By knowing what customers want, Tesco have been able to make a number of positioning decisions, such as the move into smaller format stores, Tesco Express, the launch of the website, mobile phones, insurance and the Finest Food range. The role and function of marketing Practice objective test questions A Marketing is a: Does it appear to imply a marketing orientation?
Find mission statements for competitor organisations. Can you see apparently different orientations within your industry? Look at the intranet and extranet services provided by your organisation, or one with which you are familiar, and assess their marketing content. The marketing environment The internal environment The marketing-orientated organisation is effective and offers goods and services to its customers, which have appropriate market valuation and are affordable.
To be profitable, the organisation needs to be efficient and to make and market products and services in the most economic way consistent with the required product quality and standard of service. The value chain provides the marketer with a tool to appraise the internal efficiency and effectiveness of the organisation. The marketing environment The primary activities are the day-to-day activities that we need to undertake to provide goods and services to the marketplace. However, just as a car will not go forever if it is not refuelled, longer-term support activities are required to ensure that the primary activities can continue successfully.
As always with business models, intelligent creative interpretation is required to apply them. The end result of well-tuned, balanced, primary and support activities adds value for the mutual benefit of the organisation and its customers. The value chain model is illustrated Figure 2. The value chain, after M. Porter Inbound logistics These are the activities and facilities for receiving raw materials with associated storage and quality procedures for a manufacturing organisation.
For a service organisation, this could be ensuring the right number and type of telephone lines, for example, for a telephone-sales insurance company. Operations For a manufacturing company, these are the processes used in the manufacture and testing of a product. Typical examples are the manufacture of consumer electronics. Where the product is very expensive and customised, batch assembly might be appropriate.
For vast volumes of lower-cost products e. For a service such as insurance, it may be the complex calculations undertaken to evaluate the risk for a new customer and set the appropriate premium, or simply the processing of claims. Outbound logistics For the manufacturing organisation, this is the packaging and the physical distribution of the product. Different approaches may be appropriate for the same product under different outlet conditions. In a bar, soft drinks such as cola may be dispensed from a multi-dispenser that uses mains water to dilute concentrated flavoured syrup.
This is effective and appropriate as there is a relatively high volume of consumption and the product is consumed immediately on the premises. For home consumption, however, the dilute product is manufactured and packed in non-returnable bottles or cans. For a service such as insurance, the outbound logistics involves the efficient delivery of documentation to the client.
Slow payments damage cash flow, which is bad. Non-payment and bad debts are disastrous! The sales cycle involves a number of functions. Sales plans drive the production schedule and stocking requirements. For a supermarket, the sales system can be considered as the checkout. Remember this is not just the laser reader and payment system electronic point of sale — EPOS , but also involves efficient and friendly operation by a person.
The best information and communications systems will not provide a quality experience if run by an unfriendly or poorly trained operator. Service Here we have to take care how we define service.
This is not the overall efficiency of the value chain but should be taken to cover value-added service for the product or service. As an example, for a car manufacturer this might include maintenance servicing and spare parts and financial services such as insurance and a loan to buy the vehicle. For an insurance company, it might involve providing emergency advice e. This aspect of the value chain interacts with the service extension of the marketing mix. In a competitive world, one strategy to differentiate a product is to augment its value with added and distinctive service elements.
Firm infrastructure This covers very general aspects of the business, such as reputation, image and tangible assets. Companies need to ensure they have the relevant approach to their operations and markets. Their proposition to the market is that no one will get you there more cheaply and their value chain is tuned to move people at the lowest possible cost to selected low-cost destinations often at less fashionable or less convenient airports. Other issues that need to be considered include whether the organisation wants to be a market leader implication: With customer expectations continually rising, companies have to move beyond ISO not only to satisfy but also to delight customers.
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Environmental issues are now so important that they have their own standard, ISO With strict liability and higher costs of compensation, not only are high standards of safety ethically necessary but also good business sense. Fair treatment of all relevant stakeholders and general corporate behaviour again is not just to make the management and owners feel good, but also to make good business sense. Failure to be considered a good corporate citizen can result in very active disruption of the business by pressure groups e.
All employees must be committed to safety, quality and environmental issues. The financial structure may affect how the value chain is tuned. In the case of a public company, the shareholders want good 17 Unit 2: The marketing environment share growth and good dividends now! Failure to deliver may leave the firm vulnerable to hostile takeover. If an individual wholly owns the business, a longer-term view can be taken, with, say, more investment in research and development resulting in profit further in the future.
Similar issues apply to small start-up firms: The wrong financing for an organisation can be just as disruptive as marketing the wrong product or manufacturing using the wrong technology. Human resource management No organisation can be better than the people in it. Even with the most effective equipment and the best facilities, customers will not be happy if front-line staff are not well trained and empathetic. Roles and responsibilities must be effectively defined by job descriptions and organisational structures. The nature of people e.
Technology development To remain a market leader, attention must be paid to developing the product new product development , the manufacturing operations and logistics the first three elements of the value chain primary activities , sales e. Internet sales systems and marketing e. Any element of the value chain can be improved and needs development for a successful organisation. Information and communications systems have been added to the traditional value chain model, as an appropriate framework is vital for most companies, and for some e-based organisations it almost is the whole organisation.
In knowledge-based industries, the ability to lever knowledge and skills internationally with the Internet, intranets and others is vital. For the modern company, it is just as bad for the computer to crash as for there to be a total power-out. In both cases, all operations can come to a shuddering halt. Procurement Procurement, the purchase of the inputs to the value chain, is vital. For a supermarket, the greatest percentage of costs is the price it pays for the items on the shelves. Getting the right products at the right price is vital. Marks and Spencer at one time found that its clothing was perceived to be unfashionable and over-priced.
Urgent attention had to be focused on buying products that appealed to customers at prices that were competitive. Procurement not only covers the purchase of the materials for manufacture, but also covers all inputs to the operation. In marketing, it is vital to get the best prices for printing and media space to get the most out of a limited budget. Controllable and uncontrollable environmental factors All organisations will be subject to environmental factors and in many cases these will be uncontrollable. For example any company operating within Europe will be aware of the demographic trends that are leading to an increasingly ageing population.
Declining birth rates and longer lives are both contributing to the overall trend, and are not things which companies can influence and, therefore, have no control over the overall effect of more old 18 Unit 2: The marketing environment people. However, if we take the case of a company in the tourism industry they may be able to exercise some control over the factors which are important to them. As the population becomes older and more active in their later years they can modify the holidays they offer and to a small extent influence the nature of holidays that older people take.
By marketing holidays specifically for older people they can mitigate the effect of an uncontrollable factor and possibly even capitalise upon it. With rapid changes, it is vital to analyse the impact of the event on the organisation. Slow changes such as shifts in population demographics are also important, since if the organisation is not alert, the change can become so advanced before its impact is detected that major problems arise; even survival may become questionable.
For travel agencies, the opening of the Channel Tunnel was a major event, which could be clearly identified. However, failure to respond to either would impact on the profitability of the business and service to the customers. Politics and politicians shape laws, and many organisations see the lobbying of politicians as a key part of their strategic plans.
This is not restricted to commercial organisations; social marketing groups have become most active in this area, as seen in the successful campaigning for smoking bans and the current targetting of junk food by the healthy living groups. Governments will influence the economic factors in a country by deciding taxation rates for individuals and companies, societal factors by education and training policy, technological factors by policies which encourage research and technology transfer, environmental factors by recycling policy and taxation of landfill charges, legal factors by their policy of the sale of goods and credit agreements.
In the January issue of the St. He also cites a nationwide study by two economists now at the universities of Wisconsin Milwaukee and South Carolina. Newsweek, Changing governments Clearly, a change of government when there are privatisation or nationalisation policies depending on their political colour has an impact on the macro-environment. International politics There are a number of political bodies that rest above national governments. Although these are often considered to be cooperative trade bodies they are, increasingly, political in their outlook and behaviour.
Globally, we can add the World Trade Organization to this list of organisations and, as business becomes increasingly more international this body regularly finds itself mediating between the national interests of large companies and industries. Local government Organisations also need to consider not only the national political issues but also regional and local ones.
Often the expansion plans of a supermarket are dependent on winning a lot of local political debates in order to gain the required planning permissions. Economic factors Economics is often seen as a dense and difficult mathematical subject. Certainly, governments employ many statisticians to collect and analyse the figures. However, it is important 20 Unit 2: The marketing environment to realise that economics is at the core of marketing. The Retail Price Index is not a mathematical abstraction.
It is an exciting reflection of how people live and how the pattern of spending changes. These reports are excellent sources of secondary data for marketers. Interest rates Interest rates will affect the organisation in different ways. Such a rise will also impact upon the organisation in terms of its own borrowings, this will affect the profitability and may prevent marketing departments obtaining the investment that they need to carry through their plans.
However, for companies in the financial services industry a rise in interest rates may encourage potential customers to save rather than spend making it easier to market their services. Exchange rates Exchange rates between currencies occur because of the perceived value, or purchasing power, of the currency of a two different countries, or in the case of the EU, groups of countries. The stronger an economy the higher will be the value of its currency against that of a weaker one. Interest rates will also have an effect on exchange rates since, as interest rates rise in one country, those with money to save will tend to deposit in that country since it will earn more interest and is perceived to be safer because of the strength of the currency.
At the time of writing, in early , the US dollar is quite weak compared to sterling and the euro and many people are finding it advantageous to fly to America to shop from clothing and other consumer goods. For the marketing manager a currency needs to have value, but that value should not be so high that people prefer to shop in other countries.
Wealth Economics is much more marketing orientated than some sources would indicate. The value of a house is what people are prepared to pay. This is a consumer issue involving social attitudes and values. When people see that house prices are rising, they can cash in on this in , the majority of mortgages were not new but re-mortgages to spend on consumer durables and that longed-for world cruise.
When credit is widely available, it is as much how people feel as what they have actually got disposable income that drives the high street. If they do not have it they can borrow it. Taxation and the viability of the business Taxation affects business in several different ways. An increase in direct taxation i. Higher levels of corporation tax act as a disincentive to earn increased profits. The marketing environment Social factors Social influences impact on the consumer decision-making process.
Attitudes change quickly; for example, 20 years ago one could smoke on a transatlantic airliner, but now in most countries, the social trend is to have smoking eliminated from public buildings. Social changes can also impact on media habits. A development in technology text messaging on mobile phones can influence social changes in the population e. Increased mobility Population shifts can affect the nature of society. Both Europe and North America have become much more multicultural societies, reflecting the global movements of population in the twentieth century.
This affects the demand for products and services and this, in turn, generates demand for special communication channels. With broadband technology, TV can now not only be a medium of mass advertising around a soap opera but also become highly targeted for special social groups. Kotler and Andreasen define social marketing as: Social marketing seeks to influence social behaviours not to benefit the marketer, but to benefit the target audience and the general society.
This technique has been used extensively in international health programmes, especially for contraceptives and oral rehydration therapy ORT , and is being used with more frequency in the United States for such diverse topics as drug abuse, heart disease and organ donation.
Despite this fact, many marketing campaigns continue the myth that such family units are still the norm. Modern marketing must recognise that there is an increasing diversity in structure of the family unit, and must plan campaigns accordingly. International and cultural differences General cultural knowledge includes implicit theories about the world we live in that are largely shared by the members of our society. But in addition to this shared set of ideas, we also have personal knowledge that can conflict with accepted, culturally derived practices.
For example, a boy growing up in China may generally accept the importance of his relationships with others, and therefore seek to keep harmony with family members. But 22 Unit 2: Notions about cultural differences are often the basis for international marketing communications as well as global brand management strategies. Indeed, the perceived importance of cultural issues has been increasing, fuelled by new technologies that allow marketers to reach consumers across country boundaries. Marketers are spending increasing amounts of time and effort trying to understand subtle cultural differences.
Changing social values Other changes in the social environment have a direct impact on marketing. Many of these changes are quite gradual, but their effect is significant, for example: Technological factors The beginning of the twenty-first century has been interesting for the number of hundredth birthdays including that of the first powered flight and the original development of brands such as Ford. Mass air travel and mass ownership of cars have altered society.
In the twenty-first century, convergent information and computer technologies will transform society. The Internet was originally conceived as a technical solution to a military planning problem: With commercial and consumer access to broadband, this technology has moved far from the uses originally conceived for it.
The marketer needs to interpret these developments creatively and imaginatively. For example, the impact of the Internet on book sales is not uniform. Some directories and reference books have, in effect, ceased to exist as people gain this type of reference information directly from the Internet.
We may well be happy to buy the latest blockbuster online from Amazon. However, the book addict is looking for a shopping experience and specialist shops are adapting to this, hence leading to trends such as coffee shops within bookshops to provide the right atmosphere and give shoppers an offline experience, the real joy of book buying. The marketing environment Production capabilities and techniques Over the past twenty years a new form of manufacturing has evolved: CAD and CAM are also the keys to flexible manufacturing as they enable computerised machines to perform a variety of functions.
When CAD and CAM are integrated it is possible to achieve computer-integrated manufacturing CIM whereby a system directs data flow whilst also directing the processing and movements of material. JIT methods of production involves developing: CIMA Official Terminology Product development The use of large, powerful databases and sophisticated computer modelling packages has radically changed the process of product development.
It is now possible to model the appearance and performance of new products without manufacturing models and prototypes. One such impact of this type of technology has been to shorten the lead time on new car models from the s average of 30 months to a current norm of 26 weeks MIRA. Enhanced communications Of all the aspects of the technological environment, none has changed as rapidly as communications technology.
Mobile phones, the Internet, cable television and media messaging mean that we can now contact pretty much anyone, pretty much anytime. This leads to huge challenges for marketers, for example: Customers are now less loyal, to both products and retailers, than they have ever been. Price comparison takes seconds, feature comparison a few seconds more. Environmental factors Environmental issues have become increasingly important as the stark truth confronts society that gross consumption of finite resources cannot continue forever and that, in the long term, sustainable production and distribution is the only way forward for society as a 24 Unit 2: The marketing environment whole.
Some of the issues may be rather technical: Domestic waste management systems are reaching breaking point in many countries, and there is a global trade in recyclable waste. The issue of waste management and recyclability is now a major component of packaging design — packaging is no longer just designed to protect and promote the product. Sustainability Consider the impact of a product over its total lifespan: This is important, as it is not acceptable to abdicate responsibility. Therefore, a garden centre selling hardwood garden furniture needs to be assured that sustainable and legal logging has produced the wood.
A car manufacturer may no longer consider that its environmental responsibilities have ended with the sale of the car, but must build into the vehicle the capacity for it to be recycled, and provide facilities for this. It involves changes in the variability or average state of the atmosphere over durations ranging from decades to millions of years. These changes can be caused by dynamic process on Earth, external forces including variations in sunlight intensity, and more recently by human activities.
Current studies indicate that greenhouse gases are the primary cause of global warming. The biggest factor of present concern is the increase in CO2 levels due to emissions from fossil fuel combustion, followed by aerosols particulate matter in the atmosphere , which exert a cooling effect, and cement manufacture.
Other factors, including land use, ozone depletion, animal agriculture and deforestation, also affect climate. Corporate social responsibility CSR has been defined as having four dimensions: As such society can: The marketing environment CSR has also been defined as: CSR is about capacity building for sustainable livelihoods. It respects cultural differences and finds the business opportunities in building the skills of employees, the community and the government Ghana CSR is about business giving back to society Philippines In America there is more emphasis on the philanthropic approach to CSR, where companies will make charitable donations to society or its representatives.
We can contrast the European approach where the emphasis is on business processes which are more socially responsible, complemented by investment in communities for reasons which are supported by good business cases. The Body Shop The Body Shop has become synonymous with ethical trading, proclaiming its beliefs on its packaging and advertising. Its ethical pronouncements have become part of its marketing strategy. Yet this can still lead to problems — whether of your own creation or not.
A decade ago, it emerged that almost every cosmetic the Body Shop sold had almost certainly been tested on animals. According to regulations in the United States, the European Union and Japan, no product could be sold unless it had been certified as safe. To gain such certification it would have to be tested on animals. The issue is not whether the Body Shop intentionally or innocently misled; rather it is that the negative publicity is stronger because of the previous ethical stance. It also supports Wateraid. It believes that its brand values are fashionable clothing and affordable prices.
It focuses on promoting that and nothing else. When asked, it reveals what it has in place to ensure moral behaviour. The Marketer, January 26 Unit 2: The marketing environment Legal factors Law affects everything we do in marketing. Every aspect of the marketing mix has legal issues that need consideration. When researching, we may well have to take account of data protection legislation. Lack of knowledge is no defence. Therefore, it is vital that a marketer is aware of which aspects of a marketing plan may be affected by laws and seeks professional advice where uncertainty prevails.
This is particularly important when implementing marketing plans developed for one country in another, where a different legal system prevails. A competition that is an instant hit in one country may simply be illegal elsewhere. Apart from legal constraints, there may be voluntary codes of conduct imposed by the industry. Thus, much of advertising regulation may not be imposed by government law but by industry codes of conduct enforced within the industry by the industry. Consumer protection Consumer protection is a form of government regulation that protects the interests of consumers.
For example, a government may require businesses to disclose detailed information about products — particularly in areas where safety or public health is an issue, such as food. Consumer protection is linked to the idea of consumer rights that consumers have various rights as consumers , and to the formation of consumer organisations that help consumers make better choices in the marketplace.
The Sale of Goods Act lays down several conditions that all goods sold by a trader must meet. The goods must be: As described refers to any advert or verbal description made by the trader. Satisfactory quality covers minor and cosmetic defects as well as substantial problems. It also means that products must last a reasonable time.
Fit for purpose covers not only the obvious purpose of an item but any purpose you queried and were given assurances about by the trader. Consumer interests can also be protected by promoting competition in the markets that directly and indirectly serve consumers, consistent with economic efficiency, but subject to competition law. The United Kingdom is a member state of the European Union and so is bound by the consumer protection directives of the European Union. Domestic UK laws originated within the ambit of contract and tort but, with the influence of EU law, it is emerging as an independent area of law.
The marketing environment Consumer Ppotection issues are dealt with when complaints are made to the DirectorGeneral of Fair Trade. The Office of Fair Trading will then investigate, impose an injunction or take the matter to litigation. At a local, municipal level complaints by be dealt with by Trading Standards departments. Data protection The Data Protection Act gives individuals the right to know what information is held about them. It provides a framework to ensure that personal data is handled properly.
The Act works in two ways. First it states that anyone who processes personal information must comply with eight principles, which make sure that personal information is: The second area covered by the Act provides individuals with important rights, including the right to find out what personal information is held on computer and most paper records.
The micro-marketing environment — overview Customers Stakeholders The organisation Competitors Figure 2. The micro-marketing environment 28 Suppliers Employees Distributors Unit 2: The marketing environment Customers Customer — a person or company who purchases goods or services not necessarily the end consumer. In some circumstances, it is a little difficult to define precisely who the customer is. This may be because the organisation is a not-for-profit or social marketing organisation or the definition of customer is not obvious for the product or service.
The key concept is that of stakeholders. We can then accept that customers are a key stakeholder group and that a college has many and complex stakeholder groups. Buyers can exert power over the organisation. Viewing the situation from the point of view of a hotel in a ski resort, it can be seen that in the high season, rooms are expensive as demand is high low buyer power.
However, out-of-season prices can be lower as customers can shop around high buyer power. In general, from the viewpoint of the brand manufacturer of consumer goods, the power of the buyers is twofold. If the supermarkets do not stock the product then the customers are not able to buy it. If the customers select another brand as better value for money, the situation is just as bad.
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To address these two influences, brand manufacturers use marketing strategies directed at both the retail channels push strategy and the consumers pull strategy. Stakeholders Stakeholder — a person or organisation that has an interest in the strategy of the organisation. Stakeholders normally include shareholders, customers, staff and the local community.
CIMA As such we can consider them to be people and organisations who have a say in: They are affected by, and feel they have a right to benefit or be pleased by, what you do. It is essential to satisfy or at least manage all the legitimate stakeholder expectations. It is no use marketing a toy to parents only for them to find their child does not play with it. Equally, it does not help if the parents do not buy the toy in the first place.
Most organisations operate within a framework of law and rules, which are enforced by regulators. For a manufacturer of shampoo, safety in manufacture and in consumer use is subject to regulatory control. The marketing claims made for the product e. The activity of a firm will be scrutinised by pressure groups with their own specific agenda. In Europe, animal testing of personal care products has been discontinued; however, inter29 Unit 2: The marketing environment national companies who operate under different standards in their home market may also come under pressure in Europe.
In the fashion sector of the market, consumer pressure groups may consider marketing claims extravagant and products over-priced. A key PR activity is to lobby regulators and address the issues raised by the pressure groups. Firms both compete in the marketplace and will also collaborate e. Within the industry, there may be associations such as the Article Numbering Association industry forum for ensuring the effective and efficient use of bar codes to the benefit of both manufacturers and retailers of consumer products.
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The media are a significant influence on the brand. Celebrity endorsement in the editorials of the glossy fashion press can be a very positive influence. Adverse reports in the consumer or environmental pages of a paper can have a negative effect. The trade press can be important in maintaining credibility with B2B customers and in attracting the most able staff to join the organisation. Competitors Competitors — companies that sell products or services in the same market place as one another. There are other companies that compete but not in such a direct way: Boots competes with ASDA in the personal care sector but not in clothing.
However, it should be remembered that a large, distant competitor could have a significant impact on a small organisation. By creaming off the sales of the latest blockbuster, the remaining sales of specialist books may not provide enough revenue to keep the small outlet above breakeven sales volumes. Suppliers and distributors Suppliers — organisations or individuals that provide inputs materials, labour, services to the organisation. Distributors — organisations or individuals that help to get the outputs of the organisation products, services to the end customer.
There is also the potential influence of suppliers on the organisation. Again, this may be direct or indirect, further down the supply chain. Therefore, a company may be spoilt for choice for a possible supplier of personal computer hardware, but still have to purchase a Microsoft operating system. It is not by accident that Microsoft is one of the most profitable organisations in the world. The marketing environment An organisation may be integrated to minimise some of the competition forces.
The brand manufacturer may own raw material suppliers and also own the retail outlets managing both supplier and buyer power. This type of vertical marketing system VMS can be achieved by other devices. In the contractual VMS, the same end is achieved not by ownership but by the framework of contractual relationships. The Body Shop developed with the manufacture of its products and many of the outlets working under a franchise system.
Here, the outlets are owned by individuals who then operate them under a detailed franchise contract.
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Co-operatives form a strategy for smaller organisations to gain some competitive stature by working together, to achieve critical mass in areas such as buying power. Large buyers such as Wal-Mart achieve coordination and control an administered VMS with their tight supply chain management system and sets of contractual relationships. Employees Internal stakeholders are vital and staff motivation and commitment are characteristics of successful organisations. Internal stakeholders can be segmented by features such as job level or job function. In internal marketing initiatives, such as during the management of change, attitude segmentation variables e.
There is a spectrum of possible reactions to any proposed change: Monitoring the marketing environment The problem with management is that there is too much data and not enough good relevant information. People are needed to collect certain data. You can machine-read a bar code but not a customer complaint.
Having collected the data, the system must evaluate the degree of confidence one might place in it e. The data needs to be analysed and interpreted to generate relevant useful information. There are a number of issues to be considered when formulating an appropriate MkIS for a given situation: The macro environment and microenvironment need to be monitored, as does the efficiency of our own value chain and those of our competitors, including the relevant marketing mix issues.
Market research may be conducted on an ongoing basis to track market trends e. TV viewing habits or for specific issues to evaluate if falling sales are due to changes in customer perception of the brand. The research may be quantitative how many people take part in an activity or qualitative how do consumers feel about the product. If appropriate secondary desk sources do not exist, more expensive primary research will have to be commissioned.
Market scanning Marketing intelligence is a critical source of data for the organisation. On a practical note, nobody except the commissioning company takes as much interest in marketing trials as the competition! Specific research is needed to support a unique project such as a product launch. However, knowing how the market is moving e. New launches and new advertising campaigns will impact on the business, and if the organisation were to wait six months to see what happens, it will be too late to act. Who has moved from one company to another watching competitor recruitment gives you an idea of what skills they are strengthening for future projects and other key news such as product launches and capital plans.
For new products in technology-rich areas, patent abstracts are useful. Company websites, annual reports, advertisements and other publications are all useful sources of information. One of the key reasons for attending a trade conference is to gain competitor and market intelligence. Every visit to a customer is a chance to gain intelligence. For example, an organisation uses a given company to provide photocopiers; the organisation becomes dissatisfied with the existing supplier and decides to trial a competitor company.
He then informs his boss, and a representative arrives the next day to see if there are any problems. A major technical activity for many organisations is the reverse-engineering of products. A company produces a new DVD drive or a new washing powder. The first thing for the competitor is to obtain samples, get them into the laboratory and strip them down to see how they have been built. The marketing environment Collection of secondary data Secondary data — marketing research data that already exists, and was collected for a purpose other than the current research process.
Vast amounts of internal data are collected by EPOS systems and loyalty cards. This can give accurate profiles of consumers the purchase of cat food and pet litter may indicate that you are a ripe candidate for a pet insurance mailshot. Apart from computer data systems accounts, etc. All data needs to be evaluated for accuracy and relevance so should in some way formally pass through the analytical system: If we are analysing sales trends, it is important to know if the changes are due to price or volume changes as different corrective action may be needed.
It is often useful to note not only the physical value but also some appropriate ratio. When comparing the sales from two different sized shops in the same organisation, it may be appropriate to calculate the sales per square metre. Practice objective test questions A The value chain model can be used to analyse: Unit 3 mix The marketing The importance of the marketing mix Overview It is obvious from the preceding sections that successful marketing strategies and plans can only be crafted with a clear focus on satisfying meeting customer needs and wants.
Customers must be central to everything an organisation does. Approximately 30 years ago it became accepted that in this quest for a customer-driven approach, organisations had four basic marketing dimensions. Marketing guru Philip Kotler would add at least one, P, that of People, and more recently two other factors Process and Physical evidence have been added to this basic listing to give a total of seven.
The marketer therefore is a mixer of these ingredients — procedures and policies to produce a profitable enterprise. Kotler and Lane Keller define the marketing mix as: Marketing mix — the set of controllable variables and their levels that the firm uses to influence the target market. For the majority of private sector organisations the aim of marketing is, generally speaking, synonymous with the overall purpose of maximising financial returns.
There are clearly a wide variety of possible combinations of marketing variables 35 Unit 3: The marketing mix which management can select. Inevitably some combinations will earn greater financial returns than others. The crucial combination of factors comprising the marketing mix is therefore of high significance. Altering one component of the mix impacts upon most, if not all, of the others. For instance, the quality of advertising may need to be raised if the selling price of products is increased. A manufacturer may also need a marketing mix for the end consumer, and an additional mix for the customer to whom they actually sell the product.
Each mix will change as the marketing environment changes. Product Product — the quality and attributes of a purchase product or service as perceived by the customer. For service rather than product-based organisations, this category includes the nature of the service including its key features. Product in this context also includes associated services. Marketing a product involves product design, concept testing and product launch. The starting point should of course not be with the product, but instead with the customer.
By understanding their needs and wants an appropriate product or service can be developed to fulfil these desires. This means that the product or service must fulfil their need and should clearly be of a quality that suits its purpose. This final sentence has two implications for the organisation: The marketing mix Features and benefits It is worth noting a key marketing concept: This is important for the organisation to understand so that it can concentrate on marketing the benefits of its product rather than its features.
Useful questions from a marketing point of view include: Core, augmented and potential product In marketing a product, more often than not, we do not market the core benefits. If we go to a hotel and find the toilets clean and well kept, we do not rush to reception to heap praise upon the management. If we find the reverse and the facilities are dirty and neglected, we will inform the management and possibly check out and tell all our friends. This facet of product can be linked in the broadest sense to the general concepts, researched in other contexts, advanced by Maslow and Hertzberg in their motivation theories.
Adapted from Kotler 37 Unit 3: The marketing mix Figure 3. At the lower levels, customers are provided with what they expect; all providers must supply this or they gain no business at all. To gain a competitive edge, one must provide something of benefit value to the customer above and beyond the expected benefit set. The ultimate product is that which satisfies the dream needs of the customer.
People do not want detergents; the ultimate product would be self-cleaning clothes that never needed ironing. The core benefit of a car is travel but people expect comfort not just a seat on a chassis. Today, cars are providing an ever-increasing number of electronic features cruise control, global positioning systems and in-car entertainment systems. The ultimate potential product will be the car that provides total comfort and drives itself.
New product development In business and engineering, new product development NPD is the term used to describe the complete process of bringing a new product or service to market. There are two parallel paths involved in the NPD process Figure 3. Companies typically see new product development as the first stage in generating and commercialising new products within the overall strategic process of product life cycle management used to maintain or grow their market share.
Idea generation Idea screening Concept development and testing Business analysis Product development Market testing Commercialisation Figure 3. The new product development process 38 Unit 3: The marketing mix The process of NPD is outlined as follows: Some may be eliminated. To reduce the time that the NPD process takes, many companies tackle several steps at once referred to as concurrent engineering or time to market.
Most industry leaders see new product development as a proactive process where resources are allocated to identify market changes and seize upon product opportunities before they occur in contrast to a reactive strategy in which nothing is done until problems arise or a competitor introduces an innovation. Many industry leaders see new product development as an ongoing process referred to as continuous development in which the entire organisation is always looking for opportunities.
This allows the manufacturer to use up any remaining components, and to earn a high margin on what is becoming an obsolete product. Insight Compact fluorescents are hot sellers, and Congress has passed a bill banning incandescent bulbs by So why is GE planning to sell a new high-efficiency incandescent? Snow says last gasps are common when new technologies are poised to replace older ones, partly because some of the new technology can benefit existing products.
Carburettors, he says, lasted an extra decade or so by adapting electronics designed for the fuel injectors that replaced them. Both must expect surprises in transition periods. Newsweek Product modification There are several general categories of new products. Some are new to the market e. DVD players into the home movie market , some are new to the company e. Game consoles for Sony , some are completely novel and create totally new markets e.
When viewed against a different criterion, some new product concepts are merely minor modifications of existing products while some are completely innovative to the company: Price Of the seven Ps comprising the marketing mix, price is the one most directly linked to generating income. Price setting is all-important especially for a financially orientated firm. The need to recover costs, and to earn a profit is, a powerful consideration. It is perhaps illuminating to consider the issue from three perspectives Lancaster and Withey, A market is a place where supply and demand comes into contact.
Price is the mechanism whereby demand and supply are brought into equilibrium. Pricing should be guided by the use of ratios and techniques such as breakeven analysis. Pricing strategies In practice all these viewpoints should be considered to some degree. In addition an appropriate blending of the other factors of the marketing mix will also help establish the price.
There are a number of methodologies that can help determine selling price. Competitor pricing — monitoring It is important that, as part of the pricing decision, the organisation continually monitors the prices charged by competitors. These prices should be compared to the benefits perceived by the customers for each product offering. Competitor pricing — responding Reference was made earlier to generic competitive strategy and the possibility of an organisation competing on the basis of price.
If this is the chosen strategy it is important that excess production costs are squeezed with the overall aim that the organisation will be cost leader within their market. These savings could be passed on to the customer and might be reflected in low prices. Larger, well-established businesses are better able to compete on price. This is generally as a result of two basic concepts: There can after all only be one price leader in a market. It may be more advisable therefore to add value to the product so differentiating it from the competitors offering in some way. Alternatively, part of the market a segment might be identified where the competition will find it hard to access.
There may be several other considerations when fixing price and some of which include: So, for instance, if the largest oil company cuts the price of fuel, others are likely to follow suit. This is particularly popular in pricing consumables in supermarkets. Motorists will travel miles to save a few pence a litre.
Where accurate price comparisons can be made, consumers become very price sensitive and shop around. For a major purchase, once a consumer has decided on manufacturer and models, increasingly the next step is not to go to a shop and purchase but complete an Internet search for the best possible price. People are also now able to make price comparisons across international borders and can see where companies are operating different pricing policies. Companies have a dilemma in that different markets have differing perceptions of value and affordability so differential pricing may be necessary.
Ultimately the manager must address the issue of whether customers believe the price is fair, commensurate with the quality of the product or service. CIM makes the point that existing customers are generally less price sensitive than new ones. This is one reason why it is vital to retain existing customers. A truism is that it is preferable to retain existing customers rather than having to find new ones. For the customer, price can imply quality. Pricing that is too low can have a detrimental effect on purchasing decisions and overall sales levels.
Conversely, the higher the price, the more customers will expect in terms of product and service whether packaging, the shopping environment, or promotional material, etc. The movement of goods from production to consumption points is key. Place therefore refers to: Research indicates that delivery performance is one of the main criteria for businesses choosing a particular supplier. Questions from a marketing point of view include: These issues are dealt with later in this coursebook.
Role of distribution Three aspects need to be considered: Nature of distribution Delivery of physical products was transformed in the second half of the twentieth century. It is now possible and economic to source raw materials and manufactured products on a global basis: For some products, hybridised solutions evolved.
For over years, the railways provided overnight distribution of newspapers in the United Kingdom. Now papers can be transmitted digitally to regional printing centres providing a more efficient, timely service with reduced environmental impact. People in different locations may want the same benefits but physical delivery may be different. An isolated hotel in the mountains may want gas the fuel of choice for chefs in the kitchen and broadband access. Gas pipes may not be feasible and, being remote from a town, fibre-optic links may not be available.
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