Chapter 13: Marketing Strategy
Layout of Chapter:
1.
Overview
of Marketing.
2.
How
Marketing Evolved.
3.
Developing
Marketing Strategy.
4.
Understanding
Buyer Behavior.
5.
Marketing
Research.
1.
Overview of Marketing
Marketing:
The process of planning and executing the conception, pricing, promotion
and distribution of ideas, goods and services to create exchanges that
satisfy individual and organizational objectives.
The underlined parts
dictate the different activities marketing performs: deciding what products to
offer, setting prices, developing sales promotions and advertising campaigns,
and making products readily available to customers.
Marketing is required
for Products, services or ideas.
Products
are tangible,
which can be physically possessed. E.g. CD player or Soft drinks (Pran mango
juice).
Services
are intangible
products, which cannot be physically possessed. E.g. Hospitals offer health
care services.
Adhunik (Amra Dhumpan Nibaron Kori)
offers an idea - quitting
smoking, as a product.
Ultimately the purpose
of marketing activities is to bring about exchanges between buyers &
sellers.
Exchange consists of one party providing something of value to
another party, who gives something in return.
“Something is value”
is not always a physical good, the “something in return” is not always money.
Adhunik’s notion of quitting smoke to live a longer, healthier life is an
intangible product, one that cannot be physically touched. For smokers who
“buy” that idea, the price is the effort required to break a habit that they
have found pleasurable.
Marketing Activities Add Value to Products:
This value is known
as utility. It is the ability of a
product to satisfy a consumer’s need.
There are four (4) types
of utility:
·
Form utility – This utility is created when a
firm’s production function yield a product. (Being able to buy a product in
some form / shape / size). For example, manufacturers produce readymade clothes
by using threads, color, and labor.
Another example, manufacturers produce gasoline from raw
petroleum (by using equipments, labor).
·
Time utility – Making products available when
consumers need and want them. (Being able to buy a product at any time as
wanted).
Readymade clothes stores are open throughout the day; buyers
can walk into the stores any time they want and buy clothes.
Petrol pump /Gas stations are open during peak traffic
times, with many open 24 hours a day.
·
Place utility – Making products available where
consumers need or want to obtain them. (Being able to buy a product at any
place as wanted). E.g. readymade clothes stores are located in numerous
convenient places for the shoppers.
Gas
stations are located in numerous places convenient to drivers.
·
Possession utility – When the ownership of a
product is transferred from seller to seller. (Being able to possess). E.g. Buyers
fit themselves with dazzling clothes and pay the storeowners.
Customer pump gasoline into their vehicles and pay for the
gasoline, i.e. ownership of a product is transferred from seller to buyer.
Marketing Affects Everyone
Marketing is
important to organizations and individuals alike. Marketing activities enable
us to satisfy our needs and wants. (A need is something required for
human survival, such as food, water, shelter, and clothing. A want is something
desired but not necessary for basic survival). Without marketing, many needs
and wants would go unsatisfied because exchanges would be much harder to
accomplish.
2.
How Marketing Evolved.
In 19th Century,
beginning with the Industrial Revolution, marketing was not a concept of
satisfying consumer needs and wants. It was production oriented; goods were
produce without considering consumer’s preference. Demand was so great that,
after production, marketing consisted of taking orders and shipping products. (Production Orientation).
In the mid 1920s by
producing abundance of goods pushed marketing people to emphasize advertising
and sales. Companies started using sophisticated sales techniques to increase
demand for existing products, but they still did not look at marketplace to
ensure that consumers’ needs and wants were met. (Sales Orientation)
In the 1950s, after
World War II, firms began to be more careful about meeting consumer’s
satisfaction. (Consumer orientation)
These days, firms are
also considering society’s welfare.
The policy of
customer satisfaction has become know as the marketing concept.
3.
Developing Marketing Strategy.
Marketing Strategy: A plan for selecting and analyzing a target market and
developing and maintaining a marketing mix that will satisfy this target
market.
Firms developing a
marketing strategy follow two basic steps:
- Select a target market; and
- Designing a marketing mix (a combination of product, price, promotion and distribution (place) that will satisfy the needs of the target market.
1. Selecting a target
Market:
What is a Market?
A Market is a group
of people who need and want a product and have the financial ability,
willingness and authority to purchase it.
Markets are divided
into two broad categories:
a) Consumer market: People who
purchase products for personal use.
b) Industrial market: Those who
purchase products to use in production of other products or to resell.
One firm may sell
products to both types of markets. Coca Cola sells bottles / cans to you
(consumer market) and syrups to fast food shops (industrial market).
Businesses, rarely
able to satisfy the needs of all customers in a market, divide a market into Market
Segments. Then they decide which segment or segments to serve. (Target market)
Market
Segments: A
group of individuals with one or more similar product needs.
Target
Market: A particular
group to which a firm directs its marketing activities.
Selecting a target
market is crucial in developing an effective marketing strategy. To do this successfully,
firms use either the i) undifferentiated
approach or the ii) market segmentation approach.
Undifferentiated Approach: The tactics of developing one marketing mix for the total
market for a product. It offers one type of product with little or no
variation, sets one price, establishes one distribution system, and conducts
one promotional program. E.g. Producers commonly use this approach to sell
staple food items (like salt, sugar, fruits or vegetables, flour etc.) that
most customers regard as equal or similar offerings.
Works only when the
total market has the same need.
A firm may turn to Product Differentiation (the use of
advertising, packaging, or other product characteristics to establish the
superiority of a product) to distinguish its products from others. The makers
of Puff facial tissues, for example, advertise that Puffs are softer than other
tissues.
Market Segmentation Approach: Customers in a market may have
many different needs that cannot be satisfied by a single marketing mix. Then firm
divides the total market into segments and creates a marketing mix directed to
one or more of the segments rather than the total market.
Firms segment market
in two ways:
Concentration
approach –
targeting one particular group of consumers; without considering needs of
various segments. E.g. Rolls Royce Motor cars target a specific group of
consumers with their top-of-the-line luxury cars. A company using this method
can compete with larger firms even with limited resources. However, the company
becomes fully dependent on a single market segment, with sales and profits tied
closely to that segment’s demand.
Multi-segment
approach – A
firm with considerable resources may use a multi-segment approach, directing
its marketing efforts at two or more groups by developing a marketing mix for
each. Thus, an organization can reach more customers and increase sales in the
total market. But it can also push up a company’s costs, since the firm must
use more production processes, materials, and labour, as well as several different
promotion, pricing and/ or distribution methods.
e.g. General Motors or Toyota multi-segments consumers based
on their requirement of sports cars, or economy compact cars or family cars
(station wagons/ micro bus etc.)
To divide the market
in groups (i.e. to carry out market segmentation), marketers use segmentation
bases to define characteristics of individuals or groups of customers.
Segmentation Base –
The individual or group characteristics that marketing managers use to divide the
total market into segments. Marketers can segment consumer markets according to
geographic, demographic, psychographic,
or product- related bases.
·
Geographic segmentation: Segmenting the target market or
consumer groups based on - city, district, region as well as climate, terrain
and population density. People living in Canada require air-heaters while people
of Dhaka need Air-coolers.
·
Demographic: Segmenting the target market by
- personal characteristics such as age, income, education, occupation, sex,
race, social class, marital status or family size. E.g. increasing number of
women in work force has prompted growth in child care, elderly parent care,
time-saving appliances, and home cleaning products.
·
Psychographic: Segmenting the target market by
- Person’s attitudes, personality, opinions, lifestyle, interests and motives.
Such as, athletic footwear & clothing, and “light low-fat food” products
have been developed for the health and fitness conscious consumers.
·
Product-related: Segmenting the target market by
- according to product use, including volume of use (heavy or light, frequent
or infrequent) brand loyalty, expected benefits. Such as, bankers have
segmented customers according to the benefits they are looking for. These are
loan seekers, value seekers searching for no-charge checking accounts,
investors looking for big-name institutions etc.
2. Designing Marketing
MIX:
Once a firm has
selected a target market, it must decide how to satisfy the needs of the target
through marketing mix.
Marketing Mix: The combination of four elements- product, price,
promotion and distribution (place) used to satisfy the needs of the target
market. This is also called 4Ps.
·
Product – product can be a good, a
service, or on idea. Manufacturing a product (creating form utility) is a
production function. But marketing managers have the responsibility to inform
the production people about products consumers would find appealing and about
existing products that need to be changed or that are no longer needed.
Marketers also develop brand names, packaging, and warranties.
·
Price – After developing a product, a
firm must set a price. Pricing requires crucial decision since it is very
visible to consumer and is closely tied to a company’s profit. Customers may
reject a product due to its high price, or a firm may loose money by pricing a
product too low.
·
Distribution (Place) – Even a fantastic product, priced right, can fail if it is
not available where and when the customers want it. Distribution involves
decisions about transportation, storage and store selection.
·
Promotion – Publicity, advertisement,
informs or reminds the target market about a product and tries to persuade
consumers to buy or adopt it.
The Marketing Environment:
All the forces
outside an organization that directly or indirectly influence its marketing
activities.
Such forces include -
Economic Condition, Regulations, Politics, Society, Competition, Technology etc.
See Figure 13.5 – pg
465 for Marketing Environment.
4.
Understanding Buyer Behavior.
What makes buyers choose one brand of soft drink over
another? Why do some shoppers go to Kawran-bazaar while others go to large
convenience stores like Agora? Understanding buyer behavior helps firms bring
about satisfying exchanges.
Consumer Buying
Behavior: The decisions and actions of individuals
who purchase products for personal use. This can differ from buyer to buyer and
product to product.
Product cost and frequency of purchase influence consumer
decisions:
i.
Routine decision making: low-cost & frequently
used products require little though. Cigarette, blade, chewing gum, etc.
ii. Limited decision making: for products that are occasionally bought and require
some consideration. Such as, jeans, sun-glass, fax, computers etc.
iii. Extensive decision
making: expensive and infrequently purchased products require complex thought.
Such as, car, home etc.
The Consumer buying
process [Figure 13.7, Page 468]:
Cognitive Dissonance: The conflict or doubts buyers usually
experience after making an expensive purchase. Often firms try to reduce
buyer’s doubts through advertising or by providing follow-up information or
service.
Factors those affect consumer buying decision:
Several factors, some within individuals and some external, affect the
buying decisions of consumers.
a) Social factors: family members, peers
b) Psychological factors: attitudes, personality
c) Demographic factors: personal characteristics , age, education
d) Situational factors: Specific conditions that exist at the time of
purchase decision.
See Table 13.2 (Page 469).
Industrial Buying
Behavior: The decisions and actions of buyers in
organizations. Buying decisions by organizations typically differ from consumer
purchases in several ways –
- Organizational transactions are usually much larger and less frequent.
- Exact specifications must be met to secure an industrial buyer.
- Organizational buyers tend to be more concerned about quality and services offered by sellers.
- They usually seek more information and base decisions less on emotional factors than individual consumers do.
- In small companies, owners make the purchase decision; while in larger companies, the responsibility may rest with several people who make up the purchase department.
5.
Marketing Research
The systematic gathering, recording, and analyzing of
information for guiding marketing decisions. The study can be:
·
Proactive – to prevent breakdowns (i.e.
preventive or progressive).
OR
·
Reactive – to respond to the problem
and try to fix it (i.e. to react).
The Research
Process:
|
1.
|
Forming
the research question:
|
What to find out; need the
research question first.
|
|
2.
|
Research
Design:
|
The plan for collecting
information:
i. Exploratory Research;
ii. Experimental research; or
iii. Descriptive research
|
|
3.
|
Data
Collection:
|
a) Primary data– collected for the first time
and specific to the study. b) Secondary data– Published information.
|
|
4.
|
Data
Analysis:
|
Determine what the information
means.
|
|
5.
|
Interpretation
and Conclusions:
|
Workable answer to the research
question.
|
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