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| The Marketing Process |
Marketing Strategy
Target consumers are at the center of the
marketing strategy. The company identifies the total market, divides it into
smaller segments, selects the most promising segments, and focuses on serving
them. It designs a marketing mix using mechanisms under its control: product,
price, place, and promotion. The company engages in marketing analysis,
planning, implementation, and control to find the best marketing mix and take
action. The company uses these activities to enable it to watch and adapt to
the marketing environment. We will now look briefly at each factor in the
marketing process and say where it is developed elsewhere in this book.
• Target Consumers
To succeed in today's competitive marketplace, companies must be customer-centered - winning customers from competitors by delivering greater value. However, before it can satisfy consumers, a company must first understand their needs and wants. So, sound marketing requires a careful analysis of consumers. An understanding of buyer behavior, discussed in Chapters 7 and 8, guides this process. Companies know that they cannot satisfy all consumers in a given market - at least, not all consumers in the same way. There are too many kinds of consumers with too many kinds of needs, and some companies are in a better position to serve certain segments of the market. As a consequence, each company must divide the total market, choose the best segments, and design strategies for profitably serving chosen segments better than its competitors do. This process involves five steps: demand measurement and forecasting, market segmentation, market targeting, market positioning, and competitive positioning.
The Competitive. Environment Companies aim to serve their customers, but they must do so in an environment with many other Influences. At the widest level is the macro environment of Political, Economic, Social, and Technological (PEST) influences that all organizations face. Besides this companies also face a unique microenvironment, including suppliers, competitors, channels of distribution, and the public - such as employees and the media - that are not necessarily customers. Chapters 4 and 5 explore these environments and their increasingly global dimensions.
• Demand Measurement and Forecasting
Suppose a company is looking at possible markets for :\ potential new product. First, the company needs to estimate the current and future size of the market and its segments. To estimate the current market size, the company would identify all competing products, estimate the current sales of these products, and determine whether the market is large enough to support another product profitably. Chapter 6 explores ways of doing this and other types of marketing research and information systems. Equally important is future market growth. Companies want to enter markets that show strong growth prospects. Growth potential may depend on the growth rate of a certain age, income, and nationality groups that use the product. Growth may also relate to larger developments in the environment, such as economic conditions, the crime rate, and lifestyle changes.
For example, the future markets for quality children's
toys and clothing relate to current birth rates, trends in consumer affluence, and projected family lifestyles. Forecasting the effect of these environmental
forces is difficult, but it is necessary in order to make decisions about the
market. The company's marketing information specialists will probably use
complex techniques to measure and forecast demand.
Market Segmentation
If the demand forecast looks good, the company next decides how to enter the market. The market consists of many types of customers, products, and needs, The marketer has to determine which segments offer the best opportunity for achieving company objectives. Consumers are grouped in various ways based on geographic factors (countries, regions, cities); demographic factors (sex, age, income, education); psychographic factors (social classes, lifestyles); and behavioral factors (purchase occasions, benefits sought, usage rates). The process of dividing a market into groups of buyers with different needs, characteristics, or behaviors, who might require separate products or marketing mixes, is market segmentation. Every market has market segments, but not all ways of segmenting a market are equally useful.
For example, Panadol would gain little by distinguishing between male and female users of pain relievers if both respond the same way to marketing stimuli. A market segment consists of consumers who respond similarly to a given set of marketing stimuli. In the car market, for example, consumers who choose the biggest, most comfortable car regardless of price make up one market segment. Another market segment would be customers who care mainly about price and operating economy. It would be difficult to make one model of car that was the first choice of every consumer. Companies are wise to focus their efforts on meeting the distinct needs of one or more market segments.
• Market, To/'giving
After a company has defined market segments, it can enter one or many segments of a given market. Market targeting involves evaluating each market segment's attractiveness and selecting one or more segments to enter. A company should target segments in which it has a differential advantage over its competitors; where it can generate the greatest customer value and sustain it over time. A company with limited resources might decide to serve only one or a few special segments; this strategy limits sales but can be very profitable, Alternatively, a company might choose to serve several related segments - perhaps those with different kinds of customers, but with the same basic wants. Or perhaps a large company might decide to offer a complete range of products to serve all market segments. The closely linked processes of market segmentation and targeting are both developed in Chapter 9. Most companies enter a new market by serving a single segment, and if this proves successful, they add segments. Large companies eventually seek full market coverage. They want to be their industry's 'General Motors (GM). America's GM says that it makes a car for every 'person, purse, and personality. Similarly. Japan's Seiko is proud of its range of 2,500 watches designed to cover consumer segments across the world. The leading company normally has different products designed to meet the special needs of each segment.
• Positioning
Marketing Strategies for Competitive Advantage
To be
successful, the company must do a better job than its competitors of satisfying
target consumers. Chapter 11 shows how this increasingly depends upon
establishing relationships with customers and other participants in the value
chain by providing them with quality, value, and service. Recently there has
been a major shift from marketing as a single transaction between supplier and
buyer to establishing a longer-term relationship with customers through loyalty
schemes and data-based marketing. These recognize that it is far more expensive
to obtain customers than to retain them. Providing excellent value and customer
service is a necessary but not sufficient means of succeeding in the
marketplace. Besides embracing the needs of consumers, marketing strategies
must build an advantage over the competition. The company must consider its
size and industry position, then decide how to position itself to gain the
strongest possible competitive advantage. Chapter 12 explains how to do this.
The design of competitive marketing strategies begins with competitor analysis.
The company constantly compares the value and customer satisfaction delivered
by its products, prices, channels, and promotions with its close
competitors. In this way, it can discern areas of potential advantage and
disadvantage. The company must formally or informally monitor the competitive
environment to answer these and other important questions: Who are our
competitors? What are their objectives and strategies? What are their strengths
and weaknesses? How will they react to different competitive strategies we
might use? Which competitive marketing strategy a company adopts depends on its
industry position. A firm that dominates a market can adopt one or more of
several market leader strategies. Well-known leaders include Chanel
(fragrances), Coca-Cola (soft drinks), McDonald's (fast food), Komatsu (large
construction equipment), Kodak (photographic film), Lego (construction toys), and Boeing (civil aircraft). Market challengers are runner-up companies that aggressively
attack competitors to get more market share. For example, Pepsi challenges Coke
and Airbus challenges Boeing. The challenger might attack the market leader,
other firms of its own size, or smaller local and regional competitors. Home
runner-up firms will choose to follow rather than challenge the market leader.
Firms using market-follower strategies seek stable market shares and profit by
following competitors' product offers, prices, and marketing programs.14
Smaller firms in a market, or even larger firms that lack established
positions, often adopt market niche strategies. They specialize in serving
market niches that large competitors overlook or ignore. Market niches avoid
direct confrontations with the big companies by specializing along with the market,
customer, product, or marketing mix lines. Through clever niching, low-share
firms in an industry can be as profitable as their large competitors.
Developing the Marketing Mix
Once the company has chosen its overall competitive marketing strategy, it is ready to begin planning the details of the marketing mix. The marketing mix is one of the dominant ideas in modern marketing. We define a marketing mix as the set of controllable tactical marketing tools that the firm blends to produce the response it wants in the target market. The marketing mix consists of everything the firm can do to influence the demand for its product. The many possibilities gather into four groups of variables known as the 'four Ps'; product, price, place, and promotion.15 These are the subject of the second part of this hook, Chapters 13-22. Figure 3.7 shows the particular marketing tools under each P. Product means the totality of 'goods and services that the company offers the target market.
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| The Marketing Process |
The Honda Civic 'product' is nuts, bolts,
spark plugs, pistons, headlights, and many other parts. Honda offers several
Civic styles and dozens of optional features. The car comes fully serviced,
with a comprehensive warranty and financing that is as much a part of the
product as the exhaust pipe. Increasingly, the most profitable part of the
business for car companies is the loan that they offer to car buyers. Price is
what customers pay to get the product. Honda suggests retail prices that its
dealers might charge for each car, but dealers rarely charge the full asking
price. Instead, they negotiate the price with each customer. They offer
discounts, trade-in allowances, and credit terms to adjust for the current
competitive situation and to bring the price into line with the buyer's
perception of the car's value. Place includes company activities that make the
product available to target consumers. Honda maintains a body of independently
owned dealerships that sell the company's cars. They select dealers carefully
and support them strongly. The main dealers keep a stock of Hondas, demonstrate
them to potential buyers, negotiate prices, close sales, arrange finance, and
service the cars after the sale. Promotion means activities that communicate
the merits of the product and persuade target customers to buy it. Honda spends
millions on advertising each year to tell consumers about the company and its
products. Dealership salespeople assist potential buyers and persuade them that
a Honda is a car for them. Honda and its dealers offer special promotions -
sales, cash rebates, low financing rates - as added purchase incentives. An
effective marketing program blends the marketing mix elements into a
coordinated program designed to achieve the company's marketing objectives.
The marketing mix constitutes the company's tactical tool kit for establishing
strong positioning in target markets. However, note that the four Ps represent
the sellers' view of the marketing tools available for influencing"
buyers. From a consumer viewpoint, each marketing tool must deliver a customer
benefit. One marketing expert suggests that companies should view the four Ps
as the customer's four Cs
|
FOUR Gs |
FOUK Ps |
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Customer needs and wants |
Product |
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Cost to the customer |
Price |
|
Gonvemenee |
Place |
|
Communication |
Promotion |
Winning companies are those that meet
customer needs economically and conveniently and with effective communication.
The Marketing Plan
Each business, product, or brand needs a
detailed marketing plan. What does a marketing plan look like? Our discussion
focuses on product or brand plans that are a development of the general
planning process. A product or brand plan should contain the
following sections: an executive summary, current marketing situation, threats and
opportunities, objectives and issues, marketing strategies, action programs,
budgets, and controls
Executive Summary
The marketing plan should open with a
short summary of the main goals and recommendations in the plan. Here is a
short example; The 1999 Marketing Plan outlines an approach to attaining a
significant increase in company sales and profits over the preceding year. The sales
target is #240 million - a planned 20 percent sales gain. We think this
increase is attainable because of the improved economic, competitive, and
distribution picture. The target operating margin is $25 million, a 25 percent
increase over last year. To achieve these goals, the sales promotion budget
will be S4.8 million, or 2 percent of projected sales. The advertising budget
will be S7.2 million, or 3 percent of projected sales ... [more details follow]
The executive summary helps top management to find the plan's central points
quickly. A table of contents should follow the executive summary.
Marketing Audit
SWOT Analysis
The SWOT analysis section draws from the
market audit. It is a brief list of the critical success factors in the market,
and rates strengths and weaknesses against the competition. The SWOT analysis
should include costs and other non-marketing variables. Outstanding
opportunities and threats should be given. If plans depend upon assumptions
about the market, the economy, or the competition, they need to be explicit.
Objectives and Issues
Having studied the strengths, weaknesses,
opportunities, and threats, the company sets objectives and considers issues
that will affect them. The objectives are goals that the company would like to
attain during the plan's term. For example, the manager might want to achieve a
15 percent market share, a 20 percent pre-tax profit on sales, and a 25 percent pre-tax profit on investment. If the current market share is only 10 percent,
the question needs answering: Where are the extra sales to come from? From the
competition, by increasing usage rate, by adding, and so on?
Marketing Strategy
In this section of the marketing plan, the
manager outlines the broad marketing strategy or 'game plan for attaining the
objectives. Marketing strategy is the marketing logic by which the business
unit hopes to achieve its marketing objectives. It shows how strategies for
target markets and positioning build upon the firm's differential advantages.
It should detail the market segments on which the company will focus. These
segments differ in their needs and wants, responses to marketing, and
profitability. The company should put its effort into those market segments it
can best serve from a competitive point of view. It should develop a marketing
strategy for each targeted segment.
Marketing Mix
The manager should also outline specific
strategies for such marketing mix elements in each target market: new products,
field sales, advertising, sales promotion, prices, and distribution. The manager
should explain how each strategy responds to the threats, opportunities, and
critical issues described earlier in the plan.
Action Programmes
Marketing strategies become specific action programs that answer the following questions: What will be done? When will it be done? Who is responsible for doing it? How much will it cost? For example, the manager may want to increase sales promotion as a key strategy for winning market share. A sales promotion action plan should outline special offers and their dates, trade shows entered, new point-of-purchase displays, and other promotions. The action plan shows when activities will start, be reviewed, and be completed
Budgets Action plans allow the manager to
make a supporting marketing budget that is essentially a projected profit and
loss statement. For revenues, it shows the forecast unit sales and the average
net price. On the expense side, it shows the cost of production, physical
distribution, and marketing. The difference is the projected profit. Higher
management will review the budget and either approve or modify it. Once
approved, the budget is the basis for materials buying, production scheduling,
personnel planning, and marketing operations. Budgeting can be very difficult
and budgeting methods range from simple 'rules of thumb' to complex computer
models.
Controls
The last section of the plan outlines the
controls that will monitor progress. Typically, there are goals and budgets for
each month or quarter. This practice allows higher management to review the
results of each period and to spot businesses or products that are not meeting
their goals. The managers of these businesses and products have to explain these
problems and the corrective actions they will take.
Implementation
Planning good strategies is only a start
toward successful marketing. A brilliant marketing strategy counts for little
if the company fails to implement it properly.
Marketing implementation is the process that turns marketing strategies and plans into marketing actions to accomplish strategic marketing objectives. Implementation involves day-to-day, month-to-month activities that effectively put the marketing plan to work. Whereas marketing planning addresses the what and why of marketing activities, implementation addresses the who, where, and when of the airshow.
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