Chapter 1

Role of Marketing

Answers to Think it over (p.2) 1 The readers can get their morning newspapers free of charge. They have easy access to the latest news because all free newspapers are distributed at convenient locations. The readers can also kill time by reading the free newspapers while commuting to work. 2 Yes, changing lifestyles in Hong Kong account for the rapid growth of free newspapers. Hong Kong people lead a hectic lifestyle. Free newspapers meet their needs. As Hong Kong people become busier and have less time to read newspapers, they like to read newspapers in a cost-effective manner. For this reason, most Hong Kong people grab free newspapers before getting on the bus or MTR. This can save time because they can read the newspapers while commuting to work. Thus, free newspapers are becoming more popular. 3 Yes, the success of free newspapers in Hong Kong is related to their marketing practices. Free newspapers look like an A3 size stapled book. Their appearance is different from traditional paid-for newspapers. This new size allows readers to easily grab and read themwhen travelling on board a crowded MTR or bus. Moreover, most readers just want an overview of the latest news that they can read while commuting. In an attempt to meet readers needs, all news in free newspapers is condensed into relatively short reports instead of more detailed stories. Free newspapers adopt a free pricing strategy. Because the newspaper is free-of-charge, most readers would like one. All free newspapers are distributed at convenient locations so that readers can easily get a copy. These marketing practices have resulted in high circulation for free newspapers. Their high circulation allows the publishers to readily promote their newspapers to advertisers and generate even more advertising revenues. 4 In the face of keen competition from free newspapers, paid-for Chinese newspapers should focus on readers who have more time to read detailed news reports. To differentiate themselves from free newspapers, paid-for newspapers should provide information that is not available in free newspapers. For instance, paid-for newspapers should take advantage of their relatively greater financial resources (as they charge buyers) to provide their target readers with a greater variety of news, information and special columns, etc. As paid-for newspapers have long-established relationships with advertisers, they can collaborate with their advertisers (e.g., PARKnSHOP, McDonalds) to take part in joint promotions. This can give their readers more value for money.
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p.3 Teachers guide Teachers can begin with famous enterprises or organisations (i.e., profit-making organisations and non-profit making organisations) and use them as an example to show students how marketing concepts are applied in the real world.

p.5 Try This Activity A1 The value that customers can gain from Sony Corporations Playstation is the entertainment they receive. They can also gain the admiration of their friends by using this trendy product. The obvious value for Sony is the revenue received from selling its Playstation products. A2 The process of exchanging values at my school: Step 1: The school identifies the students needs to acquire knowledge, achieve all-round development and attain good examination results, especially in public examinations. Based on this identification, the school designs various courses accordingly. Step 2: Students then enrol in the school by paying an appropriate school fee. Step 3: After attending classes in the school, students would then be able to acquire knowledge, achieve all-round development as well as attain satisfactory examination results (value for the students). Step 4: The school would, in turn, gain a reputation and enjoy an increasing number of applications, as well as receive more revenue (value for the school). Additional information Marketing can be defined as managing profitable customer relationships. The twofold goal of marketing is to (1) attract new customers by promising superior value and (2) keep and increase the number of current customers by delivering satisfaction. Additional information Needs are states of felt deprivation and are a basic part of the human condition. Needs include: physical needs for food, clothing, warmth and safety; social needs for belonging and affection; and individual needs for knowledge and self-expression.

Chapter 3 will have a detailed discussion of needs based on Maslows hierarchy of needs.

Additional information Wants are forms of human needs shaped by culture and individual personality. When wants are backed up by buying power, they become demands. Additional information After identifying its target customers, a company must decide how it will serve these customers, in other words, how it differentiates and positions itself in the market. More details on positioning will be given in Chapter 4. Teachers guide Draw students attention to the differences between needs and wants.

p.6 Teachers guide Highlight the major differences between a marketing concept and a societal marketing concept.

p.7 Answers to Discussion questions 1 The Body Shop organises its own fair trade programme called Community Trade to promote fair trade with its ingredient suppliers who are mainly from developing countries. By buying ingredients from these suppliers, the Body Shop helps them earn more income. Ultimately, people working for these suppliers are also expected to have better pay. This would help improve the living standards of people in developing countries. 2 The Body Shop Foundation improves the well-being of people in society by providing funding for non-governmental organisations working in such areas as human rights and environmental protection. These areas are essential for the well-being of people. Yes. The Body Shops Against Animal Testing policy benefits society because it offers other species a better chance to survive. One of the key factors in preserving our societys well-being is maintaining an ecological balance between humans and non-human creatures. The large number of animals used for testing may lead to the extinction of species and eventually affect the ecological balance. What the Body Shop is doing is trying to reverse the imbalance, and consequently this will benefit society. 4 The Body Shop finds the highest quality ingredients and transforms them into innovative products. It then markets and prices its products fairly. Thus, customers can enjoy a wide diversity of new, high-quality products. They can also afford to buy these products for a
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reasonable price. (As the Body Shops products are made of natural instead of artificial ingredients, they are also expected to be safer for customers. This improves the well-being of its customers.) 5 By practising a societal marketing concept, the Body Shop gains the trust and loyalty of its customers. It can also gain goodwill from the general public. In the long run, this would lead to increased sales and profits.

Try This Activity A3 Teachers guide Select a Hong Kong company and ask students to discuss: 1 Who are its major target customers? 2 What are the major needs of these customers? 3 How does the company satisfy its customers needs?

Check Your Progress Q1 If a consumer wants to show off a luxury handbag to her peers, she wants to satisfy her ego need (i.e., look good in front of others). Hence, a low-priced, unbranded handbag may not be the right product to satisfy this consumer. (Accept any other reasonable answers) Q2 If a consumer is relatively poor and is rather price-conscious, she may simply prefer a low-priced or a medium-priced product (an unbranded handbag). Since a very high-quality product is likely to be very expensive, it may not be the right product to satisfy this consumer. (Accept any other reasonable answers) The marketing concept mainly focuses on the well-being of the companys consumers. As for the societal marketing concept, the company not only focuses on the well-being of its consumers, but also the well-being of the public or the entire society.

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p.8 Additional information Marketing research is the systematic and objective process of obtaining information that can aid in making marketing decisions. Teachers guide Teachers can use a school as an example to help students understand the importance of marketing as a business function.

p. 9 Try This Activity A4 Although a monopolist, by definition, is the only seller within a particular industry, it may face competition in a broader sense. Because of the presence of competitors, monopolists still need to practise the marketing concept in order to provide more satisfaction to their target customers. For example, the MTR is the only supplier of mass transit railway services in Hong Kong. There is no competition in the narrowly defined market of mass transit railway services. However, the MTR still needs to compete for customers with public transportation like buses, minbuses and taxis, etc. Hence, it still needs to practise the marketing concept to outperform its broadly defined competitors. Check Your Progress Q4 The following are ways for the casual wear retailer to find out what its customers need: Conducting marketing research Seeking information from frontline employees Observing customers buying behaviour at its retail shops Q5 Building a long-term relationship with customers allows a company to retain customers who may refer other customers to the company. By establishing a long-term relationship, customers will likely buy more from the company. The company can generate more sales and reap more profits. Teachers guide Recall the importance of marketing management mentioned in Chapter 7 of NSS BAFS: Business Environment and Introduction to Management.

p.10 Additional information In recent years, the importance of non-profit marketing has been growing both in an economic and a political sense. Hospitals, schools, universities and charities all have to compete in society. They need to obtain, protect and justify their funding and even their existence. This means that non-profit making organisations need to think not only about efficiency and cost effectiveness, but also about market orientation. They need to define what their customers need and want, and how they can provide them with better products or services than their competitors. Activity 1 Ask students to quote more examples of exchanging value in different organisations through the use of marketing.

p.11 Check Your Progress Q6 Most people have a sense of providing community service. They will feel satisfied or happy if they can help others (especially the poor or disadvantaged groups). By employing the marketing concept, the Tung Wah Group of Hospitals can provide people with such satisfaction. For example, the Tung Wah Group of Hospitals can organise various marketing activities (i.e., fund raising activities such as flag selling, an annual fund raising variety show jointly organised with TVB). By donating money and offering community services, people will feel satisfied. At the same time, the Tung Wah Group of Hospitals can also receive the needed contributions and free labour to continue its operations. Q7 A politician can use the marketing concept to identify the needs of his target market (i.e., voters). For example, a Democratic Party politician finds that his voters are extremely concerned about universal suffrage. He may then emphasise his determination to fight for universal suffrage in all of his promotional activities (e.g., public speeches and debates among candidates, etc.). He may also demonstrate to voters that he can better satisfy their needs than other candidates (i.e., his competitors). A good image can then be fashioned. This helps the politician win support from voters.

p.12 Activity 2 (a) Choose a company and ask students to search the Internet for information about it. (b) They should then come up with a SWOT analysis for the company. Additional information Put simply, planning is concerned with the what and why of marketing activities. Implementing is concerned with the who, where, when and how of marketing activities.

p.14 Additional information Characteristics of marketing objectives In order to properly establish a marketing objective, management needs to pay attention to the following: Objectives should be compatible with one another. For example, it would sometimes be difficult for a newly launched product to achieve high growth in both sales and short-term profits. Objectives must be realistic and achievable. Objectives must be specified in a measurable and clear manner.
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p.15 Additional information A market leader can expand its total market by finding new users creating new users encouraging more usage Example: Intel has invested heavily in new PCs, networking and telecommunication applications to expand the total demand for microprocessors. Additional information A market leader can protect its current market share by: fulfilling value promises to customers keeping prices consistent with value building relationships with customers continuous innovation Example: PARKnSHOP used a low price strategy to defend its leading position against competitors. Additional information Increasing market share Example: Colgate has launched various toothpaste formulae. This satisfies customers who have different needs. As a result, the companys market share has increased. Additional information The main objective of market challengers is to gain market share and to eventually become the market leader.

p.16 Additional information Advantages of the market follower strategy: Learning from the market leader s experiences Improving on the market leaders offerings Example: The presence of various pocket tissue brands, i.e., Tango, Timpo, and Tinpo, that are similar to the leading brand Tempo shows the use of this copycat strategy. Additional information A market nicher usually earns high margins rather than high volume. The market nicher strategy is a
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good strategy for small firms with limited resources. The major risk faced by market nichers is that the market niche may be penetrated by large firms once they notice that the market niches are profitable and successful.

p.17 Check Your Progress Q8 A SWOT analysis is an analysis of the main strengths and weaknesses of a business unit, and the opportunities and threats of its operating environment. Q9 A market challenger tries hard to challenge the leadership position of the current market leader, whereas a market follower mainly tries to follow the strategies of the current market leader. Q10 A marketing plan details all the activities and actions required for the proper implementation of marketing strategies. The major purpose of formulating this plan is to provide a set of detailed and workable guidelines for the company to achieve its stated marketing objectives.

p.18 Additional information Geographical organisation may allow a marketer to settle into a territory so that the marketer may get to know his customers, and work with a minimum of travel time and cost.

p.20 Additional information Many companies have come to realise that todays marketing environment focuses less on products, brands, and territories and more on customers and customer relationships. As a result, more and more companies are shifting their brand management focus to customer management. Many companies now organise their marketing operations around major customers. Market-management organisation has grown in popularity in recent years. Activity 3 Choose a company and ask students to design an organisational structure for its marketing department using different methods to form departments.

p.21 Teachers guide Remind students of the concept of leading as a management function mentioned in Chapter 5 of
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NSS BAFS: Business Environment and Introduction to Management. Additional Information Successful marketing implementation depends on how well the company blends the following elements into a cohesive action programme that supports its marketing strategies. People: The company must be staffed by people who have the needed skills, motivation and personal characteristics. Organisational structure: An organisational structure specifies the responsibilities for each job position and the relationship between those positions. This structure plays an important role in implementing the marketing strategy by coordinating the work done by different people. Reward systems: This serves to motivate employees to work. Employees will be more committed to their jobs. Company culture: The companys marketing strategies must fit with its company culture (i.e., the system of values and beliefs shared by people in the organisation).

p.24 Check Your Progress Q11 Geographical structure should be the most suitable choice. The reasons are as follows: In a geographical structure, the positions of regional managers in charge of various marketing functions are set up (e.g., regional promotions managers, regional sales managers). The company can appoint one of its regional marketing experts to be its regional manager. With the specialised knowledge of the marketing expert, the company will be able to tailor its marketing strategy to the needs of customers in different overseas markets. The regional department will focus on developing the companys marketing strategies in different overseas markets. The company can be more sensitive to changes in the marketing environment of different regions. It can respond to changes in different overseas markets quickly. Q12 Factors include: Soundness of the marketing plan: If the department store plans to achieve an unreasonably high revenue and sets this as a target for the crazy sale, it will be very difficult to implement.

Availability of the required resources: If the department store does not allocate enough staff to work at the crazy sale or if it does not have enough of a promotional budget, the marketing manager will find it difficult to carry out the crazy sale successfully. Leadership skills of the marketing manager: Obviously, if the marketing manager lacks the
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leadership skills to coordinate all the activities or motivate salespeople to work enthusiastically, the crazy sale will not be successful. Q13 Performance standards are standards that marketing managers use to evaluate and determine whether a marketing activity is being carried out properly. As for measuring the performance of a banks customer service officer, the performance standards may be: number of complaints received from customers; number of new accounts opened; and amount of deposits attracted.

Assessment Short questions 1 The marketing concept emphasises the identification of the target markets needs and wants, and a better delivery of the desired satisfaction than its competitors. For example, in view of customers increasing demand for more communication and multimedia functions for their mobile phones, large mobile phone manufacturers (e.g., Nokia, Samsung) keep launching new phone models that are equipped with all of the advanced functions. These manufacturers are applying the marketing concept in order to deliver more satisfaction to their customers than their competitors. (Accept any other reasonable answers) 2 Yes, social enterprises should make use of the marketing concept as they also need to better understand the needs of their target customers (those who need to be helped) and deliver more satisfaction to these customers. Although social enterprises do not aim to make profits, they can practise the marketing concept to better achieve their corporate objectives, namely helping those who are in need of help. PCCW Mobile is one of the market leaders providing mobile phone network services. To maintain its leading position, it may adopt the following two strategies: Protecting current market share: PCCW Mobile may offer value-added services to its existing subscribers. When the service contracts of the existing subscribers are going to expire, PCCW Mobile may offer a tariff discount and gifts to persuade them to renew their service contracts.
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Increasing market share: PCCW Mobile may carry out aggressive promotional activities to other service providers subscribers. It may also offer financial incentives (e.g., a tariff discount) to attract these subscribers to switch to its services.

The major organisational structures that organise marketing activities include: Functional organisation: all marketing activities are arranged by functions (e.g., marketing administration, advertising and sales promotion). The head of the marketing department, i.e., the marketing vice president or marketing director, is responsible for overall coordination.

Geographical organisation: regional managers are assigned to look after their respective individual regional markets. They are responsible for some or all of the functional activities. Product organisation: product managers are assigned to look after their respective groups of products. This organisational structure usually involves an additional layer of management, i.e., the product managers, to supplement the operations of functional managers. Market-management organisation: market managers are assigned to look after their respective customer groups. They have responsibility for particular markets or customer groups.

The major steps involved in a bank controlling its marketing activities are: 1 Setting performance or target standards: This step involves setting a target amount of deposits the bank needs to attract, or a target amount of loans it needs to grant within a specified period (e.g., one year). 2 Measure the actual marketing performance: This step involves measuring the actual amount of deposits attracted and the actual amount of loans granted during the specified 3 period (e.g., one year). Compare the actual performance against the target standard: This step involves determining if the actual performance in attracting deposits and granting loans falls within the acceptable range of variation (e.g., + 5% as predetermined by the bank). Take corrective actions: If the variation identified in step 3 falls beyond the acceptable range of variation, the marketing manager of the bank should find out the causes of the deviation and take corrective action.

Essay Questions 6 The importance of marketing as a business function lies in: Marketing helps the supermarket better understand what is needed and wanted by its shoppers. This understanding helps the supermarket determine what should be stocked and what prices it should charge for its products.
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Marketing also makes the supermarket more alert about its competitors moves (e.g., other supermarkets, grocery stores, etc.). This helps the supermarket better adjust its strategies to compete with its rivals. Marketing reminds the supermarket of the importance of building long-term relationships with its shoppers. The supermarket needs to work closely with its merchandise suppliers, employees and other relevant business partners (e.g., advertising agency, marketing research agency, etc.). Consequently, marketing not only helps strengthen long-term relationships between the supermarket and its customers, but also those between the supermarket, its employees, suppliers and other business partners. Marketing helps the supermarket better monitor the changing preference of its shoppers and respond to the changes in a timely manner. Based on the above, marketing will consequently help the supermarket generate revenue and profits.

The steps required to plan the marketing activities of a fast food company include: 1 Reviewing current performance: The fast food company should first review its current performance in terms of sales revenue, market share, return on investment, cash flow and profit margin. 2 Conducting a SWOT analysis: The fast food company needs to assess its own strengths and weaknesses. It also needs to assess the environment in which it operates. This is aimed at identifying the opportunities and threats which the company needs to face. Setting marketing objectives: The fast food company needs to determine its objectives in terms of marketing performance (e.g., increase the companys market share by 10% over the next year) and financial performance (e.g., increase net profits by 5% over the next year). 4 Research and selecting target markets: The fast food company needs to undertake marketing research in the Hong Kong fast food market to find out which customer group(s) is (are) most promising and can be best served by the company. Developing marketing strategies: The fast food company needs to formulate the appropriate marketing strategies to attract the target customers it has chosen in step 4. The exact strategies formulated depend on whether the company is a market leader, a market challenger, a market follower or a market nicher. 6 Formulating a marketing plan: The fast food company needs to work out a detailed marketing plan to spell out all the activities/actions required for the proper implementation of the marketing strategies. The plan should include a marketing budget
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to list all the expected revenue, costs and profits for implementing the strategies. It should also detail how the company is going to allocate the total marketing budget among various tools in the marketing mix. 8 The steps required to control the marketing activities of a fast food company include: 1 Setting performance or target standards: This step may include setting a sales target for the fast food chain store to achieve within a specified period (e.g., one year). 2 Measure the actual marketing performance: This step involves measuring the sales the fast food chain store has generated during the specified period (e.g., one year). 3 Compare the actual performance against the target standard: This step involves determining if the actual sales performance falls within the acceptable range of variation (e.g., + 5% as predetermined by the fast food chain store). Take corrective action: If the variation identified in step 3 falls beyond the acceptable range of variation, the fast food chain store should find out the causes for the deviation and take corrective action.

As the marketing manager of the broadband service provider, I need to consider the following issues when using a promotional booth at a shopping mall over the coming weekend:

Soundness of the marketing plan: I need to consider carefully if the plan has been planned properly in the first place. I also need to consider if it is feasible to achieve the objectives or activities written down in the plan. For example, if the plan sets an unrealistically high sales target for the salespeople to achieve during the promotional period, it will be very difficult to implement.

Availability of the required resources: I also need to consider if I have been given sufficient resources (manpower, financial resources, and technical support) to implement this promotional activity. For example, if I do not have enough financial resources to place advertisements in newspapers, target consumers may not be aware of the promotional event. Consequently, the marketing plan cannot be implemented properly (e.g., cannot meet the pre-set sales target).

Leadership skills of the marketing manager: As the marketing manager, if I do not have the required skills to direct and motivate the salespersons to work enthusiastically, the promotional plan cannot be implemented properly. Case Analysis

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(a)

No, he did not apply the marketing concept. This is because he did not thoroughly study what was needed and wanted by Hong Kong homeowners. He just developed a product he thought would work and then promoted it to customers.

(b)

Given Hong Kongs living environment (a tiny flat for most people), many Hong Kong homeowners may not need to buy such a complicated in-home security system. What they need to buy may be simply a better (more secure) door lock. Moreover, the HK$2,000 price seems to be too high. It seems that Peter did not do enough marketing research to find out the acceptable price range for Hong Kong homeowners who are considering purchasing this type of product.

(c)

Several major mistakes were committed by Peter: He did not conduct a proper SWOT analysis. In particular, he did not examine thoroughly if an opportunity really exists in Hong Kong for such a highly advanced in-home security system. He also did not research and select his target markets properly. In particular, he needs to better understand what is really needed or wanted by Hong Kong homeowners. Even if he wants to target high-income homeowners in Hong Kong, he should first

estimate if this segment is large enough to be profitable. In terms of marketing mix, it seems that he also set the wrong price (i.e., too high). The price appears somewhat high for the average Hong Kong homeowner.

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(a)

Stakeholders refer to those that would affect a companys operations as well as be affected by its operations. Stakeholders of a tobacco company include: the government or the regulator; anti-smoking groups;

its owners and shareholders; its management and employees; its tobacco suppliers (tobacco farm); its customers (i.e., smokers buying its products); its distributors (i.e., convenience stores and newstands); and the general public or society (including those who do not smoke).

(b)

The marketing mix is a set of tools a company uses to deliver satisfaction to its target markets. It includes product, price, place and promotion. In the case of a tobacco company, the marketing mix can be described as follows: Product: Cigarettes Price: Prices of cigarettes, will be affected by the duties imposed by the government Place: Place to buy cigarettes, such as convenience stores, newstands, etc.
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Promotion: Activities carried out by the tobacco company to communicate the merits of the cigarettes to target customers and persuade them to buy.

(c)

As the Hong Kong government has banned public advertising of tobacco products, the promotional activities of tobacco companies are adversely affected. The choices of promotional tools are quite limited. If the Hong Kong government imposes a heavy tobacco duty on tobacco products, tobacco companies have to charge higher prices for their products.

(d)

Two possible ways for a tobacco company to adopt societal marketing concepts are: Set up a charitable fund (e.g., out of a portion of sales revenues) to help those suffering from lung disease or lung cancer. Sponsor research projects to come up with a safer substitute (e.g., less or no nicotine) for cigarettes. (Accept any other reasonable answers) The SWOT analysis for Donalds company is as follows:

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(a)

Strengths: Donalds shop has a well-established reputation in the neighbourhood. It has a group of loyal customers. It also seems that Donald has good connections with various dry seafood suppliers in the Mainland of China. This helps stabilise his supply of dry seafood and ensure product quality. Weaknesses: The shop seems to be relatively small in terms of its operational scale and resources. It may face problems when other more resourceful competitors enter the market. Donald also lacks the marketing knowledge to formulate his marketing strategies systematically so as to deal with competition or the changing business environment. Opportunities: Not much has been mentioned about this. One possible opportunity may be Hong Kong peoples consistent preference for dry seafood. Threats: The major threat is the adverse impact of the financial tsunami on Hong Kong peoples purchasing power. Another threat is new competitors as the barriers for entering the market may not be high. This definitely puts serious competitive

pressure on Donalds company. (Accept any other reasonable answers) (b) Three possible ways that Donald can use to improve his companys sales performance include: Source somewhat less expensive dry seafood and sell it to more price-conscious
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customers. Rogers suggestion is not totally unreasonable. Donald may consider redecorating his old-fashioned shop to attract young customers. This can extend the range of his customers and open up more opportunities for the growth of his business. Donald may introduce volume discounts to his customers. Customers who buy certain amounts would receive discounts. (Accept any other reasonable answers)

(c)

Donald can learn about the changing tastes and preferences of his customers by conducting marketing research. Donald may also casually chat with his customers to get a general feeling about what they prefer. More formally, he may seek help from Roger to develop a simple questionnaire (maybe just one page long) to collect opinions from those who have just finished making purchases at his shop. (Accept any other reasonable answers)

(d) If I were Roger, I would find out something that is unique about our shop. In this context, I might consider the following: As our shop has been operating for several decades in Sheung Wan, it should have already developed a good relationship with nearby residents and customers. This is one of the shops unique competitive advantages. I should try to record the individual preferences of our major customers. Based on this, I should contact (e.g., via telephone) each of them individually once the products they like are available. In a nutshell, I should try to further strengthen my relationship with current loyal customers and personalise my offerings to them. In order to further strengthen customer relationships, I may set up a bonus card scheme for our customers. Customers who purchase from our shop can accumulate

bonus points. These points can then be used to offset part of the cost in subsequent purchases. This scheme can help retain customers. Given Donalds long-established relationship with suppliers in the Mainland of China, I would search for products which are unique (not available in other dry seafood shops) and price them reasonably. This can help the shop develop a competitive advantage. (Accept any other reasonable answers)

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