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1. The act or process of buying and selling in a market. 2. The commercial functions involved in transferring goods from producer to consumer. The activities of a company associated with buying and selling a product or service. It includes advertising, selling and delivering products to people. People who work in marketing departments of companies try to get the attention of target audiences by using slogans, packaging design, aprice and promotion. Investopedia Says: Many people believe that marketing is just about advertising or sales. However, marketing is everything a company does to acquire customers and maintain a relationship with them. Even the small tasks like writing thank-you letters, playing golf with a prospective client, returning calls promptly and meeting with a past client for coffee can be thought of as marketing. The ultimate goal of marketing is to match a company's products and services to the people who need and want Marketing Dictionary: marketing Process associated with promoting for sale goods or services. The classic components of marketing are the Four Ps: product, price, place, and promotion-the selection and development of the product, determination of price, selection and design of distribution
channels (place), and all aspects of generating or enhancing demand for the product, including advertising (promotion).. Insurance Dictionary: Marketing Creation of a demand for a company's products, its distribution, and services for customers who purchase that product. Actuarial research and development, underwriting efficiency, and claim payment promptness is of little value if no one is willing to purchase insurance products. Agency and marketing departments are the focus of all sales activity within an insurance company, and touch every aspect of a company by generating (1) premium income for securities, real estate, and mortgage investments; (2) sales for review by the underwriting department and their issuance by policyholder services; (3) need for data storage and retrieval by the company's data processing center; (4) legal analysis and decisions by the law department; and (5) need for corporate planning. Business Encyclopedia: Marketing The term market is the root word for the word marketing. Market refers to the location where exchanges between buyers and sellers occur. Marketing pertains to the interactive process that requires developing, pricing, placing, and promoting goods, ideas, or services in order to facilitate exchanges between customers and sellers to satisfy the needs and wants of consumers. Thus, at the very center of the marketing process is satisfying the needs and wants of customers. Needs and Wants Needs are the basic items required for human survival. Human needs are an essential concept underlying the marketing process because needs are translated into consumer wants. Human needs are often described as a state of real or perceived deprivation. Basic human needs take one of three forms: physical, social, and individual. Physical needs are basic to survival and include food, clothing, warmth, and safety. Social needs revolve around the desire for belonging and affection. Individual needs include longings for knowledge and selfexpression, through items such as clothing choices. Wants are needs that are shaped by both cultural influences and individual preferences. Wants are often described as goods, ideas, and services that fulfill the needs of an individual consumer. The wants of individuals change as both society and technology change. For example, when a computer is released, a consumer may want it simply because it is a new and improved technology. Therefore, the purpose of marketing is to convert these generic needs into wants for specific goods, ideas, or services. Demand is created when wants are supported by an individual consumer's ability to purchase the goods, ideas, or services in question. Consumers buy products that will best meet their needs, as well as provide the most fulfillment resulting from the exchange process. The first step in the exchange process is to provide a product. Products can take a number of forms such as goods, ideas, and services. All products are produced to satisfy the needs, wants, and demands of individual buyers. The second step in the satisfaction process is exchange. Exchange occurs when an individual receives a product from a seller in return for something called consideration. Consideration usually takes the form of currency. For an exchange to take place, it must meet a number of conditions. (1) There must be at least two participants in the process. (2) Each party must
offer something of value to the other. (3) Both parties must want to deal with each other. (4) Both participants have the right to accept or to reject the offer. (5) Both groups must have the ability to communicate and deliver on the mutual agreement. Thus, the transaction process is a core component of marketing. Whenever there is a trade of values between two parties, a transaction has occurred. A transaction is often considered a unit of measurement in marketing. The earliest form of exchange was known as barter. US History Encyclopedia: Marketing Marketing is the multifaceted, systematic approach to selling goods, adopted by every business and not for-profit agency and group with a message. It attempts to optimize an organization's ability to make a profit, whether monetary (profits or donations) or electoral. Marketing encompasses advertising, promotions, product design, positioning, and product development. Marketing tools include elements such as focus groups, gap analysis, concept testing, product testing, perceptual maps, demographics, psychographics (lifestyles), and choice modeling. It is powerfully aided by market research, a science that has become increasingly complex and sophisticated over the past century or more. Market research embraces qualitative and quantitative methods. Environmental analysis gives companies key information about economic conditions, consumer demographics, consumer lifestyles, industry trends, distribution channels, new technology, employee relations and supply, foreign markets, corporate image, political and regulatory changes, and key players in the business. Sophisticated data collection and analysis investigate market segmentation and target selection, product and advertising positioning, product design, pricing, mass media advertising, direct marketing, promotion, distribution channels, and sales force allocation. Market research rarely has a direct impact on income, but provides the essential data to prove or disprove client preconceptions, resolve disagreements, expose threats, quantify a population, and qualify an opportunity. The ways that research is used for strategic decision making determines its relationship to profit and market advance. Marketing has existed in every age and culture. In the United States, marketing reached its high level of sophistication as a result of the mass market. Three overlapping stages have marked the history of our republic. Until roughly the 1880s, the economy was characterized by market fragmentation. Geographical limitations were reinforced by the absence of a transportation and communications infrastructure that spanned the continent. There were hundreds of local markets and very few national brand names. Profit was determined by low sales volume and high prices.
The Augmented Marketing Mix
(AMM or the '17 Ps'), and its
relationship with Search Engine Marketing is covered in the article 'Search Engine
Marketing in Context - is it marketing?' in THE marketing leaders (TM) in 2006. The AMM contains the original '4 Ps' and an additional 13 new P's:
Priority (we need to prioritise all our options to improve. Project Management (we all manage different projects and sub-projects. Preside (how we run the business . Pleasant (good at practising corporate social responsibility and recognising both the marketing ecosystem and the wider world of sustainability and acting responsibly along the whole supply chain and outside of it) 16.) 11. what product or service innovations should be introduced etc. lets stop doing things 'to' the prospect or customer. when they need it. how 'customer centric' we really aspire to and work to be) 12. it isnt a dirty word if it fits in with the latter 'Ps' below) 9.1. true branding rather than the questionable 'science' to do with brand-brain-wash) 7.but the company must have ALL processes firmly aligned with customer need as its pivotal point) . Product Place Price Promotion 5.based on the above) 17. 3. Precision (its more than just targeted marketing.but only offering what they really need. Pivot (but all of this is predicated on a real marketing and customer-centric approach leads to sustainability and health . yet this is not recognised in most business disciplines and teaching) 8. Process (how we do things. People (the most important component in the whole supply chain and forgotten by marketing!) 6. in the context that they will benefit most from it 14. Physical Evidence (evidential marketing . Pervasiveness (marketing has to permeate the organisation as its main process . Policy (how we do things around here.in a similar way to which IT has moved from a small department doing funny/fuzzy things into becoming the lifeblood of the organisation) 15. Positioning (where we are in the market and the mind of the customer.marrying up all our new innovations and improvements with real evidence from the customer and not relying on invention or 'creative(s)' .arghh . how modern marketing is and should be seen as one rather than a function or department. 4.alone 13. strategically or tactically change. but 'with' them . 2. or 'a colouring in activity at the end' 10. Profit (wow .I mentioned it.
A growing number of organizations. or customer-focused. and improving the product/service continuously to protect the business from competitive encroachments. Marketers hope that this process will give them a sustainable competitive advantage. both formal and informal. enhancing the benefits that sold the buyer in the first place. Marketing management is the practical application of this process. the mix of the four "Ps" must reflect the wants and desires of the consumers in the target market. to determine what consumers want and what they are willing to pay for it. Marketers depend on marketing research. Two major factors of marketing are the recruitment of new customers (acquisition) and the retention and expansion of relationships with existing customers (base management). often through market research. and then builds the product or service. It is also concerned with anticipating the customers' future needs and wants.Marketing is a social process which satisfies consumers' wants. nurturing the links. The offer is also an important addition to the 4P's theory. The term includes advertising. organization first determines what its potential customers desire. Marketing theory and practice is justified in the belief that customers use a product or service because they have a need. or because it provides a perceived benefit. especially large . Once a marketer has converted the prospective buyer. Trying to convince a market segment to buy something they don't want is extremely expensive and seldom successful. the activities encompassed by the marketing function are led by a Vice President or Director of Marketing. Within most organizations. distribution and selling of a product or service. Introduction A market-focused. For a marketing plan to be successful. The process for base management shifts the marketer to building a relationship. base management marketing takes over.
reporting to the Chief Executive Officer. Marketing methods are informed by many of the social sciences. is known as the sales era. and economics. It is also an area of activity infamous for re-inventing itself and its vocabulary according to the times and the culture. promotion. Market research underpins these activities. During this era. pricing. particularly psychology. “Marketing is the process of planning and executing the conception. and marketing. the marketing process progressed through three distinct eras—production. goods. In the 1920s. Through advertising. Operational Marketing includes the determination of the marketing mix Historical Eras of Marketing Modern marketing began in the early 1900s. but growing. Rather. In particular. and distribution of ideas. firm success was measured totally in terms of production. The American Marketing Association (AMA) states. Anthropology is also a small. Product choices were nearly nonexistent because firm managers believed that a superior product would sell itself. it is also related to many of the creative arts.US companies. product supply exceeded demand. sociology. sellers had to employ creative advertising and skillful personal selling in order to get consumers to buy. sales. the . firms operated under the premise that production was a seller's market. To overcome this consumer resistance. Thus. The marketing era emerged after firm managers realized that a better strategy was needed to attract and keep customers because allowing products to sell themselves was not effective. The second era of marketing. influence. Marketing is a wide and heavily interconnected subject with extensive publications. have a Chief Marketing Officer position. This philosophy was possible because the demand for products outlasted supply. In the twentieth century. as well as to satisfy the customer with prompt services and meeting the customer expectations. it aims at generating a competitive advantage relative to its competitors. ushered in during 1950s. Two Levels of Marketing Strategic Marketing attempts to determine how an organization competes against its competitors in a market place. and services to create exchanges that satisfy individual and organizational objectives". firms assumed that consumers would resist buying goods and services deemed nonessential. Operational Marketing executes marketing functions to attract and keep customers and to maximize the value derived for them. During this era.
The production concept prevailed into the late 1920's.marketing concept philosophy was adopted by many firms in an attempt to meet the specific needs of customers. Today most firms have adopted the marketing concept. under which companies not only would produce the products. the key questions were: • • Can we sell the product? Can we charge enough for it? . but also would try to convince customers to buy them through advertising and personal selling. and there was little unfulfilled demand. it would not be adopted widely until nearly 200 years later. they had to satisfy the needs and wants of consumers. In 1776 in The Wealth of Nations. better than the competition. Before producing a product. The Sales Concept By the early 1930's however. The key questions that a firm would ask before producing a product were: • • Can we produce the product? Can we produce enough of it? At the time. Proponents of the marketing concept argued that in order for firms to achieve their goals. it is worthwhile to put it in perspective by reviewing other philosophies that once were predominant. they are not restricted to those periods and are still practiced by some firms today. Adam Smith wrote that the needs of producers should be considered only with regard to meeting the needs of consumers. While these alternative concepts prevailed during different historical time frames. Virtually everything that could be produced was sold easily by a sales team whose job it was simply to execute transactions at a price determined by the cost of production. Around this time. the production concept worked fairly well because the goods that were produced were largely those of basic necessity and there was a relatively high level of unfulfilled demand. The Production Concept The production concept prevailed from the time of the industrial revolution until the early 1920's. To better understand the marketing concept. The production concept was the idea that a firm should focus on those products that it could produce most efficiently and that the creation of a supply of low-cost products would in and of itself create the demand for the products. firms began to practice the sales concept (or selling concept). but this has not always been the case. competition had increased. Marketing > Marketing Concept The Marketing Concept The marketing concept is the philosophy that firms should analyze the needs of their customers and then make decisions to satisfy those needs. mass production had become commonplace. While this philosophy is consistent with the marketing concept.
Aligning the marketing activities with the objectives of the firm is completed through the process of marketing management. With increased discretionary income.everybody must be concerned with customer satisfaction.The sales concept paid little attention to whether the product actually was needed. many firms have structured themselves into marketing organizations having a company-wide customer focus. The Marketing Concept After World War II. and marketing. Since the entire organization exists to satisfy customer needs. The management department is responsible for creating and implementing procedural policies of the firm. The key questions became: • • • What do customers want? Can we develop it while they still want it? How can we keep our customers satisfied? In response to these discerning customers. and these needs were not immediately obvious. the goal simply was to beat the competition to the sale with little regard to customer satisfaction. The primary responsibility of the finance department is maintaining and tracking assets. they typically set up separate marketing departments whose objective it was to satisfy customer needs. marketing objectives are established in alignment with the overall objectives of the firm. Even today. The marketing department is responsible for generating revenue through the exchange process. To satisfy those needs. firms began to adopt the marketing concept. and many people came to associate marketing with hard selling. The marketing management process involves developing . Often these departments were sales departments with expanded responsibilities. Each of these four areas performs specific functions. customers could afford to be selective and buy only those products that precisely met their changing needs. and their needs. nobody can neglect a customer issue by declaring it a "marketing problem" . the marketing team makes decisions about the controllable parameters of the marketing mix. finance. Marketing in the Overall Business There are four areas of operation within all firms: accounting. many people use the word "marketing" when they really mean sales. While this expanded sales department structure can be found in some companies today. their size. the variety of products increased and hard selling no longer could be relied upon to generate sales. As a means of generating revenue. Marketing was a function that was performed after the product was developed and produced. which involves: • • • Focusing on customer needs before developing the product Aligning all functions of the company to focus on those needs Realizing a profit by successfully satisfying customer needs over the long-term When firms first began to adopt the marketing concept. The accounting department is responsible for keeping track of income and expenditures. management. The marketing concept relies upon marketing research to define market segments.
Industrial structure refers to how well developed a country's infrastructure is while income distributed refers to how income is distributed among its citizens. In modern times. embargoes. as a result. Thus. Since cultural values regarding particular products will vary considerably from one country to another around the world. a list of threats and opportunities. political stability. There are two economic factors which reflect how attractive a particular market is in a selected country: industrial structure and income distribution. exchange controls. a marketing plan is developed for each product. International marketing is simply a strategy used by firms to improve both market share and profits. possible marketing strategies. For example. target countries will need to be identified and evaluated in terms of their potential sales and profits. proposed sales objectives. quotas. While firm managers may try to employ the same basic marketing strategies used in the domestic market when promoting products in international locations. International marketing occurs when firms plan and conduct transactions across international borders in order to satisfy the objectives of both consumers and the firm. firms scan current environmental conditions in order to determine potential opportunities.objectives that promote the long-term competitive advantage of a firm. and nontariff trade barriers. Common trade system regulations and restrictions include tariffs. A natural component of international business is international marketing. and managing the marketing effort. For example. managers must establish their international marketing objectives and policies before going overseas. who are then segmented into markets. those strategies may not be appropriate or effective. Political-legal environment is the third factor to investigate. and cultural conditions. the last factor to be considered before entering a global market is the cultural environment. economic conditions. After selecting a market . it is necessary for marketing managers to determine the particular needs and wants of potential customers. International Marketing International business has been practiced for thousands of years. The marketing management process includes analyzing marketing opportunities. the individual and cultural attitudes regarding purchasing products from foreign countries. an explanation of the current marketing situation. Unique environmental factors that need to be explored by firm managers before going global include trade systems. and budget proposals. monetary regulations. The first factor to consider in the international marketplace is each country's trading system. All countries have their own trade system regulations and restrictions. managers must take into account these differences in the planning process. Firm managers must adapt their strategies to fit the unique characteristics of each international market. political-legal. developing the marketing mix. Each product plan contains an executive summary. and government bureaucracy all influence marketing practices and opportunities. advances in technology have improved transportation and communication methods. Just as with domestic markets. action programs. selecting target markets. Finally. The second step is to establish marketing strategies that support the firm's overall strategic objectives. The aim of the marketing effort is to satisfy the needs and wants of consumers. Lastly. In order to analyze marketing opportunities. The first step in the marketing management process is to develop the firm's overall strategic plan. more and more firms have set up shop at various locations around the globe. The second factor to review is the economic environment. Various quantitative and qualitative techniques of marketing research are used to collect data about potential customers.
However. Under licensing. Anthropology is also a small. Marketing methods are also informed by many of the social sciences. trademark. direct investment is the last mode used by firms to enter international markets. particularly psychology. and direct investment. the mode of entry into the market must be determined. The third type of joint venture is called management contracting. a firm enters the market by establishing its own base in international locations. Direct investment is advantageous because labor and raw materials may be cheaper in some countries. Finally. the firms supply the capital to the local international firm in exchange for the management know-how. Joint ventures differ from direct investment in that an association is formed between firms and businesses in the international market. The scientific study of marketing is a wide and heavily interconnected subject with extensive academic publications. With exporting. firms allow other businesses in the international market to produce products under an agreement called a license. The marketing literature is also infamous for re-inventing itself and its vocabulary according to the times and the culture.and establishing marketing objectives. but growing influence. There are three major modes of entry into international markets: exporting. it is also related to many of the creative arts. which includes advertising. especially advertising and branding. Firms can also improve their images in international markets because of the employment opportunities they create. contract manufacturing. sociology. The second way to enter an international market is by using the joint-venture approach. Firms join with the local international investors to establish a local business." Marketing practice tends to be seen as a creative industry. and economics. trade secret. and joint ownership. or other items of value for a fee or royalty. The American Marketing Association (AMA) states. Both groups share joint ownership and control of the newly established business. Exporting is the simplest way to enter an international market. With direct investment. This use of these middlemen is sometimes called indirect exporting. However. Market research underpins these activities. which arranges for the manufacture of products to enter international markets. distribution and selling. which are often discovered through market research. In popular usage. It is also concerned with anticipating the customers' future needs and wants. especially advertising and branding. Through advertising. The licensee has the right to use the manufacturing process. in professional usage the term has a wider meaning which recognizes . patent. communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. With this approach. joint venture. "marketing" is the promotion of products. Four types of joint venture are licensing. "marketing" is the promotion of products. firms enter international markets by selling products internationally through the use of middlemen. A joint venture takes place when firms join forces with companies from the international market to produce or market a product. management contracting. Four Ps In popular usage. Firms also use contract manufacturing. in professional usage the term has a wider meaning of the practice and science of trading. "Marketing is an organizational function and a set of processes for creating. The last category of joint venture is joint ownership.
people are particularly important because. including discounts. services marketing calls upon an extra three. to which segment (young adults. families. 1988). as well as a framework within which these can be used. Placement or distribution refers to how the product gets to the customer. high value consumer products require adjustments to this model. they are generally inseparable from the total service . services. have passed into the language. retail). Industrial or B2B marketing must account for the long term contractual agreements that are typical in supply chain transactions. guarantees. for example. as they too can affect the customer's service experience. e. point of sale placement or retailing. Nevertheless. business people). Products are often developed to meet the desires of groups of customers or even. The price need not be monetary . His typology has become so universally recognized that his four activity sets. This fourth P has also sometimes been called Place. which geographic region or industry. Jerome McCarthy divided marketing into four general sets of activities. in the customer's eyes. and refers to the various methods of promoting the product.that marketing is customer centered. As a counter to this. the 4 Ps offer a memorable and workable guide to the major categories of marketing activity. The four Ps are: • • • • Product: The product aspects of marketing deal with the specifications of the actual goods or services.g. Relationship marketing attempts to do this by looking at marketing from a long term relationship perspective rather than individual transactions. totaling seven and known together as the extended marketing mix. and personal selling. they must be appropriately trained. brand. Seven Ps As well as the standard four Ps (Product. sales promotion. online vs. in some cases. As a result of this. time.g. Pricing: This refers to the process of setting a price for a product.it can simply be what is exchanged for the product or services. The four Ps model is most useful when marketing low value consumer products. . energy. and how it relates to the end-user's needs and wants. Promotion and Place). Pricing.g. the Four Ps. Promotion: This includes advertising. Services marketing must account for the unique nature of services. Whether as part of a supporting service to a product or involved in a total service. Fellow customers are also sometimes referred to under 'people'. These four elements are often referred to as the marketing mix. which a marketer can use to craft a marketing plan. well motivated and the right type of person. These are: • People: Any person coming into contact with customers can have an impact on overall satisfaction. for specific customers. E.. or company. psychology or attention. (e. Industrial products. publicity. in Riding the Waves of Change (Jossey-Bass. suggests that one of the greatest limitations of the 4 Ps approach "is that it unconsciously emphasizes the inside–out view (looking from the company outwards). Morgan. whereas the essence of marketing should be the outside–in approach". referring to the channel by which a product or services is sold (e. and support. The scope of a product generally includes supporting elements such as warranties. etc. at a sporting event).
Early examples include Dell on-line and Amazon. Depth -. These "passive customer bases" will ultimately be replaced by the "active customer communities". Product Scope • • Breadth -. means that potential customers could perceive greater risk when deciding whether to use a service. Peer-to-Peer and Predictive Modeling. Web 2. With the Internet and the Web 2. Steps in product design • • • • Design and development of product ideas.com. Idris Mootee devised a “New 4Ps” model in 2001 to supplement the traditional marketing 4Ps. such as case studies. • • • • Personalization: The author here refers to customization of products and services through the use of the Internet. Participation: This is to allow customer to participate in what the brand should stand for. Design and testing of product concept. which makes it intangible. This concept is laying the foundation for disruptive change through democratization of information. Peer-to-Peer': This refers to customer networks and communities where advocacy happens. trying to impose a brand on the customer.number of product items in a product line. This is most apparent in TV advertising. Physical evidence: Unlike a product. Participation. a service cannot be experienced before it is delivered.0 and Marketing New 4Ps The original 4Ps concept idea was developed to help marketers manage the four most important aspect of marketing. P2P is now being referred as Social Computing and will likely to be the most disruptive force in the future of marketing. They are Personalization.number of product lines in a range. Selection of and sifting through product ideas. it is often vital to offer potential customers the chance to see what a service would be like. This is done by providing physical evidence. To reduce the feeling of risk. what should be the product directions and even which ads to run. Emerging technologies will continue to push this idea forward. Analysis of profitability of product concept. which can be crucial to customer satisfaction. This. thus improving the chance for success. . therefore. The historical problem with marketing is that it is "interruptive" in nature. Brand engagement happens within those conversations.• • Process: This is the process(es) involved in providing a service and the behaviour of people. testimonials or demonstrations. but this concept is further extended with emerging social media and advanced algorithms.0. marketers have needed to adapt a broader perspective on these elements. Predictive Modeling: This refers to neural network algorithms that are being successfully applied in marketing problems (both a regression as well as a classification problem).
emphasizes the elegant character of the product Packaging for double-use Combination packaging -. Forms of packaging • • • • • • Specialty packaging -. Difference in uniform product design "the look & feel" from the packaging (the box) to the product its self.two or more products packaged in the same container Kaleidoscopic packaging -. well-designed Point of difference in service and supply of product.to be thrown away after use Packaging for resale -. into appropriate quantities.packaging changes continually to reflect a series or particular theme Packaging for immediate consumption -.packed. Packaging and trademarks Requirements of good packaging • • • • • • • • • Appropriately designed for target market Eye-catching Suitable to product Compliant with retailers' requirements Promotes image of enterprise Distinguishable from competitors' products Strong. simple language Easily pronounced and remembered Distinct from names of other products Easily added to an existing range Easily registered for legal protection Pricing .• Design and testing of physical product. convenient. for the retailer or wholesaler Significance of a trademark • • • • • Distinguishes one company's goods from those of another Serves as advertisement for quality Protects both consumers and manufacturers Used in displays and advertising campaigns Used to market new products Requirements of a good trademark • • • • • • Reflects products' advantages Good.
This value is determined by utility to the consumer in terms of money and/or sacrifice that he is prepared to give for it.Pricing refers to the amount of money exchanged for a product. Objectives • • • • • • • Definite sales volume Achieve profit Larger market share Maintain market share Eliminate competition Advantages of mass production Satisfactory return on capital Factors influencing price-determination • • • • • • • • Production and distribution costs Substitute goods available Normal trade practices Fixed prices Reaction of distributors Reaction of consumers Nature of demand: o Elastic o Inelastic Form of market: o Perfect competition o Monopolistic competition o Monopoly o Oligopoly' Steps to determine price • • • • Determine market share to be captured Set up price strategy Estimate demand Evaluate competitors' reactions Distribution Channels • • • Manufacturer to consumer (most direct) Manufacturer to wholesaler to retailer to consumer (traditional) Manufacturer to agent to wholesaler to retailer to consumer Manufacturers .
Wholesalers. Reasons for indirect selling methods • • • • • • Manufacturer does not have the financial resources to distribute goods.Reasons for direct selling methods • • • • • Manufacturer wants to demonstrate goods. Too many consumers in a large area. Distribution channels already established. Middlemen unable to transport. High profit margin added to goods by wholesalers and retailers. Manufacturer does not have a wide assortment of goods to enable efficient marketing. difficult to reach. Manufacturer has no knowledge of efficient distribution. Manufacturer unable to convince wholesalers or retailers to stock product. Manufacturer wishes to use capital for further production. retailers and agents not actively selling. Wholesalers Reasons for using wholesalers • • • • • • • Bear risk of selling goods to retailer or consumer Storage space Decrease transport costs Grant credit to retailers Able to sell for the manufacturers Give advice to manufacturers Break down products into smaller quantities Reasons for bypassing wholesalers • • • • • • • • • Limited storage facilities Retailers' preferences Wholesaler cannot promote products successfully Development of wholesalers' own brands Desire for closer market contact Position of power Cost of wholesalers' services Price stabilisation Need for rapid distribution Ways of bypassing wholesalers • • • • • Sales offices or branches Mail orders Direct sales to retailers Travelling agents Direct Orders Agents .
They do not acquire ownership of goods but receive del credere commission. Objectives • • • Maintain demand for well-known goods Introduce new and unknown goods Increase demand for well-known goods Requirements of a good advertisement • • Attract attention Stimulate interest . Selling agents act on an extended contractual basis. Promotion Marketing communications breaks down the strategies involved with marketing messages into categories based on the goals of each message. Factory representatives represent more than one manufacturer. They have an expert knowledge of the purchasing function. There are distinct stages in converting strangers to customers (seeClient Path Marketing) that govern the communication medium that should be used. selling all of the products of the manufacturer.• • • • • Commission agents work for anyone who needs their services. Buying agents buy goods on behalf of producers and retailers. They have full authority regarding price and terms of sale. Advertising • • • • Paid form of public presentation and expressive promotion of ideas Aimed at masses Manufacturer may determine what goes into advertisement Pervasive and impersonal medium Functions and advantages of successful advertising • • • • • • • • • • Task of the salesman made easier Forces manufacturer to live up to conveyed image Protects and warns customers against false claims and inferior products Enables manufacturer to mass-produce product Continuous reminder Uninterrupted production a possibility Increases goodwill Raises standards of living (or perceptions thereof) Prices decrease with increased popularity Educates manufacturer and wholesaler about competitors' offerings as well as shortcomings in their own. Brokers specialize in the sale of one specific product. They receive a brokerage. They operate within a specific area and sell related lines of goods but have limited authority regarding price and sales terms.
interactive relationship Personal interest Attention and response Sales promotion Short-term incentives to encourage buying of products: • • Instant appeal Anxiety to sell Publicity • • • • Stimulation of demand through press release giving a favourable report to a product Higher degree of credibility Effectively news Boosts enterprise's image Beyond the 4 Ps Resources. Competitive advantage was created by directly appealing to the needs. Successful marketing was based on who could create the better brand or the lowest price or the most hype. wants and behaviors of customers. and primarily on the psychological and sociological aspects of marketing. relationships.• • Create a desire Bring about action Seven steps in an advertising campaign • • • • • • • Market research Setting out aims Budgeting Choice of media Design and wording Coordination Test results Personal sales Oral presentation given by a salesman who approaches individuals or a group of potential customers: • • • Live. Marketers will consciously build and allocate resources. better than the competition. Marketing in the future will be based on a more strategic approach to competitive marketing success. Offerings and Business Models Marketing in the past focused mainly on basic concepts like the 4 Ps. Relationships. offerings and business models that other companies find hard to .
Relationships Success in business. human (knowledge and skill). This system is basically the four Ps renamed and reworded to provide a customer focus. It's slowly becoming business model vs.match. including the nature of the product itself. organizational (structure. This implies that the company focuses its activities and products on consumer demands. physical (plant and equipment). legal (trademarks and patents). Blog Reference. distributors. competencies. business model.(customer-vendor) The marketing strategies that are focused on building and leveraging win-win relationships are called Community marketing strategies. partners and even competitors if they want to have success in today's competitive marketplace. The rationale for this approach is that there is no point spending R&D funds developing products that people will not buy. policies). the sense of identifying market changes and the product innovation approach. Business model innovation allows a marketer to change the game instead of competing on a level playing field. This does not mean the four P approach is dead. as in life. and informational (knowledge of consumers and competitors). Some argue that community marketing is not created. . as most marketing is. product in competitive marketing is dying. A formal approach to this customer-focused marketing is known as SIVA (Solution. simply that it has been expanded upon. Access). Small companies usually have a harder time competing with larger corporations because of their disadvantage in resource allocation. is driven by the needs of potential consumers. Value. No strategy is pursued until it passes the test of consumer research. Information. Business Models The concept of product vs. consumer wants are the drivers of all strategic marketing decisions. Every aspect of a market offering. In the consumer-driven approach. is based on the relationships you have with people. The starting point is always the consumer. Marketers must aggressively build relationships with consumers. customers. Business model innovation can make the competition's product superiority irrelevant. There are four type of relationships (1)win-win (2)win-lose (3)lose-lose (4)lose-win. Customer focus Many companies today have a customer focus (or customer orientation). Generally there are three ways of doing this: the customer-driven approach. Resources Companies with a greater number of resources than their competitors will have an easier time competing in the marketplace. but rather is the cultivation of a natural social response. History attests to many products that were commercial failures in spite of being technological breakthroughs. Resources include: financial (cash and cash reserves).
because of the ex post status of consumer research. then tries to develop a market for the product.Information: Does the customer know about the solution. Some even question whether it is marketing. do they know enough to let them make a buying decision . This model was proposed by Chekitan Dev and Don Schultz in the Marketing Management Journal of the American Marketing Association.Solution: How appropriate is the solution to the customers problem/need . and if so how. successfully focus on product innovation (Such as Nintendo who constantly change the way Video games are played). and presented by them in Market Leader the journal of the Marketing Society in the UK. marketers can aggressively over-pursue product innovation and try to overcapitalize on a niche. price. what it will cost. Many firms. It is claimed that if Thomas Edison depended on marketing research he would have produced larger candles rather than inventing light bulbs. However. what might they have to sacrifice. .Value: Does the customer know the value of the transaction. Many purists doubt whether this is really a form of marketing orientation at all. such as research and development focused companies. The model focuses heavily on the customer and how they view the transaction. what will be their reward? . promotion) of marketing management. place. who from. marketers must ensure that they have a varied and multi-tiered approach to product innovation. The rationale is that customers may not know what options will be available to them in the future so we should not expect them to tell us what they will buy in the future.Access: Where can the customer find the solution. the company pursues product innovation. Product Promotion Price Place ->Access The four elements of the SIVA model are: . -> -> -> Solution Information Value Product focus In a product innovation approach. Product innovation drives the process and marketing research is conducted primarily to ensure that a profitable market segment(s) exists for the innovation. what are the benefits.The SIVA Model provides a demand/customer centric version alternative to the well-known 4Ps supply side model (product. When pursuing a product innovation approach. How easily/locally/remotely can they buy it and take delivery.
desktop advertising or online marketing. and promotion. which is appealing to supermarkets because it can "increase sales without the need to give people discounts. or how employees are trained and managed to deliver the brand in a way that positively impacts the acquisition and retention of customers (employer branding). place.000 people downloaded previously unknown songs" (Columbia University. The basic idea is that people will buy more of products that are seen to be popular. A "swarm-moves" model was introduced by a Princeton researcher." a Massachusetts company exploiting knowledge of social networking to improve sales. This is the only element in the marketing mix that generates revenue for firms. Other recent studies on the "power of social influence" include an "artificial music market in which some 14. known as the four P's of marketing. and several feedback mechanisms to get product popularity information to consumers are mentioned. marketers are turning to forms of Permission marketing such as Branded content. affiliate marketing." Large retailers Wal-Mart in the United States and Tesco in Britain plan to test the technology in spring 2007 . services and ideas. In order to generate revenue. A relatively new form of marketing uses the Internet and is called internet marketing or more generally e-marketing. The use of herd behavior in marketing. a Japanese chain of convenience stores which orders its products based on "sales data from department stores and research companies. New York). Custom media and Reality marketing.  Mechanisms to increase impulse buying and get people "to buy more by playing on the herd instinct" were shared.g. and online retailers who are increasingly informing consumers about "which products are popular with like-minded consumers" (e. In an article entitled "Swarming the shelves: How shops can exploit people's herd mentality to increase sales".. managers must . Diffusion of innovations research explores how and why people adopt new products. eBay). including smart-cart technology and the use of Radio Frequency Identification Tag technology. marketing managers seek to control the four basic elements of the marketing mix: product.• An emerging area of study and practice concerns internal marketing. • • • • Marketing Mix Once a positioning strategy has been determined. Price is the cost of the product paid by consumers. It targets its audience more precisely. The Economist recently reported a recent conference in Rome on the subject of the simulation of adaptive human behavior. the best mix of these elements is determined to reach the selected target market. Since these four variables are controllable. Amazon. It typically tries to perfect the segmentation strategy used in traditional marketing. and is sometimes called personalized marketing or one-to-one marketing. With consumers' eroding attention span and willingness to give time to advertising messages. Price. price.
penetration. Place refers to where and how the products will be distributed to consumers. consumers will focus on $19 rather than $20. A quantity-pricing strategy provides lower prices to consumers who purchase larger quantities of a product.consider factors both internal and external to the organization. ideas. External factors to consider are the target market. There are two basic issues involved in getting the products to consumers: channel management and logistics management. personal selling. and production costs. Psychological pricing tends to focus on consumer perceptions. The process of moving products from a manufacturer to the final consumer is often called the channel of distribution. product demand. managers use a blend of the four promotional tools that best reaches potential customers. For the promotional program to be effective. Place. Promotion. quantity. The goal of this promotional mix is to communicate to potential customers the features and benefits of products.95. Penetration pricing is used when firms set low prices in order to capture a large share of a market quickly. allowing firms to generate maximum profits from customers willing to pay the high price. odd pricing is a common psychological pricing strategy. competition. Various promotional tools are used to communicate messages about products. Channel management involves the process of selecting and motivating wholesalers and retailers. and government regulations. the marketing-mix strategy. the price is initially set high. sometimes called middlemen. Internal factors take the form of marketing objectives. Consumers tend to focus on the lower-value fulldollar cost even though it is really priced closer to the next higher full-dollar amount. There are a number of pricing strategies available to marketing managers: skimming. For example. or services from firms and their customers. the cost of the product may be a few cents lower than a full-dollar value. and psychological. market-coverage strategy. The last variable in the marketing mix is promotion. economic conditions. sales promotion. Several factors are reviewed by firm management when determining where to sell their products: distribution channels. . geographic locations. With odd pricing. Prices are then gradually lowered until maximum profit is received from each level of consumer. if a good is priced at $19. and publicity. The promotional tools available to managers are advertising. through the use of incentives. For example. and transportation methods. This blending of promotional tools is sometimes referred to as the promotional mix. With a price-skimming strategy. inventory.
The price need not be monetary . suggests that one of the greatest limitations of the 4 Ps approach "is that it unconsciously emphasizes the inside–out view (looking from the company outwards). Placement (or distribution): refers to how the product gets to the customer. time. Morgan. Jerome McCarthy. online vs.it can simply be what is exchanged for the product or services. Promotion: This includes advertising. families. price. Pricing: This refers to the process of setting a price for a product.Four Ps In the early 1960s. • • • • Product: The product aspects of marketing deal with the specifications of the actual goods or services. These four elements are often referred to as the marketing mix. point of sale placement or retailing. publicity. including discounts. retail). Professor E. or company. which geographic region or industry. referring to the channel by which a product or services is sold (e. to which segment (young adults. for example. and how it relates to the end-user's needs and wants.g. and support. Industrial or B2B marketing must account for the long term contractual agreements that are typical in supply chain transactions. also referring to how the environment in which the product is sold in can affect sales. branding and refers to the various methods of promoting the product. suggested that the Marketing Mix contained 4 elements: product. sales promotion. This fourth P has also sometimes been called Place. which a marketer can use to craft a marketing plan. guarantees. whereas the essence of marketing should be the outside–in approach". business people). place and promotion. psychology or attention. e. As a counter to this. Nevertheless. The scope of a product generally includes supporting elements such as warranties. brand. Services marketing must account for the unique nature of services. also at the Harvard Business School in the early 1960s. energy.g. the 4 Ps offer a memorable and workable . etc. Borden suggested that all those actions of the company represented a “Marketing Mix”. and personal selling. The four Ps model is most useful when marketing low value consumer products. Industrial products. in Riding the Waves of Change (Jossey-Bass. services. Professor Neil Borden at Harvard Business School identified a number of company performance actions that can influence the consumer decision to purchase goods or services. Relationship marketing attempts to do this by looking at marketing from a long term relationship perspective rather than individual transactions. 1988). high value consumer products require adjustments to this model.
Products can be either tangible or intangible. as well as a framework within which these can be used. intangible . as they too can affect the customer's service experience. These “passive customer bases” will ultimately be replaced by the “active customer communities”. services marketing calls upon an extra three. This. what should be the product directions and even which ads to run. To reduce the feeling of risk. (e.  These are: • • • People: Any person coming into contact with customers can have an impact on overall satisfaction. Process: This is the process(es) involved in providing a service and the behaviour of people. Tangible products are products that can be touched. As a result of this. Seven Ps As well as the standard four P's (Product. Predictive modeling: This refers to algorithms that are being successfully applied in marketing problems (both a regression as well as a classification problem). well motivated and the right type of person. Participation: This is to allow the customer to participate in what the brand should stand for. Physical evidence: Unlike a product. it is often vital to offer potential customers the chance to see what a service would be like. The historical problem with marketing is that it is “interruptive” in nature.guide to the major categories of marketing activity. P2P is now being referred as Social Computing and is likely to be the most disruptive force in the future of marketing. thus improving the chance for success. This concept is laying the foundation for disruptive change through democratization of information. but this concept is further extended with emerging social media and advanced algorithms. Emerging technologies will continue to push this idea forward. they must be appropriately trained. Brand engagement happens within those conversations. Whether as part of a supporting service to a product or involved in a total service. totaling seven and known together as the extended marketing mix. Promotion and Place). Fellow customers are also sometimes referred to under 'people'. Early examples include Dell on-line and Amazon.g. trying to impose a brand on the customer. therefore. a service cannot be experienced before it is delivered. Product Product. The first element in the marketing mix is the product. in the customer's eyes.. Peer-to-Peer: This refers to customer networks and communities where advocacy happens. which makes it intangible. new marketing 4Ps • • • • Personalization: It is here referred customization of products and services through the use of the Internet. such as case studies. people are particularly important because. which can be crucial to customer satisfaction. means that potential customers could perceive greater risk when deciding whether to use a service. at a sporting event). Pricing. This is most apparent in TV advertising. testimonials or demonstrations. they are generally inseparable from the total service .com. This is done by providing physical evidence.
styling. such as research and development focused companies. It targets its audience more precisely. Products are typically sorted according to the following five characteristics: quality. There are three basic levels of a product: core. successfully focus on product innovation (Such as Nintendo who constantly change the way Video games are played). Some even question whether it is marketing. and packaging. because of the ex post status of consumer research. It is claimed that if Thomas Edison depended on marketing research he would have produced larger candles rather than inventing light bulbs. custom media and reality marketing. actual. The use of herd behavior in marketing. Many firms. • • • • • An emerging area of study and practice concerns internal marketing. such as services. When planning new products. Product focus In a product innovation approach. food processors. or how employees are trained and managed to deliver the brand in a way that positively impacts the acquisition and retention of customers (employer branding). desktop advertising or online marketing. Many purists doubt whether this is really a form of marketing orientation at all. The next level of the product is the actual product—in the case of the previous example. follow-up technical assistance and warranties and guaranties are augmented product components. warranties. and several feedback . features. The rationale is that customers may not know what options will be available to them in the future so we should not expect them to tell us what they will buy in the future. With consumers' eroding attention span and willingness to give time to advertising messages. services and ideas. the augmented level of a product consists of all the elements that surround both the core and the actual product. The Economist reported a recent conference in Rome on the subject of the simulation of adaptive human behavior. styles. service. rather. and return policies.products are those that cannot be touched. brand name. When pursuing a product innovation approach. then tries to develop a market for the product. It typically tries to perfect the segmentation strategy used in traditional marketing. Finally. and is sometimes called personalized marketing or one-to-one marketing. the company pursues product innovation. affiliate marketing. what consumers really buy in terms of benefits. marketers are turning to forms of permission marketing such as branded content. The basic idea is that people will buy more of products that are seen to be popular. The augmented level provides purchasers with additional services and benefits. marketers must ensure that they have a varied and multi-tiered approach to product innovation. they buy the benefit of being able to process food quickly and efficiently. marketers can aggressively over-pursue product innovation and try to overcapitalize on a niche. all in an attempt to meet the needs and wants of consumers. per se. For example. packaging. A relatively new form of marketing uses the Internet and is called Internet marketing or more generally e-marketing. Product innovation drives the process and marketing research is conducted primarily to ensure that a profitable market segment(s) exists for the innovation. However. options. size. firm managers consider a number of issues including product quality. The core product is the most basic level. and augmented. For example. Diffusion of innovations research explores how and why people adopt new products. consumers do not buy food processors. features. brand name. Mechanisms to increase impulse buying and get people "to buy more by playing on the herd instinct" were shared.
etc. Amazon.. Marketing is also used to promote the businesses products and is also a great way of promoting the business its self. New York). New Product Development Steps in product design • • • • • Design and development of product ideas. perfect colour. Packaging Requirements of good packaging • • • • • • • • • • • • • Functional ." a Massachusetts company exploiting knowledge of social networking to improve sales. Analysis of business instead of product concept. and online retailers who are increasingly informing consumers about "which products are popular with like-minded consumers" (e. sale. including smart-cart technology and the use of Radio Frequency Identification Tag technology. Design and testing of emotional product." Large retailers Wal-Mart in the United States and Tesco in Britain plan to test the technology in spring 2007 . Selection of and sifting through product ideas. a Japanese chain of convenience stores which orders its products based on "sales data from department stores and research companies. which is appealing to supermarkets because it can "increase sales without the need to give people discounts. Other recent studies on the "power of social influence" include an "artificial music market in which some 14. For a perfect product. opening.mechanisms to get product popularity information to consumers are mentioned. A "swarm-moves" model was introduced by a Princeton researcher. Be environmentally responsible Be cost effective Appropriately designed for target market Eye-catching (particularly for retail/consumer sales) Communicate attributes and recommended use of the product and package Compliant with retailers' requirements Promotes image of enterprise Distinguishable from competitors' products Meet legal requirements for product and packaging Point of difference in service and supply of product. use. reuse. Forms of packaging .effectively contain and protect the contents Provide convenience during distribution. eBay). Design and testing of product concept.g.000 people downloaded previously unknown songs" (Columbia University.
Packaging is an important part of the branding process as it plays a role in communicating the image and identity of a company. Furthermore the packaging is often the most relevant element of a trademark and conduces to advertising or communication. identify." Packaging can be defined as the wrapping material around a consumer item that serves to contain. and otherwise make the product marketable and keep it clean. Packaging is the outer wrapping of a product. promote. Packing is recognized as an integral part of modern marketing operation. protect. describe. It is the process of preparing items of equipment for transportation and storage and which embraces preservation. Packaging is the enclosing of a physical object.• • • • • • Specialty packaging — emphasizes the elegant character of the product Packaging for double-use Combination packaging two or more products packaged in the same container Kaleidoscopic packaging — packaging changes continually to reflect a series or particular theme Packaging for immediate consumption — to be thrown away after use Packaging for resale — packed. It is the intended purpose of the packaging to make a product readily sellable as well as to protect it against damage and prevent it from deterioration while storing. typically a product that will be offered for sale. into appropriate quantities. which embraces all phases of activities involved in the transfer of goods and services from the manufacturer to the consumer. . display. for the retailer or wholesaler Role of Packaging Organisation in Marketing Product and Introduction Packaging is now generally regarded as an essential component of our modern life style and the way business is organized. identification and packaging of products. How can we define Packaging? Kotler defines packaging as "all the activities of designing and producing the container for a product.
Protection and preservation Requirements A basic function of package is to protect and preserve the contents during transit from the manufacturer to the ultimate consumer.Functional 1. elapsed time since packaging. inventory levels. A package must communicate what it sells. From climatic effects (heat and cold. It is the interest further that to get appropriate communication to the consumer about the product. When international trade is involved and different languages are spoken. wooden crate etc. the package must contain the product. the use of unambiguous. Communication A major function of packaging is the communication of the product. distribution routes. readily understood symbols on the distribution package is essential. chemical reaction etc. Protection is required against transportation hazards spillage. ingress and egress of moisture. Eg: beverages. how to use it and other utility informations. vapour. transport and storage. Hazards of Transport There * * * * are four Drops Compression Vibration Climatic main hazards and of transport impacts forces variations . insect infection. moisture. from hazardous substances and contaminants. Types of packaging An important distinction is to be made here between two types of packaging o Transport packing: The product entering in to the trade need to be packed well enough to protect against loss damage during handling. To function successfully. This containment function of packaging makes a huge contribution to protecting the environment. drying atmospheres). 3. colour. ensuring protection from bacteriological attacks. and from infestation. It is the protection during transport and distribution. Containment Most products must be contained before they can be moved from one place to another. price. o Consumer Packing: This packaging holds the required volume of the product for ultimate consumption and is more relevant in marketing. dirt. size. lot number. tampering pilferage etc. tobacco etc. Packaging protects the interests of consumers. A package should preserve the contents in 'Factory Fresh' condition during the period of storage and transportation. contamination by foreign material. Eg: fiberboard. Information includes: quantity. and merchandising and premium data. 2. A better packaging help to maintain the quality of the product and reachability of the product in the consumer's hand without spillages It gives better image to the organisation.
generally. o Sand and Dust Test: This test is to evaluate the resistance of a package to the penetration of sand and dust. The main functions of cushioning materials can be detailed as follows: o o Shock Protection protection against against vibration abrasion o Protection of grease proof and water proof barriers at ponut of contact with solid blocks o Protection of moisture vapour barriers at points of contact with sharp edges of the article itself. o Drum test: This test help to evaluate loaded shipping containers with respect to general overall durability and for the protection afforded to the contents against certain hazards of handling and shipment. which protects the article from damage due to shock and vibration. o Compression Test: This test is carried out. distortion. o Salt Spray Test: This test is to evaluate the resistance of a package to corrosion by salt spray and to serve as a general standard for corrosion. o Vibration Test: This test is to determine the ability of the container to withstand vibration and the protection offered by materials used for interior packing. o Inclined Impact Test: This test help to study the extend of damage in a way of crushing. Importance of Cushion Materials Cushioning is that part of packaging. Various Climatic Tests o Rain Test: This test is conducted in a simulated rain condition to assess its impact on the test area for two hours.Various Mechanical Tests o Drop Test: This test help to measure the ability of the container and inside packing materials to provide protection to its contents and to measure the ability of the container to withstand rough handling. breaking. on empty containers. o Rolling Test: This test helps to evaluate the overall strength of the container and the cushioning material provided inside and any failure of the content. o Protection of small projections . and shifting during handling storage and transport which occurs to the container and its content. cracking. o Fungus Resistance Test: This test is to evaluate all the materials used in the fabrication of shipping containers for fungus resistance. to measure the ability of the container to resists external compressive loads applied to faces or applied to diagonally opposite edges or corners.
cleaning the package product filling – closing. * * Insurance Effect of cost: It varies on depending The on the vulnerability that influence of package on sales. No matter where and how the products are transported or shipped. heavy materials of construction. because it directly involves convenience. feed back cost. * Can make the important difference to a marketing strategy by meeting customers' needs better. handling cylindrical slums etc. stenciling. Packaging is of great importance in the final choice the consumer will make. * Packaging plays a key role in brand promotion and management. information and branding. transportation delivery etc. drums etc. (freight by volume) * Loss and Damage cost: It is related to the loss and damage during operation. * Storage of filled packages: This includes the cost incurred to shift the goods from one form of packaging to another.o Filling of void space in the container o Other secondary purposes Packaging Cost The most important aspect when we look into packaging is the packaging cost. * Storage and handling cost of empty packages: This include the handling cost of bulky packages. packages and labels happen. Importance of packaging: An Overview Some of the major significance of packaging can be detailed as follows: * Can make a product more convenient to use or store. * Transportation cost of filled packages: This involves the transportation cost by sea. * The paramount concern of packaging is the reachability of the product without any damage. * Package developmental cost: This include the evaluation cost. Packaging cost include the following: * Material cost: It means the cost of the pack and quality control cost. air etc. they arrive at the customer's door in working condition without need of repair or . final trial cost etc. field testing cost. packages sales: package * Obsolescence Cost: This cost involves when changes in the packaging materials. consumer research cost. labeling – unitizing. appeal. easier to identify or promote or to send out a message. pilot test cost. * Packaging operation costs: This includes the cost involved in operations like.
Perhaps the greatest "packaging" challenge that long-term care facilities face today. Conclusion The significance of packaging has come to be increasingly recognized in export as well as in marketing of a wide range of consumer goods and industrial products within the country. but the solution is local. and one that will remain into the foreseeable future. besides colossal wastage of scarce economic resources. Marketing is difficult enough without pre-existing image problems tagging along. * Packaging is especially important in certain industry where future sales may be based largely on the quality. This makes the many good facilities feel like dolphins caught in tuna nets. Packaging makes a product. "Facilities of varying quality are grouped together in the public's eye into one stereotype across the nation. The administrator of a good nursing facility in Illinois cannot change the image of a bad facility in Maine. Goods damaged in transit or arriving at the destination in an unacceptable condition tarnishes the reputation of the manufacturer as well as the country as a whole. integrity and performance of a company's previous delivery. horror and death. The problem of a negative image might be national. One director of nurses. Keep in mind that a conscious effort on the part of marketing managers can increase the volume of sales and there by improve the reputation of the product and organisation. The last two years especially have been extraordinarily difficult. is their overall negative image. It is within the power of each and every administrator to improve the quality of care and enhance the quality of life their residents receive. more attractive and appealing to customers. but also to a substantial extends on the standards of packaging adopted for the products. summed it up rather succinctly when she wrote. packaging has a crucial role to play in the fetching higher unit values for our consumer goods (like tea and cashew) through the substitution of the bulk packs by consumer packs. with "horror stories" prominently featured in the press and broadcast media. Further. "Packaging" For Marketing Success .good service key to marketing long-term care facilities Long-term care facilities in this new millennium must learn how to package their products to gain a marketing advantage.adjustment. any product. When something is attractive and appealing. Effort should be there to understand the importance of packaging there by to avoid the loss and damage cost incurred during transport and delivery. writing in this magazine not too long ago. The national or state associations can't do it. only individual facilities can. It is one of neglect. In the recent past packaging has been increasingly recognized as a significant factor in the nations export promotion effort. The volume of exports depends not only on the quantity of the production and prices. it is obviously easier to market and sell. The many positive stories simply never make it to public view!" What Is the Solution? Every long-term care facility must become involved in trying to improve the industry's image. Professional associations can give .
Empty beds turn up." What good is it marketwise or imagewise if a facility has wonderful nursing care but deplorable housekeeping. So all de partments must perform their duties extremely well to reach the status of "high quality.. therefore. are offering the same kind of products. Families do not buy he work of one department when they admit a loved one into a facility. Where Packaging Comes In Since the product of every nursing facility is some kind of care. Quality care is the result of competent well-trained employees performing daily assignments consistently well.encouragement and support. i. which can be seen and smelled almost instantly? Even with nursing. skin breaks down and residents are not repositioned. The other has been repeatedly written about in the local newspaper for patient neglect and cited by the surveyors for poor care. Which facility should have an easier time marketing itself? There are two specific areas of concern for administrators trying to improve their facilities' image in the community. For example. then not only will their image be improved. If every nursing facility tries to create a favorable impression and is at the same time committed to providing high-quality care and superior service. guided by precise and unequivocal policies and procedures. Absenteeism also impacts the facility's ability to maintain census. it's simply because the facility is short-staffed. but their marketing will be made easier as well. If unchecked or tolerated. what good is it if the facility has high-quality nursing care Monday through Friday but things go to pot on the weekends or holidays when the nursing assistants fail to show up (the very days. These are quality killers and image busters. When families approach staff. their loved one has complaints. Both are internal failures but they can cause image and marketing problems externally: (1) absenteeism and (2) tolerance of mediocre work performance. then the quality designation (excellent. it can devour entire departments and shifts. they purchase the services of every department. Quality care must be universal and not limited to the workings of one department." Families become fed up and take their loved ones elsewhere. If staff is short. The admissions coordinator might be a great sales person--she admits residents. even thought the marketing and sales functions were carried out correctly and 'produced an admission . two facilities are located in the same part of town. Residents are neglected and basic care is not provided not because the staff doesn't care or because they lack job skills. fair or substandard) is going to be the packaging feature that makes the product more or less attractive. nursing. but each and every facility must do the actual heavy lifting to improve its image. They both provide skilled nursing care. they hear the same old refrain: "We are short today. offer rehabilitative therapies and have a subacute unit. residents are not assisted with meals or kept hydrated. But one facility has a history of deficiency-free surveys and an outstanding reputation among healthcare professionals in the area. that families and members of the community come in to visit)? Absenteeism destroys both the quality as well as the continuity of care. But no sooner are residents admitted than families get "second thoughts" about their decision because. by the way. Both facilities.e. residents are not changed and kept dry. every time they visit.
department heads.e. look and perhaps even purchase the item. attentive service. arranges for transportation back to your job--you feel great. . Just as the grade. the better the image and the easier it is to market. In some facilities. Both are management failures. the car starts to lurch and hesitate again. i.. demeanor. The process was fine (you were treated well).Another enemy of quality care is the. the grooming. but they didn't fix the problem (bad outcome). Not only are products packaged. in others. you probably won't go back to the restaurant. So where can families detect significant difference? It is in the perception of friendly. They have been around for a long time in all service-oriented businesses. The better the quality of care. When the meal you ordered (outcome) was wonderful (i. When you bring your car to the dealer because of a problem and the service agent greets you with a smile. As you pull out into traffic. All facilities have private and semiprivate rooms. we're back to packaging again. Yes. both must exceed expectations for service to bejudged as superior. Quality is a packaging element that makes the product more attractive and appealing. employees are allowed to rush through their assignments simply to get the job done. Customer service has become so important because facilities have become almost identical in what they have to offer. attitude and appearance of employees influence a customer greatly. attentive and well groomed. Airlines certainly use packaging techniques to train their flight attendants on how important it is for them to be friendly. nor the condition of the' furniture nor the decor or the design. Either way. staff and employees can also be packaged as well. waiter was inattentive. calls you by name. He thanks you for the opportunity to be of service and hands you your keys. The bellman who carries your bags when you arrive at the Marriott is certainly not the product. design and shape of a product's package help a customer to stop. All (or almost all) nursing facilities now have subacute units. size. but people. When you arrive back at the dealership to pick up your car. The product is lodging. Instances of poor care can be traced back to absenteeism or the acceptance of mediocre performance. Still very nice.e. waiter was slow. Both must match the customer's expectations for service to be judged satisfactory. People don't become upset and outraged by such factors. nicely prepared done exactly as ordered) but you went through hell to get it (process). time management fails and some duties and assignments are simply never finished. Every facility has a dining room and perhaps even a beauty shop. the horror stories revolve around case failures. either. It's unlikely you will use them again.. People-packaging techniques are not new. Rather. Families rarely remember how fast the 'job was done. acceptance of mediocre work performance by supervisors or. Notice that the common denominator in all the horror stories about nursing facilities is not the age of the building. but how the bellman treats you makes that product more attractive. the service manager explains what was done. Your expectations are high. quality suffers. they will always remember how well it was done. Two factors are always considered by every customer: the process and the outcome. color.
Your facility can zip through the state survey but still fail miserably on service. Set your personal and professional goals high. Mention the Ritz-Carlton Hotel chain and you know you are talking about a luxury hotel chain recognized the world over for luxurious accommodations and outstanding customer service. powerful message.Families know when they have been treated well--and when they have been ignored or treated poorly. "only we train them according to our expectations. much less evaluate. We're glad to have you join us. train your employees on how to do their jobs--but then also train them how to enhance customer service. employees understand exceptional service is expected of them. It's worth repeating: Service always involves outcomes and process. Posters advising "teamwork" are not going to get the job done. "We get our people from the same pool you do. There are men serving as porters who polish and buff the corridors." Near the end of the first interview. There are housekeepers who clean rooms and wash toilet bowls. The card has the Carlton's Creed neatly typed on it. Since most lay persons cannot understand. We do. Sanders would always give the same answer. Our number one goal is to provide outstanding customer service. It is a place where the care and comfort of your guests is the highest Priority." The Ritz-Carlton Way. they are forced to judge quality of care (technical) by the quality of service that accompanies the care. It's not something "extra" or "additional work". We insist that you do the same. Each and every Ritz-Carlton Hotel is more than a building made of brick and mortar. A lot of its jobs are similar to those found in a healthcare facility. All newly hired Nordstrom employees on the first day of orientation are given an Employee Handbook. . Because Nordstrom is committed to superior customer service. What a simple. technical quality of care components. after the applicant's background has been discussed and the job duties explained. BetsySanders was vice-president and general manager for Nordstrom's Southern California division. She frequently attended community events and fundraisers for charitable causes." she replied. both have to be exceeded to be rated superior. Healthcare facilities must get serious about in-service training. To ensure quality. the human resources person hands each applicant 5" x 7" card. it's part of the job. The Nordstrom Way. Your facility can pass one accreditation survey after another but still provide poor service. from their first day on the job. On the first page they find this message: Welcome to our company. Let's take a look at some prime examples. they look for people who have had some experience in hotel housekeeping duties--then they train them to clean rooms the "RitzCarlton way. There are kitchen staff who scrub pots and wash dirty dishes. When the Ritz-Carlton hires housekeepers. Both have to be met for a customer to be merely satisfied. Invariably on these occasions she would be taken aside by one of her competitors who wanted to know where Nordstrom found all those wonderfully motivated and helpful employees.
Make friendly. Then you will find. entertainment. specially designed packaging can get exp image communication-for example. moisture. that your marketing is getting easier and easier. Upward Stretching . Labelling Considerations | Nutritional Labelling | Universal Product Codes l Designing Your L | Other Points on Labelling | Packaging for Marketing | Resources Packaging for Marketing and Visual Appeal Along with protecting your product from light. Two-Way Stretching. responsive service part of every job description. how the product will be stacked and displayed. attentive. you will want to consi following when choosing the right package: • • • • • • will you have more than one product? If so. or function.how will the package be filled? Some chutney producers are demanding wide-mouthed squat jars Downward stretching: introducing a new product into a product line at the lower priced end of the market.. recognition requirements . Sit down with your department heads and determine three ways the quality of care will be improved in each department during the next six months. casual consumption. the hiring manager asks the job seeker simple question: "Will you pledge and promise to do that?" Why can't long-term care facilities do the same? If you are as fed up as I am with all the negativity and poor images surrounding nursing facilities. environmentally friendliness. then don't wait for an association to do something. no matter what services your facility offers. and handling. After the prospective employee reads that card.do you want the consumer to identify your product by package colour or shape? (Be careful with this as fancy. technical requirements . similar packaging that looks related). you may want to have a "family resemblance" in the packaging of these products (i. must pledge and promise to provide the finest personal service to each and every guest.Every employee who works at the Ritz. See Product Line Stretching. title. no matter what department. oxygen. snack foods packed in plastic bags communicate fun.e.
slogan. . both directly relating to its use. The key objective is to create a relationship of trust. more specifically. design. fonts. A brand serves to create associations and expectations among products made by a producer. A brand is a collection of images and ideas representing an economic producer. or service. ideas. term. design. Branding means creating reference of certain products in consumers mind. and media commentary. A brand often includes an explicit logo. it refers to the descriptive verbal attributes and concrete symbols such as a name. and design scheme that convey the essence of a company. logo. product or service. product or service. color schemes. and through the influence of advertising. symbols and sound which may be developed to represent implicit values. or other feature that distinguishes products and services from competitive offerings. A brand is a symbolic embodiment of all the information connected to a company. and even personality. A brand has also been defined as an identifiable entity that makes a specific promise of value. Brand recognition and other reactions are created by the accumulation of experiences with the specific product or service. product.Trademarks Significance of a trademark • • • • • Distinguishes one company's goods from those of another Serves as advertisement for quality Protects both consumers and manufacturers Used in displays and advertising campaigns Used to market new products Brands A brand is a name. A brand represents the consumers' experience with an organization. Co-branding involves marketing activity involving two or more products. symbol.
Where two products resemble each other. Advertising spokespersons have also become part of some brands. A brand owner may seek to protect proprietary rights in relation to a brand name through trademark registration. A brand is therefore one of the most valuable elements in an advertising theme. and "branding" and brand equity have become increasingly important components of culture and the economy. Consumers may look on branding as an important value added aspect of products or services. The art of creating and maintaining a brand is called brand management. Concepts Some marketers distinguish the psychological aspect of a brand from the experiential aspect. the marketing of entities which supply ideas or promises rather than product and services (e. for example: Mr. Disney has been successful at branding with their particular script font (originally created for Walt Disney's "signature" logo). A brand which is widely known in the marketplace acquires brand recognition. although it is more correctly used to specifically denote written or spoken linguistic elements of a brand. Marketers engaged in branding seek to develop or align the expectations behind the brand experience (see also brand promise). people may often select the more expensive branded product on the basis of the quality of the brand or the reputation of the brand owner. For example. The psychological aspect.The brand. now being described as "cultural accessories and personal philosophies". as it often serves to denote a certain attractive quality or characteristic (see also brand promise). Brand name The brand name is often used interchangeably with "brand". political parties or religious organizations) may also be known as "branding". creating the impression that a brand associated with a product or service has certain qualities or characteristics that make it special or unique. sometimes referred to as the brand image. From the perspective of brand owners. is a symbolic construct created within the minds of people and consists of all the information and expectations associated with a product or service. branded products or services also command higher prices. When brand recognition builds up to a point where a brand enjoys a critical mass of positive sentiment in the marketplace. Whipple . as it demonstrates what the brand owner is able to offer in the marketplace.com.g. store-branded product). The experiential aspect consists of the sum of all points of contact with the brand and is known as the brand experience. This approach works not only for consumer goods B2C (Business-to-Consumer). which it used in the logo for go. but also for B2B (Business-to-Business). One goal in brand recognition is the identification of a brand without the name of the company present. In this context a "brand name" constitutes a type of trademark. In non-commercial contexts. if the brand name exclusively identifies the brand owner as the commercial source of products or services. but one of the products has no associated branding (such as a generic. it is said to have achieved brand franchise. see Philip Kotler & Waldemar Pfoertsch.
as well as packaging and graphics. actual service or product quality or performance. but the memories we help you create are even better. striving for mutual advantage and contributing to human progress.Some practitioners however define brand identity as not only outward expression (or physical facet). product or service. warmth.Brand identity is fundamental to consumer recognition and symbolizes the brand's differentiation from competitors. Brand identity may be defined as simply the outward expression of the brand. with externalization on the one side and internalization on the other. BP continues "At the core of BP is an unshakable commitment to integrity. communication etc.and by extension the branded company. For example BP describes its brand promise as "our fundamental beliefs" which have evolved over time. for example a dining restaurant may create the following brand promise: "Carl's Steak House -"Our food is the best. The brand promise may be expressed in a "tag line". "relationship" and "reflected consumer". On the externalization side brand identity consists of "physical facet". Brand personality Brand personality is the attribution of human personality traits to a brand as a way to achieve differentiation. treating everyone with respect and dignity. characteristics and behaviour of their brand. Brand promise Brand promise is a statement from the brand owner to customers. Brand personality is usually built through long-term marketing."" Other brand owners may develop their brand promise into a detailed statement on the values. but also in terms of the values a brand carries in the eye of the consumer. Interactions may include employees. The brand owner will seek to bridge the gap between the brand image and the brand identity. from common table salt to designer clothes. The brand promise is often strongly associated with the brand owner's name and/or logo. organisation. representatives.The act of associating a product or service with a brand has become part of pop culture. On the internalization side brand identity consists of "personality". which identifies what consumers should expect from all interactions with the brand. In 1992 Jean-Noel Kapferer developed the Brand Identity Prism. such as name and visual appearance. which charts the brand identity along a constructed source and constructed receiver axis. honest dealing.of Charmin toilet tissue and Tony the Tiger of Kellogg's. Most products have some kind of brand identity." Brand value Brand equity or brand value measures the total value of the brand to the brand owner. or imagination. Brand identity How the brand owner wants the consumer to perceive the brand . and reflects the extent of brand franchise. In this respect Kapferer positions brand personality as one factor within brand identity. Such brand personality traits may include seriousness. . "culture (values)" and "consumer mentalisation".
Brand monopoly In economic terms the "brand" is. In this context. However. whatever its derivation. and its brand value can account for some of the difference. a device to create a "monopoly" — or at least some form of "imperfect competition" — so that the brand owner can obtain some of the benefits which accrue to a monopoly or unique point of sale. Some campaign groups have thought to do this by deliberately subverting a brand’s image. or focusing on the message. Facing media exposure and consumer boycotts over supply chain issues. as pioneered by groups such as Adbusters. Design Act).6 billion US$. BP’s “Beyond Petroleum” branding is subverted by campaigners into headline such as “BP: Beyond Petroleum or Beyond Preposterous?” or “BP must move beyond petroleum as profits soar“. secret recipe).: Plant Varieties Act. In all these contexts.g. especially in the case of consumer product brands. in 1999 Nike's brand value was estimated at 8 billion US$. Up to 85 percent of a company’s market value might be intangible (for example know-how. The "brand". by patent. is a very important investment for any organization. such as stock or machinery). or even created. logo or message. For example. The monopoly may also be extended. there is also a legal dimension. for it is essential that the brand names and trademarks are protected by all means available.g. most "branding" is established by promotional means. trade secret (e. Campaigning groups may deliberately target a company’s brand value to force a company into adopting a certain position or practices. This attack may be visual. particularly those related to decreased price competition. for example. for example in the case of Coca-Cola or Microsoft. Branding policies There are a number of possible policies: Company name . For example. Nike's brand value declined in following two years to 7. RHM (Rank Hovis McDougall).A brand can be an intangible asset. used by analysts to rationalize the difference between a company's "book value" and market value. For example. and Interbrand. and rose back to 9. Brand value. retailers' "own label" brands can be just as powerful. Brand value may also arise in terms of staff retention benefits (e. a brand consultancy. states that tangible assets may account for less than five percent of a company’s market value. copyright. may arise out of customer loyalty. existing client relationships). have valued their international brands at anything up to twenty times their annual earnings. creating a negative association among consumers. and other sui generis intellectual property regimes (e. the ability of the company to attract and retain skilled and/or talented employees offering competitive salaries). the market value of a company can far exceed its tangible assets (physical assets owned by the company.g.26 billion US$ in 2004 after Nike addressed its supply chain issues. in effect. Brand value can be negatively influenced.
The Body Shop. whether it's the challenge to do your best in sports and fitness. it is just the company's name which is promoted (leading to one of the most powerful statements of "branding". the saying. or the affirmation that the cup of coffee you're drinking really matters. before the company's downgrading. brands may be developed in a number of ways: Brand extension . Brand development In terms of existing products. examples include the Japanese company Muji.Howard Schultz (president. This no-brand strategy means that little is spent on advertisement or classical marketing and Muji's success is attributed to the word-of-mouth. especially in the industrial sector. does not brand its products. "No one ever got fired for buying IBM"). Safeway. quality goods" in English. which means "No label. and Apple Computer. The most frequently quoted example is Intel. Surf and Lynx are all owned by Unilever). which is not necessarily connected with the product or consumption of the product at all. Persil." . Mercedes-Benz or Black & Decker) or even a range of subsidiary brands (such as Cadbury Dairy Milk. Starbucks. which secures its position in the PC market with the slogan "Intel Inside". attitude branding is described by Naomi Klein as a "fetish strategy". Attitude branding Attitude branding is the choice to represent a larger feeling. In this case a very strong brand name (or company name) is made the vehicle for a range of products (for example. "A great brand raises the bar -. Cadbury Flake or Cadbury Fingers in the United States). Derived brands In this case the supplier of a key component. ceo and chairman of Starbucks "No-brand" branding Recently a number of companies have successfully pursued "No-Brand" strategies.it adds a greater sense of purpose to the experience. In the 2000 book. used by a number of suppliers of the endproduct. Omo. a simple shopping experience and the anti-brand movement.Often. which like Muji. Muji products are not branded. No Logo. Individual branding Each brand has a separate name (such as Seven-Up or Nivea Sun (Beiersdorf)). which may even compete against other brands from the same company (for example. Other brands which are thought to follow a no-brand strategy are American Apparel. Marketing labeled as attitude branding include that of Nike. Although there is a distinct Muji brand. may wish to guarantee its own position by promoting that component as a brand in its own right.
in a market that is fragmented amongst a number of brands a supplier can choose deliberately to launch totally new brands in apparent competition with its own existing strong brand (and often with identical product characteristics). luggage. many fashion and designer companies extended brands into fragrances. In the hotel business. uses it to keep the very different parts of the business separate — from Sara Lee cakes through Kiwi polishes to L'Eggs pantyhose. simply to soak up some of the share of the market which will in any case go to minor brands. This may be acceptable (indeed to be expected) if there is a net gain overall. Mars extended its brand to ice cream. to be sold without confusing the consumer's perception of what business the company is in or diluting higher quality products. in which the new brand takes business away from an established one which the organization also owns. Caterpillar to shoes and watches. etc. of differing quality. The rationale is that having 3 out of 12 brands in such a market will give a greater overall share than having 1 out of 10 (even if much of the share of these new brands is taken from the existing one). Sara Lee. home textile. on the other hand. Individual brand names naturally allow greater flexibility by permitting a variety of different products. hotels. tennis racquets and adhesives. Multi-brands Alternatively. dish washing detergents. Cannibalization is a particular problem of a "multibrand" approach. furniture. Procter & Gamble (P&G) did likewise extending its strong lines (such as Fairy Soap) into neighboring products (Fairy Liquid and Fairy Automatic) within the same category. Michelin to a restaurant guide. a supplier pioneering a new market which it believes will be particularly attractive may choose immediately to launch a second brand in competition with its first. Dunlop extended its brand from tires to other rubber products such as shoes. golf balls. Marriott uses the name Fairfield Inns for its budget chain (and Ramada uses Rodeway for its own cheaper hotels). There is a difference between brand extension and line extension. in order to pre-empt others entering the market. running as many as ten detergent brands in the US market. Alternatively. however there are many examples of small businesses that became very successful due to branding. Some people argue that it is not possible to brand a small business. . Small business brands Branding a small or medium sized business (SME) follows essentially the same principle a branding larger corporation. When Coca-Cola launched "Diet Coke" and "Cherry Coke" they stayed within the originating product category: nonalcoholic carbonated beverages. This also increases the total number of "facings" it receives on supermarket shelves.The existing strong brand name can be used as a vehicle for new or modified products. Adidas and Puma to personal hygiene. The main differences being that small businesses usually have a smaller market and have less reach than larger brands. the new product being one stage in this process. Procter & Gamble is a leading exponent of this philosophy. home decor. it may be the price the organization is willing to pay for shifting its position in the market. In its most extreme manifestation. for example. Once again. (sun-) glasses. shoes and accessories.
Where the retailer has a particularly strong identity (such as Marks & Spencer in the UK clothing sector) this "own brand" may be able to compete against even the strongest brand leaders. a retailer's own branded product (or service). "generic" (that is. from local communities to centralized factories. History Although connected with the history of trademarks and including earlier examples which could be deemed "protobrands" (such as the marketing puns of the "Vesuvinum" wine jars found at Pompeii). Relationship marketing has been applied most often to meet the wishes of such large customers (and indeed has been demanded by them as recognition of their buying power). Concerns were raised that such "own brands" might displace all other brands (as they have done in Marks & Spencer outlets). but the evidence is that — at least in supermarkets and department stores — consumers generally expect to see on display something over 50 per cent (and preferably over 60 per cent) of brands other than those of the retailer. the factories would literally brand their logo or insignia on the barrels used. extending the meaning of "brand" to that of trademark. also emerged as a major factor in the marketplace. although it is arguable that those which have switched their budgets to "buy space" in the retailers may be more exposed. emphasizing the lack of advertising and. Industrialization moved the production of many household items.in which they take into account all the needs of a retailer in a product category rather than more narrowly focusing on their own brand. and may outperform those products that are not otherwise strongly branded. such as soap. It would appear that the penetration of such generic products peaked in the early 1980s.Own brands and generics With the emergence of strong retailers the "own brand". however. Lyle’s Golden Syrup makes a similar claim. are likely to continue their strong performance. effectively unbranded) goods have also emerged. been seen more in the pressure they have been able to exert on the owners of even the strongest brands (and in particular on the owners of the weaker third and fourth brands). having been named as Britain’s . Some of the more active marketers have now also switched to 'category marketing' . When shipping their items. This means that strong independent brands (such as Kellogg's and Heinz). even the strongest own brands in the UK rarely achieve better than third place in the overall market. brands in the field of mass-marketing originated in the 19th century with the advent of packaged goods. Indeed. At the same time. often simply a vehicle for a different kind of image). which have maintained their marketing investments. especially. probably as an outgrowth of consumerism. More than 50 per cent of UK FMCG brand leaders have held their position for more than two decades. and most consumers still appear to be looking for the qualities that the conventional brand provides. These made a positive virtue of saving the cost of almost all marketing activities. the plain packaging (which was. perhaps. The strength of the retailers has. the British brewery. claims their red triangle brand was the world's first trademark. Bass & Company.
and Quaker Oats were among the first products to be 'branded'. This was an early commercial explanation of what we now know as branding. From there. manufacturers began to recognize the way in which consumers were developing relationships with their brands in a social/psychological/anthropological sense. questioning the power of "brand value". manufacturers quickly learned to build their brand's identity and personality (see brand identity and brand personality). following the American Civil War. By the 1940s. This trend continued to the 1980s. It quickly became apparent that a generic package of soap had difficulty competing with familiar. local products. This value is determined by utility to the consumer in terms of money and/or sacrifice that the consumer is prepared to give for it. and jingles which began to appear on radio and early television. Coca Cola. Pricing Pricing refers to the amount of money exchanged for a product. decided that since all other cattle were branded. in an effort to increase the consumer's familiarity with their products.the day Phillip Morris declared that they were to cut the price of Marlboro cigarettes by 20%. for example. Quaker Oats. Coca-Cola. This began the practice we now know as "branding" today. Aunt Jemima. Naomi Klein has described this development as "brand equity mania". the term "maverick". and well-nuanced brand image. generating mass-produced goods and needed to sell their products to a wider market. . it was felt that what they really purchased was its brand name. and is now quantified in concepts such as brand value and brand equity. Companies soon adopted slogans. Cattle were branded long before this. such as Uncle Ben's rice and Kellogg's breakfast cereal furnish illustrations of the problem. 1993 .oldest brand. PepsiCo. In 1988. such as youthfulness. with its green and gold packaging having remained almost unchanged since 1885.marked by some as the death of the brand . Campbell soup. comes from Texas rancher Samuel Augustus Maverick who. where the consumers buy "the brand" instead of the product. James Walter Thompson published a house ad explaining trademark advertising. Marlboro Friday April 2. in order to compete with bargain cigarettes. Marlboro cigarettes were notorious at the time for their heavy advertising campaigns. Factories established during the Industrial Revolution. In response to the announcement Wall street stocks nose-dived for a large number of 'branded' companies: Heinz. fun or luxury. The packaged goods manufacturers needed to convince the market that the public could place just as much trust in the non-local product. his would be identified by having no markings at all. mascots. Juicy Fruit gum. originally meaning an unbranded calf. Many thought the event signalled the beginning of a trend towards "brand blindness" (Klein 13). Many brands of that era. Phillip Morris purchased Kraft for six times what the company was worth on paper. Around 1900. to a customer base familiar only with local goods.
. See also eMarketing Price. Penetration Pricing. Use a high price where there is a uniqueness about the product or service. Premium Pricing. Savoy Hotel rooms.Objectives • • • • • • Increase sales volume Increase revenue Achieve or increase profits Increase or maintain market share Eliminate competition Achieve advantages of mass production Factors influencing price-determination • • • • • • • • Production and distribution costs Substitute goods available Normal trade practices Fixed prices Reaction of distributors Reaction of consumers Nature of demand: o elastic/inelastic Form of market: o Perfect competition o Monopolistic competition o Monopoly o Oligopoly Steps to determine price • • • Determine market share to be captured Set up price strategy Estimate demand Evaluate competitors' reactions Pricing Strategies. There are many ways to price a product. This approach is used where a a substantial competitive advantage exists. Let's have a look at some of them and try to understand the best policy/strategy in various situations. and Concorde flights. Such high prices are charge for luxuries such as Cunard Cruises.
the advantage is not sustainable. companies will charge a premium price where the consumer is captured. Captive Product Pricing Where products have complements. Where there is a range of product or services the pricing reflect the benefits of parts of the range. Premium pricing. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost. Manufacturers of digital watches used a skimming approach in the 1970s. For example car washes. and the whole package $6. They form the bases for the exercise. Once this is achieved. However there are other important approaches to pricing. . economy pricing.The price charged for products and services is set artificially low in order to gain market share. Optional 'extras' increase the overall price of the product or service. wash and wax $4. etc. Companies will attempt to increase the amount customer spend once they start to buy. rather than rational basis. other marketing strategies and pricing approaches are implemented. the price is increased. Psychological Pricing. For example a razor manufacturer will charge a low price and recoup its margin (and more) from the sale of the only design of blades which fit the razor. Price Skimming. Basic wash could be $2. This is a no frills low price. However. Supermarkets often have economy brands for soups. Product Line Pricing. and the price inevitably falls due to increased supply. This approach is used when the marketer wants the consumer to respond on an emotional. For example 'price point perspective' 99 cents not one dollar. The cost of marketing and manufacture are kept at a minimum. and price skimming are the four main pricing policies/strategies. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other. spaghetti. Optional Product Pricing. The high price tends to attract new competitors into the market. This approach was used by France Telecom and Sky TV. penetration pricing. Economy Pricing. Charge a high price because you have a substantial competitive advantage.
your widgets cost $20 in raw materials and production costs. Here sellers combine several products in the same package. This also serves to move old stock. so you need to make $10. Your total cost is $50 per unit. This is usually the most profitable form of pricing. For example. giving you again a price of $60 per unit. Value Pricing. Pricing Methods Four models for calculating your pricing As we said earlier. For example. So long as you have your costs calculated correctly and have accurately predicted your sales volume. Here are four ways to calculate prices: • Cost-plus pricing .Product Bundle Pricing. Promotional Pricing. there is no "one right way" to calculate your pricing. and at current sales volume (or anticipated initial sales volume). now you need some way to crunch the actual numbers. Videos and CDs are often sold using the bundle approach. and assume that you have $10. your fixed costs come to $30 per unit.000 profit on 1. so you add $10 (20% x $50) to the cost and come up with a price of $60 per unit.000 units in the first year. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free). The most extreme variation on this is "pay for performance" pricing for services. let's use the same situation as above. For example rarity value. You want to recoup all your investment in the first year.Price your product based on the value it creates for the customer. or $10 profit per unit. if you can achieve it.000 invested in the company. plus a certain profit margin.Set your price to achieve a target return-on-investment (ROI). including both cost of goods and fixed costs at your current volume. you will always be operating at a profit. Geographical pricing is evident where there are variations in price in different parts of the world. Value-based pricing .g. in • • .Set the price at your production cost. Your expected sales volume is 1. value meals at McDonalds. or where shipping costs increase price. You decide that you want to operate at a 20% markup. Geographical Pricing.000 units. Target return pricing . This approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales e. Once you've considered the various factors involved and determined your objectives for your pricing strategy. Pricing to promote a product is a very common application.
If your product reliably produced that kind of cost savings. and customers would gladly pay it.maybe even too cheap. you'd have a hard time charging two or three thousand dollars for it -.people would just feel like they were being gouged. you could easily charge $200. even if you don't have any direct competition.000 a year in. Dropping your price to a popular price point might mean a lower margin. how do you combine all of these calculations to come up with a price? Here are some basic guidelines: • Your price must be enough higher than costs to cover reasonable variations in sales volume. you should probably be priced higher than most of your competition. you must take into consideration the consumer's perception of your price. as are entree or snack items under $1 (notice how many fast-food places have a $0. you want to be able to be off by a factor of two or more (your sales are half of your forecast) and still be profitable. Popular price points .which you charge on a variable scale according to the results you achieve. Fair pricing . if people won't readily pay enough more than your cost to make you a fair profit. you must be priced lower than your competition. either by miscalculating costs or by inadequate market research to determine fair pricing. "under $100" is a popular price point. $300 or more for it. energy costs. but more than enough increase in sales to offset it.Sometimes it simply doesn't matter what the value of the product is. Simply put. Your price should almost never be lower than your costs or higher than what most consumers consider "fair". There is simply a limit to what consumers perceive as "fair". Have you figured salary for yourself in your costs? If not. since they would get their money back in a matter of months. If it's obvious that your product only cost $20 to manufacture. you need to reconsider your business model entirely. If your sales forecast is inaccurate.If you want to be the "low-cost leader". but many entrepreneurs seem to miss this simple concept. A little market testing will help you determine the maximum price consumers will perceive as fair. • Psychological pricing . Let's say that your widget above saves the typical customer $1.000 in value. even if it delivered $10. $60 seems like a bargain . In that case. there is one more major factor that must be considered. how far off can you be and still be profitable? Ideally. o o Now. say. Meals under $5 are still a popular price point.There are certain "price points" (specific prices) at which people become much more willing to buy a certain type of product. "Enough under $20 to be under $20 with sales tax" is another popular price point. For example. You have to make a living. This may seem obvious.Ultimately. How can you cut your costs substantially? Or change your product positioning to justify higher pricing? • • . If you want to signal high quality. because it's "one bill" that people commonly carry.99 "value menu"). However. your profit has to be enough for you to live on and still have money to reinvest in the company. figuring things like: o Positioning .
Consider how you can move your product from generic. In this case. The winners packaged the chocolate with the "Amazing Sisters. This helps you better understand the offering's value to consumers. Consider whether new products. I've worked with companies that only take into account direct competitors selling through identical channels. and the strength of the consumer's bond with the product. in fulfilling the consumer's specific needs. whatever customers were willing to pay (under the $3 price point). prestige brands. Don't limit your analysis to online distribution channels. You're certainly entitled to make a fair profit on your product. examine your offering's benefits. anxiety pricing. • Assess the product's availability and near substitutes. and even a substantial one if you create value for your customers. marketers too often underestimate the strategic importance of pricing. One client underpriced its subscription product. • Survey the market for competitive and similar products. including only its core physical attributes." $20 for a view of a contestant's underwear with a candy bar. But remember. new uses for existing products. In fact. to augmented. Like the contestants. Segments are important for positioning and merchandising the offering to ensure maximized sales at the established price point. an established $3 price for a basic candy bar. Examine all possible ways consumers can acquire your product. ultimately. This is particularly true for high-end.Pricing is a tricky business. If the price is too low. The merchandise retailed on its Web site. or price lower if your product has relatively similar features to existing products. and "flasher pricing. leapfrog your offering. Customers considered the subscription worth the full subscription price -. including additional features to enhance the offering and enabling you to charge more. an online publishing client considered bundling subscriptions with $25 worth of merchandise its target market valued. profitability. they don't optimize revenue potential. As a result.but minus the merchandise value. be careful how customers perceive the offering. The firm underestimated the uniqueness of its offering. you can price higher if consumers perceive your product and/or brand is significantly better. price on parity if your product has better features. both tangible and intangible." two attractive blondes in short skirts. for example. yielding higher profits than the other team's candy. The augmented offering sold for a whopping $5. An information client faced this situation with a premium product. To increase annual subscriptions. Underpricing hurts your product as much as overpricing does. potential customers will think it can't be that good. Its direct . The strategy instead decreased the value of my client's subscription in subscribers' eyes. or new technologies can compete with or. The losing team undermined the value of its product with a combination of generic pricing. worse. the client could increase the price with only limited risk to its customer base. Two teams competed to sell the most M-Azing candy bars. Pricing Factors to Consider • Determine primary and secondary market segments. Pricing Policy: Seven Factors to Consider Does your pricing maximize your revenue opportunities? A recent episode of "The Apprentice" underscores the importance of packaging and merchandising to pricing and. something is ultimately worth only what someone is willing to pay for it. Competitors may define your price range. To avoid this. As a result. the number of close substitutes. In doing so. yielding depressed response and lower sales. the initial increase resulted in more subscribers as the new price was more in line with its consumer-perceived value.
competitors established the price for a similar offering. As the third player in this segment, its choices were price parity with an enhanced offering or a lower price with similar features.
Examine market pricing and economics. A paid, ad-free site should generate more revenue than a free ad-supported one, for example. In considering this option, remember to incorporate the cost of forgone revenue, especially as advertisers find paying customers more attractive. To gain additional insight from this analysis, observe consumers interacting with your product to better understand their connection to it. This can yield insights into how to package and promote the offering that can affect on pricing, features, and incentives.
Calculate the internal cost structure and understand how pricing interacts with the offering. I recommended a content client promote its advertising-supported free e-zines to incent readers to register. The client believed the e-zines had no value as the content was repurposed from another product, so it didn't advertise them. Yet the repurposed content was exactly what readers viewed as a benefit. By undervaluing its offering, the client missed an opportunity to increase registrations and, hence, advertising revenues with a product that effectively had no development costs.
Test different price points if possible. This is important if you enter a new or untapped market, or enhance an offering with consumer-oriented benefits. To determine price, MarketingExperiments.com tested three different price points for a book. It found the highest price yielded the greatest product revenue. Interestingly, the middle price yielded greater revenue over time, as it generated more customers to whom other related products could be marketed.
Monitor the market and your competition continually to reassess pricing. Market dynamics and new products can influence and change consumer needs.
Pricing is tricky, as "The Apprentice" contestants learned. Optimally, you should test to determine the best price and understand long-term goals. Determine price based on a number of factors. Most important is what potential customers are willing to pay and their value to your company over time. You don't want to hear, "You're fired," when it comes to pricing policies.
distribution - introduction
Distribution (or "Place") is the fourth traditional element of the marketing mix. The other three are Product, Price and Promotion. The Nature of Distribution Channels Most businesses use third parties or intermediaries to bring their products to market. They try to forge a "distribution channel" which can be defined as "all the organisations through which a product must pass between its point of production and consumption" Why does a business give the job of selling its products to intermediaries? After all, using intermediaries means giving up some control over how products are sold and who they are sold to. The answer lies in efficiency of distribution costs. Intermediaries are specialists in selling. They have the contacts, experience and scale of operation which means that greater sales can be achieved than if the producing business tried run a sales operation itself. Functions of a Distribution Channel
The main function of a distribution channel is to provide a link between production and consumption. Organisations that form any particular distribution channel perform many key functions: Information Gathering and distributing market research and intelligence - important for marketing planning Promotion Developing and spreading communications about offers Contact Finding and communicating with prospective buyers Matching Adjusting the offer to fit a buyer's needs, including grading, assembling and packaging Negotiation Reaching agreement on price and other terms of the offer Physical distribution Transporting and storing goods Financing Acquiring and using funds to cover the costs of the distribution channel Risk taking Assuming some commercial risks by operating the channel (e.g. holding stock) All of the above functions need to be undertaken in any market. The question is - who performs them and how many levels there need to be in the distribution channel in order to make it cost effective. Numbers of Distribution Channel Levels Each layer of marketing intermediaries that performs some work in bringing the product to its final buyer is a "channel level". The figure below shows some examples of channel levels for consumer marketing channels:
In the figure above, Channel 1 is called a "direct-marketing" channel, since it has no intermediary levels. In this case the manufacturer sells directly to customers. An example of a direct marketing channel would be a factory outlet store. Many holiday companies also market direct to consumers, bypassing a traditional retail intermediary - the travel agent. The remaining channels are "indirect-marketing channels". Channel 2 contains one intermediary. In consumer markets, this is typically a retailer. The consumer electrical goods market in the UK is typical of this arrangement whereby producers such as Sony, Panasonic, Canon etc. sell their goods directly to large retailers such as Comet, Dixons and Currys which then sell the goods to the final consumers.
Channel 3 contains two intermediary levels - a wholesaler and a retailer. A wholesaler typically buys and stores large quantities of several producers goods and then breaks into the bulk deliveries to supply retailers with smaller quantities. For small retailers with limited order quantities, the use of wholesalers makes economic sense. This arrangement tends to work best where the retail channel is fragmented - i.e. not dominated by a small number of large, powerful retailers who have an incentive to cut out the wholesaler. A good example of this channel arrangement in the UK is the distribution of drugs.
distribution - types of distribution intermediary
Introduction There is a variety of intermediaries that may get involved before a product gets from the original producer to the final user. These are described briefly below: Retailers Retailers operate outlets that trade directly with household customers. Retailers can be classified in several ways: • Type of goods being sold( e.g. clothes, grocery, furniture) • Type of service (e.g. self-service, counter-service) • Size (e.g. corner shop; superstore) • Ownership (e.g. privately-owned independent; public-quoted retail group • Location (e.g. rural, city-centre, out-of-town) • Brand (e.g. nationwide retail brands; local one-shop name) Wholesalers Wholesalers stock a range of products from several producers. The role of the wholesaler is to sell onto retailers. Wholesalers usually specialise in particular products. Distributors and dealers Distributors or dealers have a similar role to wholesalers – that of taking products from producers and selling them on. However, they often sell onto the end customer rather than a retailer. They also usually have a much narrower product range. Distributors and dealers are often involved in providing after-sales service. Franchises Franchises are independent businesses that operate a branded product (usually a service) in exchange for a licence fee and a share of sales. Agents Agents sell the products and services of producers in return for a commission (a percentage of the sales revenues)
Distribution - Channel Strategy
The following table describes the factors that influence the choice of distribution channel by a business:
they effective lose control over the final consumer price. Direct distribution gives a producer much more control over these issues. This might be deemed unacceptably high for the ultimate producer business. Distribution Intensity THE RETAIL DISTRIBUTION CHANNEL E arly in 2005. By contrast perishable products (such as frozen food. without giving as much priority to the needs of the other members of their distribution channels—namely. display equipment. there is no guarantee for a producer that their product/(s) are actually been stocked by the retailer.Influence Market factors Comments An important market factor is "buyer behaviour". If so. Many channel intermediaries focus heavily on the customer interface as a way of creating competitive advantage and cementing the relationship with their supplying producers. installation and servicing. Intermediaries typically charge a "mark-up" or "commission" for participating in the channel.1 There are several types of participants that make up a distribution channel. the only option may be to use agents and/or other distributors. how do buyer's want to purchase the product? Do they prefer to buy from retailers. complex medical equipment sold to hospitals). The willingness of channel intermediaries to market product is also a factor. Producer factors A key question is whether the producer have the resources to perform the functions of the channel? For example a producer may not have the resources to recruit.ideally suited to using intermediaries such as retailers. so . They may decide not to support a particular product if it requires too much investment (e. Producers may also feel that they do not possess the customer-based skills to distribute their products. Another factor is the extent to which producers want to maintain control over how. the retailers to whom they sell. shop fitting etc. since the retailer sets the price and any relevant discounts or promotional offers. Only 9 percent of the retailers felt their suppliers had “a good understanding” of their business objectives. Product factors Large complex products are often supplied direct to customers (e. to whom and at what price a product is sold. Retailers in particular invest heavily in properties. meat. locally. Which channels are best served to provide the customer with the information they need before buying? Does the product need specific technical assistance either to install or service a product? Intermediaries are often best placed to provide servicing rather than the original producer . via mail order or perhaps over the Internet? Another important factor is buyer needs for product information. Similarly. IBM Business Consulting Services released a survey that compiled in-depth interviews with more than 100 sales. Another important factor is intermediary cost.for example in the case of motor cars. If a manufacturer sells via a retailer. The gist of the survey was that retailers felt the product manufacturers have focused their efforts on the end users of the products (the consumers). train and equip a sales team. and merchandising executives at over 20 consumer products and retail companies. training.g.g. bread) require relatively short distribution channels . warehousing). marketing.
let’s begin by listing them. to liberal return policies for its loyal customers. consignment stores. transporting. extending credit. on the other hand. An Ann Taylor store. regional chain store. sells Ann Taylor branded clothing—not much breadth of product line there. national chain store. there are several subcategories such as factory outlets.” This is a type of distribution channel in which the end consumer is a business. dollar stores. These distinctions between various types of stores will be important as we discuss their participation in certain distribution channels. A Kmart. warehouse membership clubs. but different than. Wholesalers can gather product from around a country or region. for example. by bagging their own groceries and the like. each group focused on making and marketing different products. an independent retailer. Within the “discounter” category. not an individual. negotiations. you will learn about _ The members of a distribution channel and their functions _ How retailers fit into distribution channels _ How channel relationships are managed _ Strategic alliances One of the catchphrases of the last decade or so is “B2B. As you know if you’ve ever shopped for anything. The breadth and depth of product lines carried by the store depends a lot on its ownership. _ Product assortment. as also previously mentioned. Stores are generally either discounters or full-price retailers. or departments within companies. Every brick-and-mortar retailer can be classified as a large. and facilitating the sales with services like consumer research. 32 Chapter 2 The Retail Distribution Channel In addition to a supply chain. and may arrange for shipment to those retailers. or can buy foreign product lines by becoming . but perhaps does not have much depth (not many brands) in any given category of product. In this chapter. a supply chain. _ Pricing philosophy. carries thousands of brands. so to speak. But we will attempt to keep them separate as we describe the functions of each in relation to the other. Then the supply chain kicks in. and providing other services related to making the products attractive to customers and encouraging their ultimate sale. but extensive depth in that line. on the other hand. to on-site alterations. keep them in inventory until they are resold to retailers. The distribution channel is where the “deals” are made to buy and sell products. manufacturers and retailers participate in another give-and-take relationship known as a distribution channel or marketing channel. and ordering are done by these companies. a smaller. to do the “physical” work of manufacturing. They take the same types of financial risks as retailers. specialty discount stores. PARTICIPANTS IN THE DISTRIBUTION CHANNEL retailers come in many shapes and sizes. retailers belong to several (or many) different supply chains. the more types of services it will generally offer—from a name-branded credit card. Sales. Wholesalers Wholesalers are intermediaries or middlemen who buy products from manufacturers and resell them to the retailers. A distribution channel is similar to. or a franchisee. Retailers may be grouped according to any of the following four categories: _ Ownership. You will notice some overlap because. as in Chapter 1 with supply chain participants. _ Service level. The more exclusive or specialized the store. and storing the goods. and so on. The lines do blur between modern-day distribution channels and supply chains. With the “big box” discounters. since they purchase the products (thereby taking legal responsibility for them). customers pay for convenience and bypass traditional service. Retailers The characteristic that sets a retailer apart from other members of its distribution channel is that the retailer is the party who ultimately sells the product to its end user or consumer.” short for “business-tobusiness.
is a direct channel marketer. In B2B arrangements. Dell. But the fact is that many producers are either too small or too large to handle all the necessary functions themselves to get their products to market. or they may not have the money to hire a team of full-time salespeople to court the customers and secure the orders. but their agreements are different. too. for example. are also direct channel sellers. Buying offices can also be considered a type of agent or broker. but he or she does have product samples for which orders can be placed and is responsible for bringing the items through the importation process. A resident sales agent does not always have merchandise warehoused and ready to sell. Agents and Brokers Agents (sometimes called brokers) are also intermediaries who work between suppliers and retailers (or in B2B channels). The resident sales agent represents those manufacturers. but the products come from a variety of foreign manufacturers. or manpower to send someone overseas for manufacturers’ site visits to check out the new product lines can depend on a resident sales agent to do the job. like Lands’ End. overseas shipping. And in B2B channels. Using an import wholesaler. Having a distribution channel breaks the whole buying and selling process and all its related negotiations into manageable tasks. Resident sales agents are good examples in retail. do you think Pepsi has time to take and fill individual orders from households? Channel members like wholesalers and retailers are useful because they are best at specific aspects of sales in their markets. Turning out tens of thousands of cases of soft drinks. noncompeting firms can easily handle those functions cost-effectively. They reside in the country to which they sell products. can be handy because they know the laws and customs of the suppliers’ nations. An intermediary who specializes in importing and exporting can handle the intricacies of customs paperwork. Mail-order catalog sales companies. specialty manufacturer who is terrific at making fine leather handbags but may not have the expertise to market its products as well as it makes them. An intermediary who works for several small. and the retailer sells to the consumer. that is exactly how it happens. this means they sell to distributors and end users. leaving the manufacturers to do what they do best—which is turn out the best possible product. who sells to a consumer? It’s a fair question. large companies need intermediaries because they are also in the business of manufacturing. in that they do not take ownership of the products they sell. each performed by companies that specialize in certain skills. The term “wholesale” is often used to describe discount retailers (as in “wholesale clubs”). and they can sell to wholesalers as well as retailers. _ Retailer channel. not technically wholesalers. as mentioned in Chapter 1. but discounters are retailers. wholesalers may be called distributors. who pay the agent on commission. and in some cases.importers. This is when the producer sells to the retailer. This is when the same company that manufactures a product sells it directly to the consumer or end user. Conversely. not marketing. The Need for Distribution Channels Why are all these layers needed in distribution? Why can’t a producer simply sell to a retailer. since they earn their money pairing up retailers with product lines from various manufacturers. Consider the small. Retailers that don’t have the money. . and they generally offer their own lines of credit so the retailer won’t have 34 Chapter 2 The Retail Distribution Channel We’ll set aside business-to-business channels for now and look at the four simple types of retail distribution channels for consumer products: _ Direct channel. for instance. and foreign markets. They are independent sales representatives who typically work on commission based Participants in the Distribution Channel 33 on sales volume. time.
who sells to a retailer . channel members may also work together to purchase goods or services in greater quantity at discounts. Business-to-business customers have completely different needs and buying habits than individual consumers. what do they need and expect from their shopping experience. who finally sells to the consumer or end user. The producer sells to an agent . the distribution chain is handy—beyond handy. . . There are several characteristics of product lines that make them more or less appropriate for a particular type of channel. and . . often because the merchandise is being imported. Intermediaries play a role here. A lawnmower manufacturer. _ How Channels Are Chosen Although retailers drive distribution channels. who sells to the consumer. If a product is perishable. It is easier to sell direct to customers in a large city with lots of potential outlets for a product line. . . who sells to a retailer . . What if there were no supermarkets. This term refers to the use of two or more channels to sell products to different types of customers. for instance? Can you imagine how much more time and money you would spend having to buy every item at its source? How practical would it be to run out to the nearest farm to pick up a quart of milk and some salad ingredients on your way home from work? TYPES OF CHANNELS product makes this decision. . who sells to a wholesaler . it is not usually the retailer who makes the decision to utilize one channel over the others. . _ Agent or broker channel. for example. . Another advantage of the distribution channel is its ability to even out the natural ebbs and flows of a supply chain. in fact! It has become a necessity in our society. If a product is customized. most direct distribution channel—which means the fewest possible intermediaries along the way. This factor encompasses two things: the population of an area and whether it is urban or rural. like many grocery items. _ Market size. the more logical the dependence on agents and wholesalers—or on multiple retailers in different cities—to keep product sales strong and steady. might sell some product lines at retail and others to commercial lawn care companies. Even for consumers. passing the savings on to customers. _ Dual channel or multiple channel. and where are they willing to go to buy this type of product? How much quantity do they buy at a time? A channel may be chosen because it best reflects the end users’ buying habits. This comes from the ability of some channel members to store excess goods until they are needed. Depending on how close their relationships. as the manufacturer sells to a wholesaler . Most top-dollar clothing designers and fragrance manufacturers do not want their products showing up anywhere and everywhere. and to stockpile goods in anticipation of seasonal sales peaks. _ The producer’s level of control.Wholesaler channel. The more widely dispersed the stores. The producer of the Types of Channels 35 to deal with currency exchange or negotiate payment terms with a bank in another country. Long distribution channels correspond to small purchases. They’ve worked hard to build an exclusive reputation. each requiring different intermediary services. There is no need for intermediaries when a customer orders a custom product directly from the company that makes it. _ The type of customer.Who are the customers. it also benefits from a short distribution channel. either because the retailer doesn’t carry much inventory or the consumer buys the item in small quantities. Briefly. like an expensive assembled-to-order computer system. The most complex arrangement involves several transactions. it requires the shortest. these characteristics can be summarized as follows: _ The products themselves. .
_ The size of the retailers. and the manufacturer (by implying that the company is interested in marketing “quality. Exclusive distribution is thought of most frequently for high-dollar products such as luxury cars or Rolex watches. one retail store or chain of stores has the legal right to market and sell the product line in a geographic area.in other words . to ensure that the retailer has something unique. for example.intensive. An advantage of this approach is that the producer can choose the most appropriate or best-performing outlets and focus effort (e. and they will count on the members of their channel to honor their wishes and not make bargain “deals. and everyone in-between. . the term “restrictive” does not automatically have a negative connotation. Exclusive distribution is sometimes requested by the retailer. This may also mean the retailer commits to not selling any products that are going to compete with the line. training. Such a distribution arrangement can work toward the “exclusive” image of the product (because it’s harder to get). exclusive distribution works well for extremely specialized product lines. but they must all agree on the end result—that the product(s) will be placed in the market in the manner desired by the producer or manufacturer. There are three broad options . Selective distribution works best when consumers are prepared to "shop around" . Once a channel is selected. A segment of the industry that is fragmented. ordered to the customer’s specifications and budgeted for in advance of the purchase.they have a preference for a particular brand or price and will search out the outlets that supply. and other perks to the exclusive distributor. These producers will choose a distribution channel that ensures no discount merchants have access to their lines. _ Selective distribution involves a producer using a limited number of outlets in a geographical area to sell products. the producer or manufacturer offers sales assistance. that customers can’t get anywhere else. A producer is likely to sell direct when the company is large enough to handle the additional responsibilities that intermediaries would otherwise provide—credit to customers. Types of Distribution within Channels The channel members may handle different portions of the transaction. point-of-purchase materials. They are listed as follows. retailer or distributor is used in a specific geographical area. requires the distribution channel to be longer.”) In B2B commerce. but the fact is that even small-ticket items like toys are considered exclusive when they are in high demand. in retail. from most restrictive to least restrictive—and remember. the distribution strategy can take three different forms. In exchange.g. This was the case in the 1980s with video rental 36 Chapter 2 The Retail Distribution Channel stores. retailer. and that placement of the product(s) meets the contractual agreements of producer. the ability to hire and train their own sales representatives.they expect their distribution channel to work just as hard to protect and enhance their upscale image. selective and exclusive distribution: Exclusive distribution is an extreme form of selective distribution in which only one wholesaler. with most of the stores operating as single units.” _ The size of the producing company. . until Blockbuster Video opened and began its climb to dominate the market. In an exclusive distribution agreement. training) on them. not the producer. such as heavy equipment or high-tech products. warehouses for their own goods. Smaller producers require a larger distribution chain in order to fill these roles. the retailer (for having “the only ones” available). not quantity.
In other words. so the supplier can keep the inventory stocked at the right levels. conflict does occur when the members of a distribution channel choose different ways to operate within the system. information sharing is a trade-off. this kind of cooperation runs counter to the tough. although in some ways. gives each partner a competitive advantage. Intensive distribution is usually required where customers have a range of acceptable brands to chose from. or production problems might leave the stores in the lurch? And there are more nagging questions: Can they risk confidential information being leaked to competitors? How open should they be with other channel members? It is very hard for companies to develop the level of credibility and trust needed to establish tight working relationships. Intensive distribution aims to provide saturation coverage of the market by using all available outlets. part of the goal here is to enhance the image of the product by making it harder (but certainly not impossible!) to obtain. Retailers continuously weigh the costs and benefits of sharing data and working together. or balk at sharing Channel Relationships . like candy and soft drinks. from supermarkets and convenience stores to vending machines and restaurants. and ultimately provides the best product and related services to the customer. a “you can find it anywhere” theory of marketing. Ironically. total sales are directly linked to the number of outlets used (e.g. The retailers share inventory and sales numbers. their own products within the companies sell to. Like so many other aspects of business. lower-priced merchandise lines to sell to discounters. . As with exclusive distribution. cigarettes. have differing goals. competitive side of traditional retailing.” They need the efficiency and the economy of scale. are great examples of intensive distribution—their individual unit prices are so low that thousands must be sold to make a profit.) COMPANIESGO? The fact is that modern-day companies are often forced to participate in distribution channels for practical reasons—not really because they want to be “part of the team. Channel cooperation would be ideal—a joint effort of all the members to create a supply chain that is flexible. In the meantime. (The producers may have other. when things like labor strikes._ Selective distribution means the retailers are carefully screened. Snack items. whether you’re selling candy bars or luxury automobiles. sudden price hikes. and only a few are permitted to carry the product line. For many products. This allows the retailer to charge full price. a customer will simply choose another _ Intensive distribution is the closest thing to blanket coverage in retail. The ladies’ clothing industry is full of selective distribution agreements between designer labels and so-called “finer” department stores. this intensive product availability requires a large and complex distribution channel in order to cover all the sales outlets. However. secondary brand names. Do they work with only a small group of trusted suppliers and allow them to manage their own inventory in-store? Can they risk the downsides of working with only a few suppliers. but these are generally sold under separate. Manufacturers of these products depend heavily on their wholesalers to handle the sales functions—and will drop a wholesaler who is not performing well based on sales figures—which makes this type of wholesaling very competitive. they do realize the benefits of sharing tools and skills that allow them to analyze data and make decisions. if one brand is not available. beer).
make their importing decisions. it may be struggling financially. who do more than provide materials and parts—they help design the vehicles Ford produces. Arkansas. wholesalers or distributors. must listen to consumers’ complaints. Like any kind of power. They can arise naturally from competition between multiple members of the same channel— retailers or wholesalers—who carry the same product line. more generously) than what the manufacturer is willing to do. Whatever the case. importers. if the end result is that it’s bogging down everyone else in the channel. It’s better for everyone if the participants can figure out how to get along. and disastrous at worst. has forged a unique type of channel relationship. which determine their supply chain relationships. Ford is known for its incredibly collaborative relationships with suppliers. just to be conveniently located for Wal-Mart. In business-to-business channels. or exchanges differently (say. and cost savings to members of the channel. the company hasn’t updated its computer systems. This game of “musical chairs” is difficult at best. A very common source of channel conflict is a producer’s decision to either increase or decrease prices. The wholesalers take the flack about it from retailers—who. and so on.CHANNEL RELATIONSHIPS information. The types . It is important to note that in a distribution channel. In this case. then something must be done. Channel members negotiate with each other and offer complementary resources and services to move products “down the line” from manufacturers to consumers. and retailers. any time. Each step along the channel has a specific purpose that is met by one or more member companies. channel captains may take the lead in negotiating with a participating company that is not fulfilling its responsibilities—orders are late. from price cuts to the acquisition and use of expensive new technology like radio frequency identification. channel leadership can be wielded to the benefit or detriment of the other companies. It’s safe to say that no one in any distribution channel or supply chain wields as much authority in retail today as Wal-Mart. There is a hierarchy in all distribution channels. Distribution channels are important because they allow for a continuous flow of product despite the natural peaks and slumps experienced in manufacturing and sales. whether the participants like it or not. the CEO is uncommunicative or argumentative. economies of scale. at least in the case of price hikes. The Retail Distribution Channel Companies participate in distribution channels. with offices for supplier representatives on-site in its plants. the supply chain partners provide the raw materials and logistics to meet the channel requirements. in turn. Areas of potential channel conflict are many. “authority” means the partner’s ability to either influence or control the behavior of any of the other partners in the channel. The company that has the most authority in the channel is referred to as the channel leader or channel captain. Sharing this information allows the suppliers to plan their production runs. agents or brokers. repairs. The world’s largest retailer literally treats its suppliers like extensions of its own business—manufacturers and wholesalers have free access to real-time data about how their product lines are selling at any Wal-Mart store. Retail distribution channels consist of some combination of producers or manufacturers. this Channel Captain Extraordinaire can require extraordinary things of its smaller partners. They also provide efficiency. and they consider it a small price to pay for increased access to their giant retail partner. In exchange. Then.2 Similarly. Wal-Mart’s situation aside. Hundreds of manufacturers have offices in Bentonville. any manufacturer that uses a Just-In-Time (JIT) system. They will also occur when retailers have service issues with the products and want to handle returns. any of the participants can refuse to do business with any of the others—as long as someone amenable to the entire group is tapped to take over the role that the ousted business has played.
Retailers commonly belong to several strategic alliances. which allows them to share the use of already-established distribution channels in pursuit of business growth in new markets. and the pace continues unabated today as stores continue to branch into international sales. . 2. Wholesalers. Distribution (Place) Channels • • • • • Manufacturer to consumer (most direct) Manufacturer to wholesaler to retailer to consumer (traditional) Manufacturer to agent to retailer to consumer (current) Manufacturer to agent to wholesaler to retailer to consumer Manufacturer to agent to consumer ( ex : DCL. A promising collaboration would be the alliance of two similar types of retailers in two different countries to share product lines. they use each others’ distribution channels in the new country. It should not involve the stronger channel member barking orders to the weaker one. Retailers have been forging strategic alliances since the 1950s. two retailers or two wholesalers. it must be forged between companies of the same type. They offer a way to share the risks of business expansion that. money. It must be collaborative. A strategic alliance is more than two companies holding shares of each others’ stock. and learn from each other. It also lets the consumer to be able to know how it works.AMWAY ) Manufacturers Reasons for direct selling methods • • • • • • Manufacturer wants to demonstrate goods. In order to be truly strategic.Strategic Alliances A third and similar partnership arrangement between separate companies with products or skills to share is the strategic alliance. 3. That is. Distribution channels already established. or ordering merchandise jointly for added buying power. if undertaken separately. the individual companies may lack the time. This requires common objectives and the willingness to communicate and share knowledge. It must be horizontal. High profit margin added to goods by wholesalers and retailers. or expertise to manage. retailers and agents not actively selling. In so doing. Manufacturer unable to convince wholesalers or retailers to stock product. the alliance must have all three of the following characteristics: 1. invest in technology together. Reasons for indirect selling methods • • Manufacturer does not have the financial resources to distribute goods. Middlemen unable to transport. It must be beneficial to both.
Wholesalers Reasons for using wholesalers • • • • • • • Bear risk of selling goods to retailer or consumer Storage space Decrease transport costs Grant credit to retailers Able to sell for the manufacturers Give advice to manufacturers Break down products into smaller quantities Reasons for bypassing wholesalers • • • • • • • • • • Limited storage facilities Retailers' preferences Wholesaler cannot promote products successfully Development of wholesalers' own brands Desire for closer market contact Position of power Cost of wholesalers' services Price stabilisation Need for rapid distribution Make more money Ways of bypassing wholesalers • • • • • • Sales offices or branches Mail orders Direct sales to retailers Traveling Agents Direct Orders Specific channel Agents • • • • Commission agents work for anyone who needs their services. . They have an expert knowledge of the purchasing function. Too many consumers in a large area. They do not acquire ownership of goods but receive del credere commission. Manufacturer does not have a wide assortment of goods to enable efficient marketing. Buying agents buy goods on behalf of producers and retailers. difficult to reach. Selling agents act on an extended contractual basis. Brokers specialize in the sale of one specific product.• • • • • Manufacturer has no knowledge of efficient (specific) distribution. selling all of the products of the manufacturer. Manufacturer wishes to use capital for further production. They receive a brokerage. They have full authority regarding price and terms of sale. Direct on-selling advantages.
radio. newspaper/magazines. PROMOTION Marketing communications breaks down the strategies involved with marketing messages into categories based on the goals of each message. They operate within a specific area and sell related lines of goods but have limited authority regarding price and sales terms. Advertising • • • • Paid form of public presentation and expressive promotion of ideas Aimed at masses Manufacturer may determine what goes into advertisement Pervasive and impersonal medium Functions and advantages of successful advertising • Task of the salesman made easier Objectives • • • Maintain demand for well-known goods Introduce new and unknown goods Increase demand for well-known goods/products/services Requirements of a good advertisement • • • • Attract attention (awareness) Stimulate interest Create a desire Bring about action Eight steps in an advertising campaign • • • • • • • • Market research Setting out aims Budgeting Choice of media (television. outdoor) Choice of actors (New Trend) Design and wording Co-ordination Test results Personal sales Oral presentation given by a salesman who approaches individuals or a group of potential customers: . There are distinct stages in converting strangers to customers that govern the communication medium that should be used. web.• Factory representatives represent more than one manufacturer.
People are given an incentive to buy. A formal approach to this customer-focused marketing is known as SIVA (Solution. This implies that the company focuses its activities and products on consumer demands.• • • • Live. including the nature of the product itself. interactive relationship Personal interest Attention and response Interesting presentation Sales promotion Short-term incentives to encourage buying of products: • • Instant appeal Anxiety to sell An example of this is coupons or a sale. price. is driven by the needs of potential consumers. The SIVA Model provides a demand/customer centric version alternative to the well-known 4Ps supply side model (product. Generally there are three ways of doing this: the customer-driven approach. the sense of identifying market changes and the product innovation approach. Product → Solution . Information. The starting point is always the consumer. No strategy is pursued until it passes the test of consumer research. In the consumer-driven approach. promotion) of marketing management. Marketing Public Relations (MPR) • • • • Stimulation of demand through press release giving a favourable report to a product Higher degree of credibility Effectively news Boosts enterprise's image Customer focus Many companies today have a customer focus (or customer orientation). The rationale for this approach is that there is no point spending R&D funds developing products that people will not buy. Value. place. This system is basically the four Ps renamed and reworded to provide a customer focus. Access). consumer wants are the drivers of all strategic marketing decisions. History attests to many products that were commercial failures in spite of being technological breakthroughs. A major drawback of sales promotion is that it is easily copied by competition. Every aspect of a market offering. but it does not build customer loyalty. It cannot be used as a sustainable source of differentiation. nor encourage repeat buys in the future.
usually in written form. so that the draft output of each stage is checked to see what impact it has on the earlier stages . a few organizations may look at a practical plan which stretches three or more years ahead. what it will cost. Solid marketing strategy is the foundation of a well-written marketing plan. and presented by them in Market Leader the journal of the Marketing Society in the UK. "strategic planning" is an annual process. the plan has to be formalized. a marketing plan without a sound strategic foundation is of little use. A marketing plan may be part of an overall business plan. how and from whom do they know enough to let them make a buying decision? 3. as a formal `marketing plan'. Marketing plans cover between one and five years. The essence of the process is that it moves from the general to the specific. a brand. Occasionally. To be most effective. Marketing planning aims and objectives .and is amended accordingly. typically covering just the year ahead. Information: Does the customer know about the solution? If so. Marketing plan A marketing plan is a written document that details the necessary actions to achieve one or more marketing objectives. The marketing planning process In most organizations. The model focuses heavily on the customer and how they view the transaction. Solution: How appropriate is the solution to the customer's problem/need? 2. what will be their reward? 4. Access: Where can the customer find the solution? How easily/locally/remotely can they buy it and take delivery? This model was proposed by Chekitan Dev and Don Schultz in the Marketing Management Journal of the American Marketing Association. what might they have to sacrifice. what are the benefits.Promotion → Information Price Place → Value → Access The four elements of the SIVA model are: 1. It can be for a product or service. It is also an interactive process. from the overall objectives of the organization down to the individual action plan for a part of one marketing programme. While a marketing plan contains a list of actions. Value: Does the customer know the value of the transaction. or a product line.
and will be supported by its staff at all levels. In this context some factors related to the customer. or it will constrict the development of the organization. will lay the 'corporate mission'. it should not be too wide or it will become meaningless. a vision originally promoted by the charismatic Watson dynasty." If the organization in general. In a single organization. Thus. it was perhaps the main theme of the book by Peters and Waterman. which in turn provides the context for these corporate objectives. may be: • • • • • • • Who are the customers? What are their key characteristics? What differentiates them from other members of the population? What are their needs and wants? What do they expect the `product' to do? What are their special requirements and perceptions? What do they think of the organization and its products or services? . 'customer needs' to be served. This will be not least because its strategies will be consistent. which should be included in the material collected for the audit. the definition of IBM's `corporate mission' in the 1940s might well have been: `We are in the business of handling accounting information [customer need] for the larger US organizations [customer group] by means of punched cards [technology]. but all may need to be reviewed to determine just which 'are' the few. although not by the popular exponents of corporate strategy . and its chief executive in particular. might have limited its subsequent development into other areas. On the other hand. it is largely neglected by marketing textbooks. all of IBM's marketing activities were underpinned by its philosophy of `customer service'. This `corporate mission' can be thought of as a definition of what the organization is. of what it does: 'Our business is …'. 'In Search of Excellence' said: "Nothing drives progress like the imagination. which in themselves offer the main context for the marketing plan. This definition should not be too narrow. Surprisingly. `We want to make a profit' is not too helpful in developing specific plans. In this context.' Perhaps the most important factor in successful marketing is the `corporate vision'. however. Abell suggested that the definition should cover three dimensions: 'customer groups' to be served.indeed. and 'technologies' to be utilized . in the form of their `Superordinate Goals'. as IBM was during the early 1900s. The emphasis at this stage is on obtaining a complete and accurate picture. it is likely that only a few aspects will be sufficiently important to have any significant impact on the marketing plan. then there is a good chance that the organization will achieve a strong position in its markets (and attain that future). The idea precedes the deed.Behind the corporate objectives. a too rigorous concentration on the view that `We are in the business of making meat-scales'. has a strong vision of where its future lies.
the first task of this `annual' process should be to check that the material held in the current `facts book' or `facts files' actually 'is' comprehensive and accurate. • 'Portfolio planning'. planning process itself . distribution sections. in terms of the 7 Ps . but one simple format . The marketing system itself needs to be regularly questioned. It is apparent that a marketing audit can be a complex process. the best approach is to accumulate this material continuously.Information from these departments.• • What are their attitudes? What are their buying intentions? A `traditional' . Advertising. packaging. Market data and miscellany . cultural and technical environment. Even so.albeit product-based . since this avoids the otherwise heavy workload involved in collecting it as part of the regular. Sales and distribution data . costing and finance sections. 3. as and when it becomes available.(see below) 3. indeed. Accordingly. but the aim is simple: 'it is only to identify those existing (external and internal) factors which will have a significant impact on the future plans of the company'.format for a `brand reference book' (or. competitors and the overall economic. assume the resources of a very large organization. In most organizations they would be obtained from a much smaller set of people (and not a few of them would be generated by the marketing manager alone). and can form a sound basis for the marketing audit itself. merchandising data . because the validity of the whole marketing plan is reliant upon the accuracy of the input from this system. and `garbage in. research and development. sales promotion. The last of these is too frequently ignored. as well as the current situation. . garbage out' applies with a vengeance. 'Review of the detailed marketing activity'. the coordinated planning of the individual products and services can contribute towards the balanced portfolio.may be applicable in many cases. customers. Product data --From production.From market research. A study of the marketing organization. It is clear that the basic material to be input to the marketing audit should be comprehensive. A study of the organization's markets. 2. 4. 'Review of the marketing environment'. marketing research systems and the current marketing objectives and strategies. In addition. 5. 2.when time is usually at a premium.suggested by Malcolm McDonald . political.Sales. A study of the company's marketing mix. however. typically annual. 'Review of the marketing system'. covering developing trends. Financial data --Facts for this section will come from management accounting. a `marketing facts book') was suggested by Godley more than three decades ago: 1. who would in most cases act as a source for this information. This splits the material into three groups: 1. The structure of the facts book will be designed to match the specific needs of the organization. His sources of data.
Getting the product known . The 7 Ps can sometimes divert attention from the customer. Simplifying somewhat.The amount of money needed to buy products Product. within limits. To be most effective. be unequivocally monitored.The actual product Promotion (advertising). the marketing plan must be clear. and corrective action taken as necessary. He went on to explain his view of the role of `policies'. are generally concerned with the 7 Ps. which will account for 80 per cent of the volume and 80 per cent of the `profit'. An example of such a measurable marketing objective might be `to enter the market with product Y and capture 10 per cent of the market by value within one year'. and on the 20 per cent of customers. They are part of the marketing strategy needed to achieve marketing objectives. but they do not state 'how' the results are to be achieved". The marketing objectives state just where the company intends to be. Physical Environment. converting these financial measurements into the related marketing measurements. Process. concise and simple. percentage penetration of distribution outlets and so on. They are essentially about the match between those 'products' and 'markets'. and should not be confused with marketing objectives. in the framework that we have chosen to use. This measurement may be in terms of sales volume. Place. To achieve the maximum impact. This next stage in marketing planning is indeed the key to the whole marketing process. objectives should be capable of measurement and therefore 'quantifiable'. above all. at some specific time in the future.• '80:20 rule'. money value. As it is quantified it can. James Quinn succinctly defined objectives in general as: "Goals (or objectives) state 'what' is to be achieved and 'when' results are to be accomplished. '7 Ps': Product. The marketing objectives must usually be based. • It is only at this stage (of deciding the marketing objectives) that the active part of the marketing planning process begins'. or `game plan'. People. on the organization's financial objectives. Examples are: Price. Price and Promotion. by which marketing objectives will be achieved and. market share. distribution. marketing strategies can be seen as the means. It needs to concentrate on the 20 per cent of products or services. with which strategy is most often confused: "Policies are rules or guidelines that express the 'limits' within which action should occur. advertising and so on are at a lower level. Objectives for pricing. They typically relate to what products (or services) will be where in what markets (and must be realistically based on customer behaviour in those markets). but the framework they offer can be very useful in building the action plans.
these detailed marketing programmes are the most important. you will need to develop your overall marketing strategies into detailed plans and programmes. the focus will vary. that they are not the only framework. Taking the right action at the wrong time can sometimes be almost as bad as taking the wrong action at the right time. A market or geographically oriented company will concentrate on each market or geographical area. and should normally appear as a schedule of planned activities. The focus of the strategies must be the objectives to be achieved . and perhaps more positively. these strategies describe how the objectives will be achieved. that of the detailed plans. you will need to re-check the feasibility of your objectives and strategies in terms of the market share. The 7 Ps are a useful framework for deciding how the company's resources will be manipulated (strategically) to achieve the objectives. it might include a structured list of the major options chosen. practical outcome of the whole planning process. Detailed plans and programmes At this stage. and on the strategies chosen to satisfy these needs. As in the rest of the marketing discipline. Again. Only if it fits the needs of these objectives should you choose. depending upon your organization's specific strategies. and may divert attention from the real issues. however. Having completed this crucial stage of the planning process. as we have done.activities the plan cannot be monitored. which spell out exactly what programmes and individual activities will take place over the period of the plan (usually over the next year). Although these detailed plans may cover each of the 7 Ps. It should be noted. Each will base its plans upon the detailed needs of its customers.Represent the business Physical environment. One aspect of strategy which is often overlooked is that of 'timing'. A product-oriented company will focus its plans for the 7 Ps around each of its products. Exactly when it is the best time for each element of the strategy to be implemented is often critical. even in terms of success in meeting its objectives. market research or anything else which helps you to look at your conclusions from all possible angles. These plans should therefore be: . Without these specified . Timing is.not the process of planning itself. an essential part of any plan.How do people obtain your product In principle. mood.The ambience. As a result.Where the product is located People. profits and so on which these demand in practice.and preferably quantified . experience. It is these programmes and activities which will then constitute the `marketing' of the organization over the period. or tone of the environment Process. costs. you will need to employ judgement. to use the framework of the 7 Ps. sales. Alternatively.Placement. therefore. the most important element is. The strategy statement can take the form of a purely verbal description of the strategic options which have been chosen. indeed.
6. so that its performance can be monitored. Controls In detail. 5. Description of the product or service.Macroenvironment o economy . every exception to it (throughout the year) must be questioned.SWOT Analysis Objectives Strategy Action Programme (the operational marketing plan itself for the period under review) 7. Marketing budget. Current Situation . If the marketing plan is to work. The 80:20 Rule applies in this context too. a complete marketing plan typically includes: 1.The temptation to proliferate activities beyond the numbers which can be realistically controlled should be avoided. and agree that they are achievable. including special features 2.• • Clear . 4. including advantages and disadvantages for marketing 4. • • • The resulting plans should become a working document which will guide the campaigns taking place throughout the organization over the period of the plan. quantified. Market Segmentation Medium-sized and large organizations 1. Title page 2. 2. Financial Forecast 8.They should be achievable. including the advertising and promotional plan 3.The predicted outcome of each activity should be.Those who are to implement them should be committed to them. Pricing strategy 5. Agreed . and the lessons learned. Content of the marketing plan A marketing plan for a small business typically includes Small Business Administration Description of competitors. 3. Realistic . as far as possible. including the level of demand for the product or service and the strengths and weaknesses of competitors 1. to be incorporated in the next year's plan. Quantified . Focused . Description of the business location. Executive Summary 3. Executive Summary Situational Analysis Opportunities / Issue Analysis .They should be an unambiguous statement of 'exactly' what is to be done.
5. legal government technology ecological sociocultural supply chain Current Situation .Internal o company resources financial people time skills o objectives mission statement and vision statement corporate objectives financial objective marketing objectives long term objectives description of the basic business philosophy o corporate culture Summary of Situation Analysis o external threats o external opportunities o internal strengths o internal weaknesses o Critical success factors in the industry o our sustainable competitive advantage Marketing research o information requirements o research methodology o research results Marketing Strategy . 6.Consumer Analysis  o nature of the buying decision o participants o demographics o psychographics o buyer motivation and expectations o loyalty segments Current Situation .4. 8.Product o product mix o o o o o o .Market Analysis o market definition o market size o market segmentation o industry structure and strategic groupings o Porter 5 forces analysis o competition and market share o competitors' strengths and weaknesses o market trends Current Situation . 7. 9.
o by distribution channel. Analysis contribution margin analysis G. techniques. Marketing Strategy .segmented marketing actions and market share objectives o by product. flights. 11.: cost plus. Marketing Strategy .: skimming.G. o by customer segment. o by geographical market. Implementation o personnel requirements assign responsibilities give incentives training on selling methods o financial requirements o management information systems requirements o month-by-month agenda PERT or critical path analysis o monitoring results and benchmarks o adjustment mechanism o .E. theme. Marketing Strategy . and management o sales promotion o publicity and public relations o electronic promotion (eg. or competitor indexing) o pricing strategy (eg. and media o sales force requirements. Marketing Strategy .C.product strengths and weaknesses perceptual mapping o product life cycle management and new product development o Brand name. frequency.promotion o promotional goals o promotional mix o advertising reach. or penetration) o discounts and allowances o price elasticity and customer sensitivity o price zoning o break even analysis at various prices 12. brand image. Multi Factoral analysis Quality Function Deployment 10. or telephone) o word of mouth marketing (buzz) o viral marketing 13. demand based.: Web.Price o pricing objectives o pricing method (eg.Distribution o geographical coverage o distribution channels o physical distribution and logistics o electronic distribution 14. and brand equity o the augmented product o product portfolio analysis B.
planning one full year ahead each new quarter. Of course. this does absorb more planning resource. not in the writing'.the deviation from the target figures . to capture 20 per cent by value of the market within two years) and into the corresponding strategies. `Micro.forces both the plans and their implementation to be realistic. Continuous monitoring of performance. and . .with attention focused on them so regularly .analysis'. represents a most important aspect of this. as with forecasts. Again. in non-profit organizations for example. Best of all. The more sophisticated track them in terms of 'sales variance' . in many cases the best (most realistic) planning cycle will revolve around a quarterly review.contingencies (What if's) 15. Financial Summary o assumptions o pro-forma monthly income statement o contribution margin analysis o breakeven analysis o Monte Carlo method o ISI: Internet Strategic Intelligence 16. perhaps even more important is the enforced discipline of a regular formal review. it is important to put both quantities and timescales into the marketing objectives (for example. Accordingly. sales territories. then investigates the individual elements (individual products.which allows a more immediate picture of deviations to become evident. the number of clients. Appendix o pictures and specifications of the new product o results from research already completed o Measurement of Progress The final stage of any marketing planning process is to establish targets (or standards) so that progress can be monitored. customers and so on) which are failing to meet targets. which are normally tracked. are: Sales analysis Most organizations track their sales results. Changes in the environment mean that the forecasts often have to be changed. Plans only have validity if they are actually used to control the progress of a company: their success lies in their implementation. which is a nicely pseudo-scientific term for the normal management process of investigating detailed problems. Performance analysis The most important elements of marketing performance. if not the wealth of backing detail. However. against predetermined targets.. the related plans may well also need to be changed. Along with these. is probably a quarterly rolling review . but it also ensures that the plans embody the latest information. at least in terms of the quantifiable aspects of the plans. Scenarios o Prediction of Future Scenarios o Plan of Action for each Scenario 17. or.
the figures which can be obtained (in the UK) from `The Centre for Interfirm Comparison'. where the comparable emphasis may be on remaining within budgeted costs). The above performance analyses concentrate on the quantitative measures which are directly related to short-term performance. using. targeted segment relative share -in relation to the market leaders annual fluctuation rate of market share Expense analysis The key ratio to watch in this area is usually the `marketing expense to sales ratio'.including customer panels (which are used to track changes over time) lost business . or the organization itself. Where such market share is tracked. and about what . for instance. Though absolute sales might grow in an expanding market. for example.how many customers complain about the products or services. be the net profit (for all except non-profit organizations. Some useful measures are: • • • market research . but now run by the Strategic Planning Institute.Market share analysis Few organizations track market share though it is often an important metric.that in the specific. although this may be broken down into other elements (advertising to sales. sales administration to sales. the stock was not available or the product did not meet the customer's exact requirements customer complaints . which can also indicate the organization's performance in terms of its longer-term marketing strengths and may accordingly be even more important indicators. and so on). There are a number of separate performance figures and key ratios which need to be tracked: • • • gross contribution<>net profit gross profit<>return on investment net contribution<>profit on sales There can be considerable benefit in comparing these figures with those achieved by other organizations (especially those in the same industry). But there are a number of indirect measures. The most sophisticated use of this approach. Financial Analysis The `bottom line' of marketing activities should at least in theory. is typically by those making use of PIMS (Profit Impact of Management Strategies). initiated by the General Electric Company and then developed by Harvard Business School. essentially tracking customer attitudes. however.the orders which were lost because. a firm's share of the market can decrease which bodes ill for future sales when the market starts to drop. there may be a number of aspects which will be followed: • • • • overall market share segment share .
This is a variation of `affordable'. typically the managing director on behalf of the board.This may be the most common approach to budgeting. but at least it forges a link with sales volume. which have already been formulated in the marketing plan itself. They are the equivalent of `time-series' forecasting. perhaps the most important benefit of these plans is the planning process itself. and. although. The purpose of a marketing budget is. the two will run in parallel and will interact. . and helps make choices about priorities. This typically offers a unique opportunity. However. Other alternatives are based on a simple `percentage of sales' or on `what the competitors are doing'. It is a managerial tool that balances what is needed to be spent against what can be afforded. At the very least. rather than the other way round. what can be afforded. thus. to pull together all the revenues and costs involved in marketing into one comprehensive document. Its starting point should be the marketing strategies and plans. for `information-rich' and productively focused discussions between the various managers involved. it does imply that promotion is a result of sales. The marketing budget is usually the most powerful tool by which you think through the relationship between desired results and available means. and sometimes is seen as an avoidable cost. written marketing plan is essential. then provides an agreed context for their subsequent management activities. Someone. What is more. The plan. However. they should be capable of being monitored accurately. It is then used in monitoring performance in practice. performance against budget is the main (regular) management review process. It is assumed that next year's budgets should follow some trend that is discernible over recent history. However. they are particularly important. thus. indeed. in that the budget will be set at a certain percentage of revenue. They should.Use of Marketing Plans A formal. and thus follows trends in sales. highly quantified. This figure is most often based on historical spending. This approach assumes that promotion is a cost. Budgets as Managerial Tools The classic quantification of a marketing plan appears in the form of budgets. a forum. even for those not described in the plan itself. Approaches to budgeting Many budgets are based on history. budgets may cause a rethink of some of the more optimistic elements of the plans. Percentage of revenue . Because these are so rigorously quantified.Ven: • • Affordable . the rigorous. decides what is a `reasonable' promotional budget. in that it provides an unambiguous reference point for activities throughout the planning period. represent an unequivocal projection of actions and expected results. together with the associated discussions. there are many other alternatives . in practice.
in that they reflect the reality of the business strategies as those managements see it. • • Marketing is one-to-one in nature. On the other hand. but "industrial marketing" is not confined to these types of business activities. in which case.In this case.. together with the resulting planned activities and then costs them out. construction etc. Industrial marketing Industrial marketing is the marketing of goods and services from one business to another. After carefully documenting their requirements. • • • An organization is seeking to build a new warehouse building. they continue to pour money into a dying product or service (the `dog'). or spends a proportion of what the brand leader is spending.In essence. neither makes any allowance for change. Broadly (and inadequatly) marketing could be split into consumer marketing (B2C "Business to Consumer") and industrial marketing (B2B "Business to Business"). as set out in the marketing plan. They do not allow for the development to meet emerging market opportunities and. mining. An organization has significant need for legal services and obtains submissions from two law firms. it assumes that the competitors know best. A sales representative makes an appointment with a small organization that employs 22 people. the service or product can expect to be nothing more than a follower. High value considered purchase. it matches their budgets.. or beats them. The word "industrial" has connotations of heavy machinery. at the other end of the scale. After discussing the proposal with the business owner it is decided to sign a contract to obtain the machine on a fully maintained rental and consumables basis with an upgrade after 2 years. Differences between marketing and business plans. this approach takes the objectives. Analysis of the proposals and subsequent discussions determines that there is no price advantage to placing all of the work with one firm and the decision is made to split the work between the two firms based on an evaluation of each firm's capabilities.. On the other hand. Zero-based budgeting . It is relatively easy for the seller to identify a prospective customer and to build a face-to-face relationship..Both of these methods are seen by many managements to be `realistic'. The main features of the B2B selling process are. • • Competitive parity . . B2B Business to Business (or "Industrial") Typical examples of a B2B selling process are. it obtains three proposals from suitable construction firms and after a long process of evaluation and negotiation it places an order with the organization that it believes has offered the best value for money. He demonstrates a photocopier/fax/printer to the office administrator. the organization relates its budgets to what the competitors are doing: for example.
even though these definitions are blurred. Competitive tendering . She has bought the same brand of tea for the last 18 years. and signing of final contract). Lower value of purchase. Greater reliance on distribution (getting into retail outlets). However. qualifying.. For example. • • • • • • • Marketing is one-to-many in nature. print media) advertising to build the brand and to achieve top of mind awareness. the definitions are not clear cut. A pensioner visits her local shopping mall. Equally there are big ticket items purchased by non-business consumers (houses and motor vehicles being the obvious examples). He pick's the product and adds it to his shopping cart. request for tender. More effort put into mass marketing (One to many). The main features of the B2C selling process are. More reliance on branding. The family decides to order a pizza. radio. selection process. It is not practical for sellers to individually identify the prospective customers nor meet them face-to-face. B2C Business to Consumer (or "Consumer") Examples of the B2C selling/buying process are.. She purchases a number of items including her favourite brand of tea. making representations. An advertisement appears that advertises home delivered pizza. and be selling relatively low value products. an organisation that sells electronic components may seek to distribute its products through marketing channels). wooing. awarding of tender. the final purchaser is still a business. contract negotiations.• • • Purchase decision is typically made by a group of people ("buying team") not one person. Often the buying/selling process is complex and includes many stages (for example. sales and marketing activities aimed at B2B are distinctly different from B2C (as outlined above). • • • A family are at home on a Sunday night and are watching television. developing strategies and contract negotiations. Higher use of main media (television. preparing tenders. a single man aged in his early 30's sees a hair care product that claims to reduce dandruff. Walking down a supermarket aisle.. Decision making is quite often impulsive (spur of the moment) in nature. request for expression of interest. Selling activities involve long processes of prospecting. Blurring between the definitions As in all things.. However.
Industrial marketing often involves competitive tendering (see tender, tendering). This is a process where a purchasing organisation undertakes to procure goods and services from suitable suppliers. Due to the high value of some purchases (for example buying a new computer system, manufacturing machinery, or outsourcing a maintenance contract) and the complexity of such purchases, the purchasing organisation will seek to obtain a number of bids from competing suppliers and choose the best offering. An entire profession (strategic procurement) that includes tertiary training and qualifications has been built around the process of making important purchases. The key requirement in any competitive tender is to ensure that...
• • • • • • • •
The business case for the purchase has been completed and approved. The purchasing organisation's objectives for the purchase are clearly defined. The procurement process is agreed upon and it conforms with fiscal guidelines and organisational policies. The selection criteria have been established. A budget has been estimated and the financial resources are available. A buying team (or committee) has been assembled. A specification has been written. A preliminary scan of the market place has determined that enough potential suppliers are available to make the process viable (this can sometimes be achieved using an expression of interest process). It has been clearly established that a competitive tendering process is the best method for meeting the objectives of this purchasing project. If (for example) it was known that there was only one organisation capable of supplying; best to get on with talking to them and negotiating a contract.
Because of the significant value of many purchases, issues of probity arise. Organisations seek to ensure that awarding a contract is based on "best fit" to the agreed criteria, and not bribery, corruption, or incompetence.
Suppliers who are seeking to win a competitive tender go through a bidding process. At its most primitive, this would consist of evaluating the specification (issued by the purchasing organisation), designing a suitable proposal, and working out a price. This is a "primitive" approach because...
There is an old saying in industrial marketing; "if the first time you have heard about a tender is when you are invited to submit, then you have already lost it." While flippant, the previous point illustrates a basic requirement for being successful in competitive tendering; it is important to develop a strong relationship with a prospective customer organisation well before they have started the formal part of their procurement process.
Not all industrial sales involve competitive tendering. Tender processes are time consuming and expensive, particularly when executed with the aim of ensuring probity. Government agencies are particularly likely to utilise elaborate competitive tendering processes due to the expectation that they should be seen at all times to be responsibly and accountably spending
public monies. Private companies are able to avoid the complexity of a fully transparent tender process but are still able to run the procurement process with some rigour.
Developing a sales strategy/solution selling/technical selling
The "art" of technical selling (solution selling) follows a three stage process...
Stage 1: Sell the appointment: Never sell over the telephone. The aim of the first contact with a propsective purchaser is to sell the appointment. The reason is simple; industrial sales are complex, any attempt to sell over the phone will trivialise your product or service and run the risk of not fully understanding the customer's need. Stage 2: Understand their needs: The best method of selling is to minimise the information about your goods or services until you have fully understood your customer's requirements. Stage 3: Develop and propose a solution. The solution is (of course) developed from your (or the firm that you represent's) product or service offerings.
The important point about solution selling is that it is essential not to sell the solution before you understand the customer's requirements; otherwise you are highly likely to unwittingly sell them on how ill-suited your solution is to meeting their requirements. To illustrate; imagine a couple seeking the services of an architect start their first meeting with the inevitable "we want to build a house." If the architect leapt in at that point and proceeded to show them his favourite design influence "the Mediterranean look" only to discover that they hate "Mediterranean" and wanted something "a bit more Frank Lloyd Wright" he will have gone most of the way toward alienating the sale. You can see that if he had "kept his powder dry" for a bit longer and first discovered what they were looking for, he could have better understood which way to skew his pitch. He was equally capable of designing in a Frank Lloyd Wright style. The marketing function is able to support this solution sell through tactics like account-based marketing – understanding the requirements of a specific target organization and building a marketing program around these. As research shows, sales success is heavily weighted towards suppliers who can understand their audience before selling to them (in UK research, 77 per cent of senior decision-makers believe that the marketing approaches made by new suppliers are poorly targeted and make it easy to justify staying with their current supplier).
From cannon fodder to preferred tenderer
The term "cannon fodder" derives from the World Wars and refers to the massing of undertrained and recently recruited troops sent to the fronts to face the enemy. It was noted that such troops invariably had a short survival rate but provided the tactical advantage of distracting the enemy while professional soldiers mounted a flanking manoeuvre and came around from the side or from behind the enemy. In adopting the term to Industrial Marketing it means those bids being submitted that have no chance of winning but are involved to make up the numbers (you can't have only one bid in a "competitive" tender process; that wouldn't satisfy the requirements of probity (for example in government tenders, or for private enterprise the requirement to "truly test the market" and to "keep them honest"). The reader
might be wondering why anybody would go to all of the work of submitting a tender when they had no chance of winning; for the same reason that troops were sent in to battle to die; they thought they had a real chance.
The key features of a successful industrial sales organisation
In industrial marketing the personal selling is still very effective because many products must be customized to suit the requirements of the individual customer. Indicators such as the sales tunnel give information on the expected sales in the near future, the hit rate indicates whether the sales organization is busy with promising sales leads or it is spending too much effort on projects that are eventually lost to the competition or that are abandoned by the prospect.
The internet and B2B marketing
The "dotcom" boom and bust of the late 90's saw significant attempts to develop a new retailing business model; on-line shopping. Many entrepreneurs (and their investors) discovered that merely having a website (no matter how innovative) was insufficient to generate sales; the amount of conventional main media advertising required to promote the sites burnt cash at a faster rate than they could generate through on-line sales. They also presumed that consumers would eschew the irksome shopping experience (driving, parking, poor service etc.) for the wonder and convenience of shopping on-line. Some did; but not in sufficient numbers. There were many unforeseen problems and apart from some notable exceptions (Amazon.com and others) the B2C online model was a spectacular failure. However, the same cannot be said of B2B selling where some quite impressive results have been achieved.
The term guerrilla marketing was coined by Jay Conrad Levinson in his 1984 book Guerrilla Marketing as an unconventional system of promotions on a very low budget, by relying on time, energy and imagination instead of big marketing budgets. The term has since entered the popular vocabulary to also describe aggressive, unconventional marketing methods generically.
Levinson's books include hundreds of "Guerrilla Marketing weapons," but they also encourage the guerrilla marketeer to be creative and devise his own unconventional methods of promotion. The marketeer uses all of his or her contacts, both professional and personal, and must examine his company and its products, looking for sources of publicity. Many forms of publicity can be very inexpensive, others are free.
he states: "In order to sell a product or a service. The marketer should also concentrate on how many new relationships are made each month. they are closer to their customers and considerably more agile. Forget about the competition and concentrate more on cooperating with other businesses. a company must establish a relationship with the customer. The primary statistic to measure your business is the amount of profits. It must build trust and support. more transactions with existing customers.interaction with product Tissue-pack marketing ." Levinson identifies the following principles as the foundation of guerrilla marketing: • • • • • • • • • • Guerrilla Marketing is specifically geared for the small business and entrepreneur. Use current technology as a tool to empower your business. and larger transactions. and imagination. Small businesses and entrepreneurs are able to obtain publicity more easily than large companies. It must understand the customer's needs. Guerrilla Marketers should always use a combination of marketing methods for a campaign. and guesswork. aim for more referrals. judgment. Yet ultimately. the Guerrilla Marketeer must "deliver the goods". according to Levinson. the primary investments of marketing should be time. not sales.subtle product placement Astroturfing -. It should be based on human psychology instead of experience.releasing company news to imitate grassroots popularity Experiential marketing -. In The Guerrilla Marketing Handbook. Create a standard of excellence with an acute focus instead of trying to diversify by offering too many diverse products and services.through social networks Ambient marketing Presence marketing Grassroots marketing Wild Posting Campaigns Alternative marketing Buzz marketing -. small size is actually an advantage instead of a disadvantage. energy.word of mouth marketing Undercover marketing -. Instead of concentrating on getting new customers. Instead of money. Associated marketing trends The term Guerrilla Marketing is now often used more loosely as a descriptor for nontraditional media.Levinson says that when implementing guerrilla marketing tactics. such as: • • • • • • • • • • • Viral marketing -. and it must provide a product that delivers the promised benefits.
accessible. cities. sparking a nationwide debate over wearing clothing with brand names. Market segments are evaluated as to their attractiveness or potential for generating revenue for the firm. In this process. Substantiality refers to the size of the segment in term of profitability for the firm. and a portion of Interstate 93 were closed as police examined. MARKET Segmentation In order to better manage the marketing effort and to satisfy the needs and wants of customers. Common characteristics used for consumer categorizations include demographic. interests. Demographic segmentation categorizes consumers based on such characteristics as age. Several subway stations. Psychographic segmentation uses consumers' activities. Massachusetts. and opinions to sort them into groups. and occupation. characters from the Cartoon Network's latenight Adult Swim animated television series Aqua Teen Hunger Force. many firms place consumers into groups. psychographic. but it is now increasingly adopted by large businesses. Four factors are generally reviewed to determine the potential of a particular market segment. Effective segments are measurable. characteristics. or neighborhoods in which they live. bridges. states. Action ability refers to the degree to which a firm can design or develop a product to serve a particular market segment. lifestyle. regions. a process called market segmentation. The act of ambush marketing was noticed and the staff member issued a fine for ‘displaying a sign without a permit’. geographic. and/or work. Social class. marketers divide consumers into groups based on their knowledge.Guerrilla marketing was initially used by small and medium size (SMEs) businesses. Consumers can be segmented geographically according to the nations. shop. The suspicious objects were revealed to be ads depicting the Mooninites. Categorizing consumers according to their locations is called geographic segmentation. It is one of the most popular methods of segmenting potential customers because it makes it relatively easy to identify potential customers. attitudes. potential customers are categorized based on different needs. uses. destroyed the devices. Measurability is the degree to which a market segment's size and purchasing power can be measured. substantial. took a life-size placard of cricket legend Shane Warne wearing a branded t-shirt and the company’s tell-tale ‘giant hand’ outside the West Australian Cricket Ground at the 3rd Ashes Test. Ignignokt and Err. or personality characteristics are psychographic variables used to categorize consumers into different groups. or behaviors. and in some cases. and actionable. Messages On Hold Cricket In December 2007. removed. gender. In behavioral segmentation. several guerrilla-marketing magnetic light displays in and around the city of Boston. Accessibility refers to the degree to which a market segment can be reached and served. income level. a staff member of on hold advertising company. Controversy Aqua Teen Hunger Force On 31 January 2007. or responses to a product. Consumer characteristics are used to segment markets into workable groups. . and behavioral segmentation. were mistaken for possible explosive devices.
differentiated. The position of a product in the marketplace must be clear. and desirable relative to those of its competitors in order for it to be effective. This greater emphasis ultimately leads to a better understanding of the needs of the targeted segments. with a different product geared to each segment. increase firm profits. firms followed the logic of mass production as they sought to create a "democracy of desire" by universalizing the availability of products. The concentrated strategy. which aims to serve a large share of one or a very few markets. This approach allows firms to obtain a much stronger position in the segments it targets because of the greater emphasis on these targeted segments. a different marketing plan is needed for each segment in order to maximize sales and. An undifferentiated marketing strategy occurs when a firm focuses on the common needs of consumers rather than their different needs. Companies were able to produce goods in high volume at low prices. By 1900. and transportation costs. Technological innovation mushroomed. and corporate communications. Coverage Strategies There are three basic market-coverage strategies used by marketing managers: undifferentiated. distinctive. producers design products to appeal to the largest number of potential buyers. In advanced industrial economies. Marketers may look for outlets through which to sell the company's products. A firm using a differentiated strategy makes a conscious decision to divide and target several different market segments. Market positioning is the process of arranging a product so as to engage the minds of target consumers. . firms need to station their products relative to similar products of other producers. Once primarily concerned with increasing sales through advertising and other promotional techniques. Firm managers position their products in such a way as to distinguish it from those of competitors in order to gain a competitive advantage in the marketplace. Britannica Concise Encyclopedia: marketing Activities that direct the flow of goods and services from producers to consumers. The last market coverage strategy is known as the concentrated marketing strategy. and wholesaling.Once the potential market has been segmented. and concentrated. Mass Marketing Spurred by a communications revolution and the completion of a national railroad network that by 1900 consisted of more miles of track than the rest of the world combined. With a differentiated marketing strategy. They may make psychological and demographic studies of a potential market. as a result. is best suited for firms with limited resources. direct-mail marketing. Thus. inventory. When using this strategy. and a small number of firms realized economies of scale previously undreamed of. and conduct informal interviews with target audiences. a process called product positioning. customer support. including retail stores. firms create more total sales because of broader appeal across market segments and stronger position within each segment. corporate marketing departments now focus on credit policies (see credit). product development. marketing considerations play a major role in determining corporate policy. Marketing is used both to increase sales of an existing product and to introduce new products. a national mass market emerged. Giant corporations (or a small cluster of corporations) dominated single industries. The benefit of an undifferentiated strategy is that it is cost-effective because a narrow product focus results in lower production. experiment with various marketing strategies. distribution.
behavioral science. with the appointment of its first director of commercial research. and the explosion in magazine sales. By 1910. sweeping improvements in statistical methodology. Further developments came after the 1890s with flashing electric signs. which dropped the cost of car buying from $600 in 1905 to $290 by 1924. During and after the 1920s. General Motors (GM) pioneered market segmentation in the 1920s. He had pioneered the marketing of the automobile so that it could be within the reach of almost all Americans. Market Segmentation The final stage of the twentieth-century market in America has been characterized as "market segmentation. the Curtis Publishing Company instituted the systematic analysis of carefully collected data. and in 1912 "talking signs" that allowed copy to move swiftly along boards from right to left first appeared on Broadway in New York City. Forward integration into wholesaling also aided mass marketing. independent of production costs. Hart. identically. As the mass market emerged.5 million . Price was determined not so much by how cheaply something could be sold.Mass production required the development of mass marketing as well as modern management. Advertising media were powerfully supplemented by the use of subway cars. Coca-Cola from the 1890s. as it fought and beat Ford for the biggest market share of the booming automobile business. photo technology and color lithography revolutionized the capacity to reproduce images of all kinds. manufacturers and retailers developed a range of instruments to shape and mold the market. Wrigley's Chewing Gum after 1907. his Model T sold to 15. Ayer and Son. The first advertising agency was established in 1869 as N. Shafner. Through these means—as well as coherent production and marketing plans—a mass market was created by World War II. billboards. and quantitative analysis made market research more important and accurate. when the chaos of market competition spurred efforts to make the market more predictable and controllable. W. Henry Ford was an exemplar of mass marketing." Advertising also came into its own during the early decades of the twentieth century. National brand names like the Singer Sewing Machine from the 1860s. consumerism as understood in the beginning of the twenty-first century did not triumph until after 1950. John Wanamaker placed the first full-page advertisement in a newspaper in 1879. trams. Franchise agreements with retailers were one key to the success of companies such as Coca-Cola. Another feature in the success of mass marketing was the creation and implementation of sales programs made possible by the spread of modern management structures and the division of corporate functions. and the depression of the 1890s. a process spurred by analysis of the depression of the 1870s. when unsold inventory was blamed in part for the depth of the crisis. but more by the special value a particular market placed upon the goods. In nineteen years of production. as the social sciences matured. and Maxwell House coffee around the same time heralded the "golden age of brand names. beginning in the 1870s and 1880s with meat packers like Gustavus Swift. electric trolleys. Standardized models were produced quickly. and Marx became the largest manufacturer of men's suits in America by the 1910s through research that suggested producing suits for fourteen different male body types and psychographic appeals in its advertising. However. In 1911." Fully developed in the 1970s and 1980s. firms sought competitive advantage through the use of demographics and psychographics to more accurately pinpoint and persuade consumers of their products. and only in black.
which seized a generation of Americans who were born into the first generalized age of affluence in America.000 in 1910. as researchers took into account neurological. and seniors were similarly analyzed. Age segmentation among children received particular attention. GM made not one model to suit all. Testing determined the relative perception of visual and verbal information at different ages and developmental stages. Despite the end of a long post–World War II economic expansion. a remarkable figure. By the 1990s. given the slowdown in economic growth in the preceding thirty years. It was a . Generational differences became much more important. Further changes. By 1924. GM made the ownership of automobiles both a status symbol and stylish. Consumer spending jumped from $70. movies. In 1997. and moral development. The U. Television's Nielsen ratings offered one instrument. television was deregulated into cable and satellite channels. By the 1960s. and marketing generally. Due to his methods. Market research also determined the kinds of junk mail that went to each individual and how advertising would appear on the Internet or on television. largely the result of consumerism. The development of marketing during the twentieth century matched and aided American economic growth and was symbiotic with the triumph of consumerism. social. Census Bureau reported in 2001 that retail sales just for the fourth quarter accounted for $861 billion. and Ford was forced to retool and try to catch up with GM. thanks largely to Ford. teens. Serious foreign competition in American markets during the 1970s and 1980s also spurred innovation in market research. It was in the 1920s that annual modifications to automobile models were introduced. the number of cars produced in the United States was greater than 4 million. During the 1980s and 1990s. emotional. from $12 billion in 1960 to $54. but then embraced individuality. as consumer values shifted because of social change. By 1985. but as a collection of segments with differing requirements and desires to be satisfied. meant that marketers needed to be much more sensitive to the differences between groups of Americans and their values. Ford's market share had been cut to 25 percent. about 60 percent of all toys sold in the United States were based on licensed characters from television. by 1921 Ford sold 55 percent of all new cars in America. and ethnic background led to more targeted advertising and a leap in TV advertising. The creation of a "democracy of desire" came to characterize American society and its values. gender. product design. Deregulation of children's programming in the 1980s led to cartoons becoming merchandising vehicles. and segmented marketing. marketers and advertisers sought ways to reach a more segmented society. but a number of different models to suit differing pocketbooks. children. it was estimated that "kid power" accounted for sales of over $200 billion per year.customers. GM first tried merging with rivals to create a larger market force. By 1927. In trying to compete with Ford. and Internet usage was identified. after 1970 consumer spending continued to grow. By 1987.5 billion in 1980. Humor and gender differences were also studied to make marketing more successful. compared to 180. more sophisticated research developed as patterns of credit card spending were analyzed.8 billion in 1940 to $617 billion in 1970. The ability to identify who watched what shows according to age. newer.S. It looked at the market not as an undifferentiated whole. or books. easier forms of obtaining credit. advertisers had developed eight consumer clusters for women alone. after 1970. and more sophisticated polling techniques another. and over forty lifestyle groups.
and the proliferation of the automobile has expanded the geographic area in which a consumer can make retail purchases. that part of the process of production and exchange that is concerned with the flow of goods and services from producer to consumer. warehouse. Manufacturers often maintain their own wholesale departments and deal directly with retailers. which were organized for the mass distribution of goods and enjoyed the advantages of largescale operation. making possible the prompt delivery of a variety of goods in large quantities. Recent years have seen the development of wholesale clubs. Evolution of Modern Marketing In a subsistence-level economy there is little need for exchange of goods because the division of labor is at a rudimentary level: most people produce the same or similar goods. or promote the product. Commodity exchanges. The general store superseded the public market in England and was an institution of the American country town. the typical marketing setup was one in which wholesalers assembled the products of various manufacturers or producers and sold them to jobbers and retailers. finance. The independent store. but also those who develop. In popular usage it is defined as the distribution and sale of goods. the exchange of the products of one region for those of another was limited. as the strength of marketing smoothed its economic dominance around the planet. . still further modified marketing arrangement. Independent stores may operate their own wholesale agencies to supply them with goods. where nearly all production is intended for a market. before the development of caravan travel and navigation. Interregional exchange between disparate geographic areas depends on adequate means of transportation. insure. In a modern capitalist economy.distinctive quality that influenced the attitudes of the rest of the world toward the United States. The village market or fair. enable businesses to buy and sell commodities for both immediate and future delivery. Marketing includes the activities of all those engaged in the transfer of goods from producer to consumer—not only those who buy and sell directly. Modern Marketing At all points of the modern marketing system people have formed associations and eliminated various middlemen in order to achieve more efficient marketing. in economics. In the United States in the 19th cent. which sell retail items to consumers who purchase memberships that give them the privilege of shopping at wholesale prices. It is estimated in the United States that approximately 50% of the retail price paid for a commodity is made up of the cost of marketing. such activities are just as important as the manufacture of the goods. that system met stiff competition from chain stores. The concurrent advent of the motor truck and paved highway. operated by its owner. or otherwise have a hand in the process of transfer. Wholesale houses operate outlets for their wares. Today large chain stores dominate the field of retail trade. In the 20th cent. Thus. the itinerant merchant or peddler. distribution being understood in a broader sense than the technical economic one. and farmers sell their products through their own wholesale cooperatives. transport. and the shop where customers could have such goods as shoes and furniture made to order were features of marketing in rural Europe. wholesale and retail. was the chief retail marketing agency. such as those of grain and cotton.
Critics see a systemic social evil inherent in marketing. Advertising has created an international market for many items. motivational research. However. It is especially problematic in classical economic theory. In 1999 more than $308 billion was spent on advertising in the United States alone. and through on-line transactions (“e-commerce”) on the Internet. such as selling unhealthy food to obese people or selling SUVs in a time of global warming. product promotion is an attempt coming from the supply side to influence demand. booking agents for concert or theatrical performers.9 billion in 1998. which is based on the assumption that supply and demand are independent. T. Marketing is accused of creating ruthless exploitation of both consumers and workers by treating people as commodities whose purpose is to consume. it can be used for negative purposes. There are similar concerns in industrial markets. is marketed through the same act that produces it. Critics also point out that marketing techniques have been used to achieve morally dubious ends by businesses. with the top 50 U. Criticism of marketing Some aspects of marketing. Then the argument follows that nonfree markets are imperfect and lead to production and consumption of suboptimal amounts of the product. especially promotion. While it is ethically neutral. The number of customers. saves sales clerks from haggling and promotes faith in the integrity of the merchant. Market research. Methods of marketing now include market research. marketing firms tallying revenues of $5. but it can also have a positive influence on consumer welfare.S. particularly in the form of installment buying and selling. especially for durable goods.. has been greatly increased by the practice of extending credit. Industrial market segmentation attempts to provide some answers. is a major industry in itself. and other means of determining consumer acceptability of a product before the producer decides to manufacture and market it on a large scale. by placing orders to specialized “home-shopping” television channels. Services are marketed in much the same manner as goods and commodities. like that of a repair person or physician. travel agents. . This raises a question on the effectiveness of the CIM’s definition of marketing (anticipating. identifying and satisfying customer needs profitably). and the like. Stewart in New York. The Observer’s survey among 1. Critics acknowledge that marketing has legitimate uses in connecting goods and services to the consumers who want them. Personal services may also be brokered by employment agencies. Customers also buy through mail-order catalogs (much expanded from the original catalog sales business of the late 1800s).Methods of merchandising have also been changed to attract customers. Sometimes a service. especially trademarked and labeled goods. are the subject of criticism. governments and criminals. probably introduced (1841) by A. mainly in consumer marketing. also known as business-to-business or B2B. Most marketers believe that marketing techniques themselves are amoral.206 UK adult consumers in 2001 highlighted some of the stark changes our society has gone through in the last two decades. In this way producer market power is attained as measured by profits that would not be realized under a free market. The one-price system. often conducted by means of telephone interviews with consumers.
which is why PostModern Marketing 2 was chosen as a key reference point for this chapter. The marketing concept. anachronistic. This way. environmental attention. intelligent thinking as well as resources to be implemented successfully. together with other business disciplines.' Of course all of the above is done for economic or political gain. If Mr. not on a cost-plus basis. Even some government departments address the public not as ‘the Queen’s subjects’ or ‘the applicants’ any more but as ‘customers. and “indeed. On the one hand Brown makes positive statements about marketing. Another success is the now commonly implemented value-pricing principle. Brown suggests that “the traditional. sometimes unfair. political and economic conditions and the inner workings of a company. not for the sake of innovation. appropriate or even pertinent to what is actually happening on the ground”. Its relevance is very much situational and depends on many factors such as the product. Despite all this achievement. Their statements. the segment.Core marketing elements such as segmentation. and guaranteed delivery dates. some scholars such as Stephen Brown challenge the marketing concept in an extreme language. . In the context of segmentation.g. Marketing has helped create value through customized products. comfortable cars. “in decline. the increasing academic attention that is being devoted to marketing and consumption-related phenomena by non-business disciplines such as sociology. failure. planning. shopkeepers’ smile. location. failing. they are complex topics that need a high level of effort. and using quotes such as “mid-life crisis” . “marketing is endowed with considerable personal charm and has enjoyed more than its fair share of conquests” (Brown. anthropology and history. operational and sales costs by helping to develop products because customers want them. no longer appropriate. misunderstanding. linear. A definitive statement cannot be made whether the conventional marketing concept is applicable in today’s environment. he condemns marketing by saying “marketing has to decide whether to expose its intellectual nakedness or press itself against the searing heat of postmodernism” . being abandoned. This apparent love-hate relationship is proof in itself that even a skeptics find it difficult to deny the contribution that marketing has made and can make to customer satisfaction and economic value. creating an economic growth period never seen before in the United Kingdom. implementation and control no longer seems applicable. no-questions-asked refund policies. in an unprecedented state of crisis. are relevant. e. far from being the second-hand rose of the scholarship. helped the UK to make the transition from a 19thcentury manufacturing economy to a modern model of success in the service industry. confusion. It has contributed to both customers’ and suppliers’ quality of life by selecting profitable customer satisfaction as its sole objective. Marketing also helps companies avoid unnecessary R&D. 1998:16). time. occasional inexplicable hitting of the jackpot”. whereby a product or service is sold for the price the customer is willing to pay. However. However. both suppliers and customers get a fair deal. step-by-step marketing model of analysis. for better or worse. delivered nothing of value. marketing is now something of a fashion leader’ On the other hand. to dismiss marketing as a failure is unfair. targeting and positioning are still relevant in the modern (or post-modern) world.
The truth is that marketing today leads the way in segmentation. promotion. They segment their markets. Smiths Aerospace. BAE Systems. A brief visit to their websites can make this point clear. We must also understand how decisions are made and what kinds of decision problems can be supported by formal information systems. pricing. not less. and • An understanding of the nature of analytical models within marketing information system. relate their products and services to them.Brown had studied “the ground” before making his statement. After all the contribution as well as further potential. PriceWaterhouseCoopers. BOC Edwards. distribution. product management. One can then determine whether information systems will be valuable tools and how they should be designed. Structure of the Chapter . we need objectivity. he would have realised that companies are successful the world over precisely because they implement this model. quantification. Marketing Information Systems To understand the proper role of information systems one must examine what managers do and what information they need for decision making. innovation. paradigm shifts and (some application of) science. Chapter Objectives This chapter has the purpose of leading the reader towards: • An understanding of the different roles managers play and how marketing information systems can support them in these roles • An appreciation of the different types and levels of marketing decision making • A knowledge of the major components of a marketing information system • An awareness of the often under-utilised internal sources of information available to enterprises • An ability to clearly distinguish between marketing research and marketing intelligence. define their value proposition and serve their customers accordingly. HSBC. and last but not least. rigour. which is only one element within the marketing concept. models. it is time we banished banishing passion from works of marketing scholarship”. relationships. Contrary to Brown’s suggestion in his final paragraph. to deny its successes and try to reduce it to only promotion is a great injustice to the marketing profession as well as to academic insight. Stephen Brown also has a constructive suggestion: “I reckon we need more passion in marketing. Weir Group and the BT Group to name but a few. This refers mainly to promotion. Examples are General Electric.
The attention of managers increase rapidly from one issue to another. fragmentation and brevity. The model also emphasises that the activities of managers is characterised by variety.. Managers want to work on issues that are current. but not how they do it. the various types and levels of decision that marketing managers must make. This is just as true for managers operating in the developing world as in the developed world. the stress has been placed upon the behavioural aspects of management decision making. whilst intuitively attractive in itself. government officials. There is simply not enough time for managers to get deeply involved in a wide range of issues. certain. high speed fragmentation. Managers are involved in a complex and diverse web of contacts that together act as an information system. current. espoused by writers in the 1920's. . 2. Historical. secretaries. or why. with very little pattern. 5.The chapter opens with a wide-ranging discussion of the functions of management. Behavioural models are based on empirical evidence showing that managers are less systematic. competitors. • Variety. The nature of the pressures may be different but there is no evidence that they are any less intense. up-to-date. such as Henry Fayol. routine information receives less attention. less reflective. Research suggests that a manager's day is characterised by a large number of tasks with only small periods of time devoted to each individual task. marketing intelligence systems and analytical model banks are all discussed. peers. Planning Organising Coordinating Deciding Controlling Such a model emphasises what managers do. 4. ad hoc. managers operate a network of contacts throughout the organisation and the environment. behavioural models describe 6 managerial characteristics: • High volume. hearsay. of interactions. marketing research systems. colleagues. Managers prefer speculation. work brevity specific contacts Such behavioural models stress that managers work at an unrelenting pace and at a high level of intensity. current. and so forth. gossip in brief. They converse with customers. A problem occurs and all other matters must be dropped until it is solved. The Functions of Management Clearly. information systems that claim to support managers cannot be built unless one understands what managers do and how they do it. For instance. is of limited value as an aid to information system design. • Issue preference • Complex web • Strong preference for verbal media. although uncertain information. specific and ad hoc. 3. The classical model of what managers do. Internal reporting systems. This then comprises the first half of the chapter whilst the second pan deals with the main components of a marketing information systems. In one sense. The classical model identifies the following 5 functions as the parameters of what managers do: 1. more reactive and less well organised than the classical model projects managers to be. More recently.
something that engages most of a managers time. and he or she uses whatever tools are available to be an effective communicator. high-level managers are at the mercy of their subordinates. office systems. acting largely as a communications aid in some of the newer office automation and communication-oriented applications. attempting to motivate subordinates. within each level. Decision Making Decision making is often seen as the centre of what managers do. can be identified. it has generally been found that successful managers appear to be able to control their own affairs. . These systems make a much larger contribution in the field of informational roles. information processing and decision making. only recently have decision support systems and microcomputer-based systems begun to make important contributions. until recently these contributions have been confined to narrow. require less effort and bring a faster response. who bring to their attention crises and activities that must be attended to immediately. Second. Managerial Roles Mintzberg suggests that managerial activities fall into 3 categories: interpersonal. Much work needs to be done in broadening the impact of systems on professional and managerial life. In the area of decision making. An important interpersonal role is that of figurehead for the organisation. By developing their own long-term commitments. most concrete. information systems are extremely limited and make only indirect contributions. To some extent. and professional work stations that can enhance a manager's presentation of information are significant. senior managers can control their personal agendas. A more familiar set of managerial roles is that of decisional roles. successful managers are those who can control the activities that they choose to get involved in on a day-to-day basis. Decision making can be divided into 3 types: strategic. termed as informational roles.Several studies have found that managers prefer verbal forms of communication to written forms. and the random order of crises. large-scale MIS systems. Despite the flood of work. a manager acts as a leader. receiving the latest. Communication is the work of the manager. In the area of interpersonal roles. While information systems have made great contributions to organisations. Managers act as the nerve centre for the organisation. A second set of managerial roles. and they mediate between groups in conflict within the organisation. Managers act as entrepreneurs by initiating new kinds of activities. the numerous deadlines. management control and operations control. and their own networks. Nevertheless. Less successful managers tend to be overwhelmed by problems brought to them by subordinates. Lastly. they handle disturbances arising in the organisation. most up-todate information and redistributing it to those who need to know. managers act as a liaison between various levels of the organisation and. they allocate resources where they are needed in the organisation. their own information channels. among levels of the management team. transaction processing areas. Verbal media are perceived to offer greater flexibility. It is one of the areas that information systems have sought most of all to affect (with mixed success).
Strategic decision making: This level of decision making is concerned with deciding on the objectives, resources and policies of the organisation. A major problem at this level of decision making is predicting the future of the organisation and its environment, and matching the characteristics of the organisation to the environment. This process generally involves a small group of high-level managers who deal with very complex, non-routine problems. For example, some years ago, a medium-sized food manufacturer in an East African country faced strategic decisions concerning its range of pasta products. These products constituted a sizeable proportion of the company's sales turnover. However, the company was suffering recurrent problems with the poor quality of durum wheat it was able to obtain resulting in a finished product that was too brittle. Moreover, unit costs were shooting up due to increasingly frequent breakdowns in the ageing equipment used in pasta production. The company faced the decision whether to make a very large investment in new machinery or to accept the offer of another manufacturer of pasta products, in a neighbouring country, that it should supply the various pasta products and the local company put its own brand name on the packs. The decision is strategic since the decision has implications for the resource base of the enterprise, i.e. its capital equipment, its work force, its technological base etc. The implications of strategic decisions extend over many years, often as much as ten to fifteen years. Management control decisions: Such decisions are concerned with how efficiently and effectively resources are utilised and how well operational units are performing. Management control involves close interaction with those who are carrying out the tasks of the organisation; it takes place within the context of broad policies and objectives set out by strategic planners. An example might be where a transporter of agricultural products observes that his/her profits are declining due to a decline in the capacity utilisation of his/her two trucks. The manager (in this case the owner) has to decide between several alternative courses of action, including: selling of trucks, increasing promotional activity in an attempt to sell the spare carrying capacity, increasing unit carrying charges to cover the deficit, or seeking to switch to carrying products or produce with a higher unit value where the returns to transport costs may be correspondingly higher. Management control decisions are more tactical than strategic. Operational control decisions: These involve making decisions about carrying out the " specific tasks set forth by strategic planners and management. Determining which units or individuals in the organisation will carry out the task, establishing criteria of completion and resource utilisation, evaluating outputs - all of these tasks involve decisions about operational control. The focus here is on how the enterprises should respond to day-to-day changes in the business environment. In particular, this type of decision making focuses on adaptation of the marketing mix, e.g. how should the firm respond to an increase in the size of a competitor's sales force? should the product line be extended? should distributors who sell below a given sales volume be serviced through wholesalers rather than directly, and so on. Within each of these levels, decision making can be classified as either structured or unstructured. Unstructured decisions are those in which the decision maker must provide insights into the problem definition. They are novel, important, and non-routine, and there is no well-understood procedure for making them. In contrast, structured decisions are repetitive, routine, and involve a definite procedure for handling them so that they do not have to be treated each time as if they were new.
Structured and unstructured problem solving occurs at all levels of management. In the past, most of the success in most information systems came in dealing with structured, operational, and management control decisions. However, in more recent times, exciting applications are occurring in the management and strategic planning areas, where problems are either semi-structured or are totally unstructured. Making decisions is not a single event but a series of activities taking place over time. Suppose, for example, that the Operations Manager for the National Milling Corporation is faced with a decision as to whether to establish buying points in rural locations for the grain crop. It soon becomes apparent that the decisions are likely to be made over a period of time, have several influences, use many sources of information and have to go through several stages. It is worth considering the question of how, if at all, information systems could assist in making such a decision. To arrive at some answer, it is helpful to break down decision making into its component parts. The literature has described 4 stages in decision making: intelligence, design, choice and implementation. That is, problems have to be perceived and understood; once perceived solutions must be designed; once solutions are designed, choices have to be made about a particular solution; finally, the solution has to be implemented. Intelligence involves identifying the problems in the organisation: why and where they occur with what effects. This broad set of information gathering activities is required to inform managers how well the organisation is performing and where problems exist. Management information systems that deliver a wide variety of detailed information can be useful, especially if they are designed to report exceptions. For instance, consider a commercial organisation marketing a large number of different products and product variations. Management will want to know, at frequent intervals, whether sales targets are being achieved. Ideally, the information system will report only those products/product variations which are performing substantially above or below target. Designing many possible solutions to the problems is the second phase of decision making. This phase may require more intelligence to decide if a particular solution is appropriate. Here, more carefully specified and directed information activities and capabilities focused on specific designs are required. Choosing among alternative solutions is the third step in the decision making process. Here a manager needs an information system which can estimate the costs, opportunities and consequences of each alternative problem solution. The information system required at this stage is likely to be fairly complex, possibly also fairly large, because of the detailed analytic models required to calculate the outcomes of the various alternatives. Of course, human beings are used to making such calculations for themselves, but without the aid of a formal information system, we rely upon generalisation and/or intuition. Implementing is the final stage in the decision making process. Here, managers can install a reporting system that delivers routine reports on the progress of a specific solution, some of the difficulties that arise, resource constraints, and possible remedial actions. Table 9.1 illustrates the stages in decision making and the general type of information required at each stage. Table 9.1 Stages in the decision making process
Stage of Decision Making Information Requirement 1 Intelligence Exception reporting
2 Design 3 Choice 4 Implementation
Simulation prototype "What-if simulation Graphics, charts
In practice, the stages of decision making do not necessarily follow a linear path from intelligence to design, choice and implementation. Consider again the problem of balancing the costs and benefits of establishing local buying points for the National Milling Corporation. At any point in the decision making process it may be necessary to loop back to a previous stage. For example, one may have reached stage 3 and all but decided that having considered the alternatives of setting up no local buying points, local buying points in all regions, districts or villages, the government decides to increase the amounts held in the strategic grain reserve. This could cause the parastatal to return to stage 2 and reassess the alternatives. Another scenario would be that having implemented a decision one quickly receives feedback indicating that it is not proving effective. Again, the decision maker may have to repeat the design and/or choice stage(s). Thus, it can be seen that information system designers have to take into account the needs of managers at each stage of the decision making process. Each stage has its own requirements.
Components of a marketing information system
A marketing information system (MIS) is intended to bring together disparate items of data into a coherent body of information. An MIS is, as will shortly be seen, more than raw data or information suitable for the purposes of decision making. An MIS also provides methods for interpreting the information the MIS provides. Moreover, as Kotler's1 definition says, an MIS is more than a system of data collection or a set of information technologies: "A marketing information system is a continuing and interacting structure of people, equipment and procedures to gather, sort, analyse, evaluate, and distribute pertinent, timely and accurate information for use by marketing decision makers to improve their marketing planning, implementation, and control". Figure 9.1 illustrates the major components of an MIS, the environmental factors monitored by the system and the types of marketing decision which the MIS seeks to underpin. Figure 9.1 The marketing information systems and its subsystems
size and pack type by type of • Product type. is a list of some of the information that can be derived from sales invoices. size and pack type by • Product type. Often the entrepreneur.a fully fledged MIS should have these components. Internal reporting systems: All enterprises which have been in operation for any period of time nave a wealth of information. this information often remains under-utilised because it is compartmentalised. production. However. size and pack type by • Product type. the methods (and technologies) of collection. marketing research system. decision makers can fail to appreciate how information from other functional areas might help them and therefore do not request it. or various personnel working in the functional departments holding these pieces of data. Below. manpower. either in the form of an individual entrepreneur or in the functional departments of larger businesses. marketing intelligence system and marketing models. stockholdings and sales invoices. retrieving and processing data notwithstanding. financial. marketing. These are but a few of the internal records that can be used by marketing managers. The internal records that are of immediate value to marketing decisions are: orders received. stockholding and logistical data. That is.The explanation of this model of an MIS begins with a description of each of its four main constituent parts: the internal reporting systems. In the same way. but even this small set of records is capable of generating a great deal of information. size and pack type by • Average value and/or volume of sale by • Average value and/or volume of sale by type of • Average value and/or volume of sale by • Average value and/or volume of sale by sales person territory account industry customer territory account industry By comparing orders received with invoices an enterprise can establish the extent to which it is providing an acceptable level of customer service. It is suggested that whilst the MIS varies in its degree of sophistication . information is usually categorised according to its nature so that there are.with many in the industrialised countries being computerised and few in the developing countries being so . • Product type. comparing . for example. do not see how it could help decision makers in other functional areas. storing. Similarly.
it is not unintentional Semi-focused Again. Marketing intelligence systems: Whereas marketing research is focused. hears and watches exposes him/herself to information that may prove useful. Some enterprises will approach marketing intelligence gathering in a more deliberate fashion and will train its sales force. such as collectors. often involving panels of farmers.stockholding records with orders received helps an enterprise ascertain whether its stocks are in line with current demand patterns. Marketing research is a proactive search for information. The other form of marketing research centres not around a specific marketing problem but is an attempt to continuously monitor the marketing environment. by virtue of what he/she reads. For instance. Informal search This describes the situation where a fairly limited and unstructured attempt is made to obtain information for a specific purpose. data is collected in a purposeful way to address a well-defined problem (or a problem which can be defined and solved within the course of the study). the manager may focus more on economic and business publications. It involves them in scanning newspaper trade magazines. broadcasts etc. For example. scientific or technological media. In many cases. . the scope of the search is likely to be narrow in scope and far less intensive than marketing research Formal search Marketing intelligence is the province of entrepreneurs and senior managers within an agribusiness. yet they are both proactive. including2 Unfocused scanning The manager. international aid agencies. the manager is not in search of particular pieces of information that he/she is scanning actively searching but does narrow the range of media that is scanned. and pay less attention to political. There would be little structure to this search with the manager making inquiries with traders he/she happens to encounter as well as with other ad hoc contacts in ministries. business journals and reports. Nonetheless. the enterprise which commissions these studies does so to solve a perceived marketing problem. the marketing manager of a firm considering entering the business of importing frozen fish from a neighbouring country may make informal inquiries as to prices and demand levels of frozen and fresh fish. Whilst this sort of activity may seem to share the characteristics of marketing research it is carried out by the manager him/herself rather than a professional researcher. Whilst the behaviour is unfocused and the manager has no specific purpose in mind. as well as to competitors. This is a purposeful search after information in some systematic way. customer complaints and requests and distributor problems. importers/exporters etc. Moreover. suppliers and customers. it is a largely informal process of observing and conversing. That is. Whilst the ad hoc study and continuous marketing research differs in the orientation. market intelligence is not. This scanning of the economic and business environment can be undertaken in a variety of ways. with trade associations. The information will be required to address a specific issue. Marketing research systems: The general topic of marketing research has been the prime ' subject of the textbook and only a little more needs to be added here. after-sales personnel and district/area managers to take cognisance of competitors' actions. In addition it involves management in talking to producers. consumers or distributors from which the same data is collected at regular intervals. These monitoring or tracking exercises are continuous marketing research studies. Enterprises with vision will also encourage intermediaries. economic forecasts and other media. A marketing intelligence system is a set of procedures and data sources used by marketing managers to sift information from the environment that they can use in their decision making.
statistical. Internal reports include orders received. organising. Marketing models: Within the MIS there has to be the means of interpreting information in order to give direction to decision. control (or tactical) and operational. Brand switching models are stochastic since these express brand choices in probabilities whereas linear programming is deterministic in that the relationships between variables are expressed in exact mathematical terms. even if this is likely to be less accurate then more formal and complex information systems. Three levels of decision making can be distinguished from one another: strategic. i. econometric and financial models are the analytical subsystem of the MIS. Strategic decisions have implications for changing the structure of an organisation and therefore the MIS must provide information which is precise and accurate. Management has five distinct functions and each requires support from an MIS. traders and other middlemen to be proactive in conveying market intelligence back to them. supply. decisions and controlling.) • Regression and correlation models • Analysis of Variance (ANOVA) models • Sensitivity analysis • Discounted cash flow • Spreadsheet 'what if models These and similar mathematical. Typical tools are: • Time series sales modes • Brand switching models • Linear programming • Elasticity models (price.e. etc. demand. Control decisions deal with broad policy issues and operational decisions concern the management of the organisation's marketing mix. MIS has less to contribute in the case of a manager's informational role than for the other two. A marketing information system has four components: the internal reporting system. inventory records and sales invoices. A relatively modest investment in a desktop computer is enough to allow an enterprise to automate the analysis of its data. the marketing research systems. coordinating. incomes. Given the nature of the work. Managers play at least three separate roles: interpersonal. Some of the models used are stochastic. These models may be computerised or may not. Strategic decisions are characteristically one-off situations. MIS has to support each level. These are: planning. informational and decisional. Information systems have to be designed to meet the way in which managers tend to work. MIS. Marketing . Again. those containing a probabilistic element whereas others are deterministic models where chance plays no part. in electronic form or otherwise. the marketing intelligence system and marketing models. Research suggests that a manager continually addresses a large variety of tasks and is able to spend relatively brief periods on each of these. managers tend to rely upon information that is timely and verbal (because this can be assimilated quickly). can support these roles in varying degrees.retailers. Chapter Summary Marketing information systems are intended to support management decision making.
What are stochastic models? 2. what are the contributing elements to an MIS? it 7. Key Terms Deterministic Internal Marketing Model Operational Stochastic Strategic Tactical plans models reports intelligence banks decisions models decisions Review Questions 1. According to Kotler. What differences are there between marketing research and marketing intelligence? The Role Of Marketing Research Chapter Objectives Structure Of The Chapter The role and limitations of marketing research A definition of marketing research The purpose of the research Clear. attainable. 3. What are the 3 levels of decision making outlined in this chapter? 6. concise. marketing intelligence is less specific in its purposes. To which management role does the textbook suggest MIS has least to contribute? 5.research takes the form of purposeful studies either ad hoc or continuous. By contrast. Name the four components of an MIS. measurable and quantifiable objectives The need to set a time horizon for marketing research A reporting period The research proposal Step 1: Problem definition Step 2: Hypothesis generation Step 3: Decision on type of study Step 4: Decision on data collection method Step 5: Development of an analysis plan Step 6: Data collection Step 7: Analysis of data Step 8: Drawing conclusions and making recommendations Chapter Summary Key Terms Review Questions Chapter References . What were the functions of management that Henry Fayol identified? 4. Which elements of the marketing environment are mentioned in the chapter? 8. is chiefly carried out in an informal manner and by managers themselves rather than by professional marketing researchers.
Marketing research is charged with helping to reduce such uncertainties. therefore. it is marketing managers who make the final marketing decision and not the researcher. the effectiveness of the promotional message. and Structure Of The Chapter This chapter begins by explaining the limitations of marketing research in so much that it serves to reduce rather than remove the risks attendant to decision making.. Marketing researchers work with probabilistic models of the form: y = f(x1).. For instance.(fx2). That is. the phenomenon under investigation rarely. if ever. However. x is a necessary and sufficient condition for y to occur. The role and limitations of marketing research "Marketing research does not make decisions and it does not guarantee success".. risks..but will never remove it. This reflects the fact that in order for a target market share to be reached some promotion (amount unknown) is necessary but will not be sufficient. At best. marketing research will increase the probability that the decisions which management has to take will help attain the organisation's marketing objectives. and indeed it is important that research reports should specify alternative courses of action and the probability of success. In this text an eight step research design is proposed and the reader will find a fairly thorough discussion of each of these steps within the chapter... to achieve the target. The link between promotional expenditure and sales is not so direct as that between pressure and temperature. price and distribution. Decision is invariably surrounded by uncertainties and. Chapter Objectives The objectives of this chapter are to: • Define the role of marketing research in • Outline the contents of a • Outline the contents of a research • Explain in detail each of the principal steps in research design. of these alternatives. the researcher has to respond to the brief with a research design. an increase in pressure is usually necessary and sufficient to bring about a rise in air temperature.. In the fields of science and engineering researchers are often working with deterministic models of the world where y = f(x). The second observation. including: the media used. decision making research brief proposal. is simply a recognition of the environment within which marketing takes place. not to mention the many dimensions of the product. management is about decision making. Marketing managers may seek advice from marketing research specialists.In essence. Consider the marketing problem of determining how much to spend on promotion in order to achieve a given market share. At this point. the length and frequency of the campaign. lends itself to deterministic modelling. In the social sciences. where possible. The discussion proceeds to an outline of the research brief which has to be drawn up for the guidance of the individual or group charged with executing the study. on its own. that marketing research does not guarantee success. There are a great many more intervening variables. and this includes marketing and marketing research.f(xn). ". .
Not many years ago an agricultural engineering company developed an improved rice milling machine. The characteristics of the scientific method are that it translates personal prejudices. This means that a detailed and carefully designed research plan is developed in which each stage of the research is specified. The company's assessment of the market was hardly objective. objective and analysis. The machine was introduced into Thailand where existing rice milling machines were of a design which resulted in a high percentage of brokens (broken kernels). launched with hardly any need for marketing research when the new mill had such obvious advantages over existing products. Rather the best that a competent researcher and a well designed study will be able to offer is a reduction in the amount of uncertainty surrounding the decision. At the same time alternative explanations of the event or phenomena of interest are given equal consideration. These are tested empirically. the methods to be employed in gathering the information and the analytical techniques to be used to interpret it. systematic. Since they do not have sufficient cash to pay for milling their rice they get paid in 'brokens'. The miller then sells the 'brokens' for animal feed. it has to be converted into . and analysis of. In Thailand. Marketing research seeks to set about its task in a systematic and objective fashion. the information necessary to address the problem. marketing researchers employ the scientific method. as far as possible. The marketing researcher's task goes beyond the collecting of data. notions and opinions into explicit propositions (or hypotheses). A definition of marketing research Green and Tull1 have defined marketing research as follows: "Marketing research is the systematic and objective search for. They saw the 'brokens' as a problem which their product solved." The key words in this definition are. smallholders take their rice to a miller. Intuitively a successful product would be predicted. The more effective milling machine simply did not fit into the Thai rice processing system. Data is equivalent to the raw materials of manufacturing. in itself. To this end. Maintaining objectivity in marketing research is essential if marketing management is to have sufficient confidence in its results to be prepared to take risky decisions based upon those results. He/she must also interpret the data in terms of what the it means to the organisation which commissioned the research. Such a research plan is only considered adequate if it specifies: the research problem in concise and precise terms. The organisation needs to know the alternative ways it can respond to this data. The agricultural engineering company went through the expensive and time-consuming process of importing the machine into Thailand. Knowing that 60% of those interviewed thought that product A was superior to product B is. The third of the key terms in the definition given a little earlier was analytical. of little value. The model is further complicated by the fact that these interactions are themselves often not understood. The prospective customer did not see it as a problem at all. It is for these reasons that marketing researchers cannot guarantee that decisions based on their information will always prove 'successful'. The new rice mill produced a negligible percentage of brokens. They set up extensive distribution and servicing facilities only to be surprised when the mill failed to gain acceptance. information relevant to the identification and solution of any problem in the field of marketing.Y is a function of a number of variables and the interactions between them.
Important information is that information which directly assists in making decisions and the ICO had not told the research company the purpose of the research. the research brief should include: • the purpose of the research • the objectives stated in a clear. the sample would . attainable. pricing. Although the need for precision and thoroughness in marketing research has been stressed here. buyer behaviour. promotion. instant or ground coffee. with meals or between meals. and to what depth each issue should be investigated. at minimum cost. On such occasions its methods tend to be less theoretically rigorous and its analysis more superficial. In particular. To begin with. in practice. packaging.information before it becomes useful in decision making. he/she must be selective. they simply state what they think they need to know. Therefore management often seeks answers through marketing research in the shortest time possible and. They wanted information on the coffee drinking habits of these young people: how much coffee they drank. The process of convening data into information is achieved through analysis. Since the researcher cannot investigate everything about a market. distribution. The brief must inform the researcher which aspects of the market are particularly important. The answer should lie in a document called the research brief. and simply never developed the coffee drinking habit. at what times of day. the research organisation developed a set of wide-ranging proposals which included taking a large random sample of young people. In fact much of the information was interesting rather than important. measurable and quantifiable way • a time horizon • a resource allocation. which other beverages they preferred and so on. The reality is that management is frequently under pressure to make timely decisions. In response. The purpose of the research It is not at all unusual for marketing managers to neglect to tell the researcher the precise purpose of the research. concise. that an increasing percentage of young people were consuming beverages other than coffee. This is not quite the same thing. moreover. To appreciate the difference consider the case of the marketing research agency which was contacted by the International Coffee Organisation (ICO) and asked to carry out a survey of young people in the age group 15-24. there is a perpetual conflict between the demands of expediency and the search for truth. They often do not appreciate the need to do so. Had this been explained to the research company then it is likely that their proposals would have been radically different. sales. on the part of the ICO. etc. The research design is a set of guidelines given to the researcher by the person(s) who have commissioned the research and/or the individual(s) who are to make use of the results in their decision making. it is to be remembered that. The question remains as to how the researcher decides where to focus the study. including the budget and facilities • a reporting period. The initial reason for the study had been a suspicion. The market research brief Marketing research can be concerned with any of a variety of aspects of the market: the product. particularly soft drinks. Each of these components of the brief is explained in a little more detail in the section that follows. Instead.
The researchers were able to look at precedents. prior to acquiring the rights to the tree-lifter.1 The components of market potential It was possible to test customer reaction to the concept of the new tree-lifter by showing pictures. This machine was suitable for lifting semi-mature trees. but the missing component was the company's' own plans for exploiting the market. The product's potential depended very much on such initiatives. concise. The problem with the objective is that the marketing manager needs to know the potential market for the new tree-lifter is that it is not attainable.have been composed of 15-24 year old non-coffee drinkers rather than a random sample of all 15-24 year olds.1. no idea of which. Figure 1. product quality or unique product features. complete with root-ball intact. Since the company had no involvement in the agricultural engineering sector. measurable and quantifiable. it is concise! Here is another case to be considered. Clear. The researchers began by looking at the basis of competition to determine whether it was on price. concise. An audit of the environment was undertaken too. Second. Unless the purpose of the research is stated in unambiguous terms it is difficult for the marketing researcher to translate the decision-maker's problem into a research problem and study design. One could find out how many treelifters were currently being sold but this is not the same as the objective set by the marketing manager. and transplanting such trees in another location. they had no salesmen trained in selling into this industry and so on. line drawings and by supplying product specifications to prospective buyers. . They examined the pattern of response on past occasions when one or other of those companies already in the market had launched a new product. A small engineering firm had purchased a prototype tree-lifter from a private research company. In large measure. as shown in Figure 1. they had no agreements with distributors. measurable and quantifiable objectives Suppose that the marketing manager states that he needs to know the potential market for a new product his/her organisation has been developing. The market potential for any new brand is a function of at least 4 things.e. It was thought to have potential in certain types of tree nurseries and plantations. the focus would have been non-coffee drinking habits rather than coffee drinking habits. it was also possible to gauge the likely reaction from competitors. At first glance this might appear to meet all of the requirements of being clear. since the company had not decided their pricing policy an important element could not be tested. However. attainable. i. attainable. In practice it would possibly meet only one of these criteria. of the distributors would be prepared to stock their product. if any.
In addition there are several characteristics of a good research brief and these are that it: • means the same thing to all concerned • does not ask for irrelevant information • defines the relevant populations to be measured • identifies the correct variables to be measured • specifies the degree of accuracy really needed within the main results • specifies an order of priorities when the sample has to be broken down for the purposes of analysing data for subgroups. The need to set a time horizon for marketing research Inevitably there are deadlines which the marketing research activity must fit and these must be stated clearly at the outset of the research. money and manpower allocated. at the time. if any. The form of interim reports should also be specified at the outset. and whether presentations are to be made to a group (nature and size of the group) or an individual. He or she is likely to put forward a design which is less elegant.The solution would have been to undertake a study which would have described the market in detail in terms of customers. The researcher rarely gets all of what he/she judges is required to reach a satisfactory conclusion but if the research proposal is well thought out and persuasively presented some concessions can be obtained. they can decide how much the management can afford to spend. Alternatively. whether verbal or written. As was said earlier. some kind of compromise develops. If the researcher is aware of the time constraints then this will become an overriding factor when he/she plans the research design. and the deadline for the final report. including the budget and facilities There are essentially two approaches to establishing the resource allocation to a particular marketing research exercise. because of time pressures. Management can start with the problem and work out how much it will cost to solve it. Whichever the approach to resource allocation adopted. and gives rise to less precise information but delivers the results on schedule. In practice the decision-makers prefer the latter approach and the researchers the former. competitors and the environment. In the end. it is imperative that the researcher is aware of the financial and other constraints within which he/she must complete the work. and . A reporting period The researcher must also know from the outset of the study the points in time when interim reports are required. management is often seeking quick answers from marketing research. A resource allocation. and seek the best answer they can for the time. The company could then have put a marketing plan together and conducted a follow-up study to test their propositions out on the marketplace.
responsibility for ensuring that the research proceeds along clearly defined lines rests with the decision-maker. The eight steps are set out in figure 1. if they have. Figure 1.2. the decision-maker could be asked what he has in mind when he uses the term market potential.• does not pre-judge the selection of research techniques and procedures. For example. This is a document which develops after having given careful consideration to the contents of the research brief. The research proposal sets out the research design and the procedures to be followed. In situations. Decision-makers seldom work out their objectives fully or. In theory. In many instances the researcher has to take the initiative.2 The research design Step 1: Problem definition The point has already been made that the decision-maker should clearly communicate the purpose of the research to the marketing researcher but it is often the case that the objectives are not fully explained to the individual carrying out the study. These are only briefly discussed here since the remainder of this textbook consists of a detailed explanation of each step. This is a legitimate question since the researcher is charged with the responsibility to develop a research design which will provide the right kind . the researcher responds with a research proposal. One approach is to take the problem statement supplied by the decision-maker and to break this down into key components and/or terms and to explore these with the decision-maker. they are not willing to fully disclose them. The research proposal Having received the research brief. in which the researcher senses that the decision-maker is either unwilling or unable to fully articulate the objectives then he/she will have to pursue an indirect line of questioning.
Statements lacking any or all of these characteristics are not research hypotheses. For example.3. there may be interest in answering the question: "Does a person's level of education have any bearing upon whether or not he/she adopts new products?" Or. reviews of research on related problems and researching secondary sources of information as well as studying competitive products. This process frequently proves of great value to the decisionmaker in that it helps him think through the objectives and perhaps select the most important of the objectives. Step 2: Hypothesis generation Whilst it is true that the purpose of research is to address some question. Research questions are too broad to be directly testable. Whilst seeking to clarify the objectives of the research it is usually worthwhile having discussions with other levels of management who have some understanding of the marketing problem and/or the surrounding issues. the hypotheses specify how the variables are related and that these are measurable or potentially measurable. Other helpful procedures include brainstorming.3 Characteristics of a sound definition of the research problem A hypothesis is a conjectural statement regarding the relation between two or more variables. "Does a person's age bear any relation to brand loyalty behaviour?". These characteristics imply that it is relationships. nonetheless one does not test research questions directly. which are tested. the question is reduced to one or more hypotheses implied by these questions. There are two key characteristics which all hypotheses must have: they must be statements of the relationship between variables and they must carry clear implications for testing the stated relations.of information. Instead. Another approach is to focus the discussions with the person commissioning the research on the decisions which would be made given alternative findings which the study might come up with. Figure 1. For example. rather than variables. consider the following hypothesis: . Kerlinger 2 suggests that a welldefined marketing research problem tends to have three common characteristics as shown in figure 1.
. The point has been made that it is all too easy when conducting research to collect "interesting data" as opposed to "important data". Step 3: Decision on type of study Marketing research can be carried out on one of three levels: exploratory. "red meat consumption".g. usually of a broad nature. If these problems can be resolved then we may indeed have a hypothesis. even before data is collected. The criteria have been met. descriptive or causal. However for the purposes of statistical testing it is more usual to find hypotheses stated in the so-called null form. other testable hypotheses may be deduced from it. plus a little heat.4 Three types of marketing research study Exploratory research: The chief purpose of exploratory research is to reach a better understanding of the research problem." Again there is a clear statement of the relationship being investigated but there are question marks over the measurability with respect to at least one of the variables i. However. When there is little understanding of the topic it is impossible to formulate hypotheses without some exploratory studies. Figure 1. Data and questions which enable researchers to test explicit hypotheses are important. After this period sales began to slow down. the lignin breaks down and the nutrient content increases.e. because a problem is a question.. ". "disposable incomes". A problem really cannot be solved unless it is reduced to hypothesis form." This is a relation stated between one variable. Hypotheses are central to progress in research. Three other manufacturers had entered the market by this time. both variables are potentially measurable. and is not directly testable. if treated in a strong alkali. There is a second advantage of stating hypotheses. They will direct the researcher's efforts by forcing him/her to concentrate on gathering the facts which will enable the hypotheses to be tested. However. crop residues such a straw are high in lignin (a wood-like substance) and low in nutrients. "level of education". "There is no relationship between red meat consumption and the level of disposable incomes. This includes helping to identify the variables which should be measured within the study. The company.a farmer's degree of innovativeness.e. For example. A company was established to exploit this technology and did so successfully for 4 seasons. i. Moreover. Animal ."Red meat consumption increases as real disposable incomes increase. e. The rest are merely interesting. This makes them a poor animal feed since the lignin acts against digestibility and the low nutrient content means poor food value." We may also encounter difficulties in agreeing an appropriate measure of the other variable. namely that implicit notions or explanations for events become explicit and this often leads to modifications of these explanations." Consider a second hypothesis: "There is no relationship between a farmer's educational level and his degree of innovativeness with respect to new farming technologies. and another variable. On occasion a given hypotheses may be too broad to be tested.
but in other instances these three typologies will represent phases within a single marketing research investigation. Exploratory research is intended to help researchers formulate a problem in such a way that it can be researched and suggest testable hypotheses. listing and comparison of the attributes and features of competitive products. Causal research: Causal research deals with the "why" questions. Descriptive research: As the name suggests. Nonetheless if the relationship between the two is fairly stable this descriptive information may be sufficient for the purposes of prediction. descriptive research is concerned with describing market characteristics and/or marketing mix characteristics. etc. informal personal interviews with distributors and users/non-users of the product and/or focus group interviews with farmers and/or distributors. If he/she can understand the causes of the effects observed then our ability to predict and control such events is increased. observation. specific research questions have been formulated before the research is undertaken. In summary then there are three distinct types of marketing research study: exploratory. the researcher may observe that there is an association between the geographical location of consumers and their tendency to consume red meat. and so on and on. be able to predict how fast the per capita consumption of red meat is likely to rise over a given time period. This is a good example of a situation where insufficient knowledge prevented the development of clear objectives. The main methods of data collection are secondary data searches. It was also possible that if a problem did exist it could lie in any one of a number of areas: animal populations might be declining. distributors may not be promoting the product aggressively. descriptive and causal. did not know whether the whole industry had slowed down or if only their product was suffering. perhaps because of a prior exploratory study. Typically.4. in the case of the latter. In some cases. the alternative ways in which products are currently distributed. This type of study can involve the description of the extent of association between variables. That is. there are occasions when the researcher will want to know why a change in one variable brings about a change in another. For example. a research programme will be of one kind or another. The purpose of each is summarised in figure 1. since the problem could not be articulated with any precision and therefore research of an exploratory nature was required. the survey. Such research can take the form of literature searches. Step 4: Decision on data collection method The next set of decisions concerns the method(s) of data gathering to be employed. customers may be experiencing difficulties in getting the chemicals. for example. a descriptive study specifies the number and size of market segments. The principal difference between exploratory and descriptive research is that. . Note that the researcher is able to describe the relationship rather than explain it. Nor did they know if the problem was temporary in that perhaps the market comprised of "early adopters" had been saturated but it was only a matter of time before other farmers began to buy their systems when they saw how well they worked. When descriptive research is conducted the researcher must already know a great deal about the research problem. The researcher may.Feed Systems. and is in a position to clearly define what he/she wants to measure and how to do it.
Step 6: Data collection At this stage the researcher is ready to go into the field and collect data. parametric or nonparametric hypotheses tests.. These are the number of samples to be compared.experimentation and consumer panels. or multivariate methods are to be used?) • Does the researcher have a sufficiently sound grasp of these techniques to apply them with confidence and to explain them to the decision-maker who commissioned the study? • Does the researcher have the means to perform these calculations? (e. if the calculations have to be performed manually.5 Data collection methods Step 5: Development of an analysis plan Those new to marketing research often intuitively believe that decisions about the techniques of analysis to be used can be left until after the data has been collected. to reveal its characteristic elements and structure.g. a t-test cannot be used on data which is only ranked) There is little point in spending time and money on collecting data which subsequently is not or cannot be analysed. tests of association. Step 7: Analysis of data The word 'analysis' has two component parts. Figure 1.g. access to a computer which has an analysis program which he/she is familiar with? Or.g.a process of resolving data into its constituent components." Where the data is quantitative there are three determinants of the appropriate statistical tools for the purposes of analysis.. the prefix 'ana' meaning 'above' and the Greek root 'lysis' meaning 'to break up or dissolve'. have the questions been properly coded? • Have the questions been scaled correctly for the chosen statistical technique? (e. so they are simply noted here. is there sufficient time to complete them and then to check them?) • If a computer program is to be used at the data analysis stage. The various issues relating to data collection constitute the main body of the text and therefore. Such an approach is ill-advised. are not dwelt upon here. Thus data analysis can be described as: ". Before interviews are conducted the following checklist should be applied: • Is it known how each and every question is to be analysed? (e. Therefore consideration has to be given to issues such as these before the fieldwork is undertaken. . Each of these topics is dealt with later on. which univariate or bivariate descriptive statistics.
In this case. ordinal. There are several alternative research designs which might be employed. Once the marketing researcher knows how many samples are to be compared. Samples are said to be dependent. This is because the individual will make a comparison of the two products and his/her response to one formulation is likely to affect his/her reaction or evaluation of the other product. Table 1.e. unrelated).whether the samples being compared are independent of one another and the level of data measurement. This question might be asked in either of the two following ways: Please indicate to which of the following age categories you belong (a) 15-21 22 Over 30 years ___ (b) How old are you? ___ Years Table 1. Suppose however a sample were given two formulations of fruit juice to taste. but common.1 summarises the mathematical properties of each of these levels of measurement. samples = 2 Comparing the responses of samples of heavy. each involving different numbers of samples. the same individuals are asked first to taste formulation X and then to taste formulation Y. Take for example the outline of test B above. The measurement of the responses of fruit juice drinkers to the trial formulation in no way affects or influences the responses of the sample of non-fruit juice drinkers. To illustrate the importance of understanding these connections consider the following simple. In many instances the age of respondents will be of interest. That is. the samples would be considered dependent or related to one another. responses to product X and responses to product Y. The researcher would have two sets of sample results. the samples are independent of one another.1 Levels of measurement years 30 years ___ ___ .e. Data can be nominal. interval or ratio scaled. or related. whether these samples are related or unrelated to one another and the level of measurement then the selection of the appropriate statistical test is easily made. Therefore. Test A Test B Test C Comparing sales in a test market and the market share of the product it is Number targeted to replace. question in marketing research.e. i. moderate and infrequent fruit Number juice drinkers to a trial formulation. The third factor to be considered is the levels of measurement of the data being used. samples = 1 Comparing the responses of a sample of regular drinkers of fruit juices to Number those of a sample of non-fruit juice drinkers to a trial formulation. when the measurement taken from one sample in no way affects the measurement taken from another sample. related) or independent of one another (i. samples = 3 of of of The next consideration is whether the samples being compared are dependent (i. Suppose a fruit juice processor wishes to test the acceptability of a new drink based on a novel combination of tropical fruit juices.
allows all statistical tests to be used including the more powerful parametric tests whereby cause-and-effect can be established. These are at opposite ends of the hierarchy of levels of measurement. Otherwise the whole exercise becomes increasingly inefficient.e. It often happens that data processing begins whilst the data gathering is still underway. their dependence or independence and the levels of measurement does affect how the data can be analysed. For instance. Marketing researchers have to plan ahead for the analysis stage. where it exists. Figure 1. A second logistical issue concerns any plan to build up a picture of the pattern of responses as the data comes flowing in. Whether the data is to be analysed manually or through the use of a computer program. It may be that the West of the district under study mainly wheat is grown whilst in the East it is maize which is the major crop.6 provides a useful guide to making that final selection. Another important aspect relates to logistics planning. suppose that research was being undertaken within a particular agricultural region with a view to establishing the size. cleaned (i. This includes ensuring that once the task of preparing the data for analysis has begun there is a steady and uninterrupted flow of completed data forms or questionnaires back from the field interviewers to the data processors. number and type of milling enterprises which had established themselves in rural areas following market liberalisation. It would make sense to coordinate the fieldwork with data analysis so that the interim picture was of either wheat or maize milling since the two are likely to differ in terms . since it gives the analyst ratio data. Ratio Choosing format (a) would give rise to nominal (or categorical) data and format (b) would yield ratio scaled data. Those who submit marketing research proposals involving quantitative data should demonstrate an awareness of the factors that determine the mode of analysis and a capability to undertake such analysis. If by accident or design format (a) were chosen then the analyst would have only a very small set of statistical tests that could be applied and these are not very powerful in the sense that they are limited to showing association between variables and could not be used to establish cause-and-effect.Measurement scale Nominal Measurement Level Frequency counts Examples Producing categories Mathematical properties grading Confined to a small number of tests using the mode and frequency Ordinal Interval Ranking of items Placing brands of cooking oil Wide range of nonparametric in order of preference tests which test for order Relative differences of Scoring products on a 10 Wide range of parametric tests magnitude between point scale of like/dislike items Absolute differences of Stating how much better one All arithmetic operations magnitude product is than another in absolute terms. errors removed) and the proposed analytical tests tried out to ensure that they are effective before all of the data has been collected. Format (b). data can be coded. Thus a simple change in the wording of a question can have a fundamental effect upon the nature of the data generated.6 Selecting statistical tests The individual responsible for commissioning the research may be unfamiliar with the technicalities of statistical tests but he/she should at least be aware that the number of samples. This may require careful planning of the sequencing of fieldwork. Figure 1. on the other hand.
Customer oriented marketing researchers will have noted from the outset of the research which topics and issues are of particular importance to the person(s) who initiated the research and will weight the content of their reports accordingly. This document should state the purpose of the research. objective and analytical. the budget to which the . That is. in the course of the study. experienced researchers will ensure that the greater part of the report focuses upon 'must know' type information. the time by which it must be completed. However. as opposed to actual use. Step 8: Drawing recommendations conclusions and making The final chapter of this textbook is devoted to the topic of report writing. information that would be useful to have if time and resources within the budget allocation permit (should know) and there will be information that it would be nice to have but is not at all directly related to the decision at hand (could know). the proportions prepared for animal versus human food).g. data remains of potential.g. Marketing research does not itself make the decisions. Rather. The manager or other individual initiating the research must provide guidance to the researcher in the form of a research brief. In particular he/she should distinguish between what the manager: • • • could know must should know know This means that there will be information that is essential in order for the marketing manager to make the particular decision with which he/she is faced (must know). marketing research helps to identify potential threats and opportunities. within their final report. Without interpretation. the researcher should determine what the marketing manager's priorities are with respect to the research study.of the type of mill used (e. it is perhaps worth noting that the end products of marketing research are conclusions and recommendations. to that which is considered 'must know' information. Moreover. In writing a research proposal. With respect to the marketing planning function. generates alternative courses of action. experienced researchers would be careful to limit the information which they firmly promise to obtain. its objectives. Chapter Summary Marketing research serves marketing management by providing information which is relevant to decision making. It is information which management needs to reduce the inherent risks and uncertainties in management decision making. nor does it guarantee success. marketing research helps to reduce the uncertainty surrounding the decisions to be made. hammer versus plate mills) as well as screen sizes and end use (e. marketing research has to be systematic. When conclusions are drawn from raw data and when recommendations are made then data is converted into information. Too often marketing research reports chiefly comprise a lengthy series of tables of statistics accompanied by a few brief comments which verbally describe what is already self-evident from the tables. provides information to enable marketing managers to evaluate those alternatives and advises on the implementation of the alternatives. In order to do so effectively.
1 Name the 3 key words used in the definition of marketing research by Green. i. This will probably only be done if it is intended that statistical analysis is to be undertaken. a descriptive study or a causal study. the null form. Key Terms Analysis Causal Continuous Descriptive Exploratory Hypotheses Interval Nominal Ordinal Primary Ratio Research Research Research Secondary research plan research research research research scales scales Scales research scales brief design proposal Review Questions From your knowledge of the material in this chapter. depending upon what is already known about the research problem one of three types of study might be undertaken. the researcher has to develop an analysis plan. i. give brief answers to the following questions below. There will then be an intermediate stage whereby the hypotheses are restated in a testable form. It is only when the analysis plan has been considered that fieldwork. should be undertaken. Before proceeding further. as far as is possible. What are the main items of information which should be included in a research brief? . The final step in the research design would be to write the report. Define the term 'hypothesis'. Having read.e. 2. Where the research is more qualitative in nature then it is still recommended that hypotheses should be developed. precise definition of the problem. These should include alternative hypotheses.researcher must work in developing the research design and the timing and frequency of any interim reports which the researcher is expected to make.e. Customer oriented marketing researchers will have noted from the outset of the research which topics and issues are of particular importance to the person(s) who initiated the research and will weight the content of their reports accordingly. in the form of data collection. 3. Research design begins with an accurate and. an exploratory study. questioned and understood the research brief the onus is then upon the marketing researcher to respond by preparing the research design. What are the 3 types of research described in this chapter? 4. This is followed by the generation of hypotheses. Tull and Albaum.
This being the case. Why is it important to devise a data analysis plan before collecting the data Chapter : Sampling In Marketing Research Chapter Structure Random Systematic Stratified Sample Quota Cluster Area Sampling The Type I Example Chapter Key Review Chapter References Of The Objectives Chapter sampling sampling samples strata sampling sampling sampling testing hypothesis errors size Summary Terms Questions sizes and and errors calculations null and of within multistage statistical type sample II Following decisions about how data is to be collected the next consideration is how to select a sample of the population of interest that is truly representative. Chapter Objectives This chapter serves to teach the reader to: • Distinguish between probabilistic and non-probabilistic sampling • Understand the bases for stratifying • Make an informed choice between random and quota • Comprehend multistage sampling. • Appreciate the use of area or aerial sampling. 6.5. the requirement that samples be representative of the population from which they are drawn has to be offset against time and other resource considerations. What is the aim of exploratory research? 7. methods samples samples and Structure Of The Chapter . Name 4 characteristics of a good research brief. Name the 3 factors which determine which is the appropriate statistical test to conduct on data obtained from a random sample. 8. At the same time. choices have to be made between the mathematically superior probabilistic sampling methods and the more pragmatic non-probability sampling methods.
Figure 7. These include simple random sampling. population record) does not adequately cover the target population • if some sections of the population are impossible to find or refuse to co-operate. The statistical aspects of sampling are then explored.e. numbers out of a hat or bag Systematic sampling Systematic sampling is a modification of random sampling. Thereafter. In the purest sense this does not give rise to a true random sample since some systematic arrangement is used in listing and not every distributor has a chance of being selected once the sampling fraction is calculated. Figure 7. To arrive at a systematic sample we simply calculate the desired sampling fraction. stratified sampling and cluster sampling.1 Methods of sampling It can be seen that there is a dichotomy . is explained and its strengths and weaknesses outlined.2 Systematic sampling as applied to a survey of retailers . or probability sampling. The text which follows explains these methods in some detail.The early part of the chapter outlines the probabilistic sampling methods. if there are 100 distributors of a particular product in which we are interested and our budget allows us to sample say 20 of them then we divide 100 by 20 and get the sampling fraction 5. index. all but the most pedantic of practitioners would treat a systematic sample as though it were a true random sample. A number of illustrative calculations are presented. quota sampling. and highlights the advantages and disadvantages of each method.1 gives an overview of the sampling methods that are either explained within this chapter or are explored in the exercises which accompany this textbook. However. gives each member of the target population a known and equal probability of selection. Figure 7. The first is the desire to avoid bias in the selection procedure. Two major principles underlie all sample design.probability and non probability sampling methods. e. the second is to achieve the maximum precision for a given outlay of resources. These cause selection or sample bias and can only be avoided if a random method is used. to be described shortly. Random sampling Random. e. selection is consciously or unconsciously influenced by human choice • if the sampling frame (i. the principal non-probability method. The two basic procedures are: 1 the lottery method. Thereafter we go through our sampling frame selecting every 5th distributor. Other designs. can retain the essential element of randomness but manage to increase precision by incorporating various restrictions and refinements. Bias in the selection can arise: • if the selection of the sample is done by some non-random method i.e. picking 2 the use of a table of random numbers. list. systematic sampling. because there is no conscious control of precisely which distributors are selected.g.g.
21. i. 2 7. one could easily get figures of the age distribution. e. 25. Random stratified sampling is more precise and more convenient than simple random sampling.. 9. it seems clear that the best basis would be the frequency distribution of the principal variable being studied. how many strata should be constructed and what stratum boundaries should be used? 3 Sample sizes within strata.e. 98 14 19. b. What might have to be done in this case at the analysis stage is to correct proportional representation. Draw a random number 1-5. Examples of characteristics which could be used in marketing to stratify a population include: income. only a moderate amount of coffee or drinks coffee very occasionally. 97 13 18. in a study of coffee consumption we may believe that behavioural patterns will vary according to whether a particular respondent drinks a lot of coffee. 10.e. i.Systematic sampling Population = 100 Food Stores Sample desired = 20 Food Stores a. 24.. geographical region. 100 Stratified samples Stratification increases precision without increasing sample size. It is only possible to do this if the distribution of the population with respect to a particular factor is known. 15... 6. 16. possession of a particular commodity. the population is divided into a number of strata. When stratified sampling designs are to be employed. 8. Sample every Xth store.g. age. 23. Stratification can occur after selection of individuals. 3. there are 3 key questions which have to be immediately addressed: 1 The bases of stratification. i.. race. what characteristics should be used to subdivide the universe/population into strata? 2 The number of strata. Weighting can easily destroy the assumptions one is able to make when interpreting data gathered from a random sample and so stratification prior to selection is advisable.. 99 5. 22... 4.. 20.e. if one wanted to stratify a sample of individuals in a town by age.. how many observations should be taken in each stratum? Bases of stratification Intuitively. Sample Numbered Stores 1 2 3 4 5 1. 11. Stratification does not imply any departure from the principles of randomness it merely denotes that before any selection takes place. 96 12 17. prior stratification would not be possible. Thus we may consider that to stratify according to "heavy users". but if there is no general population list showing the age distribution. sex. and if it is also known to which stratum each member of the population belongs. "moderate users" and "light . then random samples taken within each stratum. For example.
This is desirable since stratification has the effect of removing differences between stratum means from the sampling error. chemistry. Secondly. the population mean could be estimated with high precision. firm size. two difficulties may arise in attempting to proceed in this way. as many as possible should be used.g. some practical problems limit the desirability of a large number of strata: 1 No stratification scheme will completely "explain" the variability among a set of observations.marketing. However. current data on its frequency is unlikely to be available. Stratification ensures that variation between strata does not enter into the standard error by taking account of this source in drawing the sample. the average per capita consumption of coffee) we would normally use no more than about 6 strata. it is desirable to make up strata in such a way that the sampling units within strata are as similar as possible. sex. Similarly it is important to maximise differences in stratum means for the key survey variables of interest. there is usually interest in many variables. If a single overall estimate is to be made (e. socio-economic group. 2 Depending on the costs of stratification. However. The only approach is to create strata on the basis of variables. or can be made available. Stratification removes the second type of variance from the calculation of the standard error. However. that are believed to be highly correlated with the principal survey characteristics of interest. If each stratum could be made as homogeneous as possible. First. the "residual" or "unexplained" variation will dominate. the latter complaint can be attended to since it is possible to stratify after the data has been completed and before the analysis is undertaken.g. Sample sizes within strata Proportional allocation: Once strata have been established. As regards number of strata. Suppose. its mean could be estimated with high reliability and. engineering. then more strata may be justified. for which information is. even if one survey variable is of primary importance. the question becomes. history. for example. In this way a relatively limited sample within each stratum will provide a generally precise estimate of the mean of that stratum. Number of strata The next question is that of the number of strata and the construction of stratum boundaries. Total variance within a population has two types of natural variation: between-strata variance and within-strata variance. If estimates are required for population subgroups (e. mathematics. farm size. The theory goes that without stratification we would expect variation in the views expressed by students from say within the marketing speciality and between the views of marketing students. in turn. In general. we stratified students in a particular university by subject speciality .g. by region and/or age group). geography etc. and engineering students as a whole. not just one. e. and stratification on the basis of one may not provide the best stratification for the others. computer science. "How big a sample must be drawn from each?" Consider a situation where a survey of a twostratum population is to be carried out: . as a whole. a point may be reached quickly where creation of additional strata is economically unproductive. age. and questioned them about the distinctions between training and education. etc. and little improvement will be effected by creating more strata. Past a certain point.users" would provide an optimum stratification.
this method of allocation would result in: Stratum A (10. but we know that the individuals assigned to stratum A were more varied with respect to their opinions than those assigned to stratum B. we had stratum A and stratum B. Optimum allocation minimises the standard error of the estimated mean by ensuring that more respondents are assigned to the stratum within which there is greatest variation. Suppose that. In this example.000 × 0. once again. Still others believe that with adequate safeguards quota sampling can be made highly reliable and that the extra cost of probability sampling is not worthwhile.Stratum Number of Items in Stratum A B 10. So: sr = W1 1 + W2 2 + W3 3 + . Where proportional sampling has been employed we do not need to weight the means of the individual stratum when calculating the overall mean.Wk k Optimum allocation: Proportional allocation is advisable when all we know of the strata is their sizes.5%) = 50 The major practical advantage of proportional allocation is that it leads to estimates which are computationally simple. The most common approach would be to sample the same proportion of items in each stratum. it can be used safely in certain circumstances.5%) = 450 × 0. the overall sampling fraction is: Thus. so the available total sample size is 500.000 90. This is termed proportional allocation.000 If the budget is fixed at $3000 and we know the cost per observation is $6 in each stratum.. Quota sampling Quota sampling is a method of stratified sampling in which the selection within strata is nonrandom.000 Stratum B (90. Quota v random sampling The advantages and disadvantages of quota versus probability samples has been a subject of controversy for many years. statisticians criticise the method for its theoretical weakness while market researchers defend it for its cheapness and administrative convenience.. Some practitioners hold the quota sample method to be so unreliable and prone to bias as to be almost worthless. Others think that although it is clearly less sound theoretically than probability sampling. Main arguments against: Quota sampling . Generally. In situations where the standard deviations of the strata are known it may be advantageous to make a disproportionate allocation. Selection is normally left to the discretion of the interviewer and it is this characteristic which destroys any pretensions towards randomness.
Cluster and multistage sampling Cluster sampling: The process of sampling complete groups or units is called cluster sampling. 2 It is easy administratively. i. A simple course would be to select say 4 areas at random (i. provide . A large number of small clusters is better. the unit from which data are to be gathered) is the individual household. suppose that a survey is to be done in a large town and that the unit of inquiry (i.e. though. 2 The interviewer may fail to secure a representative sample of respondents in quota sampling.e. therefore. If respondents within clusters are homogeneous with respect to such things as income. all other things being equal. 4. 1 in 100) and include all the households within these areas in our sample. to obtain immediate public reaction to some event. One does not have the security. they do not fully represent the population and will. with consequent high fieldwork costs and much inconvenience.1 It is not possible to estimate sampling errors with quota sampling because of the absence of randomness. one has materially simplified and made cheaper the fieldwork. (All the more so if the survey were to be conducted in rural areas. The labour of random selection is avoided. The overall probability of selection is unchanged.e. Main arguments for: quota sampling 1 Quota sampling is less costly. For example. and that a sample of 200 households is to be selected. are those in the over 65 age group spread over all the age range or clustered around 65 and 66? 3 Social class controls leave a lot to the interviewer's judgement. socioeconomic class etc. but by selecting clusters of households. all of them listed on convenient records. but we must remember that precision is lost. especially in developing countries where rural areas are sparsely populated and access difficult). A quota interview on average costs only half or a third as much as a random interview. quota sampling may be the only possibility. 3 If fieldwork has to be done quickly. Suppose further that the town contains 20. perhaps to reduce memory errors.000 households. One approach would be to pick the 200 by some random method. Whether single stage cluster sampling proves to be as statistically efficient as a simple random sampling depends upon the degree of homogeneity within clusters. and so are the headaches of non-contact and callbacks. did interviewers place respondents in groups where cases are needed rather than in those to which they belong. this would spread the sample over the whole town. of being able to measure and control these errors. For example.. Quota sampling is independent of the existence of sampling frames. than a small number of large clusters. One might decide therefore to concentrate the sample in a few parts of the town and it may be assumed for simplicity that the town is divided into 400 areas with 50 households in each. situations where there is any sub-sampling within the clusters chosen at the first stage are covered by the term multistage sampling. However. e.g. Some people argue that sampling errors are so small compared with all the other errors and biases that enter into a survey that not being able to estimate is no great disadvantage. 4 Strict control of fieldwork is more difficult.
urban districts or parliamentary constituencies. in which case we have a two-stage sample. with the sampling ideally being random at each stage. households or addresses. This is the main method of sampling in developing countries where adequate population lists are rare. Multistage sampling: The population is regarded as being composed of a number of first stage or primary sampling units (PSU's) each of them being made up of a number of second stage units in each selected PSU and so the procedure continues down to the final sampling unit.larger standard errors. then polling districts.3 Aerial sampling .e. the lower cost of cluster sampling often outweighs the disadvantages of statistical inefficiency. In short. It would be more usual to introduce intermediate sampling stages. The area to be covered is divided into a number of smaller sub-areas from which a sample is selected at random within these areas. Within the selected PSU one may go direct to the final sampling units. The necessity of multistage sampling is easily established. Figure 7. i. PSU's for national surveys are often administrative districts. either a complete enumeration is taken or a further sub-sample. Area sampling Area sampling is basically multistage sampling in which maps. such as individuals. On the other hand. administrative districts are sub-divided into wards. rather than lists or registers. serve as the sampling frame. cluster sampling tends to offer greater reliability for a given cost rather than greater reliability for a given sample size.
Figure 7. Using random numbers. hills or mountains. if the survey is of urban households then clusters of dwellings such as blocks bounded by streets can be identified.4 depicts the procedures involved.4 Multistage aerial sampling Suppose that a survey of agricultural machinery/implement ownership is to be made in a sample of rural households and that no comprehensive list of such dwellings is available to serve as a sampling frame. etc. number these and use them as a reference grid. Figure 7. Alternatively.4 gives an impression of the pattern of sampling which emerges. sampling points are chosen within each square. If the area is large. roads. Figure 7. The town area is then divided into blocks and these blocks are numbered and a random sample . rivers. These "parcels" (the equivalent of city blocks) can be formed using natural boundaries e. is drawn and superimposed on a map of the area of concern. Then. As in figure 7. such as that shown above.g. canals. it can be subdivided into sub-areas and a grid overlayed on these. railways. This can serve as a convenient sampling frame. Using random numbers points can be placed on the map and data collected from households either on or nearest to those points. Sampling points are selected on the basis of numbers drawn at random that equate to the numbered columns and rows of the grid. If sufficient information is known about an area then it is permissible to construct the "parcels" on the basis of agro-ecosystems. A variation is to divide the area into "parcels" of land.A grid. If there is an accurate map of the area we can superimpose vertical and horizontal lines on it.3 the columns and rows are given numbers. each square in the grid is allocated numbers to define grid lines.
we may wish to know whether a particular promotional campaign has succeeded in increasing awareness amongst housewives of a certain brand of biscuit. For example. After the campaign we obtain another measure of the awareness. and we must try and establish whether these differences are real (i. before and after the campaign. We formulate it for the express purpose of rejecting it. Before the campaign we have a certain measure of awareness. railway lines and rivers make good boundaries. If the null hypothesis is rejected. This empirical data requires to be organised in such a fashion as to make it meaningful. Note that these are clearly two different and distinct hypotheses. we collect data which should yield direct information on the acceptability of that hypothesis. Streets.of them is selected. or b. To this end. The alternative hypothesis (H1) is a statement relating to the researchers' original hypothesis.e. The boundaries of the blocks must be well defined. One assumption which is made is that the survey results are based on random probability samples. easily identifiable by field workers and every dwelling must be clearly located in only one block. It is formulated before we collect the data (a priori). The null hypothesis in this case would be that "there is no difference between the proportions aware of the brand. The remainder of this paper is concerned with the statistical testing of sample data. Sampling and statistical testing Research is conducted in order to determine the acceptability (or otherwise) of hypotheses. Case (b). Having set up a hypothesis. H1: There is an increase in the proportion of housewives aware of the brand. we organise it into frequency distributions and calculate averages or percentages. But often. then the alternative hypothesis may be accepted. H1: There is a difference between the proportions of housewives aware of the brand. say x%. we would expect some differences. the alternative hypothesis could either be: a. Case (a) does not indicate the direction of change and requires a TWO-TAILED test. statistically significant) or whether they are due to random error or chance. Thus. after the promotional campaign. The data we collect often requires to be compared and when comparisons have to be made. The null hypothesis The first step in evaluating sample results is to set up a null hypothesis (Ho). these statistics on their own mean very little. The situation when a one-tailed test is used are: (a) comparing an experimental product with a currently marketed ones (b) comparing a cheaper product which will be marketed only if it is not inferior to a current product. The null hypothesis is a hypothesis of no differences. in the above example. we must take into account the fact that our data is collected from a sample of the population and is subject to sampling and other errors. indicates the predicted direction of the difference and a one-tailed test is called for. say y%. before and after the campaign". . on the other hand. Since we are dealing with sample results.
If it is more important to avoid .e.01. so as to reject the null hypothesis of A = B = 50% at. and only if. on the other hand. we found the probability of this difference occurring was 0. Clearly we can set a sample size. a 5% significance level. that the distribution of the sample means is normal. Given a significance level there are four alternatives to consider: Figure 7.Parametric tests and non-parametric tests The next step is that of choosing the appropriate statistical test. If it is more important to avoid rejecting a true hypothesis (type I error) a high confidence coefficient (low value of x) will be used. parametric and non-parametric. then we shall accept the null hypothesis A = 50% on nearly half the occasions as shown in the diagram overleaf.01 and if we had set our significance level in advance at 0. Common values of this critical level are 0. say.05 and 0. interval. Parametric tests are those which make assumptions about the nature of the population from which the scores were drawn (i. 60% of the population prefer the product. Non-parametric tests do not require this type of assumption and relate mainly to that branch of statistics known as "order statistics".5 Type I and type II errors Correct Conclusion Incorrect Conclusion Accept a correct hypothesis Reject a correct hypothesis Reject an incorrect hypothesis Accept an incorrect hypothesis Consider the following example. If we get a sample which yields 62% (and there will be 5 chances in a 100 that we get a figure greater than 60%) and the null hypothesis is in fact true. if we had found that the observed difference between the percentage of housewives aware of the brand from pre-to-post-campaign could have arisen with probability 0. then we require to use a parametric test. our null hypothesis. If we assume. (2) whether we have more or less than two levels of the independent variable. then we make what is known as a Type I error. e. We discard actual numerical values and focus on the way in which things are ranked or classed. This is the type II error. we may decide to market product A if. (These issues are covered extensively in the data analysis course notes). We can of course increase the chance of making a type I error which will automatically decrease the chance of making a type II error. the choice between alternative types of test is determined by 3 factors: (1) whether we are working with dependent or independent samples. for example. Obviously some sort of compromise is required. and (3) the mathematical properties of the scale which we have used. means and standard deviations). In this situation we shall be saying "do not market A" when in fact there is a market for A.02 then we would reject the null hypothesis and accept our alternative hypothesis. If. In a straightforward test of two products. If however. ratio. then we would accept the Ho. if a statistical test yields a value whose associated probability of occurrence is equal to or less than some small probability. ordinal or nominal. i. There are basically two types of statistical test. This depends on the relative importance of the two types of error.g.e. the real population is A = 62%. population values are "parameters". Thereafter.05. Referring back to our example. Type I errors and type II errors The choice of significance level affects the ratio of correct and incorrect conclusions which will be drawn. We will reject Ho. known as the critical region (or level).
calculate the standard error of the difference and then ask "How far away from the zero difference hypothesis is the difference we have found from our samples?" To enable researchers to answer this question. Most people will agree that in this case. a type II error will have been made: the jury has accepted the null hypothesis of innocence when the man is really guilty. in fact. a type I error will have been made: the jury has rejected the null hypothesis of innocence although it is actually true. Now. but we ask several. Economic considerations of alternative actions is often just as important. For example. a man is presumed innocent of murder until proved otherwise. if consistent patterns emerge. Statistical significance is not always the only criterion for basing action. a low confidence coefficient may be used. These. Under our system of law. make statistical tests on the key questions and look for consistent significances. guilty. In practice. then refer to a chart to ascertain the probability of such a difference occurring. The majority of tests are likely to be parametric tests where researchers assume some underlying distribution like the normal or binomial distribution. say a difference between two means. are the basic steps in the statistical testing procedure. therefore. if a jury convicts a man when he is. even if there is no real difference in the population. convicting an innocent man. We must remember that when one makes a series of tests. Example calculations of sample size 1. We do not usually base our conclusions on the results of one particular question. we may conduct a product test to find out consumers preferences. If the jury absolves the man. when he is. Researchers will obtain a result. if 20 questions were asked in our "before" and "after" survey and we test each question at the 5% level. a type I error. Significance tests may be applied to the answers to every question in a survey but the results will be only convincing. of course. some of the correct hypotheses will be rejected by chance. Then. and wishes the sample to be accurate to within 5% points and to be 95% confident of this accuracy. An analogy with the legal profession may help to clarify the matter. in fact. they convert their actual difference into "standard errors" by dividing it by its standard deviation. Suppose a researcher wishes to measure a population with respect to the percentage of persons owning a maize sheller. For example. 2. He/she may have a rough idea of the likely percentage.accepting a false hypothesis. No mention is made in these notes of considerations of costs of incorrect decisions. then one of the differences is likely to give significant results. Consider the standard error of a percentage: Assume that the researcher hazards a guess that the likely percentage of ownership is 30%. . innocent. researchers rarely base their decisions on a single significance test. is the more serious.
But 2. [SE(p)] must equal 5% (the level of accuracy required) i.e.
i.e. It is necessary to take a sample of, say, 340 (rounding up). Generally, then, for percentages, the sample size may be calculated using:
for accuracy at the 95% level. Case 1: In a census taken 6 years ago, 60% of farms were found to be selling horticultural produce direct to urban markets. Recently a sample survey has been carried out on 1000 farms and found 70% of them were selling their horticultural produce to urban centres direct. Situation: Population statistics (P = 60%) are known Question: Has there been a change in 6 years or is the higher percentage (p = 70%) found due to sampling error? When the population value is known, we can know the sampling error and we use this error for the purpose of our statistical test. The standard error of a percentage is always pq/n, but in this case the researcher puts p, the population value, in the formula and uses the size of the sample, n, to ascertain the standard error of the estimate, p = 70%. The null hypothesis for this case is: "There is no difference between the sample percentage of farms selling direct to urban areas and the population percentage of farms found to be selling direct 6 years ago" (i.e. the sample we have drawn comes from the population on which the census was carried out and there has been no change in the 6 years). This must be a 2-tailed test as it could not be assumed that there would either be more or less farms selling produce direct six years later.
PQ where Q=100 P
N.B. This has infinite degrees of freedom.
t=6.45 If reference is made to the table for a two-tailed test with infinite degrees of freedom, it can be seen that t = 3.29 which shows that there is only a 1/1000 chance of our result (p = 70%) being due to sampling error, since 6.45 > 3.29. Researchers realise that the probability of this having occurred because of sampling error must be even smaller than 1/1000. Thus they are able to say that the probability that the percentage of households selling direct is now 70% is at least 999/1000 and that the null hypothesis is refuted at beyond 1/1000 level of significance. If researchers claim this, they shall be wrong less than 1 in 1000 times. Case 2:. Six months ago, it was found from a sample survey that 20% of shoppers in a certain urban area buy fresh fruit from street vendors rather than established shops or supermarkets. A second survey, independent of the earlier one, is carried out on 500 respondents and it is found that 24% of them buy fresh fruit and vegetables regularly from street vendors. Is there any real difference? Situation: The two surveys are carried out on different occasions, so the two samples may well be subject to different amounts of error. Due to this researchers use both estimates of error. Question: Has the percentage of gift shoppers changed? Null hypothesis: There is no difference in the percentages of housewives buying from street _ vendors six months ago and now. This is a 2-tailed test.
Six months ago P1 = 20% n1 = 200 Now P2 = 24% n2 = 500
Standard error of Since P1 is independent of P2
= 3.3% Test of significance
N.B. This has infinite degrees of freedom. Since 1.18 < 1.64, the difference is not significant at even 1/10 (10%) level, so the null hypothesis is not refuted and researchers do not accept that there is any significant change in the percentage of women buying fresh fruit and vegetables from street vendors. Case 3: 54% of rural housewives are found, in a sample of 200, to include fish in their family's weekly diet. However, in a sample of 100 urban housewives only 33% said that fish was a regular part of their diet. Situation: The same commodity is being investigated on the same occasion by listing two parts of a population. Question: Is there any difference between rural and urban housewives in their regular consumption of fish? Null hypothesis: There is no difference between the two social class groups in their regular consumption of fish. This is a two-tailed test.
ABC P1 = 33% n1=100 DE P2 = 54% n2=200
no. = 33 = c1 no. = 108 = c2
Standard error of
Case 4:.N. Thus the difference in fish consumption between rural and urban housewives is significant at beyond 1/1000 level. Since 3.1 Significant test t= 3. S.44 > 3. Situation: The same sample is interviewed on two different occasions (or assessing two different products).E. Two months later. the null hypothesis is refuted at beyond the 1/1000 level. since they believe both the rural and urban families to be alike and the circumstances of measurement of p1 and p2 are exactly the same.44 (N. 200 housewives are interviewed in June to determine their purchases of a canned fruit juice. the two-tailed t-value for 1/1000 level of significance for 0 degrees of freedom. after an intensive promotional campaign. they are reinterviewed with the same object. This has infinite degrees of freedom).29.B.B. Question: Is there any difference in purchases of the product between June and September? Null hypothesis: Purchases % There is no difference in purchases of the product between June and September (A two-tailed test). Researchers take an average value of p. So = 6. June September 20 32 Sample size = n = 200 .
= = 3. In the end column these values have been squared and summed to give the total variance. like 10.54 Significance test This has infinite degrees of freedom.25 0. suppose from a sample of 100 farmers it is found that their average monthly purchases of the Insecticide Bugdeath were 10.39 > 3.0 degrees of freedom.5 ( . Rather a sample will give a range within which it is thought the true population value lies.5 litres. the null hypothesis is refuted at this level). samples do not and cannot give point estimates.1 below. For example. Since 3. Their mean consumption is 10.25 6.5 litres that this is necessarily a good estimate of the average purchases of all farmers in the population.The last term under the square root sign = 2 × Covariance of the two assessments.5 0.5 litres per month.29 with 0.25 .1 Calculating the mean and standard deviation X Consumption in litres 5 8 8 11 -X -5. Their responses appear in table 7.5 -2. In the middle column you will see that researchers have subtracted each of the individual values from the mean.5 litres. (i.1% level. It cannot assume that simply because the sample mean was 10. The standard deviation is calculated as follows: Suppose a small sample of say 8 farmers is taken and asked how much Bugdeath they bought each month.25 6. Confidence intervals for the mean Sometimes the task is one of estimating a population value from a sample mean.5 -2. the difference between the June and September purchases is significant at beyond the 1/1000 or 0. Indeed. rather than testing hypotheses. Table 7. the term which takes into consideration how each person behaves both in June and September.e.X2) 30. To calculate this range researchers need to know the standard deviation as well as the mean.
25 0.96 × 2.5±5..83 litres.) Thus.33 litres.96.5 =5 to 17 litres So. (Students may have to be reminded that if they look up their statistical tables they will see that 95% of the area under the curve equates to a Z value of 1. If researchers want to be 95% sure of a correct prediction then they must multiply their standard error by 1.5 ± 1. Chapter Summary Two major principles underlie all sample design: the desire to avoid bias in the selection procedure and to achieve the maximum precision for a given outlay of resources.25 Total variance = 86. the calculation becomes: (Standard Error) Confidence Interval = 10.5 5. researchers are 95% confident that the true value of farmers' usage of Bugdeath is between 5 and 17 litres.5 0. i. the .57 rather than 1.00 To calculate the standard deviation researchers divide the total variance by the sample size to obtain the standard deviation i. viz: Thus the estimate is that the average consumption is 10.67 litres and 13. The standard error is calculated by dividing the standard deviation by the square root of the sample size.5 0. As those who have studied elementary statistics will know.e. In other words. This is the best estimate that can be given on the basis of such a small sample.25 12.5 3.33 litres. Sampling bias arises when selection is consciously or unconsciously influenced by human choice.25 30.96. Students who have had a basic training in statistics will also know that if they wanted to be 99% confident then the Z value would be 2. researchers can only be 68% sure that the true consumption level is between 7.11 11 14 16 X=10.5 0.5 litres plus or minus 2. only 68% of the values under a normal distribution curve lie between ±1 standard deviation. This example serves to show the mechanics of the confidence interval calculation and the poor estimates we get from small sample sizes.e. it is estimated that most farmers buy somewhere between 7.67 and 13.96. From the standard deviation researchers must now calculate the standard error if they are to project from what are sample figures to the population.83 =10.
With respect to statistical efficiency. Strict control of fieldwork is more difficult. perhaps to reduce memory errors. and if fieldwork has to be quick. or probability sampling. with the sampling ideally being random at each stage. are those in the over 65 age group spread over all the age range or clustered around 65 and 66? Social class controls leave a lot to the interviewer's judgments. Quota sampling is a method of stratified sampling in which the selection within strata is nonrandom. cluster sampling tends to offer greater reliability for a given cost rather than greater reliability for a given sample size.g. The process of sampling complete groups or units is called cluster sampling. Stratification has the effect of removing differences between stratum means from the sampling error.e. A quota interview on average costs only half or a third as much as a random interview. Random. Systematic sampling is a modification of random sampling. Using cluster samples ensures fieldwork is materially simplified and made cheaper. gives each member of the target population a known and equal probability of selection. households or addresses: . Some practical problems limit the desirability of a large number of strata: (1) past a certain point. and little improvement will be effected by creating more strata (2) a point may be reached where creation of additional strata is economically unproductive. the labour of random selection is avoided. Random stratified sampling is more precise and more convenient than simple random sampling. It merely denotes that before any selection takes place. Stratification increases precision without increasing sample size. e. then a random sample is taken within each stratum. did interviewers place respondents in groups where cases are needed rather than in those to which they belong. To arrive at a systematic sample we simply calculate the desired sampling fraction and take every nth case. and so are the headaches off non-contact and callbacks. There is no departure from the principles of randomness.all other things being equal . Therefore. Some argue that sampling errors are so small compared with all the other errors and biases that not being able to estimate standard errors is no great disadvantage. It is only possible to stratify if the distribution of the population with respect to a particular factor is known. That is. The interviewer may fail to secure a representative sample of respondents in quota sampling. it is not possible to estimate sampling errors. larger numbers of small clusters is better . The population is regarded as being composed of a number of first stage or primary sampling units (PSU's) each of them being made up of a number of second stage units in each selected PSU and so the procedure continues down to the final sampling unit. Where there is sub-sampling within the clusters chosen at the first stage. the term multistage sampling applies. then the final sampling units such as individuals. Sample sizes within strata are determined either on a proportional allocation or optimum allocation basis. Quota sampling is independent of the existence of sampling frames. The best basis would be the frequency distribution of the principal variable being studied.than a small number of large clusters. quota sampling may be the only possibility.sampling frame inadequately covers the target population or some sections of the population cannot be found or refuse to co-operate. the population is divided into a number of strata. Multistage sampling involves first selecting the PSU. i. and if it is also known to which stratum each member of the population belongs. the "residual" variation will dominate.
6. 10. Explain the meaning of a 'type I error'. What are the 3 key questions to be posed when employing stratified sampling? 4. . 3. What are the 2 types of statistical tests? 9. This is the main method of sampling in developing countries where adequate population lists are rare. Explain the term 'primary sampling units 'PSUs' 7. Which Z value equates to a 95% confidence level? The Marketing Environment. rather than lists or registers. Define the term 'random sampling' 2. Explain the term 'proportional allocation'. 5. Key Terms Area Cluster Confidence Degrees Multistage Non-parametric Null Parametric Proportional Quota Random Random Sample Significance Standard Stratified Systematic Type I errors and type II errors sampling sampling intervals freedom sampling tests hypothesis tests allocation sampling number sampling mean test errors samples sampling of Review Questions 1. serve as the sampling frame. Define the term null hypothesis'. Name the 3 non-probability sampling methods shown in the opening section of the chapter.Area sampling is basically multistage sampling in which maps. 8. Outline the arguments against quota sampling.
. It includes suppliers that deal directly or indirectly.' the 'micro-environment' and the 'internal environment'. namely the 'macroenvironment.The marketing environment surrounds and impacts upon the organization. and the marketer needs to compensate for changes in culture. Micro tends to suggest small. and other local stakeholders. politics. It is a more local relationship. and the firm may exercise a degree of influence. but that are out of their direct control. It is continuously changing. and the company needs to be flexible to adapt. In this context. economics and technology. consumers and customers. but this can be misleading. There may be aggressive competition and rivalry in a market. There are three key perspectives on the marketing environment. The micro-environment This environment influences the organization directly. micro describes the relationship between firms and the driving forces that control this relationship. A company does not generally influence any laws (although it is accepted that they could lobby or be part of a trade organization). Globalization means that there is always the threat of substitute products and new entrants. The internal environment. The wider environment is also ever changing. The macro-environment This includes all factors that can influence and organization.
In fact. Marketers need to consider the state of a trading economy in the short and longterms. etc. . etc. Long-term prospects for the economy Gross Domestic Product (GDP) per capita. wages and finance. environmental analysis should be continuous and feed all aspects of planning. This is especially true when planning for international marketing. As marketers we call the process of managing internal change 'internal marketing. Is the government involved in trading agreements such as EU. Interest rates. our external customers. They are generally audited by applying the 'Five Ms' which are Men. Political Factors. Does the government have a view on culture and religion? 6. The internal environment is as important for managing change as the external. The external environment can be audited in more detail using other approaches such as SWOT Analysis. PEST Analysis. The level of inflation Employment level per capita. staff (or internal customers).Will government policy influence laws that regulate or tax your business? 3. The organization's marketing environment is made up of: 1. 2. Machinery. The macro-environment e. and Technological forces. What is PEST Analysis? It is very important that an organization considers its environment before beginning the marketing process. You must consider issues such as: 1. ASEAN. Economic forces. The micro-environment e.All factors that are internal to the organization are known as the 'internal environment'. Sociocultural forces. Sociocultural Factors. NAFTA. suppliers. Money. Michael Porter's Five Forces Analysis or PEST Analysis.g.What is the government's position on marketing ethics? 4.g. our competitors. and so on. These are known as PEST factors. The internal environment e. 2. or others? Economic Factors.' Essentially we use marketing approaches to aid communication and change management. Materials and Markets. What is the government's policy on the economy? 5. office technology. 3. The political arena has a huge influence upon the regulation of businesses. and the spending power of consumers and other businesses.g. Political (and legal) forces. You need to look at: 1.How stable is the political environment? 2. 3. agents and distributors.
What are attitudes to foreign products and services? 3. etc? The Product Life Cycle A product's life cycle (PLC) can be divided into several stages characterized by the revenue generated by the product. auctions. Technology is vital for competitive advantage. etc? 3.How much time do consumers have for leisure? 5. Customer Relationship Management (CRM). It is very important that such factors are considered.Does technology offer companies a new way to communicate with consumers e.g.What is the dominant religion? 2. flight tickets.What are the roles of men and women within society? 6.Do the technologies offer consumers and businesses more innovative products and services such as Internet banking. If a curve is drawn showing product revenue over time. Factors include: 1. etc? 4. and is a major driver of globalization.How long are the population living? Are the older generations wealthy? 7. banners. Its duration may be as short as a few months for a fad item or a century or more for product categories such as the gasoline-powered automobile. books via the Internet.How is distribution changed by new technologies e. it may take one of many different shapes. Consider the following points: 1. new generation mobile telephones.g. Does technology allow for products and services to be made more cheaply and to a better standard of quality? 2.The social and cultural influences on business vary from country to country. .Does language impact upon the diffusion of products onto markets? 4.Do the population have a strong/weak opinion on green issues? Technological Factors. an example of which is shown below: Product Life Cycle Curve The life cycle concept may apply to a brand or to a category of product.
These higher costs coupled with a low sales volume usually make the introduction stage a period of negative profits.one or few products. often during the later part of the growth stage. Samples or trial incentives may be directed toward early adopters. Once the product has been proven a success and customers begin asking for it. there may be price competition and/or increased promotional costs in order to convince consumers that the firm's product is better than that of the competition. During the introductory stage the firm is likely to incur additional costs associated with the initial distribution of the product. but such announcements also alert competitors and remove the element of surprise. There are no sales and the firm prepares to introduce the product. the primary goal is to establish a market and build primary demand for the product class. The marketing mix may be modified as follows: • Product . During the introduction stage.Distribution is selective and scattered as the firm commences implementation of the distribution plan. sales will increase further as more retailers become interested in carrying it. Promotion .Product development is the incubation stage of the product life cycle. The following are some of the marketing mix implications of the introduction stage: • • • • Product .Generally high. As the product progresses through its life cycle. During the growth stage. assuming a skim pricing strategy for a high profit margin as the early adopters buy the product and the firm seeks to recoup development costs quickly. changes in the marketing mix usually are required in order to adjust to the evolving challenges and opportunities. Introduction Stage When the product is introduced. improvement of product quality. Sales increase as more customers become aware of the product and its benefits and additional market segments are targeted.Promotion is aimed at building brand awareness. relatively undifferentiated Price . sales will be low until customers become aware of the product and its benefits. the goal is to gain consumer preference and increase sales. Advertising costs typically are high during this stage in order to rapidly increase customer awareness of the product and to target the early adopters. In some cases a penetration pricing strategy is used and introductory prices are set low to gain market share rapidly.New product features and packaging options. The introductory promotion also is intended to convince potential resellers to carry the product. Distribution . Growth Stage The growth stage is a period of rapid revenue growth. When competitors enter the market. . Some firms may announce their product before it is introduced. The marketing team may expand the distribution at this point.
Promotion .• • • Price . increasing the difficulty of differentiating the product. If the product has developed brand loyalty. Rejuvenate surviving products to make them look new again. the profitability may be maintained longer. The competing products may be very similar at this point. the product becomes technologically obsolete.Modifications are made and features are added in order to differentiate the product from competing products that may have been introduced. Discontinue the product when no more profit can be made or there is a successor product.Increased advertising to build brand preference. Harvest it. The firm places effort into encouraging competitors' customers to switch. The marketing mix may be modified as follows: • Product .New distribution channels and incentives to resellers in order to avoid losing shelf space.Distribution becomes more intensive. During the maturity stage. or reduced to capture additional customers. Price . Reduce costs and find new uses for the product. Marketing mix decisions may include: • • • • Product .The number of products in the product line may be reduced. advertising expenditures will be reduced.Maintained at a high level if demand is high. the firm generally has three options: • • • Maintain the product in hopes that competitors will exit. Promotion . they do so at a slower pace. and converting non-users into customers. the primary goal is to maintain market share and extend the product life cycle. Trade discounts are minimal if resellers show a strong interest in the product. Distribution .Possible price reductions in response to competition while avoiding a price war. Sales promotions may be offered to encourage retailers to give the product more shelf space over competing products. Incentives to get competitors' customers to switch. Unit costs may increase with the declining production volumes and eventually no more profit can be made. Decline Stage Eventually sales begin to decline as the market becomes saturated. Because brand awareness is strong. increasing usage per customer. reducing marketing support and coasting along until no more profit can be made. Competition may result in decreased market share and/or prices. or customer tastes change. Distribution .Emphasis on differentiation and building of brand loyalty. Maturity Stage The maturity stage is the most profitable. While sales continue to increase into this stage. During the decline phase. .
PLC Graphic cycle costs traditional focus 16. Combined Summaries of Product Life Cycle Management Articles some 1.Expenditures are lower and aimed at reinforcing the brand image for continued products. if sales peak and then decline.• • • Price . Prices may be maintained for continued products serving a niche market. Nonetheless. Promotion . Limitations of the Product Life Cycle Concept The term "life cycle" implies a well-defined life cycle as observed in living organisms. Why companies are product life cycle perspective reluctant to use the life cycle concept. cycle life cycle Customer and Society Perspectives 4. the product life cycle concept helps marketing managers to plan alternate marketing strategies to address the challenges that their products are likely to face. thus precipitating a further decline. managers may conclude that the product is in the decline phase and therefore cut the advertising budget. Life cycle strategies 8.Susman 1989 Marketing or Sales Perspective . For example. Problems created by 15.Distribution becomes more selective. Objectives From Producer. Four components of Life cycle Cycle Management 10. Producers Costs 11. Relationships over the 5. Ways to estimate life 14. Learning Curve Models Stages of The Product Life Cycle . 7.Stages of the product life 2. It also is useful for monitoring sales results over time and comparing them to those of products having a similar life cycle. Benefits of the PLC 6.Prices may be lowered to liquidate inventory of discontinued products. Furthermore. Stages of the product life 9. Final Customer Product 12. but products do not have such a predictable life and the specific life cycle curves followed by different products vary substantially. Distribution . critics have argued that the product life cycle may become self-fulfilling. the life cycle concept is not well-suited for the forecasting of product sales. Industry versus product 3. Channels that no longer are profitable are phased out. Trade-off investment Life Cycle Costs study 13. Consequently.
Startup Growth Maturity Decline Abandon The length and sequence between the stages is not predictable.Pontiacs. e. Pontiacs Objectives From Producer. Industry Life Cycle Versus Product Life Cycle Industry examples . convertibles. Could have one of the following: Startup Decline Abandon Startup Growth Decline Abandon Startup Growth Maturity Decline Abandon Startup Growth Maturity Revitalization Decline Abandon Startup Growth Abandon Maturity Revitalization Decline Revitalization Decline Production Perspective Conception Design Development Production Logistical Support Customer or Consumption Perspective Operations Support Disposal Note the difference between Revenue Producing Life Versus Consumable Life Perspectives Revenue producing life .. Customer and Society Perspectives Perspective Objective Methods .Automobiles.producer’s perspective Consumable life . Automobiles. forms and brands. Edsels Product classes.consumer’s perspective.g. Steel Product examples .
.Producer Maximizing life cycle profits Revenue enhancement and cost reduction (See Susman’s Exhibit 2) Customer Maximize performance Perform life cycle trade-off relative to price and after studies (See White & purchase costs Ostwald 1976) Minimize externalities . increasing. Production & Production & Production Production & Design & Logistical Logistical & Logistical Logistical Development Support Support Support Support Startup Startup Growth Maturity Decline. Profits vary depending on company’s position in the industry. Low Plant & Equipment. Advertising and Plant & Equipment. innovator. fines etc. unsafe products Society . Advertising andPlant & Equipment. High Process R&D. Moderate Process R&D Quality High Product R&D. pollution. High Process R&D. Sales growth. Increasing for decrease. Quality High Product R&D. Profits Cash flows& profits Performance indicators Expense indicators Quality Moderate Product R&D. Revitalize Abandon or Design for low Sales growth production & consumption costs. Profits Zero Negative. Moderate Advertising and Plant & Equipment.Government Relationships over the Products Life Cycle* Production Stages Marketing Stages Strategic objectives Conception. Laws. Moderate Process R&D &Advertising. Price Low Product R&D. regulation. . Process R&D.e. but Positive & Peak then Decrease.g. Price Moderate Product R&D.
Supports the value chain concept while traditional cost accounting supports the value added concept. For example. Charging high prices to enhance revenue invites competitors to enter. 3. Measures production. High market risk fornoninnovator. costs. This shows that low consumption costs must be designed into the product. For example. Recognizes that maximizing revenue and minimizing costs at every stage might not maximize profits over the product life cycle. Measures production costs. parts reduction. Lower market risk for innovator. 2. The ratio of the operating and support costs to the acquisition costs of a product is an important consideration for the customer.. snap together parts. logistical support costs & consumption costs. logistical logistical support costs & support costs & consumption consumption costs. cycle Measures product design & process innovations to lower fabrication & assembly costs e. Traditional accounting systems measure only production costs or the value added by production. the life cycle concept recognizes that actions taken in the design and development stages to generate revenue and lower costs provide long run benefits. Recognizes that customer consumption costs are important. Measures production costs. standardizing the product design to lower costs sacrifices flexibility. Traditional costing Life costing R&D treated as Measures period costs. Benefits of Product Life Cycle Perspective The life cycle perspective: 1. logistical support costs & consumption costs. . Supports a forward pricing strategy based on the experience (learning) curve. Measures Measures production. production. Provides a long term perspective that produces decisions that lead to better long term results. Measures production. 4.Risks High technological risk for innovator. production costs. Measures production costs.g.
such as reducing the number of parts. High hurdle (discount) rates used for investment justification. Helps provide better information for investment decisions. 5.. By 3. Stages in the Product Life Cycle (Czyzewski & Hull 1991) Startup Growth Maturity Harvest . 1. Places emphasis on designing products to lower fabrication and assembly costs.e. stages. Modify the product continuously and compete on the basis of product uniqueness. life function activities cycle within within stage. 3. For example. Standardize the product quickly and compete on the basis of low cost. Lack of data needed to understand the product life cycle. Why companies are reluctant to use the life cycle concept. Short term mentality. 2. By tasks within activities. Total Life Cycle Costs = Sum of the costs across all the life cycle stages. Benefits not distributed evenly to functional groups. related to the long run and value chain. quality control or maintenance may shrink as a result of designing more reliable products. and common interchangeable parts. Life cycle strategies 1.plastic and snap together parts. delivering products to customers and installing products and training customers to use them. By 4. functions. By 2. CAM-I Cost Breakdown Structure 1. Cash flow problems. using more molded parts . The PLC perspective also places emphasis on lower logistical support costs such as storing finished goods.5. 2. purchasing. i. Charge premium prices. 4.
The Life Cycle Model has Seven Stages Analysis Startup Entry Build or Growth Maturity Decline Withdrawal 2.refers to balancing process measurements and results measurements based on the critical success factors at each stage.allows managers to evaluate a company’s investments as a whole. Advanced Cost Management Systems (based on a process view of the business) provide the link between the budgeting process and the reporting process. Four Components of Life Cycle Management (Adamany & Gonsalves 1994) 1. Portfolio Theory . A Balanced Set of Performance Measures . 4. The portfolio approach helps managers smooth the peaks and valleys of the . Factors Critical at Each Stage T Critical Factor Time Customer requirements & T satisfaction quality Target pricing T T Analysis Startup Entry Growth Maturity Decline Withdrawal T T T T T T T T T T Resource requirements T Continuous improvement T Cash flow T T T T T T T T T T T T T 3.A product life cycle budgeting system is an improvement over traditional budgeting because the underlying assumptions change over the products life cycle stages.
To keep it simple.(Artto 1994) 1. Design. revitalization Life Cycle Costing Trade-off Study .000 . 8. 5.Consumption Perspective (White and Ostwald 1976) The life cycle concept is obviously important from the consumption perspective. 6. costs. 2. costs. A trade-off investment study is illustrated below based on an example provided by White and Ostwald (1976). An aerospace firm requested bids on a vacuum chamber designed to simulate high altitude pressures for electronic equipment. as well as measuring the effects of various "investment kickers". Product & process conception. costs. Net disposal costs. cash generating investments can be used to fund startup.000 Product from Vendor B Data* Costs $170. Service. Guarantees. Purchase delivery Installation Operating Support & problems and price. 7. 2. Final Customer Product Life Cycle Costs (Artto 1994) 1. The idea was to illustrate the type of analysis that needs to be performed. Maintenance 7. delay. it helps show how mature.investment cycle. For example. costs. 3. development. Logistics. cash using investments. It is also helpful in planning resource requirements and budgets at each functional level. 4. Product 4. Cost of 3. Two vendors submitted bids and data that are used in the cost calculations in the table. Producers Costs . 5. they used a two year life for the equipment and did not discount the cash flows. Marketing. Product Characteristics Product price Product from Vendor A Data* Costs $200. Production. 6.
025 (2.920)(9kwh)(.Life Installation costs Labor requirements Labor rate Machine run time Labor costs Maintenance rate Corrective maintenance: 2 years 3. 4 hours per service 864 (2.920)(2 men)($8)(2yrs) $6 per hour 300 hours 93.000 2 men $8 per hour 2. .360 (2.920)($8)(2yrs) labor $6 per hour 500 hours 46.920÷160)(4)($6)(2) 2.880 2 weeks i.720 2 years 4. 40 hours) Mean time to repair..920 per year (2. Costs cycles) (Round (2. Power costs Total kilowatt $.920)(8kwh)(.168 $256.314 $297.632 1.400 Parts & Supplies cost (% of product 1% price) Input power: Kilowatt hours per 8 kilowatt hours machine hour.600 Preventive maintenance: CycleDowntime Cost (Round cycles) After 160 hours of use. Cost per hour.025) (2yrs) 1. 1 week (i.025) (2yrs) 9 kilowatt hours $.114 * Data from vendor specifications and local management estimates.000 After 180 hours of use.000 1 man $8 per hour 2.025 (2.920÷500)(40)($6)(2yrs) 2.920÷300)(80)($6)(2yrs) 9.920÷180)(80)($6)(2yrs) 2% 3.e..920 per year (2. 8 hours per service.e. 15.440 Mean time between failures. 80 hours. (2.
e. Industrial engineering and cost accounting . Shields and Young make a distinction between life cycle costs and whole life costs. Problems created by traditional focus: 1. Need flatter organizational structures.. 4.A note on Shields and Young 1991 80-85% of the life cycle costs are committed early in the products life cycle.estimate costs based on similar component or product. Consumer Perspective Purchase Operating Support Maintenance Disposal Societal Perspective Disposal costs plus externality costs.g. Vertical organizations have a myopic focus . 5. Too much hierarchy.estimate costs of DM.need cross-functional teams including both design and manufacturing engineers. Analogy . 3. Standard cost for planning and control. 3. Over the wall structures .need employee empowerment.need horizontal communication and control. $1 spent on pre-manufacturing activities can save $8-$10 on manufacturing and post manufacturing costs. (See the Hertenstein & Platt summary). Too little employee participation . Life cycle costs include the producers cost. Need target cost strategy. (See CAM-I Figure 2-3 and Figure 2-4). DL and the usual overhead application. Parametric models use non-linear regression models. There are three ways to estimate life cycle costs: 1. . Need to eliminate variance analysis. 2. 2. health costs from pollution. Whole life costs include the consumers costs as well as the producers costs.
In the second article the authors emphasize how to deal with changes in the competitive environment. In the first article the emphasis is on competitive strategy.The Process-Product Matrix Two articles by Hayes and Wheelwright combine the stages of the process life cycle with the stages of the product life cycle. many do move down the diagonal of the matrix as indicated by the arrows. to higher volume major products. a set of concepts and a body of . one of a kind specialty items. and in some cases to higher-volume commodities. Services marketing Services marketing has incurred an explosive amount of scholarly research in the last 20 years. however since 1986 there has been no debate concerning the notion that services are distinct from products. how to compete. and thus deserve a special approach. The matrix shows a different view of the product life cycle than most of the articles mentioned above. The idea conveyed in the matrix is that products tend to evolve from low volume.e.. Both articles use the process-product matrix illustrated below as a basis for discussing strategy. i. For more on the process-product matrix see the Hayes & Wheelwright summaries. to multiple low volume products. Although some products do not evolve in this way.
meaning they differ with each use. in which intangibility. chances are they will both be exactly the same. which is important to marketers because customers will have a particular set of expectations in mind. saved. or the food on your plate in a restaurant. 1998). The actors are 'live' and performing (producing) at the same time as the audience are watching (consuming). exchange processes. and performances for the benefit of another entity or the entity itself. & Bitner. making it hard to manage supply and demand. Services are defined in (Zeithaml. the weather will have changed. even though during a service physical evidence will be apparent in the form of things like medicine the doctors prescribes to you. 2004). A good metaphor for this is being at the theatre. For example a wildlife tour will never be the same twice. None of these are physical objects in which a customer can take ownership of.knowledge (Brown. evolving from a goodsdominated view. Another notable aspect about products is that on average they stay the same. based primarily on what was promoted in the service and previous experiences in the particular industry. and marketers are left to the advertising and promotion. highlighting why services marketing is different from basic product marketing. The final distinction that differentiates services from products is their perishability. and relationships are central (Vargo & Lusch. and then finish with an explanation of the extra P's found in the services marketing mix. This invisibility creates a number of issues for marketers. resold or returned at all. not only because of the random and unpredictable nature of the animals. operational staff carries out much of the marketing function (Klassen. Fisk. Firstly there is no stock. processes. Russel. And finally. Consumers can be compared to an audience. but the guide may be in a different mood. and then go and buy the same model in America. tables. where they watch actors (employees) perform on stage (physical location like a business store) amongst props (physical objects like chairs. and there will be different customers each time. & Gremler. This brings us to the concept of interactive marketing. services simply cannot be stored. These factors make it harder to consistently give quality service. pot plants etc). Services are different in that they are heterogeneous. Vargo and Lusch define services as the application of specialized competences (knowledge and skills) through deeds. making it hard for marketers to advertise the quality of the service. In a service. Bitner. and performances". 2006) as "deeds. While some products perish very quickly (like water balloons). the photo taken of you riding the rollercoaster. Marketers main concern would be the procedure for when things do not go as planned. making it easy for other firms to copy your service. Another distinguishable feature about services is the fact that it's both produced and consumed at the same time. It will then examine the four characteristics of services. In the last century there has been a large shift in marketing thought. & Chrisman. If you buy a Ford Focus here in Australia. to a service-dominant view. Secondly services cannot be shown or displayed to customers. giving examples where possible. Four idiosyncratic features of services will now be given. in which tangible output and discrete transactions were the focus. Arguably the most distinguishing feature about services is their intangibility. 1994). because services don't physically exist. there is difficulty in patenting them. It will begin by defining services marketing and giving some background knowledge on its divergence from product marketing. This essay will explain the distinguishing features of services marketing. processes. Customers cannot simply return the service and ask for another . as opposed to products where customers do not see how the product is manufactured.
where the process is behind doors. Sometimes a person is the sole service provider. intangibility. which is the environment in which the service is delivered and where the firm and customer interact. employees could provide free coffee and refreshments while they wait. customers often have a set of expectations of the process of the service. Customers have an active role in the production. it is up to the service provider to offer the customer some kind of compensation. Firstly there is people. they instead turn their attention to other things. For example a large family with screaming children interrupting a young couples romantic dinner at a restaurant. Consider an IT professional who installs computers in people's homes. Services represent at least 70% of the nation's total GDP for at least 5 countries. Every person is important to the marketer. and after consumption of credence services. in an attempt to make up for their failing service. there is simultaneous production and consumption. When purchasing a service. Services are distinguished from products by four characteristics. Finally there is the service process. The process is important because people participate in it. The sixth 'P' is physical evidence. Services use the same elements plus three more to help account for their unique nature. especially with credence service's like financial advisors or legal advice. What is services marketing? . With product marketing the marketing mix includes the four P's. If passengers are forced to wait a long time for their flight. making it a hot topic for not only marketers. With some services customers may find it hard to judge the quality of the service. and thus can influence the outcome of their own service or the service of others. and their perishability. they were told they had to carry the raft to the top of the river first. making their performance and appearance critical to gaining a high perceived quality of service. however would change with each service provider. the perceived quality of service drops. For example in white water rafting a customer might be dissatisfied if. and when these are not met. including the United Kingdom and Australia. they are heterogeneous. During that installation the buyer may form an opinion of the service provider as a whole based purely on that IT professionals performance. define it as the environment and its instruments. product. including the procedures. physical evidence and process. price. unlike products. It is crucial that marketing managers address consumer fears regarding risk that results before. Services marketing differs from product marketing from the fact that three extra P's are added to the original marketing mix. It also includes any physical objects that assist in the delivery of the service. which comprise of everyone that influences the buyer's perceptions. when they arrived. but anyone competing in the business world. people. place and promotion. Services Marketing and the Extended Marketing Mix (7P's). mechanisms and flow of activities by which the service is delivered. no matter how small their role may be. Since the customer does not have the knowledge or experience to judge the actual service. including the buyer themselves. including the physical evidence of service quality. for example a dentist or lawyer. For example in a doctors surgery cleanliness would be expected.one. during. This would usually come in the form of a professional looking workspace.
A service is the action of doing something for someone or something.is not taken to the service. It is largely intangible (i.and cannot have a real. not material).since the human involvement of service provision means that no two services will be completely identical. and do not take ownership of it. process and people. Service Marketing Mix . A service tends to be an experience that is consumed at the point where it is purchased. also known as the 7P's . and cannot be owned since is quickly perishes. material) since you can touch it and own it.e. You cannot sell it on once it has been consumed. Right of ownership . the engineer or his equipment. it is intangible. Variability. an engineer may service your air-conditioning.from the point where it is consumed. and even then it will be staged in a different place with many different finalists. Intangible . A product is tangible (i. Therefore the marketing mix has seen an extension and adaptation into the extended marketing mix for services. once a 100 metres Olympic final has been run. or speediness of work. there will be not other for 4 more years. A person could go to a café one day and have excellent service. but you do not own the service. returning to the same garage time and time again for a service on your car might see different levels of customer satisfaction. and then return the next day and have a poor experience.physical evidence. For example. Perishable . For example. physical presence as does a product. and from the provider of the service.e. since you merely experience it. not a service). For example. you cannot take a live theatre performance home to consume it (a DVD of the same performance would be a product.in that once it has occurred it cannot be repeated in exactly the same way. For example. Western economies have seen deterioration in their traditional manufacturing industries. but the financial service itself cannot be touched i. So often marketers talk about the nature of a service as: Inseparable . motor insurance may have a certificate. and a growth in their service economies.e. For example.
training. training of bar staff. The service marketing • • • • • • • • Physical evidence. Many British organisations aim to apply for the Investors In People accreditation.g. as part of the marketing mix . let us now look at the marketing mix of a service. Off-thejob training sees learning taking place at a college. All customer facing personnel need to be trained and developed to maintain a high quality of personal service. Here are some ways in which people add value to an experience. A training and development plan is constructed for the individual which sets out personal goals that can be linked into future appraisals. Remember. so the attitude. and service knowledge to provide the service that consumers are paying for. Services tend to be produced and consumed at the same moment. Most of us can think of a situation where the personal service offered by individuals has made or tainted a tour. training centre or conference . At this very early stage the training needs of the individual are identified. people buy from people that they like. Staff should have the appropriate interpersonal skills.Having discussed the characteristics of a service.' On-the-job training involves training whilst the job is being performed e. 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. Training should begin as soon as the individual starts working for an organization during an induction. vacation or restaurant meal. skills and appearance of all staff need to be first class. personal selling and customer service. Consumers make judgements and deliver perceptions of the service based on the employees they interact with. People are the most important element of any service or experience. mix comprises off Product the 7’p’s. and aspects of the customer experience are altered to meet the 'individual needs' of the person consuming it. which tells consumers that staff are taken care off by the company and they are trained to certain standards. Training. as well as briefing him or her on dayto-day policies and procedures. The induction will involve the person in the organization's culture for the first time. These include: Price Place Promotion People Process Lets now look at the remaining 3 p’s: People An essential ingredient to any service provision is the use of appropriate staff and people. aptititude. In practice most training is either 'on-the-job' or 'off-the-job.
actually closing the sale is not of great importance at this early stage.g. there are creative sellers. Here are some examples to help your build a picture of marketing process. The next sort of sales person is the missionary. An efficient service that replaces old credit cards will foster consumer loyalty and confidence in the company. services and experiences are supported by customer services teams. from the customer's point of view. Attention needs to be paid to Continuing Professional Development (CPD) where employees see their professional learning as a lifelong process of training and development. Customer services provided expertise (e. For the purposes of the marketing mix.g. In both cases little selling is done.facility. The external sales person would be working in the field. His or her main task is to deliver the product. Here. and so effective customer service is vital. The skill is identifying the needs of a customer and persuading them that they need to satisfy their previously unidentified need by giving an order. the salesperson builds goodwill with customers with the longer-term aim of generating orders. 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. controlling service engineers. and these may be either 'internal' or 'external. processes that measure the achievement marketing objectives. . Today. Creative sellers work to persuade buyers to give them an order. e. The forth type is the technical salesperson. customer service can be face-to-face. or communicating with a salesman).' The internal sales person would take an order by telephone. over the telephone or using the Internet. or improving or ruining a company's reputation. Some see processes as a means to achieve an outcome. as with those missionaries that promote faith. Finally. technical support(e. on the selection of financial services). Process Refers to the systems used to assist the organisation in delivering the service. Another view is that marketing has a number of processes that integrate together to create an overall marketing process. People tend to buy from people that they like. and selling is of less importance e.telemarketing and Internet marketing can be integrated. A further view is that marketing processes are used to control the marketing mix. and tends to o ffer the biggest incentives. This is tough selling. or mail. The disposition and attitude of such people is vitally important to a company. i.e. Customer Service Many products. All views are understandable. Personal Selling There are different kinds of salesperson. fast food. email or over a counter. process is an element of service that sees the customer experiencing an organisation's offering. a technical sales engineer. Imagine you walk into Burger King and you order a Whopper Meal and you get it delivered within 2 minutes.to achieve a 30% market share a company implements a marketing planning process. There is the product delivery salesperson.g. The second type is the order taker.There are a number of perceptions of the concept of process within the business and marketing literature. Again. for example . The way in which a complaint is handled can mean the difference between retaining or losing a customer. Process is another element of the extended marketing mix. for example . Their in-depth knowledge supports them as they advise customers on the best purchase for their needs. but not particularly customer focused. It's best viewed as something that your customer participates in at different points in time. offering advice on IT and software) and coordinate the customer interface (e.g. Customer services can add value by offering customers technical support and expertise and advice.g. or 7P's.
Physical evidence is the material part of a service. and other serves or products are extended and marked to them. Booking a flight on the Internet . physical evidence and people enhance services. Processes essentially have inputs. 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. Process. your baggage is taken to your room. you arrive at your destination. so a consumer tends to rely on material cues. There are many examples of physical evidence. friendly environment. At each stage of the process. Your ticket/booking reference arrive by e-mail or post. and your baggage is delivered to you. Strictly speaking there are no physical attributes to a service. You enter details of your flights and book them. experiencing a similar service at the same time. • Feedback can be taken and the mix can be altered.Going on a cruise .the process begins with you visiting an airline's website. Marketing adds value to each of the stages. 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. you are greeted. 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. markets: • Deliver value through all elements of the marketing mix. including some of the following: . to casinos and shopping. and arrive refreshed at your destination. • The process itself can be tailored to the needs of different individuals.from the moment that you arrive at the dockside. Take a look at the lesson on value chain analysis to consider a series of processes at work. • Customers are retained. You catch your flight on time. This is all part of the marketing process. Finally. This is a highly focused marketing process. throughputs and outputs (or outcomes). You have two weeks of services from restaurants and evening entertainment. If you walk into a restaurant your expectations are of a clean.
Your tickets have your team's logos printed on them. . Lloyds of London). parcel and mail services (e. Furnishings. A sporting event is packed full of physical evidence.g. for example tourism attractions and resorts (e. Brochures. Uniforms. . Business cards.g. tickets and despatch notes). UPS trucks). All you need now is for your team to win! Some organisations depend heavily upon physical evidence as a means of marketing communications. and large banks and insurance companies (e. Paperwork (such as invoices. Mailboxes and many others .g. The stadium itself could be impressive and have an electrifying atmosphere. . Internet/web pages. Signage (such as those on aircraft and vehicles). . . and your seats are comfortable and close to restrooms and store. To summarise service marketing looks at: . Disney World). and players are wearing uniforms. You travelled there and parked quickly nearby. The building itself (such as prestigious offices or scenic headquarters).• • • • • • • • • • Packaging.
Price. Physical Evidence. people. Process and People. Product. To certain extent managing services are more complicated then managing products. to standardise a service is far more difficult as there are more input factors i. . Place. physical evidence.e.The Characteristics (1) Lack (2) (3) (4) (5) Heterogeneity. process to manage then with a product. products can be standardised. of a of Intangibility Perishability service that ownership are: Inseparability The Service marketing mix involves analysing the 7’p of marketing involving. Promotion.