The Role of Marketing Principles in Business Success - Literature review Example

ID 19714 Order No. 240416 22 September 2008 Word Count - 2566 The Role and Contribution of Marketing (Principles) as a guiding framework for achieving success in both new and ongoing Business Table of Contents: Introduction: Businesses have become very complex in the modern era whereby industries in almost every domain cannot avoid a fierce competition. The entire world has become increasingly innovative and knowledgeable in the last decade and hence the pace of deployment of new businesses has increased considerably. Many well established organizations have diversified quickly and successfully specifically in the new millennium. This has happened primarily due to new avenues of marketing with the help of the booming Internet and a variety of technology solutions to support Marketing. The marketing style of early nineties was driven by the knowledge & experience of the Marketing management of an organization. The theories in those days were definitely based on a number of researches but experts concluded that an empirical generalization (a pattern or regularity that repeats over different circumstances that can be applied in graphical or mathematical models) is not possible (Dekimpe, Marnik G and Dominique, M Hanssens, 1995). This thought was probably due to either an absolute quantitative or qualitative analytical approach that was getting confused by the varying marketing requirements of different industries (Bass and Jerry, 1995; Cierpicki and Wright et al, 2002). Well this thought slightly differs today as the modern marketing styles are generalized in the form of an IT enabled system whereby the Marketing is more of a Collaborative approach based on real world data and On-Line analytically processed reports which ensure a down to earth approach. The marketing requirements are different in organizations even today but the models supported by world class Marketing Information Systems provide a platform for common methodology in terms of collection of data, processing of data and analysis of data. Conclusions might differ however – but based on the data and not a timid thought process (Ashill and Jobber, 1999). Hence, modern marketing style is not based on too much of hypothecation, ego, blind optimism, lack of common sense, lack of commitment, inadequate researches & data and by just aggressively confronting to the rivals not focusing on the fundamental marketing objectives of the organization (Cierpicki and Wright et al, 2002). Today’s style is an intelligent mix of qualitative as well as quantitative analysis whereby capabilities exist to convert quantitative data into qualitative (Retseptor, Gennady, 2005; Yiyang, Zhang and Jiao, Jianxin et al, 2006). This paper presents an analytical approach of ensuring success of an organization by applying modern marketing principles & techniques using the power of Internet and Business Information Systems. The Industry being analyzed here is the fast moving consumer goods (FMCG) marketed on-line as well as via retail chains. Marketing Environment: Environment aspects influence the marketing strategists to a great deal. Given that businesses are going global rapidly, the required knowledge of the environmental factors spans to multi-regional, multi-country, multi-cultural, multi-currency, multi-lingual etc. More importantly, the knowledge needs to be gathered in a short time. The environmental factors that need to be taken in consideration by the strategists are: Economic Environment – The Economic environment of a country is dependent upon the availability of funds (credit policy of financial institutions), growth rates of businesses, International standing (Exchange rates), Inflation, Employment, etc. Marketing of fast moving consumer goods in Economic environment will depend upon the clean versus fraudulent environment in virtual money transfer (like credit card frauds), qualitative sales versus quantitative sales (example cheaper brands moving faster than expensive brands), risk of credit offerings (example an electronics equipment marketed with an installment plan), availability & efficiency of the delivery systems (like package delivery, courier, etc), costing strategy (localization of rates), economical factors that attract consumers (like buy two get one free, 20% discount on purchases of more than $100, material or holiday gifts associated with purchases etc), etc. This is a factor that can impact sales the most if not studied and understood much in advance. Natural Environment – The Natural environment in a country is dependent upon weather conditions, Pollution levels, Government regulations pertaining to environment, and availability & cost of Natural resources, Energy, Skilled Manpower, Raw Materials, etc. A fast moving consumer marketing will not be affected much by this factor if the strategy is to manage stores and sell products via retail outlets, courier or home-delivery boys. However, if a company decides to deploy manufacturing facilities, then the impact can be huge. Socio-Cultural and Demographic Environment – These environment factors are dependent upon Population, Demographics, Lifestyle, Culture, Language, Education, Household patterns and most importantly the Buying Power of end customers (spending distribution of an average individual). Acceptance of brands, the culture of shopping, purchase power of consumers, modes of payment, consumer sensitivity towards cost versus quality, affinity to local manufactured versus imported goods, etc are major factors that need to be considered under this environment. Technological and other Infrastructure Environment – Infrastructure environment of a country is dependent upon speed of technology transfer, government policies, Media Infrastructure (radio, television, magazines, newspapers, etc), Transportation, Internet Infrastructure, Information Technology (specialists, vendors, service framework, disaster recovery & business continuity, etc.), localization barriers in Global Computing (like language, mindset, symbols, annotations, slang, etc.), etc. Technology has major impact in the fast moving consumer goods marketing. Technology impacts the modes, avenues & methodology of advertising, communications and delivery of products. This factor builds the backbone of the business in the country. Political & legal Environment – Political & legal environment of a country is dependent upon type of Government (Autocratic, Democratic, Dynasty, Monopolistic, Dictatorship, Congress driven, etc.), Special Interest Groups, Consumerism, Company Laws & Regulations, Legislation, Export-Import policies, Taxation, Employment/Labor laws, Consumer Protection Laws, etc. This factor drives the limitations and discipline on the FMCG marketing activities in a country. For example, in some countries the consumers closely study the ethics and values of the company before even getting into details of the products offered. Marketing Orientation: The marketing orientation designed by the strategists is an outcome of behavioral and cultural orientation of a market given the marketing environment. The main objective of designing the marketing orientation is to analyze the firm’s competitive standing in the market and the expected response to the various product lines (Drysdale, L, 1999). Foley and Fahy (2004) developed a model that uses market sensing capability to understand the market orientation. The four factors that drive the market sensing capabilities are Learning Orientation (flexible learning, open mindedness & shared vision), Organization System (decentralization, formalization, reward system & benchmarking), Marketing Information (IT enabled Marketing Information System) and Organization Communication (values, norms & decision criteria). In a FMCG market, a number of marketing research organizations offer services to collate data against the environmental parameters defined by the marketing team primarily on a per product, per segment and per region basis The data can then be applied to the On-Line Analytical Processing (OLAP) models in the Marketing Information System that gives information on Customer Buying Behavior patterns in the market pertaining to self and competition products. Customer buying behavior data is used to apply in a trend analysis chart and predict the future behavior. One such model applicable in FMCG business is the prediction of customer buying and performance of a brand is Dirichlet Model developed by Goodhardt, Ehrenberg and Chatfield (1984) that is a combination of two Probability Density functions Negative Binomial Distribution (NBD) and Dirichlet Multinomial Distribution (DMD). NBD is a popular statistical formula that was developed by this trio in 1966 to predict stationary buying behavior (whereby it is assumed that the aggregate purchasing behavior per product is stable) used by Ehrenberg in 1988 to predict repeat buying behavior for consumer products. The Dirichlet model is used to compare a number of “theoreticals” (brand performance, market share, average purchase rate, average purchase frequency etc.) with the “observds” (historic time series of the data pertaining to purchasing by customers in terms of individual activities, interaction time & observed time that are collected through marketing research by surveying consumers face to face, inviting consumers to fill paid surveys, etc). The analysis is fairly complex but is possible today using packaged software applications and OLAP. One good thing about these models is that they only need input of simple data on a fixed time scale (say of one year) and the output is generated directly from the data. The data can be collected by the Marketing Research methodology as described below (Zitzlsperger, D.F.S. and Robbert, T et al, 2007). Marketing Research: The Marketing Research is required to understand customers, generate ideas, test concepts and estimate market attributes in a given Marketing Environment. Understanding of Customer in consumer durable markets essentially requires meeting people, taking structured interviews and asking crazy questions (alien interviews) by directly going in their usage environment. Remote Data collection methods (like inviting customers to fill paid surveys) may not generate accurate data. Ideas can be generated by brainstorming and lateral thinking. This essentially needs eye for detail even on attributes (like colour, odor, shape, etc.) that are normally ignored. Example, an oval shape soap with light pink color and jasmine odor may do well in a particular marketing environment. Such details can be worked out based on the depth of details captured. Once the concept is ready it needs to be tested by exposing them to consumers without cost – like packaging as a free gift with established products or distributing free through retailers and by visiting door to door. After generating a reasonable sample base, it is important to collect feedback against the products distributed which can then be matched with the predictions in the concept. Depending upon the target of sales, a company might like to set a threshold of acceptance based on the determination of final market attributes (like market size, growth potential, etc) which will be supported by the already established customer buying behavior patterns pertaining to comparative established products. The attributes beyond the threshold of acceptance would qualify the product for mass manufacturing (List, 2005). This paper attempts to map the Marketing workflow with the Business Transformation Model (Cutting Edge, Infosys Technologies, 2006)for the fast moving consumer goods business indicating where the Marketing Research activity fits in the bigger picture (figure below): Marketing Workflow in a Business Transformation Model The critical success factor for the FMCG industry is the designed pattern of data collection and the accuracy of data captured from the marketing research. The data needs to be very relevant, well timed, well presented, most current, aggregated and an intelligent mix of qualitative as well as quantitative information (Ashill and Jobber, 1999). The collection methodology has to be very open & flexible (even if appears stupid) keeping aside the egos and timid mindsets. The bottom Line is to make money by selling genuine products to whoever is the consumer. Marketing Information Systems: Marketing Information System plays a very vital role in success of an FMCG market. The popular models as well the ones developed in-house by a company are based on complicated statistical analysis whereby the data needs to be analyzed against multiple primary keys – like per product, per brand, per competition, per sales person, per outlet, per region, per community, per economic scale, per city, per month, per quarter, per year, per season, etc (Nedeva, Veselina Ivanova, 2004). The key to success of the FMCG industry Marketing Information System are – quality of system, quality (& relevance) of information, quality of technical support, quality of its compatibility with other information systems (like Finance Information System), quality of reporting and flexibility of customization (Panigyrakis and Chatzipanagiotou, 2006). The Information system is supposed to accurately process the data collected from marketing research and hence is the lifeline of the organization as every strategy & output depends upon its accuracy. The following model was proposed by Nicholas Ashill and David Jobber in their analysis of design characteristics of a Marketing Information System: Factors influencing effectiveness of the Marketing Information System (Ashill & Jobber, 2000) This model presents influence of knowledge of Marketing Environment, the Perception of environmental uncertainties (comes from decision making criteria that are built after information gathering) and the work environment factors (task & decision characteristics). In the FMCG industry, the environmental uncertainties are very high and perception based because the consumers are in huge number with minimal direct interaction by the company. The entire reliance is on accurate sampling and the information collected via the marketing research activities. Many products fail due to incorrect conclusions of the customer buying behavior. This indicates the importance of the effectiveness of Marketing Information System in this industry whereby the outcome should be assuring an operational sense and not full of ambiguity (Dolnicar, Sara, 2001; Cierpicki, Steven and Wright, Malcom et al, 2002). Marketing Segmentation and Positioning: After Marketing Research and adequate analysis, an organization is fairly in a position to assess where they stand. The next steps are segmenting the market as per the plusses of the company (& products) and then position appropriately. This is again not that easy and straightforward. Porter’s Diamond model gives an excellent guidance on how to evaluate the national competitive advantage of a company in a country (Recklies, 2001): Porter’s Diamond The model presents a strong correlation of four major influencing factors governing the success of an Industry at a national level governed by the local Government on these influencing factors. Firm Strategy and Rivalry corresponds to imposed urgency to boost innovations & product quality, demand conditions corresponds to the conditions imposed by end customers, scope of products & demand-supply ratio, related & supporting industries corresponds to the framework of companies that will support the business and factor conditions corresponds to the business environment in the country. An FMCG industry can apply this model in depth to understand their competitive positioning in a country and design the market segmentation & positioning of products by clearly identifying the unique characteristics of the company (and its products). Example, all Wafer (potato chips) manufacturing companies use potato as the raw product but sell based on the unique flavor that they offer. The proposition of flavor depends upon what is acceptable in a city/region/country, and what the competition offers. A lot depends upon the way these products are packaged, transported up to the retail outlets (example, styling and branding on the vehicles), and displayed in the retail outlets. Marketing Process: With all hurdles of information & knowledge barriers crossed, the final step is to trigger the marketing process. The process and methodology are derived from the intensive research, modeling and data analysis (Retseptor, Gennady, 2005; Yiyang, Zhang and Jiao, Jianxin et al, 2006). In FMCG industry, the various marketing processes followed are: Advertisement via TV, Radio, Newspaper, Magazines, etc., Customer Workshops (like road shows), Direct Marketing (door to door), Retail Marketing, Channel Marketing, and Network Marketing. Examples of marketing methods of FMCG companies are: Proctor & Gamble: Channel, Retail, and Advertisement Colgate Palmolive: Channel, Retail, and Advertisement Nokia: Direct, Retail, Channel, Advertisement and Workshops Amway: Network Marketing Conclusions: Marketing of a product requires large amount of logical data collection, in-depth probabilistic analysis, assumptions, predictions, forecasts, segmentation, positioning and finally execution. Pre-emptive knowledge of Marketing environment and OLAP reporting using Marketing Information system over an in depth marketing research can give a good idea about the market orientation and customer buying behavior. A company can segment the market & customers after understanding the position of the company using the Porter’s Diamond Model of National Competitive advantage. The marketing process then becomes more of a logistics decision to use the final outcomes in the most cost effective and efficient way. 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Recklies Management Project GmbH. 2001 In addition to the cited references, I would like to extend my special thanks to all those who extended to me knowledge and information that helped me to put together this paper. On their request, their names have not been published herewith. End of Document Read More