Marketing Notes - 1

Marketing Management
UNIT I INTRODUCTION Marketing - definition The term marketing has changed and evolved over a period of time, today marketing is based around providing continual benefits to the customer, these benefits will be provided and a transactional exchange will take place. The Chartered Institute of Marketing define marketing as 'The management process responsible for identifying , anticipating and satisfying customer requirements profitably' If we look at this definition in more detail Marketing is a management responsibility and should not be solely left to junior members of staff. Marketing requires co-ordination, planning, implementation of campaigns and a competent manager(s) with the appropriate skills to ensure success. Marketing objectives, goals and targets have to be monitored and met, competitor strategies analysed, anticipated and exceeded. Through effective use of market and marketing research an organisation should be able to identify the needs and wants of the customer and try to delivers benefits that will enhance or add to the customers lifestyle, while at the same time ensuring that the satisfaction of these needs results in a healthy turnover for the organisation. Philip Kotler defines marketing as 'satisfying needs and wants through an exchange process' Within this exchange transaction customers will only exchange what they value (money) if they feel that their needs are being fully satisfied, clearly the greater the benefit provided the higher transactional value an organisation can charge. The marketing concept The concept of marketing has changed and evolved over time. Whilst in todays business world, the customer is at the forefront, not all businesses in the past followed this concept. Their thinking, orientation or ideology put other factors rather then the customer first. Let us examine these below. Production Oriented: The focus of the business is not the needs of the custobmer, but of reducing costs by mass production. By reaching economies of scale the business will maximize profits by reducing costs. Product Orientation: The company believes that they have a superior product, based on quality and features, and because of this they feel their customers will like it also. Sales Orientation: The focus here is to make the product, and then try to sell it to the target market. However, the problem could be that consumers do not like what is being sold to them. Market Orientation: Puts the customer at the heart of the business. The organization tries to understand the needs of the customers by using appropriate research methods, Appropriate processes are developed to make sure information from customers is fed back into the heart of the organisation. In essence all activities in the organisation are based around the customer. The customer is truly king!
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In todays competitive world putting the customer at the heart of the operation is strategically important. Whilst some organizations in certain industries may follow anything other then the market orientation concept, those that follow the market orientation concept have a greater chance of being successful.
The Marketing Environment We stated on this website that marketing was about meeting needs and providing benefits and the customer should be the central focus of the business. The companies marketing strategy should be focused around this concept, however, there are factors within the companies marketing environment which can constrain this activity. These factors are both controllable and uncontrollable and have to be carefully monitored by the organisation. The marketing environment surrounds and impacts upon the organization. There are three key perspectives on the marketing environment, namely the 'macro-environment,' the 'micro-environment' and the 'internal environment'.
The companies marketing environment can be defined as the 'controllabe and uncontrollabe elements that influence the strategic direction of the company'. The companies marketing environment can be analysed in two broad levels. The macro environment involves looking at uncontrollabe variables that influence company strategy. This is is discussed further in PEST Analysis. The micro environment involves analysing controllabe variables close to the company that the company does have an influence over. This usually involves undertaking a stakeholder analysis.. Micro Environmental Factors These are internal factors close to the company that have a direct impact on the organisations strategy. These factors include: Customers
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Organisations survive on the basis of meeting the needs, wants and providing benefits for their customers. Failure to do so will result in a failed business strategy. Employees Employing the correct staff and keeping these staff motivated is an essential part of the strategic planning process of an organisation. Training and development plays an essential role particular in service sector marketing in-order to gain a competitive edge. This is clearly apparent in the airline industry. Suppliers Increase in raw material prices will have a knock on affect on the marketing mix strategy of an organisation. Prices may be forced up as a result. Closer supplier relationships is one way of ensuring competitive and quality products for an organisation. Shareholders As organisation require greater inward investment for growth they face increasing pressure to move from private ownership to public. However this movement unleashes the forces of shareholder pressure on the strategy of organisations. Satisfying shareholder needs may result in a change in tactics employed by an organisation. Many internet companies who share prices rocketed in 1999 and early 2000 have seen the share price tumble as they face pressures from shareholders to turn in a profit. In a market which has very quickly become overcrowded many havel failed. Media Positive or adverse media attention on an organisations product or service can in some cases make or break an organisation.. Consumer programmes with a wider and more direct audience can also have a very powerful and positive impact, hforcing organisations to change their tactics. Competitors The name of the game in marketing is differentiation. What benefit can the organisation offer which is better then their competitors. Can they sustain this differentiation over a period of time from their competitors?. Competitor anlaysis and monitoring is crucial if an organisation is to maintain its position within the market.
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This includes all factors that can influence and organization, but that are out of their direct control. A company does not generally influence any laws (although it is accepted that they could lobby or be part of a trade organization). It is continuously changing, and the company needs to be flexible to adapt. There may be aggressive competition and rivalry in a market. Globalization means that there is always the threat of substitute products and new entrants. The wider environment is also ever changing, and the marketer needs to compensate for changes in culture, politics, economics and technology.
The internal environment. All factors that are internal to the organization are known as the 'internal environment'. They are generally audited by applying the 'Five Ms' which are Men, Money, Machinery, Materials and Markets. The internal environment is as important for managing change as the external. As marketers we call the process of managing internal change 'internal marketing.'
Production and marketing interface Irrespective of the type of set-up, the factors that influence the interface have remain unchanged and is based on co-operation, co-ordination and realisation, says G A Moghe Pharmaceutical manufacturing and marketing both have undergone a sea change in last two decades, more particularly in the past few years. The underlying causes are technology upgradation, GMP requirements, biotechnology, mergers and acquisitions, toll manufacturing, generic business, increasing competition, etc. The product life-cycle is shortening with constant research for the disease-specific drugs. Due to greater awareness in consumers, the bottom lines are getting affected. The globalisation has paved way for more options. Because of this, it has become very essential to revisit the old practices and improve them in line with the current requirements for effective functioning. Gone are the days when companies launched the products which they could manufacture and expected marketing departments to do wonders with these products. Today, marketing departments decide the products which they can sell and ask production departments to produce these products. Production and marketing are the two most important departments of any organisation and any disharmony between these two departments adversely affects the organisation. In good old days, marketing personnel sat in posh Nariman Point offices and devised marketing strategies and prepared marketing plan. These monthly requirements used to reach factory situated far away to the planning department. The planning department would then give the plan to production department. There was hardly any interaction between production and marketing at regular intervals. The so-called monthly meetings used to be held up only to find faults with each other. Most of the MNCs have shut their manufacturing plants and are totally depending on contract manufacturing. The products are manufactured by more than one company situated at different locations. This is equally true for big Prepared by: Vinoth/ Faculty Management Studies Page 4
Indian companies. The functions of production and planning departments have practically merged. Planning is required to be done as per the capacities of contract manufacturers. This is, therefore, then left to production (technical) person who is looking after that manufacturer. Due to closure of factories, production and marketing departments have come closer and are occupying the same office. The interaction between them is now more frequent, though still not fully cordial. However, in a typical setup where the marketing offices and factories are not in the same premises, most of the old practices are still followed, although with IT revolution the geographical locations and distance have become irrelevant. Irrespective of the type of set-up, the factors which influence the interface remain unchanged. The ideal interface is based on three main factors co-operation, co-ordination and realisation. Following are some of the important aspects of this interface. Proper forecasting: It is very essential to set a realistic target and then prepare a forecast of the monthly, quarterly or annual requirements for uninterrupted smooth supplies. The forecast prepared on the basis of over-optimistic targets results into frequent changes, disruption in production programme and irregular supplies. It is observed many times that in order to run down the production department, a very high requirement is given which production department cannot supply. The production department then gears up and starts supplying excess stocks which marketing cannot liquidate. This ultimately results into huge financial burden on the organisation. It is also essential to plan the schemes or bonus offers after discussing the same with production department so that they are ready to supply in short notice. Any unexpected movement of goods for whatever reason, should also be intimated to production department to take necessary action. Sharing information: There is a tendency of both the departments to shield the information from each other. With the help of various IT tools, it has now become possible to share the information easily with all concerned people and this should be fully explored. If there is free flow of information from either side, the necessary action can be promptly taken and functions of the department can be improved to a large extent, resulting into optimum use of resources. Reporting of complaints: No one is happy to receive a complaint. However, when it becomes a tool to run down each other, the exaggeration takes place and corrective actions cannot be taken. The complaints are of two types: 1. Product-specific 2. Supply-specific In both the cases, it is essential to know the true nature of the complaint in order to take necessary action. It is essential to know whether the complaint is received from all over the country or from specific area, whether the defect observed is in high proportion or a very small proportion. This will decide the action to be taken. If a complaint is blown out of proportion, the production department may carry out unwanted changes in process, material, packing, etc, resulting in wastage of resources. Similarly, if the production department overlooks the complaint saying that it is bound to happen or nothing can be done, then it may assume larger proportion and may even go out of control.
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Complaints about shortages of packs in sealed box are common in costly products. Certain in-process checks are already in-built in packaging SOPs to avoid such mistakes. In spite of this, if there are complaints, then both the departments must sit together, analyse the situation under which such complaints arise and then tie the loose ends together. Some times, uneven distribution of stocks results into shortages in spite of proper supplies by production department. This should be looked into. Each department should realise the constraints of other department and cooperate with each other. The cost factor: The manufacturing cost is very important factor which decides the profitability of the products. Some times marketing department is not aware of the limitations and suggest changes in formulation, packaging, dosage forms, etc. which are not feasible. Their argument is that unless we are different, we cannot sell. Therefore, such suggestions are to be discussed in detail together and appropriate decisions are to be taken in the interest of the organisations. Interaction on new product development and launch: This interaction is very crucial for the success of new product prior to, during and after the launch of the new product. Both the departments should sit together and prepare a launch plan and then follow it up at regular intervals. In the absence of such interaction, the launch programme may go awry and then the blame game starts. At times, it so happens that production departments make innovations in formulation/packing etc for better output which are not conveyed to marketing. Such innovations can become talking point, an important tool for marketing to show edge over the competitor. Similarly, expectations of marketing people to always have a product superior to the competitors product are not possible. Therefore, such issues should be discussed in detail before marketing strategies and marketing plans are finalised. The promotional literature should be shown to production department before finalisation, so that some products attributes if wrongly included in it can be rectified. It is also important to monitor the movement of product in initial stages of launch and interact with production to plan the future production. This avoids excess production as well as shortages. Similarly, if any defect is observed, it should be brought to the notice of production immediately, so that necessary action can be promptly taken before it is too late. Thus, for smooth and productive functioning of these two departments, there is a need for co-operation and coordination between them and also with other departments. The realisation of each others difficulties and functions will help in a long way. Marketing interface with Finance Financial management is concerned with the raising and allocation of financial funds . Norms for efficient financial management can be derived once the financial environment and the functioning of financial instruments have been understood. This approach to financial services, such as the price-risk management services of futures markets, will create the necessary conditions for success. The financial approach to financial services is a normative one: what conditions have to be fulfilled for a financial service to be a success? It is an approach that is particularly valuable to the manager of a financial institution. However, fulfilling these necessary conditions does not guarantee the market success of financial services. The success or failure of these services also depends on the extent to which financial services satisfy the needs of potential customers at competitive prices. It is a point of view familiar in marketing: products and services are determined on the basis of the customers' wants and needs (Churchill and Peter, 1995). In the marketing approach, the customer's need for financial services and the market potential of a specific financial service will be determined Prepared by: Vinoth/ Faculty Management Studies Page 6
qualitatively and quantitatively. From this, hopefully, a specific financial service can be derived. However, often one is left with a set of alternative financial services which can satisfy the customer's wants and needs. A combination of the marketing approach, "which service is desirable from the customer point of view" and the financial approach, "which service is feasible from the technical point of view" seems a useful approach to adopt when selecting and introducing a potentially profitable new financial service (see Figure 1). Technical information Financial service r Market information Technicai feasibiilty Finance approach Economic feasibility? Marketing issue Marketing-Finance interface Customer Customer specific Information i Financial needs Market information Technical feasibility? Marketing interface with Human Relations Management The common perception of recruitment advertising is of the "want ads" in the local or national newspapers. Despite the lack of academic interest, in some cases, recruitment advertising has adopted the color, imagination, and creativity of consumer advertising. Some recruiters have recognized the marketing benefits of job ads and the need for a corporate communications policy covering all company communications. This paper examines the limited literature on recruitment advertising. The authors compile a list of characteristics of marketing-oriented recruitment advertisements and apply these to their exploratoty analysis of the recruitment section of one popular Sunday newspaper in the United Kingdom. (JEL M31) Marketing is Communication All marketing activities are designed to communicate something to someone somewhere, whether that be the company's customers, the public, competitors, employees, or potential employees. Marketing communications may take a real and direct form, such as an advertisement for a new product, or it may take an indirect form, such as the message communicated by a recruitment advertisement in the job section of a newspaper. Creating and maintaining the corporate image requires, on one hand, carefully planned and coordinated corporate communications and, on the other hand, the necessity to use all appropriate instances to communicate the organization's image and guiding principles. Recruitment advertising, a form of corporate communications, may have a potentially significant affect on the image of the organization [Paddison, 1990]. Similarly, the corporate image may have a significant effect on the success of the ad and on the types of individuals who will reply to the ad and apply for the position. The Marketing Employment Mix Price [1996] suggests that HRM has been marketing the employment product all along without really knowing or realizing it. The product is the job offer. It is defined in the job description and may include conditions, hours, holidays, opportunities for personal development and promotion, and the like. The price of the product is the salary and benefits offered, and the place is the place of employment. Promotion is the communication that the organization has with its employees or perspective employees. This may be internal promotion within the organization or external when the job is advertised in the recruitment section of the newspaper. Such attempts to force the marketing mix model onto various diverse situations or disciplines are often pedantic, academic, and seldom very useful. However, a more beneficial exercise is to adopt a marketing orientation to jobs and recruitment. According to Price [1996], HRM managers would be well advised to see employees as employment consumers who are free to choose another supplier of employment just as a typical consumer may Prepared by: Vinoth/ Faculty Management Studies Page 7
choose another product. Price suggests that organizations should forget the banality that "our employees are our greatest asset" and recognize that employees are customers of the organization. Jobs as Products From a marketing viewpoint, jobs may be seen as products. Marketing attempts to analyze consumer motivations, needs, and behaviors and to provide a range of products aimed at distinct segments to satisfy their unique demands. Similarly, the human resources department analyzes employees' motivations, needs, and behaviors and attempts to offer meaningful, satisfying employment that will attract employees who will meet the characteristics of the position to be filled and who will stay with the organization and work toward common goals. Employers are the providers of these employment products and employees are the consumers of employment [Price, 1996]. Adopting this perspective, marketing can provide a useful strategic framework for HRM. Marketing should not mean gimmicks or hard selling. It should imply a desire to understand consumer needs and to work toward meeting their requirements. The basic principles of marketing such as consumer analysis, segmentation, and targeting may be used to develop accurate and effective recruitment advertising. The recruitment ad becomes the company's cover letter and curriculum vitae to potential applicants [Martin, 1987]. Similarly, marketing research techniques can be used to examine the workforce's expectations and needs and to determine whether these are being met. The Individual's Self Concept and Corporate Image A basic requirement of the employee selection process is that the firm has enough potentially suitable applications to choose from. According to Belt and Paolillo [1982], corporate image may significantly affect the potential candidate's decision to apply for a position. What factors determine which type of people will respond to recruitment advertisement? Behling et al. [1968] report three bases that individuals use to decide which organization they would like to work for. These are, objective, critical contact, and subjective. According to the objective factor theory, individuals choose the organization they work for according to a basic set of objective and measurable attributes such as salary, benefits, career development prospects, and the nature of the work. On the other hand, critical contact theory suggests that individuals can neither make meaningful or objective decisions nor discriminate between different job offers because their knowledge and contact with the firm are too limited and most advertisements are too vague to make any meaningful choice. Thus the individual's decision will be based on the brief time spent at an interview, the appearance and questioning of the interviewer, the physical surroundings of the organization, and the efficiency in responding to applications and other paperwork. However, subjective factor theory suggests that the choice of employer is a highly emotional and personal one based on links between the individual's personality and the organization's corporate image. Tom [1971] suggests that the choice of employer is determined by the degree to which the individual's self-image or self-concept matches that of the organization. Thus, the choice of employer is based on the extent to which the personality of the company is similar to that of the individual or the extent to which the individual feels the employerorganization's personality may enhance their own personal image. Self-concept theories examine the individual's image of himself, how the individual sees himself, and the impact this has on behavior. The self-concept is a combination of the actual self (Who am I?) and the ideal self (Who or what can I be?). Research on the relationship between self-concept and the brand or product image suggests that individuals will purchase products that agree with or enhance their own self-concept [Sirgy, 1982; Schouten, 1991]. Many individuals associate themselves so closely with certain possessions that the possessions in some sense becomes part of their extended self. Similarly, there is support for the theory that when an individual chooses an employer, he is also choosing a mechanism to enhance his self-concept [Mason and Belt, 1986]. Thus, the imagery and language contained in a recruitment advertisement may provide signals which determine the personality or corporate image of the organization.
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Marketing-Oriented Recruitment Advertising A brief review of the limited literature suggests that there are a number of factors which characterize marketingoriented recruitment advertising. These include physical aspects or the appearance of the actual ad and company administrative or response systems that deal with responses to the ad. It is not within the scope of this paper to examine response effectiveness or systems in recruitment advertising. However, it is useful to mention that such systems would include call centers or phone lines set up to deal with potential applicant questions, the time it takes for the company to reply to a job applicant, the methods employed (if any) to inform applicants that they have not been successful, and applying basic customer service concepts to the recruitment process. Of course, in most cases, the vast majority of job applications will be turned down. Thus, the process of informing unsuccessful applicants may affect the applicant's future attitude to the firm and their products. Open Advertisement An open advertisement contains the name of the organization offering the job, whereas a blind advertisement may be placed by a recruitment agency and will not mention the name of the employer. There may be reasons why the company does not want to identify itself, including reducing competitor knowledge of the company's activities. However, in most cases, the inclusion of the company name or logo can prove beneficial in terms of promoting the presence of the firm. The fact that it is recruiting new employees may suggest that the firm is successful and growing. Using Employees in the Ads Using employees in recruitment advertising has become very popular in recent years. Famous celebrities and personalities are used in consumer advertising to add credibility and prestige to the advertising claims. Using employees in recruitment ads provides a real face for the corporate image. It demonstrates how employees have fulfilled their own aspirations and been successful in achieving their goals. In certain cases, the advertisement will include a written testimonial by an employee rather than an actual photograph of the person. Targeting and Positive Action Using employees in recruitment advertising can sometimes have a deterrent effect on individuals who see themselves as different from the type of person represented in the advertisement [Paddison, 1990]. They might perceive themselves as unlike the employee in the ad and so unsuited for the position (this may be deliberate or unintentional on the part of the company). In some cases, this can lead to the same types of people applying to the company all the time. In other cases, the organization over time is associated with a certain stereotype which inhibits applicants of a different gender or race from applying for positions. In the United Kingdom, legislation allows employers to target and encourage applications from groups under-represented in their workforce. Crofts [1995] reports on the case of Customs and Excise in the United Kingdom. The organization suffered from a lack of diversity in its employees. Less than 0.5 of its staff were from ethnic minorities. A new recruitment advertising campaign focused on targeting minority groups who associated Customs and Excise with the white establishment. It emerged that most people did not know what the role of the organization was or the kind of jobs available. The advertising campaign ran with a straight-talking approach, "Customs and Excise does not employ enough black people." In other cases, an organization may positively target men to apply for jobs traditionally reserved for women and vice versa. This has the benefits of a more balanced work force and the commitment to equal opportunity employment. One such ad contained the headline, "Why are men so difficult to find?," while another asked, "Is there any good reason why more customer engineers aren't women?" Channel 4, in the United Kingdom, ran a campaign headlined, "Disabled not Disqualified," in an effort to increase the number of disabled people in their workforce [Paddison, 1990]. Thus, targeted recruitment advertising can improve the organization's employee pool Prepared by: Vinoth/ Faculty Management Studies Page 9
and enhance the organization's corporate image by demonstrating a commitment to equality and inclusiveness as the public places more emphasis on social awareness and responsibility on the part of commercial organizations [Belt and Paolillo, 1982]. Appeal to Self-Actualization Employee testimonials may represent an indirect reference to self-actualisation opportunities in the company. In other cases, more direct references are employed, such as, "Are you trapped in a dead-end job?," "Have your horizons shrunk?," and "Have you run out of room to grow?" [Martin, 1987]. These headlines target people who are already employed but are dissatisfied with their jobs. One particular campaign, which adopted a dictionary analogy, ran with a series of headlines including, "Letdownitis--The deflated feeling when your company's growth doesn't match your career ambitions." Another was "Limbo--Not advancing or falling back. Usually caused by a non-growing employer" [Koch, 1989]. Language Employed According to Bucalo [1983], most recruitment advertisements look and sound the same, almost as if they were all written by the same person. The ad may be written in a general or specific manner. The more specific the language and detail, the more targeted the ad. Thus, applicants will be able to screen themselves and decide if they fit the requirements. "Language employed" refers to whether the advertisement reads like a formal job description, written in the language of an employment specialist, or written in a more familiar form and language that most applicants will feel comfortable with. In many cases, the language is copied or adapted from the company's job description files. Layout and Design One of the main problems with advertising in newspapers is the sheer clutter of advertisements vying for the readers' attention. When a reader is confronted with so many ads, he will normally browse through the pages and pay attention to a small subset. In common with all forms of print advertising, a distinctive and unique layout and design may help the advertisement to stand out on the page. Graphically Rich For the same reason as above, the advertisement which contains some form of graphic imagery, such as a photograph, an employee, or the corporate logo, will tend to stand out from the clutter. In most cases, recruitment advertising has more information to convey to the reader than commercial or product advertising. The ad must contain the basic information about the job, the type of candidate sought, and details on how to respond. A newspaper page of recruitment advertising generally contains much written, textual information. The advertisement which makes use of white space and graphic images will often be more successful at capturing the attention of the reader. Humorous or Thought-Provoking Headlines Some recruitment advertising contains witty or attention-grabbing headlines in order to stand out from the other ads on the page. There is a longstanding debate on the actual effects of humor in advertising [Weinberger and Gulas, 1992]. Humorous headlines in recruitment advertising are likely to be an effective method for attracting attention without affecting the comprehension of the advertisement. This is probably more evident in recruitment advertising pages where many of the ads contain standard and functional headlines with the titles of the vacant positions. In other cases, a more serious or thought-provoking headline may be used for the same effect, to capture the readers attention and get them involved in the advertisement. Summary of Industry or Company History Some job advertisements will include a short summary of the type of business that the company deals in or a short summary of the company's history. This is an effective manner to communicate some basic information about the company or organization and the business, its main objectives, and activities. It also appeals to the individual's own Prepared by: Vinoth/ Faculty Management Studies Page 10
self-concept or personality as it may outline what type of company it is, what type of people work there, and what their main purposes are. Executive information system An Executive Information System (EIS) is a type of management information system intended to facilitate and support the information and decision-making needs of senior executives by providing easy access to both internal and external information relevant to meeting the strategic goals of the organization. It is commonly considered as a specialized form of a Decision Support System (DSS) [1] The emphasis of EIS is on graphical displays and easy-to-use user interfaces. They offer strong reporting and drilldown capabilities. In general, EIS are enterprise-wide DSS that help top-level executives analyze, compare, and highlight trends in important variables so that they can monitor performance and identify opportunities and problems. EIS and data warehousing technologies are converging in the marketplace. In recent years, the term EIS has lost popularity in favour of Business Intelligence (with the sub areas of reporting, analytics, and digital dashboards).
Components The components of an EIS can typically be classified as: Hardware When talking about hardware for an EIS environment, we should focus on the hardware that meet the executives needs. The executive must be put first and the executives needs must be defined before the hardware can be selected. The basic computer hardware needed for a typical EIS includes four components: 1. Input data-entry devices. These devices allow the executive to enter, verify, and update data immediately; 2. The central processing unit (CPU), which is the kernel because it controls the other computer system components; 3. Data storage files. The executive can use this part to save useful business information, and this part also help the executive to search historical business information easily; 4. Output devices, which provide a visual or permanent record for the executive to save or read. This device refers to the visual output device such as monitor or printer. In addition, with the advent of local area networks (LAN), several EIS products for networked workstations became available. These systems require less support and less expensive computer hardware. They also increase access of the EIS information to many more users within a company.
Software Choosing the appropriate software is vital to design an effective EIS.[citation needed] Therefore, the software components and how they integrate the data into one system are very important. The basic software needed for a typical EIS includes four components: Prepared by: Vinoth/ Faculty Management Studies Page 11
1. Text base software. The most common form of text are probably documents; 2. Database. Heterogeneous databases residing on a range of vendor-specific and open computer platforms help executives access both internal and external data; 3. Graphic base. Graphics can turn volumes of text and statistics into visual information for executives. Typical graphic types are: time series charts, scatter diagrams, maps, motion graphics, sequence charts, and comparison-oriented graphs (i.e., bar charts); 4. Model base. The EIS models contain routine and special statistical, financial, and other quantitative analysis. Perhaps a more difficult problem for executives is choosing from a range of highly technical software packages. Ease of use, responsiveness to executives' requests, and price are all reasonable considerations. Further, it should be considered whether the package can run on existing hardware. User Interface An EIS needs to be efficient to retrieve relevant data for decision makers, so the user interface is very important. Several types of interfaces can be available to the EIS structure, such as scheduled reports, questions/answers, menu driven, command language, natural language, and input/output. It is crucial that the interface must fit the decision makers decision-making style. If the executive is not comfortable with the information questions/answers style, the EIS will not be fully utilized. The ideal interface for an EIS would be simple to use and highly flexible, providing consistent performance, reflecting the executives world, and containing help information. Telecommunication As decentralizing is becoming the current trend in companies, telecommunications will play a pivotal role in networked information systems. Transmitting data from one place to another has become crucial for establishing a reliable network. In addition, telecommunications within an EIS can accelerate the need for access to distributed data. Applications EIS enables executives to find those data according to user-defined criteria and promote information-based insight and understanding. Unlike a traditional management information system presentation, EIS can distinguish between vital and seldom-used data, and track different key critical activities for executives, both which are helpful in evaluating if the company is meeting its corporate objectives. After realizing its advantages, people have applied EIS in many areas, especially, in manufacturing, marketing, and finance areas. Manufacturing Basically, manufacturing is the transformation of raw materials into finished goods for sale, or intermediate processes involving the production or finishing of semi-manufactures. It is a large branch of industry and of secondary production. Manufacturing operational control focuses on day-to-day operations, and the central idea of this process is effectiveness and efficiency. To produce meaningful managerial and operational information for controlling manufacturing operations, the executive has to make changes in the decision processes. EIS provides the evaluation of vendors and buyers, the evaluation of purchased materials and parts, and analysis of critical purchasing areas. Therefore, the executive can oversee and review purchasing operations effectively with EIS. In addition, because production planning and control depends heavily on the plants data base and its communications with all manufacturing work centers, EIS also provides an approach to improve production planning and control. Marketing
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In an organization, marketing executives role is to create the future. Their main duty is managing available marketing resources to create a more effective future. For this, they need make judgments about risk and uncertainty of a project and its impact on the company in short term and long term. To assist marketing executives in making effective marketing decisions, an EIS can be applied. EIS provides an approach to sales forecasting, which can allow the market executive to compare sales forecast with past sales. EIS also offers an approach to product price, which is found in venture analysis. The market executive can evaluate pricing as related to competition along with the relationship of product quality with price charged. In summary, EIS software package enables marketing executives to manipulate the data by looking for trends, performing audits of the sales data, and calculating totals, averages, changes, variances, or ratios. All of these sales analysis functions help marketing executives to make final decisions. Financial A financial analysis is one of the most important steps to companies today. The executive needs to use financial ratios and cash flow analysis to estimate the trends and make capital investment decisions. An EIS is a responsibility-oriented approach that integrates planning or budgeting with control of performance reporting, and it can be extremely helpful to finance executives. Basically, EIS focuses on accountability of financial performance and it recognizes the importance of cost standards and flexible budgeting in developing the quality of information provided for all executive levels. EIS enables executives to focus more on the long-term basis of current year and beyond, which means that the executive not only can manage a sufficient flow to maintain current operations but also can figure out how to expand operations that are contemplated over the coming years. Also, the combination of EIS and EDI environment can help cash managers to review the companys financial structure so that the best method of financing for an accepted capital project can be concluded. In addition, the EIS is a good tool to help the executive to review financial ratios, highlight financial trends and analyze a companys performance and its competitors. Advantages and Disadvantages EIS Advantages of EIS

Easy for upper-level executives to use, extensive computer experience is not required in operations Provides timely delivery of company summary information Information that is provided is better understood Filters data for management Improves to tracking information Offers efficiency to decision makers
Disadvantages of EIS

System dependent Limited functionality, by design Information overload for some managers Benefits hard to quantify High implementation costs System may become slow, large, and hard to manage Need good internal processes for data management May lead to less reliable and less secure data
Future Trends
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The future of executive info systems will not be bound by mainframe computer systems. This trend allows executives escaping from learning different computer operating systems and substantially decreases the implementation costs for companies. Because utilizing existing software applications lies in this trend, executives will also eliminate the need to learn a new or special language for the EIS package. Future executive information systems will not only provide a system that supports senior executives, but also contain the information needs for middle managers. The future executive information systems will become diverse because of integrating potential new applications and technology into the systems, such as incorporating artificial intelligence (AI) and integrating multimedia characteristics and ISDN technology into an EIS. EIS - timely, efficient and effective in supporting the decision making process. Global marketing Worldwide competition One of the product categories in which global competition has been easy to track in U.S.is automotive sales. The increasing intensity of competition in global markets is a challenge facing companies at all stages of involvement in international markets. As markets open up, and become more integrated, the pace of change accelerates, technology shrinks distances between markets and reduces the scale advantages of large firms, new sources of competition emerge, and competitive pressures mount at all levels of the organization. Also, the threat of competition from companies in countries such as India, China, Malaysia, and Brazil is on the rise, as their own domestic markets are opening up to foreign competition, stimulating greater awareness of international market opportunities and of the need to be internationally competitive. Companies which previously focused on protected domestic markets are entering into markets in other countries, creating new sources of competition, often targeted to price-sensitive market segments. Not only is competition intensifying for all firms regardless of their degree of global market involvement, but the basis for competition is changing. Competition continues to be market-based and ultimately relies on delivering superior value to consumers. However, success in global markets depends on knowledge accumulation and deployment.[1] tiwana. Evolution to global marketing Global marketing is not a revolutionary shift, it is an evolutionary process. While the following does not apply to all companies, it does apply to most companies that begin as domestic-only companies. Domestic marketing A marketing restricted to the political boundaries of a country, is called "Domestic Marketing". A company marketing only within its national boundaries only has to consider domestic competition. Even if that competition includes companies from foreign markets, it still only has to focus on the competition that exists in its home market. Products and services are developed for customers in the home market without thought of how the product or service could be used in other markets. All marketing decisions are made at headquarters. The biggest obstacle these marketers face is being blindsided by emerging global marketers. Because domestic marketers do not generally focus on the changes in the global marketplace, they may not be aware of a potential competitor who is a market leader on three continents until they simultaneously open 20 stores in the Northeastern U.S. These marketers can be considered ethnocentric as they are most concerned with how they are perceived in their home country. exporting goods to other countries. loosener Rhett International marketing If the exporting departments are becoming successful but the costs of doing business from headquarters plus time differences, language barriers, and cultural ignorance are hindering the companys competitiveness in the foreign Prepared by: Vinoth/ Faculty Management Studies Page 14
market, then offices could be built in the foreign countries. Sometimes companies buy firms in the foreign countries to take advantage of relationships, storefronts, factories, and personnel already in place. These offices still report to headquarters in the home market but most of the marketing mix decisions are made in the individual countries since that staff is the most knowledgeable about the target markets. Local product development is based on the needs of local customers. These marketers are considered polycentric because they acknowledge that each market/country has different needs. Elements of the global marketing mix The Four Ps of marketing: product, price, placement, and promotion are all affected as a company moves through the five evolutionary phases to become a global company. Ultimately, at the global marketing level, a company trying to speak with one voice is faced with many challenges when creating a worldwide marketing plan. Unless a company holds the same position against its competition in all markets (market leader, low cost, etc.) it is impossible to launch identical marketing plans worldwide. Product A global company is one that can create a single product and only have to tweak elements for different markets. For example, Coca-Cola uses two formulas (one with sugar, one with corn syrup) for all markets. The product packaging in every country incorporates the contour bottle design and the dynamic ribbon in some way, shape, or form. However, the bottle or can also includes the countrys native language and is the same size as other beverage bottles or cans in that same country. Price Price will always vary from market to market. Price is affected by many variables: cost of product development (produced locally or imported), cost of ingredients, cost of delivery (transportation, tariffs, etc.), and much more. Additionally, the products position in relation to the competition influences the ultimate profit margin. Whether this product is considered the high-end, expensive choice, the economical, low-cost choice, or something inbetween helps determine the price point. Placement How the product is distributed is also a country-by-country decision influenced by how the competition is being offered to the target market. Using Coca-Cola as an example again, not all cultures use vending machines. In the United States, beverages are sold by the pallet via warehouse stores. In India, this is not an option. Placement decisions must also consider the products position in the market place. For example, a high-end product would not want to be distributed via a dollar store in the United States. Conversely, a product promoted as the low-cost option in France would find limited success in a pricey boutique. Promotion After product research, development and creation, promotion (specifically advertising) is generally the largest line item in a global companys marketing budget. At this stage of a companys development, integrated marketing is the goal. The global corporation seeks to reduce costs, minimize redundancies in personnel and work, maximize speed of implementation, and to speak with one voice. If the goal of a global company is to send the same message worldwide, then delivering that message in a relevant, engaging, and cost-effective way is the challenge. Effective global advertising techniques do exist. The key is testing advertising ideas using a marketing research system proven to provide results that can be compared across countries. The ability to identify which elements or moments of an ad are contributing to that success is how economies of scale are maximized. Market research Prepared by: Vinoth/ Faculty Management Studies Page 15
measures such as Flow of Attention, Flow of Emotion and branding moments provide insights into what is working in an ad in any country because the measures are based on visual, not verbal, elements of the ad. Global marketing Advantages and Disadvantages Advantages

Economies of scale in production and distribution Lower marketing costs Power and scope Consistency in brand image Ability to leverage good ideas quickly and efficiently Uniformity of marketing practices Helps to establish relationships outside of the "political arena" Helps to encourage ancillary industries to be set up to cater for the needs of the global player Benefits of eMarketing over traditional marketing
Reach The nature of the internet means businesses now have a truly global reach. While traditional media costs limit this kind of reach to huge multinationals, eMarketing opens up new avenues for smaller businesses, on a much smaller budget, to access potential consumers from all over the world. Scope Internet marketing allows the marketer to reach consumers in a wide range of ways and enables them to offer a wide range of products and services. eMarketing includes, among other things, information management, public relations, customer service and sales. With the range of new technologies becoming available all the time, this scope can only grow. Interactivity Whereas traditional marketing is largely about getting a brands message out there, eMarketing facilitates conversations between companies and consumers. With a two way communication channel, companies can feed off of the responses of their consumers, making them more dynamic and adaptive. Immediacy Internet marketing is able to, in ways never before imagined, provide an immediate impact. Imagine youre reading your favorite magazine. You see a double-page advert for some new product or service, maybe BMWs latest luxury sedan or Apples latest iPod offering. With this kind of traditional media, its not that easy for you, the consumer, to take the step from hearing about a product to actual acquisition. With eMarketing, its easy to make that step as simple as possible, meaning that within a few short clicks you could have booked a test drive or ordered the iPod. And all of this can happen regardless of normal office hours. Effectively, Internet marketing makes business hours 24 hours per day, 7 days per week for every week of the year. By closing the gap between providing information and eliciting a consumer reaction, the consumers buying cycle is speeded up and advertising spend can go much further in creating immediate leads.
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Demographics and targeting Generally speaking, the demographics of the Internet are a marketers dream. Internet users, considered as a group, have greater buying power and could perhaps be considered as a population group skewed towards the middleclasses. Buying power is not all though. The nature of the Internet is such that its users will tend to organize themselves into far more focused groupings. Savvy marketers who know where to look can quite easily find access to the niche markets they wish to target. Marketing messages are most effective when they are presented directly to the audience most likely to be interested. The Internet creates the perfect environment for niche marketing to targeted groups. Adaptivity and closed loop marketing Closed Loop Marketing requires the constant measurement and analysis of the results of marketing initiatives. By continuously tracking the response and effectiveness of a campaign, the marketer can be far more dynamic in adapting to consumers wants and needs. With eMarketing, responses can be analyzed in real-time and campaigns can be tweaked continuously. Combined with the immediacy of the Internet as a medium, this means that theres minimal advertising spend wasted on less than effective campaigns. Maximum marketing efficiency from eMarketing creates new opportunities to seize strategic competitive advantages. The combination of all these factors results in an improved ROI and ultimately, more customers, happier customers and an improved bottom line. Disadvantages

Differences in consumer needs, wants, and usage patterns for products Differences in consumer response to marketing mix elements Differences in brand and product development and the competitive environment Differences in the legal environment, some of which may conflict with those of the home market Differences in the institutions available, some of which may call for the creation of entirely new ones (e.g. infrastructure) Differences in administrative procedures Differences in product placement.
Marketing in a Global environment MARKETING IN A GLOBAL ENVIRONMENT: STRATEGIES TO MEET THE CHALLEGES OF GLOBALIZATION: What are the major implications of globalization for business today, and how should companies respond innovatively to the challenges in the emerging world market. Over the past few years Globalization has been by far the most discussed topic In India for a number of reasons. Eventhough , from a historical perspective globalization is definitely not a new phenomenon, considering the trade relationships civilizations established over centuries. Except for brief periods during the dark ages ,medieval ages and cold war days, It has been a fairly flat world for most part of its history. Whatever may be the fact one has to concede that from Indian industry perspective the process of globalization started only in the late seventies, when the economy started opening up slowly. Multinationals with focus on technology started entering the country. Since ,independence in 1947,Indian establishment has laid more emphasis on civil services and defence , which meant Indian enterprise was mostly commodity and cosmetics. it was not before Prepared by: Vinoth/ Faculty Management Studies Page 17
1991 ,when the process was accelerated through a series of reforms and deregulation and in late 90s when it was given a boosting by increasing FDI limits in many sectors that the pressure of competetion started having its Impact on Indian industry. In order to succeed in such an amazingly competitive environment, entrepreneurs, especially on the marketing side are required not only to foster creativity but also develop innovative techniques and processes to advance their interests. Plagiarism is least likely to succeed, because the hierarchy of commercial and cultural offerings available today is evolving rapidly and adoption of a proven process,strategies and promotional techniques may even woo the customer away from the company. Still , the biggest problem faced is tackling the four Ps of marketing, namely Product,Price, Promotion and Place, as a marketer is challenged to put in place a strategy to address successfully each of the above parameter in the global bazaar, where customer is the king. The first parameter is definitely industry centric as to whether it is a product or a service industry and this defines the customer dynamics.The remaining three parameters are entirely customer centric and hence is to be addressed by the marketer.Comparing Indian companies viz a viz multinationals though the former has the advantage in terms of price,the superior advertising and launching strategy of the latter may gloze over their short comings in terms of price.For example ,take the market for IT professionals.IT industry particularly at the lower level is very competitive with major players recruiting in large numbers every week. Here ,in order to make sure that you have the best of talent for the period the information on requirement should be easily available . IBM came up with an interesting technique to counter this problem. Advertisement for recruitment and contact details are displayed on boards across all major cities in such a way that it is noticeable even with the short attention span of a commuting aspirant. In this way they could ensure that they get maximum number of applications for the job. Such aggressive marketing techniques can put your firm way ahead of competitors. If multinational companies operating in India especially the ones in FMCG sectors need to address the problem of acculturisation and customization of product without risking its identity, their Indian competitors need to address the problem of product quality and creation of new markets for their products.Another interesting technique for extending the reach was developed by Aventis pharma during early days of internet.If some body typed the word heart burn in any of the then available search engines the listings would lead to aventis pharma and all its products. Indian ventures abroad , heirs to tradition begun more than a century ago by an unknown hotelier from central India who started a fast food chain in london during those early days of the raj,have been focussing on services. Thereby success in foreign market for these firms depends on how well they position their offering be it Idlis dosas ,naans or software services viz a viz products of the competetor. For firms dealing with raw materials,FMCG etc success depends on how well they manage their supply chain. The rising tide of information as a result of globalization continues to confuse the customer , companies must play an editorial role in determining what is relevant for the him. Globalization is about enmeshing of cultures. The success of a company depends upon its awareness of the culture of the region it is operating on. Companies that understand their potential and capability for innovation will thrive. Capability to come up with new business models is an added advantage. USE OF TECHNOLOGY: I have already stated that positioning of a product or service plays an important role in its success in the chosen market. Many companies instead of attempting to understand customer behavior and then evolve a suitable positioning strategy,attempt to brainwash the customers of their product by adopting techniques that stir emotions. such tactics can never succeed and are by large unethical business practices. Zig Ziglar ,in his much acclaimed secrets of closing a sale argues that lying about a product does not change its perception. Adoption of technology in marketing practices could improve the Capability of a company to extend its reach as well as increase its customer base. Many companies use GPS(global positioning systems) to track and monitor the flow of their products across different regions. Professor Jay Forrester is 87 years old. A stalwart from MIT, he is known as father of a research and analysis called Prepared by: Vinoth/ Faculty Management Studies Page 18
system dynamics a methodology that uses computer-based models to simulate and study the interplay of growth and equilibrium over time. Way back in the 1950s he envisioned that the techniques developed by him could be useful in a variety of disciplines including economics (say, for predicting cash flows). Absorbing the implications of these models in ways that Professor Forrester prescribes can allow mere mortals to comprehend the obscure nature of (and counterintuitive solutions to) such knotty problems as environmental damage, the boom-and-bust pattern of economic cycles, supply chain malfunctions etc. These problems, says Professor Forrester, are all manifestations of the underlying nature of complex systems, from living cells to organisms to organizations and corporations to nations to the world at large. In his pioneering computer simulations, Professor Forrester modeled the slow-to-emerge tipping points (as writer Malcolm Gladwell would later call them) that make systems difficult to manage, yet can also provide hidden leverage points for effective intervention. Modeling this kind of growth and resistance requires nonlinear calculus a form of math so intricate that even the most gifted and highly trained mathematicians are incapable of solving nonlinear equations in their heads. Professor Forresters influence, particularly in business circles, is broader than his modest name recognition might suggest. The principles of system dynamics have been incorporated into scenario planning, war gaming, lean production, and supply chain management. More than a dozen universities, most prominently MIT, have business school departments devoted to the field. One of professor Forresters simulation prompted MasterCards decision to introduce the first third-party affinity cards. The model accurately predicted the amount of market share MasterCard would gain as well as the fact that Visa would match the offering within a year, and that American Express and Discover would not or could not follow in the co-branding. Master card example shows how a company could exploit technology skillfully to multiply its market share and track the competitors. In a global environment the use of technology for marketing and positioning yields satisfactory results. CUSTOMER INTERACTION:
Any firm seeking entry into a foreign market should plan the venture in very meticulously. Data on customers should be collected and collated assiduously and periodically reviewed by employing statistical procedures and techniques. This helps in deriving various market measurements and providing more accurate projections .Data on customers should be both qualitative as well as quantitative. Marketing in an era of globalization provides many challenges. In any region customer segment is heterogenous. Marketers should be creative as well as innovative. Strategies employed must confirm to ethical business practices. skilfull usage of technology in marketing initiatives could provide great results. Meticulous collection of customer data increases marketing efficiency.
UNIT II MARKETING STRATEGY Marketing Strategy Formulation Prepared by: Vinoth/ Faculty Management Studies Page 19
Companies use strategies to accomplish goals and objectives in the business environment. Formulation is way a company plans and develops different strategies. A marketing strategy is how a company reaches out to consumers when promoting goods and services. Definition Business dictionary defines marketing as the "process through which goods and services move from concept to the customer. As a philosophy, it is based on thinking about the business in terms of customer needs and their satisfaction." Types Marketing strategy formulation typically falls under business-level strategies. These strategies focus on setting low prices to be the cost leader, differentiating products through style or quality, and focusing on a niche of consumers to establish a branded item. Factors Two factors can affect marketing strategies: timing and location. Timing includes releasing messages, how often advertisements should be released, or releasing messages in response to competitors. Location affects marketing because different areas have different demographics, which can affect the marketing message.
Ansoffs Matrix
A common tool used within marketing was developed by Igor Ansoff in 1957. His model gives organisation five strategic business options. 1. Market Penetration: This involves increasing sales of an existing product and penetrating the market further by either promoting the product heavily or reducing prices to increase sales. 2. Product Development: The organisation develops new products to aim within their existing market, in the hope that they will gain more custom and market share. For Example Sony launching the Playstation 2 to replace their existing model.. 3. Market Development: The organisation here adopts a strategy of selling existing products to new markets. This can be done either by a better understanding of segmentation, i.e who else can possibly purchase the product or selling the product to new markets overseas. 4. Diversification: Moving away from what you are selling (your core activities) to providing something new eg Moving over from selling foods to selling cars. 5. Consolidation: Where the organisation adopts a strategy of withdrawing from particular markets, scaling back on operations and concentrating on its existing products in existing markets.
SWOT Analysis A tool used by organisations to help the firm establish its Strengths, Weaknesses, Opportunities and Threats (SWOT). A SWOT analysis is used as a framework to help the firm develop its overall corporate, marketing, or product strategies. Note:Strengths and Weaknesses are internal factors which are controllable by the organisation. Opportunities & threats are external factors which are uncontrollable by the organisation. Prepared by: Vinoth/ Faculty Management Studies Page 20
Strength examples could include:

A strong brand name. Market share. Good reputation. Expertise and skill.
Weaknesses could include:

Low or no market share. No brand loyalty. Lack of experience.
Opportunities could include:

A growing market. Increased consumer spending. Selling internationally. Changes in society beneficial to your company.
Threats could include:

Competitors Government policy eg taxation, laws. Changes in society not beneficial to your company.
A SWOT analysis is an excellent tool to use if the organisation wants to take a step back and assess the situation they are in. Issues raised from the analysis are then used to assist the organisation in developing their marketing mix strategy. A SWOT analysis must form the part of any prudent marketing strategy.
Boston Consultancy Group (BCG Matrix) This product portfolio matrix classifies product lines into four categories. The BCG models suggests that organisations should have a healthy balance of products within their range. The Boston Consultancy Group classified these products as following:
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Dogs These are products which have low market shares and low market growth rates. The options for many companies is to phase these products out, however some organisation do go for the strategy of re-inventing and injecting new life into the product. (see Heinz Case Study) Question Mark/Problem Child These are products with low market share but operate in high market growth rates. The company puts a lot of resources in this product in the hope that it will eventually increase market share and generate cash returns in the future. Star Stars have high market shares that operate in growing markets. The product at this stage should be generating positive returns for the company. Cash Cow Cash Cow are products at the mature stage of the lifecycle, they generate high amounts of cash for the company, but growth rate is slowing. There are chances that the product may slip into decline, appropriate marketing mix strategies should be employed to try to prevent this from happening.
Product Life Cycle The product life cycle concept suggests that a product passes through four stages of evolution. Introduction, growth, maturity and decline. As a product evolves and passes through theses four stages profit is affected, and different strategies have to be employed to ensure that the product is a success within its market. Prepared by: Vinoth/ Faculty Management Studies Page 22
Product Life Cycle stages
Introduction As a new product much time will be spent by the organisation to create awareness of it presence amongst its target market. Profits are negative or low because of this reason. Growth If consumer clearly feel that this product will benefit them in some ways and they accept it, the organisation will see a period of rapid sales growth. Maturity Rapid sales growth cannot last forever. Sales slow down as the product sales reach peak as it has been accepted by most buyers. Decline Sales and profits start to decline, the organisation may try to change their pricing strategy to stimulate growth, however the product will either have to be re-modified, or replaced within the market.
Michael Porters Generic Strategies For an organisation to obtain a sustainable competitive advantage Michael Porter suggested that they should follow either one of three generic strategies. Strategy one: Cost Leadership. Prepared by: Vinoth/ Faculty Management Studies Page 23
This strategy involves the organisation aiming to be the lowest cost producer within their industry. The orgainisation aims to drive cost down through all the elements of the production of the product from sourcing, to labour costs. The cost leader usually aims at a broad market, so sufficient sales can cover costs. Low cost producers include Easyjet airline, Ryan air, Asda and Walmart. Some organisation may aim to drive costs down but will not pass on these cost savings to their customers aiming for increased profits clearly because their brand can command a premium rate. Strategy 2: Differentiation To be different, is what organisations strive for. Having a competitive advantage which allows the company and its products ranges to stand out is crucial for their success. With a differentiation strategy the organisation aims to focus its effort on particular segments and charge for the added differentiated value. If we look at Brompton folding cycles their compact design differentiates them from other folding bike companies. New concepts which allow for differentiation can be patented, however patents have a certain life span and organisation always face the danger that their idea that gives the competitive advantage will be copied in one form or another. Strategy 3: Niche strategies Here the organisation focuses its effort on one particular segment and becomes well known for providing products/services within the segment. They form a competitive advantage for this niche market and either succeed by being a low cost producer or differentiator within that particular segment. Examples include Roll Royce and Bentley. With both of these strategies the organisation can also focus by offering particular segments a differentiated product/service or a low cost product/service. The key is that the product or service is focused on a particular segment. (see diagram below) Are you Stuck in the middle The danger some organisation face is that they try to do all three and become what is known as stuck in the middle. The have no clear business strategy, be all to all consumers, which adds to their running costs causing a fall in sales and market share. Stuck in the middle companies are usually subject to a takeover or merger.
Porters fives forces model : Industry analysis model Porters fives forces model is an excellent model to use to analyse a particular environment of an industry. So for example, if we were entering the PC industry, we would use porters model to help us find out about: 1) Competitive Rivalry 2) Power of suppliers Prepared by: Vinoth/ Faculty Management Studies Page 24
3) Power of buyers 4) Threats of substitutes 5) Threat of new entrants. The above five main factors are key factors that influence industry performance, hence it is common sense and practical to find out about these factors before you enter the industry. Lets look at them below. Competitive rivalry A starting point to analysing the industry is to look at competitive rivalry. If entry to an industry is easy then competitive rivalry will likely to be high. If it is easy for customers to move to substitute products for example from coke to water then again rivalry will be high. Generally competitive rivalry will be high if: There is little differentiation between the products sold between customers. Competitors are approximately the same size of each other. If the competitors all have similar strategies. It is costly to leave the industry hence they fight to just stay in ( exit barriers) Power of suppliers Suppliers are also essential for the success of an organisation. Raw materials are needed to complete the finish product of the organisation. Suppliers do have power. This power comes from: If they are the only supplier or one of few suppliers who supply that particular raw material. If it costly for the organisation to move from one supplier to another (known also as switching cost) If there is no other substitute for their product. Power of buyers Buyers or customers can exert influence and control over an industry in certain circumstances. This happens when: There is little differentiation over the product and substitutes can be found easily. Customers are sensitive to price. Switching to another product is not costly. Threat of substitutes Are there alternative products that customers can purchase over your product that offer the same benefit for the same or less price? The threat of substitute is high when: Price of that substitute product falls. It is easy for consumers to switch from one substitute product to another. Buyers are willing to substitute. Threat of new entrant The threat of a new organisation entering the industry is high when it is easy for an organisation to enter the industry i.e. entry barriers are low. An organisation will look at how loyal customers are to existing products, how quickly they can achieve economy of scales, would they have access to suppliers, would government legislation prevent them or encourage them to enter the industry.
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So to summaries porters five forces model is essential to carry to help you understand your industry in depth before you enter it. Value chain analysis Michael Porter in 1985 introduced in his book The Competitive Advantage the concept of the Value Chain. He suggested that activities within the organisation add value to the service and products that the organisation produces, and all these activities should be run at optimum level if the organisation is to gain any real competitive advantage. If they are run efficiently the value obtained should exceed the costs of running them i.e. customers should return to the organisation and transact freely and willingly. Michael Porter suggested that the organisation is split into primary activities and support activities.
Primary activities Inbound logistics : Refers to goods being obtained from the organisations suppliers ready to be used for producing the end product. Operations : The raw materials and goods obtained are manufactured into the final product. Value is added to the product at this stage as it moves through the production line. Prepared by: Vinoth/ Faculty Management Studies Page 26
Outbound logistics : Once the products have been manufactured they are ready to be distributed to distribution centres, wholesalers, retailers or customers. Marketing and Sales: Marketing must make sure that the product is targeted towards the correct customer group. The marketing mix is used to establish an effective strategy, any competitive advantage is clearly communicated to the target group by the use of the promotional mix. Services: After the product/service has been sold what support services does the organisation have to offer. This may come in the form of after sales training, guarantees and warranties. With the above activities, any or a combination of them, maybe essential for the firm to develop the competitive advantage which Porter talks about in his book. Support Activities The support activities assist the primary activities in helping the organisation achieve its competitive advantage. They include: Procurement: This department must source raw materials for the organisation and obtain the best price for doing so. For the price they must obtain the best possible quality Technology development: The use of technology to obtain a competitive advantage within the organisation. This is very important in todays technological driven environment. Technology can be used in production to reduce cost thus add value, or in research and development to develop new products, or via the use of the internet so customers have access to online facilities. Human resource management: The organisation will have to recruit, train and develop the correct people for the organisation if they are to succeed in their objectives. Staff will have to be motivated and paid the market rate if they are to stay with the organisation and add value to it over their duration of employment. Within the service sector eg airlines it is the staff who may offer the competitive advantage that is needed within the field. Firm infrastructure: Every organisations needs to ensure that their finances, legal structure and management structure works efficiently and helps drive the organisation forward. As you can see the value chain encompasses the whole organisation and looks at how primary and support activities can work together effectively and efficiently to help gain the organisation a superior competitive advantage. Diffusion of innovation This extension of the product life cycle was developed by Everett M. Rogers in 1962 and simply looks who adopts products at the different stages of the life cycle. Rogers identified five types of purchasers as the product moves through its life cycle stage. He suggested: 1. Innovator who make up 2.5% of all purchases of the product, purchase the product at the beginning of the life cycle. They are not afraid of trying new products that suit their lifestyle and will also pay a premium for that benefit.
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2. Early Adopters make up 13.5% of purchases, they are usually opinion leaders and naturally adopt products after the innovators. This group of purchasers are crucial because adoption by them means the product becomes acceptable, spurring on later purchasers. 3. Early Majority make up 34% of purchases and have been spurred on by the early adopters. They wait to see if the product will be adopted by society and will purchase only when this has happened. They early majority usually have some status in society. 4. Late Majority make up another 34% of sales and usually purchase the product at the late stages of majority within the life cycle. 5. Laggards make up 16% of total sales and usually purchase the product near the end of its life. They are the wait and see group. They wait to see if the product will get cheaper. Usually when they purchase the product a new version is already on the market. Some may call Laggards, bargain hunters!
Force Field Analysis When decisions are made by managers they have to weigh up the reasons for and against that particular decision. In 1951 Kurt Lewin developed a model that allowed managers to visualise these points. He called it the Force Field Analysis Model. The analysis enables a manager to weigh the number of reasons for to against. If there are more against then a decision has to be made whether they should go ahead with that particular route. The manager also needs to assess whether these reasons against can either be turned into for or whether they can be dealt with or the severity of the against reduced. If there are more things going against you, say for a launch of a product then then you would need to deal with those factors.
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Each forces for and against are allocated a number based on the severity. 0 is usually neutral and 4 is strong. Lets look at what a typical force field analysis decision will look at.
As you can see from the diagram forces for are the customers trust the brand (4), the firm is moving into new segments (3) and, should all go well there will be an increase in sales (4). The major factors against are cost implications (4), moving into a new area of business (3) even with a trusted brand it is risky business and competitor reactions (2).. A possible solution to the risk of moving into a new area of business could be to buy an established competitor that already makes cereals and use their skill and expertise. But again this has its own risk associations. To summarise a force field analysis helps a company at strategic level to weigh up the reasons for and against a particular business decision.
KEY DRIVERS OF SUCCESSFUL MARKETING STRATEGY

In order to investigate the key drivers of successful marketing strategy for each of our study samples we, like other authors in marketing success research, use multivariate analysis (ordinary least-squares regression). The dependent variable of performance was an index of four self-reported measures of performance (profit, sales volume, market share and return on investment), using methods similar to those of Law, Wong and Mobley (1998). In the questionnaire, respondents were asked to report how their company had performed (in their last financial year) relative to its major competitors on each measure of performance, thereby allowing the following classification: 4 igher performance firms performed better than their competitors on at least three of the four H indicators and no worse than the same on the fourth (23% of the sample in 1997 and 28% of the sample in 2007). Medium performance firms performed variously across the four indicators (40% of the sample in 1997 and 35% of the sample in 2007). Lower performance firms either performed worse than their competitors on all four indicators or did not know how they had performed (37% of the sample in 1997 and 37% of the sample in 2007). Although self reported measures of relative performance have the potential to contain bias, a number of authors have suggested that in the absence of objective criteria they can be both appropriate and reliable (Dess and Robinson, 1984; Bamberger, Bacharach and Dyer, 1989; Powell, 1992; Matear et al., 2004). Nevertheless, Prepared by: Vinoth/ Faculty Management Studies Page 29
limitations include the unknown extent to which the sample is truly representative of the population under scrutiny and differences in the respondents interpretation of certain questions in the questionnaire. Comparisons of the internal composition of both samples showed that between 1997 and 2007, there has been a statistically significant shift upwards (at the 5% level) in self reported competitive performance. In addition, the median turnover for New Zealand goods marketing businesses was $15 million in 2007 compared with $11 million in 1997, and firms employing 50 or more staff increased by 4%. At both time-points, ownership characteristics remained constant at three-quarters New Zealand owned, three-quarters of companies describe themselves as autonomous (fully independent) and levels of product diversification also remained virtually the same. Firms main markets changed somewhat in 2007 with 9% more claiming they operated in established, growing markets than mature, stable markets,perhaps reflecting the economic sentiments (sustained growth) of the 1997 - 2007 decade. Priorities for Successful Marketing Strategy 1997 versus 2007 The managerial implications of this studys findings are self evident. Our findings surely provide some basic lessons for marketing strategists; lessons that are arguably applicable not only to New Zealand businesses but also to firms further afield that operate within a similarly modern, free market economy. Companies that are currently suffering in the wake of 2008s global financial crisis would do well to ensure that they observe the evergreen practices of focusing and concentrating on one or more well-chosen target market(s), competing on the basis of value-to-the-customer, and innovating new ways of doing business. At the same time however, it is important for them to be risk-averse in overall approach, seeking to avoid headon competition through a process of gradually repositioning their offerings within their existing markets
INDUSTRIAL MARKETING
Industrial marketing is the marketing of goods and services from one business to another. Industrial goods are those which are used in Industry for producing a Different end product from one or more raw materials. The word "industrial" means machinery run by power to produce goods and services. But "industrial marketing" is not confined to these types of business activities. Broadly, marketing could be split into consumer marketing (B2C "Business to Consumer") and industrial marketing (B2B "Business to Business"). B2B Business to Business (or "Industrial") Typical examples of a B2B selling process are...
An organization is seeking to build a new warehouse building. After carefully documenting their requirements, it obtains three proposals from suitable construction firms and after a long process of evaluation and negotiation it places an order with the organization that it believes has offered the best value for money. An organization has significant need for legal services and obtains submissions from two law firms. Analysis of the proposals and subsequent discussions determines that there is no price advantage to placing all of the work with one firm and the decision is made to split the work between the two firms based on an evaluation of each firm's capabilities. A sales representative makes an appointment with a small organization that employs 22 people. He demonstrates a photocopier/fax/printer to the office administrator. After discussing the proposal with the business owner it is decided to sign a contract to obtain the machine on a fully maintained rental and consumables basis with an upgrade after 2 years.
The main features of the B2B selling process are...
Marketing is one-to-one in nature. It is relatively easy for the seller to identify a prospective customers and to build a face-to-face relationship. Page 30

Highly professional and Trained people in Buying processes are involved.In many cases two or three decision makers have to be considered in purchasing industrial products. High value considered purchase. Purchase decision is typically made by a group of people ("buying team") not one person. Often the buying/selling process is complex and includes many stages (for example; request for expression of interest, request for tender, selection process, awarding of tender, contract negotiations, and signing of final contract). Selling activities involve long processes of prospecting, qualifying, wooing, making representations, preparing tenders, developing strategies and contract negotiations.
B2C Business to Consumer (or "Consumer") Examples of the B2C selling/buying process are...

A family are at home on a Sunday night and are watching television. An advertisement appears that advertises home delivered pizza. The family decides to order a pizza. Walking down a supermarket aisle, a single man aged in his early 30's sees a hair care product that claims to reduce dandruff. He picks the product and adds it to his shopping cart. A pensioner visits her local shopping mall. She purchases a number of items including her favourite brand of tea. She has bought the same brand of tea for the last 18 years.
The main features of the B2C selling process are...

Marketing is one-to-many in nature. It is not practical for sellers to individually identify the prospective customers nor meet them face-to-face. Lower value of purchase. Decision making is quite often impulsive (spur of the moment) in nature. Greater reliance on distribution (getting into retail outlets). More effort put into mass marketing (One to many). More reliance on branding. Higher use of main media (television, radio, print media) advertising to build the brand and to achieve top of mind awareness.
Blurring between the definitions As in all things, the definitions are not clear cut. For example, an organisation that sells electronic components may seek to distribute its products through marketing channels (see channel (marketing)), and be selling relatively low value products. However, the final purchaser is still a business. Equally there are big ticket items purchased by non-business consumers (houses and motor vehicles being the obvious examples). However, even though these definitions are blurred, sales and marketing activities aimed at B2B are distinctly different from B2C (as outlined above). Competitive tendering Industrial marketing often involves competitive tendering (see tender, tendering). This is a process where a purchasing organization undertakes to procure goods and services from suitable suppliers. Due to the high value of some purchases (for example buying a new computer system, manufacturing machinery, or outsourcing a maintenance contract) and the complexity of such purchases, the purchasing organization will seek to obtain a number of bids from competing suppliers and choose the best offering. An entire profession (strategic procurement) that includes tertiary training and qualifications has been built around the process of making important purchases. The key requirement in any competitive tender is to ensure that... Prepared by: Vinoth/ Faculty Management Studies Page 31

The business case for the purchase has been completed and approved. The purchasing organization's objectives for the purchase are clearly defined. The procurement process is agreed upon and it conforms with fiscal guidelines and organisational policies. The selection criteria have been established. A budget has been estimated and the financial resources are available. A buying team (or committee) has been assembled. A specification has been written. A preliminary scan of the market place has determined that enough potential suppliers are available to make the process viable (this can sometimes be achieved using an expression of interest process). It has been clearly established that a competitive tendering process is the best method for meeting the objectives of this purchasing project. If (for example) it was known that there was only one organisation capable of supplying; best to get on with talking to them and negotiating a contract.
Because of the significant value of many purchases, issues of probity arise. Organisations seek to ensure that awarding a contract is based on "best fit" to the agreed criteria, and not bribery, corruption, or incompetence. Bidding process Suppliers who are seeking to win a competitive tender go through a bidding process. At its most primitive, this would consist of evaluating the specification (issued by the purchasing organization), designing a suitable proposal, and working out a price. This is a "primitive" approach because...

There is an old saying in industrial marketing; "if the first time you have heard about a tender is when you are invited to submit, then you have already lost it." While flippant, the previous point illustrates a basic requirement for being successful in competitive tendering; it is important to develop a strong relationship with a prospective customer organization well before they have started the formal part of their procurement process.
Non-tender purchasing Not all industrial sales involve competitive tendering. Tender processes are time consuming and expensive, particularly when executed with the aim of ensuring probity. Government agencies are particularly likely to utilise elaborate competitive tendering processes due to the expectation that they should be seen at all times to be responsibly and accountably spending public monies. Private companies are able to avoid the complexity of a fully transparent tender process but are still able to run the procurement process with some rigour.Beneficial Developing a sales strategy/solution selling/technical selling The "art" of technical selling (solution selling) follows a three stage process...
Stage 1: Sell the appointment: Never sell over the telephone. The aim of the first contact with a prospective purchaser is to sell the appointment. The reason is simple; industrial sales are complex, any attempt to sell over the phone will trivialise your product or service and run the risk of not fully understanding the customer's need. Stage 2: Understand their needs: The best method of selling is to minimise the information about your goods or services until you have fully understood your customer's requirements. Stage 3: Develop and propose a solution. The solution is (of course) developed from your (or the firm that you represent's) product or service offerings.
The marketing function is able to support this solution sell through tactics like account-based marketing understanding the requirements of a specific target organization and building a marketing program around these. Prepared by: Vinoth/ Faculty Management Studies Page 32
As research shows, sales success is heavily weighted towards suppliers who can understand their audience before selling to them (in UK research, 77 per cent of senior decision-makers believe that the marketing approaches made by new suppliers are poorly targeted and make it easy to justify staying with their current supplier).[1] Sales force management has a critical function in industrial selling, where it assumes a greater role than other parts of the marketing mix. Typical industrial organisations are highly dependent on the ability of its sales people to build relationships with customers. During periods of high demand (economic boom) the sales force often become mere order takers and struggle to respond to customer requests for quotations and information. However, when economic downturn hits it becomes critical to direct the sales force out selling. From cannon fodder to preferred tenderer The term "cannon fodder" derives from the World Wars and refers to the massing of undertrained and recently recruited troops sent to the fronts to face the enemy. It was noted that such troops invariably had a short survival rate but provided the tactical advantage of distracting the enemy while professional soldiers mounted a flanking manoeuvre and came around from the side or from behind the enemy. In adopting the term to Industrial Marketing it means those bids being submitted that have no chance of winning but are involved to make up the numbers (you can't have only one bid in a "competitive" tender process; that wouldn't satisfy the requirements of probity) (for example in government tenders, or for private enterprise the requirement to "truly test the market" and to "keep them honest"). The reader might be wondering why anybody would go to all of the work of submitting a tender when they had no chance of winning; for the same reason that troops were sent in to battle to die; they thought they had a real chance. The key features of a successful industrial sales organisation In industrial marketing the personal selling is still very effective because many products must be customized to suit the requirements of the individual customer. Indicators such as the sales tunnel give information on the expected sales in the near future, the hit rate indicates whether the sales organization is busy with promising sales leads or it is spending too much effort on projects that are eventually lost to the competition or that are abandoned by the prospect. The internet and B2B marketing The "dotcom" boom and bust of the late 90's saw significant attempts to develop a new retailing business model; on-line shopping. Many entrepreneurs (and their investors) discovered that merely having a website (no matter how innovative) was insufficient to generate sales; the amount of conventional main media advertising required to promote the sites burnt cash at a faster rate than they could generate through on-line sales. They also presumed that consumers would eschew the irksome shopping experience (driving, parking, poor service etc.) for the wonder and convenience of shopping on-line. Some did; but not in sufficient numbers. There were many unforeseen problems and apart from some notable exceptions (Amazon.com and others) the B2C online model was a spectacular failure. However, the same cannot be said of B2B selling where
CONSUMER GOODS CLASSIFICATION

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Consumer goods are products which are purchased for personal consumption. Consumer goods are classified into three areas.. These are: Convenience Goods Convenience products are inexpensive frequent purchases, there is little effort needed to purchase them. Examples may include fast food and confectionery products. Convenience products are split into staples, such as milk, eggs and emergency products which are purchased when the need arises e.g. Umbrellas. Shopping goods Shopping goods are usually high risk products where consumers like to shop around to find the best features and price for that product.. Examples include buying fridges, freezers or washing machines. Specialty Goods There are products that are purchased infrequently. The consumers will conduct extensive research to make sure that their purchase decision is right, because specialty goods are expensive and infrequent purchases. The organization will support the product with an extensive warranty package. Examples include watches and diamonds. There are usually little or no substitutes for these products. RELATIONSHIP MARKETING Relationship Marketing involves using methods and tactics to develop long term relationship with customers in order to retain them. An organisation must exceed customer satisfaction in order to retain them and develop a healthy relationship with their customers. Traditional transactional marketing involved the organisation focusing all of its marketing efforts on attracting the customer for one off sales. However, customers who are loyal end up spending more in the long-term, so it makes sense, keep existing customers happy! Attracting and retaining customers Relationship marketing involves the organization undertaking a number of important activities. First of all, the company must put into place tactics to attract customers. Methods used to attract customers may include promoting the product and brand, offering good quality products/services and competitive prices. Secondly customers that are attracted to the organisation have to be retained. As we stated above whats the point of all that hard work of attracting customers if we cannot retain them? Methods used to retain, may include, loyalty cards, a good customer service section, and an individual account manager if it is a large client, along with product variety and quality.
Methods of monitoring customer satisfaction
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An organisation must continue to satisfy customers, but lets be honest, it is very difficult to keep 100% of your customers satisfied all the time, one reason is because needs and wants of your customers change. So we have to monitor what is happening in our customer environment. Methods used to monitor customer satisfaction include: Focus groups . Personal interviews. Questionnaires. Mystery Shoppers. Customer complaints. Suggestion boxes. Online surveys. General comments. In order to retain customers we must keep up to date with the needs of our customers. Customer needs do not remain static and always change. Adapting and changing along with these needs will help the organisation develop the relationship it wants with the customer. The benefit, well increased profit, market share and brand awareness. CUSTOMER RELATIONSHIP MARKETING (CRM) CRM is about the systems (IT and non IT systems) that are employed that help an organisation manage its relationships with it customers. CRM employed systems can help an organisation in a number of ways:

By using simple databases CRM can help the organisation in segmenting their most profitable customers. Help the organisation in targeting specific products at certain customers groups by looking at their past purchase patterns. Help identify light and medium users, and employing strategies to try and convert them into heavy users. CRM can provide employees with all the necessary information that they need to know about the customer they are dealing with, ensuring that the customer is dealt with in an efficient manner and ensuring personlisation for the customer.
Customer Relationship Marketing tries to ensures that customer information can be accessed at any point within the organisation. A truly marketing oriented organisation would make sure that this would happen and that this system will put the customer first. LADDER OF CUSTOMER LOYALTY Relationship marketing is about developing long term relationships with the customer. A company needs to be able to turn a one off sale into a fruitful long-tem relationship where both parties will benefit. The ladder of customer loyalty talks about the different types of customers the company encounters. The aim of relationship marketing is to retain customers, as it can cost a company anything as up to six times as much to attract new customers
There are five steps in this ladder. Starting with:
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Suspect A suspect is someone who comes across your companies promotion. They are a potential suspect for your company. Prospect If the person is interested in your promotion they become a potential prospect. Customers A customer is someone who purchases either your product or service. Clients Clients are those who come back to you. Advocates Promotes your business on your behalf. They are so happy about your product/service that they tell others.
It makes sense for the company on spending money to retain customers and keeping them happy so they can become advocates for you, therefore bringing in the business on your behalf BENEFITS OF RELATIONSHIP MARKETING Retaining customers for the long-term offers many benefits. The aim is for the company to obtain life time custom. Some of the benefits of relationship marketing include: 1. Loyal customers will recommend your business to others, thus expanding your business for you. 2. Loyal customers are willing to try some of your new products, because they trust you. 3. Customers will be willing to pay more for your services/products if there are adjustments in pricing because they are loyal to you and trust your services/products. 4. Loyal customers will tell you about problems with your products/services enabling to improve your products/services. 5. The ultimate benefit will be an increase sales, market share and dominance. Internal Marketing Internal marketing is all about the relationship an employer forms with its employees. It is said that staff should be seen as internal customers and their needs should be met, as well as external customers. But why care about internal customers? This is quite simple to answer. Motivated staff will work harder and give your external customers a better service. This will help improve the firm's reputation, sales and market share over the long term. Prepared by: Vinoth/ Faculty Management Studies Page 36
Part of internal marketing is all about communication and making sure the staff share the overall vision and goals of the firm, systems like the intranet and staff newsletters aid in sharing these common values. Empowerment and giving staff responsibility is an important part of the internal marketing role. Staff who are given responsibility usually perform better for the firm as they try their best to help the firm reach their goals. If staff need to be trained to take on responsibility then the firm should be able to offer this to show that they are interested in their skills development. Understanding staff and what motivates them is also very important. Many motivation theories such as Maslow and Herzberg have tried to pinpoint how staff can reach their full potential Rewards and recognition by the firm is also very important, staff that are praised feel a sense of satisfaction that encourages them to work harder. Culture is also an important part of the internal marketing process. Staff across departments and levels should share the same values, these values could simply be about putting the customer first and responding to customer needs as fast as possible.
MANAGING CUSTOMER SERVICES ONLINE With many firms now operating solely online, managing customer services has become ever more challenging. However this does not mean it has become impossible. The needs of the online users are still the same. In fact online there are more ways for the customer to communicate with the firm. There are number of ways an online firm can try to manage customer services online. These include: Responding to complaints by email. A firm should respond to written customer complaints within a reasonable time. If complaints are about a common issue then the online firm will know that this issue needs to be dealt with quickly before it has an impact on their repuation. Web chat. To make the buying process over the internet feel more human, some firms are using webcam chat so customers can talk to sales persons online, to reassure the customer of their online purchase.
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Delivery. Firms need to be able to deliver the product quickly at low cost or at no cost. Service levels by the customer will be judges on the basis of how quickly the product is delivered and whether the product has been secured well during postage. Returns. One of the greatest apprehension of buying online, is worrying about what will happen if the product you purchase goes faulty, will it be easy to return it? Some firms allow users to manage their returns online by issuing a returns number and then picking up the damaged product free of charge. If this is done quickly and swiftly then the customers will feel more reassured about buying from the company. Contact. Even thought the purchase is online the customer must feel that they can contact the firm. There should be a telephone number the customer can ring, if it is a small online firm and staffing is limited customers should be able to leave messages so they can be contacted back at a later stage. Overall managing customers online does requires the firm to develop different strategies, however the outcome if done correctly as with an offline business , is loyalty, increased spend on the website and recommendation to friends. COMPONENTS OF CUSTOMER SERVICES Good customer service stretches from before the customer purchases the product to after the purchase transaction has been completed. The components of customer consist of the following. Pre Transactional Strategies This is all about the strategies a firm uses to get the consumer into the store. This could involve using various promotional strategies such as offers to tempt customers. Many stores now offer cafes, have leaflets that will give detailed product information. Transactional Strategies Once in the store, how can the store support the potential customer? Sales persons should be able to answer questions confidently about a product and demonstrate the product if asked. The buying process should also be straight forward and simple, so the customer does not walk away. Post Transactional Strategies After the purchase transaction if there is a problem with the product, how is the complaint dealt with? Is the problem dealt with quickly for the customer? What is after sales service like? Should you contact the customer to ask them if they wish to extend their warranty or purchase any complimentary products. To summaries the components of customer service is all about looking after the customer before, during and after the sale.
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CUSTOMER SERVICES Customers Services is all about looking after potential and current customers and making sure that their needs are met. This can happen before the customer transacts with the company, during the transactional process and after the transaction has been completed. The above is known as the components of customer services and is talked about further here. Good customer services is an essential part of a companys strategy particularly if the company wishes to retain customers for the long-term. Customers are more likely to spend more with your firm if they are looked after well. Good customers services can take place in many forms. These include: Having a visible customer services desk. Customers should be able to find customer services very easily within a retail store and this desk should always be staffed. This sends out a good impression to customers visiting the store. Skilled staff. Staff should have the area of expertise within the section they are working within. Certainly they should know more than the average customer. This builds confidence and trust with the potential customer. Store policies: What are the policies on product returns? Customers will feel more confident with a retail store knowing they can return the product if it develops a fault. UK firm Argos have a 14 day money back guarantee on most products that are purchased. So if consumers change their mind about the product within that period, they can return it. This policy goes beyond UK law, showing their dedication to customer service. Phone line: If there is a phone line, customer calls should be answered within a reasonable time. Is the customer service line picked up as quickly as the firms sales line? If your customers have any queries or complaints they should be dealt with very quickly. Any praise given to the firm should also be acknowledged and thanked, remember the customer has taken time out of their busy schedule to thank you and praise you. Customer Services must be treated seriously. Failure to do so may result in the firm losing out to competitors and developing a bad reputation within the market. SERVICE MARKETING MOBILE EDITION Characteristics of a Service What exactly are the characteristics of a service? How are services different from a product? In fact many organisations do have service elements to the product they sell, for example McDonalds sell physical products i.e. burgers but consumers are also concerned about the quality and speed of service, are staff cheerful and welcoming and do they serve with a smile on their face? There are five characteristics to a service which will be discussed below. 1. Lack of ownership. You cannot own and store a service like you can a product. Services are used or hired for a period of time. For example when buying a ticket to the USA the service lasts maybe 9 hours each way , but consumers want and expect excellent service for that time. Because you can measure the duration of the service consumers become more demanding of it.
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2. Intangibility You cannot hold or touch a service unlike a product. In saying that although services are intangible the experience consumers obtain from the service has an impact on how they will perceive it. What do consumers perceive from customer service? the location, and the inner presentation of where they are purchasing the service?. 3. Inseparability Services cannot be separated from the service providers. A product when produced can be taken away from the producer. However a service is produced at or near the point of purchase. Take visiting a restaurant, you order your meal, the waiting and delivery of the meal, the service provided by the waiter/ress is all apart of the service production process and is inseparable, the staff in a restaurant are as apart of the process as well as the quality of food provided. 4. Perishibility Services last a specific time and cannot be stored like a product for later use. If travelling by train, coach or air the service will only last the duration of the journey. The service is developed and used almost simultaneously. Again because of this time constraint consumers demand more. 5. Heterogeneity It is very difficult to make each service experience identical. If travelling by plane the service quality may differ from the first time you travelled by that airline to the second, because the airhostess is more or less experienced. A concert performed by a group on two nights may differ in slight ways because it is very difficult to standardise every dance move. Generally systems and procedures are put into place to make sure the service provided is consistent all the time, training in service organisations is essential for this, however in saying this there will always be subtle differences.
Characteristics of a Service
SERVICE MARKETING MIX The service marketing mix comprises off the 7ps. These include: Product Price Place Promotion People Process Physical evidence. People Prepared by: Vinoth/ Faculty Management Studies Page 40
An essential ingredient to any service provision is the use of appropriate staff and people. Recruiting the right staff and training them appropriately in the delivery of their service is essential if the organisation wants to obtain a form of competitive advantage. Consumers make judgments and deliver perceptions of the service based on the employees they interact with. Staff should have the appropriate interpersonal skills, aptititude, and service knowledge to provide the service that consumers are paying for. Many British organisations aim to apply for the Investors In People accreditation, which tells consumers that staff are taken care off by the company and they are trained to certain standards. Process Refers to the systems used to assist the organisation in delivering the service. Imagine you walk into Burger King and you order a Whopper Meal and you get it delivered within 2 minutes. What was the process that allowed you to obtain an efficient service delivery? Banks that send out Credit Cards automatically when their customers old one has expired again require an efficient process to identify expiry dates and renewal. An efficient service that replaces old credit cards will foster consumer loyalty and confidence in the company. Physical Evidence Where is the service being delivered? Physical Evidence is the element of the service mix which allows the consumer again to make judgments on the organisation. If you walk into a restaurant your expectations are of a clean, friendly environment. On an aircraft if you travel first class you expect enough room to be able to lay down! Physical evidence is an essential ingredient of the service mix, consumers will make perceptions based on their sight of the service provision which will have an impact on the organisations perceptual plan of the service.
To summarise service marketing looks at: The Characteristics of a service that are: (1) Lack of ownership Prepared by: Vinoth/ Faculty Management Studies Page 41
(2) Intangibility (3) Inseparability (4) Perishability (5) Heterogeneity. The Service marketing mix involves analysing the 7p of marketing involving, Product, Price, Place, Promotion, Physical Evidence, Process and People. To certain extent managing services are more complicated then managing products, products can be standardised, to standardise a service is far more difficult as there are more input factors i.e. people, physical evidence, process to manage then with a product. COMPETITOR STRATEGIES Any organisation that wishes to succeed and survive in their market, needs to analyse their competitors strategies. Competitor analysis is a vital part of the marketing planning process. Competitor analysis enables an organisation to: Collect information on competitors that will directly influence the firms strategy. Help the firm anticipate what the actions of their competitors will be, to their entry within the marketing. To exploit the competitors weaknesses so the firm can gain an overall competitive advantage. If you were to enter a market, some of the information you would need to know about your competitors islisted below. Who are your competitors? What is the size and dominance within the market. Which customer base are they aimed at? What is their positioning within the market? What are their objectives? What are their strengths and weaknesses? Data from an array of sources can be collected on your competitors. Examples of data sources include: Competitors websites. Annual reports. Observation. News articles on TV or press. Talking to customers or sales staff. Covert operations including pretending to be a customer at your competitors store, or phoning their telephone sales line.

A complete understanding of competitors will help the organisation in preparing their overall marketing plan. As suggested, Porters Five Forces model is one model that helps the company identify competitors and potential competitor within their market and should be used in conjunction with a general competitor analysis. A competitor can easily slow down your companies progress, competitor analysis should allow you to anticipate and react effectively to their move. SMART OBJECTIVES
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All businesses need to set objectives for themselves or for the products or services they are launching. What does your company, product or service hope to achieve? Setting objectives are important., it focuses the company on specific aims over a period of time and can motivate staff to meet the objectives set. A simple acronym used to set objectives is called SMART objectives. SMART stands for: 1. Specific Objectives should specify what they want to achieve. 2. Measurable You should be able to measure whether you are meeting the objectives or not. 3. Achievable - Are the objectives you set, achievable and attainable? 4. Realistic Can you realistically achieve the objectives with the resources you have? There are a number of business objectives, which an organisation can set:
Market share objectives: Objectives can be set to achieve a certain level of market share within a specified time. E.g. obtain 3% market share of the mobile phone industry by 2004. To increase profit: An objective maybe to increase sales 10% from 2003 2004. To survive: The hard times the business is currently in. To grow: The business may set an objective to grow by 15% year on year for the next five years. To increase brand awareness over a specified period of time.
COMPARING CONSUMER TO INDUSTRIAL MARKETING Industry Mass Advertising. Normally focussed on technical media. Not normally TV. Consumer Often suitable and used including TV, Radio and mass circulation print advertising. Page 43
Direct Mail. Face to face selling by specialists.
Often very suitable due to small numbers Often very suitable for company specialists
Sometimes not viable due to high numbers & low value. Rarely suitable for individual items to end users, except in retailing by retailers own staff. (note B2B element of B2C companies selling via retailers) Not often used for end consumers, used however as in industry where retail decision makers are concerned (the B2B aspect being similar to industry). Sometimes suitable. Suitable
Hospitality
Very suitable because of often high business value per decision maker
Editorial. Publicity. Loyalty schemes.
Very suitable in targetted print media. Suitable
Rarely suitable because split between Often suitable, decision maker and person making buyer (individual) and payer payment are often the same person. Loyalty (company) creates eithical problems. schemes often act like simple loyalty discount. Often to reward volume customers. Often used for high and lower value items. Sometimes but total market population is invariably much smaller. Not needed, can address the whole population. Rarer than in consumer markets because of smaller market size. Not often used except where distribution involves trade counters and on some small qty packaging. Discount sales are often used for sales promotion. Mainly suitable for higher value items unless selling consumer wares to retail buyers. Often used because of difficulty of addressing whole population high levels of statistical analysis are required from representative samples of the population. Often used to infer views and preferences of a population. Often used for example test areas for new product trials. Extensive use.
Discounting. Specialist exhibitions and or trade shows. Opinion polling.
Focus groups. Pilot schemes. Point of sale displays and communications.
Summary: Consumer marketing is characterised by greater use of mass communication and research techniques than industrial marketing because it is harder (due to the numbers of consumers) for companies to be close to actual market participants.
Industry Direct sales force Wholesalers Distributors Often used in industry to sell direct to buyers and specifying engineers. Sometimes used. Often used.
Consumer Used where needed to sell to resellers more than to actual consumers. Often used in chain before retailers especially in export markets. Sometimes used. Page 44
Catalogues Commissioned Agents E-Commerce via Internet
Form part of distribution chains. Often used.
Form part of distribution chains. Sometimes used.
Becoming more prevalent to cut out Becoming more prevalent at retailers, less so the middle man and reduce stocks. for manufacturers because of their narrow ranges. Rarely used. Used for some specialities.
Multi-level marketing including party plan.
Summary: There are fewer differences on first view in the routes to market between industrial and consumer goods, but the variety of items falling into each of these large categories does not help differences to show through on this aspect.
8. Summary and conclusion. The key difference between industrial and consumer markets is the much greater number of buyers in consumer or end markets. This means consumer marketers are by necessity more involved in polling type research to infer information about the population of consumers. They are also more involved in mass communication such as print, television and radio advertising than their industrial counterparts. I have suggested that physical utility, rationality and deep buyer knowledge is more prevalent in industrial buying decisions. This is in part because the consumer situation features informal purchasing procedures and no formal buying groups. There are usually fewer individuals involved in consumer decisions. I argued that there are often lower switching costs for consumers which allows creative sales and promotions to persuade individual consumers to switch. This means mass communication in consumer markets can have less focus on utility than would be needed in industry. I think a study would bear this out, visible consumer promotion is usually much less about technical performance, price and relationship and more about peer acceptance, fashion, trend or approval issues. In industry personal relationship building must be used alongside utility and cost advantage (to overcome switching costs). As there is a much smaller group of possible buyers in industry marketing and selling can often be carried out face to face by individuals doing both marketing and selling tasks. This creates an interesting argumnent which is that in industry there may be no difference between marketing and selling.
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In consumer markets it could be argued that there remains a big distinction between marketing: research, creative idea production (dreaming up these advertising promotional angles which I hope do fit some demographic and target style identifiers), packaging, point of sale, loyalty schemes etc, and retail sales staff who book shelf space or man counters and checkouts. The key difference between industrial and consumer marketing may be therefore the reduced face to face interaction between organisations and customers in consumer markets with greater use of mass or delegated communications, compared to increased face to face communications in industry with greater blurring between marketing and selling. BASIC OUTLINE OF THE MAIN POINTS IN A TYPICAL MARKETING PLAN: 1.0 Executive Summary This is a summary of the main highlights of your plan. The contents of the summary should address target markets, market needs, sales prospects, expenses, and strategy. 2.0 Situation Analysis The Situation Analysis sets the scene as you develop your marketing plan. This is where you look at your company's situation and its market. Consider what your company offers and why, what you do well, and why, and introduce your marketing situation and the main components of the marketing plan. 3.0 Marketing Strategy The strategy chapter normally includes objectives, target market strategies, value propositions, and strategy pyramids. 4.0 Marketing Mix Marketing mix combines your marketing programs. It includes positioning, pricing, distribution channels, advertising and promotion, service, delivery, and other factors. The toll-free telephone number, the website, the sales literature, the advertising, and many other marketing programs are all part of the marketing mix. 5.0 Financials This chapter contains your expense budgets, sales forecasts, and breakdowns by category. Normally it is mainly tables and charts, with texts to explain the numbers in them. 6.0 Controls As your strategy is implemented, you will want to track your results and monitor new development in the internal and external environments. Is your plan on track with your revenue generation objectives? Are the programs accomplishing your goals? Programs that are not working need to be changed. Programs that meet or exceed expectations should be replicated. This is where the value of a dynamic marketing plan benefits you most.
Main Aspects of Marketing Mix The easiest way to understand the main aspects of marketing is through its more famous synonym of "4Ps of Marketing". The classification of four Ps of marketing was first introduced and suggested by McCarthy (1960), and includes marketing strategies of product, price, placement and promotion. The following diagram is helpful in determining the main ingredients of the four Ps in a marketing mix. Prepared by: Vinoth/ Faculty Management Studies Page 46
Product In simpler terms, product includes all features and combination of goods and related services that a company offers to its customers. So the Airbusproduct includes its body parts such as the engine, nut bolts, seats, etc along with its after-sales services and all are included in the product development strategy of the Airbus. However, a serious criticism can be raised here in terms of how marketing mix analysis will cater for companies such as ABN Amro Bank, Natwest Bank, British Airways and Fedex Corporation as they don't possess tangible products. It was argued that is it feasible to omit service-oriented companies with the logic that the term "services" does not start with a "P", however, it was asserted that these companies can use the terminology of "service products" under marketing mix strategy making (Kotler & Armstrong, 2004). Lazer (1971) argued that product is the most important aspect of marketing mix for two main reasons. First, for manufacturers, products are the market expression of the company's productive capabilities and determine its ability to link with consumers. So product policy and strategy are of prime importance to an enterprise, and product decisions dictate the scope and direction of company activity. Moreover, the market indicators such as profits, sales, image, market share, reputation and stature are also dependent on them. Secondly, it is imperative to realise that the product of any organisation is both a component and a determinant of the marketing mix as it has a great influence on the other elements of the mix: advertising, personal selling, channels of distribution, physical distribution and pricing. So without proper product policy, a company can not pursue for further elements of marketing mix. Pricing Pricing is basically setting a specific price for a product or service offered. In a simplistic way, Kotler and Armstrong (2004) refer to the concept of price as the amount of money that customers have to pay to obtain the product. Setting a price is not something simple. Normally it has been taken as a general law that a low price will attract more customers. It is not a valid argument as customers do not respond to price alone; they respond to value so a lower price does not necessarily mean expanded sales if the product is not fulfilling the expectation of the customers (Lazer, 1971).Generally pricing strategy under marketing mix analysis is divided into two parts: price determination and price administration (ibid). Price determination is referred to as the processes and activities employed to arrive at a price for a product including consideration of relative prices of products within the same line, and differences in price for similar products of differing grades and qualities. Price administration is referred to as the activities involved in fitting basic prices to particular sales situations such as geographic locale, functions performed by customers, position of distribution channel members, or special sales situations. An example of this is special discounted prices at, for instance, GAP, NEXTetc or Coca ColaandPepsiwheredifferent prices are set in different geographical areas considering the difference in patterns of usage as well as varying advertisement costs. Placement Placement under marketing mix involves all company activities that make the product available to the targeted customer (Kotler and Armstrong, 2004). Based on various factors such as sales, communications and contractual considerations, various ways of making products available to customers can be used (Lazer, 1971). Companies such as Ford, Ferrari, Toyota, and Nissan use specific dealers to make their products available, whereas companies such as Nestle involve a whole chain of wholesaler retailers to reach its customers. On a general note, while planning placement strategy under marketing mix analysis, companies consider six different channel decisions including choosing between direct access to customers or involving middlemen, choosing single or multiple channels of distributions, the length of the distribution channel, the types of intermediaries, the numbers of distributors, and which intermediary to use based on the quality and reputation (Proctor, 2000) Promotion Prepared by: Vinoth/ Faculty Management Studies Page 47
Promotional strategies include all means through which a company communicates the benefits and values of its products and persuades targeted customers to buy them (Kotler and Armstrong, 2004). The best way to understand promotion is through the concept of the marketing communication process. Promotion is the company strategy to cater for the marketing communication process that requires interaction between two or more people or groups, encompassing senders, messages, media and receivers (Lazer, 1971). Taking the example of Nokia, the sender of the communication in this case is Nokia, the advertising agency, or both; the media used in the process can be salesmen, newspapers, magazines, radio, billboards, television and the like. The actual message is the advertisement or sales presentation and the destination is the potential consumer or customer, in this case mobile phone users. Limitation of Marketing Mix Analysis (4Ps of Marketing) Product Customer Solution Price Customer Cost Placement Convenience Promotion Communication How to Write a Good Marketing Mix Analysis To follow a simple and best approach for marketing mix analysis, it is imperative to understand the purpose of this analysis. So the basic key is to analyse the company's overall marketing strategy primarily through the strategies it follows under the 4Ps of marketing. So the approach should be to keep equal balance in analysing all four elements of marketing mix. The following points should be considered while carrying out analysis: While analysing a company's product, a common fallacy can be focusing on the final outlook of the product and that gives rise to a nave approach. Analysts should consider and analyse all major product decisions that the company may have carried out including quality, features, options, style, brand name, packaging, sizes, after-sales services, warranties, returns, etc. Moreover, the company's position, as well as marketing strategy in the market, can be judged on the basis of its product mix including width, length, depth and consistency (Proctor, 200). Width is the number of lines the firm carries, for example Sony has various lines including TV, video, cameras and laptops. Length is the number of items in the product mix, for example Toshibahas different types of TVs and laptops. Depth is the number of variants of each product offered in the line such as clock radios, car radios and pocket radios. Finally, consistency is how closely related the various product lines are in terms of the use to which they are put, more commonly including electrical and entertainment products. So, using these bases for product strategy classification will lead to easy and effective analysis. Finally, one should attempt to identify what the company is actually aiming at through its product. There can be three possible product strategies in a company's action (Proctor, 2000). Either it aims the product at the market such as Erickson with new mobile phones to cater for the business class; it can be given a "face lift" such as Marks & Spencer's attempt with more customer-specific products; and it can be withdrawn, discontinued or eliminated such as Marks & Spencer closing down its unprofitable units across the globe.
To write a valuable pricing analysis of a company, the key is to correlate its pricing strategy with its product position in the market. The company may use various pricing strategies such as penetration, skimming, competition-based pricing, psychological pricing, price wars, etc (Proctor, 2000). A company uses penetration prices if its product is entirely new to the market so it may charge low prices to increase market share. It may be observed that Porsche and Ferrariuse skimming pricing where they may charge a higher price as they know their specific customers will buy their product at any price. Sometimes companies have more fluctuating prices so an analyst should consider that their might be competition going on or a price war has broken through between rivals. For instance, Pepsi and Coke often indulge in such price wars. Sometimes psychological dimensions can be considered as well. Customers easily find products in Tesco, Asda or Sainsbury'swith price tags of 2.99 or 4.99 rather than 3 or 5 as customers may perceive them as 2 or 4. So the writer must analyse which of these strategies a company is following and Page 48
for what reason.
Similarly, placement analysis requires the knowledge of a company's distribution channels, for instance analysis of the fact that a company is involving any middleman or not. If analysis of a consumer-good producer such as Nestle, Cadbury, and Colgate & Palmolive is carried out, there are high chances that a middleman will be involved considering the size of the market in target. However, industrial producers such as Airbus may opt for direct distribution considering the limited number of customers. Similarly, it should be noted that a company may be using a specific intermediary if the ease, reliability, image of the particular outlet, the way in which it performs and the deals which can be struck with the distributor are satisfactory. So, a company may choose C&A rather than Marks and Spencer, or Tesco rather than any other retail outlet (Proctor, 2000). On a general note, a very good analysis can be made if the placement related the six questions highlighted in previous sections are tackled. Finally, the basic step in promotion analysis is to identify the communication objective that the company is aiming at. There can be multiple communication objectives that can be identified. One should analyse how the promotion strategy is aimed at creating awareness of the product or service, provision of product information, brand recognition, gaining access to a target audience that is inaccessible to a salesman, evoking desire for a product or service, merely making the selling task easier, overcoming prejudices, creating a reminder or to allay cognitive dissonance (Proctor, 2000). Once the communication objective is identified, then it is imperative to analyse the message and the promotional mix that is used by the company including advertisement, sales promotion, publicity and personnel selling. For Instance Nike very rarely uses personal selling due to its established brand awareness, however, it continually uses advertisements with communication objective of creating a product reminder. Contrary to that, Unilevermay use personal selling, advertisements as well as offering discounts (sales promotion) if it launches a new consumer good such as toothpaste or soap to cater for the communication objective of creating new product awareness.
Information for Marketing Mix Analysis Students may seek information regarding market mix analysis (4 Ps) from two basic sources: market and academic. For market sources, information is easily available from a company's website, business reports, newspapers/published data on marketing, independent market survey reports and, in some cases, students may visit a retail outlet to analyse a product, its pricing and promotional strategies. However, to get more specific details, marketing and advertising academic journals and secondary data in the form of case studies can be the ideal source. Conclusion Marketing mix analysis is a fundamental step towards effective strategy. Where other analysis are more related to environment and feasibility analysis, the 4 Ps of marketing including the product itself, pricing, placement and promotion are the four wheels of the vehicle on which the path of an organisation's marketing success is actually dependent.
Unit III MARKETING MIX DECISIONS

PRODUCT PLANNING & DEVELOPMENT Cavell has a solid understanding of the way the markets in communication technologies are developing and the needs of the customers. By working with you we can plan and create a product or service portfolio designed to meet and exceed the needs of your customers. Successful products are designed by focussing on the customers needs. Prepared by: Vinoth/ Faculty Management Studies Page 49
The Cavell team has in-depth experience of the development and introduction of highly successful products and is ideally positioned both to assess existing portfolios and to assist in the design and implementation of new products. Using Cavell's strategic direction methodology we will help you to Understand how your customers are evolving in your territory Develop and execute effective business cases and product and marketing plans that enable you to meet customer needs profitably, including technical designs Create robust processes such as Concept2Launch, Lead2Cash and Fault2Resolution to offer end to end customer support Assess and enter new markets and geographies Understand your competitors and how to position against them Undertake a comprehensive portfolio analysis and develop new product plans using Cavell's "Ideal Portfolio" methodology Launch new products, fast tracked to meet the needs of your customers and your business

PRODUCT LIFE CYCLE The product life cycle concept suggests that a product passes through four stages of evolution. Introduction, growth, maturity and decline. As a product evolves and passes through theses four stages profit is affected, and different strategies have to be employed to ensure that the product is a success within its market. Product Life Cycle stages
Introduction As a new product much time will be spent by the organisation to create awareness of it presence amongst its target market. Profits are negative or low because of this reason. Growth If consumer clearly feel that this product will benefit them in some ways and they accept it, the organisation will see a period of rapid sales growth. Maturity Prepared by: Vinoth/ Faculty Management Studies Page 50
Rapid sales growth cannot last forever. Sales slow down as the product sales reach peak as it has been accepted by most buyers. Decline Sales and profits start to decline, the organisation may try to change their pricing strategy to stimulate growth, however the product will either have to be re-modified, or replaced within the market. NEW PRODUCT DEVELOPMENT (NPD) Improving and updating product lines is crucial for the success for any organisation. Failure for an organisation to change could result in a decline in sales and with competitors racing ahead. The process of NPD is crucial within an organisation. Products go through the stages of their lifecycle and will eventually have to be replaced There are eight stages of new product development. These stages will be discussed briefly below: Stage 1: Idea generation New product ideas have to come from somewhere. But where do organisations get their ideas for NPD? Some sources include: Within the company i.e. employees Competitors. Customers Distributors, Supplies and others. Stage 2: Idea Screening This process involves shifting through the ideas generated above and selecting ones which are feasible and workable to develop. Pursing non feasible ideas can clearly be costly for the company. Stage 3: Concept Development and Testing The organisation may have come across what they believe to be a feasible idea, however, the idea needs to be taken to the target audience. What do they think about the idea? Will it be practical and feasible? Will it offer the benefit that the organisation hopes it will? or have they overlooked certain issues? Note the idea and concept is taken to the target audience not a working prototype at this stage. Stage 4: Marketing Strategy and Development How will the product/service idea be launched within the market? A proposed marketing strategy will be written laying out the marketing mix strategy of the product, the segmentation, targeting and positioning strategy sales and profits that are expected. Stage 5: Business Analysis The company has a great idea, the marketing strategy seems feasible, but will the product be financially worth while in the long run? The business analysis stage looks more deeply into the cashflow the product could generate, what the cost will be, how much market shares the product may achieve and the expected life of the product. Stage 6: Product Development
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Finally it is at this stage that a prototype is finally produced. The prototype will clearly run through all the desired tests, and be presented to the target audience to see if changes need to be made. Stage 7: Test Marketing Test marketing means testing the product within a specific area. The product will be launched within a particular region so the marketing mix strategy can be monitored and if needed, be modified before national launch. Stage 8: Commercialization If the test marketing stage has been successful then the product will go for national launch. There are certain factors that need to be taken into consideration before a product is launched nationally. These are timing, how the product will be launched, where the product will be launched, will there be a national roll out or will it be region by region? Why develop new products for your business? Every business needs to innovate to stay ahead of the competition. No business can continue to offer the same unchanged product, if they did so, profit would not be maximized and sales would start to fall. Here we will look at some of the reasons why a company may introduce new products into its portfolio.
Consumer needs may change, forcing the company to adapt with these changing needs. If we look at food sectors around the world, consumers are becoming more health conscious, forcing companies to introduce low sugar and fat versions of their existing brands. Coca Cola Zero is a classic example. The product maybe at the end of its life cycle, so the company may introduce new and improved updated versions. Microsoft has done this by moving from the Xbox to the Xbox 360. The product might be at the maturity stage of its life cycle and might just need to be re-modified to stimulate an increase in sales. Sony PlayStation have done this with the original PlayStation by offering a smaller version called PSOne, and a slim version of the PlayStation 2. There maybe environmental changes which the company may want to capitalise on. Music companies are now selling more music via downloads then through traditional shops, originally being forced to change the way they deliver their product by Napster. Competitors may force change. New products maybe introduced because of competitors.
MARKET SEGMENTATION An organisation cannot satisfy the needs and wants of all consumers. To do so may result in a massive drain in company resources. Segmentation is simply the process of dividing a particular market into sections, which display similar characteristics or behaviour. There are a number of segmentation variables that allow an organisation to divide their market into homogenous groups. These variables will be discussed briefly below Demographic Segmentation Demographics originates from the word demography which means a study of population. The population can be divided into age, gender, income, and family lifecycle amongst other variables. Prepared by: Vinoth/ Faculty Management Studies Page 52
As people age their needs and wants change, some organisations develop specific products aimed at particular age groups for example nappies for babies, toys for children, clothes for teenagers and so on. Gender segmentation is commonly used within the cosmetics, clothing and magazine industry. All Bar One within the UK have developed their bars to attract the female audience, taking opportunity of the rise in the number of women who now enjoy social drinking. In the UK we have also seen the introduction of Maxim, (www.maxim-magazine.co.uk) a male lifestyle magazine covering male fashion, films, cars, sports and technology. We have also seen the introduction of unisex cosmetic products like CK1 which works on the similarities between the two genders.
Income segmentation is another strategy used by many organisations. Stores like Harrods, Harvey Nicohals are predominantly aimed at the affluent market. Daewoo aim their vehicles at price sensitive buyers who require a bundle of benefits for the price. In today's globally competitive environment brands are specifically developed and positioned within particular income segments inorder to maximise turnover. Products and services are also aimed at different lifecycle segments. Holidays are developed for families, the 18-30's singles, and for those in their 50's.
Geographic Segmentation Geographical segmentation divides markets into different geographical areas. Marketers use geographic segmentation because consumers in different areas may display certain characteristics and behaviours in Prepared by: Vinoth/ Faculty Management Studies Page 53
that particular region, for example, in London UK certain parts of the West End of London are more affluent then the East End and you will find particular products sold in these regions based on their affluence. An area can be divided by the town, the region or the country. If you are an organisation working on a global scale you may divide by global regions such as Europe, North America, South America, Asia and Africa. Mcdonalds globally, sell burgers aimed at local markets, for example, burgers are made from lamb in India rather then beef because of religious issues. In Mexico more chilli sauce is added and so on. Requirements of segmentation. Before an organisation can target a specific segment accurately it must ask itself a number of questions. It is important to evaluate the effectiveness of a targeting strategy and the viability of the segment, if this is not done then money will be wasted. The market which is segmented must meet the following criteria: Measurability of segment: Can you measure the size and growth of the segment. Is the segment growing? In the UK the DVD market is growing at an extremely fast pace. From January 2002 June 2002 900,000 DVDs were sold. The fast growth rate is attracting many players within the market. Accessibility of segment : Is it easy for you to target and reach your segment? Can they be reached with basic communication tools such as radio and TV advertising? If you cannot target your segment effectively with marketing communication then it is not viable. Suitability of segment: Is there enough spending power within the segment for the company to sustain itself.? Will spending within the DVD marketing continue? Actionability of segment: Does the organisation have enough resources to reach their segments?. It is no point in targeting segments you do not have the resources to cater for. If you were a car manufacturer the organisation would not concentrate on the affluent and price sensitive market if they did not have the resources to do so.
Pyschographics Segmentation Although demographic segmentation is useful, marketers can use alternative segmentation variables which aim to develop more accurate profiles of their target segments. Pyschrographics segmentation can be broken down into lifestyle, social class, and personality characteristics. Lifestyles segmentation Our lifestyle, our every days activities, our interest, opinions and beliefs on certain issues dictates who we are. Marketers refer to these as AIOs (Activities, Interest and Opinions), and our AIOs dictate our everyday behaviour from where we shop to what we buy. Marketers develop and aim products/services at particular lifestyle groups and develop lifestyle profiles on their target market. If we understand the lifestyle of a particular group we can sell them a product/services on the basis that it will enhance their lifestyle. A lifestyle group is a particular segment defined by the organisation that is marketing a product or service. This lifestyle segment is labeled because individual within it display similar characteristics. For example in the early 1980s within the UK as the economy was booming the City of London were increasingly employing young independent staff on very high salaries. The
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media termed this group as YUPPIES, they were young upwardly mobile professionals, associated with mobile phones, money, expensive cars, and prestigious city jobs. Third agers are another group termed and identified by the marketing industry. They are people in their 50s retired from a profession, and have a high disposable income with time on the hand. Many of these third-agers are adventurous and experimenters, as they have spent their past lives working hard and they seek enjoyment from their remaining years and have the income to spend on luxury items. In the United States there are 70 million third-agers who are the fastest growing users of the internet, spending more time on the internet then their younger counterpart. www.thirdage.com has a hit rate of 500,000 per month.
Lifestyle groups
Yuppie Associations

Third Agers Associations.

Mobile High valued house/flat Good Salary Young branded car.
50's Retired early from profession. Time to spare Adventure Seekers
Personality Characteristics Products and brands can also be aimed at particular personalities. Pigaio motorcycles are aimed at young 18-25 outgoing, independent persons. Often marketers try to develop personalities for their brands and products that mimic that of their target market. Ask yourself if Nike or Levis was a person, what type of person would they be? Social Class Segmentation Divides society into 6 distinct groups based solely on occupation. A Professional staff B Middle management
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C1 Junior management C2 Skilled manual D E Semi-skilled and unskilled workers. Those dependent on the state.
Social class segmentation works on the assumption that the higher your profession the more you will earn. Thus the more affluent lifestyle you will lead. Marketers use this type of information to sell products and services based on lifestyle behaviour, and your profession does have an impact on the way you behave.
Behavioural Segmentation Refers to why people purchase a product or service. Behavioural segmentation can be broken down into the benefit a consumer seeks from purchasing a product. How will the product enhance their overall lifestyle. When purchasing a computer the benefit sought maybe of ease of use to the need for speed. Occasion is another variable. When should a product be purchased? The demand for turkeys increases during Christmas, flowers and chocolates on mothers day and so on. Occasion segmentation aims to increase the reason to buy factor and thus increase sales. Usage rate divides customers into light, medium and heavy users. Heavy users obviously contribute more to turnover then light or medium users, the objective of an organisation should be to attract heavy users who will make a greater contribution to company sales.
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TARGETING After the process of segmentation the next step is for the organisation to decide how it is going to target these particular group(s). There are three targeting options an organisation can adopt. Option 1 Undifferentiated marketing - Sometimes referred to as mass marketing the firm may decide to aim its resources at the entire market with one particular product. Coca Colas original marketing strategy was based on this form. One product aimed at the mass market in the hope that a sufficient amount of buyers would be attracted., although there are now changes in their product line to cater for growing dietary and caffeine free needs of consumers.
Option 2 Differentiated marketing strategy - Where the firm decides to target several segments and develops distinct products/services with separate marketing mix strategies aimed at the varying groups. An example of this would be airline companies offering first, business (segment 1) or economy class tickets (segment 2) , with separate marketing programmes to attract the different groups.
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Option 3 Concentrated Marketing: Where the organisation concentrates its marketing effort on one particular segment. The firm will develop a product that caters for the needs of that particular group. For example Rolls Royce cars aim its vehicles at the premium segment, same as Harrods within the UK.
MARKETING PLANS A marketing plan aims to help organise the strategy for a company, its products or services. Planning is essential in all organisations and company plans should be documented. A marketing plan is not a unique document within an organisation. Production would have a Production Plan, Human Resources a Human Resources plan and so on.
However, all good plans must support the overall corporate objectives of the organisation, the corporate objectives maybe to be global leader in the next five years, all individual plans must support this. Lets look at what an outline of a marketing plan may look like. A common method used to help plan a marketing plan is an acronym called AOSTC. It simply stands for 1. Analysis Of environment. 2. Objectives Setting yourself SMART objectives. 3. Strategies For segmentation and growth, targeting and positioning. Prepared by: Vinoth/ Faculty Management Studies Page 58
4. Tactics Used i.e. marketing mix 5. Control. How you will monitor that you are achieving objectives. Structure of a typical Marketing Plan 1. Situational Analysis Where are we now? Every good marketing plans needs to analyse the current business situation and ask a simple question, where is the business now? This involves the business firstly conducting an internal audit. An internal audit will look at: - Past objectives and success rates. - Past marketing mix strategies. - Past budgets. - Past segmentation, targeting and positioning strategies. The internal audit aims to look at what you did in the past, was it successful, if not why not, if so, why so? Simple hey! After the internal audit the next stage is for you to conduct an external audit. The external audit will involve: - Conducting a PEST analysis, and discussing the impact of this on your strategy. - Researching the industry you operate in. What are the trends within the industry you operate in? - Competitor analysis. What are your competitors up to? - A SWOT analysis to help establish your current strengths, opportunities, weaknesses and threats. 2. Set your objectives Where are we going? Set yourself SMART objectives so you know where you are heading. Remember SMART stands for: Specific Clearly state what you want to achieve. Measurable Is it easy to measure the objectives you set by monitoring sales, market share figures? Achievable Set yourself attainable objectives. Realistic Can you really achieve them with the current resources you have? Timed Set a realistic time scale for the objectives. 3. What tactics or methods will you use to get there? How will you get there? - Define your target market. Select your segment, your targeting strategy and positioning strategy. - How will you use the marketing mix to assist you. What will be your product, price, place or promotion strategy?
4. How do I evaluate the strategy? Are we getting there? Are you achieving the objectives you set for yourself? To evaluate your plan some benchmarks may include: - Market share data. - Sales data. - Consumer feedback. - Feedback from staff. - Feedback from retailers.
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5. Executive summary Write a summary of the plan. Finally at the end of this task write a summary of the plan and place it at the front. Why? Well it acts as a quick reference guide to the plan you have just written. POSITIONING After the organisation has selected its target market, the next stage is to decide how it wants to position itself within that chosen segment. Positioning refers to how organisations want their consumers to see their product. What message about the product or service is the company trying to put across? Car manufacturer Daewoo in the UK, has successfully positioned themselves as the family value model. The UK car Skoda brand which has been taken over by Volkswagen has been re-positioned as a vehicle which had negative brand associations, to one which regularly wins car of the year awards. The positive comments from the industry and attributes of this vehicle is has changed the perception of consumers about the Skoda brand. Developing a positioning strategy Developing a positioning strategy depends much on how competitors position themselves. Do organisations want to develop a me too strategy and position themselves close to their competitors so consumers can make a direct comparison when they purchase? Or does the organisation want to develop a strategy which positions themselves away from their competitors? Offering a benefit which is superior depends much on the marketing mix strategy the organisation adopts. The pricing strategy must reflect the benefit offered and the promotion strategy must communicate this benefit. Ultimately positioning is about how you want consumers to perceive your products and services and what strategies you would adopt to reach this perceptual goal. For more information please read Peceptual Mapping. CHANNEL MANAGEMENT Introduction. A marketing channel is an organized network of agencies and institutions which, in combination, perform all the activities required to link producers with users to accomplish the marketing task (Bennett 1988). This channel must be designed such that it delivers a level of value to the customer that creates a sustainable competitive advantage for the supply chain. This value can take many forms depending upon the requirements of the customer. The relationship between the value of the product and the shopping experience is particularly important and the skill of the value chain is in the positioning of the total offer in a profitable way.
Supply-chain management functions. The supply chain in made up of an array of interdependent functions which form a flow of activities Roles in the marketing channel. There are a number of roles in the channel that have to be fulfilled and each type of channel will fulfil them in different ways. Firstly, there are a number of specific gaps between production and consumption that need to filled,
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specifically, time, space, quantity and variety. Secondly, intermediaries perform various functions in order to bridge these gaps. The operation of supply chains. Supply chains need to operate in an integrated way to form an integrated system that operates as a team. However, some areas of conflict can arise that need to be resolved. Conflict cannot be totally eliminated but there should be a policy of conflict minimization and a move towards partnership style arrangements. One potential source of conflict is the role played by power which is heavily influenced by the level of dependency between the channel members. Five different power bases have been identified. Power should be used in a constructive not destructive way in order to achieve channel efficiency and effectiveness. The development of supply-chain partnerships and relationship management is seen as central to the overall administration of the channel. Efficient consumer response (ECR). ECR is a total system to eliminate all activities that do not give value to the end consumers and to encourage all those that do (Mitchell 1997). It focuses on fourteen improvement concepts in three strands: category management, product replenishment and enabling technologies (Figure 11.6 pp254). ECR is facilitated by electronic data interchange systems (EDI) which is linked to electronic funds transfer (EFT) which generates payments. Activity-based costing is used to identify what is spent in the various areas with a view to questioning expenditure and thus a continuous process of improvement should occur. Designing supply chains. In the design of supply channels a key question is not what activities are to be performed but who is to perform them. Responsibility can shift from one party to another depending upon the nature of the product market. A distinction can be made between the actors with ownership or transaction roles in the channel and the use of thirdparty logistics companies. Choosing partners. This decision needs to be looked at from both sides and a number of key issues need to be examined. From the manufacturers point of view three areas that need addressing specifically are market coverage and distribution intensity; channel control; and flexibility. In addition, there are several important issues that can help a manufacturer to assess the relative merits of potential partners. Retailing. The position of the retailer in the supply-chain, being the closest to the final consumer, gives it some distinctive characteristics that need to be understood and are directly related to their positioning strategy. Franchising. Another key management system that has been one of the most popular mechanisms for expanding the distribution network is franchising. The nature of the franchise relationship can be viewed from two extremes either as a managed outlet of a larger business or as an independent business in its own right. The future. The biggest development in channel management in the future lies in the use of electronic commerce and traditional intermediaries will either disappear or reinvent themselves and a number of anticipated impacts will arise from the new channels. Conclusion. The aim of the supply chain is to provide the consumer with an offer that they will value above any other. This value is created by the offering and the gaps that are bridged in delivering it. These functions are performed by
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various combinations of actors including third-party logistics companies. Many changes have occurred recently mainly as a result of developments in IT and marketing channels will continue to be dynamic and rapidly changing. ADVERTISING Adverting is only one element of the promotion mix, but it often considered prominent in the overall marketing mix design. Its high visibility and pervasiveness made it as an important social and encomia topic in Indian society. Promotion may be defined as the co-ordination of all seller initiated efforts to set up channels of information and persuasion to facilitate the scale of a good or service. Promotion is most often intended to be a supporting component in a marketing mix. Promotion decision must be integrated and co-ordinated with the rest of the marketing mix, particularly product/brand decisions, so that it may effectively support an entire marketing mix strategy. The promotion mix consists of four basic elements. They are:1. Advertising 2. Personal Selling 3. Sales Promotion, and 4. Publicity Advertising is the dissemination of information by non-personal means through paid is the sponsoring organization. media where the source
Sales promotion is the dissemination of information through a wide variety of activities other than personal selling, advertising and publicity which stimulate consumer purchasing and dealer effectiveness. Definition of advertisisng The American Marketing Association, Chicago, has defined advertising as any form of non-personal presentation or promotion of ideas, goods or services, by an dentified sponsor. from the above definitions: Advertisement is a MESSAGE to large groups.

It is in the form of NON_PERSONAL COMMUNICATION. It persuade the GENERAL PUBLICS to purchase the goods or services, advertised. It is PAID FOR by advertiser to publisher. Advertising messages are IDENTIFIED with the advertiser.
Advertising includes the following forms of messages: The messages carried in
Newspapers and magazines; On radio and television broadcasts;
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Circular of all kinds, (whether distributed by mail, by person, thorough tradesmen, or by inserts in packages); Dealer help materials, Window display and counter display materials and efforts; Store signs, motion pictures used for advertising, Novelties bearing advertising messages and Signature of the advertiser.
Advertising Objectives Each advertisement is a specific communication that must be effective, not just for one customer, but for many target buyers. This means that specific objectives should be set for each particular advertisement campaign. Advertising is a form of promotion and like a promotion; the objectives of advertising should be specific. This requires that the target consumers should be specifically identified and that the effect which advertising is intended to have upon the consumer should be clearly indicated. The objectives of advertising were traditionally stated in terms of direct sales. Now, it is to view advertising as having communication objectives that seek to inform persuade and remind potential customers of the worth of the product. Advertising seeks to condition the consumer so that he/she may have a favorable reaction to the promotional message. Advertising objectives serve as guidelines for the planning and implementation of the entire advertising programme. Advantages of advertising

Advertising is considered multi dimensional. It helps number of marketing activities. It is a technique of sales promotion. Sales volume is increased by advertising. It helps and supports the salesman in selling the products. Consumer knowledge about the product is increase by advertising. It helps the consumer to save their time in purchases. It helps the manufacturer sell their products. It helps quick selling is possible which leads to more production at less cast. The relation between wholesalers and retailers is improved through advertising. Advertising introduces new products, stimulates markets regarding the existing Product and repeated sales
Benefits to manufacturers: 1. It increase sales volume. On the one hand, it reduces the cost of production and,on theother increases profits. 2. It helps easy introduction of products into the markets. 3. It helps to create an image and reputation not only of the product but also of the advertiser. 4. Retail price maintance is possible. 5. It helps to establish a direct contact between manufacturers and consumers.
Benefits to wholesalers retailers : 1. 2. 3. 4. Easy sale of the products is possible since consumers are aware of rhe product and its quality. It increases the rate of the turnover of stock. It supplements the selling activities. Page 63
5. The reputation credited is shared by the wholesalers and retailers and alike. 6. It enables them to have product information. Benefits to consumers 1. Advertising stresses quality and very often prices. This forms an indirect guarantee to the consumers. Further more, large scale production assured by advertising enables the seller to sell the product at a lower cast. 2. It provides an opportunity to the customers to compare the merits and demerits of various substitute products. 3. This is perhaps the only medium through which consumers could know the varied and new uses of a product. 4. Modern advertisements are highly informative. Benefits to salesmen 1. 2. 3. 4. Introducing the product is made easy. Advertising prepares necessary ground for a salesman to begin his work. Hence sales efforts are reduced. The contact established with the customer by a salesman is made permanent through advertising. The salesman can weigh the effectiveness of advertising when he makes a direct contact with the customer.
Benefits to community 1. Advertising in general is educative in nature. In the words of the late president Roosevelt of the USA, Advertising brings to the greatest number of people actual knowledge concerning useful things; it is essentially a form of education and the progress of civilization depends on education. 2. Advertising leads to large scale production creating more employment opportunities. 3. Advertising has made more popular and universal the uses of such inventions as the auto mobiles, radios, various household appliances. Advertising nourishes the consuming power of man. Its creates wants for a better standing of living.. It spurs individual exertion and greater production. SALES PROMOTION Sales promotion consists of diverse collection of incentive tools, mostly short-term designed to stimulate quicker and / or greater purchase of a particular product by consumers or the trade.. Sales promotion includes tools for consumer promotion (for example samples, coupons, prizes, cash refund, warranties, demonstrations, contest); trade promotion (for example buying allowances, free goods, merchandise allowances, co-operative advertising, advertising and display allowances, dealer sales contests); and sales-force promotion (for example bonuses, contests, sales rallies).Sales promotion efforts are directed at final consumers and designed to motivate, persuade and remind them of the goods and receives that are offered. Sales persons adopt several techniques for sales promotion.
Definitions of Sales Promotion W.J. Stanton defines sales promotion as all those activities other than advertising, personal selling, public relations and publicity that are intended to stimulate customer demand and improve the marketing performance of sellers. Purpose of sales Promotion
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Sales promotion tools vary in their specific objectives. A free sample stimulates consumer trial, while a free management advisory service comments along-term relationship with a retailer. From the marketers perspective, sales promotion serves three essential rolesit informs, persuades and reminds prospective and current customers and otherselected audiences about a company and its products. Because distribution channels are often long, a product may pass through many lands between a producer and consumers. Therefore, a producer must inform middlemen as well as the ultimate consumers or business users about the product. Wholesalers, in turn must inform retailers and retailers must inform consumers. As the number of potential customers grows and the geographic dimensions of a market expand, the problems and costs of informing the market increase. Objectives of Sales Promotion The basic objectives of sales promotion are: i) To introduce new products To induce buyers to purchase a new product, free samples may be distributed or money and merchandise allowance may be offered to business to stock and sell the product. ii) To attract new customers New customers may be attracted through issue of free samples, premiums, contests and similar devices. iii) To induce present customers to buy more Present customers may be induced to buy more by knowing more about a product, its ingredients and uses. iv) To help firm remain competitive Sales promotions may be undertaken to meet competition from a firm. v) To increase sales in off season Buyers may be encouraged to use the product in off seasons by showing them the variety of uses of the product. vi) To increase the inventories of business buyers Retailers may be induced to keep in stock more units of a product so that more sales can be effected.
Rationale of sales promotion Rationale of sales promotion may be analyzed under the following points. Short-term results
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Sales promotion such as coupons and trade allowances produce quicker, more measurable sales results. However critics of this strategy argue that these immediate benefits come at the expense of building brand equity. They believe that an over emphasize on sales promotion may under mine a brands future. Competitive Pressure If competitors offer buyers price reductions, contest or other incentives, a firm may feel forced to retaliate with its own sales promotions. Buyers expectations Once they are offered purchase incentives, consumers and channel members get used to them and soon begin expecting them. Low quality of retail selling Many retailers use inadequately trained sales clerks or have switched to self service. For these outlets, sales promotion devices such as product displays and samples often are the only effective promotional tools available at the point of purchase. Sales promotion plan preparation There is wide acceptance that sales promotion is one of the most mismanaged of all marketing functions. This can be attributed to the confusion as to what sales promotion really is - which often results in expenditures not being properly accounted for. Some companies record it as advertising expenditure, others as sales force expenditure and others as general marketing expenditure - while the loss of revenue from special price reductions is not recorded at all. The companies can no longer afford not to set objectives or to evaluate results after the event, or to fail to have some company guidelines. For example, a 1 Euro case allowance on a product with a contribution rate of 3 Euro per case has to increase sales by 50% just to maintain the same level of contribution. In order to manage a company's sales promotion expenditure more effectively, there is one essential step that must be taken. First, an objective for sales promotion must be established in the same way that an objective is developed for advertising, pricing, or distribution.
Advertising, Promotion And The Brand By now it is clearly understood that The role of Advertising and promotion In fast moving consumer Good Markets. Advertising has been seen as one of the primary tools of Brand Building. The high cost and difficulties of mass advertising are seen as one of the major challenges to fast moving consumer good brands. Prepared by: Vinoth/ Faculty Management Studies Page 66
Do All Brands Need Advertising? The basic assumption is that brands need advertising but some strong brands apparently do not. Spencer used to spend almost nothing on advertising, Yet it was an enormously powerful brand. Of course, Both these are retailers; they have stores which people pass by go into. The Stores Themselves Are In Their Way Advertising, and It Is Difficult to think of major brands other than retailers those have done without advertising. We can safely make two statements about brand communication : Every brand must have some means of communicating with its buyers. This may not be advertising, but it must be direct if it is to be controllable and frame can be achieved, but the message has to be one that it really new and interesting. All the means of communication and the messages transmitted must be Co-ordinate to make some that they are saying the sense thing,confused consumers dont buy. There Is A Price Paradise The standard model of advertising and the brand suggests that a strong brand is less sensitive to price than a weaker one. When advertising increases sales, the average sensitivity to price also increases. In other words, a seemingly successful campaign has made buyers more sensitive to price, where as we would expect our brand buyers to be, if anything, less sensitive. Integrating Advertising And Promotions The answer to the problem of conflicting communications must be to Integrate advertising and Promotion. There are two common sense reasons for integration. The First reason is that integration creates synergy. This is a much Abused word, but the evidence shows clearly that advertising and promotion can work together to produce a greater effect. In addition, The integration of advertising and promotion gives the consumer a coherent message. If advertising and promotion are to achieve synergy and to build a cumulative effect in consumers minds, they must be mutually consistent. Planning Advertising And Promotion The advertising and promotion plan is only one part of the overall marketing plan and must fit within it. In order to start the advertising plan, we need some background which Is not a very formal restrictive planning, but for a process of thinking through what the advertising and promotion are trying to achieve. From The brand plan we should expect to find the following elements. 1. 2. 3. 4. 5. 6. A situation analysis (Where we are and why) Objectives (What the brand is aiming for in sales, share and other targets) Positioning (How the brand is positioned in the consumers mind ) Strategy (How the brand is Going to compete in this market) Advertising strategy (What role advertising has next period with in tshe overall strategy) And Budget (What moneys are available to spend on advertising promotion).advertising objectives must include Long-Term brand building. They may of Course also include shorter-term tasks such as announcing a newvariation or promotion.
CONCLUSION Prepared by: Vinoth/ Faculty Management Studies Page 67
Advertising: A firm as its basic of fundamental tool production uses it. It normally has long-term objectives like building brand awareness or building consumers loyalty or repositioning a brand. It helps sales by adding some durable and long-term value to the product. Advertising in mostly an indirect way for consumer to buy a product. sales: It is generally designed to supplement advertising and facilitates personal selling.It performs the immediate task of increasing current sales. It aids selling by temporarily changing the existing price value relationship of the product. Sales promotion is a direct and almost open inducement to consumers to immediately try the product. Thus from all the above studies it can be concluded that for the marketing of any product, the best way to increase sales is through the Sales promotion rather than advertising. It is so because in advertising a product there is many criterias, which are to be, fulfilled which is not an easy task. Thus it is easier to increase the sales through sales promotion. PRICING STRATEGIES Pricing is one of the most important elements of the marketing mix, as it is the only mix, which generates a turnover for the organisation. The remaining 3ps are the variable cost for the organisation. It costs to produce and design a product, it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship. Pricing a product too high or too low could mean a loss of sales for the organisation. Pricing should take into account the following factors: Fixed and variable costs. Competition Company objectives Proposed positioning strategies. Target group and willingness to pay.
Types of Pricing Strategies An organisation can adopt a number of pricing strategies. The pricing strategies are based much on what objectives the company has set itself to achieve. Penetration pricing: Where the organisation sets a low price to increase sales and market share. Skimming pricing: The organisation sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer. Competition pricing: Setting a price in comparison with competitors. Product Line Pricing: Pricing different products within the same product range at different price points. An example would be a video manufacturer offering different video recorders with different features at different prices. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximising turnover and profits. Bundle Pricing: The organisation bundles a group of products at a reduced price. Psychological pricing: The seller here will consider the psychology of price and the positioning of price within the market place. The seller will therefore charge 99p instead 1 or $199 instead of $200 Premium pricing: The price set is high to reflect the exclusiveness of the product. An example of products using this strategy would be Harrods, first class airline services, Porsche etc. Prepared by: Vinoth/ Faculty Management Studies Page 68
Optional pricing: The organisation sells optional extras along with the product to maximise its turnover. This strategy is used commonly within the car industry. .
PRICING OBJECTIVES AND POLICIES

Determining the right price for a product or service should not be a difficult decision if the retailer has analyzed its market position correctly. A. Interactive Price Decisions - The decision to price an item at a certain level should incorporate the retailer's past decisions in the following seven retail areas: 1. Merchandise attributes, which depends on the market the retailer is serving. 2. Location, specifically the store's distance from competitors and customers. 3. Promotion, which is crucial in generating demand, is not independent ofprice. 4. Credit and/or Check Cashing availability can also generate demand andaffect pricing levels. 5. Customer Service levels affect expenses, which in turn affect price. 6. Store Image is affected by the way a retailer chooses to price its products. 7. Legal Constraints, both state and federal, must be considered whendetermining prices. B. Pricing Objectives - A retailer's pricing objectives should be in agreement with its mission statement and merchandising policies. Typical pricing objectives include: 1. Profit-Oriented Objectives a. Target Return - Sets a specific level of profit as an objective, often stated as a percentage of sales or of the retailer's capital investment. b. Profit Maximization - Seeks to get as much profit as possible. Prepared by: Vinoth/ Faculty Management Studies Page 69
(1) Skimming - Tries to sell at the highest price possible before settling on a more competitive level. (2) Penetration Pricing - Seeks to establish a loyal customer base before eventually raising its prices.
1. Sales-Oriented Objectives - Seek some level of unit sales, dollar sales, or market share. The achievement
of such objectives does not necessarily guarantee that profits will also increase.
2. Status Quo Objectives - Seek to maintain the retailer's current market share position or level of profits or to
compete on grounds other than price. C. Pricing Policies - Pricing policies are rules of action that ensure uniformity of pricing decisions within a retail operation. A retailer's pricing policies should reflect the expectations of its target market. 1. Pricing Below the Market Retailers with such a policy rely on a high volume, generated by low prices, to produce satisfactory profits. 2. Pricing at Market Levels - Most merchants want to be competitive with one another. Competitive pricing is based on a. Pricing zones, a range of prices for a certain merchandise line that appeals to customers in particular demographic group. b. The size of a retail store affects its ability to compete on a price basis. 3. Pricing Above the Market - Certain market sectors are receptive to high prices because non-price factors are more important to them than price. c. Merchandise Offerings - Some consumers are willing to pay higher prices for specialty items, an exclusive line, or unusual merchandise. d. Services Provided - Service-oriented merchants may be able to develop a loyal group of customers by providing anything from wardrobe counseling to delivery. e. Convenient Locations - The convenient location of some retailer allows them to charge higher prices since consumers value time. f. Extended Hours of Operation - By remaining open while competitors are closed, some merchants are able to charge above-average prices. II. SPECIFIC PRICING STRATEGIES - A retailer's specific pricing strategies should be in accordance with the other components of the store's retail mix. A. Customary Pricing - A retailer sets prices for goods and services and seeks to maintain those prices over an extended period of time. B. Variable Pricing - Used when differences in demand and cost force the retailer to charge prices in a fairly predictable manner. C. Flexible Pricing - Offering the same products and quantities to different customers at different prices; this is often used in situations calling for personal selling. D. One-Price Policy - Charging the same price for an item to all customers and may be used in conjunction with customary or variable pricing.
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E. Price Lining - Establishing a certain number of price points for each merchandise classification and then purchasing goods that fit into each line. The difference between the price points should be large enough to reflect a value difference to consumers. 1. Trading Up - Occurs when a salesperson moves a customer from a lowerpriced line to a higher one. 2. Trading Down - Occurs when a customer is initially exposed to high-priced lines, but expresses the desire to buy a lower-priced one. F. Odd Pricing - The practice of setting retail prices that end in the digits 5, 8, or 9. Retailers believe that consumers perceive these odd prices as substantially lower. G. Multiple-Unit Pricing This is used by retailers to encourage additional sales and to increase profits. Here multiple-unit pricing is based on the idea that the price of each unit in a multiple-unit package is less than the price of each unit if they were sold individually. H. Bundle Pricing - This generally involves selling distinct multiple items offered together at a "special price." Here the perceived savings in cost and/or time for the bundle justifies the purchase. I. Leader Pricing - The practice of setting a low price for a high-demand item and advertising heavily as a means of attracting consumers into a store; items selected should be widely known and bought frequently. 1. A loss leader is an extreme form of leader pricing which occurs when an item that is sold below a retailer's cost 2. High-low pricing involves the use of high everyday prices and low leader "specials" on featured items for their weekly ads. J. Bait and Switch Pricing - The practice of advertising a low-priced model of a shopping good to lure shoppers into a store and then attempting to convince them to purchase a higher-priced model. Illegal when the low-priced model is unavailable to shoppers. K. Private-Brand Pricing - Retailers develop private brands because they can be purchased at a cheaper price, have a larger gross margin, and still be priced lower than a comparable national brand. This makes it difficult for the consumer to make exact comparisons with private brands. III. USING MARKUPS - A retail buyer should be able to rapidly calculate whether a proposed purchase will provide an adequate markup or gross margin. In addition, there are times when a retail buyer needs to compute the markdown, which is a reduction in the selling price of the good. A. Calculating Markup: Markup is the difference between the cost of merchandise and the selling price, calculated by the following basic equation: SP = C + M B. Markup Methods: Markup may be expressed as either a dollar amount or as a percentage. 1. Markup on selling price Dollar markup = Selling price - cost (per unit figures) Percentage markup on selling price = (SP-C)/SP = M/SP 2. Markup on cost: While percent markup on cost is not widely used by retailers, it is calculated as: Percentage markup on cost = (SP-C)/C = M/C and can be used to find percent markup on selling price as follows: Percentage markup on selling price = Percentage markup on cost/(100% +percentage markup on cost) It can also be calculated from percent markup on selling price as follows: Prepared by: Vinoth/ Faculty Management Studies Page 71
Percentage markup on cost = Percentage markup on selling price/(100% -Percentage markup on selling price) C. Using Markup Formulas When Purchasing Merchandise 1. Meeting a profit objective once the retail price is known: Percentage Markup on selling price = (SP-C)/SP For example, if SP = $8 and we need a 40% markup on selling price to meetprofit objectives, what can we pay for the item?40%= ($8-C)/$8C= $4.80 2. Finding selling price of an item given cost and markup %. For example, if C = $12 and we need a 40% markup on selling price to meetprofit objectives, what is selling price? Use the original equation SP = C + M SP = C + .40 SP; since markup = 40% of SP .60 SP = $12. SP = $12/.6 = $20 D. Initial Versus Maintained Markup - It is not always possible for retailers to sell all their merchandise at the price initially set by the retailer. 1. Initial Markup - The markup placed on the merchandise when the store received it. Initial markup = (Original selling price - Cost)/Original selling price. 2. Maintained markup = (Actual retail price - Cost)/Actual retail price. Maintained markup, or achieved markup, is usually lower than the initial markup by the amount of reductions realized. 3. Reasons for the Differences Between Initial and Maintained Markup g. The need to balance demand with supply; consumer demand may change, forcing the retailer to take markdowns to make its merchandise more attractive. h. Stock shortages, due to thefts by employees or customers, or by mismarking the price when merchandise is received. i. Employee and customer discounts. j. The cost of alterations is usually not covered by price charged to the customer. k. Cash discounts, offered by suppliers to retailers to encourage prompt payment of bills, decrease the cost of merchandise sold and cause the maintained markup to be higher than the initial markup. E. Planning Initial Markups - Markups must be set at a level high enough to cover all operating expenses while still providing a reasonable profit. They must also account for potential markdowns; shortages; employee discounts; alteration expenses; and cash discounts received.
UNIT IV BUYER BEHAVIOUR

Consumer behaviour is an attempt to understand & predict human actions in the buying role. It has assumed growing importance under market-oriented or customer oriented marketing planning & management. Consumer behaviour is defined as all psychological, social & physical behaviour of potential customers as they become aware of, evaluate, purchase, consume, & tell others about product & services.
Each element in this definition is important. Page 72

Consumer behaviour involves both individual (psychological) processes & group (social processes). Consumer behavior is reflected from awareness right through post-purchase evaluation indicating satisfaction or non-satisfaction, from purchases Consumer behaviour includes communication, purchasing & consumption behaviour Consumer behaviour is basically social in nature. Hence social environment plays an important role in shaping buyer behaviour. Consumer behaviour includes both consumer & business buyer behaviour
In consumer behaviour we consider not only why, how, & what people buy but other factors such as where , how often, and under what conditions the purchase is made. An understanding of the buyer behaviour is essential in marketing planning & programmes. In the final analysis buyer behaviour is one of the most important keys to successful marketing. MAJOR FACTORS INFLUENCING BUYER BEHAVIOUR
CULTURAL FACTORS Cultural factors exert the broadest and deepest influence on consumer behavior. The roles played by the buyers culture, sub culture and social class are particularly important.
CULTURE- Culture is the most fundamental determinant of a persons wants and behavior. The growing child acquires a set of values, perceptions, preferences, and behavior through his or hr family or other key institutions.
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SUB-CULTURE- Sub-culture includes nationalities, religions, racial groups, and geographical regions. Many sub-cultures make up important market segments, and marketers often design marketing programs tailored to their needs. SOCIAL CLASS- Social classes are relatively homogenous and enduring divisions in a society, which are hierarchically ordered and whose members share similar values, interests, and behavior. Social classes do not reflect income alone but also other indicators such as occupation, education, and area of residence.
SOCIAL FACTORS
REFERNCE GROUPS- A Persons reference groups consist of all the groups that have a direct or indirect influence on the persons attitudes or behavior. Groups having direct influence on a person are called membership groups. FAMILY- The family is the most important consumer buying organization in society, and has been researched extensively. Family members constitute the most influential primary reference group. ROLE AND STATUSES- A persons position in each group that he participates throughout his life family, clubs, and organizations can be defined in terms of role and status. A role consist of activities that a person is expected to perform. Each role carries a status. Marketers are aware of the status symbol potential of products and brands.
PERSONAL FACTORS A buyers decisions are also influenced by personal characteristics. These include the buyers age & stage in the life cycle, occupation, economic circumstances, lifestyle, personality & self concept.
AGE & STAGE IN THE LIFE CYCLE- People buy different goods & services over their lifetime. They eat baby food in the early years, most foods in the growing & mature years & special diets in the later years. Peoples taste in clothes, furniture & recreation is also age related. OCCUPATION- A persons occupation also influences his or her consumption pattern. Marketers try to identify the occupational groups that have above average interest in their products and services. A company can even specialize its products for certain occupational groups. ECONOMIC CIRCUMCTANCES- Product choices are greatly affected by ones economic circumstances. Economic stability consist of their spend able income (its level, stability andtime pattern), saving and assets (including the percentage that is liquid), debts , borrowing power, attitude toward spending versus saving. LIFESTYLE- People coming from the same subculture, social class & occupation may lead quite different lifestyles. A persons lifestyles the persons pattern of living in the world as expressed in the persons activities, interests & opinions. PERSONALITY AND SELF-CONCEPT- Each person has a distinct personality that influences his or her buying behavior. By personality, we mean a persons distinguishing psychological characteristics that lead to relatively consistent and enduring responses to his or her environment. Personality can be a useful variable in analyzing consumer behavior, provided that personality type can be classified accurately and that strong correlations exist between certain personality types and product or brand choices.
PSYCHOLOGICAL FACTORS A persons buying choices are influenced by four major psychological factors-motivations, perception, learning, beliefs and attitudes.
MOTIVATION- A person has many needs at any given time. A need becomes motive when it is aroused to a sufficient level of intensity. Motivational researchers hold that each product is capable of arousing a unique set of motive in consumers. Page 74
LEARNING- When people act they learn. Learning involves changes in an individuals behavior arising from experience. Learning theory teaches marketers that they can build up demand for a product by associating it with strong drives, using motivating cues and providing positive reinforcement. PERCEPTION- Perception is the process by which an individual selects, organizes, & interprets information inputs to create a meaningful picture of the world. A motivated person is ready to act. How the motivated person actually acts is influenced by his or her perception of the situation. BELIEFS & ATTITUDES- A belief is a descriptive thought that a person holds about something. Through doing & learning, people acquire beliefs & attitudes. These in turn influence their buying behavior. Particularly important to global marketers is the fact that buyers often hold distinct disbeliefs about brands or products based on their country of origin. An attitude is persons enduring favorable or unfavorable evaluations, emotional feelings, and action tendencies towards some object or idea. People have attitude toward almost everything: religion, politics, clothes, music, food, and so on. Attitude put them into a frame of mind of liking or disliking an object , moving toward or away from it.
HOW DO CUSTOMERS BUY:
Research suggests that customers go through a five-stage decision-making process in any purchase.
This model is important for anyone making marketing decisions. It forces the marketer to consider the whole buying process rather than just the purchase decision (when it may be too late for a business to influence the choice!)
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The model implies that customers pass through all stages in every purchase. However, in more routine purchases, customers often skip or reverse some of the stages.
For example, a student buying a favourite hamburger would recognise the need (hunger) and go right to the purchase decision, skipping information search and evaluation. However, the model is very useful when it comes to understanding any purchase that requires some thought and deliberation.
The buying process starts with need recognition. At this stage, the buyer recognises a problem or need (e.g. I am hungry, we need a new sofa, I have a headache) or responds to a marketing stimulus (e.g. you pass Starbucks and are attracted by the aroma of coffee and chocolate muffins).
An aroused customer then needs to decide how much information (if any) is required. If the need is strong and there is a product or service that meets the need close to hand, then a purchase decision is likely to be made there and then. If not, then the process of information search begins.
A customer can obtain information from several sources: Personal sources: family, friends, neighbours etc Commercial sources: advertising; salespeople; retailers; dealers; packaging; point-of-sale displays Public sources: newspapers, radio, television, consumer organisations; specialist magazines Experiential sources: handling, examining, using the product
The usefulness and influence of these sources of information will vary by product and by customer. Research suggests that customers value and respect personal sources more than commercial sources (the influence of word of mouth). The challenge for the marketing team is to identify which information sources are most influential in their target markets. In the evaluation stage, the customer must choose between the alternative brands, products and services.
HOW DOES THE CUSTOMER USE THE INFORMATION OBTAINED?
An important determinant of the extent of evaluation is whether the customer feels involved in the product. By involvement, we mean the degree of perceived relevance and personal importance that accompanies the choice. Where a purchase is highly involving, the customer is likely to carry out extensive evaluation.
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High-involvement purchases include those involving high expenditure or personal risk for example buying a house, a car or making investments.
Low involvement purchases (e.g. buying a soft drink, choosing some breakfast cereals in the supermarket) have very simple evaluation processes.
WHY SHOULD A MARKETER NEED TO UNDERSTAND THE CUSTOMER EVALUATION PROCESS? The answer lies in the kind of information that the marketing team needs to provide customers in different buying situations. In high-involvement decisions, the marketer needs to provide a good deal of information about the positive consequences of buying. The sales force may need to stress the important attributes of the product, the advantages compared with the competition; and maybe even encourage trial or sampling of the product in the hope of securing the sale. Post-purchase evaluation - Cognitive Dissonance The final stage is the post-purchase evaluation of the decision. It is common for customers to experience concerns after making a purchase decision. This arises from a concept that is known as cognitive dissonance. The customer, having bought a product, may feel that an alternative would have been preferable. In these circumstances that customer will not repurchase immediately, but is likely to switch brands next time. To manage the post-purchase stage, it is the job of the marketing team to persuade the potential customer that the product will satisfy his or her needs. Then after having made a purchase, the customer should be encouraged that he or she has made the right decision.
BUYER BEHAVIOUR
Introduction
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A well-developed and tested model of buyer behaviour is known as the stimulus-response model,
In the above model, marketing and other stimuli enter the customers black box and produce certain responses.
Marketing management must try to work out what goes on the in the mind of the customer the black box. The Buyers characteristics influence how he or she perceives the stimuli; the decision-making process determines what buying behaviour is undertaken.
ONLINE CUSTOMER BEHAVIOR Introduction Prepared by: Vinoth/ Faculty Management Studies Page 78
The emergence of e-commerce as a way of doing business has created an environment in which the needs and expectations of business customers and consumers are rapidly changing and evolving. This situation presents marketing managers with the challenge of ascertaining which elements of market space are new and how much continuity can be retained from the past. Some marketers apparently believe that it is enough to offer a Web site, maintaining a superficial appearance that the firm is progressive, or they ignore the Web altogether, possibly making use of digital technology to support existing business plans. Others take the opposite tack, saying that everything is changing and that nothing can remain the same (e.g., Feather, 2000; Murphy, 2000). A more balanced view proposes that people are basically the same but that new technologies are changing many of the ways customers shop and buy thus, many businesses must overhaul their operating models to create digital strategies that meet changing needs and preserve competitiveness (Downes & Mui, 1998; Wind, Mahajan & Gunther, 2002). Our position is consistent with this balanced view. We believe that while much is changing, many fundamentals remain. Thus, we suggest ways that managers can use well-grounded concepts from consumer behavior and marketing theory, adapting them to new technologies. We begin by considering characteristics of the most innovative online buyers and how marketers might best attract these individuals to Web sites. Quite a lot has been learned in the past few years about online customer behavior. This knowledge should benefit e-marketers in their efforts to develop successful online marketing strategies. These topics are important because now that many Page 3 | Top of Article investors have been burned by dot-com business failures, they are unwilling to provide funding to start-ups that do not have clear business strategies in place and excellent indicators of potential success. In addition, competition is fierce, so competitive advantage is even more important on the Web than it is for an industrial sales representative calling on a customer or for a retail store in a neighborhood shopping mall. We propose that the more managers know about customers and their expectations of, as well as reactions to, e-commerce activities, the better these online vendors will be able to attract and to retain consumers. Thus, the objectives of this chapter are to discuss aspects of buyer behavior that offer strategic insights to e-commerce managers who wish to attract new buyers, satisfy, and retain them. Who Buys Online? "The ultimate objective of any given marketing strategy should be to attract, satisfy, and retain customers" (Best, 2004, p. 15). Thus, a discussion of online customer behavior from the management perspective should address this objective. Attracting new customers holds dual relevance. First, for any innovative good or service, the first buyers provide revenue needed to pay for research, development, and launch costs involved in bringing a new product to the market. Marketers must generate positive revenue streams quickly to grow their businesses. Moreover, it is not possible to retain all buyers as customers, so it is necessary to acquire new customers continuously to replace those who leave. Second, new customers are important because, in addition to an initial purchase, they bring the potential for lifetime value, which is the stream of profits that accrues during a customers relationship with the firm. By itself, attracting new buyers is not enough; firms need to retain at least a portion of first-time purchasers to remain viable. Loyal satisfied customers have value for the firm because they may increase their spending over time, and they tend to spread positive word-of-mouth (via e-mail, etc.) about the company, attracting other buyers (Reichheld & Schefter, 2000). Finally, the earliest buyers may also provide valuable feedback regarding their experience with the Web site, facilitating site improvements. How are companies using an online presence to reach potential and current customers? Liu et al. define online business as "the buying and selling of goods and services where part, if not all, of the commercial transaction occurs over an electronic medium" (1997, p. 336). At the time of their article examining the Fortune 500, although 322 of the firms maintained home pages on the Web, only 131 of these provided for online business. Of course, these numbers are much higher now, but the motivations for making use of an electronic marketplace still hold. They suggest that by providing improvements in communication and information processing the Web greatly reduces the costs of market coordination and improves efficiency. Because potential buyers can compare offerings more easily, electronic markets should promote price competition as well as product differentiation. However, in the case of B2C e-commerce, research suggests that price dispersion is persistent due to differences in service Prepared by: Vinoth/ Faculty Management Studies Page 79
offerings among e-tailers, market characteristics such as number of competitors, and possibly such factors as brand name and online trust (Pan, Ratchford & Shankar, 2002). The results of Liu et al. (1997) indicate that presence of a home page and revenues are significantly related this makes sense because the large majority of the home pages they observed were designed to introduce new products and provide overview information about the companies. While smaller sized firms are apparently more interested in direct selling and generation of revenue, larger firms Web sites focus on communication activities. This suggests that while larger firms are more likely to try to build awareness upon entering an electronic marketplace, smaller firms may try to move directly into selling. The latter strategy may neglect the need to communicate and assist potential customers in developing familiarity with a firm and its products this may be part of the reason so many smaller firms failed in the dot-com bust of 2000. Our essential topics for the chapter follow from the need for an e-marketer to attract new customers to a Web site, satisfy, and retain them. Although many of the critical issues are the same in the B2B and B2C marketplaces, customer needs and behaviors differ for each of these types of markets. Thus, we address each separately in this chapter, drawing on both theoretical and applied research that has become available in the past few years. Our observations are summarized in Figure 1 for convenient reference. Characteristics of B2B Online Buyers In their analysis of the buying process for tangible, customized products, Gattiker, Perlusz, and Bohmann (2000) suggest that potential B2B online customers gather information needed for decision making and process it, taking into account situational factors and available product attributes. Further, individual buyers demographic characteristics, cultural backgrounds, attitudes toward technology, and economic factors influence the decisionmaking process. For instance, they note that women are less likely than men to spend time on the Web and more likely to value interpersonal communication. Younger respondents are more likely than are older respondents to spend time on the Web and to have made at least one purchase online. More educated respondents are more likely to spend time on the Web than are less educated respondents. Outcomes, specifically Web beliefs and behaviors, depend on Web usage patterns, ability to test and purchase products online, type of information available, and usage situation. While all customers might be expected to evaluate certain product attributes, particularly as their needs depend on the planned usage of the product, B2B purchasing agents differ from individual (B2C) shoppers (Gattiker et al., 2000). In particular, corporate buyers are more concerned than are B2C consumers with obtaining specific information, such as delivery conditions and pricing options. In addition, corporate agents may require documented quality and postsale support because of company policy. Other features that may be important include presale support, availability of postsale on-site service, and terms of replacement (e.g., lead times). Gattiker et al. (2000) further suggest that some differences between online and off-line shopping may occur for both B2B and B2C customers. For instance, extrinsic product attributes, including price and brand name, recommendations from others, and warranty, may be more important online than in a brick-and-mortar retail store where other product features may be more readily evaluated. As Web sites began to provide more of the information necessary for B2B transactions to occur, this marketplace grew at a phenomenal rate, far surpassing B2C online revenues. According to E-Stats (2002, 2003), an online publication of the U.S. Department of Commerce, B2B e-commerce in the U.S. totaled $913 billion in 1999, $997 billion in 2000, and estimates suggested it would be $995 billion in 2001. The lower figure for 2001 may be due in part to a leveling-out of B2B online trade but may also be reflective of the general economic downturn that began in 2001. The publication also notes that "e-commerce outperformed total economic activity in three of four major economic sectors measured between 2000 and 2001" (2003, p. 1). Thus, e-commerce is very healthy in sectors that sell primarily to other businesses.
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Some industries are more inclined to utilize e-commerce than others. E-Stats (2003) notes that 68% of all manufacturing e-shipments occur in only five industries, including transportation equipment, beverage and tobacco, electrical equipment, appliances, and components. Merchant wholesaler e-sales were concentrated in only three industry groups with drugs and druggist sundries, motor vehicles parts and supplies, and professional and commercial equipment and supplies explaining 64% of the total. There may be greater opportunities for increasing B2B e-commerce in industries that are not yet heavily represented. Characteristics of B2C Online Buyers In the early days of the Internet, the demographics of online consumers were skewed toward young well-educated male technophiles (Modahl, 2000). Today, the population of Internet users looks more like a representative national sample. In Table 1, adapted from Lenhart et al. (2003), we see a snapshot of current Internet users.These data are consistent with information regarding B2B online shoppers in that men, more educated, and younger people are more likely to shop online. Such demographic differences are also declining in both cases. E-Stats (2002) notes that e-commerce represents a relatively small share of the B2C marketplace as compared to economic activity in the B2B sectors. Total B2C online commerce was $40 billion in 1999, $65 billion in 2000, and $71 billion in 2001 (E-Stats, 2002, 2003), including services and retail trade. Thus, although it is growing as a share of total e-commerce activity in the U.S., B2C represents only 4.2% of e-commerce in 1999, 6.1% in 2000, and 6.7% in 2001. Four industry groups account for half of e-revenues in B2C services, including travel arrangement and reservation, publishing (including software), securities and commodities contracts intermediation and brokerage, and computer systems design and services (E-Stats, 2003). The information industry is an area of services having particularly strong growth, but it is not yet well represented online. Thus, this may indicate an opportunity for e-commerce activity.Retail e-sales are concentrated in only two groups that account for over 90% of this marketplace; these are nonstore retailers (including brick and click, catalog, and pure play businesses) and motor vehicle and parts dealers. Retail e-sales grew 22% between 2000 and 2001 as compared to total retail sales growth of only 3% (E-Stats, 2003). Merchandise categories having the highest percentage of online sales include books and magazines and electronics and appliances. This is consistent with previous research, which suggests that books and CDs are common items for initial online purchases (Florsheim & Bridges, 1999). Other product categories are more likely to be purchased by more experienced online shoppers and thus may have greater potential for etailer entry and growth. How do consumers begin to buy online? This question can be placed in a larger context of online consumer behavior, defined as "any Internet-related activity associated with the consumption of goods, services, and information." Further, "Internet consumption includes (1) gathering information passively via exposure to advertising, (2) shopping, which includes both browsing and deliberate information search, and (3) the selection and buying of specific goods, services, and information" (Goldsmith & Bridges, 2000, p. 245). We can expand this definition by suggesting that online consumer behavior also includes reacting to postsale activities offered by Web merchants. Consumer loyalty may be associated with these postsale interactions. We note that for any new good, service, or idea, some B2C buyers purchase earlier than do others following the launch of an innovation. Thus, it may be appropriate to study the purchase behavior of online buyers using a model for diffusion of innovation, particularly to improve understanding of how they might be attracted to an e-commerce vendor.
Buyer Behavior of Online Consumers - Attracting and Retaining Online Buyers: Comparing B2B and B2C Customers, Introduction, Who Buys Online? http://encyclopedia.jrank.org/articles/pages/1331/Buyer-Behavior-ofOnline-Consumers.html#ixzz1C2UMsJ00 Measuring Customer Satisfaction
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So the question is simple, Are You Measuring Customer Satisfaction? You must ask yourself this question now. Finding out what customers want to tell you may be as simple as asking them. There is a natural tendency to want to know as much as possible about what your customers think and feel about your product. It is no secret that companies want to hold on to their customers. After all, repeat customers are a key part of success in the business world. The general belief is that it costs companies much more money to get new clients than it does to simple keep existing customers. This is why measuring customer satisfaction is so vitally important. If customers shop at your online store or retail store and end up unhappy, then the odds are good that they wont be returning. You have not only lost their business, but you have to suffer the potential fallout from others that they complain to about their experience at your store. These are some of the problems that result from the lack of measuring customer satisfaction. The bottom line is that you want your customers to be happy, and the importance of measuring customer satisfaction cannot be discounted. There are a wide variety of ways in which you can assess how pleased or displeased your clients may be. If you run a business in which your employees interact with customers one on one, of course you can simply ask them in person. For example, restaurants frequently ask customers, How was everything tonight? However, with many other types of business, including online stores, it can be trickier to find a way of measuring customer satisfaction. The good news is that there are new methods available that perfectly suit ecommerce. For example, there are now customer feedback questionnaires and satisfaction survey software that is easily integrated onto your website. If you are running a business and not measuring customer satisfaction, you may be losing valuable profits each year. It is time to reassess and start finding a way to gauge the happiness of your clients. As a result, you can often make much needed changes to your company that result in a better functioning business.
CUSTOMER RETENTION Introduction In his book, The Loyalty Effect, Frederick F. Reichheld states, Customer retention is the central gauge that measures how well the company is creating value for its customers. Creating value for customers builds loyalty, and loyalty in turn builds growth, profit, and more value. Companies striving to be market leaders in the competitive global economy are committing substantial resources to bolstering their customer service efforts. Whats more, they recognize that Prepared by: Vinoth/ Faculty Management Studies Page 82
the true challenge is to find a way to proactively meet their customers needs, and that having a means to measure customer satisfaction is key to ensuring success. The Need for Insight It is a known fact that acquiring new customers is approximately five times more expensive than retaining existing ones, and that loyal customers decrease acquisition costs and increase profitability. But many companies still suffer from customer churn, and few have effective programs in place to evaluate why these customers leave. To help identify customers at high risk for defection, it is absolutely critical that companies implement processes and systems to closely track and measure customer satisfaction, and to do so appropriately and meaningfully. Only with a clear and accurate sense of how to collect, analyze, and use the data can insight be gained so that companies understand how to better attract new customers, as well as retain the ones they already have. Many companies rely on outdated and unreliable methods in their attempt to measure customer satisfaction; for example, they watch sales volume, look at the monthly balance sheet, or count the frequency of complaints. While these approaches are not without value, they are clearly not a substitute for a well-designed customer satisfaction survey program. The Right Measurement Tool Customer satisfaction surveys are appropriate tools to measure and improve organizational performance, with an eye to improving profitability, because customer loyalty and satisfaction levels can be determined by analyzing the data gathered directly from the survey program. It is optimal to provide a customer survey at the time of service contact, in order to capture the most relevant information about customer needs, concerns, and wishes and to discover what contributes to feelings of customer satisfaction and loyalty. CUSTOMER SATISFACTION SURVEYS 4 OF 10 SURVEY DIMENSIONS Think about the survey interaction format: Surveys can be taken in a variety of format modes; on paper, via the Web, over the phone, etc. In the contact center, the vast majority of interactions occur over the phone, so it is natural to focus on phone-based surveys. Ensure the proper survey length: A good, user-friendly survey should contain as few questions as possible. Surveys that take too long (more than couple of minutes) are usually abandoned, so it is recommended that only three to five questions should be posed, unless you have ways to reward the customers for participating in a longer survey. Identify what is being surveyed and how to measure it: It is important to request specific information, because focusing on a specific topic of interest will ensure that your results become more reliable, thus leading to better future interactions with your customer. Some topics to be considered are the quality of the companys goods or services, price points, or the quality of customer service during and after the sale. Be aware, however, that each of these is a many-faceted area. For example, customer service alone includes such things as: response time (how long did it take to answer the phone, or to resolve a customer inquiry?), accuracy (were the callers questions answered completely?) and professionalism (did a call center agent treat the caller with respect?). Identify ranking options: A vocal/audio interaction is quite different than a written interaction. Correspondingly, the set of response options will also be different in a phone survey than in a written survey. A persons short term audio memory is challenged when more than five response options are recited, plus the question, so it is recommended that response options be designed per a numeric Prepared by: Vinoth/ Faculty Management Studies Page 83
scale, rather than a free-form response scale. In this instance, rather than asking for responses such as: agree completely, somewhat agree, neither agree nor disagree, somewhat disagree, completely disagree, the question should prompt for a rating on a sliding scale. The optimal response rating scale (called a Likert Scale) should contain no more than five rankings; for example, an appropriate question could be posed thusly: On a scale of one to five, with five being best, how would you rate the quality of the customer service agent with whom you just spoke? The survey designer will need to make an assessment about handling open-ended customer feedback as well, to ensure that it is qualified and quantified. This can be supported by recording their input, or by transferring them to customer care specialists to further qualify their opinion. Reduce the lag time between the interaction and the survey: According to industry analyst, Gartner, organizations who do perform surveys dont always conduct them in a timely manner (waiting too long after service calls occur), sometimes ask the wrong questions, or do not take action on customer feedback given (Report: Implement Customer Satisfaction Management Processes to Improve Revenue, 2nd March 2006). These poor survey habits are major contributors to low satisfaction rates and they serve to discourage customers from taking future surveys. CUSTOMER SATISFACTION SURVEYS 5 OF 10 Automated post-call surveys, on the other hand, give organizations near-immediate insight to customer opinions, allowing them to utilize the results to identify weaknesses in processes, people, and technology before more significant problems arise. Genesys Survey Solution Successful survey implementation requires thought and care and, more importantly, a solution that: Is succinct and able to quickly solicit feedback Surveys customers in relation to the services offered Generates actionable reports for management Is flexible to change without software reprogramming Is robust Genesys offers an innovative survey solution for integration into the contact center, which builds upon companies existing self-service technology investment. Established specifically for voice interactions, the Genesys Survey Solution is designed for use by business teams, rather than programmers. The design, testing, and publishing of surveys that blend with contact center services and skills are configurable through a Web user interface, incorporating audio for a branded caller experience. Access to caller responses is available through the same Web interface, or by using existing enterprise reporting tools. The solution allows for rapid duplication, modification, and adaptation of surveys to meet changing business requirements.
The survey designer is able to include questions to capture information on why the customer called, which organizational touch points were involved, length of hold times, and other attributes of the contact, in order to develop an actionable view of the customer interaction. These features are best realized when the Genesys Survey Solution is blended with the Genesys Customer Interaction Suite. The Genesys Survey Solution is comprised of the following major components: Web-based Survey Management Application with the following capabilities: Secure log-in and user profile management Prepared by: Vinoth/ Faculty Management Studies Page 84
Survey Editor for the design and maintenance of individual surveys Survey Manager to configure and schedule surveys for customer interaction Report views of survey responses Web services and strategy template for incorporation into Genesys Routing to determine survey availability and survey targeting Survey Design Template to enable rapid implementation CUSTOMER SATISFACTION SURVEYS 6 OF 10 The following diagram represents an example of how the Genesys Survey Solution interacts with the caller and other assets of your contact center: Genesys Survey Solution Interaction Flow Genesys offers a configurable, off-the-shelf survey solution that can be used for either inbound voice interactions or outbound campaigns, while still being able to link results of a survey to a specific agent or called party. CUSTOMER SATISFACTION SURVEYS 7 OF 10 Organizations can leverage the survey solution in many broad ways, but most common uses are: Post call to solicit feedback about the quality of the customer service experienced while interacting with a client care representative Stand-alone to solicit feedback about a customers experience with a product, service, or location and offer incentives to participate in the survey. This may be an inbound or outbound use of the survey Prior to the completion of an offer to solicit opinions about future buying trends CUSTOMER SATISFACTION SURVEYS 8 OF 10 IMPLEMENTING A SURVEY The implementation of a survey is as easy as opening the Survey Editor in the Web environment, and adding questions to the Call Flow. The simplified interface further offers a template to start building your customer survey interactions in just a few steps. Once a survey is readied for customer interaction, it is published on a schedule to control the offer, track the callers, and configure repeat surveys, if they are allowed. Customers simply select their response to questions, and the Genesys Survey Solution self-manages the speech or touch tone interaction. The user may make decisions in the Call Flow based on previous input, or on data elements that flow with the call and that affect how a customer interacts.
The solution offers the ability to record open-ended comments, which are reviewable via the reporting interface, and to build spoken language dependent variations. Measuring results of the survey is done via two reporting views: a Summary Report for a quick overview of how the survey results are progressing, and a Detailed Report to review the individual response ratings. CUSTOMER SATISFACTION SURVEYS 9 OF 10
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If a caller leaves open-ended comments, the Detailed Report view enables the user to hear the feedback through the user interface. And, if it is determined that a caller who leaves feedback expressing dissatisfaction with services is a premium customer, he or she might then be contacted and quickly transferred to a supervisor to resolve the issue. Conclusion Clearly, the most valuable asset for companies to use to understand how to improve customer satisfaction is customers themselves. To reduce customer churn, the right tool should be implemented that can glean information on customers needs and trends. This information must then be gathered, tracked, measured, and reported on. The appropriate customer survey solution in the contact center should be designed in a userfriendly way so as to yield high customer participation, and rich, accurate data regarding company satisfaction drivers. Whats more, when the survey participation process is proactively solicited, a noticeable customercentric culture evolves within organizations agents provide better service in anticipation of receiving direct feedback, and customers appreciate being given the opportunity to provide it. With actionable data in hand, forward-looking companies can bolster customer retention and loyalty, leading to greater profitability and a competitive edge. CUSTOMER RELATIONSHIP MARKETING (CRM) CRM is about the systems (IT and non IT systems) that are employed that help an organisation manage its relationships with it customers. CRM employed systems can help an organisation in a number of ways:

By using simple databases CRM can help the organisation in segmenting their most profitable customers. Help the organisation in targeting specific products at certain customers groups by looking at their past purchase patterns. Help identify light and medium users, and employing strategies to try and convert them into heavy users. CRM can provide employees with all the necessary information that they need to know about the customer they are dealing with, ensuring that the customer is dealt with in an efficient manner and ensuring personlisation for the customer.
Customer Relationship Marketing tries to ensures that customer information can be accessed at any point within the organisation. A truly marketing oriented organisation would make sure that this would happen and that this system will put the customer first. CUSTOMER ACQUISITION MANAGEMENT Customer acquisition management is a term used to describe the methodologies and systems to manage customer prospects and inquiries, generally generated by a variety of marketing techniques. It can be considered the connectivity between advertising and customer relationship management. This critical connectivity facilitates the acquisition of targeted customers in an effective fashion. Customer acquisition management has many similarities to lead management. Sometimes missing from lead management definitions, but always included in customer acquisition management, is a closed-loop reporting system. Such a reporting system typically allows the organization to quantify the effectiveness of results of various promotional activities. This allows organizations to realize continuous improvements in both promotional activities and customer acquisition systems. Customer acquisition management also often includes the original response to a prospect immediately after their inquiry. This response could come in many forms a personalized fulfillment letter and brochure, an e-mail Prepared by: Vinoth/ Faculty Management Studies Page 86
response or a telephone call. In each case the initial response is targeted to further the interest of the prospect and simplify the initial sales call for the sales channel. Like lead management, customer acquisition management creates an orderly architecture for managing large volumes of customer inquiries, or leads. The architecture must be able to organize numerous leads, at various stages of a sales process, across a distributed sales force. In order to understand this process, it is helpful to examine a simplified linear lead flow process, such as the following:

Advertising and CRM Customer inquiry or response Inquiry captured Inquiry filtered Lead graded and prioritized Lead distribution Sales contact Lead nurturing or retention Sales result Analysis of promotion's effectiveness
The lead flow process can become enormously complex as customers and sales professionals begin to interact. These various interactions and subsequent actions can create a variety of scenarios, both productive and counterproductive. This exponential number of scenarios can provide for numerous opportunities to mishandle leads in such a way as to reduce their value. Managing these scenarios is the function of lead management. Customer acquisition is a broad term that is used to identify the processes and procedures used to locate, qualify and ultimately secure the business of new customers. There are many different strategies used as part of the acquisition process, with some methods being more effective with specific types of potential clients. In spite of the many and sometimes contradictory ideas that surround the central idea of how to earn a customer, there are a few essentials that are included in just about any type of customer acquisition plan. One of the basics of any customer acquisition effort is to identify and quality potential customers. This is sometimes accomplished with the use of telemarketing as a means of locating individuals and businesses who either express interest in or already use products similar to those produced by the business. From this initial list, these leads are then qualified a little further, using various research methods to determine if there is any solid chance of making a sale with a given lead. If there is a good chance, and the contact is interested in learning more about the products offered, his or her status is usually upgraded to that of prospect, and assigned to a salesperson for further interaction. Customer Experience Customer Acquisition Customer Acquisition Strategies Customer Acquisition Process Customer Acquisition Costs Online Customer Acquisition Customer Acquisition Marketing Establishing rapport with the prospect is essential to any successful customer acquisition effort. Here, the salesperson finds ways to identify with the stated wants and needs of the prospect, and how the products offered can relate to those wants and needs. At the same time, the salesperson will go further and attempt to identify unstated needs, based on data provided in ongoing conversations with the prospect. This type of activity can lead to
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identifying additional wants that can be met by other products that the salesperson has to offer, or inspire additional ideas of how the prospect can obtain a greater value from purchasing the products he or she already is considering. Key to the customer acquisition process is understanding the role of customer perception throughout the process. A successful salesperson knows how to really listen to the prospect, and get a firm idea of how that prospect feels about the potential of the products offered for sale. Seeing the relationship from the prospects point of view makes it possible to proactively deal with possible objections raised by the prospect before they are voiced. In addition, the added perspective can help the salesperson connect with the client in a manner that is rarely possible otherwise. The end result is that understanding customer perceptions makes it easier to forge a relationship that not only results in a sale, but also in strong customer loyalty, provided the products live up to the claims presented during the sales cycle. Customer Acquisition Strategies on wiseGEEK:
It is not unusual for a large company to utilize a full time sales team along with some sort of affiliate program, effectively creating a larger sales force while still keeping costs within reason. Choosing the best customer acquisition strategy involves understanding what you have to offer and where to find customers that are likely to want those products, do well as identifying the most effective ways to reach them. Establishing rapport with the prospect is essential to any successful customer acquisition effort. Here, the salesperson finds ways to identify with the stated wants and needs of the prospect, and how the products offered can relate to those wants and needs.
Customer Acquisition Process on wiseGEEK:
This type of activity can lead to identifying additional wants that can be met by other products that the salesperson has to offer, or inspire additional ideas of how the prospect can obtain a greater value from purchasing the products he or she already is considering. Key to the customer acquisition process is understanding the role of customer perception throughout the process. Recognition of the actual cost of acquisition is a common element when individuals and businesses consider any type of purchase. A good example of customer acquisition costs is found with the purchase of real estate. When an individual chooses to buy a home, the purchase price serves as the foundation for all the associated costs, but is far from the total acquisition cost.
Customer retention Customer Retention is the activity that a selling organisation undertakes in order to reduce customer defections. Successful customer retention starts with the first contact an organisation has with a customer and continues throughout the entire lifetime of a relationship. A companys ability to attract and retain new customers, is not only related to its product or services, but strongly related to the way it services its existing customers and the reputation it creates within and across the marketplace. Customer retention is more than giving the customer what they expect, its about exceeding their expectations so that they become loyal advocates for your brand. Creating customer loyalty puts customer value rather than maximizing profits and shareholder value at the center of business strategy[1]. The key differentiator in a competitive environment is more often than not the delivery of a consistently high standard of customer service. Customer retention has a direct impact on profitability. Research by John Fleming and Jim Asplund indicates that engaged customers generate 1.7 times more revenue than normal customers, while having engaged employees and engaged customers returns a revenue gain of 3.4 times the norm.
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Customer lifetime value Customer lifetime value enable an organization to calculate the net present value of the profit an organization will realize on a customer over a given period of time. Retention Rate is the percentage of the total number of customers retained in context to the customers that approached for cancellation. Standardization of Customer Service Published standards exist to help organizations deliver process driven customer satisfaction in order to increase the lifespan of a customer. The International Customer Service Institute (TICSI) has released The International Customer Service Standard (TICSS). TICSS enables organizations to focus their attention on delivering excellence in the management of customer service, whilst at the same time providing recognition of success through a 3rd Party registration scheme. TICSS focuses an organizations attention on delivering increased customer satisfaction by helping the organization through a Service Quality Model. TICSS Service Quality Model uses the 5 P's - Policy, Processes, People, Premises, Product/Service, as well as performance measurement. The implementation of a customer service standard should lead to higher levels of customer satisfaction, which in turn increases customer loyalty and customer retention [2]. Customer Retention Customer Retention marketing is a tactically-driven approach based on customer behavior. It's the core activity going on behind the scenes in Relationship Marketing, Loyalty Marketing, Database Marketing, Permission Marketing, and so forth. Heres the basic philosophy of a retention-oriented marketer: 1. Past and Current customer behavior is the best predictor of Future customer behavior. Think about it. In general, it is more often true than not true, and when it comes to action-oriented activities like making purchases and visiting web sites, the concept really shines through. We are talking about actual behavior here, not implied behavior. Being a 35-year-old woman is not a behavior; its a demographic characteristic. Take these two groups of potential buyers who surf the Net:
People who are a perfect demographic match for your site, but have never made a purchase online anywhere People who are outside the core demographics for your site, but have purchased repeatedly online at many different web sites
If you sent a 20% off promotion to each group, asking them to visit and make a first purchase, response would be higher from the buyers (second bullet above) than the demographically targeted group (first bullet above). This effect has been demonstrated for years with many types of Direct Marketing. It works because actual behavior is better at predicting future behavior than demographic characteristics are. You can tell whether a customer is about to defect or not by watching their behavior; once you can predict defection, you have a shot at retaining the customer by taking action. 2. Active customers are happy (retained) customers; and they like to "win." They like to feel they are in control and smart about choices they make, and they like to feel good about their behavior. Marketers take advantage of this by offering promotions of various kinds to get consumers to engage in a behavior and feel good about doing it. These promotions range from discounts and sweepstakes to loyalty programs and higher concept approaches such as thank-you notes and birthday cards. Promotions encourage behavior. If you want your customers to do Prepared by: Vinoth/ Faculty Management Studies Page 89
something, you have to do something for them, and if its something that makes them feel good (like they are winning the consumer game) then theyre more likely to do it. Retaining customers means keeping them active with you. If you don't, they will slip away and eventually no longer be customers. Promotions encourage this interaction of customers with your company, even if you are just sending out a newsletter or birthday card. The truth is, almost all customers will leave you eventually. The trick is to keep them active and happy as long as possible, and to make money doing it. 3. Retention Marketing is all about: Marketing is a conversation, as the ClueTrain Manifesto and Permission Marketing have pointed out. Marketing with customer data is a highly evolved and valuable conversation, but it has to be back and forth between the marketer and the customer, and you have to LISTEN to what the customer is saying to you. For example, let's say you look at some average customer behavior. You look at every customer who has made at least 2 purchases, and you calculate the number of days between the first and second purchases. This number is called "latency" - the number of days between two customer events. Perhaps you find it to be 30 days. Now, look at your One-Time buyers. If a customer has not made a second purchase by 30 days after the first purchase, the customer is not acting like an "average" multi-purchase customer. The customer data is telling you something is wrong, and you should react to it with a promotion. This is an example of the data speaking for the customer; you have to learn how to listen. This site and the Drilling Down book are all about how to discover, manage, and listen to customer data. The data is speaking for the customer, telling you by its very existence (or non-existence) there has been an action (or nonaction) waiting for a reaction. 4. Retention Marketing requires allocating marketing resources. You have to realize some marketing activities and customers will generate higher profits than others. You can keep your budget flat or shrink it while increasing sales and profits if you continuously allocate more of the budget to highly profitable activities and away from lower profit activities. This doesn't mean you should "get rid" of some customers or treat them poorly. It means when you have a choice, as you frequently do in marketing, instead of spending the same amount of money on every customer, you spend more on some and less on others. It takes money to make money. Unless you get a huge increase in your budget, where will the money come from? For example, let's say you have 1,000 customers, and you have an annual budget of $1,000. You spend $1 on each customer each year, and for that $1, you get back $1.10 in profits. That's an ROI of 10%; you got back $1,100 for spending $1,000. Now, what if you knew spending $2 each year on a certain 50% of customers would bring back $8 in profits. That's a 400% ROI. Where do you get the extra $1? You take it away from the other 50% of customers. You spend the same $1,000 total and you make back 500 (half the customers) x $8 = $4,000. If you always migrate and reallocate marketing dollars towards higher ROI efforts, profits will grow even as the marketing budget stays flat. You have to develop a way to allocate resources to the most profitable promotions, deliver them to the right customer at the right time, and not waste time and money on unprofitable promotions and customers. This is accomplished by using the data customers create through their interactions with you to build simple models or rules Prepared by: Vinoth/ Faculty Management Studies Page 90
to follow. These models are your listening system, like the "30 day latency" model above. They allow the data to speak to you about the customer. Customer Defection Why do customers defect? The reality is that many businesses lose a significant number of customers of their customer base every single year and either dont know who these customers are, why they are leaving or spending less. Why are customers lost? Price while it may be important in attracting new customers it would seem that it is a minor issue in developing loyalty and retaining customers. Most of the research on price puts it as only relatively important as it accounts for only about 15% of the reason why customers switch. Physical factors Such physical factors as a more convenient location are also ranked quite low, as are competitor action and invention. Marketing and competitor activity and relationship with a competitor are a bout 15%. The competitor products advantages account for further 10% to 15% The most important and common reasons for customer switching is the indifference and inattention of the business and from the customers point of view the lack of any real reason to stay. Customer sophistication customers not only expect and demand more they are also more articulate in saying so. Twenty years of dramatic social change have changed the way most of us select the businesses we use. Complexity buying the most simplest product or service can, if the customer wishes be a very complex decision making process. The blurring of differences between brands, products and companies. Competition in almost every market in every developed country of the work, competition has increased dramatically in the last ten years. Globalization and advance manufacturing technology have resulted in businesses becoming faster and improving product quality. Costs costs play a significant role in understanding the economic trends and changes in recent years. The economic downturn of the early nineties gave birth to the business customer and the personal consumer which showed that markets can go down as well as up. Therefore it is very important to ensure that we get more value for money in purchasing and choosing suppliers.
Here are some of the key reasons why customers switch: Too little contact Too little individual attention Poor quality attention especially when problems are encountered Generally poor service levels and standards
In non-commercial organizations or utility providers where changing suppliers or switching business is more difficult - the four factors mentioned above are at the root of the majority of complaints. It is obvious that any improvement in the above four areas usually reduces the number of customers that are defecting. Prepared by: Vinoth/ Faculty Management Studies Page 91
Serving customers profitably Carrying out customer profitability analysis ensures that you develop long term relationships that will ensure long term profitable relationship. Many businesses spend 75% of their marketing budget in the search for more new customers. This is a mistake and has a negative impact on profits. Let us look at how you can calculate the true value of existing customers. It costs substantially more to win new customer than it does to keep a current customer The longer a business keeps a customer the more profitable that customer is for the business As a customers lifetime value grows the more dependent they become on the company and less susceptible to competitor offers As customers become more loyal they become advocates for the business encouraging friends and acquaintances also to buy there. While this calculation does over-simplify the issue it is useful in highlighting the value of a customer. Especially if compared with the usual high customer attrition rates of 15 to 50 per cent. The cost of replacing one customer is the sum of all marketing and sales costs for the year, divided by the number of new customers attracted. Profit per customer is achieved when marketing costs have been paid. Every month or year that the customer stays a customer they become more valuable. Tips for success There are some important steps that you should take to ensure that your enterprise provides better customer service: Customer product high quality every time preferably above expectations High perceived value attention to detail and added service touches Clear benefits Reliability Customer service responsive and knowledgeable Guarantee/ warranty Accessibility Complaint resolution fast response always Positive experiences
It might be useful to think of each customer as having certain life cycle stages: Contact phase Goal to gain a new customer. Contact through marketing, advertising, telemarketing, personal selling, direct mail, promotion and publicity. Acquisition phase Goal to increase customer retention. Collect as much information about the customer as possible. Understand Prepared by: Vinoth/ Faculty Management Studies Page 92
their purchase condition. Offer them post purchase re-assurance. Promote the price value relationship. Establish the foundation for a long term relationship. Know the associated costs. Retention phase Goal - to create long term and committed loyal customers. Develop a service philosophy. Increase responsiveness to customers. Identify and close service gaps. Improve the service recovery process. Loyalty phase Goal to extend your customers loyalty. Define loyalty and customer lifetime value and average net worth. Counteract defection rates and patterns. Understand loyalty calculations. Know costs associated with their loyalty. Provide them with accurate customer information. How to stay close to your customer? o Show them that you think of them o Tell them whats new it is a good way to stay in touch and make more sales o Offer valued customer discounts to important clients this can take the form of coupons, letters and other sales promotions o Compensate customers for lost time or money for faulty products or services. o Be personal keep notes in your customer files of every little detail that you know about the customer from spouse childrens names, hobbies etc. o Always be honest nothing undermines your credibility than dishonesty. o Accept returns unconditionally the few dollars that you lose in the short run are more than compensated for by long term value of the customer. o Honour your customers privacy. o Keep your promises Never, never make a promise that you cannot deliver. o Give feedback on referrals this is the best way to show your appreciation for the referral. o Make your customers famous if your business has a newsletter ask your customers permission to write about their success. o Keep lines of communication to the customer always open.
CUSTOMER ATTRITION AND RETENTION Relationship attrition is the number of client who do not renew their relationship per month this is expressed as a percentage of the total customers at the beginning of the month. This is a key indicator of the relationship management performance of the business and should be reviewed at least monthly. The measure of relationship retention is an important indicator of how effective your business has been fulfilling the requirements of the Prepared by: Vinoth/ Faculty Management Studies Page 93
customer. In some cases attrition rates can be very high and alarming. HOW TO KEEP CUSTOMERS FOR LIFE: Select the right customer through market research Know your purpose for being in business Move your customers from satisfaction to loyalty by focusing on retention loyalty schemes Develop reward programs Customize your products and services Train and empower your employees in excellent customer service Speed up the customer service process Know whats important for the customer Always measure whats important to the customer Introduce customer retention measures Use market value pricing concepts
UNIT V MARKETING RESEARCH & TRENDS IN MARKETING

MARKETING INFORMATION SYSTEM
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To understand the proper role of information systems one must examine what managers do and what information they need for decision making. We must also understand how decisions are made and what kinds of decision problems can be supported by formal information systems. One can then determine whether information systems will be valuable tools and how they should be designed. The Functions of Management Clearly, information systems that claim to support managers cannot be built unless one understands what managers do and how they do it. The classical model of what managers do, espoused by writers in the 1920's, such as Henry Fayol, whilst intuitively attractive in itself, is of limited value as an aid to information system design. The classical model identifies the following 5 functions as the parameters of what managers do: 1 Planning 2 Organising 3 Coordinating 4 Deciding 5 Controlling Such a model emphasises what managers do, but not how they do it, or why. More recently, the stress has been placed upon the behavioural aspects of management decision making. Behavioural models are based on empirical evidence showing that managers are less systematic, less reflective, more reactive and less well organised than the classical model projects managers to be. For instance, behavioural models describe 6 managerial characteristics: High volume, high speed work Variety, fragmentation, brevity Issue preference current, ad hoc, specific Complex web of interactions, contacts Strong preference for verbal media. Such behavioural models stress that managers work at an unrelenting pace and at a high level of intensity. This is just as true for managers operating in the developing world as in the developed world. The nature of the pressures may be different but there is no evidence that they are any less intense. The model also emphasises that the activities of managers is characterised by variety, fragmentation and brevity. There is simply not enough time for managers to get deeply involved in a wide range of issues. The attention of managers increase rapidly from one issue to another, with very little pattern. A problem occurs and all other matters must be dropped until it is solved. Research suggests that a manager's day is characterised by a large number of tasks with only small periods of time devoted to each individual task. Managers prefer speculation, hearsay, gossip in brief, current, up-to-date, although uncertain information. Historical, certain, routine information receives less attention. Managers want to work on issues that are current, specific and ad hoc. Managers are involved in a complex and diverse web of contacts that together act as an information system. They converse with customers, competitors, colleagues, peers, secretaries, government officials, and so forth. In one sense, managers operate a network of contacts throughout the organisation and the environment. Several studies have found that managers prefer verbal forms of communication to written forms. Verbal media are perceived to offer greater flexibility, require less effort and bring a faster response. Communication is the work of the manager, and he or she uses whatever tools are available to be an effective communicator. Prepared by: Vinoth/ Faculty Management Studies Page 95
Despite the flood of work, the numerous deadlines, and the random order of crises, it has generally been found that successful managers appear to be able to control their own affairs. To some extent, high-level managers are at the mercy of their subordinates, who bring to their attention crises and activities that must be attended to immediately. Nevertheless, successful managers are those who can control the activities that they choose to get involved in on a day-to-day basis. By developing their own long-term commitments, their own information channels, and their own networks, senior managers can control their personal agendas. Less successful managers tend to be overwhelmed by problems brought to them by subordinates. Managerial Roles Mintzberg suggests that managerial activities fall into 3 categories: interpersonal, information processing and decision making. An important interpersonal role is that of figurehead for the organisation. Second, a manager acts as a leader, attempting to motivate subordinates. Lastly, managers act as a liaison between various levels of the organisation and, within each level, among levels of the management team. A second set of managerial roles, termed as informational roles, can be identified. Managers act as the nerve centre for the organisation, receiving the latest, most concrete, most up-to-date information and redistributing it to those who need to know. A more familiar set of managerial roles is that of decisional roles. Managers act as entrepreneurs by initiating new kinds of activities; they handle disturbances arising in the organisation; they allocate resources where they are needed in the organisation; and they mediate between groups in conflict within the organisation. In the area of interpersonal roles, information systems are extremely limited and make only indirect contributions, acting largely as a communications aid in some of the newer office automation and communication-oriented applications. These systems make a much larger contribution in the field of informational roles; large-scale MIS systems, office systems, and professional work stations that can enhance a manager's presentation of information are significant. In the area of decision making, only recently have decision support systems and microcomputerbased systems begun to make important contributions. While information systems have made great contributions to organisations, until recently these contributions have been confined to narrow, transaction processing areas. Much work needs to be done in broadening the impact of systems on professional and managerial life. Decision Making Decision making is often seen as the centre of what managers do, something that engages most of a managers time. It is one of the areas that information systems have sought most of all to affect (with mixed success). Decision making can be divided into 3 types: strategic, management control and operations control.
Strategic decision making: This level of decision making is concerned with deciding on the objectives, resources and policies of the organisation. A major problem at this level of decision making is predicting the future of the organisation and its environment, and matching the characteristics of the organisation to the environment. This process generally involves a small group of high-level managers who deal with very complex, non-routine problems.
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For example, some years ago, a medium-sized food manufacturer in an East African country faced strategic decisions concerning its range of pasta products. These products constituted a sizeable proportion of the company's sales turnover. However, the company was suffering recurrent problems with the poor quality of durum wheat it was able to obtain resulting in a finished product that was too brittle. Moreover, unit costs were shooting up due to increasingly frequent breakdowns in the ageing equipment used in pasta production. The company faced the decision whether to make a very large investment in new machinery or to accept the offer of another manufacturer of pasta products, in a neighbouring country, that it should supply the various pasta products and the local company put its own brand name on the packs. The decision is strategic since the decision has implications for the resource base of the enterprise, i.e. its capital equipment, its work force, its technological base etc. The implications of strategic decisions extend over many years, often as much as ten to fifteen years. Management control decisions: Such decisions are concerned with how efficiently and effectively resources are utilised and how well operational units are performing. Management control involves close interaction with those who are carrying out the tasks of the organisation; it takes place within the context of broad policies and objectives set out by strategic planners. An example might be where a transporter of agricultural products observes that his/her profits are declining due to a decline in the capacity utilisation of his/her two trucks. The manager (in this case the owner) has to decide between several alternative courses of action, including: selling of trucks, increasing promotional activity in an attempt to sell the spare carrying capacity, increasing unit carrying charges to cover the deficit, or seeking to switch to carrying products or produce with a higher unit value where the returns to transport costs may be correspondingly higher. Management control decisions are more tactical than strategic. Operational control decisions: These involve making decisions about carrying out the " specific tasks set forth by strategic planners and management. Determining which units or individuals in the organisation will carry out the task, establishing criteria of completion and resource utilisation, evaluating outputs - all of these tasks involve decisions about operational control. The focus here is on how the enterprises should respond to day-to-day changes in the business environment. In particular, this type of decision making focuses on adaptation of the marketing mix, e.g. how should the firm respond to an increase in the size of a competitor's sales force? should the product line be extended? should distributors who sell below a given sales volume be serviced through wholesalers rather than directly, and so on. Within each of these levels, decision making can be classified as either structured or unstructured. Unstructured decisions are those in which the decision maker must provide insights into the problem definition. They are novel, important, and non-routine, and there is no well-understood procedure for making them. In contrast, structured decisions are repetitive, routine, and involve a definite procedure for handling them so that they do not have to be treated each time as if they were new. Structured and unstructured problem solving occurs at all levels of management. In the past, most of the success in most information systems came in dealing with structured, operational, and management control decisions. However, in more recent times, exciting applications are occurring in the management and strategic planning areas, where problems are either semi-structured or are totally unstructured. Making decisions is not a single event but a series of activities taking place over time. Suppose, for example, that the Operations Manager for the National Milling Corporation is faced with a decision as to whether to establish buying points in rural locations for the grain crop. It soon becomes apparent that the decisions are likely to be made over a period of time, have several influences, use many sources of information and have to go through several Prepared by: Vinoth/ Faculty Management Studies Page 97
stages. It is worth considering the question of how, if at all, information systems could assist in making such a decision. To arrive at some answer, it is helpful to break down decision making into its component parts. The literature has described 4 stages in decision making: intelligence, design, choice and implementation. That is, problems have to be perceived and understood; once perceived solutions must be designed; once solutions are designed, choices have to be made about a particular solution; finally, the solution has to be implemented. Intelligence involves identifying the problems in the organisation: why and where they occur with what effects. This broad set of information gathering activities is required to inform managers how well the organisation is performing and where problems exist. Management information systems that deliver a wide variety of detailed information can be useful, especially if they are designed to report exceptions. For instance, consider a commercial organisation marketing a large number of different products and product variations. Management will want to know, at frequent intervals, whether sales targets are being achieved. Ideally, the information system will report only those products/product variations which are performing substantially above or below target. Designing many possible solutions to the problems is the second phase of decision making. This phase may require more intelligence to decide if a particular solution is appropriate. Here, more carefully specified and directed information activities and capabilities focused on specific designs are required. Choosing among alternative solutions is the third step in the decision making process. Here a manager needs an information system which can estimate the costs, opportunities and consequences of each alternative problem solution. The information system required at this stage is likely to be fairly complex, possibly also fairly large, because of the detailed analytic models required to calculate the outcomes of the various alternatives. Of course, human beings are used to making such calculations for themselves, but without the aid of a formal information system, we rely upon generalisation and/or intuition. Implementing is the final stage in the decision making process. Here, managers can install a reporting system that delivers routine reports on the progress of a specific solution, some of the difficulties that arise, resource constraints, and possible remedial actions. Table 9.1 illustrates the stages in decision making and the general type of information required at each stage.
Stages in the decision making process Stage of Decision Making 1 Intelligence 2 Design 3 Choice Information Requirement Exception reporting Simulation prototype "What-if simulation Page 98
4 Implementation
Graphics, charts
In practice, the stages of decision making do not necessarily follow a linear path from intelligence to design, choice and implementation. Consider again the problem of balancing the costs and benefits of establishing local buying points for the National Milling Corporation. At any point in the decision making process it may be necessary to loop back to a previous stage. For example, one may have reached stage 3 and all but decided that having considered the alternatives of setting up no local buying points, local buying points in all regions, districts or villages, the government decides to increase the amounts held in the strategic grain reserve. This could cause the parastatal to return to stage 2 and reassess the alternatives. Another scenario would be that having implemented a decision one quickly receives feedback indicating that it is not proving effective. Again, the decision maker may have to repeat the design and/or choice stage(s). Thus, it can be seen that information system designers have to take into account the needs of managers at each stage of the decision making process. Each stage has its own requirements. COMPONENTS OF A MARKETING INFORMATION SYSTEM A marketing information system (MIS) is intended to bring together disparate items of data into a coherent body of information. An MIS is, as will shortly be seen, more than raw data or information suitable for the purposes of decision making. An MIS also provides methods for interpreting the information the MIS provides. Moreover, as Kotler's1 definition says, an MIS is more than a system of data collection or a set of information technologies: "A marketing information system is a continuing and interacting structure of people, equipment and procedures to gather, sort, analyse, evaluate, and distribute pertinent, timely and accurate information for use by marketing decision makers to improve their marketing planning, implementation, and control". Figure 9.1 The marketing information systems and its subsystems
The explanation of this model of an MIS begins with a description of each of its four main constituent parts: the internal reporting systems, marketing research system, marketing intelligence system and marketing models. It is suggested that whilst the MIS varies in its degree of sophistication - with many in the industrialised countries being computerised and few in the developing countries being so - a fully fledged MIS should have these components, the methods (and technologies) of collection, storing, retrieving and processing data notwithstanding.
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Internal reporting systems: All enterprises which have been in operation for any period of time nave a wealth of information. However, this information often remains under-utilised because it is compartmentalised, either in the form of an individual entrepreneur or in the functional departments of larger businesses. That is, information is usually categorised according to its nature so that there are, for example, financial, production, manpower, marketing, stockholding and logistical data. Often the entrepreneur, or various personnel working in the functional departments holding these pieces of data, do not see how it could help decision makers in other functional areas. Similarly, decision makers can fail to appreciate how information from other functional areas might help them and therefore do not request it. The internal records that are of immediate value to marketing decisions are: orders received, stockholdings and sales invoices. These are but a few of the internal records that can be used by marketing managers, but even this small set of records is capable of generating a great deal of information. Below, is a list of some of the information that can be derived from sales invoices. Product type, size and pack type by territory Product type, size and pack type by type of account Product type, size and pack type by industry Product type, size and pack type by customer Average value and/or volume of sale by territory Average value and/or volume of sale by type of account Average value and/or volume of sale by industry Average value and/or volume of sale by sales person

By comparing orders received with invoices an enterprise can establish the extent to which it is providing an acceptable level of customer service. In the same way, comparing stockholding records with orders received helps an enterprise ascertain whether its stocks are in line with current demand patterns. Marketing research systems: The general topic of marketing research has been the prime ' subject of the textbook and only a little more needs to be added here. Marketing research is a proactive search for information. That is, the enterprise which commissions these studies does so to solve a perceived marketing problem. In many cases, data is collected in a purposeful way to address a well-defined problem (or a problem which can be defined and solved within the course of the study). The other form of marketing research centres not around a specific marketing problem but is an attempt to continuously monitor the marketing environment. These monitoring or tracking exercises are continuous marketing research studies, often involving panels of farmers, consumers or distributors from which the same data is collected at regular intervals. Whilst the ad hoc study and continuous marketing research differs in the orientation, yet they are both proactive.
Marketing intelligence systems: Whereas marketing research is focused, market intelligence is not. A marketing intelligence system is a set of procedures and data sources used by marketing managers to sift information from the environment that they can use in their decision making. This scanning of the economic and business environment can be undertaken in a variety of ways, including2 Unfocused The manager, by virtue of what he/she reads, hears and watches exposes him/herself to information Page 100
scanning
that may prove useful. Whilst the behaviour is unfocused and the manager has no specific purpose in mind, it is not unintentional
Semi-focused Again, the manager is not in search of particular pieces of information that he/she is actively scanning searching but does narrow the range of media that is scanned. For instance, the manager may focus more on economic and business publications, broadcasts etc. and pay less attention to political, scientific or technological media. Informal search This describes the situation where a fairly limited and unstructured attempt is made to obtain information for a specific purpose. For example, the marketing manager of a firm considering entering the business of importing frozen fish from a neighbouring country may make informal inquiries as to prices and demand levels of frozen and fresh fish. There would be little structure to this search with the manager making inquiries with traders he/she happens to encounter as well as with other ad hoc contacts in ministries, international aid agencies, with trade associations, importers/exporters etc.
Formal search This is a purposeful search after information in some systematic way. The information will be required to address a specific issue. Whilst this sort of activity may seem to share the characteristics of marketing research it is carried out by the manager him/herself rather than a professional researcher. Moreover, the scope of the search is likely to be narrow in scope and far less intensive than marketing research Marketing intelligence is the province of entrepreneurs and senior managers within an agribusiness. It involves them in scanning newspaper trade magazines, business journals and reports, economic forecasts and other media. In addition it involves management in talking to producers, suppliers and customers, as well as to competitors. Nonetheless, it is a largely informal process of observing and conversing. Some enterprises will approach marketing intelligence gathering in a more deliberate fashion and will train its sales force, after-sales personnel and district/area managers to take cognisance of competitors' actions, customer complaints and requests and distributor problems. Enterprises with vision will also encourage intermediaries, such as collectors, retailers, traders and other middlemen to be proactive in conveying market intelligence back to them. Marketing models: Within the MIS there has to be the means of interpreting information in order to give direction to decision. These models may be computerised or may not. Typical tools are: Time series sales modes Brand switching models Linear programming Elasticity models (price, incomes, demand, supply, etc.) Regression and correlation models Analysis of Variance (ANOVA) models Sensitivity analysis Discounted cash flow Spreadsheet 'what if models These and similar mathematical, statistical, econometric and financial models are the analytical subsystem of the MIS. A relatively modest investment in a desktop computer is enough to allow an enterprise to automate the Prepared by: Vinoth/ Faculty Management Studies Page 101
analysis of its data. Some of the models used are stochastic, i.e. those containing a probabilistic element whereas others are deterministic models where chance plays no part. Brand switching models are stochastic since these express brand choices in probabilities whereas linear programming is deterministic in that the relationships between variables are expressed in exact mathematical terms. Summary Marketing information systems are intended to support management decision making. Management has five distinct functions and each requires support from an MIS. These are: planning, organising, coordinating, decisions and controlling. Information systems have to be designed to meet the way in which managers tend to work. Research suggests that a manager continually addresses a large variety of tasks and is able to spend relatively brief periods on each of these. Given the nature of the work, managers tend to rely upon information that is timely and verbal (because this can be assimilated quickly), even if this is likely to be less accurate then more formal and complex information systems. Managers play at least three separate roles: interpersonal, informational and decisional. MIS, in electronic form or otherwise, can support these roles in varying degrees. MIS has less to contribute in the case of a manager's informational role than for the other two. Three levels of decision making can be distinguished from one another: strategic, control (or tactical) and operational. Again, MIS has to support each level. Strategic decisions are characteristically one-off situations. Strategic decisions have implications for changing the structure of an organisation and therefore the MIS must provide information which is precise and accurate. Control decisions deal with broad policy issues and operational decisions concern the management of the organisation's marketing mix. A marketing information system has four components: the internal reporting system, the marketing research systems, the marketing intelligence system and marketing models. Internal reports include orders received, inventory records and sales invoices. Marketing research takes the form of purposeful studies either ad hoc or continuous. By contrast, marketing intelligence is less specific in its purposes, is chiefly carried out in an informal manner and by managers themselves rather than by professional marketing researchers. BASIC STEPS OF MARKETING RESEARCH PROCESS Problem Identification and Definition This is the introductory phase of the marketing research process. Basically, it involves a clear and precise understanding of the problem at hand. It is crucial that the research team identifies, understands and defines the problem in its entire capacity, as it affects all the subsequent activities involved in the research process. Research teams make use of customer feedback, internal and external data reports, sales graphs, purchasing patterns, etc. to come up with an accurate problem definition.
Designing a Proper Approach The next step is to come up with a near-flawless approach which is aimed at solving the identified problem. During this process, the research team has to analyze and examine a variety of factors such as the company's targets, goals and objectives, financial resources, skill sets, manpower, industry environment, changing business trends, etc. This phase often involves joint discussions between the research team, industry experts and higher management. Prepared by: Vinoth/ Faculty Management Studies Page 102
Developing the Actual Research Design This is the decisive step of the marketing research process. The research design is the very fulcrum of the entire marketing research process. The solidity of the research design alone decides the success or failure of the research program to a large extent. Naturally, this step is the most time-consuming of all the steps and it needs careful thinking and precise execution. Different activities involved in this process include feedback analysis, qualitative and quantitative analysis, preparing questionnaires as well as sampling of data and processes. Data Collection and Survey This process mainly involves a lot of field-related work activities such as outdoor interviews, survey campaigns and feedback sessions which are done by specially assigned data collection agents or field agents. Almost all of those doorbell-ringing pamphlet guys or the irritating tele-callers who telephone at the most untimely of hours, are data collection agents who are just doing their duty, as part of their company's marketing research process. Data collection and surveying is also implemented by means of Internet surveys, group discussions, mail surveys, etc. Data Structuring and Analysis Once the data collection and surveying activities have yielded sufficient and relevant data, it is time to systematically organize the data so that it can be interpreted and analyzed by decision makers. This typically involves activities such as data mining, clustering of data, preparing statistical graphs and curves, etc. Report Generation and Presentation All the effort that goes into designing an approach, developing a research design, collecting data and finally analyzing the data, completely goes waste, if the findings and the results are not presented properly. It is imperative that the whole marketing research project be properly documented and accounted for. The entire purpose of the research campaign is to enable the higher management to make informed decisions which will benefit the progress and the sales of the concerned product or service. Hence, it is crucial that the research findings be presented accurately, clearly and relevantly. For this purpose, the use of appropriate statistics, graphs, pie-charts, etc. is recommended. Marketing research is a thoroughly linked process, wherein every step is individually as well as collectively important. A slight mistake or shortcoming in any of these steps can largely affect the eventual success or failure of the entire marketing research campaign Concept and Product Testing / Web Surveys Market Reader Pro's online research collects quantitative responses which consumers in your marketplace have to new concepts you are developing We supply excellent, projectable feedback on your latest ideas. We can assist you with the new product development by building surveys that clearly represent your ideas and measuring potential customers responses to these ideas. We are able clarify your ideas through the use of word association questions, online focus groups, images, and virtual prototyping methods. Using the information that we collect, you will be able to rule out some product ideas and choose others for further development. This way your marketer can concentrate your resources on those new product concepts with the most potential for success.
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Our concept testing / net screening process delivers you hard measurable data as well, so you can eliminate poor concepts and identify star products. APPLICATIONS OF MARKET RESEARCH Pricing Research We provide pricing strategy consulting backed by strong pricing research capabilities. Our perspective is broad when dealing with pricing research and pricing strategy decisions, and focus on finding for your business optimum price-product-feature configurations in the context of market positioning opportunities. We employ both qualitative and quantitative pricing research tools. Product Research Product market research serves several goals: new product design and market validation research, or assessing existing product strength and line extension potential. We follow the product development cycle integrating research with creative positioning and technical product design efforts. Concept Testing Concept testing research evaluates advertising concepts, ad theme concepts and appeals, new product concepts, pricing, brand concepts, brand names, and positioning strategy concepts. We select techniques -- qualitative and quantitative -- to both develop concepts, refine, and screen to assess market potential. Positioning Research We offer experienced market positioning and creative branding research capabilities to define and go-to-market with a high-impact positioning strategy. First, it requires understanding the market positioning concept, your current and potential markets, and the process needed to generate brand name impact. Marketing Due Diligence We support venture investment firms with primary and secondary marketing research in a stand alone or component marketing due diligence study. Customer Satisfaction Research The buzz and interest around customer satisfaction research sometimes deflates if the research design does not lead to actionable results. Also, customer expectations generally rise overtime as advances in technology in many categories boost the consumer consciousness of what to expect. We build into our customer satisfaction study design "action indicators" to point to immediate use of customer satisfaction results. Branding Research Branding decisions drive branding marketing research strategy. Corporate, product and advertising brand development is a mix of creativity and marketing information to uncover brand positioning opportunities in cluttered market spaces. Brand Equity Research Brand equity research measures the breadth and depth of brand power in your target markets. We use both standard and custom tailored brand equity survey measurements. A key to research design is the goal of a brand equity measurement study. Advertising Research Prepared by: Vinoth/ Faculty Management Studies Page 104
Advertising research design is determined by specific advertising goals and the stage of ad development, or campaign. We use a broad range of advertising research techniques including ad recall surveys, message and theme salience and impact measures, buying motivation and association with the ad message or positioning theme. We employ both qualitative and quantitative pricing research tools. Market Segmentation Market segmentation research maintains focus and delivers needed marketing information in today's moving economy where new markets and new product categories emerge and traditional market segments fade away. Market segmentation research is a way to keep 'your eye on the ball.' Often we start the market segmentation process with qualitative research to the range and breadth of customers. Then we follow with quantitative research using appropriate multivariate analysis (cluster, k-means factor, etc) to define meaningful segments. Sales Analysis Data mining -- finding gems of insight from sophisticated or basic analysis of your internal customer and sales and margin trend data -- is a key first step in product and brand analysis. Simply put, a marketing analysis data mining effort searches for meaning and insight among the stacks of sales data and marketing data already within a sales and marketing organization. Through these tools we can better target your best customers, find which advertising and promotion methods are most efficient and effective. PRODUCT STRATEGIES When an organisation introduces a product into a market they must ask themselves a number of questions. 1.
2. 3. 4.
Who is the product aimed at? What benefit will they expect? How do they plan to position the product within the market? What differential advantage will the product offer over their competitors?
We must remember that Marketing is fundamentally about providing the correct bundle of benefits to the end user, hence the saying Marketing is not about providing products or services it is essentially about providing changing benefits to the changing needs and demands of the customer (P.Tailor 7/00)
Kotler suggested that a product should be viewed in three levels. Level 1: Core Product. What is the core benefit your product offers?. Customers who purchase a camera are buying more then just a camera they are purchasing memories.
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Level 2 Actual Product: All cameras capture memories. The aim is to ensure that your potential customers purchase your one. The strategy at this level involves organisations branding, adding features and benefits to ensure that their product offers a differential advantage from their competitors. Level 3: Augmented product: What additional non-tangible benefits can you offer? Competition at this level is based around after sales service, warranties, delivery and so on. John Lewis a retail departmental store offers free five year guarantee on purchases of their Television sets, this gives their `customers the additional benefit of piece of mind over the five years should their purchase develop a fault. PRODUCT DECISIONS When placing a product within a market many factors and decisions have to be taken into consideration. These include: Product design Will the design be the selling point for the organisation as we have seen with the iPad, the new VW Beetle or the Dyson Ball vacuum cleaner. Product quality: Quality has to consistent with other elements of the marketing mix. A premium based pricing strategy has to reflect the quality a product offers.
Above left: Apples iPad and right Dysons Ball vacuum cleaner. Product features: What features will you add that may increase the benefit offered to your target market? Will the organisation use a discriminatory pricing policy for offering these additional benefits? BRANDING: One of the most important decisions a marketing manager can make is about branding. The value of brands in todays environment is phenomenal. Brands have the power of instant sales, they convey a message of confidence, quality and reliability to their target market. Brands have to be managed well, as some brands can be cash cows for organisations. In many organisations they are represented by brand managers, who have hugh resources to ensure their success within the market. A brand is a tool which is used by an organisation to differentiate itself from competitors. Ask yourself what is the value of a pair of Nike trainers without the brand or the logo? How does your perception change? Increasingly brand managers are becoming annoyed by copycat strategies being employed by supermarket food retail stores particular within the UK . Coca-Cola threatened legal action against UK retailer Sainsbury after introducing their Classic Cola, which displayed similar designs and fonts on their cans. Prepared by: Vinoth/ Faculty Management Studies Page 106
Internet branding is now becoming an essential part of the branding strategy game. Generic names like Bank.com and Business.com have been sold for ms. ( Recently within the UK banking industry we have seen the introduction of Internet banks such as cahoot.com and marbles.com the task by brand managers is to make sure that consumers understand that these brands are banks! PROMOTION STRATEGIES A successful product or service means nothing unless the benefit of such a service can be communicated clearly to the target market. An organisations promotional strategy can consist of: Advertising: Is any non personal paid form of communication using any form of mass media. Public relations: Involves developing positive relationships with the organisation media public. The art of good public relations is not only to obtain favorable publicity within the media, but it is also involves being able to handle successfully negative attention. Sales promotion: Commonly used to obtain an increase in sales short term. Could involve using money off coupons or special offers. Personal selling: Selling a product service one to one. Direct Mail: Is the sending of publicity material to a named person within an organisation. There has been a massive growth in direct mail campaigns over the last 5 years. Spending on direct mail now amounts to 18 bn a year representing 11.8% of advertising expenditure ( Source: Royal Mail 2000). Organisations can pay thousands of pounds for databases, which contain names and addresses of potential customers. Direct mail allows an organisation to use their resources more effectively by allowing them to send publicity material to a named person within their target segment. By personalising advertising, response rates increase thus increasing the chance of improving sales. Listed below are links to organisation who's business involves direct mail. CONSUMER BUYING BEHAVIOUR What influences consumers to purchase products or services? The consumer buying process is a complex matter as many internal and external factors have an impact on the buying decisions of the consumer.When purchasing a product there several processes, which consumers go through. These will be discussed below. 1. Problem/Need Recognition How do you decide you want to buy a particular product or service? It could be that your DVD player stops working and you now have to look for a new one, all those DVD films you purchased you can no longer play! So you have a problem or a new need. For high value items like a DVD player or a car or other low frequency purchased products this is the process we would take. However, for impulse low frequency purchases e.g. confectionery the process is different. 2. Information search So we have a problem, our DVD player no longer works and we need to buy a new one. Whats the solution? Yes go out and purchase a new one, but which brand? Shall we buy the same brand as the one that blew up? Or stay clear of that? Consumer often go on some form of information search to help them through their purchase decision. Sources of information could be family, friends, neighbours who may have the product you have in mind, Prepared by: Vinoth/ Faculty Management Studies Page 107
alternatively you may ask the sales people, or dealers, or read specialist magazines like What DVD? to help with their purchase decision. You may even actually examine the product before you decide to purchase it. 3. Evaluation of different purchase options. So what DVD player do we purchase? Shall it be Sony, Toshiba or Bush? Consumers allocate attribute factors to certain products, almost like a point scoring system which they work out in their mind over which brand to purchase. This means that consumers know what features from the rivals will benefit them and they attach different degrees of importance to each attribute. For example sound maybe better on the Sony product and picture on the Toshiba , but picture clarity is more important to you then sound. Consumers usually have some sort of brand preference with companies as they may have had a good history with a particular brand or their friends may have had a reliable history with one, but if the decision falls between the Sony DVD or Toshiba then which one shall it be? It could be that the a review the consumer reads on the particular Toshiba product may have tipped the balance and that they will purchase that brand. 4. Purchase decision Through the evaluation process discussed above consumers will reach their final purchase decision and they reach the final process of going through the purchase action e.g. The process of going to the shop to buy the product, which for some consumers can be as just as rewarding as actually purchasing the product. Purchase of the product can either be through the store, the web, or over the phone. Post Purchase Behaviour Ever have doubts about the product after you purchased it? This simply is post purchase behaviour and research shows that it is a common trait amongst purchasers of products. Manufacturers of products clearly want recent consumers to feel proud of their purchase, it is therefore just as important for manufacturers to advertise for the sake of their recent purchaser so consumers feel comfortable that they own a product from a strong and reputable organisation. This limits post purchase behaviour. i.e. You feel reassured that you own the latest advertised product. Factors influencing the behaviour of buyers. Consumer behaviour is affected by many uncontrollable factors. Just think, what influences you before you buy a product or service? Your friends, your upbringing, your culture, the media, a role model or influences from certain groups? Culture is one factor that influences behaviour. Simply culture is defined as our attitudes and beliefs. But how are these attitudes and beliefs developed? As an individual growing up, a child is influenced by their parents, brothers, sister and other family member who may teach them what is wrong or right. They learn about their religion and culture, which helps them develop these opinions, attitudes and beliefs (AIO) . These factors will influence their purchase behaviour however other factors like groups of friends, or people they look up to may influence their choices of purchasing a particular product or service. Reference groups are particular groups of people some people may look up towards to that have an impact on consumer behaviour. So they can be simply a band like the Spice Girls or your immediate family members. Opinion leaders are those people that you look up to because your respect their views and judgements and these views may influence consumer decisions. So it maybe a friend who works with the IT trade who may influence your decision on what computer to buy. The economical environment also has an impact on consumer behaviour; do consumers have a secure job and a regular income to spend on goods? Marketing and advertising obviously influence consumers in trying to evoke them to purchase a particular product or service.
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Peoples social status will also impact their behaviour. What is their role within society? Are they Actors? Doctors? Office worker? and mothers and fathers also? Clearly being parents affects your buying habits depending on the age of the children, the type of job may mean you need to purchase formal clothes, the income which is earned has an impact. The lifestyle of someone who earns 250000 would clearly be different from someone who earns 25000. Also characters have an influence on buying decision. Whether the person is extrovert (out going and spends on entertainment) or introvert (keeps to themselves and purchases via online or mail order) again has an impact on the types of purchases made. Maslows Hierarchy of Needs Abraham Maslow hierarchy of needs theory sets out to explain what motivated individuals in life to achieve. He set out his answer in a form of a hierarchy. He suggests individuals aim to meet basic psychological needs of hunger and thirst. When this has been met they then move up to the next stage of the hierarchy, safety needs, where the priority lay with job security and the knowing that an income will be available to them regularly. Social needs come in the next level of the hierarchy, the need to belong or be loved is a natural human desire and people do strive for this belonging. Esteem need is the need for status and recognition within society, status sometimes drives people, the need to have a good job title and be recognised or the need to wear branded clothes as a symbol of status. Self-actualisation the realisation that an individual has reached their potential in life. The point of self-actualisation is down to the individual, when do you know you have reached your point of self-fulfilment? But how does this concept help an organisation trying to market a product or service? Well as we have established earlier within this website, marketing is about meeting needs and providing benefits, Maslows concept suggests that needs change as we go along our path of striving for self-actualisation. Supermarket firms develop value brands to meet the psychological needs of hunger and thirst. Harrods develops products and services for those who want have met their esteem needs. So Maslows concept is useful for marketers as it can help them understand and develop consumer needs and wants. Types of buying behaviour. There are four typical types of buying behaviour based on the type of products that intends to be purchased. Complex buying behaviour is where the individual purchases a high value brand and seeks a lot of information before the purchase is made. Habitual buying behaviour is where the individual buys a product out of habit e.g. a daily newspaper, sugar or salt. Variety seeking buying behaviour is where the individual likes to shop around and experiment with different products. So an individual may shop around for different breakfast cereals because he/she wants variety in the mornings! Dissonance reducing buying behaviour is when buyer are highly involved with the purchase of the product, because the purchase is expensive or infrequent. There is little difference between existing brands an example would be buying a diamond ring, there is perceived little difference between existing diamond brand manufacturers.
RETAILING IN INDIA Euromonitor International's Retailing in India examines whether recent high growth rates can be sustained in an economic downturn. Growth has been boosted by richer consumers spending more and some companies' decision to sell a wider range of non-food products. Rising sales have supported expansion into new markets, new store Prepared by: Vinoth/ Faculty Management Studies Page 109
formats and moves into private label products. However, the economic downturn has set some of these strategies back, this analysis looks at whether grocery retailers will continue to enjoy similar rates of growth in the future. Organised retail continues to make headway Despite the global economic recession and a consequent slowdown in the Indian economy, organised retail continued to make headway although at a slower pace in 2009. Nonetheless, if the current retail landscape is compared with that of 2004, it has undeniably become a much larger environment. Retail stalwarts such as WalMart, Tesco and Marks & Spencer have already made inroads into the Indian retail industry and with multi-billion dollar investments by major domestic players such as Reliance Retail, the market is expected to go from strength to strength, as Indian retailing has embarked on a long-term growth trajectory. Economic slowdown serves as reality check for retailers The global economic crisis and its impact on India resulted in a slowdown of the Indian economy in 2009. This caused consumers to tighten their purses, and the availability of financial support for retail expansion dried up. This put a halt to the unprecedented expansion seen over the review period. Lower consumer confidence resulting from the recession, as well as job losses, resulted in fewer visits to retail stores, and consequently sales plummeted for major retailers. With consumers becoming highly discretionary, spending on non-essential items such as lifestyle goods was highly impacted, making it one of the worst performing categories. Retailers with financial backing weather the storm Credit from banks and other lenders has been difficult to obtain in the current environment, and retailers have suffered severely as a result. Some retailers are unable to pay rental fees because all lines of credit have dried up. In such a tough operating environment, retailers under the umbrella of a diversified holding company with access to internal funds are faring better than other players. For example, Reliance Retail and Aditya Birla Retail emerged relatively unscathed compared with smaller players such as Subhiksha and Vishal Retail. Internet retailing grows at phenomenal pace Due to the increased penetration of credit cards and availability of computing facilities to a wider population, Internet retailing is witnessing stellar growth. Internet retailers offer products at discounted prices to consumers compared with store-based retailers, and bargain-hunting consumers are latching on to this fact. This has become even more pronounced in light of the economic downturn as consumers have become increasingly sensitive to price. Indias attractiveness stands over long term Indias burgeoning middle class offers considerable promise for organised retailing, which is expected to remain attractive to organised retailers over the long term. Liberalization and financial reforms would remain a key factor in the expansion of the organised retail environment. Currently, foreign direct investment is not allowed in single brand retail, and it proved a major hurdle in IKEAs billion-dollar plans in mid-2009 to enter the organised retail environment. However, with a stable government in place at the centre and reform-averse left parties out of the government, retailers are optimistic that progressive reforms will occur over the forecast period.
HOW TO BECOME A CUSTOMER DRIVEN ORGANISATION I recently wrote a post on a survey about the state of Customer Experiences in the Banking industry. It identified a high proportion of customer dissatisfaction with regards their overall banking experiences.
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Harvard Business Publishing posted an article that I found very interesting in relation to how a business can improve its customer experiences. It is based on the following premise: customer experience is an organizational mindset. Its not something a business buys, its something a business becomes. Customer experience refers to the totality of experience a customer has with a business, across all channels and touchpoints. Becoming a Customer Experience-Driven Business is a journey that requires a clear focus, organisation wide involvement and change management to ensure the required outcome is achieved. Technology is not enough! Embracing customer experience is a process, one that requires fundamental shifts in how your business behaves and is organized. A sure way to get this transformational change is to have empathy for the customer and understand how it feels to interact with the business from outside. Combining this customer centric information and attitude with organisational governance, technology and working practices will focus the effort . It isnt just about efficiency and effectiveness and reducing waste throughout your processes. This is about choreographing what you already have (technologies, people, offerings) to better respond to your customers BECOMING A CUSTOMER-DRIVEN ORGANIZATION One of the biggest challenges for companies that are transitioning from product driven to customer-driven organizations is creating a common and consistent measurement that reflects the customer value to the enterprise. This is particularly challenging for companies that have multiple business units each with its own profit and loss responsibilities, business dynamics and unique functional areas. Most companies in this position lack an accurate customer metric that can be adopted by the various business units and functional areas of an organization. In this article we will examine how Customer Lifetime Value (CLTV) can be used as a sound financial metric that can act as a common guide to steer all parts of the organization toward a common goal becoming a true customer-driven organization. We will explain how CLTV can be used as a common metric among your various functional areas, then will explain how it can be used among various business units of an organization. A Common Metric for the Various Functional Areas of Your Organization Companies have tried implementing numerous metrics that measure performance from a customer perspective, the most obvious examples being revenue, profitability and loyalty. Although these metrics provide important aspects of customer value, none of them represent the true value of customer equity, a fundamental metric for a customerPrepared by: Vinoth/ Faculty Management Studies Page 111
driven organization. Customer lifetime value (CLTV) is a metric that best provides a measurement of customer equity and can be used by various functional areas of an organization such as manufacturing, sales, finance, customer service and marketing. We will look at the fundamental components of CLTV to explain their role in maximizing customer profitability. A Common Metric for the Various Business Units of Your Organization We discussed about how CLTV can be an effective customer metric for the various functional areas of an organization. CLTV can also be used as an effective customer metric across the various business units of an organization. Again we will use the basic components of CLTV (revenue, cost and retention) to demonstrate the dynamics that must be considered. The biggest area of conflict in using CLTV as a shared customer metric across the enterprise is that each business unit within the organization might have its own business dynamics (revenue, cost, customer life cycles, customers repurchase cycle, product profitability, etc.). Using one CLTV metric for the whole organization might undermine the dynamics of one business while emphasizing the dynamics of another. For example, if a business unit sells products with a low profit margin, the revenues from that business unit might not be reflected as favorably on the CLTV measurement as the contributions of a more profitable business unit. The obvious strategy would be to sell more of the profitable products and less of the unprofitable ones. While this might be the solution for a particular case, this will not address the issue of creating a metric that is endorsed by all the business units of an enterprise. In order to implement a successful CLTV metric, a higher set of dynamics must be considered for the whole enterprise. This set of dynamics must not only address how each business unit contributes to the bottom line revenue, cost, profit and customer retention, but also how each business unit contributes to the revenue, profit, cost and customer retention of other business units. Unprofitable Products We already talked about how an unprofitable product might have a negative impact on the CLTV of a customer. The following two scenarios demonstrate that an unprofitable product might have positive effects on a customers CLTV. The first scenario is when a product has a flagship positioning in the market place. Selling less of this product might have a negative impact on the overall awareness of the firm, which will negatively impact the revenues of other profitable products of the firm. The second scenario is when an unprofitable product delivers a main benefit to customers and is critical to building customer retention. In this case using this product to increase customer retention or to lower the customer acquisition cost seem to be sound strategies. By imbedding the contribution of these products not just to overall revenue and profits, but to customer retention as well in the CLTV measurement is critical to reflect the true dynamics of the enterprise not just the dynamics of one business unit. Cannibalization Effects Similarly, cannibalization effects can be identified, which will occur when the promotion of one product is adversely influencing the sales of another. The effect in this case would show up as a change in the individual business units metrics, but the total customer equity might not be substantially impacted. If the promotion of the first product is tested and its impact on the customer equity is measured, cannibalization effects can be avoided and its impact will be better controlled. Cross-Sell Opportunities Cross- sell promotions are a great opportunity to increase revenue. However, before implementing a set of crosssell programs a clear strategy should be outlined. The question inevitably appears, Should a cross-sell program be Prepared by: Vinoth/ Faculty Management Studies Page 112
focused on selling the product which generates the largest increase in revenue, or should I sell the product which generates the largest increase in retention? Assuming that the customer was acquired by business unit A, should the next product offered to the customer be another product of As or a product from business unit B. Once again by estimating the impact of a cross-sell promotion not just on revenue, but on all the elements of CLTV of a customer, organizations can begin to estimate the impact on the true value of a customer. Implementing CLTV in Your Organization As we have seen, CLTV is an enterprise-wide metric as defined by its components. If implemented properly, CLTV can be a very effective metric for the whole enterprise. Implementing CLTV in your organization must reflect the nature of the metric itself. The implementation team must have a corporate sponsor, and it must have a team that represents the various business units and functional areas of the organization. Key business areas that must take on a leadership role are finance (and its cost accounting function) and marketing. They have the key resources and systems to generate the basic component elements of CLTV. Finally, the technology on which CLTV will be implemented must also represent the nature of the metric. Enterprise data warehouses and customer data marts are natural environments for housing the data, performing the computations necessary for developing the metric and distributing the metrics and reports to the various areas of the organization. CAUSE-RELATED MARKETING Altruism. Corporate responsibility. Philanthropy. These are often used to describe cause-related marketing-when businesses join with charities or causes to market an image, product, or service for mutual benefit. Embracing a cause makes good business sense. Nothing builds brand loyalty among today's increasingly hard-toplease consumers like a company's proven commitment to a worthy cause. Other things being equal, many consumers would rather do business with a company that stands for something beyond profits. Powerful marketing edge Cause-related marketing can become a cornerstone of your marketing plan. Your cause-related marketing activities should highlight your company's reputation within your target market. Cause-related marketing can positively differentiate your company from your competitors and provide an edge that delivers other tangible benefits, including: Increased sales Increased visibility Increased customer loyalty Enhanced company image Positive media coverage
By choosing a cause you are passionate about, cause-related marketing is emotionally fulfilling. It's a way to merge your profit center with your "passion center" and build a business that mirrors your personal values, beliefs and integrity. If your cause also resonates with your target market, your activities will generate tremendous goodwill and media attention can be its side effect.
Real-World Success Story Cosmetic dentist Mark McMahon made himself a media mini-celebrity with a thriving practice due in part to his high-profile pro bono work in his community, a strategy that landed him radio and TV appearances in areas where he worked. Prepared by: Vinoth/ Faculty Management Studies Page 113
McMahon established partnerships with local charities, including a homeless shelter and a shelter for battered women, and offered free dental services to their members. Before each event, he contacted local media and let them know what he was up to. Several TV crews showed up, filmed him treating patients, and later aired the segments on the evening news. "These events were surprisingly easy to arrange, and every year, they'd help us get press simply by doing these charitable promotions," McMahon says. "Local television news stations loved the emotional element. And it was obviously rewarding to see patients after we'd treated them who'd been in pain for months talking about how glad they were to be relieved of their toothaches." Another project involved the Delancey Street Foundation, a residential education center for former substance abusers and ex-convicts. "I agreed to treat some of their members' acute dental needs," McMahon says. "I quickly appreciated the media appeal of transforming the appearance of these rough-looking guys with terrible smiles." McMahon captured the event with before and after photos. "These guys had missing teeth and terrible smiles," he says. "So I had a professional photographer capture before pictures of these guys in street clothes with their snarling faces. After I fixed their teeth, we took more pictures, but this time dressed the guys in suits and ties, now looking like lawyers and accountants, with me sitting right in the middle. The media loved it, and it was great seeing these men looking like new." McMahon's TV appearances created name recognition. "After I did the story on a local television show, I was recognized in my gym by a masseuse who had seen the show," McMahon recalls. "She said, 'I was thinking about you this morning while I was flossing my teeth.' She became a great source of referrals." (Excerpted from the book Get Slightly Famous: Become a Celebrity in Your Field and Attract More Business with Less Effort, by Steven Van Yoder) Getting Started Cause-related marketing yields mutual benefit. Look for partners with a similar agenda whose goals can be better achieved by partnering with your business. Take inventory of the assets that make you an appealing partner in a cause-related venture. There are many types of mutually beneficial relationships you can form with your cause-related partner, including special events, sales promotions and collection plans. An easy way to embrace a cause is to team up with a charity. Whenever Johnny "Love" Metheny, a slightly famous nightclub owner in San Francisco, opens a new club, he shares the limelight with a local charity. "I have a history of including the Leukemia & Lymphoma Society in my grand openings," says Metheny, who was voted the society's Man of the Year in 1991. "It's not only something I feel good about, but it helps us market our businesses to the community and media at the same time." Volunteer with an organization. When Eunice Azzani, an executive recruiter, volunteered to serve on the board of the San Francisco AIDS Foundation, she didn't anticipate that it would connect her with executives from Mervyn's, Bank of America, and Wells Fargo Bank, all of who eventually hired her to work for them. "People don't hire a piece of paper or a process. They hire people they trust," Azzani says. "Volunteering for a position at a local organization makes you very trustworthy." She advises business owners to target causes they believe in. "If you're helping with a cause you believe in, people will see that you care. And they'll realize you will probably care as much about your work."
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As your partnership takes shape, become ambassadors for each other. Talk about the charitable organization and have flyers available. Promote the organization (and your partnership) on your website and in your newsletters. Ask your partner to extend the same courtesies to you. Never lose the marketing focus of your community partnership efforts. Even though the work is philanthropy, your cause should generate interest in your company and motivate people to buy from it. Select a cause that is important to your target market, and make sure your target market sees that connection. ETHICAL MARKETING Ethical marketing is about whether a firms marketing decision is morally right or wrong. The morality of the marketing decision can encompass any part of marketing from advertising to the pricing of their product or service, to the sourcing of their raw materials. In todays corporate world ethical marketing is playing a larger role in marketing strategy. An increasing number of consumers are buying products/services because they feel that the products, services or organisations responsible for those are ethical. In response to this consumer demand organisations have increased their focus on ethical marketing. The UK Co-operative bank is good example of an organisation that tries to follow a ethical principal, based on what the customers feel strong about. When companies are reviewing marketing strategies they need to consider whether the marketing decisions that they are making are ethical and reflect consumer and market expectations. An individuals view of ethics and morality is influenced by a variety of things including their culture, background, experience, upbringing/family, peers, community, religion and country. After a company has decided to implement ethical marketing they will need to make the following decisions: 1. Define what is ethical. 2. Which branch of ethics will they subscribe to. 3. How will the ethical approach to marketing be implemented. 4. In which areas of the firms operations should ethical marketing be implemented e.g. employees, suppliers, consumers/clients, production techniques, distribution or the whole value chain. The question of ethical is whether the firms decisions is right or wrong. A number of questions a firm must ask itself include: Should the firm employ children to their products? Do the firms suppliers use child labour? Does the firm know? Today, child labour is a very big issue, does your firm want to associate itself with this? Does the firm exaggerate the benefits of its products on its packaging? Are claims overstated? Many firms do make bold claims. The company needs to make sure these claims are fully supported. Does the firm conduct in high pressurized selling techniques or focus on customer groups that are vulnerable e.g. pensioners? With markets very competitive obtaining customer loyalty is becoming very difficult. High pressurized selling techniques could result in the firms loosing reputation within its market. Does the firm squeeze even more margins out of their supplier to the extent that it impacts on the suppliers profit margin and may well have an impact on the quality of the products sold to you? Many supermarkets have been accused of such a practice. The introduction of the fair trade policy does much to deal with this.
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Ethical marketing is based around making the right moral decisions. Balancing ethics and remaining competitive can be difficult. You can argue that as consumer attitudes shift having an ethical strategy will make a firm more competitive. Environmental marketing does stem from ethical marketing, however environmental marketing is slowly becoming so big it does deserve to be looked at separately. E-MARKETING MIX Traditionally the marketing mix is co-ordinated so efficient product, price, promotion and place strategies are developed for products purchased over the counter. The internet is changing the way we sell our products and services. Thats a fact. Consumers now use the internet to research and purchase products/services online. Organisation now need online strategies to attract and retain customers. The e-marketing mix considers the elements of presenting the marketing mix online. Lets look at it in more detail. E-product strategies We walk into a shop and see a product we like, we can assess it, touch it. Online, this immediate tangibility disappears. But, is that a disadvantage? Within the uk e-commerce sales are increasing at extremely high rates. Why? What does buying products online offer over one to one sales? Firstly there are clear online facts about the product you are purchasing. The buyer knows immediately about product features, the facts, not a sales persons assumptions. www.comet.co.uk a UK electrical store offers clear information on products and their specification, consumers know what they get if not there is a customer service number where they can find out more. The buying process is also customised for returning visitors, making repeat purchases easier. Organisations can also offer immediately ancillary products along with the main purchase. For example, the chance to buy extra printer cartridges along with your purchase of your printer online. The product can also be customised to consumers needs. www.nike.com offer customised trainers to users online. Users can design and see their trainers online before they order! E-price strategies As mentioned in our marketing mix section, pricing is always difficult to do and must take into account many considerations. Traditionally pricing was about finding about your costs, discovering how much consumers are willing to pay, taking account competition pricing then setting your price. The internet has made pricing very competitive. Many costs i.e. store costs, staff cost have disappeared for complete online stores, placing price pressures on traditional retailers. The internet gives consumers the power to shop around for the best deal at a click of a button. Website such www.kelkoo.com compare products from different websites informing consumers of where the best deal is. Such easy access to information helps to maintain prices within the online world. The growth of online auctions also helps consumers to dictate price. The online auction company www.ebay.com has grown in popularity with thousands of buyers and seller bidding daily. E-pricing can also easily reward loyal customers. Technology allows repeat visitors to be tracked, easily allowing loyalty incentives to be targeted towards them. Payment is also easy, paypals, or online credit cards use allows for easy payments. However the downside to this is internet fraud, which is growing rapidly around the world. E-place strategies Prepared by: Vinoth/ Faculty Management Studies Page 116
One of the biggest changes to the marketing mix is online purchasing. Consumers can purchase direct from manufacturers cutting out retailers totally. The challenge for online retailers is to ensure that the product is delivered to the consumer within a reasonable time. Location is important within our place strategy. Online location can refer to where links are placed on other websites. Placing a link on www.google.com home page would generate high consumer traffic for you. Knowing your customer and knowing where they visit should help you understand where to place your online links and advertisements. E-promotion strategies Promoting products and service online is concerned with a number of issues. Having a recognisable domain name is first stage towards e-promotion. Organisation such as egg.com have successfully positioned the brand on the online world as an online bank. Most organisations today have some form of webpage used in most if not all advertisements. Placing banner advertisements on other webpages is a common form of e-promotion. Banner ads must be placed where potential customers browse. Web public relations (WPR) is another approach to promoting online. News worthy stories based on product or service launches can be placed on the companies webpage, or WPR articles sent to review sites for consumers to read. Hopefully this form of online promotion will pull the consumer in. Direct email is a popular and common form of e-promotions, although slowly becoming the most hated my many consumers. Organisations can send e-leaflets to hundreds and thousands of respondents, hoping a small percentage will reply. The problem is that for every 100 emails sent the response rate will be 1-2!. Direct emailing is also known as SPAM which stands for Sending Persistent Annoying eMail. (SPAM). To summaries e-promotion includes: Banner promotions Web public relations (WPR) E-leaflets Having a domain name. The e-marketing mix must work together and support each other if the company is to have a successful online marketing strategy.
WEBSITE OPTIMISATION STRATEGIES Register a domain name. It does help if you can register a domain name indicating what you have to offer. However if that is not possible then you will have to create awareness about what your website offers. www.elephant.co.uk is a website that sells insurance, heavy advertising must remind consumers of what the website is offering. Content: Good content is vital. Users need a reason to comeback to your site and recommend others to it. Website coding: make sure your website has the correct tags so search engines can index your website correctly. Submit to search engines: Submit your website to the popular search engines like Google, Yahoo, MSN. Create links with other websites, this will help improve your ranking and search results among search engines. Prepared by: Vinoth/ Faculty Management Studies Page 117
Update your content. Remember you must give users a reason to come back so keep your content updated. VIRAL MARKETING - DEFINITION With any viral marketing campaign the objective of the firm can differ from creating product or brand awareness to increasing market share. With marketing budgets now squeezed because of the credit crunch, viral marketing is seen as an effective way to promote a firms products or services. 1. Give away valuable products or services. To grab attention something has to be given away for free!. 2. Provide effortless transfers to others. The marketing message should be easy to transfer and spread, usually by email. This is the whole point of viral marketing. 3. Scales very easily from small to large. You have the resources available if the campaign moves from small to large in a short period of time. 4. Exploits common motivation and behaviors. A viral marketing campaign should exploit human desires. Facebook and Twitter work on the fact that it is cool to have a Facebook or Twitter account. 5. Utilizes existing communication networks. Will your viral marketing campaign take advantage of social networks that users have. Is the message easily spread able via social networking sites? 5. Takes advantage of other resources. 6. Can others help your distribute your message. Can you piggy back of someone elses website to help you spread your message? Again the use of YouTube or Twitter can be to help spread the word. Viral marketing is one of the promotional mix strategies a firm can use to help them increase their brand presence within the market and a cost effective way which can result in high popularity. BENEFITS OF INTERNET MARKETING FOR THE BUSINESS Whilst there are many benefits for consumers shopping online, business that start their operations or transfer their operations online greatly benefit from doing so. Some of these benefits will be briefly discussed. Data collection Everytime a customer transacts with the company online, that transaction is captured. The firm can use this data in a number of ways. Firstly information can be analysed to find out most popular products/services sold. Secondly the data can be used to assist in segmenting their customers, profiling them and sending customers promotional material based on past buying habits.
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There has been much controversy over the amount of information that is being collected online by various companies in particular social networking sites and whether customers should be able to opt out of that information being shared to third party users. Personalisation of web experience When customers log into their accounts businesses can make their web experience almost unique. From offering special offers to that particular customer, offering add on to their recent purchase, much like Amazon.com does, or by allowing the customer to personalise their own products, like Nike does with their trainers . Personalisation allows the firm to form stronger bonds online with customers and form long term online relationships ensuring customers come back regularly. Competitor analysis The internet allows businesses to analyse their competitors online strategy. A firm can keep abreast of new products that are released, react to price changes, or use the internet to discover secondary data on their competitors. The internet allows a firm to react quickly to a change in their competitors strategy, and try to provide a service that allows them to match or beat their competitors. Cost reduction One of the major benefits of setting up or moving a business online is the cost advantages of doing so. A firm can save a number of costs. These include: 1. Staffing costs: Fewer staff are needed online then in the high street thus reducing costs. 2. Premises: The company will not need retail outlet just a centralised office and possibly warehouse space, saving on potential retail costs. 3. Disintermediation: The channel of distribution is shorter online as the consumer has the opportunity to buy directly like with Dell. As one of the intermediaries is cut out this process is known as disintermediation. 4. Financial management: As consumers pay for the product before it is dispatched, this improves the cash flow for the company, making sure for the firm that they can pay their suppliers and other costs on time.
RELATIONSHIP MARKETING WITH THE INTERNET Relationship marketing is all about keeping the customer for the long-term. The life time value the customer has to offer. Traditionally offline the firm would develop a number of strategies to try to get the customer coming back to their store, this could range from having a customer services desk to making sure staff are skilled. These strategies have evolved for the online world, and it is has become a challenge to try to make customers visit and purchase products from their websites regularly. Some strategies used to develop relationship with customers online include:
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Customisation: Customer can customise their products online to give them a unique experience. Shoe manufacturer Nike and car manufacturer Mini Cooper allow their customers to customise their products when visiting their website. Giving users an interactive experience online. Online questionnaires: Many retail websites are asking customers to feedback their experience of using the website almost instantly after they complete using their site. The information has the advantage of being analysed very quickly so the firm can offer what users need. E-vouchers: Regular customers are often sent e-vouchers that give them discounts off their next purchase. Vouchers can be targeted around what the customer frequently buys. Firms may calculate that a particular customer has not purchased from them for a while and send a voucher enticing them back to try and reestablish this online relationship. Online chat: To recreate the shopping environment some websites are offering the ability to chat via webcam or chat window. This gives the opportunity for users to talk to sales persons via the web. Dell offer this facility online, where users can query computer specifications. By trying to recreate this interactivity customers may shift or secure their loyalty to a particular online firm. Customer Service and Contact: A key to maintaining online relationships is how the customer is looked after, after the sale is complete, the post-transactional strategy. If a product is faulty, is it easy for the customer to return it? Some online electrical firms allow the customer to log the fault, print a returns number, and a date for pick up from their home. This is quite straight forward. If the customer feels that the process for returning and liaison with the online retailer is rather long, the chances are loyalties would shift. With technology changing at a very fast rate the experience of the user will become more interactive and this interactivity maybe the key to secure long-term online relationships. INTERNET MARKETING AND OBJECTIVES Objects of an online business : If your business is solely based online your objectives could be:
1. To inform users of your web presence and the benefit your website offers over its competitors. 2. To persuade users to use the services of the firm. This could be done by offering a discount for a limited time. 3. To make sure the business is listed in all the most popular search engines and directories. 4. Keep customers updated of any new products or changes to business services. 5. Make sure that customer have a pleasant website experience by continuously improving the navigation of the site. 6. To aim for sales of x amount and net profit of x amount in a given period. Objectives of a clicks and mortar business : If a business has a clicks and mortar strategy their objective maybe:

To reduce costs by moving some of their operations online. To integrate online and offline strategies to maintain and improve relationships with customers. This could be by offering reserve online and pick up in store strategies like some retailers do. The companys strategy should support the overall marketing objectives of the firm this maybe to increase overall market share or profit. To promote both online and offline activities.
MARKET RESEARCH AND THE INTERNET
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The internet is a great tool to help the organisation conduct research. Secondary data can easily be collected online, and primary data can be collected via clever use of online surveys. Market and Marketing research is essential for the company to stay ahead of its competitors and for the firm to provide what customers need. Technology is advancing and the way firms conduct their research is changing. The internet can be used to conduct research in a number of ways. Cookies Each time a user visits a website small text files called cookies are left on the computer, these files give an indication to the web companies what pages you have visited, and if you log into your account you have a customised view all the time. In terms of research cookies tell the website owner what pages you visit frequently, how long you spend on that page and how you navigate around the website. This information can help the firm develop a better customised experience for the user and help them develop a website which becomes more user friendly over time. Competitor Analysis The internet allows the company to research a competitor to analyse their marketing mix strategy online, their financial information, by looking at annual report of accounts or financial analysis done by independent websites. Also any rumours of product launches can be investigated online. Usage Analysis Businesses need to know how popular the internet is, and how long users spend online and what purchase patterns are like online. There are many websites that will give you this information. A quick Google search will give you a list of websites that will offer you that data to buy. The trend in the UK is towards more users spending time online not only for online shopping but also for social interaction via the use of Facebook and MSN. Online PESTLE Analysis Every business needs to conduct an environmental analysis. The internet enables an organisation to monitor the external environment quite easily. RSS feeds from news websites can keep companies updated, as with newsletters , forums and posts. All PESTLE factors can be monitored easily online.
Online Questionnaires A simple form of primary research online is the use of online questionnaires. When the user visits a website they are asked to complete an online questionnaire. The data is usually analysed fairly quickly, with the results being used to improve online experiences. Validity of data The internet is becoming saturated with lots of data and information. When a company uses this data online they must make sure that the data is accurate and valid. Sources should be checked, the date of publication should also be checked to makes sure it is valid.
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MARKETING OPPORTUNITIES WITH SMARTPHONES The internet is becoming mobile, that is a fact. Smartphones like Apples iPhone have made access to the internet on the move a reality. Within the UK according to Nielson research smartphone users increased from 5.6 to 6.2 million in 2009. According to BBC Click online 33% of all mobile sales within the UK 2010 will be from smartphones, this will increase to 40% of sales in 2013. Many content based websites are now designing websites for smartphones. Users who visit BBC.co.uk are automatically referred to the mobile version of the website. One of the greatest use of smartphones is for social networking use, especially amongst the young. Firms can tap into this by advertising on social networking sites, or setting up a business profile on social networking sites , on Facebook users can then become fans of that particular business. The iPhone has grabbed the market share for smartphone users and there has been a rush by developers to provide apps for users. Banks are taking advantage of this and providing iPhone apps for online banking, increasing their smartphone penetration. Currently various applications are being written for smartphones, and firms are making money developing these applications. As a marketing medium, it is early days for the smartphone, as penetration and usage increases, we will see opportunities for advertisers to shift some of their advertising spend to smartphones. BENEFITS OF INTERNET MARKETING FOR THE CUSTOMER Customers have gained immensely from the use of the internet. As the number of users of the internet increase more and more will shop online. Listed below are some of the benefits of the internet for the customer. Customers stay updated Customers are kept updated with product information either via the website or emails. With the internet now becoming mobile, through 3G technology and Wi-Fi, customers can be kept updated almost in real time. Customers can compare online One of the greatest advantages for the customer is that they can compare products or services they wish to purchase from the comfort of their own homes. Instead of visiting a number of different retail outlets, the user simply has to open different window tabs to compare prices or features of the product/service they wish to purchase. Many retailing websites offer the facility where different products they sell can now be easily compared. There is also price comparison websites that customers can use to get the best possible price for their products. Clear product information for the customer Websites offer clear product information on the product or service. There is little chance of misinterpretation or mishearing what the sales person said. Transparent pricing Pricing online is very clear and transparent for the customer. Customers can take advantages of pricing that may change regularly or take advantages of special offers that last for a limited period. Prepared by: Vinoth/ Faculty Management Studies Page 122
Track your purchase Consumers have to pay for their product /service before they receive it. It is important that consumers feel reassured when this happens. Many webistes allow consumers to track their purchase from order, dispatch to transportation before delivery to their home address. Again this reassures the consumer and makes them feel that they are obtaining a good service online. Reduction in personal carbon footprint. As consumer spend more time shopping online and use their cars less. Their personal carbon footprint is reduced. 24/7 Shopping There is no time restriction on when a consumer can shop online. Many online sales now start at midnight on a particular day encouraging customers to shop all hours of the day. SOUND MARKETING Sound is an important part of marketing, whether it is in the form of music, songs, the spoken word or noises. Sound is used in marketing to achieve various objectives including: 1. Brand reinforcer This is where sound is used to build a new brand or add to a new brand. Sound will be part of the same tool box as corporate logos, trademarks and strap lines. 2. Behaviour influencer This is where sound is used to influence the audiences or consumers behaviour. 3. Information distributor This is where the organisation uses sound to provide their audience with information for example through a radio advert or through a telephone voice over for telephone callers placed on hold or waiting to talk to the organisation.Sound marketing enables organisations, to target a sense in addition to visual or sight. This can be highly effective as 1. Firstly each person uses their senses (smell, sight, hearing, touch, taste) in different proportions 2. Secondly as visual marketing is everywhere (ubiquitous), sound marketing grants organisations the opportunity to differentiate their marketing from others via a medium other than visual and 3. Lastly sound especially music can lead people to recall events that took place on an occasion when they heard the music or sound.
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The macro-environment Prepared by: Vinoth/ Faculty Management Studies Page 3

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Strength examples could include:

Weaknesses could include:

Low or no market share. No brand loyalty. Lack of experience.

Opportunities could include:

Threats could include:

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Product Life Cycle stages

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KEY DRIVERS OF SUCCESSFUL MARKETING STRATEGY

The main features of the B2B selling process are...

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The main features of the B2C selling process are...

CONSUMER GOODS CLASSIFICATION

Methods of monitoring customer satisfaction

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There are five steps in this ladder. Starting with:

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Direct Mail. Face to face selling by specialists.

Editorial. Publicity. Loyalty schemes.

Very suitable in targetted print media. Suitable

Discounting. Specialist exhibitions and or trade shows. Opinion polling.

Focus groups. Pilot schemes. Point of sale displays and communications.

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Catalogues Commissioned Agents E-Commerce via Internet

Form part of distribution chains. Often used.

Form part of distribution chains. Sometimes used.

Multi-level marketing including party plan.

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for what reason.

Unit III MARKETING MIX DECISIONS

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Third Agers Associations.

Mobile High valued house/flat Good Salary Young branded car.

50's Retired early from profession. Time to spare Adventure Seekers

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Advertising includes the following forms of messages: The messages carried in

Newspapers and magazines; On radio and television broadcasts;

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