How Companies Decide on Product, Pricing, Promotion and Distribution Policies - Essay Example

Through the use of case studies, demonstrate how companies decide on product, pricing, promotion and distribution policies in international markets Theoretically, a good marketing strategy tells us to develop our products based on the selected few P’s that have been mentioned in the paper. However, it should be kept in mind that one should not only limit themselves to just a few actors. As competition and constraints increase, producers look for new and better ways of attracting consumers. Need for higher profits, leads to increasing innovation. Innovation not only in products and processes but also in strategies. Importance of the four P’s will remain but they are not sufficient in themselves. As time passes by, more and more P’s will have to come up to defeat rivals. Thus, as far as the theory is concerned, you can follow it to an extent but in real world, you need to understand the market environment and need of the time before making a decision. Flexibility is essentially the key. When deciding how to market a product, there are four things that need to be taken into consideration. These elements are needed to be discussed at a greater length before a product can actually be launched into the market for consumption. These four elements are: 1. Product 2. Price 3. Place/distribution 4. Promotion Marketing mix refers to the combination of all the four elements. The term became popular after Neil H. Borden published his article in 1964. The name of the article was “The concept of the Marketing Mix”. Before that James Culliton had described it as a “mixer of ingredients”. The ingredients included product planning, pricing, branding, distribution channels, personal selling, advertising, promotions, packaging, display, servicing, physical handling, fact finding and analysis. Later, these ingredients were grouped together and generalized under the four above mentioned classifications. Marketing mix is a tool needed to assist the managers in defining the marketing strategy. With the help of this, marketers, try to generate the optimal response in the target market by blending a few above mentioned variables in the best possible way. It needs to be adjusted frequently, taking the changing world into account. 4 The four parameters that the marketing manager needs to control, given the internal and external marketing constraints. Products: It mainly refers to both goods and services that are being produced by the companies. Managers have to decide on the brand name for their products, functionality that the product will serve, its styling, quality, safety standards needed for its manufacture, packaging of the product, repair and after sale service. Warranty and other accessories that come along with it, also need to be considered. This is perhaps one of the most important P’s that are looked at before marketing a product. The product should be good enough t be sold in the market. Today, there are so many products in the market, not all are a success. Some even have to be pulled out of the market if they don’t manage to cash in on enough business. Therefore all companies regardless of their sizes, carry out intensive market research and surveys before launching a product in the market. Along with the need to innovate new products, some companies also specialize in coming up with cheaper me-too versions of the already manufactured products. A very prime example of such a case is China which produces cheaper quality products in abundance with the help of cheap labor and supplies it to the developing regions of the world. Lower costs and massive sales, bring a lot of profit their way. Thus, a company needs to decide, where exactly it wants to position its product in the market as far as quality is concerned. Price: Companies have to decide the pricing strategy, keeping in mind a lot of considerations. The price chosen could be a skim price or a penetration price based on the level of competition available. Volume discount, maybe a necessary part of a particular product’s pricing. Cash or early payment price might have an element of discount in it. To gain in more profits, price discrimination might have to be adopted. Prices may have to vary according to the seasons. Expensive products are even sold on lease to encourage sale. In some industries, prices may stay constant due to stiff competition, However, in others, prices may vary a lot over time due to demand or supply fluctuations perhaps. Therefore, all companies have to determine their pricing strategy, keeping in mind their industry environment and competition level. Multinationals can charge the same price all over the world or can practice price discrimination basing on the environment it faces. For example general Electric sells its jet engines at U.S. dollar prices all over, keeping its prices constant, though it does take local considerations into account while negotiating, showing flexibility. Place: This refers to transferring the product to the consumer. To make a good product and market it well is not enough. To make profits, a company needs to provide its product at the right time and at the right place. Products, may have to be taken right to the consumer’s home. In other cases, the product is moved to the market, and consumers collect it from there. If it’s a service though, then mostly, consumers have to come to the service provider in order to receive the service. Thus, managers have to decide how to distribute their products from the available options. They have to decide for the appropriate distribution channel (retail, online, wholesaler etc). Decisions about the geographic region and target population segment (young, adults, families) needs to be made. Market coverage also needs to be focused on: inclusive, selective, exclusive etc. Inventory management and warehousing decisions also need to be made. Promotion: Simply it refers to various forms of marketing communication, that is communication of information about the product with the main objective of generating a positive consumer reaction. It includes advertising (direct or indirect), sales promotion, public relations etc. Every time, a consumer, goes to the market, he is bombarded with too many products, all that seem similar and plenty of information that makes making a choice even more difficult. Therefore, to make sure that your product stands out from the rest of the products is to use ads. Advertising can have a significant affect on the consumer base. For instance British Airways came up with memorable “Manhattan Landing” global television commercial, where Manhattan was shown landing on the whole village. Such ads are created to leave a huge impact onto consumer’s minds and most of the time they do work. Marketing could be on a global level, international level or even internet/mobile based. Sometimes, companies center their promotion on a specific idea. For instance, Coca-Cola focuses has most ads on the concept of a little boy giving coke to sports heroes. Colgate emphasizes the concept of protection against cavity to its consumers through ads.1, 4 This mix has been used for centuries to figure out the right place for the products. However, now with a wide range of products in the market, people have started to add other P’s to the list too. These include process, people, packaging etc. 2 People: The salesperson that comes into direct contact with the consumers, can significantly affect the consumer’s opinion about the product. Therefore, for a company it becomes extremely important that they are well trained and motivated. Process: This could be the process developed to provide consumers with a service or some unique method of producing the product that may give producers a competitive advantage. Physical evidence: Services are intangibles and therefore they cannot be experienced unless they are actually delivered to the customer. This puts consumers at a greater risk as they would not want to pay for a service that they really did not like. Thus, potential customers need to see the service before they use it. This is done by providing physical evidence to them (case studies, testimonials or demonstrations). Personalization: People no longer want a mass produced product. They prefer a customized product, catered only to their special need. Companies that follow such a strategy include Dell on-line and Amazon.com. Participation: In order to further increase consumer interest in the product, they are encouraged to participate in deciding what they feel a particular brand should stand for. Peer-to-Peer: This refers to customer networks where advocacy happens. 3 One more limitation as discussed by Morgan, in “Riding the Waves of Change” (Jossey-Bass 1988) is that this approach focuses on the inside-out view, whereas the focus should be on the outside-in approach. In today’s day and age, a consumer focused approach is necessary to sell product. Therefore, instead of making a product and simply putting it into the market, producers determine potential consumer demand and then build their product or service around it. This is because trying to convince, the consumers to buy a product that they don’t want can be extremely expensive and not very successful. Thus, nowadays dependence on the market research has become a necessity. This could be both formal and informal. This is also an important addition to the 4 P’s theory. Multinationals increasingly use global marketing and most have a common brand name by which they are recognized world over. Highly successful amongst these have been Nestle’, Coca-Cola, Xerox. These brands are worldwide and can be recognized by anyone living in any part of the world. But they do not standardize all of their processes as well. There is a wide range of diversity in their processes depending on regional location, however, for easy recognition they prefer a single brand name. For example a global pack design may have a common logo on it, but illustrations/instructions may be in different languages and even a different background color in some regions. By A local Unilever subsidiary uses keeps the positioning of the product but changes the brand name to something local that can be understood by people it is intended for. Due to global marketing, four potential benefits can be achieved: reduced costs, improved quality, enhanced customer preference and increased competitive leverage.1 Companies use all the P’s to position themselves a certain way in the eyes of the customers. This helps them achieve a unique selling proposition. This ensures sales and reinforces the product in the mind of the customer. For instance, because of its efforts Volkswagen is known for its reliability. Similarly, American Express is known for easy replacement as far as traveler’s checks are concerned. Sometimes, however, companies prefer to position themselves differently in different regions. For instance Volvo is considered as an unsophisticated auto brand with a high market share in Sweden but it is positioned upscale in the rest of the Europe. Because of strong successful companies, even countries get famous for a certain quality. For instance, because of profitable companies, Japan has become known for high-tech machinery and equipment. Because of this Toyota now uses model names with Japanese instead of American connotations such as Celica, Corolla, Camry. Not only do companies have to take competition and demand into consideration when deciding on the four P’s, they also have to take their own constraints into account. For instance, for a company, even if the best way to advertise is to use television, it might not be able to do so if it has budget constraints. A global company if advertises, only by stressing on the country of its origin, might not be a real success world over, where people (from other countries) cannot relate to it. Thus, you cannot use the P’s as and when you want to. They have to be used, while keeping everything in consideration. Ignoring any of the factors could lead to a product failure and business breakdown. More interestingly so, it should be kept in mind that the marketing mix will change over time and companies that fail to take such a change into consideration will not be able to maintain their position in the market as business tends to be a zero-sum game. One person’s loss is another’s gain so the mix has to be developed with caution and constantly updated. Bibliography 1. George. S. YIP. (1992) Managing for worldwide competitive advantage. New Jersey. Prentice Hall 2. (2007) The Marketing Mix. Available from http://www.netmba.com/marketing/mix/ [Accessed 12 June 2008] 3. Marketing. Available from http://en.wikipedia.org/wiki/Marketing [Accessed 12 June 2008] 4. (2008). Marketing Mix (4Ps). Available from http://www.12manage.com/methods_marketing_mix.html [Accessed 12 June 2008] 5. Marketing Mix 4 P models, 5 P models Available form http://www.valuebasedmanagement.net/methods_marketing_mix.html [Accessed 12 June 2008] Read More