The marketing process #forestmarketing
The marketing process The marketing process consists of four elements: strategic marketing analysis, marketing-mix planning, marketing implementation, and marketing control.
Strategic marketing analysis Market segments The aim of marketing in profit-oriented organizations is to meet needs profitably. Companies must therefore first define which needs—and whose needs—they can satisfy. For example, the personal transportation market consists of people who put different values on an automobile’s cost, speed, safety, status, and styling. No single automobile can satisfy all these needs in a superior fashion; compromises have to be made. Furthermore, some individuals may wish to meet their personal transportation needs with something other than an automobile, such as a motorcycle, a bicycle, or a bus or other form of public transportation. Because of such variables, an automobile company must identify the different preference groups, or segments, of customers and decide which group(s) they can target profitably.
Market niches Segments can be divided into even smaller groups, called subsegments or niches. A niche is defined as a small target group that has special requirements. For example, a bank may specialize in serving the investment needs of not only senior citizens but also senior citizens with high incomes and perhaps even those with particular investment preferences. It is more likely that larger organizations will serve the larger market segments (mass marketing) and ignore niches. As a result, smaller companies typically emerge that are intimately familiar with a particular niche and specialize in serving its needs.
Marketing to individuals A growing number of companies are now trying to serve “segments of one.” They attempt to adapt their offer and communication to each individual customer. This is understandable, for instance, with large industrial companies that have only a few major customers. For example, The Boeing Company (United States) designs its 747 planes differently for each major customer, such as United Airlines, Inc., or American Airlines, Inc. Serving individual customers is increasingly possible with the advent of database marketing, through which individual customer characteristics and purchase histories are retained in company information systems. Even mass-marketing companies, particularly large retailers and catalog houses, compile comprehensive data on individual customers and are able to customize their offerings and communications.
Positioning A key step in marketing strategy, known as positioning, involves creating and communicating a message that clearly establishes the company or brand in relation to competitors. Thus, Volvo Aktiebolaget (Sweden) positioned its automobile as the “safest,” and Daimler AG (Germany), manufacturer of Mercedes-Benz vehicles, positioned its car as the best “engineered.” Some products may be positioned as “outstanding” in two or more ways. However, claiming superiority along several dimensions may hurt a company’s credibility because consumers will not believe that any single offering can excel in all dimensions. Furthermore, although the company may communicate a particular position, customers may perceive a different image of the company as a result of their actual experiences with the company’s product or through word of mouth.
Marketing-mix planning Having developed a strategy, a company must then decide which tactics will be most effective in achieving strategy goals. Tactical marketing involves creating a marketing mix of four components—product, price, place, promotion—that fulfills the strategy for the targeted set of customer needs.
Product Product development The first marketing-mix element is the product, which refers to the offering or group of offerings that will be made available to customers. In the case of a physical product, such as a car, a company will gather information about the features and benefits desired by a target market. Before assembling a product, the marketer’s role is to communicate customer desires to the engineers who design the product or service. This is in contrast to past practice, when engineers designed a product based on their own preferences, interests, or expertise and then expected marketers to find as many customers as possible to buy this product. Contemporary thinking calls for products to be designed based on customer input and not solely on engineers’ ideas.
In traditional economies, the goods produced and consumed often remain the same from one generation to the next—including food, clothing, and housing. As economies develop, the range of products available tends to expand, and the products themselves change. In contemporary industrialized societies, products, like people, go through life cycles: birth, growth, maturity, and decline. This constant replacement of existing products with new or altered products has significant consequences for professional marketers. The development of new products involves all aspects of a business—production, finance, research and development, and even personnel administration and public relations.
Packaging and branding Packaging and branding are also substantial components in the marketing of a product. Packaging in some instances may be as simple as customers in France carrying long loaves of unwrapped bread or small produce dealers in Italy wrapping vegetables in newspapers or placing them in customers’ string bags. In most industrialized countries, however, the packaging of merchandise has become a major part of the selling effort, as marketers now specify exactly the types of packaging that will be most appealing to prospective customers. The importance of packaging in the distribution of the product has increased with the spread of self-service purchases—in wholesaling as well as in retailing. Packaging is sometimes designed to facilitate the use of the product, as with aerosol containers for room deodorants. In Europe such condiments as mustard, mayonnaise, and ketchup are often packaged in tubes. Some packages are reusable, making them attractive to customers in poorer countries where metal containers, for instance, are often highly prized. Customers in wealthier countries may prefer packaging that can be recycled.
Marketing a service product The same general marketing approach about the product applies to the development of service offerings as well. For example, a health maintenance organization (HMO) must design a contract for its members that describes which medical procedures will be covered, how much physician choice will be available, how out-of-town medical costs will be handled, and so forth. In creating a successful service mix, the HMO must choose features that are preferred and expected by target customers, or the service will not be valued in the marketplace.
Price The second marketing-mix element is price. Ordinarily companies determine a price by gauging the quality or performance level of the offer and then selecting a price that reflects how the market values its level of quality. However, marketers also are aware that price can send a message to a customer about the product’s presumed quality level. A Mercedes-Benz vehicle is generally considered to be a high-quality automobile, and it therefore can command a high price in the marketplace. But, even if the manufacturer could price its cars competitively with economy cars, it might not do so, knowing that the lower price might communicate lower quality. On the other hand, in order to gain market share, some companies have moved to “more for the same” or “the same for less” pricing, which means offering prices that are consistently lower than those of their competitors. This kind of discount pricing has caused firms in such industries as airlines and pharmaceuticals (which used to charge a price premium based on their past brand strength and reputation) to significantly reevaluate their marketing strategies.
Place Place, or where the product is made available, is the third element of the marketing mix and is most commonly referred to as distribution. When a product moves along its path from producer to consumer, it is said to be following a channel of distribution. For example, the channel of distribution for many food products includes food-processing plants, warehouses, wholesalers, and supermarkets. By using this channel, a food manufacturer makes its products easily accessible by ensuring that they are in stores that are frequented by those in the target market. In another example, a mutual funds organization makes its investment products available by enlisting the assistance of brokerage houses and banks, which in turn establish relationships with particular customers. However, each channel participant can handle only a certain number of products: space at supermarkets is limited, and investment brokers can keep abreast of only a limited number of mutual funds. Because of this, some marketers may decide to skip steps in the channel and instead market directly to buyers through factory outlets, direct mail, and shopping via the Internet (a significant trend from the late 20th century).
Promotion Promotion, the fourth marketing-mix element, consists of several methods of communicating with and influencing customers. The major tools are sales force, advertising, sales promotion, and public relations.
Sales force Sales representatives are the most expensive means of promotion, because they require income, expenses, and supplementary benefits. Their ability to personalize the promotion process makes salespeople most effective at selling complex goods, big-ticket items, and highly personal goods—for example, those related to religion or insurance. Salespeople are trained to make presentations, answer objections, gain commitments to purchase, and manage account growth. Some companies have successfully reduced their sales-force costs by replacing certain functions (for example, finding new customers) with less expensive methods.
Advertising Advertising includes all forms of paid nonpersonal communication and promotion of products, services, or ideas by a specified sponsor. Advertising appears in such media as print (newspapers, magazines, billboards, flyers), broadcast (radio, television), and Internet, including e-mail and various Web sites. Print advertisements typically consist of a picture, a headline, information about the product, and occasionally a response coupon. Broadcast advertisements consist of an audio or video narrative that can range from short 15-second spots to longer segments known as infomercials, which generally last 30 or 60 minutes. E-mail advertisements are similar in content to print advertisements and contain hyperlinks to the retailer of the product or service. Advertisements on Web sites consist of static or moving pictures and words, sometimes presented in so-called pop-up windows, and brief videos, with or without an audio narrative, along with hyperlinks. A notorious form of advertising over the Internet is spam, consisting of unsolicited commercial messages sent to e-mail accounts, blogs, social networking sites, and cellular telephones.
Sales promotion While advertising presents a reason to buy a product, sales promotion offers a short-term incentive to purchase. Sales promotions often attract brand switchers (those who are not loyal to a specific brand) who are looking primarily for low price and good value. Thus, especially in markets where brands are highly similar, sales promotions can cause a short-term increase in sales but little permanent gain in market share. Alternatively, in markets where brands are quite dissimilar, sales promotions can alter market shares more permanently. The use of promotions rose considerably during the late 20th century. This was due to a number of factors within companies, including an increased sophistication in sales promotion techniques and greater pressure to increase sales. Several market factors also fostered this increase, including a rise in the number of brands (especially similar ones) and a decrease in the efficiency of traditional advertising due to increasingly fractionated consumer markets.
Public relations Public relations, in contrast to advertising and sales promotion, generally involves less commercialized modes of communication. Its primary purpose is to disseminate information and opinion to groups and individuals who have an actual or potential impact on a company’s ability to achieve its objectives. In addition, public relations specialists are responsible for monitoring these individuals and groups and for maintaining good relationships with them. One of their key activities is to work with news and information media to ensure appropriate coverage of the company’s activities and products. Public relations specialists create publicity by arranging press conferences, contests, meetings, and other events that will draw attention to a company’s products or services. Another public relations responsibility is crisis management—that is, handling situations in which public awareness of a particular issue may dramatically and negatively impact the company’s ability to achieve its goals. For example, when it was discovered that some bottles of Perrier sparkling water might have been tainted by a harmful chemical, Source Perrier, SA’s public relations team, had to ensure that the general consuming public did not thereafter automatically associate Perrier with tainted water. Other public relations activities include lobbying, advising management about public issues, and planning community events.
Because public relations does not always seek to impact sales or profitability directly, it is sometimes seen as serving a function that is separate from marketing. However, some companies recognize that public relations can work in conjunction with other marketing activities to facilitate the exchange process directly and indirectly. These organizations have established marketing public relations departments to directly support corporate and product promotion and image management.
Marketing implementation Companies have typically hired different agencies to help in the development of advertising, sales promotion, and publicity ideas. However, this often results in a lack of coordination between elements of the promotion mix. When components of the mix are not all in harmony, a confusing message may be sent to consumers. For example, a television advertisement for an automobile may emphasize the car’s exclusivity and luxury, while a Web-site advertisement may stress rebates and sales, clashing with this image of exclusivity. Alternatively, by integrating the marketing elements, a company can more efficiently utilize its resources. Instead of individually managing four or five different promotion processes, the company manages only one. In addition, promotion expenditures are likely to be better allocated, because differences among promotion tools become more explicit. This reasoning has led to integrated marketing communications, in which all promotional tools are considered to be part of the same effort, and each tool receives full consideration in terms of its cost and effectiveness.
Marketing evaluation and control No marketing process, even the most carefully developed, is guaranteed to result in maximum benefit for a company. In addition, because every market is changing constantly, a strategy that is effective today may not be effective in the future. It is important to evaluate a marketing program periodically to be sure that it is continuing to achieve its objectives.
Marketing control There are four types of marketing control, each of which has a different purpose: annual-plan control, profitability control, efficiency control, and strategic control.
Annual-plan control The basis of annual-plan control is managerial objectives—that is to say, specific goals, such as sales and profitability, that are established on a monthly or quarterly basis. Organizations use five tools to monitor plan performance. The first is sales analysis, in which sales goals are compared with actual sales and discrepancies are explained or accounted for. A second tool is market-share analysis, which compares a company’s sales with those of its competitors. Companies can express their market share in a number of ways, by comparing their own sales to total market sales, sales within the market segment, or sales of the segment’s top competitors. Third, marketing expense-to-sales analysis gauges how much a company spends to achieve its sales goals. The ratio of marketing expenses to sales is expected to fluctuate, and companies usually establish an acceptable range for this ratio. In contrast, financial analysis estimates such expenses (along with others) from a corporate perspective. This includes a comparison of profits to sales (profit margin), sales to assets (asset turnover), profits to assets (return on assets), assets to worth (financial leverage), and, finally, profits to worth (return on net worth). Finally, companies measure customer satisfaction as a means of tracking goal achievement. Analyses of this kind are generally less quantitative than those described above and may include complaint and suggestion systems, customer satisfaction surveys, and careful analysis of reasons why customers switch to a competitor’s product.
Profitability control Profitability control and efficiency control allow a company to closely monitor its sales, profits, and expenditures. Profitability control demonstrates the relative profit-earning capacity of a company’s different products and consumer groups. Companies are frequently surprised to find that a small percentage of their products and customers contribute to a large percentage of their profits. This knowledge helps a company allocate its resources and effort.
Efficiency control Efficiency control involves micro-level analysis of the various elements of the marketing mix, including sales force, advertising, sales promotion, and distribution. For example, to understand its sales-force efficiency, a company may keep track of how many sales calls a representative makes each day, how long each call lasts, and how much each call costs and generates in revenue. This type of analysis highlights areas in which companies can manage their marketing efforts in a more productive and cost-effective manner.
Strategic control Strategic control processes allow managers to evaluate a company’s marketing program from a critical long-term perspective. This involves a detailed and objective analysis of a company’s organization and its ability to maximize its strengths and market opportunities. Companies can use two types of strategic control tools. The first, which a company uses to evaluate itself, is called a marketing-effectiveness rating review. In order to rate its own marketing effectiveness, a company examines its customer philosophy, the adequacy of its marketing information, and the efficiency of its marketing operations. It will also closely evaluate the strength of its marketing strategy and the integration of its marketing tactics.