Main Activities covered by Marketing - Essay Example

TASK 1 The Chartered Institute of Marketing defines Marketing as “the management process for identifying, anticipating and satisfying customer requirements profitably”. (Williams, 2003, p. 281) The aim of marketing is to create need and pave the way for selling, while managing profitable customer relationships. The marketing process consists of five major steps: understanding the market and customers’ needs; designing a customer-oriented marketing strategy; devising an integrated marketing program; building profitable relationships by offering customer delight; and capturing value from the customers to create profit and customer equity. The first step in this process is to understand the market and customers’ needs, which includes exploring the market offerings of competitors, observing the exchanges and relationships in the market, and evaluating the needs, wants and demands of the customers. The second step is to devise a customer-oriented marketing strategy, which entails a selection of customers to serve, a preference of a value proposition and a choice of marketing management orientation. The third step of planning an integrated marketing program is aimed at creating superior value through a product and services marketing mix. The fourth step is to forge profitable relationships with the customers through customer value, which is a set of benefits that are reckoned by the customers. It includes the functional, social, economic and aesthetic value of the product or service offered. The final step is to create profit and generate customer equity by extracting value from the customers. Thus all the activities involved in the marketing process are in-keeping with the American Marketing Association’s definition of marketing as “the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, services, organizations, and events to create exchanges that satisfy individual and organizational goals.” (Byrnes, 2008, p. 231) (a) Different Marketing Orientations that Organisations can Adopt The concept of marketing has evolved over a period of several decades. Prior to 1920’s the businesses followed a production orientation that defined business success solely in terms of production scale. This was followed by the era of sales orientation in the 1950’s which relied on personal selling and advertising to convince the customers to buy. Thereafter, the marketing concept emerged post 1950s and focussed on satisfying the customers’ needs rather than push-selling. The age soon witnessed a shift from the sellers’ market to the buyers’ market along with an emphasis on building long-term, value added relationships with the customers and the suppliers. This is as far as the traditional marketing orientations are concerned. But if we look at the modern marketing approach there are a host of non-traditional marketing orientations that include person marketing, place marketing, cause marketing, event marketing and organisation marketing. Person marketing refers to the practice of cultivating the attention, interest and preferences of a target market towards a celebrity or authority figure. Place marketing indicates the attempt to attract people and organizations to a particular geographic area. Cause marketing relates to the identification and marketing of a social issue, cause or idea to selected target markets. Event marketing refers to the marketing of events such as sports, cultural events and charitable activities to selected target markets. Organization marketing involves the attempts to influence others to accept the goals of, receive the services of, or contribute in some way to an organization. (Boone, 2013) Another major development in this regard has been in the shift from transactional marketing to relationship marketing. The emphasis has shifted from simple give-and-take exchange to the lifetime value of a customer. A major feature of this orientation is one-to-one marketing, which is a customized marketing program designed to identify a firm’s best customers and build long-term relationships with those individual customers, thereby increasing their loyalty. (Ferrell, 2012) A yet more modern orientation of marketing is interactive marketing which refers to the network of buyer-seller communications in which the customer controls the amount and type of information received from a marketer. It is done through the use of the technology revolution in marketing in the form of the internet, the World Wide Web, broadband technology, wireless internet and interactive television service. The marketers use the gifts of technology to prepare and disseminate interactive brochures, online newsletters, virtual storefronts, information clearing houses and customer service tools. This orientation has been largely put to use by the Apple Inc. in the promotion of its innovative range of products. The interaction is carried out not only through physical events and interactive sessions but also on the virtual interface of websites, blogs and videos. (Pride, 2008) (b) Four P’s of Product Marketing Mix Product marketing mix is the integrated marketing program aimed at successfully positioning a given product in the target market. It consists of the four P’s- Product, Price, Place and Promotion, each of which can be modified and changed by the companies to suit their particular needs of a desired marketing strategy. (McCarthy, 2008) Marketing Mix is the set of tactical marketing tools which comprise of Price, Products, Place and Promotion that the firm blends to produce the response it wants in the target market. (Armstrong, 2002) The first P, Product, refers to all the attributes of the product that is being marketed including the quality, design, size, features, variety, brand name, packaging and warranties of the product. Armstrong and Kotler define product as “anything that can be offered to a market for the attention, acquisition or consumption that might satisfy a want or need” (Armstrong & Kotler, 2005, p. 223). For instance, the product range offered by the Apple Inc. mainly consists of the iPod, iPhone, iPad, Mac hardware products, iTunes, Mac App Store and Apple TV. Price refers to the economic value of the product measured in terms of its list price, mark ups, discounts, competition, credit limits, payment terms, allowances and instalment options associated with the purchase of the product. Pricing is perhaps the most crucial element of the marketing mix because with the wrong price, no customer will buy the product even if all the other aspects are perfect. Apple Inc. initially wanted to target the mainstream users through price skimming and versioning strategy. (Apple Annual Reports, 2010) But that soon gave way to active pricing, where clients are charged different prices depending on individual customers and situations (Armstrong & Kotler, 2005) Place refers to the locations, distribution channels, their coverage, product inventory, warehousing and logistics related to the product. Apple Inc. is an American MNC Company whose headquarter is located in California State with a network of more than 394 retail stores that design, develop and sell consumers electronics. The company has judiciously used the touch points of established networks like Vodaphone, O2, Orange, T-Mobile etc. (Jobber, 2009) Promotion is the fourth element of the Marketing mix and is concerned with telling the target market or others in the channel of distribution about the “right” product (Armstrong & Kotler, 2005). Promotion includes the entire set of activities pertaining to sales promotion, advertising, public relations, personal selling and sales force. Apple has been most aggressive in terms of promotion of their products. During the launch of the iPhone, the company started with 4TV which could fulfil the needs of entertainment and sharing of information. It focussed on new ways to advertise the 4TV ads in July 2010. The company also made booming relations with media firms while the CEO shared new ideas with the public during several occasions. (c) Three P’s of Service Marketing Mix A service is any act of performance that one party can offer another. By nature, it is essentially intangible and its production may or may not be tied to a physical product. Some of the intangible products that fall in this category are banking, healthcare, insurance and airlines. Services in manufactured products is however a different concept altogether. It differs from the service industry, as here the focus is to offer a range of related services to the buyer, in order to supplement the product and set new values for customers. The marketing mix for services consists of 7 P’s. Apart from the product, price, place and promotion, the three extra P’s of service marketing are People, Process and Physical Evidence. People include the insiders and outsiders involved in the preparation and delivery of the service. For example, in the case of a restaurant, the chefs, cooks, waiters, housekeeping staff, managers and executives are the people. Process refers to the activities and procedures involved in the creation and delivery of the service. In a restaurant, the service process includes the entire range of activities starting right from the gathering of the raw materials for cooking till the serving of the dish to the customer. Physical evidence refers to the set of physical entities that are used in delivering the services or in enhancing the brand image of the service provider. Physical evidences in the case of a restaurant are the cutlery, crockery, utensils, furniture, cooking appliances and the testimonials of customers. (Magrath, 1986) TASK 2 (a) Segmentation Market segmentation is the process that begins with a survey of the market and subsequent analysis and evaluation of customer profiles, ending in the selection of the target markets. Effectiveness of segmentation depends on whether the parameters used for segmentation are measurable, accessible, substantial, actionable and differentiated. The segments can be formed by using either the build-up approach or the break-down approach. While the former starts with a small number of customers to deal with and gradually grows up to include more, the latter begins with a huge bulk of customers and finally arrives at its target segment through elimination. The broad parameters for segmentation include the buyers’ potential, their general characteristics, their lifestyle, desirable values, attitude towards brands and their buying behaviour. Usually the three major segmentation patterns are Customer based segmentation, Product related segmentation and Competition related segmentation. Customer based segmentation may be on the basis of geographic features like nations, regions, states or neighbourhoods; demographic features like age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality and social class; psychographic features like lifestyle, value and personality; behavioural features like user status, usage rate loyalty status, readiness stage and attitude towards product. Product related segmentation fragments a consumer population into homogeneous groups based on characteristics of their relationships to the product. These characteristics include the benefits that people seek while buying, the usage rates for a product and the consumers’ brand loyalty toward a product. Competition related segmentation combines one or more of these variables for identifying a smaller and better defined target group. (Chadwick, 1995) (b) Targeting The targeting strategy of a firm can be based on the approach of either standardisation or differentiation. The strategies for reaching out to the target markets can be based on undifferentiated marketing, differentiated marketing, concentrated marketing or niche marketing. In undifferentiated marketing, a firm produces only one product or product line and promotes it to all customers with a single marketing mix. But in a differentiated marketing, a firm produces numerous products and promotes them with a different marketing mix designed to satisfy smaller segments. For example, Canon has a largely undifferentiated market as it offers primarily photography and printing solutions through its range of printers, accessories, cameras and lenses. But if we look at Samsung, it has a highly differentiated market. It offers a myriad range of products starting from electrical goods like TV, music system, ACs and refrigerators to a vast range of electronic products like PCs, laptops, mobiles and tablets. The target market for each of the products is different and hence the marketing strategy adopted by Samsung is also differentiated. In concentrated marketing, also known as niche marketing, a firm commits all of its marketing resources to serve a single market segment as in the case of Nokia which offers and specialises solely in the mobile phone market. Micromarketing is yet another approach that involves targeting potential customers at a very basic level, such as by ZIP code, specific occupation, lifestyle or individual household. An example of this are the shops and vendors in a given locality or neighbourhood who cater to the needs of only those customers who reside in that circle. (Chadwick, 1995) (c) Positioning Positioning is a marketing strategy that focuses on serving a specific market segment by achieving a certain position in the buyers’ minds. Positioning is what you do to the mind of the prospect. It connects the product offering with the target market. The desired position in the buyers’ minds is achieved through a set of characteristics such as the attributes of the product or service, its price and quality, presence of competitors, the product applications, the users of the product and the product class. Trout and Ries have suggested a six-step question framework for successful positioning of a product or service. (Go, 1992) The six questions in this framework are: 1. What position does one currently own? 2. What position does one want to own? 3. Whom does one have to defeat to own the position one wants? 4. Does one have the resources to do so? 5. Can one persist until one gets there? 6. Are one’s tactics supporting the positioning objective one has set? Repositioning refers to the marketing strategy of changing the position of a given product in consumers’ minds relative to the positions of competing products. The positioning of Complan can be helpful in exploring the changes when a given product/service is exposed to a new positioning or repositioning. Complan was launched by Glaxo during World War II as a part of ration to the soldiers. Post the war, it was promoted as an offering for the masses as a supplementary nutrition for sick adults in period of recovery. Soon it was positioned against Horlicks as a source of essential nutrients for the growing children owing to its assortment of 23 vital nutrients in the product. Thus the target user group and the usage occasion of Complan have undergone changes every time its marketers have attempted to change its positioning in the market. (Chadwick, 1995) (d) Consumer Buying Behaviour Buying behaviour is the way consumers behave in different situations with respect to their buying decisions and the reasons behind it. It is the study of the behaviours of consumers in searching for, buying, using, evaluating and disposing off of products and services that they expect will satisfy their needs. Buying behaviour is determined by consumer demographics such as age, family size, gender, income, occupation, education, religion, race, generation and nationality. Factors affecting consumer buying behaviour include cultural, social, personal and psychological factors. The cultural factors consist of the impact of culture, sub-culture and social class of the buyers. The social factors include the family influences, reference groups and social status of the consumers. The personal factors consist of components like the age, stage in lifecycle, income, occupation, lifestyle and personality of the buyers. The psychological factors include ingredients like motivation, perception, learning, beliefs, opinions, perceived risks and attitudes of the buyers. The consumer demographics and lifestyles in the modern marketing scenario carry myriad implications for businesses. Buying behaviour affects marketing activities in different buying situations. One such instance is the changing scene of gender roles in the market. The gender-based differences in purchase decisions have assumed significant proportions amongst the modern consumers. Consumer satisfaction and confidence have become the first and foremost concerns of marketers. Owing to the transition from sellers’ market to buyers’ market, the customer is ‘someone’ and not ‘anyone’ any more. Due to the rapid changes in the life-styles, shopping behaviour is more situation-based rather than being shaped by demographics and life-styles alone. (Solomon, 2009) (e) Consumer Buying Behaviour vs. Business Buying Behaviour Consumer buying behaviour differs from business buying behaviour because the factors that influence purchase decisions and the parameters used for market segmentation are different in the two cases. Based on their buying behaviour, consumers can be divided into road warriors (who look for premium products and quality), generation F (who make quick buying decisions), true blues (who insist on brand value), home bodies (who rely on convenience) and price shoppers (who look for low prices and bargains). Business buyers can be first time prospects, novices or sophisticates based on the frequency of their purchases. Based on their approach towards buying, industrial buyers can be further categorised into programmed, relationship-oriented, transaction-oriented or bargain hunters. (Kotler, 2005) Consumer buying behaviour is influenced by: Geographic factors based on nations, states, regions, countries, cities or neighbourhood Demographic factors based on age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality and social class Psychographic factors based on lifestyle, attitudes, belief systems, values and personality Behavioural factors based on decision roles, occasions, benefits, user status, usage rate loyalty status, readiness stage and attitude towards the product On the other hand, business buying behaviour is influenced by: Operating variables such as technology, user or non-user status and customer capabilities Purchasing approaches such as purchasing function organization, power structure, nature of existing relationships, general purchase policies and purchasing criteria Situational factors such as urgency, specific application and size of order Personal characteristics such as buyer-seller similarity, attitudes towards risk and loyalty Demographic factors such as industry, company size, and location (f) Marketing Mix Planning across Two Different Segments Marketing mix is an essential tool used by companies to market their products. To understand the differences that prevail in the marketing mix of an organisation which is catering to two different target segments, we can take the example of Sony. The audio-visual systems offered by Sony are a great technological innovation and have gained huge popularity amongst the modern consumers. The two main segments targeted by Sony’s audio-visual systems are the youngsters and the household consumers. The needs, expectations and demands of these two segments differ from each other in multiple aspects. Hence the marketing mix (the 7 P’s- product, price, place, promotion, process, people and physical evidence) aimed at positioning the product is also different for the youth and the households. Product: The young generation consisting of school and college goers look for more mobile options such as the mp3 players and iPods, that are pocket friendly not only in terms of their size but also in terms of their cost. The households, on the other hand, look for a more comprehensive and high-end audio and visual experience in the form of home theatres and sophisticated TVs, laptops and PCs. Price: The youth prefer cheaper and more economical options, discounts and credit payment options. The households, consisting of multiple earning members can spend generously on sophisticated and high-priced products. Sony meets the requirements of affordability by offering different products across different price slabs. Place: Owing to the high-paced life in the modern busy world, both youngsters and household consumers hardly get the time to physically visit the retail showrooms, outlets and shopping malls. Sony offers the provision of online purchase through its website and other e-shopping portals that saves the time and energy of consumers. Promotion: The promotional activities like road shows, public events and e-advertising are targeted at the youth who are more internet savvy and frequent visitors to shopping malls and hangout zones. The traditional modes of television and newspaper advertisements are still used to capture household buyers. Process: Sony’s extensive network of retail stores and shopping outlets makes its products easily accessible to the consumers. Moreover, the e-shopping option and home delivery system has made purchase much more convenient by enabling buying with just a click of the mouse. People: The retail executives who are hired to assist the buyers in making their buying decisions are imparted the requisite training and information about the products and services. Moreover, they belong to different age groups and genders so as to make the customers more comfortable as they have the choice of being assisted by the person of their preference. Physical evidence: The tangible traits of the Sony products include their packaging, the structure of the device, the ambience of the shopping outlets etc. All of these physical evidences are taken care of in order to differentiate the Sony products from those of its competitors like Samsung, Panasonic, Philips and Sharp. TASK 3 (a) Micro and Macro Environmental Factors A business entity always operates in a market environment, which in turn is marked by the interplay of certain micro and macro factors. The micro environment is the immediate market environment and relates to the intra industry factors like competitors, substitutes, buyers and sellers that influence a business. It is evaluated through Porter’s 5-force model. The macro environment is the extended environment that takes into account the socio-economic, political and technological facets of the market. It is examined through the PEST analysis. (Kotler, 2010) Macro Environmental Factors which can affect marketing decisions are: Political Factors: The political factors in the UK have exerted a great pressure on the performance of Sainsbury. The high government debts and consumer debts currently prevailing in the UK have affected the customer attitudes. As a result, the business scenario has to face great pressure. The other political factors that can influence the expansion decision of the Sainsbury’s include the European Union extensions, the Euro Zone, the globalized nature of its current business, taxation rules and policies in the regions where it plans to operate. Economic Factors: Amongst the economic considerations, the most vital factor is inflation. In case of high rates of inflation and resulting increase in money supply in the economy, the prices will rise. Then the people will not be able to afford the products and services offered by Sainsbury’s. Other economic factors that must be considered by the company before investing in any country are the balance of payment situation, fiscal and monetary policies, and the counter-trade policy of that country. Social Factors: The social factors prevalent in the target market can have a major impact on the performance of a company. The social factors include the social systems, family backgrounds, education, religion, occupation and income levels of the potential consumers. These factors are important as they play a major role in shaping up the consumer choices, interests, attitudes and preferences for the products and services offered by Sainsbury’s. Technological Factors: In today’s world of globalisation, a plethora of new and advanced technologies have evolved that have boosted the growth of businesses and helped them to gain a substantial competitive advantage over business rivals. For instance, by employing e-commerce Sainsbury’s can widen its consumer base by marketing its products in newer target markets. Micro Environmental Factors which can affect marketing decisions are: Existing Rivalry: With its chain of 502 supermarkets and 290 convenient stores, Sainsbury’s was the UK's biggest food retailer until 1995. But later, the market was taken over by competitors like Tesco Plc and ASDA Group Limited. Soon few other competitors like Hannaford Bros. Co., Safeway Plc and The Stop and Shop Companies Inc. entered the market. All these offer the same products at similar prices, and they aim for the same target market. Threat of New Entrants: The food retail industry in the UK has significant barriers of entry. Owing to the huge size of the target food market in the country, the prime issue for any new entrant is the large-scale investment necessary to enter the established market and face the competition from recognized key players like Sainsbury, Tesco, and Safeway. The new entrants will face great challenge in terms of market share, economies of scale and branding. The substantial time and financial resources needed to gain market share will put a check on entry of new players. Threat of Substitutes: Food products fall under the class of basic necessity and the ever-growing demand for food products has led to a continuous growth of the market. The presence of substitutes in the same demographic sphere is a potent threat as the competing substitutes are constantly in the search of innovative ideas and attempts to make food-shopping a delightful experience. An example of this is the online shopping facility offered by Sainsbury’s using which almost 88% of the UK household customers can shop easily sitting at home. Despite this Sainsbury’s faces a moderate threat from its substitutes since its rivals also sell similar products at identical prices. As the customers have a plenty of choices, Sainsbury’s faces the pressure of adjusting the prices and maintaining the quality to meet the customers’ demands. Bargaining Power of Buyers: Buyers always want more services and high quality at a lower price. Sainsbury’s customers can easily switch over from them to their rivals in case they are not satisfied with the products they receive, which would lead to a loss of buyers. To check this Sainsbury’s must offer high quality products at reasonable prices. The bargaining power of the buyers is very strong and the customer loyalty is highly volatile. Bargaining Power of Suppliers: This factor depends on the number of suppliers available. Itself being a vast chain of supermarkets and convenience stores, Sainsbury’s has an upper hand in determining the terms and prices of products obtained from its suppliers. In addition, it has a large assortment of its own branded products. So Sainsbury’s should concentrate on devising marketing strategies for enlarging their client base and increasing the demand for their own products. (Sainsbury’s Annual report 2009) (b) International Marketing vs. Domestic Marketing International marketing, also known as global marketing refers to the integrated marketing process carried out by a company overseas or across national borders. In simpler terms, international marketing is the application of marketing doctrines beyond geographic boundaries. It differs from domestic marketing in several aspects. The major difference lies in the fact that as compared to domestic marketing, in international marketing the marketing activities take place in more than one country. The latter is hence more complicated and is characterised by greater levels of uncertainty and wider range of uncontrollable factors. The uncertainty is enhanced by the fact that a unique set of uncontrollable elements is added to the business environment by each foreign country in which a company operates. These factors include the nature and degree of competition, legal policies, government controls, business weather and attitude of consumers. Organisations can neither control nor influence any of these uncontrollable elements and hence need to adjust or adapt to those in a way that ensures positive outcome. The interplay of all these factors plays a vital role in affecting the profitable operations and marketing plans of a company. Thus in international marketing, the preset objectives are achieved through a harmonious amalgamation of the controllable factors like product, price, promotion and place with the uncontrollable factors like competition, politics, legal framework, consumer behaviour and technology (Keegan, 2005). (c) Key Elements of the Marketing Process for Expansion The prime marketing strategy that should be adopted by Sainsbury’s in order to achieve a successful expansion of its business operations is differentiation. Differentiation is a marketing technique used by a firm to create its strong and distinctive identity in the industry. The main aim of differentiation strategy is to make it possible for the organisation to stand apart from its industry rivals. The two forms usually assumed by a differentiation strategy are business differentiation and product differentiation (Smith, 1956). Business differentiation is a strategy used by many successful businesses that set them apart from other similar businesses in the same industry, same market, same geographical area and same demographic zone. The companies selling the same products are always engaged in fierce competition against each other. In such a scenario, business differentiation helps to shape up a positive market image of the company and its products. It is essentially about the special and unique features of the products offered by Sainsbury’s to its clients. Hence the first step for Sainsbury’s would be to identify the elements that differentiate them from their rivals and substitutes, and then further strengthening those elements. The differentiating factors of Sainsbury’s would include its competitive pricing, product quality, durability, reliability, warranty and customer service. Product differentiation is the marketing strategy used by an organisation to launch diverse varieties of the same product with the aim to cater to the different segments of the market. In product differentiation, the original product is customized and tailored to meet the specific requirements of the varied segments of the market. An example of this is the array of products offered by Coca-Cola under the same category of soft drinks: Regular soda, Diet soda, De-caffeinated soda, Diet-decaffeinated soda etc. Following this strategy, Sainsbury’s should also come up with a product range which targets the different segments of the same market and also employ extensive marketing approach to market the new products. The marketing strategies of business and product differentiation will facilitate Sainsbury’s achievement of a long term growth and expansion. 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