Marketing Aspects Audits of S.B. Cottone - Essay Example

S.B. COTTONE, INC. Part II. Marketing Function Audits: Product and Price A. Marketing Segmentation, Targeting, and Positioning Segmentation Segmentation refers to segregating buyers into groups that have common need. This strategy helped S. B. Cottone, Inc. reduce the risk in deciding where, when, and how, and to whom it will sell its products or brands. The strategy also assisted the company to direct its marketing effort to the designated market. Segmenting process also develops the ability of the company to match the needs of the customer. S.B. Cottone has defined its segment into building and residential constructions due to its mounting growth in Stanton area. Target market S. B. Cottone does not have the capabilities to market its products to all the segments identified. This segment has many markets that include real estate developers, financial and mortgage companies, contractors, residential buildings, small businesses and enterprises. In this case, the firm has not enough capacity to capture all of these markets so that a target market in the segment is needed. A target market must have the potential to be viable customer. Target market of the firm are contractors in the construction business. This was principally selected due to construction developments in Scranton and the developers’ need for contractors in the construction business. Contractors are the first-line connection to developers. They are also considered specialist by developers so their expert advice is followed. Contractors’ profiles were compiled into a database of the company for the last twenty years for easy reference and follow up. Positioning Positioning is the market strategy of how company communicates to customers. Web defines it as “effort to influence consumer on a brand relative to a competing brand.” Purpose of positioning is to have an advantageous position to consumer. Customers’ needs To start positioning the firm, has to know the needs of the target market, and understand why they need it, and its budget. Buyers’ needs are known through interviews, research and attending events such real estate openings. Based on this approach company has identified buyers’ needs as heating, ventilation, and air conditioning of rooms and building. Buying process Buyers go through a process (Linton, Ian, 2014) wherein the very first stage is recognition of a need. Needs of buildings are caused by standard requirements. Next step is the information search wherein buyer looks for sources to solve his need. Next is the evaluation process where buyer inspects different brands and offers – and evaluate it according it to product attributes and the ability of supplier to deliver. Process involves buyers’ high participation particularly if there are many proposals, and low if there is only one company to be evaluated. The last process is the buying decision. Buying decision can also be influenced by a feedback from other customers. For instance if the contractor recommends the air conditioning system of S.B. Cottone to buyer, this recommendation is most likely followed because of contractor’s sound advice. Customers rating process In the process of evaluation, customers rate the company and its competitors on reputation, product quality, service, sales force, and price, thru performance indicators such as looking at the delivery time record of S.B. Cottone or a documented procedure of how they serve customers. S. B. Cottone, when submitting proposals submit a procedure of how they provide maintenance service, number of customers or projects served/finished and testimonials of satisfied clients to attest on their capability. Company has no competition in Stanton, It has established its position in the area for twenty years. Marketing practice of the company is marketing mix (product, place, price, and promotion). As a marketing representative, products are supplied by twenty-four suppliers, place of operation is suitable being alone in the area; suppliers use competitive pricing; and promotions are done thru social media and referrals. Company follows a marketing mix strategy of product, place, price and promotion. Products are supplied by 24 suppliers, place of operation is suitable being alone in the area, price – competitive. B. Products Product objectives Product objectives are the purpose set forth or what the company wants to accomplish when product is launched. Product objectives are designed to differentiate it from competing products and by demonstrating it as a solution to need of customers. Product objectives are to acquire customers quickly. To accomplish these product objectives, S.B. Cottone impressed its customers on its reliability to deliver. It boasts of a warehouse filled with products always available so there is no waiting time for customers. Company also makes an impression of its swift service and maintenance. A product objective attempted by the company is “to upgrade heating equipment this summer.” This is followed by a 15% discount that means savings for buyers. Product-line extensions Product line extensions are used when the company introduces additional items in the same category. It can extend its product line thru down-market, up-ward market or two-way market stretch. Down-market stretch is when a company introduces lower priced line item to attract more customers, or when they find some of the items declining. S.B. Cottone applied down-stretch approach when the product line of cooling was performing low on sales. It has not applied the upward-stretch marketing because of capability and budget limitations. An upward-stretch is positioning itself in the higher scale of market for higher profit margin. An example is when company extends operation into manufacturing its own line of product. A two-way stretch is when company extends its line both in high and lower ends scale to gain wider customers. For instance, it will represent a company with higher price of heating equipment, and also represent a company offering similar equipment that has a lower price. S. B. Cottone applied this approach with fire dampers. Lloyd Industries offered lower price while Prefco Products offered higher price for the same product line. Upon investigation of sales and inventories, products to be phased out are ceiling fans as sales are low and to ease up the cash tied up with inventory. Products to be added are fire protection equipments that are needed by buildings all year round. Company should nurture available means to transmit information to buyers. One common practice is thru social media, advertisements, and the e-marketing process. S.B. Cottone has established a website where prospects are directed to all its products and services. It has a map of location, and contact representatives . Since January 15, 2015, it has gathered 300 views and 50 feedbacks from interested parties. Noteworthy for consideration are 20 prospective buyers commenting prices are not competitive, meaning it is high. Others commented that the company offers known brands, standard quality, and product features are same with competitors. In this kind of business, cultivating contacts with prospects are more important than just relying on database information. A personalized interaction of sales representatives of the S. B. Cottone is done by visiting contractors and developers to present information of the company. From interactions, several areas for improvement appeared. These are diffusers and registers. It is observed that several competitors offer same product. The 3 Engineers assigned to gather, generate and screen new product is also questioned was found not enough. Being a representative of several companies, it is not doing concept research and does not develop new products. Company does not carry out product and market testing before launching new product. Product testing is done by the manufacturers while market testing is for commodity items. Product cycle The marketing strategy used by S.B. Cottone of referrals , direct contacts to contractors, and website presence are appropriate since it is less costly, and beats competitors in terms of established connections. The strategies could also be adopted to product cycle particularly in deciding the appropriate marketing mix of pricing and promotion. Product life cycle is divided into development, introduction, growth, maturity, and decline. HVAC products have a long product life cycle because of growth and development in the area of building construction. C. Pricing Before pricing could be set, a goal and objective that guide the business in setting cost of product or services has to be established. Pricing objectives Pricing objective of S. B. Cottone considered pricing process, product goals, and financial goal. In this case, pricing objective is to achieve high profit thru a return of 50%. To attain this, mark up on price is applied since company is only a representative. Other companies give specific pricing that includes commission, so mark-up is not needed. Mark up is computed as MOP = price – marginal cost/price. The process of canvassing for suppliers, buying and screening of materials to be purchased assures customers that prices are competitive and the quality are in line with the value of its offer. Price elasticity There are times that company discriminates on pricing. This occurs when business charges different price to different groups of consumers for the same good or service, for reasons not associated with cost. (Riley, Geoff, 2012) Basis for that is the elasticity of demand. A company may charge higher price to a group with inelastic demand and a lower price to group with a more elastic demand. The extent on prices set on cost is determined by measuring demand elasticity wherein it measured by the percentage of quantity demanded in response to price change. When result is negative, demand is inelastic, and when result is positive or greater than 1, demand is elastic. This means that when demand is inelastic, change in price has no effect in sales, while an elastic demand means a change in price affects the quantity demanded, thus it has reduced the sale. Price elasticity of demand is a method that explains how much people buy when prices drop or increase. It measures how responsive is demand to price changes. Price elasticity helps management settle pricing policy. (Economics on-line., 2014) . Management applies price-elasticity in pricing decision to lower prices, and adjust it according to market needs. Pricing policy and strategies There are four pricing strategies in business; the penetration pricing, economy pricing, skimming pricing, and psychological pricing (Friesner, Tim, 2014) S. B. Cottone applies the Penetration Pricing, wherein prices are set low to gain a market. When this is achieved , price is increased. They need to do this in order to have a big market of their products and services. Initially, company offered big discounts in the introductory offer and a free service maintenance of heating and cleaning equipments. After a while, discounts were reduced, and after six months or ne year, service fee is introduced. Economy pricing is also used as a strategy wherein no frills are introduced. In this pricing, no discounts and free services are offered. Price skimming is also used because of its competitive advantage. In price skimming, company can set a high price because it has no competition in the area. Captive pricing is sometimes used by the company since S.B. Cottone was the exclusive distributor of sound traps, a product manufactured by Aerosonics, Inc. In this kind of pricing, company can charge a higher price since buyer has no choice. Other pricing schemes are not appropriate for the company since it is designed for commodity items. These are the product bundle pricing, promotional “buy-one-take one” pricing and premium pricing. Premium pricing is found when product is unique. Pricing policy reacts with the needs of dealers such offering low prices for new products; offering low products to fit market conditions and to increase price when government introduces new regulation such as taxation. References Economics on-line. 2014 . Price Elasticity on Demand. Retrieved 21 February 2015 from http://www.economicsonline.co.uk/Competitive_markets/Price_elasticity_of_demand.html Friesner, Tim. 2014. Pricing Strategies. Marketing Teacher. Retrieved 22 February 2015 from http://www.marketingteacher.com/pricing-strategies/ Linton, Ian , 2014. Five Stages of Business Buying Decision Process. Small business. Chron.. Retrieved 22 February 2015 from http://smallbusiness.chron.com/eight-stages-business-buying-decision-process-21820.html Riley, Geoff, 2012. Price Elasticity of Demand. Tutor2U .Retrieved 22 Feb. 2015 fromhttp://www.tutor2u.net/economics/revision-notes/as-markets-price-elasticity-of- demand.html Read More

 

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