Professional Documents
Culture Documents
What is Marketing?
The term marketing has changed and evolved over a period of time, today marketing is
based around providing continual benefits to the customer, these benefits will be provided
and a transactional exchange will take place.
Marketing objectives, goals and targets have to be monitored and met, competitor
strategies analysed, anticipated and exceeded. Through effective use of market and
marketing research an organisation should be able to identify the needs and wants of the
customer and try to delivers benefits that will enhance or add to the customers lifestyle,
while at the same time ensuring that the satisfaction of these needs results in a healthy
turnover for the organisation.
Philip Kotler defines marketing as ‘satisfying needs and wants through an exchange
process’
Within this exchange transaction customers will only exchange what they value (money)
if they feel that their needs are being fully satisfied, clearly the greater the benefit
provided the higher transactional value an organisation can charge.
Business Objectives
All businesses need to set objectives for themselves or for the products or services they
are launching. What does your company, product or service hope to achieve?
Setting objectives are important., it focuses the company on specific aims over a period
of time and can motivate staff to meet the objectives set.
A simple acronym used to set objectives is called SMART objectives. SMART stands
for:
Market share objectives: Objectives can be set to achieve a certain level of market share
within a specified time. E.g. obtain 3% market share of the mobile phone industry by
2004.
To increase profit: An objective maybe to increase sales 10% from 2003 – 2004.
To grow: The business may set an objective to grow by 15% year on year for the next
five years.
Introduction
• Pest Factors – These are external forces which the organisation does not have direct
control over these factors. PEST is an acronym and each letter represents a type of factor
(Political, Economical Social and Technological).
• Micro environmental factors – These are internal factors, which the organisation can
control.
Political
The first element of a PEST analysis is a study of political factors. Political factors
influence organisations in many ways. Political factors can create advantages and
opportunities for organisations. Conversely they can place obligations and duties on
organisations. Political factors include the following types of instrument:
Non conformance with legislative obligations can lead to sanctions such as fines, adverse
publicity and imprisonment. Ineffective voluntary codes and practices will often lead to
governments introducing legislation to regulate the activities covered by the codes and
practices.
Economical
An economy undergoing recession will have high unemployment, low spending power
and low stakeholder confidence. Conversely a “booming” or growing economy will have
low unemployment, high spending power and high stakeholder confidence.
In this global business world organisations are affected by economies throughout the
world and not just the countries in which they are based or operate from. For example: a
global credit crunch originating in the USA contributed towards the credit crunch in the
UK in 2007/08.
Cheaper labour in developing countries affects the competitiveness of products from
developed countries. An increase in interest rates in the USA will affect the share price of
UK stocks or adverse weather conditions in India may affect the price of tea bought in an
English café.
A truly global player has to be aware of economic conditions across all borders and needs
to ensure that it employs strategies that protect and promote its business through
economic conditions throughout the world.
Social
The third aspect of PEST focuses its attention on forces within society such as family,
friends, colleagues, neighbours and the media. Social forces affect our attitudes, interest s
and opinions. These forces shape who we are as people, the way we behave and
ultimately what we purchase. For example within the UK peoples attitudes are changing
towards their diet and health. As a result the UK is seeing an increase in the number of
people joining fitness clubs and a massive growth for the demand of organic food.
Products such as Wii Fit attempt to deal with society’s concern, about children’s lack of
exercise.
Population changes also have a direct impact on organisations. Changes in the structure
of a population will affect the supply and demand of goods and services within an
economy. Falling birth rates will result in decreased demand and greater competition as
the number of consumers fall. Conversely an increase in the global population and world
food shortage predictions are currently leading to calls for greater investment in food
production. Due to food shortages African countries such as Uganda are now
reconsidering their rejection of genetically modified foods.
In summary organisations must be able to offer products and services that aim to
complement and benefit people’s lifestyle and behaviour. If organisations do not respond
to changes in society they will lose market share and demand for their product or service.
Technological
Unsurprisingly the fourth element of PEST is technology, as you are probably aware
technological advances have greatly changed the manner in which businesses operate.
Organisations use technology in many ways, they have
1. Technology infrastructure such as the internet and other information exchange systems
including telephone
2. Technology systems incorporating a multitude of software which help them manage
their business.
3. Technology hardware such as mobile phones, Blackberrys, laptops, desktops,
Bluetooth devices, photocopiers and fax machines which transmit and record
information.
Technology has created a society which expects instant results. This technological
revolution has increased the rate at which information is exchanged between
stakeholders. A faster exchange of information can benefit businesses as they are able to
react quickly to changes within their operating environment.
However an ability to react quickly also creates extra pressure as businesses are expected
to deliver on their promises within ever decreasing timescales..
For example the Internet is having a profound impact on the marketing mix strategy of
organisations. Consumers can now shop 24 hours a day from their homes, work, Internet
café’s and via 3G phones and 3G cards. Some employees have instant access to e-mails
through Blackberrys but this can be a double edged sword, as studies have shown that
this access can cause work to encroach on their personal time outside work.
The pace of technological change is so fast that the average life of a computer chip is
approximately 6 months. Technology is utilised by all age groups, children are exposed to
technology from birth and a new generation of technology savvy pensioners known as
“silver surfers” have emerged. Technology will continue to evolve and impact on
consumer habits and expectations, organisations that ignore this fact face extinction.
PESTLE
These are internal factors close to the company that have a direct impact on the organisations
strategy. These factors include:
Customers
Organisations survive on the basis of meeting the needs, wants and providing benefits for their
customers. Failure to do so will result in a failed business strategy.
Employees
Employing the correct staff and keeping these staff motivated is an essential part of the strategic
planning process of an organisation. Training and development plays an essential role particular
in service sector marketing in-order to gain a competitive edge. This is clearly apparent in the
airline industry.
Suppliers
Increase in raw material prices will have a knock on affect on the marketing mix strategy of an
organisation. Prices may be forced up as a result. Closer supplier relationships is one way of
ensuring competitive and quality products for an organisation.
Shareholders
As organisation require greater inward investment for growth they face increasing pressure to
move from private ownership to public. However this movement unleashes the forces of
shareholder pressure on the strategy of organisations. Satisfying shareholder needs may result in
a change in tactics employed by an organisation. Many internet companies who share prices
rocketed in 1999 and early 2000 have seen the share price tumble as they face pressures from
shareholders to turn in a profit. In a market which has very quickly become overcrowded many
havel failed.
Media
Positive or adverse media attention on an organisations product or service can in some cases
make or break an organisation.. Consumer programmes with a wider and more direct audience
can also have a very powerful and positive impact, hforcing organisations to change their tactics.
Competitors
The name of the game in marketing is differentiation. What benefit can the organisation offer
which is better then their competitors. Can they sustain this differentiation over a period of time
from their competitors?. Competitor anlaysis and monitoring is crucial if an organisation is to
maintain its position within the market.
Production Oriented: The focus of the business is not the needs of the customer, but of
reducing costs by mass production. By reaching economies of scale the business will
maximize profits by reducing costs.
Product Orientation: The company believes that they have a superior product, based on
quality and features, and because of this they feel their customers will like it also.
Sales Orientation: The focus here is to make the product, and then try to sell it to the
target market. However, the problem could be that consumers do not like what is being
sold to them.
Market Orientation: Puts the customer at the heart of the business. The organization
tries to understand the needs of the customers by using appropriate research methods,
Appropriate processes are developed to make sure information from customers is fed
back into the heart of the organisation. In essence all activities in the organisation are
based around the customer. The customer is truly king!
In today’s competitive world putting the customer at the heart of the operation is
strategically important. Whilst some organizations in certain industries may follow
anything other then the market orientation concept, those that follow the market
orientation concept have a greater chance of being successful.
Competitor Strategies
Any organisation that wishes to succeed and survive in their market, needs to analyse
their competitors strategies. Competitor analysis is a vital part of the marketing planning
process.
• Collect information on competitors that will directly influence the firms’ strategy.
• Help the firm anticipate what the actions of their competitors will be, to their
entry within the marketing.
• To exploit the competitor’s weaknesses so the firm can gain an overall
competitive advantage.
If you were to enter a market, some of the information you would need to know
about your competitors islisted below.
• Who are your competitors?
• What is the size and dominance within the market.
• Which customer base are they aimed at?
• What is their positioning within the market?
• What are their objectives?
• What are their strengths and weaknesses?
• Competitors websites.
• Annual reports.
• Observation.
• News articles on TV or press.
• Talking to customers or sales staff.
• Covert operations including pretending to be a customer at your competitors store,
or phoning their telephone sales line.
A competitor can easily slow down your companies progress, competitor analysis
should allow you to anticipate and react effectively to their move.
1) Competitive Rivalry
2) Power of suppliers
3) Power of buyers
4) Threats of substitutes
5) Threat of new entrants.
The above five main factors are key factors that influence industry performance, hence it
is common sense and practical to find out about these factors before you enter the
industry. Lets look at them below.
Competitive Rivalry
A starting point to analysing the industry is to look at competitive rivalry. If entry to an
industry is easy then competitive rivalry will likely to be high. If it is easy for customers
to move to substitute products for example from coke to water then again rivalry will be
high. Generally competitive rivalry will be high if:
Power of suppliers
Suppliers are also essential for the success of an organisation. Raw materials are needed
to complete the finish product of the organisation. Suppliers do have power. This power
comes from:
• If they are the only supplier or one of few suppliers who supply that particular raw
material.
• If it costly for the organisation to move from one supplier to another (known also as
switching cost)
• If there is no other substitute for their product.
Power of buyers
Buyers or customers can exert influence and control over an industry in certain
circumstances. This happens when:
• There is little differentiation over the product and substitutes can be found easily.
• Customers are sensitive to price.
• Switching to another product is not costly.
Threat of substitutes
Are there alternative products that customers can purchase over your product that offer
the same benefit for the same or less price? The threat of substitute is high when:
The threat of a new organisation entering the industry is high when it is easy for an
organisation to enter the industry i.e. entry barriers are low.
An organisation will look at how loyal customers are to existing products, how quickly
they can achieve economy of scales, would they have access to suppliers, would
government legislation prevent them or encourage them to enter the industry.
So to summaries porters five forces model is essential to carry to help you understand
your industry in depth before you enter it.
There is much information available in the public domain that allows a company to
analyse its competitors. In 1997 Davidson suggested that the sources of competition
information could be placed into three groups.
1. Recorded data. This is data on competitors that already has been published. This data
could be internal to the organisation e.g. annual reports or external e.g. newspaper articles
or magazine reviews of competitor products.
2. Observable data. This is data collected through observation of your competitors. This
could include looking at your competitors marketing mix strategy, product or service
ranges.
3. Opportunistic data. This data involves the firm talking to those who have or have had
contact with the competitor’s suppliers. These people could give inside information on
the company. The company could also actively recruit people who worked for their
competitors, or head hunt others.
Competitor analysis is crucial if the firm wants to stay ahead. Competitor analysis may
give a firm new ideas and help formulate new business strategies for growth and profit.
Competitor analysis should stimulate innovation, beneficial for both the firm and the
customer.
Marketing Research
Research is the only tool an organisation has to keep in contact with its external operating
environment. Inorder to be proactive and change with the environment simple questions need to
be asked:
• How are customer needs changing? Can you meet these changing needs? What
do your customers think about existing products or services?
• How are competitors operating within the environment? Are their strategies
exceeding or influencing yours? What should you do?
• How are macro and micro environmental factors influencing your organisation?
Again how will you react?
As witnessed with the UK retail clothing group C&A , failure to react to the changing needs of its
customers within its environment has resulted in C&A closing all their UK retail stores. Marks and
Spencers also faces an uncertain future. Research tells them that customers feel that the stores
and clothes are outdated. M&S are now rushing out new lines and experimenting with new
concept stores to retain existing and attract potential new customers. In the world of credit it is
just recently that M&S are excepting credit cards!
A common mistake by many students, lecturers and textbooks is that there is no understanding of
the clear distinction between market research and marketing research.
Market Research: Involves researching specific industry’s or markets. Researching the computer
industry to discover the number of competitors and their market share will be an example of
market research.
Marketing Research: Marketing Research goes further. Marketing Research analyses a given
marketing opportunity or problem, defines the research and data collection methods required to
deal with the problem or take advantage of the opportunity, through to the implementation of the
project. In essence marketing research aims to discover the root cause for a specific problem
within an organisation ( eg declining sales) and put forward solutions to that problem.
Data Types
Qualitative Data: Focuses on people’s opinions and attitudes towards a product or service.
Sampling methods
With this method of sampling the potential people you want to interview are listed e.g. a
group of 100 are listed and a group of 20 may be selected from this list at random. The
selection may be done by computer.
Systematic samples
Out of the 100 people we talked about above, systematic sampling suggests that if we
select the 5th person from the above list, then we would select every 5th, 10th, 15th, 20th
etc. The pattern is the every consecutive 5th. If the 6th person was selected then it would
be every consecutive 6th.
Multi-Stage Samples
With this sampling process the respondents are chosen through a process of defined
stages. For example residents within Islington (London) may have been chosen for a
survey through the following process:
Throughout the UK the south east may have been selected at random, ( stage 1), within
the UK London is selected again at random (stage 2), Islington is selected as the borough
(stage 3), then polling districts from Islington (stage 4) and then individuals from the
electoral register (stage 5).
As demonstrated five stages were gone through before the final selection of respondents
were selected from the electoral register.
Convenience Sampling
Where the researcher questions anyone who is available. This method is quick and cheap.
However we do not know how representative the sample is and how reliable the result.
Quota Sampling
Using this method the sample audience is made up of potential purchasers of your
product. For example if you feel that your typical customers will be male between 18-23,
female between 26-30, then some of the respondents you interview should be made up of
this group, i.e. a quota is given.
Dimensional Sampling
An extension to quota sampling. The researcher takes into account several characteristics
e.g. gender, age income, residence education and ensures there is at least one person in
the study that represents that population. E.g. out of 10 people you may want to make
sure that 2 people are within a certain gender, two a certain age group who have an
income rate between £25000 and £30000, this will again ensure the accuracy of the
sample frame again.
To summaries there are two types of sampling frames - probability and non-probability,
and within this six types of sampling methods as discussed above.
Sampling methods
With this method of sampling the potential people you want to interview are listed e.g. a
group of 100 are listed and a group of 20 may be selected from this list at random. The
selection may be done by computer.
Systematic samples
Out of the 100 people we talked about above, systematic sampling suggests that if we
select the 5th person from the above list, then we would select every 5th, 10th, 15th, 20th
etc. The pattern is the every consecutive 5th. If the 6th person was selected then it would
be every consecutive 6th.
Multi-Stage Samples
With this sampling process the respondents are chosen through a process of defined
stages. For example residents within Islington (London) may have been chosen for a
survey through the following process:
Throughout the UK the south east may have been selected at random, ( stage 1), within
the UK London is selected again at random (stage 2), Islington is selected as the borough
(stage 3), then polling districts from Islington (stage 4) and then individuals from the
electoral register (stage 5).
As demonstrated five stages were gone through before the final selection of respondents
were selected from the electoral register.
Convenience Sampling
Where the researcher questions anyone who is available. This method is quick and cheap.
However we do not know how representative the sample is and how reliable the result.
Quota Sampling
Using this method the sample audience is made up of potential purchasers of your
product. For example if you feel that your typical customers will be male between 18-23,
female between 26-30, then some of the respondents you interview should be made up of
this group, i.e. a quota is given.
Dimensional Sampling
An extension to quota sampling. The researcher takes into account several characteristics
e.g. gender, age income, residence education and ensures there is at least one person in
the study that represents that population. E.g. out of 10 people you may want to make
sure that 2 people are within a certain gender, two a certain age group who have an
income rate between £25000 and £30000, this will again ensure the accuracy of the
sample frame again.
To summaries there are two types of sampling frames - probability and non-probability,
and within this six types of sampling methods as discussed above.
Secondary research is research already published, and is the cheapest form of research because
the data already exists for your acquisition. Secondary research can be split into internal and
external research.
Internally an organisation has access to a wealth of information, which can be a useful tool for
decision making for managers. Information available may assist the organisation in discovering
why sales are decreasing, why customers are not satisfied, customer usage rates and so on.
Sources of internal research may include:
Clearly as this information can be generated internally the only cost implication will be of staff
time obtaining the data.
• Periodicals.
• Specialist marketing reports i.e Mintel
• Industry magazines.
• Chamber of commerce.
• Government statistics.
• Internet.
• Professional bodies.
• Trade associations.
It is easy to find and collect secondary data., however, you need to be aware of the limitations the
data may have and the problems that could arise if these limitations are ignored.
• Secondary data can be general and vague and may not really help companies
with decision making.
• The information and data may not be accurate. The source of the data must
always be checked.
• The data maybe old and out of date.
• The sample used to generate the secondary data maybe small.
• The company publishing the data may not be reputable.
www.mintel.com
www.statistics.gov.uk
www.businessmonitor.co.uk
Primary Research
Primary research is research used to collect data for a specific task. Types of primary data
collection methods include:
• Easy to administer
• Quick.
• Allows for reaction and some in-depth interviews.
• Questions can be modified.
• Focus Groups: A discussion between six – eight individuals with the aim to
produce qualitative data (opinions and attitudes) on the topic being discussed.
The topic may be their opinions on a new product the organisation wishes to
introduce. The person who monitors the group is called 'the moderator'
• The group may have one or some dominant people within it who may actually
dissuade some other group member to make a full contribution.
• Difficult for moderator to interrupt once a discussion gets going.
• Bias from moderator.
Every business needs to innovate to stay ahead of the competition. No business can
continue to offer the same unchanged product, if they did so, profit would not be
maximized and sales would start to fall.
Here we will look at some of the reasons why a company may introduce new products
into its portfolio.
• Consumer needs may change, forcing the company to adapt with these changing
needs. If we look at food sectors around the world, consumers are becoming more
health conscious, forcing companies to introduce low sugar and fat versions of
their existing brands. Coca Cola Zero is a classic example.
• The product maybe at the end of its life cycle, so the company may introduce new
and improved updated versions. Microsoft has done this by moving from the
Xbox to the Xbox 360.
• The product might be at the maturity stage of its life cycle and might just need to
be re-modified to stimulate an increase in sales. Sony PlayStation have done this
with the original PlayStation by offering a smaller version called PSOne, and a
slim version of the PlayStation 2.
• There maybe environmental changes which the company may want to capitalise
on. Music companies are now selling more music via downloads then through
traditional shops, originally being forced to change the way they deliver their
product by Napster.
Improving and updating product lines is crucial for the success for any organisation.
Failure for an organisation to change could result in a decline in sales and with
competitors racing ahead. The process of NPD is crucial within an organisation. Products
go through the stages of their lifecycle and will eventually have to be replaced There are
eight stages of new product development. These stages will be discussed briefly below:
New product ideas have to come from somewhere. But where do organisations get their
ideas for NPD? Some sources include:
This process involves shifting through the ideas generated above and selecting ones
which are feasible and workable to develop. Pursing non feasible ideas can clearly be
costly for the company.
The organisation may have come across what they believe to be a feasible idea, however,
the idea needs to be taken to the target audience. What do they think about the idea? Will
it be practical and feasible? Will it offer the benefit that the organisation hopes it will? or
have they overlooked certain issues? Note the idea and concept is taken to the target
audience not a working prototype at this stage.
How will the product/service idea be launched within the market? A proposed marketing
strategy will be written laying out the marketing mix strategy of the product, the
segmentation, targeting and positioning strategy sales and profits that are expected.
Stage 5: Business Analysis
The company has a great idea, the marketing strategy seems feasible, but will the product
be financially worth while in the long run? The business analysis stage looks more deeply
into the cashflow the product could generate, what the cost will be, how much market
shares the product may achieve and the expected life of the product.
Finally it is at this stage that a prototype is finally produced. The prototype will clearly
run through all the desired tests, and be presented to the target audience to see if changes
need to be made.
Test marketing means testing the product within a specific area. The product will be
launched within a particular region so the marketing mix strategy can be monitored and if
needed, be modified before national launch.
Stage 8: Commercialization
If the test marketing stage has been successful then the product will go for national
launch. There are certain factors that need to be taken into consideration before a product
is launched nationally. These are timing, how the product will be launched, where the
product will be launched, will there be a national roll out or will it be region by region?
Marketing Tactics
Marketing Mix
The marketing mix principles (also known as the 4 p’s.) are used by business as tools to assist
them in pursuing their objectives. The marketing mix principles are controllable variables, which
have to be carefully managed and must meet the needs of the defined target group. The
marketing mix is apart of the organisations planning process and consists of analysing the
defined:
• How will you design, package and add value to the product. Product strategies.
• What pricing strategy is appropiate to use Price strategies.
• Where will the firm locate? Place strategies.
• How will the firm promote its product Promotion strategies.
Please click on the above links to learn more about the marketing mix
The marketing mix principles (also known as the 4 p’s.) are used by business as tools to assist
them in pursuing their objectives. The marketing mix principles are controllable variables, which
have to be carefully managed and must meet the needs of the defined target group. The
marketing mix is apart of the organisations planning process and consists of analysing the
defined:
• How will you design, package and add value to the product. Product strategies.
• What pricing strategy is appropiate to use Price strategies.
• Where will the firm locate? Place strategies.
• How will the firm promote its product Promotion strategies.
Please click on the above links to learn more about the marketing mix
Product strategies
When an organisation introduces a product into a market they must ask themselves a number of
questions.
We must remember that Marketing is fundamentally about providing the correct bundle of benefits
to the end user, hence the saying ‘Marketing is not about providing products or services it is
essentially about providing changing benefits to the changing needs and demands of the
customer’ (P.Tailor 7/00)
Philip Kotler in Principles of Marketing devised a very interesting concept of benefit building with a
product
Level 1: Core Product. What is the core benefit your product offers?. Customers who purchase
a camera are buying more then just a camera they are purchasing memories.
Level 2 Actual Product: All cameras capture memories. The aim is to ensure that your potential
customers purchase your one. The strategy at this level involves organisations branding, adding
features and benefits to ensure that their product offers a differential advantage from their
competitors.
Level 3: Augmented product: What additional non-tangible benefits can you offer? Competition
at this level is based around after sales service, warranties, delivery and so on. John Lewis a
retail departmental store offers free five year guarantee on purchases of their Television sets, this
gives their `customers the additional benefit of ‘piece of mind’ over the five years should their
purchase develop a fault.
Product Decisions
When placing a product within a market many factors and decisions have to be taken into
consideration. These include:
Product design – Will the design be the selling point for the organisation as we have seen with
the iMAC, the new VW Beetle or the Dyson vacuum cleaner.
Product quality: Quality has to consistent with other elements of the marketing mix. A premium
based pricing strategy has to reflect the quality a product offers.
Product features: What features will you add that may increase the benefit offered to your target
market? Will the organisation use a discriminatory pricing policy for offering these additional
benefits?
Branding: One of the most important decisions a marketing manager can make is about
branding. The value of brands in today’s environment is phenomenal. Brands have the power of
instant sales, they convey a message of confidence, quality and reliability to their target market.
Brands have to be managed well, as some brands can be cash cows for organisations. In many
organisations they are represented by brand managers, who have hugh resources to ensure their
success within the market.
A brand is a tool which is used by an organisation to differentiate itself from competitors. Ask
yourself what is the value of a pair of Nike trainers without the brand or the logo? How does your
perception change?
Increasingly brand managers are becoming annoyed by ‘copycat’ strategies being employed by
supermarket food retail stores particular within the UK . Coca-Cola threatened legal action
against UK retailer Sainsbury after introducing their Classic Cola, which displayed similar designs
and fonts on their cans.
Internet branding is now becoming an essential part of the branding strategy game. Generic
names like Bank.com and Business.com have been sold for £m’s. ( Recently within the UK
banking industry we have seen the introduction of Internet banks such as cahoot.com and
marbles.com the task by brand managers is to make sure that consumers understand that these
brands are banks!
Pricing Strategies
Pricing is one of the most important elements of the marketing mix, as it is the only mix, which
generates a turnover for the organisation. The remaining 3p’s are the variable cost for the
organisation. It costs to produce and design a product, it costs to distribute a product and costs to
promote it. Price must support these elements of the mix. Pricing is difficult and must reflect
supply and demand relationship. Pricing a product too high or too low could mean a loss of
sales for the organisation. Pricing should take into account the following factors:
Competition
Company objectives
Pricing Strategies
An organisation can adopt a number of pricing strategies. The pricing strategies are based much
on what objectives the company has set itself to achieve.
Penetration pricing: Where the organisation sets a low price to increase sales and market
share.
Skimming pricing: The organisation sets an initial high price and then slowly lowers the price to
make the product available to a wider market. The objective is to skim profits of the market layer
by layer.
Product Line Pricing: Pricing different products within the same product range at different price
points. An example would be a video manufacturer offering different video recorders with different
features at different prices. The greater the features and the benefit obtained the greater the
consumer will pay. This form of price discrimination assists the company in maximising turnover
and profits.
Psychological pricing: The seller here will consider the psychology of price and the positioning
of price within the market place. The seller will therefore charge 99p instead £1 or $199 instead of
$200
Premium pricing: The price set is high to reflect the exclusiveness of the product. An
example of products using this strategy would be Harrods, first class airline services,
porsche etc.
Optional pricing: The organisation sells optional extras along with the product to
maximise its turnover. This strategy is used commonly within the car industry.
Refers to how an organisation will distribute the product or service they are offering to the end
user. The organisation must distribute the product to the user at the right place at the right time.
Efficient and effective distribution is important if the organisation is to meet its overall marketing
objectives. If organisation underestimate demand and customers cannot purchase products
because of it profitability will be affected.
Two types of channel of distribution methods are available. Indirect distribution involves
distributing your product by the use of an intermediary. Direct distribution involves distributing
direct from a manufacturer to the consumer e.g. For example Dell Computers. Clearly direct
distribution gives a manufacturer complete control over their product.
Distribution Strategies
Depending on the type of product being distributed there are three common distribution strategies
available:
1. Intensive distribution: Used commonly to distribute low priced or impulse purchase products
eg chocolates, soft drinks.
2. Exclusive distribution: Involves limiting distribution to a single outlet. The product is usually
highly priced, and requires the intermediary to place much detail in its sell. An example of would
be the sale of vehicles through exclusive dealers.
3. Selective Distribution: A small number of retail outlets are chosen to distribute the product.
Selective distribution is common with products such as computers, televisions household
appliances, where consumers are willing to shop around and where manufacturers want a large
geographical spread.
Promotion Strategies - Click here if you want Edward to read this bit.
Promotion quiz
A successful product or service means nothing unless the benefit of such a service can be
communicated clearly to the target market. An organisations promotional strategy can consist of:
Advertising: Is any non personal paid form of communication using any form of mass media.
Public relations: Involves developing positive relationships with the organisation media public.
The art of good public relations is not only to obtain favorable publicity within the media, but it is
also involves being able to handle successfully negative attention.
Sales promotion: Commonly used to obtain an increase in sales short term. Could involve using
money off coupons or special offers.
Direct Mail: Is the sending of publicity material to a named person within an organisation. There
has been a massive growth in direct mail campaigns over the last 5 years. Spending on direct
mail now amounts to £18 bn a year representing 11.8% of advertising expenditure ( Source:
Royal Mail 2000). Organisations can pay thousands of pounds for databases, which contain
names and addresses of potential customers.
Direct mail allows an organisation to use their resources more effectively by allowing them to
send publicity material to a named person within their target segment. By personalising
advertising, response rates increase thus increasing the chance of improving sales. Listed below
are links to organisation who's business involves direct mail.
www.royalmail.co.uk/atwork
www.dmis.co.uk
www.dmconcepts.co.uk
www.marketline.co.uk
Message & Media Strategy - Click here if you want Edward to read this bit.
An effective communication campaign should comprise of a well thought out message strategy.
What message are you trying to put accross to your target audience?. How will you deliver that
message? Will it be through the appropiate use of branding? logos or slogan design?. The
message should reinforce the benefit of the product and should also help the company in
developing the positioning strategy of the product. Companies with effective message strategies
include:
Media strategy refers to how the organisation is going to deliver their message. What aspects of
the promotional mix will the company use to deliver their message strategy. Where will they
promote? Clearly the company must take into account the readership and general behaviour of
their target audience before they select their media strategy. What newspapers do their target
market read? What TV programmes do they watch? Effective targeting of their media campaign
could save the company on valuable financial resources.
Push & Pull Strategies - Click here if you want Edward to read this bit.
Communication by the manufacturer is not only directed towards consumers to create demand. A
push strategy is where the manufacturer concentrates some of their marketing effort on
promoting their product to retailers to convince them to stock the product. A combination of
promotional mix strategies are used at this stage aimed at the retailer including personal selling,
and direct mail. The product is pushed onto the retailer, hence the name. A pull strategy is based
around the manufacturer promoting their product amongst the target market to create demand.
Consumers pull the product through the distribution channel forcing the wholesaler and retailer to
stock it, hence the name pull strategy. Organisations tend to use both push and pull strategies to
create demand from retailers and consumers.
Promotion through the Product lifecycle. - Click here if you want Edward to read this bit.
As products move through the four stages of the product lifecycle different promotional strategies
should be employed at these stages to ensure the healthy success and life of the product .
Introduction
When a product is new the organisations objective will be to inform the target audience of its
entry. Television, radio, magazine, coupons etc may be used to push the product through the
introduction stage of the lifecycle. Push and Pull Strategies will be used at this crucial stage.
Growth
As the product becomes accepted by the target market the organisation at this stage of the
lifecycle the organisation works on the strategy of further increasing brand awareness to
encourage loyalty.
Maturity
At this stage with increased competition the organisation take persuasive tactics to encourage the
consumers to purchase their product over their rivals. Any differential advantage will be clearly
communicated to the target audience to inform of their benefit over their competitors.
Decline
As the product reaches the decline stage the organisation will use the strategy of reminding
people of the product to slow the inevitable
Internet promotion.
The development of the world wide web has changed the business environment forever. Dot com
fever has taken the industry and stock markets by storm. The e-commerce revolution promises to
deliver a more efficient way of conducting business. Shoppers can now purchase from the
comfort of their home 24 hours a day 7 days a week. However, particularly in the UK the e-
commerce revolution is hindered by two factors. Firstly the cost of logging on to the net.
Consumers are still weary of the time-spent surfing, the high cost is slowing down the take-up.
The number of homes that are linked to the web in the UK is only 25% of all house owner. If e-
commerce businesses are to succeed the home penetration rate of internet access must also
increase. Secondly, most homes are linked to modems of 56K. As the growth of people signing
on-line grows the access speed slows down. In America most consumers only spend 10 seconds
browsing on a web page, before they change sites, within the UK it is 2 minutes. The future
seems to be with ADSL networks which will speed up access to the Internet dramatically running
at 512K per second. However, again whether this format is adapted depends much on the cost.
Owning a website is a now a crucial ingredient to the marketing mix strategy of an organisation.
Consumers can now obtain instant information on products or services to aid them in their crucial
purchase decision. Sony Japan took pre-orders of their popular Playstaion 2 console over the
net, which topped a 1 million after a few days, European football stars are now issuing press
releases over the web with the sites registered under their own names. Hit rates are
phenomenal.
Branding
What is a Brand?
Why brand?
A brand name helps an organisation differentiate itself from its competitors. In todays
competitive world no product can go without a brand. Customers often build up a
relationship with a brand that they trust and will often go back to time and time again. For
example, some people may only purchase a Sony TV although there are acceptable
alternatives on the market, because of a past positive history with this brand.
Brand Equity
How much is a brand worth? Brand equity refers to the value of the brand. Brand equity
does not develop instantaneously. A brand needs to be carefully nurtured and marketed so
consumers feel real value and trust towards that brand. Nike, Adidas, Harrods, have high
brand equity. These brand command high awareness and consumer loyalty. But how
much are these brands worth? It is difficult to put a value on these brands. But how much
is a pair of Nike trainers worth without the logo on it?
Branding strategies
When a company manages its brands it has a number of strategies it can use to further
increase its brand value. These are:
Line extension: This is where an organisation adds to its current product line by
introducing, versions with new features, an example could be a Crisp manufacturer
extending its line by adding more exotic flavours.
Brand extension: If your current brand name is successful, you may use the brand name
to extend into new or existing areas. For example Virgin extending its brand from
records, to airlines, to mobiles.
Multi Branding: The company decides to further introduce more brands into an already
existing category. Kellogg’s for example have a number of brands in the cereal market
and the cereal bar market. Multi-branding can allow an organisation to maximise profits,
but a company needs to be weary over their own brands competing with each other over
market share.
New Brands: An organisation may decide to launch a new brand into a market. A new
brand may be used to compete with existing rivals and may be marketed as something
‘new and fresh’.
Brand Names
How do you name a product? Simply put it, there is no easy option. Depending on how
established an organisation is, there are a number of ways to brand a product.
Individual name: A product could be branded with an individual name. A firm may
decide it wants a brand, which has no association with any of its other brands.
Volkswagen in the UK, for example own the brand SEAT and Skoda
Family brand: Where a product is part of a family, e.g. Kellogg’s, with Corn flakes, Rice
Krispies, and Frosties. The brand is stretched to other products because customers trust it,
and the firm is trying to maximize the equity it holds in the brand.
Combined brand name: A popular strategy involves the organisation combing the
already established family name with a new individual brand name. The idea is to use the
reputation of the established family or company name to launch a new associated
product. For example Nestle may use their name to launch a new cereal or cereal bar.
Philip Kotler in Principles of Marketing devised a very interesting concept of benefit building with a
product
Level 1: Core Product. What is the core benefit your product offers?. Customers who purchase
a camera are buying more then just a camera they are purchasing memories.
Level 2 Actual Product: All cameras capture memories. The aim is to ensure that your potential
customers purchase your one. The strategy at this level involves organisations branding, adding
features and benefits to ensure that their product offers a differential advantage from their
competitors.
Level 3: Augmented product: What additional non-tangible benefits can you offer? Competition
at this level is based around after sales service, warranties, delivery and so on. John Lewis a
retail departmental store offers free five year guarantee on purchases of their Television sets, this
gives their `customers the additional benefit of ‘piece of mind’ over the five years should their
purchase develop a fault.
In helping you develop a market positioning strategy for your product or service,
perceptual maps or positioning maps as they are sometimes referred to, are often used to
help the organisation identify a positioning strategy.
When plotting a peceptual map two dimensions are commonly used. Below is a very
basic perceptual map. If we plot the UK chocolate market we can identify those brands
which are high price and high quality. Belgium chocolates are plotted as high quality and
high price, and twix is plotted one low quality low price brand. Once completed the
perceptual map could help identify where an organisation could launch a new brand
pherhaps at the medium price and quality range. In our basic map, you can see there is
not much competition within that particular area.
We must remember that perceptual maps are plotted on the basis of someones perception
and what maybe a quality product to one person, may not be percieved as quality to
another.
After the organisation has selected its target market, the next stage is to decide how it
wants to position itself within that chosen segment. Positioning refers to ‘how
organisations want their consumers to see their product’. What message about the
product or service is the company trying to put across? Car manufacturer Daewoo in the
UK, has successfully positioned themselves as the family value model. The UK car
Skoda brand which has been taken over by Volkswagen has been re-positioned as a
vehicle which had negative brand associations, to one which regularly wins car of the
year awards. The positive comments from the industry and attributes of this vehicle is has
changed the perception of consumers about the Skoda brand.
Ultimately positioning is about how you want consumers to perceive your products and
services and what strategies you would adopt to reach this perceptual goal. For more
information please read Peceptual Mapping.
Service Marketing
Characteristics of a Service
What exactly are the characteristics of a service? How are services different from a
product? In fact many organisations do have service elements to the product they sell, for
example McDonald’s sell physical products i.e. burgers but consumers are also concerned
about the quality and speed of service, are staff cheerful and welcoming and do they
serve with a smile on their face?
1. Lack of ownership.
You cannot own and store a service like you can a product. Services are used or hired for
a period of time. For example when buying a ticket to the USA the service lasts maybe 9
hours each way , but consumers want and expect excellent service for that time. Because
you can measure the duration of the service consumers become more demanding of it.
2. Intangibility
You cannot hold or touch a service unlike a product. In saying that although services are
intangible the experience consumers obtain from the service has an impact on how they
will perceive it. What do consumers perceive from customer service? the location, and
the inner presentation of where they are purchasing the service?.
3. Inseparability
Services cannot be separated from the service providers. A product when produced can be
taken away from the producer. However a service is produced at or near the point of
purchase. Take visiting a restaurant, you order your meal, the waiting and delivery of the
meal, the service provided by the waiter/ress is all apart of the service production process
and is inseparable, the staff in a restaurant are as apart of the process as well as the
quality of food provided.
4. Perishibility
Services last a specific time and cannot be stored like a product for later use. If travelling
by train, coach or air the service will only last the duration of the journey. The service is
developed and used almost simultaneously. Again because of this time constraint
consumers demand more.
5. Heterogeneity
It is very difficult to make each service experience identical. If travelling by plane the
service quality may differ from the first time you travelled by that airline to the second,
because the airhostess is more or less experienced.
A concert performed by a group on two nights may differ in slight ways because it is very
difficult to standardise every dance move. Generally systems and procedures are put into
place to make sure the service provided is consistent all the time, training in service
organisations is essential for this, however in saying this there will always be subtle
differences.
Having discussed the characteristics of a service, let us now look at the marketing mix of
a service.
The service marketing mix comprises off the 7’p’s. These include:
• Product
• Price
• Place
• Promotion
•
• People
• Process
• Physical evidence.
People
An essential ingredient to any service provision is the use of appropriate staff and people.
Recruiting the right staff and training them appropriately in the delivery of their service is
essential if the organisation wants to obtain a form of competitive advantage. Consumers
make judgements and deliver perceptions of the service based on the employees they
interact with. Staff should have the appropriate interpersonal skills, aptititude, and service
knowledge to provide the service that consumers are paying for. Many British
organisations aim to apply for the Investors In People accreditation, which tells
consumers that staff are taken care off by the company and they are trained to certain
standards.
Process
Refers to the systems used to assist the organisation in delivering the service. Imagine
you walk into Burger King and you order a Whopper Meal and you get it delivered
within 2 minutes. What was the process that allowed you to obtain an efficient service
delivery? Banks that send out Credit Cards automatically when their customers old one
has expired again require an efficient process to identify expiry dates and renewal. An
efficient service that replaces old credit cards will foster consumer loyalty and confidence
in the company.
Physical Evidence
Where is the service being delivered? Physical Evidence is the element of the service mix
which allows the consumer again to make judgements on the organisation. If you walk
into a restaurant your expectations are of a clean, friendly environment. On an aircraft if
you travel first class you expect enough room to be able to lay down!
Physical evidence is an essential ingredient of the service mix, consumers will make
perceptions based on their sight of the service provision which will have an impact on the
organisations perceptual plan of the service.
The Service marketing mix involves analysing the 7’p of marketing involving, Product,
Price, Place, Promotion, Physical Evidence, Process and People.
To certain extent managing services are more complicated then managing products,
products can be standardised, to standardise a service is far more difficult as there are
more input factors i.e. people, physical evidence, process to manage then with a product.
When purchasing a product there several processes, which consumers go through. These
will be discussed below.
1. Problem/Need Recognition
How do you decide you want to buy a particular product or service? It could be that your
DVD player stops working and you now have to look for a new one, all those DVD films
you purchased you can no longer play! So you have a problem or a new need. For high
value items like a DVD player or a car or other low frequency purchased products this is
the process we would take. However, for impulse low frequency purchases e.g.
confectionery the process is different.
2. Information search
So we have a problem, our DVD player no longer works and we need to buy a new one.
What’s the solution? Yes go out and purchase a new one, but which brand? Shall we buy
the same brand as the one that blew up? Or stay clear of that? Consumer often go on
some form of information search to help them through their purchase decision. Sources of
information could be family, friends, neighbours who may have the product you have in
mind, alternatively you may ask the sales people, or dealers, or read specialist magazines
like What DVD? to help with their purchase decision. You may even actually examine the
product before you decide to purchase it.
4. Purchase decision
Through the evaluation process discussed above consumers will reach their final
purchase decision and they reach the final process of going through the purchase action
e.g. The process of going to the shop to buy the product, which for some consumers can
be as just as rewarding as actually purchasing the product. Purchase of the product can
either be through the store, the web, or over the phone.
Ever have doubts about the product after you purchased it? This simply is post purchase
behaviour and research shows that it is a common trait amongst purchasers of products.
Manufacturers of products clearly want recent consumers to feel proud of their purchase,
it is therefore just as important for manufacturers to advertise for the sake of their recent
purchaser so consumers feel comfortable that they own a product from a strong and
reputable organisation. This limits post purchase behaviour. i.e. You feel reassured that
you own the latest advertised product.
Culture is one factor that influences behaviour. Simply culture is defined as our attitudes
and beliefs. But how are these attitudes and beliefs developed? As an individual growing
up, a child is influenced by their parents, brothers, sister and other family member who
may teach them what is wrong or right. They learn about their religion and culture, which
helps them develop these opinions, attitudes and beliefs (AIO) . These factors will
influence their purchase behaviour however other factors like groups of friends, or people
they look up to may influence their choices of purchasing a particular product or service.
Reference groups are particular groups of people some people may look up towards to
that have an impact on consumer behaviour. So they can be simply a band like the Spice
Girls or your immediate family members. Opinion leaders are those people that you look
up to because your respect their views and judgements and these views may influence
consumer decisions. So it maybe a friend who works with the IT trade who may influence
your decision on what computer to buy. The economical environment also has an impact
on consumer behaviour; do consumers have a secure job and a regular income to spend
on goods? Marketing and advertising obviously influence consumers in trying to evoke
them to purchase a particular product or service.
Peoples social status will also impact their behaviour. What is their role within society?
Are they Actors? Doctors? Office worker? and mothers and fathers also? Clearly being
parents affects your buying habits depending on the age of the children, the type of job
may mean you need to purchase formal clothes, the income which is earned has an
impact. The lifestyle of someone who earns £250000 would clearly be different from
someone who earns £25000. Also characters have an influence on buying decision.
Whether the person is extrovert (out going and spends on entertainment) or introvert
(keeps to themselves and purchases via online or mail order) again has an impact on the
types of purchases made.
Abraham Maslow hierarchy of needs theory sets out to explain what motivated
individuals in life to achieve. He set out his answer in a form of a hierarchy. He suggests
individuals aim to meet basic psychological needs of hunger and thirst. When this has
been met they then move up to the next stage of the hierarchy, safety needs, where the
priority lay with job security and the knowing that an income will be available to them
regularly. Social needs come in the next level of the hierarchy, the need to belong or be
loved is a natural human desire and people do strive for this belonging. Esteem need is
the need for status and recognition within society, status sometimes drives people, the
need to have a good job title and be recognised or the need to wear branded clothes as a
symbol of status.
Self-actualisation the realisation that an individual has reached their potential in life. The
point of self-actualisation is down to the individual, when do you know you have reached
your point of self-fulfilment?
But how does this concept help an organisation trying to market a product or service?
Well as we have established earlier within this website, marketing is about meeting needs
and providing benefits, Maslows concept suggests that needs change as we go along our
path of striving for self-actualisation. Supermarket firms develop value brands to meet
the psychological needs of hunger and thirst. Harrods develops products and services for
those who want have met their esteem needs. So Maslows concept is useful for marketers
as it can help them understand and develop consumer needs and wants.
There are four typical types of buying behaviour based on the type of products that
intends to be purchased. Complex buying behaviour is where the individual purchases a
high value brand and seeks a lot of information before the purchase is made. Habitual
buying behaviour is where the individual buys a product out of habit e.g. a daily
newspaper, sugar or salt. Variety seeking buying behaviour is where the individual likes
to shop around and experiment with different products. So an individual may shop around
for different breakfast cereals because he/she wants variety in the mornings! Dissonance
reducing buying behaviour is when buyer are highly involved with the purchase of the
product, because the purchase is expensive or infrequent. There is little difference
between existing brands an example would be buying a diamond ring, there is perceived
little difference between existing diamond brand manufacturers.
To summarise:
• There are five stages of consumer purchase behaviour
• Problem/Need Recognition
• Information search.
• Evaluation of purchases.
• Purchase decision.
• Post purchase behaviour.
• Culture has an impact on the company.
• Marketers should take into account Maslows hierarchy of needs.
Consumer goods are products which are purchased for personal consumption. Consumer
goods are classified into three areas.. These are:
Convenience Goods
Convenience products are inexpensive frequent purchases, there is little effort needed to
purchase them. Examples may include fast food and confectionery products.
Convenience products are split into staples, such as milk, eggs and emergency products
which are purchased when the need arises e.g. Umbrellas.
Shopping goods
Shopping goods are usually high risk products where consumers like to shop around to
find the best features and price for that product.. Examples include buying fridges,
freezers or washing machines.
Specialty Goods
There are products that are purchased infrequently. The consumers will conduct extensive
research to make sure that their purchase decision is right, because specialty goods are
expensive and infrequent purchases. The organization will support the product with an
extensive warranty package. Examples include watches and diamonds. There are usually
little or no substitutes for these products.
Introduction
An increased focus on environmental issues, has contributed to a rise in the demand for
environmentally friendly products and services (EFS). The spotlight on sustaining the
environment has created new terminology such as “carbon footprint” and “offsetting”.
Many organisations have adapted their marketing strategies to capitalise on the consumer
appetite for EFS.
EF marketing strategy takes into account additional factors which arent usually part of
the marketing mix. Such a deviation from the academic acceptance of the “marketing
mix” components has led Learnmarketing to develop the ‘environmental marketing mix.’
Environmental Product Strategies
There are a large number of environmental issues impacting on the production of goods
and products. For example:
All organisations will need to “carefully” time when their product reaches consumers;
exact time of distribution will depend on the product or service being distributed. Such
timing may have an environmental implication.
Some products will need to reach the consumer shortly after production for example fresh
food in order to retain freshness, taste or nutritional value. The fastest method of
distribution may damage the environment. Conversely a more environmentally friendly
method e.g. via canals may impact on speed of distribution and consequently quality of
the product. A method of distribution that combines speed with “environmentally
friendliness” may increase distribution costs as some of these processes are still under
development e.g. electric vehicles.
In addition to the type of transport used for distribution, an organisation will need to
review distribution techniques; For example timing deliveries so that they occur during
off peak hours and do not contribute to congestion.
Some organisations attempt to make fewer deliveries, whilst others promote concentrated
products (e.g. fabric conditioner) as they increase the number of products that can carried
in each delivery vehicle.
Even if “environmentally friendly distribution” is not at the top of an organisation’s list of
priorities, government policies may elevate it to the top. Congestion charging and low
emission zones have been introduced in the London. Apart from the obvious increase in
costs emanating from observance of such policies, a failure to observe environmentally
friendly rules and regulations will lead to fines and sanctions and consequently negative
publicity.
After reviewing internal distribution methods an organisation will need to review supplier
and subcontractor distribution as consumers and the media expect organisations claiming
environmental credentials to only liaise with other environmentally friendly
organisations.. For example do the subcontractors use Bio-fuel? Are the subcontractors
actively managing their “carbon footprint” or energy use?
Due to the consumer, celebrity and government appetite for protecting the “environment”
environmentally friendly practices are used as promotional tools. For example the award
of ISO 14001 (which certifies that an organisation has certain environmental standards, as
certified by an independent external auditing organisation) is often quoted in marketing
literature.
Product packaging that can be recycled will have a message on the packaging clearly
stating the recycling properties for the packaging. Similarly organic products will be
labelled, not only on the packaging but also around the shelving displaying the organic
produce.
Some organisations have sought to reduce costs through the promotion of
environmentally friendly strategies. The use of carrier bags has changed dramatically in
the UK over the last 2-3 years. Retailers actively promote the benefit of reusable bags as
they have many benefits
• Lower costs for the retailer
• Consumers “feel good” as they believe that the use of a reusable bag is helping the
environment
• Fewer carrier bags go to landfill
Another example is hotels offering guests the opportunity to engage in fewer linen and
towel changes. Such strategy is environmentally friendly as it reduces the use of
detergents and energy but it also reduces costs for the hotel and improves corporate
image.
Some organisations providing products and services which may harm the environment
have added “off setting” methods to their portfolios and marketing literature. The idea
behind “off setting” is that the consumer is offered the opportunity to indirectly engage in
an activity (such as tree planting) that benefits the environment and therefore
balances/evens out the damage they caused for example through flying. Such schemes
attempt to ease the consumer’s conscience and retain a positive image for the
organisation providing the environmentally unfriendly product or service.
Requirements of segmentation.
Before an organisation can target a specific segment accurately it must ask itself a
number of questions. It is important to evaluate the effectiveness of a targeting strategy
and the viability of the segment, if this is not done then money will be wasted.
The market which is segmented must meet the following criteria:
Measurability of segment: Can you measure the size and growth of the segment. Is the
segment growing? In the UK the DVD market is growing at an extremely fast pace. From
January 2002 – June 2002 900,000 DVD’s were sold. The fast growth rate is attracting
many players within the market.
Accessibility of segment: Is it easy for you to target and reach your segment? Can they
be reached with basic communication tools such as radio and TV advertising? If you
cannot target your segment effectively with marketing communication then it is not
viable.
Suitability of segment: Is there enough spending power within the segment for the
company to sustain itself.? Will spending within the DVD marketing continue?
Actionability of segment: Does the organisation have enough resources to reach their
segments?. It is no point in targeting segments you do not have the resources to cater for.
If you were a car manufacturer the organisation would not concentrate on the affluent and
price sensitive market if they did not have the resources to do so.
Market Segmentation
An organisation cannot satisfy the needs and wants of all consumers. To do so may result in a
massive drain in company resources. Segmentation is simply the process of dividing a particular
market into sections, which display similar characteristics or behaviour. There are a number of
segmentation variables that allow an organisation to divide their market into homogenous groups.
These variables will be discussed briefly below
Demographic Segmentation
Demographics originates from the word ‘demography’ which means a ‘study of population’. The
population can be divided into age, gender, income, and family lifecycle amongst other variables.
As people age their needs and wants change, some organisations develop specific products
aimed at particular age groups for example nappies for babies, toys for children, clothes for
teenagers and so on. Gender segmentation is commonly used within the cosmetics, clothing
and magazine industry. All Bar One within the UK have developed their bars to attract the female
audience, taking opportunity of the rise in the number of women who now enjoy ‘social drinking’.
In the UK we have also seen the introduction of Maxim, (www.maxim-magazine.co.uk) a male
lifestyle magazine covering male fashion, films, cars, sports and technology. We have also seen
the introduction of unisex cosmetic products like CK1 which works on the similarities between the
two genders.
Age & lifecycle segmentation: As people age their needs and lifestyles change.
Income segmentation is another strategy used by many organisations. Stores like Harrods,
Harvey Nicohals are predominantly aimed at the affluent market. Daewoo aim their vehicles at
price sensitive buyers who require a bundle of benefits for the price. In today's globally
competitive environment brands are specifically developed and positioned within particular
income segments inorder to maximise turnover.
Products and services are also aimed at different lifecycle segments. Holidays are developed
for families, the 18-30's singles, and for those in their 50's.
Geographic Segmentation
Pyschographics Segmentation
Lifestyles segmentation
The Oxford English dictionary defines a lifestyle 'as a way of life' and lifestyle segmentation aims
to examine the way people live.
Our lifestyle, our every days activities, our interest, opinions and beliefs on certain issues
dictates who we are. Marketers refer to these as AIO’s (Activities, Interest and Opinions), and our
AIO’s dictate our everyday behaviour from where we shop to what we buy. Marketers develop
and aim products/services at particular lifestyle groups and develop lifestyle profiles on their
target market. If we understand the lifestyle of a particular group we can sell them a
product/services on the basis that it will enhance their lifestyle. A lifestyle group is a particular
segment defined by the organisation that is marketing a product or service. This lifestyle segment
is labeled because individual within it display similar characteristics. For example in the early
1980s within the UK as the economy was booming the City of London were increasingly
employing young independent staff on very high salaries. The media termed this group as
YUPPIES, they were young upwardly mobile professionals, associated with mobile phones,
money, expensive cars, and prestigious city jobs.
Third agers are another group termed and identified by the marketing industry. They are people in
their 50’s retired from a profession, and have a high disposable income with time on the hand.
Many of these third-agers are adventurous and experimenters, as they have spent their past lives
working hard and they seek enjoyment from their remaining years and have the income to spend
on luxury items. In the United States there are 70 million third-agers who are the fastest growing
users of the internet, spending more time on the internet then their younger counterpart.
www.thirdage.com has a hit rate of 500,000 per month.
Lifestyle groups
• Mobile • 50's
• High valued • Retired early from
house/flat profession.
• Good Salary • Time to spare
Products and brands can also be aimed at particular personalities. Pigaio motorcycles are aimed
at young 18-25 outgoing, independent persons. Often marketers try to develop personalities for
their brands and products that mimic that of their target market. Ask yourself if Nike or Levi’s was
a person, what type of person would they be?
A Professional staff
B Middle management
C1 Junior management
C2 Skilled manual
Social class segmentation works on the assumption that the higher your profession the more you
will earn. Thus the more affluent lifestyle you will lead. Marketers use this type of information to
sell products and services based on lifestyle behaviour, and your profession does have an impact
on the way you behave.
Behavioural Segmentation
Refers to why people purchase a product or service. Behavioural segmentation can be broken
down into the benefit a consumer seeks from purchasing a product. How will the product
enhance their overall lifestyle. When purchasing a computer the benefit sought maybe of ‘ease
of use’ to the ‘need for speed’. Occasion is another variable. When should a product be
purchased? The demand for turkeys increases during Christmas, flowers and chocolates on
mothers day and so on. Occasion segmentation aims to increase the ‘reason to buy factor’ and
thus increase sales. Usage rate divides customers into light, medium and heavy users. Heavy
users obviously contribute more to turnover then light or medium users, the objective of an
organisation should be to attract heavy users who will make a greater contribution to company
sales.
Requirements of segmentation.
Before an organisation can target a specific segment accurately it must ask itself a
number of questions. It is important to evaluate the effectiveness of a targeting strategy
and the viability of the segment, if this is not done then money will be wasted.
The market which is segmented must meet the following criteria:
Measurability of segment: Can you measure the size and growth of the segment. Is the
segment growing? In the UK the DVD market is growing at an extremely fast pace. From
January 2002 – June 2002 900,000 DVD’s were sold. The fast growth rate is attracting
many players within the market.
Accessibility of segment: Is it easy for you to target and reach your segment? Can they
be reached with basic communication tools such as radio and TV advertising? If you
cannot target your segment effectively with marketing communication then it is not
viable.
Suitability of segment: Is there enough spending power within the segment for the
company to sustain itself.? Will spending within the DVD marketing continue?
Actionability of segment: Does the organisation have enough resources to reach their
segments?. It is no point in targeting segments you do not have the resources to cater for.
If you were a car manufacturer the organisation would not concentrate on the affluent and
price sensitive market if they did not have the resources to do so.
Targeting
After the process of segmentation the next step is for the organisation to decide how it is going to
target these particular group(s). There are three targeting options an organisation can adopt.
Option 1.
Undifferentiated marketing - Sometimes referred to as mass marketing the firm may decide to
aim its resources at the entire market with one particular product. Coca Colas original marketing
strategy was based on this form. One product aimed at the mass market in the hope that a
sufficient amount of buyers would be attracted., although there are now changes in their product
line to cater for growing dietary and caffeine free needs of consumers.
Option 2
Differentiated marketing strategy - Where the firm decides to target several segments and
develops distinct products/services with separate marketing mix strategies aimed at the varying
groups. An example of this would be airline companies offering first, business (segment 1) or
economy class tickets (segment 2) , with separate marketing programmes to attract the different
groups.
Option 3
Concentrated Marketing: Where the organisation concentrates its marketing effort on one
particular segment. The firm will develop a product that caters for the needs of that particular
group. For example Rolls Royce cars aim its vehicles at the premium segment, same as Harrods
within the UK.
Positioning.
After the organisation has selected its target market, the next stage is to decide how it
wants to position itself within that chosen segment. Positioning refers to ‘how
organisations want their consumers to see their product’. What message about the
product or service is the company trying to put across? Car manufacturer Daewoo in the
UK, has successfully positioned themselves as the family value model. The UK car
Skoda brand which has been taken over by Volkswagen has been re-positioned as a
vehicle which had negative brand associations, to one which regularly wins car of the
year awards. The positive comments from the industry and attributes of this vehicle is has
changed the perception of consumers about the Skoda brand.
Ultimately positioning is about how you want consumers to perceive your products and
services and what strategies you would adopt to reach this perceptual goal. For more
information please read Peceptual Mapping.
Marketing Plans
What is it?
A marketing plan aims to help organise the strategy for a company, its products or
services. Planning is essential in all organisations and company plans should be
documented.
However, all good plans must support the overall corporate objectives of the organisation,
the corporate objectives maybe to be global leader in the next five years, all individual
plans must support this.
A common method used to help plan a marketing plan is an acronym called AOSTC. It
simply stands for
1. Analysis – Of environment.
2. Objectives – Setting yourself SMART objectives.
3. Strategies – For segmentation and growth, targeting and positioning.
4. Tactics – Used i.e. marketing mix
5. Control. – How you will monitor that you are achieving objectives.
Every good marketing plans needs to analyse the current business situation and ask a
simple question, where is the business now? This involves the business firstly conducting
an internal audit.
The internal audit aims to look at what you did in the past, was it successful, if not why
not, if so, why so? Simple hey!
After the internal audit the next stage is for you to conduct an external audit. The
external audit will involve:
- Conducting a PEST analysis, and discussing the impact of this on your strategy.
- Researching the industry you operate in. What are the trends within the industry you
operate in?
- Competitor analysis. What are your competitors up to?
- A SWOT analysis to help establish your current strengths, opportunities, weaknesses
and threats.
Set yourself SMART objectives so you know where you are heading. Remember SMART
stands for:
Specific – Clearly state what you want to achieve.
Measurable – Is it easy to measure the objectives you set by monitoring sales, market
share figures?
Achievable – Set yourself attainable objectives.
Realistic – Can you really achieve them with the current resources you have?
Timed – Set a realistic time scale for the objectives.
- Define your target market. Select your segment, your targeting strategy and positioning
strategy.
- How will you use the marketing mix to assist you. What will be your product, price,
place or promotion strategy?
Are you achieving the objectives you set for yourself? To evaluate your plan some
benchmarks may include:
- Market share data.
- Sales data.
- Consumer feedback.
- Feedback from staff.
- Feedback from retailers.
Finally at the end of this task write a summary of the plan and place it at the front. Why?
Well it acts as a quick reference guide to the plan you have just written.
Relationship Marketing
What is it?
Relationship Marketing involves using methods and tactics to develop long term
relationship with customers in order to retain them. An organisation must exceed
customer satisfaction in order to retain them and develop a healthy relationship with their
customers.
Traditional transactional marketing involved the organisation focusing all of its marketing
efforts on attracting the customer for one off sales. However, customers who are loyal
end up spending more in the long-term, so it makes sense, keep existing customers
happy!
An organisation must continue to satisfy customers, but lets be honest, it is very difficult
to keep 100% of your customers satisfied all the time, one reason is because needs and
wants of your customers change. So we have to monitor what is happening in our
customer environment. Methods used to monitor customer satisfaction include:
Focus groups .
Personal interviews.
Questionnaires.
Mystery Shoppers.
Customer complaints.
Suggestion boxes.
Online surveys.
General comments.
In order to retain customers we must keep up to date with the needs of our customers.
Customer needs do not remain static and always change. Adapting and changing along
with these needs will help the organisation develop the relationship it wants with the
customer. The benefit, well increased profit, market share and brand awareness.
CRM is about the systems (IT and non – IT systems) that are employed that help an
organisation manage its relationships with it customers.
• By using simple databases CRM can help the organisation in segmenting their
most profitable customers.
• Help the organisation in targeting specific products at certain customers groups by
looking at their past purchase patterns.
• Help identify light and medium users, and employing strategies to try and convert
them into heavy users.
• CRM can provide employees with all the necessary information that they need to
know about the customer they are dealing with, ensuring that the customer is dealt
with in an efficient manner and ensuring personlisation for the customer.
Relationship marketing is about developing long term relationships with the customer. A
company needs to be able to turn a one off sale into a fruitful long-tem relationship where
both parties will benefit.
The ladder of customer loyalty talks about the different types of customers the company
encounters. The aim of relationship marketing is to retain customers, as it can cost a
company anything as up to six times as much to attract new customers.
Suspect.
A suspect is someone who comes across your companies’ promotion. They are a potential
suspect for your company.
Prospect
Customers
Clients
Advocates
Promotes your business on your behalf. They are so happy about your product/service
that they tell others.
It makes sense for the company on spending money to retain customers and keeping them
happy so they can become advocates for you, therefore bringing in the business on your
behalf.
Ansoffs Matrix
A common tool used within marketing was developed by Igor Ansoff in 1957. His model gives
organisation five strategic business options.
1. Market Penetration: This involves increasing sales of an existing product and penetrating the
market further by either promoting the product heavily or reducing prices to increase sales.
2. Product Development: The organisation develops new products to aim within their existing
market, in the hope that they will gain more custom and market share. For Example Sony
launching the Playstation 2 to replace their existing model..
3. Market Development: The organisation here adopts a strategy of selling existing products to
new markets. This can be done either by a better understanding of segmentation, i.e who else
can possibly purchase the product or selling the product to new markets overseas.
4. Diversification: Moving away from what you are selling (your core activities) to providing
something new eg Moving over from selling foods to selling cars.
5. Consolidation: Where the organisation adopts a strategy of withdrawing from particular
markets, scaling back on operations and concentrating on its existing products in existing
markets.
SWOT Analysis
A tool used by organisations to help the firm establish its Strengths, Weaknesses, Opportunities
and Threats (SWOT). A SWOT analysis is used as a framework to help the firm develop its
overall corporate, marketing, or product strategies. Note:Strengths and Weaknesses are
internal factors which are controllable by the organisation. Opportunities & threats are
external factors which are uncontrollable by the organisation.
• A growing market.
• Increased consumer spending.
• Selling internationally.
• Changes in society beneficial to your company.
• Competitors
• Government policy eg taxation, laws.
• Changes in society not beneficial to your company.
A SWOT analysis is an excellent tool to use if the organisation wants to take a step back and
assess the situation they are in. Issues raised from the analysis are then used to assist the
organisation in developing their marketing mix strategy. A SWOT analysis must form the part of
any prudent marketing strategy.
This product portfolio matrix classifies product lines into four categories. The BCG
models suggests that organisations should have a healthy balance of products within their
range. The Boston Consultancy Group classified these products as following:
Dogs
These are products which have low market shares and low market growth rates. The
options for many companies is to phase these products out, however some organisation
do go for the strategy of re-inventing and injecting new life into the product. (see Heinz
Case Study)
Star
Stars have high market shares that operate in growing markets. The product at this stage
should be generating positive returns for the company.
Cash Cow
Cash Cow are products at the mature stage of the lifecycle, they generate high amounts of
cash for the company, but growth rate is slowing. There are chances that the product may
slip into decline, appropriate marketing mix strategies should be employed to try to
prevent this from happening.
As a new product much time will be spent by the organisation to create awareness of it presence
amongst its target market. Profits are negative or low because of this reason.
Growth:
If consumer clearly feel that this product will benefit them in some ways and they accept it, the
organisation will see a period of rapid sales growth.
Maturity
Rapid sales growth cannot last forever. Sales slow down as the product sales reach peak as it
has been accepted by most buyers.
Decline.
Sales and profits start to decline, the organisation may try to change their pricing strategy to
stimulate growth, however the product will either have to be re-modified, or replaced within the
market.
This strategy involves the organisation aiming to be the lowest cost producer within their
industry. The orgainisation aims to drive cost down through all the elements of the
production of the product from sourcing, to labour costs. The cost leader usually aims at a
broad market, so sufficient sales can cover costs. Low cost producers include Easyjet
airline, Ryan air, Asda and Walmart. Some organisation may aim to drive costs down but
will not pass on these cost savings to their customers aiming for increased profits clearly
because their brand can command a premium rate.
Strategy 2: Differentiation
Here the organisation focuses its effort on one particular segment and becomes well
known for providing products/services within the segment. They form a competitive
advantage for this niche market and either succeed by being a low cost producer or
differentiator within that particular segment. Examples include Roll Royce and Bentley.
With both of these strategies the organisation can also focus by offering particular
segments a differentiated product/service or a low cost product/service. The key is that
the product or service is focused on a particular segment. (see diagram below)
The danger some organisation face is that they try to do all three and become what is
known as stuck in the middle. The have no clear business strategy, be all to all
consumers, which adds to their running costs causing a fall in sales and market share.
‘Stuck in the middle’ companies are usually subject to a takeover or merger.
Porters fives forces model : Industry analysis model
1) Competitive Rivalry
2) Power of suppliers
3) Power of buyers
4) Threats of substitutes
5) Threat of new entrants.
The above five main factors are key factors that influence industry performance, hence it
is common sense and practical to find out about these factors before you enter the
industry. Lets look at them below.
Competitive Rivalry
Power of suppliers
Suppliers are also essential for the success of an organisation. Raw materials are needed
to complete the finish product of the organisation. Suppliers do have power. This power
comes from:
• If they are the only supplier or one of few suppliers who supply that particular raw
material.
• If it costly for the organisation to move from one supplier to another (known also as
switching cost)
• If there is no other substitute for their product.
Power of buyers
Buyers or customers can exert influence and control over an industry in certain
circumstances. This happens when:
• There is little differentiation over the product and substitutes can be found easily.
• Customers are sensitive to price.
• Switching to another product is not costly.
Threat of substitutes
Are there alternative products that customers can purchase over your product that offer
the same benefit for the same or less price? The threat of substitute is high when:
The threat of a new organisation entering the industry is high when it is easy for an
organisation to enter the industry i.e. entry barriers are low.
An organisation will look at how loyal customers are to existing products, how quickly
they can achieve economy of scales, would they have access to suppliers, would
government legislation prevent them or encourage them to enter the industry.
So to summaries porters five forces model is essential to carry to help you understand
your industry in depth before you enter it.
Michael Porter in 1985 introduced in his book ‘ The competitive advantage’ the concept
of the Value Chain. He suggested that activities within the organisation add value to the
service and products that the organisation produces, and all these activities should be run
at optimum level if the organisation is to gain any real competitive advantage. If they are
run efficiently the value obtained should exceed the costs of running them i.e. customers
should return to the organisation and transact freely and willingly. Michael Porter
suggested that the organisation is split into ‘primary activities’ and ‘support activities’.
Primary activities
Inbound logistics : Refers to goods being obtained from the organisations suppliers ready
to be used for producing the end product.
Operations : The raw materials and goods obtained are manufactured into the final
product. Value is added to the product at this stage as it moves through the production
line.
Outbound logistics : Once the products have been manufactured they are ready to be
distributed to distribution centres, wholesalers, retailers or customers.
Marketing and Sales: Marketing must make sure that the product is targeted towards the
correct customer group. The marketing mix is used to establish an effective strategy, any
competitive advantage is clearly communicated to the target group by the use of the
promotional mix.
Services: After the product/service has been sold what support services does the
organisation have to offer. This may come in the form of after sales training, guarantees
and warranties.
With the above activities, any or a combination of them, maybe essential for the firm to
develop the competitive advantage which Porter talks about in his book.
Support Activities
The support activities assist the primary activities in helping the organisation achieve its
competitive advantage. They include:
Procurement: This department must source raw materials for the organisation and obtain
the best price for doing so. For the price they must obtain the best possible quality
Human resource management: The organisation will have to recruit, train and develop
the correct people for the organisation if they are to succeed in their objectives. Staff will
have to be motivated and paid the ‘market rate’ if they are to stay with the organisation
and add value to it over their duration of employment. Within the service sector eg
airlines it is the ‘staff’ who may offer the competitive advantage that is needed within the
field.
Firm infrastructure: Every organisations needs to ensure that their finances, legal
structure and management structure works efficiently and helps drive the organisation
forward.
As you can see the value chain encompasses the whole organisation and looks at how
primary and support activities can work together effectively and efficiently to help gain
the organisation a superior competitive advantage.
Diffusion of innovation
This extension of the product life cycle was developed by Everett M. Rogers in 1962 and
simply looks who adopts products at the different stages of the life cycle.
Rogers identified five types of purchasers as the product moves through its life cycle
stage. He suggested:
1. Innovator who make up 2.5% of all purchases of the product, purchase the product at
the beginning of the life cycle. They are not afraid of trying new products that suit their
lifestyle and will also pay a premium for that benefit.
2. Early Adopters make up 13.5% of purchases, they are usually opinion leaders and
naturally adopt products after the innovators. This group of purchasers are crucial
because adoption by them means the product becomes acceptable, spurring on later
purchasers.
3. Early Majority make up 34% of purchases and have been spurred on by the early
adopters. They wait to see if the product will be adopted by society and will purchase
only when this has happened. They early majority usually have some status in society.
4. Late Majority make up another 34% of sales and usually purchase the product at the
late stages of majority within the life cycle.
5. Laggards make up 16% of total sales and usually purchase the product near the end of
its life. They are the ‘wait and see’ group. They wait to see if the product will get cheaper.
Usually when they purchase the product a new version is already on the market. Some
may call Laggards, bargain hunters!
International Marketing
So you decided you want to sell your product overseas. The world is becoming a smaller
place because of technology (the internet) and social mobility, that is, people are
travelling more and are seeing familiar brands around the world, and, you can identify
similar segment in overseas markets, so, lets go global!
So why go ‘Global’?
Competition within your national market is becoming too intense so you decide to push
sales in overseas markets.
Your products within your national markets are reaching the end of the lifecycle so you
wish to push it into national markets.
There are a number of steps that need to be taken before you decide to enter international
markets.
Analyze the international marketing environment. A PEST/STEP analysis needs to be
conducted on the market you enter, to assess whether it is worthwhile or not. Lets briefly
look at some factors that may influence an international decision.
Political factors
Consider:
Economical Factors
Consider:
Social Factors
Consider
Technological
Consider:
After assessing the environment in your selected country, how do you decide which are
the best countries to enter? Paliwood (1993) suggests that before you enter an overseas
market there are six factors that need to be considered:
Trading overseas
There are a number ways an organisation can start to sell their products in international
markets.
1. Direct export.
The organisation produces their product in their home market and then sells them to
customers overseas.
2. Indirect export
The organisations sells their product to a third party who then sells it on within the
foreign market.
3.Licensing
Another less risky market entry method is licensing. Here the Licensor will grant an
organisation in the foreign market a license to produce the product, use the brand name
etc in return that they will receive a royalty payment.
4.Franchising
Franchising is another form of licensing. Here the organisation puts together a package of
the ‘successful’ ingredients that made them a success in their home market and then
franchise this package to oversea investors. The Franchise holder may help out by
providing training and marketing the services or product. McDonalds is a popular
example of a Franchising option for expanding in international markets.
5.Contracting
Another of form on market entry in an overseas market which involves the exchange of
ideas is contracting. The manufacturer of the product will contract out the production of
the product to another organisation to produce the product on their behalf. Clearly
contracting out saves the organisation exporting to the foreign market.
6.Manufacturing abroad
The ultimate decision to sell abroad is the decision to establish a manufacturing plant in
the host country. The government of the host country may give the organisation some
form of tax advantage because they wish to attract inward investment to help create
employment for their economy.
7.Joint Venture
To share the risk of market entry into a foreign market, two organisations may come
together to form a company to operate in the host country. The two companies may share
knowledge and expertise to assist them in the development of company, of course profits
will have to be shared out also
When launching a product into foreign markets do you standardise or adapt your
marketing mix to the foreign market? A company can adopt to use a standardised
marketing mix around the world or an adapted marketing mix in each country.
The arguments however for standardisation suggest that if you go through the process of
adapting the product to local markets it does little but add to the overall cost of producing
the product and weakens the brand on the global scale. In today’s global world, where
consumers travel more, watch satellite television, communicate and shop internationally
over the internet, the world now is becoming a lot smaller. Because of this there is no
need to adapt products to local markets. Brands such as Coca-Cola, MTV, Nike, Levis are
all successful global brands where they have a standardised approach to their marketing
mix, all these products are targeted at similar groups globally.
In many circumstances a company will have to adapt their product and marketing mix
strategy to meet local needs and wants that cannot be changed. Mcdonald is a global
player however, their burgers are adapted to local needs. In India where a cow is a sacred
animal their burgers are served with chicken or fish. In Mexico burgers come with chilli
sauce. Coca-cola is some parts of the world taste sweeter then in others. Yes we can argue
that standardisation is better for the organisation because it reduces cost, however many
organisations will have to ‘think global, but act local’ if they are to successfully establish
them selves in foreign markets.
Competition,
Company objectives ,
the organisation needs to consider the costs of transport, any tariffs or import duties that
may be levied on their product(s) when they are sold on the international scale. Also what
currency do you expect to be paid in? Will it be home or international currency?
Exchange rate fluctuation will also impact profitability and influence pricing decisions.
Other factors to consider include local incomes, what are income and PDI levels. What is
the general economic situation of the country and how will this influence pricing?
The internet is now making pricing more transparent for consumers. Goods can be
purchased online from any overseas organisations at local currency prices, a prime
examples is dvd’s which are purchased from sites like www.dvdsoon.com which deliver
internationally.
Marketing Glossary