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Submitted by: NAPUTO, Jay M. NATANAUAN, Efren N. OCASLA, Melanie B. OPLE, Donna Luz R.
OUANO, Rosemarie S.

Submitted to: Marietta D. Reyes

CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES Marketing is defined by the AMA as "the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large."1 It can also be defined as "the process by which companies create value for customers and build strong customer relationships, in order to capture value from customers in return". This replaces the previous definition, which still appears in the AMA's dictionary: "an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders."2 It generates the strategy that underlies sales techniques, business communication, and business developments. It is an integrated process through which companies build strong customer relationships and create value for their customers and for themselves.3 Marketing is used to identify the customer, satisfy the customer, and keep the customer. With the customer as the focus of its activities, marketing management is one of the major components of business management. Marketing evolved to meet the stasis in developing new markets caused by mature markets and overcapacities in the last 2-3 centuries. The adoption of marketing strategies requires businesses to shift their focus from production to the perceived needs and wants of their customers as the means of staying profitable. The term marketing concept holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions. It proposes that in order to satisfy its organizational objectives, an organization should anticipate the needs and wants of consumers and satisfy these more effectively than competitors. 4

Marketing is not an event, but a process . . . It has a beginning, a middle, but never an end, for it is a process. You improve it, perfect it, change it, even pause it. But you never stop it completely.

The term developed from an original meaning which referred literally to going to a market to buy or sell goods or services. Seen from a systems point of view, sales process engineering marketing is "a set of processes that are interconnected and interdependent with other functions5, whose methods can be improved using a variety of relatively new approaches."

Jay Conrad Levinson

^ "AMA Definition of Marketing." American Marketing Association. /Community/ARC/Pages/Additional/Definition/default.aspx. Retrieved 2012-01-18. 2 ^ "Dictionary." American Marketing Association. Retrieved 2011-12-02. The Marketing Accountability Standards Board (MASB) endorses this definition as part of its ongoing Common Language: Marketing Activities and Metrics Project. 3 ^ a b Kotler, Philip; Gary Armstrong, Veronica Wong, John Saunders (2010). "Marketing defined". Principles of marketing (5th ed.). p. 7. id=6T2R0_ESU5AC&lpg=PP1&pg=PA7#v=onepage&q=&f=true. Retrieved 2009-10-23. 4 ^ a b Kotler, Philip; Gary Armstrong, Veronica Wong, John Saunders (2008). "Marketing defined". Principles of marketing (5th ed.). p. 17. id=6T2R0_ESU5AC&lpg=PP1&pg=PA7#v=onepage&q=&f=true. Retrieved 2009-10-23. 5 ^ Paul H. Selden (1997). Sales Process Engineering: A Personal Workshop. Milwaukee, WI. p. 23.



The Chartered Institute of Marketing defines marketing as "the management process responsible for identifying, anticipating and satisfying customer requirements profitably." A different concept is the value-based marketing which states the role of marketing to contribute to increasing shareholder value. In this context, marketing is defined as "the management process that seeks to maximize returns to shareholders by developing relationships with valued customers and creating a competitive advantage." Marketing practice tended to be seen as a creative industry in the past, which included advertising, distribution and selling, merchandise support. However, because the academic study of marketing makes extensive use of social sciences, psychology, sociology, mathematics, economics, anthropology and neuroscience, the profession is now widely recognized as a science, allowing numerous universities to offer Master-of-Science (MSc) program. The overall process starts with marketing research and goes through market segmentation, business planning and execution, ending with pre- and post-sales promotional activities. It is also related to many of the creative arts. The marketing literature is also adept at reinventing itself and its vocabulary according to the times and the culture. Browne (2010) reveals that supermarkets spend millions of dollars intensively researching and studying consumer behavior. Their aim is to make sure that shoppers leave their stores spending much more than they originally planned. Choice examined the theory of trolley logy finding that many shoppers instinctively look to the right when theyre in the supermarket. Supermarkets move products around to confuse shoppers; the entry point is another marketing tactic. Consumer psychologist Dr. Paul Harrison (cited in Browne, 2010) states that supermarkets are constantly using different methodologies of selling. One method is performing regular overhauls changing the locations of products all around to break habitual shopping, and break your budget. Harrison also contends that people who are shopping in a counter clockwise direction are likely to spend more money than people shopping in a clockwise direction. Consumer psychologists (cited in Browne, 2010) reported that most people write with their right hand, thus it is a biological trait that people have the tendency of veering to the right when shopping, it is understood that supermarkets capitalize on this fact. Found on the capturing right-hand side are usually appealing products that a shopper might impulsively buy e.g. an umbrella when the weather is dull. WHY STUDY MARKETING? Perhaps the best reason for studying marketing is that modern economies are customer-oriented and therefore must be marketing-oriented. In the United States, it has been estimated that 48 to 59 per cent of the consumer dollar is spent in marketing. One study6 shows the following estimated expenditure breakdown of the customer dollar: Cost to make...........................................................41.10%

Paul w. Stewart and J. Frederick Dewhurst, Does Distribution cost too much?


CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES Cost to distribute.................................................... 58.9% Retail Cost....................................19.2% Wholesale cost.............................10.7% Manufacturers distribution cost...13.9% Transportation costs....................13.4% Other distribution cost.................1.7% Total cost.......................................100% To the college student, an equally important reason for studying marketing is that many starting jobs are in the marketing area. A careful study of marketing will give the student a better idea about business and where the best opportunities lie for a career. But there is still more fundamental reason for studying marketing. Obviously, there can be no business without sales. Since all of the other activities of business are dependent upon marketing, we should understand its working and its importance. Moreover, marketing is a vital regulating force in our economy. It allocates resources in the light of consumer demand. It affects the distribution and size of income. A firms basic source of income is sales. If enough sales cannot be made to maintain a profit, the firm may go out of businessor at least wage and salary wages and salary levels may drop. This process can be seen at work in the soft coal, hat, leather, textile, and many agricultural and mining industries. These industries receive a relatively small share of national income because consumers are not willing to pay more for these products or services. Marketing occupies a critical role in respect to the development of such growth areas. Indeed marketing is the most important multiplier of such developments. It is in itself in every one of these areas, the least developed, the most backward part of the economic system. Its development, above all others, makes possible economic integration and the fullest utilization of whatever assets and productive capacity an economy already possess. It contributes to the greatest needs: that for the rapid development of entrepreneurs and managers, and at the same time it may be the easiest area of managerial work to get going.7 WHY IS MARKETING IMPORTANT? Ensures we get our goods and services to our customers effectively and efficiently Builds and maintains brand value and awareness Delivers profitable growth Builds customer value Enhances shareholder value Companies that focus on customers needs and deliver great customer experience are more successful than those that do not.8

Peter F. Drucker, Marketing and Economic Development Journal of marketing, Vol. XXII (January 1958), p.253 Reprinted from the Journal of Marketing, national quarterly publication of the American Marketing Association. 8


CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES THE IMPORTANCE OF MARKETING TO ENTREPRENEURS What exactly is marketing and why it is vital to the entrepreneur? Marketing is everything you do to place your product or service in the hands of customers. It is also an opportunity for people "Many a small with entrepreneurial skill, insight and highest awareness on how to thing has been effectively reach potential customers, successfully promote their products and make it most appealing to a greater number of made large by consumers. It includes such diverse disciplines like sales, public the right kind of relations, pricing, packaging and distribution. If business is all about people, money and the art of persuading, then marketing is all about advertising." finding the right people to persuade. The most brilliant marketing strategy will not help earn a profit or achieve a dream if it is not built around potential clients. A strategy that is not based on customers is Mark Twain like a man who knows a thousand ways to court a woman but does not know any woman. People have their own unique perceptions of the world based on their belief system. The most innovative ideas, the greatest products or a superior service succeed only when they are marketed in the context of peoples perceptions. For instance, the domestic marketing industry was the first in the world to sell products in sachets to cater to the needs of the low and middle class income clients, specifically the daily wage earners who buy anything from sugar to cooking oil in small amounts, that small variety store owners repack in small plastic bags. The idea of selling products in sachet packs caught the attention of the world marketing industry which today sells many products in small and convenient sizes, enough for one time use. The idea of selling products in sachet form is proof that people do not just buy a product. They buy the concept of what that product will do for them or help them do for themselves. In the case of sachet, it is enough to match their daily budget. In general, marketing is identifying the particular wants and needs of customers, and then going about satisfying those clients better than the competitors. Entrepreneurs are passionate about their ideas, products and service, and innocently assume that other people feel the same. However, it does not work that way. Marketing does not begin with a great idea or a unique product. It begins with customers who want and need a particular product and will actually patronize it.9 VARIOUS APPROACHES TO STUDYING MARKETING There are a number of possible approaches to the study of marketing. The commodity, institutional, and functional approaches are traditionally used. In our study, however, all of these will be incorporated in the management approach, i.e., we will take the business managers viewpoint.


CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES The Commodity approach studies the marketing of many different products. While the description and analysis can be very specific, this can be very time-consuming if all products are covered. It also tends to produce a fragmented picture. The institutional approach undertakes to describe and analyze the various types of wholesalers, retailers and other institutions which make up the marketing system. This is essentially descriptive, and while necessary to some extent, does not provide insights to the student who is interested in solving business problems. The functional approach is more theoretical. It attempts to break down the entire marketing process into a number of basic functions or activities. This highly analytical approach is useful to understanding the basic marketing process and will be helpful to us. The following eight basic functions are found in all marketing processes: buying, selling, transporting, storing, grading, financing, risk-taking, and market information.10 WHAT IS MARKETING? Marketing Directs To get a more active view of marketing, however, we are going to look at it from the marketing managers standpoint. The marketing manager is concerned with the direction of specific functions and activities (which encompasses several functional). In this sense, the definition which emphasizes the need to adjust production capabilities might be too general. The marketing manager is concerned with specific activities and he works towards specific results. Within this framework, we may say: Marketing is the performance of business activities that direct the flows of goods and services from producer or user in order to satisfy customer or user in order to satisfy customers and accomplish the firms objectives. When we define marketing as the performance of the activities that direct the flow of goods and services, we mean the just direct. Marketing should begin with the customer, not the plant. Marketing and not production should determine what products are to be made, what prices to be charged and where and how the products are to be advertised and sold. This does not mean that marketing should take over the traditional production, accounting, and financial activities, but merely that it will direct the activities. After all the purpose of business is making sales not making products which might be sold. A factory can make products, but it takes coordination of all the activities of the business to make sales, especially at a profit. Marketing Takes Global View The marketing management of a firm is not limited to satisfying customers merely in one region or even one country. Increasingly, marketing oriented companies are taking a broader view of potential markets. People all over the world are viewed as potential customers. This global

Basic marketing: a managerial approach, e. Jerome Mc Carthy p. 15


CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES approach requires even more planning and coordination, and makes marketing even more important.11 Marketing Functions are Universal In order for the marketing bridge to work correctly - providing consumers with Opportunities to purchase the products and services they need - the marketing Process must accomplish nine important functions. The functions are: Buying - people have the opportunity to buy products that they want. Selling - producers function within a free market to sell products to consumers. Financing - banks and other financial institutions provide money for the production and marketing of products. Storage - products must be stored and protect ed until they are needed. This function is especially important for perishable products such as fruits and vegetables. Transportation -products must be physically relocated to the locations where Consumers can buy them. This is a very important function. Transportation includes Rail road, ship, airplane, truck, and telecommunications for non-tangible products such as market information. Processing - processing involves turning a raw product, like wheat, into something the consumer can use -- for example, bread. Risk-Taking - insurance companies provide coverage to protect producers and marketers from loss due to fire, theft, or natural disasters. Market Information - information from around the world about market conditions, weather, price movements, and political changes, can affect the marketing process. Market information is provided by all forms of telecommunication, such as television, the internet and phone. Grading and Standardizing - Many products are graded in order to conform to previously determined standards of quality. For example, when you purchase US No. 1 Potatoes, you know you are buying the best potatoes on the market. 12 Marketing is oriented to customers, profits and society

Basic marketing a managerial approach, E. Jerome Mc Carthy p.16 Abs central, p 13-14



CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES The interesting thing about marketing is that when all of the various business and marketing activities are coordinated, the whole is greater than that the sum of the parts. Marketing acts as a liaison between customers and the production side of business. Through careful blending of the needs of the customers with the capabilities of production, marketing management attempts to satisfy its customers. MARKETING CONCEPT The marketing concept is the philosophy that firms should analyze the needs of their customers and then make decisions to satisfy those needs, better than the competition. Today most firms have adopted the marketing concept, but this has not always been the case. In 1776 in The Wealth of Nations, Adam Smith wrote that the needs of producers should be considered only with regard to meeting the needs of consumers. While this philosophy is consistent with the marketing concept, it would not be adopted widely until nearly 200 years later. To better understand the marketing concept, it is worthwhile to put it in perspective by reviewing other philosophies that once were predominant. While these alternative concepts prevailed during different historical time frames, they are not restricted to those periods and are still practiced by some firms today.13 Business enterprises are conducting their marketing activities under the following five marketing concepts. 1. Production Concept 2. Product Concept 3. Selling Concept 4. Marketing Concept 5. Societal Concept Production Concept It is the oldest concept under which the businessmen produce goods thinking customers are interested only in low priced, extensively and easily available goods. Finishing and the interest of customers are not important for the manufacturers. They focus only on large scale production and try to make it available on large scale. They try to achieve high production efficiency and creating wide distribution coverage. This concept can be adopted under the following situations. a. When the supply of the product is less than the demand, you can sell more if


CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES you increase production. Main concern is to fill the demand by producing more. b. If the cost of the product is high and the increase in production will decrease the cost of goods, this concept can be adopted. Production orient business organizations adopt this concept. Such organizations have only sales department which sell product at a price set by production and finance department.14 The production concept prevailed from the time of the industrial revolution until the early 1920's. The production concept was the idea that a firm should focus on those products that it could produce most efficiently and that the creation of a supply of low-cost products would in and of itself creates the demand for the products. The key questions that a firm would ask before producing a product were: Can we produce the product? Can we produce enough of it? At the time, the production concept worked fairly well because the goods that were produced were largely those of basic necessity and there was a relatively high level of unfulfilled demand. Virtually everything that could be produced was sold easily by a sales team whose job it was simply to execute transactions at a price determined by the cost of production. The production concept prevailed into the late 1920's.15 Product Concept Consumers favor those products that offer the most quality, performance and features are the basis of product concept. They believe that consumers are willing to pay higher cost for the goods or services which have extra quality. Companies which concentrate on product concept are focused on product improvement. They constantly improve the product quality and features to satisfy and attract the customers. Too much focus on product may go off the track and fail. For example, a biscuit manufacturer produced a new brand of biscuits with good color, ingredients and packing etc., without taking much importance in consumer tastes and preferences. This may fail in the market if the biscuit does not taste good to the ultimate consumer.16 Sales Concept

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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES In selling concept, producers believe that the aggressive persuasion and selling is the essence of their business success. They think without such aggressive methods they cannot sell or exist in the market. They are focused on finding ways and means to sell their products. They believe that consumer themselves will not buy enough of the enterprises products or service by themselves. Hence they do considerable promotional efforts to sell their product through advertisements and other means. Sales agents of electrical equipments, insurance agents, and soft drink/health drink companies and fund raisers for social or religious causes come under this category. That is why we are getting lots of calls from insurance agents, even though insurance is a Marketing takes subject matter of solicitation. In short, selling day to learn. concepts assumes that consumers on their own will Unfortunately it not buy enough of enterprises products, unless takes a lifetime to the enterprise undertakes aggressive sales and master promotional efforts. Marketers who follow selling concept often forget the taste of consumers and not interested in the feedback of consumers. They use fair and unfair means of persuasion to increase sales. They are not interested in building a network of satisfied customers and target new Philip Kotler, 1931 -, customers for selling their products.17 US marketing guru. By the early 1930's however, mass production had become commonplace, competition had increased, and there was little unfulfilled demand. Around this time, firms began to practice the sales concept (or selling concept), under which companies not only would produce the products, but also would try to convince customers to buy them through advertising and personal selling. Before producing a product, the key questions were: Can we sell the product? Can we charge enough for it?

The sales concept paid little attention to whether the product actually was needed; the goal simply was to beat the competition to the sale with little regard to customer satisfaction. Marketing was a function that was performed after the product was developed and produced, and many people came to associate marketing with hard selling. Even today, many people use the word "marketing" when they really mean sales.18

Marketing Concept
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Under marketing concept the task of marketing begins with finding what the consumer want and produce a product which will meet the consumer requirement and provides maximum satisfaction. "Customer is the King" concept emerged from this point of view. In the process of evolution many organizations changed their way of thinking to match the marketing concept. Under this concept producers considers the needs and wants of consumers as the guiding spirit and deliver such goods which can satisfy the consumer needs more efficiently and effectively than the competitors. Marketing concept is consumer oriented and looks forward to achieve long term profits by making a network of satisfied consumers. When an organization practice the marketing concept, all their activities such as research and development, distribution, quality control, finance, manufacturing, selling etc., are focused to satisfy the consumer needs and wants. Nowadays, those companies which have attained a certain maturity who look on beyond the immediate future adopt this concept. Some companies avoid this concept due to unavailability of short term profit and the uncertainty and unpredictability of the future profit. Also the companies who look for 'quick bucks' may not adopt this concept. A company which are successful and enjoys goodwill adopt marketing concept as their philosophy. They realized that the satisfied customers are the best advertisers for their products. This concept is nowadays used world wide. 19 After World War II, the variety of products increased and hard selling no longer could be relied upon to generate sales. With increased discretionary income, customers could afford to be selective and buy only those products that precisely met their changing needs, and these needs were not immediately obvious. The key questions became: What do customers want? Can we develop it while they still want it? How can we keep our customers satisfied?

In response to these discerning customers, firms began to adopt the marketing concept, which involves: Focusing on customer needs before developing the product Aligning all functions of the company to focus on those needs Realizing a profit by successfully satisfying customer needs over the long-term

When firms first began to adopt the marketing concept, they typically set up separate marketing departments whose objective it was to satisfy customer needs. Often these departments were sales departments with expanded responsibilities. While this expanded sales department structure can be found in some companies today, many firms have structured themselves into marketing organizations having a company-wide customer focus. Since the entire organization exists to satisfy customer needs, nobody can neglect a customer issue by declaring it a "marketing problem" - everybody must be concerned with customer satisfaction. The marketing concept relies upon marketing research to define market segments, their size, and their needs. To satisfy those needs, the marketing team makes decisions about the controllable parameters of the marketing mix.20
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Societal concept With the growing awareness of the social responsibility of the business, attempts made successfully to turn the business organizations socially responsible. Environmental deterioration, excessive exploitation of resources and growing consumer movements have necessitated the recognition and relevance of marketing based on socially responsible. Societal concept is the extension of marketing concept to cover the society in addition to the consumers. Under the societal concept the business organization must take into account the needs and wants of the consumers and deliver the goods and services efficiently so as to balance the consumers satisfaction as well as the society's well-being. A company which adopts the societal concept has to balance between the society interests, company profit and consumer satisfaction. A voluntary acceptance of societal concept is necessary for the long term existence of the business organization. Such organizations try to reduce the emission of pollutants to the environment and market such goods which give full value and satisfaction of the money spent.21 One of the greatest needs of managers of business is to understand and develop marketing programs for their products and services. Business success is based on the ability to build a growing body of satisfied customers. Modern marketing programs are built around the "marketing concept," which directs managers to focus their efforts on identifying and satisfying customer needs - at a profit. Marketing continues to be a mystery . . . to those who create it and to those who sponsor it. Often, the ad that generates record-breaking volume for a retail store one month is repeated the following month and bombs. A campaign designed by the best ad agency may elicit a mediocre response. The same item sells like hotcakes after a 30-word classified ad, with abominable grammar, appears on page 35 of an all-advertising shopper tossed on the front stoops of homes during a rainstorm! The mystery eludes solution but demands attention. Your marketing results can be improved through a better understanding of your customers. This approach usually is referred to as the marketing concept. Putting the customer first is probably the most popular phrase used by firms ranging from giant conglomerates to the corner barber shop, but the sloganizing is often just lip service. The business continues to operate under the classic approach - "Come buy this great product we have created or this fantastic service we are offering." The giveaway, of course, is the word we. In other words, most business activities, including advertising, are dedicated to solving the firm's problems. Success, however, is more likely if you dedicate your activities exclusively to solving your customer's problems. Any marketing program has a better chance of being productive if it is timed, designed and written to solve a problem for potential customers and is carried out in a way that the customer understands and trusts. The pages that follow will present the marketing concept of putting the

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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES customer first. Marketing is a very complex subject; it deals with all the steps between determining customer needs and supplying them at a profit. 22 MARKETING MIX AND STRATEGIES Marketing decisions generally fall into the following four controllable categories: Product Price Place (distribution) Promotion The term "marketing mix" became popularized after Neil H. Borden published his 1964 article, The Concept of the Marketing Mix. Borden began using the term in his teaching in the late 1940's after James Culliton had described the marketing manager as a "mixer of ingredients". The ingredients in Borden's marketing mix included product planning, pricing, branding, distribution channels, personal selling, advertising, promotions, packaging, display, servicing, physical handling, and fact finding and analysis. E. Jerome McCarthy later grouped these ingredients into the four categories that today are known as the 4 P's of marketing, depicted below:

These four P's are the parameters that the marketing manager can control, subject to the internal and external constraints of the marketing environment. The goal is to make decisions that center the four P's on the customers in the target market in order to create perceived value and generate a positive response.23 Marketing mix is a term used to identify the crucial ingredients in a business, which will conduce to long-term profits. To understand what a marketing mix and mix market is, let us look at an analogy. Consider watercolor painting! An artist uses three primary colors (red, blue and
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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES yellow) to derive required shades on the canvas. If he wants green, he simply mixes some blue and yellow together. If he wants dark green, he simply increases the amount of blue and vice versa. Moreover, he blends different shades of paints on the canvas to get a mesmerizing final painting. Similarly, a marketing mix is the combination of factors such as the type of product, its price, place of distribution and promotional strategies used. Product A 'Product' is anything that satisfies a customer's need. The product may be a tangible commodity like cars, accessories, gadgets, etc. or may be an intangible service like health care service, hotel service, etc. The product is the first P of the marketing mix and is by default the most important aspect of the marketing mix. This is because the product is the bait of the company, without which it cannot get the fish. Bad, stinky bait will not lead to hooking soda cans. So this explains how crucial a good, innovative and impressive the product has to be. A useless, unimpressive product can never succeed no matter how good the other three P's of the marketing mix are. Thus, companies need to conduct thorough market research, to check if consumers need this product and then need to come up with a product that has a cutting edge above other products sold by competitors. 24 Here are some examples of the product decisions to be made:

Brand name Functionality Styling Quality Safety Packaging Repairs and Support Warranty Accessories and services25

Product strategies. Product mix is a combination of products manufactured or traded by the same business house to reinforce their presence in the market, increase market share and increase the turnover for more profitability. Normally the product mix is within the synergy of other products for a medium size organization. However large groups of Industries may have diversified products within core
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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES competency. Larsen & Toubro Ltd, Godrej, Reliance in India are some examples. One of the realities of business is that most firms deal with multi-products .This helps a firm diffuse its risk across different product groups/Also it enables the firm to appeal to a much larger group of customers or to different needs of the same customer group .So when Videocon chose to diversify into other consumer durables like music systems, washing machines and refrigerators, it sought to satisfy the needs of the middle and upper middle income group of consumers.26 Likewise, Bajaj Electricals.a household name in India has almost ninety products in its portfolio ranging from low value items like bulbs to high priced consumer durables like mixers and luminaries and lighting projects .The number of products carried by a firm at a given point of time is called its product mix. This product mix contains product lines and product items .In other words its a composite of products offered for sale by a firm.

Often firms take decisions to change their product mix. These decisions are dictated by the above factors and also by the changes occurring in the market place. Like the changing life-styles of Indian consumers led BPL-Sanyo to launch an entire range of white goods like refrigerators, washing machines, and microwave ovens .It also motivate the firm to launch other entertainment electronics. Rahejas, a well-known builders firm in Bombay, took a major decision to convert one of its theatre buildings in the western suburbs of Bombay into a large garments and accessories store for men ,women and children, perhaps the first of its kind in India to have almost all products

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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES required by these customer groups Competition from low priced washing powders (mainly Nirma) forced Hindustan Levers to launch different brands of detergent powder at different price levels positioned at different market segments .Customer preferences for herbs, mainly shikakai motivated Lever to launch black Sunsilk Shampoo ,which has shikakai .Also ,low purchasing power. And cultural bias against shampoo market made Hindustan Lever consider smaller packaging mainly sachets, for single use .So, it is the changes or anticipated changes in the market place that motivates a firm to consider changes in its product mix. When an organization introduces a product into a market they must ask themselves a number of questions. Who is the product aimed at? What benefit will customers expect? How does the firm plan to position the product within the market? What differential advantage will the product offer over their competitors?

We must remember that Marketing is fundamentally about providing the correct bundle of benefits to the end user, hence the saying Marketing is not about providing products or services it is essentially about providing changing benefits to the changing needs and demands of the customer (P.Tailor 7/00) Philip Kotler in Principles of Marketing devised a very interesting concept of benefit building with a product.

Kotler suggested that a product should be viewed in three levels. Level 1: Core Product. What is the core benefit your product offers? Customers who purchase a camera are buying more then just a camera they are purchasing memories. 16 | P a g e

CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES Level 2 Actual Product: All cameras capture memories. The aim is to ensure that your potential customers purchase your one. The strategy at this level involves organizations branding, adding features and benefits to ensure that their product offers a differential advantage from their competitors. Level 3: Augmented product: What additional non-tangible benefits can you offer? Competition at this level is based around after sales service, warranties, delivery and so on. John Lewis a retail departmental store offers free five year guarantee on purchases of their Television sets, this gives their `customers the additional benefit of peace of mind over the five years should their purchase develop a fault.27

Product Decisions When placing a product within a market many factors and decisions have to be taken into consideration. These include: Product Decision Product design Product quality Product features Example Will the design be the selling point for the organization as we have seen with the iPad, the new VW Beetle or the Dyson Ball vacuum cleaner? Quality has to consistent with other elements of the marketing mix. A premium based pricing strategy has to reflect the quality a product offers What features will you add that may increase the benefit offered to your target market? Will the organization use a discriminatory pricing policy for offering these additional benefits? One of the most important decisions a marketing manager can make is about branding. The value of brands in todays environment is phenomenal. Brands have the power of instant sales; they convey a message of confidence, quality and reliability to their target market.

Product branding

"The secret of success is to know something nobody else knows."



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More on Branding Brands have to be managed well, as some brands can be cash cows for organizations. In many organizations they are represented by brand managers, who have high resources to ensure their success within the market. A brand is a tool which is used by an organization to differentiate itself from competitors. Ask yourself what is the value of a pair of Nike trainers without the brand or the logo? How does your perception change? Increasingly brand managers are becoming annoyed by copycat strategies being employed by supermarket food retail stores particular within the UK. Coca-Cola threatened legal action against UK retailer Sainsbury after introducing their Classic Cola, which displayed similar designs and fonts on their cans. 28
A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well. Jeff Bezos

Price Second place in the marketing mix goes to 'Price'. According to the management stalwarts; Philip Kotler and Gary Armstrong, the concept of price refers to the amount of money a consumer has to pay to attain a product. Price determination is not child's play. It is a popular belief that low prices lure large number of customers, thereby resulting in high sales ratios. However, this is not true. Price alone will not attract consumers. Before arriving at a price, the company needs to consider the prices of similar products sold in the market. Moreover, depending on the features provided by the product they will have to raise or lower the price. It doesn't end here! Price


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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES administration is also required, wherein the company needs to consider factors like geographic location, times for special sales, distributors, etc. to determine the price at special situations. For example a product in the United States may vary in price from the one sold in India. Depending on the demand for a product at a particular place, price determination can vary. 29 Some examples of pricing decisions to be made include:

Pricing strategy (skim, penetration, etc.) Suggested retail price Volume discounts and wholesale pricing Cash and early payment discounts Seasonal pricing Bundling

Price flexibility Price discrimination30

Pricing strategies

Pricing is one of the most important elements of the marketing mix, as it is the only mix, which generates a turnover for the organization. The remaining 3ps are the variable cost for the organization. It costs to produce and design a product; it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship. Pricing a product too high or too low could mean a loss of sales for the organization. Pricing should take into account the following factors:

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Fixed and variable costs. Competition Company objectives Proposed positioning strategies. Target group and willingness to pay. 31 31

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Types of Pricing Strategies PRICING STRATEGY Penetration pricing: DEFINITION Here the organization sets a low price to increase sales and market share. Once market share has been captured the firm may well then increase their price. The organization sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer. Setting a price in comparison with competitors. Really a firm has three options and these are to price lower, price the same or price higher EXAMPLE A television satellite company sets a low price to get subscribers then increases the price as their customer base increases. A games console company reduces the price of their console over 5 years, charging a premium at launch and lowest price near the end of its life cycle. Some firms offer a price matching service to match what their competitors are offering.

Skimming pricing:

Competition pricing

Product Line Pricing:

Pricing different products within the An example would be a same product range at different price DVD manufacturer offering points. different DVD recorders with different features at different prices e.g. A HD and non HD version. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximizing turnover and profits. The organization bundles a group of This strategy is very popular products at a reduced price. with supermarkets who often Common methods are bought one offer BOGOF strategies. and get one free promotion or BOGOF's as they are now known. Within the UK some firms are now moving into the realms of buy one get two free can we call this BOGTF

Bundle Pricing:

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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES I wonder? Psychological pricing: The seller here will consider the The seller will therefore psychology of price and the charge 99p instead 1 or positioning of price within the $199 instead of $200. The market place reason why this methods work, is because buyers will still say they purchased their product under 200 pounds or dollars, even thought it was a pound or dollar away. My favorite pricing strategy. The price set is high to reflect the An example of products exclusiveness of the product. using this strategy would be Harrods, first class airline services, Porsche etc. The organization sells optional This strategy is used extras along with the product to commonly within the car maximize its turnover. T industry as I found out when purchasing my car. The firms take into account the cost of production and distribution, they then decide on a mark up which they would like for profit to come to their final pricing decision. If a firm operates in a very volatile industry, where costs are changing regularly no set price can be set, therefore the firm will decide on their mark up to confirm their pricing decision.

Premium pricing

Optional pricing:

Cost Based Pricing:

Cost Plus Pricing:

Here the firm adds a percentage to For example it may cost costs as profit margin to come to 100 to produce a widget their final pricing decisions. and the firm add 20% as a profit margin so the selling price would be 120.00


Price Skimming Skimming is short for skimming the cream from the market; setting a high initial price to maximize revenue while the brand has no or few competitors. Clearly this can be done only if the product offers genuine new benefits which are salient to buyers and for which they are prepared to pay. Often this means a new invention such as a drug, which can be patented. Penetration Pricing

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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES The alternative to skimming is to adopt a relatively low price which will develop the market quickly and give a dominating share to the innovator. If the market is expected to develop fast, and competition to enter quickly, then provided that the production costs support it, a penetration strategy makes sense; a dominating market share taken by the leader is extremely difficult to attack.

Everyday Low Pricing (EDLP) Pricing strategy that promises consumers the lowest available price without coupon clipping, waiting for discount promotions, or comparison shopping is called everyday low pricing (value pricing). EDLP saves retailers the time and expense of periodic price markdowns, saves manufacturers the cost of distributing and processing coupons, and is believed to generate shopper loyalty. A manufacturer's successful EDLP wholesale pricing strategy may reduce volatility in production and shipping quantities and decrease the number of time-degraded product units that consumers receive. EDLP has been championed by Wal-Mart and Procter & Gamble. In recent years, other marketers have dropped EDLP in favor of more traditional strategies, believing that consumers are more motivated by temporary markdowns and coupon savings. To be successful, EDLP requires every day low costs in line with the pricing.33

Place The third P in the marketing mix stands for 'Place'. This refers to the methods of distributing finished products from the manufacturing unit to the final consumer. This would involve transportation and storage of goods, till they are availed by the customer. It's all about 'providing the right product to the right place at the right time' with the help of an efficient distribution system. The type of distribution channel chosen by manufacturers will depend on whether they find it convenient to sell it to wholesalers or directly to retailers or consumers via specific dealers. The company will focus on making products available to the consumer as fast as they can.34 Distribution is about getting the products to the customer. Some examples of distribution decisions include:

33 34

Distribution channels Market coverage (inclusive, selective, or exclusive distribution) Specific channel members Inventory management Warehousing Distribution centers

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Order processing Transportation Reverse logistics35

Place strategies This refers to how an organization will distribute the product or service they are offering to the end user. The organization must distribute the product to the user at the right place at the right time. Efficient and effective distribution is important if the organization is to meet its overall marketing objectives. If an organization underestimate a demand and customers cannot purchase products because of it, profitability will be affected.

What channel of distribution will they use? Two types of channel of distribution methods are available. Indirect distribution involves distributing your product by the use of an intermediary for example a manufacturer selling to a wholesaler and then on to the retailer. Direct distribution involves distributing direct from a manufacturer to the consumer For example Dell Computers providing directly to its target customers. The advantage of direct distribution is that it gives a manufacturer complete control over their product.

Distribution Strategies Three types of distribution can be used to make product available to consumers: (1) intensive distribution, (2) selective distribution, and (3) extensive distribution.


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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES 1. Intensive distribution: Used commonly to distribute low priced or impulse purchase products e.g. chocolates, soft drinks. 36 In intensive distribution, the product is sold to as many appropriate retailers or wholesalers as possible. Intensive distribution is appropriate for products such as chewing gum, candy bars, soft drinks, bread, film, and cigarettes where the primary factor influencing the purchase decision is convenience. Industrial products that may require intensive distribution include pencils, paperclips, transparent tape, file folders, typing paper, transparency masks, screws, and nails.37 2. Selective Distribution: A small number of retail outlets are chosen to distribute the product. Selective distribution is common with products such as computers, televisions household appliances, where consumers are willing to shop around and where manufacturers want a large geographical spread.38 In selective distribution, the number of outlets that may carry a product is limited, but not to the extent of exclusive dealing. By carefully selecting wholesalers or retailers, the manufacturer can concentrate on potentially profitable accounts and develop solid working relationships to ensure that the product is properly merchandised. The producer also may restrict the number of retail outlets if the product requires specialized servicing or sales support. Selective distribution may be used for product categories such as clothing, appliances, televisions, stereo equipment, home furnishings, and sports equipment.39 3. Exclusive distribution: Involves limiting distribution to a single outlet. The product is usually highly priced, and requires the intermediary to place much detail in its sell. An example of would be the sale of vehicles through exclusive dealers. When a single outlet is given an exclusive franchise to sell the product in a geographic area, the arrangement is referred to as exclusive distribution. Products such as specially automobiles, some major appliances, certain brands of furniture, and lines of clothing that enjoy a high degree of brand loyally are likely to be distributed on an exclusive basis. This is particularly true if the consumer is willing to overcome the inconvenience of traveling some distance to obtain the product. Usually, exclusive distribution is undertaken when the manufacturer desires more aggressive selling on the part of the wholesaler or retailer, or when channel control is important, exclusive distribution may enhance the products image and enable the firm to charge higher retail prices. 40 If a manufacturer decides to adopt an exclusive or selective strategy they should select an intermediary which has experience of handling similar products, credible and is known by the target audience.41 Promotion


39 40

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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES The fourth P in the marketing mix stands for 'Promotion', which refers to a company's communication line with the end consumer. Just like how, having talent is useless till one actually uses it and lets the world see it, same is the case with a product. No matter how good the product is, if it remains in the factory, it will never rope in profits. It needs to be publicized among people who need it, who will buy it and come back to make more purchases. Various marketing promotion methods can be used to advertise the product and generate awareness. Promotional costs are usually very high in the introduction stage of the product life cycle, however, as the product gains market share, the promotional costs reduce. Later when the product sale begins to decline, it again undergoes vigorous advertising using various marketing tools. "Success is the Thus, marketing strategy and marketing mix are interdependent concepts. Depending on the current situations, a marketing strategy is formulated using the appropriate proportions of the 4Ps. After analyzing the stage in the product life cycle, the company needs to formulate a marketing mix strategy.42 In the context of the marketing mix, promotion represents the various aspects of marketing communication, that is, the communication of information about the product with the goal of generating a positive customer response. Marketing communication decisions include:

sum of small efforts, repeated day in and day out."

Robert Collier

Promotional strategy (push, pull, etc.) Advertising Personal selling & sales force Sales promotions Public relations & publicity Marketing communications budget43

Promotion strategies A successful product or service means nothing unless the benefit of such a service can be communicated clearly to the target market. An organizations promotional mix strategy can consist of:

42 43

of Explanation

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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES promotion Advertising: Any non personal paid form of communication using any form of mass media.

Public relations Involves developing positive relationships with the organization media public. The art of good public relations is not only to obtain favorable publicity within the media, but it is also involves being able to handle successfully negative attention. Sales promotion: Personal selling: Direct Mail Commonly used to obtain an increase in sales short term. Could involve using money off coupons or special offers. Selling a product service one to one Is the sending of publicity material to a named person within an organization Direct mail allows an organization to use their resources more effectively by allowing them to send publicity material to a named person within their target segment. By personalizing advertising, response rates increase thus increasing the chance of improving sales. Listed below are links to organization whose business involves direct mail. Internet Marketing Sponsorship Promoting and selling your services online using various forms of online marketing techniques such as banner advertisements, videos or social media. Where you pay an organization to use your brand or logo. This organization usually has a high profile so that you know that your brand will be seen by a large audience. Most common use of sponsorship is with sporting events. The 2012 Olympics being held in London is being sponsored by a number of organizations such as McDonalds and Coca-Cola as the event will attract a world wide audience that will run into hundreds of millions.

Message & Media Strategy An effective communication campaign should comprise of a well thought out message strategy. What message are you trying to put across to your target audience? How will you deliver that message? Will it be through the appropriate use of branding? Logos or slogan design? The message should reinforce the benefit of the product and should also help the company in developing the positioning strategy of the product. Companies with effective message strategies include: Nike: Just do it. Coca-Cola: The real thing Media strategy refers to how the organization is going to deliver their message. What aspects of the promotional mix will the company use to deliver their message strategy. Where will 26 | P a g e

CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES they promote? Clearly the company must take into account the readership and general behavior of their target audience before they select their media strategy. What newspapers do their target markets read? What TV programs do they watch? Effective targeting of their media campaign could save the company on valuable financial resources.44

Promotion through the Product Life Cycle. Integration of all the elements of promotion mix is necessary to meet the information requirements of all target customers. This simply means that the promotion mix is not designed to satisfy only the prospective buyer or only the regular buyer. Some elements of the mix may be aimed at the target customer who is unaware of the product, while others may be aimed at potential customers who are fully aware of the product and are likely to purchase it. Suppose you are interested in buying a personal computer. Because of your interest in the product, you started paying attention to computer advertisements in newspapers and magazines. You may even read the media reports on personal computers by experts. You also may participate in training programs or demonstrations. You may also contact the sales persons of different computers and find out the features and relative merits. Based on all this information you may then purchase a specific brand. Which aspect of the promotional mix brought you to the decision to buy the brand you finally selected? You may say that the expertise of the salespersons was a major influence, but the fact is that all the elements of the mix played their roles in bringing about the sale. Therefore, to get better response from the target customers, you have to adopt all the different components of the promotion mix. However, you should note that the elements of the promotion mix must be coordinated and integrated so that they reinforce and complement each other to create a blend that helps in achieving the promotional objectives of the organization.45 As products move through the four stages of the product lifecycle different promotional strategies should be employed at these stages to ensure the healthy success and life of the product stages and promotion strategies employed.
Life is either a daring adventure or nothing. Helen Keller

Introduction When a product is new the organizations objective will be to inform the target audience of its entry. Television, radio, magazine, coupons etc may be used to push the product through the introduction stage of the lifecycle. Push and Pull Strategies will be used at this crucial stage.46 Starts when the new product is first launched. Introduction takes time and sales growth is act to be
44 45 46

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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES slow. In this stage, as compared to other stages, profits are negative or low because of the low sales and high distribution and promotion expenses to inform consumers of their new product and get them to try it.

Growth If the new product satisfies the market, it will enter a growth stage in which sales will start climbing quickly. As the product becomes accepted by the target market the organization at this stage of the lifecycle the organization works on the strategy of further increasing brand awareness to encourage loyalty. Attracted by the opportunities for profit, new competitors will enter the market. Prices remain where they are/fall only slightly. Companies keep their promotion spending at the same or a slightly higher level. Educating the market remains the goal, but now the company also must meet competition.47

Maturity At this stage with increased competition the organization take persuasive tactics to encourage the consumers to purchase their product over their rivals. Any differential advantage will be clearly communicated to the target audience to inform of their benefit over their competitors. At some point, a product sales growth will slow down and the product will enter a maturity stage. The stage in the product life cycle where sales growth slows or levels off. Modifying the market: It looks for new users and market segments. Modifying the product: Product attributes. Modifying the market mix: Price cut the prices to attract new users and competitors; Promotion better advertising campaign; Placement a better distribution channel.

Decline As the product reaches the decline stage the organization will use the strategy of reminding people of the product to slow the inevitable. The product life cycle stage at which a product sales decline. Sales decline for many reasons including technological advances, shifts in consumers tastes and increased competition. Sales and profits decline some firms withdraw from the market. Management may decide to maintain its brand without change in the hope that competitors will leave the industry. Management may decide to harvest the product which means reducing costs (plant and equipment, advertising and sales for sales force) and hoping that sales hold up. Management may decide to drop the product from the line.


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Components of Promotion Mix There are seven main elements in a promotional mix. They are: Advertising - Any paid form of non-personal communication through mass media about a service or product or an idea by a sponsor is called advertising. It is done through non personal channels or media. Print advertisements, advertisements in Television, Radio, Billboard, Broachers and Catalogs, Direct mails, In-store display, motion pictures, emails, banner ads, web pages, and posters are some of the examples of advertising. Paid promotion and presentation of goods, services, ideas by a sponsor comes under the advertisement. Personal Selling - This is a process by which a person persuades the buyer to accept a product or a point of view or convince the buyer to take specific course of action through face to face contact. It is an act of helping and persuading through the use of oral presentation of products or services. Target audience may vary from product to product and situation to situation. In other words personal selling is a person to person process by which the seller learns about the prospective buyer's wants and seeks to satisfy them by making a sale. Examples: Sales Meetings, sales presentations, sales training and incentive programs for intermediary sales people, samples and telemarketing etc. It can be of face-to-face or through telephone contact. Publicity: Non-personal stimulation of demand for a product, service or business unit by generating commercially significant news about it in published media or obtaining favorable presentation of it on radio, television or stage. Unlike advertising, this form of promotion is not paid for by the sponsor. Thus, publicity is news carried in the mass media about an organization, its products, policies, actions, personnel etc. It can


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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES originate with the media or the marketer, and is published or broadcast at no charge for media space and time. Examples: Magazine and Newspaper articles/reports, radio and television presentations, charitable contributions, speeches, issue advertising, and seminars. Publicity can be favorable (positive) or unfavorable (Negative). The message is in the hands of media and not controlled by the organization/firm. Sales promotion - is any activity that offers an incentive for a limited period to obtain a desired response from the target audience or intermediaries which includes wholesalers and retailers. It stimulates consumer demand, market demand and improves product availability. Examples: Contests, product samples, Coupons, sweepstakes, rebates, tie-ins, self-liquidating premiums, trade shows, trade-ins, and exhibitions. Corporate image - It is important to create a good image in the sight of general public as the Image of an organization is a crucial point in marketing. If the reputation of a company is bad, consumers are less willing to buy a product from this company as they would have been, if the company had a good image. Exhibitions: Exhibitions provide a chance to try the product by the customers. It is an avenue for the producers to get an instant response from the potential consumers of the products. Direct Marketing is reaching the customer without using the traditional channels of advertising such as radio, newspaper, television etc. This type of marketing reaches the targeted consumers with techniques such as promotional letters, street advertising, catalogue distribution, fliers etc.

These promotional efforts are of two general types involving: Direct face to face communication Indirect communication through some mass medium, such as television, newspapers, radio, etc.

Sometimes a mixture of personal/direct and non personal/indirect promotion is used as we use in the sales promotion. Industrial buyer will not decide to purchase equipments on the basis of advertisements or direct mail. Personal selling is preferred in this case. On the other hand a customer buying toothpaste or hair oil will have less contact with the company sales person and will be influenced more by advertisements. 49


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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES Limitations of the Marketing Mix Framework The marketing mix framework was particularly useful in the early days of the marketing concept when physical products represented a larger portion of the economy. Today, with marketing more integrated into organizations and with a wider variety of products and markets, some authors have attempted to extend its usefulness by proposing a fifth P, such as packaging, people, process, etc. Today however, the marketing mix most commonly remains based on the 4 P's. Despite its limitations and perhaps because of its simplicity, the use of this framework remains strong and many marketing textbooks have been organized around it.50


The Oxford University Press defines global marketing as marketing on a worldwide scale reconciling or taking commercial advantage of global operational differences, similarities and opportunities in order to meet global objectives. Oxford University Press Glossary of Marketing Terms. DOMESTIC MARKETING

A marketing restricted to the political boundaries of a country, is called "Domestic Marketing". A company marketing only within its national boundaries only has to consider domestic competition. Even if that competition includes companies from foreign markets, it still only has to focus on the competition that exists in its home market. Products and services are developed for customers in the home market without thought of how the product or service could be used in other markets. All marketing decisions are made at headquarters. The biggest obstacle these marketers face is being blindsided by emerging global marketers. Because domestic marketers do not generally focus on the changes in the global marketplace, they may not be aware of a potential competitor who is a market leader on three continents until they simultaneously open 20 stores in the Northeastern U.S. These marketers can be considered ethnocentric as they are most concerned with how they are perceived in their home country.


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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES INTERNATIONAL MARKETING If the exporting departments are becoming successful but the costs of doing business from headquarters plus time differences, language barriers, and cultural ignorance are hindering the companys competitiveness in the foreign market, then offices could be built in the foreign countries. Sometimes companies buy firms in the foreign countries to take advantage of relationships, storefronts, factories, and personnel already in place. These offices still report to headquarters in the home market but most of the marketing mix decisions are made in the individual countries since that staff is the most knowledgeable about the target markets. Local product development is based on the needs of local customers. These marketers are considered polycentric because they acknowledge that each market/country has different needs. Choose a job you love, and you will never have to work a day in your life. Confucius

Services Marketing Services marketing are a sub field of marketing, which can be split into the two main areas of goods marketing (which includes the marketing of fast moving consumer goods (FMCG) and durables) and services marketing. Services marketing typically refer to both business to consumer (B2C) and business to business (B2B) services, and include marketing of services like telecommunications services, financial services, all types of hospitality services, car rental services, air travel, health care services and professional services. The range of approaches and expressions of a marketing idea developed with the hope that it be effective in conveying the ideas to the diverse population of people who receive it. Services are economic activities offered by one party to another. Often time-based, performances bring about desired results to recipients, objects, or other assets for which purchasers have responsibility. In exchange for money, time, and effort, service customers expect value from access to goods, labor, professional skills, facilities, networks, and systems; but they do not normally take ownership of any of the physical elements involved. There has been a long academic debate on what makes services different from goods. The historical perspective in the late-eighteen and early-nineteenth centuries focused on creation and possession of wealth. Classical economists contended that goods were objects of value over which ownership rights could be established and exchanged. Ownership implied tangible possession of an object that had been acquired through purchase, barter or gift from the producer or previous owner and was legally identifiable as the property of the current owner. Adam Smiths famous book, The Wealth of Nations, published in Great Britain in 1776, distinguished between the outputs of what he termed productive and unproductive labor. The former, he stated, produced goods that could be stored after production and subsequently exchanged for money or other items of value. But unproductive labor, however honorable, useful, or... necessary created services that perished at the time of production and therefore didnt contribute to wealth. Building on this theme, French economist Jean-Baptist Say argued that 32 | P a g e

CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES production and consumption were inseparable in services, coining the term immaterial products to describe them. Internet Marketing Internet marketing, also known as web marketing, online marketing, webvertising, or emarketing, is referred to as the marketing (generally promotion) of products or services over the Internet. iMarketing is used as an abbreviated form for Internet Marketing. Internet marketing is considered to be broad in scope because it not only refers to marketing on the Internet, but also includes marketing done via e-mail and wireless media. Digital customer data and electronic customer relationship management (ECRM) systems are also often grouped together under internet marketing. Internet marketing ties together the creative and technical aspects of the Internet, including design, development, advertising and sales. Internet marketing also refers to the placement of media along many different stages of the customer engagement cycle through search engine marketing (SEM),search engine optimization (SEO), banner ads on specific websites, email marketing, mobile advertising, and Web 2.0 strategies. In 2008, The New York Times, working with comScore, published an initial estimate to quantify the user data collected by large Internet-based companies. Counting four types of interactions with company websites in addition to the hits from advertisements served from advertising networks, the authors found that the potential for collecting data was up to 2,500 times per user per month.

CUSTOMER RELATIONSHIP MANAGEMENT What is CRM (customer relationship management)? CRM (customer relationship management) is an information industry term for methodologies, software, and usually Internet capabilities that help an enterprise manage customer relationships in an organized way. For example, an enterprise might build a database about its customers that described relationships in sufficient detail so that management, salespeople, people providing service, and perhaps the customer directly could access information, match customer needs with product plans and offerings, remind customers of service requirements, know what other products a customer had purchased, and so forth. According to one industry view, CRM consists of: Helping an enterprise to enable its marketing departments to identify and target their best customers, manage marketing campaigns and generate quality leads for the sales team. Assisting the organization to improve telesales, account, and sales management by optimizing information shared by multiple employees, and streamlining existing processes (for example, taking orders using mobile devices) Allowing the formation of individualized relationships with customers, with the aim of improving customer satisfaction and maximizing profits; identifying the most profitable customers and providing them the highest level of service. 33 | P a g e


Providing employees with the information and processes necessary to know their customers understand and identify customer needs and effectively build relationships between the company, its customer base, and distribution partners. Many organizations turn to CRM software to help them manage their customer relationships. CRM technology is offered on-premise, on-demand or through Software as a Service (SaaS) CRM, depending on the vendor. Recently, mobile CRM and the open source CRM software model have also become more popular. CRM and Information Technology As we have discussed, CRM is more than just software. For the purposes of this introduction - Information Technology (IT) and CRM have three key elements, namely Customer Touch Points, Applications, and Data Stores. This section is based loosely upon Raisch (2001) the eMarketplace. Customer Touch Points are vital since your business has a marketing orientation and focuses upon the customer and his or her current and future needs. This is the interface between your organization and its customers. For example you buy a new car from a dealership, and you enter a showroom.

The dealership is a contact point. You meet with a salesperson that demonstrates the car. The salesperson is a contact point. You go home and look at the car manufacturer's website, and then send the company an e-mail. Both are contact points. Other contact points include 3G telephone, video conferencing, Interactive TV, telephone, and letters. Applications are essentially the software and programs that support the process. Incidentally, this is what some would call CRM - but we know better. Applications serve Marketing (e.g. data mining software* and permission marketing**), Sales (e.g. monitoring Customer Touch Points), and Service (e.g. customer care). 34 | P a g e


Data Stores contain data on every aspect of the customer, and the Customer Life Cycle (CLC). For example, an organization keeps data on the products you buy, when you buy them, and where they are sent. Data is also kept on the web pages that you visit and the products that you consider, but then do not buy. Leads are stored here. Data on the life time value of individual customers is stored here, as well as details of how and when the customer was recruited, how - and for how long - individuals have been retained, and details of any products that have been extended to individuals are also stored. The data is analyzed using Applications. *Data Mining is where an organization evaluates large Data Stores for patterns, or relationships between groups or individuals (or segments). Applications present 'patterns' in a format that can be used for marketing decision-making. ** Permission Marketing is where a customer elects to accept (or 'opt-in' to) marketing material from an organization e.g. where you buy insurance and the vendor asks if you wish to receive further details from them, or similar organizations. It is so called because marketers need your 'permission' to market to you. Permission marketing can occur at any of the Customer Touch Points. CRM is a term that is often referred to in marketing. However, there is no complete agreement upon a single definition. This is because CRM can be considered from a number of perspectives. In summary, the three perspectives are: Information Technology (IT) perspective The Customer Life Cycle (CLC) perspective Business Strategy perspective

The Customer Life Cycle (CLC) and CRM The Customer Life Cycle (CLC) has obvious similarities with the Product Life Cycle (PLC). However, CLC focuses upon the creation of and delivery of lifetime value to the customer i.e. looks at the products or services that customers NEED throughout their lives. It is marketing orientated rather than product orientated, and embodies the marketing concept. Essentially, CLC is a summary of the key stages in a customer's relationship with an organization. The problem here is that every organizations product offering is different, which makes it impossible to draw out a single Life Cycle that is the same for every organization.

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Let's consider an example from the Banking sector. HSBC has a number of products that it aims at its customers throughout their lifetime relationship with the company. Here we apply a CLC. You can start young when you want to save money. 11-15 year olds are targeted with the Livecash Account, and 16-17 year olds with the Right Track Account. Then when (or if) you begin College or University there are Student Loans, and when you qualify there are Recent Graduate Accounts. When you begin work there are many types of current and savings account, and you may wish to buy property, and so take out a mortgage. You could take out a car loan, to buy a vehicle to get you to work. It would also be advisable to take out a pension. As you progress through your career you begin your own family, and save for your own children's education. You embark upon a number of savings plans and schemes, and ultimately HSBC offer you pension planning (you may want to insure yourself for funeral expenses - although HSBC may not offer this!). This is how an organization such as HSBC, which is marketing orientated, can recruit and retain customers, and then extend additional products and services to them - throughout the individual's life. This is an example of a Customer Life Cycle (CLC). Another important point is that a lifetime CLC is made up many shorter CLC's. So, for example, Volkswagen Cars retains a customer for many years and one can predict the products that meet a customers needs throughout his or her family lifetime. However the purchase of each car will in itself be a CLC with many Customer Touch Points. The consumer may need a bigger vehicle as his or her family expands - so they visit VW's website and register. The customer reviews models and books a test-drive with her or his local dealer. He or she decides to buy the car and arranges finance. The car is then delivered from the factory, and returns every year for its annual service. Then after three years, the customer decides to trade in his or her car, and the cycle begins again. The longer-term life cycle is simply the shorter-term life cycles viewed consecutively.

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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES CRM is a term that is often referred to in marketing. However, there is no complete agreement upon a single definition. This is because CRM can be considered from a number of perspectives. In summary, the three perspectives are: Business Strategy and CRM We now consider the Business Strategy Perspective on CRM. Here, we propose a model, which is a hybrid, and typical of many of the models and diagrams of CRM that you will find on The Internet and in popular books on the topic of eMarketing/eCommerce. The model has three key phases and three contextual factors:

Three key phases: 1. Customer Acquisition. 2. Customer Retention. 3. Customer Extension. Three contextual factors: 4. Marketing Orientation. 5. Value Creation. 6. Innovative IT. 1. Customer Acquisition - This is the process of attracting our customer for the first their first purchase. We have acquired our customer. Growth - Through market orientation, innovative IT and value creation we aim to increase the number of customers that purchase from us for the first time. 2. Customer Retention - Our customer returns to us and buys for a second time. We keep them as a customer. This is most likely to be the purchase of a similar product or service, or the next level of product or service. 37 | P a g e

CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES Growth - Through market orientation, innovative IT and value creation we aim to increase the number of customers that purchase from us regularly. 3. Customer Extension - Our customers are regularly returning to purchase from us. We introduce products and services to our loyal customers that may not wholly relate to their original purchase. These are additional, supplementary purchases. Of course once our loyal customers have purchased them, our goal is to retain them as customers for the extended products or services. Growth - Through market orientation, innovative IT and value creation we aim to increase the number of customers that purchase additional or supplementary products and services. 4. Marketing Orientation - means that the wholes organization is focused upon the needs of customers. Customer needs are addressed by the Three Levels of a Product whereby the organizations not only supplies the actual, tangible product, but also the core product and its benefit, and also the augmented product such as a warranty and customer service. Marketing orientation will focus upon the needs of consumers for all three levels of a product. (N.B. 'market' orientation and 'marketing' orientation are not the same). 5. Value Creation - centers on the generation of shareholder value based upon the satisfaction of customer needs (as with marketing orientation) and the delivery of a sustainable competitive advantage. 6. Innovative IT - is exactly that - Information Technology must be up-to-date. It should be efficient, speedy and focus upon the needs of customers. Whilst IT and/or software are not the entire story for CRM, it is vital to its success. CRM software collects data on consumers and their transactions. Huge databases store data on individuals and groups of individuals. In some ways, CRM means that an organization is dealing with a segment of one person, since every consumer displays different purchasing habits and preferences. Organizations will track individuals, and try to market products and services to them based upon similar buyer behavior seen in other individuals (e.g. When Amazon tells you those customers that viewed/bought the same product as you, also bought another product). CRM is a term that is often referred to in marketing. However, there is no complete agreement upon a single definition. This is because CRM can be considered from a number of perspectives. In summary, the three perspectives are: Information Technology (IT) perspective The Customer Life Cycle (CLC) perspective Business Strategy perspective51



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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES Marketing ethics is the area of applied ethics which deals with the moral principles behind the operation and regulation of marketing. Some areas of marketing ethics (ethics of advertising and promotion) overlap with media ethics. Fundamental issues in the ethics of marketing Frameworks of analysis for marketing ethically Possible frameworks: Value-oriented framework, analyzing ethical problems on the basis of the values which they infringe (e.g. honesty, autonomy, privacy, transparency). An example of such an approach is the AMA Statement of Ethics.52 Stakeholder-oriented framework, analyzing ethical problems on the basis of which they affect (e.g. consumers, competitors, society as a whole). Process-oriented framework, analyzing ethical problems in terms of the categories used by marketing specialists (e.g. research, price, promotion, placement). None of these frameworks allows, by itself, a convenient and complete categorization of the great variety of issues in marketing ethics.

Contrary to popular impressions, not all marketing is adversarial, and not all marketing is stacked in favor of the marketer. In marketing, the relationship between producer/consumer and buyer/seller can be adversarial or cooperative. For an example of cooperative marketing, see relationship marketing. If the marketing situation is adversarial, another dimension of difference emerges, describing the power balance between producer/consumer and buyer/seller. Power may be concentrated with the producer (caveat emptor), but factors such as over-supply or legislation can shift the power towards the consumer (caveat vendor). Identifying where the power in the relationship lies and whether the power balance is relevant at all are important to understanding the background to an ethical dilemma in marketing ethics. 53

The interesti ng thing is when we design and architect a server, we don't design it for Windows or Linux, we design it for both.

Power-based analysis

Is marketing inherently evil?

52 53

^ American Marketing Association Statement of Ethics (2004) ^ Lizabeth England,Marketing With A Conscience: Sales and Ethics, US Dept. of State.

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CHAPTER 10: STRATEGIC MARKETING TRENDS AND ISSUES A popularist anti-marketing stance commonly discussed on the blogosphere54 and popular literature55 is that any kind of marketing is inherently evil. The position is based on the argument that marketing necessarily commits at least one of three wrongs: Damaging personal autonomy. The victim of marketing in this case is the intended buyer whose right to self-determination is infringed. Causing harm to competitors. Excessively fierce competition and unethical marketing tactics are especially associated with saturated markets. Manipulating social values. The victim in this case is society as a whole, or the environment as well. The argument is that marketing promotes consumerism and waste. Marketing has a major impact on our self-images, our ability to relate to one another, and it ruins any knowledge and action that might help to change that climate. Marketing/Advertising creates artificiality and influences sexual attitudes. Specific issues in marketing ethics

Market research Ethical danger points in market research include: Invasion of privacy. Stereotyping.

Stereotyping occurs because any analysis of real populations needs to make approximations and place individuals into groups. However if conducted irresponsibly, stereotyping can lead to a variety of ethically undesirable results. In the American Marketing Association Statement of Ethics, stereotyping is countered by the obligation to show respect ("acknowledge the basic human dignity of all stakeholders").56 Market audience

^ A.J.Kandy, Is marketing evil?, King Marketing, 2004; William DeJong, Marketing Gets Unfairly Branded as Evil, Youth Today; Kathy Sierra, You ARE a marketer. Deal with it, 2005. 55 ^ The vastness of the literature on this topic is perhaps best conveyed by D. Slaters 1999 bibliography of consumer culture with over 1500 items. W.R. Childs (Ohio State University) has posted a shorter bibliography of consumer culture. 56 ^ American Marketing Association Statement of Ethics

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Ethical danger points include: Excluding potential customers from the market: selective marketing is used to discourage demand from undesirable market sectors or disenfranchise them altogether. Targeting the vulnerable (e.g. children, the elderly).

Examples of unethical market exclusion57 or selective marketing are past industry attitudes to the gay, ethnic minority and obese ("plus-size") markets. Contrary to the popular myth that ethics and profits do not mix, the tapping of these markets has proved highly profitable. For example, 20% of US clothing sales are now plus-size.58 Another example is the selective marketing of health care, so that unprofitable sectors (i.e. the elderly) will not attempt to take benefits to which they are entitled.59 A further example of market exclusion is the pharmaceutical industry's exclusion of developing countries from AIDS drugs.60 Examples of marketing which unethically targets the elderly include: living trusts, time share fraud, mass marketing fraud61 and others.62 The elderly hold a disproportionate amount of the world's wealth and are therefore the target of financial exploitation.63 In the case of children, the main products are unhealthy food, fashion ware and entertainment goods. Children are a lucrative market: "...children 12 and under spend more than $11 billion of their own money and influence family spending decisions worth another $165 billion", but are not capable of resisting or understanding marketing tactics at younger ages ("children don't understand persuasive intent until they are eight or nine years old")64. At older ages competitive feelings towards other children are stronger than financial sense. The practice of extending children's marketing from television to the school ground is also controversial.


^ The term "selective marketing" is preferred. The term market exclusion is normally used in the different context of a cartel of suppliers excluding newcomers from distribution chains. 58 ^ CBS News, Plus-Size People, Plus-Size Stuff, Nov 10, 2003 59 ^ Mark H. Waymack, The ethics of selectively marketing the Health Maintenance Organization, Journal of Theoretical Medicine and Bioethics, Issue Volume 11, Number 4 / December, 1990, Pages 301-309 60 ^ Ruair Brugha, Antiretroviral treatment in developing countries, BMJ 2003;326:1382-1384 61 ^ Senior Journal, Hundreds Arrested in Mass-Marketing Fraud Targeting Senior Citizens, May 24, 2006 62 ^ Washington State Department of Financial Institutions, Frauds That Target The Elderly, July 11, 2006 (Originally from: Federal Deposit Insurance Corporation Consumer News) 63 ^ US Federal Trade Commission, Consumer fraud against the elderly. 64 ^ a b Tom McGee and Kevin Heubusch, `Getting Inside Kids' Heads', American Demographics, Vol. 19, No. 1 (1997), quoted in Sharon Beder, Marketing to Children, University of Wollongong, 1998.

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