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Marketing lectures123 Marketing lectures123 Document Transcript

  • What is marketing?The term marketing has changed and evolved over a period of time, todaymarketing is based around providing continual benefits to the customer,these benefits will be provided and a transactional exchange will takeplace.The Chartered Institute of Marketing define marketing as ‘Themanagement process responsible for identifying , anticipating andsatisfying customer requirements profitability’If we look at this definition in more detail Marketing is a managementresponsibility and should not be solely left to junior members of staff.Marketing requires co-ordination, planning, implementation of campaignsand a competent manager(s) with the appropriate skills to ensure success.Marketing objectives, goals and targets have to be monitored and met,competitor strategies analyzed, anticipated and exceeded. Througheffective use of market and marketing research an organization should beable to identify the needs and wants of the customer and try to deliversbenefits that will enhance or add to the customers lifestyle, while at thesame time ensuring that the satisfaction of these needs results in a healthyturnover for the organization.Philip Kotler defines marketing as ‘satisfying needs and wants throughan exchange process’Within this exchange transaction customers will only exchange what theyvalue (money) if they feel that their needs are being fully satisfied, clearlythe greater the benefit provided the higher transactional value anorganization can charge.P.Tailor of www.learnmarketing.net suggests that Marketing is not aboutproviding products or services it is essentially about providing changingbenefits to the changing needs and demands of the customer’ (P.Tailor7/00)Take an exercise on SMART hereBusiness ObjectivesAll businesses need to set objectives for themselves or for the products orservices they are launching. What does your company, product or servicehope to achieve?
  • Setting objectives are important., it focuses the company on specific aimsover a period of time and can motivate staff to meet the objectives set.A simple acronym used to set objectives is called SMART objectives.SMART stands for:1. Specific – Objectives should specify what they want to achieve.2. Measurable – You should be able to measure whether you are meetingthe objectives or not.3. Achievable - Are the objectives you set, achievable and attainable?4. Realistic – Can you realistically achieve the objectives with theresources you have?5. Time – When do you want to achieve the set objectives?Some Business Objectives:There are a number of business objectives, which an organization can set:Market share objectives: Objectives can be set to achieve a certain levelof market share within a specified time. E.g. obtain 3% market share of themobile phone industry by 2004.To increase profit: An objective maybe to increase sales 10% from 2003– 2004.To survive: The hard times the business is currently in.To grow: The business may set an objective to grow by 15% year on yearfor the next five years.To increase brand awareness over a specified period of time. View a PowerPoint slide PEST Analysis | Take a excercise hereMarketing EnvironmentThere are many variables that operate within an organizations environment thathave a direct or indirect influence on their strategy. A successful organization isone, which understands and can anticipate and take advantage off changeswithin their environment.
  • An organizations operating environment can be analyzed by looking at: • External forces (those factors that an organization has no control over), • Internal forces (factors that an organization has direct control over)The external environment of an organization can be analyzed by conducting aP.E.S.T analysis. This is a simple analysis of an organization Political,Economical Social and Technological environment.PoliticalPolitical factors can have a direct impact on the way business operates.Decisions made by government affect our every day lives and can come in theform of policy or legislation. The government’s introduction of a statutoryminimum wage affects all businesses, as do consumer and health and safetylaws and so on. The current increase in global petrol prices is having a profoundimpact on major economies, it is estimated that £200bn has been added to theglobal fuel bill sincethe price increases started (BBC news 19/9/00).The political decision as to whether the UK signs up to the Single EuropeanCurrency is again having an impact on UK businesses. Firms like Nissan whohave recently invested in the UK have signaled that they will withdraw theirbusiness from the UK if the government fails to sign up.EconomicalAll businesses are affected by economical factors nationally and globally. Interestrate policy and fiscal policy will have to be set accordingly. Within the UK theclimate of the economy dictates how consumer may behave within society.Whether an economy is in a boom, recession or recovery will also effectconsumer confidence and behavior.Marketing ResearchResearch is the only tool an organization has to keep in contact with its externaloperating environment. In order to be proactive and change with the environmentsimple questions need to be asked: • How is customer needs changing? Can you meet these changing needs? What do your customers think about existing products or services?
  • • How are competitors operating within the environment? Are their strategies exceeding or influencing yours? What should you do? • How are macro and micro environmental factors influencing your organization? Again how will you react?As witnessed with the UK retail clothing group C&A , failure to react to thechanging needs of its customers within its environment has resulted in C&Aclosing all their UK retail stores. Marks and Spencer’s also faces an uncertainfuture. Research tells them that customers feel that the stores and clothes areoutdated. M&S are now rushing out new lines and experimenting with newconcept stores to retain existing and attract potential new customers. In the worldof credit it is just recently that M&S are excepting credit cards!Market Research and Marketing Research a difference.A common mistake by many students, lecturers and textbooks is that there is nounderstanding of the clear distinction between market research and marketingresearch.Market Research: Involves researching specific industries or markets.Researching the computer industry to discover the number of competitors andtheir market share will be an example of market research.Marketing Research: Marketing Research goes further. Marketing Researchanalyses a given marketing opportunity or problem, defines the research anddata collection methods required to deal with the problem or take advantage ofthe opportunity, through to the implementation of the project. In essencemarketing research aims to discover the root cause for a specific problem withinan organization ( eg declining sales) and put forward solutions to that problem.Data TypesThere are two types of data to be collected:Qualitative Data: Focuses on people’s opinions and attitudes towards a productor service.Quantitative Data: Focuses on collecting data for numerical analysis.
  • An economy, which is booming, is characterized by certain variables.Unemployment is low, job confidence is high, because of this confidencespending by consumers is also high. This has an impact on most businesses.Organizations have to be able to keep up with the increased demand if they areto increase turnover. An economy, which is in a recession, is characterized byhigh unemployment, and low confidence. Because of high unemploymentspending is low, confidence about job security is also low. Businesses face atough time, consumers will not spend because of low disposable income. Manybusinesses start cutting back on costs i.e. Labor, introduce shorter weeks andcut back on advertising to save money.Case: In the early 1990’s when the UK economy was in a slump, andbusinesses were folding repeatedly, a security company called ‘Dreadlockssecurity’ to combat falling sales embarked on strategy of cutting back onlabor costs, and doubling advertising expenditure. The companies’ theorywas that not their entire target segment was affected by the recession andhe had to fight for the customers that still had the income to spend onsecurity products.Economies globally also have an impact on UK businesses, cheaper labourabroad affects the competitiveness of UK products nationally and globally. Anincrease in interest rates in the USA will effect the share price of UK stocks oradverse weather conditions in India may affect the price of tea.A truly global player has to be aware of economic conditions across all bordersand ensure they employ strategies and tactics that their protects their business.SocialWithin society forces such as family, friends, media affect our attitude, interestand opinions. These forces shape who we are as people and the way we behaveand what we ultimately purchase. For example within the UK peoples attitudesare changing towards their diet and health. As a result the UK is seeing anincrease in the number of people joining fitness clubs and a massive growth forthe demand of organic food. On the other end of the spectrum the UK is worriedabout the lack of exercise its youngster are obtaining. These ‘fast food games
  • console’ children are more likely to experience health problems in their future because of the lifestyle they are living now. Population changes also have a direct impact on all organizations. Changes in the structure of a population will affect the supply and demand of goods and services within an economy. In Japan the fall in the birth rate has had a major impact on the sales of toys, as demand falls competition for the remaining market becomes very intense. If this trend continues it will have an impact on other sectors within the future affecting teen products, 20’s products and so on. As society changes, as behaviors change organizations must be able to offer products and services that aim to complement and benefit peoples lifestyle and behavior. Technological Changes in technology are changing the way business operates. The Internet is having a profound impact on the marketing mix strategy of organisations. Consumers can now shop 24 hours a day comfortably from their homes. The challenge these organisation faces is to ensure that they can deliver on their promise. Those businesses, which are slow to react, will fall at the first few hurdles. This technological revolution means a faster exchange of information beneficial for businesses as they can react quickly to changes within their operating environment. There is renewed interest by many governments to encourage investment in research and development and develop technology that will give their country the competitive edge. The pace of technological change is so fast that in the computer industry the average life of a computer chip is approximately 6 months. In the name of progression technology will continue to evolve organsiations that continue to ignore this will face extinction. New Product Development Why develop new products for your business? Every business needs to innovate to stay ahead of the competition. No business can continue to offer the same unchanged product, if they did so, profit would not be maximized and sales would start to fall. Here we will look at some of the reasons why a company may introduce new products into its portfolio.• Consumer needs may change, forcing the company to adapt with these changing needs. If we look at food sectors around the world, consumers are becoming more
  • health conscious, forcing companies to introduce low sugar and fat versions of their existing brands. Coca Cola Zero is a classic example.• The product maybe at the end of its life cycle, so the company may introduce new and improved updated versions. Microsoft has done this by moving from the Xbox to the Xbox 360.• The product might be at the maturity stage of its life cycle and might just need to be re-modified to stimulate an increase in sales. Sony PlayStation have done this with the original PlayStation by offering a smaller version called PSOne, and a slim version of the PlayStation 2.• There maybe environmental changes which the company may want to capitalise on. Music companies are now selling more music via downloads then through traditional shops, originally being forced to change the way they deliver their product by Napster.• Competitors may force change. New products maybe introduced because of competitors. New Product Development (NPD) Improving and updating product lines is crucial for the success for any organization. Failure for an organization to change could result in a decline in sales and with competitors racing ahead. The process of NPD is crucial within an organization. Products go through the stages of their lifecycle and will eventually have to be replaced There are eight stages of new product development. These stages will be discussed briefly below: Stage 1: Idea generation New product ideas have to come from somewhere. But where do organizations get their ideas for NPD? Some sources include: • Within the company i.e. employees • Competitors. • Customers • Distributors, Supplies and others. Stage 2: Idea Screening This process involves shifting through the ideas generated above and selecting ones, which are feasible and workable to develop. Pursing non- feasible ideas can clearly be costly for the company.
  • Stage 3: Concept Development and TestingThe organization may have come across what they believe to be a feasibleidea, however, the idea needs to be taken to the target audience. What dothey think about the idea? Will it be practical and feasible? Will it offerthe benefit that the organization hopes it will? or have they overlookedcertain issues? Note the idea and concept is taken to the target audiencenot a working prototype at this stage.Stage 4: Marketing Strategy and DevelopmentHow will the product/service idea be launched within the market? Aproposed marketing strategy will be written laying out the marketing mixstrategy of the product, the segmentation, targeting and positioningstrategy sales and profits that are expected.Stage 5: Business AnalysisThe company has a great idea, the marketing strategy seems feasible, butwill the product be financially worthwhile in the long run? The businessanalysis stage looks more deeply into the cash flow the product couldgenerate, what the cost will be, how much market shares the product mayachieve and the expected life of the product.Stage 6: Product DevelopmentFinally it is at this stage that a prototype is finally produced. The prototypewill clearly run through all the desired tests, and be presented to the targetaudience to see if changes need to be made.Stage 7: Test MarketingTest marketing means testing the product within a specific area. Theproduct will be launched within a particular region so the marketing mixstrategy can be monitored and if needed, be modified before nationallaunch.Stage 8: CommercializationIf the test marketing stage has been successful then the product will go fornational launch. There are certain factors that need to be taken intoconsideration before a product is launched nationally. These are timing,how the product will be launched, where the product will be launched, willthere be a national roll out or will it be region by region?
  • Marketing MixThe marketing mix principles (also known as the 4 p’s.) are used by business as tools to assistthem in pursuing their objectives. The marketing mix principles are controllable variables, whichhave to be carefully managed and must meet the needs of the defined target group. Themarketing mix is apart of the organizations planning process and consists of analyzing thedefined: • Product strategies. • Price strategies. • Place strategies. • Promotion strategies.Please click on the above links to learn more about the marketing mix Introducing the marketing mix Product strategies When an organisation introduces a product into a market they must ask themselves a number of questions. 1. Who is the product aimed at? 2. What benefit will they expect? 3. How do they plan to position the product within the market? 4. What differential advantage will the product offer over their competitors? We must remember that Marketing is fundamentally about providing the correct bundle of benefits to the end user, hence the saying ‘Marketing is not about providing products or services it is essentially about providing changing benefits to the changing needs and demands of the customer’ (P.Tailor 7/00)
  • Philip Kotler in Principles of Marketing devised a very interesting concept ofbenefit building with a productFor a more detailed analysis please refer to Principles of Marketing byP.Kotler.Kotler suggested that a product should be viewed in three levels.Level 1: Core Product. What is the core benefit your product offers?. Customerswho purchase a camera are buying more then just a camera they are purchasingmemories.Level 2 Actual Product: All cameras capture memories. The aim is to ensurethat your potential customers purchase your one. The strategy at this levelinvolves organizations branding, adding features and benefits to ensure that theirproduct offers a differential advantage from their competitors.Level 3: Augmented product: What additional non-tangible benefits can youoffer? Competition at this level is based around after sales service, warranties,delivery and so on. John Lewis a retail departmental store offers free five yearguarantee on purchases of their Television sets, this gives their `customers theadditional benefit of ‘piece of mind’ over the five years should their purchasedevelop a fault.Product DecisionsWhen placing a product within a market many factors and decisions have to betaken into consideration. These include:Product design – Will the design be the selling point for the organization as wehave seen with the iMAC, the new VW Beetle or the Dyson vacuum cleaner.Product quality: Quality has to consistent with other elements of the marketingmix. A premium based pricing strategy has to reflect the quality a product offers.
  • Product features: What features will you add that may increase the benefit offered to your target market? Will the organization use a discriminatory pricing policy for offering these additional benefits? Branding: One of the most important decisions a marketing manager can make is about branding. The value of brands in today’s environment is phenomenal. Brands have the power of instant sales; they convey a message of confidence, quality and reliability to their target market. Brands have to be managed well, as some brands can be cash cows for organizations. In many organizations brand managers, who have Hugh resources to ensure their success within the market, represent them. A brand is a tool, which is used by an organization to differentiate itself from competitors. Ask yourself what is the value of a pair of Nike trainers without the brand or the logo? How does your perception change? Increasingly brand managers are becoming annoyed by ‘copycat’ strategies being employed by supermarket food retail stores particular within the UK . Coca- Cola threatened legal action against UK retailer Simsbury after introducing their Classic Cola, which displayed similar designs and fonts on their cans. Internet branding is now becoming an essential part of the branding strategy game. Generic names like Bank.com and Business.com have been sold for £m’s. (Recently within the UK banking industry we have seen the introduction of Internet banks such as cahoot.com and marbles.com the task by brand managers is to make sure that consumers understand that these brands are banksPricing StrategiesAn organization can adopt a number of pricing strategies. The pricing strategies are based muchon what objectives the company has set itself to achieve.Penetration pricing: Where the organization sets a low price to increase sales and marketshare.
  • Skimming pricing: The organization sets an initial high price and then slowly lowers the price tomake the product available to a wider market. The objective is to skim profits of the market layerby layer.Competition pricing: Setting a price in comparison with competitors.Product Line Pricing: Pricing different products within the same product range at different pricepoints. An example would be a video manufacturer offering different video recorders with differentfeatures at different prices. The greater the features and the benefit obtained the greater theconsumer will pay. This form of price discrimination assists the company in maximizing turnoverand profits.Bundle Pricing: The organization bundles a group of products at a reduced price.Psychological pricing: The seller here will consider the psychology of price and the positioningof price within the market place. The seller will therefore charge 99p instead £1 or $199 instead of$200Premium pricing: The price set is high to reflect the exclusiveness of the product. Anexample of products using this strategy would be Harrods, first class airline services,Porsche etc.Optional pricing: The organization sells optional extras along with the product tomaximize its turnover. This strategy is used commonly within the car industry.Marketing Mix: PlacePlace strategiesRefers to how an organization will distribute the product or service they are offering to the enduser. The organization must distribute the product to the user at the right place at the right time.Efficient and effective distribution is important if the organization is to meet its overall marketingobjectives. If organization underestimate demand and customers cannot purchase productsbecause of it profitability will be affected.What channel of distribution will they use?Two types of channel of distribution methods are available. Indirect distribution involvesdistributing your product by the use of an intermediary. Direct distribution involves distributingdirect from a manufacturer to the consumer e.g. For example Dell Computers. Clearly directdistribution gives a manufacturer complete control over their product.
  • Above indirect distribution (left) and direct distribution (right).Distribution StrategiesDepending on the type of product being distributed there are three common distribution strategiesavailable:1. Intensive distribution: Used commonly to distribute low priced or impulse purchase productseg chocolates, soft drinks.2. Exclusive distribution: Involves limiting distribution to a single outlet. The product is usuallyhighly priced, and requires the intermediary to place much detail in its sell. An example of wouldbe the sale of vehicles through exclusive dealers.3. Selective Distribution: A small number of retail outlets are chosen to distribute the product.Selective distribution is common with products such as computers, televisions householdappliances, where consumers are willing to shop around and where manufacturers want a largegeographical spread.If a manufacturer decides to adopt an exclusive or selective strategy they should select aintermediary which has experience of handling similar products, credible and is known by thetarget audience. Promotion Strategies - A successful product or service means nothing unless the benefit of such a service can be communicated clearly to the target market. An organisations promotional strategy can consist of: Advertising: Is any non personal paid form of communication using any form of mass media.
  • Public relations: Involves developing positive relationships with the organisationmedia public. The art of good public relations is not only to obtain favorablepublicity within the media, but it is also involves being able to handle successfullynegative attention.Sales promotion: Commonly used to obtain an increase in sales short term.Could involve using money off coupons or special offers.Personal selling: Selling a product service one to one.Direct Mail: Is the sending of publicity material to a named person within anorganisation. There has been a massive growth in direct mail campaigns over thelast 5 years. Spending on direct mail now amounts to £18 bn a year representing11.8% of advertising expenditure ( Source: Royal Mail 2000). Organisationscan pay thousands of pounds for databases, which contain names andaddresses of potential customers.Direct mail allows an organisation to use their resources more effectively byallowing them to send publicity material to a named person within their targetsegment. By personalising advertising, response rates increase thus increasingthe chance of improving sales. Listed below are links to organisation whosbusiness involves direct mail.Above a pull strategy (left) push strategy (right).Communication by the manufacturer is not only directed towards consumers tocreate demand. A push strategy is where the manufacturer concentrates some oftheir marketing effort on promoting their product to retailers to convince them tostock the product. A combination of promotional mix strategies are used at this
  • stage aimed at the retailer including personal selling, and direct mail. The productis pushed onto the retailer, hence the name. A pull strategy is based around themanufacturer promoting their product amongst the target market to createdemand. Consumers pull the product through the distribution channel forcing thewholesaler and retailer to stock it, hence the name pull strategy. Organisationstend to use both push and pull strategies to create demand from retailers andconsumers.Communication Model - AIDAAIDA is a communication model which can be used by firms to aid them in sellingtheir product or services. AIDA is an Acronym for Attention, Interest, Desire,Action.. When a product is launched the first goal is to grab attention. Think,how can an organisation use it skills to do this? Use well-known personalities tosell products? Once you grab attention how can you hold Interest, throughpromoting features, clearly stating the benefit the product has to offer? The thirdstage is desire, how can you make the product desirable to the consumer? Bydemonstrating it? The final stage is the purchase action, if the company hasbeen successful with its strategy then the target customer should purchase theproduct.Promotion through the Product lifecycle. -As products move through the four stages of the product lifecycle differentpromotional strategies should be employed at these stages to ensure the healthysuccess and life of the product .Stages and promotion strategies employed.IntroductionWhen a product is new the organisations objective will be to inform the targetaudience of its entry. Television, radio, magazine, coupons etc may be used topush the product through the introduction stage of the lifecycle. Push and PullStrategies will be used at this crucial stage.Growth
  • As the product becomes accepted by the target market the organisation at thisstage of the lifecycle the organisation works on the strategy of further increasingbrand awareness to encourage loyalty.MaturityAt this stage with increased competition the organisation take persuasive tacticsto encourage the consumers to purchase their product over their rivals. Anydifferential advantage will be clearly communicated to the target audience toinform of their benefit over their competitors.DeclineAs the product reaches the decline stage the organisation will use the strategy ofreminding people of the product to slow the inevitableInternet promotion.The development of the world wide web has changed the business environmentforever. Dot com fever has taken the industry and stock markets by storm. The e-commerce revolution promises to deliver a more efficient way of conductingbusiness. Shoppers can now purchase from the comfort of their home 24 hours aday 7 days a week. However, particularly in the UK the e-commerce revolution ishindered by two factors. Firstly the cost of logging on to the net. Consumers arestill weary of the time-spent surfing, the high cost is slowing down the take-up.The number of homes that are linked to the web in the UK is only 25% of allhouse owners. If e-commerce businesses are to succeed the home penetrationrate of Internet access must also increase. Secondly, most homes are linked tomodems of 56K. As the growth of people signing on-line grows the access speedslows down. In America most consumers only spend 10 seconds browsing on a
  • web page, before they change sites, within the UK it is 2 minutes. The futureseems to be with ADSL networks, which will speed up access to the Internetdramatically, running at 512K per second. However, again whether this format isadapted depends much on the cost.Owning a website is a now a crucial ingredient to the marketing mix strategy ofan organization. Consumers can now obtain instant information on products orservices to aid them in their crucial purchase decision. Sony Japan took pre-orders of their popular Playstaion 2 console over the net, which topped a 1million after a few days; European football stars are now issuing press releasesover the web with the sites registered under their own names. Hit rates arephenomenal.BrandingWhat is a Brand?In Principles of Marketing, by Philip Kotler and Gary Armstrong a brandis defined as ‘a name, term, sign symbol or a combination of these, thatidentifies the maker or seller of the product’P.Tailor of www.learnmarketing.net defines a brand as a ‘ Marketing toolthat allows consumers to recognize the maker of a product’.Why brand?A brand name helps an organization differentiate itself from itscompetitors. In today’s competitive world no product can go without abrand. Customers often build up a relationship with a brand that they trustand will often go back to time and time again. For example, some peoplemay only purchase a Sony TV although there are acceptable alternativeson the market, because of a past positive history with this brand.Brand EquityHow much is a brand worth? Brand equity refers to the value of the brand.Brand equity does not develop instantaneously. A brand needs to becarefully nurtured and marketed so consumers feel real value and trusttowards that brand. Nike, Adidas, Harrods, have high brand equity. Thesebrand command high awareness and consumer loyalty. But how much arethese brands worth? It is difficult to put a value on these brands. But howmuch is a pair of Nike trainers worth without the logo on it?Branding strategies
  • When a company manages its brands it has a number of strategies it canuse to further increase its brand value. These are:Line extension: This is where an organization adds to its current productline by introducing, versions with new features, an example could be aCrisp manufacturer extending its line by adding more exotic flavors.Brand extension: If your current brand name is successful, you may usethe brand name to extend into new or existing areas. For example Virginextending its brand from records, to airlines, to mobiles.Multi Branding: The Company decides to further introduce more brandsinto an already existing category. Kellogg’s for example have a number ofbrands in the cereal market and the cereal bar market. Multi-branding canallow an organization to maximize profits, but a company needs to beweary over their own brands competing with each other over market share.New Brands: An organization may decide to launch a new brand into amarket. A new brand may be used to compete with existing rivals and maybe marketed as something ‘new and fresh’.Brand NamesHow do you name a product? Simply put it, there is no easy option.Depending on how established an organization is, there are a number ofways to brand a product.Individual name: A product could be branded with an individual name. Afirm may decide it wants a brand, which has no association with any of itsother brands. Volkswagen in the UK, for example own the brand SEATand SkodaFamily brand: Where a product is part of a family, e.g. Kellogg’s, withCorn flakes, Rice Krispies, and Frosties. The brand is stretched to otherproducts because customers trust it, and the firm is trying to maximize theequity it holds in the brand.Combined brand name: A popular strategy involves the organisationcombing the already established family name with a new individual brandname. The idea is to use the reputation of the established family orcompany name to launch a new associated product. For example Nestlemay use their name to launch a new cereal or cereal bar.Philip Kotler in Principles of Marketing devised a very interesting concept ofbenefit building with a product
  • For a more detailed analysis please refer to Principles of Marketing by P.Kotler. Kotler suggested that a product should be viewed in three levels. Level 1: Core Product. What is the core benefit your product offers?. Customers who purchase a camera are buying more then just a camera they are purchasing memories. Level 2 Actual Product: All cameras capture memories. The aim is to ensure that your potential customers purchase your one. The strategy at this level involves organisations branding, adding features and benefits to ensure that their product offers a differential advantage from their competitors. Level 3: Augmented product: What additional non-tangible benefits can you offer? Competition at this level is based around after sales service, warranties, delivery and so on. John Lewis a retail departmental store offers free five year guarantee on purchases of their Television sets, this gives their `customers the additional benefit of ‘piece of mind’ over the five years should their purchase develop a fault.Service MarketingCharacteristics of a Service
  • What exactly are the characteristics of a service? How are services different from aproduct? In fact many organisations do have service elements to the product they sell, forexample McDonald’s sell physical products i.e. burgers but consumers are alsoconcerned about the quality and speed of service, are staff cheerful and welcoming anddo they serve with a smile on their face?There are five characteristics to a service which will be discussed below.1. Lack of ownership.You cannot own and store a service like you can a product. Services are used or hired fora period of time. For example when buying a ticket to the USA the service lasts maybe 9hours each way , but consumers want and expect excellent service for that time. Becauseyou can measure the duration of the service consumers become more demanding of it.2. IntangibilityYou cannot hold or touch a service unlike a product. In saying that although services areintangible the experience consumers obtain from the service has an impact on how theywill perceive it. What do consumers perceive from customer service? the location, andthe inner presentation of where they are purchasing the service?.3. InseparabilityServices cannot be separated from the service providers. A product when produced canbe taken away from the producer. However a service is produced at or near the point ofpurchase. Take visiting a restaurant, you order your meal, the waiting and delivery of themeal, the service provided by the waiter/ress is all apart of the service production processand is inseparable, the staff in a restaurant are as apart of the process as well as thequality of food provided.4. PerishibilityServices last a specific time and cannot be stored like a product for later use. If travellingby train, coach or air the service will only last the duration of the journey. The service isdeveloped and used almost simultaneously. Again because of this time constraintconsumers demand more.5. HeterogeneityIt is very difficult to make each service experience identical. If travelling by plane theservice quality may differ from the first time you travelled by that airline to the second,because the airhostess is more or less experienced.A concert performed by a group on two nights may differ in slight ways because it is verydifficult to standardise every dance move. Generally systems and procedures are put intoplace to make sure the service provided is consistent all the time, training in service
  • organisations is essential for this, however in saying this there will always be subtledifferences. Service Marketing Mix Having discussed the characteristics of a service, let us now look at the marketing mix of a service.The service marketing mix comprises off the 7’p’s. These include:• Product• Price• Place• Promotion•• People• Process• Physical evidence. Lets now look at the remaining 3 p’s: People An essential ingredient to any service provision is the use of appropriate staff and people. Recruiting the right staff and training them appropriately in the delivery of their service is essential if the organisation wants to obtain a form of competitive advantage. Consumers make judgements and deliver perceptions of the service based on the employees they interact with. Staff should have the appropriate interpersonal skills, aptititude, and service knowledge to provide the service that consumers are paying for. Many British organisations aim to apply for the Investors In People accreditation, which tells consumers that staff are taken care off by the company and they are trained to certain standards. Process Refers to the systems used to assist the organisation in delivering the service. Imagine you walk into Burger King and you order a Whopper Meal and you get it delivered within 2 minutes. What was the process that allowed you to obtain an efficient service delivery? Banks that send out Credit Cards automatically when their customers old one has expired again require an efficient process to identify expiry dates and renewal. An efficient service that replaces old credit cards will foster consumer loyalty and confidence in the company.
  • Physical EvidenceWhere is the service being delivered? Physical Evidence is the element ofthe service mix which allows the consumer again to make judgements onthe organisation. If you walk into a restaurant your expectations are of aclean, friendly environment. On an aircraft if you travel first class youexpect enough room to be able to lay down!Physical evidence is an essential ingredient of the service mix, consumerswill make perceptions based on their sight of the service provision whichwill have an impact on the organisations perceptual plan of the service.To summarise service marketing looks at:The Characteristics of a service that are:(1) Lack of ownership(2) Intangibility(3) Inseparability(4) Perishability(5) Heterogeneity.The Service marketing mix involves analysing the 7’p of marketinginvolving, Product, Price, Place, Promotion, Physical Evidence, Processand People.To certain extent managing services are more complicated then managingproducts, products can be standardised, to standardise a service is far moredifficult as there are more input factors i.e. people, physical evidence,process to manage then with a productConsumer Buying BehaviourWhat influences consumers to purchase products or services? Theconsumer buying process is a complex matter as many internal andexternal factors have an impact on the buying decisions of the consumer.When purchasing a product there several processes, which consumers gothrough. These will be discussed below.
  • 1. Problem/Need RecognitionHow do you decide you want to buy a particular product or service? Itcould be that your DVD player stops working and you now have to lookfor a new one, all those DVD films you purchased you can no longer play!So you have a problem or a new need. For high value items like a DVDplayer or a car or other low frequency purchased products this is theprocess we would take. However, for impulse low frequency purchasese.g. confectionery the process is different.2. Information searchSo we have a problem, our DVD player no longer works and we need tobuy a new one. What’s the solution? Yes go out and purchase a new one,but which brand? Shall we buy the same brand as the one that blew up? Orstay clear of that? Consumer often go on some form of information searchto help them through their purchase decision. Sources of informationcould be family, friends, neighbours who may have the product you havein mind, alternatively you may ask the sales people, or dealers, or readspecialist magazines like What DVD? to help with their purchase decision.You may even actually examine the product before you decide to purchaseit.3. Evaluation of different purchase options.So what DVD player do we purchase? Shall it be Sony, Toshiba or Bush?Consumers allocate attribute factors to certain products, almost like apoint scoring system which they work out in their mind over which brandto purchase. This means that consumers know what features from therivals will benefit them and they attach different degrees of importance toeach attribute. For example sound maybe better on the Sony product andpicture on the Toshiba , but picture clarity is more important to you thensound. Consumers usually have some sort of brand preference withcompanies as they may have had a good history with a particular brand ortheir friends may have had a reliable history with one, but if the decisionfalls between the Sony DVD or Toshiba then which one shall it be? Itcould be that the a review the consumer reads on the particular Toshibaproduct may have tipped the balance and that they will purchase thatbrand.4. Purchase decisionThrough the evaluation process discussed above consumers will reachtheir final purchase decision and they reach the final process of goingthrough the purchase action e.g. The process of going to the shop to buy
  • the product, which for some consumers can be as just as rewarding asactually purchasing the product. Purchase of the product can either bethrough the store, the web, or over the phone.Post Purchase BehaviourEver have doubts about the product after you purchased it? This simply ispost purchase behaviour and research shows that it is a common traitamongst purchasers of products. Manufacturers of products clearly wantrecent consumers to feel proud of their purchase, it is therefore just asimportant for manufacturers to advertise for the sake of their recentpurchaser so consumers feel comfortable that they own a product from astrong and reputable organisation. This limits post purchase behaviour. i.e.You feel reassured that you own the latest advertised product.Factors influencing the behaviour of buyers.Consumer behaviour is affected by many uncontrollable factors. Justthink, what influences you before you buy a product or service? Yourfriends, your upbringing, your culture, the media, a role model orinfluences from certain groups?Culture is one factor that influences behaviour. Simply culture is definedas our attitudes and beliefs. But how are these attitudes and beliefsdeveloped? As an individual growing up, a child is influenced by theirparents, brothers, sister and other family member who may teach themwhat is wrong or right. They learn about their religion and culture, whichhelps them develop these opinions, attitudes and beliefs (AIO) . Thesefactors will influence their purchase behaviour however other factors likegroups of friends, or people they look up to may influence their choices ofpurchasing a particular product or service. Reference groups are particulargroups of people some people may look up towards to that have an impacton consumer behaviour. So they can be simply a band like the Spice Girlsor your immediate family members. Opinion leaders are those people thatyou look up to because your respect their views and judgements and theseviews may influence consumer decisions. So it maybe a friend who workswith the IT trade who may influence your decision on what computer tobuy. The economical environment also has an impact on consumerbehaviour; do consumers have a secure job and a regular income to spendon goods? Marketing and advertising obviously influence consumers intrying to evoke them to purchase a particular product or service.Peoples social status will also impact their behaviour. What is their rolewithin society? Are they Actors? Doctors? Office worker? and mothers
  • and fathers also? Clearly being parents affects your buying habitsdepending on the age of the children, the type of job may mean you needto purchase formal clothes, the income which is earned has an impact. Thelifestyle of someone who earns £250000 would clearly be different fromsomeone who earns £25000. Also characters have an influence on buyingdecision. Whether the person is extrovert (out going and spends onentertainment) or introvert (keeps to themselves and purchases via onlineor mail order) again has an impact on the types of purchases made.Maslow’s Hierarchy of NeedsAbraham Maslow hierarchy of needs theory sets out to explain whatmotivated individuals in life to achieve. He set out his answer in a form ofa hierarchy. He suggests individuals aim to meet basic psychologicalneeds of hunger and thirst. When this has been met they then move up tothe next stage of the hierarchy, safety needs, where the priority lay withjob security and the knowing that an income will be available to themregularly. Social needs come in the next level of the hierarchy, the need tobelong or be loved is a natural human desire and people do strive for thisbelonging. Esteem need is the need for status and recognition withinsociety, status sometimes drives people, the need to have a good job titleand be recognised or the need to wear branded clothes as a symbol ofstatus.Self-actualisation the realisation that an individual has reached theirpotential in life. The point of self-actualisation is down to the individual,when do you know you have reached your point of self-fulfilment?But how does this concept help an organisation trying to market a productor service?Well as we have established earlier within this website, marketing is aboutmeeting needs and providing benefits, Maslows concept suggests thatneeds change as we go along our path of striving for self-actualisation.Supermarket firms develop value brands to meet the psychological needsof hunger and thirst. Harrods develops products and services for those whowant have met their esteem needs. So Maslows concept is useful formarketers as it can help them understand and develop consumer needs andwants.For further information on motivation theory please visitTypes of buying behaviour.There are four typical types of buying behaviour based on the type ofproducts that intends to be purchased. Complex buying behaviour is wherethe individual purchases a high value brand and seeks a lot of information
  • before the purchase is made. Habitual buying behaviour is where theindividual buys a product out of habit e.g. a daily newspaper, sugar or salt.Variety seeking buying behaviour is where the individual likes to shoparound and experiment with different products. So an individual may shoparound for different breakfast cereals because he/she wants variety in themornings!Consumer Goods ClassificationConsumer goods are products which are purchased for personalconsumption. Consumer goods are classified into three areas.. These are:Convenience GoodsConvenience products are inexpensive frequent purchases, there is littleeffort needed to purchase them. Examples may include fast food andconfectionery products. Convenience products are split into staples, suchas milk, eggs and emergency products, which are purchased when theneed arises e.g. Umbrellas.Shopping goodsShopping goods are usually high risk products where consumers like toshop around to find the best features and price for that product.. Examplesinclude buying fridges, freezers or washing machines.Specialty GoodsThere are products that are purchased infrequently. The consumers willconduct extensive research to make sure that their purchase decision isright, because specialty goods are expensive and infrequent purchases.The organization will support the product with an extensive warrantypackage. Examples include watches and diamonds. There are usually littleor no substitutes for these products.Requirements of segmentation.
  • Before an organisation can target a specific segment accurately it must askitself a number of questions. It is important to evaluate the effectiveness ofa targeting strategy and the viability of the segment, if this is not done thenmoney will be wasted.The market which is segmented must meet the following criteria:Measurability of segment: Can you measure the size and growth of thesegment. Is the segment growing? In the UK the DVD market is growingat an extremely fast pace. From January 2002 – June 2002 900,000 DVD’swere sold. The fast growth rate is attracting many players within themarket.Accessibility of segment: Is it easy for you to target and reach yoursegment? Can they be reached with basic communication tools such asradio and TV advertising? If you cannot target your segment effectivelywith marketing communication then it is not viable.Suitability of segment: Is there enough spending power within thesegment for the company to sustain itself.? Will spending within the DVDmarketing continue?Actionability of segment: Does the organisation have enough resourcesto reach their segments?. It is no point in targeting segments you do nothave the resources to cater for. If you were a car manufacturer theorganisation would not concentrate on the affluent and price sensitivemarket if they did not have the resources to do so.Market SegmentationAn organisation cannot satisfy the needs and wants of all consumers. To do somay result in a massive drain in company resources. Segmentation is simply theprocess of dividing a particular market into sections, which display similarcharacteristics or behaviour. There are a number of segmentation variables thatallow an organisation to divide their market into homogenous groups. Thesevariables will be discussed briefly belowDemographic Segmentation
  • Demographics originates from the word ‘demography’ which means a ‘study ofpopulation’. The population can be divided into age, gender, income, and familylifecycle amongst other variables.As people age their needs and wants change, some organisations developspecific products aimed at particular age groups for example nappies for babies,toys for children, clothes for teenagers and so on. Gender segmentation iscommonly used within the cosmetics, clothing and magazine industry. All BarOne within the UK have developed their bars to attract the female audience,taking opportunity of the rise in the number of women who now enjoy ‘socialdrinking’. In the UK we have also seen the introduction of Maxim, (www.maxim-magazine.co.uk) a male lifestyle magazine covering male fashion, films, cars,sports and technology. We have also seen the introduction of unisex cosmeticproducts like CK1 which works on the similarities between the two genders.Age & lifecycle segmentation: As people age their needs and lifestyles change.Income segmentation is another strategy used by many organisations. Storeslike Harrods, Harvey Nicohals are predominantly aimed at the affluent market.Daewoo aim their vehicles at price sensitive buyers who require a bundle ofbenefits for the price. In todays globally competitive environment brands arespecifically developed and positioned within particular income segments inorderto maximise turnover.Products and services are also aimed at different lifecycle segments. Holidaysare developed for families, the 18-30s singles, and for those in their 50s.
  • Geographic SegmentationGeographical segmentation divides markets into different geographicalareas. Marketers use geographic segmentation because consumers indifferent areas may display certain characteristics and behaviours in thatparticular region, for example, in London UK certain parts of the WestEnd of London are more affluent then the East End and you will findparticular products sold in these regions based on their affluence. An areacan be divided by the town, the region or the country. If you are anorganisation working on a global scale you may divide by global regionssuch as Europe, North America, South America, Asia and Africa.Mcdonalds globally, sell burgers aimed at local markets, for example,burgers are made from lamb in India rather then beef because of religiousissues. In Mexico more chilli sauce is added and so on. | Pyschographics Segmentation Although demographic segmentation is useful, marketers can use alternative segmentation variables which aim to develop more accurate profiles of their target segments. Pyschrographics segmentation can be broken down into lifestyle, social class, and personality characteristics.
  • Lifestyles segmentationThe Oxford English dictionary defines a lifestyle as a way oflife and lifestyle segmentation aims to examine the way peoplelive.Our lifestyle, our every days activities, our interest, opinions andbeliefs on certain issues dictates who we are. Marketers refer tothese as AIO’s (Activities, Interest and Opinions), and our AIO’sdictate our everyday behaviour from where we shop to what webuy. Marketers develop and aim products/services at particularlifestyle groups and develop lifestyle profiles on their targetmarket. If we understand the lifestyle of a particular group wecan sell them a product/services on the basis that it will enhancetheir lifestyle. A lifestyle group is a particular segment defined bythe organisation that is marketing a product or service. Thislifestyle segment is labeled because individual within it displaysimilar characteristics. For example in the early 1980s within theUK as the economy was booming the City of London wereincreasingly employing young independent staff on very highsalaries. The media termed this group as YUPPIES, they wereyoung upwardly mobile professionals, associated with mobilephones, money, expensive cars, and prestigious city jobs.Third agers are another group termed and identified by themarketing industry. They are people in their 50’s retired from aprofession, and have a high disposable income with time on thehand.Many of these third-agers are adventurous and experimenters,as they have spent their past lives working hard and they seekenjoyment from their remaining years and have the income tospend on luxury items. In the United States there are 70 millionthird-agers who are the fastest growing users of the internet,spending more time on the internet then their youngercounterpart. www.thirdage.com has a hit rate of 500,000 permonth. Lifestyle groups Yuppie Associations Third Agers Associations.
  • • Mobile • 50s • High valued • Retired early from house/flat profession. • Good Salary • Time to spare • Young branded car. • Adventure SeekersPersonality Characteristics.Products and brands can also be aimed at particular personalities. Pigaiomotorcycles are aimed at young 18-25 outgoing, independent persons. Oftenmarketers try to develop personalities for their brands and products that mimicthat of their target market. Ask yourself if Nike or Levi’s was a person, what typeof person would they be?Social Class SegmentationDivides society into 6 distinct groups based solely on occupation.A Professional staffB Middle managementC1 Junior managementC2 Skilled manualD Semi-skilled and unskilled workers.E Those dependent on the state.Social class segmentation works on the assumption that the higher yourprofession the more you will earn. Thus the more affluent lifestyle you will lead.Marketers use this type of information to sell products and services based onlifestyle behaviour, and your profession does have an impact on the way youbehave.
  • Behavioural SegmentationRefers to why people purchase a product or service. Behavioural segmentationcan be broken down into the benefit a consumer seeks from purchasing aproduct. How will the product enhance their overall lifestyle. When purchasing acomputer the benefit sought maybe of ‘ease of use’ to the ‘need for speed’.Occasion is another variable. When should a product be purchased? Thedemand for turkeys increases during Christmas, flowers and chocolates onmothers day and so on. Occasion segmentation aims to increase the ‘reason tobuy factor’ and thus increase sales. Usage rate divides customers into light,medium and heavy users. Heavy users obviously contribute more to turnoverthen light or medium users, the objective of an organisation should be to attractheavy users who will make a greater contribution to company sales.