Differentiation and Opps + threats
Differentiation: Allows the development of differential marketing strategies. Breaking market into sub-segments allows the company to differentiate offerings between segments; if it chooses to target more than 1 segment. Differential advanatage gives the customer a reason to buy from a company rather than from its competition. Blackberry - lost ground to the iPhone because of its easy to use icon-based user interface and Samsung Galaxy - uses Android platform and offersmany high-tech features.
Opportunities + threats:
Markets are rarely static. New segments emege as customers become more affluent and seek new experiences. Companies which first spot new and under-served market segments and meet its needs better than the competition can benefit from increased sales and profit growth. Next; founded on identifying a new market segment - women who wanted smart, fashionable clothing at reasonable prices. Neglecting market segments can pose threats as competition could use this as a gateway to market entry; Japanese manufacturers exploited British companies' lack of interest in low-powered motorcycle segment. Reluctance of US motor car producers to make small cars allowed Japanese companiesto achieve market-wide penetration. Market segments MUST be protected.
Process of market segmentation
Target market is selected in 3 ways:
- 1. Understanding requirements + characteristics of individuals/organisations comprising the market (market research used here)
- 2. Grouping into segments according to these requirements and characteristics: A market can be segmented in various ways depending on choice of criteria. Market for cars could be segmented by; type of buyer (individual/organisation), family size (empty nester or kids). Using new criterion or well-known criteria in a novel way may give fresh insights into a market. Apple: 1st to recognise that young consumers wanted mobile music but also wanted thousands of songs - iTunes.
- 3. Choosing market segments to target: A marketing mix can then be developed, based on a deep understanding of target-market customers' needs and values. The aim is to design a mix which is distinctive from competitor's offerings.
Market segmentation and target marketing
Characteristics of individual consumers understood (each customer is treated spearately) - could be the global population.
Customers grouped into segments on the basis of having similar characteristics - countries (UK customers, Greek Customers. You only segment into countries if belonging to a certain country has a serious implication for liking the product (McDonalds - food is different in different countries)
The most attractive segment is chosen, and a marketing mix is developed for that target market. You don't have to choose just 1 segment, you can have many segments.
Week 5: Market Segmentation
Purpose of segmentation:
- Identification of individuals/organisations with similar characteristics that have significant implications for the determination of marketing strategy:
- Aids target market selection, the ability to design a tailored marketing mix and identification of opportunities and threats as well as development of differential marketing strategies.
- Target marketing: Choice of specific segments to serve, Decision of where to compete. It's used to focus company resources on those segments it's best able to serve.
1. Tailored marketing mix: Market segmentation allows grouping of customers based on similarities (benefits sought) that are important when designing marketing strateges. Marketers can understand the requirements of a segment and tailor a marketing mix. BMW 3 series saloon car targets middle managers whereas the X5 4X4 targets ast well-off couples with children. Segmentation promotoes the notion of customer satisfaction by viewing markets as diverse sets of needs to be understood and met by suppliers.
Qualitatitive + Quantitative
Focus: Verbal data vs. Numerical data
Research purpose + outcome: Rich, in depth insights vs. broad generalisations.
Research means: Focus groups or depth interviews vs. structured questionnaires
Operation: High flexibility in data collection vs. low flexibility
Data capture: Audio recording requiring post-coding vs. pre-coded response categories on structured Q
Sampling: Small samples vs. large
Analysis: Content analysis of respondent statements from audio recording vs. stat analysis of pre-coded responses from structured Q
Reporting: Underlying themes illustrated by quotes and summary statements vs. statistical.
Data analysis + Interpretation
Quantitative analysis of Q design will be carried out by the computer
SNAP - Software analysis packages
Sophisticated software is being developed to enable better and more accurate analysis of increasingly complex data sets.
Care needed when interpreting differences in means - subject to sampling error.
Sampling error: error associated with not having sampled the entire population.
Data analysis + Interpretation
Quantitative analysis of Q design will be carried out by the computer
SNAP - Software analysis packages
Sophisticated software is being developed to enable better and more accurate analysis of increasingly complex data sets.
Care needed when interpreting differences in means - subject to sampling error.
Sampling error: error associated with not having sampled the entire population.
- 1. Title page
- 2. Contents
- 3. Preface
- 4. Summary of conclusions + recommendations
- 5. Previou srelated research
- 6. Research method
- 7. Research findings
- 9. Appendices.
Dividing the market
Characteristics used as a basis to divide the disaggreagated market: different fromsector to sectors according to relevant characteristics.
It may not be relevant to segment a market (water - age) but for cosmetics, younger women/men buy different cosmetics than mature people (may prefer anti-wrinkling).
Categories for consumer segmentation:
Perceptions and beliefs.
- Customers can also be segmented on the basis of heavy users, light users, and non-users of a product category. Heavy users allow this group to receive most marketing attention (especially promotion efforts) - on the assumption that creating brand loyalty among these people will pay heavy dividends.
- 80:20 rule applies, where 80% of a product's sales come from 20 % of its customers. (Avneet and Superdry).
- Beer is a market where this rule often applies.
- Long tail - term used to reflect the increase in interest in niche products by marketers.
- Information technology has increased access to and knowledge of niche markets by marketers.
- Brands are increasingly developed to target niche market segments (as markets are ageing there is more demand of specialist healthcare products. Ford - adding healthcare technology to its cars so it can access niche segments - ECG seat that measures the heart rate of the driver automatically.
- Microsoft Xbox Kinect - gaming device is used by surgeons as a means of streamlining communications while performing operations.
Usage continued (HEAVY + LIGHT)
- Segmenting by use highlights an important issue in market segmentation. Individuals may buy product offerings that appear to appeal to different people in the market: SAME person may buy shredded wheat and cornflakes, cheap wine and expensive wine, economy and first-class tickets.
- A criticism of market segmentation is that: Markets are nOT made up of segments with different requirements because buyers of one brand buy other brands as well.
- HOWEVER the fact that an individual may purchase 2 completely different product offerings doesn't imply the absence of meaningful segments. This is because purchases may reflect different use occasions, purchases for different family members or for variety. E.G. purchase of shredded wheat and cornflakes may reflect variety-seeking behaviouror purchases for different family members. Cheap wine may be purchased to accompany a regular family meal, whereas expensive wine could be for a special dinner party. The wine = purchasing behaviour that is dependent on occasion.
- Market segmentation concerns the grouping of individuals/organisations with similar characteristics with implications for determination of marketing strategy.
- An individual may have different needs at different points in time (use occasions) doesn't mean that segmentation isn't warranted. The fact that there will be some overlap doesn't deny sense in making different marketing strategy for each segment (business and economy class)
Perceptions, attitudes and beliefs
Favourable + Unfavourable.
Consumers are grouped by identifying those people who view the products in a market in a similar way (perceptual segmentation)and have similar beliefs (belief segmentation).
These kinds of segmentation analyses provide an understanding of how groups of customers view the marketplace.
If their perceptions and beliefs are different, opportunities to target specific groups more effectively may arise.
Attitudes towards products and services can prove fruitful as a basis for segmenting a market
71% of UK population said they were middle class but this very large section of the population represented a wide spectrum of incomes, wealth and attitudes.
6 different tribes found, shows how tribal variations = different attitudes toward brand preferences.
Purchase behaviour 2
- Consumer services sector - linking actual purchase behaviour to individuals. The growth in retailer loyalty schemes has provided a mechanism for gathering behavioural data.
- Customers are given cards that are swiped through an electronic machine at the checkout so that points can be accumulkated (Boots) towards discounts and vouchers.
- The more loyal the shopper, the higher the number of points gained.
- Retailer benefits by knowing the purchasing behaviour of named individuals.
- This biographic data can be used to segment and target customers very precisely - easy to identify a group of customers that are 'ground coffee' purchasers and target them through direct marketing initiatives.
- Analysis of such data allows retailers to stock products in each of their stores that are most relevant to their customer's age, lifestyle and expenditure.
- Tesco Clubcard, Boots Advantage Card, Costa's club card - some retailers stock different products according to location.
- Solus buying, brand switching, innovations
- When a new product is launched, a key task is to identify the innovator segment of the market
- These people/organisations may have distinct characteristics which allow communication to be targeted specifically at them (young/middle class)
- Innovators are more likely to buy the product soon after launch (Apple - people queue up to buy the latest phone, and Yeezy's)
- Other people may need more time to assess the benefits, and will delay purchase until after the innovators have taken the early risks of purchase.
- Only once the credential has been established by these innovators is the brand moved to a wider target audience.
- Number of electric cars is still relatively low and prices are typically high - this type is car still has to appeal to a wide audience.
- Brand loyalty: Useful basis for segmenting customers. Solus buyers; totally brand loyal (buy only one brand in that product group-someone who only buys Ariel washing powder).
- Most customers brand-switch (Persil, Fairy) - others, however may show NO loyalty and may buy different brands on the basis of special offers.
Benefit segmentation: Understanding of why people buy in a market and can aid the identification of opportunities.
People in a market seek different benefits from a product: Convenience, status, performance, price
Car Industry: Ferrari (speed, style) then an X5 (convenience - big families) - they can have different products for different segments (Audi - A1 and then Q7)
- Lego: Focus on boys, with building bricks designed to assemble helicopters + warrior-themed ranges - playing with lego provides educational benefits (spatial awareness)
Research: Sampson (benefits sought from a car can predict what the consumer will buy)
Pleasure seekers: Driving is about pleasure - freedom, enjoyment and wellbeing
Image seekers: Driving is all about self-image - car provides power, prestige and status - driving is secondary
Functionality seekers: Driving is only a means of getting from A-B, convenience is v. important
- Markets can be segmented on a basis of price sensitivity
- A market is often characterised by a segment of customers who value the benefit of low price and another that values high quality or service and is prepared to pay more for that benefit.
- Tesco - grocery market leader (UK) has developed 2 product ranges (everyday value, and Finest) to cater for both market segments. Sainbury's also has a 'Taste the difference range' for premium quality products - enabled supermarket chain to capture market share and drive sales growth.
- Michelin - uses its own brand to target the quality (higher mileage) segment, whereas it markets Kleber brands to price-sensitive buyers.
- EasyJet + Ryanair grew rapidly because established airlines failed to cater for the price-sensitive market segment.
- Intel: Split market into 3 segments (Basic PC users - limited power but price sensitive, Mainstream performance seekers - wanted more power and were prepared to pay more for it, and Enthusisasts - computing power was vital and were ready to pay more for it. They developed different microprocessors; with differing price levels to target each segment.
- Intel identified 2 segments; value segment-price sensitive (served with Celeron microprocessor, whereas more expensive brand was served with Centrino).
- Marketing is about providing customers with benefits they value.
- Self-buy, special occasions, eating occasions
- Customers can be distinguished according to the occasions when they purchase a product.
- A product - tyres, or a service - plumbing may be purchased as a result of an emergency OR just a routine unpressurised buy.
- Price sensitivity; much lower in emergency buying situation - people are willing to pay however much is needed (when I got to the train-station and had to pay £60 to get home).
- Some products - mobile phones can be bought as gifts or self-purchases. Differing occasions can have implications for marketing mix and targeting decisions.
- Gift market - concentrated at Christmas so advertising budgets will be concentrated in the pre-Christmas period. Package design may also differ for the gift vs. personal buy segment.
- Many brands of chcocolates are targeted at the gift segment of the confectionary market (Thorntons, UK, Bonnat, France).
- Segmentation by purchase occasion is also relevant in the grocery market. Tesco - provided 3 store formats according to occasions when consumers purchase groceries. Tesco Superstores offer a wide range of food and non-food items and convenience purchases. BUT Tesco Express offers a more restricted range of products as does Tesco Metro.
- Easter + Christmas: Associated with higher prices; prices of Easter eggs fall dramatically after Easter Sunday. Marketers also need to be aware that gifts with too low a price-tag may not be seen as acceptable. McDonalds - offers b'fast meals+lunch and evening time food.
Design stage of Q - Continued
- 5. Scaling: Exploratory research may allow attitudes + beliefs to be measured by scales (strongly agree, strongly disagree) Emotions can also be measured using avatars - pictorial representations of people - emoticons (breaking bad faces).
- 6. Probes and prompts: Seek to explore/clarify what a respondent has said. Probes; in what way did you like that? Prompt; help someone remember (names of a criminal)
- 7. Coding: By using closed questions the interviewer only has to tick the code number next to the respondent's choice of answer. In computer-assisted telephone interviewing and with increasing use of laptop computers for face-to-face interviews, the code number can be put into the computer straight away. These questionnaires are pre-coded and so make the process of interviewing and data analysis much easier. Open-ended questions require post-coding where answers are categorised after the interview - time consuming and laborious,
Design stage of Q
- 1. Ordering of topics: Logical flow, start with easy-to-answer Q's. Builds confidence of respondents and allows them to relax - usually anxious at the beginning of an interview - concerned that they may show their ignorance. It's logical to ask awareness questions before attitude measurement questions. Unaided awareness questions should be asked first. Classifactory questions; personal information (age + occupation) usually asked last.
- 2. Types of Q: Closed-ended questions specify range of answers that'll be recorded. If there is only a yes/no answer to a question it is called DICHOTOMOUS. Open-ended questions allow respondent to answer question in their own way - interviewer then writes the answer in space.
- 3. Wording + Instructions: Q designers need to guard against ambiguity, leading questions, double-barreled questions and using unfamiliar words. Instructions - underlined or CAPITALS.
- 4. Layout: Shouldn't appear cluttered. In mail questionnaires, it's bad to squeeze as many questions as you can onto 1 page in order to shorten the length. If the Q looks heavy, you're less likely to get responses than if it's long.
PRM: Qualitative research continued
- Technology - impact on face-to-face discussion settings and high tech labs used to observe participants through 2-way glass (client organisation views the focus group session live).
- Online focus groups - popular and can reduce costs + create more opportunities to interact with customer groups. Research has also found that consumers are more hoenst online than in face-to-face (social desirability factors). Limitations: Non-verbal communications, eye movements, and interaction between participants can be missed.
- Internet communuties + social media sites: Provide access to 'communities of interests' - chat rooms/websites dedicated to specific interests or issues - useful forums for conducting focus groups, or identifying suitable participants. Q's can be posed to P'swho aren't under time pressure to respond (gives richer insight as they can think deeply about questions put to them online. They can also target people worldwide at minimal cost.
- In-depth interviews: Involve the interviewing of consumers individually for 1/2 hours about a topic. Aims-similar to those of group discussions but used when the presence of others could inhibit honest answers and viewpoints- topic requires individual treatment; organisation of a group is not feasible (may be impossible to arrange for 6 busy purchasing managers to meet)
- When interpreting results of qualitative research; findings are usually based on small sample sizes - more interesting viewpoints may be disporoportionately reported - should be followed up with quantitative study.
Qualitative research continued
Consultation with experts:
- Based on discussions + interviews with actual and potential buyers of a brand or service. Consultation with experts involves interviewing people who may not form part of the target market but who, can still provide important marketing-related insights.
- Many industries have experts in unis, financial institutions and the press - may be willing to share their knowledge.
- This provides invaluable background info and can be used to predict future trends.
- Also helps in exploratory research when the product field is unfamiliar
- Watching people buy wine in supermarket/paint in DIY store could provide useful background knowledge when planning a survey in these markets - Observational research that focuses on employee performanceis mystery shopping - 'shopper' acts like any other customer visiting a store, but is trained to ask particular questions and assess perormance on criteria such as - service time, friendliness and product knowledge,
- Aim - identify service weaknesses + strengths and provide input into staff training.
- Form of qualitative research which involves detailed and prolonged observation of consumers in the situations which inform their buying behaviour.
- Researchers live in a studied society for months/years.
- Direct observations, interviews and video and audio recordings - connects impoertant personal experiences to specific contexts; enables researchers to get closer to consumers in order to understand behaviour in new and more detailed ways,
- Procter & Gamble: 20 families in the UK and 20 in Italy were chosen to take part in a study that involved recording their daily household behaviour by video camera. Idea of the study was to gain insight into consumer habits (MaxFactor, Ariel, Pampers).
- Research found that the nappy was not as important as P&G previously thought. New mothers were more interested in information and knowledge than nappies. P&G then launched Pampers.com - online community for mothers which attracts over 650,000 users across Europe.
- Ethnographic research in China; low-income consumers doing their washing were willing to do the extra hand-washing to compensate for water hardness.
- P&G responded - lower price version of Tide detergent without water softener.
- Ethical issues concerning privacy are dealt with by getting full permission beforehand and giving families editorial control over what is eventually shown to marketing team.
PRM: Focus groups
Focus groups: Unstructured/ Semi-structured discussions between a moderator/group leader, who is often a psychologist, and a group of consumers.
A good deal of information can be gained about the consumer. This can be helpful when planning questionnaires; which can be designed to focus on what's important to the respondent as opposed to the researcher.
Another advantage: Findings may provide rich insights into consumer motivations and behaviour because of the group dynamics where group members 'feed off' each other and reveal ideas that would not have arisen on a one-to-one basis.
Weaknesses: Interpretation of the results is highly subjective, the quality of the results depends heavily on the skills of the moderator. Sample size is usually small - hard to generalise. Resukts may be biased by the presence of 'research groupies' - who enjoy taking part in focus groups and return again and again; some people even take on different identities and skew survey results.
Association of Qualitative Research Practitioners - focus group participants have to provide proof of identity each time they attend a group.
Primary research methods
Each ad hoc marketing research project may be different
- Qualitative research: Using small numbers of respondents (aims to understand consumers' attitudes, values, behaviours and beliefs.
- Quantitative research: Structured study of small or large samples using a predetermined list of questions or criteria; involves interviewing hundreds/thousands of consumers.
Analysis and understanding of patterned conduct and social process of society. Main forms of qualitative research used in market research are group discussions: In-depth interviews and ethnography; which involve bringing together personal encounters, life events and understandings into a more meaningful context.
Qualititative research seeks to understand the 'why' and 'how' of consumer behaviour.
Defines what the marketing research agency promises to do for its client, and how much it'll cost. The proposal should be written to avoid misunderstandings
- 1. Statement of objectives: Show an understanding of cleint's marketing + research problems.
- 2. What will be done: Clear description of research design, survey method, type of sample
- 3. Timetable: If and when a report will be produced
- 4. Costs: How much research will cost and what, is/is not being included in these costs.
- 5. Beware of vagueness: If proposal is vague, assume, report is also likely to be. If the agency doesn't state what is to be done, why and who is doing it and when, it isn't clear in their own minds
- 6. Beware of jargon: Marketing-research terminology can be explained in non-expert language, so it's the responsibility of the agency to make the proposal understandanble to the client.
- 7. Beware of what is missing: Assume that anything not specified won't be provided.
Involves the preliminary exploration of a research area prior to the main data-collection stage.
Major purpose of exploratory research is to guard against the sins of omission and admission:
Allows researcher to understand market being researched.
Serves as a basis for the quantitative data collection stage of the marketing research
Sin of omissions: Not researching a topic in enough detail, or failing to provide sufficient respondents in a group to allow meaningful analysis.
Sin of admission: Collecting data that are irrelevant to the marketing problem, or using too many groups for analysis purposes; thereby unecessarily increasing the sample size.
- Secondary research
- Qualititative research
- Consultation with experts
- Data comes to the researcher second-hand (other people have compiled the data)
- Comes from sources such as internal company records, reports and previous research carried out for the company.
- Government and EU statistics, publishers of reports and directories on markets, countries and industries, trade associations, banks.
- Trendwatching; specialises in identifying emerging global consumer and marketing trends
- Experian - Internet presence which provides various types of information
- Mintel - Provides industry specific reports, but data may be unreliable if on Internet.
- Secondary research should actually be carried out BEFORE primary research
- Without secondary research, expensive primary research survey may be commissioned in order to provide information that's already available from secondary sources.
- Kompas: Directory which can be used when selecting a sample in a business-to-business marketing research project
Ethnography - Kenco
- Videoed people to understand what was nost important in a coffee shop experience
- Kenco found that, while its on focus was on the coffee beans, a range of other things were just as important to consumers; crockery in which coffee is serve.
- Video project - much more interesting way of relaying findings to management - watching consumers talk was much more vivid than watching a Powerpoint Presentation.
Objective of exploratory research stage in the marketing research proess is NOT to form conclusions but to get better acquainted with the market and its customers.
Allows the researcher to base the next stage - involving wider data collection on informed assumptions rather than guesswork.
1. Descriptive research: Undertaken to describe consumers' beliefs, attitudes, preferences and behaviour (survey into advertising effectiveness may measure awareness of the brand, recall of a recent ad and knowledge about its content.
2. Experimental research: Setting up control procedures to measure cause and effect (effect on sales of a promotional offer). Control procedures are set up to isolate the impact of a factor (money-off sales promotion) on a dependent variable (sales). Key to successful experimental design is the elimination of other explanations of changes in the dependent variable - narrow it down to one reason.
For example: Sales promotion may be applied in a random selection of stores with remaining stores selling the brand without the offer (normal price). Statistical significance testing can be used to test whether differences in sales are likely to be caused by the sales promotion or are simply random variations. Effects of other influences on sales are assumed to impact randomly on the sales promotion and the no promotion alternatives.
Telephone:Halfway house between face-to-face and mail surveys. They have a higher response rate than mail questionnaires but lower than face-to-face; their cost is usually less than face-to-face and they allow a degree of flexibility when interviewing.
HOWEVER, visual aids aren't possible and there's a limit to the number of questions that can be asked- people may end the interview or give quick (invalid) answers to speed up the process.
- Computer-aided telephone interviewing (CATI) is common (helps with interviewing) - centrally located interviewers read questions from a computer monitor and input answers via the keyboard
- Mail surveys -cheapest, give a reasonable response rate. Low research budget and widely dispersed population means that mail survey is the best way to go.
- Major problem with mail surveys is the potential of low response rates and danger of an unrepresentative sample.
- Mail questionnaires must be fully structured - no opportunity to probe further and control over who completes the questionnaire is low (marketing managers may pass the questionnaire to subordinate for completion). Visual aids can, however be supplied with the questionnaire and because of self-completion, interviewer bias is low. There may still be a source effect (where the questionnaire was sent from - commerical/non-commercial).
Using the internet as a survey tool
Questionnaire is given out via email or appears in banner advertising - Google or Yahoo (drives people to the questionnaire). Bespoke survey companies; surveymonkey
Faster: Faster to distribute than mail surveys but telephone surveys can provide the most instantaneous response.
Easier: Internet surveys may be easier to compile and use; this is subjective as it depends on tehcnological literacy of those involved.
Cheaper: In terms of sample size this may be true, as the larger the sample, the greater the cost for the other methods of data collection. There can, however be significant up-front costs involved in setting up an Internet survey and accessing desired target respondents.
Better: They need to ensure the validity of response in order to meet this 'better' requirement,
Absence of accurate contact lists is a problem when using email to survey populations - researchers need to be careful that they don't spam email users as this may be blocked by firewalls and end up in the 'junk' pile.
- 1. Respondents must understand the question (phrased in language the respondent can interpret)
- 2. Respondents must be able to provide the answer (not something that the respondent can't remember or is outside of their experience). OR asking them to answer a question about a brand thay they're unaware of.
- 3. Respondents must be willing to answer
Stages in development of a questionnaire:
- 1. Planning stage
- Define research problem + exploratory research
- Information required, Defined population, target groups, survey method.
- 2. Design stage
- Ordering of topics, type of question, wording+instructions, layout, scaling, probes + prompts
- 3. Pilot stage
- Pilot testing + redesign
- 4. Final Questionnaire.
Survey method: Mail survey
Open ended questions on a mail survey would lower response rates on a mail survey. Time restrictionsn for a telephone interview limit the use if open ended questions.
Probing is also easier with face-to-face interviews.
Types of probes:
- 1. Clarifying probes - can you explain what you mean by...
- 2. Exploratory probes - stimulate the interviewee to give a full answer (are there any reasons why?
- A certain degree of probing can be achived with a telephone interview, but time pressure and less personalised situation will limit its use. Visual aids (drawing of a new product concept) can be used where this cannot be used in a telephone interview.
- Drawbacks of face-to-face: More expensive than telephone and mail questionnaires. Telephone and mail surveys are also cheaper because the cost of contacting respondents is much less expensive - unless the population is very concentrated. Presence of i
- Interviewer can cause bias - social desirability (sensitive information can be misreported)
- O'Dell - found that only 17% of respondents admitted borrowing money from a bank in a face-to-face interview compared to 42% in a comparable mail survey.
Survey method (face-to-face)
- 1. Face-to-face interviews
- 2. Telephone interviews
- 3. Mail surveys
- 4. Internet surveys
- Response rates are generally higher than telephone interviews or mail surveys - personal element makes refusal less likely
- Testing the effectiveness of a stimulus would normally be conducted by face-to-face interview rather than a mail survey where high non-response rates and the lack of control over who completes the questionnaire could invalidate the results.
- They are more versatile than telephone and mail surveys.
Main quantitative data collection
Sampling process: Pop definition, sampling frame, sampling method, sample size.
Survey method: Face-to-face interviews, telephone interviews,mail surveys, internet surveys.
Questionnaire design: Planning, designing, plotting.
1. Define the population
2. Search for sampling frame
3. Specify sampling method + Determine sample size
4. Select sample.
- Defining the population - Group that forms the subject of study in a particular survey.
- Survey objective - Provide results that are representative of this group
- Sampling frame - List or other record of the chosen population from which a sample can be selected (Kompass directory of companies could be used)
- Result of sampling frame determines whether a random or non-random sample can be chosen. Random sample requires accurate sampling frame, without one, the researcher is restricted to non-random methods.
3 MAJOR sampling methods: Simple random, stratified random and quota.
- Simple random: Each individual/company in sampling frame is given a number and numbers drawn at random until sample is complete. Random because everyone has an equal chance of selection.
- Stratified random: Population broken down into groups (company size/industry) and random sample drawn for each group - ensures that each group is represented in the sample.
- Quota: No sampling frame, but percentage of population falling into various groupings is known (gender,age). Interviewers select individuals on the basis of these %'s (50:50 female to male). Non-random - not everyone has an equal chance of selection - less £ than random.
Importance of sampling size
Larger the sample - the more representative of the population.
Statistical theory allows calculation of sampling error - error caused by not interviewing everyone in the populationfor various sample sizes(psychology)
Number of people interviewed is based on a balance between sampling error and cost considerations. Sample sizes of around 1000 (or fewer) can provide measurements with tolerable error levels when representing populations in their millions.
Perceptions, attitudes and beliefs continued
- Dislike/Like: Brand preferences
- Squeezed Strugglers:
- Low income (30k) They like Gilette + ITV, don't like Sainsbury's or National trust. 6% of pop
- Bargain Hunters:
- 33k, like eBay and Muller, don't like John Lewis or Sainsbury's, 17% of pop
- Daily Mail Disciplinarians:
- 36k, like BA, don't like L'Oreal or Channel 4, 15% of pop
- Comfortable greens:
- 36k, Like fair trade and green and black's, don't like ASDA, or Coca-cola, 13% of pop
- Deserving downtimers:
- 47k, like John lewis and Channel 4, don't like EasyJet or Coca-cola, 8% of pop
- Urban networkers:
- 41k, like Apple and Pizza Express, they are pro all brands 12% of pop
Perceptions, attitudes and beliefs continued 2
Toyota: use belief segmentation to segment the market and target specific groups. They aimed to attract a new generation of car buyers in Europe with its Yaris model.
In targeting 20-30 year olds, Toyota used direct marketing to persuade this group that these cars are fun, entertaining and enjoyable to own. The new models have added attributes such as touch-screen, multimedia systems and other gadgets to attract the attention of the target group.
Values-based segmentation is based on the principles and standards that people use to judge what is important in life.
Values form the basis of attitudes and lifestyles - these manifest as behaviour.
Marketers have recognised the importance of identifiying the values that trigger purchase for many years, but now it is possible to link value groups to profiling systems that make targeting feasible.
Week 7: Marketing Planning continued
Each business may be strategically autonomous and will form a strategic business unit; business or company division serving a distinct group of customers, with a distinct set of competitors.
Virgin Group, made up of a community of independently operating companies.
Virgin Media was created through mergers with NTL, Telewest and Virgin Mobile.
Decisions to add or release a business are taken at the corporate and strategic planning level
- Richard Branson: Expanded business' reach by entering markets as diverse as cosmetics, weddings and hotels.
- Marketing links to corporate decision-making by identifying opportunities and threats in the environmant.
- Opportunity to develop the travel arm of the Virgin group by adding Virgin hotels is likely to have emerged from MP actions.
- MP is part of the overarching corporate strategic planning process, providing a range of insights from the trading environment to target markets and customer needs.
Functions of marketing planning
- Where are we now? Business mission, SWOT analysis, marketing audit
- Current position of business in terms of past performance, considering how effective previous marketing plans and questioning what will happen in the future if there were no changes in current practice. Virgin Atlantic 2011: Performed well against objectives, managed resources effectively through tough economic conditions.
- Where would we like to be? Marketing objectives
- Virgin's corporate objective: 'Offer the best business product in the air'. So the implications for the marketing planning team are setting suitable objectives which ensure improved customer service of the business products.
- How do we get there? Core strategy, marketing mix decisions, organisation, implementation
- Needs of business travellers - consider expectations and experiences. Virgin- won awards for Upper Class Suite (first-class product for price of business class).
- Are we on course? Control
- Performance measures, Virgin measures sales and profitability, however also uses other measures such as an increase in fuel efficiency and reduction in carbon emissions - targets the use of sustainable products and renewable resources.
Marketing planning process
Divided into distinct areas:
- Business unit level - Virgin Atlantic (FIRST 4)
- Product level - Virgin flights to... (LAST 4)
- 1. Business mission: Enduring statement about the purpose of the business (Ackoff)
- 2. Marketing audit: Systematic examination of a business' marketing environemnt, objectives, strategies and activities
- 3. SWOT analysis: Evaluating strategic position of a business by identifying strengths, weaknesses, opportunities and threats.
- 4. Marketing objectives: Strategic thrust (which products to sell in which markets) and strategic objectives (product-level objectives; build, hold, harvest and divest).
- 5. Core strategy: Achieving marketing objectives; including target markets, competitor targets and competitive advantage.
- 6. Marketing mix decisions: Product, place, promotion, price
- 7. Organisation and implementation (Problems)
- 8. Control: Performance against plan is monitored so that corrective action can be taken
Week 7: Marketing Planning (EXAM)
- What is it? Corporate strategic planning framework which provides direction to the company. This allows the company's activities to constantly meet high performance objectives (being market leader or improving profitability)
- It involves all business functions - Marketing, operations, finance, HR
- Marketing planning in strategy development is complex and can vary in terms of what's involved. At the simplest level, a company may only market one product at a time - role of MP is to ensure that the marketing plan for the product matches customers' needs.
- BUT, some companies offer many different products to different target markets, and so the marketing mix is different for each. In this situation, decisions must be made regarding the allocation of resources to each product/service - difficult because resource allocation is dependent on the attractiveness of the market for each product (1 product may be more pop)
- Also, some companies may comprise a number of discrete but connected divisions (or totally separate companies) each of which serves a distinct group of customers and competitors.
Virgin Group: Operates many companies in different sectors (V.Media, V. Megastore-music, V. Active - gyms, V.Atlantic airways)
- Both product and target market are changed
- Company may decide to move upmarket or downmarket by introducing a new range of products to meet the needs of new target customers.
- Samsung Electronics: Once an unfocused manufacturer of cheap, undifferentiated TVs and microwaves - selling to all age groups and is now a premium-priced flat-screen TV and mobile handset brand which focuses on high-life seeker segment of the market.
- These are consumers who are willing to adopt technology early (innovators) and pay the price for it.
- Mercedes-Benz; used tangible and product repositioning to compete against Japanese car manufacturers.
- Tangible repositioning - developing new products (city car - A/C-Class) to appeal to NEW target customers.
- Product repositioning - Required in the current market segments to bring down cost of development and manufacture in the face of lower-priced rivals such as Toyota-Lexus.
Positioning = Choice of target market and differential advantage
- Positioning idea must be clear in terms of target market and differential advantage. Complicated positioning statements are not memorable. Simple messages - BMW (ultimate driving machine) or Asda's (every little helps) are clear and memorable.
- People are bombarded with messages daily
- To break through this 'noise', a consistent message is required.
- Confusion will arise if this year we position on 'quality of service' and then next year, we change it to 'superior product performance'.
- Consistent message to target customers: Gilette; 'the best a man can get'
- L'Oreal; 'Because you're worth it'.
- The consistent use of this message causes a high recall among customers.
Successful positioning 2
- Differential advantage that's chosen must be credible in the minds of the target customer.
- Ford - found that its brand image was not compatible with the marketing of upmarket cars - this lack of credibility led it to purchase Jaguar, Land Rover, Volvo & Aston Martin.
- As consumers became aware of their new owner, the credibility of the original brands suffered, and they were all sold except for Volvo.
- Toyota - lack of credibility as an upmarket brand caused it to use 'Lexus' rather than 'Toyota Lexus' as the brand name for its top of the range cars.
- Honda - followed a similar strategy using Acura brand name for its luxury models - shows the importance of credibility when positioning brands.
- Differential advantage should have a competitive edge - offer something of value to the customer that the competition is failing to supply.
- iPod - based on differential advantage of seamless downloading of music from a dedicated music store; iTunes to a mobile player that produced better sound q than rivals - Walkman.
Changing the target markets, the differential advantage or both
- Image repositioning: Keep product and target market the same but change the image of the product. The product may be acceptable in functional terms yet lack the required image. M&S (Plan A programme) and Ryanair have changed their image by altering business practices in order to be perceived as sustainable and environmentally friendly.
- Product repositioning: Target market same, product changes. IBM - Moved away from manufacture of computers - sold its PC division to Lenovo and now only provide software and services, yet to the same type of customer. Talk Radio: Speech-based radio station was rebranded as talkSPORT - target market remained the same, but the product changed as it now focuses on sport.
- Intangible repositioning: Targeting a different market segment with the same product. Lucozade; originally targeted by Beecham's foods at sick children. Marketing found that mothers were drinking it as a pick-me-up and brand was repositioned to focus on this segment. They used well-known athletes and footballers in ads to get the drink to appeal to a wider target market (Youths). Wagner (german supplier of paint-guns) supplies internationally. In Europe these guns are purchased by professional painters, but in the USA the same products are targeted at the consumer market - people use them for home-use.
MPP: Business mission
- 1. What business are we in? 2. What business do we want to be in?
- Samsung: 2020 vision statement for the coming decade 'Inspire the world, create the future'
- Google: Mission statement 2012: 'To organise the world's info and make it universally accessible and useful'.
- Misssion statement should reflect the market and describe the process by which a customer need can be satisfied. Inclusion of market and needs ensures that the business definition is market focused rather than product based,
- Apple: Purpose is to solve customers' information problems, NOT manufacture computers. It's important to ensure that a business definition is market focused is because products change, however basic needs such as transportation, entertainment and eating are lasting.
- Levitt (leading American Economist): Businesses should be viewed as customer-satisfying, not goods-producing processes. Said that rail-road companies would have survived had they defined their business as transportation and moved into airline business. But the management has to have competence and resources at their disposal.
- Competences can widen business mission (ASDA) redefined business mission asa producer + distributor of milk to a fast-moving consumer goods retailer due to its distribution skills which it felt could be extended to products beyond milk.
MPP: Business mission continued
Virgin Group: Adapted to changing market demands. Founded in 1970 with Virgin records and has now developed into a multi-faceted global business w. 300 companies in various sectors.
Macro-environmental change is a second influence on business mission. Change provides opportunities + threats which many influence the company's mission. ASDA saw that changes in retail practice from corner shops to high-volume supermarkets presented an opportunity. Background of company and personalities of senior management: third influence on BM
- The mission should be based on the vision of senior management and subordinates. An effective mission statement should be based on 4 factors:
- 1. Solid understanding of business: Nokia (1865) paper manufacturer, vision of management in early 1990s changed company by redefining its mission. Abandoned paper to focus on mobile phone technology - strategic decision; became world leader in mobiles in early 21st c.
- 2. Strong personal conviction + motivation of leader: With ability to make vision contagious. Walt Disney (MS 'To make people happy') - contagious + motivating for staff. Jeff Bezos (Amazon) vision + mission 'To be the earth's most consumer-centric company + build a place where people can come + discover anything they want to buy online'. Passion + commitment has led company to become world's leading e-commerce company
- 3. Creating strategicintent of winning throughout organisation: Creates a sense of common purpose, stresses need to create competitive advantage rather than settle for moves that other company's have done.
- 4. Enabling success: Managers have to feel they have latitude to make strategic-decisions without being second-guessed by top management.
SWOT analysis and strategy development
Once a SWOT analysis has been completed, you can look at how to turn weaknesses into strengths, and threats into opportunities.
E,G: Perceived weakness in customer care might suggest the need for staff training to create a new strength
An example of a company that successfully matched strengths with opportunities is:
Charles Tyrwhitt: Gent's clothing retailer, whose founder Nick Wheeler saw an opportunity in the growing demand for online sales. Strength was that the company had run its own catalogue business for more than a decade to service its existing home shopping operation. Result: Charles Tyrwhitt has created highly profitable online business, outselling rivals (Thomas Pink and TM Lewin in terms of online sales).
Using SWOT Analysis for car example: Company may decide to increase production levels and incorporate more modern production levels. They could also raise price levels (if marketing research supports this idea). Marketing strategies may include building on the company's strengths in producing a reliable product and possessing a well-respected global brand name.
- Strategic thrust: Objectives at the overall business level
- Shape the direction of the plan and involve deciding on which markets to target and which products/services to sell.
- Danone: May decide to target new customers (Muller yoghurt eaters) with existing products - Activia
- Strategic objectives: Set specific objectives for individual products - to implement your plan you'll need to build market share of (Activia yoghurts)
Strategic thrust: Future direction (which products to sell in which markets)
- Existing products in existing markets (market penetration or expansion)
- New/related products for existing markets (product development)
- Existing products in new/related markets (market development)
- New/related products for new/related markets (entry into new markets)
Nature of marketing audit + SWOT analysis
- Marketing audit is a systematic examination of a business' marketing environment, objectives, strategies and activities, with a view to identifiying key strategic issues, problem areas and opportunities.
- Consists of an examination of a company's external + internal environments. External: MACRO, market and competition. Internal environment audit consists of operating results,strategic issues analysis, marketing mix effectiveness, marketing structures and systems.
- SWOT analysis provides a simple method of summarising the results of the marketing audit. Internal issues are summarised under strengths + weaknesses, and external issues are summarsised under opportunities and threats.
Specialist, low-volume US Sports manufacturer
- Reliable products
- Well-respected brand name worldwide
- Competitive prices
- Tight focus on specialist niche market
- Production limited to few cars per week (long waiting lists)
- Outdated production methods
- Lack of marketing expertise
- Limited marketing research
- Only distributed in UK and USA
- Growing market in USA
- Untapped market potential in UK
- Increasing number of specialist car manufacturers setting up in Europe.
SWOT Analysis (ANSOFF)
Structured approach to evaluating the strategic position of a business by identifiying its strengths, weaknesses, opportunities and threats.
When evaluating strengths and weaknesses, only those resources or capabilities that would be valued by the customer should be included; strengths such as 'we are an established firm' or 'we are technologically advanced' should be questioned for their impact on customer satisfaction.
Strengths Weaknesses Internal (controllable)
Opportunities Threats External (uncontrollable)
Systematic examination of a business' marketing environment, objectives, strategies + activities in order to identify strategic issues, problem areas and opportunities.
Internal audits: Focuses on areas that are under the control of marketing management
External audit: Concerned with forces over which management has no control (MACRO +MICRO)
Macroenvironment: Broad environmental issues; Political/Legal, Economic, Ecological/Physical, Social/cultural, Technological (PEEST).
External marketing audit checklist
- Political/Legal: EU + National Laws, codes of practice
- Economic: Economic growth, unemployment, interest + exchange rates, global economic trends (growth of BRIC(S) Economies)
- Ecological/Physical: Global warming, pollution, energy, and scarce resources, recycling
- Social/Cultural: Changes in world population, age distribution, household structure, attitude and lifestyle changes
- Technological: Innovations, communications, technology, infrastructures, bio-technology.
- Market: Size;growth rates
- Customers: Who? Choice criteria, How? When and where they buy, how they rate competition on a product, promotion, price and distribution, how customers group (market segmentation) and the benefits each group seek
- Competitors: Major competitors (actual + potential) obkectives + stategies, strengths+ weaknesses, size.
- Distributors: Channel attractiveness, strengths and weaknesses, physical distribution methods
- Suppliers: Who they are and location, strengths and weaknesses, power changes.
Microenvironment - marketing audit
Actors in the firm's immediate environment that affect its capabilities to operate effectively in its chosen markets.
Microenvironmental analysis consists of:
- Market analysis: Statistical analysis of market size, growth rates and trends
- Customer analysis of buying behaviour: Survey of who who customers are, what choice criteria they use, how they rate competitive offerings and on what variables they can be segmented.
- Competitor analyis: Examination of the nature of actual and potential competitors, and their objectives and strategies.
- Distribution analysis: Examination of movements in power bases, channel attractiveness, physical distribution and distribution beahviour.
- Supplier analysis: Examination of who and where suppliers are located, their competences and shortcomings, trends affecting them and the future outlook for them.
- Strategic issues analysis: Examination of the suitability of marketing objectives and segmentation bases in the light of changes in the marketplace.
- Eddie Stobart - Noticed that customers hated 'slovenly drivers' and 'old dirty lorries' - Focused on dress code and cleanliness. This helped him to transform not only his own company but the whole of the haulage industry in the UK.
- Apple - Built a leading global brand by investing in developing innovative digital technology products. Danger of moving into area away from core competencies into areas where skills don't provide competitive ad.
Marget Segmentation: Identifying segments...Understanding characteristics
Market Targeting: Assessing and selecting which segment(s) to serve
Market Positioning: Decisions concerning how the company is going to compete in chosen segment(s).
- Choice of target market (where we want to compete)
- Differential advantage (how we want to compete) using mark mix to create something special
The whole point of marketing is to create and maintain a distinctive place in the market for a company and its products. This is through giving the customer something better than what the competition is offering.
Product differentiation = added features that give customers benefits that rivals cannot match. This may be from unique images created from advertising or valued salespeople. Distribution differentiation = making buying situation more convenient for consumers.
Benefits of customisation
Better targeting of customers' needs and wants
Higher levels of customer value
- Costs of customisation: Higher coordination costs (communication, reporting, error-related costs)
- Lower economies of scale inproduction - each product is different
- Higher procurement (buying) costs - less bargaining power with suppliers
- Greater operational costs - set-up costs on FMSs
- Extra investments in plants and other resources.
Young single, young couples, young parents, middle aged empty nesters, retired.
- Disposable income and purchase requirements may vary according to life-cycle stage (young single vs married with children)
- Consumer durable purchases - Dependent on life-cycle stage, with young couples without children being a prime target market for furnishings and appliances as they set up home.
- VW Golf (What Car? 2011) 1.4 5-dorr was rated as being the best small family car, whereas the Ford Mondeo 2.0 Zetec won the best family car. Manufacturers do, however also consider other variables like carbon emissions and high performance - enables them to access particualar segments.
- People are classified according to the neighbourhood in which they live (system is produced by CACI - targets everyone on UK electoral roll)
Social class, terminal education age, income
Social class: Upper middle, middle, skilled working, unwaged
- In the UK, social class is measured using occupation, in other European countries, demographic variables are used (age, gender, life-cycles)
- Social class can be multi-layered and consequently may me more difficult to identify (upper middle and middle)
- Also people who hold similar occupations have very different lifestyles, values and purchasing behaviour
- Social class has proved useful in discriminating between owning a dishwasher, having central heating and privatization share ownership - shouldn't be discounted as a segmentation variable.
- Geodemographics: Geo and demographic variables
- Geographic segmentation method is useful when there are geographic locational differences in consumption; variations in food preferences; France, Spain + Italy are oil-based cooking markets, while UK + Germany are margarine and butter oriented.
- National advertising expectations may also form geographic segments for communicational purposes - Germans expect a great deal of factual information in their advertisements - this would bore British and French viewers.
- France - with its more relaxed attitude to nudity, broadcasts commercials which would be banned in the UK.
- Honda + Toyota have launched their first 'Asia-specific' cars but they face competition with Tata - produces cars for home market (small, affordable, reliable car for Indian Families)
- Geodemographic: UK variables such as age, social status, family size, ethnic background, tupe of housing are used to group small geographic areas (enumeration districts) into segments which share similar characteristics.
Age + Gender
- Has been used to segment many consumer markets
- Children - receive their own TV programmes, cereals, computer games and confectionary are also markets which are formulated with children in mind.
- Sweet tooth kids: Kellogg's Frosties
- L'Oreal targets over 50s with its AgePerfect and Revitalift brands
- Vodafone - 35-55 year olds with an easy-to-use, no frills mobile phone offering uncomplicated functionality that many within this age-group value.
- Offers much for the marketing manager planning segmentation strategy. Magazines, clothing, hairdressing and cosmetics - differing tastes + customs between men and women reflected
- A popular way of communicating with these segments is through digital media communications.
These variables allow consumer groups to be classified in such a way that can be reached by the communications media (Advertising, direct mail).
Involves grouping people according to their lifestyle and personality characteristics.
Groups people according to their way of living, reflected in their activities, interests and opinions.
Marketing researchers attempt to identify groups of people with similar patterns of living
Lifestyle segmentation has proved popular among advertising agencies - attempt to relate brands (Hugo Boss) to a particular lifestyle (aspirational).
Sky - used lifestyle segmentation to target special interest groups including sports enthusiasts (sky sports) and then film lovers (sky movies) and news followers (sky news)
Trendsetters, conservatives, sophisticates.
Personality - Psychographic
Extroverts, Introverts, aggressive, submissive.
Brand choice may be related to personality. HOWEVER the usefulness of personality as a segmentation variable is likely to depend on the product category.
Buyer and brand personalities are likely to match where brand choice is a direct manifestation of personal values but for most fast-moving consumer goods (cereal, tea, detergents) people buy a repertoire (same) of brands.
Personality + lifestyle segmentation is more likely to work when brand choice is a reflection of self-expression (brand becomes a badge that makes public an aspect of personality)
'I choose this brand to say this about me and that this is how I would like you to see me'.
Successful personality segmentation has been found in the areas of cosmetics, alcohol drinks and cigarettes (Anastasia Beverly Hills).
These variables allow consumer groups to be classified in such a way that can be reached by the communications media (Advertising, direct mail).
Geodemographic systems in UK
ACORN + MOSAIC (uses Experian's consumer segmentation database
ACORN: Segments households into 5 categories, wealthy achievers, urban prosperity, comfortably off, moderate means and hard pressed. Each is then subdivided further (wealthy achievers - wealthy executives, affluent greys and flourishing families).
MOSAIC: 11 categories: Symbols of success, happy families, suburban comfort, ties of community, urban intelligence, welfare borderline, municipal dependency, blue-collar enterprise, twilight subsistence, grey perspectives and rural isolation. These are also further divided down; Symbols of success is broken down into global connections, cultural leadership, golden emoty nesters etc.).
MOSAIC global - 18 countries,
- This info has been used to select recipients of direct mail campaigns in order to identify the best locations for stores and find best poster sites. Consumers can be identified by means of their postcode - census data is used here to buy advertising spots on television.
- Geodemographics links buyer behaviour to customer groups.Buying habits can be determined by large-scale surveys (MORI financial services)or panel data
Choice of which market segments to serve with a tailored marketing mix.
When evaluating market segments, a company should examine 2 broad issues:
1. Market attractiveness: Market factors,competitive factors, political, social and environmental factors.
2. Company's capability to compete in the segment.
- When market segmentation reveals several potential targets, specific marketing mixes can be developed in order to appeal to all or some of the segments.
- Airlines: Design different marketing mixes for first-class and economy passengers; varying prices, service levels, quality of food, in-cabin comfort and waiting areas at airports.
- This marketing strategy exploits the differences between marketing segments by designing a specific marketing mix for each segment.
- Disad: Loss of cost economies, however the use of flexible manufacturing systems can minimise these problems (they can alter between production rapidly).
Stores: Weekly shoppers
Express: Convenience shoppers
Online: Online shoppers
- Identification of several segments in a market doesn't mean that a company should serve them all - some may be unattractive or out of line with business strengths.
- When a business develops a single marketing mix aimed at one target market (niche) it is practicing focused marketing - good for companies with limited resources.
- Small companies may stretch their resources too far by competing in more than one segment.
- This type of marketing allows R+D expenditure to be concentrated on meeting the needs of this one segment, or their efforts may be spread across the whole market that they pay insufficient attention to their requirements.
- Bang + Olufsen: Danish audio electronics firm. Targets upmarket customers who value self-development, pleasure and open-mindedness with its stylish TV and music systems.
- 'High Q, but we're not Rolls Royce - more BMW'. Company places emphasis on distinctive design, good quality and simplicity of use.
- Target a particular age group - Saga (over 50s) broadened its range of products marketed to this age-group such as a share-dealing service.
- Heavy buyers is another good place to focus, 20% of customers account for 80% of sales. Companies who focus on heavy buyers may, however commit majority fallacy (blind pursuit of the largest, most easily identified market segment. This segment has been recognised by everyone and has intense competition.
- There will likely be high marketing expenditures, price cutting + low profitability. Better to target small segment
- Requirements of individual customers are unique and their purchasing power is sufficient to make designing a separate marketing mix for each customer viable.
- Segmentation at this disaggregated level leads to customized marketing being used.
- Service providers; advertising and marketing research agencies, architects and solicitors vary their offerings on a customer-customer basis. They discuss face-to-face with each customer their requirements and tailor their services accordingly.
- It's also found within organisational markets because of the high value of orders and the special needs of customers.
- Locomotive manufacturers will design and build products to specifications given to them by individual rail transport providers.
- Associated with close relationships between supplier and customer in these circumstances because the value of the order justifies large marketing and sales efforts being focused on each buyer.
- Mass customisation: Marketing of highly individual products on a mass scale
- Audi,BMW,Mercedes and Renault have the capacity to build to order (cars are manufactured only when there is an order specification from a customer.
- Dell - customised computers. Nike - customised trainers.
- These FMS's allow customers to specify individual products from range of optional equipment
Target marketing strategies
Absence of segmentation: Undifferentiated: One size fits all
The cost in developing a separate marketing mix for separate segments may outweigh the potential gains of meeting customer needs more exactly.
A company may therefore develop a single marketing mix for the whole market.
Companies that lack a marketing orientation may practice undifferentiated marketing through lack of customer knowledge.
More convenient for managers since they only have to develop a single product
Finding out that customers have diverse needs that can only be met by products with diverse characteristics means that managers have to go to the trouble and expense of developing new products, designing new promotional campaigns and developing new distribution channels. Moving into new segments also means that salespeople have to start prospecting for new customers.
- Firm's capability to serve the market segment is v.important.
- Market segment may be attractive but outside the resources of the company
Exploitable marketing assets:
- Does the market segment allow the firm to exploit its current marketing strengths?
- Toyota: Developed Lexus model name when entering upper-middle executive car segment.
- Companies that can exploit cheaper materiall, labour or technological cost advantages to achieve a low cost position compared to competition may be in a strong position. esp. if segment is PS.
- Strength may be derived by superior technology, which iis the source of differential advantage in the market segment. Patent protection (pharmaceuticals) can create a strong defensable position - high profitability
Managerial capabilities and commitment:
- Segment may look attractive but realistic assessment of managerial capabilities may lead to rejection
Market attractiveness factors
- Segment size:Large-sized segments more attractive than small-sales potential greater + chance of achieveing economies of scale is improved. V. competitive as other companies see attraction. Small companies, no resources to compete in large segments- smaller ones.
- Segment growth rate: Growing segments usually seen as more attractive than stagnant or declining segments, as new business opportunities will be greater. Growth markets are, however often associated with heavy competition (mobile computing market, tablet computers).
- Segment profitability: Potential to make profits is an important factor in market attractiveness.
- Price sensitivity: Profit margins eroded by price competition. Low-price sensitive segments usually more attractive since margins can be maintained. Comp may be based on Q and non-price factors.
- Bargaining power of Customers: End and intermediate (distributors) customers can reduce attraction of market segment if they can exert high bargaining pressure on suppliers - reduction in profit margins as customers (supermarket chains) negotiate lower prices in return for placing big orders.
- Bargaining power of suppliers: When supply is hands of few dominant companies, segment will be less attractive than when served by competing suppliers.
- Barriers to market segment entry: Barriers to market can be high marketing expenditures needed to compete, patents or high switching costs for customers. If a company judges that it can overcome barriers to entry, their existence may raise segment attractiveness if company judges that barriers will deter new rivals entering.
- Baririers to exit: Specialised product facilities which can't be easily liquidated or spare parts promise.
Nature of competition:
- Segments characterised by strong aggressive competition are less attractive than where competition is weak. Weakness of European and North American car manufacturers made Japanese entry into a highly competitive market segment relatively easy. Q of competition is far more significant than the number of companies operating in a market segment,
- New entrants: Judgement about the likelihood of new entrants must be made, possibly with new technology which could change the rules of the game (Google - changed rules in search engine market)
- Competitive differentiation: Segments more attractive if there is a real probability of creating a differentiated offering that customers value. Identifying underved needs and meeting them
- Political issues: Deregulation of telecommunications in the UK paved the way for private companies to enter consumer segments of their market. Attraction of entering new geographic segments may be reduced if political instability exists or is forecast - Greek Economic Crisis; problems with Thomas Cook.
- Social trends: Changesin society need to be assessed to measure their impact on the market segment. Changes in society can give rise to latent market segments. Big gains made by first entrants (Apple's entry into the mobile music market with iTunes)
- Enviornmental issues: Body Shop - took opportunity afforded by the movement against animal testing of cosmetics and toiletries. Conversely, market for CFCs decreased when they were linked to depleting ozone layer.
What is Marketing?
Peter Drucker: The basic function of marketing is to attract and retain customers at a profit.
Marketing is seen as a central role for business success and focus' manager's attention on attracting and keeping customers.
The purpose of marketing is not just to attract ANY customer at ANY price, as profit is used as a criterion by Drucker.
Profit may be used by many commercial organisations, whereas in the non-profit sector, other measures of success might be used; reduction of social deprivation or hunger.
It's much more expensive to attract new customers than it is to retain old ones; Rosenberg found that it is upto 6 times cheaper to keep old customers.
Gronroos: Stressed the importance of relationship building. Definition of marketing; Objective of marketing is to establish, develop and commercialise long-term customer relationships.
Research planning - research brief
Research Brief: Client explains marketing problem and outlines research objectives. Clients should not only tell research agencies what they want to understand but what the research is to be used for.
- Background info: Product's history and competitive situation
- Sources of info: Client may have a list of industries who may be potential users of the product - helps researchers define the scope of the research.
- Scale of project: Is the client looking for a 'cheap and cheerful' job or a major study
- Timetable: When is the information needed?
Client should produce a specific written research brief (may be given to research agency before meeting and maybe modified). Research brief should state the client's requirements and should be in written form to minimise misunderstandings.
- Commissioning good research is similar to buying any other product/service.
- 1. Define terms clearly; If market share info is needed, the term 'market should be clearly defined'.
- 2. Beware of researchers who bend research problems so that they can use their favourite technique - may be specialists in a particular research-gathering method (group-discussion) or statistical technique (factor/cluster analysis) and look for ways of using these methods in any research problem that they face - irrelevant info and unecessary expense.
- 3. Don't be put off by naive researchers asking what simple questions + brief 2/3 agencies-more info.
MO Case study
1986: First .co.uk address was registered
25 years later: Nearly 3/4 of households and businesses in the UK have access to the Internet via broadband connections.
Boston Consulting Group: 'Internet is transforming the UK economy' and more than 7% of Gross Domestic Product (GDP) comes via the Internet.
This is important as GDP is an indicator of the health of a country's economy; if it shows positive growth, then the economy is expanding
GDP is measured in 3 ways:
1. Output: Value of goods produced by all sectors of the economy
2. Expenditure: Value of all goods purchased by households and government departments
3. Income: Wages of individuals and company profits
Companies who found latent markets:
- 3M's Post-it: Filled a latent market for a quick, temporary attachment to a document
- Ebay: Exploited the latent market for individuals who wished to sell products directly to others
- Nintendo: Identified the latent marketfor a new style of home entertainment with the launch of the Wii console. The new product targets families, and the electronic games promise health and fitness for everyone who plays.
YET, internally driven companies are happy to just stick with their existing products and markets
Intensive competion means that market-driven companies should respond quickly to latent markets; they need to innovate, manufacture and distribute their products and services rapidly if they are to succeed before the strategic window of opportunity closes
Microsoft was a company which was slow to respond to opportunities in the mobile computer. In 2010 Apple introduced an iPad, it widened demand and now dominates this sector.
Market-oriented companies strive for competitive advantage, they seek to serve customers better than their competition. Internally oriented companies are happy to produce me-too copies of what is already available on the market.
Research on MO: 2 views
The market orientation-performance relationship
Resource based view: Linear andpositive relationship between market orientation and a company's performance
Contingency theory: Relationship between market orientation and a company's performance. This is non-linear AND moderated by contingency factors. It does, however depend on certain factors; market dynamism, internationalism
Market-driven businesses know how their products and services are being evaluated against those of the competition. They understand the choice criteria that customers are using and ensure that their marketing mix matches those criteria better than competition.
Businesses that are focused internally segment by product and therefore are vulnerable when customer requirements change.
Market-driven businesses recognise that marketing research expenditure is an investment which can yield better results through better customer understanding.
Toyota: Market-led company wich uses market research extensively. The Toyota Yaris was specifically designed to meet th needs of the European consumer - they designed their optimal drive technology in order to enhance performance, lower emissions and give customers better fuel economy.
Internally driven businesses - See marketing research as a non-productive intangible waste of time. They prefer to rely on anecdotes and received wisdom
Market-oriented behaviour INCREASES performance relationship
Superior value for customers: Firms that constantly respond to customer needs and preferences and are able to anticipate future needs and preferences are better placed to tailor products and services to customers.
Superior marketing strategy: Market-oriented behaviour (MOB) provides informational advantages. This makes firms wiser than less market-oriented competitors in terms of target market choice, and the choice of marketing strategies in target markets.
Source of sustainable competitive advantage: MOB's informational capabilities are intangible - this means that they cannot just be purchased on the marketplace. Components are highly interconnected. Evidence shows that firms with strong MOBs are rare.
These are values that need to run through the entire organisation, from management to customer support (customer satisfaction, customer value and doing better than competitors)
MO Norms: Implicit/explicit norms that characterise the organisation (rules and procedures)
Examples of MO norms:
- Customer service-related procedures (formal rules - customer service centre (script is used)
- Periodic meetings with members from multiple departments (marketing, production, logistics and HR)
- Information storing and sharing rules/procedures.
- Unwritten rules: Innovative companiesmay have low levels of informality (this fosters innovation and motivation)
- Information sharing rules can slow down the process of communication.
These are objects which allow the company to act in a market-oriented way
This is crucial for the implementation of market orientation
Information systems that allow the firm to store relevant information about customers, competitors' actions and market trends
Technology that allows to manufacture products that effectively meet customer needs
Three necessary components of market behaviour:
1. Market-focused information generation
Systematic gathering of information on customers and competitors - present and potential AND other factors that can/may influence customers' needs and preferences (Hunt & Morgan - 1995)
2. Market-focused Infomation dissemination
Communication and spreading data widely, and/or sale of the information generated to relevant departments in the organisation (Kohli and Jaworski - 1990)
3. Market-focused responsiveness
Systematic analysis of information, it is to develop knowledge, and use that knowledge to guide strategy (recognition, creation, selection, implementation, modification) Hunt & Morgan - 1995
Resource based view
Increasing market-orientation increase performance
Creating superior value for customers
Endorsing superior marketing strategies
Establishing a sustainable competitive advantage
Commodity vs. Non Commodity:
- Upside down U shape for commodities - this means that market orientation increases performance up to a point, but where the highest point is reached, any higher than this means that there is no further benefit from MO and returns bought by MO are smaller and it costs the same amount of money to market the product so you are inccuring money expenditure.
- Positive and linear relationship for non-commodities (highly customised products)
- Dynamic markets - customer needs changing quickly (competitive advantages don't last long) and so MO is vital for survival - moving with the needs of the customer.
- If dynamism level is HIGH --> GREATER impact of MO on the company’s performance
- If dynamism level is LOW --> SMALLER impact of MO on the company’s performance
- Highly internationalised companies (which serve many markets need more complex marketing strategies to succeed --> MO is vital (McDonalds - healthy and different food)
- If internationalisation is HIGH --> GREATER impact of MO on company's performance and vice versa.
- Laws governing marketing practice:
In addition to EU laws, member states have the rigt to make their own legislation governing business practice - meaning inconsistencies across Europe.
National Laws governing advertising across Europe means that what is accepatable in one country is banned in another.
Toys cannot be advertised in Greece
Tobacco advertising is illegal in Scandinavia, the UK + Italy
Alcohol advertising is banned in France
There are national bodies set-up to investigate anti-competitive behaviour. Self-regulation also occurs at national level, with industries drawing up codes of practice to protect consumer interests. e.g. Competition Commission in UK is an example of a national body
These can impact marketing decisions through their effect on supply and demand
- 1. Economic growth
- 2. Unemployment
- 3. Interest and exchange rates
- 4. Changes in the global economic environment (growth of the EU and the Eurozone) and rise of BRIC economies (Brazil, Russia, India and China)
Marketers need to have contingency plans in place to cope with economic turbulence and downturns
They also need to be aware of the opportunities and threats arising from changes in the global marketing enviornment.
Economic Growth + unemployment
- Most of the world's economies have gone through a period of economic significant growth since the mid 1990s, driven partly by productivity gains bought about by developments in computing and telecommunication technologies.
- Growth was followed by a period of economic slump - began in 2008 in the 'credit crunch'; followed by deepening recession and the eurozone debt crisis - threatened to impact on the worldwide economy.
- Within an economy, different sectors experience varying growth rates, leading to changing degrees of market attractiveness. The services sector has experienced the fastest growth and become the dominant force in most western economies.
- E.g. Among the 27 EU countries, services account for 70% of gross domestic product which is a measure of the total value of goods and services produced within an economy,
- Acquiring excessive market power through acquisition (obtaining an asset): Control the size that firms grow to through acquisition or merging with other firms within defined markets; stops the creation of monopolistic profits (imperfect competition - market structure is between pure competition and pure monopoly). Actions to prevent the build-up of excess power include blocking mergers - Volvo wanted to acquire Scania (lorry company) and the reason this was prevented was because such a merger would create a near monopoly, Less severe actions = apply strict conditions to any merger such as the requirement that: Nestle sell a number of Perrier brands to econourage a third force to emerge in the French water market to allow them to compete with Nestle.
- Relying on state aid: It can be in a nation's interest for their government to give state aid to firms which need help. This can give artificial competitive advantages to recipient firms, enabling them to charge lower prices than their unsupported rivals. Recipients may also be unfairly shielded from the full force of competitive pressures affecting their markets. Approval of state aid is usually given as part of a restructuring or rescue package for struggling firms. These payments should be 'one-offs' to prevent uncompetitive firms being repeatedly bailed out by their governments. Icelandic volcano erupted and casued havoc with airlines. These airlines applied for state assistance and although non-state aid was allowed,'unfair assistance' was prohibited as it would undermine competition.
Political and Legal forces: EU-wide laws -
- Collusion (secret/illegal cooperation) - Price fixing, cartels and collaborative activities. Competition is encouraged by preventing firms joining forces to act in a monopolistic way. The EU commision enforces EU rules. For example; the commission broke up a cartel between British Airways and Virgin Airways. BA were fined £270 million, however Virgin escaped prosecution because it alerted the regulators about the price fixing for passenger fuel surcharges on transatlantic flights.
- Abuse of market dominance; discouraged from taking action such as monopoly and discriminatory pricing - could harm small buyers with little bargaining power. Market dominance was successfully challenged when Italian cigarette producer AAMS was found to be abusing its dominant position for the wholesale distribution of cigarettes - AAMS was protecting its own sales by imposing restrictive distribution contracts on foreign manufacturers - limiting the access of foreign cigarettes to the Italian market. Microsoft was fined £340 million for its alleged misuse of its near monopoly in operating systems - they failed to disclose technical info on 'reasonable terms' which would let rivals make products which worked with Windows.
Week 3: Marketing Environment
Broad forces that affect not only the company but also the other actors in the environment - social, political, technological and economic
Actors in the firm's immediate environment that affect its capability to operate effectively in its chosen markets - namely, suppliers, distributors, customers and competitors.
The Marketing Environment
Microenvironment; Suppliers, Customers, Distributors, Competitors
Macroenvironment; Political/Legal, Ecological/Physical, Technological, Social/Cultural, Economic
MO firms look outwards to the environment in which it operates, they try to to adapt to take advantage of emerging opportunities and to minimise potential threats.
Marketing environment: Consists of the actors and factors that affect a company's capability to operate effectively in providing products and services to its customers.
Ingredients of Market orientation
Managers make assumptions about the role of satisfying customer needs as a route to enhancing performance.
Kodak: They were the first to discover the digital camera, yet they didn't go ahead and do it. This could be one of the reasons that they failed; not innovating to meet the times
Similarly, Blockbuster thought that people would always want the same thing, therfore they didn't change with the times and technology and failed.
ZARA, and ASOS however realised that customers wanted fashion with the latest designs at an affordable cost for the mass market . This latent need was discovered because the managers realised the importance of customer value.
Marketing versus product-orientation
- Convenience comes first
- Assumes price and product performance is key to generating sales
- Segment by product (not customer differences)
- Rely on anecdotes (instead of investing in MR)
- Cherish status quo (welcome change)
- Ignore competition (instead of trying to understand competition)
- Marketing spend regarded as a luxury (instead of being seen as a luxury)
- Innovation punished (instead of being rewarded)
- Stick with the same - why search for latent markets?
- Why rush? (although being fast gives you a competitive advantage)
- Happy to be me-too (don't care about standing out)
- Efficient (rather than being effective)
Perceived performance of the product in delivering value relative to a buyer's expectations.
3 possible outcomes:
Customer satisfaction occurs when perceived performance matches or exceeds expectations; Canon, Samsung and Toyota all place customer satisfaction at the heart of their business philosphy.
Companies such as Chrysler and Gap are facing difficulties as they have failed to change to meet the new expectations and needs of customers.
ASOS: This company succeeds in satisfying young women's desire to replicate the look of their favourite celebrities by offering affordable versions of celebrity outfits
Customer Satisfaction Continued
Customer satisfaction is taken so seriously by some comapnies, that they actually link satisfaction to financial bonuses. 2 days after taking delivery of a new car BMW and Mini customers receive a telephone call to check on how well they were treated in the dealership.
Their responses for various questions were measured. Dealerships have to be capable of achieving good performance scores, and existing dealerships that consistently fail to meet these standards are at risk of franchise termination.
This approach makes a lot of sense as higher levels of customer satisfaction are associated with higher levels of customer retention, financial performance and shareholder value, Mittal + Kamakura.
Customer expectations need to be exceeded for commercial success so that customers are delighted with the outcome.
Customer Satisfaction Continued
Kano model: Helps to separate characteristics that cause dissatisfaction, satisfaction and delight.
3 characteristics underlie the model; 'Must be' 'More is better' and 'Delighters'.
Must be: These characteristics are expected to be present and are taken for granted. E.g. In a hotel, customers expect service at reception and a clean room. A lack of these can cause annoyance, but their presence only brings dissatisfaction up to a neutral level.
More is better: These can take satisfaction past neutral into the positive satisfaction range. For example, no response to a telephone call would lead to dissatisfaction, wheres a quick response would lead to satisfaction or even delight.
Delighters: Unexpected characteristics that suprise the customer. Their absence DOESN'T cause dissatisfaction but their presence delights the customer; a hotel may provide customers with a free fruit basket - this would delight many customers who weren't expectecting this treat.
How else to delight customers: Under-promise but over-deliver (say that the watch repair will take 1 hour, but do it in 10 minutes
Perceived benefits: RIPS
Perceived sacrifice: TEMP
- TIME COSTS
- PSYCHOLOGICAL COSTS
- MONETARY COSTS
- ENERGY COSTS
Relational benefits: Relationship between customer and supplier.
Customers may enjoy working with suppliers with whom they've developed close personal and profesional friendships, and value the convenience of working with trusted partners.
Perceived sacrifice is the total cost associated with buying a product.
This isn't just monetary cost, however is also the time and energy involved in purchase
For example, with fast-food restaurants, suitablelocation can reduce the time and energy required to find a suitable eating place.
HOWEVER, marketers need to be aware of a major sacrifice in some buying situations. This is the potential psychological cost of the buyer not making the right decision.
For example:McDonalds attempts to reduce perceived risk by standardising its complete offer so that customers can be confident of what they'll receive before entering the outlet.
Organisational markets - companies offer guarantees to reduce the risk of purchase.
Why do we need marketing?
Consumer, industrial and not-for-profit are characterised by strong competition. So organisations need not only to understand what their customers want but also to understand what competitors provide. If customer needs aren't met, they may switch to a rival supplier,
Marketing exists though exchanges. Exchange = process of receiving something from someone by giving them something in return.
The 'something' could be a physical good, service, idea or money
The idea of satisfaction is particularly important to suppliers of products, because satisfied customers are more likely than dissatisfied customers to return and buy more.
Hence, the notion of customer satisfaction as the central pillar of marketing is fundamental to the creation of a stream of exchanges upon which commerical success depends.
Customer Value - Customer Satisfaction (Page 14)
Customer Value: Perceived benefits - Perceived Sacrifice.
Market oriented companies attempt to create customer value in order to attract and retain customers
E.g. Global success of McDonald's has been based on creating added value for its customers, which is based not only on the food products it sells but on the complete delivery system that goes to make up a fast food restaurant.
It sets high standard in quality, service, cleanliness and value (QSCV)
Customers can be sure that the same high standards will be found in all of the McDonald's outlets around the world. This example shows that customer value can be derived from many aspects of what the company delivers to its customers - not just the basic product
- These can be derived from the product (taste of the hamburger)
- From the associated service (how quickly customers are served and the cleanliness of outlet)
- Image of the company (whether the image of the company/product is favourable)
If one of these factors - for example, product benefits changes, then perceived benefits and customer value also change.
For example; McDonalds fortune downturn a few years ago was largely attributed to the trend towards healthier eating. This caused some consumers to regard the product benefits of its food to be less, resulting in lower perceived benefits and reduced customer value.
In an attempt to redress the situation, McDonalds introduced healthy'eating options including salad and fruit, and is developing allegiances with Weight Watchers and its weight-loss programme.
Problems with Customer Satisfaction
Over time, delighters become expected; for example some car manufacturers provided small unexpected delighters; pen holders and delay mechanisms on interior lights so that there is enough time to find the ignition socket at night.
These are now seen as being standard on most cars and have become 'must be' characteristics as customers expect them. Marketers must constantly strive to find new ways of delighting customers
Innovative thinking and listening to customers are key ingredients in this.
Marketing concept - case study
Companies achieve their profit and other objectives by satisfying (even delighting) customers.
To achieve success, companies must go further than mere customer satisfaction; they must do better than the competition.
Mercedes-Benz: Constantly focusses on the competition, and builds on its success through successful marketing and innovation.
2011: Mercedes-Benz was ranked top super brand in the luxury car market (increased market share by 3.4%) Clark
German paint and assembly systems manufacturer, gets close to its customers by assigning over half its workforce to the sites of the customers; Ford and Audi.
Sometimes, when personal contact is insufficient or not feasible, formal marketing research is commissioned to understand customer motivations and behaviour.
Customer needs -> Potential Market Opportunities -> Marketing products and services -> Customers
Market oriented companies encompass other actor's in the firm's enviornment (competitors, technology, political/legal forces)
So market-oriented firms DON'T just focus on the customer, they focus on all of these things
Market versus internal focus:
- Customer concern throughout business
- Knowledge of customer choice criteria - enables a match with the marketing mix
- Segment the market by customer differences
- Invest in MR (market research) and track market changes
- Welcome change
- Try to understand competition
- Marketing spend is seen as an investment (not a waste of money)
- Innovation is rewarded
- Search for latent markets
- Being fast
- Strive for competitive advantage
- Efficient and effective
Market versus internal focus:
- Customer concern throughout business
- Knowledge of customer choice criteria - enables a match with the marketing mix
- Segment the market by customer differences
- Invest in MR (market research) and track market changes
- Welcome change
- Try to understand competition
- Marketing spend is seen as an investment (not a waste of money)
- Innovation is rewarded
- Search for latent markets
- Being fast
- Strive for competitive advantage
- Efficient and effective
These market-oriented companies focus on customer needs. Change is recognised as endemic and adaptation is considered a condition for survival.
An individual's changing need presents potential market opportunities, which drive the company - latent needs (needs which aren't actually needed until the customer uses it and decides that they need it).
Change towards ethical consumption has created opportunities for existing companies - Danone.
Danone: (2011) Company launched Fundooz brand aimed at improving nutritional intake of children in India
One water: Donates 100% of its profits to life-saving projects in Africa
Toms Shoes: 1 pair of shoes is donated every time one pair is sold.
Market-oriented companies get close to their customers so that they can get to understand their needs and problems
1. Management becomes cost-focused and believes that the central focus of its job is to attain economies of scale by producing a limited range of products. (Sometimes, just 1).
Henry Ford is described as being a production-oriented manager because he built just one car in one colour (black model T) in order to minimise costs.
His main objective was, however customer satisfaction; bringing the car to new market segments through low prices. A true production-oriented manager only cares about cost reduction, this comes from providing a narrow product range.
Production capabilities --> Manufacture product --> Aggressive sales effort --> Customers
Modern marketing concept
The achievement of corporate goals through meting and exceeding customer needs and expectations better than the competition.
3 conditions need to be met in order to apply this concept:
1. Company activities should focus on providing customer satisfaction rather than making things easier and better for the producer/manufacturer. It's not an easy condition to meet BUT it is necessary to place the customer at the centre of all activity.
2. Achievement of customer satisfaction relies on integrated effort. The belief that customer needs are central to the operation of a company should run throughout production, finanace, research and development and all other departments. It is simply the role of marketing to coordinate activities, not be the only ones carrying them out.
3. Integrated effort should work successfully, management must believe that corporate goals can be achieved through satisfied customers.
Marketing Orientation; evolutionary process and companies can move from unawareness to complete acceptance of the marketing concept - they may not initially adopt it.
A competing philosphy to marketing orientation is product orientation. This is NOT, however the only competing philosphy.
Product-orientation; Managers can become focused on the internal aspects of their business
There is also financial orientation; where companies focus on short-term returns, basing decisions more on financial ratios than customer value.
Sales orientation; emphasise sales push rather than adaptation to customer needs
Interest and exchange rates
Key monetary tool that governments use to manage the economy is interest rates
Interest rates represent the pricethat borrowers have to pay lenders for the use of their money over a specified period of time.
Western economies lowered interest rates during the credit crunch to encourage borrowing and lending - in an effort to avert a major slump in consumer and business demand.
An exchange rate is the price of one currency in terms of another (an exchange rate of £1 = 1.2 euros)
Fluctuations in exchange rates mean that the price a consumer in one country pays for a product and/or the money that a supplier in an overseas country receives for selling the product can change.
The EU + The Eurozone
The EU is a largely deregulated (without barriers) market.
A key objective if the EU is to lower the costs of operating throughout Europe and to create an enormous free market in which companies can flourish.
EU has 27 member states and is expanding, as it has expanded, new member states have contributed to the development of the community and helped with the conomic growth of union.
The eurozone = Economic and monetary union (EMU) between 17 member states of the EU. Each state has adopted the euro as a currency and is managed and controlled by the European Central Bank.
The ECB's primary responsibilities are to control inflation and manage debt and economic reforms - a common currency therefore brings advantages through helping the flow of free trade within the community.
4: Market Analysis
Involves the statistical analysis of market size, growth rates and trends.
Why do we need market analysis?
To find out:
- What kind of people buy my products?
- Where do customers buy?
- What kinds of new products would customers like to see in the market?
Car manufacturer - Ford (you're going to launch a new product in a new segment (luxury niche). You can run focus groups to see what the customer's reaction is. If companies launch products blindly, they may be unsucessful.
Measure brand image - Strong brands such as McDonalds, Google, Apple - assess what the perceptions of their brands are. Market analysis encompasses marketing reseach
- What are the chances of my new product being a failure/success
- What price will customers be willing to pay for my new product?
Marketing Information System
System in which marketing information is fomally stored, analysed and distributed to managers in accord with their informational needs or a regular planned basis.
It's built on an understanding of the information needs of marketing management - supplies this info, where, when and how the manager wants it.
Data are derived from ME and transferred into information that marketing managers can use in decision-making.
Data: Most basic form of knowledge (brand of butter sold to a customer in a certain town) This stat is of little worth in itself BUT may become meaningful when combines with other data.
Information: Combo of data which provides decision-relevant knowledge (brand preferences of customers in a certian age-category in a particular geographic region. Nature of marketing information systems: Internal continuous data, Internal ad hoc data, Environmental scanning and Marketing research.
Internal continuous data
An advantage of setting up an MkIS is that data can be converted into something that can be used by marketing management - profitability of a product, customer or distribution channel OR even the profitability of a particular product to an individual customer.
Viking Direct (part of Office Depot) is one of the world's largest suppliers of office stationary- targeting the wrong customer has serious implications for its promotion strategy.
Viking operates in the UK -London, Manchester and Leicester and claims to sell more office products than any other company. Viking sells writing materials, office equipment, warehouse and cleaning supplies. HOWEVER when the company streamlined its information systems in order to improve customer insight, they found that the stereo-typical '35 year-old female secretary' was not the primary buyer as they previously thought. New survey data found that middle-aged men were more likely to be primary stationary buyers - this shift was due to the recession - men left corporate world to start their own businesses. Data analysis also revealed that men were not only buying the stationary but they were also older than previously thought and were working in smaller companies.
Due to this customer insight, Viking Direct changed its marketing materials and sales initiatives and developed a loyalty ladder for driving sales using motivational triggers - relevance of product, ease of ordering, delivery, price and fulfilment.
Micro - Suppliers.
Fortunes of companies is affected by customers, competiors, distributors, and suppliers.
Increases in supply costs can push prices up - makes other alternatives more attractive.
- Increases in the price of aluminium may make plastic seem more attractive.
- As with distributors, powerful suppliers can force up prices (rise in gas prices has been blamed on powerful European suppliers who restricted supply in order to force prices to increase.
companies monitor supply availability (shortages due to labour strikes or political factors - causing customer dissatisfaction and decrease sales)
companies also need to be careful with changing input materials that can be existed to those of existing suppliers if the changed material's prices rise or availability diminishes significantly.
many customers increasingly form partnerships with selected suppliers in order to enhance the value delivery
ALL elements of Micro must be monitored and assessed to allow opportunities to be exploited and threats combated - essential ingredient for strategic fit between company and ME.
Micro - Distributors
some companies - those that provide a service, dispense products with the use of distributors; these people prefer to deal directly with end-user customers.
These intermediaries perform many valuable services - including breaking bulk, making products availbale to customers where and when they want them and provide specialist services such as maintenance and installation.
Distributors can reduce the profitability of suppliers by putting pressure on profit margins (large retailers - Wal-Mart and Tesco have maasive buying power and can demand low prices from suppliers (tesco didn't even pay them) - this is something that has been criticized in the media when applied to small farmers.
Distribution is monitored - trend towards downloading music has hit traditional music outlets which sell CDs. Growth of the Internet-based sellers such as Amazon has impacted on traditional bricks-and-mortar booksellers (ottakers and waterstones)
As the attractiveness of distribution channles changes, supplier must also alter strategies to keep in touch with customers.
increase in one-person houselholds, households with no children and the growth in dual-income families.
more people are living alone by choice, through divorce or bereavement. Suggests that a key market segment is people who demand products meeting their particular needs (one-bed houses or apartments and single-portion foods).
proportion of couples with no children has increased - reflects a desire to maintain high standards of living for longer. The implication is and increase in attractiveness of markets where couples are likely to spend their disposable income - restaurant meals, designer clothes and luxury holidays.
EU countries - dual-earner families. UK: 1/2 of couples with dependent children are double-income familes. The rise of 2 income households means that this market segment possibly has higher disposable income - lead to reduced price sensitivity and capacity to buy luxury furniture and clothing products - upmarket furniture + clothing and expensive services - foreign holidays + restaurant meals.
Microenvironment - customers
Consists of actors in firm's immediate environment that affect its capabilities to operate effectively in chosen markets. Customers, competitors, distributors + suppliers.
At the centre of the marketing philsophy and effort - task of marketing management to satisfy needs and expectations better.
Changing customer tastes, lifestyles, motivations and expectations need to be monitored - allows companies to supply the appropriate targeted marketing mix strategies which meet their needs.
Changes in consumer behaviour also need to be monitored (consumers are using social network sites like twitter to communicate (this is something that marketers have picked up on) and are marketers seek out the latest customer needs.
Micro - Competition
- When competitors price-cut, the attractiveness of the market can fall and their ability to innovate can ruin once highly profitable brands.
- marketing history - littered with brands that were once successful (Amstrad computers, lotus software) that have now become defunct because rivals developed and marketed better alternatives.
- It's no longer good enough to just meet the needs of consumer needs and expectations. success is dependent on being better than the competition.
- marketing-oriented strategies monitor and seek to understand customers but also research competitors and brands in order to understand strengths, weaknesses, strategies and response patterns.
Internal ad hoc data
Company data can also be used for specific ad hoc purpose - management may look at how sales have reacted to a price increase or a change in advertising copy. Although this could be part of a continuous monitoring programme, specific one-off anlayses are needed from time to time.
Capturing this information on the MkIS allows speicific analyses to be conducted when needed.
PEEST forces are monitored - they can be difficult to monitor amorphous nature (vague) but they're important as they can shape the context within which the company, suppliers, distributors and competition do business.
Environmental scanning provides and early warning system for the forces that may impact on a company's products and markets in the future. In this way, scanning enables an organisation to act on, rather than react to, opportunities and threats.
This focus looks at the longer-term perspective and allows the company to be in a position to plan ahead. Information.
Data analysis provides a major input into such strategic decisions as which future products to develop and market to enter, and the formulation of a competitive strategy (to attack or defend against competition.)
External continuous data
Companies collect data on customers on an ongoing basis. Data is stored on marketing databases, which contain each customer's name, address, telephone number, past transactions and demographic data.
Info on types of purchases, frequency of purchases, purchase value and responsiveness to promotional offers may be held. Retailers encourage collection of data by introducing loyalty card schemes - Nectar Card (allows customers to collect points that can be redeemed for cashback or gifts at various store groups).This includes Sainsburys, Argos, Ebay Amazon. Boots - Advantage card as well as Staples.
Operationally - Loyalty card is swiped through cash machine at checkout and cardholder info is stored on the card with name and address so that purchasing data including spend per visit , types of brand purchased, how often the customer shops and where can be linked to individuals. Tesco's clubcard - Store loyalty card; used to gather consumer behaviour data - this info is analysed and used to produce personalised marketing and sales promotion initiatives. Boots, Sainsbury - rewards, Tesco - saving money.
Customer relationship management systems
- Vital for building long-term relationships and effective marketing strategies with business clients and consumers.
- For CRM systems to perform effectively, data generated at different stages needs to be brought together; customer acquisition, retention and relationship development.
- A potential problem with marketing databases was that a company had many separate databasescreated in different departments. E.g. Sales department may have an account managemnet database containing information on customers, while call centre staff may use a different database created at a different time, also containing information on customers.
- This led to problems, so companies take an integrated approach towards data management with data captured and made accessible through one system.
- Data are collected, stored and analysed to provide info to customer-contact staff in a form that corresponds to the way they work and the way customers want to access the company - salesforce, telephone, email or websites.
- Many companies that are investing in this approach are creating competitive advatage as they can get better customer insight.
- Analysing consumers' use of websites.
- From a website or email marketing letter it is possible to generate a vast amount of user data - most frequently accessed item on a web page, how long each visitor stays on a page and which products are purchased.
- Technical info can also be gathered- how well the site loads and downloads, whether it ranks within the top 3 pages of major search engines and the number of links from other sites.
- Google Analytics - can be used to analyse website performance
External continuous data
Retail audits: Continuous research, by gaining corporation of retail outlets (supermarkets) sales of brands can be measured (laser scans of barcodes on packaging, which are read at the checkout). Brand loyalty and switching cannot be measured but retail audits can provide accurate assessment of sales achieved by store.
Nielson - produces retail trend information based on in-store scanning on a regular basis. The company is able to produce vital info that can be used to predict future behaviour. E.g. Retailers globally are facing increasing challenges to get customers to visit stores - UK Grocery sector: 55% of packaged grocery items are own-label.
TV Viewership panels:
Measure audience sizes: Panel selected from private homes from each ITV & BBC region and one panel member represents about 5000 of the UK population. Survey conducted on a continuous basis using various data-collection techniques (interviews and online meters which can monitor and record behaviour). The Broadcasters' Audience Research Board (BARB) collects and collates viewing data which show how particular TV programmes have performed. Commericial breaks can be allocated ratings points - proportion of the target audience watching - currency by which TV advertising is bought + judged
Importance of marketing research
- Viewpoints within and outside of a company may be at odds with each other
- It's therefore dangerous to rely solely on the internal view of managers
- It's only when a company truly understands what the consumer wants can marketing inititaives be put in place to improve technical and delivery services.
Approaches to conducting marketing research:
In house - personally.
- Company has marketing staff but a low/non-existent marketing research budget, the only option may be for staff to carry out the marketing research themselves.
- Small sample sizes: Small and there are suitable skilled staff available - this option may be feasible.
- Disadvantage of doing research in-house is the possibility that responses will be biased through respondents' awareness of who is asking the questions - organisation who conducts its own research must make this known in order to comply with market research ethics codes.
1. External continuous data sources: TV audience monitoring and consumer panels where household purchases are recorded over time. Loyalthy cards are also a source of continuous data, providing information on customer purchasing patterns and responses to promotions
2. External ad hoc data: Gathered by means of surveys into specific marketing issues - usage and attitude studies, advertising and product testing and corporate image research. Traditional forms of market research - telephone interviews and face-to-face attitude surveys are being replaced by email surveys and online panel polls. The Internet is being used for gathering qualitative survey data but also qualitative data through real-time audio and online video discussions - Skype.
Social media are providing access to an innovative form of digital discussion groups and companies are analysing online converstaions to find out what consumers really think of their products.
Types of marketing research
- Ad hoc research: Focuses on a specific marketing problem and collects data at one point in time from one sample of respondents. Usage and attitude surveys, product and concept tests, advertising development and evaluation studies. They are either custome designed or omnibus studies.
- Based on the specific needs of the client. Research design is based on research brief gievn to the marketing research agency or internal marketing researcher. They can be expensive
- Space is bought on questionnaires for face-to-face or telephone interview. Interview may cover many topics as the space is bought by a number of clients who benefit from cost-sharing.
- Type of info sought is quite simple (awareness levels and ownership data). Survey is usually based on demographically balanced samples (1000-2000 adults)
- Ipsos UK: Takes a snapshop of consumer opinion using i-omnibus (online) capibus (weekly face-to-face survey). There are more specialist surveys covering markets for children and young adults - Dubit Youth Omnibus; uses an Informer Panel of 37,000 young people aged 11-24.
- Gathers information from external sources on an ongoing basis
- Major types of continuous research are consumer panels, retail audits, TV viewership panels, marketing databases, customer relationship management systems and website analysis.
- Formed by recruiting large numbers of households - provide infor on their purchase over time.
E.G. Grocery panel would record the brands, pack sizes, prices and stores used for a wide range of supermarket brands.
Diaries are a useful method of gathering data - panel members fill these in with details of purchases and return to the survey organisation on a weekly basis.
Digital and online technology is now more involved in the data collection process. By using the same households over a period of time, measures of brand loyalty and switching can be achieved - with the demographic profile of the type of person who buys a particular product.
Stages in marketing research process
Initial Contact: Realising that there's a marketing problem (new product or advertising decision) requires information to help find a solution. Marketing management may contact internal marketing research staff or an outside agency. If an agency is required, a meeting will be arranged to discuss the nature of the problem and the client's research needs.
Macro - Age distribution
- Raising proportion of people over the age of 45 in the EU - decline in the younger age group.
- rise in over 45s creates marketing opps because of their high level of per capita income - they have higher levels of disposable income and higher levels of savings than younger people. They also tend to benefit from inheritance wealth and are healthier than before.
- France: Average per capita disposable income hor households headed by a retired person is now higher than average for all households, people over 60 (18% of pop) consume more than 22% of french GDP.
- Growth in number of retired people in Europe is another change - people living longer and also because of early retirement.
- UK: retirement age is 65 but this is likely to rise, early retirement schemes and redundancies mean that a high proportion of people below this age group are retired (over 30% of men aged 55-64 have left the labour market early)
- High disposable income + increasing demand for medical products + housing designed for elderly people + single-portion foods should increase as well as an increase in leisure time means that there should be an increase in recreational activities - golf, fishing.
- Understanding the needs of the over 45s presents big marketing opportunities - products created can possess differential advantages valued by these peopl.
- It's also likely that there are subgroups according to age-group (market segmentation)
- Consumer companies may need to reposition product offerigs to take account of rise in 'grey' purchasing power.
Ecology: Study of living things within their environmental context; it concerns the relationship between people and the physical environment
Ecological/Physical Environmental Factors:
1. Global warming
3. Energy and Scarce Resource Conservation
4. Environmentally Friendly Ingredients and Components
5. Recycling and non-wasteful packaging.
- Industries such as insurance, agriculture and oil have felt the impact from natural disasters such as Hurricane Katrina in the USA.
- 1992: Countries joined in an international treaty to cooperatively consider what they could do to limit average global tem[erature increases and the resulting climate change and to cope with whatever impacts were, by then, inevitable.
- UN Framework Convention on Climate Change (UNFCCC) realised that measures in place to control climate change were insufficient.
- The Kyoto Protocol was then developed - this is an international agreement that focuses member countries on how to keep global temperature increases below 2 degrees Celcius.
- 37 industrialised nations and the European community which have signed up to the KP have committed themselves to the reduction by 2012 of 4 greenhouse gases: CO2, CH4, NO, Sulphur hexafluoride by 5%.
- 2011: Tesco, Philips, Swisscom won Gigaton awards for being businesses which have showed outstanding performance in measurable carbon reduction.
- Toyota's environmentally friendly image has also helped sell over 3 million of its cars worldwide - and has made a contribution in establishing the hybrid car market.
- Honda: Was behind Toyota, but then made the Jazz hybrid, which won awards for its fuel efficiency and lower carbon emission
- Manufacture, use and disposal of products can have a harmful effect on the quality of the physical environment.
- The production of chemicals that pollute the atmosphere, the use of nitrates as a fertiliser that pollutes rivers, and the disposal of by-products into the sea that have caused considerable public concern. There is a garbage patch in the Northern Pacific Ocean - accumulation of plastics, chemical sludge and debris deposited by ocean currents.
- It is called the 'Trash Vortex' by Greenpeace and is equivalent in size to the state of Texas in the US - this is a major pollution problem for the marine enviornment. - It is ingested by marine animals as the waste degrades - poisioning them and entering the food chain.
- Pollution issues - Denmark: Introduced a series of anti-pollution measures (charge on pesticides and a CFC tax) Netherlands has imposed higher taxes on pesticides, fertilisers, and carbon monoxide emissions.
- The EU has made an agreement with car manufacturers to produce colour-coded labels to make it easier for car users to understand the environmental impact of the vehicle they choose to drive.
- Germany: One of the marketing benefits of its involvement in green technology has been a thriving export business in pollution-control equipment.
- Brazil was one of the first emerging markets to show signs of recovery from the global recession, with a 7.5% growth in GDP in 2010 - but it has still experienced a slow-down. High interest rates can still make Brazil a destination for foreign investors.
- In 2012: Country was ranked 8th in the world in terms of its GDP purchasing power parity(equal) - a measure used by economists to compare the living conditions and resources of different countries.
- Brazil's industry: Linked to agribusiness and other primary products. It's main output comes from sugar, steel, oil and iron.
- It also has an important technological sector which ranges from submarines to aircraft - involved with space research.
- Its economy has benefited from high levels of foreign investment by companies such as; Procter & Gamble, IBM, Ford, Peugeot and PepsiCo. Largest companies are Petrobas (energy) and Vale (material).
- Brazil is also a major producer of ethanol (sugar-based biofuel)
- Growth in the economy has led to rising demand for cars, mobile phones, computers and televisions among the large population of 190million.
- It hasn't however developed significant brand-building capabilities.
Wealth is centred around Moscow and there are cash-rich consumers present - Russia is the 4th biggest consumer of luxury goods - After the USA, Japan, and China.
140 million - rapidly become richer has attracted international food and drink companies such as Unilever, PepsiCo, Kellogg, Kraft, Nestle, Coca-Cola. These companies have all entered by acquisition.
PepsiCo purchased the Russian food and drinks group Lebedyansky for over £1 billion. Working in Russia can be highly profitable for western companies, but can be fraught with problems.
China and India
- For the past 20 years, China's economy has been growing at an average of 9.5% and is predicted to become the largest economy in the world by 2020.
- India's growth is less at 6%
- Both nations possess considerable strengths in low-cost labour, but also in technical and managerial skills.
- China possesses strengths in mass manufacturing and has heavy industrial factories.
- India, is an emerging power in software, design services and precision industry
- These complementary skills mean that some electronics multinationals have their products built in China with software circuity designed in India.
- Chinese buy more cars than the Americans (nearly 2 million more) and Western brands are becoming increasingly popular - Burberry, Tesco, Bosch, Procter and Gamble, Nestle
- Companies don't always get it right - M&S; Made a mistake on opening stores in China as they filled rails with clothes of wrong sizes. Chinks are smaller and skinnier and have smaller feet than European women - many Chinese students buy shoes from children's section.
- Consumer market is also growing rapidly in India, but indian consumers aren't as wealthy as Chinese. However in less than 15 years, India's economy could be as large as China's is today so prospects are good.
Nestle - India
Nestle has operated in India for nearly a century and runs 7 factories making a variety of yoghurt and milk products and chocolates.
Nestle has invested in the infrastructure, training and education programmes which have taught local farmers how to do things better and more efficiently. Hindustan Unilever is another European firm taking opportunities in India to create competitive advantage.
Nationally - Indians' preference for soap and shampoo vary much less than their taste in food, therefore Unilever is doing much better with an 18% increase in profits.
China and India's economies aren't just booming in the physical world, but are also rapidly expanding online and in mobile markets.
Emerging economies with market development potential, and while both have suffered during the 2008-2009 recessions, they are recovering.
Russia's economy - Changed dramaticaaly since the collapse of the communist state, and its centrally planned economy has moved into a globally intergrated company.
2009 Russia - Economy was hit hard by the recession caused by its reliance on commodities such as oil, steel, and natural gas.
Russia has been investing in building up its high tech industries but with limited success.
2011: High oil prices helped economic recovery and put Russia back on growth trajectory. Retail markets are now receovering, showing growth rates of around 11% but this is much lower than pre-recession.
It has one of the lowest income tax rates in the world; a flat rate of 13%. Also, all Russians own their own homes - they were given their own house/flat free as the Soviet Era ended; most of these, however are in a poor state of repair.
Macro - Social/cultural
- Demographic: Changes in populations in terms of their size and characteristics. Demography is important to marketers because it helps to predict size and growth rates of markets + need for products such as schools, one-person housing and homes for the elderly.
- World pop growth, age distribution, structure of households in western countries.
- Global population is expanding at an increasing rate - yet the rate of growth is uneven across the world.
- Population in developed countriesis expected to be stable or shrinking - whereas in Africa, India, 'other Asia' and Latin America are expected to account for over 90% of the projected population growth in the 21st century.
- These countries grow more youthful, developing countries play host to an ageing population. 2025 - half the population of Europe will be over 45 years old. the world pop is expected to grow by an average of 97 million per year - over the next decade.
- Changing world pop distribution suggests new markets outside developed economies may provide attractive opportunities. This depends, however on a rise in income levels in less developed world.
- Problem - major growth is predicted to be in countries that are already poor - hp + citibank are focusing attention to these 'pre-markets' (not sufficiently developed enough to be considered consumer markets). HP - aims to sell/lease/donate $billion of computer equip
Energy and scarce resource conservation
- Finite nature of the world's resources is driving conservation. Energy conservation is reflected in the demand for energy-efficient housing and fuel-efficient cars.
- Sweden: Has taken the lead in developing an energy policy based on renewable resources. The tax system penalises the use of polluting energy sources such as coal and oil, while less polluting resources such as peat and woodchip receive favourable tax treatment.
- Sweden is planning to become the world's first oil-free economy in 2020, not by building nuclear power stations but by utlising renewable resources such as wind and wave power, geothermal energy and waste heat.
- The plan is a response to warnings that the world may be running out of oil, together with global climate change and rising petrol prices.
- UK Government: responding by committing to green energy production on a large scale and investing in offshore wind farms, anticipating being able to produce 70% of the nergy needed to meet its 2020 targets by 2017. Companies are also making more energy-efficient products. Philips manufacturesenergy-efficient consumer products. Wood consumption is another concern - forest depletion by the deforestation activities of companies and the effects of acid rain damage the ecosystem. Consumers' desire for soft and hardwood furniture and window frames is at odds with the need to preserve forests. Landslide in Philippines was caused by illegal logging - no trees to absorb water.
Technological Forces- Information + Data Managemen
Information technology describes the broad range of processes and products within the fields of computing and telecommunications.
Accessibility of information has been found to be a source of competitive advantage and data warehouses are an important new technology that offers organisations the potential to leverage this advantage from their information resources effectively.
Data warehouses - used for sharing information and allow this information to be accessed whenever needed - this info can be used to facilitate commercial benefits.
Better quality information = managers make more informed decisions and can save time to make a better contribution to coporate and marketing success.
I nformation systems are used in many areas of the business.
Salesforce automation improves the efficiency of salesforce (on direct communications, personal selling and sales management).
Internet and mobile phone technology have allowed companies to use new channels of communication and distribution (music downloads) to reach consumers.
new technology - speeds up communications and enables multiple interactions using a variety of media.
Multiochannel world - We communicate and gather information from multiple points (websites, apps, variety of TV channels and printed publications)
Digital technologies; completely altered modes of communication - this is, however eroding the boundaries between the message, the media, the channel and the product.
Digital technologies - becoming more important to most of economic activity
The Internet has motivated companies to rethink the role of technology and has had a significant effect on socity.
The Internet has not only provided the means to find, buy and sell products, but it's also created an environment for building communities - where like-minded people can network, socialise and be entertained.
Emergence of facebook, twitter and linkedIn have had a big impact on global society - they give a voice to the masses of individuals, businesses and communities around the world; its influence can be powerful.
Social media has been used to organise protests, communicate and influence politics and government.
Social media is reshaping human language through mixing of dialects alphabets. - poses the question of whether we will have long-term effects on the way we speak, write and listen.
Market-led companies seek to monitor technological trends + pioneer breakthroughs - transform markets and shift competitive advantage in their favour.
Environmentally friendly ingredients and component
Environmentalists favour the use of biodegradeable and natural ingredients and components when practicable, and PETA (People for the Ethical Treatment of Animals) campaigns against cruelty to animals.
Companies have responded to the challenge by launching products such as Estee Lauder Origins skincare and cosmetics range of vegetable-based products containing no animal ingredients.
Plastic products and components have been the target of criticism because they don't biodegrade. But, biodegradeable polymers are now available.
Biopol - developed by ICI, is the first fully biodegradeable commerical plastic; it's used for disposable nappies, rubbish bags and other plastic-coated disposable household items.
GM ingredients in food is also another concern, as health implications are uncertain. Pressure from consumer groups forced Monsanto (GM pioneer) to stop further development. It also persuaded supermarkets to banish such products from their shelves.
Countries such as Austria, Germany, Greece, Italy have imposed import bans.
Marketing and R&D staff should work closely together to ensure that investments are purposeful andnot just for the sake of technology. Concorde - technologically sophisticated but management knew before launch that it never stood a chance ofbeing commercially viable, In contrast, the development of the Airbus A380; the world's biggest passenger plane, has been market-based (taking into account the greater need for passenger comfort on long-haul flights and pressure to reduce CO2 emissions.
Teflon: First developed as a coating on the nose of space rockets, similarly Visco Foam (developedby NASA has been used to create Visco memory foam beds that adjust to body position and maximising body support.
Lack of investement in high-potential tech areas can affect the fortunes of companies. Sony - was once a leader in high-tech product innovation and lost ground due to its lackof early investment in developing Flat Screen TVs (liquid display) and so Samsung gained a competitive advantage.
Similalrly, Apple - Superseded Sony Walkman with the iPOD which also allows download of music, not just mobile listening
Recycling and non-wasteful packaging
- Germany; took the lead in the recycling of packaging when it introduced the Berpackvo (allows shoppers to return packaging to retailers who then pass it back to the supplier.
- Supplirs promised to assume responsibility for the management of packaging waste
- 400 companies have created a mechanism called the Dual System Deutschland (DSD).
- Consumers are asked to return glass bottles and waste paper to recycling bins and are encouraged to separate other recyclable materials - plastic, composite packaging and metals. These are then placed in yellow bags and collected by the DSD every month - the cost of refuse collection is absorbed by the packaging manufacturers.
- Sweden: Recycling is important here, where industry has established a special company to organise the collection and sorting of waste for recycling.
- Finland - Over 35% of packaging is recycled
- Fast food companies: Promote recycling by using recycled pape rfor burger containers rather than polystyrene (which doesn't degrade)
- Although the idea of decreasing packaging makes economic sense, it is also commercially sensible as concentrated detergents and refill packs have been introduced to lower packaging.
- Germany (LeverGmbH) Saved 15% of paper, carton and corrugated board (30% through concentrated detergents - reduced weight of packaging by half) Henkel; Introduced 22-gram 'light-packs' which are polyethylene bottles which save 270 tons of plastic per year.
- Culture: Combination of traditions, taboos, balues and attitudes of the society in which an individual lives.
- Asian population - provided restaurants and stores supplying food from Asia - this influence can now be seen in supermarkets, where Asian foods are readily available.
- Free movement of workers around the EU has also encouraged the growth of subcultures- flow of workers from central and eastern Europe to older, established EU countries. (To meet the needs of the Polish community for example, Tesco now runs a groceries website in Polish)
- Subcultures - Can span national boundaries - Levi's jeans, Coca-Cola and Pepsi can be marketed with only modest adaptation to local tastes.
- Young consumers - spend a lot of time On Facebook, Twitter, Instagram - means that they can share information, post photos and download music; these sites provide huge opportunities for marketers to reach young audiences.
- Nestle-branded cereal: Targeted at children and so has been reformulated with 10% less sugar due to pressures towards healthy eating (less sugar, fat and salt are desired)
- McDonald's nutrition calculators and healthy options for people who want to know what they're eating.
- Mole: Looked at managemant styles in the EU + USA (PAGE 95)
- Takes the form of organised action against business practices that aren't in the interests of consumers. Organised action is taken through the consumer movement - organised collection of groups and organisations whose objective is to protect the rights of consumers.
- Corporate social responsibility: CSR refers to the ethical principle that an organisation should be accountable for how its behaviour might affect society and the environment.
- The consumer movement has had notable successes; including improvements in car safety, the encouragement of fast-food restaurants to provide healthy-eating options and health labelling of food product, as well as banning smoking in public places in some European countries includin UK and Ireland.
- Consumers International (CI) is a worldwide federation of consumer groups that have joined together as an independant voice of the consumer. March 15th every year: WRCD (World Consumer Rights Day) endorses solidarity of the consumer movement and is an opportunity to promote the basic rights of the consumer.
- Consumerism tackles issues from around the world - Kenya (there were problems with product safety and inappropriate use of labelling which could have could serious harm to young consumers. In Asia, there is a great deal of marketing of unhealthy food to children; in Latin America CI is working to protect consumer's right to a healthy environment.
- Changes in social and cultural aspects of ME need to be monitored and understood so that marketing management is aware of the changing tastes and behaviour of consumers.
- Take existing product in existing market and attempt increased penetration
- Existing customers may become more brand loyal and switch less often and/or new customers in the same market may begin to buy the brand.
- Other tactics to increase penetration include getting existing customers to use the brandmore often (lather, rinse repeat). OR, use two tablespoons of loose tea instead of 1.
- Glasses Direct - Online reseller of glasses launched a 2 for 1 offer to buy several pairs.
- Increasing sales by improving present products or developing new products for current markets.
- New product replacements that fail to provide additional benefits may disappoint, as with Vista verson of Microsoft Windows - intended to replace XP - many users didn't change systems as they preferred the XP product
- Cadbury's Dairy milk, Caramel nibbles, crunchie bars, crunchie rocks (provide slightly modified features for target customers.
Marketing Objectives - MD and entry
- Market Development:
- Used when current products are sold in new markets
- Moving into new geographical markets
- Many consumer durable brands; cars, consumer electronics and household appliance brands are sold in overseas markets with no or minor modification to those sold at home.
- Alternative market development strategy is to move into new market segments (BSkyB - expanded market share through aquiring Virgin Media's TV Channel)
- This enabled BSkyB to gain access to Virgin's customers by providing Sky's existing content.
- Tesco: Started with large superstores - offer petrol, clothes and cafes, they then embarked on a new MD strategy based on entering a new market segment - express stores.Tesco Metro-convenience shopping in town centres, Express-found at petrol stations for added convenience.Moved to new markets - USA, China, India - compete with Wal-Mart.
- Entry into new markets: RISKY (may be needed when current products offer few prospects for future growth)
- New products developed for new marketsWhen there is a synergy between existing + new products, this strategy is more likely to work Apple: Experience and competences in computer electronics provided platform for designing a new product; iPod (targeted different market - young people who want downloadable music on a portable device.
- This was followed by the launch of the iPhone, has placed Apple in a strong position in the smartphone market. Intel: Also believes it has the competence to move into smartphones, net books + tablet computing
Strategic objectives: product-level objectives
- 1. Build
- 2. Hold
- 3. Harvest
- 4. Divest
New products: Strategic objective will inevitably be to build sales and market share
Existing products: Appropriate strategic objective will depend on the particular situation associated with the product; determined by SWOT analysis, marketing audit and evaluation of the strategic options.
Building sales and market share is not only the sensible strategic objective for a product. Holding sales and market share may make commercial sense. Under certain conditions, harvesting (sales and market share allowed to fall but profit margins are maximised) - may be preferred to building. Divestment - product is dropped or sold
Strategic thrust and objectives define where the business and its products intend to go in the future.
Core marketing strategy
- 1. Target Markets (which market should we sell the product?)
Decisions should be taken about which groups of customers (segments) are most attractive to the business and best fit with its capabilities. Economist: Targets business professionals who wish to be well-informed about business matters.
- 2. Competitor targets (which companies should we compete with?)
- 3. Establishing a competitive advantage (how are we to differentiate from competitors?)
- Decisions should be taken about which segments (groups of customers) are most attractive to the business and best fit with its capabilities.
- The Economist: Targets people who want to be well-informed about business matters. It claims to 'Offer authoritative insight and opinion on international news, politics, business, finance, science and technology' - it can achieve high standards of journalism as it attracts many writers who want to work together to produce thought-provoking articles. - example of a company with a clear target market and can use its capabilities to produce something which satisfies the needs of customers.
- Choice of target market can result from the SWOT analysis and setting of marketing objectives (strategic thrust).
- Samsung: Identified an opportunity to use technological know-how to respond to change in the marketing environment. It is now entering the solar-energy business. It has to now assess the attractiveness of each potential market (Industrial, resellers, consumers)
- To assess the attractiveness of each market, they should consider measures such as; size of market, growth potential, level of competitor activity and customer requirements - much of this info would be compiled during marketing audit, + SWOT analysis info should provide the basis for judging Samsung's capabilities to be able to respond to opportunities.
- Existing product: Marketing management should consider current TM and their changing needs
- Samsung: Should focus on customers' needs across established product ranges, e.g. tablet computers are constantly evolving in response to consumer needs. In order to retain market share, Samsung will make changes to the marketing mix to adapt to new requirements. If a TM decreases in attractiveness, products will need to be repositioned to different TM segments.
- Organisations against which the company chooses to compete directly. Smasung competes directly with Apple in the tablet computer market and with mobile phones.
- Weak competitors could be seen as easy prey and resources could be channeled to attack them.
- Link between TM and competitor targets is Competitive advantage.
- Achievement of superior performance through differentiation to provide superior customer value, or by managing to achieve lowest delivered cost.
- Businessed need to achieve a clear performance differential over their competition on factors which are important to their customers.
- Being better: Superior Quality or service (John Lewis, Emirates, Mercedes-Benz)
- Being faster: Respond to customer needs faster than competitors (ZARA, ASOS)
- Being closer: Establish close, long-term relationships with customers (M&S, John Lewis)
Another route to competitive advantage is achieving the lowest relative rate cost position of all competitors. Lowest cost can be seen as a competitive advantage through low prices.
Marketing mix decisions
Product, price, place, promotion
Major supermarkets: Tesco, ASDA, Sainsbury's and Morrisons - all compete for market share. There is limited growth in the overall size of the grocery market, so each of these major players has to grow its share by attracting competitors' customers.
- ASDA: Created competitive advantage by keeping prices very low
- Sainsburys: Focuses on quality products
- Morrisons: Differentiates itself through the freshness of products and store destinations.
- Tesco: Positions its brand on offering greatest value across widest product range.
Place is part of the marketing mix - challenges marketing manager (Online shopping is proving very popular and many retailers are devising strategies which allow the consumer to shop from home, while on the move and in store - mobile phones).
This is having an effect on the size and number of stores needed to meet corporate objectives.
Organisation + implementation
- Firm must be able to turn a plan into an action
- Organisational weaknesses may hinder full implementation of the plan
- Resistance may occur due to internal conflicts and power struggles.
- Business must design an organisation with the capability of implementing the plan
- Organisation weaknesses discovered as part of the SWOT analysis may restrict the feasible range of options.
- Reorganisation could mean establishing a new marketing organisation or department in the business - many businesses never had a marketing department (Chief Officer made these decisions)
- Environmental change could also cause need for strategy change and reorganisation of marketing and sales business functions.
- Growth of large corporate customers with enormous buying power has resulted in businesses focusing their resources more firmly on meeting their needs (strategy change) - led to dedicated marketing and sales teams being organised to service these accounts - reorganisation.
- Strategy change and reorganisation affect the balance of power in business and the daily lives and workloads of workers, resistance may occur. so marketing personnel need to understand barriers to change.
Aim of control systems is to evaluate results of marketing plan so that corrective action can be taken if performance doesn't meet objectives.
Short-term control systems: Plot results against objectives on a weekly, monthly, quarterly or annual basis. Measures include; sales, profits, costs and cash flow.
Marketing Metrics: Used by marketing managers to assess payoff from investments and justify them. Quantitative measures of the outcomes of marketing activities and expenditures.
Long-term: Strategic control systems. Managers need to stand back from week-by-week and month-by-month results to reassess whether their plans are in line with their capabilities and environement.
Lack of this long-term control may result in the pursuit of plans which have lost strategic credibility. New competition, changes in technology and moving customer demand may render old plans obsolete - causes planning process to start again (marketing audit)
Reward of MP
- Consistency: Plan provides focal point for decisions + actions. Referencing a common plan should make management's decisions more consistent.
- Monitoring of change: Planning process forces managers to step away from day-to-day problems and review impact of change on the business from strategic perspective.
- Organisational adaptation: Planning allows organisation to adapt to match environment. Marketing planning promotes necessity to be able to adapt to change - capability to adapt has been linked to superior performance.
- Stimulates achievement: Planning process focuses on objectives, strategies and results. It encourages people to ask 'What can we achieve given our capabilities'? - motivates people to set new horizons for objectives when they may be content to accept lower standards.
- Resource allocation: Which products should receive high investment? (build) which should be maintained (hold) which should have resources drawn out slowly (harvest) and which should have resources withdrawn immediately (divest).
- Competitive advantage: Promotes search for sources of competitive advantage.
Problems in making planning work
- Political: MP is a resource allocation process; outcome of this process is an allocation of more funds to some products and departments.
- High opportunity cost: Some busy managers view marketing planning as a time-wasting activity that conflicts with the need to deal with day-to-day problems.
- Lack of reward systems tied to longer-term results: Reward systems of many businesses are geared to the short-term. Incentives and bonuses may be linked to quarterly or annual results.
- Lack of relevant information: Market share, size and growth rates are basic inputs into the marketing audit but may be unavailable or purposefully withheld by vested interests, who know that knowledge is power - so they distort the truth to protect their position.
- Cultural and personality clashes: Businesses may plan by making small decisions, therefore the strategic planning system may challenge the status quo and be seen as a threat. The beliefs of some managers may be hostile to a planning system altogether. Personality clashes and pent-up antagonisms can surface when discussing marketing planning. The process can degenerate into abusive argument and cause problems in management team.
- Lack of managerial knowledge and skills: Management team doesn't have the knowledge and skills to perform tasks properly. Basic marketing knowledge about market segmentation, competitive advantage and the nature of strategic objectives may lack.
Recommendations for overcoming MP problems
Attaining senior management support: Top management must be commited to planning and be seen to be giving it total support by middle management. This should be on-going
Matching planning system to culture of business: How the marketing planning process is managed should be consistent with the culture of the organisation; in some organisations the top-down/bottom-up balance will move towards top-down . Less directive cultures, the balance will move towards a more bottom-up planning style.
Creating reward system focused on longer-term performance: Should reward achievement of longer-term objectives rather than just focus on short-term results.
Communicate clearly to those responsible for implementing changes: Communicate plans with those in charge of implementation
Training in necessary marketing knowledge and skills to conduct marketing planning: Marketing personnel should be trained in necessary marketing knowledge and skills to perform planning job. Management team should attend same training course so they sharecommon understanding of concepts and can communicate using same technology.