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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:
Pivot (but all of this is predicated on a real marketing and customer-centric approach leads to sustainability and health . 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. lets stop doing things 'to' the prospect or customer. Priority (we need to prioritise all our options to improve. or 'a colouring in activity at the end' 10. People (the most important component in the whole supply chain and forgotten by marketing!) 6. Preside (how we run the business . Process (how we do things. Physical Evidence (evidential marketing .but only offering what they really need. 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.but the company must have ALL processes firmly aligned with customer need as its pivotal point) .based on the above) 17.) 11.1. but 'with' them . 3.arghh .I mentioned it. what product or service innovations should be introduced etc. Project Management (we all manage different projects and sub-projects. Precision (its more than just targeted marketing. Product Place Price Promotion 5. yet this is not recognised in most business disciplines and teaching) 8.alone 13. when they need it. Pervasiveness (marketing has to permeate the organisation as its main process .marrying up all our new innovations and improvements with real evidence from the customer and not relying on invention or 'creative(s)' . it isnt a dirty word if it fits in with the latter 'Ps' below) 9. Positioning (where we are in the market and the mind of the customer. true branding rather than the questionable 'science' to do with brand-brain-wash) 7. strategically or tactically change. how modern marketing is and should be seen as one rather than a function or department. 4. 2. Profit (wow . in the context that they will benefit most from it 14. how 'customer centric' we really aspire to and work to be) 12.
A growing number of organizations. The process for base management shifts the marketer to building a relationship. The term includes advertising. distribution and selling of a product or service. or customer-focused. 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. Marketing theory and practice is justified in the belief that customers use a product or service because they have a need.Marketing is a social process which satisfies consumers' wants. The offer is also an important addition to the 4P's theory. to determine what consumers want and what they are willing to pay for it. base management marketing takes over. enhancing the benefits that sold the buyer in the first place. often through market research. Once a marketer has converted the prospective buyer. the mix of the four "Ps" must reflect the wants and desires of the consumers in the target market. Two major factors of marketing are the recruitment of new customers (acquisition) and the retention and expansion of relationships with existing customers (base management). Marketing management is the practical application of this process. Marketers hope that this process will give them a sustainable competitive advantage. For a marketing plan to be successful. Introduction A market-focused. organization first determines what its potential customers desire. or because it provides a perceived benefit. It is also concerned with anticipating the customers' future needs and wants. and then builds the product or service. Marketers depend on marketing research. and improving the product/service continuously to protect the business from competitive encroachments. both formal and informal. Within most organizations. especially large . nurturing the links.
This philosophy was possible because the demand for products outlasted supply. firms assumed that consumers would resist buying goods and services deemed nonessential. “Marketing is the process of planning and executing the conception. the . Operational Marketing includes the determination of the marketing mix Historical Eras of Marketing Modern marketing began in the early 1900s.US companies. sellers had to employ creative advertising and skillful personal selling in order to get consumers to buy. promotion. firms operated under the premise that production was a seller's market. Thus. goods. ushered in during 1950s. reporting to the Chief Executive Officer. Operational Marketing executes marketing functions to attract and keep customers and to maximize the value derived for them. it is also related to many of the creative arts. Anthropology is also a small. but growing. The American Marketing Association (AMA) states. firm success was measured totally in terms of production. influence. To overcome this consumer resistance. sales. In the 1920s. Rather. sociology. and marketing. is known as the sales era. and economics. the marketing process progressed through three distinct eras—production. The second era of marketing. 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. and distribution of ideas. product supply exceeded demand. In the twentieth century. and services to create exchanges that satisfy individual and organizational objectives". It is also an area of activity infamous for re-inventing itself and its vocabulary according to the times and the culture. as well as to satisfy the customer with prompt services and meeting the customer expectations. During this era. Marketing methods are informed by many of the social sciences. Through advertising. Marketing is a wide and heavily interconnected subject with extensive publications. In particular. Market research underpins these activities. it aims at generating a competitive advantage relative to its competitors. During this era. Product choices were nearly nonexistent because firm managers believed that a superior product would sell itself. have a Chief Marketing Officer position. particularly psychology. Two Levels of Marketing Strategic Marketing attempts to determine how an organization competes against its competitors in a market place. pricing.
firms began to practice the sales concept (or selling concept). In 1776 in The Wealth of Nations. better than the competition. but this has not always been the case. Before producing a product. 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. 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. but also would try to convince customers to buy them through advertising and personal selling. While these alternative concepts prevailed during different historical time frames. it would not be adopted widely until nearly 200 years later. The Sales Concept By the early 1930's however. Adam Smith wrote that the needs of producers should be considered only with regard to meeting the needs of consumers. it is worthwhile to put it in perspective by reviewing other philosophies that once were predominant. and there was little unfulfilled demand. 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. competition had increased. Proponents of the marketing concept argued that in order for firms to achieve their goals. the key questions were: • • Can we sell the product? Can we charge enough for it? . under which companies not only would produce the products. Around this time. 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. 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. To better understand the marketing concept. mass production had become commonplace. they had to satisfy the needs and wants of consumers. While this philosophy is consistent with the marketing concept. The Production Concept The production concept prevailed from the time of the industrial revolution until the early 1920's. Today most firms have adopted 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. they are not restricted to those periods and are still practiced by some firms today.
Marketing was a function that was performed after the product was developed and produced. customers could afford to be selective and buy only those products that precisely met their changing needs. The marketing department is responsible for generating revenue through the exchange process. The management department is responsible for creating and implementing procedural policies of the firm. Aligning the marketing activities with the objectives of the firm is completed through the process of marketing management. To satisfy those needs. the goal simply was to beat the competition to the sale with little regard to customer satisfaction.The sales concept paid little attention to whether the product actually was needed. and their needs. marketing objectives are established in alignment with the overall objectives of the firm. many firms have structured themselves into marketing organizations having a company-wide customer focus. and these needs were not immediately obvious. firms began to adopt the marketing concept. nobody can neglect a customer issue by declaring it a "marketing problem" . The primary responsibility of the finance department is maintaining and tracking assets. Each of these four areas performs specific functions. Marketing in the Overall Business There are four areas of operation within all firms: accounting. Even today. and marketing. 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. finance. The marketing concept relies upon marketing research to define market segments. the marketing team makes decisions about the controllable parameters of the marketing mix. With increased discretionary income. Often these departments were sales departments with expanded responsibilities. The Marketing Concept After World War II. management. 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. they typically set up separate marketing departments whose objective it was to satisfy customer needs. The accounting department is responsible for keeping track of income and expenditures.everybody must be concerned with customer satisfaction. and many people came to associate marketing with hard selling. The marketing management process involves developing . their size. While this expanded sales department structure can be found in some companies today. the variety of products increased and hard selling no longer could be relied upon to generate sales. Since the entire organization exists to satisfy customer needs. As a means of generating revenue. many people use the word "marketing" when they really mean sales.
and budget proposals. selecting target markets. Unique environmental factors that need to be explored by firm managers before going global include trade systems. Various quantitative and qualitative techniques of marketing research are used to collect data about potential customers. managers must take into account these differences in the planning process. For example. For example. the last factor to be considered before entering a global market is the cultural environment. target countries will need to be identified and evaluated in terms of their potential sales and profits. The first factor to consider in the international marketplace is each country's trading system.objectives that promote the long-term competitive advantage of a firm. Just as with domestic markets. exchange controls. Political-legal environment is the third factor to investigate. a marketing plan is developed for each product. In order to analyze marketing opportunities. embargoes. In modern times. The first step in the marketing management process is to develop the firm's overall strategic plan. and government bureaucracy all influence marketing practices and opportunities. A natural component of international business is international marketing. There are two economic factors which reflect how attractive a particular market is in a selected country: industrial structure and income distribution. International Marketing International business has been practiced for thousands of years. Firm managers must adapt their strategies to fit the unique characteristics of each international market. Each product plan contains an executive summary. possible marketing strategies. and managing the marketing effort. proposed sales objectives. quotas. the individual and cultural attitudes regarding purchasing products from foreign countries. economic conditions. political stability. International marketing occurs when firms plan and conduct transactions across international borders in order to satisfy the objectives of both consumers and the firm. and cultural conditions. Thus. as a result. and nontariff trade barriers. firms scan current environmental conditions in order to determine potential opportunities. Industrial structure refers to how well developed a country's infrastructure is while income distributed refers to how income is distributed among its citizens. All countries have their own trade system regulations and restrictions. action programs. who are then segmented into markets. political-legal. The second step is to establish marketing strategies that support the firm's overall strategic objectives. it is necessary for marketing managers to determine the particular needs and wants of potential customers. The aim of the marketing effort is to satisfy the needs and wants of consumers. more and more firms have set up shop at various locations around the globe. Lastly. After selecting a market . Finally. The second factor to review is the economic environment. monetary regulations. a list of threats and opportunities. The marketing management process includes analyzing marketing opportunities. developing the marketing mix. Common trade system regulations and restrictions include tariffs. While firm managers may try to employ the same basic marketing strategies used in the domestic market when promoting products in international locations. an explanation of the current marketing situation. Since cultural values regarding particular products will vary considerably from one country to another around the world. those strategies may not be appropriate or effective. managers must establish their international marketing objectives and policies before going overseas. advances in technology have improved transportation and communication methods. International marketing is simply a strategy used by firms to improve both market share and profits.
trademark. A joint venture takes place when firms join forces with companies from the international market to produce or market a product. firms allow other businesses in the international market to produce products under an agreement called a license. the mode of entry into the market must be determined. "marketing" is the promotion of products.and establishing marketing objectives. Firms can also improve their images in international markets because of the employment opportunities they create. in professional usage the term has a wider meaning of the practice and science of trading. firms enter international markets by selling products internationally through the use of middlemen. "marketing" is the promotion of products. especially advertising and branding. distribution and selling. Four Ps In popular usage. "Marketing is an organizational function and a set of processes for creating. particularly psychology. but growing influence. or other items of value for a fee or royalty. and economics. It is also concerned with anticipating the customers' future needs and wants. The licensee has the right to use the manufacturing process. The third type of joint venture is called management contracting. With this approach. Direct investment is advantageous because labor and raw materials may be cheaper in some countries. and joint ownership. With direct investment. patent." Marketing practice tends to be seen as a creative industry. direct investment is the last mode used by firms to enter international markets. management contracting. Finally. Anthropology is also a small. The American Marketing Association (AMA) states. However. joint venture. Firms join with the local international investors to establish a local business. This use of these middlemen is sometimes called indirect exporting. Firms also use contract manufacturing. a firm enters the market by establishing its own base in international locations. Marketing methods are also informed by many of the social sciences. which arranges for the manufacture of products to enter international markets. Both groups share joint ownership and control of the newly established business. especially advertising and branding. However. communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. in professional usage the term has a wider meaning which recognizes . Joint ventures differ from direct investment in that an association is formed between firms and businesses in the international market. The second way to enter an international market is by using the joint-venture approach. In popular usage. With exporting. trade secret. contract manufacturing. which are often discovered through market research. The last category of joint venture is joint ownership. The scientific study of marketing is a wide and heavily interconnected subject with extensive academic publications. and direct investment. There are three major modes of entry into international markets: exporting. it is also related to many of the creative arts. sociology. The marketing literature is also infamous for re-inventing itself and its vocabulary according to the times and the culture. Through advertising. Four types of joint venture are licensing. which includes advertising. Under licensing. the firms supply the capital to the local international firm in exchange for the management know-how. Market research underpins these activities. Exporting is the simplest way to enter an international market.
Products are often developed to meet the desires of groups of customers or even. or company. for example. His typology has become so universally recognized that his four activity sets. publicity. they are generally inseparable from the total service .that marketing is customer centered. online vs. referring to the channel by which a product or services is sold (e. the 4 Ps offer a memorable and workable guide to the major categories of marketing activity. etc.. Relationship marketing attempts to do this by looking at marketing from a long term relationship perspective rather than individual transactions. for specific customers. they must be appropriately trained. which geographic region or industry. Nevertheless.g. These four elements are often referred to as the marketing mix. Fellow customers are also sometimes referred to under 'people'. (e. services. Jerome McCarthy divided marketing into four general sets of activities. time.g. retail). Promotion: This includes advertising.it can simply be what is exchanged for the product or services. Pricing: This refers to the process of setting a price for a product. business people). The four Ps are: • • • • Product: The product aspects of marketing deal with the specifications of the actual goods or services. the Four Ps. at a sporting event). whereas the essence of marketing should be the outside–in approach". Whether as part of a supporting service to a product or involved in a total service. 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). As a result of this. in some cases. Pricing. and how it relates to the end-user's needs and wants. in the customer's eyes. energy. sales promotion. well motivated and the right type of person. Promotion and Place). brand. Services marketing must account for the unique nature of services. These are: • People: Any person coming into contact with customers can have an impact on overall satisfaction. including discounts. families. people are particularly important because. as well as a framework within which these can be used. and support. . As a counter to this. 1988). have passed into the language. point of sale placement or retailing. Morgan. totaling seven and known together as the extended marketing mix. e. in Riding the Waves of Change (Jossey-Bass. Seven Ps As well as the standard four Ps (Product. The four Ps model is most useful when marketing low value consumer products. E. and personal selling.g. as they too can affect the customer's service experience. guarantees. high value consumer products require adjustments to this model. which a marketer can use to craft a marketing plan. This fourth P has also sometimes been called Place. and refers to the various methods of promoting the product. psychology or attention. The scope of a product generally includes supporting elements such as warranties. Placement or distribution refers to how the product gets to the customer. Industrial products. services marketing calls upon an extra three. The price need not be monetary . to which segment (young adults. Industrial or B2B marketing must account for the long term contractual agreements that are typical in supply chain transactions.
Peer-to-Peer': This refers to customer networks and communities where advocacy happens. Selection of and sifting through product ideas. This. Participation. which makes it intangible. such as case studies. They are Personalization. trying to impose a brand on the customer. Participation: This is to allow customer to participate in what the brand should stand for. what should be the product directions and even which ads to run. 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.com. P2P is now being referred as Social Computing and will likely to be the most disruptive force in the future of marketing. Design and testing of product concept. which can be crucial to customer satisfaction. Brand engagement happens within those conversations.0.number of product lines in a range. Early examples include Dell on-line and Amazon. Depth -. . • • • • Personalization: The author here refers to customization of products and services through the use of the Internet. 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). Idris Mootee devised a “New 4Ps” model in 2001 to supplement the traditional marketing 4Ps. These "passive customer bases" will ultimately be replaced by the "active customer communities". thus improving the chance for success. Product Scope • • Breadth -. The historical problem with marketing is that it is "interruptive" in nature. Emerging technologies will continue to push this idea forward. Web 2. means that potential customers could perceive greater risk when deciding whether to use a service.0 and Marketing New 4Ps The original 4Ps concept idea was developed to help marketers manage the four most important aspect of marketing. Analysis of profitability of product concept. testimonials or demonstrations. Physical evidence: Unlike a product. Steps in product design • • • • Design and development of product ideas. a service cannot be experienced before it is delivered. therefore.• • Process: This is the process(es) involved in providing a service and the behaviour of people. To reduce the feeling of risk. This is most apparent in TV advertising. With the Internet and the Web 2. Peer-to-Peer and Predictive Modeling.number of product items in a product line. marketers have needed to adapt a broader perspective on these elements. 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.
two or more products packaged in the same container Kaleidoscopic packaging -.• Design and testing of physical product. Forms of packaging • • • • • • Specialty packaging -. into appropriate quantities. 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.packed. convenient. Difference in uniform product design "the look & feel" from the packaging (the box) to the product its self.packaging changes continually to reflect a series or particular theme Packaging for immediate consumption -. 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.emphasizes the elegant character of the product Packaging for double-use Combination packaging -. simple language Easily pronounced and remembered Distinct from names of other products Easily added to an existing range Easily registered for legal protection Pricing . well-designed Point of difference in service and supply of product.to be thrown away after use Packaging for resale -.
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 . 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.
Manufacturer has no knowledge of efficient distribution. Too many consumers in a large area. difficult to reach. Manufacturer does not have a wide assortment of goods to enable efficient marketing. Middlemen unable to transport. Distribution channels already established. 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 .Reasons for direct selling methods • • • • • Manufacturer wants to demonstrate goods. Manufacturer unable to convince wholesalers or retailers to stock product. Wholesalers. retailers and agents not actively selling. Reasons for indirect selling methods • • • • • • Manufacturer does not have the financial resources to distribute goods. Manufacturer wishes to use capital for further production. High profit margin added to goods by wholesalers and retailers.
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 receive a brokerage. They have an expert knowledge of the purchasing function. 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. They have full authority regarding price and terms of sale. Selling agents act on an extended contractual basis. They operate within a specific area and sell related lines of goods but have limited authority regarding price and sales terms. There are distinct stages in converting strangers to customers (seeClient Path Marketing) that govern the communication medium that should be used.• • • • • Commission agents work for anyone who needs their services. Brokers specialize in the sale of one specific product. 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 all of the products of the manufacturer. Buying agents buy goods on behalf of producers and retailers.
and primarily on the psychological and sociological aspects of marketing. Competitive advantage was created by directly appealing to the needs. offerings and business models that other companies find hard to . Marketers will consciously build and allocate resources. 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. better than the competition. Relationships. Successful marketing was based on who could create the better brand or the lowest price or the most hype. Marketing in the future will be based on a more strategic approach to competitive marketing success.• • 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. relationships. Offerings and Business Models Marketing in the past focused mainly on basic concepts like the 4 Ps. wants and behaviors of customers.
Relationships Success in business. . legal (trademarks and patents). This implies that the company focuses its activities and products on consumer demands. Every aspect of a market offering. policies). It's slowly becoming business model vs. as in life.match. but rather is the cultivation of a natural social response. Access). Marketers must aggressively build relationships with consumers. Business model innovation allows a marketer to change the game instead of competing on a level playing field. 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. In the consumer-driven approach. Generally there are three ways of doing this: the customer-driven approach. including the nature of the product itself. The starting point is always the consumer. Business Models The concept of product vs. Value. organizational (structure. competencies. Information. as most marketing is. partners and even competitors if they want to have success in today's competitive marketplace. customers. A formal approach to this customer-focused marketing is known as SIVA (Solution. There are four type of relationships (1)win-win (2)win-lose (3)lose-lose (4)lose-win. consumer wants are the drivers of all strategic marketing decisions. human (knowledge and skill). Customer focus Many companies today have a customer focus (or customer orientation). is based on the relationships you have with people. Business model innovation can make the competition's product superiority irrelevant. This system is basically the four Ps renamed and reworded to provide a customer focus. History attests to many products that were commercial failures in spite of being technological breakthroughs. Resources include: financial (cash and cash reserves). product in competitive marketing is dying. business model. simply that it has been expanded upon. Blog Reference. Resources Companies with a greater number of resources than their competitors will have an easier time competing in the marketplace. the sense of identifying market changes and the product innovation approach. and informational (knowledge of consumers and competitors). The rationale for this approach is that there is no point spending R&D funds developing products that people will not buy. No strategy is pursued until it passes the test of consumer research. Some argue that community marketing is not created.(customer-vendor) The marketing strategies that are focused on building and leveraging win-win relationships are called Community marketing strategies. This does not mean the four P approach is dead. distributors. physical (plant and equipment).
This model was proposed by Chekitan Dev and Don Schultz in the Marketing Management Journal of the American Marketing Association. However. what it will cost. then tries to develop a market for the product. When pursuing a product innovation approach. marketers must ensure that they have a varied and multi-tiered approach to product innovation. who from. the company pursues 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. do they know enough to let them make a buying decision . Product innovation drives the process and marketing research is conducted primarily to ensure that a profitable market segment(s) exists for the innovation. Product Promotion Price Place ->Access The four elements of the SIVA model are: . successfully focus on product innovation (Such as Nintendo who constantly change the way Video games are played). marketers can aggressively over-pursue product innovation and try to overcapitalize on a niche. and if so how.Information: Does the customer know about the solution. because of the ex post status of consumer research. Some even question whether it is marketing. price. The model focuses heavily on the customer and how they view the transaction. promotion) of marketing management. such as research and development focused companies.Value: Does the customer know the value of the transaction. . How easily/locally/remotely can they buy it and take delivery. what are the benefits.Solution: How appropriate is the solution to the customers problem/need . place. Many firms. Many purists doubt whether this is really a form of marketing orientation at all.The SIVA Model provides a demand/customer centric version alternative to the well-known 4Ps supply side model (product. -> -> -> Solution Information Value Product focus In a product innovation approach. It is claimed that if Thomas Edison depended on marketing research he would have produced larger candles rather than inventing light bulbs. what will be their reward? . what might they have to sacrifice. and presented by them in Market Leader the journal of the Marketing Society in the UK.Access: Where can the customer find the solution.
Amazon. This is the only element in the marketing mix that generates revenue for firms. eBay).  Mechanisms to increase impulse buying and get people "to buy more by playing on the herd instinct" were shared. A "swarm-moves" model was introduced by a Princeton researcher.• An emerging area of study and practice concerns internal marketing. and several feedback mechanisms to get product popularity information to consumers are mentioned. The use of herd behavior in marketing. 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). In order to generate revenue. New York). which is appealing to supermarkets because it can "increase sales without the need to give people discounts. It targets its audience more precisely.g. It typically tries to perfect the segmentation strategy used in traditional marketing." Large retailers Wal-Mart in the United States and Tesco in Britain plan to test the technology in spring 2007 . a Japanese chain of convenience stores which orders its products based on "sales data from department stores and research companies. marketing managers seek to control the four basic elements of the marketing mix: product. Price. managers must . The basic idea is that people will buy more of products that are seen to be popular. desktop advertising or online marketing. price. services and ideas.000 people downloaded previously unknown songs" (Columbia University. Other recent studies on the "power of social influence" include an "artificial music market in which some 14. and is sometimes called personalized marketing or one-to-one marketing. and online retailers who are increasingly informing consumers about "which products are popular with like-minded consumers" (e. The Economist recently reported a recent conference in Rome on the subject of the simulation of adaptive human behavior. Custom media and Reality marketing." a Massachusetts company exploiting knowledge of social networking to improve sales. Since these four variables are controllable. Diffusion of innovations research explores how and why people adopt new products. and promotion. including smart-cart technology and the use of Radio Frequency Identification Tag technology. affiliate marketing. • • • • Marketing Mix Once a positioning strategy has been determined. the best mix of these elements is determined to reach the selected target market. marketers are turning to forms of Permission marketing such as Branded content. With consumers' eroding attention span and willingness to give time to advertising messages.. Price is the cost of the product paid by consumers. In an article entitled "Swarming the shelves: How shops can exploit people's herd mentality to increase sales". known as the four P's of marketing. place. A relatively new form of marketing uses the Internet and is called internet marketing or more generally e-marketing.
Prices are then gradually lowered until maximum profit is received from each level of consumer. This blending of promotional tools is sometimes referred to as the promotional mix. allowing firms to generate maximum profits from customers willing to pay the high price. For example. odd pricing is a common psychological pricing strategy. The last variable in the marketing mix is promotion. geographic locations.95. For example. sales promotion. ideas. consumers will focus on $19 rather than $20. The promotional tools available to managers are advertising. Place refers to where and how the products will be distributed to consumers. managers use a blend of the four promotional tools that best reaches potential customers. personal selling. The goal of this promotional mix is to communicate to potential customers the features and benefits of products. Promotion. There are two basic issues involved in getting the products to consumers: channel management and logistics management. product demand. market-coverage strategy. and psychological. and publicity. External factors to consider are the target market. Penetration pricing is used when firms set low prices in order to capture a large share of a market quickly. the cost of the product may be a few cents lower than a full-dollar value. through the use of incentives. the marketing-mix strategy. With a price-skimming strategy. penetration. There are a number of pricing strategies available to marketing managers: skimming. economic conditions. and production costs. Channel management involves the process of selecting and motivating wholesalers and retailers. The process of moving products from a manufacturer to the final consumer is often called the channel of distribution. For the promotional program to be effective. competition. sometimes called middlemen. and government regulations. inventory. A quantity-pricing strategy provides lower prices to consumers who purchase larger quantities of a product. and transportation methods. With odd pricing. Internal factors take the form of marketing objectives. the price is initially set high. or services from firms and their customers.consider factors both internal and external to the organization. . quantity. Various promotional tools are used to communicate messages about products. Several factors are reviewed by firm management when determining where to sell their products: distribution channels. Psychological pricing tends to focus on consumer perceptions. Consumers tend to focus on the lower-value fulldollar cost even though it is really priced closer to the next higher full-dollar amount. Place. if a good is priced at $19.
suggested that the Marketing Mix contained 4 elements: product.Four Ps In the early 1960s. for example. The price need not be monetary .g. Promotion: This includes advertising. place and promotion. The scope of a product generally includes supporting elements such as warranties. e. Placement (or distribution): refers to how the product gets to the customer. Nevertheless. which a marketer can use to craft a marketing plan. services. business people). • • • • Product: The product aspects of marketing deal with the specifications of the actual goods or services. Jerome McCarthy. in Riding the Waves of Change (Jossey-Bass. including discounts. price. The four Ps model is most useful when marketing low value consumer products. whereas the essence of marketing should be the outside–in approach". These four elements are often referred to as the marketing mix. families. or company. Relationship marketing attempts to do this by looking at marketing from a long term relationship perspective rather than individual transactions. This fourth P has also sometimes been called Place. time. 1988). 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. guarantees. to which segment (young adults. etc. Professor E. energy. Industrial or B2B marketing must account for the long term contractual agreements that are typical in supply chain transactions. and support. Industrial products. online vs. As a counter to this. Borden suggested that all those actions of the company represented a “Marketing Mix”. publicity. also referring to how the environment in which the product is sold in can affect sales. high value consumer products require adjustments to this model. the 4 Ps offer a memorable and workable . retail).g. and how it relates to the end-user's needs and wants. which geographic region or industry. Pricing: This refers to the process of setting a price for a product. and personal selling. psychology or attention. Services marketing must account for the unique nature of services. referring to the channel by which a product or services is sold (e. 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).it can simply be what is exchanged for the product or services. branding and refers to the various methods of promoting the product. brand. point of sale placement or retailing. Morgan. sales promotion. also at the Harvard Business School in the early 1960s.
This is done by providing physical evidence.. This. testimonials or demonstrations. a service cannot be experienced before it is delivered. it is often vital to offer potential customers the chance to see what a service would be like. P2P is now being referred as Social Computing and is likely to be the most disruptive force in the future of marketing.g. totaling seven and known together as the extended marketing mix. Product Product. Peer-to-Peer: This refers to customer networks and communities where advocacy happens. Physical evidence: Unlike a product. services marketing calls upon an extra three. The historical problem with marketing is that it is “interruptive” in nature. To reduce the feeling of risk. at a sporting event). they are generally inseparable from the total service . people are particularly important because. Seven Ps As well as the standard four P's (Product. trying to impose a brand on the customer. Early examples include Dell on-line and Amazon. (e. as they too can affect the customer's service experience. The first element in the marketing mix is the product. which can be crucial to customer satisfaction. such as case studies. thus improving the chance for success. well motivated and the right type of person.guide to the major categories of marketing activity. Products can be either tangible or intangible. Participation: This is to allow the customer to participate in what the brand should stand for. but this concept is further extended with emerging social media and advanced algorithms. Predictive modeling: This refers to algorithms that are being successfully applied in marketing problems (both a regression as well as a classification problem). Brand engagement happens within those conversations. what should be the product directions and even which ads to run. Process: This is the process(es) involved in providing a service and the behaviour of people. therefore. Fellow customers are also sometimes referred to under 'people'.com. Promotion and Place). new marketing 4Ps • • • • Personalization: It is here referred customization of products and services through the use of the Internet. means that potential customers could perceive greater risk when deciding whether to use a service. they must be appropriately trained. Emerging technologies will continue to push this idea forward. in the customer's eyes. This is most apparent in TV advertising. as well as a framework within which these can be used. As a result of this. which makes it intangible.  These are: • • • People: Any person coming into contact with customers can have an impact on overall satisfaction. Whether as part of a supporting service to a product or involved in a total service. Tangible products are products that can be touched. Pricing. This concept is laying the foundation for disruptive change through democratization of information. These “passive customer bases” will ultimately be replaced by the “active customer communities”. intangible .
warranties.products are those that cannot be touched. Product focus In a product innovation approach. There are three basic levels of a product: core. 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. When pursuing a product innovation approach. because of the ex post status of consumer research. successfully focus on product innovation (Such as Nintendo who constantly change the way Video games are played). For example. It targets its audience more precisely. actual. desktop advertising or online marketing. the augmented level of a product consists of all the elements that surround both the core and the actual product. However. The basic idea is that people will buy more of products that are seen to be popular. When planning new products. Many firms. consumers do not buy food processors. options. The core product is the most basic level. The next level of the product is the actual product—in the case of the previous example. such as services. styling. custom media and reality marketing. Some even question whether it is marketing. Many purists doubt whether this is really a form of marketing orientation at all. Diffusion of innovations research explores how and why people adopt new products. marketers can aggressively over-pursue product innovation and try to overcapitalize on a niche. For example. service. such as research and development focused companies. marketers are turning to forms of permission marketing such as branded content. packaging. affiliate marketing. Mechanisms to increase impulse buying and get people "to buy more by playing on the herd instinct" were shared. food processors. styles. size. marketers must ensure that they have a varied and multi-tiered approach to product innovation. and augmented. brand name. The augmented level provides purchasers with additional services and benefits. the company pursues product innovation. per se. features. services and ideas. and return policies. It is claimed that if Thomas Edison depended on marketing research he would have produced larger candles rather than inventing light bulbs. The Economist reported a recent conference in Rome on the subject of the simulation of adaptive human behavior. Product innovation drives the process and marketing research is conducted primarily to ensure that a profitable market segment(s) exists for the innovation. • • • • • An emerging area of study and practice concerns internal marketing. all in an attempt to meet the needs and wants of consumers. what consumers really buy in terms of benefits. It typically tries to perfect the segmentation strategy used in traditional marketing. and packaging. and is sometimes called personalized marketing or one-to-one marketing. then tries to develop a market for the product. follow-up technical assistance and warranties and guaranties are augmented product components. The use of herd behavior in marketing. A relatively new form of marketing uses the Internet and is called Internet marketing or more generally e-marketing. they buy the benefit of being able to process food quickly and efficiently. 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). firm managers consider a number of issues including product quality. brand name. Products are typically sorted according to the following five characteristics: quality. rather. and several feedback . Finally. With consumers' eroding attention span and willingness to give time to advertising messages. features.
opening. Packaging Requirements of good packaging • • • • • • • • • • • • • Functional . including smart-cart technology and the use of Radio Frequency Identification Tag technology. a Japanese chain of convenience stores which orders its products based on "sales data from department stores and research companies. eBay). reuse. Forms of packaging . Marketing is also used to promote the businesses products and is also a great way of promoting the business its self. and online retailers who are increasingly informing consumers about "which products are popular with like-minded consumers" (e.g. 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." Large retailers Wal-Mart in the United States and Tesco in Britain plan to test the technology in spring 2007 . Amazon. New York). Other recent studies on the "power of social influence" include an "artificial music market in which some 14.mechanisms to get product popularity information to consumers are mentioned. New Product Development Steps in product design • • • • • Design and development of product ideas. Analysis of business instead of product concept. A "swarm-moves" model was introduced by a Princeton researcher. Selection of and sifting through product ideas." a Massachusetts company exploiting knowledge of social networking to improve sales. perfect colour..000 people downloaded previously unknown songs" (Columbia University. Design and testing of emotional product. Design and testing of product concept.effectively contain and protect the contents Provide convenience during distribution. For a perfect product. etc. which is appealing to supermarkets because it can "increase sales without the need to give people discounts. sale. use.
Packaging is an important part of the branding process as it plays a role in communicating the image and identity of a company. Packaging is the outer wrapping of a product." Packaging can be defined as the wrapping material around a consumer item that serves to contain. describe. into appropriate quantities. which embraces all phases of activities involved in the transfer of goods and services from the manufacturer to the consumer. and otherwise make the product marketable and keep it clean. 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. 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.• • • • • • 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. Packing is recognized as an integral part of modern marketing operation. . identify. Packaging is the enclosing of a physical object. protect. display. promote. It is the process of preparing items of equipment for transportation and storage and which embraces preservation. How can we define Packaging? Kotler defines packaging as "all the activities of designing and producing the container for a product. typically a product that will be offered for sale. Furthermore the packaging is often the most relevant element of a trademark and conduces to advertising or communication. identification and packaging of products.
Functional 1. lot number. Protection is required against transportation hazards spillage. vapour. transport and storage. Communication A major function of packaging is the communication of the product. contamination by foreign material. A package must communicate what it sells. size. and merchandising and premium data. wooden crate etc. distribution routes. and from infestation. tampering pilferage etc. When international trade is involved and different languages are spoken. the use of unambiguous. 2. Packaging protects the interests of consumers. It is the protection during transport and distribution. colour. Eg: fiberboard. Hazards of Transport There * * * * are four Drops Compression Vibration Climatic main hazards and of transport impacts forces variations . ingress and egress of moisture. how to use it and other utility informations. readily understood symbols on the distribution package is essential. o Consumer Packing: This packaging holds the required volume of the product for ultimate consumption and is more relevant in marketing. A package should preserve the contents in 'Factory Fresh' condition during the period of storage and transportation. From climatic effects (heat and cold. from hazardous substances and contaminants. This containment function of packaging makes a huge contribution to protecting the environment. moisture. 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. Information includes: quantity. 3. price. Eg: beverages. insect infection. It is the interest further that to get appropriate communication to the consumer about the product. dirt. tobacco etc. elapsed time since packaging. 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. ensuring protection from bacteriological attacks. the package must contain the product. chemical reaction etc. 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. drying atmospheres). inventory levels. Containment Most products must be contained before they can be moved from one place to another.
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. on empty containers. and shifting during handling storage and transport which occurs to the container and its content. which protects the article from damage due to shock and vibration. breaking. 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. Importance of Cushion Materials Cushioning is that part of packaging.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. o Compression Test: This test is carried out. distortion. o Protection of small projections . o Inclined Impact Test: This test help to study the extend of damage in a way of crushing. generally. cracking. 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. 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 Fungus Resistance Test: This test is to evaluate all the materials used in the fabrication of shipping containers for fungus resistance. 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 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. o Sand and Dust Test: This test is to evaluate the resistance of a package to the penetration of sand and dust. to measure the ability of the container to resists external compressive loads applied to faces or applied to diagonally opposite edges or corners.
information and branding. stenciling. packages and labels happen. * Can make the important difference to a marketing strategy by meeting customers' needs better.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. final trial cost etc. * Storage of filled packages: This includes the cost incurred to shift the goods from one form of packaging to another. field testing cost. consumer research cost. feed back cost. (freight by volume) * Loss and Damage cost: It is related to the loss and damage during operation. * Storage and handling cost of empty packages: This include the handling cost of bulky packages. drums etc. air etc. * Packaging plays a key role in brand promotion and management. they arrive at the customer's door in working condition without need of repair or . labeling – unitizing. Packaging is of great importance in the final choice the consumer will make. transportation delivery etc. because it directly involves convenience. * Packaging operation costs: This includes the cost involved in operations like. packages sales: package * Obsolescence Cost: This cost involves when changes in the packaging materials. 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. cleaning the package product filling – closing. * * Insurance Effect of cost: It varies on depending The on the vulnerability that influence of package on sales. * Transportation cost of filled packages: This involves the transportation cost by sea. pilot test cost. appeal. * Package developmental cost: This include the evaluation cost. heavy materials of construction. Packaging cost include the following: * Material cost: It means the cost of the pack and quality control cost. * The paramount concern of packaging is the reachability of the product without any damage. easier to identify or promote or to send out a message. No matter where and how the products are transported or shipped. handling cylindrical slums etc.
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. more attractive and appealing to customers. but the solution is local. Perhaps the greatest "packaging" challenge that long-term care facilities face today. The volume of exports depends not only on the quantity of the production and prices. In the recent past packaging has been increasingly recognized as a significant factor in the nations export promotion effort. Professional associations can give . Further. "Facilities of varying quality are grouped together in the public's eye into one stereotype across the nation. "Packaging" For Marketing Success . Marketing is difficult enough without pre-existing image problems tagging along. it is obviously easier to market and sell. Packaging makes a product. horror and death. 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. The administrator of a good nursing facility in Illinois cannot change the image of a bad facility in Maine. One director of nurses. This makes the many good facilities feel like dolphins caught in tuna nets. writing in this magazine not too long ago. with "horror stories" prominently featured in the press and broadcast media. only individual facilities can. summed it up rather succinctly when she wrote. any product. besides colossal wastage of scarce economic resources.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. It is one of neglect. but also to a substantial extends on the standards of packaging adopted for the products. 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. 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. When something is attractive and appealing. The last two years especially have been extraordinarily difficult. integrity and performance of a company's previous delivery. 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. Effort should be there to understand the importance of packaging there by to avoid the loss and damage cost incurred during transport and delivery. 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. and one that will remain into the foreseeable future. The problem of a negative image might be national. * Packaging is especially important in certain industry where future sales may be based largely on the quality. The national or state associations can't do it.adjustment. is their overall negative image.
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. they hear the same old refrain: "We are short today. Both facilities. they purchase the services of every department. it's simply because the facility is short-staffed. their loved one has complaints. The admissions coordinator might be a great sales person--she admits residents. residents are not assisted with meals or kept hydrated." What good is it marketwise or imagewise if a facility has wonderful nursing care but deplorable housekeeping. that families and members of the community come in to visit)? Absenteeism destroys both the quality as well as the continuity of care. But one facility has a history of deficiency-free surveys and an outstanding reputation among healthcare professionals in the area. nursing." Families become fed up and take their loved ones elsewhere. it can devour entire departments and shifts. Residents are neglected and basic care is not provided not because the staff doesn't care or because they lack job skills. Absenteeism also impacts the facility's ability to maintain census. two facilities are located in the same part of town. So all de partments must perform their duties extremely well to reach the status of "high quality. but each and every facility must do the actual heavy lifting to improve its image. When families approach staff. which can be seen and smelled almost instantly? Even with nursing. therefore. 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. Families do not buy he work of one department when they admit a loved one into a facility. but their marketing will be made easier as well. then not only will their image be improved. These are quality killers and image busters.encouragement and support. offer rehabilitative therapies and have a subacute unit. i. If unchecked or tolerated. 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. If staff is short. They both provide skilled nursing care. fair or substandard) is going to be the packaging feature that makes the product more or less attractive. But no sooner are residents admitted than families get "second thoughts" about their decision because. residents are not changed and kept dry. by the way.. For example. even thought the marketing and sales functions were carried out correctly and 'produced an admission . guided by precise and unequivocal policies and procedures. are offering the same kind of products. Where Packaging Comes In Since the product of every nursing facility is some kind of care. 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. The other has been repeatedly written about in the local newspaper for patient neglect and cited by the surveyors for poor care. Quality care is the result of competent well-trained employees performing daily assignments consistently well. Quality care must be universal and not limited to the workings of one department. every time they visit. skin breaks down and residents are not repositioned.e. Empty beds turn up.
the grooming. acceptance of mediocre work performance by supervisors or. i. the service manager explains what was done.e. Not only are products packaged. When you arrive back at the dealership to pick up your car. Two factors are always considered by every customer: the process and the outcome. look and perhaps even purchase the item. but people. the car starts to lurch and hesitate again. either. staff and employees can also be packaged as well. nor the condition of the' furniture nor the decor or the design. . we're back to packaging again. employees are allowed to rush through their assignments simply to get the job done. All facilities have private and semiprivate rooms. Just as the grade. in others. Both are management failures. quality suffers. Instances of poor care can be traced back to absenteeism or the acceptance of mediocre performance. Both must match the customer's expectations for service to be judged satisfactory. attitude and appearance of employees influence a customer greatly. Still very nice. waiter was inattentive. All (or almost all) nursing facilities now have subacute units. the horror stories revolve around case failures. waiter was slow.. The product is lodging. color. arranges for transportation back to your job--you feel great. Either way. They have been around for a long time in all service-oriented businesses. The better the quality of care. both must exceed expectations for service to bejudged as superior. In some facilities. they will always remember how well it was done. but how the bellman treats you makes that product more attractive. attentive and well groomed. Quality is a packaging element that makes the product more attractive and appealing. you probably won't go back to the restaurant. the better the image and the easier it is to market. The process was fine (you were treated well). Families rarely remember how fast the 'job was done.Another enemy of quality care is the. Every facility has a dining room and perhaps even a beauty shop.. nicely prepared done exactly as ordered) but you went through hell to get it (process). but they didn't fix the problem (bad outcome). Rather. Airlines certainly use packaging techniques to train their flight attendants on how important it is for them to be friendly. People don't become upset and outraged by such factors. time management fails and some duties and assignments are simply never finished. People-packaging techniques are not new. As you pull out into traffic. It's unlikely you will use them again. Notice that the common denominator in all the horror stories about nursing facilities is not the age of the building.e. size. Customer service has become so important because facilities have become almost identical in what they have to offer. When you bring your car to the dealer because of a problem and the service agent greets you with a smile. He thanks you for the opportunity to be of service and hands you your keys. So where can families detect significant difference? It is in the perception of friendly. Your expectations are high. 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. demeanor. department heads. When the meal you ordered (outcome) was wonderful (i. attentive service. calls you by name. Yes.
much less evaluate. A lot of its jobs are similar to those found in a healthcare facility." Near the end of the first interview. What a simple. Sanders would always give the same answer. Both have to be met for a customer to be merely satisfied. When the Ritz-Carlton hires housekeepers. There are men serving as porters who polish and buff the corridors. There are housekeepers who clean rooms and wash toilet bowls. BetsySanders was vice-president and general manager for Nordstrom's Southern California division. We do. Healthcare facilities must get serious about in-service training. "only we train them according to our expectations. Let's take a look at some prime examples. Set your personal and professional goals high. It's not something "extra" or "additional work". It is a place where the care and comfort of your guests is the highest Priority. We're glad to have you join us. All newly hired Nordstrom employees on the first day of orientation are given an Employee Handbook. employees understand exceptional service is expected of them. after the applicant's background has been discussed and the job duties explained. from their first day on the job.Families know when they have been treated well--and when they have been ignored or treated poorly. Our number one goal is to provide outstanding customer service. they are forced to judge quality of care (technical) by the quality of service that accompanies the care. "We get our people from the same pool you do. . Your facility can pass one accreditation survey after another but still provide poor service. technical quality of care components. both have to be exceeded to be rated superior. The card has the Carlton's Creed neatly typed on it. To ensure quality. Your facility can zip through the state survey but still fail miserably on service. powerful message. it's part of the job. Each and every Ritz-Carlton Hotel is more than a building made of brick and mortar. On the first page they find this message: Welcome to our company. The Nordstrom Way. Since most lay persons cannot understand. train your employees on how to do their jobs--but then also train them how to enhance customer service. There are kitchen staff who scrub pots and wash dirty dishes. the human resources person hands each applicant 5" x 7" card. She frequently attended community events and fundraisers for charitable causes. It's worth repeating: Service always involves outcomes and process. they look for people who have had some experience in hotel housekeeping duties--then they train them to clean rooms the "RitzCarlton way. 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." The Ritz-Carlton Way. We insist that you do the same. 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. Because Nordstrom is committed to superior customer service. Posters advising "teamwork" are not going to get the job done." she replied.
environmentally friendliness. recognition requirements . then don't wait for an association to do something. similar packaging that looks related). or function. 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. specially designed packaging can get exp image communication-for example. that your marketing is getting easier and easier.Every employee who works at the Ritz. no matter what department. Upward Stretching . casual consumption.e. responsive service part of every job description. and handling..do you want the consumer to identify your product by package colour or shape? (Be careful with this as fancy. See Product Line Stretching. entertainment. Then you will find. you will want to consi following when choosing the right package: • • • • • • will you have more than one product? If so. 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. moisture. After the prospective employee reads that card. attentive. oxygen. technical requirements . how the product will be stacked and displayed. no matter what services your facility offers. snack foods packed in plastic bags communicate fun. 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. title. must pledge and promise to provide the finest personal service to each and every guest. Make friendly. you may want to have a "family resemblance" in the packaging of these products (i. Two-Way Stretching.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.
A brand serves to create associations and expectations among products made by a producer. product or service. and design scheme that convey the essence of a company. fonts. and through the influence of advertising. The key objective is to create a relationship of trust. Co-branding involves marketing activity involving two or more products. slogan. ideas.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. it refers to the descriptive verbal attributes and concrete symbols such as a name. and even personality. design. Brand recognition and other reactions are created by the accumulation of experiences with the specific product or service. symbols and sound which may be developed to represent implicit values. A brand often includes an explicit logo. symbol. Branding means creating reference of certain products in consumers mind. . and media commentary. term. product or service. A brand represents the consumers' experience with an organization. or other feature that distinguishes products and services from competitive offerings. A brand has also been defined as an identifiable entity that makes a specific promise of value. product. or service. A brand is a symbolic embodiment of all the information connected to a company. design. color schemes. A brand is a collection of images and ideas representing an economic producer. both directly relating to its use. logo. more specifically.
the marketing of entities which supply ideas or promises rather than product and services (e. The experiential aspect consists of the sum of all points of contact with the brand and is known as the brand experience. but one of the products has no associated branding (such as a generic.The brand. 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. as it often serves to denote a certain attractive quality or characteristic (see also brand promise). is a symbolic construct created within the minds of people and consists of all the information and expectations associated with a product or service. Disney has been successful at branding with their particular script font (originally created for Walt Disney's "signature" logo). Advertising spokespersons have also become part of some brands. now being described as "cultural accessories and personal philosophies". When brand recognition builds up to a point where a brand enjoys a critical mass of positive sentiment in the marketplace. In non-commercial contexts. political parties or religious organizations) may also be known as "branding". and "branding" and brand equity have become increasingly important components of culture and the economy. it is said to have achieved brand franchise. as it demonstrates what the brand owner is able to offer in the marketplace. if the brand name exclusively identifies the brand owner as the commercial source of products or services. although it is more correctly used to specifically denote written or spoken linguistic elements of a brand. for example: Mr. Whipple . From the perspective of brand owners. creating the impression that a brand associated with a product or service has certain qualities or characteristics that make it special or unique. 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. One goal in brand recognition is the identification of a brand without the name of the company present. The psychological aspect. branded products or services also command higher prices. store-branded product). Brand name The brand name is often used interchangeably with "brand". In this context a "brand name" constitutes a type of trademark.com. Marketers engaged in branding seek to develop or align the expectations behind the brand experience (see also brand promise).g. Concepts Some marketers distinguish the psychological aspect of a brand from the experiential aspect. see Philip Kotler & Waldemar Pfoertsch. Where two products resemble each other. A brand which is widely known in the marketplace acquires brand recognition. This approach works not only for consumer goods B2C (Business-to-Consumer). A brand is therefore one of the most valuable elements in an advertising theme. sometimes referred to as the brand image. For example. A brand owner may seek to protect proprietary rights in relation to a brand name through trademark registration. which it used in the logo for go. but also for B2B (Business-to-Business).
such as name and visual appearance. Most products have some kind of brand identity. In 1992 Jean-Noel Kapferer developed the Brand Identity Prism. Brand identity may be defined as simply the outward expression of the brand. The brand owner will seek to bridge the gap between the brand image and the brand identity. In this respect Kapferer positions brand personality as one factor within brand identity." Brand value Brand equity or brand value measures the total value of the brand to the brand owner. from common table salt to designer clothes.Some practitioners however define brand identity as not only outward expression (or physical facet). honest dealing.Brand identity is fundamental to consumer recognition and symbolizes the brand's differentiation from competitors. or imagination. and reflects the extent of brand franchise. striving for mutual advantage and contributing to human progress. The brand promise is often strongly associated with the brand owner's name and/or logo. "relationship" and "reflected consumer". communication etc. Brand identity How the brand owner wants the consumer to perceive the brand . as well as packaging and graphics. warmth. product or service. Such brand personality traits may include seriousness. BP continues "At the core of BP is an unshakable commitment to integrity.The act of associating a product or service with a brand has become part of pop culture. but the memories we help you create are even better.of Charmin toilet tissue and Tony the Tiger of Kellogg's. characteristics and behaviour of their brand. .and by extension the branded company."" Other brand owners may develop their brand promise into a detailed statement on the values. Interactions may include employees. "culture (values)" and "consumer mentalisation". Brand personality Brand personality is the attribution of human personality traits to a brand as a way to achieve differentiation. On the externalization side brand identity consists of "physical facet". treating everyone with respect and dignity. Brand personality is usually built through long-term marketing. which identifies what consumers should expect from all interactions with the brand. organisation. representatives. On the internalization side brand identity consists of "personality". actual service or product quality or performance. but also in terms of the values a brand carries in the eye of the consumer. The brand promise may be expressed in a "tag line". which charts the brand identity along a constructed source and constructed receiver axis. 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. Brand promise Brand promise is a statement from the brand owner to customers. with externalization on the one side and internalization on the other.
6 billion US$. For example. RHM (Rank Hovis McDougall). the ability of the company to attract and retain skilled and/or talented employees offering competitive salaries). In this context. especially in the case of consumer product brands. for example. 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“. and rose back to 9.26 billion US$ in 2004 after Nike addressed its supply chain issues. Brand value may also arise in terms of staff retention benefits (e. Brand value can be negatively influenced. In all these contexts. Up to 85 percent of a company’s market value might be intangible (for example know-how. Campaigning groups may deliberately target a company’s brand value to force a company into adopting a certain position or practices.g. for example in the case of Coca-Cola or Microsoft. However. Brand monopoly In economic terms the "brand" is. there is also a legal dimension. most "branding" is established by promotional means. 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. states that tangible assets may account for less than five percent of a company’s market value.g. may arise out of customer loyalty. logo or message. The monopoly may also be extended. a brand consultancy. used by analysts to rationalize the difference between a company's "book value" and market value. as pioneered by groups such as Adbusters. in 1999 Nike's brand value was estimated at 8 billion US$. This attack may be visual. whatever its derivation. or even created. Some campaign groups have thought to do this by deliberately subverting a brand’s image. in effect. For example. by patent. or focusing on the message. and Interbrand. Brand value. have valued their international brands at anything up to twenty times their annual earnings. and other sui generis intellectual property regimes (e. The "brand". retailers' "own label" brands can be just as powerful. such as stock or machinery). creating a negative association among consumers. For example.A brand can be an intangible asset. Facing media exposure and consumer boycotts over supply chain issues. trade secret (e.g. Design Act). copyright. secret recipe).: Plant Varieties Act. existing client relationships). and its brand value can account for some of the difference. for it is essential that the brand names and trademarks are protected by all means available. the market value of a company can far exceed its tangible assets (physical assets owned by the company. particularly those related to decreased price competition. Nike's brand value declined in following two years to 7. Branding policies There are a number of possible policies: Company name . is a very important investment for any organization.
which may even compete against other brands from the same company (for example. a simple shopping experience and the anti-brand movement. Individual branding Each brand has a separate name (such as Seven-Up or Nivea Sun (Beiersdorf)). quality goods" in English. the saying. Attitude branding Attitude branding is the choice to represent a larger feeling. and Apple Computer. which means "No label. before the company's downgrading. especially in the industrial sector. used by a number of suppliers of the endproduct. or the affirmation that the cup of coffee you're drinking really matters. brands may be developed in a number of ways: Brand extension . Marketing labeled as attitude branding include that of Nike. Safeway. Surf and Lynx are all owned by Unilever). whether it's the challenge to do your best in sports and fitness. attitude branding is described by Naomi Klein as a "fetish strategy". Other brands which are thought to follow a no-brand strategy are American Apparel.Often. may wish to guarantee its own position by promoting that component as a brand in its own right. examples include the Japanese company Muji.it adds a greater sense of purpose to the experience. it is just the company's name which is promoted (leading to one of the most powerful statements of "branding". does not brand its products. which like Muji." . "A great brand raises the bar -.Howard Schultz (president. which is not necessarily connected with the product or consumption of the product at all. Muji products are not branded. No Logo. Brand development In terms of existing products. ceo and chairman of Starbucks "No-brand" branding Recently a number of companies have successfully pursued "No-Brand" strategies. Mercedes-Benz or Black & Decker) or even a range of subsidiary brands (such as Cadbury Dairy Milk. which secures its position in the PC market with the slogan "Intel Inside". Starbucks. Cadbury Flake or Cadbury Fingers in the United States). The Body Shop. 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. Although there is a distinct Muji brand. "No one ever got fired for buying IBM"). Omo. Derived brands In this case the supplier of a key component. The most frequently quoted example is Intel. Persil. In this case a very strong brand name (or company name) is made the vehicle for a range of products (for example. In the 2000 book.
The main differences being that small businesses usually have a smaller market and have less reach than larger brands. Individual brand names naturally allow greater flexibility by permitting a variety of different products. home decor. When Coca-Cola launched "Diet Coke" and "Cherry Coke" they stayed within the originating product category: nonalcoholic carbonated beverages. Caterpillar to shoes and watches. to be sold without confusing the consumer's perception of what business the company is in or diluting higher quality products. golf balls. Michelin to a restaurant guide. Alternatively. Some people argue that it is not possible to brand a small business. for example. Marriott uses the name Fairfield Inns for its budget chain (and Ramada uses Rodeway for its own cheaper hotels). home textile. In its most extreme manifestation. many fashion and designer companies extended brands into fragrances. 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. 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. Adidas and Puma to personal hygiene. tennis racquets and adhesives. it may be the price the organization is willing to pay for shifting its position in the market. furniture. of differing quality. Once again. 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). 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). in which the new brand takes business away from an established one which the organization also owns.The existing strong brand name can be used as a vehicle for new or modified products. the new product being one stage in this process. Multi-brands Alternatively. dish washing detergents. This also increases the total number of "facings" it receives on supermarket shelves. etc. hotels. . Cannibalization is a particular problem of a "multibrand" approach. shoes and accessories. uses it to keep the very different parts of the business separate — from Sara Lee cakes through Kiwi polishes to L'Eggs pantyhose. Dunlop extended its brand from tires to other rubber products such as shoes. simply to soak up some of the share of the market which will in any case go to minor brands. on the other hand. There is a difference between brand extension and line extension. Mars extended its brand to ice cream. in order to pre-empt others entering the market. however there are many examples of small businesses that became very successful due to branding. luggage. Procter & Gamble is a leading exponent of this philosophy. Sara Lee. In the hotel business. (sun-) glasses. Small business brands Branding a small or medium sized business (SME) follows essentially the same principle a branding larger corporation. running as many as ten detergent brands in the US market. This may be acceptable (indeed to be expected) if there is a net gain overall.
from local communities to centralized factories. often simply a vehicle for a different kind of image). Lyle’s Golden Syrup makes a similar claim. perhaps. emphasizing the lack of advertising and. At the same time. This means that strong independent brands (such as Kellogg's and Heinz). however.Own brands and generics With the emergence of strong retailers the "own brand". "generic" (that is. claims their red triangle brand was the world's first trademark. which have maintained their marketing investments. Indeed. It would appear that the penetration of such generic products peaked in the early 1980s. such as soap. 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. 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). the factories would literally brand their logo or insignia on the barrels used. More than 50 per cent of UK FMCG brand leaders have held their position for more than two decades. are likely to continue their strong performance. The strength of the retailers has. even the strongest own brands in the UK rarely achieve better than third place in the overall market. Bass & Company. extending the meaning of "brand" to that of trademark. and most consumers still appear to be looking for the qualities that the conventional brand provides. 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. 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). also emerged as a major factor in the marketplace. probably as an outgrowth of consumerism. the plain packaging (which was. a retailer's own branded product (or service). 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. especially. the British brewery. These made a positive virtue of saving the cost of almost all marketing activities. Concerns were raised that such "own brands" might displace all other brands (as they have done in Marks & Spencer outlets). effectively unbranded) goods have also emerged. 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). brands in the field of mass-marketing originated in the 19th century with the advent of packaged goods. and may outperform those products that are not otherwise strongly branded. When shipping their items. having been named as Britain’s . although it is arguable that those which have switched their budgets to "buy space" in the retailers may be more exposed. Some of the more active marketers have now also switched to 'category marketing' .
From there. 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. Pricing Pricing refers to the amount of money exchanged for a product. following the American Civil War. decided that since all other cattle were branded. Campbell soup. Coca Cola. originally meaning an unbranded calf. In 1988. Marlboro cigarettes were notorious at the time for their heavy advertising campaigns. manufacturers quickly learned to build their brand's identity and personality (see brand identity and brand personality). and Quaker Oats were among the first products to be 'branded'. and is now quantified in concepts such as brand value and brand equity. questioning the power of "brand value". comes from Texas rancher Samuel Augustus Maverick who. The packaged goods manufacturers needed to convince the market that the public could place just as much trust in the non-local product.marked by some as the death of the brand . such as Uncle Ben's rice and Kellogg's breakfast cereal furnish illustrations of the problem. local products. Quaker Oats. and jingles which began to appear on radio and early television. Juicy Fruit gum. it was felt that what they really purchased was its brand name. Aunt Jemima. where the consumers buy "the brand" instead of the product. fun or luxury. This trend continued to the 1980s. to a customer base familiar only with local goods. manufacturers began to recognize the way in which consumers were developing relationships with their brands in a social/psychological/anthropological sense. in an effort to increase the consumer's familiarity with their products. Marlboro Friday April 2. his would be identified by having no markings at all. generating mass-produced goods and needed to sell their products to a wider market. This began the practice we now know as "branding" today. Many brands of that era. the term "maverick".the day Phillip Morris declared that they were to cut the price of Marlboro cigarettes by 20%. Coca-Cola. . It quickly became apparent that a generic package of soap had difficulty competing with familiar. Cattle were branded long before this. for example. and well-nuanced brand image. By the 1940s. Companies soon adopted slogans. This was an early commercial explanation of what we now know as branding. PepsiCo. James Walter Thompson published a house ad explaining trademark advertising.oldest brand. 1993 . mascots. in order to compete with bargain cigarettes. Factories established during the Industrial Revolution. Many thought the event signalled the beginning of a trend towards "brand blindness" (Klein 13). Around 1900. In response to the announcement Wall street stocks nose-dived for a large number of 'branded' companies: Heinz. Phillip Morris purchased Kraft for six times what the company was worth on paper. such as youthfulness. with its green and gold packaging having remained almost unchanged since 1885. Naomi Klein has described this development as "brand equity mania".
There are many ways to price a product. This approach is used where a a substantial competitive advantage exists. Penetration Pricing. . Savoy Hotel rooms. Let's have a look at some of them and try to understand the best policy/strategy in various situations.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. Such high prices are charge for luxuries such as Cunard Cruises. Premium Pricing. See also eMarketing Price. Use a high price where there is a uniqueness about the product or service. and Concorde flights.
the price is increased. rather than rational basis. However. economy pricing. The cost of marketing and manufacture are kept at a minimum. Once this is achieved. However there are other important approaches to pricing. and the price inevitably falls due to increased supply. Supermarkets often have economy brands for soups. Optional 'extras' increase the overall price of the product or service. Economy Pricing. Manufacturers of digital watches used a skimming approach in the 1970s. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost. The high price tends to attract new competitors into the market. penetration pricing. . Captive Product Pricing Where products have complements. This approach was used by France Telecom and Sky TV. Companies will attempt to increase the amount customer spend once they start to buy. This approach is used when the marketer wants the consumer to respond on an emotional. spaghetti. For example car washes. and price skimming are the four main pricing policies/strategies. They form the bases for the exercise. 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. and the whole package $6. the advantage is not sustainable. For example 'price point perspective' 99 cents not one dollar. other marketing strategies and pricing approaches are implemented. wash and wax $4. Premium pricing. Product Line Pricing. etc. Where there is a range of product or services the pricing reflect the benefits of parts of the range. Charge a high price because you have a substantial competitive advantage. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other. Price Skimming.The price charged for products and services is set artificially low in order to gain market share. This is a no frills low price. companies will charge a premium price where the consumer is captured. Basic wash could be $2. Optional Product Pricing. Psychological Pricing.
and assume that you have $10.Price your product based on the value it creates for the customer. value meals at McDonalds. You decide that you want to operate at a 20% markup. Target return pricing . including both cost of goods and fixed costs at your current volume.Set the price at your production cost. Here sellers combine several products in the same package. Geographical pricing is evident where there are variations in price in different parts of the world. Videos and CDs are often sold using the bundle approach. if you can achieve it.Product Bundle Pricing.000 units in the first year. so you add $10 (20% x $50) to the cost and come up with a price of $60 per unit. So long as you have your costs calculated correctly and have accurately predicted your sales volume. 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. your fixed costs come to $30 per unit. The most extreme variation on this is "pay for performance" pricing for services. Pricing Methods Four models for calculating your pricing As we said earlier. you will always be operating at a profit. in • • . Value Pricing. This is usually the most profitable form of pricing. Here are four ways to calculate prices: • Cost-plus pricing . now you need some way to crunch the actual numbers. Pricing to promote a product is a very common application. let's use the same situation as above.000 invested in the company.000 profit on 1. Value-based pricing . there is no "one right way" to calculate your pricing. or where shipping costs increase price. your widgets cost $20 in raw materials and production costs. For example rarity value. Promotional Pricing. and at current sales volume (or anticipated initial sales volume). This also serves to move old stock. Once you've considered the various factors involved and determined your objectives for your pricing strategy.Set your price to achieve a target return-on-investment (ROI). or $10 profit per unit. plus a certain profit margin. giving you again a price of $60 per unit. For example. You want to recoup all your investment in the first year. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free). Your total cost is $50 per unit.g. so you need to make $10. For example. Your expected sales volume is 1. Geographical Pricing.000 units.
Sometimes it simply doesn't matter what the value of the product is. there is one more major factor that must be considered.maybe even too cheap. you'd have a hard time charging two or three thousand dollars for it -.99 "value menu"). your profit has to be enough for you to live on and still have money to reinvest in the company. you must be priced lower than your competition. In that case. and customers would gladly pay it. either by miscalculating costs or by inadequate market research to determine fair pricing. A little market testing will help you determine the maximum price consumers will perceive as fair. 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. but many entrepreneurs seem to miss this simple concept. Have you figured salary for yourself in your costs? If not. "under $100" is a popular price point. 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. Meals under $5 are still a popular price point.people would just feel like they were being gouged. how far off can you be and still be profitable? Ideally. if people won't readily pay enough more than your cost to make you a fair profit. Fair pricing .If you want to be the "low-cost leader". You have to make a living. energy costs. Simply put. because it's "one bill" that people commonly carry. For example. Your price should almost never be lower than your costs or higher than what most consumers consider "fair". If it's obvious that your product only cost $20 to manufacture.which you charge on a variable scale according to the results you achieve. Let's say that your widget above saves the typical customer $1.000 in value. but more than enough increase in sales to offset it. There is simply a limit to what consumers perceive as "fair".There are certain "price points" (specific prices) at which people become much more willing to buy a certain type of product. since they would get their money back in a matter of months. even if you don't have any direct competition. How can you cut your costs substantially? Or change your product positioning to justify higher pricing? • • . This may seem obvious. o o Now. If you want to signal high quality. you must take into consideration the consumer's perception of your price. If your sales forecast is inaccurate. If your product reliably produced that kind of cost savings. $60 seems like a bargain .000 a year in. Popular price points . Dropping your price to a popular price point might mean a lower margin. even if it delivered $10. you should probably be priced higher than most of your competition. • Psychological pricing . you need to reconsider your business model entirely. figuring things like: o Positioning . $300 or more for it. you could easily charge $200. say. "Enough under $20 to be under $20 with sales tax" is another popular price point. However. as are entree or snack items under $1 (notice how many fast-food places have a $0.Ultimately.
anxiety pricing. Competitors may define your price range. worse." $20 for a view of a contestant's underwear with a candy bar. leapfrog your offering. be careful how customers perceive the offering. and the strength of the consumer's bond with the product.Pricing is a tricky business. Customers considered the subscription worth the full subscription price -. to augmented. price on parity if your product has better features. Consider how you can move your product from generic. Consider whether new products. This helps you better understand the offering's value to consumers. As a result. prestige brands. examine your offering's benefits. the number of close substitutes. If the price is too low. The winners packaged the chocolate with the "Amazing Sisters. the initial increase resulted in more subscribers as the new price was more in line with its consumer-perceived value. Its direct . or price lower if your product has relatively similar features to existing products. you can price higher if consumers perceive your product and/or brand is significantly better.but minus the merchandise value. An information client faced this situation with a premium product. ultimately. Two teams competed to sell the most M-Azing candy bars. You're certainly entitled to make a fair profit on your product. they don't optimize revenue potential. The merchandise retailed on its Web site. in fulfilling the consumer's specific needs. and "flasher pricing. The augmented offering sold for a whopping $5. something is ultimately worth only what someone is willing to pay for it. In this case. • Assess the product's availability and near substitutes. One client underpriced its subscription product. an online publishing client considered bundling subscriptions with $25 worth of merchandise its target market valued. marketers too often underestimate the strategic importance of pricing. including only its core physical attributes. The losing team undermined the value of its product with a combination of generic pricing. including additional features to enhance the offering and enabling you to charge more. and even a substantial one if you create value for your customers. As a result. Pricing Factors to Consider • Determine primary and secondary market segments. In fact. The firm underestimated the uniqueness of its offering. Underpricing hurts your product as much as overpricing does. Segments are important for positioning and merchandising the offering to ensure maximized sales at the established price point." two attractive blondes in short skirts. the client could increase the price with only limited risk to its customer base. 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. This is particularly true for high-end. In doing so. But remember. profitability. for example. To avoid this. The strategy instead decreased the value of my client's subscription in subscribers' eyes. yielding depressed response and lower sales. potential customers will think it can't be that good. Don't limit your analysis to online distribution channels. yielding higher profits than the other team's candy. an established $3 price for a basic candy bar. I've worked with companies that only take into account direct competitors selling through identical channels. new uses for existing products. both tangible and intangible. To increase annual subscriptions. or new technologies can compete with or. Like the contestants. • Survey the market for competitive and similar products. Examine all possible ways consumers can acquire your product. whatever customers were willing to pay (under the $3 price point).
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:
since the retailer sets the price and any relevant discounts or promotional offers. Direct distribution gives a producer much more control over these issues. By contrast perishable products (such as frozen food. to whom and at what price a product is sold. IBM Business Consulting Services released a survey that compiled in-depth interviews with more than 100 sales. training. complex medical equipment sold to hospitals). Another factor is the extent to which producers want to maintain control over how. Producers may also feel that they do not possess the customer-based skills to distribute their products. bread) require relatively short distribution channels . Many channel intermediaries focus heavily on the customer interface as a way of creating competitive advantage and cementing the relationship with their supplying producers.g. Another important factor is intermediary cost. If so.Influence Market factors Comments An important market factor is "buyer behaviour". the only option may be to use agents and/or other distributors. Retailers in particular invest heavily in properties. and merchandising executives at over 20 consumer products and retail companies. they effective lose control over the final consumer price. how do buyer's want to purchase the product? Do they prefer to buy from retailers. shop fitting etc. warehousing). train and equip a sales team. 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 . without giving as much priority to the needs of the other members of their distribution channels—namely. via mail order or perhaps over the Internet? Another important factor is buyer needs for product information. They may decide not to support a particular product if it requires too much investment (e. If a manufacturer sells via a retailer. there is no guarantee for a producer that their product/(s) are actually been stocked by the retailer. Intermediaries typically charge a "mark-up" or "commission" for participating in the channel. so .ideally suited to using intermediaries such as retailers. the retailers to whom they sell. The willingness of channel intermediaries to market product is also a factor. marketing. installation and servicing. 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. Product factors Large complex products are often supplied direct to customers (e.g. display equipment. locally. Only 9 percent of the retailers felt their suppliers had “a good understanding” of their business objectives.1 There are several types of participants that make up a distribution channel. meat. 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). Distribution Intensity THE RETAIL DISTRIBUTION CHANNEL E arly in 2005. Similarly. This might be deemed unacceptably high for the ultimate producer business.for example in the case of motor cars.
but different than. and storing the goods. But we will attempt to keep them separate as we describe the functions of each in relation to the other. the more types of services it will generally offer—from a name-branded credit card. A Kmart. an independent retailer. dollar stores. 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. to do the “physical” work of manufacturing.” short for “business-tobusiness. there are several subcategories such as factory outlets. You will notice some overlap because. The breadth and depth of product lines carried by the store depends a lot on its ownership. PARTICIPANTS IN THE DISTRIBUTION CHANNEL retailers come in many shapes and sizes. Retailers may be grouped according to any of the following four categories: _ Ownership. and may arrange for shipment to those retailers. or a franchisee. to on-site alterations. The distribution channel is where the “deals” are made to buy and sell products. The lines do blur between modern-day distribution channels and supply chains. since they purchase the products (thereby taking legal responsibility for them). sells Ann Taylor branded clothing—not much breadth of product line there. warehouse membership clubs. on the other hand. and so on. 32 Chapter 2 The Retail Distribution Channel In addition to a supply chain. The more exclusive or specialized the store. on the other hand. retailers belong to several (or many) different supply chains. An Ann Taylor store. specialty discount stores. as in Chapter 1 with supply chain participants. transporting. Within the “discounter” category. or can buy foreign product lines by becoming . Stores are generally either discounters or full-price retailers. each group focused on making and marketing different products. and facilitating the sales with services like consumer research. a smaller. to liberal return policies for its loyal customers. or departments within companies. _ Pricing philosophy. regional chain store. In this chapter. manufacturers and retailers participate in another give-and-take relationship known as a distribution channel or marketing channel. for example. With the “big box” discounters. customers pay for convenience and bypass traditional service. Sales. by bagging their own groceries and the like. not an individual. but perhaps does not have much depth (not many brands) in any given category of product. Wholesalers Wholesalers are intermediaries or middlemen who buy products from manufacturers and resell them to the retailers. keep them in inventory until they are resold to retailers.” This is a type of distribution channel in which the end consumer is a business. These distinctions between various types of stores will be important as we discuss their participation in certain distribution channels. a supply chain. and providing other services related to making the products attractive to customers and encouraging their ultimate sale. national chain store. extending credit. carries thousands of brands. Wholesalers can gather product from around a country or region. _ Product assortment. Then the supply chain kicks in. and ordering are done by these companies. consignment stores. but extensive depth in that line.let’s begin by listing them. as also previously mentioned. They take the same types of financial risks as retailers. so to speak. Every brick-and-mortar retailer can be classified as a large. A distribution channel is similar to. negotiations. _ Service level. 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. As you know if you’ve ever shopped for anything.
and foreign markets. is a direct channel marketer. Agents and Brokers Agents (sometimes called brokers) are also intermediaries who work between suppliers and retailers (or in B2B channels). A resident sales agent does not always have merchandise warehoused and ready to sell. This is when the producer sells to the retailer. not technically wholesalers. Buying offices can also be considered a type of agent or broker. like Lands’ End. 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. but discounters are retailers. noncompeting firms can easily handle those functions cost-effectively. 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. Having a distribution channel breaks the whole buying and selling process and all its related negotiations into manageable tasks. An intermediary who specializes in importing and exporting can handle the intricacies of customs paperwork. large companies need intermediaries because they are also in the business of manufacturing. for example. Resident sales agents are good examples in retail. that is exactly how it happens. Using an import wholesaler. And in B2B channels. too. The Need for Distribution Channels Why are all these layers needed in distribution? Why can’t a producer simply sell to a retailer. overseas shipping. 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. and they can sell to wholesalers as well as retailers. An intermediary who works for several small.importers. are also direct channel sellers. time. who sells to a consumer? It’s a fair question. but their agreements are different. They are independent sales representatives who typically work on commission based Participants in the Distribution Channel 33 on sales volume. Consider the small. or they may not have the money to hire a team of full-time salespeople to court the customers and secure the orders. in that they do not take ownership of the products they sell. and the retailer sells to the consumer. and in some cases. 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. Conversely. wholesalers may be called distributors. not marketing. They reside in the country to which they sell products. who pay the agent on commission. 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. each performed by companies that specialize in certain skills. In B2B arrangements. 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. for instance. but the products come from a variety of foreign manufacturers. _ Retailer channel. since they earn their money pairing up retailers with product lines from various manufacturers. Retailers that don’t have the money. 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. The term “wholesale” is often used to describe discount retailers (as in “wholesale clubs”). as mentioned in Chapter 1. This is when the same company that manufactures a product sells it directly to the consumer or end user. can be handy because they know the laws and customs of the suppliers’ nations. The resident sales agent represents those manufacturers. Mail-order catalog sales companies.
_ Dual channel or multiple channel. as the manufacturer sells to a wholesaler . If a product is perishable. Another advantage of the distribution channel is its ability to even out the natural ebbs and flows of a supply chain. Even for consumers. who sells to a wholesaler . . This factor encompasses two things: the population of an area and whether it is urban or rural. channel members may also work together to purchase goods or services in greater quantity at discounts. might sell some product lines at retail and others to commercial lawn care companies. it is not usually the retailer who makes the decision to utilize one channel over the others. _ The type of customer. what do they need and expect from their shopping experience. . who finally sells to the consumer or end user. There is no need for intermediaries when a customer orders a custom product directly from the company that makes it. 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. If a product is customized. . the distribution chain is handy—beyond handy.Wholesaler channel. . This term refers to the use of two or more channels to sell products to different types of customers. either because the retailer doesn’t carry much inventory or the consumer buys the item in small quantities. Intermediaries play a role here. most direct distribution channel—which means the fewest possible intermediaries along the way. The most complex arrangement involves several transactions. There are several characteristics of product lines that make them more or less appropriate for a particular type of channel. who sells to a retailer . like many grocery items. each requiring different intermediary services. who sells to a retailer . . The more widely dispersed the stores. _ Agent or broker channel. passing the savings on to customers. Briefly. They’ve worked hard to build an exclusive reputation. Depending on how close their relationships. the more logical the dependence on agents and wholesalers—or on multiple retailers in different cities—to keep product sales strong and steady. _ The producer’s level of control. _ Market size. . . Long distribution channels correspond to small purchases. This comes from the ability of some channel members to store excess goods until they are needed. and . it also benefits from a short distribution channel. . it requires the shortest. A lawnmower manufacturer.Who are the customers. who sells to the consumer. Business-to-business customers have completely different needs and buying habits than individual consumers. It is easier to sell direct to customers in a large city with lots of potential outlets for a product line. . What if there were no supermarkets. for example. often because the merchandise is being imported. like an expensive assembled-to-order computer system. The producer of the Types of Channels 35 to deal with currency exchange or negotiate payment terms with a bank in another country. Most top-dollar clothing designers and fragrance manufacturers do not want their products showing up anywhere and everywhere. in fact! It has become a necessity in our society. _ How Channels Are Chosen Although retailers drive distribution channels. The producer sells to an agent . . 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. and to stockpile goods in anticipation of seasonal sales peaks. these characteristics can be summarized as follows: _ The products themselves.
”) In B2B commerce. 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. Exclusive distribution is sometimes requested by the retailer. Exclusive distribution is thought of most frequently for high-dollar products such as luxury cars or Rolex watches. Types of Distribution within Channels The channel members may handle different portions of the transaction. 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. until Blockbuster Video opened and began its climb to dominate the market. one retail store or chain of stores has the legal right to market and sell the product line in a geographic area. that customers can’t get anywhere else. such as heavy equipment or high-tech products.they expect their distribution channel to work just as hard to protect and enhance their upscale image. but the fact is that even small-ticket items like toys are considered exclusive when they are in high demand.g. the ability to hire and train their own sales representatives. Selective distribution works best when consumers are prepared to "shop around" . and they will count on the members of their channel to honor their wishes and not make bargain “deals. the distribution strategy can take three different forms. A segment of the industry that is fragmented. training) on them. training. from most restrictive to least restrictive—and remember. ordered to the customer’s specifications and budgeted for in advance of the purchase. retailer. _ The size of the retailers. Smaller producers require a larger distribution chain in order to fill these roles. There are three broad options . point-of-purchase materials. warehouses for their own goods.intensive.” _ The size of the producing company. to ensure that the retailer has something unique. with most of the stores operating as single units.they have a preference for a particular brand or price and will search out the outlets that supply. Once a channel is selected. selective and exclusive distribution: Exclusive distribution is an extreme form of selective distribution in which only one wholesaler. An advantage of this approach is that the producer can choose the most appropriate or best-performing outlets and focus effort (e. for example. not quantity.in other words . requires the distribution channel to be longer. the producer or manufacturer offers sales assistance. the term “restrictive” does not automatically have a negative connotation. In exchange. and everyone in-between. Such a distribution arrangement can work toward the “exclusive” image of the product (because it’s harder to get). and that placement of the product(s) meets the contractual agreements of producer. They are listed as follows. In an exclusive distribution agreement. retailer or distributor is used in a specific geographical area. exclusive distribution works well for extremely specialized product lines. This was the case in the 1980s with video rental 36 Chapter 2 The Retail Distribution Channel stores. in retail. . the retailer (for having “the only ones” available). and other perks to the exclusive distributor. and the manufacturer (by implying that the company is interested in marketing “quality. . This may also mean the retailer commits to not selling any products that are going to compete with the line. not the producer. _ Selective distribution involves a producer using a limited number of outlets in a geographical area to sell products. These producers will choose a distribution channel that ensures no discount merchants have access to their lines.
Ironically. The retailers share inventory and sales numbers. (The producers may have other. Intensive distribution aims to provide saturation coverage of the market by using all available outlets. beer). information sharing is a trade-off. 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. Channel cooperation would be ideal—a joint effort of all the members to create a supply chain that is flexible. have differing goals. gives each partner a competitive advantage. Intensive distribution is usually required where customers have a range of acceptable brands to chose from. and only a few are permitted to carry the product line. their own products within the companies sell to. a customer will simply choose another _ Intensive distribution is the closest thing to blanket coverage in retail. lower-priced merchandise lines to sell to discounters. As with exclusive distribution. competitive side of traditional retailing. In other words. secondary brand names. like candy and soft drinks. . but these are generally sold under separate. are great examples of intensive distribution—their individual unit prices are so low that thousands must be sold to make a profit. from supermarkets and convenience stores to vending machines and restaurants. cigarettes.” They need the efficiency and the economy of scale. However. Like so many other aspects of business. this intensive product availability requires a large and complex distribution channel in order to cover all the sales outlets. although in some ways. conflict does occur when the members of a distribution channel choose different ways to operate within the system. Snack items. The ladies’ clothing industry is full of selective distribution agreements between designer labels and so-called “finer” department stores. if one brand is not available. total sales are directly linked to the number of outlets used (e. part of the goal here is to enhance the image of the product by making it harder (but certainly not impossible!) to obtain. and ultimately provides the best product and related services to the customer. so the supplier can keep the inventory stocked at the right levels. whether you’re selling candy bars or luxury automobiles.) 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. Retailers continuously weigh the costs and benefits of sharing data and working together. a “you can find it anywhere” theory of marketing. when things like labor strikes. 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. sudden price hikes.g. This allows the retailer to charge full price._ Selective distribution means the retailers are carefully screened. they do realize the benefits of sharing tools and skills that allow them to analyze data and make decisions. 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. For many products. or balk at sharing Channel Relationships . In the meantime. this kind of cooperation runs counter to the tough.
channel leadership can be wielded to the benefit or detriment of the other companies. and so on. The types . It’s better for everyone if the participants can figure out how to get along. In this case. make their importing decisions. importers. agents or brokers. in turn. any time. and cost savings to members of the channel. In exchange. A very common source of channel conflict is a producer’s decision to either increase or decrease prices.2 Similarly. 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. They can arise naturally from competition between multiple members of the same channel— retailers or wholesalers—who carry the same product line. repairs. Hundreds of manufacturers have offices in Bentonville. more generously) than what the manufacturer is willing to do. They will also occur when retailers have service issues with the products and want to handle returns. just to be conveniently located for Wal-Mart. Channel members negotiate with each other and offer complementary resources and services to move products “down the line” from manufacturers to consumers. In business-to-business channels. There is a hierarchy in all distribution channels. the company hasn’t updated its computer systems. and retailers. from price cuts to the acquisition and use of expensive new technology like radio frequency identification. Then. Areas of potential channel conflict are many. this Channel Captain Extraordinaire can require extraordinary things of its smaller partners. must listen to consumers’ complaints. The wholesalers take the flack about it from retailers—who. any manufacturer that uses a Just-In-Time (JIT) system. or exchanges differently (say. 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.CHANNEL RELATIONSHIPS information. and they consider it a small price to pay for increased access to their giant retail partner. which determine their supply chain relationships. who do more than provide materials and parts—they help design the vehicles Ford produces. whether the participants like it or not. 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. economies of scale. then something must be done. Retail distribution channels consist of some combination of producers or manufacturers. channel captains may take the lead in negotiating with a participating company that is not fulfilling its responsibilities—orders are late. The Retail Distribution Channel Companies participate in distribution channels. Like any kind of power. with offices for supplier representatives on-site in its plants. it may be struggling financially. Whatever the case. if the end result is that it’s bogging down everyone else in the channel. It is important to note that in a distribution channel. The company that has the most authority in the channel is referred to as the channel leader or channel captain. Wal-Mart’s situation aside. wholesalers or distributors. This game of “musical chairs” is difficult at best. “authority” means the partner’s ability to either influence or control the behavior of any of the other partners in the channel. Arkansas. Sharing this information allows the suppliers to plan their production runs. the CEO is uncommunicative or argumentative. Distribution channels are important because they allow for a continuous flow of product despite the natural peaks and slumps experienced in manufacturing and sales. Ford is known for its incredibly collaborative relationships with suppliers. Each step along the channel has a specific purpose that is met by one or more member companies. They also provide efficiency. the supply chain partners provide the raw materials and logistics to meet the channel requirements. at least in the case of price hikes. has forged a unique type of channel relationship. and disastrous at worst.
if undertaken separately. retailers and agents not actively selling.Strategic Alliances A third and similar partnership arrangement between separate companies with products or skills to share is the strategic alliance. It must be beneficial to both. invest in technology together. In so doing. and the pace continues unabated today as stores continue to branch into international sales. This requires common objectives and the willingness to communicate and share knowledge. 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. Retailers have been forging strategic alliances since the 1950s. 3. High profit margin added to goods by wholesalers and retailers. Reasons for indirect selling methods • • Manufacturer does not have the financial resources to distribute goods. That is. It must be horizontal. Distribution channels already established.AMWAY ) Manufacturers Reasons for direct selling methods • • • • • • Manufacturer wants to demonstrate goods. In order to be truly strategic. It must be collaborative. A strategic alliance is more than two companies holding shares of each others’ stock. money. and learn from each other. or ordering merchandise jointly for added buying power. Retailers commonly belong to several strategic alliances. the individual companies may lack the time. It also lets the consumer to be able to know how it works. Wholesalers. Middlemen unable to transport. which allows them to share the use of already-established distribution channels in pursuit of business growth in new markets. 2. A promising collaboration would be the alliance of two similar types of retailers in two different countries to share product lines. . two retailers or two wholesalers. It should not involve the stronger channel member barking orders to the weaker one. Manufacturer unable to convince wholesalers or retailers to stock product. the alliance must have all three of the following characteristics: 1. or expertise to manage. they use each others’ distribution channels in the new country. They offer a way to share the risks of business expansion that. it must be forged between companies of the same type.
Brokers specialize in the sale of one specific product. selling all of the products of the manufacturer. difficult to reach. Manufacturer does not have a wide assortment of goods to enable efficient marketing. Direct on-selling advantages. Buying agents buy goods on behalf of producers and retailers. They have full authority regarding price and terms of sale. They receive a brokerage. . 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. Selling agents act on an extended contractual basis. Too many consumers in a large area. Manufacturer wishes to use capital for further production. They do not acquire ownership of goods but receive del credere commission.• • • • • Manufacturer has no knowledge of efficient (specific) distribution. They have an expert knowledge of the purchasing function.
web. They operate within a specific area and sell related lines of goods but have limited authority regarding price and sales terms. PROMOTION Marketing communications breaks down the strategies involved with marketing messages into categories based on the goals of each message. There are distinct stages in converting strangers to customers that govern the communication medium that should be used. radio. 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.• Factory representatives represent more than one manufacturer. newspaper/magazines. 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: .
Information. consumer wants are the drivers of all strategic marketing decisions. Product → Solution . No strategy is pursued until it passes the test of consumer research. 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). place. price. the sense of identifying market changes and the product innovation approach. A major drawback of sales promotion is that it is easily copied by competition.• • • • Live. In the consumer-driven approach. People are given an incentive to buy. nor encourage repeat buys in the future. This system is basically the four Ps renamed and reworded to provide a customer focus. promotion) of marketing management. is driven by the needs of potential consumers. History attests to many products that were commercial failures in spite of being technological breakthroughs. Every aspect of a market offering. 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. A formal approach to this customer-focused marketing is known as SIVA (Solution. The starting point is always the consumer. The SIVA Model provides a demand/customer centric version alternative to the well-known 4Ps supply side model (product. This implies that the company focuses its activities and products on consumer demands. The rationale for this approach is that there is no point spending R&D funds developing products that people will not buy. It cannot be used as a sustainable source of differentiation. but it does not build customer loyalty. Generally there are three ways of doing this: the customer-driven approach. Access). including the nature of the product itself. Value.
as a formal `marketing plan'. how and from whom do they know enough to let them make a buying decision? 3. Value: Does the customer know the value of the transaction. what are the benefits. a brand.Promotion → Information Price Place → Value → Access The four elements of the SIVA model are: 1. Marketing planning aims and objectives . Solid marketing strategy is the foundation of a well-written marketing plan. The model focuses heavily on the customer and how they view the transaction. Information: Does the customer know about the solution? If so. the plan has to be formalized. 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. and presented by them in Market Leader the journal of the Marketing Society in the UK. what might they have to sacrifice. or a product line. a marketing plan without a sound strategic foundation is of little use. what will be their reward? 4.and is amended accordingly. 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. from the overall objectives of the organization down to the individual action plan for a part of one marketing programme. so that the draft output of each stage is checked to see what impact it has on the earlier stages . It can be for a product or service. a few organizations may look at a practical plan which stretches three or more years ahead. Marketing plans cover between one and five years. To be most effective. typically covering just the year ahead. A marketing plan may be part of an overall business plan. "strategic planning" is an annual process. usually in written form. what it will cost. The essence of the process is that it moves from the general to the specific. It is also an interactive process. While a marketing plan contains a list of actions. Occasionally. Solution: How appropriate is the solution to the customer's problem/need? 2.
" If the organization in general. might have limited its subsequent development into other areas. Surprisingly. it is likely that only a few aspects will be sufficiently important to have any significant impact on the marketing plan. it should not be too wide or it will become meaningless. however. On the other hand. then there is a good chance that the organization will achieve a strong position in its markets (and attain that future). 'customer needs' to be served. Abell suggested that the definition should cover three dimensions: 'customer groups' to be served. In this context some factors related to the customer. has a strong vision of where its future lies. 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].indeed. as IBM was during the early 1900s. in the form of their `Superordinate Goals'. although not by the popular exponents of corporate strategy . or it will constrict the development of the organization. The idea precedes the deed. 'In Search of Excellence' said: "Nothing drives progress like the imagination. and will be supported by its staff at all levels. will lay the 'corporate mission'.' Perhaps the most important factor in successful marketing is the `corporate vision'. and 'technologies' to be utilized .Behind the corporate objectives. it was perhaps the main theme of the book by Peters and Waterman. The emphasis at this stage is on obtaining a complete and accurate picture. but all may need to be reviewed to determine just which 'are' the few. This `corporate mission' can be thought of as a definition of what the organization is. a vision originally promoted by the charismatic Watson dynasty. and its chief executive in particular. In a single organization. This definition should not be too narrow. which should be included in the material collected for the audit. which in themselves offer the main context for the marketing plan. which in turn provides the context for these corporate objectives. of what it does: 'Our business is …'. This will be not least because its strategies will be consistent. In this context. Thus. all of IBM's marketing activities were underpinned by its philosophy of `customer service'. 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? . it is largely neglected by marketing textbooks. `We want to make a profit' is not too helpful in developing specific plans. a too rigorous concentration on the view that `We are in the business of making meat-scales'.
cultural and technical environment. and can form a sound basis for the marketing audit itself. competitors and the overall economic. since this avoids the otherwise heavy workload involved in collecting it as part of the regular. 'Review of the marketing system'. typically annual. and `garbage in. Advertising. indeed. 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). This splits the material into three groups: 1. garbage out' applies with a vengeance. as and when it becomes available. 5. A study of the company's marketing mix. distribution sections. in terms of the 7 Ps . who would in most cases act as a source for this information. political. 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.Information from these departments. but one simple format . research and development. Product data --From production. the coordinated planning of the individual products and services can contribute towards the balanced portfolio. merchandising data . It is clear that the basic material to be input to the marketing audit should be comprehensive. The structure of the facts book will be designed to match the specific needs of the organization. A study of the organization's markets.may be applicable in many cases. His sources of data. customers. because the validity of the whole marketing plan is reliant upon the accuracy of the input from this system. as well as the current situation.Sales.when time is usually at a premium.format for a `brand reference book' (or. Even so. 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'. The marketing system itself needs to be regularly questioned. covering developing trends.• • What are their attitudes? What are their buying intentions? A `traditional' . 'Review of the detailed marketing activity'. a `marketing facts book') was suggested by Godley more than three decades ago: 1. It is apparent that a marketing audit can be a complex process.albeit product-based . packaging. 3. Financial data --Facts for this section will come from management accounting. . Market data and miscellany . 4. 2. 'Review of the marketing environment'.(see below) 3. planning process itself . • 'Portfolio planning'. Accordingly. 2. Sales and distribution data . costing and finance sections. A study of the marketing organization. The last of these is too frequently ignored. the best approach is to accumulate this material continuously.From market research. sales promotion.suggested by Malcolm McDonald . marketing research systems and the current marketing objectives and strategies. however. In addition. assume the resources of a very large organization.
Getting the product known . They are essentially about the match between those 'products' and 'markets'. James Quinn succinctly defined objectives in general as: "Goals (or objectives) state 'what' is to be achieved and 'when' results are to be accomplished. This next stage in marketing planning is indeed the key to the whole marketing process. The marketing objectives must usually be based. People. but the framework they offer can be very useful in building the action plans. or `game plan'. This measurement may be in terms of sales volume.The amount of money needed to buy products Product. and on the 20 per cent of customers. Examples are: Price. percentage penetration of distribution outlets and so on. which will account for 80 per cent of the volume and 80 per cent of the `profit'. on the organization's financial objectives. advertising and so on are at a lower level. 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'. market share. Process. • It is only at this stage (of deciding the marketing objectives) that the active part of the marketing planning process begins'. It needs to concentrate on the 20 per cent of products or services. Place. concise and simple. with which strategy is most often confused: "Policies are rules or guidelines that express the 'limits' within which action should occur. The marketing objectives state just where the company intends to be. above all. To be most effective. '7 Ps': Product. Physical Environment. at some specific time in the future. money value. be unequivocally monitored. He went on to explain his view of the role of `policies'. within limits.• '80:20 rule'. Price and Promotion. marketing strategies can be seen as the means. Objectives for pricing. and corrective action taken as necessary. distribution. 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). To achieve the maximum impact. converting these financial measurements into the related marketing measurements. are generally concerned with the 7 Ps. They are part of the marketing strategy needed to achieve marketing objectives. in the framework that we have chosen to use. and should not be confused with marketing objectives. The 7 Ps can sometimes divert attention from the customer. by which marketing objectives will be achieved and. As it is quantified it can. but they do not state 'how' the results are to be achieved". Simplifying somewhat. objectives should be capable of measurement and therefore 'quantifiable'.The actual product Promotion (advertising). the marketing plan must be clear.
The focus of the strategies must be the objectives to be achieved .The ambience. Again. you will need to re-check the feasibility of your objectives and strategies in terms of the market share. these strategies describe how the objectives will be achieved. and on the strategies chosen to satisfy these needs.Placement. that of the detailed plans. Each will base its plans upon the detailed needs of its customers. Having completed this crucial stage of the planning process. that they are not the only framework. which spell out exactly what programmes and individual activities will take place over the period of the plan (usually over the next year). profits and so on which these demand in practice. it might include a structured list of the major options chosen. As in the rest of the marketing discipline.Represent the business Physical environment. experience. an essential part of any plan. practical outcome of the whole planning process. as we have done. Without these specified . the focus will vary. Alternatively. even in terms of success in meeting its objectives. A market or geographically oriented company will concentrate on each market or geographical area. you will need to employ judgement. Although these detailed plans may cover each of the 7 Ps.and preferably quantified . market research or anything else which helps you to look at your conclusions from all possible angles. Timing is. these detailed marketing programmes are the most important. Detailed plans and programmes At this stage. to use the framework of the 7 Ps. indeed.not the process of planning itself. the most important element is. Exactly when it is the best time for each element of the strategy to be implemented is often critical. you will need to develop your overall marketing strategies into detailed plans and programmes.How do people obtain your product In principle. therefore. and may divert attention from the real issues. and perhaps more positively. As a result. however. The 7 Ps are a useful framework for deciding how the company's resources will be manipulated (strategically) to achieve the objectives. depending upon your organization's specific strategies. These plans should therefore be: . sales. Taking the right action at the wrong time can sometimes be almost as bad as taking the wrong action at the right time.Where the product is located People. and should normally appear as a schedule of planned activities. One aspect of strategy which is often overlooked is that of 'timing'. mood. Only if it fits the needs of these objectives should you choose. costs. or tone of the environment Process.activities the plan cannot be monitored. A product-oriented company will focus its plans for the 7 Ps around each of its products. It should be noted. It is these programmes and activities which will then constitute the `marketing' of the organization over the period. The strategy statement can take the form of a purely verbal description of the strategic options which have been chosen.
Macroenvironment o economy . 4. and agree that they are achievable. Title page 2. Controls In detail. and the lessons learned. 2. If the marketing plan is to work. including advantages and disadvantages for marketing 4. Description of the product or service. to be incorporated in the next year's plan. Executive Summary Situational Analysis Opportunities / Issue Analysis . Pricing strategy 5. Executive Summary 3. Realistic . quantified.The temptation to proliferate activities beyond the numbers which can be realistically controlled should be avoided.They should be an unambiguous statement of 'exactly' what is to be done. so that its performance can be monitored. including special features 2.The predicted outcome of each activity should be.They should be achievable. 5. Content of the marketing plan A marketing plan for a small business typically includes Small Business Administration Description of competitors. 6.• • Clear . The 80:20 Rule applies in this context too. Quantified . Agreed . Market Segmentation Medium-sized and large organizations 1. 3. • • • The resulting plans should become a working document which will guide the campaigns taking place throughout the organization over the period of the plan.Those who are to implement them should be committed to them. Current Situation . including the level of demand for the product or service and the strengths and weaknesses of competitors 1. as far as possible. every exception to it (throughout the year) must be questioned. Financial Forecast 8. Description of the business location. including the advertising and promotional plan 3. Marketing budget. a complete marketing plan typically includes: 1.SWOT Analysis Objectives Strategy Action Programme (the operational marketing plan itself for the period under review) 7. Focused .
4. 5. legal government technology ecological sociocultural supply chain Current Situation .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. 6.Product o product mix o o o o o o .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 . 8.Consumer Analysis  o nature of the buying decision o participants o demographics o psychographics o buyer motivation and expectations o loyalty segments Current Situation . 9.
Price o pricing objectives o pricing method (eg.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. Marketing Strategy . flights.product strengths and weaknesses perceptual mapping o product life cycle management and new product development o Brand name. o by customer segment. demand based.E. and media o sales force requirements. 11.: Web. techniques.: cost plus. Marketing Strategy . brand image.: skimming. Marketing Strategy .G. o by geographical market. and management o sales promotion o publicity and public relations o electronic promotion (eg. and brand equity o the augmented product o product portfolio analysis B. Multi Factoral analysis Quality Function Deployment 10.segmented marketing actions and market share objectives o by product. or telephone) o word of mouth marketing (buzz) o viral marketing 13. or competitor indexing) o pricing strategy (eg. frequency. 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 .Distribution o geographical coverage o distribution channels o physical distribution and logistics o electronic distribution 14.C. Analysis contribution margin analysis G. Marketing Strategy . o by distribution channel. theme.
Best of all. Continuous monitoring of performance. the related plans may well also need to be changed. represents a most important aspect of this. against predetermined targets. then investigates the individual elements (individual products. Again. at least in terms of the quantifiable aspects of the plans.planning one full year ahead each new quarter. in non-profit organizations for example. it is important to put both quantities and timescales into the marketing objectives (for example. Of course.analysis'.with attention focused on them so regularly . are: Sales analysis Most organizations track their sales results. which are normally tracked.which allows a more immediate picture of deviations to become evident. if not the wealth of backing detail. but it also ensures that the plans embody the latest information. sales territories. 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. However. in many cases the best (most realistic) planning cycle will revolve around a quarterly review. which is a nicely pseudo-scientific term for the normal management process of investigating detailed problems. `Micro. and . Plans only have validity if they are actually used to control the progress of a company: their success lies in their implementation. to capture 20 per cent by value of the market within two years) and into the corresponding strategies. is probably a quarterly rolling review .. Performance analysis The most important elements of marketing performance. Changes in the environment mean that the forecasts often have to be changed. Along with these. 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. The more sophisticated track them in terms of 'sales variance' . Scenarios o Prediction of Future Scenarios o Plan of Action for each Scenario 17. Accordingly. customers and so on) which are failing to meet targets.the deviation from the target figures . perhaps even more important is the enforced discipline of a regular formal review.forces both the plans and their implementation to be realistic. not in the writing'.contingencies (What if's) 15. the number of clients. or. as with forecasts. this does absorb more planning resource. .
Financial Analysis The `bottom line' of marketing activities should at least in theory. Though absolute sales might grow in an expanding market. is typically by those making use of PIMS (Profit Impact of Management Strategies).Market share analysis Few organizations track market share though it is often an important metric. or the organization itself.that in the specific. which can also indicate the organization's performance in terms of its longer-term marketing strengths and may accordingly be even more important indicators. 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). the figures which can be obtained (in the UK) from `The Centre for Interfirm Comparison'. Some useful measures are: • • • market research .including customer panels (which are used to track changes over time) lost business . the stock was not available or the product did not meet the customer's exact requirements customer complaints .how many customers complain about the products or services.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. 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'. but now run by the Strategic Planning Institute. initiated by the General Electric Company and then developed by Harvard Business School. The above performance analyses concentrate on the quantitative measures which are directly related to short-term performance. although this may be broken down into other elements (advertising to sales. and so on). Where such market share is tracked. sales administration to sales. The most sophisticated use of this approach. for example. where the comparable emphasis may be on remaining within budgeted costs). essentially tracking customer attitudes. however. for instance. there may be a number of aspects which will be followed: • • • • overall market share segment share . But there are a number of indirect measures. and about what . be the net profit (for all except non-profit organizations. using.
highly quantified.Ven: • • Affordable . there are many other alternatives . It is a managerial tool that balances what is needed to be spent against what can be afforded. This figure is most often based on historical spending. and helps make choices about priorities. However. The plan. but at least it forges a link with sales volume. and. they are particularly important. performance against budget is the main (regular) management review process. the two will run in parallel and will interact. What is more. a forum. rather than the other way round. in practice. typically the managing director on behalf of the board. However. perhaps the most important benefit of these plans is the planning process itself. However. although. Percentage of revenue . it does imply that promotion is a result of sales. Approaches to budgeting Many budgets are based on history. Because these are so rigorously quantified. They should. together with the associated discussions. thus.This may be the most common approach to budgeting. It is then used in monitoring performance in practice. Someone. in that the budget will be set at a certain percentage of revenue. to pull together all the revenues and costs involved in marketing into one comprehensive document. and thus follows trends in sales. . At the very least. written marketing plan is essential. This approach assumes that promotion is a cost.Use of Marketing Plans A formal. Budgets as Managerial Tools The classic quantification of a marketing plan appears in the form of budgets. they should be capable of being monitored accurately. represent an unequivocal projection of actions and expected results. Its starting point should be the marketing strategies and plans. the rigorous. They are the equivalent of `time-series' forecasting. decides what is a `reasonable' promotional budget. Other alternatives are based on a simple `percentage of sales' or on `what the competitors are doing'. then provides an agreed context for their subsequent management activities. indeed.This is a variation of `affordable'. The marketing budget is usually the most powerful tool by which you think through the relationship between desired results and available means. for `information-rich' and productively focused discussions between the various managers involved. even for those not described in the plan itself. what can be afforded. and sometimes is seen as an avoidable cost. budgets may cause a rethink of some of the more optimistic elements of the plans. thus. which have already been formulated in the marketing plan itself. in that it provides an unambiguous reference point for activities throughout the planning period. The purpose of a marketing budget is. It is assumed that next year's budgets should follow some trend that is discernible over recent history. This typically offers a unique opportunity.
. On the other hand. Differences between marketing and business plans. in which case. After carefully documenting their requirements.In essence. or spends a proportion of what the brand leader is spending. The main features of the B2B selling process are. On the other hand.Both of these methods are seen by many managements to be `realistic'. He demonstrates a photocopier/fax/printer to the office administrator. it assumes that the competitors know best.. An organization has significant need for legal services and obtains submissions from two law firms. the organization relates its budgets to what the competitors are doing: for example. together with the resulting planned activities and then costs them out.. • • • An organization is seeking to build a new warehouse building. in that they reflect the reality of the business strategies as those managements see it. Broadly (and inadequatly) marketing could be split into consumer marketing (B2C "Business to Consumer") and industrial marketing (B2B "Business to Business"). neither makes any allowance for change. mining. 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. they continue to pour money into a dying product or service (the `dog'). the service or product can expect to be nothing more than a follower. High value considered purchase. They do not allow for the development to meet emerging market opportunities and. Industrial marketing Industrial marketing is the marketing of goods and services from one business to another.. this approach takes the objectives. 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. The word "industrial" has connotations of heavy machinery. but "industrial marketing" is not confined to these types of business activities. at the other end of the scale. Zero-based budgeting . A sales representative makes an appointment with a small organization that employs 22 people. construction etc.. B2B Business to Business (or "Industrial") Typical examples of a B2B selling process are. as set out in the marketing plan. 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. it matches their budgets. • • Competitive parity .In this case. or beats them. • • Marketing is one-to-one in nature. It is relatively easy for the seller to identify a prospective customer and to build a face-to-face relationship.
She purchases a number of items including her favourite brand of tea. Competitive tendering . awarding of tender. sales and marketing activities aimed at B2B are distinctly different from B2C (as outlined above). the definitions are not clear cut. Greater reliance on distribution (getting into retail outlets). The main features of the B2C selling process are. making representations. the final purchaser is still a business. radio. Blurring between the definitions As in all things. contract negotiations. wooing. and be selling relatively low value products. Selling activities involve long processes of prospecting. developing strategies and contract negotiations. print media) advertising to build the brand and to achieve top of mind awareness. The family decides to order a pizza. Decision making is quite often impulsive (spur of the moment) in nature. For example. Higher use of main media (television. Walking down a supermarket aisle. selection process. • • • • • • • Marketing is one-to-many in nature..• • • Purchase decision is typically made by a group of people ("buying team") not one person. More reliance on branding. She has bought the same brand of tea for the last 18 years. even though these definitions are blurred. preparing tenders. More effort put into mass marketing (One to many). B2C Business to Consumer (or "Consumer") Examples of the B2C selling/buying process are. request for expression of interest. An advertisement appears that advertises home delivered pizza. qualifying. However. and signing of final contract). He pick's the product and adds it to his shopping cart.. request for tender. • • • A family are at home on a Sunday night and are watching television.. a single man aged in his early 30's sees a hair care product that claims to reduce dandruff. an organisation that sells electronic components may seek to distribute its products through marketing channels). It is not practical for sellers to individually identify the prospective customers nor meet them face-to-face. 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). Often the buying/selling process is complex and includes many stages (for example.. However. Lower value of purchase.
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.
Associated marketing trends The term Guerrilla Marketing is now often used more loosely as a descriptor for nontraditional media. Create a standard of excellence with an acute focus instead of trying to diversify by offering too many diverse products and services. The primary statistic to measure your business is the amount of profits.through social networks Ambient marketing Presence marketing Grassroots marketing Wild Posting Campaigns Alternative marketing Buzz marketing -.interaction with product Tissue-pack marketing .Levinson says that when implementing guerrilla marketing tactics. Forget about the competition and concentrate more on cooperating with other businesses. he states: "In order to sell a product or a service. they are closer to their customers and considerably more agile. and larger transactions. It must build trust and support. Small businesses and entrepreneurs are able to obtain publicity more easily than large companies. the primary investments of marketing should be time. and guesswork." Levinson identifies the following principles as the foundation of guerrilla marketing: • • • • • • • • • • Guerrilla Marketing is specifically geared for the small business and entrepreneur. such as: • • • • • • • • • • • Viral marketing -. Instead of concentrating on getting new customers. Instead of money. It must understand the customer's needs. judgment. more transactions with existing customers. a company must establish a relationship with the customer.releasing company news to imitate grassroots popularity Experiential marketing -.word of mouth marketing Undercover marketing -.subtle product placement Astroturfing -. The marketer should also concentrate on how many new relationships are made each month. not sales. small size is actually an advantage instead of a disadvantage. It should be based on human psychology instead of experience. Yet ultimately. the Guerrilla Marketeer must "deliver the goods". and imagination. Guerrilla Marketers should always use a combination of marketing methods for a campaign. In The Guerrilla Marketing Handbook. aim for more referrals. Use current technology as a tool to empower your business. and it must provide a product that delivers the promised benefits. according to Levinson. energy.
Consumers can be segmented geographically according to the nations. Categorizing consumers according to their locations is called geographic segmentation. Psychographic segmentation uses consumers' activities. Accessibility refers to the degree to which a market segment can be reached and served. gender. accessible. Action ability refers to the degree to which a firm can design or develop a product to serve a particular market segment. Ignignokt and Err. or personality characteristics are psychographic variables used to categorize consumers into different groups. destroyed the devices. and occupation. and/or work. Massachusetts. Market segments are evaluated as to their attractiveness or potential for generating revenue for the firm. The suspicious objects were revealed to be ads depicting the Mooninites. several guerrilla-marketing magnetic light displays in and around the city of Boston. or responses to a product. Effective segments are measurable. . Substantiality refers to the size of the segment in term of profitability for the firm. It is one of the most popular methods of segmenting potential customers because it makes it relatively easy to identify potential customers. psychographic. regions. characteristics. substantial. or neighborhoods in which they live. interests. lifestyle. were mistaken for possible explosive devices. Consumer characteristics are used to segment markets into workable groups. bridges. 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. a staff member of on hold advertising company. potential customers are categorized based on different needs.Guerrilla marketing was initially used by small and medium size (SMEs) businesses. MARKET Segmentation In order to better manage the marketing effort and to satisfy the needs and wants of customers. Measurability is the degree to which a market segment's size and purchasing power can be measured. Several subway stations. geographic. sparking a nationwide debate over wearing clothing with brand names. The act of ambush marketing was noticed and the staff member issued a fine for ‘displaying a sign without a permit’. removed. marketers divide consumers into groups based on their knowledge. attitudes. many firms place consumers into groups. Social class. In this process. and actionable. or behaviors. Four factors are generally reviewed to determine the potential of a particular market segment. uses. states. In behavioral segmentation. Demographic segmentation categorizes consumers based on such characteristics as age. shop. and in some cases. Controversy Aqua Teen Hunger Force On 31 January 2007. characters from the Cartoon Network's latenight Adult Swim animated television series Aqua Teen Hunger Force. and behavioral segmentation. income level. a process called market segmentation. and a portion of Interstate 93 were closed as police examined. Common characteristics used for consumer categorizations include demographic. cities. Messages On Hold Cricket In December 2007. but it is now increasingly adopted by large businesses. and opinions to sort them into groups.
Thus. and corporate communications. and concentrated. a national mass market emerged. Market positioning is the process of arranging a product so as to engage the minds of target consumers. differentiated. as a result. and desirable relative to those of its competitors in order for it to be effective. Marketing is used both to increase sales of an existing product and to introduce new products. This approach allows firms to obtain a much stronger position in the segments it targets because of the greater emphasis on these targeted segments. marketing considerations play a major role in determining corporate policy. distinctive. including retail stores.Once the potential market has been segmented. producers design products to appeal to the largest number of potential buyers. Marketers may look for outlets through which to sell the company's products. When using this strategy. with a different product geared to each segment. The position of a product in the marketplace must be clear. product development. a different marketing plan is needed for each segment in order to maximize sales and. increase firm profits. The last market coverage strategy is known as the concentrated marketing strategy. They may make psychological and demographic studies of a potential market. An undifferentiated marketing strategy occurs when a firm focuses on the common needs of consumers rather than their different needs. and wholesaling. direct-mail marketing. Coverage Strategies There are three basic market-coverage strategies used by marketing managers: undifferentiated. firms followed the logic of mass production as they sought to create a "democracy of desire" by universalizing the availability of products. Britannica Concise Encyclopedia: marketing Activities that direct the flow of goods and services from producers to consumers. experiment with various marketing strategies. By 1900. corporate marketing departments now focus on credit policies (see credit). which aims to serve a large share of one or a very few markets. Once primarily concerned with increasing sales through advertising and other promotional techniques. and transportation costs. and a small number of firms realized economies of scale previously undreamed of. 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. distribution. With a differentiated marketing strategy. a process called product positioning. inventory. The benefit of an undifferentiated strategy is that it is cost-effective because a narrow product focus results in lower production. and conduct informal interviews with target audiences. This greater emphasis ultimately leads to a better understanding of the needs of the targeted segments. 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. firms create more total sales because of broader appeal across market segments and stronger position within each segment. . is best suited for firms with limited resources. customer support. In advanced industrial economies. firms need to station their products relative to similar products of other producers. The concentrated strategy. A firm using a differentiated strategy makes a conscious decision to divide and target several different market segments. Companies were able to produce goods in high volume at low prices. Technological innovation mushroomed. Giant corporations (or a small cluster of corporations) dominated single industries.
" Fully developed in the 1970s and 1980s. Further developments came after the 1890s with flashing electric signs. electric trolleys. Through these means—as well as coherent production and marketing plans—a mass market was created by World War II. and the explosion in magazine sales. Price was determined not so much by how cheaply something could be sold. and only in black. and quantitative analysis made market research more important and accurate. Coca-Cola from the 1890s. 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. Hart. behavioral science. John Wanamaker placed the first full-page advertisement in a newspaper in 1879. However. General Motors (GM) pioneered market segmentation in the 1920s. Ayer and Son. identically. Shafner. consumerism as understood in the beginning of the twenty-first century did not triumph until after 1950. and the depression of the 1890s. As the mass market emerged. and Maxwell House coffee around the same time heralded the "golden age of brand names. By 1910. W. billboards. beginning in the 1870s and 1880s with meat packers like Gustavus Swift.Mass production required the development of mass marketing as well as modern management. when the chaos of market competition spurred efforts to make the market more predictable and controllable. 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. 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. sweeping improvements in statistical methodology. as it fought and beat Ford for the biggest market share of the booming automobile business. In 1911. independent of production costs.5 million . as the social sciences matured. 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. The first advertising agency was established in 1869 as N. During and after the 1920s. which dropped the cost of car buying from $600 in 1905 to $290 by 1924. Market Segmentation The final stage of the twentieth-century market in America has been characterized as "market segmentation. manufacturers and retailers developed a range of instruments to shape and mold the market. photo technology and color lithography revolutionized the capacity to reproduce images of all kinds. with the appointment of its first director of commercial research. Wrigley's Chewing Gum after 1907. Advertising media were powerfully supplemented by the use of subway cars. a process spurred by analysis of the depression of the 1870s. In nineteen years of production. National brand names like the Singer Sewing Machine from the 1860s. Franchise agreements with retailers were one key to the success of companies such as Coca-Cola. Standardized models were produced quickly. Henry Ford was an exemplar of mass marketing. He had pioneered the marketing of the automobile so that it could be within the reach of almost all Americans. firms sought competitive advantage through the use of demographics and psychographics to more accurately pinpoint and persuade consumers of their products. Forward integration into wholesaling also aided mass marketing. the Curtis Publishing Company instituted the systematic analysis of carefully collected data. his Model T sold to 15." Advertising also came into its own during the early decades of the twentieth century. trams.
customers. teens. meant that marketers needed to be much more sensitive to the differences between groups of Americans and their values. and Internet usage was identified. by 1921 Ford sold 55 percent of all new cars in America. Consumer spending jumped from $70. Due to his methods. Ford's market share had been cut to 25 percent. compared to 180. social. after 1970. By the 1990s. thanks largely to Ford. and over forty lifestyle groups. The creation of a "democracy of desire" came to characterize American society and its values. children. and segmented marketing. gender.S. Serious foreign competition in American markets during the 1970s and 1980s also spurred innovation in market research. During the 1980s and 1990s. newer. but a number of different models to suit differing pocketbooks. GM made the ownership of automobiles both a status symbol and stylish. GM first tried merging with rivals to create a larger market force. 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. emotional. television was deregulated into cable and satellite channels. product design. By 1985. Age segmentation among children received particular attention. given the slowdown in economic growth in the preceding thirty years. and moral development. and more sophisticated polling techniques another. movies. advertisers had developed eight consumer clusters for women alone. In 1997. Testing determined the relative perception of visual and verbal information at different ages and developmental stages. It was a .5 billion in 1980. largely the result of consumerism. as researchers took into account neurological. marketers and advertisers sought ways to reach a more segmented society. Further changes. The U. but as a collection of segments with differing requirements and desires to be satisfied. or books. By the 1960s. more sophisticated research developed as patterns of credit card spending were analyzed. The ability to identify who watched what shows according to age. about 60 percent of all toys sold in the United States were based on licensed characters from television. Humor and gender differences were also studied to make marketing more successful. Television's Nielsen ratings offered one instrument. easier forms of obtaining credit. In trying to compete with Ford. By 1924. which seized a generation of Americans who were born into the first generalized age of affluence in America. Deregulation of children's programming in the 1980s led to cartoons becoming merchandising vehicles. and Ford was forced to retool and try to catch up with GM. GM made not one model to suit all. By 1927. it was estimated that "kid power" accounted for sales of over $200 billion per year. and marketing generally. It looked at the market not as an undifferentiated whole. The development of marketing during the twentieth century matched and aided American economic growth and was symbiotic with the triumph of consumerism. after 1970 consumer spending continued to grow. and seniors were similarly analyzed. from $12 billion in 1960 to $54. and ethnic background led to more targeted advertising and a leap in TV advertising. a remarkable figure. Despite the end of a long post–World War II economic expansion. but then embraced individuality.8 billion in 1940 to $617 billion in 1970. the number of cars produced in the United States was greater than 4 million. By 1987. Generational differences became much more important.000 in 1910. Census Bureau reported in 2001 that retail sales just for the fourth quarter accounted for $861 billion. It was in the 1920s that annual modifications to automobile models were introduced. as consumer values shifted because of social change.
. 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. Recent years have seen the development of wholesale clubs. In popular usage it is defined as the distribution and sale of goods. Interregional exchange between disparate geographic areas depends on adequate means of transportation. Wholesale houses operate outlets for their wares. Today large chain stores dominate the field of retail trade. which sell retail items to consumers who purchase memberships that give them the privilege of shopping at wholesale prices. that system met stiff competition from chain stores. distribution being understood in a broader sense than the technical economic one. in economics. In a modern capitalist economy. warehouse. In the 20th cent. transport. enable businesses to buy and sell commodities for both immediate and future delivery. which were organized for the mass distribution of goods and enjoyed the advantages of largescale operation. In the United States in the 19th cent. was the chief retail marketing agency. The concurrent advent of the motor truck and paved highway. as the strength of marketing smoothed its economic dominance around the planet. but also those who develop. making possible the prompt delivery of a variety of goods in large quantities. Independent stores may operate their own wholesale agencies to supply them with goods. The general store superseded the public market in England and was an institution of the American country town. 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. and farmers sell their products through their own wholesale cooperatives. Manufacturers often maintain their own wholesale departments and deal directly with retailers. insure. finance. the itinerant merchant or peddler. Commodity exchanges. operated by its owner. 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. before the development of caravan travel and navigation. the exchange of the products of one region for those of another was limited. or promote the product. the typical marketing setup was one in which wholesalers assembled the products of various manufacturers or producers and sold them to jobbers and retailers. or otherwise have a hand in the process of transfer. The village market or fair. such as those of grain and cotton. The independent store. Thus. such activities are just as important as the manufacture of the goods. and the shop where customers could have such goods as shoes and furniture made to order were features of marketing in rural Europe.distinctive quality that influenced the attitudes of the rest of the world toward the United States. that part of the process of production and exchange that is concerned with the flow of goods and services from producer to consumer. and the proliferation of the automobile has expanded the geographic area in which a consumer can make retail purchases. 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. wholesale and retail. where nearly all production is intended for a market. still further modified marketing arrangement.
Methods of marketing now include market research. mainly in consumer marketing. Marketing is accused of creating ruthless exploitation of both consumers and workers by treating people as commodities whose purpose is to consume. Most marketers believe that marketing techniques themselves are amoral. travel agents. are the subject of criticism. . such as selling unhealthy food to obese people or selling SUVs in a time of global warming.S. Advertising has created an international market for many items. like that of a repair person or physician. Market research. it can be used for negative purposes. Then the argument follows that nonfree markets are imperfect and lead to production and consumption of suboptimal amounts of the product. has been greatly increased by the practice of extending credit. The Observer’s survey among 1. and the like.Methods of merchandising have also been changed to attract customers. The one-price system. which is based on the assumption that supply and demand are independent. is marketed through the same act that produces it. particularly in the form of installment buying and selling. This raises a question on the effectiveness of the CIM’s definition of marketing (anticipating. especially for durable goods. The number of customers. Personal services may also be brokered by employment agencies. Criticism of marketing Some aspects of marketing. saves sales clerks from haggling and promotes faith in the integrity of the merchant. While it is ethically neutral.206 UK adult consumers in 2001 highlighted some of the stark changes our society has gone through in the last two decades. identifying and satisfying customer needs profitably). especially trademarked and labeled goods. governments and criminals. It is especially problematic in classical economic theory. However. motivational research. and through on-line transactions (“e-commerce”) on the Internet.. also known as business-to-business or B2B. often conducted by means of telephone interviews with consumers. Stewart in New York. product promotion is an attempt coming from the supply side to influence demand. is a major industry in itself. booking agents for concert or theatrical performers. Critics acknowledge that marketing has legitimate uses in connecting goods and services to the consumers who want them. by placing orders to specialized “home-shopping” television channels. probably introduced (1841) by A.9 billion in 1998. T. Critics see a systemic social evil inherent in marketing. Customers also buy through mail-order catalogs (much expanded from the original catalog sales business of the late 1800s). Industrial market segmentation attempts to provide some answers. Services are marketed in much the same manner as goods and commodities. In 1999 more than $308 billion was spent on advertising in the United States alone. Critics also point out that marketing techniques have been used to achieve morally dubious ends by businesses. with the top 50 U. especially promotion. and other means of determining consumer acceptability of a product before the producer decides to manufacture and market it on a large scale. marketing firms tallying revenues of $5. but it can also have a positive influence on consumer welfare. There are similar concerns in industrial markets. Sometimes a service. In this way producer market power is attained as measured by profits that would not be realized under a free market.
operational and sales costs by helping to develop products because customers want them. “in decline. confusion. no longer appropriate. Its relevance is very much situational and depends on many factors such as the product. the segment. location. they are complex topics that need a high level of effort. anachronistic. misunderstanding. 1998:16). which is why PostModern Marketing 2 was chosen as a key reference point for this chapter. he condemns marketing by saying “marketing has to decide whether to expose its intellectual nakedness or press itself against the searing heat of postmodernism” . not on a cost-plus basis. step-by-step marketing model of analysis. and guaranteed delivery dates.g. occasional inexplicable hitting of the jackpot”. Marketing has helped create value through customized products. the increasing academic attention that is being devoted to marketing and consumption-related phenomena by non-business disciplines such as sociology. delivered nothing of value. .' Of course all of the above is done for economic or political gain. A definitive statement cannot be made whether the conventional marketing concept is applicable in today’s environment. and “indeed. This way. failing. for better or worse. Despite all this achievement. to dismiss marketing as a failure is unfair. some scholars such as Stephen Brown challenge the marketing concept in an extreme language. together with other business disciplines. time. e. far from being the second-hand rose of the scholarship. environmental attention. anthropology and history. being abandoned. It has contributed to both customers’ and suppliers’ quality of life by selecting profitable customer satisfaction as its sole objective. intelligent thinking as well as resources to be implemented successfully. In the context of segmentation.Core marketing elements such as segmentation. political and economic conditions and the inner workings of a company. targeting and positioning are still relevant in the modern (or post-modern) world. appropriate or even pertinent to what is actually happening on the ground”. planning. 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. in an unprecedented state of crisis. “marketing is endowed with considerable personal charm and has enjoyed more than its fair share of conquests” (Brown. Even some government departments address the public not as ‘the Queen’s subjects’ or ‘the applicants’ any more but as ‘customers. creating an economic growth period never seen before in the United Kingdom. implementation and control no longer seems applicable. no-questions-asked refund policies. comfortable cars. Marketing also helps companies avoid unnecessary R&D. However. However. and using quotes such as “mid-life crisis” . are relevant. The marketing concept. both suppliers and customers get a fair deal. Another success is the now commonly implemented value-pricing principle. Their statements. failure. Brown suggests that “the traditional. If Mr. linear. On the one hand Brown makes positive statements about marketing. shopkeepers’ smile. not for the sake of innovation. marketing is now something of a fashion leader’ On the other hand. helped the UK to make the transition from a 19thcentury manufacturing economy to a modern model of success in the service industry. whereby a product or service is sold for the price the customer is willing to pay. sometimes unfair.
and last but not least. Stephen Brown also has a constructive suggestion: “I reckon we need more passion in marketing. Examples are General Electric. promotion. Contrary to Brown’s suggestion in his final paragraph. Smiths Aerospace. 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. not less. quantification. define their value proposition and serve their customers accordingly. They segment their markets. Weir Group and the BT Group to name but a few. paradigm shifts and (some application of) science. pricing. which is only one element within the marketing concept. This refers mainly to promotion. and • An understanding of the nature of analytical models within marketing information system. distribution. BOC Edwards. The truth is that marketing today leads the way in segmentation. After all the contribution as well as further potential.Brown had studied “the ground” before making his statement. A brief visit to their websites can make this point clear. innovation. Structure of the Chapter . One can then determine whether information systems will be valuable tools and how they should be designed. BAE Systems. rigour. we need objectivity. models. it is time we banished banishing passion from works of marketing scholarship”. he would have realised that companies are successful the world over precisely because they implement this model. We must also understand how decisions are made and what kinds of decision problems can be supported by formal information systems. relate their products and services to them. HSBC. PriceWaterhouseCoopers. relationships. product management. 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. 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.
colleagues. work brevity specific contacts Such behavioural models stress that managers work at an unrelenting pace and at a high level of intensity. secretaries. 2. A problem occurs and all other matters must be dropped until it is solved. In one sense. Managers prefer speculation. The nature of the pressures may be different but there is no evidence that they are any less intense. marketing research systems. government officials. managers operate a network of contacts throughout the organisation and the environment. The classical model of what managers do. gossip in brief. There is simply not enough time for managers to get deeply involved in a wide range of issues. 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. or why. certain. routine information receives less attention. competitors.. less reflective. fragmentation and brevity. The model also emphasises that the activities of managers is characterised by variety. • Variety. and so forth. ad hoc. current. Historical. 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. hearsay. 3. with very little pattern. . peers. More recently. behavioural models describe 6 managerial characteristics: • High volume. whilst intuitively attractive in itself. specific and ad hoc. but not how they do it. They converse with customers. Planning Organising Coordinating Deciding Controlling Such a model emphasises what managers do. espoused by writers in the 1920's. is of limited value as an aid to information system design. more reactive and less well organised than the classical model projects managers to be. Managers are involved in a complex and diverse web of contacts that together act as an information system. high speed fragmentation. This is just as true for managers operating in the developing world as in the developed world. information systems that claim to support managers cannot be built unless one understands what managers do and how they do it. Managers want to work on issues that are current. such as Henry Fayol. of interactions.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. although uncertain information. the various types and levels of decision that marketing managers must make. • Issue preference • Complex web • Strong preference for verbal media. current. 5. 4. up-to-date. the stress has been placed upon the behavioural aspects of management decision making. For instance. The attention of managers increase rapidly from one issue to another. The Functions of Management Clearly. marketing intelligence systems and analytical model banks are all discussed. The classical model identifies the following 5 functions as the parameters of what managers do: 1.
senior managers can control their personal agendas. and professional work stations that can enhance a manager's presentation of information are significant. information systems are extremely limited and make only indirect contributions. receiving the latest. most concrete. and they mediate between groups in conflict within the organisation. and their own networks. most up-todate information and redistributing it to those who need to know. large-scale MIS systems. By developing their own long-term commitments. Managerial Roles Mintzberg suggests that managerial activities fall into 3 categories: interpersonal. among levels of the management team. transaction processing areas. termed as informational roles. within each level. the numerous deadlines. something that engages most of a managers time. Much work needs to be done in broadening the impact of systems on professional and managerial life. An important interpersonal role is that of figurehead for the organisation. These systems make a much larger contribution in the field of informational roles. A more familiar set of managerial roles is that of decisional roles. . Despite the flood of work. Managers act as the nerve centre for the organisation. successful managers are those who can control the activities that they choose to get involved in on a day-to-day basis. Managers act as entrepreneurs by initiating new kinds of activities. who bring to their attention crises and activities that must be attended to immediately. management control and operations control. only recently have decision support systems and microcomputer-based systems begun to make important contributions. a manager acts as a leader. and he or she uses whatever tools are available to be an effective communicator. Lastly. Communication is the work of the manager. Verbal media are perceived to offer greater flexibility. until recently these contributions have been confined to narrow. Decision making can be divided into 3 types: strategic. acting largely as a communications aid in some of the newer office automation and communication-oriented applications. managers act as a liaison between various levels of the organisation and. Second. In the area of interpersonal roles. it has generally been found that successful managers appear to be able to control their own affairs. While information systems have made great contributions to organisations. A second set of managerial roles. require less effort and bring a faster response. their own information channels. Nevertheless. attempting to motivate subordinates. they handle disturbances arising in the organisation. It is one of the areas that information systems have sought most of all to affect (with mixed success). To some extent. and the random order of crises. can be identified. information processing and decision making. Less successful managers tend to be overwhelmed by problems brought to them by subordinates. high-level managers are at the mercy of their subordinates. In the area of decision making. office systems.Several studies have found that managers prefer verbal forms of communication to written forms. they allocate resources where they are needed in the organisation. Decision Making Decision making is often seen as the centre of what managers do.
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
marketing intelligence system and marketing models. do not see how it could help decision makers in other functional areas. Similarly. It is suggested that whilst the MIS varies in its degree of sophistication . storing. The internal records that are of immediate value to marketing decisions are: orders received. size and pack type by type of • Product type. comparing . marketing. the methods (and technologies) of collection. size and pack type by • Product type. 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. However. Below. manpower. Often the entrepreneur. is a list of some of the information that can be derived from sales invoices.with many in the industrialised countries being computerised and few in the developing countries being so . production. stockholdings and sales invoices. In the same way.a fully fledged MIS should have these components. • Product type. That is. either in the form of an individual entrepreneur or in the functional departments of larger businesses. or various personnel working in the functional departments holding these pieces of data. marketing research system. size and pack type by • Product type. decision makers can fail to appreciate how information from other functional areas might help them and therefore do not request it. this information often remains under-utilised because it is compartmentalised.The explanation of this model of an MIS begins with a description of each of its four main constituent parts: the internal reporting systems. stockholding and logistical data. Internal reporting systems: All enterprises which have been in operation for any period of time nave a wealth of information. but even this small set of records is capable of generating a great deal of information. retrieving and processing data notwithstanding. information is usually categorised according to its nature so that there are. financial. These are but a few of the internal records that can be used by marketing managers. for example.
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. international aid agencies. 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. For instance. In addition it involves management in talking to producers. This is a purposeful search after information in some systematic way. with trade associations. . 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. In many cases. Whilst the behaviour is unfocused and the manager has no specific purpose in mind. 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. That is. scientific or technological media. suppliers and customers. by virtue of what he/she reads. it is a largely informal process of observing and conversing. The information will be required to address a specific issue. economic forecasts and other media. consumers or distributors from which the same data is collected at regular intervals. 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. often involving panels of farmers. The other form of marketing research centres not around a specific marketing problem but is an attempt to continuously monitor the marketing environment. it is not unintentional Semi-focused Again. Some enterprises will approach marketing intelligence gathering in a more deliberate fashion and will train its sales force. the manager may focus more on economic and business publications. importers/exporters etc. market intelligence is not. Whilst the ad hoc study and continuous marketing research differs in the orientation. These monitoring or tracking exercises are continuous marketing research studies. the enterprise which commissions these studies does so to solve a perceived marketing problem. customer complaints and requests and distributor problems. broadcasts etc. Moreover. Nonetheless. Marketing research is a proactive search for information. 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. This scanning of the economic and business environment can be undertaken in a variety of ways. Enterprises with vision will also encourage intermediaries. It involves them in scanning newspaper trade magazines. such as collectors. after-sales personnel and district/area managers to take cognisance of competitors' actions. business journals and reports. and pay less attention to political. including2 Unfocused scanning The manager. as well as to competitors. Marketing intelligence systems: Whereas marketing research is focused. yet they are both proactive. hears and watches exposes him/herself to information that may prove useful. 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). For example. Informal search This describes the situation where a fairly limited and unstructured attempt is made to obtain information for a specific purpose. 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.stockholding records with orders received helps an enterprise ascertain whether its stocks are in line with current demand patterns.
Control decisions deal with broad policy issues and operational decisions concern the management of the organisation's marketing mix. traders and other middlemen to be proactive in conveying market intelligence back to them. organising. control (or tactical) and operational. those containing a probabilistic element whereas others are deterministic models where chance plays no part. i. can support these roles in varying degrees. Marketing . Chapter Summary Marketing information systems are intended to support management decision making. Again. A marketing information system has four components: the internal reporting system. Managers play at least three separate roles: interpersonal. These models may be computerised or may not. 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. in electronic form or otherwise. MIS has less to contribute in the case of a manager's informational role than for the other two. These are: planning. Three levels of decision making can be distinguished from one another: strategic. supply. the marketing research systems. Given the nature of the work. decisions and controlling. the marketing intelligence system and marketing models. Management has five distinct functions and each requires support from an MIS. econometric and financial models are the analytical subsystem of the MIS. incomes. statistical. etc. Marketing models: Within the MIS there has to be the means of interpreting information in order to give direction to decision. inventory records and sales invoices. informational and decisional. Strategic decisions have implications for changing the structure of an organisation and therefore the MIS must provide information which is precise and accurate.) • Regression and correlation models • Analysis of Variance (ANOVA) models • Sensitivity analysis • Discounted cash flow • Spreadsheet 'what if models These and similar mathematical. even if this is likely to be less accurate then more formal and complex information systems. MIS has to support each level. Some of the models used are stochastic. MIS. A relatively modest investment in a desktop computer is enough to allow an enterprise to automate the analysis of its data. Typical tools are: • Time series sales modes • Brand switching models • Linear programming • Elasticity models (price. managers tend to rely upon information that is timely and verbal (because this can be assimilated quickly).retailers. Research suggests that a manager continually addresses a large variety of tasks and is able to spend relatively brief periods on each of these. Internal reports include orders received. coordinating. demand. Information systems have to be designed to meet the way in which managers tend to work. Strategic decisions are characteristically one-off situations.e.
What are stochastic models? 2. is chiefly carried out in an informal manner and by managers themselves rather than by professional marketing researchers. what are the contributing elements to an MIS? it 7. marketing intelligence is less specific in its purposes. attainable. Key Terms Deterministic Internal Marketing Model Operational Stochastic Strategic Tactical plans models reports intelligence banks decisions models decisions Review Questions 1. What were the functions of management that Henry Fayol identified? 4. 3. 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 are the 3 levels of decision making outlined in this chapter? 6. Which elements of the marketing environment are mentioned in the chapter? 8. According to Kotler.research takes the form of purposeful studies either ad hoc or continuous. 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. To which management role does the textbook suggest MIS has least to contribute? 5. Name the four components of an MIS. concise. By contrast.
the researcher has to respond to the brief with a research design. 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. of these alternatives.. not to mention the many dimensions of the product. decision making research brief proposal. the length and frequency of the campaign. 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. it is marketing managers who make the final marketing decision and not the researcher.. 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. The second observation. ". where possible. is simply a recognition of the environment within which marketing takes place. x is a necessary and sufficient condition for y to occur. price and distribution. management is about decision making. In the fields of science and engineering researchers are often working with deterministic models of the world where y = f(x). At best. including: the media used.. an increase in pressure is usually necessary and sufficient to bring about a rise in air temperature. Marketing managers may seek advice from marketing research specialists. Marketing researchers work with probabilistic models of the form: y = f(x1). 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.. There are a great many more intervening variables.but will never remove it. Decision is invariably surrounded by uncertainties and.. The link between promotional expenditure and sales is not so direct as that between pressure and temperature.f(xn). marketing research will increase the probability that the decisions which management has to take will help attain the organisation's marketing objectives. lends itself to deterministic modelling. to achieve the target. that marketing research does not guarantee success.(fx2). and indeed it is important that research reports should specify alternative courses of action and the probability of success. .In essence. However. 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. That is. the effectiveness of the promotional message. At this point. if ever. risks. Consider the marketing problem of determining how much to spend on promotion in order to achieve a given market share. For instance. the phenomenon under investigation rarely. on its own. In the social sciences.. and this includes marketing and marketing research.. Marketing research is charged with helping to reduce such uncertainties. The role and limitations of marketing research "Marketing research does not make decisions and it does not guarantee success". therefore.
systematic. of little value. In Thailand." The key words in this definition are. The organisation needs to know the alternative ways it can respond to this data. This means that a detailed and carefully designed research plan is developed in which each stage of the research is specified. The model is further complicated by the fact that these interactions are themselves often not understood. Not many years ago an agricultural engineering company developed an improved rice milling machine. and analysis of. These are tested empirically. Such a research plan is only considered adequate if it specifies: the research problem in concise and precise terms. Data is equivalent to the raw materials of manufacturing. as far as possible. The agricultural engineering company went through the expensive and time-consuming process of importing the machine into Thailand. The new rice mill produced a negligible percentage of brokens. Intuitively a successful product would be predicted. objective and analysis. the methods to be employed in gathering the information and the analytical techniques to be used to interpret it. The characteristics of the scientific method are that it translates personal prejudices. 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.Y is a function of a number of variables and the interactions between them. To this end. smallholders take their rice to a miller. Since they do not have sufficient cash to pay for milling their rice they get paid in 'brokens'. information relevant to the identification and solution of any problem in the field of marketing. The prospective customer did not see it as a problem at all. 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). notions and opinions into explicit propositions (or hypotheses). The marketing researcher's task goes beyond the collecting of data. marketing researchers employ the scientific method. A definition of marketing research Green and Tull1 have defined marketing research as follows: "Marketing research is the systematic and objective search for. He/she must also interpret the data in terms of what the it means to the organisation which commissioned the research. The third of the key terms in the definition given a little earlier was analytical. it has to be converted into . At the same time alternative explanations of the event or phenomena of interest are given equal consideration. The more effective milling machine simply did not fit into the Thai rice processing system. the information necessary to address the problem. Knowing that 60% of those interviewed thought that product A was superior to product B is. The company's assessment of the market was hardly objective. They set up extensive distribution and servicing facilities only to be surprised when the mill failed to gain acceptance. It is for these reasons that marketing researchers cannot guarantee that decisions based on their information will always prove 'successful'. The miller then sells the 'brokens' for animal feed. 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. launched with hardly any need for marketing research when the new mill had such obvious advantages over existing products. in itself. Marketing research seeks to set about its task in a systematic and objective fashion. They saw the 'brokens' as a problem which their product solved.
The process of convening data into information is achieved through analysis. The answer should lie in a document called the research brief. sales. In fact much of the information was interesting rather than important. The initial reason for the study had been a suspicion. This is not quite the same thing. They wanted information on the coffee drinking habits of these young people: how much coffee they drank. 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 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. In response. measurable and quantifiable way • a time horizon • a resource allocation. at minimum cost. concise. buyer behaviour. it is to be remembered that. 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. the sample would . and simply never developed the coffee drinking habit. Instead. Since the researcher cannot investigate everything about a market. To begin with. 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. On such occasions its methods tend to be less theoretically rigorous and its analysis more superficial. promotion. and to what depth each issue should be investigated. in practice. Each of these components of the brief is explained in a little more detail in the section that follows. with meals or between meals. In particular. particularly soft drinks. The brief must inform the researcher which aspects of the market are particularly important. etc. the research brief should include: • the purpose of the research • the objectives stated in a clear. They often do not appreciate the need to do so. packaging. including the budget and facilities • a reporting period.information before it becomes useful in decision making. Had this been explained to the research company then it is likely that their proposals would have been radically different. they simply state what they think they need to know. at what times of day. instant or ground coffee. moreover. The question remains as to how the researcher decides where to focus the study. that an increasing percentage of young people were consuming beverages other than coffee. distribution. he/she must be selective. Therefore management often seeks answers through marketing research in the shortest time possible and. attainable. there is a perpetual conflict between the demands of expediency and the search for truth. which other beverages they preferred and so on. The market research brief Marketing research can be concerned with any of a variety of aspects of the market: the product. Although the need for precision and thoroughness in marketing research has been stressed here. the research organisation developed a set of wide-ranging proposals which included taking a large random sample of young people. The reality is that management is frequently under pressure to make timely decisions. on the part of the ICO. pricing.
no idea of which.have been composed of 15-24 year old non-coffee drinkers rather than a random sample of all 15-24 year olds.1. they had no salesmen trained in selling into this industry and so on. 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. . Since the company had no involvement in the agricultural engineering sector. This machine was suitable for lifting semi-mature trees. The product's potential depended very much on such initiatives. attainable. In large measure. In practice it would possibly meet only one of these criteria. concise. 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.1 The components of market potential It was possible to test customer reaction to the concept of the new tree-lifter by showing pictures. product quality or unique product features. concise. attainable. A small engineering firm had purchased a prototype tree-lifter from a private research company. An audit of the environment was undertaken too. and transplanting such trees in another location. prior to acquiring the rights to the tree-lifter. as shown in Figure 1. However. Second. i. At first glance this might appear to meet all of the requirements of being clear. It was thought to have potential in certain types of tree nurseries and plantations. they had no agreements with distributors. 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. but the missing component was the company's' own plans for exploiting the market. of the distributors would be prepared to stock their product. measurable and quantifiable. 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. it is concise! Here is another case to be considered. The researchers were able to look at precedents.e. Figure 1. complete with root-ball intact. if any. 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. since the company had not decided their pricing policy an important element could not be tested. The market potential for any new brand is a function of at least 4 things. The researchers began by looking at the basis of competition to determine whether it was on price. line drawings and by supplying product specifications to prospective buyers. Clear. 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.
If the researcher is aware of the time constraints then this will become an overriding factor when he/she plans the research design. In the end.The solution would have been to undertake a study which would have described the market in detail in terms of customers. at 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. A reporting period The researcher must also know from the outset of the study the points in time when interim reports are required. He or she is likely to put forward a design which is less elegant. including the budget and facilities There are essentially two approaches to establishing the resource allocation to a particular marketing research exercise. whether verbal or written. and whether presentations are to be made to a group (nature and size of the group) or an individual. because of time pressures. 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. money and manpower allocated. and . Alternatively. 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 form of interim reports should also be specified at the outset. if any. and the deadline for the final report. management is often seeking quick answers from marketing research. Whichever the approach to resource allocation adopted. A resource allocation. Management can start with the problem and work out how much it will cost to solve it. some kind of compromise develops. 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. 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. it is imperative that the researcher is aware of the financial and other constraints within which he/she must complete the work. they can decide how much the management can afford to spend. competitors and the environment. and seek the best answer they can for the time. As was said earlier.
responsibility for ensuring that the research proceeds along clearly defined lines rests with the decision-maker. the decision-maker could be asked what he has in mind when he uses the term market potential. The research proposal Having received the research brief. they are not willing to fully disclose them. For example. the researcher responds with a research proposal. This is a document which develops after having given careful consideration to the contents of the research brief. 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. 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. The eight steps are set out in figure 1.2. This is a legitimate question since the researcher is charged with the responsibility to develop a research design which will provide the right kind .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.• does not pre-judge the selection of research techniques and procedures. if they have. In many instances the researcher has to take the initiative. Figure 1. The research proposal sets out the research design and the procedures to be followed. In situations. In theory. Decision-makers seldom work out their objectives fully or.
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. consider the following hypothesis: .3 Characteristics of a sound definition of the research problem A hypothesis is a conjectural statement regarding the relation between two or more variables. the hypotheses specify how the variables are related and that these are measurable or potentially measurable. 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. nonetheless one does not test research questions directly. the question is reduced to one or more hypotheses implied by these questions. 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. Statements lacking any or all of these characteristics are not research hypotheses. rather than variables. Step 2: Hypothesis generation Whilst it is true that the purpose of research is to address some question. For example. These characteristics imply that it is relationships. Research questions are too broad to be directly testable. which are tested. 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. Instead. For example.3.of information. Other helpful procedures include brainstorming. Figure 1. Kerlinger 2 suggests that a welldefined marketing research problem tends to have three common characteristics as shown in figure 1. "Does a person's age bear any relation to brand loyalty behaviour?". 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.
However. i. e." We may also encounter difficulties in agreeing an appropriate measure of the other variable.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. After this period sales began to slow down. For example. and another variable. A company was established to exploit this technology and did so successfully for 4 seasons. Step 3: Decision on type of study Marketing research can be carried out on one of three levels: exploratory. namely that implicit notions or explanations for events become explicit and this often leads to modifications of these explanations. "There is no relationship between red meat consumption and the level of disposable incomes. Hypotheses are central to progress in research. "level of education". plus a little heat. because a problem is a question. "red meat consumption". However for the purposes of statistical testing it is more usual to find hypotheses stated in the so-called null form. descriptive or causal. crop residues such a straw are high in lignin (a wood-like substance) and low in nutrients. Animal .e. This includes helping to identify the variables which should be measured within the study. and is not directly testable. When there is little understanding of the topic it is impossible to formulate hypotheses without some exploratory studies. However.a farmer's degree of innovativeness. Figure 1.e. "disposable incomes". the lignin breaks down and the nutrient content increases. On occasion a given hypotheses may be too broad to be tested. There is a second advantage of stating hypotheses. Moreover. if treated in a strong alkali." 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. even before data is collected."Red meat consumption increases as real disposable incomes increase. usually of a broad nature. 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. The rest are merely interesting. both variables are potentially measurable. The point has been made that it is all too easy when conducting research to collect "interesting data" as opposed to "important data".." This is a relation stated between one variable. If these problems can be resolved then we may indeed have a hypothesis." 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. Data and questions which enable researchers to test explicit hypotheses are important.g. This makes them a poor animal feed since the lignin acts against digestibility and the low nutrient content means poor food value. Three other manufacturers had entered the market by this time. The company. ". The criteria have been met. other testable hypotheses may be deduced from it.. A problem really cannot be solved unless it is reduced to hypothesis form.
there are occasions when the researcher will want to know why a change in one variable brings about a change in another. listing and comparison of the attributes and features of competitive products. Step 4: Decision on data collection method The next set of decisions concerns the method(s) of data gathering to be employed.Feed Systems. etc. . The researcher may. specific research questions have been formulated before the research is undertaken. Exploratory research is intended to help researchers formulate a problem in such a way that it can be researched and suggest testable hypotheses. In some cases. the researcher may observe that there is an association between the geographical location of consumers and their tendency to consume red meat. That is. 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. descriptive and causal. Descriptive research: As the name suggests. distributors may not be promoting the product aggressively. observation. did not know whether the whole industry had slowed down or if only their product was suffering. a research programme will be of one kind or another. 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. and so on and on. The main methods of data collection are secondary data searches. for example. a descriptive study specifies the number and size of market segments. The purpose of each is summarised in figure 1. Causal research: Causal research deals with the "why" questions. since the problem could not be articulated with any precision and therefore research of an exploratory nature was required. but in other instances these three typologies will represent phases within a single marketing research investigation. Such research can take the form of literature searches. The principal difference between exploratory and descriptive research is that. and is in a position to clearly define what he/she wants to measure and how to do it. informal personal interviews with distributors and users/non-users of the product and/or focus group interviews with farmers and/or distributors. Nonetheless if the relationship between the two is fairly stable this descriptive information may be sufficient for the purposes of prediction. When descriptive research is conducted the researcher must already know a great deal about the research problem. perhaps because of a prior exploratory study. Note that the researcher is able to describe the relationship rather than explain it. in the case of the latter. the alternative ways in which products are currently distributed. If he/she can understand the causes of the effects observed then our ability to predict and control such events is increased. the survey.4. This is a good example of a situation where insufficient knowledge prevented the development of clear objectives. descriptive research is concerned with describing market characteristics and/or marketing mix characteristics. This type of study can involve the description of the extent of association between variables. be able to predict how fast the per capita consumption of red meat is likely to rise over a given time period. For example. In summary then there are three distinct types of marketing research study: exploratory. customers may be experiencing difficulties in getting the chemicals. Typically.
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. to reveal its characteristic elements and structure. are not dwelt upon here. The various issues relating to data collection constitute the main body of the text and therefore. Thus data analysis can be described as: ". Step 7: Analysis of data The word 'analysis' has two component parts. which univariate or bivariate descriptive statistics. Before interviews are conducted the following checklist should be applied: • Is it known how each and every question is to be analysed? (e. the prefix 'ana' meaning 'above' and the Greek root 'lysis' meaning 'to break up or dissolve'." Where the data is quantitative there are three determinants of the appropriate statistical tools for the purposes of analysis. tests of association. Such an approach is ill-advised..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.g. Each of these topics is dealt with later on. parametric or nonparametric hypotheses tests. . Therefore consideration has to be given to issues such as these before the fieldwork is undertaken. These are the number of samples to be compared. 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.a process of resolving data into its constituent components.. have the questions been properly coded? • Have the questions been scaled correctly for the chosen statistical technique? (e.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. Figure 1.experimentation and consumer panels. so they are simply noted here. Step 6: Data collection At this stage the researcher is ready to go into the field and collect data.g. if the calculations have to be performed manually. access to a computer which has an analysis program which he/she is familiar with? Or.
Data can be nominal. Take for example the outline of test B above. ordinal. Once the marketing researcher knows how many samples are to be compared. Samples are said to be dependent. There are several alternative research designs which might be employed. moderate and infrequent fruit Number juice drinkers to a trial formulation. but common.1 summarises the mathematical properties of each of these levels of measurement. i. The researcher would have two sets of sample results. when the measurement taken from one sample in no way affects the measurement taken from another sample. unrelated). each involving different numbers of samples. 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. samples = 2 Comparing the responses of samples of heavy. the samples are independent of one another. To illustrate the importance of understanding these connections consider the following simple. 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. Suppose a fruit juice processor wishes to test the acceptability of a new drink based on a novel combination of tropical fruit juices. The third factor to be considered is the levels of measurement of the data being used. 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.e. 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.e. Table 1. responses to product X and responses to product Y. question in marketing research.e. samples = 3 of of of The next consideration is whether the samples being compared are dependent (i. That is. related) or independent of one another (i. interval or ratio scaled. In many instances the age of respondents will be of interest. Therefore. or related. the same individuals are asked first to taste formulation X and then to taste formulation Y.whether the samples being compared are independent of one another and the level of data measurement. 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. In this case.1 Levels of measurement years 30 years ___ ___ . the samples would be considered dependent or related to one another. 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. Suppose however a sample were given two formulations of fruit juice to taste.
cleaned (i. where it exists. 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. their dependence or independence and the levels of measurement does affect how the data can be analysed. number and type of milling enterprises which had established themselves in rural areas following market liberalisation. 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. 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. Another important aspect relates to logistics planning. errors removed) and the proposed analytical tests tried out to ensure that they are effective before all of the data has been collected.e.6 provides a useful guide to making that final selection. Figure 1. It often happens that data processing begins whilst the data gathering is still underway. data can be coded. 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 . For instance. This may require careful planning of the sequencing of fieldwork.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. 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. Marketing researchers have to plan ahead for the analysis stage. allows all statistical tests to be used including the more powerful parametric tests whereby cause-and-effect can be established. on the other hand. Otherwise the whole exercise becomes increasingly inefficient. A second logistical issue concerns any plan to build up a picture of the pattern of responses as the data comes flowing in. These are at opposite ends of the hierarchy of levels of measurement. Figure 1. suppose that research was being undertaken within a particular agricultural region with a view to establishing the size. since it gives the analyst ratio data. Thus a simple change in the wording of a question can have a fundamental effect upon the nature of the data generated. Whether the data is to be analysed manually or through the use of a computer program.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. Format (b).
In writing a research proposal. within their final report. provides information to enable marketing managers to evaluate those alternatives and advises on the implementation of the alternatives. When conclusions are drawn from raw data and when recommendations are made then data is converted into information. With respect to the marketing planning function. its objectives. experienced researchers would be careful to limit the information which they firmly promise to obtain. as opposed to actual use. Marketing research does not itself make the decisions. the researcher should determine what the marketing manager's priorities are with respect to the research study.g. 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. Without interpretation. Moreover. Chapter Summary Marketing research serves marketing management by providing information which is relevant to decision making. nor does it guarantee success. That is. hammer versus plate mills) as well as screen sizes and end use (e. objective and analytical. marketing research helps to reduce the uncertainty surrounding the decisions to be made. In order to do so effectively.of the type of mill used (e. marketing research helps to identify potential threats and opportunities. the proportions prepared for animal versus human food). experienced researchers will ensure that the greater part of the report focuses upon 'must know' type information. in the course of the study. Step 8: Drawing recommendations conclusions and making The final chapter of this textbook is devoted to the topic of report writing. However. the budget to which the . marketing research has to be systematic. it is perhaps worth noting that the end products of marketing research are conclusions and recommendations. 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 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). This document should state the purpose of the research. It is information which management needs to reduce the inherent risks and uncertainties in management decision making. the time by which it must be completed. data remains of potential.g. The manager or other individual initiating the research must provide guidance to the researcher in the form of a research brief. to that which is considered 'must know' information. generates alternative courses of action. Rather. 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).
an exploratory study. Where the research is more qualitative in nature then it is still recommended that hypotheses should be developed. There will then be an intermediate stage whereby the hypotheses are restated in a testable form. i. It is only when the analysis plan has been considered that fieldwork. Having read. the null form. a descriptive study or a causal study. questioned and understood the research brief the onus is then upon the marketing researcher to respond by preparing the research design. Tull and Albaum. should be undertaken. What are the main items of information which should be included in a research brief? .researcher must work in developing the research design and the timing and frequency of any interim reports which the researcher is expected to make. The final step in the research design would be to write the report. 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. 1 Name the 3 key words used in the definition of marketing research by Green. What are the 3 types of research described in this chapter? 4. the researcher has to develop an analysis plan. i. 3. This is followed by the generation of hypotheses. depending upon what is already known about the research problem one of three types of study might be undertaken. Before proceeding further.e. precise definition of the problem. in the form of data collection.e. give brief answers to the following questions below. as far as is possible. Research design begins with an accurate and. 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 will probably only be done if it is intended that statistical analysis is to be undertaken. These should include alternative hypotheses. 2. Define the term 'hypothesis'.
methods samples samples and Structure Of The Chapter . • Appreciate the use of area or aerial sampling. 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. 6. What is the aim of exploratory research? 7. the requirement that samples be representative of the population from which they are drawn has to be offset against time and other resource considerations. Name 4 characteristics of a good research brief. 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. This being the case. At the same time. Name the 3 factors which determine which is the appropriate statistical test to conduct on data obtained from a random sample. choices have to be made between the mathematically superior probabilistic sampling methods and the more pragmatic non-probability sampling methods. 8.5.
the principal non-probability method. list. all but the most pedantic of practitioners would treat a systematic sample as though it were a true random sample. population record) does not adequately cover the target population • if some sections of the population are impossible to find or refuse to co-operate. Two major principles underlie all sample design. Figure 7. 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.e. gives each member of the target population a known and equal probability of selection. the second is to achieve the maximum precision for a given outlay of resources.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. The text which follows explains these methods in some detail.1 Methods of sampling It can be seen that there is a dichotomy . Bias in the selection can arise: • if the selection of the sample is done by some non-random method i. The two basic procedures are: 1 the lottery method. Thereafter we go through our sampling frame selecting every 5th distributor. quota sampling. e. is explained and its strengths and weaknesses outlined. Thereafter. picking 2 the use of a table of random numbers. index. Figure 7. The first is the desire to avoid bias in the selection procedure. Figure 7. selection is consciously or unconsciously influenced by human choice • if the sampling frame (i.g. To arrive at a systematic sample we simply calculate the desired sampling fraction. because there is no conscious control of precisely which distributors are selected. Other designs. 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. systematic sampling. e. These include simple random sampling.e.2 Systematic sampling as applied to a survey of retailers .probability and non probability sampling methods. The statistical aspects of sampling are then explored.The early part of the chapter outlines the probabilistic sampling methods. These cause selection or sample bias and can only be avoided if a random method is used. or probability sampling. numbers out of a hat or bag Systematic sampling Systematic sampling is a modification of random sampling. can retain the essential element of randomness but manage to increase precision by incorporating various restrictions and refinements. However. A number of illustrative calculations are presented.g. to be described shortly. stratified sampling and cluster sampling. and highlights the advantages and disadvantages of each method. Random sampling Random.
then random samples taken within each stratum.. race. how many strata should be constructed and what stratum boundaries should be used? 3 Sample sizes within strata. how many observations should be taken in each stratum? Bases of stratification Intuitively. 10. there are 3 key questions which have to be immediately addressed: 1 The bases of stratification.Systematic sampling Population = 100 Food Stores Sample desired = 20 Food Stores a. 6. sex. 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.. 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. 11.. It is only possible to do this if the distribution of the population with respect to a particular factor is known. When stratified sampling designs are to be employed. possession of a particular commodity. i. 23. 9. what characteristics should be used to subdivide the universe/population into strata? 2 The number of strata.. For example. Stratification can occur after selection of individuals. only a moderate amount of coffee or drinks coffee very occasionally. 99 5. 100 Stratified samples Stratification increases precision without increasing sample size. Sample every Xth store. i. 2 7. prior stratification would not be possible. e... Sample Numbered Stores 1 2 3 4 5 1. 25. Thus we may consider that to stratify according to "heavy users".. the population is divided into a number of strata. but if there is no general population list showing the age distribution. 97 13 18. b. age. Random stratified sampling is more precise and more convenient than simple random sampling..g.. if one wanted to stratify a sample of individuals in a town by age. Stratification does not imply any departure from the principles of randomness it merely denotes that before any selection takes place. 15. 3.e. i. 20. 21. one could easily get figures of the age distribution.. 8. 16. 4. 96 12 17. 98 14 19. 24. Examples of characteristics which could be used in marketing to stratify a population include: income. geographical region. 22. it seems clear that the best basis would be the frequency distribution of the principal variable being studied. What might have to be done in this case at the analysis stage is to correct proportional representation.e. "moderate users" and "light . and if it is also known to which stratum each member of the population belongs.e. Draw a random number 1-5.
The only approach is to create strata on the basis of variables. the average per capita consumption of coffee) we would normally use no more than about 6 strata. the "residual" or "unexplained" variation will dominate. as a whole. a point may be reached quickly where creation of additional strata is economically unproductive. Total variance within a population has two types of natural variation: between-strata variance and within-strata variance. Number of strata The next question is that of the number of strata and the construction of stratum boundaries. socio-economic group.marketing. mathematics. Stratification removes the second type of variance from the calculation of the standard error. Similarly it is important to maximise differences in stratum means for the key survey variables of interest.g. not just one. 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.users" would provide an optimum stratification. chemistry. In general. Past a certain point. However. or can be made available. we stratified students in a particular university by subject speciality . First. as many as possible should be used. geography etc. 2 Depending on the costs of stratification. 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. "How big a sample must be drawn from each?" Consider a situation where a survey of a twostratum population is to be carried out: . Suppose. age. and questioned them about the distinctions between training and education. If each stratum could be made as homogeneous as possible. farm size. for which information is. and engineering students as a whole. the question becomes.g. Stratification ensures that variation between strata does not enter into the standard error by taking account of this source in drawing the sample. and stratification on the basis of one may not provide the best stratification for the others. Sample sizes within strata Proportional allocation: Once strata have been established. by region and/or age group). e. As regards number of strata. even if one survey variable is of primary importance. the population mean could be estimated with high precision. there is usually interest in many variables. firm size. its mean could be estimated with high reliability and. This is desirable since stratification has the effect of removing differences between stratum means from the sampling error. If estimates are required for population subgroups (e. However. current data on its frequency is unlikely to be available. that are believed to be highly correlated with the principal survey characteristics of interest. In this way a relatively limited sample within each stratum will provide a generally precise estimate of the mean of that stratum. in turn. 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. However. Secondly. then more strata may be justified. and little improvement will be effected by creating more strata. sex. it is desirable to make up strata in such a way that the sampling units within strata are as similar as possible. etc. computer science. If a single overall estimate is to be made (e. for example.g. engineering. history. two difficulties may arise in attempting to proceed in this way.
once again.Stratum Number of Items in Stratum A B 10. we had stratum A and stratum B. this method of allocation would result in: Stratum A (10.000 90. the overall sampling fraction is: Thus.. so the available total sample size is 500. Generally. but we know that the individuals assigned to stratum A were more varied with respect to their opinions than those assigned to stratum B.000 Stratum B (90.5%) = 50 The major practical advantage of proportional allocation is that it leads to estimates which are computationally simple. Selection is normally left to the discretion of the interviewer and it is this characteristic which destroys any pretensions towards randomness. 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. statisticians criticise the method for its theoretical weakness while market researchers defend it for its cheapness and administrative convenience.Wk k Optimum allocation: Proportional allocation is advisable when all we know of the strata is their sizes. So: sr = W1 1 + W2 2 + W3 3 + .000 If the budget is fixed at $3000 and we know the cost per observation is $6 in each stratum. it can be used safely in certain circumstances. In this example. Main arguments against: Quota sampling . 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. The most common approach would be to sample the same proportion of items in each stratum. Quota v random sampling The advantages and disadvantages of quota versus probability samples has been a subject of controversy for many years. Where proportional sampling has been employed we do not need to weight the means of the individual stratum when calculating the overall mean. Others think that although it is clearly less sound theoretically than probability sampling. Quota sampling Quota sampling is a method of stratified sampling in which the selection within strata is nonrandom. This is termed proportional allocation.000 × 0..5%) = 450 × 0. Some practitioners hold the quota sample method to be so unreliable and prone to bias as to be almost worthless. Suppose that. In situations where the standard deviations of the strata are known it may be advantageous to make a disproportionate allocation.
One does not have the security.e. Cluster and multistage sampling Cluster sampling: The process of sampling complete groups or units is called cluster sampling. A simple course would be to select say 4 areas at random (i. one has materially simplified and made cheaper the fieldwork.000 households. (All the more so if the survey were to be conducted in rural areas. e. Suppose further that the town contains 20. 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. the unit from which data are to be gathered) is the individual household. especially in developing countries where rural areas are sparsely populated and access difficult). 3 If fieldwork has to be done quickly. but by selecting clusters of households. this would spread the sample over the whole town. and that a sample of 200 households is to be selected.e. Quota sampling is independent of the existence of sampling frames. quota sampling may be the only possibility. A quota interview on average costs only half or a third as much as a random interview. to obtain immediate public reaction to some event. situations where there is any sub-sampling within the clusters chosen at the first stage are covered by the term multistage sampling. they do not fully represent the population and will. 1 in 100) and include all the households within these areas in our sample. Whether single stage cluster sampling proves to be as statistically efficient as a simple random sampling depends upon the degree of homogeneity within clusters. 2 It is easy administratively. provide . and so are the headaches of non-contact and callbacks. The overall probability of selection is unchanged. than a small number of large clusters. For example. One approach would be to pick the 200 by some random method. 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. with consequent high fieldwork costs and much inconvenience. Main arguments for: quota sampling 1 Quota sampling is less costly. For example. 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. but we must remember that precision is lost. perhaps to reduce memory errors.. The labour of random selection is avoided. all of them listed on convenient records. 4. therefore. though. A large number of small clusters is better. However. suppose that a survey is to be done in a large town and that the unit of inquiry (i. all other things being equal. did interviewers place respondents in groups where cases are needed rather than in those to which they belong. If respondents within clusters are homogeneous with respect to such things as income. 4 Strict control of fieldwork is more difficult. i.e.g. 2 The interviewer may fail to secure a representative sample of respondents in quota sampling. socioeconomic class etc. of being able to measure and control these errors.1 It is not possible to estimate sampling errors with quota sampling because of the absence of randomness.
Within the selected PSU one may go direct to the final sampling units. such as individuals. PSU's for national surveys are often administrative districts. then polling districts. households or addresses. Area sampling Area sampling is basically multistage sampling in which maps. in which case we have a two-stage sample. administrative districts are sub-divided into wards. cluster sampling tends to offer greater reliability for a given cost rather than greater reliability for a given sample size. This is the main method of sampling in developing countries where adequate population lists are rare. serve as the sampling frame. with the sampling ideally being random at each stage. either a complete enumeration is taken or a further sub-sample. urban districts or parliamentary constituencies. In short. Figure 7. The necessity of multistage sampling is easily established. i. rather than lists or registers.3 Aerial sampling . On the other hand.e. the lower cost of cluster sampling often outweighs the disadvantages of statistical inefficiency. 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.larger standard errors. It would be more usual to introduce intermediate sampling stages. 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.
A variation is to divide the area into "parcels" of land. if the survey is of urban households then clusters of dwellings such as blocks bounded by streets can be identified.4 gives an impression of the pattern of sampling which emerges. it can be subdivided into sub-areas and a grid overlayed on these. hills or mountains. Figure 7.g.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. number these and use them as a reference grid. If sufficient information is known about an area then it is permissible to construct the "parcels" on the basis of agro-ecosystems. Sampling points are selected on the basis of numbers drawn at random that equate to the numbered columns and rows of the grid. rivers. sampling points are chosen within each square. Using random numbers.3 the columns and rows are given numbers.A grid. Alternatively. These "parcels" (the equivalent of city blocks) can be formed using natural boundaries e. This can serve as a convenient sampling frame. is drawn and superimposed on a map of the area of concern. railways. The town area is then divided into blocks and these blocks are numbered and a random sample . such as that shown above. Figure 7. etc. Then. each square in the grid is allocated numbers to define grid lines. If there is an accurate map of the area we can superimpose vertical and horizontal lines on it. If the area is large.4 depicts the procedures involved. As in figure 7. canals. Using random numbers points can be placed on the map and data collected from households either on or nearest to those points. Figure 7. roads.
easily identifiable by field workers and every dwelling must be clearly located in only one block. The remainder of this paper is concerned with the statistical testing of sample data. then the alternative hypothesis may be accepted. indicates the predicted direction of the difference and a one-tailed test is called for. The null hypothesis in this case would be that "there is no difference between the proportions aware of the brand. The data we collect often requires to be compared and when comparisons have to be made.e. The alternative hypothesis (H1) is a statement relating to the researchers' original hypothesis. we would expect some differences. To this end. before and after the campaign. Sampling and statistical testing Research is conducted in order to determine the acceptability (or otherwise) of hypotheses. This empirical data requires to be organised in such a fashion as to make it meaningful. we collect data which should yield direct information on the acceptability of that hypothesis. After the campaign we obtain another measure of the awareness. in the above example. Note that these are clearly two different and distinct hypotheses. . Having set up a hypothesis. we may wish to know whether a particular promotional campaign has succeeded in increasing awareness amongst housewives of a certain brand of biscuit. after the promotional campaign. on the other hand. Since we are dealing with sample results. 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. 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. The null hypothesis is a hypothesis of no differences. H1: There is an increase in the proportion of housewives aware of the brand. For example. We formulate it for the express purpose of rejecting it. and we must try and establish whether these differences are real (i. these statistics on their own mean very little. Streets. The null hypothesis The first step in evaluating sample results is to set up a null hypothesis (Ho). statistically significant) or whether they are due to random error or chance. we organise it into frequency distributions and calculate averages or percentages. Case (a) does not indicate the direction of change and requires a TWO-TAILED test. or b. before and after the campaign". If the null hypothesis is rejected. Thus. H1: There is a difference between the proportions of housewives aware of the brand. But often. railway lines and rivers make good boundaries. One assumption which is made is that the survey results are based on random probability samples. Before the campaign we have a certain measure of awareness. The boundaries of the blocks must be well defined. the alternative hypothesis could either be: a. Case (b). say y%. It is formulated before we collect the data (a priori). say x%.of them is selected.
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. then we require to use a parametric test. i. In this situation we shall be saying "do not market A" when in fact there is a market for A. (These issues are covered extensively in the data analysis course notes). In a straightforward test of two products. 60% of the population prefer the product. This is the type II error. then we would accept the Ho. population values are "parameters". the choice between alternative types of test is determined by 3 factors: (1) whether we are working with dependent or independent samples. There are basically two types of statistical test. say. Common values of this critical level are 0. our null hypothesis. the real population is A = 62%. means and standard deviations). and only if. If it is more important to avoid . then we make what is known as a Type I error. Type I errors and type II errors The choice of significance level affects the ratio of correct and incorrect conclusions which will be drawn. e. ratio.e. 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. 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. 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.02 then we would reject the null hypothesis and accept our alternative hypothesis. we found the probability of this difference occurring was 0. 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. and (3) the mathematical properties of the scale which we have used. We will reject Ho.05 and 0. so as to reject the null hypothesis of A = B = 50% at.Parametric tests and non-parametric tests The next step is that of choosing the appropriate statistical test. known as the critical region (or level). Clearly we can set a sample size. If however. Given a significance level there are four alternatives to consider: Figure 7. ordinal or nominal. interval. we may decide to market product A if. Obviously some sort of compromise is required. If. that the distribution of the sample means is normal. This depends on the relative importance of the two types of error. then we shall accept the null hypothesis A = 50% on nearly half the occasions as shown in the diagram overleaf. parametric and non-parametric. on the other hand. Thereafter. (2) whether we have more or less than two levels of the independent variable.01 and if we had set our significance level in advance at 0.01. If we assume. Parametric tests are those which make assumptions about the nature of the population from which the scores were drawn (i. a 5% significance level. if a statistical test yields a value whose associated probability of occurrence is equal to or less than some small probability.g. for example. Referring back to our example.e. We discard actual numerical values and focus on the way in which things are ranked or classed. Non-parametric tests do not require this type of assumption and relate mainly to that branch of statistics known as "order statistics".05.
convicting an innocent man. researchers rarely base their decisions on a single significance test. guilty. if 20 questions were asked in our "before" and "after" survey and we test each question at the 5% level. we may conduct a product test to find out consumers preferences. a man is presumed innocent of murder until proved otherwise. if a jury convicts a man when he is. some of the correct hypotheses will be rejected by chance. innocent. a type I error. These.accepting a false hypothesis. they convert their actual difference into "standard errors" by dividing it by its standard deviation. even if there is no real difference in the population. Statistical significance is not always the only criterion for basing action. For example. We must remember that when one makes a series of tests. but we ask several. No mention is made in these notes of considerations of costs of incorrect decisions. 2. For example. a type II error will have been made: the jury has accepted the null hypothesis of innocence when the man is really guilty. Significance tests may be applied to the answers to every question in a survey but the results will be only convincing. is the more serious. Then. in fact. . Most people will agree that in this case. then refer to a chart to ascertain the probability of such a difference occurring. if consistent patterns emerge. In practice. Now. say a difference between two means. Economic considerations of alternative actions is often just as important. 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. He/she may have a rough idea of the likely percentage. Under our system of law. Consider the standard error of a percentage: Assume that the researcher hazards a guess that the likely percentage of ownership is 30%. If the jury absolves the man. Researchers will obtain a result. a type I error will have been made: the jury has rejected the null hypothesis of innocence although it is actually true. The majority of tests are likely to be parametric tests where researchers assume some underlying distribution like the normal or binomial distribution. in fact. Example calculations of sample size 1. therefore. are the basic steps in the statistical testing procedure. when he is. then one of the differences is likely to give significant results. 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. Suppose a researcher wishes to measure a population with respect to the percentage of persons owning a maize sheller. a low confidence coefficient may be used. of course. We do not usually base our conclusions on the results of one particular question. make statistical tests on the key questions and look for consistent significances.
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
after an intensive promotional campaign. This has infinite degrees of freedom). Researchers take an average value of p. S.44 (N. Since 3. Situation: The same sample is interviewed on two different occasions (or assessing two different products). the null hypothesis is refuted at beyond the 1/1000 level. Case 4:. Two months later.B. June September 20 32 Sample size = n = 200 . 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. So = 6. they are reinterviewed with the same object.1 Significant test t= 3.29. Thus the difference in fish consumption between rural and urban housewives is significant at beyond 1/1000 level.44 > 3.B. 200 housewives are interviewed in June to determine their purchases of a canned fruit juice.E.N. 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). the two-tailed t-value for 1/1000 level of significance for 0 degrees of freedom.
25 0. Their responses appear in table 7.54 Significance test This has infinite degrees of freedom.5 litres.5 -2.5 litres.25 . 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.5 litres per month. For example.5 ( . like 10. It cannot assume that simply because the sample mean was 10. = = 3. In the end column these values have been squared and summed to give the total variance.39 > 3.0 degrees of freedom. Confidence intervals for the mean Sometimes the task is one of estimating a population value from a sample mean.5 0. In the middle column you will see that researchers have subtracted each of the individual values from the mean.5 litres that this is necessarily a good estimate of the average purchases of all farmers in the population.1 Calculating the mean and standard deviation X Consumption in litres 5 8 8 11 -X -5. Rather a sample will give a range within which it is thought the true population value lies. (i. the difference between the June and September purchases is significant at beyond the 1/1000 or 0. the term which takes into consideration how each person behaves both in June and September. Table 7.1 below. samples do not and cannot give point estimates. Indeed.The last term under the square root sign = 2 × Covariance of the two assessments. suppose from a sample of 100 farmers it is found that their average monthly purchases of the Insecticide Bugdeath were 10.29 with 0. rather than testing hypotheses. Since 3.e.5 -2. the null hypothesis is refuted at this level).1% level. Their mean consumption is 10.25 6.X2) 30.25 6. To calculate this range researchers need to know the standard deviation as well as the mean.
As those who have studied elementary statistics will know.33 litres.5 3. researchers are 95% confident that the true value of farmers' usage of Bugdeath is between 5 and 17 litres. Sampling bias arises when selection is consciously or unconsciously influenced by human choice. 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.) Thus.5 litres plus or minus 2.25 0. 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 litres.e.e.5 ± 1. only 68% of the values under a normal distribution curve lie between ±1 standard deviation. the .11 11 14 16 X=10.57 rather than 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.96 × 2. This example serves to show the mechanics of the confidence interval calculation and the poor estimates we get from small sample sizes..5 5.25 30. This is the best estimate that can be given on the basis of such a small sample. If researchers want to be 95% sure of a correct prediction then they must multiply their standard error by 1. i.5 =5 to 17 litres So.67 litres and 13.96.25 Total variance = 86.00 To calculate the standard deviation researchers divide the total variance by the sample size to obtain the standard deviation i.67 and 13. it is estimated that most farmers buy somewhere between 7.25 12. the calculation becomes: (Standard Error) Confidence Interval = 10.83 =10. The standard error is calculated by dividing the standard deviation by the square root of the sample size.5 0.33 litres. viz: Thus the estimate is that the average consumption is 10.5±220.127.116.11 0.5 0. researchers can only be 68% sure that the true consumption level is between 7. (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. In other words.
did interviewers place respondents in groups where cases are needed rather than in those to which they belong. with the sampling ideally being random at each stage. then a random sample is taken within each stratum. Quota sampling is a method of stratified sampling in which the selection within strata is nonrandom. the term multistage sampling applies. The process of sampling complete groups or units is called cluster sampling. Some practical problems limit the desirability of a large number of strata: (1) past a certain point. Strict control of fieldwork is more difficult. larger numbers of small clusters is better . To arrive at a systematic sample we simply calculate the desired sampling fraction and take every nth case. Systematic sampling is a modification of random sampling.sampling frame inadequately covers the target population or some sections of the population cannot be found or refuse to co-operate.g. It is only possible to stratify if the distribution of the population with respect to a particular factor is known. Multistage sampling involves first selecting the PSU. and if fieldwork has to be quick. i. That is. the labour of random selection is avoided. e. then the final sampling units such as individuals. Random stratified sampling is more precise and more convenient than simple random sampling. or probability sampling.all other things being equal . and if it is also known to which stratum each member of the population belongs. households or addresses: . 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. Where there is sub-sampling within the clusters chosen at the first stage. The interviewer may fail to secure a representative sample of respondents in quota sampling. There is no departure from the principles of randomness. 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. The best basis would be the frequency distribution of the principal variable being studied. With respect to statistical efficiency. 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. A quota interview on average costs only half or a third as much as a random interview. Stratification increases precision without increasing sample size. cluster sampling tends to offer greater reliability for a given cost rather than greater reliability for a given sample size. It merely denotes that before any selection takes place. the "residual" variation will dominate.e. perhaps to reduce memory errors. and little improvement will be effected by creating more strata (2) a point may be reached where creation of additional strata is economically unproductive. gives each member of the target population a known and equal probability of selection.than a small number of large clusters. Quota sampling is independent of the existence of sampling frames. Random. Sample sizes within strata are determined either on a proportional allocation or optimum allocation basis. it is not possible to estimate sampling errors. the population is divided into a number of strata. quota sampling may be the only possibility. and so are the headaches off non-contact and callbacks. Using cluster samples ensures fieldwork is materially simplified and made cheaper. Stratification has the effect of removing differences between stratum means from the sampling error. Therefore.
Name the 3 non-probability sampling methods shown in the opening section of the chapter. What are the 3 key questions to be posed when employing stratified sampling? 4. rather than lists or registers. Define the term 'random sampling' 2.Area sampling is basically multistage sampling in which maps. Outline the arguments against quota sampling. 8. 3. 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. . Explain the term 'primary sampling units 'PSUs' 7. Explain the meaning of a 'type I error'. This is the main method of sampling in developing countries where adequate population lists are rare. 10. Define the term null hypothesis'. Explain the term 'proportional allocation'. What are the 2 types of statistical tests? 9. serve as the sampling frame. 6. Which Z value equates to a 95% confidence level? The Marketing Environment.
but this can be misleading. and the company needs to be flexible to adapt. micro describes the relationship between firms and the driving forces that control this relationship.' the 'micro-environment' and the 'internal environment'. and the firm may exercise a degree of influence. economics and technology. and the marketer needs to compensate for changes in culture. The macro-environment This includes all factors that can influence and organization. Globalization means that there is always the threat of substitute products and new entrants. In this context. politics. It includes suppliers that deal directly or indirectly. The micro-environment This environment influences the organization directly. The wider environment is also ever changing. namely the 'macroenvironment. Micro tends to suggest small.The marketing environment surrounds and impacts upon the organization. A company does not generally influence any laws (although it is accepted that they could lobby or be part of a trade organization). There may be aggressive competition and rivalry in a market. It is continuously changing. but that are out of their direct control. The internal environment. There are three key perspectives on the marketing environment. . It is a more local relationship. consumers and customers. and other local stakeholders.
etc.g. . Materials and Markets. The external environment can be audited in more detail using other approaches such as SWOT Analysis. Political (and legal) forces. agents and distributors. 3. or others? Economic Factors.Will government policy influence laws that regulate or tax your business? 3. The internal environment is as important for managing change as the external. environmental analysis should be continuous and feed all aspects of planning. The organization's marketing environment is made up of: 1. These are known as PEST factors. As marketers we call the process of managing internal change 'internal marketing.g. and so on. The macro-environment e. Is the government involved in trading agreements such as EU. What is the government's policy on the economy? 5. office technology. 2. 3. and the spending power of consumers and other businesses. You must consider issues such as: 1. Economic forces. 2. PEST Analysis. The internal environment e. Machinery. ASEAN. Money.All factors that are internal to the organization are known as the 'internal environment'. Interest rates.' Essentially we use marketing approaches to aid communication and change management. What is PEST Analysis? It is very important that an organization considers its environment before beginning the marketing process.g. Michael Porter's Five Forces Analysis or PEST Analysis. Does the government have a view on culture and religion? 6. Political Factors. our external customers. This is especially true when planning for international marketing. The micro-environment e. etc. and Technological forces. Marketers need to consider the state of a trading economy in the short and longterms. Long-term prospects for the economy Gross Domestic Product (GDP) per capita. suppliers. The level of inflation Employment level per capita. staff (or internal customers).What is the government's position on marketing ethics? 4. our competitors. Sociocultural Factors. In fact. Sociocultural forces. wages and finance. You need to look at: 1. They are generally audited by applying the 'Five Ms' which are Men. NAFTA. The political arena has a huge influence upon the regulation of businesses.How stable is the political environment? 2.
new generation mobile telephones.g.How is distribution changed by new technologies e.Does technology offer companies a new way to communicate with consumers e. flight tickets.What are attitudes to foreign products and services? 3. it may take one of many different shapes. Customer Relationship Management (CRM). It is very important that such factors are considered.The social and cultural influences on business vary from country to country. If a curve is drawn showing product revenue over time.Do the population have a strong/weak opinion on green issues? Technological Factors. books via the Internet.How long are the population living? Are the older generations wealthy? 7. Consider the following points: 1. auctions. . etc? 3. Factors include: 1. and is a major driver of globalization.What is the dominant religion? 2.Does language impact upon the diffusion of products onto markets? 4. 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. 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. Does technology allow for products and services to be made more cheaply and to a better standard of quality? 2.g. 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.How much time do consumers have for leisure? 5. Technology is vital for competitive advantage. etc? 4.Do the technologies offer consumers and businesses more innovative products and services such as Internet banking.What are the roles of men and women within society? 6. banners.
Distribution is selective and scattered as the firm commences implementation of the distribution plan. the primary goal is to establish a market and build primary demand for the product class. During the growth stage. When competitors enter the market. Sales increase as more customers become aware of the product and its benefits and additional market segments are targeted. The introductory promotion also is intended to convince potential resellers to carry the product. In some cases a penetration pricing strategy is used and introductory prices are set low to gain market share rapidly. . These higher costs coupled with a low sales volume usually make the introduction stage a period of negative profits. Promotion .New product features and packaging options. As the product progresses through its life cycle. improvement of product quality. During the introduction stage. The marketing mix may be modified as follows: • Product . Distribution . Once the product has been proven a success and customers begin asking for it. Advertising costs typically are high during this stage in order to rapidly increase customer awareness of the product and to target the early adopters. There are no sales and the firm prepares to introduce the product. but such announcements also alert competitors and remove the element of surprise.Promotion is aimed at building brand awareness. the goal is to gain consumer preference and increase sales. often during the later part of 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. Samples or trial incentives may be directed toward early adopters. Growth Stage The growth stage is a period of rapid revenue growth. changes in the marketing mix usually are required in order to adjust to the evolving challenges and opportunities. Some firms may announce their product before it is introduced. 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. The following are some of the marketing mix implications of the introduction stage: • • • • Product .one or few products.Product development is the incubation stage of the product life cycle. Introduction Stage When the product is introduced. During the introductory stage the firm is likely to incur additional costs associated with the initial distribution of the product.Generally high. The marketing team may expand the distribution at this point. relatively undifferentiated Price . sales will increase further as more retailers become interested in carrying it. sales will be low until customers become aware of the product and its benefits.
If the product has developed brand loyalty. advertising expenditures will be reduced. Distribution .Emphasis on differentiation and building of brand loyalty.Modifications are made and features are added in order to differentiate the product from competing products that may have been introduced. The competing products may be very similar at this point.Maintained at a high level if demand is high. Maturity Stage The maturity stage is the most profitable. The firm places effort into encouraging competitors' customers to switch. reducing marketing support and coasting along until no more profit can be made. Rejuvenate surviving products to make them look new again. Price .New distribution channels and incentives to resellers in order to avoid losing shelf space. Trade discounts are minimal if resellers show a strong interest in the product. increasing the difficulty of differentiating the product.Increased advertising to build brand preference. Harvest it. Because brand awareness is strong. the firm generally has three options: • • • Maintain the product in hopes that competitors will exit. they do so at a slower pace.Distribution becomes more intensive. Decline Stage Eventually sales begin to decline as the market becomes saturated. . the profitability may be maintained longer. Incentives to get competitors' customers to switch. Distribution .• • • Price . Unit costs may increase with the declining production volumes and eventually no more profit can be made. While sales continue to increase into this stage.The number of products in the product line may be reduced. During the maturity stage. or reduced to capture additional customers. and converting non-users into customers. Marketing mix decisions may include: • • • • Product . During the decline phase. Promotion . Competition may result in decreased market share and/or prices. increasing usage per customer. Promotion .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. or customer tastes change. The marketing mix may be modified as follows: • Product . Discontinue the product when no more profit can be made or there is a successor product. the product becomes technologically obsolete. the primary goal is to maintain market share and extend the product life cycle. Reduce costs and find new uses for the product.
the product life cycle concept helps marketing managers to plan alternate marketing strategies to address the challenges that their products are likely to face. but products do not have such a predictable life and the specific life cycle curves followed by different products vary substantially. Furthermore. 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. Combined Summaries of Product Life Cycle Management Articles some 1. thus precipitating a further decline.Distribution becomes more selective. if sales peak and then decline. the life cycle concept is not well-suited for the forecasting of product sales.Expenditures are lower and aimed at reinforcing the brand image for continued products. Limitations of the Product Life Cycle Concept The term "life cycle" implies a well-defined life cycle as observed in living organisms. Relationships over the 5. Why companies are product life cycle perspective reluctant to use the life cycle concept. Stages of the product life 9. Life cycle strategies 8. Industry versus product 3. critics have argued that the product life cycle may become self-fulfilling.• • • Price . Channels that no longer are profitable are phased out. PLC Graphic cycle costs traditional focus 16.Prices may be lowered to liquidate inventory of discontinued products. managers may conclude that the product is in the decline phase and therefore cut the advertising budget. Distribution . Objectives From Producer. Prices may be maintained for continued products serving a niche market.Stages of the product life 2. 7. Final Customer Product 12.Susman 1989 Marketing or Sales Perspective . Trade-off investment Life Cycle Costs study 13. Consequently. Four components of Life cycle Cycle Management 10. Promotion . Problems created by 15. Learning Curve Models Stages of The Product Life Cycle . Nonetheless. cycle life cycle Customer and Society Perspectives 4. For example. Producers Costs 11. Ways to estimate life 14.
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 .consumer’s perspective.Automobiles.producer’s perspective Consumable life .. Industry Life Cycle Versus Product Life Cycle Industry examples .Startup Growth Maturity Decline Abandon The length and sequence between the stages is not predictable. Customer and Society Perspectives Perspective Objective Methods .Pontiacs. convertibles. Edsels Product classes. forms and brands. Steel Product examples . Automobiles.g. Pontiacs Objectives From Producer. e.
Advertising andPlant & Equipment.Government Relationships over the Products Life Cycle* Production Stages Marketing Stages Strategic objectives Conception. but Positive & Peak then Decrease. Quality High Product R&D. Increasing for decrease. Low Plant & Equipment. High Process R&D. . Production & Production & Production Production & Design & Logistical Logistical & Logistical Logistical Development Support Support Support Support Startup Startup Growth Maturity Decline. Price Moderate Product R&D. regulation. Moderate Process R&D &Advertising. unsafe products Society . Moderate Advertising and Plant & Equipment. pollution. Revitalize Abandon or Design for low Sales growth production & consumption costs. Advertising and Plant & Equipment. increasing.e.. Sales growth. Laws. Profits Zero Negative. Moderate Process R&D Quality High Product R&D. innovator. Process R&D. Profits Cash flows& profits Performance indicators Expense indicators Quality Moderate Product R&D.g.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 . Price Low Product R&D. High Process R&D. fines etc. Profits vary depending on company’s position in the industry.
Measures Measures production. Recognizes that customer consumption costs are important. production costs. Supports a forward pricing strategy based on the experience (learning) curve. Traditional accounting systems measure only production costs or the value added by production.g. Recognizes that maximizing revenue and minimizing costs at every stage might not maximize profits over the product life cycle. logistical support costs & consumption costs. Provides a long term perspective that produces decisions that lead to better long term results. The ratio of the operating and support costs to the acquisition costs of a product is an important consideration for the customer. costs.. Measures production. Measures production. Measures production costs. Lower market risk for innovator. . the life cycle concept recognizes that actions taken in the design and development stages to generate revenue and lower costs provide long run benefits. 3. 4. standardizing the product design to lower costs sacrifices flexibility. For example. logistical logistical support costs & support costs & consumption consumption costs. Supports the value chain concept while traditional cost accounting supports the value added concept. Measures production costs. parts reduction. For example. production. This shows that low consumption costs must be designed into the product. snap together parts. Measures production costs. Traditional costing Life costing R&D treated as Measures period costs.Risks High technological risk for innovator. Charging high prices to enhance revenue invites competitors to enter. 2. cycle Measures product design & process innovations to lower fabrication & assembly costs e. logistical support costs & consumption costs. High market risk fornoninnovator. Benefits of Product Life Cycle Perspective The life cycle perspective: 1.
Life cycle strategies 1. quality control or maintenance may shrink as a result of designing more reliable products. related to the long run and value chain. High hurdle (discount) rates used for investment justification. 2. Modify the product continuously and compete on the basis of product uniqueness. Places emphasis on designing products to lower fabrication and assembly costs.5. Helps provide better information for investment decisions. stages. 1. 4. By 4. delivering products to customers and installing products and training customers to use them. Lack of data needed to understand the product life cycle. i. Standardize the product quickly and compete on the basis of low cost. By 3. and common interchangeable parts. By 2.. CAM-I Cost Breakdown Structure 1. purchasing. 3. Benefits not distributed evenly to functional groups. Why companies are reluctant to use the life cycle concept. such as reducing the number of parts. 5. For example.e. Stages in the Product Life Cycle (Czyzewski & Hull 1991) Startup Growth Maturity Harvest . Total Life Cycle Costs = Sum of the costs across all the life cycle stages.plastic and snap together parts. Cash flow problems. Short term mentality. Charge premium prices. By tasks within activities. life function activities cycle within within stage. 2. using more molded parts . functions. The PLC perspective also places emphasis on lower logistical support costs such as storing finished goods.
A product life cycle budgeting system is an improvement over traditional budgeting because the underlying assumptions change over the products life cycle stages. 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. The portfolio approach helps managers smooth the peaks and valleys of the . Advanced Cost Management Systems (based on a process view of the business) provide the link between the budgeting process and the reporting process. Portfolio Theory . A Balanced Set of Performance Measures . The Life Cycle Model has Seven Stages Analysis Startup Entry Build or Growth Maturity Decline Withdrawal 2.allows managers to evaluate a company’s investments as a whole.refers to balancing process measurements and results measurements based on the critical success factors at each stage. Four Components of Life Cycle Management (Adamany & Gonsalves 1994) 1. 4.
cash generating investments can be used to fund startup. delay. Cost of 3. Net disposal costs. Product 4. as well as measuring the effects of various "investment kickers". Logistics. 6. Guarantees. costs. It is also helpful in planning resource requirements and budgets at each functional level.000 Product from Vendor B Data* Costs $170.000 . costs. 2. 2.investment cycle. The idea was to illustrate the type of analysis that needs to be performed. Final Customer Product Life Cycle Costs (Artto 1994) 1. Product & process conception.Consumption Perspective (White and Ostwald 1976) The life cycle concept is obviously important from the consumption perspective. Design. costs. Maintenance 7. 4. 8. Producers Costs . A trade-off investment study is illustrated below based on an example provided by White and Ostwald (1976). Production. Service. Purchase delivery Installation Operating Support & problems and price. development. costs.(Artto 1994) 1. revitalization Life Cycle Costing Trade-off Study . For example. Marketing. To keep it simple. 3. Product Characteristics Product price Product from Vendor A Data* Costs $200. Two vendors submitted bids and data that are used in the cost calculations in the table. cash using investments. 5. 7. 5. it helps show how mature. they used a two year life for the equipment and did not discount the cash flows. 6. An aerospace firm requested bids on a vacuum chamber designed to simulate high altitude pressures for electronic equipment.
1 week (i.Life Installation costs Labor requirements Labor rate Machine run time Labor costs Maintenance rate Corrective maintenance: 2 years 3.400 Parts & Supplies cost (% of product 1% price) Input power: Kilowatt hours per 8 kilowatt hours machine hour.000 After 180 hours of use.920)(2 men)($8)(2yrs) $6 per hour 300 hours 93.920 per year (2.920÷180)(80)($6)(2yrs) 2% 3.920)(9kwh)(.440 Mean time between failures.920 per year (2.114 * Data from vendor specifications and local management estimates.000 1 man $8 per hour 2. 8 hours per service. Cost per hour.025) (2yrs) 1.. 4 hours per service 864 (2.720 2 years 4.e.168 $256.025 (2.e.360 (2.632 1. 80 hours.920)($8)(2yrs) labor $6 per hour 500 hours 46.880 2 weeks i.600 Preventive maintenance: CycleDowntime Cost (Round cycles) After 160 hours of use. . (2. Power costs Total kilowatt $.314 $297. Costs cycles) (Round (2.025 (2.000 2 men $8 per hour 2. 15.920÷500)(40)($6)(2yrs) 2.920÷160)(4)($6)(2) 2.920)(8kwh)(.025) (2yrs) 9 kilowatt hours $. 40 hours) Mean time to repair..920÷300)(80)($6)(2yrs) 9.
need horizontal communication and control. 5. Over the wall structures . 3. 2.g. Life cycle costs include the producers cost. There are three ways to estimate life cycle costs: 1. (See CAM-I Figure 2-3 and Figure 2-4). Too little employee participation . 4. Analogy . Standard cost for planning and control.need employee empowerment. Industrial engineering and cost accounting . Whole life costs include the consumers costs as well as the producers costs. DL and the usual overhead application. 3. e. Parametric models use non-linear regression models. Vertical organizations have a myopic focus .A note on Shields and Young 1991 80-85% of the life cycle costs are committed early in the products life cycle. Too much hierarchy. $1 spent on pre-manufacturing activities can save $8-$10 on manufacturing and post manufacturing costs.estimate costs of DM.need cross-functional teams including both design and manufacturing engineers. Problems created by traditional focus: 1. Need flatter organizational structures. Need to eliminate variance analysis. Consumer Perspective Purchase Operating Support Maintenance Disposal Societal Perspective Disposal costs plus externality costs. . 2. (See the Hertenstein & Platt summary).. Shields and Young make a distinction between life cycle costs and whole life costs. Need target cost strategy. health costs from pollution.estimate costs based on similar component or product.
to multiple low volume products. a set of concepts and a body of . Services marketing Services marketing has incurred an explosive amount of scholarly research in the last 20 years. Both articles use the process-product matrix illustrated below as a basis for discussing strategy. The idea conveyed in the matrix is that products tend to evolve from low volume. In the first article the emphasis is on competitive strategy. one of a kind specialty items. and thus deserve a special approach. how to compete. and in some cases to higher-volume commodities. i. to higher volume major products. In the second article the authors emphasize how to deal with changes in the competitive environment. Although some products do not evolve in this way.e.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. For more on the process-product matrix see the Hayes & Wheelwright summaries. many do move down the diagonal of the matrix as indicated by the arrows.. however since 1986 there has been no debate concerning the notion that services are distinct from products. The matrix shows a different view of the product life cycle than most of the articles mentioned above.
as opposed to products where customers do not see how the product is manufactured. 1998). because services don't physically exist. Firstly there is no stock. and marketers are left to the advertising and promotion. or the food on your plate in a restaurant. If you buy a Ford Focus here in Australia. and then finish with an explanation of the extra P's found in the services marketing mix. 1994). This invisibility creates a number of issues for marketers. in which intangibility. None of these are physical objects in which a customer can take ownership of. meaning they differ with each use. Secondly services cannot be shown or displayed to customers. & Chrisman. Services are defined in (Zeithaml. 2004). even though during a service physical evidence will be apparent in the form of things like medicine the doctors prescribes to you. For example a wildlife tour will never be the same twice. This essay will explain the distinguishing features of services marketing. making it easy for other firms to copy your service. In the last century there has been a large shift in marketing thought.knowledge (Brown. Vargo and Lusch define services as the application of specialized competences (knowledge and skills) through deeds. not only because of the random and unpredictable nature of the animals. which is important to marketers because customers will have a particular set of expectations in mind. pot plants etc). services simply cannot be stored. Four idiosyncratic features of services will now be given. operational staff carries out much of the marketing function (Klassen. A good metaphor for this is being at the theatre. The final distinction that differentiates services from products is their perishability. and performances for the benefit of another entity or the entity itself. It will begin by defining services marketing and giving some background knowledge on its divergence from product marketing. Customers cannot simply return the service and ask for another . Another notable aspect about products is that on average they stay the same. making it hard for marketers to advertise the quality of the service. highlighting why services marketing is different from basic product marketing. Another distinguishable feature about services is the fact that it's both produced and consumed at the same time. the photo taken of you riding the rollercoaster. The actors are 'live' and performing (producing) at the same time as the audience are watching (consuming). and performances". giving examples where possible. While some products perish very quickly (like water balloons). It will then examine the four characteristics of services. Services are different in that they are heterogeneous. Bitner. In a service. These factors make it harder to consistently give quality service. chances are they will both be exactly the same. Fisk. based primarily on what was promoted in the service and previous experiences in the particular industry. And finally. Marketers main concern would be the procedure for when things do not go as planned. Arguably the most distinguishing feature about services is their intangibility. processes. the weather will have changed. resold or returned at all. in which tangible output and discrete transactions were the focus. and there will be different customers each time. Consumers can be compared to an audience. saved. where they watch actors (employees) perform on stage (physical location like a business store) amongst props (physical objects like chairs. processes. and relationships are central (Vargo & Lusch. & Bitner. tables. evolving from a goodsdominated view. 2006) as "deeds. Russel. to a service-dominant view. & Gremler. there is difficulty in patenting them. but the guide may be in a different mood. exchange processes. making it hard to manage supply and demand. This brings us to the concept of interactive marketing. and then go and buy the same model in America.
including the physical evidence of service quality. With some services customers may find it hard to judge the quality of the service. What is services marketing? . including the procedures. product. Firstly there is people. place and promotion. It also includes any physical objects that assist in the delivery of the service. they instead turn their attention to other things. making their performance and appearance critical to gaining a high perceived quality of service. This would usually come in the form of a professional looking workspace. the perceived quality of service drops. Sometimes a person is the sole service provider. when they arrived. it is up to the service provider to offer the customer some kind of compensation. During that installation the buyer may form an opinion of the service provider as a whole based purely on that IT professionals performance. including the buyer themselves. With product marketing the marketing mix includes the four P's. especially with credence service's like financial advisors or legal advice. Services represent at least 70% of the nation's total GDP for at least 5 countries.one. but anyone competing in the business world. and thus can influence the outcome of their own service or the service of others. during. which comprise of everyone that influences the buyer's perceptions. physical evidence and process. employees could provide free coffee and refreshments while they wait. For example a large family with screaming children interrupting a young couples romantic dinner at a restaurant. unlike products. there is simultaneous production and consumption. and their perishability. customers often have a set of expectations of the process of the service. Every person is important to the marketer. For example in white water rafting a customer might be dissatisfied if. they were told they had to carry the raft to the top of the river first. however would change with each service provider. Services are distinguished from products by four characteristics. When purchasing a service. no matter how small their role may be. where the process is behind doors. mechanisms and flow of activities by which the service is delivered. Services Marketing and the Extended Marketing Mix (7P's). The sixth 'P' is physical evidence. in an attempt to make up for their failing service. Finally there is the service process. The process is important because people participate in it. Customers have an active role in the production. and after consumption of credence services. price. making it a hot topic for not only marketers. Consider an IT professional who installs computers in people's homes. intangibility. Services use the same elements plus three more to help account for their unique nature. define it as the environment and its instruments. Services marketing differs from product marketing from the fact that three extra P's are added to the original marketing mix. they are heterogeneous. people. Since the customer does not have the knowledge or experience to judge the actual service. for example a dentist or lawyer. It is crucial that marketing managers address consumer fears regarding risk that results before. and when these are not met. If passengers are forced to wait a long time for their flight. including the United Kingdom and Australia. For example in a doctors surgery cleanliness would be expected. which is the environment in which the service is delivered and where the firm and customer interact.
A service is the action of doing something for someone or something. You cannot sell it on once it has been consumed. and cannot be owned since is quickly perishes. but you do not own the service. A person could go to a café one day and have excellent service. So often marketers talk about the nature of a service as: Inseparable . and then return the next day and have a poor experience. physical presence as does a product. For example.physical evidence. not material).e.e. there will be not other for 4 more years. A service tends to be an experience that is consumed at the point where it is purchased. It is largely intangible (i. it is intangible. Intangible .and cannot have a real. and from the provider of the service.from the point where it is consumed. Perishable .in that once it has occurred it cannot be repeated in exactly the same way. Service Marketing Mix . but the financial service itself cannot be touched i. For example.since the human involvement of service provision means that no two services will be completely identical. and even then it will be staged in a different place with many different finalists. since you merely experience it. once a 100 metres Olympic final has been run. returning to the same garage time and time again for a service on your car might see different levels of customer satisfaction. For example. you cannot take a live theatre performance home to consume it (a DVD of the same performance would be a product.e. the engineer or his equipment. For example.is not taken to the service. A product is tangible (i. Right of ownership . motor insurance may have a certificate. and do not take ownership of it. and a growth in their service economies. For example. also known as the 7P's . Variability. or speediness of work. an engineer may service your air-conditioning. Western economies have seen deterioration in their traditional manufacturing industries. process and people. material) since you can touch it and own it. Therefore the marketing mix has seen an extension and adaptation into the extended marketing mix for services. not a service).
personal selling and customer service. Remember. people buy from people that they like.g. as part of the marketing mix . Here are some ways in which people add value to an experience. Most of us can think of a situation where the personal service offered by individuals has made or tainted a tour. training of bar staff. The induction will involve the person in the organization's culture for the first time. In practice most training is either 'on-the-job' or 'off-the-job. A training and development plan is constructed for the individual which sets out personal goals that can be linked into future appraisals. Services tend to be produced and consumed at the same moment. Training. People are the most important element of any service or experience. Many British organisations aim to apply for the Investors In People accreditation. and aspects of the customer experience are altered to meet the 'individual needs' of the person consuming it. so the attitude. training centre or conference .Having discussed the characteristics of a service. All customer facing personnel need to be trained and developed to maintain a high quality of personal service. At this very early stage the training needs of the individual are identified. aptititude. 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. mix comprises off Product the 7’p’s. let us now look at the marketing mix of a service. vacation or restaurant meal. 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. Off-thejob training sees learning taking place at a college. Staff should have the appropriate interpersonal skills.training. and service knowledge to provide the service that consumers are paying for. The service marketing • • • • • • • • Physical evidence. as well as briefing him or her on dayto-day policies and procedures. Consumers make judgements and deliver perceptions of the service based on the employees they interact with. which tells consumers that staff are taken care off by the company and they are trained to certain standards. Training should begin as soon as the individual starts working for an organization during an induction.' On-the-job training involves training whilst the job is being performed e. skills and appearance of all staff need to be first class.
g. The disposition and attitude of such people is vitally important to a company. for example . Customer services provided expertise (e. processes that measure the achievement marketing objectives. services and experiences are supported by customer services teams. All views are understandable. There is the product delivery salesperson. the salesperson builds goodwill with customers with the longer-term aim of generating orders. controlling service engineers. His or her main task is to deliver the product. Process Refers to the systems used to assist the organisation in delivering the service. The next sort of sales person is the missionary.There are a number of perceptions of the concept of process within the business and marketing literature.g. i. Here. and so effective customer service is vital. a technical sales engineer.telemarketing and Internet marketing can be integrated. . on the selection of financial services). 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. Today. Customer Service Many products. Imagine you walk into Burger King and you order a Whopper Meal and you get it delivered within 2 minutes. e. For the purposes of the marketing mix. Finally.g. or improving or ruining a company's reputation.g.e. Again. and these may be either 'internal' or 'external. The second type is the order taker. Their in-depth knowledge supports them as they advise customers on the best purchase for their needs. Some see processes as a means to achieve an outcome. Attention needs to be paid to Continuing Professional Development (CPD) where employees see their professional learning as a lifelong process of training and development. 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. This is tough selling. as with those missionaries that promote faith. Process is another element of the extended marketing mix. offering advice on IT and software) and coordinate the customer interface (e. The forth type is the technical salesperson. over the telephone or using the Internet. and selling is of less importance e. An efficient service that replaces old credit cards will foster consumer loyalty and confidence in the company. there are creative sellers. The way in which a complaint is handled can mean the difference between retaining or losing a customer. or 7P's. It's best viewed as something that your customer participates in at different points in time. actually closing the sale is not of great importance at this early stage. The external sales person would be working in the field.facility. from the customer's point of view. Customer services can add value by offering customers technical support and expertise and advice. process is an element of service that sees the customer experiencing an organisation's offering. or communicating with a salesman). customer service can be face-to-face. Here are some examples to help your build a picture of marketing process. fast food. A further view is that marketing processes are used to control the marketing mix. for example . Another view is that marketing has a number of processes that integrate together to create an overall marketing process. Personal Selling There are different kinds of salesperson. but not particularly customer focused.' The internal sales person would take an order by telephone. Creative sellers work to persuade buyers to give them an order. and tends to o ffer the biggest incentives.to achieve a 30% market share a company implements a marketing planning process. In both cases little selling is done.g. or mail. technical support(e. email or over a counter. People tend to buy from people that they like.
Strictly speaking there are no physical attributes to a service. Booking a flight on the Internet . you are greeted. throughputs and outputs (or outcomes). This is a highly focused marketing process. and other serves or products are extended and marked to them. This is all part of the marketing process. Process. Processes essentially have inputs. You catch your flight on time. experiencing a similar service at the same time. 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. friendly environment. your baggage is taken to your room. Take a look at the lesson on value chain analysis to consider a series of processes at work. Physical evidence is the material part of a service. • The process itself can be tailored to the needs of different individuals. If you walk into a restaurant your expectations are of a clean. You have two weeks of services from restaurants and evening entertainment. and arrive refreshed at your destination. There are many examples of physical evidence. and your baggage is delivered to you. you arrive at your destination.from the moment that you arrive at the dockside. including some of the following: . physical evidence and people enhance services. You enter details of your flights and book them. 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. Your ticket/booking reference arrive by e-mail or post. • Customers are retained. 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. Finally. At each stage of the process. • Feedback can be taken and the mix can be altered. Marketing adds value to each of the stages. markets: • Deliver value through all elements of the marketing mix. so a consumer tends to rely on material cues.the process begins with you visiting an airline's website. to casinos and shopping.Going on a cruise .
Mailboxes and many others . and players are wearing uniforms. The building itself (such as prestigious offices or scenic headquarters). Uniforms. Furnishings. tickets and despatch notes). Business cards. A sporting event is packed full of physical evidence. . and large banks and insurance companies (e.g. . Paperwork (such as invoices. To summarise service marketing looks at: . Signage (such as those on aircraft and vehicles).g. Brochures. The stadium itself could be impressive and have an electrifying atmosphere.• • • • • • • • • • Packaging. UPS trucks). Disney World). All you need now is for your team to win! Some organisations depend heavily upon physical evidence as a means of marketing communications. Your tickets have your team's logos printed on them. . You travelled there and parked quickly nearby. . . parcel and mail services (e.g. for example tourism attractions and resorts (e. and your seats are comfortable and close to restrooms and store. Lloyds of London). Internet/web pages.
physical evidence. Product. products can be standardised. process to manage then with a product. . Price. 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. people.The Characteristics (1) Lack (2) (3) (4) (5) Heterogeneity. Process and People. Promotion. Physical Evidence. Place. of a of Intangibility Perishability service that ownership are: Inseparability The Service marketing mix involves analysing the 7’p of marketing involving.e.
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