Principles of Marketing - Coursework Example

Principles of Marketing Contents Contents 2 Task 3 Introduction 3 Consumer Behaviour Analysis and Company Sales 3 Summary 8 Task 2 8 Product Life Cycle 8 Case Analysis 10 Implication of Product Life Cycle Theory on Toga Toys 11 Recommendations for Future Marketing Plan 13 Reference List 15 Task 1 Introduction Mike Mitchell, founder of the toy company, Toga Toys, desires to increase economic prosperity of the concern. The founder claims that his company can achieve higher sales in the long run by simply implementing changes in products or marketing services, through which utility of consumers can increase. The company’s services are not consumer oriented, which is one of the primary obstacles in its commercial growth. In the contemporary world, scale and scope of business corporations have significantly expanded. With rise in the degree of commercialization, extent of market competition faced by companies has significantly increased. This is the era of “consumerism”, where all profit making firms should try to execute activities that contribute towards enhancing utility or satisfaction level of consumers (Fornell, et al., 2006). Efficient consumer behaviour analysis can help in augmenting sales of an organization. Consumer Behaviour Analysis and Company Sales Consumer behaviour analysis has received immense importance in the modern business world. The marketing plans of companies are formulated after making an in-depth analysis about the needs and preference pattern of different consumers. The factor services or resources available with a firm are generally scarce. Any rational business organization desires to achieve optimality in business in order to attain equilibrium. At market equilibrium, companies try to maximize output level or consumers’ utility subjected to minimization or inputs or cost. However, equilibrium can only be attained by a firm through efficient allocation of productive business resources (Fornell, et al., 2006). Figure 1: Consumer Behaviour Analysis (Source: New Page Publishers, 2010) The above figure shows various aspects that a company must address while manufacturing products and services for consumers. It also indicates that duty of a company towards its customers does not end at the time of sales. The consumer’s utility and brand loyalty towards a company considerably depends upon its after sales services. The decision making process of consumers depends on the value of a product. For instance, if the product or service offered by a company is a necessity (medicines), then consumers are less sensitive to changes in prices. On the other hand, if a comfort product is offered by a company (toys), then consumers are more likely to be price sensitive. In that case, Toga Toys should strategically adopt price increasing decisions (Fornell, et al., 2006). The purchasing decision of consumers is greatly dependent on their lifestyle. Demographic factors, social status, culture, values, reference groups are other factors that determine the buying decisions of consumers. Since consumers are quite influenced by the marketing activities of a company, it is favourable to frame marketing strategies according to the factors affecting consumer behaviour analysis. Figure 2: Consumer Behaviour and Marketing Strategy (Source: New Page Publishers, 2010) The above chart presents various features that should be addressed in the marketing strategies of a company. If marketing activities of a company are formulated on the basis of such strategies, then it would be easier to deliver services and products in accordance with the preference pattern of consumers. A company can increase its sales in business, only by maximizing satisfaction of its clientele (Fornell, et al., 2006). Figure 3: Generating Consumers Satisfaction (Source: New Page Publishers, 2010) The above flowchart suggests that consumers make their purchasing decisions after analyzing quality and price of a particular type of product or service offered by many companies. Finally, they purchase the one with maximum expected value. Sales of a company can be assumed to grow in the long run, if perceived values and satisfaction derived by its customers are equal or more than expected values (Fornell, et al., 2006). Hence, it is likely that the marketing department of Toga Toys must address to consumer behaviour analysis for increasing sales in business. The company can make use of consumer analytics process in business. Under this process, the concern makes business decisions on basis of data on consumer behaviour through predictive analytics and market segmentation. The amount of investments made by the company on customer loyalty programmes should also be increased. If any company aims to increase sales, then customer relationships should always be prioritized. Superior customer relationships always help to increase brand value of an organization. The sales executives of a company are responsible for conducting direct discussions with customers. Nonetheless, it should be noted that it is difficult to quantitatively measure customer satisfaction and loyalty. Companies that have achieved higher customers’ utility prove to be more successful in corporate markets (Fornell, et al., 2006). If the company services received by customers exceed their expectations, then they tend to repeat purchase the same. Unpleasant experiences with a company tend to lower trust or loyalty of consumers. If the relationship between employees and customers of an organization is good, then the likelihood of repetitive purchases increases. So, quality of service provided by a company appears to be the most crucial customer satisfaction determining factor (Fornell, et al., 2006). The popular multinational software company, Microsoft Corporation, claims to enhance customer relationships for increasing revenue in business. The company introduced a program named “insitum” in 2012 (Insitium, 2013). The program aimed to lower problems faced by the company’s small and medium sized business branches in countries such as, China, India, Brazil, Russia, France, Norway, US, Germany. Four executives of the company performed an ethnographic research in these eight nations. After comprehending problems faced by the company in these markets, these officials conducted several innovation and alternation workshops with marketing teams in these branches. Consequently, numerous solutions were obtained, which were incorporated within company’s strategic business plan. This program had significantly helped to enhance utility level of consumers of Microsoft. Following this program, estimated sales of the company increased by US$19 million per year (accounting to 7% rise) (Insitium, 2013). The popular multinational retailing company, WalMart, also aims to serve in ways that helps in maximizing utility of consumers. Annual revenue of the company is almost 2% of the total GDP of U.S. Figure 4: WalMart Customer Satisfaction (Source: Z. Wei and R. Wei, 2011) The above figure is based on a research work conducted upon WalMart. The research work included 70 loyal and potential customers of the company. The above line graph represents the fact that customer satisfaction of these individuals from WalMart’s product prices had increased with the essence of its after sales services. Some of the customer satisfaction enhancement services provided by WalMart are 28 Day Guarantee offer, Kids Trolleys and Braille guns. Currently, the company is providing special pet caring facilities for store visitors. Figure 5: WalMart Sales Increasing (Source: Z. Wei and R. Wei, 2011) The above bar graph shows that gross sales of WalMart are increasing with time. This implies that the company is performing better than many of its market rivals like, Careefour. WalMart could experience higher sales in business only with the help of superior customer services. Summary The above analysis proves that Toga Toys can improve its sales in the long run by adopting activities, which would effectively increase customers’ utility. Companies such as, Microsoft Corporation and WalMart, have become successful primarily with the help of effective consumer behaviour analysis. This indicates that marketing strategies of companies should be framed on the basis of consumers’ satisfaction perceptions (Wheeler and Mody, 2000). Task 2 Product Life Cycle The concept of product life cycle explains common stages that occur throughout the life of a business product. It presents the way in which market considers the product or service of a company at different stages of its life span. Figure 6: Product Life Cycle Stages (Source: Authors Creation) The above graph explains the different stages in a product life cycle. Development In this stage, product of a company is tested and its features are formulated. A product that a company manufactures is set in the market either through mass production or a launching process (Porter, 2013). Introduction At this stage, newly developed product of a company is launched in the market for the first time. Growth This is the stage where new product introduced by the company gains market recognition and popularity. Maturity When this popular product of the company would attain maturity stage, its sales growth rate in the market will become low. At this stage, the company needs to introduce brand extension strategies in business and defend its product positioning in the market. Saturation The product will reach the saturation stage of its life cycle at the end of its maturity period. The market will be highly saturated by this point of time and expenditures incurred for promotional purposes would prove futile (Porter, 2013). Decline The preference patterns of consumers will entirely change at this stage and consequently, sales of the company from the concerned product will fall. Case Analysis Toga Toys is a company that engages in manufacturing toys for children within age group of two to nine years. The founder of the company, Mike Mitchell, states that majority of the sales is accrued from superior customer relationships. The investments made by the company in advertisements are not organized due to absence of an accurate marketing plan. The management aims to increase sales in the near future, through formulation of an effective marketing plan. However, the plan will be based on marketing strategies of the company. The strategies will be devised by the company after considering product life cycle and consumer behaviour analysis (Porter, 2013). Implication of Product Life Cycle Theory on Toga Toys Development The product development strategies of Toga Toys must be framed very carefully. The company can develop new non-plastic educational toys for children. This is because consumers nowadays prefer environmental friendly products (Porter, 2013). Moreover, if toys of the company are made of plastic, then those should be non-recyclable in nature. As this stage will involve high cost and low profitability, Toga Toys should then apply innovation strategy in its business. It should be noted that product features and specifications should be developed only after considering tastes and preference patterns of the buyers. Toga Toys will incur high expenditure at this stage. In addition to that, the company will not earn any income in this phase as the product is yet to be launched (Porter, 2013). Introduction The company will launch its new toy in the market at this stage. The customers for the new product will be few and hence, income of the concern will be lower. The profits can either be nil or very low, yet Toga Toys will experience higher risk of incurring loss. The competition experienced will be less intense. The company must invest large amount of money for product promotional purposes. This is a stage with high market uncertainty and costs (Porter, 2013). This is because; with low sales, the company would not be able to experience economies of scale in production. The company can also face multiple production related technical problems at this point of time. Hence, this will be a stage of high cost and low profitability for Toga Toys. As instructed by Mike Mitchell, the company should try to promote its new product over internet media. Toga Toys can create an official website in order to advertise this product. The proportion of internet users are presently on the rise and through digital marketing method, the company will be able to cover a wide base of customers (Porter, 2013). Growth Here, the company will begin to park more customers from growing sales of the toy in the market. Average cost of the company from every unit production at this stage gradually declines due to economies of scale experienced in production process (Porter, 2013). This is a stage of booming returns, where advertisement related costs of the company must also be increased. Apart from internet and general means of promotions, Toga Toys can offer other promotional services like, free home deliveries and special discounts on bulk purchases (Porter, 2013). Maturity It should be noted that the company operates in a market that is highly competitive in nature. Since the new product of Toga Toys will become popular at this stage, the company would experience high threats of competition. In order to lead the competition, Toga Toys must apply differentiation strategies in business (Czinkota and Ronkainen, 2007). Figure 7: Positioning Map High Quality Low Price High Price Low Quality (Source: Author’s Creation) The above figure shows the possible way in which the company should position its product in the market. Toga Toys should convince buyers that products produced are of good quality and have affordable price (Czinkota and Ronkainen, 2007). Saturation Promotional activities of the company will not be useful at this stage. Hence, Toga Toys should implement the strategy of cost leadership at this point of time. Profit can only be increased at this stage by lowering costs. Decline In the declining stage, the company must launch new product lines or plan for extension strategies in business. For instance, certain new features can be added to the product with diminishing popularity in the market (Czinkota and Ronkainen, 2007). Recommendations for Future Marketing Plan Toga Toys can considerably increase its sales in business by following certain amendments in the future marketing plan. The recommendations are created after analyzing sales history of SpellWhiz brand. The company should consider SMART objectives of marketing in the plan. The objectives should be systematic, measurable, achievable, realistic and time bound in nature. The company strategies should be framed by giving greater priority to taste and preference patterns of the consumers. Records of past consumers experiences should also be considered during strategy formulation. The marketing strategies should direct focus on matters relating to product, price, place and promotion. The marketing mix strategy for each toy of the company should be made according to respective product life cycles (Hennessey, 2004). Toga Toys also require an appropriate marketing budget. The advertisement and promotional investments of the concern should adhere to this budget. The entrepreneurs of the company need to apply tools of entrepreneurial marketing for successful operation. With such tools, entrepreneurs would be able to frame marketing activities of the company, in terms of proactive orientation, customer and innovation focus, risk and opportunity management and resource leveraging. The valuable and non-imitable resources of the company should be utilized for securing unique position in the competitive industry. As Toga Toys is known for superior innovation, its entrepreneurs must consistently try to enhance creativity and innovation aspects of the firm across all business segments. Social networking can always help in enhancing creativity of the organization. Through above recommendations, the company would surely be able to improve sales as well as brand value in the long run (Z. Wei and R. Wei, 2011). Reference List Czinkota, M.R. and Ronkainen, I A., 2007. International marketing. Toronto: Thompson Learning. Fornell, C., Mithas, S., Morgeson, F. and Krishnan, M. S., 2006. Customer satisfaction and stock prices: High returns, low risk. Journal of Marketing, 70(1), pp. 3-14. Hennessey, J. 2004. Global marketing strategies. Massachusetts: Houghton Mifflin. Insitium, 2013. Microsoft customer experience. [online] Available at: [Accessed 2 May 2014]. New Page Publishers, 2010. Consumer behaviour. [pdf] New Page Publishers. Available at: http://www.newagepublishers.com/samplechapter/000160.pdf [Accessed 2 May 2014]. Porter, M. E., 2013. On competition. Massachusetts: Harvard Business Press. Wei, Z. and Wei, R., 2011. Performance assessment of customer service strategy in Wal-Mart. Journal of System and Management Sizes, 1(6), pp. 85-93. Wheeler, D. and Mody, A., 2000. International investment location decisions: The case of U.S. firms. Journal of International Economics, 33 (2), pp. 57–67. Read More