Sales Planning Assignment

The 7 Ps Marketing Mix & the Consumer Buying Behaviour

Introduction
Marketing is the process by which companies determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It is an integrated process through which companies create value for customers and build strong customer relationships in order to capture value from customers in return. Marketing is used to identify the customer, to keep the customer and to satisfy the customer. With the customer as the focus of its activities, it can be concluded that marketing management is one of the major components of business management. The evolution of marketing was caused due to mature markets and overcapacities in the last decades. Companies then shifted the focus from production to the customer in order to stay profitable. The term marketing concept holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions.It proposes that in order to satisfy its organizational objectives, an organization should anticipate the needs and wants of consumers and satisfy these more effectively than competitors.

Marketing Services
The Characteristics of a service that are: (1) Lack of ownership (2) Intangibility (3) Inseparability (4) Perishability (5) Heterogeneity. The Service marketing mix involves analyzing the 7p 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 standardized, to standardize a service is far more difficult as there are more input factors i.e. people, physical evidence, process to manage then with a product.

The Marketing Orientation

Customer orientation
A firm in the market economy survives by producing goods that persons are willing and able to buy. Consequently, ascertaining consumer demand is vital for a firm's future viability and even existence as a going concern. Many companies today have a customer focus (or market orientation). This implies that the company focuses its activities and products on consumer demands. Generally there are three ways of doing this: the customer-driven approach, the sense of identifying market changes and the product innovation approach. In the consumer-driven approach, consumer wants are the drivers of all strategic marketing decisions. No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering, including the nature of the product itself, is driven by the needs of potential consumers. The starting point is always the consumer. The rationale for this approach is that there is no point spending R&D funds developing products that people will not buy. History attests to many products that were commercial failures in spite of being technological breakthroughs.

Organizational orientation In this sense, a firm's marketing department is often seen as of prime importance within the functional level of an organization. Information from an organization's marketing department would be used to guide the actions of other departments within the firm. As an example, a marketing department could ascertain (via marketing research) that consumers desired a new type of product, or a new usage for an existing product. With this in mind, the marketing department would inform the R&D department to create a prototype of a product/service based on consumers' new desires.

The 7 Ps
Your marketing mix is a combination of marketing tools that are used to satisfy customers and company objectives. Consumers often call the marketing mix "the offering." Your offer is controlled by the following variables often referred to as the four Ps in marketing:

Product Price Place (Distribution) Promotion Process People Physical Evidence

By using variations of these seven components you have the ability to reach multiple consumers within your target market. Creating a successful marketing mix that will increase results often takes experimenting and market research. There are many methods that can be used, both in person and the use of impersonal presentations. The key is to not always depend on "one" mix always explore other avenues. The combining and coordination of these elements will be more effective than depending on one. You must coordinate all elements so that the prospective consumer is not being sent mixed messages that can cause confusion.

1. Product strategies
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.

Product - A tangible object or an intangible service that is mass produced or manufactured on a large scale with a specific volume of units. Intangible products are service based like the tourism industry & the hotel industry or codes-based products like cell phone load and credits. Typical examples of a mass produced tangible object are the motor car and the disposable razor. A less obvious but ubiquitous mass produced service is a computer operating system. Product features: What features will you add that may increase the benefit offered to your target market? Will the organization 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 todays 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 organizations. In many organizations they are represented by brand managers, who have high resources to ensure their success within the market. A brand is a tool which is used by an organization 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?

The Product Life Cycle The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).

In theory it's the same for a product. After a period of development it is introduced or launched into the market; it gains more and more customers as it grows; eventually the market stabilises and the product becomes mature; then after a period of time the product is overtaken by development and the introduction of superior competitors,
it

goes into

decline and is eventually withdrawn. However, most products fail in the introduction phase. Others have very cyclical maturity phases where declines see the product promoted to regain customers.

2. 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 organization. The remaining 3ps are the variable cost for the organization. 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 organization. Pricing should take into account the following factors: 1. Fixed and variable costs. 2. Competition

3. Company objectives 4. Proposed positioning strategies. 5. Target group and willingness to pay.

Types of Pricing Strategies

Pricing is a fundamental aspect of financial modeling, and is one of the four Ps of the marketing mix. The other three aspects are product, promotion, and place. It is also a key variable in microeconomic price allocation theory. Price is the only revenue generating element amongst the four Ps, the rest being cost centers. Pricing is the manual or automatic process of applying prices to purchase and sales orders, based on factors such as: a fixed amount, quantity break, promotion or sales campaign, specific vendor quote, price prevailing on entry, shipment or invoice date, combination of multiple orders or lines, and many others. Automated systems require more setup and maintenance but may prevent pricing errors. An organization 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 organization sets a low price to increase sales and market share. Skimming pricing: The organization 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. Competition pricing: Setting a price in comparison with competitors. 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 maximizing turnover and profits.

Bundle Pricing: The organization bundles a group of products at a reduced price. 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 organization sells optional extras along with the product to maximize its turnover. This strategy is used commonly within the car industry.

3. Marketing Mix: Place

Place strategies This refers to how an organization will distribute the product or service they are offering to the end user. The organization must distribute the product to the user at the right place at the right time. Efficient and effective distribution is important if the organization is to meet its overall marketing objectives. If an organization underestimate demand and customers cannot purchase products because of it, profitability will be affected. What channel of distribution will they use? Two types of channel of distribution methods are available. Indirect distribution involves distributing your product by the use of an intermediary for example a manufacturer selling to a wholesaler and then on to the retailer.. Direct distribution involves distributing direct from a manufacturer to the consumer For example Dell Computers providing directly to its target customers. The advantage of direct distribution is that it gives a manufacturer complete control over their product.

Channel Structure and Membership Issues Paths to the customer. For most products and situations, it is generally more efficient for a manufacturer to go through a distributor rather than selling directly to the customer. This is especially the case when consumers need to have variety and assortment (e.g., consumer would like to buy not just toothpaste but also other personal hygiene products, and even other grocery products at the same place), when products are bought in small volumes or at low value (e.g., a candy bar sells for less than $1.00), or even intermediaries have skills or resources that the manufacturer does not (a sales force, warehousing, and financing). Nevertheless, there are situations when these conditions are not metmost typically in industrial settings. As an extreme case, most airlines are perfectly happy only being able to buy aircraft and accessories from Boeing and would prefer not to go through a retailerparticularly since the planes are often highly customized. More in the "gray" area, it may or may not be appropriate to sell microcomputers directly to consumers rather than going through a distributorthe costs of providing those costs may be roughly comparable to the margin that a distributor would take. Potential channel structures. Channel structures can assume a variety of forms. In the extreme case of Boeing aircraft or commercial satellites, the product is made by the manufacturer and sent directly to the customers preferred delivery site. The manufacturer, may, however, involve a broker or agent who handles negotiations but does not take physical possession of the property. When deals take on a smaller magnitude, however, it may be appropriate to involve retailer--but no other intermediary. For example, automobiles, small planes, and yachts are frequently sold by the manufacturer to a dealer who then sends directly to the customer. It does not make sense to deliver these bulky products to a wholesaler only to move them again. On the other hand, it would not make sense for a California customer to fly to Detroit, buy a car there, and then drive it home. As the need for variety increases, a wholesaler may then be introduced. For example, an office supply store needs to sell more merchandise than any one manufacturer can

produce. Therefore, a wholesaler will buy a very large quantity of binders, file folders, staplers, reams of paper, glue sticks, and similar products and sell this in smaller quantitiessay 200 staplers at a timeto the office supply store, which, in turn, may go to another wholesaler who has acquired telephones, typewriters, and photocopiers. Note that more than one wholesaler level may be involveda local wholesaler serving the Inland Empire may buy from each of the two wholesalers listed above and then sell all, or most, of the products needed by local office supply stores. Finally, even in longer channels, agents or brokers may be involved. This, in particular, will happen when the owner of a small, entrepreneurial company has more experience with technology than with businesses negotiations. Here, the manufacturer can be freed in return for paying the agent, from such tasks, allowing him or her to focus on what he or she does well.

4. Promotion
Promotion represents all of the communications that a marketer may use in the marketplace. Promotion has four distinct elements advertising , public relations, word of mouth and point of sale. A certain amount of crossover occurs when promotion uses the four principal elements together, which is common in film promotion. Advertising covers any communication that is paid for, from cinema commercials, radio and Internet adverts through print media and billboards. Public relations are where the communication is not directly paid for and includes press releases, sponsorship deals, exhibitions, conferences, seminars or trade fairs and events. Word of mouth is any apparently informal communication about the product by ordinary individuals, satisfied customers or people specifically engaged to create word of mouth momentum. Sales staff often plays an important role in word of mouth and Public Relations (see Product above).

Packaging also needs to be taken into consideration. Broadly defined, optimizing the
marketing mix is the primary responsibility of marketing. By offering the product with

the right combination of the four Ps marketers can improve their results and marketing effectiveness. Making small changes in the marketing mix is typically considered to be a tactical change. Parm Bains says making large changes in any of the four Ps can be considered strategic. For example, a large change in the price, say from $19.00 to $39.00 would be considered a strategic change in the position of the product. However a change of $130 to $129.99 would be considered a tactical change, potentially related to a promotional offer. A successful product or service means nothing unless the benefit of such a service can be communicated clearly to the target market. An organizations 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 organization 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. Personal selling: Selling a product service one to one. Direct Mail: Is the sending of publicity material to a named person within an organization. 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). Organizations can pay thousands of pounds for databases, which contain names and addresses of potential customers. Direct mail allows an organization to use their resources more effectively by allowing them to send publicity material to a named person within their target segment. By personalizing advertising, response rates increase thus increasing the chance of

improving sales. Listed below are links to organization who's business involves direct mail.

5. 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 organization wants to obtain a form of competitive advantage. Consumers make judgments 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 organizations aim to apply for the Investors In People accreditation, which tells consumers that staff are taken care of by the company and they are trained to certain standards.

6. Process
Refers to the systems used to assist the organization 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.

7. Physical Evidence
Where is the service being delivered? Physical Evidence is the element of the service mix which allows the consumer again to make judgments on the organization. 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 organizations perceptual plan of the service.

What is Consumer Buying Behavior?

Definition of Buying Behavior: Buying Behavior is the decision processes and acts of people involved in buying and using products. Need to understand:

why consumers make the purchases that they make? what factors influence consumer purchases? the changing factors in our society.

Consumer Buying Behavior refers to the buying behavior of the ultimate consumer. A firm needs to analyze buying behavior for:

Buyers reactions to a firms marketing strategy has a great impact on the firms success.

The marketing concept stresses that a firm should create a Marketing Mix (MM) that satisfies (gives utility to) customers, therefore need to analyze the what, where, when and how consumers buy.

Marketers can better predict how consumers will respond to marketing strategies.

Stages of the Consumer Buying Process Six Stages to the Consumer Buying Decision Process (For complex decisions). Actual purchasing is only one stage of the process. Not all decision processes lead to a purchase. All consumer decisions do not always include all 6 stages, determined by the degree of complexity...discussed next. The 6 stages are: 1. Problem Recognition(awareness of need)--difference between the desired state and the actual condition. Deficit in assortment of products. Hunger--Food. Hunger stimulates your need to eat. Can be stimulated by the marketer through product information--did not know you were deficient? I.E., see a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes. 2. Information search-o o

Internal search, memory. External search if you need more information. Friends and relatives (word of mouth). Marketer dominated sources; comparison shopping; public sources etc.

A successful information search leaves a buyer with possible alternatives, the evoked set. Hungry, want to go out and eat, evoked set is
o o o o

chinese food indian food burger king klondike kates etc

3. Evaluation of Alternatives--need to establish criteria for evaluation, features the buyer wants or does not want. Rank/weight alternatives or resume search. May

decide that you want to eat something spicy, indian gets highest rank etc. If not satisfied with your choice then return to the search phase. Can you think of another restaurant? Look in the yellow pages etc. Information from different sources may be treated differently. Marketers try to influence by "framing" alternatives. 4. Purchase decision--Choose buying alternative, includes product, package, store, method of purchase etc. 5. Purchase--May differ from decision, time lapse between 4 & 5, product availability. 6. Post-Purchase Evaluation--outcome: Satisfaction or Dissatisfaction. Cognitive Dissonance, have you made the right decision. This can be reduced by warranties, after sales communication etc. After eating an indian meal, may think that really you wanted a chinese meal instead.

Types of Consumer Buying Behavior

Types of consumer buying behavior are determined by:

Level of Involvement in purchase decision. Importance and intensity of interest in a product in a particular situation.

Buyers level of involvement determines why he/she is motivated to seek information about a certain products and brands but virtually ignores others.

High involvement purchases--Honda Motorbike, high priced goods, products visible to others, and the higher the risk the higher the involvement. Types of risk:

Personal risk Social risk Economic risk

The four type of consumer buying behavior are:

Routine Response/Programmed Behavior--buying low involvement frequently purchased low cost items; need very little search and decision effort; purchased almost automatically. Examples include soft drinks, snack foods, milk etc.

Limited Decision Making--buying product occasionally. When you need to obtain information about unfamiliar brand in a familiar product category, perhaps. Requires a moderate amount of time for information gathering. Examples include Clothes--know product class but not the brand.

Extensive Decision Making/Complex high involvement, unfamiliar, expensive and/or infrequently bought products. High degree of

economic/performance/psychological risk. Examples include cars, homes, computers, education. Spend alot of time seeking information and deciding. Information from the companies MM; friends and relatives, store personnel etc. Go through all six stages of the buying process.

Impulse buying, no conscious planning.

The purchase of the same product does not always elicit the same Buying Behavior. Product can shift from one category to the next. For example: Going out for dinner for one person may be extensive decision making (for someone that does not go out often at all), but limited decision making for someone else. The reason for the dinner, whether it is an anniversary celebration, or a meal with a couple of friends will also determine the extent of the decision making. Categories that Effect the Consumer Buying Decision Process A consumer, making a purchase decision will be affected by the following three factors: 1. Personal 2. Psychological 3. Social The marketer must be aware of these factors in order to develop an appropriate MM for its target market. Personal Unique to a particular person. Demographic Factors. Sex, Race, Age etc. Who in the family is responsible for the decision making.

Young people purchase things for different reasons than older people. Highlights the differences between male and female shoppers in the supermarket.

Psychological factors Psychological factors include:

Motives-A motive is an internal energizing force that orients a person's activities toward satisfying a need or achieving a goal. Actions are effected by a set of motives, not just one. If marketers can identify motives then they can better develop a marketing mix. MASLOW hierarchy of needs!!
o o o o o

Physiological Safety Love and Belonging Esteem Self Actualization

Need to determine what level of the hierarchy the consumers are at to determine what motivates their purchases.

Perception--

Perception is the process of selecting, organizing and interpreting information inputs to produce meaning. IE we chose what info we pay attention to, organize it and interpret it. Information inputs are the sensations received

References: http://www.learnmarketing.net/marketingmix.htm http://en.wikipedia.org/wiki/Marketing_mix http://en.wikipedia.org/wiki/Marketing