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CIM REVISION CARDS

Marketing FundamentalsMaggie Jones of Marketing Knowledge

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TABLE OF CONTENTS

Preface .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv1. The development of marketing and marketing orientation .. . . . . . . . . . . . . . . . . 12. Marketing planning and budgeting .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153. Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334. New product development and portfolio management . . . . . . . . . . . . . . . . . . . . . . . 475. Price operations .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 576. Place operations .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 707. Promotional operations .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 828. Services and customer care .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 969. Marketing in context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

PREFACEWelcome to the CIM Revision Cards from Elsevier/Butterworth–Heinemann. We hope you will find these useful torevise for your CIM exam. The cards are designed to be used in conjunction with the CIM Coursebooks fromElsevier/Butterworth–Heinemann, and have been written specifically with revision in mind. They also serve asinvaluable reviews of the complete modules, perfect for those studying via the assignment route.

n Learning outcomes at the start of each chapter identify the main points

n Key topics are summarized, helping you commit the information to memory quickly and easily

n Examination and revision tips are provided to give extra guidance when preparing for the exam

n Key diagrams are featured to aid the learning process

n The compact size ensures the cards are easily transportable, so you can revise any time, anywhere

To get the most of your revision cards, try to look over them as frequently as you can when taking your CIMcourse. When read alongside the Coursebook they serve as the ideal companion to the main text. Good luck– we wish you every success with your CIM qualification!

THE DEVELOPMENT OFMARKETING AND MARKETINGORIENTATIONLEARN ING OUTCOMES

� Understanding the development of marketingas an exchange process and a businessphilosophy

� Recognizing the contribution of marketing tocreate customer value and compete effectively

� Appreciate the importance of marketingorientation and identify the factors that promoteand impede its adoption

Syllabus Reference: 1.1–1.6

� Understand the role of marketing incoordinating organizational resources

� Understand the impact of marketing actionsupon society and the need to act in a sociallyresponsible manner

� Appreciate the significance of the buyer–sellerrelationship and the role of relationshipmarketing in retaining customers

Unit 1

MARKETING FUNDAMENTALS 1

KEY REV IS ION PO INTS

� The importance of a marketing orientatedculture to the effective implementation ofmarketing strategies within the organization

� Understanding the dynamics of the buyer–seller relationship across a range of industrysectors

� Understanding the role of ICT in furtherdevelopment of marketing orientation

� The importance of internal marketing inbuilding and sustaining a marketing culturewithin the organization

THE DEVELOPMENT OF MARKETING AND MARKETING ORIENTATION 2

What is Marketing?

The management process which identifies, anticipates and satisfies customer requirementsefficiently and profitably

n Central focus is the customer

n Aim is to satisfy their needs

n Encompasses selling, researching marketsand attracting and retaining customers

n Requires a set of management activities to bein place to enable organization to compete

The Marketing Concept puts the customer at the centre of all business decision-making. An organizationwith this approach is said to be marketing orientated to have a marketing culture.

Marketing is about creating a mutually beneficialexchange (Dibb et al.) determined by

n Two parties must participate

n Each party must possess something of value

n Both parties must be willing to exchange

n Usually involves exchanging money for goodsand services


The Development of Marketing

Orientation

1900–1930 Production Orientation – focused on whatthe organization can produce, not if there is a need forwhat can be produced

1930–1960 Selling Orientation – focused onpersuading customers to buy through using selling andpromotion

1960–present day Marketing Orientation – identifieswhat the customer wants and attempts to satisfythose needs better than the competition and within theorganizational capabilities

Marketing Culture – the first step to developing amarketing culture within an organization is to ensureall employees at all levels and functions have theability and information to ‘think customers’

Factors underpinning further development

n Customers are better educated andknowledgeable, exercising more power

n Higher disposable income available

n Overcapacity of goods and services

n Emergence of global brands via better travelledcustomers and increased information

n Better quality information enables closersegmentation and targeting

n Increased channels to market


Creating a Sustainable Competitive

Advantage

Marketing orientation can enable the organizationto compete by

n Creating and maintaining superior value througheffective application of the marketing mix

n Creating a link between customer needs andorganizational strengths

n Consider the competition from the customerperspective

Organizational Factors Required

for Marketing Culture to Flourish

n Committed senior management

n Specific board level marketing responsibility

n Customer satisfaction inherent in all jobdescription

n Training in customer care for all

n Training in marketing developments for marketingstaff

n Reward and motivation systems in place

n Regular marketing research


Internal Marketing to Create a

Marketing Culture

Key Definition – The creation of an internalenvironment which supports customer consciousnessand sales-mindedness amongst all personnel withinan organization

Benefits

n More profitable organizations

n Increasing need for jobs and staff development

n Greater job satisfaction possible

n Better skilled, empowered employees

Internal marketing must demonstrate

n The organizational objectives and strategies withinthe markets they compete in

n The importance to the organization of deliveringsuperior customer value

n The rewards available through implementingsuccessful strategies

n How all employees contribute to the customerexperience

n An understanding of the differing needs andrequirements of differing employee groups

n How improving customer care improves jobsatisfaction and motivation


Barriers to Implementing

a Marketing Culture

n Failure of managers to understand and embracea marketing culture

n Resistance to change

n Political power struggles between theorganization’s functions and departments

n Lack of clearly defined responsibility for internalmarketing

n Organizational structure may inhibit two-waycommunication and dissemination of information

Marketing must Play a Coordinating role


Wider application of Marketing Culture

The marketing environment is dynamic and everchanging

Marketing has spread from the FMCG sectors andis now prevalent in many other industry sectors

Business-to-Business (B2B)

Purchasing on behalf of the organization rather thanfor personal use. Key relationships between supplier,manufacturers and distributors to deliver added valueto the end user. Buying decision-making process(DMP) longer and involves more people (DMU)

Service Industries

Dominate in many developed economies such as USAand UK. Key issues are Intangibility, Inseparability andPerishability. Benefits much more difficult tocommunicate.

Not-for-Profit

These organizations exist for reasons other than toproduce profit and are often service based, e.g.hospitals, universities, and charities. Usually have tooperate within a tight regulatory framework and the‘customers’ are numerous and have very different andoften conflicting needs.

Global Marketing

The emergence of a global village. Customers aroundthe world have similar lifestyles and consumptionpatterns to their global neighbours. Increased mobilityand education of consumers, aligned with moreefficient communication, has led to the growth ofglobal brands


Further Developments

Relationship Marketing

Aims to maximize the value generated from theexchange for buyer and seller by establishing alonger-term relationship and brand loyal customers.Database technology has enabled tracking ofpurchases and targeted communication. Focus onincreasing Customer Lifetime Value – CLV

Quality and Customer Care

Arises from the need to build relationships. Marketinghas recognized that customers perceive quality andlevel of customer care delivered as a differentiatingfactor when purchasing. More powerful consumersnow expect and demand consistent quality and service

Societal Marketing

Organizations have become more environmentallyaware in response to customers becoming morediscerning. The possible effect of marketing activitiesand provision of goods and services on society and theenvironment are also key differentiators in the mindsof more and more customers. More organizationsdeveloping a stance on Corporate Social Responsibility(CSR)

Database Marketing

Increased information availability and channels ofcommunication via ICT developments have led tobetter segmentation, shorter time to market andincreased channels to market. Flexibility has led togreater differentiation in product/service offering


Marketing as a Management Function

Key steps in marketing planning

Key Tasks of the Marketing Manager

Analysis – Assessment of

Micro Factors – Customers, competition,supply chain, other stakeholders

Macro factors – Legal, Social, Economic,Technological, Political, Environmental

Planning – Process detailed on the left

Implementation – Ensuring budgets and resourcesare in place to implement the plan and the plans arecommunicated and accepted

Control – Measuring the effectiveness of the planimplemented in relation to achievement of objectivesset. Changed circumstances may lead to plans beingamended. Process continues on to the next planningcycle


Marketing Mix – Tools of Marketing Management

Key Definition – The marketing mix is the set of controllable variables which the marketer uses todevelop marketing plans and programmes

Basic 4Ps – As developed by Neil Borden

Product

Price

Place

Promotion

The Extended/Service Mix – 7 Ps

Process

People

Physical Evidence


Growth of Technology in Marketing

Helps with the development of a marketing-orientatedculture by

n Using sophisticated databases to understandCustomer Behavior

n Using the Internet to gather competitor information

n Building customer care systems

n Identifying segments and niches with differingneeds

n Gathering information to underpin effectivemarketing planning and decision-making

Major Effects on the Marketing Environment include

n Growth of home shopping

n Greater price competition as customers cancompare prices via the Internet – pricetransparency

n Potential demise of some markets to be replacedby new products and industries

n New relationships and level of interaction betweenmembers of the value chain


Hints and Tips

n Read through Unit 1 of the MarketingFundamentals Coursebook – these revision tipsrelate closely to it

n The Marketing Fundamentals exam is about beingable to apply a range of concepts and theories inthe context of an organization

n You need to show the examiner that you canunderstand how to ‘do marketing’!

n Introduce different theories to underpin youranswers

n Use as many process models as possible to helpyou remember key concepts

n Challenge theories where you think they may notbe appropriate or where you think they could bedisproven

n Use examples to support your answers whereappropriate – e.g. Egg, easyJet, Starbucks. . .

n Answer the question asked!

n Break down the different components of thequestions to ensure you address all of the issues

n Have a go at as many past exam questions aspossible

n Go to www.cimvirtualinstitute.com andwww.marketingonline.co.uk for additional supportand guidance


MARKETING PLANNING ANDBUDGETINGLEARN ING OUTCOMES

� Understanding the importance of the planningprocess and the structure and stages of themarketing plan

� Understanding the models available in the auditand strategy formulation stages of the marketingplan

� Understanding the importance of objectivesetting, market segmentation and the value ofmarketing research to the planning process

� Appreciate the range of tools and techniquesavailable to satisfy customer needs and competeeffectively

� Understand the process of setting marketingbudgets


� The relationship between the marketing plan andthe corporate plan

� What is marketing strategy and the basics of agood marketing strategy?

� The role and components of the marketing planand barriers to marketing planning

Syllabus Reference: 2.1 through to 2.11, 3.1, 3.16

Unit 2


Why Plan?

More organizations now undertake a structuredplanning process because:

n The marketing environment is highly competitiveand change is occurring at a rapid rate

n High levels of investment are required to developnew products and services

n More sophisticated planning techniques and toolsare available

n Marketing personnel are better trained and haveaccess to better quality data and information

n Organizations recognize the need to integrate allfunctions of the organization to better meet thecustomers needs

The advantages are:

n A structured analysis of the environment theorganization operates within is undertaken

n Objectives and strategies are based on thestrengths and resources available

n Proactive approach rather than a reactive oneenables the organization to compete better

n Increased customer focus possible

n Better use of organizational resources

MARKETING PLANNING AND BUDGETING 16

The Planning Process

See Unit 1 for the extended process, but more simply

M.A.O.S.T.I.C.

How do we get there?


Marketing in the context of the organization

Marketing plays a role in feeding information upwards to provide guidance, direction and vision for thecorporate objectives and the development of the corporate strategy, as shown in the Strategy andPlanning Hierarchy below.

n Corporate planning starts at the top of theorganization and impinges upon every aspect andevery division or department of the organization

n Corporate strategy and plans are clearly linkedto achieving the mission and vision of theorganization

n Each business unit has responsibility for thedevelopment of its own function plans


Understanding the stages in more detail

Mission – What business are we in? What are ourvalues?

Objectives – Need to be SMART. Focus on growth,financial performance, reputation and corporate socialresponsibility (CSR)

Audit – Should encompass all aspects of theorganization and the environment it operates within.

Assessment of skills, resources and systems theorganization have used to develop a SCA. See SWOT

Internal/micro-Competitors Customers

Distributors Suppliers

External/macro-Legal Political

Economic Technological

Social Environmental

Objectives – provide the guiding framework on howthe company will compete in a market place. Shouldrelate to:

Market share

Market scope – range of products/services

Innovation – NPD

Positioning

Market position

Strategy – see belowImplementation – detailing the actions requiredto bring the Marketing Plan to life. Include:

Men Materials

Money Minutes

Machines

Control – Measurement vs. objectives


How the SWOT Analysis Helps the Planning Process


Strategy Formulation – Useful Tools

Market penetration – existing customers buy more or encourage brand switching from competition

Market development – enter new market segments, e.g. International or geographic areas

Product development – develop additional features or additions to range. Enter new product areas

Diversification – most risky, can be in related or non-related areas, e.g. CAT clothing


Porter’s Three Generic Competitive Strategies

As developed by Michael Porter

Cost Leadership The ability to compete on price due to market position or organizational efficiencies

Focus/Niche – Meeting the needs of a small, closely targeted sector

Differentiation – Meeting a set of specific customer needs more closely


Marketing segmentation and competitive positioning

SEGMENTATION

Consider the basis on which to segment the market – geographic, demographic, do-demographic, lifestyle,behavioural. Look at the profile of people and how they break into groups and confirm if the groups arevalid segments

TARGETING

Decide on target strategy

Decide which segments should be targeted and why?

POSITIONING

Understand consumer perceptions

Position products in the mind of the consumer

Design an appropriate marketing mix to meet customer requirements


Stages in Marketing Segmentation Process

n Identify the possible segments within themarket – this will consist of individuals ororganizations with similar needs or preferences

n Gather information on those market segmentsidentified – to do this, the segments need to beaccessible

n Evaluate the attractiveness of differentsegments – they need to be large enough to beviable

n Ascertain the competitive position within eachof the target segments

n Develop variations on product/servicespecifications to meet the needs of individualsegments

n Design the appropriate communications mixto meet the target market demands

REMEMBER! -

1. Customers must need and want the products/services

2. Customers must assert their buying power, i.e.money, resources, etc.

3. Customers must be willing to use their moneyand resources to buy products

4. Customers must have authority to buy differentproducts or services!


Basis for Segmentation

Any basis used must be:

n Measurable

n Substantial

n Accessible

Consumer Bases Industrial Bases

Demographics Industry type

Socioeconomic Size of the organization

Geographic Geographic

Personality and lifestyle User status

Frequency of use Usage rate

Benefits sought Benefits sought


Targeting as a Marketing Activity

Options for deciding on target markets include:

n Organizations should concentrate on makingone product for one market and having onemarketing plan – i.e. mass marketing

n The organization could concentrate its effortson one market but have a number of differentversions of each product – differentiatedmarketing

n Concentrating efforts on a small and carefullychosen segment – focus market

Six components of target marketing

1. Customer needs – wants and expectations2. Product market – size and structure3. Brand strength and market share4. Company capability5. Competitive rivalry6. Economies of scale – production and

marketing


Positioning as a Marketing Activity

Steps in establishing a positioning plan

n Identify all segments within the marketn Decide which segments are most suitablen Ensure the organization understands customer

requirementsn Develop product or service that specifically

meets the target audience needsn Identify benefits, usage, user category,

competitive positioning

n Evaluate how the product or service ispositioned in the eyes of the target group

n Identify an image that matches therequirements of the customer

n Promote the product to the target audience,establish relationships and aim for customerloyalty

Remember positioning alternatives

n Distinctiven Fill the gapsn Repositioning


Tactics – The Development of the

Marketing Mix

The application of the 4/7Ps to the organizationalcontext. See Unit 1

Contextualization is the key to ensure these elementsare brought together to form an integrated andcohesive whole

Synergy

Where the outcome of combining the individualelements of the marketing mix together is greaterthan the simple sum total of each of the elements.Often expressed as 2 þ 2 ¼ 5

Synergistic use of the mix will deliver an SCA

Development of the right marketing mix will

depend upon:

n Number of differing segments targeted

n Stage of the Product life cycles reached

n The industry context, i.e. B2C or B2B

n Need to be consistent

n Resources of the organization

n Corporate and Marketing objectives


Marketing Budgets

n Bottom-up budgeting – is where the budgetingprocess is fed and developed within theorganization and where the activities happen

n Negotiated budgeting – is where the processof budget allocation is by negotiation

n Objectives and task approach – is where thebudget is allocated specifically on the necessityto achieve output, i.e. achievable objectives

n Incremental budgeting – is where the budgetis based upon an incremental rise on budgetaryexpenditure per year, in line with predictedgrowth in the forthcoming year

n Percentage of sales method – is where thebudget is allocated, based on a percentage ofsales from the previous year

n Competitive parity – is where the budget is set,based on spending the same percentage ascompetitors within the same industry

n Judgemental methods – this is where budgetsare developed, based upon the judgement ofmanagers most directly involved in the future ofthe business

REMEMBER -

You must be able to describe a budgetaryprocess and evaluate it in the context of agiven scenario!


The Control Process

Monitoring and control contains four key activities:

1. Development or adjustment of marketingobjectives in line with internal and external driversaffecting performance

2. Setting of performance standards, i.e. keymeasures such as quality, production, sales

3. Evaluating performance, i.e. identifyingperformance indicators and measures andanalyzing findings

4. Corrective action, i.e. revised forecasts or salestargets, increasing advertising, etc.

Methods for controlling the marketing plan:

1. Measuring income/expenditure budgets –performance

2. Performance appraisal evaluation, i.e. staff3. Variance analysis4. Budgetary control5. Benchmarking6. Marketing mix effectiveness7. Competitor performance


Hints and Tips

n Ensure you are clear on the differences betweencorporate, business and marketing objectives andstrategies

n Remember marketing objectives must be SMART– this is essential

n You are expected to understand the importance ofsegmentation and the different segmentationoptions available to you, including linking them totargeting and positioning

n Part A of the exam paper, which is the mini-casestudy, often tests different aspects of themarketing planning process

n Ensure you consider the 7Ps of the marketing mix,not just the 4Ps

n Do not just describe budgeting, but be prepared toselect an appropriate budgetary process for agiven scenario. Be able to evaluate effectively



PRODUCT

LEARN ING OUTCOMES

� Understand how products deliver customervalue and satisfy customer requirements

� Understand the notion of different levels ofproduct

� Understand the product life cycle and its effectson the marketing mix

� Understand the principles of product policy

Syllabus Reference: 3.2, 3.4–3.6


� Understanding the different facets of theproduct and the various product classifications

� Creating a product range within a product lifecycle

� Managing the product life cycle� The product adoption process

Unit 3


The Product Dimensions

Key definition – A product is anything that can be offered to a market for attention, consumption,acquisition or use

PRODUCT 34

The Five Levels of Product Core – The basic benefit the product brings, e.g. a caris a form of transport

Actual – Product features such as style and design,e.g. BMW

Expected – The attributes the customer expects theproduct to deliver, e.g. reliability, status. If these arelacking, the customer will be dissatisfied

Augmented – Additional attributes which support theproduct and enhance the package, e.g. after salessupport, servicing, etc. Often the main area ofdifferentiation

Potential – How the product may evolve, e.g. electriccars


Product classifications

The product has three classifications:

n Durable – products that are durable last fora period of time, e.g. a car’s stereo system,a washing machine, etc.

n Non-durable – products that can be consumedor used only once, i.e. food, paper, drinks, etc.

n Service products – services are intangible –there is nothing physical at the end of the serviceexperience, i.e. holidays, hairdressing, personalbanking/financial services

Sub-classifications of product classifications

n Convenience productsn Shopping goodsn Speciality goodsn Unsought goodsn Business productsn Process productsn Plant and equipmentn Supplies and services

PRODUCT 36

Creating a Product Range

Components of the product range include the productmix and the product line

n The product mix is the total portfolio of productthat a company has to offer

n The product line is a group of closely relatedproducts

n Organizations must ensure that they establish thebreadth and depth of the product mix

n Organizations should ensure that products arecompatible with one another and that they meetthe needs of increasingly powerful customers

n The planning process should enable organizationsto reflect on their existing product ranges toensure that the products fit with one another

n The product or service is at the very heart of theorganization’s existence and a structured andanalytical approach must be taken whendeveloping a product range. This must includeanalysis of market forces, key drivers, factorsinfluencing change and an in-depth understandingof customers


The Product Life Cycle

PRODUCT 38

Managing the Product Life Cycle

Marketing strategy for growth

n Introducing new and innovative products

n Undertaking high levels of advertising and salespromotions activity – offering incentives to switchbrands

n Targeting customers should be tightly defined

n Marketing mix should be well coordinated andeffective

Marketing strategy for maturity

n Modification of the product/services – quality,function and style modifications

n Strategies for differentiation

n Aim for market development and marketpenetration to maximize profit potential

Marketing strategy for decline

n Consider the introduction of more innovative andup-to-date versions for the same product

n Replacement strategies should be defined

n Carefully manage the decline of the product

n Consider which approach is more appropriate –repositioning or obsolescence

n Consider the three approaches to obsolescence –phase it out, run it out, drop it


Criticisms of the Product Life Cycle

n Stages not always clearly defined in terms ofwhere one ends and another begins

n Not all products go through all stages

n The progression can be changed by strategicdecisions such as repositioning

n Length will vary according to industry sector, e.g.aviation vs. electronic toys

International Product Life Cycle

n Identified by Lancaster, it is often the case that asa market enters maturity in one country, theorganization will decide to export that product toother markets to grow the brand

n The product then enters the growth stage in thatnew market

n However, with the pace of change increasing andglobal brands becoming more prevalent, manycountries may miss out on several stages ofa product’s evolution

PRODUCT 40

The Product Adoption Process


Categories of Adoption

Innovators – Early Adopters

Younger, well educated and high disposableincomes. Like to be the first to have somethingnew. Price is not an issue. Early adopters enterat the growth stage

Early Majority

Slightly above average in terms of education anddisposable income. Influenced by the opinionleaders in the Innovator/Early Adopter categories

Late Majority

Adopt innovations after acceptance by theprevious groups and usually because of socialpressure or because the price has fallen

Laggards

Cautious, older with low disposable income. Lastinto the market. Often buy when Innovators havemoved on to new innovations

PRODUCT 42

The Adoption Process Rate of Diffusion dependent upon:

Communicability – The easier the product benefitscan be communicated, the faster the diffusion occurs

Trialability – If it is possible to have a trial beforepurchase then the faster the diffusion will occur

Relative Advantage – Advantages over and abovethe products previously marketed. The greater theadditional advantages, the faster the diffusion


Branding

The means of distinguishing one supplier’sproduct from another, by conferring a set ofvalues upon that brand. This can be achieved by:

Name

Packaging

Image

Positioning

Consumers relate to brands due to:

n Emotional connections

n Status benefits

n The ability to lessen the risk of purchasing

Benefits

n Creating a brand creates a vehicle forcommunication

n Powerful at creating an SCA

n Consumers relate to brands and feel an affinitytowards them

n Consumers gain status from buying brandedproducts

n Brands hold power within the distribution process

n Brands are highly valued company assets

PRODUCT 44

Establishing and supporting successful brands

Requires:

Linking brand values with target customer needs

Determining brand values in relation to those heldfor competitive brands

Perceptual positioning to be established in linewith brand values

Continuous communication of brand values to thetarget market

Monitor customer perceptions and react to change

Service industry brands are oftendifferentiated on the basis of:

Technical support

Marketing support

Financial support

After-sales support

Often referred to as ’Added value’

Packaging

An effective part of the mix, either as part of theproduct or as a vehicle for promotion

Packaging design can protect, aid use, communicateand provide convenience to the consumer


Hints and Tips

n Product operations is an area that is subject tocontinual questioning in the examinations and itis important to be familiar with it and to be ableto apply it

n Ensure that you can talk competently about theimportance of product models when assessingthe current status of products within themarketing mix

n It is important to show that you understand theimportance of managing growth at each stage ofthe product life cycle and the methods and optionsfor doing so

n Always aim to link other aspects of the marketingmix to the product life cycle and show how eachelement of the marketing mix applies andcontributes to the successful implementation ofproduct/service operations


PRODUCT 46

NEW PRODUCTDEVELOPMENT ANDPORTFOLIO MANAGEMENTLEARN ING OUTCOMES

� Understand the importance of launching newproducts and describe the processes involved

� Understand the relationship between portfolioanalysis and the principles of product policyand management

Syllabus Reference: 3.6, 3.7


� Using product portfolio planning tools� New product development options and process

Unit 4


Product Portfolio Planning Tools

Portfolio analysis is a collection of techniques aimed at managing a company’s collection orportfolio of products.

NEW PRODUCT DEVELOPMENT AND PORTFOLIO MANAGEMENT 48

The General Electrical Matrix (GE Matrix)


The Shell Directional Policy Matrix

These three are commonly used and all look at the attractiveness or growth potential in the marketand the ability of the organization’s brands to compete in the market


Other portfolio models

Include

Porters Industry/market evolution model

A.D Littles industry maturity/competitive positionmatrix

Barksdale and Harris portfolio analysis/product lifecycle matrix

All of these models are concerned with the stage oflife that the product is in and the strategies available.These can be summarized by using the model to theright

Product Life Cycle Portfolio Matrix


New Product Development

Different types of new product development

New World/Innovation

The focus of this model is upon technicaldevelopment, incurring high/risk return. Canrevolutionize or create markets

New product lines or additions

Such products can be (i) new to the provider or(ii) be additions to the product range

Product revisions/replacements

Replacements and upgrades of existing products.Changes can be aimed at cost reductions

Reposition

Aim to diversify away from existing markets byuncovering new applications, uses or marketsfor current products

Imitative products

Copycat products produced by others, but wherethere is a market for many alternative andcompeting versions


The New Product Development Process Idea Generation – From market research or gleanedfrom the market via sales people. Ideas generatedshould be collected via a management function

Screening – Size of potential market, real consumerneed, company’s competence and resources

Testing – Various concepts via market research withpotential customers

Business Analysis – Will it pay? Does it add value tothe portfolio?

Product development – Prototype developed,researched and fine-tuned

Test Marketing – Launching the product in a smallerarea, representative of the total population, irons outfinal problems before wide-scale investment

Launch – All criteria examined and full launchplanned

Highest chance of success is 50%


Costs of New Product Development


How ICT can aid NPD

Interactive nature of the internet can involve thecustomer at an earlier stage

Databases can be used to identify potential customersand involve them at the early stages

Concepts and ideas can be shown and researchobtained on potential customer reaction

Computer-aided design shortens the process toprototype

International NPD

International NPD requires products that meetinternational legal requirements

Economies of scale are apparent as the potentialmarket size is multiplied

Joint ventures/strategies and alliances often takeplace, to reduce risk and increase skill base ininternational markets


Hints and Tips

n Ensure that you can talk competently about theimportance of product portfolio models whenassessing the current status of products withinthe marketing mix

n New product development and the process that anorganization goes through when considering NPD,is often an exam question in Part B of theMarketing Fundamentals paper

n How ICT underpins and aids marketing processesis also often part of Part B questions



PRICE OPERATIONS

LEARN ING OUTCOMES

� Understand the role and importance of price inthe marketing mix

� Appreciate the process of making pricingdecisions and the internal and external factorsaffecting these

� Understand the different pricing policies



� Price perception of the customer and theorganization

� Influences on price� Correlating price with value� Determining price� Pricing objectives and strategies

Unit 5


Price – The monetary value placed upon a product/service by the marketer

Not just the cost, can also be:

Cost Rent

Fee Commission

Interest charged Time given

Price is the element of the marketing mix thatgenerates revenue

Revenue¼ Price� Quantity

Profit¼ Revenue� cost of production

Price can communicate quality

Price can deliver a competitive advantage

Price can build barriers to other market entrants

PRICE OPERATIONS 58

Price perceptions – the customer and the organization

Customer Perspective

n Price is the value placed upon either a product ora service

n Price is often perceived as being constant, butthe reality is that it changes in the mind of thecustomers as and when their circumstanceschange

n Supply and demand of products can affectperception, as competitive rivalry and productrarity influence their perception and they perceiveprice changes drastically in relation to value

Organization Perspective

n Price is the only element of the marketing mix thatgenerates revenue for the organization

n Pricing is an opportunity to gain ‘ROI’ (Return onInvestment) or ROCE (Return on Capital Employed)

n Price is used as a means to an end in meetingprofit objectives and funding growth opportunitiesin future years


Key definitions

Total cost¼ The sum of all fixed costs and variable costs times the quantity produced

Average Cost¼ Total cost divided by the number of units produced

Fixed Costs¼ Costs that do not vary with the number of units produced or sold

Variable Costs¼ Costs that vary directly according to the number of units produced or sold

Marginal Cost¼ The addition to cost of producing one extra unit of output

Economies of scale¼ The potential reduction in average costs as a result of increasing output/sales

Contribution¼ Selling price� Variable cost. This is then a contribution to covering fixed costs

Break-even Point¼ Fixed costs divided by the level of contribution per unit¼ number of units that needto be sold before becoming profitable

PRICE OPERATIONS 60

Customer Demand

The marketer needs to know the amount that will bedemanded for differing price levels

Price elasticity¼ Percentage change inquantity demanded in relation to percentagechange in price

Goods are said to be price inelastic when, regardlessof price increases, the customer still purchases thesame amount. This often happens in categories wherethey have no choice, e.g. electricity, car insurance

Goods are price elastic when an increase in priceleads to a decrease in demand and vice versa.Most FMCG goods fall into this category


Correlating Price with Value

Typical factors that affect perceived value include:

Four Cs that determine price¼ Customers, Competitors, Company considerations and price asa Communicator

PRICE OPERATIONS 62

Strategic Pricing Determinants

DemandThis relates to being able to meet customerdemand in a cost-effective way

Price senstitivityFrequency of purchase

Necessity of purchase

Cost of purchase

Competitor alternatives

Stock availability

Debtors and creditorsLiquidity

Credibility

Payment/terms and cashflow

Financial management linked to KPIs

Product positioningProduct perception vs. price

Product value

Price, profitability and product life cycle

CompetitorsMatch the price of competitors

Reduce price below competitors

Introduce promotional incentives to affectcompetitors

Other factorsSaturation of markets

Price as a tool for competitive attack

Price vs. value


Pricing Objectives

Pricing objectives include:

n To achieve return on investment – ensuringsufficient sales revenue to cover all associatedcost bases and pay back initial investment

n To maximize profits – setting prices forprofitability, i.e. low market share may meanhigh price to maximize profit potential

n To maximize sales revenue – increase salesturnover – selling volume leading to increasedprofitability

n To achieve product quality leadership –Providing the best quality product in the market inorder to create differentiation against competitors

n To survive in the market place – settingobjectives that ensure survival in a highlycompetitive market is central to organizationalsuccess. However, organizations tend to aimhigher than survival. The aim is to work on abreak-even basis in order to stay in business

PRICE OPERATIONS 64

Strategic Pricing

Price Skimming

Charging high prices to gain early return oninvestment

Price skimming features include:

n Relatively high price per unitn Good strategy to apply to new products

to recoup costsn Easy to segment the marketn Profits can be made on a per unit basis

Price Penetration

Charging a low price to ensure marketpenetration

Price penetration features include:

n Offers a low price per unitn Is used when a large volume of market share

is involvedn Profit is made through volume of salesn Low price is aided by high promotions


Tactical Pricing

Characteristics of tactical pricing strategies include:

1. Marginal pricing

Offering a special price

Ensuring profit is still made

2. Quantity discounting

Economies of scale

Money is received quickly

Removing changes for the competition topenetration market, but offering bulk buys

3. Differential pricing

High fixed costs

The relevant application of seasonal timings

Benefits both the producer and the consumer

4. Cost-plus pricing

Covering the cost of overheads, plus percentageon top, to meet marketing/profit objectives

Often used for projects that are difficult to cost outor take a long time for completion

PRICE OPERATIONS 66

Other Pricing Strategies

Perceived value price

Most are marketing orientated, in that price is relatedto the perceived value and set at what the markets willbear. Other elements of the mix are used to build highquality perception.

Psychological Pricing

Perceptual tactics £10 or £9.99 – one says a bargain,the other quality

Segmented/differential pricing

Allows pricing to flex dependent upon demand overtime, e.g. off peak travel

Promotional pricing

Variety of tactics including

Cash rebates or sales promotions

Special event pricing

Lost leader pricing

Low interest deals

Product Mix Pricing

Where the pricing for related items is also important,i.e. razors and razor blades, where one is sold ata loss to generate profitable sales for the other


Establishing a Price – a Structured Approach

PRICE OPERATIONS 68

Hints and Tips

n The price element of the marketing mix shouldfind that marketing is aiming to blend price, qualityand perceived value

n Price is the only element of the mix that createsincome for the organization

n Demonstrate your understanding and show thatcustomers are fickle; they have considerablechoice and therefore have a significant influenceon supply and demand

n Prices will vary according to what people will payand also what they are prepared to pay. Therefore,pricing needs to be used with some flexibility tomeet those requirements. You should be able toshow how you might achieve this level of flexibility

n The critical success factors in relation to price areto maintain the organization objectives, whilst atthe same time remaining sensitive to customerneeds

n The key to price is to link the product quality witha clear indication of value for money. Pitch theprice at the right level – it may be the differencebetween success and failure



PLACE OPERATIONS

LEARN ING OUTCOMES

� Appreciate the process of designing channelsof distribution, including the factors that affectdecisions in this area

� Be aware of the key trends and developmentsin distribution, including those from use of ICT

Syllabus Reference. 3.10, 3.11


� Influences on distribution� The role and benefits of intermediaries� The distribution channel and the customer� Selecting channels of distribution and

intermediaries� Vertical and horizontal channel integration, and

PDM� Evaluating channel effectiveness

Unit 6

Key Influences on Distribution

There is a wealth of influences, both internal andexternal, in relation to distribution or ‘place’ as a toolof the marketing mix. The list is extensive. Try toselect a number of influences that you may beconfident and comfortable in discussing

n Fuel prices

n Environmental legislation

n Taxation

n Transportation

n National/global transportation infrastructure

n Packaging

n Product life cycle

n Nature and characteristics of the product

n Changing lifestyles

n The emergence of ICT

n Customer wants and expectations

n Level of complexity in buying behavior

n Competitive strategies

n Production targets

n Marketing mix components

n Customer services

n Technical support

Place is about getting the goods to thecustomer

Right Place

Right Time

Right Quantity

Right Condition

Right Level of Support


Marketing Channels

Key definition – A Marketing Channel comprises individuals and organizations that togetherensure the flow of products and services from the producer to the customers

Marketing Channels need to be evaluated in relation to the cost of use and the competitive advantage they candeliver

PLACE OPERATIONS 72

Key Factors

Channel length

See the diagram on page 72. The longer the channellength the greater the loss of control the marketer has

Types of Intermediaries

Agents and brokers – often used internationally

Distributor and dealers – independents who formalliances with manufacturers and add value, e.g. cars

Wholesalers – buy in bulk and sell on in smallerchunks

Retailers – closest to point of purchase – buy fromwholesalers or direct

Market Coverage

Intensive – Maximum cover, all outlet types

Selective – More specialist retailers required, e.g. cars

Exclusive – Expensive items convey quality, e.g. Rolex

Channel Management/responsibility

Who has the ultimate control?

Who sets price?

Who holds title to the goods?

Who is responsible for quality?

Who provides after-sales support and warranty?


The Distribution Channel and the Customer

Passing of goods and services directly from the manufacturer to the consumer

Passing of goods and services via a retailer and then on to a consumer

From the manufacturer via a wholesaler and then directly on to the consumer

The passing of goods and services from the manufacturer via a wholesaler, then on to the retailer andsubsequently the consumer

The manufacturer can distribute the products and services via an agent to a wholesaler

PLACE OPERATIONS 74

Selecting the Channels of Distribution

Below is a list of key questions that marketersshould ask when aiming to select the mostappropriate distribution channels:

n What are the product characteristics and how dothey affect methods of distribution?

n Who are the customers and where are they?

n What are the customer requirements in relation toaccess and delivery of their products andservices?

n How, where and when do they want to buytheir products?

n What are their competitors doing by way ofdistribution?

n What is the cost of distribution?

n What are the legal and regulatory constraintson distribution?


Intermediary Selection Criteria

Operational Criteria

Knowledge of local markets

Appropriate premises and equipment

Technological systems and processes

Customer convenience

Product knowledge and expertise

Payment facilities

Sales force structure, size and effectiveness

Efficient customer service infrastructure

Strategic Criteria

Plans for growth and expansion

Resource capacity and future development

Quality assurance processes

Management ability

Innovative

Willing partnership

Levels of loyalty and cooperation

PLACE OPERATIONS 76

Channel Strategies

Intensive DistributionMaximum number of outletsTarget outlets in as many geographical regions aspossibleConsumer convenience productsHigh purchase frequencyImpulsive purchaseLow price

Selective Distribution

Medium level of customersLess intensive distribution outletShopping-based productsMedium number of shoppersPurchase is occasionalPurchase is more likely to be plannedMedium price

Exclusive Distribution

Relatively few customersLimited retail outletsCloser retailer/customer relationshipsSpeciality productsInfrequent purchaseHigh involvement and planned purchaseHigh price


Vertical, Horizontal and Physical

Distribution

Vertical Distribution

A distribution system where two or more channelmembers are connected by ownership or legalobligation

Or

A marketing channel in which a single channelmember will coordinate or manage channel activitiesto achieve efficient, low-cost distribution, aimed atsatisfying target market customers

Horizontal Distribution

The combination of institutions at the same level ofchannel operation under one management

Physical Distribution Management (PDM)

This is the term used to describe the managementof every part of the distribution process. This can becontracted out to a specialist, or can be developed asa specialist function within the organization

Things to consider:

n Costs involved

n Methods of transport

n Routes used

n Stock and storage

n Protection and delivery of stock

n Timing – a key element

PLACE OPERATIONS 78

The Internet and distribution

The benefits of the Internet at a strategic

level

Improves corporate image

Improves customer service

Increases visibility

Creates market growth opportunities

Lowers overall business costs

Moves towards online transactions

The benefits of the Internet at an

operational level

Improves speed of transaction

Improves management information

Increased service levels

Removal of time constraints

Removal of distance

Ability to complete transactions electronically

Access to full competitive arena

New revenue opportunities

Cost-effectiveness


Evaluating Channel Effectiveness

Key performance and evaluation measures include:

n Regular reviews

n A forum for problem review and solution

n Monthly, quarterly and yearly sales data analysis

n Average stock levels

n Lead and delivery times

n Zero defects

n Customer service complaints

n Marketing support

n Annual performance audits

From an Internet perspective, typical evaluationmethods include:

n Number of leads

n Increased sales

n Customer retention

n Increased market share

n Brand enhancement and loyalty

n Customer service

PLACE OPERATIONS 80

Hints and Tips

n There is an increasing emphasis on distribution.Ensure that the key concepts of intermediaries,channels and channel selection criteria are clearin your mind

n Be prepared to make a decision on channeloptions, based upon clear justifications of choice

n Ensure that you are confident with the broadercomplexities of distribution, the challenges, costs,logistical arrangements and how they must bemanaged to meet different channel stakeholders

n There is increasing evidence of mergers andacquisitions closely related to distributioneconomies

n Be confident in your ability to discuss newemerging alternatives to distribution, in particularvarious e-technologies that support and underpinthe distribution process

n Channel management and channel selection isa key marketing activity and it is important toensure that you can find new and innovative waysof meeting customer needs and wants



PROMOTIONAL OPERATIONS

LEARN ING OUTCOMES

� Understand the role and importance ofcommunication and promotion in marketing

� Understand the process of communication� Understand the range of tools that comprise the

marketing communications mix� Understand the factors that contribute to the

development and implementation of themarketing communications mix

� Be aware of key trends and developments inpromotion

Syllabus Reference: 3.12


� The marketing communications mix in thecontext of marketing planning

� Push and pull strategies� Aims and objectives of the promotional

communications process� The promotional mix

Unit 7

Promotional Operations

It is essential that customers are aware of theproducts/services that are provided and the wayin which they differ from those of competitors

The customers are informed via the use of promotionor marketing communications

The promotional element of the marketing mix is verycostly and it is therefore essential that the company:

Sends the correct message

To the correct audience

Using the most appropriate media

The communication process

Individuals are bombarded by thousands of messagesevery day. A look at the process of communicationdemonstrates why all are not remembered.Communication involves:

Sender – the person or company wishing tocommunicate a message

Encoding – translating the message into signs andsymbols that the receiver will understand and reactpositively to

Channel – chosen media to transmit the message,e.g. television or a direct mail letter

Receiver – the person to whom the message wasintended, usually the customer

Decoding – the content of the message receivedby the receiver can differ from the one sent


Noise goes on around us all the time in daily life. Promotional messages have to cut through that noise tobe heard

Feedback from the receiver can be in many forms – additional sales, complaints or general reaction tothe campaign

PROMOTIONAL OPERATIONS 84

Customer Behaviour Models

In order to communicate well, we need to understand how people behave when they are purchasing

Response Hierarchy Models


Push and Pull Strategies

Push Strategy – This is where the manufacturer takes the decision to concentrate their communicationefforts on members to the distribution channel. The basis of this strategy is to promote directly to thesuppliers, therefore pushing the products down the line to reach the customers throughout variouschannel members

Pull Strategy – This strategy operates in contrast to the push strategy and requires the manufacturer tocreate demand for the product through direct communication with the customers. The aim is to createdemand at the direct supply end and pull the product upwards through the channels, through customerdemand


Five key communication effects of

promotional activities

n Category needs – the perception of the actualcustomer needs

n Brand awareness – the ability of the consumer toidentify and associate with a particular brand

n Brand attitude – this relates to the consumer’sparticular observations, view and perceptions ofthe brand, cognitive beliefs

n Brand purchase – once the category needs havebeen identified, the brand purchase intentionfollows

n Purchase facilitation – the organization needs toensure the product is in the right place, at the rightprice, at the right time

Possible communication objectives

n Clarification of customer needs

n Increasing brand awareness

n Increasing product knowledge

n Improving brand image

n Increasing brand preference

n Stimulating search behavior

n Increasing trial purchase

n Increasing financial position

n Increasing flexibility of the corporate image

n Increasing cooperation from trade

n Enhancing the reputation of the organization

Based on Delozier – 1976


The Promotional Mix

Advertising – A paid form of non-formal communication that is transmitted through mass media, such astelevision, radio, newspapers, magazines, direct mail, public transport vehicles, outdoor displays and theInternet

Advertising objectives

n Promoting products, organizations and services

n Stimulating demand for products

n Increasing sales growth

n Educating the market

n Increasing product/service usage

n Reminding/reinforcing

n Reducing demand fluctuations

Advertising and the marketing mix

As a marketing communications planner, you willbe involved in the following:

n Liaising with channel members

n Have an awareness of channel needs and theassociated communications support

n Provide consistency for all communications andensure that all members are empowered by themessage


Sales Promotions

Sales Promotions – A range of tactical marketing techniques designed within a strategic marketingframework to add value to a product or service in order to achieve specific sales and marketing objectives

Aims and objectives of sales promotions

n To increase brand and product awareness

n To increase trial and adoption of products

n To attract customers to brands

n To level fluctuations in supply and demand

n To disseminate information

n To encourage trading up to next size

Sales promotions and the marketing mix

Responsibility for sales promotions will include:

n Selecting appropriate promotional techniques

n Trade promotions, retailer to consumerpromotions, manufacturer to consumer promotions

n Development of consumer loyalty schemes


Public Relations

Public Relations – Is a planned and sustained effort to establish and maintain goodwill and mutualunderstanding between an organization and its target publics

Aims and objectives of public relations

n To create and maintain the corporate and brandimage and enhance the position and standing ofthe organization in the eyes of the public

n To communicate the organization’s ethos andphilosophy, and corporate values

n To undertake damage limitation to overcomepoor PR

n To raise the company profile and forge strongerrelationships

Responsibility for public relations includes

n Changing negative into positive, hostility intosympathy, prejudice into acceptance, apathy intointerest, ignorance into knowledge

n Define techniques, such as press releases, pressconferences, publications, media relations, etc.

n Undertake internal PR activities

n Select appropriate PR techniques based uponsuitability, feasibility and acceptability


Direct and Interactive Marketing

Direct and Interactive Marketing – An interactive system of marketing which uses one or moreadvertising media to effect a measurable response at any location.

Aims and objectives of direct marketing

n Increasing direct mail order levels from newand existing customers

n To increase provision of information to aidinformation and adoption

n Increase the number of sales leads generated

n Increase the number of trial leads

Responsibilities of direct marketing

n Ensuring an appropriate database that iseffective in reaching targets

n Defining the appropriate techniques, e.g. directmail, internet, e-mail marketing, tele-marketing,direct response advertising

n To be aware of Data Protection legislation andhow it affects the activities of direct marketing


Sponsorship

Sponsorship – Is the provision of financial or material support by a company for some independentactivity . . . not usually directly linked to the company’s normal business, but support from which thesponsoring company would hope to benefit

Sponsorship Objectives

n Increasing brand awareness

n Building and enhancing corporate image

n Raising awareness of brands related to productsrestricted in advertising through variouslegislation, such as alcohol and cigarettes

Responsibilities of Sponsorship

n Selecting appropriate form of sponsorship, i.e.programme sponsorship, arts/sports sponsorship,event sponsorship, individual or team sponsorship

n To ensure appropriate sponsorship arrangementsare in place and the match between theorganization and the potential sponsoringorganization is right

n Develop the right mix, i.e. ensuring high-level ofspin-offs in promotions, optimizing costeffectiveness, advertising, merchandising andpromotional incentives


Personal Selling

Personal Selling – An interpersonal communication tool which involves face-to-face activities undertakenby individuals, often representing an organization, in order to inform, persuade or remind an individual orgroup to take appropriate action, as required by the sponsor’s representative

Objectives of personal selling

n To increase sales turnover

n To reduce the number of clients with minimumviable orders

n To reduce the costs of sales

n To increase the number of distribution outlets

Responsibilities of the marketer in

supporting the sales team:

n Provision of market information and competitorintelligence

n Provision of potential leads

n Client history/database information

n Financial reports – Dunn and Bradstreet

n Provision of appropriate promotional materials

n Provision of sales aids, promotional plans andincentives


Factors affecting the promotional mix

Target Market – lifestyle and media consumption

Characteristics and effectiveness of the tools– in relation to reaching your target audience

Company resources and objectives – launchingproducts requires more resource than maintainingthem

Availability of promotional tools

Product life cycle stage

The promotional planning process


Hints and Tips

n Ensure that you can link the organizationperspective of the marketing mix with thecustomer perspective

n Push and pull strategies are commonplace andyou should be prepared to include them inpotential strategy development areas

n As for the promotional mix, be familiar with eachaspect of the mix, its definition, the objectives themix can achieve, and understand the areas ofresponsibility that an operational manager shouldbe involved in planning and implementing

n Be aware of the need to coordinate thepromotional mix and ensure that you develop aneffective and creative message that will maximizethe potential impact of a fully coordinated mix

n Ensure you are able to apply these areas – it is notknowledge regurgitation

n Have a go at as many past exam questions aspossible



SERVICES AND CUSTOMERCARELEARN ING OUTCOMES

� Understand the importance of service as anelement of the marketing mix

� Understand the factors that contribute to thedelivery of service quality

� Understand the relationship between servicequality and the broader concept of customer care

� Understand the role and importance ofcustomer care and how to plan and implementa customer care policy

� Understand the importance of people and acompany’s staff in contributing to customercare and effective service delivery


� The management concept of TQM� The extended marketing mix� Implementing customer care programmes� The SERVQUAL model and its application


Unit 8

Services and Customer Care

n The process of adding value to the customerpurchase

n Now as applicable to purchasing products asoriginally a part of service delivery

n Part of the Augmented Product offering

n Enables a competitive advantage to bedelivered (SCA)

n Needs to emanate from a customer-orientedorganization

Service is important because of

n Perishability

n Intangibility

n Inseparability

Leads to the application of the extended mix

n Process – How the customer actually receives orpurchases the goods/services and how effectivethat transaction is

n Physical evidence – The organizational missionand the way it is communicated and manifestsitself in the customer transaction

n People – The staff the customers encounter,either at the point of purchase or as an after-salesexperience


Total Quality Management

A management culture that puts quality and customercare at the heart of the organization

TQM approach is to meet customer requirementsfirst time, every time

TQM delivers the quality aspect, whereas customercare delivers the service aspect of the customerexperience

TQM – The guiding principles

n Recognition of the strategic importance ofcustomers and suppliers

n Development of win – win relations betweencustomer and suppliers

n Establishing relationships based on trust

These are put into practice by

n Constantly collecting information on customerexpectations

n Disseminating the information widely withinthe organization

n Using the information to design and deliverthe product/service offering

SERVICES AND CUSTOMER CARE 98

TQM needs

n Total commitment from staff

n A customer-orientated culture

n An understanding of customer requirements andthe organization’s obligations

n Commitment from top management

n Adherence to process and procedures designed todeliver the obligations

n Monitoring of customer needs and how they maychange

Information must be

n Up-to-date

n Reliable

n Used to inform decision-making and planning

n Produced to inform and motivate staff

n Produced at regular stages to monitorimprovement

n Able to make measurement part of theimplementation process


Building a customer care programme

Key questions

What policy of customer care is most appropriate forthe company?

How far should this policy affect the operations?

All customers have the right to

n A basic minimum level of customer care

n Common courtesy from staff

n Effective response to complaints


Successful customer care programmes

Staff must be

n Clear about the programme and their role in it

n Committed to the programme

n Well trained to carry out the programme

n Sufficiently resourced

n Sufficiently skilled

The programme must

n Provide clear benefits for the staff

n Be reinforced with top management commitmentand rewards

Management must be

n Informed about the progress and the effectivenessof staff performance

n Provided with regular and appropriate information

n Supportive of marketing objectives and facilitatethe work of staff towards meeting those objectives

Benefits

n Minimizes organizational confusion

n Potentially delivers an SCA

n Offers value addition to customers

n Promotes better customer understanding

n Motivates staff

n Aids customer retention


The SERVQUAL Model

As developed by Parasuraman, Zeithaml and Barry

Provides a comprehensive framework for identifyingkey criteria for the customer

Guides the implementation of quality programmes

Ten criteria for assessing levels of service quality

Process quality Outcome Quality

n Responsiveness n Access

n Courtesy n Reliability

n Competence n Credibility

n Communication n Security

n Tangibles n Understanding

Gaps occur because companies

Don’t understand what customers want

Are unwilling to provide what they need

Do not have staff trained to meet the needs

May have encouraged unrealistic customerexpectations


Hints and Tips

n Ensure that you fully understand the benefits thatcustomer care can deliver

n Ensure that you are aware of the process ofbuilding a customer care system and thecommitment required from the organization

n Ensure that you have an understanding of theSERVQUAL model and are able to apply it toa range of organizations

n Build up a set of examples from your ownexperience of good and bad customer serviceto use as examples in the exam



MARKETING IN CONTEXT

LEARN ING OUTCOMES

� Understanding the importance of contextualsetting in influencing the selection of themarketing mix tools

� Understand the differences in thecharacteristics of various types of marketingcontext

� Being able to compare and contrast themarketing activities of organizations thatoperate and compete within differentcontextual settings

� Understand some of the key contextual factorsaffecting the marketing mix, such as ICT,international dimensions


� The importance of the contextual setting on thedevelopment of the marketing mix

� Understanding the different contextual settingsthat exist

� Understanding the role of ICT in furtherdevelopment of marketing orientation

� Understanding the importance of internationalmarkets

Syllabus Reference: 3.3, 3.15, 4.1–4.5

Unit 9

Marketing in Differing Contexts

Fast Moving Consumer Goods or B2C

Buyer behavior is dependent upon

Personal factors – Age, sex, economic profile andfamily life stage. Also level of involvement in purchasecategory

Psychological factors – Perceptions, motivations,attitudes and personality and how these affect thepurchasing

Social and cultural factors – Who are we heavilyinfluenced by? Who are our opinion leaders andreference groups? How do they influence us?


Business-2-Business markets Who is Involved?

Initiators

Influencers

Deciders

Buyers

Users

Factors affecting B2B purchasing

Environmental factors – STEPLE

Interpersonal factors – How the buying unit or DMUrelate to each other and work together

Organizational factors – Such as inviting to tender

Individual factors – personal preferences

MARKETING IN CONTEXT 106

Small to medium enterprises

Although small, these organizations will need to bemore marketing oriented in order to compete withlarger organizations in their sector, they will typicallyhave restrictions on resources affecting:

n Staff numbers and skills

n Financial resources

n Information access

n Systems

Many SMEs form alliances to share resources, such asmarketing research information and utilizeGovernment services such as Business Link

Service sector

Key Issues:

Perishability

Intangibility

Variability

Inseparability

Non-ownership


E-Commerce or E-Business

Key definition – The use of electronic technologies and systems, so as to facilitate and enhancetransactions between different parts of the value chain

Can deliver

Cost reductions to the marketer

Enhanced service to the customer

Covers the use of

Internet – Internally, i.e. Intranet

Externally, i.e. Extranet

World Wide Web – as an information source

Electronic Data Interchange (EDI)

Data base technology – datawarehousing

– data mining

Advantages

n Better communication

n Faster and more flexible transactions

n Removal of geographical boundaries

n Better coordination of value chain

n Improved relationships and retention

E-Commerce marketsTravel Cars Grocery

Music Toys Insurance

Books Software

Wine Event booking


Digital Technology Enables

Direct response television

Two-way communication

Interactive television

Multimedia – CD Roms/DVDs

Mobile technology

Wireless technology

SMS messaging

E-mails/video clips

All of these developments are ableto improve

Quality and quantity of marketing research informationfor decision-making

Communication between the value chain and the enduser, resulting in improved service to the customer

Improvements to the promotional mix, enablinggreater measurement and degree of two-waycommunications

Improved customer management – Electronic CRMand customer care, providing quicker, more targetedresponses at a cheaper price


The International Marketing Mix

Product

Manufacturing requirements

Market research

Ability to produce the product

Customer needs and fit with the product portfolio

Technical/after-sales support

Technology

Standardization vs. adaptation

Price

Economic variables, currency exchange rates,international and local legislation

Varying taxes, tariffs

Price sensitivity and cultural diversity

Place

Set-up costs of channel members

Level of investment required

Level of incentive required

Synergy with local/domestic channels

Management and control of the overall process

Promotional mix

Language, image, relationships

Corporate identity, company image

Methods of advertising/tolerance of advertising

Media, ethics, literacy, accessibility

Agencies


Standardization

A company wishing to globalize its businessneeds to consider standardization of thefollowing:

n Market access

n Industry standards

n Technology

n Products/services

n Promotion

n Distribution

n Customer requirements

n Competition

n Communication

Adaptation

A company adapting products/services to marketneeds will consider the following options:

n Modifying the marketing mix to meet differentcustomer needs

n Adapting products to meet local needs andconditions

n Adapting promotional strategies for each of theirstrategic business units (SBUs) or products/strategies

n Avoiding conflict in promotional protocol

n Being aware of price sensitivities, economicinstabilities, global pricing


Hints and Tips

n Whilst international marketing is a subject in itsown right, it may not always be separated for thepurpose of exam questions. For example, you maybe asked to answer a marketing planning questionin the context of an international business

n Be prepared to adapt the marketing mix to anygiven context – B2C, B2B, SMEs, Not for Profit,and International

n Be aware of how technology is improving themarketing process and how this works betterin some markets than others. Build a bank ofexamples

n Be prepared to compare and contrast marketingcontexts and demonstrate you are aware of howthese differences manifest themselves



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