies
 licence/franchise
 importer
 trading house
 joint venture
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(3) SWOT analysis
(4) proposal Go/Don’t go: Points of departure:
- reliable partner for your customer Yes or No?
- Combinations Yes or No?
- Bigger quantities per article Yes or No?
- Product assortment changes Yes or No?
- Sound financial situation Yes or No?
- Name / brand Yes or No?
- Short communication line Yes or No?
- Distribution Yes or No?
Step (4) - Export plan(ning)
- Assessment of international goals and capacities of the firm
- Analysis of foreign market
- Analysis of marketing research structure
- Development of distribution strategy and marketing mix strategies
Step (5) - Implementation and control
Scheme 4-14: Narrowing strategic world-wide options and expansion of plans
Company strategy (low cost, differentiation, focusing) and long term objectives derived
from segmentation, targeting, positioning, and marketing mix actions recorded in
databases
Market facts and
forecasts
Internal audit of current
marketing
Analysis of international market opportunities
Feasible international market
Narrowing
of strategic
world-wide
options
Expansion of
operational
marketing
plans
Financial assessment
Selection of marketing
strategy (STP, NPD, PLC,
CLFN, global)
Prime operational objectives
Major objectives for marketing mix assessment
Expanded plan: detailed programs, targets, and budgets
Implementation, measurement of progress, comparison with plan, and adjustment
105
Scheme 4-15: Model for development of core competencies
Stage 1: Analysis of situation
Identification of competence gaps: how is firm A’s competence in relation to market
(customers’) demands for a supplier?
Stage 2: Scenarios
How will market (customers’) demands for a supplier look in, e.g. 5 years’ time
Stage 3: Objectives
How does firm A want the competence profile to be in, e.g., 5 years?
Stage 4: Strategy and implementation
How should the objectives be reached?
Process Ordered Planning Decisions:
1. International marketing decision
a. Economic development
b. Technological development
c. Social and cultural influence
d. Political and legal decisions
e. Business practices and institutions.
Organisation of marketing department – reactions to conflicts between marketing and other
departments:
a. Sales
b. Sales with auxiliary marketing functions
c. Separate marketing department
d. Modern marketing department
e. Modern marketing company
c. Competitive activity
2. Market selection decision
3. Market entry decision (If it sells in Birmingham, it will sell in Chicago, Prague, Lyon, or
Duseldorf also)
4. Marketing mix decision:
a. Product
b. Distribution
c. Price
d. Promotion
5. Marketing organisation implements decision about export department through following
functions:
a. Promotional support
b. Direct selling
106
c.
d.
e.
f.
g.
h.
i.
j.
k.
Marketing service and sales service support
Pricing support
Inventory support
Product management support
Financial support
Technical support
Packaging support
Shipping support
Other support
Marketing project management - sales/finances/production
Table 4-7: Some key indicators of early performance
Early performance indicators
Market implications
Sudden drop in quantities demanded
Problem is marketing strategy or its implementation
Sharp decrease or increase in sales
Product gaining acceptance or being rejected
volume
quickly
Customer complaints
Product not debugged properly
A notable decrease in competitors’
Product gaining acceptance quickly or market
business
conditions deteriorating
Large volume of returned merchandise Problems in basic product design
Excessive requests for parts or reported Problems in basic product design, low standards
repairs
Sudden changes in fashion or styles
Product (or competitors’ product) causing a deep
impact on the consumers’ lifestyles
Source: Samli (1993)
Export audit of Secondary research
Organisation: objectives, management capabilities, employees
Production: capacity, flexibility
Finance: stock, debtors, liquidity, solvability, investments
Possible export countries: imports, import barriers
Marketing Mix: successful products, transport, price level, distribution, cultural differences
Determinants of foreign market pricing:
- Company goals
- Costs of manufacturing
- Transportation
- Marketing
- Demand
- Competition
- Government
- Taxes and tariffs
- Inflation
- Product line
- Distribution channels
- Marketing mix
107
Mandatory product adaptations:
- legal requirements
- tariffs
- nationalism
- technical
- taxation
- climate
Control system for processes of marketing programs design
A first step is to create a picture about control processes
Scheme 4-16: Marketing control processes
Decide on: (i) objectives, (ii) strategies, (iii) plans for implementation
Establish marketing performance standards: (i) product, (ii) distribution, (iii)
communications, (iv) pricing
Alter
standards
Locate responsibility
Evaluate performance against standards
Reward,
promote,
advise,
punish
Take corrective / supportive actions
Alter
objectives
The second step is control of the process items using proper criteria.
Measures of marketing performance:
Product:
Sales by market segments
New product introduction each year
Sales relative to potential
Sales growth rates
Market share
Contribution margin
Product defects
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Warranty expense
Percentage of total profits
Return on investment
Pricing:
Response time to price changes of competitors
Price relative to competitor
Price changes relative to sales volume
Discount structure relative to sales volume
Bid strategy relative to new contacts
Margin structure relative to marketing expenses
Margins relative to channel member performance
Distribution:
Sales, expenses and contribution margin by channel type
Percentage of stores carrying the product
Expense-to-sales ratio by channel, etc.
Order cycle performance by channel, etc.
Logistics costs by logistics activity by channel
Communication:
Advertising effectiveness by type of media (e.g. awareness levels)
Actual audience / target audience ratio
Cost per contact
Number of calls, enquiries, and information requests by type of media
Sales per sales call
Sales per territory relative to potential
Selling expenses to selling ratio
New accounts per time period
Lost accounts per time period (Jobber, 1995)
Project items for documentation in company
The process of implementation contains the following steps:
1. Sales analyses
2. Market share analyses
3. Marketing expense to sales analyses
4. Financial analyses
5. Marketing plans
6. Actions – marketing programs
7. Customer attitude tracking
8. Corrective actions
Marketing implementation is the process that turns marketing plans into action assignments
and ensures that such assignments are executed in a manner that accomplishes objectives
stated in plans. And it is used to control a process consistency.
Having all tools prepared, it is time to implement the plan.
109
A model of corporate briefing:
1. General scenario for the market
2. Management perceptions of opportunities and threads
3. Corporate mission
4. Focus on the competitive advantage of company
5. Strategic intentions of company, which are derived from analysis of business development
criteria, new products, new markets
6. Planning system outline
7. Parts to be played by different groups
Implementation of International Marketing Strategy into Marketing Strategy of
Company
Scheme 4-17: Adjustment of global marketing strategy
Feedforward
International
marketing strategy
Changes in marketing strategy
Early
symptoms
Marketing
impact
Revised
marketing
impact
Feedback
Kotler,P.: Marketing Management - see chapter 25: Organising and Implementing Marketing
Programs, and chapter 26: Evaluating and Controlling Marketing Performance
4.4 Method of Ass essment
Used methods and indices must be suitable for industrial marketing where professionals do
both buy and sell
Literature:
Jain, S.C.: International Marketing Management. Kent Publishing Co.
Kotrbová, H.: Mezinárodní marketing. VŠE Praha 1992.
Ollivier, A. Dayan, A. a Ourset, R.: International Marketing, 116 p.
110
5. Presentation of Marketing Plan for Selected Product or
Service
Aim
Marketing course capstone module to check student’s understanding of the marketing concept
and its implementation when presenting strategic guidelines of documentation for a new
product
Objectives
1. To provide student with an opportunity to express his/her understanding of marketing
2. To give student an opportunity to evaluate what alternative product may be suitable for
his/her organisation.
Course Format
Individual case presentation followed by a critical review
Course content
1. Project development workshops
2. Project presentation and critical review
Method of Assessment
Case study 40% of course mark
Final exam 40% of course mark
Recommended Reading
Cool cow and ISO 000 for written documentation
Sweets for PowerPoint presentations
Aperture for CRM backing
Final Exam Questions Proving Skills of Participant
1. How to reach any next state? (by appending value from new inputs to previous results and
next claims)
2. How to select a person willing to get job or business? (s/he has to see and explore needs of
individual clients and managerial functions and both must be evident in a project delivered
by the person)
3. What follows the preliminary research? (preliminary research is followed by investment
into confirmatory research and implementation processes guaranteed by creditor)
4. How to be successful as marketer? (assign analysis, evaluate and implement changes of
marketing mix)
5. How to become a successful manager froom the beginning? (select the place with efficient
control, for example, in the form of information systems, quality and performance norms,
technological processes)
6. How to remain successful? (use offers of project services, or information about new
inputs, or positive results of own experiments)
111
7. Where to seek (prognoses) a long term successful change? (by converting non/markets
and functions into controllable processes)
8. How to implement durable change of paradigm (culture, concept)? (lobby a public sector)
9. How to set correct indices for the entrepreneurial sector? (from property to product
markets)
10. How to set correct indices for the public sector? (from research to assigning topics
challenging discussion)
11. How to implement a partial proposal? (put it as an incentive at a transitional moment
between previous and next state)
12. How to implement and control partial activities into a successful process? (MBO)
13. What follows a failure in previous state in entrepreneurial sector? (decline, and often
personnel change)
14. What helps to access a credit? (Add meetings, which need to be exercised. Underline
activities and add names of responsible members. Create a calendar of events and control
indices – even the selection of the new project topic is one of events and part of the
training, which can always help)
15. What creates a final evaluation (mark)of student? (Interested but hesitating creditor
(good), signing contract to get your project (very good), pushing on fast signing to prevent
being replaced by other creditor (excellent))
Communicati on a nd Documentation Issues and Skills
You should read and understand the following headlines:
When you have completed this chapter, you should be able to:
1. Explain the communication process, including non-verbal communications and
communication styles
2. Describe how communication take place within the organisations, including networks,
directions of communication, and informal communication
3. Describe barriers to effective communication
4. Discuss methods for improving communication in organisations, written communication
and strategy related communication.
Non-verbal communication
When you have completed this section you should be able to:
- identify the three communication interaction components and assess their relationship to
each other
- identify the three major components of non-verbal communication, i.e.:
- - visual
- - vocal
- - environment and space
- describe and appreciate the effect of:
- - the various visual elements
- - the role of voice tone and other vocal variations, and
- - the significance of space, distance and environment
in non-verbal communication.
You should read and understand to following headlines:
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What are the components of communication
Non-verbal communication
The visual component
The vocal component
Environment and space
Having worked through this section you should have developed a good ability to understand
the main features of non-verbal communication and relate them particularly to the C.N.C.
context. In particular, you will have addressed the key role played by non-verbal
communication in the overall communication process. We described the components of the
communication interaction processes:
- visual
- vocal
- verbal
and identified the extent to which each one influences the process.
You will also have had a good opportunity to describe and apply the three key aspects of nonverbal behaviour, i.e.:
- the visual element
- the vocal element
- the environment and space element
Finally, you had the opportunity to integrate the different components of non-verbal
behaviour and apply them to a specific situation.
Listening
When you have completed this section you should be able to:
- identify the amount of time we spent on listening in average day
- describe the four main facets of listening:
-- listener
-- speaker
-- message
-- environment
and identify some of the barriers to effective listening
- describe the significance of listening in the communication process and apply the active
listening model
- explain the three main listening skills:
-- attending skills
-- leading skills
-- reflecting skills
- use the listening checklist to assess and improve your listening.
You should read and understand the following headlines:
Listening time
The facets of listening
Listening and understanding
The skills of listening
In this section we have looked at the effective receiving of messages, I.E. the listening skills.
First we identified the amount of time we spend on listening in an average day. We then went
on to describe the four main facets of listening:
113
- the listener
- the speaker
- the message
- the environment
and highlighted some barriers that hinder effective listening.
We established that listening is not just about hearing the message but also about
understanding, and we illustrated this with the active listening model.
The three skills of listening:
- attending skills
- leading skills
- reflecting skills
were described and applied to various situations in your everyday workplace.
Finally, you used a listening checklist to assess your listening skills and you should now be
able to make plans to develop and enhance you listening capabilities.
We now move on to Section 4 where we are going to apply the skills learned so far to
interviewing.
Interviewing
When you have completed this section you should be able to:
- define an interview
- describe the different types of interviews and their purposes within the C.N.C.
- adopt a structured approach to the interviewing process, i.e.
-- the planning stage
-- the opening stage
-- the body of interview
-- the closing stage
- identify and apply the key skills used in interviewing.
You should read and understand to following headlines:
What is an interview?
Types of interviews
Interview structure
The skills of interviewing
In this section we used our acquired skills from the earlier sections and applied them to
interviewing situations. Firstly, we established what is an interview and although initially
most people would associate this with getting a job, we saw how interviews are used in many
other businesses and personal situations.
We went on to describe these various types of interviews, i.e.:
- appraisal interviews
- counselling interviews
- disciplinary interviews
- information gathering interviews.
If you are to carry our successful interviews then they require careful planning. We discussed
various methods of preparation before the actual meeting and then looked at the actual
interview with regard to opening the meeting, the main part or body of the meeting and
eventually bringing the interview or meeting to a satisfactory conclusion.
114
All the skills learned in previous sections, i.e. non-verbal behaviour, listening, questioning,
etc. were all related to the interviewing process. Finally, another case study was used to apply
these skills.
In section 5 we will look at communication within groups or teams.
Communication in groups or teams
When you have completed this section you should be able to:
- identify the main groups in C.N.C.
- define the group and describe its key characteristics
- outline the benefits and disadvantages of group decision making
- plan and run effective meetings
- describe the range of management styles used by group leaders
- describe the task, relationship and individual activities performed in groups
- describe the stages of the group development
- list the eight roles suggested for effective group functioning.
You should read and understand to following headlines:
The role of groups
Definition of a small group
Benefits and disadvantages of group decision making
Making group meetings effective
The role of the group leader
Group dynamics
This section has taken us from the purpose of groups through to developing an effective
group.
First, we identified the main groups in the C.N.C. movement. We defined a group as being a
small number of people who have a common purpose or goal:, this is achieved by each
member contributing and interacting at meetings to achieve their goal.
We then discussed benefits of group decision making, i.e.:
- higher quality of decisions
- higher level of acceptance and commitment.
and disadvantages:
- the time spent at meetings
- the poor output from meetings.
The key issues to make meetings work effectively were outlined, i.e.:
-establishing the purpose
- planning
- informing those involved
- preparing
- structuring and controlling
- summarising and recording.
The importance of the group leader was highlighted and the different management styles were
briefly examined. The interaction of members within a group - task, relationship and
individual - were explained and you were asked to observe group members at one of your
meetings.
Finally, we examined the process of group development and the eventual composition of a
group using Belbin’s eight rules.
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We will now move on to the final section in this Unit which will deal with written
communication.
Written communication
When you have completed this section you should be able to:
- describe the advantages and disadvantages of written communication
- identify the key qualities of effective writing
- describe the main elements of writing a plan
-- purpose of writing
-- audience analysis
-- organisation of thoughts
-- researching the subject
-- first draft construction and editing of draft
-- reconstruction of final draft
- list the main aspects of writing a business plan
- outline the standard features in writing memos
Why written communications?
Communicating messages in writing may seem more formal and inflexible than the same
messages delivered in face-to-face interactions, but they are especially suited to delivering
formal, and sometimes complex, items of information.
Exercise: There are several advantages and disadvantages of written communication. Under
the headings of advantages and disadvantages, we have provided one example of each. Can
you identify at least one other?
Advantages: Better for difficult or formal messages. Can be reviewed.
Disadvantages: Written communications can appear to be very time-consuming.
Answers: Other advantages, which you may have included, are:
- useful when a written record is required for reference purposes
- can be both written and read when the parties (sender/receiver) wish
- can be carefully planned and designed before transmission
- errors can be removed before the message is transmitted.
Disadvantages include:
- feedback on the message is delayed or may be non-existent
- the writer can never be sure the message is read
- some people do not like to read
- absence of non-verbal clues which assist in the interpretation of messages
- may seem formal and lack warmth and individuality
- many people do not, or believe they do not communicate well in writing.
Research by Randall Majors (1990) in Business Communication suggested that while writing
is a requirement of all formalised education and most business careers, that most people ‘if at
all possible avoid writing’.
Exercise: Some of the negative attitudes toward writing are based on past experiences. Can
you suggest, from your own experience, what these might be?
116
Answers: If you have any negative attitudes toward writing they may be based on:
- earlier school experiences
- the relevancy of what was written
- grammar and punctuation drills, etc.
Beyond the value of writing in the C.N.C. setting, writing can also be enjoyable - but only if
we develop a solid set of relevant and basic skills. As we develop our abilities to write clearly
and gracefully, we will become more comfortable with expressing our thoughts on paper.
We will now look at developing these skills of effective writing.
Effective writing
Different kinds of letters are produced to be sent outside your organisation:, memos are
written for internal use:, reports are presented at annual meetings.
Writing takes time and money. Some business companies estimate that the average business
letter cost about GBP 10 when the writer’s time, the typist’s time, and the stationary and
postage are calculated. It is essential therefore that communication in writing is used
effectively. The skills used for effective written communication can be acquired, developed
and improved.
Criteria for effective writing
Exercise: Your organisation has purchased computer equipment, which has not been
delivered. You have received a letter from the company regarding the delay. Which of the
following effective communication criteria might be of value to the writer of this report?
Table 5-1: Importance of effective writing criteria
Very
Important
Important
Not
Important
Accuracy:
What are the precise facts about
the delivery? What is the delivery date?
Clarity:
What are the reasons for the delay?
Completeness:
Has everything been said that needs
to be said?
Appropriateness:
What tone will the letter have? How can the
company maintain a positive relationship?
Dynamism:
What kind of image do I want to project?
How personal do I want to be with the
reader?
You may have regarded them all as being very important or perhaps have ticked accuracy and
clarity as more important than others. We will now look at these elements in more detail.
Accuracy
When information is inaccurate, at best it can make understanding difficult, and at worst it
may result in lost time, money and credibility. The effective communicator strives for zero
defect correctness.
Exercise: What do you think a writer needs to do to achieve zero defect correctness of any
correspondence.
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Basically, the writer needs to:
- check facts
- proof read for errors
- seek to control accuracy in references, spelling and grammar.
Sometimes we see what we expect to see rather than what is actually on the page.
Computer systems are very useful, but ultimately the writer is responsible for accuracy, e.g.
spelling checkers do not identify
- properly spelled words improperly substituted for other properly spelled words:, examples
include:
-- form when from was intended
-- is when in was intended
Clarity
Have you ever tried to look through a dirty window? You can see shapes and movements, but
you may not be certain about the detail of what you are observing. Some written
communication may have the same effect.
Effective written communications needs to have clear:
- purpose
- structure
- language
in order to avoid confusion or misunderstanding.
Clarity of purpose
Clarity of purpose is achieved by analysing your writing goal in advance of communicating.
You can do this by asking yourself:
- Why I am writing?
- What is my real reason for writing?
- What I am hoping to achieve? Change of attitude / opinion?
- What is my purpose?
-- to inform
-- to persuade
-- to influence
-- to educate
-- to entertain.
Clarity of structure
The overall structure of your message is also important, i.e. have you presented your ideas in
a logical way? The time spent organising your message before you commence writing may
save both you and the reader significant time later.
Various approaches or methods are used in organising ideas /information before you begin to
write. Two such methods are:
- the traditional outline method
- the decision tree method.
We will be looking at the outline method in sub-section 6.4, developing a writing plan.
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Scheme 5-1: Example of a decision tree.
Costs
Quality service
Dividend on Shares
Personal and
Professional
Service
Interest at 1 % per
month on declining
balance
Opening hours
Mon-Sat
10.00 am - 5.00pm
Community orientation
Insurance cover at no
extra costs
Member owned
and controlled
Join the …
(Desired Decision)
outcome
- The trunk is the outcome you seek - the decision you want your reader(s) to reach.
- The major branches are significant points you will need to make in order to convince your
reader(s).
- Ideas, evidence, etc. are filled out by smaller supporting branches.
The decision tree method makes it easy to organise your ideas as you think of them,
regardless of the order in which you think of them.
Clarity of language
As a writer you create clarity of language by thinking about:
- who your audience is, and
- what she or he knows.
Exercise: Can you give an example of a concrete terms as opposed to an abstract term?
Our examples are:
- Saturday is more concrete than sometime this weekend
- three is more concrete than a few.
Remember, before writing ask yourself:
- Who is exactly my audience?
- What sort of person is she? Education? Age? Status? Personality?
- How is she likely to react to the “You should read and understand the following headlines of
my message?”
- What does she already know about the subject of my message?
-- A lot?
-- Not much?
-- Nothing?
-- More/less than I do?
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Completeness
As a communicator, you need to determine how much you should say in a written message. It
may be difficult for you to decide how much information is sufficient without writing too
much or too little. In general, written business communications should be concise and to the
point. You should avoid extraneous details.
One good technique to ensure completeness may be to put yourself in the position of the
reader and ask yourself:
- What questions is the reader likely to ask about the topic?
- How much information is needed for the reader to do what you want?
You should seek to anticipate responses of the reader to these questions and also to supply
information that may be needed at the next stage of communications. By this we mean that
you should not force the reader to request information that you should have included in the
first place.
In summary, completeness can be developed by seeking to answer the following questions:
- What exactly do I want to communicate?
- What do I need to say?
- What does the reader need to know?
- What information / detail can I omit or should I include?
Appropriateness
The key to successful writing skills for communication is the appropriateness of what and
how you write for the context and the audience. Know what you want to say. Be clear about
how it will be received.
We will address two areas of appropriateness:
- verbal and non-verbal elements
- common courtesies.
Verbal and non-verbal elements
The writer’s values may be transmitted simultaneously by the verbal and non-verbal elements
in a piece of written communication. For example a job application hastily hand written on
foolscap paper may contain all the necessary information (verbal element) but a prospective
employer may find the medium (non-verbal element) to be inappropriate.
Exercise: When writing a letter, how would you take these values into account?
Answer: You should seek to send messages of:
- respect
- sensitivity
- positive regard
both in the language and format you select. Elements such as:
- the paper
- the typing
- the layout of information on the page
- the neat appearance of the material
communicate important messages regarding the writer and reader.
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Dynamism
Effective written communication hold the reader’s attention and make him want to read more
of what you have to say. Dynamism is the expression of the communicator’s personality in his
writing or speech.
This aspect of the written communications process becomes more important when you seek to
influence the reader to do something.
Example: Can you give an example of when you might be trying to influence a decision from
a reader in which the use of dynamism would be important.
Examples include:
- to use services being offered
- to follow a proposed course of action
- to agree with your views, etc.
We will now look at various aspects of written communication which will make it more
dynamic, i.e.:
- word choice/writing style
- emphasis
- repetition
- active/passive voice.
Developing of writing plan
The previous section considered the five qualities of effective communication viz.,
- Accuracy
- Clarity
- Completeness
- Appropriateness
- Dynamism
You should keep these qualities in mind as we work through the writing plan.
Many writers on Communication suggest different elements for writing plans. However, the
six steps or techniques outlined here are included by most writers:
1. Purpose of writing, i.e. what is your goal
2. Audience analysis, i.e. what do you know about the receiver(s)
3. Thought(s) organisation
4. Subject research
5. Construction and editing of first draft
6. Reconstruction the final draft.
We look at each of these six steps.
1. Purpose of writing
What I am trying to achieve with this letter / memo / report? Do I have a specific goal? Are
my goals / purposes in writing clear?
These are basic questions which some of us neglect to either pose and /or answer before we
commence writing. Our sense of direction may suffer, but what about the unfortunate reader!
The purpose of writing may be to:
- inform
- persuade
- communicate negative information
- impress
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- teach
- entertain.
Each of these situations is different and the purpose of writing is different.
2. Audience analysis
One of the best approaches for clarifying your reason for writing is to see the situation from
the reader’s point of view, i.e. What does the reader want? In many situations we are required
to write because the reader (receiver) request information from us. If you:
- analyse your audience, and
- anticipate what they need to read
this approach may help you to focus on what you need to say in your written message.
Knowing the audience may also help you determine what not to say. Sometimes material we
write is irrelevant because the reader already knows much about the matter.
The format for your written presentation and the language you should use will also be
dependent on your understanding of your audience’s education, attitudes and values. If what
you write is boring or demotivating for your readers then you risk losing their goodwill and
your credability may suffer. If you use language which is cumbersome and difficult to
interpret, you may confuse your readers and they may misunderstand your message. Knowing
your readers and seeking to pitch your material in a non-patronising manner at their level, is
an important element in writing.
3. Thought organisation
Having determined your purpose and analysed your audience, you are now ready to begin the
actual construction of the message. A helpful way to begin construction is with a short
blueprint, i.e. skeletal plan that will generally direct your building of message.
Exercise: What do you think is the benefit of a skeletal plan?
Answer: Thinking on paper allows you to jot down your ideas in any form before you start to
arrange them logically. Having drafted a preliminary outline of points and thoughts and issues
to be covered, you can then return to delete some ideas because they maybe irrelevant, or
indeed add new ideas that would improve the balance and tone of the message.
Remember, however, that the outline is just a planning document:, it should grow and change
as the message is developed. In a long written communication the outline may contain seven
or eight points, each of them referring to different paragraphs in the communication. Planning
gives an orderly and organised approach which will become evident to the reader in the
written communication.
4. Researching your subject
In many instances your own experience and knowledge will supply you with the information
you need to send your written message. In other situations, you may need to do research. In
either case you need to consider very carefully the information you have assembled in your
outline and evaluate its:
- relevance
- sufficiency
- authority.
Exercise: What these terms means in this context?
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Answers: Information is relevant when it applies directly to the issue at hand in the message.
You must determine which information is most relevant to suit the purposes of the receivers
and yourselves as you focus the message. The inclusion of relevant information may attract
the receiver’s interest and attention because it is seen as useful and practical.
Sufficiency of information means that enough material and examples are offered to explain
the central points in the written message. As senders of messages we can sometimes err in
either direction.
- If too much information is contained in the message, the receivers maybe overwhelmed
and/or bored by the amount of detail.
- If too little information is offered, the message may remain unclear.
You need to find the proper balance in the amount of information you provide in the written
message.
Authority in information is determined by the credibility of the message source. In some areas
the opinions and beliefs we show with authority are more important than personal opinion.
We need to ask ourselves questions in this regard.
- How detailed do I need to be in the presentation of my information?
- How specific do I need to be?
- How exact do I need to be?
5. Constructing and editing the first draft
Having assembled your items of information and thoughts to be presented in your message
you are now ready to begin construction of that message.
One effective approach is to write a number of drafts before you complete the final effort.
Exercise: How would this help?
Answers: If you are working on your firs draft, whether letter, memo or report, it does not
have to be perfect so you may feel freer to experiment with different words, formats or
approaches. The use of a multiple draft approach could help those writers who suffer from
‘writer’s block’ i.e. the inability to commence writing. Some people point out that the only
way to write well is to rewrite, rewrite, and rewrite.
A significant stage in this process is editing your first drafts. You need to examine your draft
for clarity and accuracy.
Exercise? What areas do you look at to ensure clarity and accuracy?
Answers: You need to look at the following:
- Is the purpose clear?
- Are your points clearly stated?
- Are your facts accurate?
- Is the spelling correct?
- Have you covered you area thoroughly without incorporating irrelevant detail?
- Is your choice of medium suited to the situation?
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- Is your language appropriate?
- Have you communicated energy and a sense of personality in your written message?
These factors should also be taken into account as you redraft and edit your message. Careful
attention to detail gives you the chance to make corrections and changes before you formally
communicate in writing with your reader.
6. Reconstructing the final draft
This is the last stage in your planning process and takes advantage of all that has gone before.
By clearly:
- determining your purpose
- analysing your audience
- organising material
- researching your facts and information adequately
your draft should now be in the form of an effective message. Careful editing and revision of
this draft will allow you the opportunity to strengthen and enhance the final product. This
attention to detail, quality, and reconstruction may take time but, if you are concerned about
the effectiveness of your message then your final product will be worth all your effort and
energy.
Exercise: It is said that good communication ultimately can be reduced down to two
principles. Can you name them?
Answers: The two principles are:
- careful planning, and
- attention to detail.
The more you will work with these tools and the more familiar you become with how they
operate for you, the more effective your written communications will become.
Letters and memos
We will now look at the difference between letters and memos. Letters are produced to be
sent outside the organisation, whereas memos are written for internal use. The writing plan
outlined above can be applied to letters and memos in terms of the steps necessary to attain
quality in the final product.
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Letters
Santon 1990 outlines the following principal types of business letters and the purpose of
writing them.
Principal Types of Business Letter
Purpose
to seek information, opinion,
confirmation
To give information, opinion,
confirmation
To seek reparation of some
fault or deficiency
To accept the claim, provide
reparation
To place an order for goods or
services
To confirm acceptance of an
order
To give an estimate of price,
time, etc.
To give a final price, time,
etc.
To sell goods or service
To remind of sales offers
To advertise goods or services
To authorise advance of credit
Letter classification
Query
Area
General
Acknowledgement
General information
Complaint/claim
General
Adjustment
General
Order
Ordering and estimating
Confirmation of
Ordering and order estimating
Estimate
Ordering and estimating
Tender
Ordering and estimating
Sales Letter
Follow-up sales letter
Non-solicited sales letter
Letter of credit
Sales and advertising
Sales and advertising
Sales and advertising
Financial, and credit
management
Check or comment on credit - Credit reference inquiry /
Financial, and credit
worthiness or rating
reply
management
To obtain payment of a debt
Collection (various stages Financial, and credit
usually 1,2 ..3)
management
Each type of letter makes its own demands on us as writers. However, if we approach it in a
structured and planned manner, we may find the task easier then we expected.
Memos
Memos are internal letters in an organisation.
Exercise: There are five elements which are used in the drafting of memos. Can you name
them?
Answers: The five elements used most commonly in drafting memos are:
1. The title line
2. The sender line
3. The receiver line
4. The date
5. The subject line
All memos should have these elements in some form. The following is a simple example of
the features of a standard memo.
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To:
Memorandum
From:
Date:
Subject:
- The title line (Memorandum) is necessary to identify immediately that this is and internal
document.
- The receiver line (TO:) identifies the intended recipient(s) of the written message. The
readers may be either an individual or a group of people.
- The sender line (From:) identifies the writer of the memo.
- The date line is important for filing and maintaining records of actions taken.
- Finally, the subject line should include both the general subject area and, where possible,
some specific points regarding the purpose of the memo.
In writing an effective memo the following points may be helpful as you plan and write.
- make sure the memo is necessary
- clarify purpose and grab attention
- organise the body of the memo for easy reading
- use informal, professional language
- keep your tone positive.
Purpose of memos
Memos are written for a number of basic purposes, i.e.:
- to inform
- to persuade
- to document actions or ideas.
Informative memos:
Exercise: Can you identify at least four informative uses for a memo?
Answers: An informative memo can:
- Give instructions
- Announce a meeting
- Record minutes of a meeting
- Announce policy changes
- Request a meeting
- Explain process
- List job duties
- Post policies and rules
- Provide project timetables
- Offer feedback
Persuasive memos:
Exercise: Can you identify four persuasive purposes of memo?
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Answers: Persuasive purposes may include the following:
- Propose an improvement
- Recommend a purchase
- Recommend a procedure
- Support a position
- Ask for creation or support
- Ask for a raise
- Motivate people to attend a meeting
- Solicit volunteers
- Sell a product or service
- Motivate compliance
Documentary memos:
Exercise: Give one example of a situation that would need to be documented in a memo
Answers: Examples of situations that might need documentation are the following:
- On being hired, a new employee is promised a raise in six months.
- A superior has required an employee to perform a certain task which the employee feels will
result in ‘disaster’, for example, delaying the reordering of paper goods until after a heavy
work period.
- An employee has a telephone conversation with a member that may have serious
consequences:, for example, the member/customer threatens to terminate membership unless
a specific action is taken.
- A manager observes unethical behaviour in an employee and wants to document it in the
employee’s personnel file.
Another use of the documentary memo is to demonstrate excellent performance. Memos can
show that employee:
- has good ideas
- can express them well
- take initiative to propose improvements and solutions
- has good problem-solving skills
- is sensitive toward people, and
- is assertive and decisive.
You can use documentary memos to advance your career by putting onto paper:
- your innovative ideas
- perceptions of problems
- proposed solutions
- recommendations.
If you document your ideas by means of memos, you are more likely to get credit for them
and to be perceived as a valuable employee. You might wish to document situations such as
the following:
- propose an improvement
- suggest the solution to the problem
- bring attention to a hidden problem with serious consequences
- share praise, be thoughtful, give compliments, express appreciation.
Summary
Writing as an essential part of the communications process involves us in sharing with a
receiver a message full of information, thoughts and ideas. We need to approach it in the same
thorough manner as any part of the communications process. Planning and attention to detail
are as essential here as they are in other sections on communications.
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Written communications, as we have seen in this section, are required on occasions when
formal records are necessary and can be planned and checked before transmission. We looked
at several advantages and disadvantages of written communication and outlined some of the
reasons we may have negative feelings towards writing.
The criteria / characteristics of effective writing, identified by Majors 1990 and other
researches, were outlined, i.e.:
- Accuracy
- Clarity
- Completeness
- Appropriateness
- Dynamism.
You should use these elements as general criteria to be followed when you are constructing
your written communications.
The writing plan is a more specific activity and builds on these general characteristics.
Together they constitute an overall framework for writing.
The last section focused primarily on the role of memos and letters and various elements in
the writing of memos (internal letters) were outlined. We also identified different kinds of
memos, i.e.
- informative
- persuasive, and
- documentary.
This concludes the module on Communications and we wish you luck with the remaining part
of your study programme.
1.6 Designing a mar keting intellige nce while working with
databases: Signifi cance of practical processes for strategy
Experts are accustomed to hide or confuse information. Farmers are always complaining that
competitors never have problems, for example. Therefore, it is necessary for a researcher to
keep independent judgement. The following schemes can help to keep managerial position of
the researcher independent.
a. Consequent process
The example of consequent process is the connection between previous and next state. The
objective in this case is to teach students how to add value to previous behaviour by selection
of inputs adding value to successive behaviour with full awareness of all risks.
Scheme 5-2: Substantial elements of the consequent process
Input (M), incentive
(I)
Process
Previous state of
subject: Culture,
paradigm
Function
Successive state of
subject, functions,
processes
Output (M), end (I)
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M = matter
I = information (incentive and end are related to process of research and design)
Culture = behaviour of groups determining (changes of) external environment
Paradigm = Approach resulting to the change of culture
Process = consequent states with logical end
Function = recommendations leading to target states
Previous state is distinct contrary to consecutive state where more options emerge.
a.1 Example of using consequent processes during supply and demand
development
Scheme 5-3: Common principles of supply and demand perception
Supply
Demand
Step 1
Step 2
Step 3
Step 4
+
b. Contradictory processes
Contradiction of cultures offer to people either to prefer their own needs (left branch) or
contribute to keeping organisations running (right branch).
Scheme 5-4: Roots of optional cultures
Welfare
Personal needs
Ordered
needs
(states)
of
process –
see
Scheme
3
Managerial functions
leading to
competitiveness
Ordered
functions
(states)
of a
process see
Scheme
3
Size
0
129
c. Specialisation of staff /entrepreneurs on developmental/risk challenges or
line managers/businessman on sustainability
Firstly, a real time management using marketing mix methodology is on the left. Secondly,
real time line management using control by norms, quality systems, information systems and
so on is on the right. Thirdly, risk/developmental staff or external services are in a centre.
Scheme 5-5: Professional options
Free (mostly) trials (project management)
by: salesman, innovators, regional
authorities
Service
market/
exchange
Product
Market
Old culture of
supply
organisations
marginalizing
alternatives
(marketing)
Debate on
change of
paradigm or
culture
New culture
creating
demand
alternatives
(management)
See 5-2: transitional
incentives between process
ordered states
Research
budget /
time
Property
market
Managers (on the right) and marketers (on the left) are under time pressure. This pressure can
be diminished by marketing staff / external services, displayed in between. Developmental
functions are elaborated in detail in a central part (Scheme 5-5). To reach effect of these
functions it is necessary work processes out of them ( Scheme 5-6).
c.1 Difficulties of corporate implementation
Scheme 5-6: Biases and corrective actions of project management
Defensive
and
Innovation
Operations
Innovation
Operations
Offensive strategies
Feedback by
general pitfalls
Innovation
identification
Investment:
Improvements
Top management
succeeded
Free of charge
projects:
Champions shown
up skills
Underpaid
Project
Movement
: Steering
committe
e
succeeded
Stolen/punished projects
by
Advisers or Autocratic
managers
130
d. Information processing for managers and marketers
Information processing begins with product or challenge (competitor) / see collumns (Table
5-2). Information processing begins from the collumn “service” through the states, which are
described in raws: Discussion skills (?) limiting capability to find and design (I), commission
research, run case study (/), and give assignment for spin off (Q) and repeat whole process in
new or opposite conditions until the balance between supply and demand is reached (Table 52)
Table 5-2: Ordered overview of conditions facilitating transition between roles, functions, and
states of process
Re-launch of
Mature
Business or
products
How to support correct between marginalised
Alternatives: Prospects Formulation
Product
?
I
Paradigm
Alternatives
(marginalised)
Crisis
/
Innovation
Q
Property
Service
Research
Challenge
?
I
/
Q
?
I
/
New projects
appended to
life cycles of
preceding one
?
I
/
Q
?
I
/
Q
Debate
Policy choice
Alternatives
(supported)
Q
Paradigm
?I/Q symbols are closed into consequent cycles, which are specialised each time for different
topic: Product, property, service, research and assignments. This consequent line of topics
have its optional beginnings in relaunch (left) life cycle developing (right) and by adding
service to both previous cases (centre). Re-launch side of process begins with decline, which
is financed from loans backed by property sales. Appending new alternatives to phases of life
cycles of others begin with investment in its introductory phases (assignment). Re-launch and
life cycle based approaches are expensive. Therefore, it is better to begin from service
formulating prospects, which also usually occur in periods without time pressure. Services
substitute losers. Often after they escaped. Once the situation stabilises and real time
managers win over planners delivering service, it is possible to store the gained knowledge
and deliver it later as external service or internal patterns.
The skill in using (?I/Q) process is the sequential process (Scheme 1). Once this process is
connected with previous methodological steps the cycle is defined in which it is possible to
test skills and simplify decision making about selection and support of alternatives.
d.1 Motivation to responsibility for final result
There are so many processes and tasks which must be performed and finished with synergy
that responsible persons prefer to skip over responsibility for the final result and get assigned
responsibility only for partial process. They know that they can succeed easily there.
Success is measured by performance; motivation is measured by increase above the standard
level of performance. To reach the standard level of performance, it is important develop
131
habits of doing things unsuccessful people do not do. People fail in direct proportion to their
willingness to accept socially acceptable excuses for failure.
To increase the performance level above the standard, motivation is important. Physical
performance improves in direct proportion to mental discipline. An individual asks: What are
my chances for success? And where is the value -- measured in self-esteem – to me?
Motivation of individual = (Task significance + Task variety + Task identity)/3 * Autonomy *
Feedback
Scheme 5-7: Motivation by challenging
Satisfaction
Motivation
Dissatisfaction
Responsibility should be accepted before actions begin.
d.2 Selection of resulting value
Once all previous steps are successfully accomplished, it is time to target a effect of final
result:
- Improvement of performance over competitors using principle of „expensive“ quality
- Substitution of products of competitors when new innovative product is „cheap“ quality
based
Scheme 5-9: Getting competitors’ share
Scheme 5-8: Expensive quality
New
border
of
market
shares
high
Costs
Previous
border
of
market
shares
Quality
Quality
Zero sum principle
keeps the size of
market
Scheme 5-11: Creating new market
high
Befor
e
Scheme 5-10: Cheap quality
high
Costs
Quality
high
After
Newly
created
value even if
unjustly
favouring
one partner
but
acceptable
for 132
the other
1.6 Synergy of connected philosophy and activity
Marketer creates demand for philosophy of consumer needs and activity of organisations on
markets.
Sustainability of economy where demand recovery is not sure is threatened together with
decreasing supply of organisations respecting declining demand. It is possible to reverse trend
of demand when consumers or at least part of them, begin to act as marketers.
Scheme 5-12: Increasing of demand
Property market
Product market
Research
Individual and
service market
Promotion
A future marketer has to leaves the safe position of employee, and begin with delivery of
services as an entrepreneur to product and property markets. But markets of organisations can
become dependent on purchase of external services only if research and promotional effects
are part of them. Otherwise employees are cheaper.
Project cycle:
Targeting – bring new incentives based on assignments and agreements
Identification – hot to find and solve new incentives
Instruction – search of new opportunities through experts
Financing and budgeting – of investments, personal, and co-financing
Mission – ensure integration of partners
Evaluation – identifies benefits, for example: people return when they make money and
support this proposal
Documentation of Project Cycle:
1. Summary (reasoning, expected effect, place of implementation, targeting of priorities,
process stages, financial plan, external support, new working places, risks, relationships,
commitment)
133
2. Context (sectoral, proposers, performers, problems, supporters)
3. Resource information
Table 5-3: Proposal balancing
Framework +
dates
Arguments of
Supplier
Confirmation
of Income
Evidence of
Costs
Hypotheses of
Awarded
Support
Global
Objectives
Specific
Objectives
Results
Actions
Table 5-4: Project Process Management
Marketing
Global Objectives
Specific Objectives
Results
Actions
Design and
implementation
Global Objectives
Specific Objectives
Results
Actions
Feed Back
Global Objectives
Specific Objectives
Results
Actions
4. Budget
5. Risks
Assignment: Remember the case study about Business Innovation Centres Management.
Define tasks for squatters, for autocratic managers, offensive management, for your team, and
for yourself in the table below
Table 5-5: Examples of actions planned in corporation
Strategic
Planning by
Implementing by
Business
advisers
extensioners
Units:
Corporation
Potential
Delivery
maximisation
standardisation
- strat. Market. Plan - ISO 9000 based
- niche marketing
MBO
- quality not price
implementation
- MBO
- Flattening the org.
Structure
Division
Right first time
Entry program
- Know your
- Identification
product
- Objectives
- Market
- Procedures
Control by personnel or
outsourcing
Personality transformation
- Honest sales
- Successful presentation
- Pitfalls implementation
Personal diversity
- How to enter
- How to monitor
- How to correct
134
Business
Product
- Competition
Company re-launch
- Analyses
- Management
structure
research
- Recommendatio
ns
- Conclusions
implementation
- New
management
structure
Beginners and
entrepreneurs
- Mission
- Resources
- Objectives
- Programs
- Action’s program
Marketing planning
- Overview
- Objectives
- Strategies
- Special actions
Project management
- Company
promotion
- Objectives
confirmation
- MBO
- Market knowledge
- Market strategy
Expansion planning
- Company marketing
- Product marketing
- Knowledge expansion
(tools, self-evaluation,
weekly plan)
Team work
- Who does what
- Procedures
- Sale by action
- Review meetings
- Personal analyses
Questions:
1. What to communicate downwards?
2. What to communicate upwards?
3. What tools and how to use for lateral communication?
Pitfalls
Top Ten Things a Consultant Shouldn't Tell a Client
10. That was my first guess as well, but then I really thought about it.
9. You should see the hotel I'm staying at.
8. Hey, I just realised that I was in junior school when you started working
here.
7. I like this office space. I'll have them put me in here when you're gone.
6. My rental car looks nicer than that junk you're driving.
5. Sure it'll work; I learned it in business school.
4. So what do you need me to tell you?
3. Of course it's right; the spreadsheet says so.
2. I could just tell you the answer, but we're committed to a three month
project.
1. What are you, stupid?
135
Top Ten Ways to Know You've Got the Consulting Bug
10. Can't stop using words that don't exist.
9. Worried that he who dies with the most frequent-flyer miles wins.
8. Use so much jargon in conversation, friends think you're speaking a
foreign language.
7. Constant urge to give advice on subjects you know nothing about.
6. Always-hyphenating-words-that-don't-need-to-be-hyphenated.
5. Keep seeing bullet points everywhere.
4. Can fit the thematic undercurrents of War and Peace into a two-by-two
matrix.
3. Tired of having a social life beyond work.
2. A two-page story in Business Week is all it takes to make you an expert.
1. Firmly believe that an objective viewpoint means more than any real work
experience.
Top Ten Things You'll Never Hear from a Consultant
10. You're right; we're billing way too much for this.
9. Bet you I can go a week without saying "synergy" or "value-added".
8. How about paying us based on the success of the project?
7. This whole strategy is based on a Harvard business case I read.
6. Actually, the only difference is that we charge more than they do.
5. I don't know enough to speak intelligently about that.
4. Implementation? I only care about writing long reports.
3. I can't take the credit. It was Ed in your marketing department.
2. The problem is, you have too much work for too few people.
1. Everything looks okay to me.
Top Ten Things You Shouldn't Say at a Consulting Interview
10. I'm a T-shirt and jeans kind of person.
9. Do you pay overtime?
8. I hate flying.
7. I'm useless without ten hours of sleep a night.
6. There are lies, damn lies, and statistics.
5. Do you cover rental cars for collision?
4. Oxford taught me that working in teams is great for slackers.
3. I think three letter acronyms are for people too stupid to remember whole phrases.
2. Two words: family first.
1. Call it what you want, it still means firing people.
]
136
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