MK01 Getting Smart

B216 Marketing

School of Management and Communication

Learning Outcomes

• Explain the role and importance of the marketing function

• Explain the interrelationship between the marketing function

and other functions in a company

• Apply motivational theory in determining Consumers’

Motivation in buying

• Identify and discuss the stages in the Consumer Buying

Decision Process

• Identify the Business (B2B) buying process and how it differs

from the Consumer buying process.
Content

• Problem Analysis
• What is Marketing?
• Interrelation of Marketing with Other Functions
• Consumer Behaviour
• Buyer’s Motivation
• High/Low Involvement Purchase
• Consumer Buying Decision Process
• Business Buying Decision Process
• Recommendations & Conclusion
• Concept Diagram
• Resources
Problem Analysis
Samsung is • What do they need to
marketing its know about the
latest Note 8 smartphones?
smartphones
• How to use this
Two different information to
segments with design marketing
different needs strategy? • How to co-ordinate
with other
departments?

What is the business buying

Consider buyer’s motivation
and buying decision process to
advise Samsung’s marketing
department on how it should
work with other departments
to market its product
decision process specifically for
company named Lechtor ?
Suggest suitable strategies for
Samsung to attract business
buyers.
What is Marketing?
• Marketing involves satisfying customer needs

• Marketing is the process by which companies create value for customers and
build strong relationships in order to capture value from customers in return

• The marketing management philosophy that achieving organization goals

depends on knowing the needs and wants of target markets and delivering
the desired satisfactions better than competitors do

• Marketers select target markets, then create meaningful relationships with

customers, by delivering superior customer value through the execution of
marketing strategies.

The marketing concept

Market → Customer → Integrated → Profits through
needs marketing customer satisfaction
Interrelation of Marketing with other
Functions
Managing resources e.g.
salaries and expenses
Finance
Cost
Containment, Manpower,
production Production HR
Training
efficiencies &
Quality Issues

New Product
Design and R&D Marketing Sales Sales Forecast, Retail
Development Programmes

Understand Customer Needs

The Consumer Market (B2C)
The Consumer Market – Markets dominated by products and services
designed for the general consumers or end users.

Also referred to as Business-to-Consumer (B2C) market.

Example: NTUC Fairprice

(Business) selling to end
users (Consumer)
Consumer Behaviour
• The buying behaviour of final consumers (individuals and households) who
buy goods and services for personal consumption.

Model of Consumer Behaviour

Environmental
Buyer’s Black Box Buyer Responses
Stimulus
Marketing Buyer’s Characteristics • Product Choice
• Product • Motivation • Brand Choice
• Price • Attitude • Dealer Choice
• Place • Perception • Purchase Timing
• Promotion • Personality • Purchase
• Learning Amount
Application: To attract consumers
Environmental Decision Process to purchase the new
• Economic • Problem Recognition
smartphones, we need to
• Technological • Information Search
understand:
• Political • Evaluation of Alternatives
- Why consumers buy
• Cultural • Purchase Decision
(motivation)
• Demographic • Post-purchase Behaviour
- How consumers buy (buyer
decision process)
Adapted from Kotler, P. & Armstrong, G. (2012). Consumer Markets and Consumer Buyer Behaviour ,Principles of Marketing (14th
ed.) [pp 161] Pearson.
Psychological Factors in Consumer Behaviour

Motivation
Consumer behaviour is
mostly influenced by
psychological factors such as Consumer
• Motivation Behaviour
• Level of purchase
involvement Level of
Purchase
Involvement
Buyer’s Motivation
Buyer’s behaviour is influenced by psychological factors such as motivation.
One motivation theory is Maslow’s Hierarchy of Needs, which explains why
people are driven by particular needs at particular times.

Adapted from Maslow’s Hierarchy of Needs, businessballs.com website: http://www.businessballs.com/maslow.htm

Watch the video https://www.youtube.com/watch?v=l7xvddOgUfc

 Buyer’s Motivation

Self-actualisation - challenge, new

experiences, love of art, nature, etc.

Esteem - competition,
achievement, recognition
Belongingness - team sport,
club 'family‘ and relationships

Safety - against accident

and injury
Biological - health, fitness,
energising mind and body, etc.

Adapted from Maslow’s Hierarchy of Needs, businessballs.com website: http://www.businessballs.com/maslow.htm

Watch the video https://www.youtube.com/watch?v=l7xvddOgUfc

Buyer’s Motivation
Watch the video on Maslow’s Hierarchy of Needs :-
https://www.youtube.com/watch?v=l7xvddOgUfc
Levels of Purchase Involvement
• Consumer purchase behaviour is influenced by the level of
purchase involvement.

• The characteristics of levels of purchase involvement are as follows:

• When product is usually • When product is usually low

expensive, risky, purchased cost and/or frequently
infrequently and/or highly self purchased
expressive
• Consumers do not search
• Consumers gather information extensively for information or
about products and evaluate evaluate the alternatives before
the alternatives before purchase
purchase
High Low
Involvement Involvement
Purchase Purchase
5 stages of Consumer Buying Decision Process

Problem Information Evaluation Purchase Post-

Recognition Search: of Decision: purchase
: Perceiving a Seeking value Alternatives Buying Value Behaviour:
need through : Assessing Value in
internal/exter value consumption
nal search or use

Whose books are Buy Philip Kotler’s

I need What options do I good? books!
reference books for have? Author 1
Marketing Author 2
Author 3

• Internal search:
Where I can get them
 past experience cheap?
From
2nd
hand
• External search: Borders
bookstore
 Friends, facilitator School bookshop
2nd hand bookstore
 Online reviews
 Book catalogue
The Business Market (B2B)
The Business Market - all organisations that buy goods and services to
use in the production of other products and services that are sold,
rented, or supplied to others.

Also referred to as Business-to-Business (B2B) market.

e.g. The Business e.g. The Supplier

Customer: Toyota Kenwood (audio
(car manufacturer) equipment
The parties are: manufacturer)
•Manufacturing The parties are:
department •Sales executives
•IT department •Marketing executives
•Purchasing •Hardware engineers
department •Call centre support
•Accounts staff
department
Business Buying Process
Business Buying Process consists of 8 stages
Someone in Buyer describes the Buyer develops the Buyer conducts a
company recognise characteristics and technical supplier search to
a problem or a need quantity of the specifications find best vendors
needed item

Problem General need Product Supplier

recognition description specification search

Order-
Performance Supplier Proposal
routine
review selection solicitation
specification
Buyer reviews Buyer specify order- Buyer reviews the Buyer invites
supplier routine which proposal and select qualified suppliers
performance by includes final order, supplier based on a to submit proposals
contacting users to technical set of criteria
rate their specifications,
satisfaction quantity needed etc
Application to Case
Recommendations on Role of Marketing Function

Samsung’s marketing department has to understand buyers’ needs and

coordinate with other departments to successfully launch their latest
smartphones.
Marketing Budget
“Work with Finance to secure
budget for a $1Mil TV campaign”

Finance
Cost Containment Training
“Work with production “Work with HR to
to ensure low cost Production HR ensure promoters are
production to ensure trained for sales of its
competitive pricing.” products”

New Product Sales Forecast,

Development R&D Marketing Sales Retail Programs
Work with R&D to “Work with Sales on
retail programs for
design new products
the sale of its
and specifications.
Understand Customer Needs products”
e.g. “Group2 – Consumers with 2
different types of needs”
 Recommendations on Understanding Buyer’s Motivation

Samsung’s marketing department has to understand buyers’ motivation in

purchasing a smartphone and devise strategies to satisfy their needs

Consumers (Type 2)
Consumers (Type 1) prefers a good looking
prefers better resolution for photo phone design that they
taking with friends can be proud to hold.
Recommendations on Buying Decision Process

Buying a smartphone is a high involvement purchase hence consumers and

businesses, respectively, go through the 5 and 8 stages of buying decision
process
Characteristics of Smartphone Purchase
• Expensive (Above $500 <without subscription contract> is
expensive for households and small businesses)
• Risky (e.g. technologies change rapidly and product can be
outdated in short period of time)
• Purchased infrequently (smartphones are purchased after 2
years)
• Highly self expressive (the smartphones you choose reflects
your personal preference and taste)

High Involvement Purchase

Consumers and businesses gather information about

products and evaluate the alternatives before purchase
Consumer Buying Decision Process
Recommendations on Marketing Strategies
Samsung’s marketing department has to understand consumers’ buying
decision process and devise strategies to satisfy their needs.
Post-
Problem Evaluation purchase
Information Purchase
Recognition: of Behaviour:
Search: Decision:
Perceiving a
Seeking value Alternatives: Buying Value Value in
need Assessing value consumption or
use
“I need a phone “Ask friends for “Compare specs “Decided to buy “Samsung is
with better recommendations and prices of Samsung at IT better than I
resolution for
and read reviews various brands of Fair” expected as its
photo taking and download speed
be proud to hold.” on internet & in smartphones”
is fast and has
magazines” excellent
resolution”

Recommended strategies

Focus Provide Provide product Participate in Follow up with

communication on specifications on comparison major IT Fair and customers to
uniqueness and key
specifications of website & in feature at website offer attractive ensure
product magazines for review sales promotion satisfaction
Consumer Buying Decision Process Vs Business Buying
Decision Process
Business Buying Decision Process
Business Buying Process
Business Buying Process consists of 8 stages
Lechtor needs Lechtor needs latest Lechtor provides Lechtor does a
smartphones for speedy technologies to send detailed search on various
communications e.g. messages and files/ specifications such brands of
texts, emails and documents to staff download speeds of smartphones
documents files

General need Product Supplier

Problem
description specification search
recognition

Order-
Performance Supplier Proposal
routine
review selection solicitation
specification
Lechtor reviews Lechtor specifies order Lechtor reviews the
performance by rating quantities of proposals from the Lechtor invites
its satisfaction of the smartphones for a various supplies and Samsung and HTC to
performance of trial duration of two years selects supplier submit proposals
smartphones based on its criteria
Business Buying Process
Business Buying Process consists of 8 stages
Lechtor needs Lechtor needs latest Lechtor provides
1 Lechtor does a
smartphones for speedy technologies to send detailed search on various
communications e.g. messages and files/ specifications such brands of
texts, emails and documents to staff download speeds of smartphones
documents files

General need Product Supplier

Problem
description specification search
recognition

2
Order-
Performance Supplier Proposal
routine
review selection solicitation
specification
Lechtor reviews Lechtor specifies order Lechtor reviews the
performance by rating quantities of proposals from the Lechtor invites
its satisfaction of the smartphones for a various supplies and Samsung and HTC to
performance of trial duration of two years selects supplier submit proposals
smartphones based on its criteria

Areas where Samsung can influence

Business Buying Process
Business Buying Process consists of 8 stages
Lechtor needs Lechtor does a
smartphonesRecommended
for speedy
Lechtor needs latest
Strategies 1
technologies to send search on various
• communications
Ensure Samsung’se.g. website has adequate
messages and files/ brands of
texts, emails andon its mobile
information phonesto staff
documents smartphones
documents

Supplier
search

Recommended Strategies 2
Make a presentation on itsOrder-
• Performance phones to
Lechtor’s routine Proposal
reviewbuying committee solicitation
• Offer terms which match specification
or exceed
Lechtor’s Lechtor
requirements
Lechtor reviews specifies order
eg extended
performance by rating quantities of Lechtor invites
warranty on its phones,smartphones
free software
for a
or
its satisfaction of the Samsung and HTC to
app upgrades
performance of trial duration of two years submit proposals
smartphones
How is Business Buying Process Different from
Consumer Buying Process
Business Buying Process
1 More stages (8 stages)
2 More participants in the
decision making process
3 More formalized (involves
contract)
4 Process duration is longer
5 Size of each purchase is of
larger value
6 Information search takes a
longer time
Consumer Buying Process
Fewer stages (5 stages)
Fewer participants – usually is just
the consumer
Less formalized (usually no
contract)
Process duration is shorter
Size of each purchase is of smaller
value
Information search takes a shorter
time
Conclusion

Marketers need to understand why consumers make their

purchases and how they arrive at their purchase decision,
especially for a new product.

By understanding the customers (both B2B and B2C), firms can

better design their marketing strategies to attract and retain the
customers.
 Concept Diagram
TYPES OF BUYERS
Business Buying
Buying Processes Decision Process
• Problem Recognition
• General Need Description
• Product Specification
Businesses Consumers • Supplier Search

Business
• Proposal Solicitation
• Supplier Selection
Buyer’s Motivation • Order Routine
Departments Specification
Maslow’s Hierarchy of Needs
• R&D • Performance Review
• Self Actualisation
• Marketing
• Esteem
• Production
• Belongingness & Love
• Finance
• Safety
• HR Consumer Buying
• Biological &
• Sales

Consumer
Physiological Decision Process
• Problem Recognition
• Information Search
• Evaluation of Alternatives
• Purchase Decision
• Post-purchase Behaviour
Resources
Recommended Textbooks
• Kotler, P. & Armstrong, G. (2012). Consumer Markets and Consumer Buyer Behaviour, Principles of
Marketing (14th ed.) [pp158 – 178, pp 188 - 207] Pearson.
• Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yau, O. (2011). Consumer Markets and
Consumer Buyer Behaviour, Principles of Marketing: An Asian Perspective (3rd edition) [pp 115 –
143, pp 144-156] Pearson/Prentice-Hall

Reference Textbooks
• Kotler, P. & Keller, K. (2006). Marketing Management (12th ed.) Prentice Hall.
• Gamble, P., Tapp, A., Marsella, A. & Stone, M. (2005). Marketing Revolution. Kogan Page
Publications.
• McDaniel, C., Lamb, C.W., Hair, J. (2008). Introduction to Marketing (9th ed.). Thomson South-
Western.
• Hoffman, D., Czinkota, M. & Dickson, P. (2003). Marketing – Best Practices. Thomson Learning.
• Fisk P. (2006). Marketing Genius. Capstone Publications
Resources
Websites
• Mobile Youth – Understanding Youth Culture (2009). Retrieved on September 10, 2017, from
mobile youth website: http://www.mobileyouth.org
• Consumer Buying Behaviour. Retrieved on September 10, 2017, from learn marketing website:
http://www.learnmarketing.net/consumer.htm
• Consumer Purchase Decision Process. Retrieved on March 04, 2017 (website no longer available),
from rohan.sdsu.edu website: http://www-rohan.sdsu.edu/~renglish/370/notes/chapt05/
• Consumer Buying Process. Retrieved on September 10, 2017, from scribe.com website:
http://www.scribd.com/doc/7103205/Consumer-Buying-Decision-Process
• Maslow’s Hierarchy of Needs. Retrieved on September 10, 2017, from businessballs.com website:
http://www.businessballs.com/maslow.htm
• Organisational Functions. Retrieved on September 10, 2017, from learnmanagement2.com
website: http://www.learnmanagement2.com/ORGANISATIONAL%20FUNCTIONS.htm

• B2B vs B2C - more than just a letter. Retrieved on September 10, 2017, from the Marketing Eye
website: http://www.themarketingeye.com/blog/marketing-discipline/b2b-vs-b2c-more-than-just-
a-letter.html
 The 5 Stages of Consumer Purchase Decision Process

1. Problem Recognition
 Perceiving a difference between a person's ideal and actual situations big enough to
trigger a decision
 Can be as simple as noticing an empty milk carton or it can be activated by
marketing efforts

2. Information Search
 The information search stage clarifies the options open to the consumer and may
involve 2 steps : internal search or external search
 Internal search : scanning one’s memory to recall previous experiences with
products or brands
 External search : personal sources, such as friends and family or public sources,
including various product-rating organizations such as Consumer Reports or
Marketer-dominated sources, such as advertising, company websites, and
salespeople)

3. Evaluation of Alternatives
 Consumers determine which features they would prefer
 The attributes preferred could be objective (such as locate speed on a portable CD
player) or subjective (such as prestige)

4. Purchase Decision
 Depends on considerations such as Terms of sale (eg. credit card, zero-interest
instalment plans etc.), Return policy

5. Post-purchase Behaviour
 Consumer compares product benefit with expectations and is either satisfied or
dissatisfied
 Satisfaction affects consumer value perceptions, consumer communications, repeat-
purchase behaviour

Adapted from : Consumer Purchase Decision Process. Retrieved on March 04, 2017 (website no
longer available), from rohan.sdsu.edu website: http://www-
rohan.sdsu.edu/~renglish/370/notes/chapt05/
 Abraham Maslow's Hierarchy of Needs Motivational Model

Maslow's Hierarchy of Needs

Each of us is motivated by needs. Our most basic needs are inborn, having evolved over
tens of thousands of years. Abraham Maslow's Hierarchy of Needs helps to explain how
these needs motivate us all.
Maslow's Hierarchy of Needs states that we must satisfy each need in turn, starting with the
first, which deals with the most obvious needs for survival itself.
Only when the lower order needs of physical and emotional well-being are satisfied are we
concerned with the higher order needs of influence and personal development.
Conversely, if the things that satisfy our lower order needs are swept away, we are no longer
concerned about the maintenance of our higher order needs.

Maslow's original Hierarchy of Needs model was developed between 1943-1954, and first
widely published in Motivation and Personality in 1954. At this time the Hierarchy of Needs
model comprised five needs. This original version remains for most people the definitive
Hierarchy of Needs.
1. Biological and Physiological needs - air, food, drink, shelter, warmth, sex, sleep, etc.
2. Safety needs - protection from elements, security, order, law, limits, stability, etc.
3. Belongingness and Love needs - work group, family, affection, relationships, etc.
4. Esteem needs - self-esteem, achievement, mastery, independence, status, dominance,
prestige, managerial responsibility, etc.
5. Self-Actualization needs - realising personal potential, self-fulfillment, seeking personal
growth and peak experiences.
This is the definitive and original Maslow's Hierarchy of Needs.
While Maslow referred to various additional aspects of motivation, he expressed the
Hierarchy of Needs in these five clear stages.

Interpreting Behaviour According to Maslow's Hierarchy of Needs

Maslow's Hierarchy of Needs is an excellent model for understanding human motivation, but
it is a broad concept. If you are puzzled as to how to relate given behaviour to the Hierarchy
it could be that your definition of the behaviour needs refining. For example, 'where does
'doing things for fun' fit into the model? The answer is that it can't until you define 'doing
things for fun' more accurately.
You'd need to define more precisely each given situation where a person is 'doing things for
fun' in order to analyse motivation according to Maslow's Hierarchy, since the 'fun' activity
motive can potentially be part any of the five original Maslow needs.
Understanding whether striving to achieve a particular need or aim is 'fun' can provide a
helpful basis for identifying a Maslow driver within a given behaviour, and thereby to assess
where a particular behaviour fits into the model:
 Biological - health, fitness, energising mind and body, etc.
 Safety - order and structure needs met for example by some heavily organised, structural
activity
 Belongingness - team sport, club 'family' and relationships
 Esteem - competition, achievement, recognition
 Self-Actualization drivers - challenge, new experiences, love of art, nature, etc.

However in order to relate a particular 'doing it for fun' behaviour the Hierarchy of Needs we
need to consider what makes it 'fun' (i.e., rewarding) for the person. If a behaviour is 'for fun',
then consider what makes it 'fun' for the person - is the 'fun' rooted in 'belongingness', or is it
from 'recognition', i.e., 'esteem'. Or is the fun at a deeper level, from the sense of self-
fulfilment, i.e., 'self-actualization'.
Apply this approach to any behaviour that doesn't immediately fit the model, and it will help
you to see where it does fit.
Maslow's Hierarchy of Needs will be a blunt instrument if used as such. The way you use the
Hierarchy of Needs determines the subtlety and sophistication of the model.
For example: the common broad-brush interpretation of Maslow's famous theory suggests
that that once a need is satisfied the person moves onto the next, and to an extent this is
entirely correct. However an overly rigid application of this interpretation will produce a rigid
analysis, and people and motivation are more complex. So while it is broadly true that
people move up (or down) the hierarchy, depending what's happening to them in their lives,
it is also true that most people's motivational 'set' at any time comprises elements of all of
the motivational drivers. For example, self-actualizers (level 5 - original model) are mainly
focused on self-actualizing but are still motivated to eat (level 1) and socialise (level 3).
Similarly, homeless folk whose main focus is feeding themselves (level 1) and finding
shelter for the night (level 2) can also be, albeit to a lesser extent, still concerned with social
relationships (level 3), how their friends perceive them (level 4), and even the meaning of
life (level 5 - original model).
Like any simple model, Maslow's theory not a fully responsive system - it's a guide which
requires some interpretation and thought, given which, it remains extremely useful and
applicable for understanding, explaining and handling many human behaviour situations.
Website Sources:

 Maslow's Hierarchy of Needs. Retrieved on September 10, 2017, from

businessballs.com website: http://www.businessballs.com/maslow.htm
2 Levels of Purchase Involvement

High Involvement Purchase

 Can have considerable personal consequences (financial and social) if product does not
perform to expectation
 Product is expensive
 Product reflects one’s social image
 Considerable amount of time was spent researching on it
 Purchase is infrequent
 Examples: House and Cars

Low Involvement Purchase

 Product is inexpensive
 Purchase is done frequently
 Not much time is spent on information search or evaluating alternative brands
 Examples: A bar of Soap and Cereals

Adapted from: Consumer Purchase Decision Process. Retrieved on March 04, 2017 (website no
longer available), from rohan.sdsu.edu website: http://www-
rohan.sdsu.edu/~renglish/370/notes/chapt05/
Organisational Functions

Each organisational function needs to work together so that the whole organisation has the same
aims and objectives. To achieve this, communication across the various functions is key activity. A
starting point for this type of communication is the creation of a clear set of company objectives which
each function is aware of. These objectives then need to be further broken down into specific
objectives for each function.

Departments Functions

Marketing The marketing department will research customer needs to develop strategies and
products to satisfy the customer needs. In its research, the marketing department will
investigate the market they are aiming at; the type of consumers making up the
market (age, background, gender etc.) and the preferences of the consumer within
that market. The marketing department will then need to marry consumer
preferences with producing a product that is profitable. Once the product has been
designed by the production department, marketing will then need to package,
advertise, and promote the product.

Finance The financial section of the organisation will keep manual/electronic records of
money received and paid out by the organisation. This information will then be used
to produce various financial statements for tax purposes and to comply with legal
requirements. The information will also be used to produce management accounts to
enable senior managers to plan and review business strategy.

The finance department or unit may also be responsible for administering employee
expenses and salaries. For payment of wages the finance department will need to
take into account statutory deductions such as tax, and employee contributions such
as pension or loan repayments.

Human Human resources main responsibility is the recruitment, selection, training and
Resource development of staff. This will involve developing staff to maximise their potential in a
manner that furthers the organisation’s objectives.

They may also create policies that balance organisational needs with those of the
employee. They will also interpret employee welfare legislation and ensure that the
organisation is complying with the applicable legislation.

Sales Sales are responsible for persuading the consumer to purchase the end product,
manufactured through marketing’s research. The Sales Department’s selling strategy
could involve mailshots, travelling sales representatives, telephone sales and
devising the sales interview.

Research & The aim of research and development is to improve existing products, create new
Development and better products, improve production methods, and create effective processes.
This will enable the organisation to reduce costs, increase profitability and remain
(R&D) ahead of the competition. As not all research will lead to new/improved
products/processes companies will need to allocate a specific portion of their budget
to research and development activities.

Production Production is the functional area responsible for turning inputs into finished outputs
through a series of production processes. The department will set standards and
targets for each section of the production process. The quantity and quality of
products coming off a production line are closely monitored.

Website Sources:

 Organisational Functions. Retrieved on September 10, 2017, from learnmanagement2.com website:

http://www.learnmanagement2.com/ORGANISATIONAL%20FUNCTIONS.htm
 Aims and functions of production department. Retrieved on September 10, 2017, from
businesscasestudies.co.uk website: http://businesscasestudies.co.uk/business-theory/operations/aims-and-
functions-of-production-department.html
The Business Buying Process
The figure below lists the eight stages of the business buying process. Buyers who face a new-task
buying situation usually go through all stages of the buying process. Buyers making modified or
straight rebuys may skip some of the stages. We will examine these steps for the typical new-task
buying situation.

Problem Recognition
The buying process begins when someone in the company recognizes a problem or need that can be
met by acquiring a specific product or service. Problem recognition can result from internal or
external stimuli:

• Internal stimuli: The company may decide to launch a new product that requires new
production equipment and materials. Or a machine may break down and need new parts.
Perhaps a purchasing manager is unhappy with a current supplier’s product quality, service,
or prices.

• External stimuli: The buyer may get some new ideas at a trade show, see an ad, or receive a
call from a salesperson who offers a better product or a lower price.

General Need Description

Having recognized a need, the buyer next prepares a general need description that describes the
characteristics and quantity of the needed item. For standard items, this process presents few
problems. For complex items, the buyer may need to work with others – engineers, users,
consultants – to define the item. The team may want to rank the importance of reliability, durability,
price, and other attributes desired in the item. In the phase, the alert business marketer can help

Page | 1
the buyers define their needs and provide information about the value of different product
characteristics.

Product Specification
The buying organization next develops the item’s technical product specifications, often with the
help of a value analysis engineering team. The team decides on the best product characteristics and
specifies them accordingly.

Supplier Search
The buyer now conducts a supplier search to find the best vendors. The buyer can compile a small
list of qualified suppliers by reviewing trade directories, doing computer searches, or phoning other
companies for recommendations. Today, more and more companies are turning to the Internet to
find suppliers. The supplier’s task is to get listed in major directories and build good reputation in
the marketplace. Salespeople should watch for companies in the process of searching for suppliers
and make certain that their firm is considered.

Proposal Solicitation
In the proposal solicitation stage of the business buying process, the buyer invites qualified suppliers
to submit proposals. Some suppliers will send only a catalog or a salesperson. However, when the
item is complex or expensive, the buyer will usually require detailed written proposals or formal
presentations from each potential supplier. Business marketers must be skilled in researching,
writing, and presenting proposals in response to buyer proposal solicitations.

Supplier Selection
The members of the buying center now review the proposals and select a supplier or suppliers.
During supplier selection, the buying center often will draw up a list of the desired supplier
attributes and their relative importance. In one survey, purchasing executives listed the following
attributes as most important in influencing the relationship between supplier and customer: quality
products and services, on-time delivery, ethical corporate behavior, honest communication, and
competitive prices. Other important factors include repair and servicing capabilities, technical aid
and advice, geographic location, performance history and reputation.

Page | 2
Order-Routine Specification
The buyer now prepares an order-routine specification. It includes the final order with the chosen
supplier or suppliers and lists items such as technical specifications, quantity needed, expected time
of delivery, return policies, and warranties. In the case of maintenance repair and operating items,
buyers may use blanket contracts rather than periodic purchase orders. A blanket contract creates a
long term relationship in which the supplier promises to resupply the buyer as needed at agreed
prices for a set time period.

Performance Review
In this stage, the buyer reviews supplier performance. The buyer may contact users and ask them to
rate their satisfaction. The performance review may lead the buyer to continue, modify or drop the
arrangement. The seller’s job is to monitor the same factors used by the buyer to make sure that
the seller is giving the expected satisfaction.

Adapted from: Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yan, O. (2009). Business
Buying Process. Principles of Marketing: An Global Perspective. [pp. 153-156]. South Asia: Pearson
Education

Page | 3
MK02 KOREAN BURGER, ANYONE?
6TH PRESENTATION
 CONTENT PAGE
 Learning Outcomes

 Problem Analysis

 Managing the Marketing Effort

 Getting from Marketing Analysis to Marketing Planning
 Scanning the Marketing Environment
 Macro-environment
 Micro-environment

 Analysing the Marketing Environment

 SWOT Analysis

 Developing Strategies for the Marketing Environment

 Application to Case

 Conclusion

 Resources
 LEARNING OUTCOMES
• Identify and examine the various components (Internal /
External Analysis) of following tools to evaluate the
business environment
- PESTLE
- SWOT

• Evaluate and apply how these factors influence a

company's business and marketing decisions
 PROBLEM ANALYSIS
Lotteria, a successful What are the different
fast food brand from factors Lotteria needs
South Korea, is to consider before
planning an expansion starting a business
of its business into the venture in a country
Singapore market. like Singapore?
What are the different
types of marketing
tools it can use to
analyse the marketing
environment and
formulate strategies?

Objective
To impress Mr. Kim by preparing
an analysis of Singapore’s
marketing environment, and
providing a recommendation of
whether Lotteria should enter the
Singapore market.
MANAGING THE MARKETING EFFORT

Marketing Analysis

Marketing Control Marketing Planning

Marketing
Implementation
GETTING FROM MARKETING ANALYSIS TO
MARKETING PLANNING

Marketing Analysis Marketing Planning

• 1) Scan the Marketing Environment (macro • 3) Use SWOT Analysis to formulate
and micro) to identify the factors and trends marketing strategies.
that impact the market/ industry.

• 2) Use SWOT Analysis to analyse the

environmental factors and trends that
impact the company directly.
SCANNING THE MARKETING ENVIRONMENT
A company’s marketing environment consists of the actors and forces
outside marketing that affect marketing management’s ability to build
and maintain successful relationships with target customers.
Macro-environment Micro-environment

P • Political
The Company

E • Economic
Customers Suppliers
S • Socio-cultural
Marketing
T • Technology
Marketing
Publics intermediari
L • Legal es

• Environmental
E Competitors
(nature)
 MACRO-ENVIRONMENT
 It is the collection of external and uncontrollable forces and
trends facing a company.

 Understanding the macro-environment enables company to take

the advantage of the opportunities, and minimise the external
threats faced by company’s business activities.

 It can be analysed by conducting a scan of the external events

outside of the company, such as potential regulatory issues,
demographic trends, political upheaval, and cutting-edge
technology.
 MACRO-ENVIRONMENT FACTORS
• Political stability
P • Political • Government transparency
• Government support & subsidy
• Spending power of consumers
E • Economic • Stability of economy /banks’
interest rates
• Religion/ culture
S • Socio-Cultural • Values, beliefs, habits & behaviour
• Relevant current and future
T • Technological technology innovations
• Global communication and
technological advances

L • Legal •
•
Taxation / Tariff
Legislation Changes
• Recycling considerations
E • Environmental • Attitudes to the environment
from the government, media and
consumers
 MICRO-ENVIRONMENT
 It is the actors/ forces close to the company that affects its ability to serve
its customers.
 All internal AND external micro-environment forces affect the firm.
 External micro-environment forces (suppliers, marketing intermediaries,
competitors, public and customers) are more difficult to influence.

The
Company
Customers Suppliers

Marketing
Marketing
Publics intermediaries

Competitors
 MICRO-ENVIRONMENT
 It is the factors/ forces close to the company that affects its ability to serve
its customers.
 All internal AND external micro-environment forces affect the firm.
 External micro-environment forces (suppliers, marketing intermediaries,
competitors, public and customers) are more difficult to influence.

Internal
The
Environment
Company

Customer
s Suppliers

Marketi
ng
External Marketing
Publics Environment intermedi
aries
Competitor
s
 MICRO-ENVIRONMENT FACTORS
• Refers to the internal environment of the company. This includes
The Company all departments, such as management, finance, research and
development, purchasing, operations and accounting.

• An important aspect of the microenvironment because even the

Suppliers slightest delay in receiving supplies can result in customer
dissatisfaction

• Refers to resellers, physical distribution firms, marketing services

Marketing agencies, and financial intermediaries. These are the people that
Intermediaries help the company promote, sell, and distribute its products to final
buyers.
• To remain competitive a company must consider who their biggest
competitors are while considering its own size and position in the
Competitors industry. The company should develop a strategic advantage over
their competitors.

• Refers to any group that has an interest in or impact on the

Publics organization’s ability to meet its goals.

• There are different types of customer markets including consumer

Customers markets, business markets, government markets, international
markets, and reseller markets.
ANALYSING THE MARKETING ENVIRONMENT
 Conduct SWOT analysis by evaluating the company’s overall strengths (S),
weaknesses (W), opportunities (O) and threats (T).

 Company should analyse its markets and marketing environment to:

 find attractive opportunities
 identify threats
 analyse the strengths and weaknesses, current and possible marketing actions

 The goal is to match the company’s strengths to attractive opportunities

in the environment, while eliminating or overcoming the weaknesses to
overcome the threats.
MARKETING ANALYSIS WITH SWOT

Analyse the Identify

macro- opportunities
environment and threats
Identify the
organisation’s
current Formulate
mission, SWOT Analysis strategies
objectives and
strategies
Analyse the Identify
micro- strengths and Implement
environment weaknesses strategies

Evaluate
results
 SWOT ANALYSIS
To make a strategic business and marketing decision, an organisation has
to understand its own Strengths and Weaknesses, as well as the
immediate and future Opportunities and Threats.

Weaknesses
Strengths
Limitation or deficiency
Resource or capability
in a firm’s resources or
that gives a firm an Internal Forces
capabilities relative to
advantage relative to its
its competitors that
competitors
create a disadvantage

Opportunities Threats
External Forces
Favourable situation in a Unfavourable situation
firm’s external in a firm’s external
environment environment
 Strengths & Opportunities
Strengths Opportunities

Your specialist marketing expertise. A developing market such as the

Internet.

A new, innovative product or Mergers, joint ventures or strategic

service. alliances.

Location of your business. Moving into new market segments

that offer improved profits.

Quality processes and procedures. A new international market.

Any other aspect of your business A market vacated by an ineffective

that adds value to your product or competitor.
service.
 Weaknesses & Threats
Weaknesses Threats

Lack of marketing expertise. A new competitor in your home

market.

Undifferentiated products or Negative publicity related to your

services (i.e. in relation to your product.
competitors).
Location of your business. A competitor has a new, innovative
product or service.

Poor quality goods or services. Competitors have superior access

to channels of distribution.
Damaged reputation. Taxation is introduced on your
product or service.
MARKETING PLANNING WITH SWOT

WO
SO Strategy
Strategy
Identify the
organisation’s Formulation of Business
current SWOT
mission, Analysis and Marketing
objectives and Strategies
strategies
ST Strategy WT Strategy
Implement
strategies

Evaluate
results
 SWOT ANALYSIS
Strengths Weaknesses

SO Strategy WO Strategy
How do I use these How do I overcome the
Opportunities strengths to take weaknesses so that I can
advantage of these effectively pursue these
opportunities? opportunities?

ST Strategy
How do I use or redeploy WT Strategy
Threats these strengths to How do I deal with the
reduce the likelihood threat knowing that I am
and impact of these weak in certain area?
threats?
HOW STARBUCKS USED SWOT ANALYSIS
Strengths
- Well known brand (S1)
- A strong asset base and positive cash
flow. (S2)
Opportunities
• Rapidly expanding coffee drinking
consumer base in Asia (O1)
• Coffee-drinking habit being picked up
in younger age groups (O2)
Strategy Developed: SO Strategy
Starbucks used its financial power
(S2) and strong branding (S1) to
successfully penetrate into many
Asian cities (O1)
Weaknesses
- Narrow range of food choices in the
menu (W1)
- Higher pricing (W2)
Threats
- Rise in the cost of coffee and dairy
products (T1)
- Keen competition from
competitors.(T2)
- Coffee beans are susceptible to
environmental crisis. (T3)
HOW STARBUCKS USED SWOT ANALYSIS
Strengths
- Well known brand (S1)
- A strong asset base and positive cash
flow. (S2)
Opportunities
• Rapidly expanding coffee drinking
consumer base in Asia (O1)
• Coffee-drinking habit being picked up
in younger age groups (O2)
Strategy Developed: WT Strategy
Starbucks expanded its food
choices (W1) to ward off its
competitors (T2)
Weaknesses
- Narrow range of food choices in the
menu (W1)
- Higher pricing (W2)
Threats
- Rise in the cost of coffee and dairy
products (T1)
- Keen competition from
competitors.(T2)
- Coffee beans are susceptible to
environmental crisis. (T3)
APPLICATION
SCANNING THE MACRO-ENVIRONMENT
The macro-environment forces are external and uncontrollable factors
faced by Lotteria. To understand the impact of these factors, we will use
PESTLE as a guide.

• Political situation of Singapore is relatively stable. Stable political

P • Singapore is ranked as the most transparent Asian country.
• Singapore is the world leader in foreign trade and investment
as well as the world's easiest place to do business.
environment for
Lotteria to invest

Stable economy
• Singapore is ranked first for having the most open economy although
for international trade and investment. expecting nominal

E • Singapore has low poverty rate with low unemployment

rate.
• Singapore has most conducive environment for business,
growth with
population having
strong purchasing
both regionally and globally
power
SCANNING THE MACRO-ENVIRONMENT
• Singaporean prefers to have convenience when it
Possible increasing
S comes to dining.
• Lifestyle in Singapore is fast paced and relatively
demand for new dining
experience
stressful so Singaporean generally enjoy new dining
experience.

Good technological
infrastructure will
• Singapore has a strong infrastructure for information
T technology and wireless capability.
• High household broadband subscription rate
enable good
communication with
customers and
partners

• Singapore is ranked 1st in Asia for having the best The policies are in
protection of intellectual property. favor of the business,
L • Government offers good support for foreign investors;
corporate taxes in Singapore are generally low.
e.g. lower company tax

Lotteria may focus on

promoting their eco-
E • Singapore is gradually becoming an eco-friendly city. friendly products and
services
SCANNING THE MICRO-ENVIRONMENT
The Company
E.g. Lotteria’s mission
statement

Customers Suppliers
E.g. Youths and E.g. Local bread
families maker
Micro-
environm
ent Marketing
Publics
intermediaries
E.g. Media, netizens
UberEats, Food
and interest group
Panda, Deliveroo

Competitors
E.g. McDonald,
Burger King, MOS
Burger
SCANNING THE MICRO-ENVIRONMENT
Lotteria has to build relationships with company departments, suppliers,
marketing intermediaries, customers, competitors, and various publics.
• Lotteria’s philosophy is: “To Lotteria, nothing is more important than satisfying
The Company customers from the heart”.

• Bread suppliers (can be locally bought: e.g. Sunshine Bakery, Gardenia, etc.)
Suppliers • Meat supplier (must be imported)

Marketing • Deliveroo, UberEats, Food Panda

Intermediaries

• 450 fast food outlets in Singapore in 2014.

Competitors • Direct competitors include McDonald's, Burger King and MOS Burger
• Indirect competitors include KFC, Korean restaurants and local food centres

• Several media reports cited health risks as strong associations to fast food
Publics consumption.

• According to the results of the National Nutrition Survey 2010, there is an

Customers increasing trend of Singaporeans dining out.
 SWOT ANALYSIS
Strengths
• Strong branding in Asia including Korea,
China, Myanmar, Vietnam (S1)
• Strong management team with relevant
experience due to prior investment in
other countries (S2)
• Fresh and high nutritional ingredients
used in their burgers (S3)
• Able to design products around customers’
needs (S4)
Opportunities
• Few Korean fast food brands in Singapore
(O1)
• Increasing receptivity to Korean culture
due to exposure to K-pop and Korean
drama (O2)
• Dining-out culture.(O3)
Weaknesses
• New to the fast food market in Singapore
(W1)
• May not fully understand Singapore
consumers’ dining habits and behaviour
(W2)
• No contact for local suppliers (W3)
• No existing pool of trained local staff to
start restaurant operation immediately
(W3)
Threats
• Many existing strong competitors in
Singapore (T1)
• Strong bargaining power of local suppliers
(T2)
• Fastfood perceived as unhealthy (T3)
 RECOMMENDED STRATEGIES

Lotteria should leverage on its use of fresh and high nutritional ingredients (S3) through social media
campaigns to reach out to Singaporeans who are increasingly becoming receptive to Korean culture
(O2).

Lotteria can position itself as a healthy fast food joint by emphasizing on its fresh and high nutritional
ingredients used (S3) to overcome the perception of Lotteria’s fastfood as unhealthy (T3).

Since Lotteria’s weakness (W1) was being new to the fast food market in Singapore, the company could
engage famous K-pop star/(s) as Lotteria’s spokesperson to attract the people who are becoming more
receptive to Korean culture and food (O2).

Hire local restaurant managers or area managers who have experience with the local fast food industry
and existing contact with local suppliers (W3) to level the playing field with strong competitors in
Singapore (T1)
 CONCLUSION
Based on the micro and macro-environment analysis using SWOT, we may
conclude that Singapore offers a conducive marketing environment for
Lotteria to expand into.

The SWOT Analysis can be used to help Lotteria and other companies to
formulate their marketing strategies.
 Concept Diagram
Environment Scanning Environment Analysis Strategy Formulation
Micro-environment

The
Company

Customers Suppliers
SWOT Analysis SWOT Strategies
Micro-
environm
ent Marketing Strengths Weaknesses
Publics intermedi
aries Strengths Weaknesses

Competit Opportuni
SO Strategy WO Strategy
ors ties

Macro-environment
Opportunities Threats Threats
P • Political ST Strategy WT Strategy

E • Economic

S • Socio-cultural

T • Technological

L • Legal

E • Environmental
 RESOURCES
Recommended Textbooks
Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14th ed.) [Chapter 2, pp 60 – 87;
Chapter 3, pp88 – 119]. Singapore: Pearson.

Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yau, O. (2011). Principles of
Marketing: An Asian Perspective (3rd ed.) [Chapter 2, pp 59 – 60; Chapter 3, pp 73 – 93]
Singapore: Pearson.

Pearce II, J., & Robinson Jr, R. (2009). Strategic Management (11th ed.) [Chapter 6, pp 159 –
163]. Singapore: McGraw Hill

Reference Textbooks
Grewal. D. and Levy M. (2008) (Chapter 2, 4). Marketing. McGraw-Hill.

Enz. Cathy A. (2010). Hospitality Strategic Management (2nd ed.) (Chapter 1, 2). John Wiley &
Sons.

McDaniel. C., Lamb. C. W. and Hair F. (2009). Introduction to Marketing (10th ed.) (Chapter 4).
Cengage Learning

Bearden I., and LaForge (2007). Marketing Principles and Perspective (5th ed.). McGraw-
Hill/Irwin.
 RESOURCES
Websites

PESTLE and SWOT Analysis Prioritisation | Jisc. (n.d.). Retrieved March 15, 2017 from
website: https://www.jisc.ac.uk/guides/managing-strategic-activity/prioritisation – link no
longer works

Lotteria’s official website. Retrieved March 15, 2017 , from Lotteria’s official website
http://www.lotteria.com/eng/index.asp - link no longer works

PESTLE ANALYSIS (n.d.). Retrieved September 16, 2017 from website

http://pestleanalysis.com/category/pest-analysis
Business and the environment

The business transformation process does not take place in a vacuum. Firms operate in a
particular context and they are influenced by and are able to influence this environment.

The business environment can be divided into:

 The micro-environment: this involves individuals or organisations that a firm deals

with on a regular basis. For example, suppliers, distributors, competitors, customers
and employees are all members of the micro-environment. These groups are
stakeholders of the business. They all have a direct interest in the activities of the
firm and are clearly affected by its actions. Managers regularly interact with others
in the micro-environment and their decisions have a direct effect on them e.g. a
decision to expand may mean an increase in supplies, an increase in overtime, more
deliveries and greater profits. At the same time these stakeholder groups can have a
direct impact on the firm. Labour shortages in the local labour market may make it
more expensive to recruit, competitors launching new products may take away
market share and changes in customer tastes may require a rethinking of the
marketing strategy. Delays by suppliers may lead to cash-flow problems and
problems with distributors may hit sales. The micro environment therefore plays a
critical role in the success and behaviour of a business.

 The macro-environment. This involves factors outside of the direct control of the
business. These macro-factors such as the economy, government policy and social
change can have a significant effect on a firm's success but the relationship is fairly
one way. A change in the exchange rate can affect the ability of a firm to sell abroad;
for example, the pound rose in value to nearly 2 dollars in 2007 making UK exports
expensive in America. The increasing interest in healthy eating has boosted organic
sales. The ageing population has increased demand for healthcare resources.
However, whilst these macro factors can fundamentally change the environment of
an organisation one individual business can rarely do much on its own to shape
them. One firm is unlikely to be able to influence government taxation policy or new
legislation, for example. The macro-environment can be analysed using PESTEL
analysis which is outlined later.

Source: Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14th ed.) [Chapter 2, pp 60 – 87;
Chapter 3, pp88 – 119]. Singapore: Pearson.
THE COMPANY’S MICRO-ENVIRONMENT
It includes all of the actors close to the company that affect positively or negatively, its ability to
create value for and relationships with its customers

The Company
In designing marketing plans, marketing management takes other company groups into
account-groups such as top management, finance, research and development (R&D),
purchasing, operations, and accounting. All these interrelated groups form the internal
environment. Top management sets the company’s mission, objectives, broad strategies, and
policies. Marketing managers make decisions within the strategies and plans made by top
management. Marketing managers must work closely with other company departments. Other
departments have an impact on the marketing department’s plans and actions. And under the
marketing concept, all of these functions must “think consumer.” They should work in harmony
to provide superior customer value and satisfaction.

Suppliers
Suppliers form an important link in the company’s overall customer value delivery system. They
provide the resources needed by the company to produce its goods and services. Supplier
problems can seriously affect marketing. Marketing managers must watch supply availability
supply shortages or delays, labor strikes, and other events can cost sales in the short run and
damage customer satisfaction in the long run. Marketing managers also monitor the price trends
of their key inputs. Rising supply costs may force price increases that can harm the company’s
sales volume.

Most marketers today treat their suppliers as partners in creating and delivering customer value.

Marketing Intermediaries
Firms that help the company to promote, sell, and distribute its goods to final buyers; they
include resellers, physical distribution firms, marketing service agencies, and financial
intermediaries.

Customers
The company needs to study five types of customer markets closely. Consumer markets consist
of individuals and households that buy goods and services for personal consumption. Business
markets buy goods and services for further processing or for use in their production process,
whereas reseller markets buy goods and services to resell at a profit. Government markets are
made up of government agencies that buy goods and services to produce that need them
finally, international markets consist of these buyers in other countries, including consumers,
producers, resellers and governments. Each market type has special characteristics that call for
careful study by the seller.

Competitors
The marketing concept states that to be successful, a company must provide greater customer
value and satisfaction than its competitors do. Thus marketers must do more than simply adapt
to the needs of target consumers. They also must gain strategic advantage by positioning their
offerings strongly against competitors offering in the minds of consumers.

No single competitive marketing strategy is best for all companies. Each firm should consider its
own size and industry position compared to those of its competitors. Large firms with dominant
positions in an industry can use certain strategies that smaller firms cannot afford. But being
large is not enough. There are winning strategies for large firms, but there are also losing ones.
And small firms can develop strategies that give them better rates of return that large firms
enjoy.

Publics
The company’s marketing environment also includes various publics. A public is any group that
has an actual or potential interest in or impact on an organization’s ability to achieve its
objectives. Some examples of publics are Media Public (includes newspapers, magazine,
bloggers, etc.) and Citizen-action Public (includes interest groups, environmental groups,
consumer associations, etc.).

Adapted from:
th
Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14 ed.) [Chapter 2, pp 90 – 83]. Singapore: Pearson.
PESTLE and SWOT analysis - find out the current status of your organisation
These are tools used to find out the current status and position of an organisation or individual in
relation to their external environment and current role. They can then be used as a basis for future
planning and strategic management.

The PESTLE analysis should be used to provide a context for the organisation’s/individual’s role in
relation to the external environment. It covers Political, Economic, Social, Technological, Legal and
Environmental factors. Depending on which elements are included it can also be referred to as STEP,
STEEP, PESTEL, PESTLE or LEPEST. Recently it was even further extended to STEEPLE and STEEPLED,
including education and demographics.

The process underpins many other analytical techniques, such as Scenario Planning. The factors can
be at macro (e.g. World-, EU- or UK-wide) or micro (e.g. institutional or individual) level. Depending
on the scope and scale of the exercise being undertaken, you may want to consider for each factor:

 Which of the below are of most importance now?

 Which are likely to be most important in a few years?

 What are the factors influencing any changes?

Political

What are the key political drivers of relevance?

Worldwide, European and government directives, funding council policies, national and local
organisations’ requirements, institutional policy

Economic

What are the important economic factors?

Funding mechanisms and streams, business and enterprise directives, internal funding models,
budgetary restrictions, income generation targets

Social

What are the main societal and cultural aspects?

Societal attitudes to education, particularly in relation to government directives and employment

opportunities. Also general lifestyle changes, changes in populations, distributions and
demographics and the impact of different mixes of cultures

Technological

What are current technology imperatives, changes and innovations?

Major current and emerging technologies of relevance for teaching, research or administration
Legal

Current and impending legislation affecting the role

European and national proposed and passed legislation

Environmental

What are the environmental considerations, locally and further afield?

Local, national and international environmental impacts, outcomes of political and social factors

You will tend to find a lot of crossover – for example policies under political factors leading to legal
and environmental factors. You do not need to worry too much about pigeon-holing issues into the
right category – the framework simply helps you think about the context as a whole.

Now you have the PESTLE context you can use this output to map out a SWOT analysis. SWOT
stands for; Strengths, Weaknesses; Opportunities; Threats

A traditional SWOT analysis would take the context of the PESTLE and analyse how these factors may
emerge/impact.

This may be an interesting exercise but often doesn’t lead to anything apart from four lists that are
filed away and forgotten.

A SWOT analysis should be a useful tool for planning and marketing strategy. Identify your strengths
and weaknesses first because they may suggest some of the opportunities and threats later. There is
a tendency for people to play the ‘opposites game’ whereby an opportunity might be identified and
then a converse threat that ‘it might not be taken up’.

This is not a threat, threats have to exist now in the present – this is a RISK associated with taking
that opportunity and this should be recorded in the risk register. Our risk management guide
explores this whole area in more depth.
A better way to map this output more directly into a project plan and/or strategy is to use a 3×3 grid,
arranging your strengths, weaknesses, opportunities and threats in the labelled boxes. Then come
up with some ‘mini strategies’ in the four boxes in the bottom right corner of the matrix, addressing
the questions outlined.

Having done this you can use the top left box to either translate the strategies into a task list for a
project plan or come up with a strategy or mission statement for whatever topic was the subject of
the SWOT analysis.
SWOT Analysis

 Acronym for the internal Strengths (S) and Weaknesses (W) of a firm and the
environmental Opportunities (O) and Threats (T) facing that firm
 Assumption that an effective strategy derives from a sound “fit” between a firm’s
internal resources and capabilities (strengths and weaknesses) and its external
situation (Opportunities and Threats)
 A good fit maximizes a firm’s strengths and opportunities and minimizes its
weaknesses and threats

Definition of Strengths (S), Weaknesses (W), Opportunities (O) and Threats (T) with
examples of SWOT analysis performed by Apple Computer that led to the rapid
development and introduction of the IPod.

Strengths (S)

A strength is a resource or capability controlled by or available to a firm that gives it an

advantage relative to its competitors in meeting the needs of the customers it serves.
Examples;

 Sizable miniature storage expertise

 User-friendly engineering skill
 Reputation and image with youthful consumers
 Brand name
 Web-savvy organization and people
 Steve Job’s Pixar experience

Weaknesses (W)

A weakness is a limitation or deficiency in one or more of a firm’s resources or

capabilities relative to its competitors that create a disadvantage in effectively meeting
customer needs. Examples;

 Economies of scale versus computer rivals

 Maturing computer markets
 Limited financial resources (prior to IPad/IPhone era)
 Limited music industry expertise
Opportunities (O)

An opportunity is a major favorable situation in a firm’s environment. Key trends are one
source of opportunities. Identification of a previously overlooked market segment,
changes in competitive or regulatory circumstances, technological changes, and
improved buyer or supplier relationships could represent opportunities for the firm.
Examples;

 Confused online music situation

 Emerging file-sharing restrictions
 Few core computer-related opportunities
 Digitalization of movies and music

Threats (T)

A threat is a major unfavorable situation in a firm’s environment. Threats are key

impediments to the firm’s current or desired position. The entrance of new competitors,
slow market growth, increased bargaining power of key buyers or suppliers,
technological changes, and new or revised regulations could represent threats to a
firm’s success. Examples;

 Growing global computer companies

 Major computer competitors

SWOT Analysis Diagram

Numerous Environmental
Opportunities (O)

Cell 3: Cell 1:
W-O Strategies S-O Strategies
Critical Substantial
Internal Internal
Weaknesses Strengths
(W) (S)
Cell 4: Cell 2:
W-T Strategies S-T Strategies

Major Environmental
Threats (T)
The SWOT Analysis Diagram’s objective is for identification of one of four distinct
patterns in the match between a firm’s internal resources/capabilities and external
situation.

Cell 1 (S-O Strategies)

 A firm faces several environmental opportunities and has numerous strengths

that encourage pursuit of those opportunities
 Suggest growth-oriented strategies to exploit the favorable match
 Example: Apple IPod as the result of a favorable match of its strong technical
expertise, early entry, and reputation resources with an opportunity for
impressive market growth as millions of people sought a legally viable,
convenient way to obtain, download, store, and use their own customized music
choices.

Cell 2 (S-T Strategies)

 A firm identified several key strengths while facing an unfavorable environment

 Seek to redeploy those strong resources and competencies to alleviate threats
and build long term opportunities
 Example: IBM, a dominant manufacturer of mainframes, servers and PCs
increasingly faced major threats that include pricing pressures, accelerated pace
of innovation etc. IBM’s decision to leverage of its brand name and focus on
continued development of IBM Global Services has allowed them to build a long
term opportunity in a more profitable market.

Cell 3 (W-O Strategies)

 A firm faces an impressive market opportunity but is constrained by weak internal

resources/capabilities
 Focus is on eliminating the internal weaknesses so as to more effectively pursue
the market opportunity
 Example: Microsoft has big problems with computer viruses. To alleviate such
weaknesses, Microsoft is driving massive changes in how they writes software-
to make it more secure before it reaches the market rather than fix it later with
patches
Cell 4 (W-T Strategies)

 A firm faces major environmental threats from a weak resource position

 Improve on the existing weak resource position to reduce/avert the impact of
threat
 Might call for strategy that reduce or redirect involvement in the products or
markets examined
 Example: Texas Instruments is a struggling maker of chips, calculator and laptop
PCs. It exited the market and concentrated on an emerging class of chips known
as digital signal processors (DSPs)

Source: Pearce II, J., & Robinson Jr, R. (2009). Strategic Management (11th ed.) [Chapter 6, pp 159 – 163].
Singapore: McGraw Hill.
A PEST analysis most commonly measures a market; a SWOT analysis
measures a business unit, a proposition or idea.

Generally speaking a SWOT analysis measures a business unit or proposition, whereas a PEST
analysis measures the market potential and situation, particularly indicating growth or decline, and
thereby market attractiveness, business potential, and suitability of access - market potential and
'fit' in other words. PEST analysis uses four perspectives, which give a logical structure, in this case
organized by the PEST format, that helps understanding, presentation, discussion and
decisionmaking. PEST analysis can be used for marketing and business development assessment and
decision-making, and the PEST template encourages proactive thinking, rather than relying on
habitual or instinctive reactions.

Here the PEST analysis template is presented as a grid, comprising four sections, one for each of the
PEST headings: Political, Economic, Social and Technological. The free PEST template below includes
sample questions or prompts, whose answers are can be inserted into the relevant section of the
PEST grid. The questions are examples of discussion points, and obviously can be altered depending
on the subject of the PEST analysis, and how you want to use it. Make up your own PEST questions
and prompts to suit the issue being analysed and the situation (ie. the people doing the work and
the expectations of them). Like SWOT analysis, it is important to clearly identify the subject of a PEST
analysis, because a PEST analysis is four-way perspective in relation to a particular business unit or
proposition - if you blur the focus you will produce a blurred picture - so be clear about the market
that you use PEST to analyse.

A market is defined by what is addressing it, be it a product, company, brand, business unit,
proposition, idea, etc, so be clear about how you define the market being analysed, particularly if
you use PEST analysis in workshops, team exercises or as a delegated task. The PEST subject should
be a clear definition of the market being addressed, which might be from any of the following
standpoints:

• a company looking at its market

• a product looking at its market
• a brand in relation to its market
• a local business unit
• a strategic option, such as entering a new market or launching a new product
• a potential acquisition
• a potential partnership
• an investment opportunity

Be sure to describe the subject for the PEST analysis clearly so that people contributing to the
analysis, and those seeing the finished PEST analysis, properly understand the purpose of the PEST
assessment and implications.

Source:
Pest Market Analysis Tool : Businessballs website (n.d.) Retrieved on 2 October 2017.
http://www.businessballs.com/strategy-innovation/pest-market-analysis-tool-20/
 6th Presentation
Marketing Research and Managing Marketing
Information
Content Page
 Learning Outcomes
 Need For Research
 The Steps in the Marketing Research Process
 Step 1: Defining the Problem and Research
Objectives
 Step 2: Developing the Research Plan
Questionnaire Design
 Step 3 & 4: Implementation & Interpretation
 Application to Case
 Conclusion & Resources
Learning Outcomes
 Describe the stages in the marketing research
process
 Differentiate between the various types of
research objectives
 Identify the various components of a research
plan
 Explain how to design an effective questionnaire
Need for Research
Marketing Research
 To identify market segments
The systematic design,
collection, analysis, and
reporting of data  To determine competitors
relevant to a specific
marketing situation
facing an organization
(Kotler pg 129.)
 To discover how to overcome
Market Research barriers to market entry
Market Research is a
collection and analysis
of data about a
particular target
market* See Notes
 To understand customers' needs

 To support marketing mix

decisions
 The Steps in the Marketing Research
Process
STEP 1: Defining the Problem and Research
Objectives
Focus on
Step 1 & 2
STEP 2: Developing the Research Plan

STEP 3: Implementing the Research Plan-

Collecting and analysing data

STEP 4: Interpreting and reporting findings

STEP 1: Defining the Problem
 Defining the problem is the most important step
in the Marketing Research process.
 If the problem is incorrectly defined, all else is wasted
effort
 Problem definition indicates a specific marketing
decision to be clarified or problem to be solved
 It specifies research questions to be answered and the
objectives of research
 Research objectives state specifically what information
should be collected, what the researchers must do, in
order to deliver the research findings that allow the
manager to select the correct decision alternative.
Defining the Problem (some examples)
Market Market Research Market Research Objective
Problem Question (specify)
(define) (formulate)
New product Should a new product be To determine consumer preference
proposal introduced? and purchase intention for the
proposed new product.

Advertising Should the advertising To determine the effectiveness of

effectiveness campaign be changed? the current advertising campaign.

Price increase Should the price be To determine the price elasticity of

decision increased? demand and the impact on sales
and profits of price changes.
New market Should a new brand To determine consumer preference
entry enter SG? and purchase intention for new
brand in the market
 STEP 1: Defining Research Objectives
Research Designs Types of Research Objectives

• To gather preliminary information that will

Hypothesis Exploratory help define problem and suggest hypotheses
A Research • Eg: Conducting Focus Group discussions to find out
hypothesis what customers like or dislike about McDonalds
is a
proposed
explanatio • To better describe things, such as market
n for an Descriptive potential for a product
Research • Eg: Conducting a Survey on existing customer profiles
observable (age group, spending etc.) at various McDonalds
phenomen outlets
on
• To test hypothesis about cause and effect
relationships
Causal • Eg: McDonalds just launched a special advert to
Research emphasize its healthy food and conducted a survey to
find out if its customers’ had a change of attitude as a
result of the ad
 STEP 2: Developing the Research Plan
The • Primary
researcher
Sources of Data • Secondary
has to make
these
• Qualitative
decisions Research
while • Quantitative
Methods
preparing the
research plan
• Mail
Researchers Contact • Telephone
may use Methods • Personal (individual/group)
qualitative to • Online
gain insights • Sampling Unit
followed by
• Sample size
quantitative Sampling Plan • Sampling Procedure
to seek
statistical (Probability/Non-Probability)
evidence • Questionnaires
Research • Discussion Guides
Instruments • Mechanical Instruments
 STEP 2a: Developing the Research
Plan: Sources of Data
The project
might
• It consists of information collected for a
require use
specific purpose at hand which does not
of one or Primary already exist.
both types Data
of data • Common sources include observations,
focus groups, surveys

Researchers
may use
secondary
data for
gaining • It consists of information that already
exists, having been collected for another
insights and Secondary purpose.
primary
data for
Data • Common sources include censuses,
confirming organizational records
 STEP 2b: Developing the Research
Plan: Method of Research
Criteria Qualitative Research Quantitative Research
Definition It provides insight into the It seeks to quantify the data , and,
perceptions, attitudes, beliefs typically, applies some form of
and behaviour of people statistical analysis

Objective To gain a qualitative To quantify the data and generalise

understanding of the the results from the sample to the
underlying reasons and population of interest
motivations
Sample Small number Large number

Data Analysis Non-Statistical Statistical

Examples Focus Group Study Survey

(Research instrument used: (Research instrument used:
Discussion Guide) Questionnaire)
STEP 2c: Developing the Research
Plan: Contact Methods
Criteria Definition
Flexibility Ability to obtain in-depth responses?

Control on Interviewer* Is there control over the actions and conduct of the
interviewer?
Control of Sample Is it possible to target specific groups of
respondents?
Speed of Data Collection How quickly can we obtain the responses from the
sample?
Response Rate How many people will actually respond to your
research?
Cost The cost of collecting the data more than the
benefits of the data itself?
* Control over Interviewers: Assume standardised Questionnaire given to all Interviewers
 STEP 2c: Developing the Research
Plan: Contact Methods
Criteria Mail Telephone Personal Online
Adapted from Flexibility Poor Good Excellent Good
Kotler, P., &
Armstrong, G. Control on Excellent Fair Poor High*
(2012), Interviewer*
Managing
Marketing Control of Sample Fair Excellent Good Excellent
Information to
Gain Customer
Insights,
Speed of Data Poor Excellent Good Excellent
Principles of Collection
Marketing (14th
ed.)[pp. 134]. Response Rate Poor Poor Good Good
Singapore:
Pearson.
Cost Good Fair Poor Excellent

* Control over Interviewers: Assume standardised Questionnaire given to all Interviewers

 STEP 2d: Developing the Research
Plan: Sampling Plan
Sample: A
segment of the
population
Sampling • Who is to be surveyed?
selected to Unit
represent the
populations as
a whole

Probability
Sampling: Each
Sample • How many people should be
population Size surveyed?
member has a
known chance of
being selected in
the sample
Sampling • How should the people in the
Non-Probability:
- Based on Procedur sample be chosen?
arbitrary
selection
e • Probability vs Non-Probability
 STEP 2e: Developing the Research
Plan: Research Instruments
• A questionnaire is a productive tool
listing questions for obtaining
Questionnaire information.
• Used for survey research

• A written outline of topics to cover

Eye Tracker Discussion during a focus group discussion
Guide • Uses mostly open-ended questions
• Used for Focus Group Study

Mechanical • Include cameras, EEG, Eye

Instruments tracker etc
Biopac (EEG)
Focus Group Study

It is an interview conducted by a trained moderator in a

non-structured and natural manner with a small group
of respondents. The moderator leads the discussion.

Objective:
• Gain insight by listening to a group of people from the Brand!
appropriate target market talk about issues of interest
to the researcher.
• The value of the technique lies in the unexpected Qualit
findings often obtained from a free-flowing group y!

discussion.

Instrument Tool Used:

Discussion Guide (see sample)
Questionnaire Design: Structure
Sections in a Questionnaire
INTRODUCTION SCREENER CORE CLASSIFICATION

To introduce To allow us to To allows us to To allow us to

the purpose of select the gather classify the
the study respondents information to respondents
that meet the meet the within
criteria research different
purpose categories.
Questionnaire Design: Types of questions
Objectives
• Allows respondent to choose one of the 2 or
Closed-ended more options

Open-ended • Allows respondent to elaborate on their

attitudes towards the given subject

Partially open- • Gives some options but also allows the

respondent to express in his-her own words
ended if the options are not exhaustive

• The respondent is asked to rate an issue on a

Rating Scale scale that ranges from poor to good

• Help to ascertain how strongly the

Likert Scale respondent agrees with a particular
statement.
Questionnaire Design: Guidelines
Do’s
• Keep the objective in mind
• Clearly introduce the
questionnaire
• Keep your language simple
• Start with interesting
questions
• Use simple rating scales or
lists of choices
• Put your questions in logical
order
• Keep the questionnaire as
short as possible
• Pre-testing helps avoid
mistakes
Don’t s
• Don’t make it too formal or
informal
• Limit, or avoid, the use of
open-ended questions
• Avoid following errors
• Leading questions
• Embarrassing Questions
• Hypothetical Questions
• Double Barrelled Questions
Types of questions to avoid when preparing a
questionnaire (errors in question design)
Leading Questions
Leading questions are questions that force your audience for a particular type of answer. For
example, “Which train company do you use most often?” This question presumes that the
respondent travels by train. If they don’t, they can’t answer.

Embarrassing Questions
Embarrassing questions are questions that ask respondents details about personal and
private matters.

Hypothetical Questions
Hypothetical questions are questions that are based on speculation and fantasy. An example
of a hypothetical question would be “If you were the CEO of ABC organization what would
be the changes that you would bring?”

Double barrelled questions

A double barrelled question is when you combine two questions into one. Example: "How
would you rate the cleanliness and service at establishment XYZ?"
Poor Fair Good Excellent
STEP 3 & Step 4: Implementation &
Interpretation
STEP 3: Implementing the Research Plan- Collecting and analysing
data
Personnel Data
Time Cost Tabulation
and Field Work Processing
Materials
Scheduling Estimates Plans
and Analysis

Step 4: Interpreting and reporting findings

This involves compiling the findings of the study in a concrete report, based on
which the client can then make intelligent business decisions.
MK03 Capturing the moment in its
entirety!
STEP 1: Defining the Problem and
Research Objectives:
Problem • “Samsung wants to position its Gear 360 camera in
Definition Singapore to youths”

Research • “To determine the awareness level and market

potential among youths in Singapore for its Gear 360
Objective camera”

Type of • Descriptive Research because it aims to describe the

Research awareness level and market potential of the Gear 360
amongst youths in Singapore.
Objective
STEP 2: Developing the Research Plan:
• Primary Data: as there is no existing research on
Sources of Data consumers keen to purchase the Gear 360 camera in
Singapore

• Quantitative research: to affirm the needs of the

Research Methods target statistically

• Online: need the information urgently and with low

Contact Methods budget

• Sampling Unit: Youth (15-35 years old)

• Sample size: 200
Sampling Plan
• Sampling Procedure: Non Probability (due to time
constraints)

Research Instrument • Questionnaire

STEP 2: Developing the Research
Plan:
An example of a Questionnaire for a
Quantitative Research
STEP 3 & Step 4: Implementation &
Interpretation

STEP 3: Implementing the Research Plan- Collecting and analysing

data
Data
Field Work Processing
Tabulation Execute and
Personnel Time Cost
Materials Analysis
Survey Tabulate data
Estimated Estimated Code the
Respondent raw data collection
1 Research time 2 cost SGD data and
incentives from with
Assistant weeks 2,000 identify
interviews minimum
error statistical
tools

Step 4: Interpreting and reporting findings

Decision on Target Segment Decision on Marketing Mix

Conclusion
 Market Research is aimed at the target market whereas
Marketing Research is much broader and includes all activities
providing information leading to marketing decisions.

 Market Research Process comprises of 4 steps where each leads

us closer to getting the required information.

 Every research should have a well defined objective.

 Effective marketing research process leads to logical marketing

decisions.
 Concept Diagram
Marketing Problem

Focus on
Step 1 & 2
STEP 3:
STEP 1: Implementing
Marketing Defining the STEP 2: STEP 4:
the Research Interpreting
Research Problem and Developing the Plan- and reporting
Process Research Research Plan
findings
Objectives Collecting and
analysing data

Marketing Mix Decisions

Resources
Recommended Textbooks
 Kotler, P., & Armstrong, G. (2012), Managing Marketing Information to Gain
Customer Insights, Principles of Marketing (14th Ed.)[pp. 120-155]. Singapore: Pearson.
 Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yau, O. (2011)
Managing Marketing Information, Principles of Marketing: An Asian Perspective (3rd
Ed.).[pp 103-139] Singapore: Pearson.
 Malhotra, N. K. (1999). Marketing research: An applied orientation. Upper Saddle
River, NJ: Prentice Hall.

Reference Textbooks
 McDaniel, C. & Gates, R. (2001) Qualitative research, Marketing Research Essentials
(3rd Ed.) [pp 106-142]. Ohio: Thomson South-Western
 Boyce, J. (2002). Focus Groups, Market Research in Practice. [pp. 115] Australia:
McGraw Hill
 Kerin, R.A, Hartley, S.W., Rudelius, W., & Theng, L.G. (2009). Marketing Research:
From Consumer Insights to Actions, Marketing in Asia (3rd Ed.) [pp. 209-239] New
York: McGraw Hill.
 Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yan, O. (2009).
Marketing Research. Principles of Marketing: A Global Perspective. [pp. 90-99].
South Asia: Pearson Education
W EBSITE R ESOURCES
 Definition of Market Research. (n.d.). Retrieved September 17, 2017, from Market Research World
website:
http://www.marketresearchworld.net/index.php?option=com_content&task=view&id=14&Itemi
d=38
 What is marketing research? definition and meaning - BusinessDictionary.com. (n.d.). Retrieved
September 17, 2017, from Business Dictionary website:
http://www.businessdictionary.com/definition/marketing-research.html
 The Importance of Market Research. (n.d.). Retrieved September 17, 2017, from Pierobon website:
http://www.pierobon.org/export/ch2/why.htm
 Why is Market Research Useful? The Importance of Market Research | MoreBusiness.com. (n.d.).
Retrieved September 17, 2017, from More Business website:
http://www.morebusiness.com/running_your_business/management/Market-Research.brc
 Types of Questions in Questionnaire Design - Outsource2india. (n.d.). Retrieved September 17,
2017, from Outsource 2 India website:
http://www.outsource2india.com/kpo/articles/questionnaire-types-of-questions.asp
 How to write a questionnaire? (n.d.). Retrieved September 17, 2017, from Birmingham City
University website: http://library.bcu.ac.uk/learner/writingguides/1.05.htm
 How to Write a Survey or Questionnaire? | eHow. (n.d.). September 17, 2017, from eHow website:
http://www.ehow.com/how_16596_write-survey-questionnaire.html
 Business Tips: Tips for Conducting Focus Groups (n.d.). Retrieved September 17, 2017, from
YouTube website: http://www.youtube.com/watch?v=mwaYzapf7nQ&feature=related
Strengths and Weaknesses of Contact
Methods

Contact Methods:

• Mail Questionnaires: This is probably the most common method of research. By combining it with other
activities however, such as checking out of a hotel, installing new software, sending in the guarantee
form, or making it part of the application process for loans or life insurance and other services it can be
turned into an effective method of research. To be really effective it is best to use questionnaires that ask
for boxes to be ticked or strength of agreement to statements to be indicated. This has the advantage
that it is easier and faster for the recipient to complete and also allows direct comparability of answers.

• Telephone Interviewing: Involves phoning a sample of respondents and asking them a series of questions.
Using the telephone to collect has one great advantage - it is cheap. One researcher can make many calls
in a day without leaving an office. It is also both very focussed as you are initiating the call and it is fast as
interviews do not take long and the elapsed time to complete the exercise is also short. There are some
drawbacks however - often people do not like to receive unsolicited calls, each call is typically not long,
and it can be very difficult to use in a corporate - business to business - environment. It relies on a
structured script and on obtaining answers in the same manner (e.g. interviewers tick boxes on template
in front of them).

• Personal Interviewing:

o In-depth Interview: A face-to-face conversation to explore issues

Page | 1
 o Focus Group Discussion: It is an interview conducted by a trained moderator in a non-
structured and natural manner with a small group of respondents. The moderator leads the
discussion. The main purpose of focus groups is to gain insight by listening to a group of
people from the appropriate target market talk about issues of interest to the researcher.
The value of the technique lies in the unexpected findings often obtained from a free-flowing
group discussion. The benefit of this free interaction of group members is that it often
provides insight that direct questioning cannot

• Online Marketing Research: Online research can take many forms. A company can include questionnaire
on its website and offer incentives for completing it. Or it can use email, web links or web pop-ups to
invite people to answer questions and possible win a prize.

Criteria for evaluation of data collection methods: (to identify the most appropriate type of data
collection methods required for its research analysis purpose)

• Flexibility: Ability to obtain in-depth responses? Ability to vary/amend the questions asked?

• Control on Interviewer: Is there control over the actions and conduct of the interviewer?

• Control of Sample: Is it possible to target specific groups of respondents?

• Speed of Data Collection: How quickly can we obtain the responses from the sample?

• Response Rate: How many people will actually respond to your research?

• Cost: The cost of collecting the data more than the benefits of the data itself?

Assumptions on some Criteria for Contact Methods:

1) Control on Interviewer – Online. As it is an online survey, there is no interviewer involved.
2) Control on Sample is equally dependent on research design as well as contact methods. Depending
on the context of the situation, research design may be more important than contact methods.
3) Response Rate for online is deemed weaker as respondents have an option to delay in their reply.

Source: Adapted from Kotler, P., & Armstrong, G. (2012), Managing Marketing Information to Gain Customer
Insights, Principles of Marketing (14th ed.)[pp. 120-155]. Singapore: Pearson

Page | 2
Marketing Research
Marketing research is the systematic design, collection, analysis and reporting of data relevant to
a specific marketing situation facing an organization. Companies use marketing research in a wide
variety of situations. For example, marketing research can help marketers understand customer
satisfaction and purchase behavior. The marketing research process has 4 steps: defining the
problem and research objectives, developing the research plan, implementing the research plan, and
interpreting and reporting the findings.

1. Defining the Problem and Research Objectives

Marketing managers and researchers must work closely together to define the problem and agree
on research objectives. After the problem has been defined carefully, the research objectives are set.
Together, the statement of the problem and research objectives guides the entire research process.

A marketing research project might have one of three types of objectives:

• The objective of exploratory research is to gather preliminary information that will help
define the problem and suggest hypothesis

• The objective of descriptive research is to describe things, such as the market potential for a
product or the demographics and attitudes of consumers who buy them

• The objective of causal research is to test hypothesis about cause and effect relationships.
For example, would a 10 percent decrease in tuition fees at private college result in an
enrollment increase sufficient to offset the reduced tuition?

Managers often start with exploratory research and later follow with descriptive or causal research.

2. Developing the Research Plan

The research plan outlines sources of existing data and spells out the specific research approaches,
contact methods, sampling plans, and instruments that researchers will use to gather data.

Page | 1
2.1 Sources of Data
Research objectives must be translated into specific information needs. To meet these information
needs, the research plan can call for gathering secondary data, primary data, or both. Secondary
data consist of information that already exists somewhere, having been collected for another
purpose. Primary data consist of information collected for the specific purpose at hand.

2.1.1 Gathering Secondary Data

Researchers usually start by gathering secondary data. The company’s internal database provides a
good starting point. However, the company can also tap a wide assortment of external information
sources, including commercial data services and government sources.

2.1.2 Primary Data Collection

In most cases, the company must collect primary data. It needs to make sure that the data will be
relevant, accurate, current and unbiased. Designing a plan for primary data collection calls for a
number of decisions on research approaches, contact methods, sampling plans and research
instruments.

2.2 Research Methods

Research methods for gathering primary data include qualitative and quantitative research.

Qualitative research provides insight into the perceptions, attitudes, beliefs and behaviour of people.
It allows a researcher to gain a qualitative understanding of the underlying reasons and motivations
of consumers. Qualitative research often involves small sample size and the data analysis is non-
statistical. Example of qualitative research is a Focus Group Study which brings together a small
group of consumers to discuss the product or advertising, under the guidance of a trained
moderator.

Quantitative research seeks to quantify the data and generalise the results from the sample to the
population of interest. It is used to measure how many people feel, think or act in a particular way.
It often involves large sample size and the data analysis is often statistical in nature. Example of
quantitative research is a survey which uses questionnaires to collect information from a sample
group that represents the target market.

Page | 2
2.3 Contact Methods
Information can be collected by mail, telephone, personal interview, or online.

Mail questionnaires can be used to collect large amount of information at low cost per respondent.
Respondents may give more honest answers to more personal questions on mail questionnaire than
to an unknown interviewer in person or over the phone. Also, no interviewer is involved to bias the
respondent’s answers. However, mail questionnaire are not very flexible – all respondents answer
the same questions in a fixed order. Mail surveys usually take longer to complete, and the response
rate – number of people returning completed questionnaire - is often very low. Finally, the
researcher often has little control over the mail questionnaire sample. Even with a good mailing list,
it is hard to control who at the mailing address fills out the questionnaire.

Telephone interviewing is one of the best methods for gathering information quickly, and it
provides greater flexibility than mail questionnaires. Interviewers can explain difficult questions and,
depending on the answers they receive, skip some questions or probe on others. Response rates
tend to be higher than with mail questionnaires, and interviewers can ask to speak to respondents
with the desired characteristics or even by name. However, with telephone interviewing, the cost
per respondent is higher than with mail questionnaires. Also, people may not want to discuss
personal questions with an interviewer. The method introduces interviewer bias – the way
interviewers talk, how they ask questions, and other differences may affect respondents’ answers.
Finally, different interviewers may interpret and record responses differently, and under time
pressures some interviewers might even cheat by recording answers without asking questions.

Personal interviewing takes two forms – individual and group interviewing. Individual interviewing
involves talking with people in their homes or offices, on the street, or in shopping malls. Such
interviewing is flexible. Trained interviewers can guide interviews, explain difficult questions, and
explore issues as the situation requires. They can show subjects actual products, advertisements, or
packages and observe reactions and behavior. However, individual personal interviews may cost
three to four times as much as telephone interviews.

Group interviewing consists of inviting six to ten people to meet with a trained moderator to talk
about a product, service, or organization. Participants normally are paid a small sum for attending.
The moderator encourages free and easy discussion, hoping that group interactions will bring out
actual feelings and thoughts. At the same time, the moderator “focuses” the discussion – hence the
name focus group interviewing.

Increasingly, marketing researchers are collecting primary data through online marketing research –
Internet surveys, online panels, experiments and online focus groups. Online research can take many
forms. A company can include questionnaire on its website and offer incentives for completing it.
Or it can use email, web links or web pop-ups to invite people to answer questions and possible win
a prize. Web research offers some advantages over traditional surveys and focus groups. The most
obvious are speed and low costs. Online focus groups require some advance scheduling, but results
are practically instantaneous.

Page | 3
2.4 Sampling Plan
Marketing researchers usually draw conclusions about large groups of consumers by studying a small
sample of the total consumer population. A sample is a segment of the population selected for
marketing research to represent the population as a whole. Designing the sample requires three
decisions. First, who is to be surveyed (the sampling unit)? Second, how many people should be
surveyed (what sample size)? Third, how should the people in the sample be chosen (what sampling
procedure)? There are two main kinds of sampling procedure, probability and non-probability
samples. Using probability samples, each population member has a known chance of being
included in the sample, and researchers can calculate confidence limits for sampling error. But when
probability sampling costs too much or takes too much time, marketing researchers often take non-
probability samples, even though their sampling error cannot be measured.

2.5 Research Instruments

In collecting primary data, marketing researchers have a choice of two main research instruments –
the questionnaire and mechanical devices. The questionnaire is by far the most common
instrument, whether administered in person, by phone or online.

Although questionnaires are the most common research instrument, researchers also use
mechanical instruments to monitor consumer behavior. Nielson Media Research attaches people
meters to television sets in selected homes to record who watches what programs.

3. Implementing the Research Plan

The researcher next puts the marketing research plan into action. This involves collecting,
processing, and analyzing the information. Data collection can be carried out by the company’s
marketing research staff or by outside firms. The data collection phase phase of the marketing
research process is generally the most expensive and the most subjected to error. Researchers
should watch closely to make sure the plan is implemented correctly. Researchers must also process
and analyse the collected data to isolate important information and findings.

4. Interpreting and Reporting the Findings

The market researcher must now interpret the findings, draw conclusions and report them to
management. The researcher should not try to overwhelm managers with numbers and fancy
statistical techniques. Rather, the researcher should present important findings that are useful in
the major decisions faced by management.

Page | 4
Adapted from: Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yan, O. (2009).
Developing the Research Plan. Principles of Marketing: An Global Perspective. [pp. 90-99]. South
Asia: Pearson Education

Page | 5
New Market Research Methods and
Techniques
As technology and socioeconomic trends change, so will our means of gaining customer insights.
Many of these are really just new technologies applied to traditional methods, as opposed to
radically different methodologies. In any case, here is a sampling of some of the new market
research trends and techniques popular now, in no particular order:-

1. Shift from data collection to data analysis

 Today, actual customer behaviour data is collected with ease, to the point
where analysis (or data mining) is more challenging than obtaining the data
 Google Analytics provides webmasters with tons of information about
website visitors, including languages, pages visited, screen resolutions, etc.
 By carefully monitoring the products a user purchases/views and correlating
that information with purchase histories, companies can effectively present
product recommendations

2. Shift from “how you think you will behave” to “I know how you behaved”
 Companies would prefer to sell a customer something based on what
customers actually want (observational research) rather than what they think
they want

3. Mobile market research methods

 As smart phones and tablets take the world by storm, these devices are
becoming a preferred platform for many applications and markets, including
market research
 Text messaging surveys and voting are emerging
 Smartphone-designed surveys are being developed
 Location awareness – advanced phone market research techniques can
leverage on smartphone location (GPS) information to trigger questions or
simply track movement over time
 Mobile Ethnography - using information like location awareness, researchers
are able to gather rich contextual data (using mobile phones) about
behaviours, allowing them to really understand the habits and lifestyles of
subjects
4. Biometric Market Research Techniques
 New biometric research methods that measure a subject’s physical response
to stimuli (e.g., television commercial) provide valuable data that a subject
might not be able or willing to express verbally
 Examples of biometric market research methods include heart rate
monitoring, respiration monitoring, skin and muscle activity, brain activity
(using functional MRI) and eye tracking

5. Prediction Markets
 A prediction market is like a mini stock market (virtual, online), where a
group of people can buy and sell based on “predictions” of various events
using virtual money (e.g., this company is going to launch a new smartphone
with air purification capabilities, I predict it will sell very well but nobody
knows about it yet. I shall buy a large number of shares now while it’s cheap,
and then sell the shares when it gets popular. This way, the company can test
the idea of selling the smartphone with air purification capabilities)
 For example, a company could ask employees to bid on a prediction market
that has to do with competitors, industry trends, or the success of product
concepts in order to get an early read on those ideas
 Prediction markets tend to be good indications of reality
 Well-known companies like Hewlett-Packard, Motorola, Intel, Best Buy and
Microsoft, use prediction markets to predict sales figures and identify best-
selling products
 Prediction markets have typically been used during the discovery stage, when
market researchers are determining which ideas should continue on with
research and development. Instead of investing large amounts of money on a
target audience using traditional monadic testing for each and every idea on
the table, researchers are now using prediction markets to quickly and
efficiently identify the winning concept

6. Virtual Shopping
 This involves the use virtual store simulation to mimic a shopping experience
for participants–a good way to test things retail issues like product
placement, store layout, packaging, etc.

7. Live Audience Response

 These systems involve a handhold remote control for audience members to
respond to questions that appear on-screen

8. Online Collaboration Tools

 Tools like Skype (video calling) and instant messaging
 They are often much cheaper than physically gathering people
 They also allow researchers to gather people from broader geographies much
easier
9. Social Media Market Research
 Social media dominates the Web, so it is natural that market researchers are
looking for ways to leverage on this technology
 Research of social media — Simply researching the market of social media.
For example, “X% of people use Facebook and the average age of a Google+
users is X”
 Research using social media data — there is a lot of data that can be gleaned
from social media sites
 Research using social media as part of the methodology or delivery
mechanism — Many companies have a large following on social media sites
and can leverage that audience to ask questions

10. QR Code Surveys

 A poster could ask a simple survey question and provide two QR codes,
asking people to scan their choice

Adapted from:-
 New Market Research Methods and Techniques (2013). Retrieved on Mar 15, 2017, from
mymarketresearchmethods website: http://www.mymarketresearchmethods.com/new-
market-research-methods-techniques/
 Using Prediction Markets For Market Research. (n.d.). Retrieved on Retrieved on Mar 15,
2017, from http://blog.optimizationgroup.com/an-introduction-to-using-prediction-
markets-for-market-research
 B216 Marketing

PBL PROBLEM PRE-CLASS READING

Title of Problem: Simply Marvellous! Module: B216 - Marketing

Questionnaire Design
Questionnaires are an inexpensive way to gather data from a potentially large number of
respondents. It is important to remember that a questionnaire should be viewed as a multi-
stage process beginning with definition of the aspects to be examined and ending with
interpretation of the results. Every step needs to be designed carefully because the final
results are only as good as the weakest link in the questionnaire process. Although
questionnaires may be cheap to administer compared to other data collection methods, they
are every bit as expensive in terms of design time and interpretation.

What can questionnaires measure?

Questionnaires are quite flexible in what they can measure, however they are not equally
suited to measuring all types of data. We can classify data in two ways, Subjective vs.
Objective and Quantitative vs. Qualitative.

In general, questionnaires can measure both qualitative and quantitative data well, but that
qualitative questions require more care in design, administration, and interpretation. By their
very nature, quantitative questions are more exact then qualitative.

When to use a questionnaire?

A questionnaire should be considered in the following circumstances.

 When resources and money are limited. A Questionnaire can be quite inexpensive to
administer.
 When it is necessary to protect the privacy of the participants. Questionnaires are
easy to administer confidentially.
 When corroborating other findings. In studies that have resources to pursue other
data collection strategies, questionnaires can be a useful confirmation tools

© 2016 RP/SMC/Sem2/WWS Page 1

 B216 Marketing

Defining the Objectives of the Survey

The importance of well-defined objectives cannot be over emphasized. A questionnaire that

is written without a clear goal and purpose is inevitably going to overlook important issues
and waste participants' time by asking useless questions. The questionnaire may lack a
logical flow and thereby cause the participant to lose interest. Consequential, what useful
data you may have collected could be further compromised. The problems of a poorly
defined questionnaire do not end here, but continue on to the analysis stage.

Writing the Questionnaire

Most questionnaires gather demographic data on the participants. This is used to correlate
response sets between different groups of people. It is important to see whether responses
are consistent across groups. Typically, demographic data is collected at the beginning of
the questionnaire, but such questions could be located anywhere or even scattered
throughout the questionnaire. One obvious argument in favour of the beginning of the
questionnaire is that normally background questions are easier to answer and can ease the
respondent into the questionnaire. One does not want to put off the participant by jumping in
to the most difficult questions. We are all familiar with such kinds of questions. It is important
to ask only those background questions that are necessary. Do not ask income of the
respondent unless there is at least some rational for suspecting a variance across income
levels. There is often only a fine line between background and personal information. You do
not want to cross over in to the personal realm unless absolutely necessary. If you need to
solicit personal information, phrase your questions as unobtrusively as possible to avoid
ruffling your participants and causing them to answer less than truthfully.

What kind of questions do we ask?

In general, there are two types of questions one will ask, open format or closed format.

Open format questions are those that ask for unprompted opinions. In other words, there are
no predetermined set of responses, and the participant is free to answer however he
chooses. Open format questions are good for soliciting subjective data or when the range of
responses is not tightly defined. Open format questions have several disadvantages. First,
their very nature requires them to be read individually. There is no way to automatically
tabulate or perform statistical analysis on them. This is obviously more costly in both time
and money, and may not be practical for lower budget or time sensitive evaluations. They
are also open to the influence of the reader, for no two people will interpret an answer in
precisely the same way. Finally, open format questions require more thought and time on the
part of the respondent.

© 2016 RP/SMC/Sem2/WWS Page 2

 B216 Marketing
Closed format questions usually take the form of a multiple-choice question. Closed format
questions offer many advantages in time and money. By restricting the answer set, it is easy
to calculate percentages and other hard statistical data over the whole group or over any
subgroup of participants. Closed format questions also make it easier to track opinion over
time by administering the same questionnaire to different but similar participant groups at
regular intervals.

Whether your questions are open or closed format, there are several points that must be
considered when writing and interpreting questionnaires:

 Clarity: Questions must be clear and unambiguous. The goal is to eliminate the chance
that the question will mean different things to different people. To this end, it is best to
phrase your questions empirically if possible and to avoid the use of necessary adjectives.
For example, it asking a question about frequency, rather than supplying choices that are
open to interpretation such as: Sometimes or Rarely. It is better to quantify the choices,
such as:
1. Every Day or More
2. 2-6 Times a Week
3. About Once a Week
4. About Once a Month
5. Never
There are other more subtle aspects to consider such as language and culture. Avoid the
use of colloquial or ethnic expressions that might not be equally used by all participants.
Technical terms that assume a certain background should also be avoided.

 Leading Questions: A leading question is one that forces or implies a certain type of
answer. It is easy to make this mistake not in the question, but in the choice of answers. A
closed format question must supply answers that not only cover the whole range of
responses, but that are also equally distributed throughout the range. All answers should
be equally likely. An obvious, nearly comical, example would be a question that supplied
these answer choices:
1. Superb
2. Excellent
3. Great
4. Good
5. Fair
6. Not so Great

 Phrasing: Most adjectives, verbs, and nouns in English have either a positive or negative
connotation. Two words may have equivalent meaning, yet one may be a compliment and
the other an insult. Consider the two words "child-like" and "childish", which have virtually
identical meaning. Child-like is an affectionate term that can be applied to both men and
women, and young and old, yet no one wishes to be thought of as childish.
 Embarrassing Questions: Embarrassing questions dealing with personal or private
matters should be avoided. Your data is only as good as the trust and care that your

© 2016 RP/SMC/Sem2/WWS Page 3

 B216 Marketing
respondents give you. If you make them feel uncomfortable, you will lose their trust. Do
not ask embarrassing questions.
 Hypothetical Questions Hypothetical is based, at best, on conjecture and, at worst, on
fantasy. Such as: “If you were governor, what would you do to stop crime?”

This forces the respondent to give thought to something he may have never considered.
This does not produce clear and consistent data representing real opinion. Do not ask
hypothetical questions.

Pretesting

You should review the questionnaire with a few test takers and discuss all points that were in
any way confusing and work together to solve the problems. You will then produce a new
questionnaire. It is possible that this step may need to be repeated more than once
depending on resources and the need for accuracy.

When these guidelines are followed, the questionnaire becomes a powerful and economic
tool.

Adapted from:

Survey Research. (n.d.). Retrieved on March 17, 2017, from

http://www.socialresearchmethods.net/kb/survey.php

© 2016 RP/SMC/Sem2/WWS Page 4

Questionnaire Sections
There are four main sections in a questionnaire: introduction, screener, core and classification
questions.

1. Introduction

The introduction is a statement that explains the purpose and goals of the research and asks for the
respondent's cooperation and participation in the research study. The introduction's specific
wording is dependent upon the need for disguise, the complexity of the study and the sensitive
nature (if any) of the type of data collected. The goal of the introduction is to motivate the
respondent to participate, thereby reducing nonresponse error.

2. Screener

A screener works like a gate: it admits into the study all individuals who possess all of the target
characteristics and eliminates all the individuals who lack at least one of the identified sample
characteristics. The use and characteristics of a screener, therefore, depends upon the specifics of
the research study's sample population.

Some studies are conducted among a random sample of the adult population. In these cases, no
screener is typically necessary. More often, however, advertising research is conducted among the
subset of the total population that possesses a specific combination of demographics and category-
or product-related characteristics. In these cases, the introduction is followed by a screener, a short
series of questions that identifies those respondents who should be included in the study.

3. Core

The core of the questionnaire, or sometimes known as the main body, consists of questions which
allow the researcher to gather information which addresses the research’s main objective (i.e.
descriptive, exploratory or causal). For example in a descriptive research, questions under the core
section would seek to collect information regarding the market potential for a product, or the
demographics and attitudes of consumers who buy them. In an exploratory research, the core
questions would seek to gather preliminary information about a topic that is not well understood by
the marketer. And in a causal research, the core questions would seek to find out if a change in one
factor would cause a change in another factor.

4. Classification

Questionnaires typically conclude with a series of questions that collect any relevant demographic,
brand usage or behavioural information not collected as part of the screener or in the core of the
questionnaire. Demographic questions may, for example, address, age, gender, education, income,
ethnicity and family/marital status. Brand usage and behavioural questions may also be included in
the classification questions if the information collected by these questions is important for the
analysis of different subgroups within the total sample. Remember, the purpose of all classification
questions is to provide a means for examining important subgroups within the larger sample.

Adapted from:
 Bearden, W., Ingram, T. and LaForge, R., Marketing Principles and Perspectives, 5th Edition, McGraw-
Hill/Irwin, 2007
 Kotler, P., Marketing Management, 11th Edition, Prentice Hall, 2005
Numeracy & Quantitative Methods

Laura Lake
Types of Sampling
• Probability sample – a method of sampling that uses
random selection so that all units/ cases in the population
have an equal chance (probability) of being chosen.
• Non-probability sample – does not involve random
selection and methods are not based on the rationale of
probability theory.

• Watch the following video on sampling

methods:
https://www.youtube.com/watch?v=pTuj57
uXWlk
 Probability Sampling in
Quantitative Research
Why is probability sampling important in quantitative research?
• Research finding could be biased / unrepresentative.

• Enables research to be replicable or repeatable.

• Research results can be projected from the sample to the larger

population with known levels of certainty/precision (i.e. standard errors
& confidence intervals for survey estimates can be constructed).
Probability Sampling in
Quantitative Research
To achieve this, the sampling frame used needs to:
• ensure that the correct population is being sampled i.e. it
addresses the questions of interest
• accurately covers all members of the population being
studied so they have a chance to be sampled.

The quality of the population list (sampling frame) i.e.

whether it is up-to-date and complete is the most important
feature for accuracy in the sampling.
 Sampling Design Process

• There are two broad categories of sampling method: Probability and Non-probability.
• Probability sampling methods are sampling methods in which it is possible, for each
person in the population, to calculate the chance that they will be selected for the
sample.

Probability Non-Probability
Sampling Sampling

i. Simple random i. Convenience

ii. Systematic ii. Judgmental
iii. Stratified iii. Quota
iv. Cluster iv. Snowball
(i) Simple Random Sampling
• Each population element has a known and equal chance of selection [To
calculate the probability, divide the sample size (n) by the target population (N) ]

• E.g. Target population: 25,000; sample: 200

• 200/25,000 = 0.008 ; Probability of being selected is 0.8% or 1 in 125

• All members of the population are labeled with a number and random numbers
should be used to select the sample

Step 1: Assign number to each element

Step 2: Auto-generate Random Numbers
Step 3: Select sample based on the random
numbers generated
 (ii) Systematic Sampling
 Compute Skip interval, k = Target population size / Sample size
 Randomise the order of the elements in the population and number them.
 Choose a random starting point between 1st and kth element.
 Every kth element is sampled.

EXAMPLE: N = 100, sample size needed n = 20

Step 1: Calculate skip interval k

k = N/n = 100/20 = 5

Step 2: Randomly select a number from 1 to k, e.g. 4

Step 3: Start with the selected number, and select every kth unit until sample size
is reached (e.g. 4, 9, 14...)

 Probability of be selected = n/N = 20/100 = 0.2

• Very similar to simple random sampling

• Each element of the population again has an equal chance of selection
(iii) Stratified Random Sampling
 The population is divided into non-overlapping subgroups called strata.
 The percentage of the sample from each stratum is fixed to be the
same as the percentage of that stratum in the population.
 Within each stratum the samples are taken randomly.

E.g. Sample size = 80

If 65% of the population are
Caucasians
65% 12% 23%  65% of sample should be
Caucasians
 No. of Caucasians in sample
= 0.65 x 80 = 52
(iv) Cluster sampling
• Divide population into many clusters/ subgroups
• Randomly choose some of clusters and take sample from each
• E.g. a survey in RP by cluster sampling 2 Interest Groups (IGs) out of 5 IGs from a
particular Club to represent student population in the Club.

IG No. of Students
IG A 82 EXAMPLE: Cluster sampling of 2 IGs out of 5, Sample size 60
IG B 60 (30 from each selected IG)
Step 1: Select clusters from all available clusters (e.g. IG B
IG C 64 and D)
IG D 72 Step 2: Take sample from each cluster
IG E 78
(i) Convenience Sampling
 Convenience sampling attempts to obtain a sample of convenient
elements. The selection is left primarily to the
interviewer/researcher.

(ii) Judgment Sampling

 Judgment sampling is used to select specific groups within the
population.
 Population elements are purposely selected based on the
judgment of the researcher, usually based on appearance.
(iii) Quota Sampling
 Researcher lists relevant control characteristics such as gender, age or race
(based on judgement) and uses judgement to determine the appropriate
number to sample from each subgroup.

 E.g. 45% women and 55% men, 50 Year 1 students and 30 Year 2 students

 Sample elements are then selected based on convenience or judgement to

meet the assigned quota.
(iv) Snowball Sampling
 Initial group of respondents is selected at random. Subsequent respondents
are selected based on referrals provided by the initial respondents.

 Useful when trying to reach populations that are inaccessible or hard to find.
Sample Size?
• “How large should my sample be in order for it to be
representative”?
•Larger samples are not necessarily better – how
representative a sample it depends on the sampling technique
used and the size of the population.
•Determining sample size is dependent of how much error
you are prepared to accept in your sample.
One of the aims in Statistics (Slide 3) is to describe variables relating to the
population by estimating their mean or variance. Sample data can be used to
compute such estimates.

Even when a sample is highly representative of the population (as with simple
random and stratified sampling), these estimates may not be exactly the
same as the true population mean or variance, purely due to randomness.
This effect is known as sampling error.

Other factors that result in differences between sample estimates and true
population values, such as sample bias or inaccurate data collection, are
collectively classified as non-sampling error.
Recommended Textbooks
 McClave, Benson, Sincich (2011). Statistics for Business and Economics (11th ed). [pp. 306-308]. Pearson.

 Levine, D.M., Krehbiel, T.C., & Berenson, M.L. (2010). Sampling and Sampling Distributions, Business
Statistics: A First Course (5th ed.). [pp. 232-240, 254-258]. New Jersey: Pearson Prentice Hall.

Reference Textbooks
 Berenson, L. M., Levine, M. D., & Krehbiel, C. T. (2006). Sampling Distributions, Basic Business Statistics
Concepts and Applications (10th ed.). [pp.227-246]. Pearson Prentice Hall.
 Groebner, D.F., Shannon, P.W., Fry, P.C. & Smith, K.D. (2010). The Where, Why, and How of Data
Collection, Business Statistics: A decision-making approach (8th ed.). [pp. 38-40]. Pearson Prentice Hall.

Websites
 Survey Sampling Methods. (n.d.). Retrieved on 11 September, 2017, from StatPac website:
http://www.statpac.com/surveys/sampling.htm
 Statistics and Probability (n.d.). Retrieved on 11 September, 2017, from Stat Trek website:
http://stattrek.com
 Non probability Sampling. (n.d.). Retrieved on 11 September, 2017, from Research Methods Knowledge
Base website: http://www.socialresearchmethods.net/kb/sampnon.php
 Probability Sampling. (n.d.). Retrieved on 11 September, 2017, from Research Methods Knowledge Base
website: http://www.socialresearchmethods.net/kb/sampprob.php
Learning Outcomes

• Explain the concept of market segmentation

• List and discuss the various segmentation variables/ methods
for segmentation
• Explain how companies can identify attractive market
segments and target them
• Describe how companies
can position their products
to gain a competitive
advantage
Problem analysis
• Established natural and organic food supplier
• Practices fair trade
• Philanthropic organisation
• Encourages environment friendliness

• Wants to set up retail store in Singapore

Needs to understand the various market segments in Singapore
• Has approached your team to advise on:

Executive vice president of growth and business development

SEGMENTATION TARGETING POSITIONING

Develop a strong positioning
Consumer Identify the
of Whole Foods Market
Markets most appropriate
in the mind of
target segment
the target market
The Consumer Market (B2C)
What is Consumer Market
The Consumer Market – Markets dominated by products and services
designed for the general consumer or end users

Also referred to as Business-to-Consumer (B2C) market

Example: NTUC Fairprice

(Business) selling to end
users (Consumer)
 The Consumer Market (B2C)
Segmentation, Targeting & Positioning (STP) Strategy
Positioning
• Developing a marketing
mix that will appeal target
market.
Targeting
• Prioritising target segments
which are most promising

Segmentation
• Dividing market into
meaningful submarkets based
on common characteristics
The Consumer Market (B2C)
Steps in Segmentation, Targeting & Positioning (STP) Strategy

• Step 1: Identify Segmentation Variables

Segmentation • Step 2: Develop Profiles of resulting Segments

• Step 3: Develop Criteria for Target Selection

Targeting
• Step 4: Select the Target Segment(s)

• Step 5: Develop Positioning for each segment

Positioning • Step 6: Communicate Positioning for each
segment
The Consumer Market (B2C)
Step 1: Identify Segmentation Variables

Geographic Demographic Psychographic Behavioural

Variables Variables Variables Variables

Age Lifestyle Occasions

Region Family Size • Activities
Family Life Cycle • Interests
Benefits sought
Gender • Opinions User Status
City Size
Income
Occupation Usage Rate
Values
Education Brand Loyalty
Density
Religion Personality
Race Readiness Stage

Climate Nationality Attitude towards

Social Class Product
Generation
The Consumer Market (B2C)

Behavioural Variables

Occasions

Benefits sought

User Status

Usage Rate

Brand Loyalty

Readiness Stage

Attitude towards Product

 The Consumer Market (B2C)
Step 2: Develop Profiles of Resulting Segments
Demographic Variables Psychographic Variables Behavioural Variables
Type

• Gender: Females (Mothers) • Personality: Traditional, • Usage Rate : Light User

• Age: 20 to 30s conservative
Profile 1

• Occupation: Working • Values: Value wealth but not

• Education: secondary or its external signs.
below
• Gender: Males • Personality: Traditional, • Usage Rate : Medium User
• Age: 60s conservative
Profile 2

• Occupation: Retired • Values: Value family life

• Education: Tertiary or above

• Gender: Males • Personality: Driven, ambitious • Usage Rate : Non- User

• Age: mid-30s to 40s and materialistic
Profile 3

• Occupation: starting career • Values: Value wealth,

• Education: Tertiary Indifferent to community,
• Income: $1,500 - $3,000 / religion, society and
month environment;
 The Consumer Market (B2C)
Step3:Develop Criteria for Target Segment Selection

• Segment Size
• In terms of Percentage of total population

• Segment Growth Trends/ Potential

• In terms of rise/ fall from previous years

• Segment Structural attractiveness

• In terms of income and/or competition (potential substitutes)

• Segment Compatibility with Company’s Objectives & Resources

• In terms of attitude towards company or its products
• Segment should be dismissed if they do not fit the company’s long
term objectives or if the company lack skills and resources
needed to meet the needs of the segment. (eg, delivery speed)
 The Consumer Market (B2C)
Step 4: Select the Target Segments (evaluation based on the criteria)
Segment Size Growth Structural Compatibility with
Type

Attractiveness company’s objective

• Approximately • 20% per annum • Disposable income • Yes
Profile 1

25,0000 people approximately

$6000 per month
Example
• Approximately • 15% per annum • Disposable income • Yes
Profile 2

15,000 people approximately

$2000 per month

• Approximately • 10% per annum • Disposable income • No

20,000 people approximately
Profile 3

$4000 per month

The Consumer Market (B2C)
Step 5: Develop Positioning for each Segment

4 Aspects of Positioning

• Identify a Differentiator
i

• Choose the right Competitive Advantage

ii • (Right Differentiator for Right target)

• Develop Positioning using Perceptual Map

iii

• Develop a Positioning Statement

iv
 The Consumer Market (B2C)
Step 6 Communicate Positioning for each Segment

General positioning statement

•For (segment), (brand) is (concept)

that (differentiator). (Link
differentiator to target’s goal).
 The Consumer Market (B2C)
Step 1: Identify Segmentation Variables
Successful Cosmopolitans Ageing Wealth Comfortable Heartlanders
Young Contemporary Multicultural Grassroots Blue Collar Subsistence
Twilight Fringe

Based on the article, Singaporeans have been segmented based on :

Geographic Demographic Psychographic Behavioural

Variables Variables Variables Variables

• Not applicable as • Gender • Personality • Usage Rate: light,

Singapore is a • Age • Values medium, heavy
small concentrated • Occupation users of the
market product

Note: For a variable to considered as a segmentation variable it should be

present in all the segments
 The Consumer Market (B2C)
Step 2: Develop Profiles of Resulting Segments
Type

Demographic Variables Psychographic Variables Behavioural Variables

• Age: middle-aged • Values: health conscious and • Usage Rate : High (Reason:
• Occupation: senior takes care of themselves they eat organic food at
Cosmopolitans
Successful

management roles • Lifestyle(AIO): luxury least 4 times a week

• Income: high cosmopolitan lifestyles, hectic,
• Race: Chinese, Indian sophisticated music
preferences, travel often, yoga,
pilates, music

• Age: older-aged • Values: Value health and • Usage Rate : User (Reason:
• Occupation: either retired or quality of life high as they prefer natural
holding upper management • Lifestyle (AIO): leading leisurely and non-processed food,
Ageing Wealth

positions and affluent lifestyle and organic food.

• Education: high travels often, classical concerts,
• Income: well-to-do charity galas.
 The Consumer Market (B2C)
Step 2: Develop Profiles of Resulting Segments cont’d
Demographic Variables Psychographic Variables Behavioural Variables
Type

• Age: all ages • Personality: motivated to get • Usage Rate : Low as they
• Occupation: hold ahead have little or no emphasis on
Heartlanders
Comfortable

professional or middle • Lifestyle (AIO): upwardly organic or natural food

management positions mobile and enjoy activities alternatives
• Education: educated like windsurfing, regular
holiday goers

• Age: young • Lifestyle (AIO): may or may • Usage Rate : Low user as
• Occupation: entry level or not own cars, comfortable there is low inclination
Young Contemporary

mid-level jobs with technology, likes music, towards natural food or

• Education: freshly minted local sports, technology organic sources
Degree or Diploma
• Race: multiracial
• Family Life Cycle: families
with young children
 The Consumer Market (B2C)
Step 2: Develop Profiles of Resulting Segments cont’d
Demographic Variables Psychographic Variables Behavioural Variables
Type

• Income: middle-income • Lifestyle (AIO): fair standard • Usage Rate: Non-User as

Multicultural Grass

families of living, enjoys wide range of there is a low preference for

• Race: all major ethnic groups social activities, value- natural food alternatives since
Roots

• Family Life Cycle: new conscious, seek bargains and these are viewed by them as
families with/out children, practical when shopping being lower in taste
may have extended family

• Income: low • Lifestyle (AIO): rarely take • Usage Rate : Non-User as

Blue Collar Subsistence

• Occupation: works in holidays as daily effort to there is no interest in organic

industrial areas cope with work and daily food sources
• Race: Chinese and Malay routine takes up time
 The Consumer Market (B2C)
Step 2: Develop Profiles of Resulting Segments cont’d
Type

Demographic Variables Psychographic Variables Behavioural Variables

• Age: older-aged • Lifestyle (AIO): have little • Usage Rate : Non-User as

• Occupation: either retired or savings, do not have skills to fit they are constrained by
Twilight Fringe

low-skilled worker into modern economy, price budget and have little interest
• Income: low conscious, music, handicraft in organic or natural food
sources.
• Race: Chinese and Indian
 The Consumer Market (B2C)
Step 3:Develop Criteria for Target Segment Selection
Type Size Growth Structural Compatibility with Company’s
% Potential Attractiveness Objectives and Resources
%
Successful Cosmopolitans 8.70 10 √ √

Ageing Wealth 8.79 20 √ √

Comfortable Heartlanders 13.24 8

Young Contemporary 18.82 3

Multicultural Grass Roots 13.69 2

Blue Collar Subsistence 24.06 -10

Twilight Fringe 12.24 16

 The Consumer Market (B2C)
Step 3:Develop Criteria for Target Segment Selection
Type Size Growth Structural Compatibility with Company’s
% Potential Attractiveness Objectives and Resources
%
Successful Cosmopolitans 8.70 10 √ √

Ageing Wealth 8.79 20 √

√

Comfortable Heartlanders 13.24 8

Young Contemporary 18.82 3

Multicultural Grass Roots 13.69 2

Blue Collar Subsistence 24.06 -10

Twilight Fringe 12.24 16

‘Successful Cosmopolitans’ and ‘Ageing Wealth’ are the

two groups to fulfill 3 out of 4 criteria
 The Consumer Market (B2C)
Step 4: Select the Target Segments ( evaluation based on the criteria)
Type Size Growth Structural Compatibility with Company’s
% Potential Attractiveness Objectives and Resources
%
Successful Cosmopolitans 8.70 10 √ √

Ageing Wealth 8.79 20 √

√

Comfortable Heartlanders 13.24 8 √

Young Contemporary 18.82 3

Multicultural Grass Roots 13.69 2

Blue Collar Subsistence 24.06 -10

Twilight Fringe 12.24 16

‘Ageing Wealth’ is the primary target segment

followed by ‘Successful Cosmopolitans’
The Consumer Market (B2C)
Step 5: Develop Positioning for each Segment

Competitive
Differentiator
Advantage

Product Variety of health

(natural and food would appeal
organic- healthy) to Ageing Wealth
 The Consumer Market (B2C)
Step 5 Develop Positioning for each Segment
iii Aspect of Positioning: Perceptual Map
Applied to organic products
Two dimensions –
More Variety
* Variety of organic products
Whole Foods
Supernature
Market * Price

Low Price High Price Whole Foods Market should be

Organic4Less positioned as
Market Place
* High in variety
* High in price, but worth it , prices lower
Fairprice than Supernature

Less Variety
 The Consumer Market (B2C)
Step 6 Communicate Positioning for each Segment

General positioning statement

• For (segment), (brand) is (concept) that (differentiator). (Link
differentiator to target’s goal).

Positioning Statement for Whole Foods Market

• For health conscious people, Whole Foods Market is a retailer of

a large variety of natural and organic products. With Whole
Foods Market, you can enhance your health and well-being with
nature’s fresh products.
To Summarise
Positioning statement:

For health conscious people,

Whole Foods Market is a retailer of
Successful
Cosmopolitans a large variety of natural and
organic products. With Whole Foods
Successful Market, you can enhance your
Ageing Wealth Comfortable
Heartlanders Cosmopolitans health and well-being with nature’s
fresh products.
Young Multicultural
Comtemporary Grass Roots Ageing Wealth

Blue Collar Twilight

Subsistence Fringe

Segmentation Targeting Positioning

Conclusion

• Segmentation helps us in identifying market opportunities

• Targeting helps us focus the marketing efforts on the market

segment that offers the greatest potential

• Positioning helps in fine tuning the marketing mix to the

needs of the potential customer

• STP strategy is powerful tool for the company to achieve its

marketing objectives
Concept Diagram
Consumer Market

• Step 1: Identify Segmentation Variables

Segmenting • Step 2: Develop Profiles of resulting Segments

• Step 3: Develop Criteria for Target Selection

Targeting • Step 4: Select the Target Segment(s)

• Step 5: Develop Positioning for each segment

Positioning • Step 6: Communicate Positioning for each segment

28
Resources

Textbooks
• Kotler, P., & Armstrong, G. (2012). Customer-Driven Marketing Strategy: Creating Value for
Target Customers. Principles of Marketing (14th ed.) [pp. 216-241]. Upper Saddle River,
New Jersey: Pearson Education.
• Kotler, P. & Armstrong, G. (2012). Principles of Marketing (14th ed.) [pp 188 – 211].
Pearson.
• Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yan, O. (2009). Customer-
Driven Marketing Strategy: Creating Value for Target Customers. Principles of Marketing:
An Global Perspective. [pp. 166-192]. South Asia: Pearson Education
• Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yau, O. (2008). Principles of
Marketing: A Global Perspective. (3rd ed). [pp 179– 204] Pearson/Prentice-Hall
• Kotler, P. & Keller, K. (2006). Marketing Management (12th ed.) Prentice Hall.
• Boone, L.E., Kurtz, D.E, MacKenzie, H.F., and Snow, K. (2010) Contemporary Marketing.
(2nd ed.) [pp. 165-166]. USA: Nelson Education.
• Dwyer, F.R., & Tanner, J.F. (2009). Business Marketing: Connecting strategy, relationships,
and learning. New York: McGraw-Hill/Irwin.
• Marshall, G. W., & Johnston, M. W., (2010). Segmentation, Target Marketing and
Positioning [pp.236-265] Marketing Management, Boston: McGraw Hill.
Resources

Websites

• Organic food demand may ride out recent adverse publicity, thanks to consumer loyalty
and non-health benefits. (2009) Retrieved Oct 3, 2017, from the spireresearch website:
http://www.spireresearch.com/wp-content/uploads/2012/03/october-2009.pdf
• Kau, A.K, Jung, K., Tambayah, S.K. & Tan, S.J. (2005) Understanding Singaporeans:
values, lifestyles, aspirations, and consumption behaviors, Retrieved Oct 3, 2017, from
the books.google
website:http://books.google.com.sg/books?id=GfIueP1H1I8C&printsec=frontcover&dq=U
nderstanding+Singaporeans:+values,+lifestyles,+aspirations,+and+consumption+...+By+
Ah+Keng+Kau&source=bl&ots=WuewPHyI7i&sig=berbQPJ6SeiPxfUon4Y0XcASk7c&hl=
en&ei=fS13TZ7HMcjJrAeDp-i-
Cg&sa=X&oi=book_result&ct=result&resnum=1&ved=0CBUQ6AEwAA#v=onepage&q&f=
false
 B216 Marketing

Segmentation Variables
Segmentation variables help marketers group the market in well-defined segments. A
company may use one or more of these variables to divide the market.

1. Geographic
2. Demographic
3. Psychographic
4. Behavioural

1. Geographic Variables
Based upon where people live (historically a popular way of dividing markets)

• Regions: By country, nation, state, and neighbourhood

Example: Ford has developed a different version of cars for Indian market than what it
sells in Europe. The main modifications include higher ground clearance, stiffer rear
springs, high resistance to dust in order to match rough and dusty roads, changed
location of horns as Indians use it more often, compatibility of engine requirements
to match the fuel available in India

• City size: By size of area, population size and growth rate

• Population Density: Urban, suburban, rural

• Climate: Regions having similar climate pattern may be considered as one segment

2. Demographic Variables
Based upon age, gender and income level (very often used)

• Gender : Male, female

Example: Gillette Razors for men, women

• Age: Children, youth, middle age, elderly

Example: Disney’s Cartoons for children; Pension Plans, Retirement Funds for elderly;
LIC for middle aged

Page 1
 B216 Marketing

• Household Size :Small, medium, large

• Income: High, medium, low

Example: Toyota Lexus for high end income group; Camry for the middle of the
roaders; whereas BMW, Audi caters to high income category

• Family Size: 2, 3, 4, 5, etc.

• Family Life Cycle: Young single, Young married- no children, etc.

• Occupation: Professional, manager, blue collar etc.

• Education: Primary, secondary etc.

• Religion: Buddhist, Christian, etc.

• Race: White, black etc.

• Generation: Baby boomers, Gen X, Gen Y, etc.

• Nationality: Singaporean, American etc.

Example: For instance, private elementary schools might define their target market as
highly educated households (Education) containing women (Gender) of childbearing
age (Age)

3. Psychographic
Based on people’s lifestyles, values, personality, social class.

• Lifestyle comprises of AIO

• Activities: The activities consumers engage in will have a huge impact on the
products they buy and marketers need to be aware of any changes. They
include work, hobbies, social events, etc.
• Interests: The interests’ consumers have like fashion, food, media, etc.
• Opinions: This includes consumers’ political opinions, views on the
environment, sporting, etc. The opinions that consumers hold has an impact
on the products they buy too.

Example: People who have positive opinion about sporting may also buy gym
membership

Page 2
 B216 Marketing

• Values: To say a person "has a value" is to say that he or she has an enduring belief
that a specific mode of conduct or end-state of existence is personally and socially
preferable to alternative modes of conduct or end-states to existence (Rokeach, 1960).

Example: Some Asian values include collectivism, respect for elders. Value of respect
for elders may influence a person to buy what the elders recommend

• Personality: compulsive, outgoing, authoritarian, ambitious etc.

• Social class: upper class, middle class, lower class.

4. Behavioural
Based on the different expectation that customers have about what a product/service
can do for them
• Occasions: Events like weddings, festivals etc.

Example: Hallmark segments targets based on occasions like mother’s day, New
Year etc.

• Benefits sought: Some people are price sensitive, others seek quality or service.

Example: Colgate

• Tartar Control for Tartar

• Colgate sensitive for sensitive teeth

Example: Marriott Hotel target different customers using a different package.

• Marriott Suites...for Permanent vacationers

• Fairfield Inn...for Economy Lodging

• Residence Inn...for Extended Stay

• Courtyard By Marriott...for Business Travellers

• User Status: First Time, Regular or Potential

Example: StarHub gives special deals to first time users

Page 3
 B216 Marketing

Example: Meiji has various packs small tetra packs, 1 litre packs and 2 litre packs for
light, medium, heavy users

• Usage rate: light, medium, heavy users

• Brand Loyalty: none, medium, high

Example: StarHub gives special deals to StarHub club members

• Readiness : unaware, aware, informed, interested, desirous, intending to buy

• Attitude towards the product: Attitudes have been understood as learned

predispositions that project a positive or negative behaviour consistently toward various
objects of the world. They are formed as we grow up, based on the environment in which
we grow up. Attitudes can be either of a high or low degree and the intensity depends on
the strength of conviction with which the person believes in them. Attitudes toward a
product can be changed by highlighting new functions of the product, or by associating
them with celebrities

Example: A positive attitude towards Kraft Company may influence a consumer to

buy its latest range of cheese snack

Note: Behavioural does not refer to general behaviour like “likes to speed or keeps up with
trends”, but it refers specifically to behaviour towards the product

Note: Segmentation Variables may also be referred to as Bases for Segmentation in some
resources

Note: But for a variable to be considered as a segmentation variable it should be present

in all segments.

Adapted from;

Kotler, P., & Armstrong, G. (2012). Customer-Driven Marketing Strategy: Creating Value for
Target Customers. Principles of Marketing (14th ed.) [pp. 216-241]. Upper Saddle River,
New Jersey: Pearson Education.

Page 4
 B216 Marketing

Target Market Selection

Selecting target markets requires the marketer to critically evaluate the segments in order to
select those which are most attractive. In determining whether a segment is worthy of being
a target market, the marketer needs to address the following questions:

 Is the segment large enough to support the marketer’s objectives?

This is an especially critical question if the marketer is entering a market served by

many competitors.

 Is the segment showing signs of growth?

One of the worst situations for a marketer is to enter a market whose growth is flat or
declining, especially if competitors already exist.

 Is the segment structurally attractive?

The buyers should have sufficient buying power and/or the number of competitors
(potential substitutes) should be low or manageable for a segment to be attractive.

 Is the segment compatible with the company’s objectives and resources?

Even if the segment is of the right size and growth and is structurally attractive, the
company must consider its own objectives and resources. Segment should be
dismissed if they do not fit the company’s long term objectives or if the company
lacks skills and resources needed to meet the needs of that segment.

Once one or more segments have been identified the marketer must choose the most
attractive option(s) for their marketing efforts. At this point the choice becomes the firm’s
target market(s).

Adapted from:

Step 2: Choosing Market Segments. (n.d). Retrieved April 18, 2017, from the
knowthis.com website: http://www.knowthis.com/principles-of-marketing-
tutorials/targeting-markets/choosing-market-segments/

Page 1
Back in Action!

MK05
6th Presentation B216 Marketing
• Describe product life cycle and the strategies relating to each
stage of the cycle

• Differentiate between convenience, shopping, specialty and

unsought products

• Define product and identify the various product levels

constituting the “total product”
Casio’s Exilim wants to • How can Casio take
look at its action cam advantage of this
product strategy favourable trend?

• What strategy should

Market research findings
Casio adopt based
indicate favourable trend in the
action cam market.
for its action cam
line up based on
• Product Life Cycle?
The action cam market is
• Product Types?
currently experiencing rising
sales, with the many • Product Levels?
competitors (established and
new) competing for the
market share
Product Class “A group of products Example 1 Example 2 Example 3
(otherwise that, on some level,
provide similar sets
known as Televisions (TV) Game Consoles Gasoline
of benefits.” Barron’s
product Marketing Dictionary powered
industry or automobiles
category) (CAR)

Product Form “Anything that is • LED TVs • Handheld (PSP) • Saloon

(otherwise offered to a market • HD TVs • Home video (used at • SUV
for attention,
known as • LCD Tvs home) • MPV
acquisition, use or
product sub- consumption and • 3D TVs • Microconsoles (apps • Roaster
class) that might satisfy a • CRT TVs in mobile phones)
want or need.” Kotler • Dedicated consoles
(those in arcades)
Brand "name, term, design, Under HD TV Under Home Video Under SUV
symbol, or any other • Philips HD TV • Sony PlayStation • Toyota
feature that identifies
• LG HD TV • Microsoft Xbox Rav4
one seller's good or
service as distinct • Samsung HD • Nintendo Wii • BMW X3
from those of other TV • Honda CRV
sellers" American
Marketing
Association
PLC Stage Product Product Levels
Category (Type)

•Provides the •Influences the •Incorporates

overall way consumer product
product makes their strategies and
strategy for a purchase consumer
particular decision e.g. decision
stage of the comparison process into
product life between specific
cycle features of product levels
products
 Product Life Cycle is the course that a product’s sales and profits take
over its lifetime.
 The product life cycle has five distinct stages:
 Product Development
 Introduction
 Growth
 Maturity
 Decline
 PLC is best applied with Product Class or Product Form
Sales
Sales & Profits

Profits

Development Introduction Growth Maturity Decline

Source: Kotler and Armstrong (pp. 297)

 Stages of PLC
Introduction Growth Maturity Decline
Sales Low sales Rapidly rising Peak sales Declining sales
Characteristics

Costs High cost per Average cost per Low cost per Low cost per
customer customer customer customer

Profits Negative Rising profits High profits Declining profits

Customers Innovators Early adopters Middle majority Laggards

Competitors Few Growing number Stable number Declining number

beginning to
decline
Marketing • Create product • Maximise • Maximise profit • Reduce
Firm’s Actions

Objective awareness and market share • Defend market expenditure

trial share
Product • Offer a basic • Offer product • Diversify brand • Phase out weak
product extensions, and models items
Strategy
• Secure patent service, warranty • Seek ways to
protection • Improve product make the
quality and add product new
new product again
features and
models

Adapted from Kolter. P., & Armstrong. G, Principles of Marketing, 2012

Convenience Products
• Frequent purchase
• Little planning, comparison or shopping effort.
• Low consumer involvement
• Available in many locations

Shopping Products
• Less frequent purchase compared to convenience products
• Much planning and shopping effort.
• Comparison on suitability in price, quality, functionality, design etc.
• Available in fewer locations compared to convenience products
Specialty Products
• Less frequent purchase
• Special effort made to purchase, low price sensitivity
• Little comparison of brands, strong brand preference and loyalty
• Available in usually in one or very few outlets

Unsought Products
• Low purchase frequency
• Little or negative interest in buying, product awareness or knowledge
• Little comparison as purchase is usually impulsive
• Availability varies according to the product
Reference: Kotler & Armstrong (pp. 251)
 Core Product:
Define Core, problem solving benefits or services that
consumers seek.
(e.g. Communication & infotainment on the go)

Actual Product:
Turn core benefit into an actual product. Develop
product and service features, design, quality level, a
brand name and packaging.
(e.g. Apple iPhone 4, Full touch screen 3.5G phone
with 5 megapixel camera & HD video recording)

Augmented Product:
Offer additional non-tangible consumer services and
benefits in order to create a bundle of benefits to
satisfy customers.
(e.g. 2 years on-site warranty, repair service, training
classes)

Source: Kolter. P & Armstrong. G (2012). Principles of Marketing.

http://peterzafiris.com/wp-content/uploads/2014/05/Augmenting-Your-Product1.png
PLC Stage Product Product Levels
Category (Type)

•Provides the •Influences the •Incorporates

overall way consumer product
product make their strategies and
strategy for a purchase consumer
particular decision e.g. decision
stage of the comparison process into
product life between specific
cycle features of product levels
products
 PLC Stage: Note: We shall apply it to the Product Form – Action Cam.
 The Action Cam Category is at Growth Stage - based on evidence from the PS
◦ Sales: Rapidly rising
◦ Competition: Growing number in both established and new companies/brands
◦ Customers: Early adopters

Sales
Action
Sales & Profits

Cams

Profits

Development Introduction Growth Maturity Decline

Adapted from: Kotler and Armstrong (pp. 297)

Product Class “A group of products that, on Digital Video Camera
(otherwise known as some level, provide similar
product industry or sets of benefits.” Barron’s
Marketing Dictionary
category)

Product Form “Anything that is offered to a • Handheld

(otherwise known as market for attention, • Action Cam
product sub-class) acquisition, use or • Professional
consumption and that might
satisfy a want or need.”
Kotler
Brand "name, term, design, symbol, Under Action Cam
or any other feature that • GoPro Hero
identifies one seller's good or • Casio Exilim FR series
service as distinct from those
• Sony Action Cam
of other sellers" American
Marketing Association • Garmin Virb
• Xiaomi Yi
• Polaroid Cube
 Since Action Cam Category is at Note: This problem
GROWTH Stage of PLC only covers one
element of the
marketing mix in
Marketing Objective for Casio Exilim: Product detail- Product
Strategy Price strategy
• Maximise market share Strategy
Marketing
Mix

Recommended Product Strategy: Promotion Place

Strategy Strategy
• Offer product extensions, service,
warranty
• Improve product quality and add new
product features and models

* Casio can do the following to increase sales to maximise market share:

• Current Range:
 Provide on site service or extended warranty
• New 2017 Range:
 Improving features like better low light recording, higher megapixels
 Add new models like Drone capable action cam i.e. Lily Camera Video
PLC Stage Product Product Levels
Category (Type)

•Provides the •Influences the •Incorporates

overall way consumer product
product make their strategies and
strategy for a purchase consumer
particular decision e.g. decision
stage of the comparison process into
product life between specific
cycle features of product levels
products
 Action Cam comes under Shopping Goods

 An average user will change his action cam every

two years (infrequent purchase)

 Users would take efforts to research on the various

types of action cams and their uniqueness (much
planning and shopping effort)

 Purchase decisions are usually based on price,

design and functionality (make comparisons)
PLC Stage Product Product Levels
Category (Type)

•Provides the •Influences the •Incorporates

overall way consumer product
product make their strategies and
strategy for a purchase consumer
particular decision e.g. decision
stage of the comparison process into
product life between specific
cycle features of product levels
products
Core Product
• Capturing moment (video recording)
• Creative expression (movie making)
Actual Product:
• 16mm*1 Super Wide-angle／F1.8 Lens
• Night vision recording
• 3-axis Anti Shake on Video
• 4.0-inch 920,000-dot Touch Panel LCD
• Shock resistant/Low temperature resistant/
• 60m Waterproof Out of the Box
Augmented Product
• Quick start guide
• After-sale counter service
• Extended Warranty Note: Orange text are improved specification over existing product
• There are 3 levels of benefits in a product and each level adds
more value to the customer.

• When considering which marketing strategies to engage in, there

is a need to understand which stage of the product life cycle the
product class is at, and the product attributes so as to come up
with the most appropriate strategies.

• Both product development and marketing work hand in hand to

deliver the product to meet customer needs and wants.
PLC Stage Product Product Levels
Category (Type)

•Introduction •Convenience •Core

•Growth •Shopping •Actual
•Maturity •Specialty •Augmented
•Decline •Unsought
Recommended Textbooks
• Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14th ed.). [pp. 246-311].
Singapore: Pearson
• Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yau, O. (2011). Principles of
Marketing: An Asian Perspective.(3rd ed). [pp. 247-315] Singapore: Pearson/Prentice-Hall.

Reference Textbooks
• Kotler, P. (2006). Marketing Management (12th ed.). Prentice Hall
• Saaksvuori, A. (2004). Product Life Cycle Management. Springer.
• Winder, R.S. (2007). Marketing Management (3rd ed.) Pearson/Prentice-Hall
• Levitt, T. (2006). Ted Levitt on Marketing. Harvard Business School.

Online Resources
1. Categories of Consumer Products. (n.d.). Retrieved 3 Oct 2017, from KnowThis.com website:
http://www.knowthis.com/principles-of-marketing-tutorials/product-decisions/categories-of-
consumer-products/
2. Product Life Cycle. (n.d.). Retrieved 3 Oct 2017, from tutor2u.net website:
http://tutor2u.net/business/marketing/products_lifecycle.asp
3. Product Life Cycle. Retrieved 3 Oct 2017, from YouTube website:
https://www.youtube.com/watch?v=CRfjJ9yOyp0
4. Product levels (Apple’s iPod & Barack Obama). Retrieved 3 Oct 2017, from YouTube website:
https://www.youtube.com/watch?v=JbnTxo9CODM
Categories of Consumer Products

Categories of consumer products is also known as types of consumer products.

In addition to categorizing by type of offering, most products intended for consumer
use can be further categorized by how frequently and where they are purchased.

• Convenience Products – These are products that appeal to a very large market
segment. They are generally consumed regularly and purchased frequently.

Examples include most household items such as food, cleaning products, and
personal care products. Because of the high purchase volume, pricing per item tends
to be relatively low and consumers often see little value in shopping around since
additional effort yields minimal savings. From the marketer’s perspective the low
price of convenience products means that profit per unit sold is very low. In order to
make high profits marketers must sell in large volume. Consequently, marketers
attempt to distribute these products in mass through as many retail outlets as
possible.

• Shopping Products – These are products consumers purchase and consume on

a less frequent schedule compared to convenience products. Consumers are willing
to spend more time locating these products since they are relatively more expensive
than convenience products and because these may possess additional
psychological benefits for the purchaser, such as raising their perceived status level
within their social group.

Examples include many clothing products, personal services, electronic products,

and household furnishings. Because consumers are purchasing less frequently and
are willing to shop to locate these products, the target market is much smaller than
that of convenience goods. Consequently, marketers often are more selective when
choosing distribution outlets to sell their products.

• Specialty Products – These are products that tend to carry a high price tag
relative to convenience and shopping products. Consumption may occur at about the
same rate as shopping products but consumers are much more selective. In fact, in
many cases consumers know in advance which product they prefer and will not shop
to compare products. But they may shop at retailers that provide the best value.

Examples include high-end luxury automobiles, expensive champagne, and celebrity

hair care experts. The target markets are generally very small and outlets selling the
products are very limited to the point of being exclusive.
In addition to the three main categories above, products may also be classified as
follows:

• Unsought Products – These are products whose purchase is unplanned by the

consumer but occur as a result of marketer’s actions. Such purchase decisions are
made when the customer is exposed to promotional activity, such as a salesperson’s
persuasion or purchase incentives like special discounts offered to certain online
shoppers. These promotional activities often lead customers to engage in Impulse
Purchases.

Source: Categories of Consumer Products. (n.d.). Retrieved 3 Oct 2017, from

KnowThis.com website: http://www.knowthis.com/product-decisions/categories-of-
consumer-products
Products - Product Life Cycle (PLC)

We define a product as "anything that is capable of satisfying customer needs. This

definition includes both physical products (e.g. cars, washing machines, DVD players) as
well as services (e.g. insurance, banking, private health care).

Businesses should manage their products carefully over time to ensure that they deliver
products that continue to meet customer wants. The process of managing groups of brands
and product lines is called portfolio planning.

The stages through which individual products develop over time is commonly known as the
"Product Life Cycle". Besides individual products or brands, the Product Life Cycle can
also be used for product class or product form (also known as product sub-class). The
PLC concept applies differently in each case. Product classes have the longest life cycles;
the sales of many product classes stay in the mature stage for a long time. A specific
brand’s life cycle can change quickly because of changing competitive attacks and
responses. For example, although laundry soaps (product class) and powdered detergents
(product form) have enjoyed fairly long life cycles, the life cycles of specific brands have
tended to be much shorter.

The roduct life cycle has four main stages (illustrated in the diagram below): Introduction;
Growth; Maturity and Decline

Sales and
Profit ($)

Sales

Profit

Time
Product
Development Introduction Growth Maturity Decline

Introduction Stage
At the Introduction (or development) Stage, market size and growth is slight. It is possible
that substantial research and development costs have been incurred in getting the product
to this stage. In addition, marketing costs may be high in order to test the market, undergo
launch promotion and set up distribution channels. It is highly unlikely that companies will
make profits on products at the Introduction Stage. Products at this stage have to be
carefully monitored to ensure that they start to grow. Otherwise, the best option may be to
withdraw or end the product.

Innovators are the group of consumers prevalent in this stage. They are the first to adopt
and display behaviour that demonstrates that they likely to want to be ahead, and to be the
first to own new products, well before the average consumer. They are often not taken
seriously by their peers. The often buy products that do not make it through the early stages
of the Product Life Cycle (PLC).

Growth Stage
The Growth Stage is characterized by rapid growth in sales and profits. Profits arise due to
an increase in output (economies of scale) and possibly better prices. At this stage, it is
cheaper for businesses to invest in increasing their market share as well as enjoying the
overall growth of the market. New features and improvement in product quality may be done
to increase market share. Accordingly, significant promotional resources are traditionally
invested in products that are firmly in the Growth Stage. Firms focus on brand preference
and gaining market share. It is market acceptance stage. But due to competition, companies
invest more in advertisement to convince customers.

In growth stage, consumers are Early Adoptors are quick to buy new products and
services, and so are key opinion leaders with their neighbors and friends as they tend to be
amongst the first to get hold of items or services.

Maturity Stage
The Maturity Stage is, perhaps, the most common stage for all markets. It is in this stage
that competition is most intense as companies fight to maintain their market share. Here,
both marketing and finance become key activities. Marketing spending has to be monitored
carefully, since any significant moves are likely to be copied by competitors. The Maturity
Stage is the time when most profit is earned by the market as a whole. Any expenditure on
research and development is likely to be restricted to slight product modification and
improvement (ie, makers of consumer food products introduce new flavors, colors,
packages to enhance performance and revitalize consumer buying) and perhaps to improve
production efficiency and quality (ways to manufacture products faster and cheaper).

There are typically two groups of consumers in the maturity stage of the PLC, the early
majority and the late majority. The Early Majority looks to the innovators and early adopters
to see if a new product or idea works and begins to stand the test of time. They stand back
and watch the experiences of others. Then there is a surge of mass purchases.

The Late Majority tends to purchase the product later than the average person. They are
slower to catch on to the popularity of new products, services, ideas, or solutions. There is
still mass consumption, but it begins to end.

Decline Stage
In the Decline Stage, the market is shrinking, reducing the overall amount of profit that can
be shared amongst the remaining competitors. At this stage, great care has to be taken to
manage the product carefully. It may be possible to take out some production cost, to
transfer production to a cheaper facility, sell the product into other, cheaper markets. Care
should be taken to control the amount of stocks of the product. Ultimately, depending on
whether the product remains profitable, a company may decide to end the product.
In this stage, the Laggards tend to very late to take on board new products and include
those that never actually adopt at all. Here there is little to be made from these consumers.

Summary of Product Life Cycle Characteristics, Objectives, and Strategies for

television (TV)

Introduction Growth Maturity Decline

Examples 3D Television LED/OLED TV LCD/Plasma TV CRT TV

Characteristics
Sales Low Rapidly Rising Peak Declining
Costs High cost per Average cost per Low cost per Low cost per
customer customer customer customer
Profits Negative Rising profits High profits Declining
Customers Innovators Early adopters Middle majority Laggards
Competitors Few Growing numbers Stable number Declining
beginning to
decline

Marketing Create product Maximize market Maximize profit Reduce

Objectives awareness and share while defending expenditure
trial market share

Strategies
Product Offer a basic Offer product Diversify brand Phase out weak
product extensions, and models items
service, warranty
Price Use cost plus Price to penetrate Price to match or Cut price
market beat competitors
Distribution Build selective Build intensive Build more Go selective:
distribution distribution intensive phase out
distribution unprofitable outlet
Advertising Build product Build awareness Stress brand Reduce to level
awareness and interest in the differences and needed to retain
among early mass market benefits hard core loyals
adopters and
dealers
Sales Promotion Use heavy sales Reduce to take Increase to Reduce to
promotion to advantage of encourage brand minimal level
entice trial heavy consumer switching
demand

Adapted:

1) Product Life Cycle. (n.d.). Retrieved 3 Oct 2017, from tutor2u.net website:
http://tutor2u.net/business/marketing/products_lifecycle.asp

2) Product Life Cycle examples. Retrieved 3 Oct 2017, from product life cycle stages
website: http://productlifecyclestages.com/product-life-cycle-examples/

3) Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14th ed.). [pp. 297-303].
Singapore: Pearson
Product Levels

Product planners need to think about products and services on three levels. Each level
adds more customer value.

Augmented
Product

Delivery Actual After- sale

and Credit Product service

Brand Features
name
Core
Product
Quality Design
Level

Product Packaging Warranty

support

Level 1: Core Product – Also call the core customer value, which addresses the
question “What is the buyer really buying”. The core, problem solving benefits or
services that consumer seeks. People who buy smartphones are buying more than cell
phone. They are buying freedom and on-the-go connectivity to people and resources.

Level 2: Actual Product – Product planners need to develop product and service
features, design, a quality level, a brand name, and packaging. For example the
BlackBerry is an actual product. Its name, parts, styling, features, packaging, and other
attributes have all been carefully combined to deliver the core customer value of staying
connected.

Level 3: Augmented Product – Product planners must build an augmented product

around the core benefit and actual product by offering additional consumer services and
benefits. For example when consumer buys a BlackBerry, the company and dealer also
might give buyers a warranty on parts and workmanship, instructions on how to use the
device, quick repair services when needed, and a toll-free telephone number and
website to use if they have a problem.

Source: Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14th ed.) [Chapter 8, pp 249 – 250].
Singapore: Pearson.
 B216 MARKETING
MK06: TO LET LIVE OR LET GO!
6th Presentation
Learning Outcomes

 Outline the various dimensions of a company’s product mix

(breadth, length, depth and consistency)
 Apply the various tools available to make product mix
decisions (BCG matrix)
 Explain how companies manage their product mix/
assortment
Problem Analysis
Cannondale Management is
optimistic about their market
growth in Singapore and is
looking for ways to expand its
market share and cash flow
position
It has many bike categories, with
each category having different
market share size. Growth
potential of each category is also
different
Tasks
• How can it tap on the market
growth?
• How can it increase its market
share?
• How can it strengthen its cash
flow position?
• What is the product mix of
Cannondale?
• Which products of Cannondale
are in which BCG quadrant?
• How can they take advantage
of any trends in the market?
• To analyse the product
mix using a suitable tool
• To recommend a product
strategy to optimise cash
flow
 Product Mix

Product mix (or portfolio or assortment) consists of all the product

lines and items that a particular seller offers for sale

Dimensions of product mix

Breadth / Width Length Depth Consistency

• Number of • Total number of • The number of • How closely

different product products in a different related the
lines the product line versions, such as product lines are
company carries packaging size/ in the end–use,
formulations etc production
offered for each requirements,
product in the distribution
line channels etc.
Product Mix: Samsung (Example)
Width of the Product Mix

Samsung

TV Fridge Washing Machine Laptop

Front Load
LCD TV Single Door Gaming
Length of Product Mix

Plasma TV Double Door Top Load Netbook

LED TV Features: Features: Touch Screen

Water saving
Energy Saving
Colours
Colours
Noise control
LED 3D TV Sizes Ultra Portable

Features:
Colours
Weight
Features:
Colours,
Remote control
CONSISTENCY: Screen Size

Plasma display Fairly consistent as

they are all
electrical products,
Depth of
Product Mix
even though
technology is
different.
 Product Portfolio Analysis

• It is the process by which management evaluates the product mix/ products that
Definition make up the company

• Companies need to manage their product portfolio :

• To balance the cash flow
Need • To optimise sales and revenue for the product line or company as a whole
• To optimise market planning

• A useful method developed by the Boston Consulting Group (BCG) to analyse and
BCG manage the product portfolio
Matrix • It helps analyse and manage the SBU

• An SBU is a strategic business unit which can be a company division, product line
within a division, or single product or company brand, product category .
SBU
BCG Matrix: Benefits & Limitations

Benefits
• Useful 'map' of the organisation's product strengths and weaknesses
• Helps analyse which segments are in a good position and which ones
aren’t.
• Helps decide on the most appropriate investment strategy for business in
the future, and where best to allocate resources.
• Helps to plan the product lifecycle of product mix
• Helps avoid pressure on cash position

Limitations
• Data collection for market growth and market share can be expensive
• Difficult to define “high” and “Low”
• Growth rate may only reflect one aspect of industry attractiveness. It may
not truly reflect profitability
• BCG takes reference to only larger competitors and may result in an
oversight to “future threats”
• Focus is on classifying current businesses products
 Product Portfolio Analysis Tool: BCG Matrix

Dimensions of BCG Matrix BCG Matrix

Stars Question Mark

High
Market Growth
of each product
category in the

Market Growth Rate

mix Determines
the
position of
the product
category in
the
Relative* BCG
Low
Market Share Matrix
of the company Cash Cow Dogs
in each product High Relative Market Share Low
category of the
mix
Each SBU is represented by a circle placed in a quadrant . The size of
the circle depends on the sales volume
*Relative means “as compared to competitors in that category”
 BCG Matrix: In terms of Growth-Share

Stars Question Mark

High

High market growth, High market growth,

High market share Low market share
Market Growth Rate

Low market growth, Low market growth,

Low
High market share Low market share

Cash Cow Dogs

High Low
Relative Market Share
 BCG Matrix: Impact on Cash Flow
Stars Question Mark
High

Generates some cash

but also requires Requires a lot of cash
extra cash for to build market share
Market Growth Rate

continued growth

Generates surplus
cash for allocation to May drain portfolio
Low other products and of cash
company’s expenses

Cash Cow Dogs

High Low
Relative Market Share
 BCG Matrix: Most preferred strategy for
each quadrant
Stars Question Mark
High

Hold Build
Market Growth Rate

Harvest Divest
Low

Cash Cow Dogs

High Low
Relative Market Share
** The diagram indicates the most preferred strategy for each quadrant.
 Strategies: Based on BCG

Quadrant Question Mark Star Cash Cow Dogs

BCG Strategy Build Hold Harvest Divest

Investment Increase investment to Maintain Reduce Investment and Cut off investment and
support it for growth Investment to ensure maintain market dispose related assets
and increase market continual growth position
share
Cash Flow Low cash flow due to Generate but also “Milk” to yield positive Small net cash flow and
Generation increased investment to require positive cash cash flow. Generate frequently negative due
convert question mark flow to ensure large cash surplus. to low sales.
to a star. growth rate. Provide resources for Dispose related assets to
Ride on growth to Question Marks and increase cash yield.
yield positive cash Stars.
flow.
Product Strategy Provide high quality; Increase length of Increase depth of Reduce length of product
get patent or product mix product/new features; mix; phase out products
trademark protection Reposition of product
Portfolio Analysis: at a Glance

Criteria/ Question Stars Cash Cows Dogs

Quadrant Marks
Market High High Low Low
Growth
Relative Low High High Low
Market
Share
Impact on Requires huge Requires additional cash Generates cash May drain company
amount of cash surplus of cash
Cash Flow
Strategy**
Build Hold Harvest Divest

** Indicates the most preferred strategy for each quadrant

Application to the Problem:
Cannondale
Product Mix: Cannondale

Width of the Product Mix

Cannondale

Bikes Components Accessories

Mountain Chainrings Water bottles

Length of Product Mix

Consistency:
Road Saddles Highly consistent
Powerbreathe
as all products
Urban Brackets are bicycle-
related using the
same distribution
Kids Cranksets channel

Fitness Boy & Girl versions

Depth
6 to 10 Speed

7 Colours

* This chart illustrates the dimensions on part of the mix . Due to lack of space, depth of only one bike Street 24 has been given
 Market Growth of Various Bikes

Bike Category Market

Average Market Growth By Category (Product Form) Growth
35%
29%
Kids Bike 6%
30%

25%

20%
19% Mountain Bike 12%
15% 12%
10%
6%
Fitness Bike -2%
5%
-2%
0%
Road Bike 19%
-5% Kids Bike Mountain Fitness Bike Road Bike Urban Bike
Bike
Urban Bike 29%

Note: For this case study, the growth rate beyond 15% is to be considered high (indicated by green bars in chart
on left, and in blue circles in right table)
 Market Performance for Cannondale
Table B: Relative Market Share of Main Players Table B: Relative Market Share of
In each Bike Sub-class Cannondale in each Bike Sub-class

Brand Kids Mountain Fitness Road Urban

Bike Sub-class BCG Quadrant
Bike Bike Bike Bike Bike
(Product Form)

Kids Bike 7%

Trek 25% 23% 20% 26% 57%

Mountain Bike 30%
Giant 23% 15% 21% 14% 3%
GT 14% 9% 23% 13% 15% Fitness Bike 5%
Specialized 17% 11% 12% 17% 2%
Road Bike 20%
Cannondale 7% 30% 5% 20% 18%

Others 14% 12% 19% 10% 5% Urban Bike 18%

Note: For this case study, a player is considered to have high market share in a category if it is in top 3
(indicated by blue circles)
BCG Quadrants : Cannondale

Bike Category Market Relative BCG Quadrant

(Product Form) Growth Market Share

Kids Bike 6% Low 7% Low Dog

Mountain Bike 12% Low 30% High Cash Cow

Fitness Bike -2% Low 5% Low Dog

Road Bike 19% High 20% High Star

Urban Bike 29% High 18% High Star

 BCG Matrix: Cannondale

Stars Question Mark

High

Urban Bike
Road Bike
Market Growth Rate

Low Mountain Bike Kids Bike

Fitness Bike

Cash Cow Dogs

High Low
Relative Market Share
Each product category (Product Form)
is represented by a circle and the size of the circle depends on the size of sales extracted from Table B2 (problem statement appendix)
Cannondale: BCG Strategy on Investment
Bike BCG Investment Strategy
Category Quadrant
(Product
Form)
Mountain Bike Cash Cow • Reduce investment, milk the market to increase cash flow
• Reduce advertising cost
• Cash generated can finance the promotion of Urban bike and Road
bike

Urban Bike Star • Maintain investment

• Advertise unique selling proposition vs. competition
Road Bike Star • Reinvest cash generated on itself to further growth and market share

Fitness Bike Dog • Monitor closely to see whether they represent a drain on company’s
resources
• Re-direct investment to other BCG quadrant products.
Kids Bike Dog
Cannondale: BCG Strategy on Product
Bike BCG Product
Category Quadrant
(Product
Form)
Harvest
Mountain Bike Cash Cow • Reposition the mountain bike as a hip urban transport
• Increase depth of product/new features such as increased bike color
and design

Urban Bike Star • Increase length of product mix by adding more bike models catered
to different users and preference
Hold
Road Bike Star

Fitness Bike Dog • Sell off existing stock at discounted prices

• Reduce length of product mix by taking away certain models that is
particularly slow in sales
Divest
• Phase out products
Kids Bike Dog
 Is the existing BCG
BCG Matrix: Cannondale portfolio balanced?

Stars Question Mark

High

Urban Bike
Road Bike No products in Question
Market Growth Rate

Mark quadrant

Low Mountain Bike Kids Bike

Fitness Bike

Cash Cow Dogs

High Low
Relative Market Share
Each product sub-class (Product Form)
is represented by a circle and the size of the circle depends on the size of sales extracted from Table B2 (problem statement appendix)
Cannondale: Recommended Product Strategy

Electric
Bike

Recommended Product Strategy – Introduce a new product line : Electric Bikes

• No existing “Question Mark” that has the potential to grow into future “Stars”
• Market for electric bikes is fast-growing.
• Cannondale can tap on this and sell electric bikes
• Existing “Cows” can finance the development of this new sub-class (product form)
Conclusion

 BCG growth-share matrix is an impressive tool for

product portfolio analysis which :
• offers a visual representation of the product range
• enables the organisation to analyze the cash position
• helps organisation in long-term product management
 Companies can modify their product strategies based
on their BCG Matrix analysis.
 Concept Diagram

Stars Question Mark

High
High market growth, High market growth,
High market share Low market share
Market Growth Rate

Hold Build

Low market growth, Low market growth,

High market share Low market share
Low

Harvest
Divest
Cash Cow Dogs
High Low
Relative Market Share

Strategies based on BCG Quadrant

References
Recommended Textbooks
 Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14th Ed.) (Chapter 2, pp 60-87). Singapore :
Pearson
 Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yau, O. (2011). Principles of Marketing: An
Asian Perspective. (3rd Ed.) (Chapter 2, pp. 35-37) Singapore: Pearson/Prentice-Hall.
Reference Textbooks
 Kerin, R.A, Hartley, S.W., Rudelius, W., & Theng, L.G. (2009). Marketing in Asia (3rd Ed.) [Chapter 2, pp.
40-43; Chapter 10, pp. 270-273; Chapter 11, pp 304-306 ] New York: McGraw Hill.
 Kerin, R.A, Hartley, S.W., Rudelius, W., & Theng, L.G. (2007). Marketing the Core (2nd Ed.) [Chapter 2, pp.
29-31; Chapter 10, pp. 212-213] New York: McGraw Hill.
Websites
 Growth-share Matrix (n.d.). Retrieved Oct 23, 2017, from the Wikipedia website:
http://en.wikipedia.org/wiki/BCG_growth-share_matrix
 Product Portfolio Strategy (n.d.). Retrieved Oct 23, 2017, from the tutor2u.net website:
http://tutor2u.net/business/strategy/bcg_box.htm
 Product Marketing Strategy Today (n.d.) Retrieved Oct 23, 2017, from website :
http://productmarketingstrategytoday.com/product-extension/
 Product Mix Decisions
What is product mix
A product mix consists of all the product lines and items that a particular seller offers for sale. For
example, Colgate’s product mix consists of four major product lines: oral care, personal care, home care
and pet nutrition. Each line consists of several sublines and they all consist of many individual items.
Altogether, Colgate’s product mix includes hundreds of items.

4 dimensions of product mix

Product Width

 Refers to the number of different product lines the company carries

 Example Samsung’s product width consist of a number of product lines such as TV, refrigerators,
mobile phones, washing machine, laptops and tablets etc

Product Length

 Refers to the total number of items a company carries within its product lines
 Example Samsung’s laptop product line consists of gaming laptops, netbook, touch screen
laptops etc

Product Depth

 Refers to the number of versions offered for each product in the line
 Example Samsung’s gaming laptop comes in black, blue, green version

Product Consistency

 Refers to how closely related the various product lines are in end use, production requirements,
distribution channels, or some other way
 Example Samsung’s products are fairly consistent such that they are all electrical products and
mostly home appliances.

Product mix in relation to product strategy

 These product mix dimensions provide the handles for defining the company’s product strategy
 The company can increase its business in 4 ways:
o Add new product lines, widening its product mix. In this way, its new lines build on the
company’s reputation in its other lines. Eg Samsung adding sound system as one of its
product line
o Lengthen its existing product lines to become a more full-line company. Eg Samsung
adding projector screen TVs into its TV product line
 o Add more versions of each product and thus deepen its product mix. Eg Samsung adding
different screen sizes of its popular Galaxy tablets
o Pursue more product line consistency-or less-depending on whether it wants to have a
strong reputation in a single field or in several fields

Width

Pdt Line 1 Pdt Line 2 Pdt Line 3 Pdt Line 4 Pdt Line 5 Pdt Line 6

Fridge Laptop Mobile TVs Tablet Washing

Phones Machine

Gaming

Netbook
Depth
Length
Touch
screen

Ultra-
portable

Source: Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14th Ed.) (Chapter 8, pp 258-260).
Singapore : Pearson
 Product & Marketing Strategy – Maturity stage

Although many products in the mature stage appear to remain unchanged for long periods, most successful ones are
actually evolving to meet changing consumer needs. Product managers should do more than simply ride along with or
defend their mature products – a good offense is the best defense. They should consider one of the below strategy:

a) Modify the product

b) Modify the market
c) Modify the marketing mix

Modify the product

 Changing characteristics such as quality, features, style, or packaging to attract new users and inspire more
usage
 Increasing product width – adding new lines of products. For example Tabasco pepper sauce may have been
around for more than 140 years, but to keep the brand young, they added a full range of new products under
the Tabasco name such as steak sauces, spicy beans, chili mix, jalapeno nacho slices, and even spicy chocolate
and a Tabasco lollipop.
 Product line extension – extension of product lines such as adding new flavors, different product quality or
specification, different functionality etc. For example Tabasco added a full line of flavors for its Tabasco sauce
including Garlic, Sweet and Spicy, Chipotle apart from its original flavor. IPhone first came up with IPhone, then
IPhone 3G, IPhone 3GS, IPhone 4, IPhone 4S, IPhone 5, IPhone 5C and IPhone 5S etc.
 Increasing product depth – changing the styles and packaging of each individual product. For example adding of
champagne color for the IPhone 5C and 5S which proved to be very popular

Modify the market

 Tries to increase consumption by finding new users and new market segments for its brands. For example
mature 101 year old card maker American Greetings is now reaching younger consumers through social
networking widgets and instant messaging channels.
 Look for ways to increase usage among present customers. For example Glad Products company helps
customers find new uses for its Press n Seal wrap and Coke comes up with food recipes featuring usage of Coke.

Modify the marketing mix

 Improve sales by changing one or more marketing mix elements
 Some examples include offering new or improved services to buyers, cut prices to attract new users and
competitors’ customers, launch a better advertising campaign, use aggressive sales promotions, or move into
new marketing channels to help serve new users.

Source:

Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14th Ed.) (Chapter 9, pp 301-302). Singapore : Pearson
 BCG Matrix Model
Introduction
The Boston Consulting Group (BCG) matrix or also called BCG model is a portfolio planning method
developed by Boston Consulting Group, a leading management consulting firm.

The purpose of strategic planning is to find ways in which the company can best use its strengths to
take advantage of attractive opportunities in the environment. Most standard portfolio analysis
methods (including the BCG matrix) evaluate the product on two important dimensions: the
attractiveness of the product’s market or industry (market growth) and the strength of the product
position in that market or industry (market share).

When should I use the BCG matrix model?

In general, a company should maintain a balanced portfolio of products. Having a balanced product
portfolio includes both high-growth products as well as low-growth products.

A high-growth product is for example a new one that we are trying to get to some market. It takes
some effort and resources to market it, to build distribution channels, and to build sales
infrastructure, but it is a product that is expected to bring the gold in the future. An example of this
product would be a 3D printer.

A low-growth product is for example an established product known by the market. Characteristics of
this product do not change much, customers know what they are getting, and the price does not
change much either. This product has only limited budget for marketing. This is the milking cow that
brings in the constant flow of cash. An example of this product would be regular Colgate toothpaste.

The BCG matrix also helps in answering these questions about your products:

1. How do we classify what we sell?

2. Where does each of our products fit into our product mix?
3. Should we promote one product more than the other one?
4. Given our limited resources, which product should we place more emphasis in?

What is the BCG matrix and how does the BCG model work?
Placing products in the BCG matrix results in 4 categories in a portfolio of a company:

BCG STARS (high growth, high market share)

- Stars are defined by having high market share in a growing market.

- Stars are the leaders in the business but still need a lot of support for promotion a placement.
- If market share is kept, Stars are likely to grow into cash cows.
BCG QUESTION MARKS (high growth, low market share)

- These products are in growing markets but have low market share.
- Question marks are essentially new products where buyers have yet to discover them.
- The marketing strategy is to get markets to adopt these products.
- Question marks have high demands and low returns due to low market share.
- These products need to increase their market share quickly or they become dogs.
- The best way to handle Question marks is to either invest heavily in them to gain market share or
to sell them.

BCG CASH COWS (low growth, high market share)

- Cash cows are in a position of high market share in a mature market.

- If competitive advantage has been achieved, cash cows have high profit margins and generate a lot
of cash flow.
- Because of the low growth, promotion and placement investments are low.
- Investments into supporting infrastructure can improve efficiency and increase cash flow more.
- Cash cows are the products that businesses strive for.

BCG DOGS (low growth, low market share)

- Dogs are in low growth markets and have low market share.
- Dogs should be avoided and minimized.
- Expensive turn-around plans usually do not help.
BCG Matrix and Cash Flow
B.C.G. Analysis is a technique used in brand marketing and product management to help a company
decide what products) to add to its product portfolio. It involves rating products according to their
market share and market growth rate. The products are then plotted on a two dimensional map.
Products with high market share but low growth are referred to as "cash cows". Products with high
market share and high growth are referred to as "stars". Products with low market share and low
growth are referred to as "dogs" and should usually be discontinued. Products with low market
share but high growth are referred to as "question marks".

Each circle represents a product or brand. The size of the circle indicates its dollar sales volume. A
"question mark" has the potential to become a "star" in the future if it is developed. A company
should have a balanced portfolio. This implies having at least one "cash cow" which can generate
revenue that can be used to develop one or more "question mark". This process, referred to as
"milking your cash cow", is shown in the next diagram where the arrows represent cash flows.

High

Company’s Bills Star Question mark

1. Salary

2. Utilities
Market Growth

3. Rental

4. Overheads

5. Miscellaneous

Cash Cow Dog

Low
High Market Share Low

= Dollar Sales Volume of a product (the bigger the higher sales volume)

= Cash flow

Dog
 Ensure that they can generate enough cash flow to maintain themselves.
 Alternatively companies can Divest (liquidate) them.

Question Mark
 Require a lot of cash to defend their market share, let alone increase it.
 High growth requires cash to support it, but the Question Marks have difficulty generating
cash because of their low share.
  May require cash from Cash Cow to Build them into future Stars. Alternatively it can be
phased out.

Star
 Often require to Hold the level of heavy investment to finance their rapid growth
 Sales and profit made often needs to be reinvested in themselves
 Sometimes needs additional cash from Cash Cow

Cash Cow
 Need less investment to hold their market share
 Harvest by the company as it produce a lot of cash that the company can use to pay its bills
and support other product that need investment

Limitations of BCG Matrix

• The first problem can be how we define market and how we get data about market share
• A high market share does not necessarily lead to profitability at all times
• The model employs only two dimensions – market share and product or service growth rate
• Low share or niche businesses can be profitable too (some Dogs can be more profitable than
Cash Cows)
• The model does not reflect growth rates of the overall market
• The model neglects the effects of synergy between business units
• Market growth is not the only indicator for attractiveness of a market
• There are probably even more aspects that need to be considered in a particular use of the BCG
model.

Source:

 Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14th Ed.) (Chapter 2, pp 66-68).
Singapore : Pearson
 BCG Matrix Model (n.d.). Retrieved Oct 20, 2017 from maxi-pedia.com website:
http://www.maxi-pedia.com/BCG+matrix+model
MK07 Same Same But Different

Print It Real

B216 Marketing
School of Management & Communication
Content
 Learning Outcomes
 Problem Analysis
 What is a Price
 Factors Influencing Pricing
 Pricing Decisions
 Pricing Methods
 Price Quality Strategies
 New Product Pricing
 Price Adjustment Strategies
 Ethical Issues in Pricing
 Application
 Conclusion
 Concept Diagram
 Resources
Learning Outcomes

 Evaluate the different methods used to set a price (cost-based,

value-based and competition-based)

 Identify and compare the various strategies used to determine

the price of a new product (skimming, penetration)

 Explain how companies use price adjustment strategies

 Identify ethical issues related to pricing

Problem Analysis

3D Systems is launching a 3D Systems is launching a no

revolutionary 4D home printer
called 4D-CUBO. Advise on the
pricing strategies for initial
launch and subsequent price
adjustment
frills 2D laser printer called the
2D-SQUARE. Advise on the
pricing strategies for initial
launch and subsequent price
adjustment

• Which pricing methods and

pricing strategies can 3D
Systems adopt?
• How to make pricing
decisions?
• Should the price be adjusted
later?
What is a Price

“Price is the amount of money charged for a product or service.

It is the sum of all the values that customers give up to gain the
benefits of having or using a product or service.”
(Philip Kotler)

Why is Price important?

- Only element in marketing mix that produces revenue
- One of the most flexible marketing mix elements
- One of the most influential element affecting consumer decision making
- Direct impact on firm’s bottom line
Factors Influencing Pricing

External
Internal
Customers

Cost Competition

Company Channel
Objectives Pricing Members
 Pricing Decisions
• Cost-Based Pricing
Pricing • Value-Based Pricing
Methods
• Competition-Based pricing

• Premium Strategy
Price Quality Strategies • Good Value Strategy
• Overcharging Strategy
• Economy Strategy

Pricing New Product • Market Skimming

Pricing Strategies • Market Penetration
Strategies
• International Price • Discount and Allowance
Pricing
Pricing Adjustment
• Promotional Pricing • Segmented Pricing
Strategies
• Dynamic Pricing • Psychological Pricing
Pricing Methods
• Corporate objectives
• Revenue & profit
Targets
Cost-Based
Company
• Product positioning Pricing
• Distribution channel

• Features, Advantages
& Benefits (FAB)
Customers
• Perception of product Value-Based
quality & brand
• Ability & willingness to
Pricing
Pay

• Similar product offerings Competition-

Competitors (FAB)
• Strong competition
Based
Pricing
Pricing Methods (Cost-Based Pricing)

• Firms design what they consider to be a

Cost-Based Pricing good product, total the costs of making
the product, and set a price that covers
costs plus a target profit

Example

• Mark-up Pricing Method Selling price

is obtained after marking up the cost
price by a margin, (calculated as % of
cost price)
Pricing Methods (Cost-Based Pricing)

Break-Even Volume = Total Fixed Cost _

(Unit Selling Price – Unit Variable Cost)

Profit = Total Revenue – Total Cost

Cost in Dollars (thousands)

1,200 Break-even pt Total Revenue Targeted Profit

1,000
800 Total Cost
600
Variable Cost
400
200 Fixed Cost

10 20 30 40 50
Sales Volume in Units (thousands)
Pricing Methods (Cost-Based Pricing)

Break-Even Volume = Total Fixed Cost _

(Unit Selling Price – Unit Variable Cost)

• Fixed cost – costs associated with the product that have to be paid
regardless of the volume sold. e.g. R&D cost, equipment cost, rental
etc.
• Variable cost – costs that correlate to the quantity of the product
produced / sold. e.g. raw materials cost etc.
• Breakeven Point - the point at which a company’s sales exactly cover
its expenses. The company sells enough units of its product to cover its
expenses without making a profit or taking a loss. If it sells more, then
it makes a profit. On the other hand, if it sells less, it takes a loss.
• Break Even Volume- number of units sold at which sales revenue
equals total costs.
Pricing Methods (Value-Based Pricing)

• Firms set prices based on the overall

Value-Based Pricing value of the product offering as
perceived by consumers

Example

• Steinway piano sells at higher price

than many competing brands. But to
those who buy one, it’s a great value.
For them, as a recent ad proclaims,
“Steinway takes you places you’ve
never been.” The Steinway name
evokes images of classical concert
stages.
Pricing Methods (Competition-Based Pricing)

• Firms set prices based on the

Competition-Based competitors’ prices charged for similar
Pricing products

Examples

Adapted from: http://www.businessdictionary.com/definition/going-rate-pricing.html

Pricing Methods

Advantages Disadvantages
 Less frequent price
Cost-Based adjustments  Disappointing profits if price
Pricing  Price competition minimised turns out too high
 Fairer method

Value-Based  Price matches consumers’  Measuring perceived value

Pricing perceived value difficult.

 Price represents collective

Competition-  May affect profit margin
wisdom of industry
Based Pricing when cost rises
 Prevents harmful price wars
Price-Quality Strategies

4 pricing strategies under the price-quality matrix relating a firm’s

product positioning and its pricing

Adapted from Cravens & Piercy (2009).

New Product Pricing Strategies
Market-Skimming
• Setting a HIGH price for a new product
to skim maximum revenues layer by
layer from the segments willing to pay
the high price.
• The company makes fewer but more
profitable sales.
• Used when:
 Target market perceives product/service
having unique advantages that no other
competitor is able to offer. E.g. iPhone 5
 Consumers of the product are not price
sensitive.
• Commonly used for new high end
products in consumer electronics, e.g.
Sharp’s Aquos Wireless Lifestyle TV
introduced in 2011.
Adapted from Kotler, P. & Armstrong, G. (2012). Principles of Marketing (14th ed.) [Chapter 11] Pearson.
Market-Penetration
• Setting a LOW PRICE for a new product
to attract a large number of buyers and
a large market share.
• The company sacrifices short term
profits to gain market share.
• Used when:
 The product has relatively little product
differentiation
 Consumers of the product are price
sensitive.
• Commonly used for products that are
of good quality, but do not stand out as
vastly better than competing products,
e.g. Dell
 New Product Pricing Strategies
This is a diagrammatic simplification of the previous slide.

MARKET SKIMMING MARKET PENETRATION

• Set initial low price for
• Set initial high price for
high market share
high revenue
New-
Product Works when:
Works when:
Pricing • Market is price sensitive
• Superior quality and
Strategy • Costs fall with large
image
volume
• Enough buyers
• Competition is kept out
• Competitors cannot
• Low price can be
charge lower price
maintained

Adapted from Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yau, O. (2011) Principles of Marketing: An Asian
Perspective (3rd ed.) [Chapter 10, pp 258 – 279; Chapter 11, pp 280 – 303]. Pearson.
Price Adjustment Strategies
Strategy Description Example
Discount and Adjustment of basic price to reward Discount for a dealer buying a
Allowance Pricing business customers for certain purposes, very large quantity of products
such as the early payment of bills, volume
purchases, and off-season buying. These can
be for many purposes:
 For paying bills promptly
 For buying large quantities
 For performing certain functions such as
selling, storing and record keeping (trade
intermediaries)
 For buying out-of-season products
 For trading in old items when buying in
new ones
 For rewarding intermediaries for
participating in advertising and sales
support programs

Adapted from: Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yan, O. (2009). Price-Adjustment
Strategies. Principles of Marketing: A Global Perspective. [pp. 286-294]. South Asia: Pearson Education
Price Adjustment Strategies
Strategy Description Example
Segmented Selling a product or service at two or more Customer: Some movie theaters
Pricing prices based on differences in customer, and museums charge lower for
time, location or product senior citizens and students

Time: Movie theaters charge a

higher price during weekends
compared to weekdays

Location: Tickets for the center

seats for Phantom of the Opera is
more expensive than tickets at the
rear balcony

Product: A one litre bottle of Evian

mineral water cost substantially less
than a 200ml Evian water face spray
even though the aerosol packaging
cost a little more than the plastic
bottles

Adapted from: Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yan, O. (2009). Price-Adjustment
Strategies. Principles of Marketing: A Global Perspective. [pp. 286-294]. South Asia: Pearson Education
Price Adjustment Strategies

Strategy Description Example

Psychological Pricing that considers the psychology of An LCD TV priced at $888 during
Pricing prices, not simply the economics; the Chinese New Year. ‘8’ used in
price says something about the product pricing to suggest good fortune

Stereo system pricing at $299 (less

than $300 and perception that it is
in the $200 range)

Promotional Temporarily pricing products below the list Supermarkets will price a few
Pricing price, and sometimes even below cost, to products at super low prices to
increase short term sales attract customers to store and
hope they will buy other items at
normal prices

Adapted from: Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yan, O. (2009). Price-Adjustment
Strategies. Principles of Marketing: A Global Perspective. [pp. 286-294]. South Asia: Pearson Education
Price Adjustment Strategies

Strategy Description Example

Dynamic Pricing Adjusting price continually to meet the Bidding for an item on the internet
characteristics and needs of individual such as Ebay & Priceline.com
customers and situations
Stock exchanges where prices of
shares fluctuate by the minute.

International Adjusting price to suit different A pair of Levi’s selling for $30 in the
Pricing international markets U.S. might go for $63 in Tokyo and
$88 in Paris. (Might be due to
difference in wage, rental, foreign
exchange rates and custom taxes
etc between different countries)

Adapted from: Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yan, O. (2009). Price-Adjustment
Strategies. Principles of Marketing: A Global Perspective. [pp. 286-294]. South Asia: Pearson Education
Ethical Issues in Pricing
 Deceptive Reference Pricing
• Buyers make decision based on selling price comparisons and if the reference price is inflated or is
just plain fictitious, it will do harm to consumers.
• E.g. Real estate agents inflating the selling price of and discount for new condominium units
 Bait and Switch
• The tactic is deceptive because sellers advertise items for a very low price without the intent to really
sell any.
• E.g. Retailers at Sim Lim Square advertise electronic products at low price but always out of stocks

 Predatory Pricing
• The aim is to keep the price low until the competition have been driven out of business after which
the prices are increased.
• If prices set are below cost, this can be illegal in some countries.
• E.g. Singtel offering hand phone on contract at low or zero cost when M1 entered the market
 Price Discrimination
• Selling the same product to different consumers at different prices based on different time, season,
location, perceived consumer wealth etc.
• E.g. Restaurant having different menus for locals and tourists.
 Price Fixing
• Practice of colluding with other firms to control price
• Companies aim to avoid price competition and set a price which is more favorable towards profit
maximisation.e.g. Oil cartel formed by oil producing nations in the 80s to control price of oil
Problem Application
 4D-CUBO Home Printer : Application
Pricing Method and Strategy

Pricing Method – Value Based Pricing

As 4D home printer CUBO is a revolutionary new product with unique features,

consumers are more willing to pay a slightly higher premium due to the higher
perceived value. It is also positioned as top of the line due to its higher quality.

Price-Quality Strategy

Premium Strategy as it is top of the line

with unique features.

Adapted from Cravens D, Piercy N. (2009). Strategic Marketing (9th ed.)

[Chapter 11] McGraw Hill.
4D-CUBO Home Printer : Application
New Product Pricing Strategy
New product pricing strategy - Market Skimming
 The product quality is high as it is top of the line

 It has unique features and benefits over its competitors which support its
higher price

 Set initial high prices to ‘skim/yield’ the customers who are more willing
to pay for new technology

 Reduce price subsequently to ‘skim’ the other segments who are more
price-conscious – i.e. early adopter / price sensitive consumers

 As CUBO is a product with new feature and technology, competitors

would not be able to enter market so easily and undercut the high price
2D-SQUARE Laser Printer : Application
Pricing Method and Strategy

Pricing Method – Competition-Based Pricing

As SQUARE is a shopping product, consumers will make price comparisons.

Hence, we can use Competition-Based Pricing.

Since SQUARE is positioned as a laser printer with similar functions at a lower

price and does not enjoy the brand equity of competitors such as HP & Canon,
SQUARE should position its price lower than them.

Price-Quality Strategy

Good value strategy as it is a no-frills

printer with basic functions and features

Adapted from Cravens D, Piercy N. (2009). Strategic Marketing (9th ed.)

[Chapter 11] McGraw Hill.
2D-SQUARE Laser Printer : Application
New Product Pricing Strategy

New product pricing strategy - Market Penetration

 Firm’s objective: To maximize sales growth and gain market share

 Market is price sensitive as there are many available substitutes in

the market

 Set low prices to “penetrate” the market by price-conscious

consumers and gain market share in a short time
 Price Adjustment Strategies Application

After the launch of 4D-CUBO and 2D-SQUARE printers, 3D Systems can deploy
the following Price Adjustment Strategies to gain market share:

Segmented Pricing Promotional Pricing Psychological Pricing

Student ONLY HP Printer at SGD $95

SGD $69 for 2D-SQUARE 2D-SQUARE from SGD$90 → SGD$70 2D-SQUARE at SGD $89
& SGD $5599 for 4D-CUBO 4D-CUBO from SGD$7000 → $6000

Discount & Allowance International Pricing Dynamic Pricing

Retailers get a
discount off the
printers for placing
the 2 printers POP Pricing 2D-SQUARE & 4D-CUBO Offer a limited no of units up
at store front for 1 at USD $49 & $5,000 while it for time sales bidding starting
month was sold in China for USD $59 from SGD $50 for 2D-SQUARE
& $6,000
Conclusion

• Managers should consider factors influencing pricing when

making pricing decisions

• Key pricing decisions include pricing methods, price quality

strategies, new product pricing and price adjustment strategies

• Managers should always take into account ethical issues when

making pricing decisions
 Concept Diagram
• Cost-Based Pricing
Pricing • Value-Based Pricing
Methods
• Competition-Based pricing

• Premium Strategy
• Good Value Strategy
Price Quality Strategies • Overcharging Strategy
• Economy Strategy

Pricing New Product • Market Skimming

Pricing Strategies • Market Penetration
Strategies
• International Price • Discount and Allowance
Pricing
Pricing Adjustment
• Promotional Pricing • Segmented Pricing
Strategies
• Dynamic Pricing • Psychological Pricing etc.
Resources
Recommended Textbooks
• Kotler, P. & Armstrong, G. (2012). Principles of Marketing (14th ed.). [Chapter 10, pp 312 –
335; Chapter 11, pp336 – 349]. Pearson.

• Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yau, O. (2011) Principles of
Marketing: An Asian Perspective (3rd ed.) [Chapter 10, pp 258 – 279; Chapter 11, pp 280 –
303]. Pearson.

Reference Textbooks
• Cravens, D. & Piercy, N.M. (2003). Strategic Marketing. (7th ed), McGraw Hill

• McDaniel C., Lamb CW., & Hair J. (2008). Introduction to Marketing (9th ed.). Thomson South-
Western

• Grewal, D., & Levy, M., (2008). Marketing. The McGraw-Hill

Resources
Websites

• Allen, S. (n.d.). Pricing Methods – Four Model. Retrieved October 4, 2017, from

Entrepreneurs.about.com website:
http://entrepreneurs.about.com/od/salesmarketing/a/pricingstrategy_2.htm

• What is Price Elasticity of Demand (n.d.). Retrieved October 4, 2017, from Wisegeek website:
http://www.wisegeek.com/what-is-price-elasticity-of-demand.htm

• Pricing Strategies – Skimming. (n.d.) Retrieved October 4, 2017, from tutor2u.net website:
http://tutor2u.net/business/marketing/pricing_strategy_skimming.asp

• Top 8 factors affecting on pricing in the international market (n.d.) Retrieved October 4,
2017, from globalpricingstrategies.com website:

http://globalpricingstrategies.com/top-8-factors-affecting-on-pricing-in-the-international-
market/
 Factors Affecting Pricing Decisions
Internal Factors Explanation
Achieving company’s Pricing plays an important role in helping to accomplish company
objective objectives at many levels. A firm can set prices to attract new
customers or retain existing ones; it can set prices low to prevent
competition from entering the market or set prices at competitor’s
level to stabilize the market; prices can be reduced temporarily to
create excitement for a brand or priced to help the sales of other
products in the company’s line.
Alignment of price to Price is only one element of the company’s broader marketing
overall marketing strategy. Thus, before setting price, the company must decide on its
strategy overall marketing strategy for the product or services. For example if
target market and positioning is set, then its marketing mix strategy
including price will be fairly straightforward.
Alignment of overall Price in this case, is a crucial product-positioning factor that defines
marketing strategy to the product’s market, competition and design. Instead of first
price determining its cost and ends with a selling price, a company starts
with an ideal selling price based on customer value consideration and
then focus on keeping cost within the price range.
External Factors Explanation
The market and The number of competitors in the market sometimes determines
demand how sensitive the sellers are to each other’s pricing and marketing
strategies. When there are few sellers, each seller is alert and
responsive to competitors’ pricing strategies and moves. The price
Examples
When Xiaomi launched their smart phones in
the Southeast Asia market, it relied heavily on
limited time sales to create buzz around its
brand and attract new customers in the midst
of fierce competition between the bigger
brands such as Apple and Samsung.
Honda positioned its “Acura” brand as
premium to compete with European cars in
the higher income segment and therefore,
requires charging a high price.
When Honda set out to design the Fit, it
began with a $13,950 starting price point and
an operating efficiency of 33 miles per gallon
firmly in mind. It then designed a stylish car
with costs that allowed it to give target
customers those values.
Examples
Singtel, Starhub and M1 are more sensitive to
each other’s marketing strategies compared
to Laptop companies such as Lenovo, Acer
etc. The demand for products with a number
 that a seller can charge also depends on how sensitive the demand is of substitutes such as flavoured drinks is also
to price changes. The degree price sensitivity depends on many more price sensitive compared to products
factors such as availability of substitutes, whether it is a need or want with little or no substitute.
etc.
The economy Economic conditions can have a strong impact on the firm’s pricing In the aftermath of the 2007 Asia Financial
strategies. Economic factors such as a boom or recession, inflation, Crisis, many consumers have tightened their
and interest rates affect pricing decisions because they affect belts and become more value conscious. As a
consumer spending, consumer perceptions of the product’s price and result, many marketers increased their
value, and the company’s costs of producing and selling a product. emphasis on value for money pricing
strategies.
Other factors A company must know what impact its prices will have on other For cab, bus and other transport operators to
parties in its environment. For example how will resellers and raise prices, the company has to take into
government react to various prices and are there any social concerns consideration the affordability of public
that need to be taken into account. transport to low income earners and seek
approval from the Public Transport Council.

Source: Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14th ed.). [pp. 314-328]. Singapore: Pearson
 Price Adjustment Strategies
Strategy Description Example
Discount and Allowance Adjustment of basic price to reward business customers for Discount for a dealer buying a very large
pricing certain purposes, such as the early payment of bills, volume quantity of products
purchases, and off-season buying. These can be for many
purposes:
 For paying bills promptly
 For buying large quantities
 For performing certain functions such as selling,
storing and record keeping (trade intermediaries)
 For buying out of season products
 For trading in old items when buying in new ones
 For rewarding intermediaries for participating in
advertising and sales support programs

Segmented pricing Selling a product or service at two or more prices based on Customer: Some movie theaters and
differences in customer, time, location or product museums charge lower for senior citizens
and students
Time: Movie theaters charge a higher
price during weekends compared to
weekdays
Location: Tickets for the center seats for
Phantom of the Opera is more expensive
than tickets at the rear balcony
Product: A one liter bottle of Evian
mineral water cost substantially less than
a 200ml Evian water face spray even
though the aerosol packaging cost a little
more than the plastic bottles
Psychological pricing Pricing that considers the psychology of prices, not simply An LCD TV priced at $888 during Chinese
the economics; the price says something about the product New Year (auspicious) or pricing at $299
to give the illusion of a product being
cheaper instead of pricing at $300)

Promotional pricing Temporarily pricing products below the list price, and Temporarily reducing the price of the new
sometimes even below cost, to increase short term sales IPhone5 to increase sales

Dynamic pricing Adjusting price continually to meet the characteristics and Bidding for an item on the internet such as
needs of individual customers and situations EBay

International pricing Adjusting price for international markets A pair of Levi’s selling for $30 in the U.S.
might go for $63 in Tokyo and $88 in Paris

Adapted from: Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14th ed.). [pp. 338-356]. Singapore: Pearson
 Pricing Methods

Customer Other internal and external Product costs

perceptions of considerations
value
Marketing strategy, objectives,
and mix
Competitors’ strategies and
prices
Price ceiling Nature of market and demand Price floor
No demand No profits below
above this price this price

1. Cost‐Based Pricing

Cost‐based pricing involves setting prices based on the costs for producing, distributing, and
selling the product plus a fair rate of return for its efforts and risk. A company’s costs may be an
important element in its pricing strategy. Many companies, such as Air Asia, Carrefour, and Dell,
work to become the “low‐cost producers” in their industries. Companies with lower costs can
set lower prices that result in greater sales and profits.

2. Value‐Based Pricing

Good pricing begins with an understanding of the value that a product or service creates for
customers. Value‐based pricing uses buyers’ perceptions of value, not the seller’s cost, as the
key to pricing. Value‐based pricing means that the marketer cannot design a product and
marketing program and then set the price. Price is considered along with the other marketing
mix variables before the marketing program is set.

3. Competition‐Based Pricing

In setting its prices, the company must also consider competitors’ costs, prices and market
offerings. Consumers will base their judgments of a product’s value on the prices that
competitors charge for similar products. A consumer who is thinking about buying a Canon
digital camera will evaluate Canon’s customer value and price against the value and prices of
comparable products made by Nikon, Sony, Olympus, and others.

Adapted from: Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14th ed.). [pp. 314-328].
Singapore: Pearson
 New Product Pricing Strategies
Strategy Description Example
Market Skimming Setting a high price for a new product to skim maximum When Apple first introduced the IPhone,
Pricing revenues layer by layer from the segments willing to pay the its initial price was as much as $599 per
high price; the company makes fewer but more profitable phone. The phones were purchased only
sales. by customers who really wanted the sleek
new gadget (innovators) and could afford
Market skimming make sense only under certain conditions: to pay a high price for it. Six months later,
 Product’s quality and image must support its higher Apple dropped the price to $399 for an
price 8GB model and $499 for the 16GB model
 Enough buyers must want the product at that price to attract new buyers. Within a year, it
 The costs of producing a smaller volume cannot be dropped prices again to $199 and $299
so high that they cancel the advantage of charging respectively. In this way, Apple skimmed
more the maximum amount of revenue from
 Competitors should not be able to enter the market the various segments of the market.
easily and undercut the high price
Market Penetration Setting a low price for a new product to attract a large When Ikea first opened stores in China in
Pricing number of buyers and a large market share 2002, they slashed its prices in China to
the lowest in the world, the opposite
Some conditions must be met for this low price strategy to approach of many Western retailers there.
work: By increasingly stocking its Chinese stores
 Market should be highly price sensitive so that a low with China-made products, the retailer
price produces more market growth pushed prices on some items as low as
 Production and distribution costs must decrease as 70% below prices in Ikea’s outlets outside
sales volume increases (economy of scale) China. Ikea now captures a 43% market
 Low price must help keep out the competition, and share of China’s fast-growing home wares
the penetration pricer must maintain its low-price market alone.
position. Otherwise the price advantage may be only
temporary
Adapted from: Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14th ed.). [pp. 338-356]. Singapore: Pearson
MK08 - Re:Store Convenience To
Your Life!
B216 Marketing
Learning Outcomes

• Identify the objectives of advertising campaigns

• Outline the stages in the development of an

advertisement

• Compare various advertising media

• Identify major PR tools

Problem Analysis
Tasks for Marketing
Target young Executive
working
professionals Suggest advertising
Re:Store is a new who are busy message and concept
efficient food
service concept in
Uniqueness of Evaluate the various
CBD
Re:Store is: media and
• Convenience recommend suitable
• No need for advertising plan
long queues

Explore including PR
tools

Advertising Budget:
$720,000
 Components of Promotional Mix/ IMC

Advertising Scope of MK08

Sales Integrated Marketing Public

Promotion Communication Relations
An integration of
promotional tools to
send a consistent,
clear and compelling
Scope of MK09 brand message

Personal Direct
Selling Marketing Not covered in B216

Watch this video on Definition of Integrated Marketing Communication by Dr Yahya Alavi

https://www.youtube.com/watch?v=sOfHtANrmbI
 Components of Promotional Mix/ IMC
Promotion Tools Definitions Examples
Advertising Paid, non-personal communication from an Broadcast, print,
identified sponsor using mass media (e.g.. TV , Internet, outdoor
Radio, etc.) to persuade or influence an audience.

Public Relations Building good relations with the company’s various Press releases,
publics by obtaining favorable publicity, building up sponsorships,
a good corporate image and handling or heading off special events
unfavorable rumors, stories, and events.
Sales Promotion Short-term incentives to encourage the purchase or Discounts,
sale of a product or service. coupons, displays
Personal Selling Personal presentation by the firm’s sales force for Sales
the purpose of making sales and building customer presentations,
relationships. trade shows
Direct Direct connections with carefully targeted individual Catalogues,
Marketing consumers to both obtain an immediate response telephone
and cultivate
Adapted from Kotler, P., & Armstrong, lastingandcustomer
G. (2012). Advertising relationships.
Public Relations. th
marketing,
Principles of Marketing (14 ed.) [pp. 458-485]. kiosks,
Upper Saddle
River, New Jersey: Pearson Education
Internet
Advertising
What is Advertising

Advertising is paid, non-

personal communication
What is from an identified sponsor
using mass media (e.g. TV,
Advertising ? Radio, etc.) to persuade or
influence an audience.

Purposes of Advertising
• create awareness of product or event
• educate target audience on product
attributes
• induce trials of new products
• persuade and reinforce on unique
selling point (USP)
Purpose of Advertising

Great Ads

Engage customers
and deliver message

Achieve the
company’s
objectives
Developing an Ad Campaign
Target Identification Step 1

Advertising Objectives Step 2

Budget Decisions Step 3

Media Selection Step 4

Message Decisions Step 5

Campaign Evaluation Step 6

Source: http://www.knowthis.com/tutorials/principles-of-marketing/managing-the-advertising-campaign.htm
 Setting Advertising Objectives
• Increase awareness of a product
• Telling the market about a new product, how it
works, where to find it
Informative
• Suggest new uses for the product
• Correcting false impressions
• Eg: Nike advertises on its new range of shoes

• Encourage brand switching

• Change customer perceptions of product value
Persuasive • Influence customers to take action now
• E.g.: A Burger King advertisement that
encourages brand switching

• Maintain consumer awareness

• Remind consumers of future need for products
Reminder • Remind consumers where to buy
• E.g.: A Baygon advertisement that is aimed to
maintain consumer awareness

Adapted from Kotler, P., & Armstrong, G. (2012). Advertising and Public Relations. Principles of Marketing (14th ed.) [pp. 458-485]. Upper
Saddle River, New Jersey: Pearson Education
Selecting Advertising Media
Reach, Frequency, Impact
• Reach: % of target audience exposed to the advertising message
• Frequency: Number of times target audiences are exposed to the advertising message
• Impact: Qualitative strength of a medium’s ability to convey a message

Choosing Media Types

• Television, Newspaper, Magazines, Outdoor, Radio, Direct Mail, Internet, Mobile Devices
• Factors to consider (refer to slide 12 for elaboration): (1) Campaign objectives, (2) Media
habits of target audience, (3) Media impact, (4) Cost

Selecting Specific Media Vehicles

• For example for television:

Adapted from Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yan, O. (2009). Advertising and Public Relations. Principles of
Marketing: A Global Perspective [pp. 407-411]. South Asia: Pearson Education
Selecting Advertising Media
4 Factors to Consider when Selecting Media Types

1. Campaign Objectives
• If the objective requires demonstrating product benefits, interactive modes like TV or
internet videos may be better alternatives. If the objective is to inform, tell a detailed
story and using precise pictures, then print advertising is more appropriate.

2. Media Habits of Target Audience

• Match your market with the media. To guarantee good media selection, the advertiser
first must clearly specify its target market. Then the advertiser can choose media that
reach those target customers

3. Media Impact
• Marketers need to understand how consumers will be impacted from the adverts.
Hence, today, advertisers are directing more attention to smaller, more defined target
markets. The most obvious evidence of this is in the growth of spending on direct mail
advertising to consumers in databases as well as through cell phones, specific radio and
magazines types.

4. Cost and Budget

• Marketers have to consider their budgets before considering which media types to
adopt. The costs must be aligned to the needs of the campaign objectives, media habits
of target audience and media impact, hence ensuring that the returns (impact on sales)
is greater than the initial costs
Selecting Advertising Media
Profiles of Major Media Types

Television
Advantages Limitations
• Good mass-marketing coverage • High absolute cost
• Low cost per exposure • High clutter
• Combines sight, sound and motion • Fleeting exposure
• Appealing to the senses • Less audience selectivity

Newspaper
Advantages Limitations
• Flexibility and Timeliness • Short life
• Good local market coverage • Poor reproduction quality
• Broad acceptability • Small pass-along audience
• High Believability

Magazines
Advantages Limitations
• High geographic and demographic selectivity • Long ad purchase lead time
• Credibility and prestige • High cost
• High quality reproduction • No guarantee of position
• Long life and good pass-along readership
Selecting Advertising Media
Profiles of Major Media Types

Outdoor
Advantages Limitations
• Flexibility and good positional selectivity • Little audience selectivity
• High repeat exposure • Creative limitations
• Low cost and low message competition

Radio
Advantages Limitations
• Good local acceptance • Audio only
• High geographic and demographic selectivity • Fleeting exposure
• Low cost • Low attention (“half heard” medium)

Mobile Devices
Advantages Limitations
• High audience selectivity • Demographically skewed audience
• Flexibility and allows personalisation (eg use of • Audience controls exposure
QR codes by location)

Internet
Advantages Limitations
• High selectivity • Demographically skewed audience
• Interactive capabilities and immediacy • Audience controls exposure
• Low cost • Relatively low impact
Creating Advertising Message
Rational Appeal Emotional Appeal Moral Appeal
Relates to audience’s self Attempts to stir up either Is directed to audience’s
interest. Shows desired positive or negative sense of what is “right”
benefits from products. emotions that can and “proper”
motivate purchase

Love Joy Humour Sensual Fear Guilt

Adapted from Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yan, O. (2009). Communicating Customer Value: Integrated Marketing
Communication Strategy. Principles of Marketing: A Global Perspective [pp. 378-379]. South Asia: Pearson Education
Public Relations
What is Public Relations

Public Relations… PR is used to:

…involves building good relations with the • build good relations with
company’s various publics by obtaining stakeholders
• gain favourable publicity
favourable publicity, building up a good
• build up good corporate
corporate image, and handling image
unfavourable rumours, stories and events • handle unfavourable
rumours, stories & events

Public Relations vs. Publicity?

• Publicity is ONE aspect of public relations.
• Often referred to as free media, the goal of publicity is to get attention
in online and traditional media.
Public Relations Tools
Public Relations Tools

Community Relations
Media Relations Special Events Sponsorships and Philanthropy
Publicising firm’s Events designed to Help to build Contribute money,
products or capture the product or service to
goodwill and brand charitable causes to
company to press to attention of an recognition by develop positive
garner media audience and mass associating with an relationships with
coverage. Tools media. Special members of the
event or group. community
include Press Kits, events should Sponsorship should
Press Conference convey the correct reach target groups,
and Media Reviews image to target fit within budget and
audience suit marketer’s
objectives

Sleepover in IKEA
 Advertising
vs.
Public Relations
Advertising vs. Public Relations

FACTOR ADVERTISING PR

Control Great Little

Credibility Lower Higher

Reach More Control Less Control

Frequency Schedulable Uncontrollable

Cost High/Specific Low / Unspecified

Flexibility High Low

Timing Specific Tentative

A combination of Advertising and PR is ideal

 Ethical Issues Regarding Advertising & PR
Ethical Issues Advertisements Should NOT…
Legality contain anything illegal
Decency contain anything that is offensive to standard of decency
Honesty abuse the trust of consumer or exploit his lack of
experience, expertise or knowledge
Fear, superstition, violence play on fear, exploit superstition or support acts of violence
Truthful presentation mislead in anyway by inaccuracy, ambiguity, exaggeration
or omission
Safety show disregard for safety
Portrayal of persons portray anyone in a manner disrespectful of their dignity
Children and young people exploit the natural credulity of children or lack of
experience of young people
Social and family values distort or misinterpret Singapore’s social and family value
Non-denigration unfairly
Source: Adapted from Singapore Code of attack
Advertising or (2008)
Practice discredit other products, organisations or
professionals
Source: Adapted from Singapore Code of Advertising Practice (2008)
The Future of Advertising and PR
Advertising and PR in a Digital Age

In the past 20 years, digital technology has

enabled marketers to develop successful
advertising and PR campaigns online. Social
media platforms like Twitter, Snapchat and
Instagram have become popular ways for
marketers to engage their audience.

The future of Augmented Reality (the

platform that Pokémon Go is developed on)
may bring about new ideas for advertising
and PR campaigns.

Watch this short concept video to have a glimpse of what advertising may be like in
the future:
https://www.youtube.com/watch?v=09vxKN1zLNI
Application to Problem
Ensuring Media Effectiveness
To ensure Media Effectiveness, it is critical to consider the
4 Factors when selecting the correct media type :

Media
Campaign Habits of Media
Cost
Objectives Target Impact
Audience
Application to Problem
Developing an Ad Campaign

Target : Busy young working professionals often

short of time for a proper meal

Objectives: Informative advertising

(Create awareness of new product)

Budget: Allocated by Re:Store

(S$720,000)

Media Selection

Message Decisions

Campaign Evaluation
Application to Problem
Media Habits

Before Re:Store develops its campaigns in Singapore, it should evaluate the media habits
of Singaporeans to ensure media effectiveness:

• Enjoy catching up on the latest news on their journey to work by reading free
newspapers given out at MRT stations.

• Enjoy unwinding in front of the television after work or on weekends.

• Like surfing social media platforms to catch up with the latest happenings.

• For car owners, the radio is their constant companion. Research has shown that over
nine in 10 (>90%) young adults in Singapore continue to tune in to listen to a radio
station on a weekly basis.

• A large proportion of this segment works in the Central Business District (CBD) such as
Raffles Place and shop at Orchard Road during the weekends. Hence outdoor
advertisements set up in these locations would be strategic in reaching out to this
target segment.
 Application to Problem
Selecting Advertising Media

Reach, Frequency, Impact

Reach: Target to reach 70% of target market (young working professionals, 20-35 yrs old)
Frequency: Target each audience to be exposed on average 5 times to the ad
Impact: To leverage on impactful medium for this target group

Choosing Media Types Outdoor Internet

TV Newspaper Radio

Combine sight, sound & Good local market coverage High demographic Good positional High audience
motion to show how the and high believability selectivity (e.g. car selectivity (e.g. Raffles
Place and Orchard selectivity, low cost
app and locker works owners) Road)

Selecting Specific Media Vehicles

TV Newspaper Radio Outdoor (Bus Ad) Internet

Target working crowd

Prime Time after office travelling by MRT Morning slot 7-9am and 16 bus routes passing Place banner
evening slot 7-9pm to advertisements on
hours and weekends to through Raffles Place Facebook
target young working and Orchard Road
target young working
professionals car owners
professionals
 Application to Problem
Selecting Advertising Media
Media Budget Allocation
Media Vehicle Projected insertion Estimated Rates Est Budget
TV Channel 5 Spot (80 spots) 30sec spot: $ 350,000
(2mths) Channel NewsAsia 30 sec Spot Combination Prime $ 6,800/ Non-prime
$ 2,200
Radio 98.7/ Yes 93.3 Spot (AM/PM) 15sec spot - $150-$200 $ 68,000
(6mths) (600 spots), 15sec spots
Newspaper The New Paper QPFC (45 insertions) Quarter Page FC $ 106,000
(2mths ) $ 2900 per insertion
Bus Ad CBD Route Package -16 Bus routes $ 800 per month per bus $ 90,000
(3mths) (Single deck rear painted)
Outdoor CBD – young Package – 3mths Package $ 100,000
working (From May onwards)
professionals
Internet Facebook Banner advertisements for 3 $ 2,000 per month $6,000
(3mths) months
Total Spending (S$) $720,000 $720,000

* No. of insertions are based on the unit rate estimates only. It may vary according to the package
Application to Problem
Creating Advertising Message

Message (Application): Focus on Convenient and Healthy Meal

Rational Appeal

Focusing on
wellness &
convenience

Why focus on Rational Appeal?

Wellness: The modern Singaporean is health conscious

and this is reflected in the food that they consume.

Convenience: Order and collect from locker. No

queues. Working professionals have little time to enjoy
fresh and healthy meals, so convenience is important.
Application to Problem
Public Relations Tools

Public Relations Tools

Community Relations
Media Relations Special Events Sponsorships & Philanthropy
Send press kits and Organise “Fastest Sponsor “The Bull Donate a percentage
products for media cooked food chef” Run” at Raffles Place of sales to National
reviews challenge at Raffles to associate with Breast Cancer
Place and invite ‘speed’ and Foundation
media to witness ‘wellness’
Conclusion

Re:Store needs to first identify their advertising objectives and

target market before deciding on the mode of advertising

With objectives and target market identified, select the most

relevant media and decide on a key message to communicate to
meet the objectives

To complete the campaign, Re:Store should explore the

possibility of leveraging on PR tools to complement the
campaign

At the end of the campaign, there should be an evaluation

process to measure the success of the campaign
Concept Diagram
Resources
Recommended Textbooks
• Kotler, P., & Armstrong, G. (2012). Advertising and Public Relations.
Principles of Marketing (14th ed.) [pp. 458-485]. Upper Saddle River, New
Jersey: Pearson Education
• Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yan, O. (2011).
Advertising and Public Relations. Principles of Marketing: An Asian
Perspective (3rd Ed). [pp. 487-518]. Singapore: Pearson

Websites
• Advertising Campaign Plan (2009). Retrieved November 20, 2017, from
knowthis.com website: http://www.knowthis.com/tutorials/principles-of-
marketing/managing-the-advertising-campaign.htm
• Using Advertising Media More Effectively. Retrieved November 23, 2017
from myprofessionaladvertising.com website :
https://www.adp.org/october-9-2012-using-advertising-media-more-
effectively/
Advertising Campaign Plan

In this part of our Principles of Marketing Tutorials we continue our discussion of advertising
by taking a closer look at the decisions involved in creating an advertising campaign.

Whether a marketer employs a professional advertising agency to handle its advertising

campaign or chooses to undertake all advertising tasks on its own, a successful campaign
requires a number of important decisions including:

1. Target Audience Identification

2. Setting the Advertising Objective
3. Setting the Advertising Budget
4. Selecting Media for Message Delivery
5. Creating a Message
6. Evaluating Campaign Results

For major consumer products companies that spend large sums to promote their products
each of these decisions will be intensely evaluated. On the other hand, smaller companies
with limited budgets may be forced to focus what little money they have on only one key
decision, such as selecting media, and give less attention to other areas. In either case,
knowledge of all advertising campaign decisions is important and should be well understood
by all marketers.

1. Target Audience Identification

We identify the profile of target audience and what are their needs and behaviour. Different
type of advertisement and media channel can attract and reach different type of target
audience. With the understanding, it can increase the success of the campaign.

2. Setting the Advertising Objective

As we noted in the Promotion Decisions tutorial, marketing promotion, which includes
advertising, can be used to address several broad objectives including: building product
awareness, creating interest, providing information, stimulating demand and reinforcing the
brand. To achieve one or more of these objectives, advertising is used to send a message
containing information about some element of the marketer’s offerings. For example:

 Message About Product – Details about the product play a prominent role in
advertising for new and existing products. In fact, a very large percentage of product
oriented advertising includes some mention of features and benefits offered by the
marketer’s product. Advertising can be used to inform customers of changes that
take place in existing products. For instance, if a beverage company has purchased
the brands of another company resulting in a brand name change, an advertising
message may stress "New Name but Same Great Taste".

 Message About Price – Companies that regularly engage in price adjustments,

such as running short term sales (i.e., price markdown), can use advertising to let the
market know of price reductions. Alternatively, advertising can be used to encourage
customers to purchase now before a scheduled price increase takes place.

 Message About Other Promotions – Advertising often works hand-in-hand with

other promotional mix items. For instance, special sales promotions, such as
contests, may be announced within an advertisement. Also, advertising can help
salespeople gain access to new accounts if the advertising precedes the
salesperson’s attempt to gain an appointment with a prospective buyer. This may be
 especially effective for a company entering a new market where advertising may help
reduce the uncertainty a buyer has about a new company.

 Message About Distribution – Within distribution channels, advertising can help

expand channel options for a marketer by making distributors aware of the
marketer’s offerings. Also, advertising can be used to let customers know locations
where a product can be purchased.

3. Setting the Advertising Budget

Setting an advertising objective is easy, but achieving the objective requires a well-thought
out strategy. One key factor affecting the strategy used to achieve advertising objectives is
how much money an organization has to spend. The funds designated for advertising make
up the advertising budget and it reflects the amount an organization is willing (i.e., approved
by high level management) to commit to achieve its advertising objectives. Organizations
use several methods for determining advertising budgets including:

 Percentage of Sales – Under this approach advertising spending is set based on

either a percentage of previous sales or a percentage of forecasted sales. For
example, an organization may set next year’s advertising budget at 10% of this
year’s sales level. One problem with this approach is that the budget is based on
what has already happened and not what is expected to occur. If the overall market
grows rapidly in the following year, the 10% level from the previous year may be well
below what is necessary for the company to maintain or increase its market share.
Alternatively, companies may consider allocating advertising funds based on a
percentage of forecasted sales. In this way advertising is viewed as a driver of future
sales and spending on advertising is linked directly to meeting future sales forecasts.
However, since future sales are not guaranteed, the actual percentage spent may be
considerably higher than expected if the sales forecast is greater than what actually
occurs.

 What is Affordable – Many smaller companies find spending of any kind to be

constraining. In this situation, advertising may be just one of several tightly allocated
spending areas and, thus, the level spent on advertising may vary over time. For
these companies, advertising may only occur when extra funds are available.

 Best Guess – Companies entering new markets often lack knowledge of how much
advertising is needed to achieve their objectives. In cases where the market is not
well understood, marketers may rely on their best judgment (i.e., executive’s
experience) of what the advertising budget should be.

4. Selecting Media for Message Delivery

With an objective and a budget in place, the advertising campaign will next need to focus on
developing the message. However, before effort is placed in developing a message the
marketer must first determine which media outlets will be used to deliver their message
since the choice of media outlets guides the type of message that can be created and how
frequently the message will be delivered.
An advertising message can be delivered via a large number of media outlets. These range
from traditional outlets, such as print publications, radio and television, to newly emerging
outlets, such as the Internet and mobile devices. However, each media outlet possess
different characteristics and, thus, offer marketers different advantages and disadvantages.
The factors to consider when selecting which different media outlets can be assessed
include the following factors:

1. Campaign objectives - Medium should fit promotional objectives. The medium

should support the promotional objectives. If the objective requires demonstrating
product benefits, TV may be the best alternative. If the objective is to inform, telling a
detailed story and using precise pictures, then internet advertising is most
appropriate. Alternatively, with a broad target market, print media like magazines and
newspapers maybe better. For example, Jockey switched its advertising to
magazines from TV when it decided to show the variety of styles of its men’s briefs.
Jockey worried that there were problems with modelling men’s underwear on TV.
However, Jockey might have stayed with TV if it had been targeting consumers in
France or Brazil, where nudity in TV ads is common.

2. Media Habits - Match your market with the media. To guarantee good media
selection, the advertiser first must clearly specify its target market. Then the
advertiser can choose media that read those target customers. Most media firms use
marketing research to develop profiles of their audiences. Generally, this research
focuses on demographic characteristics rather than the segmenting dimensions
specific to the planning needs of each different advertiser.

3. Media Impact – Today, advertisers direct more attention to smaller, more defined
target markets. The most obvious evidence of this is in the growth of spending on
direct mail advertising to consumers in databases. Traditional media are also
becoming more targeted. TV is a good example. Cable TV channels like MTV, ESPN
and Nickelodeon are taking advertisers away from the networks because they target
specific audiences. MTV appeals most strongly to young viewers, but its
programming is seen in about 400 million homes worldwide – more than any other
programs.

Radio has also become a more specialised medium. Some stations cater to
particular ethnic and racial groups, i.e. 93.3 to Chinese and Gold 95 to English
speaking communities in Singapore. Others aim at specific target markets with rock,
country or classical music.
Magazines serve special interest groups. Specialty magazines that have international
editions will help marketers reach consumers with similar interests in different parts
of the world.

In many countries, there are about as many cell phones as adults, and people carry
them everywhere. In UK, some firms are experimenting with ads that target
customers based on the customers’ location at a particular moment. Imagine walking
down a city street on a hot day and suddenly getting a text message offer for a
discount on a cold Frappuccino at the Starbucks across the street.

4. Costs – This is mainly with reference to the available advertising budget for
marketers. Marketers need to ensure that the media types chosen are within the
specified budget to ensure media effectiveness (ie media impact generates higher
sales returns for the firm that the campaign costs).
5. Creating an Advertising Message
In our discussion of the communication process in the Promotion Decisions tutorial, effective
communication requires the message source to create (encoding) a message that can be
interpreted (decoding) by the intended message receiver. In advertising, the act of creating a
message is often considered the creative aspect of carrying out an advertising campaign.
And because it is a creative process, the number of different ways a message can be
generated is limited only by the imagination of those responsible for developing the message.
When creating an advertising message the marketer must consider such issues as:

 General Message Factors

 Message Structure
 Message Testing

Advertising Message Structure

Most advertising messages share common components within the message including:
 The Appeal – This refers to the underlying idea that captures the attention of a
message receiver. Appeals can fall into such categories as emotional, fearful,
humorous, and sexual.
 Value Proposition – The advertising message often contains a reason for customers
to be interested in the product which often means the ad will emphasize the benefits
obtained from using the product.
 Slogan – To help position the product in a customer’s mind and distinguish it from
competitors’ offerings, advertisements will contain a word or phrase that is repeated
across several different messages and different media outlets.

6. Evaluating Advertising Campaign Results

The final step in an advertising campaign is to measure the results of carrying out the
campaign. In most cases the results measured relate directly to the objectives the marketer
is seeking to achieve with the campaign. Consequently, whether a campaign is judged
successful is not always tied to whether product sales have increased since the beginning of
the campaign. In some cases, such as when the objective is to build awareness, a
successful campaign may be measured in terms of how many people are now aware of the
product. In order to evaluate an advertising campaign it is necessary for two measures to
take place.

First, there must be a pre-campaign or pre-test measure that evaluates conditions prior to
campaign implementation. For instance, prior to an advertising campaign for Product X, a
random survey may be undertaken of customers within a target market to see what
percentage are aware of Product X. Once the campaign has run, a second, post-campaign
or post-test measure is undertaken to see if there is an increase in awareness. Such pre and
post testing can be done no matter what the objective including measuring

 Audience Size – Refers to the number of people who experience the media outlet
during a particular time period. For example, for television outlets audience size is
measured in terms of number of program viewers, for print publications audience is
measured by number of readers, and for websites audience is measured by number
of visitors. In general, the more people experiencing a media outlet, the more the
outlet can charge for ads. However, actual measurement of the popularity of media
outlets is complicated by many factors to the point where the media outlets are rarely
trusted to give accurate figures reflecting their audience. Today nearly all media
outlets rely on third-party audit organizations to measure audiences and most
marketers rely on these auditors to determine whether the cost of placement is
justified given the audited audience size.
  Audience Type – As we have discussed many times in the Principles of Marketing
tutorial, the key to marketing is aligning marketing decisions to satisfy the needs of a
target market. A well-defined target market is critical to successful marketing and vital
to a successful advertising campaign. When choosing a media outlet, selection is
evaluated based on the outlet’s customer profile (i.e., viewers, readers, website
visitors) and whether these match the characteristics sought by the marketer’s
desired target market. The more selectively targeted the audience, the more valuable
this audience is to advertisers since with targeted advertising promotional funds are
being spent on those with the highest potential to respond to the advertiser’s
message. The result is that media outlets, whose audience shares very similar
characteristics (e.g., age, education level, political views, etc.), are in a position to
charge higher advertising rates than media outlets that do not appeal to such a
targeted group.

 Characteristics of the Advertisement – Media outlet also charge different rates

based on creative characteristics of the message. Characteristics that create ad rate
differences include:
o Run Time (e.g., length of television or radio ads)
o Size (e.g., print ads size, billboard size)
o Print Style (e.g., black-and-white vs. color)
o Location in Media (e.g., back magazine cover vs. inside pages)

Source: http://www.knowthis.com/managing-the-advertising-campaign Retrieved November

23, 2017, from knowthis.com website
 ADVERTISING OBJECTIVES

Advertising objectives should be specific. Each ad must be effective not just for one customer
but for thousands or millions of them.

Effective advertising will achieve one or more of the 3 goals: it will

 INFORM the target audience,
 PERSUADE the target audience or
 REMIND the target audience.

Often a marketer will try to achieve two or more of these goals at the same time.

INFORMING

Informative advertising seeks to convert an existing need into a want or to stimulate interest in a
new product. It is generally more prevalent during the early stages of the product life cycle.
People typically will not buy a product or service or support a non-profit organization until they
know its purpose and its benefits to them. Informative messages are important for promoting
complex and technical products, such as automobiles, computers and investment services.
For example, Philip’s original advertisement for the Magnavox flat-screen TV showed young,
urban consumers trying the flat-screen TV all over the house, including the ceiling. The ad
focused on “how to” use the flat-screen TV rather than the Philips Magnavox brand or the
technological capabilities.

Informative advertising is also important for a “new” brand being introduced into an “old” product
class – for example, a new brand of frozen pizza entering the frozen pizza industry, which is
dominated by well-known brands like Kraft’s DiGorno and Schwan Grocery Products’ Red
Baron. The new product cannot establish itself against more mature products unless potential
buyers are aware of it, value its benefits, and understand its positioning in the marketplace.

PERSUADING

Persuasive advertisement is designed to stimulate a purchase or an action related to increased

usage – for example, to eat more Doritos or use Verizon wireless mobile phone service.
Persuasion normally becomes the main promotion goal when the product enters the growth
stage of its life cycle. By this time, the target market should have general product awareness
and some knowledge of how the product can fulfill their wants. Therefore, the promotional goal
switches from informing consumers about the product category to persuading them to buy the
company’s brand rather than the competitor’s. At this time, the promotional message
emphasizes the product’s real and perceived competitive advantages, often appealing to
emotional needs such as love, belonging, self-esteem, and ego satisfaction.
For example, the latest advertisement for the Philips Magnavox flat-screen TV still features
young, urban consumers. But the ad focuses on the products’ benefits such as lifestyle
enhancements, technological features like HDTV and Dolby digital surround sound, and the
superiority of the brand.

Persuasion can also be an important goal for very competitive mature product categories such
as many household items, soft drinks, beer and banking services. In a marketplace
characterized by many competitors, the promotional message often encourages brand switching
and aims to convert some buyers into loyal users. For example, to persuade new customers to
switch their checking accounts, a bank’s marketing manager may offer a year’s worth of free
checks with no fees.

Critics believe that some promotional messages and techniques can be too persuasive, causing
customers to buy products and services that they really don’t need.

REMINDING

Reminder advertising is used to keep the product and brand name in the public’s mind. This
type of promotion prevails during the maturity stage of the life cycle. It assumes that the target
market has already been persuaded of the goods or services’ merits. Its purpose is simply to
trigger a memory. Crest toothpaste, Tide laundry detergent, Miller beer and many other
consumer products often use reminder promotion. Similarly, Philips Magnavox could advertise
just the brand rather than the benefits of the product.

Possible Advertising Objectives

Informative Advertising
Communicating customer value
Building a brand and company image
Telling the market about a new product
Explaining how a product works
Persuasive Advertising
Building brand preference
Encouraging switching to a brand
Changing customer perceptions of product
value
Reminder Advertising
Maintaining customer relationships
Reminding consumers that the product may be
needed in the near future
Suggesting new uses for a product
Informing the market of a price change
Describing available services and support
Correcting false impressions
Persuading customers to purchase now
Persuading customers to receive a sales call
Convincing customers to tell others about the
brand
Reminding customers where to buy product
Keeping the brand in a customer’s mind during
off-seasons

Adapted from:
 McDaniel C., Lamb C., Hair J.. (2010) “Introduction to Marketing” (10th ed), International
Student Edition
 Adapted from: Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14th ed.). [pp.
461]. Singapore: Pearson
Designing a Message
Having defined the desired audience response, the communicator turns to developing an effective
message. Ideally, the message should get Attention, hold Interest, arouse Desire, and obtain Action
(a framework known as the AIDA model). In practice, few messages take consumer all the way from
awareness to purchase, but the AIDA framework suggests the desirable qualities if a good message.

When putting the message together, the marketing communicator must decide what to say
(message content) and how to say it (message structure and format).

Message Content
The marketer has to figure out an appeal or theme that will produce the desired response. There
are three types of appeals: rational, emotional and moral. Rational appeals relate to the audience’s
self-interest. They show that the product will produce the desired benefits. Examples are messages
showing a product’s quality, economy, value or performance. Thus, Panadol Nasal Clear runs a
series of ads in Hong Kong, which inform customers about the pain reliever and why Panadol is the
best choice. The ads promote “Runny nose cleared in a flash!”

Emotional appeals attempt to stir up either negative or positive emotions that can motivate
purchase. Communicators may use positive emotional appeals such as love, pride, joy, harmony and
humour. For example in China, advocates claim that auspicious messages attract more attention
and create more liking and belief in the sponsor. Jinliufu, a famous Chinese liquor, does not have a
distilling process which is different from its competitors. However, it has been capable in capturing a
huge market share because of its brand name. The name Jinliufu in Chinese, when pronounced,
sounds like “Having every good luck today” which serves as an emotional appeal to ordinary Chinese
folk. Since the Chinese have always had a strong desire for good fortune, Jinliufu successfully stirs
their emotion to seek “the liquor of a good day”, especially to be used during daily rituals and
festivals when they pray for prosperous days to come.

These days, it seems as though every company is using humour in its advertising, from consumer
product firms such as Anheuser-Busch to the scholarly American Heritage Dictionary, Advertising in
recent Super Bowls appears to reflect consumers’ preferences for humour. For example, 14 of the
top 15 most popular ads in USA Today’s ad meter consumer rankings of 2006 Super Bowl
advertisements used humour. Anheuser-Busch used humour to claim six of the ten ad spots. Its Bud
Light ads featured everything from young men worshipping a neighbour’s rotating magic fridge
stocked with Bud Light to an office manager who motivates employees by hiding bottles of Bud Light
throughout the office.

Properly used, humour can capture attention, make people feel good, and give a brand personality.
Anheuser-Busch has used humour effectively for years, helping consumers relate to its brands.
However, advertisers must be careful when using humour. Used poorly, it can detract from
comprehension, wear out its welcome fast, overshadow the product, or even irritate consumers.
For example, many consumers and ad critics took exception to some of the humour used in the 2004
Super Bowl ads, including Anheuser-Busch ads.
Communicators can also use negative emotional appeals, such as fear, guilt, and shame that get
people to do things they should (brush their teeth, eat better, buy new tyres) or to stop doing things
they shouldn’t (smoke, drink too much, eat unhealthy foods). For example, an ad for TLC’s show
Honey We’re Killing the Kids (a reality show that tries to get families to eat healthier) teaches “Life
Lesson #74: Sometimes being their best friend is not being their best friend.” And Etonic ads ask.
“What would you do if you couldn’t run?” They go on to note that Etonic athletic shoes are designed
to avoid injuries – they’re built so you can last.”

Moral appeals are directed to the audience’s sense of what is “right” and “proper”. They are often
used to urge people to support social causes such as a cleaner environment, better race relations,
equal rights for women, and aid to the disadvantaged. An example of a moral appeal is the Salvation
Army headline, “While you’re trying to figure out what to get the man who has everything, don’t
forget the man who has nothing.”

Adapted from: Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yan, O. (2009).
Designing a Message. Principles of Marketing: An Global Perspective. [pp. 378-379]. South Asia:
Pearson Education
Using Advertising Media More Effectively

How to Pick the Best Media

What advertising media should you use to promote your business? Simple. Use the one that
is most influential and believable, and that comprehensively reaches the highest percentage
of your target audience for the lowest cost.

Is that easy? No.

There are many advertising media options for reaching your target audience. This chapter
covers the relative strengths and weaknesses of different types of advertising media, and
specifically explains how to choose the most effective printed advertising media.

Pick An Advertising Media Category: Factors to consider

The first decision to make is what category or combination of categories of advertising media
to use [newspaper, magazine, radio, direct mail, television, telemarketing, direct sales,
yellow pages, outdoor, etc.]

Note that we did not say that the first decision was what the company could afford. It is a
fundamental mistake to buy any advertising media that you can’t afford to use effectively, or
that will not generate the volume of sales you need to stay in business.

Many companies decide what advertising media to use too fast, and they base the decision
on too little information. Don’t make assumptions about what you should do until you get
some information. And you absolutely do not want to make media decisions based on what
media sales rep knocks on your door.

A clearly defined set of goals and objectives for your advertising campaign will help
you to choose the best advertising media available. Know what you want your advertising to
do, so that you can measure the results and make decisions accordingly.

You would also need to consider the media habits of your target audience. Are they
newspaper readers, radio listeners, or a potato couch? Are they into current affairs,
entertainment, or financial news?

And understanding the relative strengths and weaknesses between the different advertising
media will help you to deliver the right message to the right person at the right time. A good
understanding of the believability factor in conveying a message (media impact) will be
essential in the selection of the media.

Lastly, a realistic budget (costs) should indicate which advertising media could be
effectively used for your campaign.

Effective Frequency in Print Advertising Media

 Effective Reach is the total number of different households or individuals that see
your ad enough times to be aware of your message during a specified time period
[normally four weeks].
 Effective Frequency is the number of times a household or an individual needs to
be exposed to your message to notice and understand it.

Understanding and estimating what effective frequency you need to achieve to get your
message through is very important. After all, if you pull or change your ads before your
customers get the message, you will be wasting your advertising budget.
Pick Your Newspaper: Comparing Print Advertising Media
1. What are the demographics the newspaper or magazine is offering?

The publisher will send you a complete description of their market. How well is your
specific target group represented? Compare different local media against each other for
better coverage of your market. It’s well worth the effort.

2. Don’t assume that one newspaper is better than another.

For example, morning papers tend to have a wider geographic circulation, and are read
by more men. Evening papers have a higher female audience. Which hits your target
group better? A morning paper can get you sales in the afternoon. An evening paper
might be used to get a family to talk and think about a purchase the following day. What
fits your needs?
Talk to your customers, and ask them what they read and why. Ask them if they read
each newspaper by name, and how often they read it. Ask if they are subscribers, and
ask how many other people in the house [and in your target audience] read the paper.
Remember, the most important thing is whether or not the paper is being read by your
target group.

3. What environment does the paper provide?

Is the paper well liked and believable? Is the paper seen as an authority on issues related
to your business? Do you need to associate yourself with the most authoritative or
prestigious paper or magazine you can? If you need the prestige, then pay for it. Don’t
waste your money advertising in the wrong place. It is true that often the media is the
message.

4. You normally want to advertise in the same newspaper as your competition is advertising
in. That is probably where most of your clients are looking for information.

5. It is normally a good strategy to spend your advertising budget where your current
customers are coming from.

Certainly you can try new media outlets for getting new customers, but it is normally more
expensive to get new customers from new media than it is to get new customers from
your regular media. As always, go slow, and test.

6. There is also advertising theory to consider when you decide on what newspaper or
magazine to choose.

The recency theory of advertising states that you want to reach as many people as you
can as close to the time that they are going to make a purchase as possible. This means
that you want them to receive your advertisement in the Saturday morning newspaper for
their Saturday afternoon shopping.

7. The position your ad gets in the paper is very important.

A quarter-page ad that falls on the fold of the paper will only get 50% of the readership
that a quarter-page ad in the upper right hand corner will get. Bad positioning just lost you
half of your customers.

Ever notice how ads selling the same things are grouped together? If you place your ad in
the wrong location in the paper, your customer will miss it. If you place it on the wrong
 day of the week, your customer will miss it. Make sure your ad runs at the right time and
in the right place.

8. Readership is the average number of readers per copy sold.

The readership number reflects the pass-along rate of the newspaper. It’s important to
understand actual readership rates when comparing one paper against another.

Using Advertising Media In Combination

Large advertisers almost always use a combination of different media to promote their
products. This strategy makes sense for a number of reasons, but mainly because it is cost
effective.

By using multiple media outlets you have reached more of your target audience with your
marketing and advertising. You have also reached them multiple times because they get
messages from different places. Your messages reinforce each other. The result is an
overall higher response at a lower cost. You have created synergy with your marketing and
advertising. It works because different people pay more attention to [and have more faith in]
different types of media.

Choose Your Best Media

Each kind of media has advantages and disadvantages. How can you figure out what to do?
Understand what kinds of media are available to you. Understand what they cost and whom
they reach. Understand where your customers are looking for information. Test different ads
and media, and measure the results. [And keep testing over time]. Your work will be richly
rewarded.

Don’t forget that the media you select has a great influence on your advertising effectiveness
and believability. What is the difference between an ad in the newspaper and a flyer on your
car? What is the difference between a column listing and a display ad in the yellow pages?
The difference is effectiveness and believability. What is the difference between the
smallest ad, and the biggest, most professional ad? A whole lot of customers.

Adapted from:
Association of Directory of Publishers (2015). Retrieved May 24, 2017 from
http://www.adp.org/node/399
What is Public Relations (PR)

Public Relations – building good relations with the company’s various publics by obtaining
favourable publicity, building up a good corporate image, and handling or heading off
unfavourable rumours, stories, and events.

What is PR used for

PR is used to promote products, people, places, ideas, activities, organizations, and even
nations. Companies use PR to build good relations with consumers, investors, the media,
and their communities. Trade associations have used PR to rebuild interest in declining
commodities, such as eggs, apples, potatoes and milk. Even government organizations use
PR to build awareness.

The role and impact of PR

Public relations can have a strong impact on public awareness at a much lower cost than
advertising can. The company does not pay for the space or time in the media. Rather, it
pays for a staff to develop and circulate information and manage events. If the company
develops an interesting story or event, it could be picked up by several different media,
having the same effect as advertising that would cost millions of dollars. And it would have
more credibility than advertising.

What are the common PR tools

1. Media Relations
Media relations includes all efforts to publicize products or the company to members
of the press — TV and Radio, newspaper, magazine, newsletter and Internet. In
garnering media coverage, PR professionals work with the media to place stories
about products, companies and company spokespeople. Key tools in media
relations includes: Press Kits, Audio or Video press releases, Press Conference,
Media reviews/golden samples

2. Special Events
Special events can be designed to reach a specific narrow target audience. Stunts,
such as building the world’s largest ice cream sundae captures the attention of an
audience in the immediate area, but also attracts the attention of mass media such
as TV news and major newspapers, which provide broad reach. Special event
planners must work hard to ensure the program planned conveys the correct
message and image to the target audience.

3. Sponsorships
Companies and brands use sponsorships to help build goodwill and brand
recognition by associating with an event or group. Marketers can examine
sponsorship opportunities to find those that reach target groups, fit within a specified
budget and provide sponsorship benefits that suit the marketer’s objectives. An
example is Samsung’s sponsorship of World Cyber Games to bond with youth and to
position itself as an exciting brand.

4. Community Relations & Philanthropy

Companies implement programs supportive of the community ranging from
supporting local organizations and institutions (e.g., arts organizations, community
activities, parks) to conducting educational workshops (e.g., for teachers, parents) to
donating product for community events and charitable fundraisers. The goal is
generally to develop a positive relationship with members of the community (i.e., be
 known as a good neighbor). Some companies also make an effort to contribute to
charitable organizations, often organizations that have some relationship to the
company’s mission or to a key principal of the company.

Adapted from:
 Kotler, P., & Armstrong, G. (2012). Marketing Channels: Delivering Customer Value.
Principles of Marketing (14th ed.) [pp. 478-479]. Upper Saddle River, New Jersey:
Pearson Education
 KnowThis.com. (n.d.). Types of Public Relations Tools. Retrieved November 24,
2017, from http://www.knowthis.com/types-of-public-relations-tools
 B216 Marketing

MK09 You are My Sunshine

Learning Outcomes

• Identify the objectives and characteristics of sales promotion

tools
• Compare the effectiveness of the various sales promotional
tools
• Evaluate the different marketing strategies that can be
applied to a digital environment
• Relate the importance of personal selling as a part of
promotion mix
• Describe the role of personal selling.
• Discuss ethical issues involving sales promotion and personal
selling
Problem Analysis

Profits have been Losing shelf space to

declining main competitors

Design a sales promotional

campaign to:
• Encourage product trial
• Increase sales
• Increase market share
• Encourage brand switching
Components of Promotional Mix/ IMC

Advertising Scope of MK08

Sales Integrated Marketing Public

Promotion Communication Relations
An integration of
promotional tools to
send a consistent,
clear and compelling
Scope of MK09 brand message

Personal Direct
Selling Marketing Not covered in B216

Watch this video on Definition of Integrated Marketing Communication by Dr Yahya Alavi

https://www.youtube.com/watch?v=sOfHtANrmbI
Sales Promotion – What is it?

 Short term incentive tools to stimulate quicker or larger

purchase by customers.

 Advertising offers reason to buy while sales promotion

offers incentive to buy NOW.

 Typically used with advertising.

 Sales Promotion Tools include:

 Consumer Promotion
 Trade Promotion
 Sales Force Promotion
Steps for Developing Sales Promotion
Campaign

Setting Sales Promotion Objectives We will focus on the

first 3 steps
Selecting the Sales Promotion Tools

Developing the Sales Promotion Program

Pre-testing the Sales Promotion Program

Implementing & Controlling

Sales Promotion Program

Evaluating the Sales Promotion Results

Step 1: Setting Sales Promotion Objectives

Promotion for Consumers

 Attracting consumers to try new product
 Encouraging purchase of larger quantities
 Building trials among non-users Typical
 Switching customers from competitors
 Building brand loyalty promotional
objectives
Promotion for Trade
 Carry new items
 Carry higher level of inventory or buy ahead
 Advertise the company’s product
 Give more shelf space
 Build brand loyalty of retailers

Promotion for Sales Force

 Encourage support for a new product or model
 Encourage sales force to sign up new accounts
 Stimulating off-season sales
Step 1: Setting Sales Promotion Objectives
(based on the PLC)

Introduction Growth Maturity Decline

Sales Heavy Reduce Heavy Reduce
Promotion

Promotion Entice trial Take Encourage Reduce promotions in

Objective among non- advantage brand line with falling sales
users of increase switching and profits
in demand
Step 2: Selecting Sales Promotion Tools
(Categories of Sales Promotion Tools)

PRODUCER

A pull strategy attempts to pull in the

consumers towards the product.

The company focuses its marketing

communications efforts on consumers
in the hope that it stimulates interest
“PULL”

and demand for the product at the end-

user level.
Consumer
(Typically – Consumer Promotions)
Promotion

CONSUMER
Step 2: Selecting Sales Promotion Tools
(Categories of Sales Promotion Tools)
Trade Sales
PRODUCER Force
Promotion
Promotion
A push strategy involves
convincing trade
intermediary channel
members to "push" the
Retailers product through the Sales Force
distribution channels to
the ultimate consumer via
promotions and personal
Consumer selling efforts.
Promotion
(Typically – Trade and Sales
Force Promotion)

CONSUMER
Step 2: Selecting Sales Promotion Tools
(Types of Sales Promotion Tools)
CONSUMER
TRADE SALES FORCE
• Price down (Retailers / (Internal Sales Staff)
• Free samples Wholesalers)
• Contests • Sales contests
• Sweepstakes • Price off • Awards
• Coupons • Free goods • Incentives
• Cash refunds • Sales contests
• Price packs • Allowance
• Premiums • Push money
• Patronage rewards • POP displays
• POP displays • Advertising
• Advertising specialties
specialties

Some of the sales promotion tools for consumer

can also be used as tools for trade and sales force.
Step 2: Selecting Sales Promotion Tools
(Consumer Tools and their Objectives)
► Free samples To introduce a new product and build trials

► Price down To boost sales during off-season

► Coupons To induce frequent purchase

► Premiums
To give an incentive to buy a product
► Sweepstakes

► Patronage rewards To reward and retain present customers

► Price Packs To increase purchase amount by combining

products and offering a package deal
Example of How NESCAFE Uses Consumer
Sales Promotion Tools
Free samples

Price down

Price Packs

Advertising specialty
Sweepstakes

Point of Purchase Display

Premiums (using Augmented reality) Coupons
Step 3: Developing the Sales Promotion
Program (Components of a Sales Promotion Program)

Size of Incentive

Conditions for Participation

Components of a Duration of Promotion

Sales Promotion
Program
Timing of Promotion

Distribution Vehicle

Total Sales Promotion Budget

Step 3: Developing the Sales Promotion
Program (Components of a Sales Promotion Program)

Size of Incentive
A certain minimum incentive is necessary if the promotion is to succeed; a larger
incentive will produce more sales response. (e.g. 20% price down)

Conditions for Participation

Incentives might be offered to everyone or only to select groups (e.g. get a 20% price
down if you purchase more than $100 worth of products)

Duration of Promotion
If the sales promotion is too short, many prospects will miss it. If the promotion runs
too long, the deal will lose some of its “act now” force. (e.g. 2 months)

Timing of Promotion
The starting and ending dates of promotion (e.g. 1 Aug 2016 – 30 Sep 2016)

Distribution Vehicle
How to promote and distribute the promotion program itself. A $2-off coupon could
be given out in a package, at the store, via the Internet, or in an advertisement. Each
distribution vehicle involves a different level of reach and cost.
Ethical Issues in Sales Promotion and
Personal Selling
 Contradict public interest or be considered socially undesirable or offensive
E.g. sales promotion of alcohol in retail outlets located within or near a school
compound

 Sales promotion and related communications that abuse or exploit consumer

trust, inexperience or lack of knowledge
E.g. selling complicated financial products to elderly who may not understand
what they are buying

 Misrepresentation via equivocality, ambiguities, exaggerations etc.

E.g. Not stating the requirements for contest or lucky draw

 Sales promotion activities aimed at children or designed to attract children shall

be created and realized in a way that does not cause physical, mental or moral
injury to children.
 Internet Marketing &
the Use of Digital Marketing
Internet Marketing
• The internet has created a virtual “market” space giving marketers new
ways to create value and build customer relationships.

• It has changed customers’ notions of speed, price, convenience,

information, service. It has a viral effect stronger than any other media.

• It is becoming increasingly hard to find companies without web presence

Types of company
Brick-and-mortar Click-and-mortar Click-only
companies companies companies

Purely Physical Online and Physical Purely Online

Store Store
Digital Marketing Platforms

Social Network Blogging Pay Per Click Email Marketing

Content Corporate Mobile

Video Marketing
Marketing Website Marketing

Search Engine
Kiosk Marketing Interactive TV
Optimization

Marketers may use any of these platforms to implement their digital

marketing strategies (e.g. free software trials and online price-based
promotions)
Digital Marketing Platforms

Social Network
A social networking website that allows users to add friends, send messages
and update profiles (e.g. Facebook, Twitter, Instagram etc.)

Blogging
A website with regular entries of news, events, graphics or videos. Entries are
usually displayed in reverse-chronological order. (e.g. xiaxue.blogspot.com/)

Pay Per Click

Paying the host website whenever the advertisement (banner or link) of the
company is clicked on.

Email Marketing
Sending advertisement, information or updates via email to acquire new
customers or build relationship with current customers.
Digital Marketing Platforms

Content Marketing
A marketing technique of creating and distributing relevant and valuable content to
attract, acquire, and engage a clearly defined and understood target audience - with
the objective of driving profitable customer action. (e.g. http://blog.sharpie.com/)

Corporate Website:
These sites are designed to build customer goodwill, collect customer feedback, and
supplement other sales channels. They typically offer a rich variety of information and
other features in an effort to answer customer questions, build closer customer
relationships and generate excitement about the company or brand. (e.g.
www.rp.edu.sg/)

Video Marketing
Producing and distributing videos about the company or products through company
website, host websites or viral marketing, host websites or viral marketing. (e.g.
https://www.youtube.com/watch?v=DXAZLLnmF5U)

Mobile Marketing
E-marketing to consumers on the go. Able to make use of location based technology,
QR codes or mobile payments like e-wallet to their advantage.
Digital Marketing Platforms

Kiosk Marketing
As consumers become more and more comfortable with computer and digital
technology, companies are placing information and ordering machines – called
kiosks, in stores, airports and other locations. E.g. eNets, kiosks

Interactive TV
Interactive TV lets viewers interact with television programming and
advertising using their remote controls. E.g. Shopping channel HSN developed
a “Shop by remote” interactive TV service that allows viewers to immediately
purchase any item on HSN using their remote control.

Search Engine Optimization (SEO)

The coding and creating of content of a website such that search engines
would display the website at the top of the search result
Application to Problem
Step 1: Setting Sales Promotion Objectives
(based on the Product Life Cycle Stage)

Increase sales
promotion to
encourage
brand switching
Step 1: Setting Sales Promotion Objectives

Setting Objectives….

PROMOTION OBJECTIVES WITHIN 3 MONTHS

• To reach out to 10,000 kids below 15 years old and their parents
with the promotional tools
• To improve shelf space in major retailers from current 15% to 50%
(NTUC FairPrice, Giant, Cold Storage and Sheng Siong)
• To penetrate into at least 15 new retailers
• Increase market share by 15% in the bottled drink industry
• To increase sales by 200,000 units
Step 1: Setting Sales Promotion Objectives

Setting Objectives….

DIGITAL MARKETING AS PART OF PROMOTIONAL STRATEGY

Currently 3 out of every 10 teenagers and young adults are aware of
the brand.
The objective of including the Digital Marketing Strategy is to reach out
to the teenagers and young adults so as to increase brand awareness
level by 20% to reach 50% (i.e. one out of every two teenagers and
young adults would be aware of Sunkist’s range is made up of natural
fruit juices).
Step 2: Selecting Sales Promotion Tools

CONSUMER
TRADE SALES FORCE
• Price down (Retailers / (Internal Sales Staff)
• Free samples Wholesalers)
• Contests • Sales contests
• Sweepstakes • Price off • Awards
• Coupons • Free goods • Incentives
• Cash refunds • Sales contests
• Price packs • Allowance
• Premiums • Push money
• Patronage rewards • POP displays
• POP displays • Advertising
• Advertising specialties
specialties
Step 2: Selecting Sales Promotion Tools
(Consumers)
Premiums
To give an incentive to
buy a product

Price Pack
To increase purchase amount
Pull Strategy
Sales Promotion Objectives Sweepstakes
• To reach out to 10,000 kids below To give an
15 years old and their parents with incentive to buy a
product
the promotional tools
• Increase market share by 15% in the
bottled drink industry
• To increase sales by 200,000 units

Patronage Rewards Coupons Free Samples

To reward and retain To induce To introduce a
present customers frequent new product and
purchase build trials
Step 2: Selecting Sales Promotion Tools
(Trade-Retailers)
Price Off
Incentive to carry higher
level of inventory

Advertising Push Strategy

Specialties Sales Promotion Objectives Advertising
Build brand • To improve shelf space in major Allowance
loyalty Contribute to the retailer
retailers from current 15% to 50% for advertising Sunkist’s
(NTUC FairPrice, Giant, Cold Storage products in retailer’s
and Sheng Siong) advertisements
• To penetrate into at least 15 new
retailers
Payment of Point-of-Purchase
“Push” Money Free Goods Displays
Incentivize Encourage retailers Pay retailers to
retailers to push increase visibility
to buy goods this
your goods through POP displays
month
Step 2: Selecting Sales Promotion Tools
(Internal Sales Force)
Incentives for New Accounts
Incentivize your sales team to sign
up new retailers to carry your
products
Push Strategy

Sales Promotion Objectives

• To reach out to 10,000 kids below
15 years old and their parents with
the promotional tools
• Increase market share by 15% in the
bottled drink industry
Sales Contest /
• To increase sales by 200,000 units
Award
Encourage sales force • To penetrate into at least 15 new
on the retail ground to retailers
sell more products
Step 3: Developing the Sales Promotion
Program
Component Consumers Trade (Retailers) Sales Force
Duration 3 months
Timing 1st Jan – 31st Mar 2017
Size of • Patronage rewards: Get • POP: 3 POP units at • Sales Contest:
Incentive a free toy with every 5 each major • Top Sales (individual)
stamps collected supermarket given extra 5%
• Coupons: 5% off retail • Price Off: 3% off for commission
price every 10,000 units • Top Sales (team) given
• Augmented Reality - ordered extra 3% commission
Point of Purchase • Free goods: Free 100 • Incentives for New
Display: See Slide 13 units for every 10,000 Accounts: Sales Team
• Premiums: 100,000 units ordered which secures the
units of toys with most number of new
purchase accounts wins a 10-
• Sweepstakes: 4 pairs of day group tour to
Air Tickets to Paris Hawaii.
Step 3: Developing the Sales Promotion
Program
Component Consumers Trade (Retailer) Sales Force
Conditions • While stocks last. • Bulk discounts & free • Duration of sales
• Prizes are not goods: only applicable competition and
exchangeable for cash. if supermarkets fulfill incentives only
• Employees of the order requirements apply during the 3
participating retailers • Trade promotions only months of the
and management of applies during the sales sales promotion
Sunquick are not promotion campaign (3 campaign
allowed to participate in months)
lucky draw

Distribution Flyers, Direct Mail, Newsletters to retailers Newsletters to the

Vehicle Magazines and Newspapers sales force
(coupons)
Sales *SGD 400,000
Promotion
Budget *Estimated amount
 Digital Marketing
Using Augmented Reality for Sales Promotion

Pokestops and Temporary Drawing

of Pokemon Monsters to location
• Temporary setting up of
Pokestops and luring of digital
monsters to outdoor Sunkist
events
 Digital Marketing
Content Marketing

Content Marketing
Create content related to cooking using
Sunquick cordial as an ingredient to
cater to youngsters interested in
cooking using simple recipes

Cooking recipes using Sunquick as an ingredient

Ethical considerations

• Depends on the promotional angle they adopt

• Sunquick should be responsible and special care should
be taken not to mislead children

An example of an Unethical Promotion :

Free toy figurines are given in each packet of

Sunquick. However the figurines are Japanese anime
characters dressed in revealing clothing and
sometimes depicted in a violent manner
Extended Learning
What is Personal Selling?

Personal selling
 Direct communication between paid representatives and
prospects that lead to purchase orders, customer satisfaction
and account development
 Involves interpersonal interaction
When Is Personal Selling Used?

Why Personal Selling?

• the salesperson conducts business with the customer
(especially in B2B) in person
• allows the salesperson to target the message specifically to the
audience and receive immediate feedback
• can be an important source of marketing information
• may help a small business build loyal, long-term relationships
with customers

When to Use Personal Selling?

- when a product is sold to companies
- when a product has a high unit value
- when it requires a demonstration of its benefits
- when it is a highly technical product
Personal Selling vs Advertising and Sales Promotion

Advertising and Sales

Personal Selling is more
Promotion
important if...
is more important if...

Product has a high value Product has a low value

Product is custom made Product is standardised

There are few customers There are many customers.

Product is Product is
technically complex simple to understand
Customers are Customers are
concentrated geographically dispersed
Conclusion

 Sales promotion is a short term incentive tool to stimulate quicker

or larger purchase by customers.

 The target audience of the sales promotion include consumers,

retailer (trade) as well as the sales force.

 The digital marketing platforms are avenues where marketers can

implement sales promotion, direct marketing and personal selling
too.

 Personal selling is the interpersonal arm of promotion mix,

creating and communicating customer value through personal
interactions with customers.
Concept Diagram

Setting Sales Selecting Sales

Developing Sales
Promotion Promotion
Promotion Program
Objectives Tools

Size of Incentive
CONSUMER
• Price down TRADE Conditions for Participation
• Free samples
(Retailers /
• Contests
• Sweepstakes Wholesalers) SALES FORCE Duration of Promotion
• Coupons • Price off (Internal Sales
• Cash refunds • Free goods Timing of Promotion
Staff)
• • Sales contests
Price packs • Sales contests
• • Allowance Distribution Vehicle
Premiums • Awards
• • Push money
Patronage • Incentives
rewards • POP displays Total Sales Promotion
• POP displays • Advertising Budget
• Advertising specialties
specialties
Concept Diagram

Digital Marketing Platforms

Search Engine
Social Network Blogging Pay Per Click
Optimization

Content Corporate
Email Marketing Video Marketing
Marketing Website

Mobile
Kiosk Marketing Interactive TV
Marketing
Resources
Recommended Textbooks
• Kotler, P., & Armstrong, G. (2012). Personal Selling and Sales Promotion, Principles of
Marketing (14th ed.) [pp. 486-517]. Singapore: Pearson.
• Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yau, O. (2005). Personal
Selling and Sales Promotion. Principles of Marketing: An Asian Perspective, [pp 428-
451], Singapore: Pearson.

Reference Textbooks
• Bearden, W. O., Ingram, T. N. & LaForge, R. (2007). Consumer and Trade Promotions.
Marketing Principles and Perspectives. (5th ed.) [pp 420-437]. USA: McGraw-
Hill/Irwin.

Websites
• Dolak, D. (n.d.). Sales promotion. Retrieved Oct 15, 2017, from Dave Dolak website:
http://www.themarketingguywhodrivessales.com/crashcourse/promo.htm
• Anderson, K. (n.d.). 19 ways to attract more customers. Retrieved Oct 15, 2017, from
Frugal Marketing website: http://www.frugalmarketing.com/dtb/kareanderson.shtml
Digital Sales Promotion

Digital sales promotion encompasses a huge range of creative promotional ideas and
approaches. In fact there are too many to list here; so this short lesson on digital sales
promotion will give you some ideas, but it is certainly not limited to this small number of
approaches. Just think about the multitude of different sales promotion activities that you are
exposed to in the everyday terrestrial world, I think that these could be transposed into the
digital world or even combined with digital activities.

The online experience is ideal for digital self-promotion. Again many of the topics which are
covered in other lessons on Marketing Teacher raised their heads again, it is digital marketing
communications is integrated; so yes SEO and SEM can be part of a sales promotion campaign.

Some examples of digital sales promotion:

 Free trials and giveaways e.g. some free software for 30 days, and then you must sign
up for a full version. Companies such as Spotify are good examples of this
 You can use social media such as Facebook and Twitter as teasers or as part of the
guerrilla marketing campaign; viral campaigns are also ideal when combined with social
media and are in themselves digital self-promotional tools
 Promotional product or service videos are good examples of self-promotional activities.
 Product reviews and expert articles in blogs or other online media
 E-mail can be combined as part of an integrated digital sales campaign
 Product codes and vouchers such as Groupon.com and similar suppliers
 Price-based promotions such as discounts or good old-fashioned Buy One Get One
Free (BOGOF) online promotions
 Shipping can be undertaken for free as an incentive, for example eBay and Amazon
 Contests in competitions online are sometimes popular especially in niche markets
 Valuations such as www.webuyanycar.com is a new and innovative way of creating user
interest and self-promotion
 Naturally loyalty programmes and CRM embed sales promotions to retain and
communicate with customers
 There are a reseller promotions and drop shipping incentives whereby services and
products from one supplier sold via another online retail organisation

As you can see from the examples above there are many different and exciting types of sales
promotion that can be combined and extended in order to generate new types of digital self-
promotion.

Source:
MarketingTeacher.com. (n.d.). Digital Sales Promotion. Retrieved 14 Oct 2017, from
http://www.marketingteacher.com/digital-sales-promotion/
Digital Marketing Tools and Techniques
Content Marketing
 A marketing technique of creating and distributing valuable, relevant and consistent content to
attract and acquire a clearly defined audience – with the objective of driving profitable customer
action.
 Differs from traditional marketing tools as there is no selling or purely ads for a company’s
products or services.
 Based on the belief that if businesses deliver consistent, ongoing valuable information to buyers,
they ultimately reward them with their business and loyalty
 E.g. Publishing recipes instead of promoting and selling its products directly – Recipes - Betty
Crocker. (n.d.). Retrieved on 14 Oct 2017 from http://www.bettycrocker.com/recipes
 E.g. Blogging about the interesting ways people had used their Sharpie pen; from designing their
own t-shirt to decorating their coffee table, instead of selling their pen – Sharpie Markers
Official Blog | UNCAP WHAT'S INSIDE! (n.d.). Retrieved on 14 Oct 2017 from
http://blog.sharpie.com/
 E.g. Charmin, a toilet paper seller, helps consumer finds a nearby toilet with its own app instead
– Welcome to SitOrSquat. (n.d.). Retrieved on 14 Oct 2017 from https://www.sitorsquat.com/

Social Networking
 One of the best marketing tools for humanizing your brand and connecting with your customers
in real time
 A strong digital marketing strategy incorporates all social media forums appropriate to your
organization, including Facebook, Twitter, LinkedIn, Google+, Pinterest, and Instagram etc.
 These tools have different purposes: Twitter has become a virtual telephone, a way for
customers to lodge complaints or ask questions. Image-driven social media such as Instagram
and Pinterest are a great way to get viral with visual storytelling. Facebook might be a good
media to distribute more detailed product information.

Mobile Marketing
 Catered to more and more people whom are accessing information on-the-go
 Taking mobility a step further by using location data garnered by customer check-in tools like
Foursquare or Facebook, or data provided by Adwords and GPS, to target marketing campaigns
and build an ever more complete picture of who your customer is, where she goes, what she
wants, and when she wants it
 QR code technology allows you to place these codes anywhere and lead anyone online. E.g. a
restaurant could place a QR code on the napkin to lead people to a Facebook contest or a
coupon for a special meal deal
 Location based technology allows company to create, or be part of apps that lead people to
your business and at the same time, promote your brand

Search Engine Optimisation

 Search engine algorithm update has one primary goal: to improve user experience by generating
the most relevant results
 SEO is about coding and creating the content of a website such that search engines would
display the website at the top of the search result
  Knowing what search engines like Google looks for in websites, companies can implement
practices to take advantage of those qualities

Blogging
 A blog is a type of website with regular entries of news, events, graphics or videos. Entries are
usually displayed in reverse-chronological order.
 E.g. ieatishootipost: Singapore Food Reviews and Recipes. (n.d.). Retrieved on 14 Oct 2017 from
http://ieatishootipost.sg/

Email Marketing
 Sending advertisement, information or updates via email to acquire new customers or build
relationship with current customers.

Pay Per Click

 Paying the host website whenever the advertisement (banner or link) of the company is clicked
on.

Video Marketing
 Producing and distributing videos about the company or products through company website,
host websites or viral marketing

Corporate Website
 These sites are designed to build customer goodwill, collect customer feedback, and supplement
other sales channels.
 Typically offer a rich variety of information and other features in an effort to answer customer
questions, build closer customer relationships and generate excitement about the company or
brand.

Sources:
1. https://www.forbes.com/sites/joshsteimle/2014/09/19/what-is-content-
marketing/#793e5ea010b9 retrieved on 14 Oct 2017

2. http://www.businessnewsdaily.com/5753-location-based-mobile-marketing-tools-small-
businesses.html retrieved on 14 Oct 2017
Push and Pull Promotional Strategy
There are three types of sales promotion strategies:
 A push strategy
 A pull strategy or
 A combination of the two

A 'push' sales promotion strategy involves 'pushing' distributors and retailers to sell your
products and services to the consumer by offering various kinds of promotions and personal
selling efforts. What happens here is that a company promotes their product/services to a
reseller who in turn promotes it to another reseller or to the consumer. The basic objective of
this strategy is to persuade retailers, wholesalers and distributors to carry your brand, give it
shelf space, promote it by advertising, and ultimately 'push' it forward to the consumer.
Typical push sales promotion strategies include; buy-back guarantees, free trials, contests,
discounts, and specialty advertising items.

A 'pull' sales promotion strategy focuses more on the consumer instead of the reseller or
distributor. This strategy involves getting the consumer to 'pull' or purchase the
product/services directly from the company itself. This strategy targets its marketing efforts
directly on the consumers with the hope that it will stimulate interest and demand for the
product. This pull strategy is often used when distributors are reluctant to carry or distribute a
product. Typical pull sales promotion strategies include; samples, coupons, cash refunds or
rebates, loyalty programs and rewards, contests, sweepstakes, games, and point-of-
purchase displays.

A 'combination' sales promotion strategy is just that; it is a combination of a push and a pull
strategy. It focuses both on the distributor as well as the consumers, targeting both parties
directly. It offers consumer incentives side by side with dealer discounts.

Source: Difference Between Push & Pull Marketing. Retrieved on 14 Oct 2017, from
Houston Chronicle website: http://smallbusiness.chron.com/difference-between-push-pull-
marketing-31806.html
 Sales Promotion
Personal selling and advertising often work closely with another promotion tool, sales promotion.
Sales promotion consists of short-term incentives to encourage purchase or sales of a
product or service, and includes a wide variety of promotional tools designed to stimulate
earlier or stronger market response. Whereas advertising offers reasons to buy a product or
service, sales promotion offers reasons to buy now. Sales promotion tools are used by
organisations, including manufacturers, distributors, retailers and not-for-profit institutions. They
are targeted towards final buyers (consumer promotions), retailers and wholesalers (trade
promotions), and members of the sales force (sales force promotions). In developing a sales
promotion program, a company must first set sales promotion objectives and then select the
best tools for accomplishing these objectives. Finally, marketers must develop the full sales
promotion program.

1. Setting Sales Promotion Objectives

Sales promotion objectives vary widely. Sellers may use consumer promotions to urge short
term customer buying or to enhance long term customer relationships. Objectives for trade
promotions include getting retailers to carry new items and more inventory, buy ahead, or
advertise the company’s product and give them more shelf space. For sales force promotions,
objectives include getting more sale force support for current or new products or getting sales
people to sign up new accounts.

In general, rather than creating only short term sales or temporary brand switching, sales
promotions should help to reinforce the product’s position and build long term customer
relationships. If properly designed, every sales promotion tool has the potential to build both
short term excitement and long term customer relationships. Examples include all the
“frequency marketing programs” and loyalty clubs that have mushroomed in recent years. Most
hotels, supermarkets, and airlines now offer frequent buyer programs offering rewards to regular
customers.

2. Selecting Sales Promotion Tools

Many tools can be used to accomplish sales promotion objectives. Descriptions of main
consumer, trade, and business promotion tools follow.

2.1 Consumer Promotion Tools

The main consumer promotion tools include:

• Free Samples
• Coupons
• Cash refunds
• Price packs
• Premiums
• Advertising specialties
• Patronage rewards
• Point-of-purchase displays and demonstrations
• Contest, sweepstakes and games
Free Samples are offers of a trial amount of a product. Sampling is the most effective – but
most expensive – way to introduce a new product or create new excitement for an existing one.
Some samples are free, for others, the company charges a small amount to offset its cost. The
sample might be delivered door-to-door, sent by mail, handed out in a store, attached to another
product, or featured in an ad.

Coupons are certificates that give buyers a saving when they purchase specified products.
Coupons can promote early trial of a new brand or stimulate sales of a mature brand. Marketers
are also cultivating new outlets for distributing coupons, such as supermarket shelf dispensers,
electronic point-of-sales coupon printers, email and online media, or even text-messaging
systems.

Cash refunds are like coupons except that the price reduction occurs after the purchase rather
than at the retail outlet. The consumer sends a “proof of purchase” to the manufacturer, who
then refunds part of the purchase price by mail.

Price packs offer consumers savings off the regular price of a product. The producer marks the
reduced prices directly on the label or package. Price packs can be single packages sold at a
reduced price (such as two for the price of one) or two related products banded together (such
as a toothbrush and toothpaste). Price packs are very effective – even more so than coupons –
in stimulating short terms sales.

Premiums are goods offered either free or at low cost as an incentive to buy a product, ranging
from toys included with kids’ products to phone cards and DVDs. A premium may come inside
the package (in-pack) or outside the package (on-pack). For example, Kellogg often
incorporates premiums with its cereals.

Advertising specialties are useful articles imprinted with an advertiser’s name, logo, or
message that are given as gifts to consumers. Typical items include T-Shirt and other apparels,
pens, coffee mugs, calendars, key chains, mouse pads, tote bags and caps. Such items can be
very effective. The “best of them stick around for months, subtly burning a brand name into a
user’s brain.

Patronage rewards are cash or other awards offered for the regular use of a certain company’s
products or services. For example, airline offer frequent flier plans, awarding points for miles
traveled that can be turned in for free airline trips.

Point of Purchase (POP) promotions include displays and demonstrations that take place at
the point of sale. These include aisle displays, promotional signs, “shelf talkers” or
demonstrators offering free tastes of featured food products.

Contest, sweepstakes and games give consumers the chance to win something, such as
cash, trips, or goods by luck or through extra effort. A contest calls for consumers to submit an
entry – a jingle, guess, suggestion – to be judged by a panel that will select the best entries. A
sweepstakes calls for consumers to submit their names for a drawing. A game presents
consumers with something – bingo numbers, missing letters – every time they buy, which may
or may not help them win a prize.
2.2 Trade Promotion Tools

Manufacturers direct more sales promotion dollars towards retailers and wholesalers (78
percent) than final consumers (22 percent). Trade promotion tools can persuade resellers to
carry a brand, give it shelf space, promote it in advertising, and push it to consumers. Shelf
space is so scarce these days that manufacturers often have to offer price-offs, allowances,
buy-back guarantees, or free goods to retailers and wholesalers to get products on the shelf and,
once there, to keep them on it.

Manufacturers use several trade promotion tools. Many of the tools used for consumer
promotions – contest, premiums, and displays – can also be used as trade promotions.

Sales Contest urges dealers to increase their efforts, with prizes going to the top performers.

Price-off involves manufacturer offering a straight discount off the list price on each case
purchased during a stated period of time. Manufacturers also may offer an allowance (usually
so much off per case) in return for the retailer’s agreement to feature the manufacturer’s
products in some way.

Advertising allowance compensates retailers for advertising the product. A display allowance
compensates them for using special displays.

Free goods might be offered by the manufacturers to resellers who buy a certain quantity or
who feature a certain flavor or size.

Push money are cash or gifts given by manufacturer to dealers or their sales forces to “push”
the manufacturer’s goods.

Advertising specialties are items that carry the company’s name, such as pens, pencils,
calendars, memo pads etc, that manufacturers may give to retailers.

2.3 Sales Force Promotion Tools

A sales contest is a contest for salespeople to motivate them to increase their sales
performance over a given period. Sales contests motivate and recognize good company
performers, who may receive trips, cash prizes or other gifts. Some companies award points for
performances, which recipients can turn in for any of a variety of prizes. Sales contests work
best when they are tied to measurable and achievable sales objectives (such as finding new
accounts, reviving old accounts, or increasing account profitability).

3. Developing the Sales Promotion Program

Beyond selecting the types of promotions to use, marketers must make several other decisions
in designing the full sales promotion program. First, they must decide on the size of the
incentive. A certain minimum incentive is necessary if the promotion is to succeed; a larger
incentive will produce more sales response. The marketer also must set conditions for
participation. Incentives might be offered to everyone or only select groups.

Marketers must decide the distribution vehicle of the sales promotion program, which is how
to promote and distribute the promotion program itself. A $2-off coupon could be given out in a
package, at the store, via the Internet, or in an advertisement. Each distribution vehicle involves
a different level of reach and cost.

The length of the promotion is also important. If the sales promotion is too short, many
prospects will miss it. If the promotion runs too long, the deal will lose some of its “act now”
force.

Adapted from:
Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yan, O. (2009). Sales Promotion.
Principles of Marketing: An Global Perspective. [pp. 446-451]. South Asia: Pearson
Education
 Sales Promotion
Changing emphasis at different stages of the Product Life
Cycle

Introduction
 Advertising and public relations  creates awareness
 Sales promotion  usually heavy  allows customer trial

Growth
 Advertising and PR  strengthens brand loyalty
 Sales promotion  less emphasis

Maturity
 Advertising persuasion, reminder
 Sales promotion  usually heavy  increase market share

Decline
 Reduction in advertising and PR
 Sales promotions  usually reduced  in line with falling sales and profits

Source: Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yan, O. (2009). Sales
Promotions. Principles of Marketing: A Global Perspective. [pp. 450]. South Asia: Pearson
Education
Where to sell them?
B216 Marketing – MK10
6th Presentation
Learning Outcomes
• Define the roles of various channel intermediaries and explain
the marketing functions performed by intermediaries. (physical
distribution, communication and transaction, facilitating
functions)

• Analyse the major channels of distribution used by marketers of

consumer and organisational products (direct, indirect, hybrid)

• Explain how companies decide the extent of distribution

(intensive, selective, exclusive)

• Identify the factors in planning a distribution channel

 Problem Analysis
Target Segments

Zenix manufactures Mass Consumers Distribution

handphone casings - Buy common Options
handphone casings
Through
* Small scale * Handphone retailer
manufacturing shops or
business. Niche Consumers * Own store or
* No distribution - Like customisation * Other intermediaries..?
department - Prefers personalised
service
* Limited - Buys 5 or more
covers at a go
resources
- Values home delivery

Advise on one suitable distribution strategy for reaching out to

mass consumers and niche consumers

Introduction to Distribution

Distribution
• The process of moving a product from its manufacturing source
to its customers

Distribution Channel
• A set of interdependent organisations that help make a product
or service available for use or consumption by consumer or
business user

Intermediary
• Intermediaries (middleman) in a distribution channel are
individuals or firms that link producers to other intermediaries or
the ultimate buyer
 Functions of Intermediaries
• Gathering & distributing information
within channel
• Assuming risks of
carrying out Information
channel work • Developing
Risk Taking Promotion communications
about offer

• Finding &
• Acquiring of communicating
Functions of
funds to cover Financing
Intermediaries
Contact with
cost of channel prospective
work buyers

Physical • Shaping offers to

Distribution
Matching buyers’ needs (grading,
• Transporting and packaging etc)
Negotiation
storing of goods

• Reaching agreement on price and other

terms so that ownership can be transferred
Introduction (Example)
Distribution (with Intermediaries) Distribution (without Intermediaries)

Puma Sportswear Puma Sportswear -

(Producer) Specialty Store
(Producer)

Royal
World of
Sporting
Sports
House

Consumer Consumer

Legend
Distribution (the process)
Puma World of Royal Sporting Distribution Channel (the players)
YOU
Sportswear Sports House

World of Royal Sporting

Sports House Intermediaries (middleman)
Channel Design Decision
Step 1: Analysing Customer Needs
Assortment Delivery Location Level of service

Step 2 : Setting Channel Objectives

Segment(s) selection Targeted level of customer service

Step 3 : Identifying Major Alternatives

Types of Intermediaries Types of Distribution Distribution Intensity

Step 4 : Evaluating the Major Alternatives

Economic Criteria Control Criteria Adaptive Criteria
Step 1 : Analysing Customer Needs
Analyse what customer wants from the channel in terms of :

• Assortment Breath/Depth
• Delivery Location (Nearby shops, delivery etc.)
• Level of Service (After sales service, shop assistants etc.)

Example (sports shoes) :

Needs Of Mass Consumers Of Niche Consumers
Assortment Limited choice of colour options Many customisation options (e.g.
patterns, photos etc.)

Delivery Location Many stores in shopping malls Specialty Store

Level of Service Standard (eg. convenience, fast Concierge (eg. customised, home
checkout) delivery)
Step 2 : Setting Channel Objectives
State marketing channel objectives in terms of :
• Number of segments to serve
• Which segments to serve
• Targeted level of service
Example (sports shoes) :
Objectives Mass Consumers Niche Consumers (Luxury)
Segments to Serve Consumers who buy shoes off the Consumers who want personalised
(2) shelves shoes

Targeted Level of Standard level Concierge level

Service
Step 3 : Identifying Major Alternatives (Types of Intermediaries)
•Frequently physically assemble, sort
and grade goods in large lots, break
bulk, repack and redistribute in
smaller lots
Wholesaler •It assumes no other role than simply
• A business whose sales come fulfilling orders from retailers and is
primarily from selling goods or not involved in promoting the
services directly to final producer’s product.
consumers for their personal,
non business use.

Retailer
Types of Agent
Intermediaries
•A party that apart from breaking bulk, • A person who is authorized to act
also offers value added service on behalf of another to create a
to the product such as break bulk legal relationship with a Third
delivery, inventory management, Party
credit terms and maintenance contract. Distributor
•It acts as a sales representative for the
producer in actively promoting its
product.
Step 3 : Identifying Major Alternatives (Types of Distribution)
Direct Distribution Indirect Distribution Hybrid Distribution

One or more intermediary Combines direct and

No intermediary levels levels. indirect approaches

Producers sell to Producers sell directly as

Producer sells directly to well as through
consumers customers through
intermediaries such as intermediaries
wholesalers, etc.
Mostly for B2B business,
complex and high For fast moving consumer For established brands,
involvement products goods (FMCG) where to reach various level of
(e.g. Lasik Operation wide distribution is target ( e.g.. Adidas is
Machine) or High End required to deliver sold via Adidas store –
Consumer goods (e.g. meaningful business direct, World of Sports,
Vertu) objective. ( e.g.. Takashimaya – Indirect
Toothpaste in NTUC) etc.)
Step 3 : Identifying Major Alternatives (Types of Distribution)

Manufacturer / Producer / Product Brand Owner

Agent
Indirect

Hybrid
Direct

Wholesaler
Wholesaler Wholesaler
Distributor

Retailers Retailers Retailers Retailers

Consumers
Step 3 : Identifying Major Alternatives (*Distribution Intensity)
* Distribution intensity applies only when intermediaries are involved

• This strategy makes • Means that ONE • Selective distribution

a product available particular retailer is the strategy in
at ALL possible retail serving a given area which several but
outlets in a given is granted sole rights not all retailers in a
area. to carry a product given area will
• Typically used for • Typically used for distribute the
convenience goods specialty/luxury product
and fast moving goods or business • Typically used for
consumer goods products (e.g. shopping goods (e.g.
(e.g. toothbrush, iRobot, Peugeot car, Samsung LCD TV,
battery, shampoo, Caterpillar heavy Adidas, HP Laptops)
milk etc.) machinery)

Intensive Exclusive Selective

Distribution Distribution Distribution
Step 4 : Evaluating Channel Alternatives (E.C.A. Criteria)

Economic Control Adaptive

Criteria Criteria Criteria
Compares the likely Compares ability to Compares ability to
sales, costs, and control marketing keep channel flexible
profitability of activities, service so that it can adapt to
different channel levels and access to environmental
alternatives end consumers changes

Evaluates level of Evaluates level of Evaluates level of cost

channel investment control over marketing incurred when making
needed, channel activities, (eg. changes to channel
efficiency in reaching promotions) access to (eg. withdrawing from
customers, logistic end consumers etc. retail outlets)
efficiency etc.
Step 4 : Evaluating Channel Alternatives (Distribution Strategy)
Direct Distribution Indirect Distribution

* Direct distribution refers to • Less investment needed compared to

physical store direct(E)
• Control over marketing • Ability to attain maximum reach or
activities (C) coverage efficiently (E)
• Control over service level (C) • Value-added by intermediaries (E)
• Direct access and contact with • Efficient logistics (E)
customers (C) • Lower cost when making changes (A)

• High investment needed (E) • Exorbitant ‘slotting’ fees and margins by

some intermediaries (E)
• Inefficient logistic (E)
• Less or no control over marketing
• Extremely costly to make
activities (C)
changes (A)
• Less or no control over service level (C)
• No direct access and contact with
customers (C)
Hybrid Distribution combines both

Legend (E): Economic (C): Control (A): Adaptive

Pros Cons
 Application to Problem
WHERE TO SELL THEM?
 Application to problem
Step 1 : Analysing Customer Needs
Criteria Mass Consumers Niche Consumers
Assortment Common and standard Wide selection of customisation
casings options (photos, diamonds, sequins)
Delivery Location Phone retailers near home, Specialty store in town and home
work place or MRT stations delivery
Level of Service Standard Concierge

Step 2: Setting Channel Objectives

Criteria Mass Consumers Niche Consumers
Segments to serve (2) Consumers who want Consumers who want individualised
standard casings casings
Targeted level of Standard Concierge
service
 Application
Step 3: Identifying Alternatives
Key Decisions Mass Niche Consumers
Consumers
Type of Intermediaries Alternatives Alternatives
• No intermediary • No intermediary
• Retailers • Retailers
• Wholesalers • Wholesalers
• Distributors • Distributors
• Agent • Agent

Type of Distribution Alternatives Alternatives

• Direct( own shop) • Direct (own store)
• Indirect (Intermediaries) • Indirect
• Hybrid • Hybrid

Type of Distribution Alternatives Alternatives – not applicable

Intensity • Intensive as no intermediary is used
• Selective • Intensive
• Exclusive • Selective
• Exclusive
Step 4 : Evaluating Channel Alternatives (MASS CONSUMERS)
Direct Distribution :
Specialty store selling handphone
casings
• Able to control marketing
activities such as home delivery
and assortment (C)
• Able to access end consumer to
understand their needs (C)
• Huge investment needed to reach
Singaporean mass market ( E)
• Inefficient logistic ( E)
• Costly to change (i.e. Risky as no
experience in distribution) (A)
Rejected
Legend (E): Economic (C): Control
Indirect Distribution:
Using phone retailers
(Singtel and M1 shops)
• Able to reach mass market efficiently(E)
• Better control–direct dealings with
retailers(C)
• Less costly to change channel (lower
risk)(A)
• Exorbitant rental fees of $1,000 per
month(E)
• Less control over marketing
activities(C)
• No direct dealings with consumers(C)
• No resources and expertise to fulfill
delivery requirements (daily 80 outlets
)(E)
Rejected
(A): Adaptive
Pros Cons
Recommended Distribution Strategy (MASS CONSUMERS)

Indirect Distribution : Indirect Distribution

using intermediaries Zenix

• Distributors have the expertise and

specialisation to offer value added
service (network )(E)
• Economies of scale, distribution cost Distributor
would be lower (E)
• Able to efficiently reach as many
Singaporeans as possible (E)
• Less costly to change channel (lower Phone Retailers
risk) (A) (Singtel and M1 outlets)
• Less control over marketing
activities(C)
• No contact with customers (C)

Recommended Selective Distribution

Legend (E): Economic (C): Control (A): Adaptive Mass Consumers

 Step 4 : Evaluating Channel Alternatives (NICHE CONSUMERS)

Indirect Distribution: Direct Distribution :

Specialty Store selling handphone Direct
With Intermediaries Distribution
casings
• Intermediaries expertise • Able to control marketing Zenix
and specialisation value activities and service level (i.e.
added service (wide amount of customization, wide
network with stocking, assortment, home delivery)(C)
delivery, credit terms)(E) • Direct access and dealings with

Own store
• Minimal cost to change customers (C)
channel(A)
• Intermediaries margin high(E) • Huge investment needed to
open own store, but because
• Less ability to control niche consumers mainly reside
marketing activities and in town, only one store is
service level.(C) needed
• No direct access to customers
(C)
Niched
consumers
Rejected Recommended

Legend (E): Economic (C): Control (A): Adaptive

Recommendations (Distribution Strategy Overview)

Indirect Distribution Direct Distribution

Zenix Zenix

Own Specialty Store

Distributor

Hybrid
Selective

Retailers
(Singtel and M1 outlets)

Mass Consumers Niche Consumers

 Conclusion
• Intermediaries offer expertise and
specialisation to the channel

• Firms should analyse customer needs

when planning their channel design.

• Firms should consider various channel

alternatives including types and level of
intermediaries, and distribution
intensity.
Conclusion
• Firms should evaluate various channel
alternatives using economic, control
and adaptive criteria.
Concept Diagram
Channel Design Decision
Customer Needs
Assortment Delivery Location Level of Service

Channel Objectives
Segment Selection Targeted Level of Customer Service

Major Alternatives
Channel Intermediaries Types of Distribution Distribution Intensity
• Agent • Direct • Exclusive
• Wholesalers • Indirect • Selective
• Distributors • Hybrid • Intensive
• Retailers
Criteria for Evaluating the Major Alternatives
Economic Criteria Control Criteria Adaptive Criteria
References
Recommended Textbooks

1. Kotler, P., & Armstrong, G. (2012). Marketing Channels: Delivering Customer

Value. Principles of Marketing (14th ed.) [pp. 362-387]. Upper Saddle River, New
Jersey: Pearson Education.

2. Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yan, O. (2009).
Marketing Channels and Supply Chain Management. Principles of Marketing: An
Global Perspective. [pp. 305-328]. South Asia: Pearson Education.

Websites
1. Type of Channel Members (2010). Retrieved December 07, 2017, from
knowthis.com website: http://www.knowthis.com/distribution-
decisions/type-of-channel-members

2. Distribution Systems (2010). Retrieved December 07, 2017, from

knowthis.com website: http://www.knowthis.com/principles-of-marketing-
tutorials/distribution-decisions/distribution-systems/
 B216 Marketing

Channel Intermediaries

Wholesalers

 They break down 'bulk' into smaller packages for resale by a retailer.
 They buy from producers and resell to retailers. They take ownership or 'title' to
goods whereas agents do not (see below).
 They provide storage facilities. For example, cheese manufacturers seldom wait
for their product to mature. They sell on to a wholesaler that will store it and
eventually resell to a retailer.
 Wholesalers often reduce the physical contact cost between the producer and
consumer e.g. customer service costs, or sales force costs.
 Example: a wholesaler can buy in bulk tea leaves from the tea plantations, then
break the tea leaves into smaller cartons to sell to tea distributors.

Distributors

 Wholesalers who carry only non-competing goods or lines are called distributors.
 Distributor also break bulk but along with that they offer value added service to
the product such like break bulk delivery, *credit terms and maintenance contract
 Usually wholesalers pass the product to distributors who add on value-added
services before passing them to retailers
 Example: distributor could further break up the tea leave cartons into smaller
cartons and then sell to retailers like Giant, Cold Storage, or to restaurants or
cafes.

© 2017 RP/SMC/Sem2/WWS Page 1

 B216 Marketing

Agents

 Agents are mainly used in international markets.

 Selling agent has contractual authority to sell a manufacturer’s output.
 An agent will typically secure an order for a producer and will take a commission.
They do not tend to take title to the goods. This means that capital is not tied up
in goods. However, a 'stockist agent' will hold consignment stock (i.e. will store
the stock, but the title will remain with the producer. This approach is used where
goods need to get into a market soon after the order is placed e.g. foodstuffs).
 Agents can be very expensive to train. They are difficult to keep control of due to
the physical distances involved. They are difficult to motivate.
 Example: a tea plantation in Cameron Highlands looks for their local agent who
has international contacts to try to look for wholesalers or distributors in other
countries.

Retailers

 Retailers will have a much stronger personal relationship with the consumer.
 The retailer will hold several other brands and products. A consumer will expect
to be exposed to many products.
 Retailers will often offer credit to the customer e.g. electrical wholesalers, or
travel agents.
 Products and services are promoted and merchandised by the retailer.
 The retailer will give the final selling price to the product.
 Retailers often have a strong 'brand' themselves e.g. Wall-Mart in USA, and
Giant in Singapore

Internet Intermediaries (Websites)

 This is a new entity not usually found in traditional channels.

 The Internet has a geographically disperse market.
 Internet may be used as a direct channel of distribution (own website) but also
indirect (using intermediaries) such as niche websites like Amazon.com, etc.
 The main benefit of the Internet is that niche products reach a wider audience
 There are low barriers to entry as set up costs are low.
 Use e-commerce technology (for payment, shopping software, etc.)
 There is a paradigm shift in commerce and consumption which benefits
distribution via the Internet

© 2017 RP/SMC/Sem2/WWS Page 2

 B216 Marketing

*Credit terms – ie, distributor offers retailers a period of 3 to 6 months to pay for the
goods that retailers buy from them.

Adapted from:

1. Types of Channel Intermediaries (n.d.). Retrieved December 07, 2017, from the
marketingteacher.com website: http://www.marketingteacher.com/marketing-place/
2. Kotler, P., & Armstrong, G. (2014). Principles of Marketing (14th ed.) [pp. 362-425].
England, Pearson Education.

© 2017 RP/SMC/Sem2/WWS Page 3

Channel Design Decisions

For maximum effectiveness, channel analysis and decision making should be more purposeful.
Marketing channel design calls for 1.analyzing consumer needs, 2.setting channel
objectives, 3.identifying major channel alternatives, and 4.evaluating them.

1. Analysing Consumer Needs

Designing the marketing channel starts with finding out what target consumers want from the
channel. Providing the fastest delivery, greatest assortment, and most services may not be
practical or possible. The company and its channel members may not have the resources or
skills needed to provide all the desired services. Also, providing higher level of service results in
higher costs for the channel and higher prices for consumers. The company must balance the
needs not only against the feasibility and costs of meeting these needs but also against
customer price preferences.

2. Setting Channel Objectives

Companies should state their marketing objectives in terms of targeted levels of customer
service. Usually, a company can identify several segments wanting different levels of service.
The company should decide which segments to serve and the best channels to use in each
case. In each segment, the company wants to minimize the total channel cost of meeting
customer-service requirements.

3. Identifying Major Alternatives

When a company has defined its channel objectives, it should next identify its major channel
alternatives in terms of types of intermediaries, number of intermediaries, and responsibilities of
each channel member.

Types of Intermediaries

A firm should identify the types of channel members available to carry out its channel work.
Most companies face many channel member choices. Using many types of resellers in a
channel provides both benefits and drawbacks. By selling through retailers and value added
resellers, in addition to the company’s direct channel, the company can reach more and
different kinds of buyers. However, the direct and indirect channels will compete with each
other for many of the same customers, causing potential conflict.

Number of Marketing Intermediaries

Companies must also determine the number of channel members to use at each level. Three
strategies are available: intensive distribution, exclusive distribution, and selective
distribution. Producers of convenience products and common raw materials typically seek
intensive distribution – a strategy in which they stock their products in as many outlets as
possible. By contrast, some producers purposely limit the number of intermediaries handling
their products. The extreme form of this practice is exclusive distribution, in which the producer
gives only one dealer the exclusive right to distribute its product in their territories. Exclusive
distribution is found in the distribution of luxury automobiles and prestige women’s clothing.
Between intensive and exclusive distribution lies selective distribution – the use of more than
one, but fewer than all, of the intermediaries who are willing to carry a company’s product.

Responsibilities of Channel Members

The producer and intermediaries need to agree on the terms and responsibilities of each
channel member. They should agree on price policies, conditions of sales, territorial rights,
and specific services to be performed by each party

4. Evaluating Major Alternatives

Suppose a company has identified several channel alternatives and wants to select the one that
will best satisfy its long-run objectives. Each alternative should be evaluated against economic,
control, and adaptive criteria.

Using economic criteria, a company compares the likely sales, costs, and profitability of different
channel alternatives. The company must also consider control issues. Using intermediaries
usually means giving them some control over the marketing of the product, and some
intermediaries take more control than others. Other things being equal, the company prefers to
keep as much control as possible. Finally, the company must apply adaptive criteria. Channels
often involve long term commitments, yet the company wants to keep its channel flexible so that
it can adapt to environmental changes.

Criteria Description Description

Economic • Compares the likely sales, costs, and profitability of different channel
alternatives
• Evaluates level of investment needed, channel efficiency in
reaching customers, logistic efficiency etc

Control • Ability to control marketing activities, service levels and access end
consumers
• Using intermediaries usually means giving them some control over
marketing of the product and some intermediaries take more
control than others
• Evaluate level of control over marketing activities, control over
service levels, access to end consumers etc

Adaptive • Ability to keep channel flexible so that it can adapt to environmental

changes
• Channel often involves long term commitments and cannot be
changed easily
• Evaluate cost incurred when making changes to channel

Adapted from Kotler, P., & Armstrong, G. (2012). Marketing Channels: Delivering Customer Value. Principles of
Marketing (14th ed.) [pp. 375-378]. Upper Saddle River, New Jersey: Pearson Education.
 6th Presentation
Marketing Research and Managing Marketing
Information
Content Page
 Learning Outcomes
 Company and Product Background
 Micro and Macro Environment
 SWOT Analysis
 Competitor Analysis + Perceptual Map
 Marketing Objectives
 Market Research
 Target Market Analysis
 What Do We Do Next?
 Marketing Mix (Product, Price, Place, Promotion)
 Conclusion
Learning Outcomes
1. Apply marketing theories and concepts to prepare
marketing plan

2. Identify and select the appropriate target market

3. Develop marketing mix (4Ps) with marketing

communication plan

4. Illustrate the use of a financial budget for a marketing

plan
Problem Analysis
Samsung is not sure
The Samsung Gear 360 Need to formulate a
how to market its Gear
camera was launched in marketing plan for
360 camera to youths in
Singapore in April 2016. Samsung.
Singapore

What are marketing mix

strategies to consider?

What marketing
What is the What would make communication plan
awareness level the Samsung Gear should we adopt?
and market 360 camera
potential amongst appeal to
the youth? Singapore youth? What financial budget
plan to implement?
Company and Product Background
1. Samsung Electronics has grown into a global information
technology leader, managing more than 200 subsidiaries
around the world.
2. Samsung offers home appliances such as TVs, monitors,
refrigerators, and washing machines as well as key mobile
telecommunications products like smartphones and
tablets.
3. The Gear 360 is a 360 degree camera produced in the
Samsung Gear family of devices
4. The camera works with all phones that can run the
required application
Micro Environment
Micro-environment
• Company : Samsung is an iconic
electronics brand. The Company
• Supplier : Packaging material
• Marketing intermediaries :
Customers Suppliers
 Retailers like Challenger, Best
Denki, Courts
• Customers : People who love to take Marketing
pictures and videos in 360 degrees Marketing
Publics intermediari
• Competitors : LG 360, Ricoh, 360 Fly, es
VSN
• Publics : Bloggers, media, Competitors
photography enthusiasts etc.
Macro Environment (PESTLE)

Political Singapore government is stable, with little / no political unrest,

high political transparency and low corruption

Economic Singapore has a highly developed trade-oriented economy, is

the world’s easiest place to do business, and is attractive as an
investment location

Socio-Cultural There is increasing interest amongst youths in videos and

pictures with a 360-degree coverage

Technological Singapore has good infrastructure and technological advances

that can help companies reach out to its customers easily.

Legal Low corporate tax for foreign companies that set up business
in Singapore.

Environmental No natural disasters in Singapore. Government emphasises on

‘green ticks’ eco-friendliness.
SWOT Analysis
Strengths (S) SWOT Opportunities (O)
• Established brand name in electronics (S1) • Teens like taking pictures and videos and
• Good product design (S2) posting about them (O1)
• Strong financial standing (S3) • High spending power of consumers (O2)
• Affordable (S4) • Consumers receptive to new brands (O3)
• Application is compatible with many smartphones • Increasing interest about 360 degree images
(S5) and videos (O4)
• Easy to use (S6)

• Does not record in true 4K (W1)
• Disappointing video quality(W2)
• Battery life is not as long as the first
generation (W3) 360 degree cameras due to
smaller size
• Competitors such as LG, Ricoh, VSN (T1),
360 FLY
• Demand and awareness level is low (T2)

Weaknesses (W) Threats (T)

Recommended SWOT Strategies
Strengths (S)
Opportunities SO
(O)
Use Samsung’s strong
financial standing (S3) to
advertise on social media the
benefits of its Gear 360
camera to target the
increasing number of
Singaporean youths (O1)
keen in taking and posting
their pictures and videos
Threats (T) ST
Advertise the better pricing of
the Gear 360 (S4) to
overshadow competitors (T1)
like GoPro
Weaknesses (W)
WO
Overcome the weakness of
poor video quality (W2) by
improving its quality to go
after the increasing number
of Singaporean youths (O1)
keen in taking and posting
their pictures and videos
WT
Improve its battery life (W3)
to overcome its weakness to
counter its competitors (T1)
that may have longer battery
life
Competitor Analysis
Brand Gear 360 360FLY Ricoh Theta S LG 360 VSN Mobil V360

Price $340 - $400 $440 - $580 $525 - $620 $500 - $600 $490 - $630
range

Weight 130g 172g 125g 75g 230g

Size 100.6 x 61 x 46 x 44 x 130 x 23mm 30 x 97 x 56 x 102 x 56mm

46.3 x 12mm 25mm
45.1mm

Compatib iOS and iOS and android iOS and android iOS and iOS and android
ility android android

Mexapixe 15MP 16 MP 14 MP 13 MP 16 MP
ls
 High Price

Low Quality High Quality

(megapixels) (megapixels)

Low Price

Perceptual Map (Price and Quality)

Marketing Objectives
Marketing Objectives:

 Assess current awareness level and market potential of Gear

360 amongst youths

 Recommend ways to market Gear 360 to the youth segment

Positioning
Positioning
Differentiator: i) Good product design ii) Affordability

Positioning Statement
To youths with a budget constraint and keen on 360 degree
cameras, Samsung Gear 360 is a camera offering 360 degree
recording that is optimally designed so you can have 360 degree
images at an affordable price.
Segment
Brand
Concept
Differentiator
Link
Market Research
Example

Findings from questionnaire survey on Gear 360 camera for 100

respondents from 15 – 35 year old
Market Research
Example
Target Market Analysis
Group Demographic Psychographic Behavioral
The Young & •Age: 15 to 23 years • Conscious of what •Exhibits little loyalty
Funky old others think of them for brands
•School going •Trendy •Likes taking pictures
•Mainly secondary or •Loves photography and videos several
post-secondary school and videography times a week
education •Keen interest in
•Allowance: $300 – fashion, sports, music
$500 monthly •Always on social
•Almost equal mix of media
males and females

The Young •Young adults •Status-conscious •Takes pictures for

Wannabes •Age: 24 to 35 years •Working class both work and leisure
old •Believes in latest •Wants a camera that
•Income: $1,200 to trends produces quality
$2,000 monthly •Interested in travelling pictures and videos
•Mostly unmarried •Likes to follow
•Newly employed bloggers to keep up
•Fresh graduates with latest happenings
•Prefers online
shopping
Target Market Analysis
Group Demographic Psychographic Behavioral
The Young & •Age: 15 to 23 years • Conscious of what •Exhibits little loyalty
Funky old others think of them for camera brands
•School going •Trendy •Likes taking pictures

SECONDARY
•Mainly secondary or
post-secondary school
•Loves photography
and videography
and videos several
times a week

TARGET
education
•Allowance: $300 –
•Keen interest in
fashion, sports, music
$500 monthly •Always on social
•Almost equal mix of media
males and females

The Young •Young adults •Status-conscious •Takes pictures for

Wannabes •Age: 24 to 35 years •Working class both work and leisure
PRIMARY
old •Believes in latest •Wants a camera that
•Income: $1,200 to trends produces quality
TARGET
$2,000 monthly •Interested in travelling pictures and videos
•Mostly unmarried •Likes to follow
•Newly employed bloggers to keep up
•Fresh graduates with latest happenings
•Prefers online
shopping
What do we do NEXT?
Based on the
analysis, there are SWOT
ample opportunities Analysis
for Samsung to
target the youth

Gear 360 is
positioned as
“Good Value”
There are 2
consumer
Target
Market
Gear Competitor to counter
Analysis their
groups, that is
younger youth
Analysis 360 competitors
aged 15 to 23
years old and
older youth
aged 24 – 35
years old Favourable
Macro & considerations for
Micro Samsung to target the
Environment youth
What do we do NEXT?
Based on the
analysis, there are SWOT
ample opportunities Analysis
for Samsung to
target the youth

Here is the comprehensive Gear 360 is

positioned as
There are 2
Marketing
Target
Plan
Gear with specific “Good Value”
to counter
proposals an Advertising
for360
consumer Competitor
Market Analysis their
groups, that is Analysis competitors
younger youth
aged 15 to 23
Campaign for 3 months proposed
years old and
older youth
for Samsung
aged 24 – 35
years old Favourable
Macro & considerations for
Micro Samsung to target the
Environment youth
Marketing Mix

Product Price

Marketing
Mix
Place Promotions
Marketing Mix - Product
Improvements / New product ideas:
● Shatter-proof camera
● Sharper 4K resolution
● Longer battery life
● Have software that allows transfer to personal
computer or laptop
● Improve its recording in low light
Product Life Cycle
● PLC stage: Growth
 Digital camera sales are rising in Singapore*
 Buyers are the early adopters
 Increasing number of competitors with new ones still
entering market
 Companies are attempting to grow and maximise
market share
● Product Type/Category : Shopping product
 Not bought as often as convenience Products
 Customers compare and spend time doing research
 Customers are price sensitive
 There is medium to high consumer involvement
Product Levels

Core Product:
Capturing moments
Creation of expression

Actual Product:
Brand: Samsung Gear 360
Dual fisheye lens
Dual cam video (2840x1920)
32-64GB internal storage
MicroSD slot with adaptable storage

Augmented Product:
Free training services
Home delivery option
Customer care helpline
Marketing Mix - Price
Price
High Low

Premium Good Value

High
Strategy Strategy
Quality

Overcharging Economy
Low
Strategy Strategy
Marketing Mix - Price
Price Adjustment Strategies

 Segmented pricing (eg offer students a special pricing)

 Psychological pricing (eg $299 vs $300)
 Discount and allowance pricing (eg Samsung can given retailers
30% discount for bulk purchase of 200 or more units per month)
Marketing Mix – Place (Distribution)
Distribution options:

 Direct distribution
 Sell via own retail stores
 Sell online via Samsung website

 Indirect distribution
 Distribute through major electronic retailers in Singapore
Marketing Mix – Promotions
Target Identification

Objectives Setting

Budget
BudgetDecisions
: $1.2million

Message Decisions Media Selection

Marketing Mix – Promotions
Target Identification
The Young and Funky (Primary) & The Young Wannabes

Informative advertising
Objectives
(Create Setting
awareness of product)

Budget
BudgetDecisions
: $1.2million

Message Decisions Media Selection

Advertising Strategy
Marketing Mix – Promotions
Rationale for recommended media :
New Media is more suitable. Social media websites such as
Facebook and Youtube are more relevant to the youth and can
promote more effectively reach out to both age groups (15 – 23, 24
– 35 year olds) that use social media frequently.

Traditional Media is also applicable. Outdoor advertising can

attract the youths via advertisements on buses and mrt trains.
• The advertisement can feature the location of the stores where the
Gear 360 is available.
Marketing Mix – Promotions
Digital Marketing Platforms for the youth

Social Blogging Pay Per Click

Network

Email Content Corporate Video

Marketing Marketing Website Marketing

Mobile Kiosk
Interactive TV
Marketing Marketing

Propose to Samsung to use advertising space on social networks such as

Facebook, Instagram and Youtube
Marketing Mix – Promotions
Recommended Media Budget Allocation
----New ---- -Traditional media-

FIRST 3 MONTHS

Media Proposed Type Est. Budget

Buses CBD routes 10 routes 60000
Routes in heartland estates 20 routes 105000
MRT Trains North South / East West / 16 trains 300000
Circle and Downtown Lines
Search Engines Web Banner Yahoo and Google 25000

Social Media Facebook @$500 per 30000

advertisement
Social Media Youtube Pay per view @ $0.30 30000

Social Media Instagram @$500 per 30000

advertisement
580,000
Marketing Mix – Promotions
Consumer Sales Promotions:
 Promotional price of 25% discount off retail selling price for
students who show their matriculation card

 Price pack
 Bundling purchase of Samsung Gear 360 and VR at special
price

Trade Sales Promotions:

 Price off of 10% for bulk purchases by retailers

 Sponsor in-store retail POP materials for display

 Give advertising allowance to retailers who advertise Samsung

products in their advertisements
Marketing Mix – Promotions
Sales Force Sales Promotions:

 Free incentive trips to any destination in Europe for top 3

salespersons

 Offer a higher commission over market rate for sales person

 Offer additional 5% commission for entire sales team if the sales

volume exceed target by 20%

 Free Samsung merchandise for staff to create brand awareness

and encourage word of mouth to friends and family
Marketing Mix – Public Relations
Public Relation Tools

Special Events
Community
Media Attract public and Relations
Relations media attention by and
creating a special Sponsorship Philanthropy
Send press kits event where
and invite extreme sports Be the main For every
media to review enthusiasts are sponsor for $400 worth of
the Gear VR invited to post their Singapore’s Samsung
with videos most exciting Spartan race items bought,
captured by the videos and the $2 will be
Gear 360 most popular one donated to
camera wins a Samsung the charity.
prize.
Online Banner
Conclusion
 Although many factors contribute to a business doing well,
successful companies share a strong consumer focus.

 The marketing mix is dependent on the understanding of the

target market selected.

 We need to ensure that all marketing activities revolve

around the consumer (consumer-centric).

 Each of the 4Ps needs to work in tandem with one another

to create an integrated communication exercise.
Resources
RESOURCES / REFERENCES

Websites
 Strategic Marketing Plan. (n.d.). Retrieved on 27 Dec 2017 from businessplans website:
http://www.businessplans.org/Market.html
 Marketing Tutorials – KnowThis.com. (n.d.) Retrieved on 27 Dec 2017 from
https://www.knowthis.com/how-to-write-a-marketing-plan
 Samsung website. Retrieved 27 Dec 2017 from Samsung website:
http://www.samsung.com/sg

Textbooks
 Bearden, W., Ingram, T. and LaForge, R., Marketing Principles and Perspectives, 5th
Edition, McGraw-Hill/Irwin, 2007
 Kotler, P., Marketing Management, 11th Edition, Prentice Hall, 2005
 Shimp, T., Integrated Marketing Communications in Advertising and Promotion, 7th Edition,
Thomson South-Western, 2007
 Hartley, R., Marketing Mistakes and Successes, 10th Edition, Wiley, 2006
 Ang, S.H., Gu, Y., Lau, G.T., Leong, S.M., Lwin, M.O., Mohammed, A.R., Shamdasani,
P.N., Subrahmanyan, S. and Wirtz, J., Principles of Marketing, An Asian Case Book,
Prentice Hall, 2000
Branding
• Explain the concept of brand identity
• Identify the role and importance of
branding and brand equity to a company
• Evaluate the factors affecting brand
equity
• Evaluate ways to enhance brand equity
• Identify ethical issues involving branding
 They are
These companies Their brands have continuously Factors that can
are all targeting evolved over the working to affect its brand
the youth market years improve their equity.
brand equity

Which industry How can they

What are some use these
are they from Why and how elements of
and what have their factors to
brand equity further
products/services brands evolved that they have
do they have for over time? improve their
worked on? brand
the youth?
Brand
A name, term, sign, symbol, design or a
combination of these that identifies
the products or services of one seller or
group of sellers and differentiates
them from those of competitors

Brand identity
Is the visual and verbal articulation of a
brand, including all pertinent design
applications, such as logo, typography,
colour, imagery, business cards,
letterhead, or packaging.
The set of human characteristics associated with a given brand
A set of assets linked to a brand’s name & symbol that adds to the value
provided by a product to a firm and/or that firm’s customers.
TO THE FIRM
Premium Price Charging
e.g. price for burgers
Competitive Advantage
e.g. more negotiation power
Easier Access to Markets
e.g. penetrate China easier
than competitors
Premium Product
Placement
e.g. greater opportunity to
secure movie placement
Launch Brand Extension
e.g. McCafe
TO THE CUSTOMER
Reduces Search Cost
e.g. fast food = McDonald’s
Reduces Risk
e.g. consumers know they
will get what they pay for.
No surprises!
Simplifies Decision Making
e.g. McDonald’s comes out
on top of mind recall
Provides Predictable
Quality
e.g. consumers know that
McDonald’s products are
consistent in quality.
1st Element

It refers to anything “linked” in memory to a brand. It is the images, symbols

and attributes of a brand which comes to a consumer’s mind when the brand
is talked about.
Elements of Brand Association

Character – Ronald McDonald

Consumer segment – Kids

Product characteristics – Fast food, service
Symbol – Golden Arches

Strategies for achieving Brand Association

Be consistent over time (i.e. branding and quality)
Establish a brand identity or symbols that signify the brand or product
 Involvement in high profile event sponsorship which cater to the same target
market
Create strategic alliance and partnerships of similar brand category
 2nd Element

It is the extent to which a potential buyer is able to recognise or recall

that a brand is a member of a certain product category
High
The first brand that comes to consumer’s mind when its
Top of Mind product class is mentioned
Unaided recall. The set of brands that a consumer will
Level of Brand Recall consider when a particular product class is mentioned
awareness
Aided recall. The ability to identify a familiar brand
Brand Recognition when given the product category and a list of brands

Low Unaware of brand *Note: Brand

Awareness is when
The Awareness Pyramid people recognise the
brand as yours. This
does NOT necessarily
Strategies for achieving Brand Awareness mean they associate
 Differentiation any superior
attributes to your
 Repeat exposure
brand (i.e. brand
 Strategic location (i.e. good visibility/ accessibility) association). It just
 Integrated marketing communications (i.e. advertising, means consumers are
direct marketing, sales promotions, etc.) able to identify your
brand under different
conditions.
3rd Element

Customer’s perception of the overall quality or superiority of a product or

services with respect to its intended purpose, relative to alternatives.

Compare these
three brands:

Strategies for achieving Perceived Quality

Improve the appearance or look of the product
Ensure consistent and good performance
Benchmark against major brands
Minimise risk of purchase
4th Element

A measure of attachment that a customer has to a brand

• Core of a brand’s equity

• Reflects how likely a customer will be to switch to
another brand, especially when that brand makes a change
either in price or product features
• Directly translates to future sales and profits

Strategies for achieving Brand Loyalty

Stay connected with customers (i.e. build relationships)
Manage customer satisfaction
Have good publicity
Create switching costs
• Ethics refers to moral rules or principles of behaviour for
deciding what is right and wrong
• Ethical branding enhances the firm’s reputation and could
provide the company with a differential advantage as a
growing number of consumers are becoming more ethically
conscious.

• The following are some examples of branding strategies which

may be ethically questionable:
 Targeting at children as young as five years old who are impressionable;
 Alcoholic soft drink advertising encouraging under-age drinking;
 False and misleading advertising.

• A brand needs to be evaluated not just by the

economic or financial criteria but also by the moral ones.
• An ethical brand should not harm public good; instead
it should contribute to or help promote public good.
Issues
• Negative association with ill-reputed celebrities or
celebrities linked to scandals
• Negative association with undesirable situation or
circumstances
• Weak brand association formed with desirable
attributes

Recommendations
.
• Disassociate or terminate contract with affected
celebrity spokesperson
• Highlight association with reputable or desirable
attributes whenever possible
 Issues
• Consumers are unware of brand
• Even if they are aware, it might not be
at the top of the mind recall of its
consumers

Recommendations
Top of Mind • Differentiate brand from other
brand out in the market
Brand Recall • Repeat exposures (eg. Event
posters, outdoor advertising etc)
Brand Recognition to increase familiarity and help
brand recall
Unaware of brand
Issues
• Consumers are unsure of the quality of the product
• Quality perceived to be bad due to eg. country of
origin or packaging

Recommendations
• Offer money back guarantees
• Long warranty period gives consumers reassurance
that quality is good
• Change to better packaging
• Do quality test versus competitors (eg taste test)
Issues
• Many alternatives in the market for the product or
services
• Low switching cost

Recommendations
• Differentiate product or services from competitors or
offer value added services
• Increase the switching cost for customers
• Give customers incentives for staying with you eg have
a customer loyalty programme, VIP club
 To achieve strong brand equity, the 4 elements of brand
awareness, perceived quality, brand loyalty and brand
associations must work together.
 The resulting effect of one of the 4 components will have a
positive or negative effect on the others.
 Companies need to nurture their brands into sustainable equity
to compete.
 Brand relationships drive corporate results.
Brand Identity
Brand Personality
Brand Equity
Recommended Textbooks
 Kotler, P., & Armstrong, G. (2012). Products, Services, and Brands:
Building Customer Value, Principles of Marketing (14th Ed.) (pp
267-276). Pearson.
 Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yau,
O. (2011). Product, Services and Branding Strategy, Principles of
Marketing: An Asian Perspective. (3rd Ed.) (pp. 419-447)
Singapore: Pearson

Reference Textbooks
 Keller, K.L. (2003). Strategic Brand Management: Building,
Measuring, and Managing Brand Equity (2nd edition). Upper Saddle
River, N.J: Prentice Hall.
 Aaker, D. (1996). Building Strong Brands. New York : Free Press.
 Whitwell, S. (2005). Ingredient branding case study: Intel. Retrieved 6 December
2016, from the Intangible business website:
http://www.intangiblebusiness.com/Brand-services/Marketing-
services/News/Ingredient-branding-case-study-Intel~466.html (website no longer
available)

 Brandz Top 100 most valuable global brands 2017. Retrieved 30 December 2017,
from Millwardbrown Optimor website: http://www.millwardbrown.com/mb-
global/brand-strategy/brand-equity/brandz/top-global-brands

 Meskauskas, J. (2005). Media Maze: Neuromarketing, Part I. Retrieved 30

December 2017, from imedia connection website:
http://www.imediaconnection.com/articles/ported-articles/red-dot-
articles/2005/jul/media-maze-neuromarketing-part-i/

 Ethical Branding and Corporate Reputation. Corporate Communications: An

International Journal, Volume 10, Number 4 (2005), pp. 341-350(10). 30 December
2017, from Brunel University London website:
http://bura.brunel.ac.uk/bitstream/2438/1283/3/Ethical+branding.pdf
What is Brand Equity?

A brand is a name or symbol used to identify the source of a product. When developing a
new product, branding is an important decision. The brand can add significant value when it
is well recognized and has positive associations in the mind of the consumer. This concept is
referred to as brand equity.

Brand equity is an intangible asset that depends on associations made by the consumer.
There are at least three perspectives from which to view brand equity:

 Financial - One way to measure brand equity is to determine the price premium that a
brand commands over a generic product. For example, if consumers are willing to
pay $100 more for a branded television over the same unbranded television, this
premium provides important information about the value of the brand. However,
expenses such as promotional costs must be taken into account when using this
method to measure brand equity.

 Brand extensions - A successful brand can be used as a platform to launch related

products. The benefits of brand extensions are the leveraging of existing brand
awareness thus reducing advertising expenditures, and a lower risk from the
perspective of the consumer. Furthermore, appropriate brand extensions can
enhance the core brand. However, the value of brand extensions is more difficult to
quantify than are direct financial measures of brand equity.

 Consumer-based - A strong brand increases the consumer's attitude strength toward

the product associated with the brand. Attitude strength is built by experience with a
product. This importance of actual experience by the customer implies that trial
samples are more effective than advertising in the early stages of building a strong
brand. The consumer's awareness and associations lead to perceived quality,
inferred attributes, and eventually, brand loyalty.

Price premium
above generic
products

FINANCIAL

STRONG
BRAND VALUE
CONSUMER- BRAND
BASED EXTENSIONS

Increases the consumer's Launch related

attitude strength toward products
the associated product

Reduces
Leads to perceived advertising
quality, inferred costs and risks
attributes, and brand
loyalty
Adapted from source: Brand Equity. (n.d.). Retrieved on 25 Dec 2017 from website
http://www.netmba.com/marketing/brand/equity/
Brand Associations

Brand Associations are not benefits, but are images and symbols associated with a brand or
a brand benefit. For example - The Nike Swoosh, Nokia sound, McDonald’s golden ‘M’
Arches, Blue colour with Pepsi, etc. Associations are not “reasons-to-buy” but provide
acquaintance and differentiation that’s not replicable. It is relating perceived qualities of a
brand to a known entity. For instance - Hyatt Hotel is associated with luxury and comfort;
BMW is associated with sophistication, fun driving, and superior engineering. Most popular
brand associations are with the owners of the brand, such as - Bill Gates and Microsoft,
Apple and Steve Jobs.

Brand association is anything which is deep seated in a customer’s mind about the
brand. Brand should be associated with something positive so that the customers relate
your brand to being positive. Brand associations are the attributes of a brand which come
into consumers mind when the brand is talked about. It is related with the implicit and
explicit meanings which a consumer relates/associates with a specific brand name. While
choosing a brand name, it is essential that the name chosen should reinforce an important
attribute or benefit association that forms its product positioning.

Brand associations are formed on the following basis:

 Customer’s contact with the organisation and its employees;

 Advertisements;
 Word of mouth publicity;
 Price at which the brand is sold;
 Celebrity/big entity association;
 Quality of the product;
 Products and schemes offered by competitors;
 Product class/category to which the brand belongs;
 POP ( Point of purchase) displays; etc

Positive brand associations are developed if the product which the brand depicts is durable,
marketable and desirable. The customers must be persuaded that the brand possess the
features and attributes satisfying their needs. This will lead to customers having a positive
impression about the product. Positive brand association helps an organization to gain
goodwill, and obstructs the competitor’s entry into the market.

Adapted from: Management Study Guide (2016) Retrieved 25 Dec, 2017, from website:
http://www.managementstudyguide.com/brand-association.htm
Aaker’s Four Dimensions of Brand Equity
Source:

Dimitrov, Silvana (2008). Brand Origin and Product Characteristics Effects on Corporate Versus Product Brand Equity
in B2B Markets. Gordon Institute of Science, University of Pretoria. Retrieved on 25 Dec 2017, from University of
Pretoria website: http://repository.up.ac.za/bitstream/handle/2263/23124/dissertation.pdf?sequence=1
 B216 Marketing

PBL PROBLEM PRE-CLASS READING

The 5 Dimensions of Brand Personality

Consumers make purchasing decisions based on any number of associations they have
with individual brands, and companies spend millions on advertising and marketing activities
so that they can influence what those associations might be. Just as we each choose our
friends based on their personalities, brands can elicit the same sort of response in
consumers. In light of this, wouldn’t it be interesting to know which human personality traits
consumers tend to apply to brands?

Personality can be a useful variable in analysing consumer brand choices. The idea is that
brands also have personalities, and that consumers are likely to choose brands whose
personalities match their own. We define brand personality as the specific mix of human
traits that may be attributed to a particular brand

The Brand Personality Dimensions of Jennifer Aaker (Journal of Marketing Research, 8/97,
pp 347-356) is a framework to describe and measure the “personality” of a brand in five core
dimensions, each divided into a set of facets. It is a model to describe the profile of a brand
by using an analogy with a human being. It's imperative that a brand be carefully
"humanized" in order to connect with the audience. In her paper Dimensions of Brand
Personality, Jennifer Aaker has identified 5 brand personalities.

THE FIVE CORE DIMENSIONS AND THEIR FACETS

Personality Facet
Sincerity down-to-earth, honest, wholesome, cheerful
Excitement daring, spirited, imaginative, up-to-date
Competence reliable, intelligent, successful
Sophistication upper class, charming
Ruggedness outdoorsy, tough

© 2017 RP/SMC/Sem2/WWS Page 1

 B216 Marketing

Adapted from

1. Friend, C. (2010) in Brand Builders, Brands, External, Internal, Movers and Shakers,
Resources, Strategy . Retrieved 30 Dec 2016, from Fuelourbranding website:
http://www.fuelyourbranding.com/the-5-dimensions-of-brand-personality/ (website no
longer available)

2. Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yau, O. (2003) Analysing
Consumer Markets and Buyer Behaviour, Principles of Marketing: An Asian Perspective
(3rd Ed.).[pp 182-183] Singapore: Pearson/Prentice-Hall.

© 2017 RP/SMC/Sem2/WWS Page 2

 BRAND EQUITY

Brand equity is a set of assets (and liabilities) linked to a brand’s name and symbol
that adds to (or subtracts from) the value provided by a product or service to a firm
and/or that firm’s customers.

The major asset categories (elements) are:

1. Brand Awareness

Brand awareness is the ability of a potential buyer to recognise or recall that a

brand is a member of a certain product category. This does not necessarily
mean they prefer your brand (brand preference), attach a high value to, or
associate any superior attributes to your brand (brand association). It just
means that they recognise your brand and can identify it under different
conditions.

People will often buy a familiar brand because they are comfortable with the
familiar. A recognised brand will thus often be selected over an unknown
brand. The lowest level brand recognition, is based upon an aided recall test.
For example, for search engines, you would usually think of Google first.
Other brands that you will also consider, e.g. Yahoo, Bing, AskJeeves.

Strategies for achieving Brand Awareness

 Differentiation
 Repeat exposure
 Strategic location (i.e. good visibility/ accessibility)
 Integrated marketing communications (i.e. advertising, direct
marketing, sales promotions, etc.)

2. Perceived Quality

Perceived quality is defined relative to an intended purpose and a set of

alternatives. Thus, a Cold Storage outlet will be judged on a different set of
criteria as compared to ShengSiong or NTUC because they do not deliver the
same quality merchandise, and the same store ambience as Cold Storage.

Strategies for achieving Perceived Quality

 Improve the appearance or look of the product

 Ensure consistent and good performance
 Benchmark against major brands
 Minimise risk of purchase
 3. Brand Loyalty

Brand Loyalty is the extent of the faithfulness of consumers to a particular

brand, expressed through their repeat purchases, regardless of the marketing
pressure generated by the competing brands. With brand loyalty, it
establishes consumers’ relationships with brands. Strong relationship means
better sales.

Strategies for achieving Brand Loyalty

 Stay connected with customers (i.e. build relationships)

 Manage customer satisfaction
 Have good publicity
 Create switching costs

4. Brand Associations

A brand association is anything “linked” in memory to a brand. It is the

images, symbols or attributes of a brand which come to a consumer’s mind
when the brand is talked about. For example, McDonald’s could be linked to a
character such as Ronald McDonald, a consumer segment such as kids, a
feeling such as having fun, a product characteristic such as service, a symbol
such as the Golden Arches, a life-style such as harried, an object such as a
car, etc.

Strategies for achieving Brand Association

 Be consistent over time (i.e. branding and quality)

 Establish a brand identity or symbols that signify the brand or product
 Involvement in high profile event sponsorship which cater to the same
target market
 Create strategic alliance and partnerships of similar brand category

Source: Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14th ed.). Singapore:
Pearson

---End---
 B216 Marketing
MK12 Gaping Gaps
6th Presentation
Part 1
Specific Learning Outcomes

• Identify the four characteristics of a

service that affect marketing decisions.

• Evaluate how service quality can be

improved to create strong brands by
covering the service gaps [using
SERVQUAL Model].

• Discuss ethical issues involving

services.
 Services Marketing

Service: An activity that is intangible and does not

result in ownership of anything

Pure Tangible Good Hybrid Service Pure

Tangible With Minor Offer With Minor Service
Good Services • Restaurant Goods • Teaching
• Salt • Air Con with (Experience • Flight with
installation with Food) Snacks

Product Service Continuum

 Key Service Concepts

Four Service Characteristics

• Which differentiate services from

products

Five Service Dimensions (SERVQUAL)

• Which are used for measuring

service quality
Services Characteristics

INTANGIBILITY INSEPARABILITY
• Services cannot be • Services cannot be
seen, tasted, felt, separated from their
heard or smelled providers
before purchase

VARIABILITY PERISHABILITY
• Quality of services • Services cannot be
depends on who stored for later sale
provides them and or use
when, where and
how

Kolter. P, Armstrong. G, Principles of Marketing, 2012

 Activity 1 – Team Discussion
You have been sitting in the waiting room in your doctor’s clinic for an hour. With the
knowledge that services marketing is quite different from products marketing, answer
the following questions:

Listed below are the four characteristics of services. Complete the table given below
by:
•Listing the drawbacks that each characteristic has on services.
•Suggesting strategies to overcome the drawbacks.
•Recommending how the doctor can overcome the drawbacks associated with
the service characteristics in order to enhance customer satisfaction.

One example has been done for your reference.

Service Drawback Strategies to Overcome Examples in context of

characteristics Drawback Doctor

Intangibility Services cannot be Communicate service Give assurance of doctors

touched, tasted, or quality by other means service by displaying his
seen.  qualifications /
certificates
 testimonials by patients/
medical association

Inseparability
Variability
Perishability
Service Quality Dimensions- SERVQUAL (RATER)
• Ability to perform the promised service
Reliability dependably and accurately

• Knowledge and courtesy of employees

Assurance and their ability to inspire trust and
confidence

• Appearance of physical facilities,

Tangibles equipment, personnel, and communication
materials

• Caring, individualized attention the firm

Empathy provides its customers

• Willingness to help customers and

Responsiveness provide prompt service

Grewal. D, Levy. M, Marketing, 2008

Example of Service Failures

Please watch the following video before

attempting the next activity
https://www.youtube.com/watch?v=03Vnp9AUuIs
 Discussion Question

Which service quality dimensions

did the store in the video fail to
meet?
 Ethical Considerations
The company should:

Communicate its services clearly.

Give customers the opportunity to ask questions before they

commit to purchasing your services.

Design price schedules that are clear, logical and fair

(No hidden charges)

Communicate clearly why the prices are at a premium

(higher price should translate to better service quality)
Activity 2 – Class Discussion

Please watch the following video before

attempting the next activity
https://www.youtube.com/watch?v=eFbvWmAM4nY
Activity 2 – Class Discussion

Do you think it is ethical for Ryan Air to

charge for the following items:

1. Seat Belts and its release

2. Oxygen

Why or why not?

 Tasks

Lecturer to upload the worksheet now.

Students are to work on Q1 from the worksheet (10 mins)

Lecturer to go through Q1 of the worksheet

 Resources
Recommended Textbooks

•Kotler, P., & Armstrong, G. (2012). Products, Services, and Brands: Building Customer Value, Principles of Marketing (14th ed.) [pp. 246-
281]. Singapore: Pearson.

•Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yau, O. (2005). Product, Services, and Branding Strategy, Principles of
Marketing: An Asian Perspective, [pp 218-224], Singapore: Pearson.

Reference Textbooks

•Lovelock, C., Wirtz, J. and Chew, P. (2009). Introduction to Services Marketing, Essentials of Services Marketing. [pp. 4-28]. Singapore:
Pearson

•Zeithaml, V. A., Bitner, M. J. and Gremler, D. D. (2009) Services Marketing – Integrating Customer Focused Across the Firm (5th ed.)
[Chapter 1, pp. 1-30; Chapter 2, pp. 31-46]. Singapore: McGraw Hill Irwin

Websites

•Service Quality. (n.d). Retrieved on 30 December 2017 from Quality Dimension website: http://ils.unc.edu/daniel/131/servicequality.html,

•The Gap Model. (n.d). Retrieved on 30 December 2017 from Effective Customer Service website: http://www.degromoboy.com/cs/gap.htm

•Henning, J. (2009) Service Quality Gap Model. Retrieved on 30 December 2017 from Vovici website:
http://blog.vovici.com/blog/bid/18271/Service-Quality-Gap-Model
 B216 Marketing
MK13 Gaping Gaps
6th Presentation
Part 3
Application to the Problem
Serenity Spa

“Strategies to fill gaps, improve service

dimensions and win back customers!”
 Problem Analysis
Serenity Spa is a
pioneer but losing out to
competitors.

There are ‘gaps’ in its

services as compared to
the competitors.

It needs to identify these

Service Quality Gaps
and close them

Tasks
* Suggest strategies to fill
service gaps
* Improve service
dimensions to win back
customers!
 Strategies to Overcome drawback of Service
Characteristics
INTANGIBILITY

• Issue: Services cannot be seen, tasted, felt, heard or smelt before purchase
• Strategy: Provide testimonials, tangibles

INSEPARABILITY

• Issue: Services cannot be separated from their providers, long waiting time
• Strategy: Schedule appointments, call to remind before the appointment and
recruit substitute masseurs in peak periods

VARIABILITY

• Issue: Quality of services depends on provider, inconsistent skills

• Strategy: Train staff to reduce variability and record customer preferences

PERISHABILITY

• Issue: Services cannot be stored for later sale or use

• Strategy: Ensure fair distribution of customers using off-peak promotions
Strategies to build Service Dimensions ( RATER Score Poor)
Reliability
• Issue: Staff is inconsistent in massage skills
• Strategy: Train staff

Responsiveness
• Issue: Long queues, do not attend to customers promptly
• Strategy: Set standards for staff to respond promptly

Assurance
• Issue: Staff is not able to explain package
• Strategy: Keep records , be courteous, knowledgeable, build trust

Empathy
• Issue: Do not give individual attention, do not remember names, hard sell
• Strategy: Treat them special, avoid probing/ hard-selling, allow them to relax

Tangibles
• Issue: Outdated décor, high tech equipment, clutter
• Strategy: Modernize décor, get latest equipment, share testimonials
 Gap 1: Knowledge Gap
Company
does not know
what customers
Customer’s expects Company’s
perception of
expectations these expectations

Outdated perception of
Expectations are now what customers expect as
different from what they they were based on
were 10 years ago customers’ feedback 10
years ago

Remedies
• Get customers to fill up feedback forms to know customers’ preferences
 Gap 2: Standards Gap
Management sets
incorrect service
standards/
guidelines
Company’s Company’s
Perception Standard

Sasha knew that customers Sasha did not specifically

like to be greeted by their inform her masseurs to
names greet all the customers by
their name

Remedies:
• Set standards that are aligned with current customers’ expectations and communicate
clearly to their staff
 Gap 3: Delivery Gap
Failure to ensure that
customers’ service
performance matches
required standards
Company’s Company’s
Standard Delivery

Consistent massage skills Massage skills are

inconsistent

Remedies
•Set and communicate Performance Standards
•Have effective recruitment and training policies
•Hire for attitude, train for skills
•Reward excellent staff.
 Gap 4: Communication Gap
Delivery
not as per
communication
Company’s Company’s
Communication Delivery

Promised to charge a Charge a different price

certain price for the service for the service advertised

Remedies
• Ensure that advertisements do not over-promise
• Communicate the types of service given clearly and ensure all staff know what is
communicated to customers and fulfill it.
 Gap 5: Customer Gap
Customers’
Perception is
below his
Customer’s Expectations Customer’s
Expectation Perception
(Before) (After)

Serenity Spa has been

around for decades and Poor perception as
reviews have been suggested by the drop in
relatively good. Customers’ business and feedback
expectation is high from her former customer

Remedies
• Fill each of the provider gaps
• Do not raise expectations by over promising
• Deliver what you promise, can under promise or over deliver but not overpromise and under
deliver
 Conclusion
Services are different from physical goods as they are
• Variable, Intangible, Inseparable, and Perishable (VIIP).
In order to measure service quality, we should refer to service quality
dimensions
• Reliability, Responsiveness, Assurance, Empathy, Tangibles
Sometimes, customers’ expectations are not met, and this is due to
Service Gaps which are grouped as:
• Customer Gap &
• Provider Gaps (Knowledge Gap, Standards Gap, Delivery Gap,
& Communication Gap)

In order to meet customer expectations (lessen the Customer Gap)

• the company must minimise the provider gaps.

 Concept Diagram
Service: An activity that creates value and provides benefits for customers at a
specific time.

Service Service
Service Gaps
Characteristics Dimensions

Customer Provider
gap gaps

Customer’s Knowledge
 Reliability expected gap
 Responsiveness service

 Assurance
FOUR
 Empathy Provider
Standards
gap
 Tangibles gaps add up
to the
Customer
Delivery gap
gap

Customer’s
perception of Communicati
service quality on gap
 Resources
Recommended Textbooks

•Kotler, P., & Armstrong, G. (2012). Products, Services, and Brands: Building Customer Value, Principles of Marketing (14th ed.) [pp. 246-
281]. Singapore: Pearson.

•Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yau, O. (2005). Product, Services, and Branding Strategy, Principles of
Marketing: An Asian Perspective, [pp 218-224], Singapore: Pearson.

Reference Textbooks

•Lovelock, C., Wirtz, J. and Chew, P. (2009). Introduction to Services Marketing, Essentials of Services Marketing. [pp. 4-28]. Singapore:
Pearson

•Zeithaml, V. A., Bitner, M. J. and Gremler, D. D. (2009) Services Marketing – Integrating Customer Focused Across the Firm (5th ed.)
[Chapter 1, pp. 1-30; Chapter 2, pp. 31-46]. Singapore: McGraw Hill Irwin

Websites

•Service Quality. (n.d). Retrieved on 30 December 2017 from Quality Dimension website: http://ils.unc.edu/daniel/131/servicequality.html,

•The Gap Model. (n.d). Retrieved on 30 December 2017 from Effective Customer Service website: http://www.degromoboy.com/cs/gap.htm

•Henning, J. (2009) Service Quality Gap Model. Retrieved on 30 December 2017 from Vovici website:
http://blog.vovici.com/blog/bid/18271/Service-Quality-Gap-Model
 B216 Marketing
MK13 Gaping Gaps
6th Presentation
Part 2
 Activity – Bon Qui Qui

Please watch the following video before

attempting the next activity
https://www.youtube.com/watch?v=jZkdcYlOn5M
 Activity

1. What kind of services do you expect when you patronize a fast

food joint like McDonalds? List them on the board.

2. Each team to identify what went wrong with the services

delivered by Bon Qui Qui at King Burger.

3. Each team to present 2 points on how the services delivered by

King Burger can be improved.

4. What is the implication to customer loyalty as a result of poor

service?
Specific Learning Outcomes

Evaluate how service quality can be

improved to create strong brands by
covering the service gaps [using Gap
Model].
Understanding Customers’ Expectations
The gap in the service quality is the difference between
Perceived Quality of the product and service and the
Customers’ Expectations

(i.e. the Customers’ expectation

Expected Service of the physical product and
service to be provided)

(i.e. the Customers’ perception

Perceived Service of the actual physical product
and service experienced)
 Key Service Concepts

The Gap Model

• Which are used for identifying the

difference between customer
expectations and the actual services
provided by the organisation
and improving the service by
closing the gap
 The Gap Model
CUSTOMER GAP PROVIDER GAPS
Knowledge gap

Not knowing what customers expect

Standards gap

Arises due to the four
provider gaps
Not meeting customers’
expectations, leads to poor
after service perception
Not setting the right service standards
Delivery gap
Not delivering as per the service
standards

Communication gap

Not matching performance to promises

 The Gap Model (Detailed)
CUSTOMER PROVIDER Customer’s expectations of service
GAP GAPS
Knowledge gap
Company’s perception of these
Customer’s
expectation of
expectations
service
Company’s perception of the
expectations on their service standards
Standards gap
Customer-driven service standards

Customer-driven service standards

Delivery gap
Service delivery by the company
Customer’s
perception of
service quality Communication gap Service delivery by the company

Company’s communications
 Gap 1: Knowledge Gap

Company
Customer’s does not know Company’s
what customers perception of
expectations these expectations
expect

I would like the Customer can wait

waiter to for 10 minutes
attend to me before our waiter
within 5 minutes attends to them

Causes
Remedies
• Failure to know the market
• Conduct Marketing research
• Lack of upward
communication • Communicate with Customers

• Failure of management to • Encourage Customer Feedback

identify different Customers’ • Management accessibility and
expectations presence
 Gap 2: Standards Gap

Management sets
Company’s incorrect service Company’s
Perception standards/ Standard
guidelines

Management Company does not set

perception is a clear standard that
that a customer waiter should attend
be served to the customer within
within10 10 minutes of arrival.
minutes of Waiter serves
arrival. customer after 15
mins of arrival

Causes
• Poor service design
• Absence of customer-driven
standards
• Resource Constraints (e.g.
financial, equipment, STAFF)
Remedies:
• Develop standards & review the
services provided.
• Re-evaluate the communication of
standards to staff
 Gap 3: Delivery Gap

Failure to ensure
that Customers’
Company’s service Company’s
Standard performance Delivery
matches required
standards
Standard is to Waiter knows
attend to this standard
customer within but attends to
10 minutes of customer only
arrival after 20
minutes

Causes
• Staff unaware and/or unable to
deliver performance requirements
• Poor human resource policies
• Failure to match demand and
supply
• Staff unable to handle complaints
Remedies
• Set and communicate Performance
Standards
• Effective recruitment and training
policies
• Hire for attitude, train for skills
• Reward excellent staff
• Empower staff to resolve complaints
 Gap 4: Communication Gap

Delivery
Company’s not as per Company’s
Communication communication Delivery

Ad: Quick service is

our motto. We serve Food served
food within 15 minutes after 1 hour
of your order

Causes
• Lack of integrated services
marketing communications
• Ineffective management of
customer expectations
• Over-promising
• Inadequate internal communication
Remedies
• Ensure that advertisements do
not over-promise
• Communicate the types of
service given clearly.
• Ensure all staff know what is
communicated to customers and
fulfill it
 Gap 5: Customer Gap

Customer’s Customers’ Customer’s

Expectation Perception is Perception
(Before) below his (After)
Expectations

My friends shared
their experiences
with me that the
service provided is
always good in this
Restaurant.
Causes
• Each Provider gap contributes to
Customer Gap
• Company raises customer’s
expectations but provides
service lower than expected, so
customer develops a poor
perception of the service
I found that the
service was not as
described by my
friends and I am so
disappointed.
Remedies
• Fill each of the provider gaps
• Do not raise expectations by
over promising
• Deliver what you promise, can
under promise or over deliver but
not overpromise and under
deliver
 Need to Retain Customers
• Businesses who are able to capture customer loyalty can capitalize on “Lifetime
value of the customer.” – It is the total amount of sales revenue the average
customer contributes to the company over the life of the relationship.

• It is a long term approach which

places greater emphasis on
customer service and long-term
customer satisfaction, rather than
on maximizing short-term sales.
• When customers leave a
business they take their
money to competitors
• Company not only loses
revenue, but ends up
increasing profitability of
competition

YOUR
YOU COMPETITOR
Total Lifetime Value (TLV) of a Customer

How to calculate the TLV of a customer that cuts his hair

at QB Cut?

Based on the following assumptions:

1. the age to cut hair is from 0 to 85 years old.

2. Average haircut is 1 per month @ $10 each time.
3. TLV = 1 x 12 x 85 x $10 = $10,200

Each customer would consume $10.2k of revenue in his

lifetime.

Every 100 customers that QB Cut loses = $1mil potential

loss of revenue for QB Cut.
• Students to work on Q2 and Q3 of worksheet
• Lecturer to go through Q2 and Q3 of the worksheet
• Discuss the problem statement and identify with
the students what needs to be produced in
meeting 3
 Resources
Recommended Textbooks

•Kotler, P., & Armstrong, G. (2012). Products, Services, and Brands: Building Customer Value, Principles of Marketing (14th ed.) [pp. 246-
281]. Singapore: Pearson.

•Kotler, P., Armstrong, G., Ang, S.H., Leong, S.M., Tan, C.T., & Yau, O. (2005). Product, Services, and Branding Strategy, Principles of
Marketing: An Asian Perspective, [pp 218-224], Singapore: Pearson.

Reference Textbooks

•Lovelock, C., Wirtz, J. and Chew, P. (2009). Introduction to Services Marketing, Essentials of Services Marketing. [pp. 4-28]. Singapore:
Pearson

•Zeithaml, V. A., Bitner, M. J. and Gremler, D. D. (2009) Services Marketing – Integrating Customer Focused Across the Firm (5th ed.)
[Chapter 1, pp. 1-30; Chapter 2, pp. 31-46]. Singapore: McGraw Hill Irwin

Websites

•Service Quality. (n.d). Retrieved on 30 December 2017 from Quality Dimension website: http://ils.unc.edu/daniel/131/servicequality.html,

•The Gap Model. (n.d). Retrieved on 30 December 2017 from Effective Customer Service website: http://www.degromoboy.com/cs/gap.htm

•Henning, J. (2009) Service Quality Gap Model. Retrieved on 30 December 2017 from Vovici website:
http://blog.vovici.com/blog/bid/18271/Service-Quality-Gap-Model
 CHARACTERISTICS OF SERVICES

Services have unique characteristics which make them different from that of
goods. The most common characteristics of services are:

 Intangibility
 Inseparability
 Perishability
 Variability

Intangibility

Services are activities performed by the provider, unlike physical products they
cannot be seen, tasted, felt, heard or smelt before they are consumed. Since,
services are not tangibles, they do not have features that appeal to the
customers senses, their evaluation, unlike goods, is not possible before actual
purchase and consumption. The service provider has to follow certain things to
improve the confidence of the client:

Not all the service product has similar intangibility. Some services are highly
intangible, while the others are low i.e. the goods (or the tangible component)
in the service product may vary from low to high.
For example: Teaching, Consulting, Legal advices are services which have
almost nil tangible components; While restaurants, fast food centers, hotels and
hospitals offer services in which their services are combined with product
(tangible objective) , such as food in restaurants, or medicines in hospitals etc.

The provider can try to increase the tangibility of services. For example, by
displaying a plastic or a clay model showing patients an expected state after a
plastic surgery. The provider can emphasize on the benefits of the service
rather than just describing the features.

Inseparability

Services are typically produced and consumed simultaneously. In case of

physical goods, they are manufactured into products, distributed through
multiple resellers, and consumed later. But, in case of services, it cannot be
separated from the service provider. Thus, the service provider would become a
part of a service.

For example: Taxi operator drives taxi, and the passenger uses it. The presence
of taxi driver is essential to provide the service. The services cannot be produced
now for consumption at a later stage / time. This produces a new dimension to
service marketing. The physical presence of customer is essential in services. For
example: to use the services of an airline, hotel, doctor, etc a customer must be
physically present.

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Inseparability of production and consumption increases the importance of the
quality in services. Therefore, service marketers not only need to develop task-
related, technical competence of service personnel , but also , require a great
input of skilled personnel to improve their marketing and inter personal skills.

Perishability

Services are deeds, performance or act whose consumption take place

simultaneously; they tend to perish me the absence of consumption. Hence,
services cannot be stored. The services go waste if they are not consumed
simultaneously i.e. value of service exists at the point when it is required.

The perishable character of services adds to the service marketer’ problems. The
inability of service sector to regulate supply with the changes in demand; poses
many quality management problems. Hence, service quality level deteriorates
during peak hours in restaurants, banks, transportation etc. This is a challenge
for a service marketer. Therefore, a marketer should effectively utilize the
capacity without deteriorating the quality to meet the demand.

Variability

Services are highly variable, as they depend on the service provider, and where
and when they are provided. Service marketers face a problem in standardizing
their service, as it varies with experienced hand, customer, time and firm.
Service buyers are aware of this variability.

So, the service firms should make an effort to deliver high and consistent quality
in their service; and this is attained by selecting good and qualified personnel for
rendering the service.

Adapted from: Characteristics of services (2006) Retrieved 25 December 2017,

from citeman website: http://www.citeman.com/274-characteristics-of-
services.html

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 The Service Gap Model
SERVQUAL (service quality gap model) is a method for measuring service quality. The aim of this
model is to:

 Identify the gaps between customer expectation and the actual services provided
 Close the gap and improve the service

This model developed by Parasuraman, Zeithalm and Berry in 1985 identifies five different gaps:

The Knowledge Gap (GAP 1): The Gap between Consumer Expectation and Management
Perception

The knowledge gap is the difference between the customer’s expectations of the service provided
and the company’s perception of customer’s expectations of the service.

In this case, managers are not aware or have not correctly interpreted the customer’s expectation in
relation to the company’s services or products.

If a knowledge gap exists, it may mean companies are trying to meet wrong or non-existing
consumer needs. In a customer-orientated business, it is important to have a clear understanding of
the consumer’s need for service. To close the gap between the consumer’s expectations for service
and management’s perception of service delivery will require comprehensive market research.

It is also known as Market Information Gap and can be filled by collecting the right information

For example – Hospital administrators may think patients want better food, but patients may be
more concerned with the responsiveness of the nurse.

The Standards Gap (GAP 2): The Gap between Management Perception and Service Quality
Specification

This gap reflects management’s incorrect guidelines for employees. Some companies experience
difficulties translating consumer expectation into specific service quality delivery. This can include
poor service design, or simply a lack of standardisation. Virtually all companies possess service
standards and measures that are company defined – established to reach internal company goals for
productivity, efficiency, cost or technical quality. Instead, a company must set customer-defined
standards: operational standards based on pivotal customer requirements that are visible to and
measured by customers.

For example – Hospital administrators may tell the nurse to respond to a request ‘fast’, but may
not specify ‘how fast’.

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The Delivery Gap (GAP 3): The Gap between Service Quality Specification and Service Delivery

This gap exposes the weakness in employee performance.

Organisations with a Delivery Gap may specify the service required to support consumers but have
subsequently failed to train their employees, put good processes and guidelines in action. As a
result, employees are ill equipped to manage consumer’s needs. Some of the problems experienced
if there is a delivery gap are:

 Employees lack product knowledge and have difficulty managing customer questions and
issues
 Organisations have poor human resource policies
 Lack of cohesive teams and the inability to deliver

For example – The hospitals standard is for doctors to attend to patients within 1 hour of
admission. However doctors attend to patients only 1.5 hours later.

The Communication Gap (GAP 4): The Gap between Service Delivery and External Communications

In some cases, promises made by companies through advertising media and communication raise
customer expectations. When over-promising in advertising does not match the actual service
delivery, it creates a communication gap. Consumers are disappointed because the promised service
does not match the expected service and consequently may seek alternative product sources.

For example – The hospital printed on the brochure may have clean and furnished rooms, but in
reality it may be poorly maintained – in this case the patient’s expectations are not met.

The Customer Gap (GAP 5): The Gap between Customer Expectations and Customer Perceptions

The customer gap is the difference between customer expectations and customer perceptions.
Customer expectation is what the customer expects according to available resources and is
influenced by cultural background, family lifestyle, personality, demographics, advertising,
experience with similar products and information available online. Customer perception is totally
subjective and is based on the customer’s interaction with the product or service. Perception is
derived from the customer’s satisfaction of the specific product or service and the quality of service
delivery.

The customer gap is the most important gap and in an ideal world the customer’s expectation would
be almost identical to the customer’s perception. In a customer orientated strategy, delivering a
quality service for a specific product should be based on a clear understanding of the target market.
Understanding customer needs and knowing customer expectations could be the best way to close
the gap.

For example – Previous patients shared their experiences with a new patient that the service
provided is always good in this hospital. However, the new patient found that the service was not
as described by the previous patients and was disappointed.

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Conclusion:

Recognising and closing gaps offers high quality service to the consumer and helps them to achieve
their goal whilst maximising market position, market share and financial results through customer
satisfaction. It also helps managers to identify areas of weakness and make improvements to a
company’s service delivery.

B216 Marketing Page 3

Adapted from:

1. The Gap Model. (n.d). Retrieved on 25 December 2017 from Effective Customer Service
website: http://www.degromoboy.com/cs/gap.htm
2. Henning, J. (2009) Service Quality Gap Model. Retrieved on 25 December 2017 from Vovici
website: http://blog.vovici.com/blog/bid/18271/Service-Quality-Gap-Model
3. Talebzadeh, S. (2009). The Customer Service Gap Model. Retrieved 25 December 2017 from
Brainmates website: www.brainmates.com.au/brainrants/the-customer-service-gap-model
4. The Gap Model. (n.d). Retrieved on July 07, 2017 from Boundless website:
https://www.boundless.com/marketing/services-marketing/service-quality/the-gap-model/
(website no longer available)

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 Service Quality Dimensions - RATER
Every company wants to get loyal customers for increasing their maximum revenue. A good way

to put your business in the position of getting repeat customers is to implement the use of the five

Service Quality Dimensions. Each of the 5 Service Quality Dimensions makes an addition to the

level and quality of service which the company offers to its customers. It also makes the service

far more unique and satisfying.

Reliability
Reliability refers to how the company is performing in fulfilling its promised service, quality and

accuracy within the given set of requirements stated by the customer. To measure reliability we

may ask the following questions:

 Are exact specifications of client followed?

 Are statements or reports free of error?
 Is service performed right the first time?
 Is level of service same at all times of day and for all members of staff?

Assurance
Assurance refers to the employees’ ability to instil confidence and perceived security in all

interactions the customer has with the firm. If the customers are not comfortable with the

employees, there is a high chance that the customers will not return to do further business with

the company. To measure assurance we should ask the following questions:

 Do employees and management instil confidence in customers?

 Do customers feel safe and secure on the premise?
 Are the employees skilled workers?
 Are they able to gain the trust and confidence of the customers?
 Are employees consistently courteous?

Tangibles
Tangibles refer to the appearance of the physical surroundings and facilities, equipment,

personnel and the way of communication. In other words, the tangible dimension is about

creating first hand impressions. A company should want all their customers to get a unique

positive and never forgetting first hand impression, this would make them more likely to return in

B216 Marketing Page 1

the future. To measure tangibles we should ask the following questions:

 Are the facilities attractive?

 Is staff dressed appropriately?
 Are the written materials easy to understand?
 Does technology look modern?

Empathy
Empathy refers to care and individualized attention given to the customers, to make them feel

valued and special. If the customers feel they get individualized and quality attention there is a

very big chance that they will return to the company and do business there again. To measure

empathy we should ask the following questions:

 Do employees and management understand the needs of different customers?

 Do customers receive individual attention?
 Do front-line employees recognise regular customers and address them by name?
 Do employees and management listen to customers’ problems and demonstrate
understanding and concern? Are various options to a particular query clearly explained?
 Do employees have the customers’ best interests at heart?

Responsiveness
Responsiveness refers to firm’s ability and willingness to provide prompt and efficient service to

anticipate, meet and exceed Customers’ needs. To measure responsiveness we should ask the

following questions:

 Is service provided at times and places it is needed?

 If a response is promised in a certain time, does it happen?
 Is level of service same at all times of day and for all members of staff?
 Is service provided with minimum inconvenience to the customer?
 Do STAFF show a readiness to respond immediately to the customer?
 When there is a problem, does organization respond to it quickly and with empathy?
 Is STAFF willing to answer client questions?
 Are customer needs anticipated and acted upon?
 Are customers kept informed about relevant changes?
 Are public situations treated with care and seriousness?

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Adapted from:

 Downwindz(2010). The 5 Service Quality Dimensions. Retrieved 25 December 2017 from the
wikinut.com website: http://business.wikinut.com/The-5-Service-Quality-Dimensions/.d-m.4b./

 Service Quality. (n.d.) Retrieved on 25 December 2017 from Quality Dimension website:
https://ils.unc.edu/daniel/131/servicequality.html

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