Key Steps in the Marketing Process - Coursework Example

Innovation in business Marketing can be defined as all the operations undertaken to promote, market and deliver a product or service. In a more scholarly focus, marketing can be defined as “the process of managing profitable customer relationships” . Marketing is done with two key goals. One being to draw in new customers and the other is to enhance customer retention by satisfying customer needs. There are five key steps in the marketing process. The first step in the process is to identify and analyze the market and market needs. What is done here is to know what the consumer needs and wants are. There are five core concepts in this first step. These are needs, wants and demands, market offerings, value and satisfaction, exchanges and relationships and lastly, markets . The second step is defining the target market. Here, the marketer chooses the customers whose needs he/she will address and how he/she will serve these customers to the best of their abilities. The third step in this process is to determine the marketing strategy. This involves developing a marketing strategy that will among other things, attract new customers, retain current customers and increase their customer satisfaction level. The next step involves the marketing mix which is the 4Ps of marketing which are product, price, promotion and place . Here, the marketer must develop the product, define the appropriate price of the product, develop a strategy to promote the produce and finally find the best place to sell the product. The final step involves customer satisfaction and retention. Here the company must have a customer support team to handle customer issues. At each of these steps, it is important to do research and evaluation to make sure whatever strategy is adopted suits the purpose. There are five key aspects of marketing. The first is advertising or public relations. This involves all methods which a company uses to convey the message. Advertising campaigns are targeted towards building customer knowledge and attitude towards the company’s products and services, employees and practices. By developing powerful and effective advertising and PR campaigns, the company can promote itself and significantly increase market share. The second key aspect of marketing is product development. Product is one of the 4Ps in the marketing mix, therefore the product itself, its integration and how the market responds to it is an extremely important aspect of marketing. Product development involves all steps starting from research on the product including all analysis performed to ensure that product sales flourish. The third aspect of marketing is pricing. Price is one of the 4Ps of the marketing mix. After coming up with the most appropriate product, the next thing is to price the product competitively. This is done by understanding the perceived value of the products to the buyer and the market position and products provided by competitors. The price set should be appeasing to all prospective customers. Another aspect of marketing is developing the target market. It is always crucial to have an in-depth understanding of the market and develop strategies that will bring exemplary results. The last aspect of marketing is competitive analysis. Here, the marketers consider several items to compare the competition to what their company is offering in terms of placement, product, price, and customer base. By performing a competitive analysis, one is able to keep abreast with the competition and act accordingly to maintain and increase market share. The aspect of marketing that I would like to discuss is pricing. Pricing refers to the process of setting the price of the product. There are several ways in which companies set their pricing. One is cost-plus pricing. This is where the company sets the price based on their cost of production of the product and their desired profit margin. So if the cost of production is $1 and the desired profit margin is 25%, the price would be $1 plus 0.25% of $1 which is $1.25. The second method of determining price is market-based pricing. This is where a new company entering into an existing market sets the price based on what other companies are charging for the product or service. The company may choose to have their price equal to current market prices or lower than the market price as their entry strategy. Another method of pricing is psychological pricing where the price is set to be perceived to be cheaper such as $1.99 instead of $2. The last method of price setting is value-based pricing. Here the price is set based on the value the consumers place on the product also known as the “true economic value” of the product . There are several factors which affect the pricing of a product. These are the cost of manufacturing or production of the product, target market, competition and competitors, market demographics and other market conditions and the quality of the product. Pricing is a tact that is applied by businesses and it is usually coupled with revenue optimization so as to give direction in which price should change . Price is sometimes influenced by the forces of demand and supply . When supply is high and demand is low, pricing has to be set to be low so as to increase demand and market share. When demand is high and supply is low, price is set to be high to drive revenue. Pricing is quite tricky and must be tackled with tact in order to balance revenue optimization and market share. This is because persistently high prices will cause market share to reduce and setting low prices will drive consumers to believe that the product is inferior and this may reduce market share. In the holiday market, demand in the form of peak and low seasons appreciably determine the pricing mechanism. During the peak seasons, prices are higher because demand is high. However, it is essential to balance price with demand and supply. In packaged holidays, the package can be deemed as a perishable good since it expires if it is not sold out by the departure date, therefore pricing is quite weighty. If the price is set too high to optimize revenue, then there is the risk of the operators losing all the revenue when the package expires, however, with the price perfectly matched to maintain revenue at a healthy margin and draw as many customers as possible, the deal will mature and the operators will turn a decent profit. This causes a headache in accurately matching demand with the available and required capacity. For packaged deals, the contracts with other companies such as airlines, hotels, etc. are usually sealed well before the tour date this means that if the packaged deal remains unsold, it leads to enormous loses since refunds are generally not feasible and even where a refund is given, there can be huge penalties or fines charged. Therefore pricing is extremely important to attract enough customers to keep the deal profitable. The people involved in marketing of the deals should always keep abreast with competitor’s offers, consumer needs and wants such as new destinations and by advertising and PR, they can reach the required minimum to make the deal profitable. A marvelous pricing strategy is one which creates a customer’s incentive to buy the product and at the same time gives the company incentive to sell the product . The role of pricing is to generate revenues and create value of both the product and the company. A complete pricing strategy should generate enough revenue for the company to reimburse themselves for the cost of production and other expenses such as salaries, wages, inputs, etc. and at the same time support research to develop better products and the target market. Lastly, the revenue generated should be sufficient to make a profit for the investors or shareholders. A perfect example is the case of Coca-Cola. If the company were to increase their prices by 0.01 of a dollar, it would result in increased sales of over 300 million dollars . Since Coca-Cola has a great reputation, this price increase would be accepted by the consumers since it is almost negligible but to the company that meager increase results to a healthy increase in revenues. Phillips states that “there are no pricing decisions in perfectly competitive markets – prices are determined by the iron law of the market . However, the good thing is that a perfectly competitive market is not feasible. Therefore in all markets that we have, it is important to establish winning pricing strategies. When McDonald’s opened their first outlet in India in October of 1996 , there were several other large players in the fast food industry such as Nirula’s, Domino’s Pizzas and 22,000 others . In 2009, at a time when food prices were rising daily, McDonald’s surprisingly reduced their menu prices for lunch and dinner by close to 25% and this made customers greatly choose McDonald’s as their preferred lunch and dinner destination and greatly increased their market share in the fast food industry . The most important reason for any company to improve its pricing is to be able to increase revenue and therefore, profits . With commodity prices rising every day, many companies find themselves in a precarious position as cost of production is increasing yet in most cases, passing the cost to the consumer may not be a solution since it may lead them to switch to another competitor or greatly reduce consumption of the product. An Ohio-based rubber company was experiencing this and in as much as sales was increasing drastically, the company was unable to realize profits because cost of inputs was greatly increasing. The company hired independent consultants who after their analysis found out that the customer satisfaction was quite high and could not be affected by a slight increase in price and after a 2.5% price increase, the company was able to increase profits by 21% . Many companies find themselves in a dilemma concerning list price vs. pocket price. List price is the price the company would like to set for the product after including their cost of production and profit margin while pocket price is the amount that consumers are willing to pay for the product. There is a huge difference between these two prices since at times, it may need the company to reduce their profit margin in order to retain current customers and attract new customers or to adopt other pricing strategies. For example when Alamo Car Rental was starting out, they had a market-based pricing strategy where they always ensured their prices was at least a dollar cheaper than their competitors such as Avis and Hertz. This helped them to achieve the goal of speedy growth and market penetration . Pricing is quite important since it is the only revenue generating element of the 4Ps of the marketing mix. The rest of the elements are just cost centers. Therefore setting the price accordingly by using appropriate pricing strategies and avoiding pricing mistakes, the company can avoid loses and earn a huge profit. Although pricing is the only element of the marketing mix elements that has a money-making aspect, all of the elements need to be worked together for a business venture to be successful. References Armstrong, G., Harker, M., Kotler, P., & Brennan, R. (2009). Marketing: An Introduction. Essex: Financial Times Prentice Hall. Dr. Smita, K., Dr. Walfried, L., Sridhar, C., & Venkitachalam, A. (2009). McDonald’s Ongoing Marketing Challenge: Social Perception in India. Online Journal of International Case Analysis, 1(2), 1-19. Hanna, N., & Dodge, H. R. (1997). Pricing: policies and procedures. Basingstoke, Hampshire: Macmillan. Marshall, G. W., & Johnston, M. W. (2010). Essentials of Marketing Management. New York: McGraw-Hill Higher Education. Phillips, R. L. (2005). Pricing and revenue optimization. Palo Alto, California: Stanford Business Books. PricePoint Partners. Pricing Strategies Help Midwest-Based Rubber Company Boost Net Income 21%. Retrieved Sep 23, 2011, from http://pricepointpartners.com/pricing-strategies/case-studies Rodrik, D., & Subramanian, A. (2004). Why India Can Grow at 7 per Cent a Year or More: Projections and Reflections. Economic and Political Weekly, 39(16), 1591-1596. Silk, A. J., & Harvard Business School Press. (2006). What is marketing? Boston, MA: Harvard Business School Press. Vignali, C. (2001). "McDonald’s: “think global, act local” – the marketing mix". British Food Journal, 103(2), 97-111.  Read More