Understanding Customers and Competitors - Essay Example

Report on: Understanding s and Competitors Terms of Reference: The Chairman, XXX Company, Fax: 000-000-000 -- Mr. AAA, Market Analyst, XXXX Consulting Plc. Abstract: Companies can passively accept the marketing environment as an uncontrollable element to which they must adapt, avoiding threats and taking advantage of opportunities as they arise. Or they can take an environmental management perspective, in which the firm takes aggressive actions to affect the publics and forces in its marketing environment rather than simply watching and reacting to them that is proactively working to change the environment rather than simply reacting to it. Whenever possible, companies should try to be proactive rather than reactive. Understanding the Customers and Competitors is a vital issue and SWOT analysis is the key tools in this regards. Contents Page Terms of Reference: 1 Abstract: 1 Contents Page 2 Introduction: 3 Stage - 1: Marketing Environment 3 Market Segmentation 7 The Public: 8 Stage-2: Market Summary 11 Customers Dilemma 13 Competitive advantage 14 Market positioning 15 Stage-3: Recommendations 17 Quality Gap 17 Competitor analysis 18 Research Methodology 19 SWOT analysis 20 Conclusion: 23 Bibliography: 23 Appendix 25 Figure-1 26 Introduction: Every company has competitors. First of all it is necessary to identify competitors. At the same time every company has its customers with limited budgets. They are free to choose to purchase from a company or other then that company who offer the same goods and services and at the same time competitor of the first company. Customers also free purchase totally different substitute goods and services by means of their limited funds. Companies those offer similar goods and services are the direct competitors of each other. Thus it is most important to understanding the Customers and Competitors Stage - 1: Marketing Environment A company's marketing environment consists of the actors and forces outside marketing management's ability to develop and maintain successful transactions with its target customers. The marketing environment offers both opportunities and threats. Successful companies know the vital importance of constantly watching and adapting to the changing environment. Treacy, M. & Wiersema, F. (1993) mentioned that marketers take the major responsibility for identifying significant changes in the environment. More than any other group in the company, marketers must be the trend trackers and opportunity seekers. Although every manager in an organisation needs to observe the outside environment marketing it, marketers have two special aptitudes. They have disciplined methods-marketing intelligence and marketing research- for collecting information about the marketing environment. They also spend time in the customer and competitor environment. By conducting systematic environmental scanning, marketers are able to revise and adapt marketing strategies to meet new challenges and opportunities in the marketplace. Evans, J. R., & Berman, B. (1990) has stated the marketing environment is made up of a microenvironment and a microenvironments. The microenvironment consists of the forces close to the company that affect its ability to serve its customers- the company, suppliers, marketing channel firms, customer markets, competitors, and publics. The macroenvironvent consists of the larger societal forces that affect the microenvironment- demographic, economic, natural, technological, political, and cultural forces. Kotler, P., Armstrong, G. (2006) argued that marketing environment is made up of five microenvironmental and six macroenvironmental components. The microenvironment consists of other actors close to the company that combine to form the company's value delivery system or which affect its ability to serve its customers. The first microenmental component is the company's internal environment- its several departments and management levels- as it influences marketing decision making. The second component consists of the marketing channel firms that corporate to create value- the suppliers and marketing intermediaries, including resellers, physical, distribution firms, marketing services agencies, and financial intermediaries. The third component is made up of the five types of customer markets, including consumer, producer, reseller, government, and international markets. The fourth component consists of competitors, and the fifth comprises the seven publics with an actual or potential interest in or impact on the company's ability to meet its objectives, including the financial, media, government, citizen action, and local, general, and internal publics. Schumpeter, J. A. (1982) added that the microenvironment consists of larger societal forces that affect the entire microenvironment. The six forces making up the company's macroenvironment include demographic, economic, natural, technological, political, and cultural forces. These forces shape opportunities and pose threats to the company. Demography is the study of the characteristics of human populations. Today's demographic environment shows a changing age structure, shifting family profiles, geographic population shifts, a more-educated and more white-collar population, and increasing diversity. The economic environment consists of factors that affect buying power and patterns. The economic environment is characterized by lower real income shifting consumer-spending patterns. Today's "squeezed consumers" are seeking greater value-just the right combination of good quality and service at a fair price. The distribution of income also is shifting. The rich have grown richer, the middleclass has shrunk, and the poor leading to a two-tired marked. Many companies now tailor their marketing offers two different markets- the less affluent. Skinner, S. J., & Ivancevich, J. M. (2003) emphasised that the natural environment shows four major trends: shortages of certain raw materials, increased costs of energy, higher pollution levels, and more government intervention in natural resource management Environment concerns create marketing opportunities for alert companies. The marketer should watch for four major trends in the technological environment: the rapid pace of technological change, high R&D budgets, the concentration by companies on minor product improvements, and increased government regulation. Companies that fail to keep up with technological change will miss out on new product and marketing opportunities. Wiersema, F. & Treacy, M. (2001) stated that the political environment consists of laws, agencies, and groups that influence or limit marketing actions. The political environment has undergone three changes that affect marketing worldwide- increasing legislation regulating business, strong government agency enforcement, and greater emphasis on ethics and socially responsible actions. The cultural environment is made up of institutions and forces that affect a society's values, perceptions, preferences, and behaviors. The environment shows long-term trends toward a "we-society", a return to cautious trust of institutions, increasing patriotism, greater appreciation for nature, a new spiritualism, and search for more meaningful and enduring values. Often, companies can find positive ways to overcome seemingly uncontrollable environmental constrains. For example: Cathay Pacific Airlines determines that many travelers were avoiding Hong Kong because of lengthy delays at immigration. Rather than assuming that this was a problem they could not solve, Cathay's senior staff asked the Hong Kong government how to avoid these immigration delays. After lengthy discussions, the airline agreed to make an annul grant-in- aid to the government to hire more immigration inspectors- but these reinforcements would service primarily the Cathy Pacific gates. The reduced waiting period increased customer value and thus strengthened. Market Segmentation Kotler, P., Armstrong, G. (2006) has mentioned that the company needs to study its customer or consumer markets closely. There are five types of customer markets. They are: - Customer Markets: - It consists of individuals and households that buy goods and services for personal consumption. Business Markets: - They buy goods and services for further processing or for use in their production process. Reseller Markets: - To get profit they buy goods and services and resell them. Government Markets: These markets are made up of government agencies that buy goods services to produce public services or transfer the goods and services to others who need them. International markets: - International markets consist of these buyers in other countries, including consumers, producers, resellers, and governments. Each market type has special characteristics that call for careful study by the seller. The Public: The company's marketing environment includes various publics. A public is any group that has an actual or potential interest in or impact on an organisation's ability to achieve its objectives. Seven types of publics are as follow- Financial publics influence the company's ability to obtain funds, Banks, investments houses, and stockholders are the major financial publics Media publics carry news, features, and editorial opinion. They include newspapers, magazines, and radio and television stations. Government publics: - Management must take government developments into account. Marketers must often consult the company's lawyers on issues of product safety, truth in advertising, and other matters. Citizen action publics: - A company's marketing decisions may be questioned by consumer organisations, environmental groups, and others. Its public relations department can help it stay in touch with consumer and citizen groups. Local publics include neighborhood residents and community organisations. Large companies usually appoint a community relations' officer to deal with the community, attend meetings, answer questions, and contribute to worthwhile causes. General public: - A company needs to be concerned about the general public's attitude toward its products and activities. The public's image of the company affects it's buying. Internal publics include workers, managers, volunteers, and the board of directors. Large companies use newsletters and other means to inform and motive their internal publics. When employees feel good about their company, this positive attitude spills over to external publics. Wiersema, F. & Treacy, M. (2001) added that the Companies must do more than make good products- they have to inform consumers about product benefits and carefully position products in consumers' minds. To do this, they must skillfully employ mass- promotion tools in addition to personal selling, which targets specific buyers: advertising, sales promotion, and public relations. Public relations building good relations with the company's various publics by obtaining favorable publicity, building up a good "corporate image," and handling or heading off unfavorable rumors, stories, and events. In another word public relations refers - gaining favorable publicity and creating a favorable company image- is the least used of the major promotion tools, although it has great potential for building consumer awareness and preference. Public relations departments may perform any or all of the following functions: Press relations or press agency: - Creating and placing newsworthy information in the news media to attract attention to a person, product, or service. Product publicity: - Publicizing specific products. Public affairs:- Building and maintaining national or local community relations. Lobbying: - Building and maintaining relations with legislators and government officials to influence legislation and regulation. Investor relations: - Maintaining relationships with shareholders and others in the financial community. Development: - Public relations with donor or members of nonprofit organisations to gain financial or volunteer support. Public relations are used to promote products, people, places, ideas, activities, and organisations. Trade associations have used public relations to rebuild interest in declining, commodities such as eggs, apples, milk, and potatoes. LONDON city turned its image around when its "I Love LONDON" campaign took root, bringing millions more tourists to the city. Nations have used public relations to attract more tourists, foreign investment, and international support. Public relations can have a strong impact on public awareness at a much lower cost than advertising. Stage-2: Market Summary Stoner, J. A. F., Freeman, R. E., and Gilbert, D. R. (2006) have explained that Market can be defined as a set of all actual and potential buyers of a product or services. In other word people who buys today and would be buy tomorrow is known as market. So we can say that market does not refer any place, it means people are the market. Stoner, J. A. et al (2006) also added that Marketing only as selling and advertising. However, selling and advertising is only the tip of the marketing iceberg. Today, marketing must be understood not in the old sense of marketing a sale but in the new sense of satisfying customer needs. So, marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. The core concepts of marketing are needs, wants, and demands; products and services; value, satisfaction, and quality; exchange, transactions, and relationships; and markets. Wants are the form assumed by human needs when shaped culture and individual personality. When backed by buying power, wants become demands. People satisfy their needs, wants, and demands with products and services. A product is anything that can be offered to a market to satisfy a need, want, or demand. Products are also including services and other entities such as persons, places, organisations, activities, and ideas. Wiersema, F. & Treacy, M. (2001) concerned that every firm must organize and distribute a continuous flow of information to its marketing managers. Companies study their managers' information needs and design marketing information system (MIS) to meet these needs. A marketing information system (MIS) consists of people, equipment, and procedures to gather, sort, Analyse, evaluate, and distribute needed, timely, and accurate information to marketing decision makers. The company's marketing information system should represent a cross between what managers really need, and what is economically feasible. An internal MIS committee can interview a cross- section of marketing managers to discover their information needs. A marketing intelligence system is a set of producers and sources used by managers to obtain everyday information about developments in the marketing environment. Marketing managers collect marketing intelligence by reading books, newspapers, and trade publications; talking to customers, suppliers, and distributors; and meeting with other company managers. A company can take several steps to improve the quality of its marketing intelligence. Marketing research system is the systematic design, collection, analysis, and reporting of data relevant to a specific marketing situation facing an organisation. William M, P. & Ferrell, P. C. (2000) argued that a growing number of organisations are used a marketing decision support system to help their marketing managers make better decisions. Marketing decision support system (MDSS) is a coordinated collection of data, systems, tools, and techniques with supporting software and hardware by which an organisation gathers and interprets relevant information from business and environment and turns it into a basis for marketing action. The marketing research design has four steps. They are as follow- 1. Defining the problem and research objectives. 2. Developing the research plan. 3. Implementing the research plan. 4. Interpreting and reporting the findings. Customers Dilemma Kotler, P, (2004) Customer-centered company focuses on customer developments in designing its marketing strategies and on delivering superior value to its target customers. Customer database is an organized collection of comprehensive data about individual consumers or prospects, including geographic, demographic, psychographics, and behavioral data. Customer delivered value assesses the product's overall capacity to satisfy consumer's needs. The difference between total customers value and total customers cost of marketing offers "profit" to the customer. Griffin, R. W. (2006) explained that Customer lifetime value is the amount by which revenues from a given customer over time will exceed the company's costs of attracting, selling, and servicing that customer. Customer sales force structure of a sales force organisation under which sales people specialize in selling only to certain customer or industries. Customer satisfaction extent, which a product's perceived performance, matches a buyer's expectations. If the product's performance falls short of expectations, the buyer is dissatisfied. If performance matches or exceeds expectations, the buyer is satisfied or delighted. Customer value is the difference between the values the customer gains from owning and using a product and the costs of obtaining the product. Customer value- delivery network is the system made up of the value chains of the company and its suppliers, distributors, and ultimately customers who work together to customers. The marketing concept states that to be successful, a company must provide greater customer value and satisfaction than its competitors. Thus, marketers must do more than simply adapt to the needs of target consumers. They also must gain strategic advantage by positioning their offerings strongly against competitors' offerings in the minds of consumers. Competitive advantage No single competitive marketing strategy is best for all companies. Each firm should consider its own size and industry position compared to those of its competitors. Large firms with dominant positions in an industry can use certain strategies that smaller firms cannot afford. But being large is not enough. There are winning strategies for large firms, but there are also losing ones. And firms can develop strategies that give them better rates of return than large firms enjoy. Competitive advantage is an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices. Competitive marketing strategies that strongly position the company against competitors and that give the company the strongest possible strategic advantage. Market positioning Evans, J. R., & Berman, B. (1990) mentioned that more than a decade ago, Michel Porter suggested four basic competitive positioning strategies that companies can follow- three winning strategies and one losing one. The three winning strategies include: - Overall cost leadership: - Here the company works hard to achieve the lowest costs of production and distribution so that it can price lower than its competitors and win a large market share. Differentiation: - Here the company concentrates on creating a highly differentiated product line and marketing program so that it comes across as the class leader in the industry. Most customers would prefer to own this brand if its price is not too high. Focus: - Here the company focuses its effort on serving a few market segments well rather than going after the whole market. Thus, glassmaker AFG Industries focuses on users of tempered and colored glass- it makes 70 percent of the glass for shower doors and patio tabletops. Companies that peruse a clear strategy one of the above are likely to perform well. The firm that carries out that strategy best will make the most profits. But firm that do not peruse a clear strategy- middle-of-the-readers-do the worst. William M, P. & Ferrell, P. C. (2000) offered a new classification of competitive marketing strategies. They suggest that companies gain leadership positions by delivering superior value to their customers. Companies can peruse any of the three strategies called value disciplines- for delivering superior customer value. These are: - Operational excellence: The Company provides superior value by leading its industry in price and convenience. It works to reduce costs and to create a lean and efficient value- delivery system. It serves customers who want reliable, good- quality products or services, but who want them cheaply and easily. Customer Intimacy: Evans, J. R., & Berman, B. (1990) suggested that the Company provides superior value by precisely segmenting its markets and then tailoring its products or services to match exactly the needs of targeted customers. It specializes in satisfying unique customer needs through a close relationship with and intimate knowledge of the customer. It builds detailed customer respond quickly to customer needs. It serves customers who are willing to pay a premium to get precisely what they want, and it will do almost anything to build long-term customer loyalty and to capture customer lifetime value. Stage-3: Recommendations Quality Gap In recent years, however, Western firms have closed the quality gap. Many have started their own quality programs in an effort to complete both globally and at home. Thus, total quality has become a truly global concern. Total quality stems from the following premises about quality improvement: 1. Quality is in the eye of the customer. 2. Quality must be reflected not just in the company's products, activity. 3. Quality requires total employee commitment. 4. Quality requires high- quality partners. 5. A quality program cannot save a poor product. 6. Quality can always be improved. 7. Quality improvement sometimes requires quantum leaps. 8. Quality does not cost more. 9. Quality is necessary but may not be sufficient. Competitor analysis William M, P. & Ferrell, P. C. (2000) mentioned that Competitor analysis is the process of identifying key competitors; assessing their objectives, strategies, strengths and weaknesses, and reaction patterns; and selecting which competitors to attack or avoid. Competitor centered company who moves are mainly based on competitors' actions and reactions; it spends most of its time tracking competitors' moves and market shares and trying to find strategies to counter them. Firms competing in a given target market, at any point in time, differ in their objectives and resources. Some firms are large, others small. Some have many resources others are strapped for funds. Some are old and established others new fresh. Some strive for rapid market share growth, others for long- term profits. The firms occupy different competitive positions in the target market. We now examine competitive strategies based on the roles firms play in the target market- that of- Market leader: The firms in an industry with the largest market share; it usually leads other firms in price changes, new product introductions, distribution coverage, and promotion spending. Market challenger: A runner-up firm in an industry that is fighting hard to increase its market shares. Market follower: A runner-up firm in an industry that wants to hold its share without rocking the boat. Market richer: A firm in an industry that serves small segments those other firms overlook or ignore. Research Methodology Malhotra, N. K. (2006), mentioned that to meet the manager's information needs, the researcher can gather data from various sources. Sources of data collection are basically two types. This includes primary data and secondary data. The researcher can gather secondary data, primary data, or both. Primary data consists of information collected for the specific purpose at hand. Secondary data consists of information that already exists somewhere, having been collected for another purpose. Researchers usually start by gathering secondary data. A company's sources of secondary data are commercial data sources, online databases and Internet data sources. Companies can buy secondary data reports from outside suppliers. Using commercial online databases, marketing researches can conduct their own searches of secondary data sources. A recent survey of marketing researchers found that 81 percent use such online services for conducting research. A readily available online database exists to fill almost any marketing information need. General database services such as CompuServe, Dialog, and Lexis-Nexis put an incredible wealth of information at the keyboards of marketing decision makers. Secondary data can also present problems. The needed information may not exist- researchers can rarely obtain all the data they need from secondary sources. For example, Campbell will not find existing information about consumer reactions to new packaging that it has not yet placed on the market. Even when data can be found, they might not be very usable. The researcher must evaluate secondary information carefully to make certain it is relevant SWOT analysis The overall evaluation of a company's strengths, weakness, opportunities, and threats is called SWOT analysis. Opportunity and threat analysis: Koch, A. J. (2007) added that opportunity and threat are under external environment. A major purpose of environmental scanning is to discern new marketing opportunities. A marketing opportunity is an area of buyer need or potential interest in which a company can perform profitably. The company now applies Market Opportunity Analysis (MOA) to determine the attractiveness and success probability of any opportunity. Opportunities are- 1. Company develops a more powerful lighting system. 2. Company develops a device for measuring the energy efficiency of any lighting system. 3. Company develops a device for measuring illumination level. 4. Company develops a software program to teach lighting fundamentals to TV studio personnel. Some developments in the external environment represent threats. An environmental threat is a challenge posed by an unfavorable trend or development that would lead, in the absence of defensive marketing action, to deterioration in sales or profit. Threats should be classified according to seriousness and probability of occurrence. Threats may be- 1. Competitor develops a superior lighting system. 2. Major prolonged economic depression. 3. Higher costs. 4. Legislation to reduce number of TV studio licenses. Strengths and weakness analysis: Koch, A. J. (2007) also added that IT is one thing to discern attractive opportunities and another to be able to take advantage of these opportunities. Each business needs to evaluate its internal strengths and weakness. Clearly, the business does not have to correct all its weakness, nor should it gloat about all its strengths. The big question is whether the business should limit itself to those opportunities where it possesses the required strengths or whether it should consider better opportunities where it might have to acquire or develop certain strengths. From aforementioned discussions we reach at the following recommendations- 1. Analyse why the market dislike the product. 2. Analyse whether the marketing progress consists of product redesign, lower price and more positive promotion can change belief and attitude. 3. Find ways to connect the benefits of products with people's natural needs and interest 4. Measure the size of the potential market. 5. Develop goods and services to satisfy the demand. 6. Reverse the declining demand through creative remarketing. 7. Analyse the cause of decline and determine whether the demand can resituated by new target market. 8. Find ways to alter the pattern of demand through flexible pricing, promotion and other incentives. 9. Maintain the current level of demand in the face of changing consumer preference. 10. Maintain and improve the products quality and continuously measure consumer satisfaction. 11. If necessary demarking findings ways to reduce the demand of the product. 12. Rising price. 13. Reducing promotion and service. 14. In case of harmful product that is not socially acceptable such as cigarettes, hard drugs, alcohol, large family get people who like something to give it up. Such as-fear message, price hikes, and reduced availability. Conclusion: To understanding Costumer and competition it has evidenced that first of all it is significant to understanding the to marketing environment both external and internal and their working tools, customer or consumer buying behaviour, customer value, customers satisfaction, patterns of competitors, their position, their strategies, management information system. Marketing intelligence and research system is very dominant factor for marketing decision support system. To market research design limitations of secondary data collection is a supportive tool. SWOT analysis of a company's gives a clear picture of the actual strengths, weakness, opportunities, and threats to design a strong recommendation in various situations. Bibliography: Charles W. Lamb, Jr. & Joseph F. Hair, Jr. & Carl McDaniel, (2000), Marketing, 5th ed, South Western College Publishing, Evans, J. R., & Berman, B. (1990), Marketing, 4th edition, Macmillan Publishing Company, Griffin, R. W. (2006), Management, 8th Edition, Houghton Mifflin Company, Boston New York, ISBN: 0-618-35459x Koch, A. J. (2007), SWOT Does Not Need to be Recalled: It Needs to be Enhanced, Working Paper, Swinburne University of Technology, Hawthorn, Victoria. Kotler, P., Armstrong, G. (2006), Principles of Marketing, 11th Edition, Prentice-Hall of India Private Limited, New Delhi, ISBN: 81-203-2825-6 Kotler, P, (2004), Marketing Management, 11th ed, Person Education Singapore, Pte. Ltd. ISBN-0-13-033624321. Schumpeter, J. A. (1982) The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle, Transaction Publishers, ISBN-13: 978-0878556984 Skinner, S. J., & Ivancevich, J. M. (2003), Business for the 21st Century, Homewood, Boston, ISBN: 0-256-09222-2 Stoner, J. A. F., Freeman, R. E., Gilbert, D. R. (2006), Management, 6th Edition, Prentice-Hall of India Private Limited, ISBN: 81-203-0981-2 William M, P. & Ferrell, P. C. (2000), Marketing Concepts and Strategies, 10th edition, Pride and Ferrell Wiersema, F. & Treacy, M. (2001), The Discipline of Market Leaders, Cambridge, Mass.: Perseus Books Treacy, M. & Wiersema, F. (1993), Customer Intimacy and Other Value Description, Harvard Business Review, Cambridge, Mass.: Perseus Books Appendix Figure-1 Read More