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Lessons on Marketing Plans | Marketing Teacher

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Table of Contents

▼ Marketing Plans (30)
  1. Ansoff's Matrix - Planning for Growth
  2. Behavioral Marketing Planning
  3. Decision Making Unit
  4. Formal Marketing Plans
  5. Informal Marketing Plans
  6. Marketing Audit
  7. Marketing Budget
  8. Marketing Environment
  9. Marketing Place
  10. Marketing Planning (Advanced)
  11. Marketing Planning and Performance
  12. Marketing Planning and the Marketing Manager
  13. Marketing Planning and the Size of the Organization
  14. Marketing Plans
  15. Marketing Plans and Consumer Behavior
  16. People - Marketing Mix
  17. PEST Analysis
  18. PESTEL
  19. Physical Evidence - Marketing Mix
  20. Positioning
  21. Pricing Strategies
  22. Promotion
  23. Sales Promotion
  24. Segmentation
  25. Segmentation, Demographics and Behavior
  26. Segmenting Publics in America
  27. SMART Objectives
  28. Targeting
  29. The Product Life Cycle (PLC)
  30. Three Levels of a Product


LESSON 1

Ansoff’s Matrix – Planning for Growth

This well known marketing tool was first published in the Harvard Business Review (1957) in an article called ‘Strategies for Diversification’. It is used by marketers who have objectives for growth. Ansoff’s matrix offers strategic choices to achieve the objectives. There are four main categories for selection.

Market Penetration

Here we market our existing products to our existing customers. This means increasing our revenue by, for example, promoting the product, repositioning the brand, and so on. However, the product is not altered and we do not seek any new customers.

Market Development

Here we market our existing product range in a new market. This means that the product remains the same, but it is marketed to a new audience. Exporting the product, or marketing it in a new region, are examples of market development.

Product Development

This is a new product to be marketed to our existing customers. Here we develop and innovate new product offerings to replace existing ones. Such products are then marketed to our existing customers. This often happens with the auto markets where existing models are updated or replaced and then marketed to existing customers.
Ansoff's Product/Market Mix

Diversification

This is where we market completely new products to new customers. There are two types of diversification, namely related and unrelated diversification. Related diversification means that we remain in a market or industry with which we are familiar. For example, a soup manufacturer diversifies into cake manufacture (i.e. the food industry). Unrelated diversification is where we have no previous industry nor market experience. For example a soup manufacturer invests in the rail business.
Ansoff’s matrix is one of the most well know frameworks for deciding upon strategies for growth.


LESSON 2

Behavioral Marketing Planning

Marketing Planning and the Individual

Human and behavioral inputs are brought to marketing planning by the marketing manager himself or herself. The driver for the illogical approach of Piercy and Giles (1989) lies with the experience of managers. So where informal marketing planning recognized that there are different approaches to marketing planning, away from the structure and linear process of formal marketing planning, where the behavior of the manager influences the plan, a behavioral approach to marketing planning sees the individual at the center of the marketing plan.
Too much attention is given to the marketing audit, and the audit itself tends to ignore the organizational context of marketing planning i.e. the attitudes of individuals and groups to the process of planning (Martin 1987). The individuals and groups that shape the marketing plan, and their interaction, can affect the attainment of marketing objectives. Such a behavioral process will influence the efficiency and effectiveness of marketing planning. The nature of the marketing environment may also dictate the approach taken by the marketer when planning for marketing. In low change, low complexity situations marketing structure is the most important factor. However in high change, high complexity situations skilled managers secure better results (Bonomo and Crittenden cited in Wilson, Gilligan and Pearson 1992). There is recognition that moving away from structure to the skills of an individual may secure better results. The way in which the skills are applied is down to the behavior of the individual. How these skills are developed are down to the learning of the individual.
How these skills are developed are down to the learning of the individual. Learning and marketing planning begin to demonstrate some common traits. Dispensing with an oversimplified traditional formal marketing planning process sees the emergence of an iterative process (Piercy and Giles 1989). The marketer plans constantly and makes minor improvements as marketing occurs. An iterative marketing planning process is constantly reviewed and fine-tuned. The marketer reflects upon marketing planning and makes changes where necessary. Reflection is a key activity to behavioral marketing planning. Reflection is a key activity to experiential learning (Kolb 1984). There may be a relationship between behavioral marketing planning and individual learning.
The plan is driven by the individual and his human characteristics influence the plan. Such characteristics include the experience of the manager and the nature of his learning. The relationship between planning and human behavior is recognized in a number of ways. Culture is distinguished from planning techniques and specifications (King and Cleland 1978). Therefore corporate or national culture would influence, to an extent, the individual that plans for marketing. According to Martin (1987), they see that ‘human-based culture’ at both strategic and operational levels to be an antecedent of effective planning. Recognition of the human nature of marketing planning could dispel the mistaken beliefs that managers have (Piercy and Giles 1998). In contrast, a behavioral view of marketing planning sees fewer stages to the process itself. Strategies may evolve or emerge (Minzberg 1987). Culture influences the behavior of the planner (King and Cleland 1978). Analysis and planning are ongoing, and are not always deliberately written down as a formal ‘plan.’


LESSON 3

Decision Making Unit (DMU)

Individuals who make up the DMU

The decision Making Unit (DMU) is a collection or team of individuals who participate in a buyer decision process. Generally DMU relates to business or organisational buying decisions rather than to those of a family for example. There are a number of key players in this process namely the initiators, the gatekeepers, the buyers, the deciders, the users and the influencers. Let’s consider these individually prior to applying the decision making unit to an example of organisational buying.

Influencers

Influencers are those who may have a persuasive role in relation to the deciders. They may be specialists who make recommendations based upon experience and their knowledge of products and services. Examples are consultants employed by businesses to help deciders make a final decision, or another example might be lawyers employed to offer legal advice. There are also informal influences such as family and friends, and people that you meet at trade associations or informal gatherings.
The relationship amongst the key players will be different for every organisation and in every purchase situation. Individuals may influences as well as initiators, and therefore none of these categories is mutually exclusive i.e. stand alone, since there is much crossover and blurring around the edges of roles.

Initiators

Initiators are the players who recognise that there is a need to be satisfied or a problem to be solved. This might come from a drive for efficiency due to the fact that some equipment will need replacing. There could be many reasons which stimulate the initiation.

Gatekeepers

Gatekeepers are individuals who press the stop/go button in the process. Often gatekeepers will be proactive in searching for information and delivering recommendations for those decision-makers further up the line. On other occasions gatekeepers can be seen stalling the flow of the decision-making process.

Buyers

Buyers are the professional function within an organisation generally responsible for purchasing. They are given a brief with a series of criteria against which to judge potential products or services, and their suppliers. They tend to be responsible for sourcing and negotiation.
 decision-making-unit

Deciders

Deciders in a large organisation certainly are responsible for making the final deal or decision. Their role carries the responsibility of placing the final order. They might be senior managers or agents acting on behalf of an organisation in the market. The deciders will review information provided from lower down the buyer decision process from the buyers, gatekeepers and the original initiators.

Users

Users are those who put the service or product into operation once the deal has been clinched. Their opinions will be important especially if they are using manufacturing equipment, flying aircraft, using software to improve customer satisfaction, and so on. Users will be heavily involved in the post-purchase evaluation phase of the buyer decision process.


LESSON 4

Formal Marketing Plans

What are formal marketing plans?

Formal marketing planning is what is commonly thought of as marketing planning. It tends to be a systematic process that includes a series of stages. Few authors agree on the specifics of the process but it is common to see the marketing plan beginning with analysis, the development of strategy and the implementation of the marketing mix (Hooley et al 1996, Simkin 2000, Kotler 2001, Baker 2000, Dibb 2002).
Hence there is the use of a mission statement and corporate objectives. Such a strategic view is not common to all approaches. Commonly the organization’s size is ignored completely (Dibb 2002). Others place marketing planning after strategic planning (Kotler 2001, Wensley (in Baker 2003). There are many applications of marketing planning that create their own contradictions and confusions that simply underpin the fact that there is no straightforward, commonly accepted approach. There is often some overlap between the strategic and operational aspects of marketing planning (Varadarajan and Clark 1994)
Marketing planning is widespread (Dibb 2002) and has been adopted by a wide variety of organizations in almost every market and sector, such as the service sector (Greenley 1983), the manufacturing sector (Greenley 1982), cause relate marketing (Adkins 1999), arts marketing (Kerrigan et al 2004), as well as many others. The subject of marketing planning has generated a large number of papers, books and studies that have approached the subject in a number of ways. The earliest references to marketing planning were made in the 1960’s. Marketing planning for industrial products has been investigated (Ames 1960). Consumer manufacturing companies were scrutinized by Stasch and Lanktree in the 1980’s. Hopkins (1981) looked into 265 US companies of varying sizes. US grocery manufacturers from the top one-hundred spenders on advertising were examined in 1982 by Cosse and Swan. From a geographical point of view, the early research was done in the United States of America followed by research from British academics.
McDonald’s 1982 PhD thesis looked at the views of mainly directors and chief executives from UK companies, whilst Greenley (1982, 1983) investigated both manufacturing companies and service companies, all with varying turnovers and with differences in size. Therefore strategic versus tactical marketing planning may be an oversimplification. As can be seen from the short series of selected examples above, companies that adopt marketing planning come from a variety of market sectors, different countries and cultures, from companies with a range of turnovers.
Marketing plans, according to McDonald (2003), contain a series of steps that make up the marketing planning process. The steps are mission, corporate objectives, marketing audit, SWOT analysis, assumptions, marketing objectives and strategies, estimate expected results, identify alternative plans and mixes, budgets, and first year implementation programme. This is a typical formal marketing planning process. However McDonald tends to take a strategic perspective on marketing planning as opposed to a tactical/operational perspective, and this difference of perspective is one for which there are varying opinions in the marketing planning literature.

Strategic and Tactical – Marketing Planning Perspectives

The much emulated and generally highly regarded ‘McDonald’ approach to marketing planning contains a series of provisos or assumptions. It is strategic rather than tactical i.e. it is a corporate marketing plan. Definitions of strategic as opposed to tactical are cited below.
A strategic plan is a plan which covers a period beyond the next fiscal year. Usually this is for between three and five years.
(McDonald 2003 p31)
A tactical plan covers in quite a lot of detail about actions to be taken, by whom, during a short-term planning period. This is usually for one year or less.
(McDonald 2003 p31)


LESSON 5

Informal Marketing Plans

What is informal marketing planning?

Formal and informal approaches to marketing planning were investigated by Lyles (1993). This study found that neither had any relationship with business success. Over 60 studies into SME’s were collated by Shrader et al (1989). Their conclusion was that there are some benefits to informal marketing planning, especially in smaller firms.
The shift from formal to informal marketing planning tends to see the marketing planning process as something that is not linear but as something influenced by the behaviour of the marketer. The linear approach to planning ignores the human and organisational factors that impact upon the marketing planning process. Many organisations could find difficulty in closing the gap between the theory and practice of marketing planning. The reason for this is that a logical model of marketing planning is being superimposed upon an organisation. It ignores the behavioural and experiential inputs that the manager himself brings to the planning process (Piercy and Giles 1989). From this behavioural perspective, the plan is not a written document (Monroy 1985). The most recent manifestation of the inadequacy of the current literature was expressed by Greenley, Hooley and Saunders (2004).
Their criticism has resonance since it is based upon their dissatisfaction with the current focus upon ‘what’ decisions should be made, rather than ‘how’ they are made. They suggest two models of marketing planning, and propose directions for new research. The first model is the ‘direct effects’ model, and the second is the ‘moderator effects’ model. Whilst the call for new research into the topic of marketing planning is welcomed, the nature of the two models is informal, but more importantly the value of the individual marketing manager is omitted. Neither model refers to human behaviour, individual learning or experience.
The owner/manager tends to make business decisions based upon his or own experience and judgement. Once again there is disagreement regarding the link between such planning and decision-making in small businesses, with Robinson and Pearce (1993) finding that owners of small businesses did not link their decision-making process to formal planning. The formal nature of marketing planning is rejected by Piercy and Giles (1989).
There is recognition that the formal marketing planning process does not take into account the human realities of the planner. Marketing plans may in reality be driven from below by tactics rather than from above by strategies. These ideas are important since they not only see marketing planning taking place almost in reverse, but also because they offer informed criticism of the linear, formal planning process and begin to suggest that marketing planning in general is more informal than formal. It is also noticeable that Piercy and Giles (1989) do not see formal marketing planning as something adopted by large organisations with informal planning being practiced solely by small businesses or their owners. Informal marketing planning is also practiced by large organisations. Applying the same planning process to all organisations is like a doctor prescribing the same drug to all patients regardless of their ailment (McDonald 1986b). A series of criticisms of a written business plan were lodged by Monroy (1995).
A written business plan was rarely referred to after preparation, and there was little causality between business plan creation and business success. This view is supported by the earlier work of Bracker and Pearson (1986) in that the unstructured nature of planning was a process rather than a written document. If the process it not written and nor is it formal, what actually takes place? It is accepted that a written planning document is often the starting point (Kuratko 1995).


LESSON 6

Marketing Audit

How to conduct a marketing audit

The marketing audit is a fundamental part of the marketing planning process. It is conducted not only at the beginning of the process, but also at a series of points during the implementation of the plan. The marketing audit considers both internal and external influences on marketing planning, as well as a review of the plan itself.

2. The External Marketing Environment.

As a market orientated organisation, we must start by asking – What is the nature of our ‘customer?’ Such as:
  • Their needs and how we satisfy them.
  • Their buyer decision process and consumer behaviour.
  • Their perception of our brand, and loyalty to it.
  • The nature of segmentation, targeting and positioning in our markets.
  • What customers ‘value’ and how we provide that ‘value?.’
What is the nature of competition in our target markets?
  • Our competitors’ level of profitability.
  • Their number/concentration.
  • The relative strengths and weaknesses of competition.
  • The marketing plans and strategies of our competition.
What is the cultural nature of the environment(s)?
  • Beliefs and religions.
  • The standards and average levels of education.
  • The evolving lifestyles of our target consumers.
  • The nature of consumerism in our target markets.
What is the demography of our consumers? Such as average age, levels of population, gender make up, and so on. How does technology play a part?
  • The level of adoption of mobile and Internet technologies.
  • The way in which goods are manufactured.
  • Information systems.
  • Marketing communications uses of technology and media.
What is the economic condition of our markets?
  • Levels of average disposable income.
  • Taxation policy in the target market.
  • Economic indicators such as inflation levels, interest rates, exchange rates and unemployment.
Is the political and legal landscape changing in any way?
  • Laws, for example, copyright and patents.
  • Levels of regulation such as quotas or tariffs.
  • Labour/labor laws such as minimum wage legislation.

3. A Review of Our Current Marketing Plan

  • What are our current objectives for marketing?
  • What are our current marketing strategies?
  • How do we apply the marketing mix? (Including factors covered above in (a))
  • Is the marketing process being controlled effectively?
  • Are we achieving our marketing budget?
  • Are we realising our SMART objectives?
  • Are our marketing team implementing the marketing plan effectively?
  • Levels of staffing.
  • Staff training and development.
  • Experience and learning.
What is our market share? (total sales/trends/sales by product or customer or channel) Are we achieving financial targets? (profit and margins/ liquidity and cash flow/ debt: equity ratio/ using financial ratio analysis)
There are a number of tools and audits that can be used, for example SWOT analysis for the internal environment, as well as the external environment. Other examples include PEST and Five Forces Analyses, which focus solely on the external environment.
In many ways the marketing audit clarifies opportunities and threats, and allows the marketing manager to make alterations to the plan if necessary.
This lesson considers the basics of the marketing audit, and introduces a marketing audit checklist. The checklist is designed to answer the question, what is the current marketing situation? Lets consider the marketing audit under three key headings:
  • The Internal Marketing Environment.
  • The External Marketing Environment.
  • A Review of Our Current Marketing Plan.

1.The Internal Marketing Environment.

What resources do we have at hand? (i.e. The FIVE ‘M’s):
  • MEN (Labor/Labour).
  • MONEY (Finances).
  • MACHINERY (Equipment).
  • MINUTES (Time).
  • MATERIALS (Factors of Production).
  • How is our marketing team organised?
  • How efficient is our marketing team?
  • How effective is our marketing team?
  • How does our marketing team interface with other organisations and internal functions?
  • How effective are we at Customer Relationship Management (CRM)?
  • What is the state of our marketing planning process?
  • Is our marketing planning information current and accurate?
  • What is the current state of New Product Development? (Product)
  • How profitable is our product portfolio? (Product)
  • Are we pricing in the right way? (Price)
  • How effective and efficient is distribution? (Place)
  • Are we getting our marketing communications right? (Promotion)
  • Do we have the right people facing our customers? (People)
  • How effective are our customer facing processes? (Process)
  • What is the state of our business’s physical evidence? (Physical Evidence)


LESSON 7

Marketing Budget

Failure to properly cost and budget your marketing plan could lead to problems. While insufficient funding for such items as equipment or staffing may immediately come to mind when budgeting for the whole business, it’s the lack of a properly constructed marketing budget that dooms many marketing plans and campaigns. A marketing budget is the marketing plan written in terms of costs.

Summary of the Marketing Budget

Marketing budgets ensure that your marketing plan or campaign is realistically costed. Some pre-budget research into your industry and market, your competitors and your business’s historical marketing metrics helps marketing managers make a more informed calculation. You should cost out all general marketing and marketing communications expenses. You could also work in conjunction with an accountant to make sure that the figures are complete and realistic.

Marketing Budget

A marketing budget is an estimate of projected costs to market your products or services. A typical marketing budget will take into account all marketing costs e.g. marketing communications, salaries for marketing managers, cost of office space etc. However much of the budget is concerned with marketing communications e.g. public relations, website, advertising, etc. Both are considered here.
The costs in a marketing budget will be allocated according to the campaign and the media to be utilized. Some prior research will be necessary for the cost estimates to be as realistic as possible. This is called advertising or marketing communications research.

Helpful Pre-budgeting Research

  • 1. Industry and Market Research
  • 2. Competitor Analysis/SWOT
  • 3. Internal marketing performance records e.g. marketing metrics, marketing controls.
  • 4. Marketing Audit.
Knowledge of key industry and market factors must be taken into account when developing your marketing plan. Your plan will also be influenced by researching your competition. You will want to allot funding in a way that exploits the weaknesses of your competitors and emphasizes your strengths.
Other information that can guide your spending plan is found in your internal records. What advertising expenditures have proven successful for your business? For example, you can review internal records and determine the return on investment of your advertising dollars. A periodic examination of the performance of these records may lead you to drop certain media that have not proven fruitful.

Typical general marketing expenses:

  • Advertising agency commissions
  • Salaries for marketing managers
  • Salaries for marketing support e.g. marketing assistants.
  • Office space
  • Fixtures and fittings
  • Travel costs
  • Other direct and indirect marketing costs, including marketing communications costs (see below).

Typical marketing communications costs:

  • Personal Selling
  • Public Relations
  • Printing
  • Mailing
  • Website Development & Hosting
  • Brochure Design
  • Advertising
  • Television Advertising
  • Radio Advertising
  • Direct Marketing
  • Newspaper Advertising
  • Proposal Development/bid submittal
  • Networking
  • Event Attendance
  • Sales Promotion
  • Many other marketing communications tools.


LESSON 8

Marketing Environment

The marketing environment surrounds and impacts upon the organization. There are three key elements to the marketing environment which are the internal environment, the microenvironment and the macroenvironment. Why are they important? Well marketers build both internal and external relationships. Marketers aim to deliver value to satisfied customers, so we need to assess and evaluate our internal business/corporate environment and our external environment which is subdivided into micro and macro.

Macroenvironment

The macroenvironment is less controllable. The macro environment consists of much larger all-encompassing influences (which impact the microenvironment) from the broader global society. Here we would consider culture, political issues, technology, the natural environment, economic issues and demographic factors amongst others.
Again for Walmart the wider global macro environment will certainly impact its business, and many of these factors are pretty much uncontrollable. Walmart trades mainly in the United States but also in international markets. For example in the United Kingdom Walmart trades as Asda. Walmart would need to take into account local customs and practices in the United Kingdom such as bank holidays and other local festivals. In the United Kingdom 2012 saw the 60th anniversary of Queen Elizabeth II’s reign which was a national celebration.
The United States and Europe experience different economic cycles, so trading in terms of interest rates needs to be considered. Also remember that Walmart can sell firearms in the United States which are illegal under local English law. There are many other macroeconomic influences such as governments and other publics, economic indicators such as inflation and exchange rates, and the level nature of the local technology in different countries. There are powerful influencers such as war (in Afghanistan for example) and natural disasters (such as the Japanese Fukushima Daiichi nuclear disaster) which inevitably would influence the business and would be out of its control.
To summarise, controllable factors tend to be included in your internal environment and your microenvironment. On the other hand less controllable factors tend to be in relation to your macro environment. Why not list your own controllable versus uncontrollable factors for a business of your choice?

Five Forces

Internal Environment

The internal environment has already been touched upon by other lessons on marketing teacher. For example, the lessons on internal marketing and also on the functions within an organization give a good starting point to look at our internal environment. A useful tool for quickly auditing your internal environment is known as the Five Ms which are Men, Money, Machinery, Materials and Markets. Here is a really quick example using British Airways. Looking internally at men, British Airways employees pilots, engineers, cabin crew, marketing managers, etc. Money is invested in the business by shareholders and banks for example. Machinery would include its aircraft but also access to air bridges and buses to ferry passengers from the terminal to the aircraft. Materials for a service business like British Airways would be aircraft fuel called kerosene (although if we were making aircraft materials would include aluminium, wiring, glass, fabric, and so on). Finally markets which we know can be both internal and external. Some might include a sixth M, which is minutes, since time is a valuable internal resource.
Let’s look at an example of how the internal environment would impact a company such as Walmart. We are looking at the immediate local influences which might include its marketing plans, how it implements customer relationship management, the influence of other functions such as strategy from its top management, research and development into new logistics solutions, how it makes sure that it purchases high-quality product at the lowest possible price, that accounting is undertaken efficiently and effectively, and of course its local supply chain management and logistics for which Walmart is famous.

Microenvironment

The microenvironment is made from individuals and organizations that are close to the company and directly impact the customer experience. Examples would include the company itself, its suppliers, other marketing input from agencies, the markets and segments in which your business trades, your competition and also those around you (which public relations would call publics) who are not paying customers but still have an interest in your business. The Micro environment is relatively controllable since the actions of the business may influence such stakeholders.
Walmart’s Micro environment would be very much focused on immediate local issues. It would consider how to recruit, retain and extend products and services to customers. It would pay close attention to the actions and reactions of direct competitors. Walmart would build and nurture close relationships with key suppliers. The business would need to communicate and liaise with its publics such as neighbours which are close to its stores, or other road users. There will be other intermediaries as well including advertising agencies and trade unions amongst others.


LESSON 9

Marketing Place


Place

As you will be aware from your experiences as a consumer, producers rarely sell their goods or services directly to the person that consumes them. Marketing channels, or place in terms of the marketing mix, are the means by which interdependent organizations move products or services from the producer to the person that purchases or consumes the product. This is the basic role of distribution.
Different customers have different needs. Customers in different segments have different needs, for example a food distributor will sell flour in different ways when it sells to a hotel as opposed to when the sales to a wholesaler. A business customer will have different needs to a retail customer, for example a stationary distributor will sell printer paper in bulk directly to a large company but will sell a single ream (500 sheets) indirectly to the average householder via his local stationery store.

Types of Channel Intermediaries.

There are many types of intermediaries including wholesalers, agents, retailers, the Internet, licensing and franchising. The main modes of distribution will be looked at in more detail as follows:

Channel Intermediaries – Wholesalers

  • They break down ‘bulk’ into smaller packages for resale by a retailer.
  • They buy from producers and resell to retailers. They take ownership or ‘title’ to goods whereas agents do not (see below).
  • They provide storage facilities. For example, cheese manufacturers seldom wait for their product to mature. They sell on to a wholesaler that will store it and eventually resell to a retailer.
  • Wholesalers offen reduce the physical contact cost between the producer and consumer e.g. customer service costs, or sales force costs.
  • A wholesaler will often take on some of the marketing responsibilities. Many produce their own brochures and use their own telesales operations.

Channel Intermediaries – Agents

  • Agents are mainly used in international markets.
  • An agent will typically secure an order for a producer and will take a commission. They do not tend to take title to the goods. This means that capital is not tied up in goods. However, a ‘stockist agent’ will hold consignment stock (i.e. will store the stock, but the title will remain with the producer. This approach is used where goods need to get into a market soon after the order is placed e.g. foodstuffs).
  • Agents can be very expensive to train. They are difficult to keep control of due to the physical distances involved. They are difficult to motivate.

Channel Intermediaries – Retailers

  • Retailers will have a much stronger personal relationship with the consumer.
  • The retailer will hold several other brands and products. A consumer will expect to be exposed to many products.
  • Retailers will often offer credit to the customer e.g. electrical wholesalers, or travel agents.
  • Products and services are promoted and merchandised by the retailer.
  • The retailer will give the final selling price to the product.
  • Retailers often have a strong ‘brand’ themselves e.g. Ross and Wall-Mart in the USA, and Alisuper, Modelo, and Jumbo in Portugal.

Channel Intermediaries – Internet

  • The Internet has a geographically dispersed market.
  • The main benefit of the Internet is that niche products reach a wider audience e.g.
    Scottish salmon direct from an Inverness fishery.
  • There are low barriers to entry as set up costs are relatively small.
  • Use e-commerce technology (for payment, shopping software, etc)
  • There is a paradigm shift in commerce and consumption which benefits distribution via the Internet
There is a huge growth in online retailing. People buy physical products from companies such as Amazon or eBay, as well as a whole plethora of other smaller retailers marketing in a wide variety of small niches, also known as the long thin tail of marketing. There are many transaction related products such as theatre tickets and software upgrades that can be bought solely online. One way of segmenting Internet users was identified by McKinsey in 2000 and is summarised here as follows:
Simplifiers – experienced Internet users who seek convenience and low prices.
Surfers – an innovative minority who enjoy buying niche items and experiences based upon their own initiative.
Bargainers – price sensitive surfers looking for the best price.
Connectors – those new to the Internet who want to connect with others via Facebook and Twitter, with little knowledge to go much further.
Routiners – who have a small number of favourite sites which they visit often, such as online banking for example.
Sportsters – who spend most of their time looking at entertainment and sport.
Which of the above best represent you and your buyer behaviour when you are online?

Licensing and franchising

Some businesses are hothouses of ideas and innovation but they may lack expertise in terms of business and finance. In these situations licensing or franchising are an ideal option.
Licensing is essentially a contract which allows another business to manufacture or provide a service which conforms to your licence. Licensing is useful if the business wishes to quickly move into foreign countries, if manufacturing in a local market is too expensive then manufacturing could be undertaken overseas under licence, if shipping costs are too expensive or perhaps a market overseas would prefer a locally branded item. In return the licensee will get fees, will be able to penetrate a wide range of overseas markets, generally can control quality and production levels, and ultimately will be able to introduce new models as they arise.
Franchising is similar to licensing but tends to be used where there is a brand name or a particular format that a company owns. There are lots of familiar examples of franchising including KFC and many familiar high street and mall names – marketing everything from hamburgers to jewellery. Try to identify some franchises the next time that you go for a day out shopping.

Changing roles of logistics

Place also includes logistics. Logistics historically were largely about the physical distribution of goods from manufacturer to consumer by road and rail, sea and air. Logistics has undergone many changes since the 1970s. The cargo container was developed which reduced the amount of times the products needed loading on and off vehicles, and in and out of warehouses. More recently goods are loaded onto the container at the factory and products stay in the container until they are unloaded in at their final desination.
Supply chain management is now a focal discipline which takes logistics to the next level. Distribution is a central strategic management topic, and involves logistics professionals with highly technical information technology, resources and software.
The logistics manager integrates all elements of physical distribution and will optimise the flow of services and goods. There is a large amount of planning and organising in terms of the whole process, which includes selecting other agents and suppliers who are integrated into the process. Often logistics will integrate forwards with the supply chain of a large customer. An example of current thinking on logistics would include Just In Time Management (JIT) where components are delivered directly to manufacturing sites as the producers need them on the assembly line.
Let us consider the nature of distribution by looking at a very simple example of how it works in relation to our everyday experiences.
A basic example would be a tin of vegetable soup. The entire chain would begin with the seeds that the farmer sews and then plants. The farmer would sell the vegetables to the soup manufacturer, who would create soup from a recipe and then package the soup in a tin, and then bulk pack tins into a box and then those same boxes onto a pallet. The pallets would be driven by lorry or some other vehicle to a wholesaler. Independent retailers whilst visiting the wholesaler would break down a pallet and take a box of tinned soup. The retailer would return to his or her store and open the boxes of soup and place individual items onto a shelf next to similar products. The purchaser or customer would enter the store and buy a series of products including tinned soup. Having paid for the products the customer returned home and cooked soup for his or her family. The family eats the soup and they are the final consumers, as opposed to customers. This is an example of a very basic marketing channel in operation.
The case is that a manufacturer will attempt to maximise the accessibility of his product to as many consumers as possible. A prime example of this is Coca-Cola and their attempt to put a bottle of Coke within the arms reach of every consumer. For Coca-Cola this means a number of channels of distribution including manufacturing, transportation, bottling, wholesaling, retailing, vending machines and any other form of distribution you can think of. Coca-Cola maximises its accessibility.
(A marketing channel is) . . . a set of interdependent organisations that help make a product or service available for use or consumption by the consumer or business user.
Kotler et al (2010)
A channel of distribution comprises a set of institutions which perform all of the activities utilised to move a product and its title from production to consumption.
Bucklin – Theory of Distribution Channel Structure (1966)
The Bucklin definition above albeit more than 50 years old still represents the basic concept of place in the marketing mix.
Place has a number of names. Place is also known as channel, distribution or intermediary. It is the mechanism through which goods and/or services are moved from the manufacturer/ service provider to the user or consumer. So let’s take a look at some basic distribution or channel decisions, and how we decide on the best distribution channel for our product or service.

There are six basic ‘channel’ decisions:

  • Do we use direct or indirect channels? (e.g. ‘direct’ to a consumer, ‘indirect’ via a wholesaler).
  • Single or multiple channels.
  • Cumulative length of the multiple channels.
  • Types of intermediary (see later).
  • Number of intermediaries at each level (e.g. How many retailers in southern Spain?).
  • Which companies as intermediaries to avoid ‘intrachannel conflict’ (i.e. infighting between local distributors).

Selection Consideration – how do we decide upon a distributor?

  • Market segment – the distributor must be familiar with your target consumer and segment.
  • Changes during the Product Life Cycle – different channels can be exploited at different points in the PLC e.g. Foldaway scooters are now available everywhere. Once they were sold via a few specific stores.
  • Producer/distributor fit – Is there a match between their polices, strategies, image, and yours? Look for ‘synergy’.
  • Qualification assessment – establish the experience and track record of your intermediary.
  • How much training and support will your distributor require?


LESSON 10

Marketing Planning (Advanced)


What is Marketing Planning?

Formal, Informal and Behavioral Approaches to Marketing Planning.

There is no commonly accepted definition or approach to marketing planning. This is because of a number of problems that pepper the marketing planning literature relating to the size of an organization, the market or sector in which it exists, its culture, and the human beings that work within it.
Author(s)
Date
Medium
Subject
Wensley et al
2002 ongoing
Study
The state of marketing knowledge and skills within UK organisations.
Lancaster and Waddelow
1998
Paper
Use of learning logs as a means of marketing planning in SMEs
Hooley et al
1996
Paper
Marketing Planning in Central/Eastern Europe
Greenley and Bayus
1996
Paper
Comparison of marketing planning decision making between UK and US companies
Piercy and Morgan
1994
Paper
Behavioral problems and analytical techniques in marketing plan credibility
McKee, Varadarajan and Vassar
1990
Paper
Recommended a taxonomy of marketing planning styles.
McDonald
1989
Paper
Barriers to marketing planning
Martin
1987
Paper
Human element of marketing planning systems
Carter
1985
Paper
Learning styles and learning environment of marketers (no LSI was used).
Hooley, West and Lynch
1984
Study
Market orientation (including marketing planning)
McDonald
1984
Thesis
Marketing planning in industrial companies
Piercy and Thomas
1983
Professional Magazine
Integration of long-term strategy with short-term budgets
Greenley
1983
Paper
Marketing Planning in UK Service Companies
Greenley
1982
Paper
Marketing Planning in UK Manufacturing Companies
McDonald
1982
Paper
International Marketing Planning.
Cosse and Swan
1982
Paper
Strategic Marketing Planning by Product Managers
Hopkins
1981
Paper
Stasch and Lanktree
1980
Paper
Improving Marketing Planning
Ames
1968
Paper
Marketing Planning for Industrial Products
A Summary of Marketing Planning Research (1968 – 2005) by study
There is a huge body of research that has considered marketing planning and its models, structures and processes, theory and typologies. The only one thing that is certain is that, after considering the findings of a number of studies and as the output of many informed views, there is no common agreement on a single definition or approach to marketing planning.
After considering the marketing planning literature in depth, it was concluded that marketing planning falls into three broad categories:
  • A. Formal marketing planning
  • B. Informal Marketing Planning
  • C. Behavioral marketing planning
By considering the array of perspectives and themes on the subject of the marketing planning process, the three aforementioned categorizes develop to form a contemporary typology of the marketing planning process that subcategorizes the marketing planning process as either formal or informal, and the marketing manager as a functional role or as an individual. See the table below for a summary of marketing planning research from 1968 until 2005.


LESSON 11

Marketing Planning and Performance

Will marketing planning improve performance?

Marketing as a discipline is not a precise science. However, the area of marketing planning does have its own theory, the validity of which is open to some criticism. The theory of marketing planning contends that a formalized marketing planning system will help a company to improve its performance (McDonald 1982). In other words a formal, systematic process of marketing planning assists an organization to improve business performance.
Nevertheless business success must be achievable in the absence of a written marketing plan since business success existed before written marketing plans. The level of formal or informal marketing planning, and whether or not a written document is evidence of marketing planning is returned to later in this chapter and on occasions throughout this thesis. Morgan et al (2000) found that the marketing dimension of a business benefited high business performance firms over low business performance firms. Here, firms were medium and large. No relationship between planning and business performance was found by Schwenk and Shrader (1993), and a nil or negative effect was found by Hayes (1985) and Kallman and Shapiro (1978). So the assertion that marketing planning and business success are related is open to some criticism. Marketing planning leads to business success for some organizations, may not in others, and may even have a negative effect on business success for others.
This is achieved by a ‘systematization’ of the process of marketing planning. It is this systematization that is core to the theory. The relationship between planning (i.e. planning in a general sense) and organizational performance has been the topic of much research. As with research into company size there is much dissimilarity between the subject matter of each study.
Firms employing formal marketing planning processes outperformed those that did not (Capon et al 1983). A positive relationship between marketing planning and business success was the finding of Baker (1983). The same positive relationship was found by Ogunmokum (1990) and Robinson and Pearce (1984) in small businesses. However untenable assumptions were made in these studies (Hannon and Atherton 1998). They consider the production of a paper-based marketing plan conclusive evidence that marketing planning has actually taken place. A written marketing plan is evidence of formal marketing planning. However, it may not necessarily follow that that producing a written document means business success. An assumption is made that implies that if no written marketing plan exists, then marketing planning does not take place.


LESSON 12

Marketing Planning and the Marketing Manager

The Relationship Between the Marketing Planning Process and the Marketing Manager

After considering the current management literature in depth, it has become apparent that there are four main categories of marketing planning based upon the relationship between the marketing planning process and the marketing manager. The four types of marketing planning are formal/functional, informal/functional, formal/individual and informal/individual.

Classification A: Formal/Functional

Kotler (1991) comprehensive, independent and periodic
McDonald (1984) logical model of planning
Lancaster and Massingham (1988) planning role of marketing management
Wesley (1994) activities a firm plans to take
Baker et al (1983), Ogunmokum (1990)
Robinson and Pearce (1984) positive relationship between planning and business success.
Hayes (1985) and Kallman and Shapiro (1978) planning nil/negative effect on performance
Kurato (1995) written planning document

Classification C: Formal/Individual

Shein (1987) planning ignores human and organizational factors
Martin (1987) human based culture a determining antecedent
Piercy and Thomas (1983) human nature of marketing planning

Classification B: Informal/Functional

Greenley, Hooley and Saunders (2004) how decisions are made
McDonald (1986b) different plans for different organizations
Monroy  (1995) objected to output of a business plan.
Bracker and Pearson (1986) unstructured nature of planning
Hannon and Atherton (1998) written plan not evidence of planning process
Piercy and Giles (1989) illogical sequence of activities

Classification D: Informal/Individual

Lancaster and Waddelow (1998) learning cycle advocated to SME marketing planners
Hill and McGowan (1998) use of learning diaries by marketing managers.
Revans (1978) Learning starts with the individual
The Relationship Between the Marketing Planning Process and the Marketing Manager

Classification C: Formal/Individual

There is an acceptance that planning ignores the human realities and organizational factors. The marketing manager influences the process of marketing planning. The human based culture and its regard for the individual influences the formal process of marketing planning (Shein (1987), Martin (1987) and Piercy and Thomas 1983)). Marketing planning is still a linear process with a series of steps. It is still logical and structured. However the impact of the plethora of attributes that the individual brings to the formal marketing plan are accepted.

Classification D: Informal/Individual

This is the behavioral classification. It recognizes the relationship between the individual, marketing planning and ELT. The process of marketing planning, albeit structured or illogical, is replaced by the individual’s own learning. The learning is generated through experience. It begins with the marketing manager since learning starts with the individual (Revans 1978). It need not take the form of a written plan. The plan is replaced by a written learning diary or by a recognition on the part of the individual marketing manager that learning through experience is taking place. Diaries assist individuals with reflection (Hill, McGowan and Maclaren 1999).The formal stages of the marketing planning process are removed, experiential learning has become an integrated part of the marketing planning process, and there is recognition of the importance of individual experiential learning.
The literature reviewed dates from the 1960’s to the current day. This allows for an overview of academic thought on the subject of marketing planning that allows for an up-to-date typology of marketing planning. The classifications are as follows:

Classification A: Formal/Functional

Marketing planning is a linear process with a series of prescribed steps. It is logical and structured. It spells out a series of activities that the plan needs to include in order to achieve its marketing objectives. It is recommended as an approach for all types and sizes of organization regardless of sector. It is a written, tangible document (McDonald (2003), Dibb (2002), Kotler (2001), Simkin (2000), Baker (2000), Hooley et al (1996)). This classification relates to the theory of marketing planning i.e. that a formalized marketing planning system will help a company to improve its performance. The marketing planner is seen as a role rather than an individual. Personal factors such as experience are not taken into account.

Classification B: Informal/Functional

There is a recognition that different organizations use different approaches to marketing planning. A formal written document is not the output of the marketing planning process, neither is it evidence that marketing planning has taken place. The nature of planning is unstructured. In fact the marketing planning process is not a series of prescribed steps but is an illogical series of activities (Greenley, Hooley and Saunders (2004), Lyle (1993) McDonald (1986b), Monroy (1995), Bracker and Pearson (1986), Hannon and Atherton (1998) and Piercy and Giles (1989)). The marketing planner is seen as a role rather than an individual. Human realities of the planner are not taken into account, and personal factors such as experience are ignored.


LESSON 13

Marketing Planning and the Size of the Organization

Can any size of organization use marketing plans?

Marketing planning research has been based on organizations of various sizes. Most studies consider large corporations more specifically large multi-divisional companies (Ames 1968), companies selected from the top 100 US spenders on advertising (Cosse and Swan 1983), and companies with more than a £17 million turnover (Piercy and Thomas 1983). SME’s were investigated by Lancaster and Waddelow (1998).
Author(s)
Date
Medium
Co. Size
Subject
Lancaster and Waddelow
1998
Paper
SMEs
Use of learning logs as a means of marketing planning in SMEs
Hooley et al
1996
Paper
Various
Marketing Planning in Central/Eastern Europe
Greenley and Bayus
1996
Paper
UK and US companies of various sizes
Comparison of marketing planning decision making between UK and US companies
Piercy and Morgan
1994
Paper
Medium and Large Firms
Behavioral problems and analytical techniques in marketing plan credibility
Martin
1987
Paper
US companies of various sizes
Human element of marketing planning systems
Hooley, West and Lynch
1984
Study
UK companies of various sizes
Market orientation (including marketing planning)
McDonald
1984
Thesis
Directors and Senior Executives from a spectrum of UK organizations
Marketing planning in industrial companies
Piercy and Thomas
1983
Professional Magazine
£17 + turnover
Integration of long-term strategy with short-term budgets
Greenley
1983
Paper
Companies with various turnovers and sizes
Marketing Planning in UK Service Companies
Greenley
1982
Paper
Companies with various turnovers and sizes
Marketing Planning in UK Manufacturing Companies
Cosse and Swan
1982
Paper
Companies selected from ‘100 Leading National Advertisers’- Advertising Age
Strategic Marketing Planning by Product Managers
Stasch and Lanktree
1980
Paper
6 large US corporations
Longitudinal research into marketing planning effectiveness
Ames
1968
Paper
Large multi-divisional businesses listed in the Fortune 500
Marketing Planning for Industrial Products
A Summary of Marketing Planning Research by Company Size.
It demonstrates that size does not restrict the adoption of marketing planning. There is little evidence that large corporations always have marketing plans and the SME’s never have marketing plans. It is currently accepted that marketing is greatly underrepresented at board level in the United Kingdom, so how can it be that marketing planning only takes place at a strategic level in large corporations? Is it also fair to contend that SMEs do not plan for marketing simply because there is no evidence of a written formal marketing plan?
Companies of various sizes and turnovers were researched by Hooley, West and Lynch (1984) in the United Kingdom, and by Martin (1987) in the United States. Greenly and Bayus (1996) compared the marketing planning processes of both British and US companies of various sizes. Eastern European marketing planning processes of companies of various sizes were looked at by Hooley (1996). The size of organization varies between studies. The table below summarizes the different sizes of companies that plan for marketing.


LESSON 14

Marketing Plans

Marketing plans are vital to marketing success. They help to focus the mind of companies and marketing teams on the process of marketing i.e. what is going to be achieved and how we intend to do it. There are many approaches to marketing plans. Marketing Teacher has focussed upon the key stages of the plan. It is contained under the popular acronym AOSTC.
Also see tools for internal/external audit:
  • SWOT.
  • PEST.
  • Porter’s Five Forces.
  • Marketing Environment.

Stage Two – Set marketing objectives.

SMART objectives.
  • Specific – Be precise about what you are going to achieve.
  • Measurable – Quantify you objectives.
  • Achievable – Are you attempting too much?
  • Realistic – Do you have the resource to make the objective happen (men, money, machines, materials, minutes)?
  • Timed – State when you will achieve the objective (within a month? By February 2010?).
If you don’t make your objective SMART, it will be too vague and will not be realized. Remember that the rest of the plan hinges on the objective. If it is not correct, the plan may fail.

Stage Three – Describe your target market

  • Which segment? How will we target the segment? How should we position within the segment?
  • Why this segment and not a different one? (This will focus the mind).
  • Define the segment in terms of demographics and lifestyle. Show how you intend to ‘position’ your product or service within that segment. Use other tools to assist in strategic marketing decisions such as Boston Matrix , Ansoff’s Matrix , Bowmans Strategy Clock, Porter’s Competitive Strategies, etc.

Stage Four – Marketing Tactics.

Convert the strategy into the marketing mix (also known as the 4Ps). These are your marketing tactics.
  • Price Will you cost plus, skim, match the competition or penetrate the market?
  • Place Will you market direct, use agents or distributors, etc?
  • Product Sold individually, as part of a bundle, in bulk, etc?
  • Promotion Which media will you use? e.g sponsorship, radio advertising, sales force, point-of-sale, etc? Think of the mix elements as the ingredients of a ‘cake mix’. You have eggs, milk, butter, and flour. However, if you alter the amount of each ingredient, you will influence the type of cake that you finish with.

Stage Five – Marketing Controls.

Remember that there is no planning without control. Control is vital.
  • Start-up costs.
  • Monthly budgets.
  • Sales figure.
  • Market share data.
  • Consider the cycle of control.
Finally, write a short summary (or synopsis) which is placed at the front of the plan. This will help others to get acquainted with the plan without having to spend time reading it all. Place all supporting information into an appendix at the back of the plan.

LESSON 15

Marketing Plans and Consumer Behavior

Nothing highlights the need for a cogent marketing plan like the doldrums of a slumping economy. That’s when small business owners observe radical changes in consumer behavior such as belt tightening, and the postponement of large purchases.
Among the many marketing plan elements that might be adjusted in reaction to a change in consumer behavior positioning may hold the most potential. Trout and Ries suggest a six-step question framework for successful positioning:
  • 1. What position do you currently own?
  • 2. What position do you want to own?
  • 3. Whom you have to defeat to own the position you want.
  • 4. Do you have the resources to do it?
  • 5. Can you persist until you get there?
  • 6. Are your tactics supporting the positioning objective you set?
Finally, a company’s adaptation to changes in consumer behavior might also be aided by using the following framework:
Marketing Inputs
Product
Place
Promotions
Price
Psychological Inputs
Culture
Attitude
Learning
Perception
Purchase Decisions
Product
Location Choice
Brand Choice
Other Choices
A business is in a better position to weather an economic downturn when it is buttressed by a good marketing plan. A firms understanding of consumer behavior is enhanced if its marketing plan includes careful consideration of market segmentation, targeting and positioning.
Segmentation – is essentially the identification of subsets of buyers within a market who share similar needs and demonstrate similar buyer behavior. A company should evaluate each segment with regard to profit potential.
Targeting – Identifying a segment or series of segments of the market to concentrate on, i.e., to target.
Positioning – The term ‘positioning’ refers to your firm’s ability to influence the consumer’s perception of a product or service in relation to its competitors. You need to ask yourself, what is the position of our product in the mind of the consumer?


LESSON 16

People – Marketing Mix


People as part of the marketing mix

People are the most important element of any service or experience. Services tend to be produced and consumed at the same moment, and aspects of the customer experience are altered to meet the individual needs of the person consuming it. Most of us can think of a situation where the personal service offered by individuals has made or tainted a tour, vacation or restaurant meal. Remember, people buy from people that they like, so the attitude, skills and appearance of all staff need to be first class. People have an important role in service delivery, they are relied upon to deliver and maintain transactional marketing and people play an important part in the customer relationship.

Personal Selling

There are different kinds of salesperson. There is the product delivery salesperson. His or her main task is to deliver the product, and selling is of less importance e.g. fast food, or mail. The second type is the order taker, and these may be either ‘internal’ or ‘external.’ The internal sales person would take an order by telephone, e-mail or over a counter. The external sales person would be working in the field. In both cases little selling is done.
The next sort of sales person is the missionary. Here, as with those missionaries that promote faith, the salesperson builds goodwill with customers with the longer-term aim of generating orders. Again, actually closing the sale is not of great importance at this early stage. The forth type is the technical salesperson, e.g. a technical sales engineer. Their in-depth knowledge supports them as they advise customers on the best purchase for their needs. Finally, there are creative sellers. Creative sellers work to persuade buyers to give them an order. This is tough selling, and tends to offer the biggest incentives. The skill is identifying the needs of a customer and persuading them that they need to satisfy their previously unidentified need by giving an order.

Customer Service

Many products, services and experiences are supported by customer services teams. Customer services provide expertise (e.g. on the selection of financial services), technical support (e.g. offering advice on IT and software) and coordinate the customer interface (e.g. controlling service engineers, or communicating with a salesman). The disposition and attitude of such people is vitally important to a company. The way in which a complaint is handled can mean the difference between retaining or losing a customer, or improving or ruining a company’s reputation. Today, customer service can be face-to-face, over the telephone or using the Internet. People tend to buy from people that they like, and so effective customer service is vital. Customer services can add value by offering customers technical support, expertise and advice.
People deliver services in all sorts of settings. It is an important element of the services marketing mix. If you go to an organized event such as the Olympics then everything about the experience is underpinned by people. Behind-the-scenes there are project managers and chefs, maitre d’ and accountants. The people deliver the service and this is the same for restaurants, hairdressers and auto mechanics.
People are the transactional interface between the company and its customers so people deliver the service and they collect money i.e. get paid on behalf the company for the service. So if you go to a restaurant the waiter will greet you, take your order and serve your food and finally he or she will take the money which completes the contractual transaction.
People underpin the customer relationship between the company and the consumer. Remember that people buy from people (as we always remind you on Marketing Teacher) and that the relationship between the person you are dealing with and yourself add much value to the transaction.
If you know you’re going to eat at your favorite restaurant, it a good idea to learn the waiter’s name and build a rapport. Think of other times such as when you were selling a property and an agent was a particularly reliable and polite person, or perhaps you bought a car because you trusted the salesperson and this advantage clinched the deal. Marketing today is based on Customer Relationship Management (CRM) and the relationship with people that you’re dealing with at the company can recruit you as a customer, retaining you as a customer and encourage you to remain a customer in the future. This is where people underpin the long-term customer relationship.
Here are some ways in which people add value to an experience as part of the marketing mix. Let’s consider training, personal selling and customer service.

Training.

All customer facing personnel need to be trained and developed to maintain a high quality of personal service. Training should begin as soon as the individual starts working for an organization during an induction. The induction will involve the person in the organization’s culture for the first time, as well as briefing him or her on day-to-day policies and procedures. At this very early stage the training needs of the individual are identified. A training and development plan is constructed for the individual which sets out personal goals that can be linked into future appraisals. In practice most training is either ‘on-the-job’ or ‘off-the-job.’ On-the-job training involves training whilst the job is being performed e.g. training of bar staff. Off-the-job training sees learning taking place at a college, training center or conference facility. Attention needs to be paid to Continuing Professional Development (CPD) where employees see their professional learning as a lifelong process of training and development.


LESSON 17

What is PEST Analysis?

It is very important that an organization considers its environment before beginning the marketing process. In fact, environmental analysis should be continuous and feed all aspects of planning.

Technological Factors.

Technological

Technological factors are a multifaceted influencer. Let’s just think about the sorts of technology that you come in touch with almost daily. Smart phones such as Android and iPhone are now common – all – garden, and we are used to being able to access information and communication technology instantly no matter where we are. During studies or at work we have access to information on quick PCs and over the Internet, with faster broadband connections arriving in many parts of the world.
Technology also surrounds business processes. As we saw from our lesson on the functions within an organisation all departments use information technology or technology in one form or another. Our manufacturing operations will use technology to produce goods and services. Our logistics and warehousing functions use forklifts and lorries as well as order tracking technology and software. The customer service department will use communication technology to talk to customers but will also have access to internal systems, such as technology to simplify credit control and stock control for example. There are many, many more examples of technology.
Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points:
1. Does technology allow for products and services to be made more cheaply and to a better standard of quality?
2.Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?
3.How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?
4.Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?
The organization’s marketing environment is made up of:
  • 1. The internal environment e.g. staff (or internal customers), office technology, wages and finance, etc.
  • 2. The micro-environment e.g. our external customers, agents and distributors, suppliers, our competitors, etc.
  • 3. The macro-environment e.g. Political (and legal) forces, Economic forces, Sociocultural forces, and Technological forces. These are known as PEST factors.

Political Factors.

The political environment revolves around the current government in a particular country in which we manufacture or trade, and also laws/legislation operate within your home market as well as overseas. If your government is socialist then perhaps there is a policy to tax more and to invest in the public sector. On the other hand if you have a more conservative or Republican government then the free-market is left to take control, taxation is less and there is often a smaller public sector.
The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as:
1.How stable is the political environment?
2.Will government policy influence laws that regulate or tax your business?
3.What is the government’s position on marketing ethics?
4. What is the government’s policy on the economy?
5. Does the government have a view on culture and religion?
6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?

Economic Factors.

The economic environment is a direct influence on all businesses. Obviously if you are studying marketing there is a huge element of economics within the topic itself, and you should be no stranger to the principles of economics. As we saw from our lesson on the marketing environment there is a macroenvironment, and internal environment and the microenvironment.
More specifically you’ll be at looking elements such as where a business is in terms of the current business cycle, and whether or not you are trading in a recession.
Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at:
1. Interest rates.
2. The level of inflation Employment level per capita.
3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on.
PEST Analysis

Sociocultural Factors.

The sociocultural environment embodies everything which is social and cultural within a nation or society. There are plenty of examples of society and culture on the marketing teacher website, so we recommend that you go to our lesson store and look through some of the consumer behaviour pages. Some notable examples would include the influence of learning, memory, emotion and perception, motivation, lifestyle and attitude and consumer culture. Have a look at the six living generations in America, social environment and class, the impact of your birth order on how you behave as a consumer and take a look at the eight types of online shoppers.
In a more general sense consider influences such as the increase in life expectation of Western consumers, and demographics which is the study of populations.
The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include:
1.What is the dominant religion?
2.What are attitudes to foreign products and services?
3.Does language impact upon the diffusion of products onto markets?
4.How much time do consumers have for leisure?
5.What are the roles of men and women within society?
6.How long are the population living? Are the older generations wealthy?
7.Do the population have a strong/weak opinion on green issues?


LESSON 18

PESTEL Model

As we know from our lesson on the marketing environment the wider macroenvironment impacts upon how marketing managers make decisions. During this lesson we’re going to look at how we audit and evaluate our external business environment. There are a number of acronyms which are popular for doing this including PEST (Political/Economic/Sociocultural/Technological), PESTEL (Political/Economic/Sociocultural/Technological/Environmental/Legal), SLEPT (Societal/Legal/Economic/Political/Technological), STEP (Society/Technological/Economic/Political) and others which include LE-PEST-C and SPECTACLES. They are all pretty much the same. Below are details of how to complete a PESTEL analysis, supported by some examples.

Sociocultural

The sociocultural environment embodies everything which is social and cultural within a nation or society. There are plenty of examples of society and culture on the marketing teacher website, so we recommend that you go to our lesson store and look through some of the consumer behaviour pages. Some notable examples would include the influence of learning, memory, emotion and perception, motivation, lifestyle and attitude and consumer culture. Have a look at the six living generations in America, social environment and class, the impact of your birth order on how you behave as a consumer and take a look at the eight types of online shoppers.
In a more general sense consider influences such as the increase in life expectation of Western consumers, and demographics which is the study of populations.

Technological

Technological factors are a multifaceted influencer. Let’s just think about the sorts of technology that you come in touch with almost daily. Smart phones such as Android and iPhone are now common – all – garden, and we are used to being able to access information and communication technology instantly no matter where we are. During studies or at work we have access to information on quick PCs and over the Internet, with faster broadband connections arriving in many parts of the world.
Technology also surrounds business processes. As we saw from our lesson on the functions within an organisation all departments use information technology or technology in one form or another. Our manufacturing operations will use technology to produce goods and services. Our logistics and warehousing functions use forklifts and lorries as well as order tracking technology and software. The customer service department will use communication technology to talk to customers but will also have access to internal systems, such as technology to simplify credit control and stock control for example. There are many, many more examples of technology.

Environmental

Environmentalism and marketing connect where marketing may affect the environment when serving consumers with products and services. There is an environmental movement which puts pressure on businesses, governments and everyday people to be green. There are a number of examples of how companies can be greener internally and externally, from addressing manufacturing today, to designing a much more sustainable future. A manufacturer might reduce the amount of waste produced as a result of the manufacturing process or a restaurant might reduce the amount of packaging or food waste. An environmental approach is set in today’s tactics, but will eventually be embedded in the strategic vision of the business.

Legal

When marketing overseas your business will need to take into account laws in the local market. For example cars sold in mainland Europe and the United States tend to be left-hand drive, whilst cars which are marketed in Japan and the United Kingdom right-hand drive. This is a local requirement. Different countries have different laws in relation to maximum speed limits and safety ratings on vehicles, as well as many other bylaws and codes.

Political

The political environment revolves around the current government in a particular country in which we manufacture or trade, and also laws/legislation operate within your home market as well as overseas. If your government is socialist then perhaps there is a policy to tax more and to invest in the public sector. On the other hand if you have a more conservative or Republican government then the free-market is left to take control, taxation is less and there is often a smaller public sector.

Economic

The economic environment is a direct influence on all businesses. Obviously if you are studying marketing there is a huge element of economics within the topic itself, and you should be no stranger to the principles of economics. As we saw from our lesson on the marketing environment there is a macroenvironment, and internal environment and the microenvironment.
More specifically you’ll be at looking elements such as where a business is in terms of the current business cycle, and whether or not you are trading in a recession.


LESSON 19

Physical Evidence – Marketing Mix


Are you looking for physical marketing?

Physical evidence as part of the marketing mix

Services as we know are largely intangible when marketing. However customers tend to rely on physical cues to help them evaluate the product before they buy it. Therefore marketers develop what we call physical evidence to replace these physical cues in a service. The role of the marketer is to design and implement such tangible evidence. Physical evidence is the material part of a service.

Physical Environment

The physical environment is the space by which you are surrounded when you consume the service. So for a meal this is the restaurant and for a journey it is the aircraft that you travel inside. The physical environment is made up from its ambient conditions; spatial layout and functionality; and signs, symbols, and artefacts (Zeithaml 2000).

Ambience

The ambient conditions include temperature, colour, smell and sound, music and noise. The ambience is a package of these elements which consciously or subconsciously help you to experience the service. Ambience can be diverse. The ambience of a health spa is relaxing and calm, and the music and smells underpin this experience. The ambience of a nightclub will be loud noise and bright lights which enhance this customer experience, obviously in a different way. The marketer needs to match the ambience to the service that is being delivered.

Spatial Layout

The spatial layout and functionality are the way in which furniture is set up or machinery spaced out. Think about the spatial layout of your local cinema, or a church or temple that you have visited and how this affects your experience of the service. Functionality is more about how well suited the environment is to actually accomplish your needs. For example is the seat in the cinema comfortable, or can you reach your life jacket when on an aircraft?

Corporate branding (signs, symbols and artefacts)

Finally corporate image and identity are supported by signs, symbols and artefacts of the business itself. Examples of this would be the signage in Starbucks which reassures the consumer through branding. When you visit an airport there are signs which guide you around the facility smoothly, as well as statues and logos displayed throughout the complex. This is all important to the physical evidence as a fundamental element of the services marketing mix.
There are many examples of physical evidence, including some of the following:
  • The building itself (such as prestigious offices or scenic headquarters). This includes the design of the building itself, signage around the building, and parking at the building, how the building is landscaped and the environment that surrounds the building. This is part of what is known as the servicescape.
  • The interior of any service environment is important. This includes the interior design of the facility, how well it is equipped, internal signage, how well the internal environment is laid out, and aspects such as temperature and air conditioning. This is also part of the servicescape.
  • Packaging.
  • Internet/web pages.
  • Paperwork (such as invoices, tickets and dispatch notes).
  • Brochures.
  • Furnishings.
  • Signage (such as those on aircraft and vehicles).
  • Uniforms and employee dress.
  • Business cards.
  • Mailboxes.
  • Many others . . .
A sporting event is packed full of physical evidence. Your tickets have your team’s logos printed on them, and players are wearing uniforms (i.e. the team colors/colours and clothing). The stadium itself could be impressive and have an electrifying atmosphere. You travelled there and parked quickly nearby, and your seats are comfortable and close to restrooms and store. All you need now is for your team to win!
Some organizations depend heavily upon physical evidence as a means of marketing communications, for example tourism attractions and resorts (e.g. Disney World), parcel and mail services (e.g. UPS Courier Services), and large banks and insurance companies (e.g. Lloyds of London). This is important to their corporate image. Of course there are other examples with a slightly more tangible offering such as Rolls-Royce motor cars and P&O cruises.


LESSON 20

Positioning

Part of STP – Segment-Target-Postion

The third and final part of the SEGMENT – TARGET – POSITION (STP) process is ‘positioning.’ Positioning is undoubtedly one of the simplest and most useful tools to marketers. After segmenting a market and then targeting a consumer, you would proceed to position a product within that market.
The term ‘positioning’ refers to the consumer’s perception of a product or service in relation to its competitors. You need to ask yourself, what is the position of the product in the mind of the consumer?
Trout and Ries suggest a six-step question framework for successful positioning:
1. What position do you currently own?
2. What position do you want to own?
3. Whom you have to defeat to own the position you want.
4. Do you have the resources to do it?
5. Can you persist until you get there?
6. Are your tactics supporting the positioning objective you set?

Look at the example below using the auto market.

Product: Ferrari, BMW, Kia, Range Rover, Saab, Hyundai.
Positioning

Positioning Map for Cars.

The six products are plotted upon the positioning map. It can be concluded that products tend to bunch in the high price/low economy(fast) sector and also in the low price/high economy sector. There is an opportunity in the low price/ low economy (fast) sector. Maybe Hyundai or Kia could consider introducing a low cost sport saloon. However, remember that it is all down to the perception of the individual.
Remember this important point. Positioning is all about ‘perception’. As perception differs from person to person, so do the results of the positioning map e.g what you perceive as quality, value for money, etc, is different to my perception. However, there will be similarities.
Products or services are ‘mapped’ together on a ‘positioning map‘. This allows them to be compared and contrasted in relation to each other. This is the main strength of this tool. Marketers decide upon a competitive position which enables them to distinguish their own products from the offerings of their competition (hence the term positioning strategy).
Take a look at the basic positioning map template below.
Position
The marketer would draw out the map and decide upon a label for each axis. They could be price (variable one) and quality (variable two), or Comfort (variable one) and price (variable two). The individual products are then mapped out next to each other Any gaps could be regarded as possible areas for new products.


LESSON 21

Pricing Strategies

In terms of the marketing mix some would say that price is the least attractive element. Marketing companies should really focus on generating as high a margin as possible. The argument is that the marketer should change product, place or promotion in some way before resorting to price reductions. However price is a versatile element of the mix as we will see.

Penetration Pricing.

The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by France Telecom and Sky TV. These companies need to land grab large numbers of consumers to make it worth their while, so they offer free telephones or satellite dishes at discounted rates in order to get people to sign up for their services. Once there is a large number of subscribers prices gradually creep up. Taking Sky TV for example, or any cable or satellite company, when there is a premium movie or sporting event prices are at their highest – so they move from a penetration approach to more of a skimming/premium pricing approach.

Economy Pricing.

This is a no frills low price. The costs of marketing and promoting a product are kept to a minimum. Supermarkets often have economy brands for soups, spaghetti, etc. Budget airlines are famous for keeping their overheads as low as possible and then giving the consumer a relatively lower price to fill an aircraft. The first few seats are sold at a very cheap price (almost a promotional price) and the middle majority are economy seats, with the highest price being paid for the last few seats on a flight (which would be a premium pricing strategy). During times of recession economy pricing sees more sales. However it is not the same as a value pricing approach which we come to shortly.

Price Skimming.

Price skimming sees a company charge a higher price because it has a substantial competitive advantage. However, the advantage tends not to be sustainable. The high price attracts new competitors into the market, and the price inevitably falls due to increased supply.
Manufacturers of digital watches used a skimming approach in the 1970s. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches are implemented. New products were developed and the market for watches gained a reputation for innovation.
Pricing
The diagram depicts four key pricing strategies namely premium pricing, penetration pricing, economy pricing, and price skimming which are the four main pricing policies/strategies. They form the bases for the exercise. However there are other important approaches to pricing, and we cover them throughout the entirety of this lesson.

Psychological Pricing.

This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example Price Point Perspective (PPP) 0.99 Cents not 1 US Dollar. It’s strange how consumers use price as an indicator of all sorts of factors, especially when they are in unfamiliar markets. Consumers might practice a decision avoidance approach when buying products in an unfamiliar setting, an example being when buying ice cream. What would you like, an ice cream at $0.75, $1.25 or $2.00? The choice is yours. Maybe you’re entering an entirely new market. Let’s say that you’re buying a lawnmower for the first time and know nothing about garden equipment. Would you automatically by the cheapest? Would you buy the most expensive? Or, would you go for a lawnmower somewhere in the middle? Price therefore may be an indication of quality or benefits in unfamiliar markets.

Product Line Pricing.

Where there is a range of products or services the pricing reflects the benefits of parts of the range. For example car washes; a basic wash could be $2, a wash and wax $4 and the whole package for $6. Product line pricing seldom reflects the cost of making the product since it delivers a range of prices that a consumer perceives as being fair incrementally – over the range.
If you buy chocolate bars or potato chips (crisps) you expect to pay X for a single packet, although if you buy a family pack which is 5 times bigger, you expect to pay less than 5X the price. The cost of making and distributing large family packs of chocolate/chips could be far more expensive. It might benefit the manufacturer to sell them singly in terms of profit margin, although they price over the whole line. Profit is made on the range rather than single items.

Optional Product Pricing.

Companies will attempt to increase the amount customers spend once they start to buy. Optional ‘extras’ increase the overall price of the product or service. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other. Again budget airlines are prime users of this approach when they charge you extra for additional luggage or extra legroom.

Captive Product Pricing

Where products have complements, companies will charge a premium price since the consumer has no choice. For example a razor manufacturer will charge a low price for the first plastic razor and recoup its margin (and more) from the sale of the blades that fit the razor. Another example is where printer manufacturers will sell you an inkjet printer at a low price. In this instance the inkjet company knows that once you run out of the consumable ink you need to buy more, and this tends to be relatively expensive. Again the cartridges are not interchangeable and you have no choice.

Product Bundle Pricing.

Here sellers combine several products in the same package. This also serves to move old stock. Blu-ray and videogames are often sold using the bundle approach once they reach the end of their product life cycle. You might also see product bundle pricing with the sale of items at auction, where an attractive item may be included in a lot with a box of less interesting things so that you must bid for the entire lot. It’s a good way of moving slow selling products, and in a way is another form of promotional pricing.

Promotional Pricing.

Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free), money off vouchers and discounts. Promotional pricing is often the subject of controversy. Many countries have laws which govern the amount of time that a product should be sold at its original higher price before it can be discounted. Sales are extravaganzas of promotional pricing!

Geographical Pricing.

Geographical pricing sees variations in price in different parts of the world. For example rarity value, or where shipping costs increase price. In some countries there is more tax on certain types of product which makes them more or less expensive, or legislation which limits how many products might be imported again raising price. Some countries tax inelastic goods such as alcohol or petrol in order to increase revenue, and it is noticeable when you do travel overseas that sometimes goods are much cheaper, or expensive of course.

Value Pricing.

This approach is used where external factors such as recession or increased competition force companies to provide value products and services to retain sales e.g. value meals at McDonalds and other fast-food restaurants. Value price means that you get great value for money i.e. the price that you pay makes you feel that you are getting a lot of product. In many ways it is similar to economy pricing. One must not make the mistake to think that there is added value in terms of the product or service. Reducing price does not generally increase value.
See also eMarketing Price and international Marketing price.
Our financial objectives in terms of price will be secured on how much money we intend to make from a product, how much we can sell, and what market share will get in relation to competitors. Objectives such as these and how a business generates profit in comparison to the cost of production, need to be taken into account when selecting the right pricing strategy for your mix. The marketer needs to be aware of its competitive position. The marketing mix should take into account what customers expect in terms of price.
There are many ways to price a product. Let’s have a look at some of them and try to understand the best policy/strategy in various situations.

Premium Pricing.

Use a high price where there is a unique brand. This approach is used where a substantial competitive advantage exists and the marketer is safe in the knowledge that they can charge a relatively higher price. Such high prices are charged for luxuries such as Cunard Cruises, Savoy Hotel rooms, and first class air travel.


LESSON 22

Promotion

Promotion is the marketing term used to describe all marketing communications activities and includes personal selling, sales promotion, public relations, direct marketing, trade fairs and exhibitions, advertising and sponsorship. Promotion needs to be precisely coordinated and integrated into the businesses global communications message, and this is called Integrated Marketing Communications (IMC). IMC integrates the message through the available channels to deliver a consistent and clear message about your company’s brands, products and services. Any movement away from the single message confuses the consumer and undermines the brand.

The Promotions Mix.

Let us look at the individual components of the promotions mix in more detail. Remember all of the elements are ‘integrated’ to form a specific communications campaign.

1. Personal Selling.

Personal Selling is an effective way to manage personal customer relationships. The sales person acts on behalf of the organization. They tend to be well trained in the approaches and techniques of personal selling. However sales people are very expensive and should only be used where there is a genuine return on investment. For example salesmen are often used to sell cars or home improvements where the margin is high.

2. Sales Promotion.

.
Sales promotions tend to be thought of as being all promotions apart from advertising, personal selling, and public relations. For example the BOGOF promotion, or Buy One Get One Free. Others include couponing, money-off promotions, competitions, free accessories (such as free blades with a new razor), introductory offers (such as buy digital TV and get free installation), and so on. Each sales promotion should be carefully costed and compared with the next best alternative.

3. Public Relations (PR).

Public Relations is defined as ‘the deliberate, planned and sustained effort to establish and maintain mutual understanding between an organization and its publics’ (Institute of Public Relations). PR can be relatively cheap, but it is certainly not free. Successful strategies tend to be long-term and plan for all eventualities. All airlines exploit PR; just watch what happens when there is an incident. The pre-planned PR machine clicks in very quickly with a very effective rehearsed plan.

4. Direct Marketing.

Direct marketing is any marketing undertaken without a distributor or intermediary. In terms of promotion it means that the marketing company has direct communication with the customer. For example Nintendo distributes via retailers, although you can register directly with them for information which is often delivered by e-mail or mail.
Direct mail is very highly focussed upon targeting consumers based upon a database. As with all marketing, the potential consumer is targeted based upon a series of attributes and similarities. Creative agencies work with marketers to design a highly focussed communication in the form of a mailing. The mail is sent out to the potential consumers and responses are carefully monitored. For example, if you are marketing medical text books, you would use a database of doctors’ surgeries as the basis of your mail shot.
Similarly e-mail is a form of online direct marketing. You register, or opt in, to join a mailing list for your favourite website. You confirm that you have opted in, and then you will receive newsletters and e-mails based upon your favourite topics. You need to be able to unsubscribe at any time, or opt out. Mailing lists which generate sales are like gold dust to the online marketer. Make sure that you use a mailing list with integrity just as you would expect when you sign up. The mailing list needs to be kept up-to-date, and often forms the basis of online Customer Relationship Management (CRM).

5. Trade Fairs and Exhibitions.

Such approaches are very good for making new contacts and renewing old ones. Companies will seldom sell much at such events. The purpose is to increase awareness and to encourage trial. They offer the opportunity for companies to meet with both the trade and the consumer.

6. Advertising.

Advertising is a ‘paid for’ communication. It is used to develop attitudes, create awareness, and transmit information in order to gain a response from the target market. There are many advertising ‘media’ such as newspapers (local, national, free, trade), magazines and journals, television (local, national, terrestrial, satellite) cinema, outdoor advertising (such as posters, bus sides). There is much more about digital, online and Internet advertising further down this pages, as well as throughout Marketing Teacher and the Marketing Teacher Blog.

7. Sponsorship.

Sponsorship is where an organization pays to be associated with a particular event, cause or image. Companies will sponsor sports events such as the Olympics or Formula One. The attributes of the event are then associated with the sponsoring organization.
The elements of the promotional mix are then integrated to form a unique, but coherent campaign.

Online Promotions

Online promotions will include many of the promotions mix elements which we considered above. For example advertising exists online with pay per click advertising which is marketed by Google. You can sponsor are website for example. Online businesses regularly send out newsletters which are targeted using e-mail and mailing lists, which is a form of direct marketing. Indeed websites are premium vehicle in the public relations industry to communicate particular points of view to relevant publics.
The online promotions field is indeed emerging. The field will soon spread into Geo targeting of adverts to people in specific locations via smart phones. Another example would be how social media targets adverts to you whilst you socialising online. Take a look at Marketing Teacher’s Blog for more up-to-date examples of the emerging online promotions space.
The promotions mix (the marketing communications mix) is the specific blend of promotion tools that the company uses to persuasively communicate customer value and build customer relationships.
Kotler et al (2010).
Promotion is the element of the marketing mix which is entirely responsible for communicating the marketing proposition. Marketers work hard to create a unique marketing proposition for their product or service. McDonald’s is about community, food and enjoyment. Audi is about the driver experience and technology.
Think of it like a cake mix, the basic ingredients are always the same. However if you vary the amounts of one of the ingredients, the final outcome is different. It is the same with promotions. You can integrate different aspects of the promotions mix to deliver a unique campaign. Now let’s look at the different elements of the promotions mix.
The elements of the promotions mix are:
  • Personal Selling.
  • Sales Promotion.
  • Public Relations.
  • Direct Mail.
  • Trade Fairs and Exhibitions.
  • Advertising.
  • Sponsorship.
And also online promotions.
Image
The elements of the promotions mix are integrated to form a coherent campaign. As with all forms of communication, the message from the marketer follows the ‘communications process’ as illustrated above. For example, a radio advert is made for a car manufacturer. The car manufacturer (sender) pays for a specific advert with contains a message specific to a target audience (encoding). It is transmitted during a set of commercials from a radio station (message/medium).
The message is decoded by a car radio (decoding) and the target consumer interprets the message (receiver). He or she might visit a dealership or seek further information from a web site (Response). The consumer might buy a car or express an interest or dislike (feedback). This information will inform future elements of an integrated promotional campaign. Perhaps a direct mail campaign would push the consumer to the point of purchase. Noise represents the thousands of marketing communications that a consumer is exposed to everyday, all competing for attention.


LESSON 23

Sales Promotion

What is sales promotion?

Sales promotion is any initiative undertaken by an organisation to promote an increase in sales, usage or trial of a product or service (i.e. initiatives that are not covered by the other elements of the marketing communications or promotions mix). Sales promotions are varied.
(e) Free gifts e.g. Subway gave away a card with six spaces for stickers with each sandwich purchase. Once the card was full the consumer was given a free sandwich.
(f) Discounted prices e.g. Budget airline such as EasyJet and Ryanair, e-mail their customers with the latest low-price deals once new flights are released, or additional destinations are announced.
(g) Joint promotions between brands owned by a company, or with another company’s brands. For example fast food restaurants often run sales promotions where toys, relating to a specific movie release, are given away with promoted meals.
(h)  Free samples (aka. sampling) e.g. tasting of food and drink at sampling points in supermarkets. For example Red Bull (a caffeinated fizzy drink) was given away to potential consumers at supermarkets, in high streets and at petrol stations (by a promotions team).
(i) Vouchers and coupons, often seen in newspapers and magazines, on packs.
(j) Competitions and prize draws, in newspapers, magazines, on the TV and radio, on The Internet, and on packs.
(k) Cause-related and fair-trade products that raise money for charities, and the less well off farmers and producers, are becoming more popular.
(l) Finance deals – for example, 0% finance over 3 years on selected vehicles.
Many of the examples above are focused upon consumers. Don’t forget that promotions can be aimed at wholesales and distributors as well. These are known as Trade Sales Promotions. Examples here might include joint promotions between a manufacturer and a distributor, sales promotion leaflets and other materials (such as T-shirts), and incentives for distributor sales people and their retail clients.
Often they are original and creative, and hence a comprehensive list of all available techniques is virtually impossible (since original sales promotions are launched daily!). Here are some examples of popular sales promotions activities:
(a) Buy-One-Get-One-Free (BOGOF) – which is an example of a self-liquidating promotion. For example if a loaf of bread is priced at $1, and cost 10 cents to manufacture, if you sell two for $1, you are still in profit – especially if there is a corresponding increase in sales. This is known as a PREMIUM sales promotion tactic.
(b) Customer Relationship Management (CRM) incentives such as bonus points or money off coupons. There are many examples of CRM, from banks to supermarkets.
(c) New media – Websites and mobile phones that support a sales promotion. For example, in the United Kingdom, Nestle printed individual codes on KIT-KAT packaging, whereby a consumer would enter the code into a dynamic website to see if they had won a prize. Consumers could also text codes via their mobile phones to the same effect.
(d) Merchandising additions such as dump bins, point-of-sale materials and product demonstrations.


LESSON 24

Segmentation

This is the first of three lessons based upon SEGMENT – TARGET – POSITION. To get a product or service to the right person or company, a marketer would firstly segment the market, then target a single segment or series of segments, and finally position within the segment(s).
The are many ways that a segment can be considered. For example, the auto market could be segmented by: driver age, engine size, model type, cost, and so on. However the more general bases include:
  • by geography – such as where in the world was the product bought.
  • by psychographics – such as lifestyle or beliefs.
  • by socio-cultural factors – such as class.
  • by demography – such as age, sex, and so on.
A company will evaluate each segment based upon potential business success. Opportunities will depend upon factors such as: the potential growth of the segment the state of competitive rivalry within the segment how much profit the segment will deliver how big the segment is how the segment fits with the current direction of the company and its vision.
Segmentation Matrix
The Segmentation Matrix Business Battlemap is a useful segmentation tool. There are two bases for segmentation. Here we use beer brand versus ages groups. The various products are then plotted on the matrix. The result is a ‘battlemap’.
SEGMENT – TARGET – POSITION
Segmentation is essentially the identification of subsets of buyers within a market that share similar needs and demonstrate similar buyer behavior. The world is made up of billions of buyers with their own sets of needs and behavior. Segmentation aims to match groups of purchasers with the same set of needs and buyer behavior. Such a group is known as a ‘segment’. Think of your market as an orange, with a series of connected but distinctive segments, each with their own profile.
Segmentation
Of course you can segment by all sorts of variables. The diagram above depicts how segmentation information is often represented as a pie chart diagram – the segments are often named and/ or numbered in some way.
Segmentation is a form of critical evaluation rather than a prescribed process or system, and hence no two markets are defined and segmented in the same way. However there are a number of underpinning criteria that assist us with segmentation:
  • Is the segment viable? Can we make a profit from it?
  • Is the segment accessible? How easy is it for us to get into the segment?
  • Is the segment measurable? Can we obtain realistic data to consider its potential?


LESSON 25

Segmentation, Demographics and Behavior


Segmentation is the process of breaking down the intended product market into manageable groups; it can be broken down by:

Behavior

  • Needs—economic, functional, psychological, social.
  • Benefits–quality, service, economy, convenience, speed.
  • Attitude toward product--Enthusiastic, positive, indifferent, negative, hostile.
  • User status--Nonuser, ex user, potential user, first time user, regular user.
  • Loyalty status--None, medium, strong, absolute.
  • Brand Familiarity-Unaware, aware, informed, interested, desirous, intending to buy.
  • Occasion–Regular occasion; special occasion, convenience, comparison shopping, unsought product.
  • Type of problem solving needed-routine, limited, extensive.
  • Information required-low, medium, high.

Geographic Location

  • Region of world, country— North America, South America, Africa, Asia, Europe.
  • Regions within that country— (For Example USA) Pacific Northwest, South, Midwest, New England.
  • Size of city— population under 5,000 people to 4 million or more.
  • Urban vs. rural— country, city, large city = more resources, more independence; country=more dependence on neighbors and pooling resources.
  • Climate— cold, hot, rainy, desert, beaches, mountains.

Demographics

  • Income— under $5,000 to $250,000+ a year.
  • Gender— male, female, neither, both.
  • Age— Infant, toddler, preschool, tween (age 8 to 12), teen, college age, 20, 30, 40, 50, 60, 70-90.
  • Family size— 1 person, 2, 3, 4, 5 or more.
  • Family life cycle— young, single, engaged, DINKS (double income no kids), SINKS (single income no kids), married with kids (babies, toddler, elementary school age, teen, older), recently divorced, empty nester (children have moved out), same-sex couples, single parents, extended parents (grandparents raising their grandchildren), retired (either wealthy or Medicare dependent/poor). There are also Boomerang Kids (adult children have moved back home), Cougar/Silver Fox (Cougar is a 40-60 year old weathly, single, career driven woman seeking a younger man; Silver Fox is a 40-60 year old wealthy, single, career driven man seeking a younger woman).
  • Job— unemployed, housewife, part-time, full-time, student, professional, craftsperson, farmer, retired.
  • Education— grade school or less, some high school, high school graduate, some college, college graduate, graduate degrees.
  • Religion— Christian, Jewish, agnostic, atheist, Muslim, Islam etc.
  • Race— White, Black, Asian, Hispanic, Native American, mixed race, etc.
  • Culture/nationality—American, French, English, African, Russian, Indian etc.
  • Generation— (For Example USA) GI Generation, Silent, Matures, Baby Boomer, Gen X, Gen Y, Boomlets.

Psychographics

Psychographics
  • Lifestyle— interests, hobbies, activities, interests, opinions, values, media preferences. Everyone has two lifestyles, the one they are in now, and the one they desire to be in, which is usually better than the current one. Almost all decisions are influenced by the buyer’s current and desired lifestyle.
  • Personality traits
    • Sincerity.
    • Excitement.
    • Competence.
    • Sophistication.
    • Ruggedness.
  • Social class— Lower, middle-low, middle, middle-upper, upper, upper-upper, working class, blue collar.
  • Relationship
  • Customer Type
  • Product Use
  • Buying Situation
  • Purchasing Method
  • Behavior
  • Geographic Location
  • Demographics
  • Psychographics

Relationship

  • Kind of relationship— weak, strong, “arm’s length” dealing, close partnership.

Customer Type

  • Type of customer— manufacturer, service, government, military, non profit, wholesaler, retailer, end user.
Segmentation Groups

Product Use

  • How customer’s use product— installation, components, accessories, raw material, eaten, professional service.

Buying Situation

  • Buying situation— rebuy, modified rebuy, new purchase.

Purchasing Method

  • Purchasing methods— Internet, long term contract, warranty, financing, cash on demand.


LESSON 26

Consumer Behavious

Segmenting Publics in America

Another way of segmenting publics is to do it based on values and lifestyles. Such segmentation regularly is used by marketers to focus product and service appeals on particular socioeconomic levels. According to the VALS Lifetime Scale, segmentation separates consumers into eight distinct categories based on income and social class.
a) Actualizers are those with the most wealth and power.
i) Successful, sophisticated, active, high self esteem, abundant resources.
ii) Image is important not as a status symbol but as an expression of their independence and character.
iii) Leaders in business and government.
iv) Concerned with social issues.
v) Have a taste for the finest things in life.
vi) 72% married, 59% men, 95% college educated.
vii) Income is $5 million a year and up.
b) Fulfilleds have high resources and are principle-oriented professionals or retirees.
i) Mature, satisfied, comfortable people.
ii) Value order, knowledge and responsibility.
iii) Most are well educated and in or recently retired from professional jobs.
iv) Leisure activities center around the home and family.
v) Conservative, practical consumers that look for functionality, value and durability in the products they buy.
vi) Income is $2-$5 million a year.
c) Believers are Fulfilleds without the resources.
i) Conservative, conventional with concrete beliefs based on traditional established codes: family, church, community and the nation.
ii) Deeply rooted moral codes.
iii) As consumers they are predictable and conservative, favoring American products and established brands.
iv) 70% married, 46% men, 6% college educated.
v) Median age is 58.
vi) Income is $500,000 to $2 million.
Actualizers, Fulfilleds, and Believers are upper class. They are only .5% of the population in the USA but control 80% of the wealth.
d) Achievers have high resources and are status oriented.
i) Seek recognition and self definition through achievements at work and school.
ii) Value predictability and stability.
iii) Deeply committed to work and family.
iv) Social lives are centered around family church and career.
v) Image is important to them.
vi) They favor established prestige products and products that demonstrate success to their peers.
vii) 73% married, 39% men, 77% college educated.
viii) Income around $200,000.
e) Strivers lack the resources of Achievers but are equally status oriented.
i) Seek approval from the world around them.
ii) Striving to find a secure place in life.
iii) Easily bored and impulsive.
iv) Wish to obtain things that are out of their reach.
v) Income around $100,000.
Achievers and Strivers are the middle class. This group is shrinking due to high credit card debt, bad mortgages and an increasing level of unemployment in America. 90% of Americans make $100,000 or less a year in income.
f) Experiencers have high resources, are action oriented, and are disposed toward taking risks.
i) Young, vital, impulsive and rebellious.
ii) Politically uncommitted and ambivalent about what they believe.
iii) Avid consumers that spend much of their money on clothing, fast food, music and movies.
iv) 34% married, 53% men, 41% college educated.
v) Median age is 26.
vi) Income is around $50,000 a year.
g) Makers also are action oriented but have low resources.
i) Practical with constructive skills.
ii) Experience the world by working in it, building a house, raising children, fixing cars, canning vegetables.
iii) Politically conservative.
iv) Suspicious of new ideas.
v) Respectful of government ideas and organized labor.
vi) Unimpressed by material possessions other than those with a functional purpose.
vii) Sometimes called the “working class.”
viii) Income is around $30,000 a year.
h) Strugglers have the lowest resources.
i) Have constricted lives.
ii) Chronically poor.
iii) Uneducated and limited skills.
iv) Without strong social bonds.
v) Chief concerns are about their health and safety.
vi) Cautious consumers.
vii) Loyal to favorite brands.
viii) 47% married, 37% men, 3% college educated.
ix) Median age is 61.
x) Median income is $9,000 a year, which is equivalent to minimum wage.
Experiencers, Makers, and Strugglers are lower class. These three classes total around 30 million Americans. About half are married in an effort to combine resources.
How do you appeal to each of these groups?

Actualizers

Appeal to their sense of independence and emphasize how it will enhance character.

Fulfilleds

Appeal to family issues, durability and value.

Believers

Appeal as an established brand, family issues.

Achievers

Appeal to their need to feel prestigious, image is important to them, also family and work.

Strivers

Appeal to the sense of attaining products they will feel important having.

Experiencers

Action! Appeal to a sense of youth and fun.

Makers

Appeal to function

Strugglers

Appeal to loyalty and security
Remember that income is not the same as wealth, income is money that is earned, wealth is accumulated assets that people already have (cars, house, art). Some people can have a high income and have no money because they spent it all, or they can have lots of wealth and no job.
a) Actualizers
b) Fulfilleds
c) Believers
d) Achievers
e) Strivers
f) Experiencers
g) Makers
h) Strugglers
See below for more detail and examples.


LESSON 27

SMART Objectives

How do you make objectives SMART?

SMART objectives are simple and quick to learn. The objective is the starting point of the marketing plan. Once environmental analyses (such as SWOT, Five Forces Analysis, and PEST) and marketing audit have been conducted, their results will inform SMART objectives. SMART objectives should seek to answer the question ‘Where do we want to go?’. The purposes of SMART objectives include:

Some examples of SMART objectives follow:

1. Profitability Objectives
To achieve a 20% return on capital employed by August 2019.
2. Market Share Objectives
To gain 25% of the market for sports shoes by September 2018
3. Promotional Objectives
To increase awareness of the dangers of AIDS in France from 12% to 25% by June 2017.
To increase trail of X washing powder from 2% to 5% of our target group by January 2019.
4. Objectives for Survival
To survive the current double-dip recession.
5. Objectives for Growth
To increase the size of our Brazilian operation from $200,000 in 2017 to $400,000 in 2018.
6. Objectives for Branding
To make Y brand of bottled beer the preferred brand of 21-28 year old females in North America by February 2017.
There are many examples of SMART objectives. Be careful not to confuse objectives with goals and aims. Goals and aims tend to be more vague and focus on the longer-term. They will not be SMART. However, many SMART objectives start off as aims or goals and therefore they are of equal importance.
  • To enable a company to control its marketing plan.
  • To help to motivate individuals and teams to reach a common goal.
  • To provide an agreed, consistent focus for all functions of an organization.
All objectives should be SMART i.e. Specific, Measurable, Achievable, Realistic, and Timed.
  • Specific – Be precise about what you are going to achieve.
  • Measurable – Quantify your objectives.
  • Achievable – Are you attempting too much?
  • Realistic – Do you have the resources to make the objective happen (men, money, machines, materials, minutes)?
  • Timed – State when you will achieve the objective (within a month? By February 2018?)


LESSON 28

Targeting

Part of STP – Segment-Target-Postion

Targeting is the second stage of the SEGMENT "Target" POSITION (STP) process. After the market has been separated into its segments, the marketer will select a segment or series of segments and ‘target’ it/them. Resources and effort will be targeted at the segment.
Targeting
The first is the single segment with a single product. In other word, the marketer targets a single product offering at a single segment in a market with many segments. For example, British Airway’s Concorde is a high value product aimed specifically at business people and tourists willing to pay more for speed.
Targeting
Secondly the marketer could ignore the differences in the segments, and choose to aim a single product at all segments i.e. the whole market. This is typical in ‘mass marketing’ or where differentiation is less important than cost. An example of this is the approach taken by budget airlines such as Go/
Targeting
Finally there is a multi-segment approach. Here a marketer will target a variety of different segments with a series of differentiated products. This is typical in the motor industry. Here there are a variety of products such as diesel, four-wheel-drive, sports saloons, and so on.
Now have a look at the final stage, positioning.


LESSON 29

The Product Life Cycle (PLC)

The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).

Decline.

At this point there is a downturn in the market. For example more innovative products are introduced or consumer tastes have changed. There is intense price-cutting and many more products are withdrawn from the market. Profits can be improved by reducing marketing spend and cost cutting.
Product Life Cycle

Problems with Product Life Cycle.

In reality very few products follow such a prescriptive cycle. The length of each stage varies enormously. The decisions of marketers can change the stage, for example from maturity to decline by price-cutting. Not all products go through each stage. Some go from introduction to decline. It is not easy to tell which stage the product is in. Remember that PLC is like all other tools. Use it to inform your gut feeling.
Another marketing tool for evaluating PRODUCT is the Three Levels of a Product.
In theory it’s the same for a product. After a period of development it is introduced or launched into the market; it gains more and more customers as it grows; eventually the market stabilises and the product becomes mature; then after a period of time the product is overtaken by development and the introduction of superior competitors, it goes into decline and is eventually withdrawn.
The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).
In theory it’s the same for a product. After a period of development it is introduced or launched into the market; it gains more and more customers as it grows; eventually the market stabilises and the product becomes mature; then after a period of time the product is overtaken by development and the introduction of superior competitors, it goes into decline and is eventually withdrawn.
However, most products fail in the introduction phase. Others have very cyclical maturity phases where declines see the product promoted to regain customers.

Strategies for the differing stages of the Product Life Cycle.

Introduction.

The need for immediate profit is not a pressure. The product is promoted to create awareness. If the product has no or few competitors, a skimming price strategy is employed. Limited numbers of product are available in few channels of distribution.

Growth.

Competitors are attracted into the market with very similar offerings. Products become more profitable and companies form alliances, joint ventures and take each other over. Advertising spend is high and focuses upon building brand. Market share tends to stabilise.

Maturity.

Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at a decreasing rate and then stabilise. Producers attempt to differentiate products and brands are key to this. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and use a greater variety of media.


LESSON 30

Three Levels of a Product

Consumers often think that a product is simply the physical item that he or she buys. In order to actively explore the nature of a product further, let’s consider it as three different products – the CORE product, the ACTUAL product, and finally the AUGMENTED product. This concept is known as the Three Levels of a Product.


New Product Development (NPD)

New Product Development (NPD) will take in to account the consumer’s preference for benefits over features by considering research into their needs. NPD aims to satisfy and anticipate needs. NPD delivers products which offer benefits at the core, actual and augmented levels.
NPD might offer a replacement product for a current line, it could add products to the current line, it could discover new product lines and sometimes it delivers very innovative products which the world might not have seen before.
New products are launched for all sorts of reasons. As we know from our previous lesson on the business environment, legislation i.e. changes in the law can mean that companies have to design and develop new products. An example of this was when we moved from videotape recorders to digital and DVD recorders. So products need to be modified for changing target markets.
Three Levels of a Product
Sometimes the company will need to increase the volume that a production plant delivers, since maybe it is not running at full capacity. An example of this would be a food manufacturer of tinned soup that has a factory which can operate 24/7, designing different derivatives of the soup in order to lower the unit cost of production. So product lines are extended, in this case the reason being is to ease operational efficiency.
Intense competitive rivalry in the market will also lead to the need for NPD. Just think about your smart phone and how quickly such products go through their product life cycles, throughout your customer life-cycle.
Change in any element of the marketing mix would influence NPD, for example there is a movement to shop online and some products need to be distributed via online retailers, and the product is adapted to make it compact and simple to deliver. NPD can be driven by many influences from changing consumer tastes to the need to adapt products and services for local or international market.
Another marketing tool for evaluating PRODUCT is the Product Life Cycle (PLC). Also see the Customer Life Cycle (CLC).
The CORE product is NOT the tangible physical product. You can’t touch it. That’s because the core product is the BENEFIT of the product that makes it valuable to you. So with the car example, the benefit is convenience i.e. the ease at which you can go where you like, when you want to. Another core benefit is speed since you can travel around relatively quickly.
The ACTUAL product is the tangible, physical product. You can get some use out of it. Again with the car, it is the vehicle that you test drive, buy and then collect. You can touch it. The actual product is what the average person would think of under the generic banner of product.
The AUGMENTED product is the non-physical part of the product. It usually consists of lots of added value, for which you may or may not pay a premium. So when you buy a car, part of the augmented product would be the warranty, the customer service support offered by the car’s manufacturer and any after-sales service. The augmented product is an important way to tailor the core or actual product to the needs of an individual customer. The features of augmented products can be converted in to benefits for individuals.

Features and benefits of products

Features and benefits of a product are also relevant to the three levels of the product. Products tend to have a whole series of features but only a small number of benefits to the actual consumer.
Let’s look at this another way, if you buy a Nintendo console it has many features; for example you can play games alone or you can play against another opponent or two or three opponents. You can also have access to the Internet. Avatars are adaptable so you can create yourself and your friends. These are all examples of features to the consumer. However a consumer may buy it because he or she wants to stay fit and will use software and peripherals to become healthier. Becoming healthier is the benefit to the consumer.
The consistent marketer will aim to discover the consumer’s preference for benefits and will match individual features to the preference. That is why professional salespeople for example, often ask many questions whereas a novice salesperson will just tell you the features of the product.
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