Promotion, the fourth element in the marketing mix, is the most difficult one to describe. It is all the communicative activities you use to ensure that customers know about your offerings, have a favorable impression of them, and actually make a transaction. Promotion represents all of the communications that a marketer may insert into the marketplace. These activities include advertising, catalogs, contests, public relations and personal selling. Within these categories we have TV, radio, and print ads, billboards, product placements in movies, sponsorship of public TV and radio channels, two-for-one dinner specials, customer loyalty programs, telemarketing, direct mail sales, and door-to-door solicitations. And on and on.
The many faces of promotion are too numerous to cover in a book of this size. Suffice it to say that, along with market research, promotion provides the critical communication link between your company and the customers you aim to serve.
Sunday, July 22, 2007
Price
Price is what a buyer must give up in exchange for your product or service. Pricing in a competitive environment is both critical and challenging. If you set the price too low, you'll increase unit sales at the expense of profits. If you set it too high, some of your customers will walk into the waiting arms of competitors. Price decisions include price point, list price, discounts, payment period, and so on.
In free and competitive markets, pricing is the linchpin of most transactions. When a customer who wants a product perceives that its value is worth the asking price, a transaction will take place, barring other choices. Thus, moving the price higher or lower regulates the quantity of units sold. This point has implications for the product life cycle. You can price much more aggressively when your product is perceived as new, unique, and without strong substitutes, but you must often reduce your price as substitutes and competitors appear in the maturity stage of the cycle.
Generally, your flexibility in pricing is a function of the uniqueness of your product or service. This is because customers have difficulty in assessing the value of more unique offerings, such as a custom-built guitar or a fully restored 1962 MG sports car.
Some sellers successfully maintain a high price by surrounding their very ordinary products with an aura of uniqueness, quality, or exoticism. This approach is commonplace in, for example, the cosmetics industry.
Wherever you price your product or service, that price is an important element of the marketing mix and will have an impact on your results. You can price for any of the following objectives: to increase unit sales, profits, or market share; to undermine a competitor; or to keep competitors from entering your turf. Successful companies design their new products with specific price targets in mind.
In free and competitive markets, pricing is the linchpin of most transactions. When a customer who wants a product perceives that its value is worth the asking price, a transaction will take place, barring other choices. Thus, moving the price higher or lower regulates the quantity of units sold. This point has implications for the product life cycle. You can price much more aggressively when your product is perceived as new, unique, and without strong substitutes, but you must often reduce your price as substitutes and competitors appear in the maturity stage of the cycle.
Generally, your flexibility in pricing is a function of the uniqueness of your product or service. This is because customers have difficulty in assessing the value of more unique offerings, such as a custom-built guitar or a fully restored 1962 MG sports car.
Some sellers successfully maintain a high price by surrounding their very ordinary products with an aura of uniqueness, quality, or exoticism. This approach is commonplace in, for example, the cosmetics industry.
Wherever you price your product or service, that price is an important element of the marketing mix and will have an impact on your results. You can price for any of the following objectives: to increase unit sales, profits, or market share; to undermine a competitor; or to keep competitors from entering your turf. Successful companies design their new products with specific price targets in mind.
Thursday, July 19, 2007
Place
Place refers to the point of sale and distribution of the product or service. Place represents the location where a product can be purchased. It is often referred to as the distribution channel. Place may be a retail store, a national distributor network, an e-commerce Web site, or a direct mail catalog.
Few companies use a single place for transacting business with customers. Many have market channels through which they meet customers; the more numerous and effective these channels are, the greater the opportunities to make sales.
Few companies use a single place for transacting business with customers. Many have market channels through which they meet customers; the more numerous and effective these channels are, the greater the opportunities to make sales.
Product
The product (or service) is the centerpiece of the marketing mix. Whether it's a life insurance policy, a washing machine, or a broadband Internet service, the product is the company's offer to customers. That offer includes physical aspects as well as the less tangible elements, such as warranties, option choices, and after-sales service. Thus, the product is the entire package you offer to customers.
You can differentiate products physically or through the services your company provides in support of the product. Products' physical distinctions include the following:
• Form. Size, shape, physical structure
• Features.
• Performance quality. The level at which the product's primary characteristics function
• Conformance quality. The degree to which all the units of the product perform equally
• Durability. The product's expected operating life under natural or stressful conditions
• Reliability. The probability that the product won't malfunction or fail
• Repairability. The ease with which the product can be fixed if it malfunctions
• Style. The product's look and feel
• Design. The way all the foregoing qualities work together (it's easy to use, looks nice, and lasts a long time)
You can also differentiate your product by service distinctions that set it apart. Service distinctions include the following:
• Ordering ease. How easy it is for customers to buy the product
• Delivery. How quickly and accurately the product is delivered
• Installation. How well the work is done to make the product usable in its intended location
• Customer training. Whether your company offers to train customers in using the product
• Customer consulting. Whether your company offers advice or research services to buyer.
• Maintenance and repair. How well your company helps customers keep the product in good working order.
The actual design of the product or service should be guided by a deep understanding of what customers need, want, and are willing to pay for, as determined by market understanding and research.
You can differentiate products physically or through the services your company provides in support of the product. Products' physical distinctions include the following:
• Form. Size, shape, physical structure
• Features.
• Performance quality. The level at which the product's primary characteristics function
• Conformance quality. The degree to which all the units of the product perform equally
• Durability. The product's expected operating life under natural or stressful conditions
• Reliability. The probability that the product won't malfunction or fail
• Repairability. The ease with which the product can be fixed if it malfunctions
• Style. The product's look and feel
• Design. The way all the foregoing qualities work together (it's easy to use, looks nice, and lasts a long time)
You can also differentiate your product by service distinctions that set it apart. Service distinctions include the following:
• Ordering ease. How easy it is for customers to buy the product
• Delivery. How quickly and accurately the product is delivered
• Installation. How well the work is done to make the product usable in its intended location
• Customer training. Whether your company offers to train customers in using the product
• Customer consulting. Whether your company offers advice or research services to buyer.
• Maintenance and repair. How well your company helps customers keep the product in good working order.
The actual design of the product or service should be guided by a deep understanding of what customers need, want, and are willing to pay for, as determined by market understanding and research.
Differentiation
Approaches to differentiation are limited only by the human imagination, but they generally take one of these form:
• Appealing design, for example, Braun kitchen products
• Superior performance, for example, the Apple PowerBook, Porsche, and Lexus automobiles
• Technical innovation, for example, hybrid-powered vehicles introduced by Toyota and Honda
• Reliability and durability, for example, Maytag appliances
• Convenience and ease of ordering, for example, Amazon.com
• Owner safety, for example, Volvo and Saab automobiles
A vendor can also differentiate itself through what many refer to as atmospherics: the physical or psychological environment in which business is conducted. This can be a powerful differentiator. Many people look for a satisfying environment in which to make their purchases, and they are willing to pay for it.
Branding
Branding is another approach to differentiation. One could make a case that branding is the culmination of efforts to differentiate product or service. By building a positive and familiar image for your offering, you have a better than even chance of becoming the buyer's first choice among many competitors.
A strong brand either will become the default choice when the customer goes to make a purchase, or--the next best outcome--it will get the product or service onto the short list of possible choices.
Brand-name products have an aura of quality or utility that rival products in the same category do not possess. That aura usually translates into premium prices over nonbranded rivals. Brand power also leads to higher unit sales, because customers don’t have to agonize over whether or not to buy them. As Patrick Barwise and Sean Meehan have written, "Familiar brands reduce risks in a reliable, affordable, convenient way." A recognizable brand acts as an imprimatur of reliability, making the consumer's choice easy. People mostly don’t have time or energy to compare and consider other products when they are shopping. When people find something that works for them, they tend to stay with it. So they reflexively add products to their carts based on brands that they already have in mind.
The power of some categories of consumer packaged-goods brands may be diminishing, however, as customers come to understand that the aura of superiority may be nothing more than a curtain of advertising, and that nonbranded products may deliver the same utility at significantly lower cost. This understanding is gaining ground as supermarkets and drugstores place their lower-cost-generic products side-by-side with more expensive brands.
Differentiation That Matters
Differentiation matters only to the extent that customers value the difference. If the targeted customers truly value the difference that sets your product or service apart, they will either (1) select yours over others (2) be willing to pay a premium for what you offer, or (3) act on some combination of 1 and 2. Experience and market research are the best way to determine whether your difference is valued by customers.
There is growing evidence, however that many physical products fail to differentiate themselves in ways that customers really value. Company marketers and product developers sometimes add bells and whistles to new and enhanced product versions without giving much thought about whether customers care about or are willing to pay for them.
Do consumers want the many capabilities built into their DVD players, VHS machines, digital cameras, and office software suites? Engineers love these things and dedicate enormous effort to making them part of their products. This explains why every new version of Microsoft Word and Excel gets bigger and more complex, even though 90 percent of users probably use only a small fraction of these capabilities.
According to Patrick Barwise and Sean Meehan, being the best at what matters to customers produces a winner, and in many cases being the best is achieved when a product or service performs as it should, is easy to buy and operate, and is backed by excellent service.
They argue that most companies have taken differentiation so far that they have left their customer behind. The emphasis on being different is probably driven by ad people, who desperately need something different to talk about so as to cut through the smog of contemporary media. In advertising today, you must say something very different to be noticed. According to them, many customers don’t want bells and whistles and other differentiators as much as they want quality products, reliable service, on-time-delivery, and fair value for their money.
To be more succeed, then you have to be different.
• Appealing design, for example, Braun kitchen products
• Superior performance, for example, the Apple PowerBook, Porsche, and Lexus automobiles
• Technical innovation, for example, hybrid-powered vehicles introduced by Toyota and Honda
• Reliability and durability, for example, Maytag appliances
• Convenience and ease of ordering, for example, Amazon.com
• Owner safety, for example, Volvo and Saab automobiles
A vendor can also differentiate itself through what many refer to as atmospherics: the physical or psychological environment in which business is conducted. This can be a powerful differentiator. Many people look for a satisfying environment in which to make their purchases, and they are willing to pay for it.
Branding
Branding is another approach to differentiation. One could make a case that branding is the culmination of efforts to differentiate product or service. By building a positive and familiar image for your offering, you have a better than even chance of becoming the buyer's first choice among many competitors.
A strong brand either will become the default choice when the customer goes to make a purchase, or--the next best outcome--it will get the product or service onto the short list of possible choices.
Brand-name products have an aura of quality or utility that rival products in the same category do not possess. That aura usually translates into premium prices over nonbranded rivals. Brand power also leads to higher unit sales, because customers don’t have to agonize over whether or not to buy them. As Patrick Barwise and Sean Meehan have written, "Familiar brands reduce risks in a reliable, affordable, convenient way." A recognizable brand acts as an imprimatur of reliability, making the consumer's choice easy. People mostly don’t have time or energy to compare and consider other products when they are shopping. When people find something that works for them, they tend to stay with it. So they reflexively add products to their carts based on brands that they already have in mind.
The power of some categories of consumer packaged-goods brands may be diminishing, however, as customers come to understand that the aura of superiority may be nothing more than a curtain of advertising, and that nonbranded products may deliver the same utility at significantly lower cost. This understanding is gaining ground as supermarkets and drugstores place their lower-cost-generic products side-by-side with more expensive brands.
Differentiation That Matters
Differentiation matters only to the extent that customers value the difference. If the targeted customers truly value the difference that sets your product or service apart, they will either (1) select yours over others (2) be willing to pay a premium for what you offer, or (3) act on some combination of 1 and 2. Experience and market research are the best way to determine whether your difference is valued by customers.
There is growing evidence, however that many physical products fail to differentiate themselves in ways that customers really value. Company marketers and product developers sometimes add bells and whistles to new and enhanced product versions without giving much thought about whether customers care about or are willing to pay for them.
Do consumers want the many capabilities built into their DVD players, VHS machines, digital cameras, and office software suites? Engineers love these things and dedicate enormous effort to making them part of their products. This explains why every new version of Microsoft Word and Excel gets bigger and more complex, even though 90 percent of users probably use only a small fraction of these capabilities.
According to Patrick Barwise and Sean Meehan, being the best at what matters to customers produces a winner, and in many cases being the best is achieved when a product or service performs as it should, is easy to buy and operate, and is backed by excellent service.
They argue that most companies have taken differentiation so far that they have left their customer behind. The emphasis on being different is probably driven by ad people, who desperately need something different to talk about so as to cut through the smog of contemporary media. In advertising today, you must say something very different to be noticed. According to them, many customers don’t want bells and whistles and other differentiators as much as they want quality products, reliable service, on-time-delivery, and fair value for their money.
To be more succeed, then you have to be different.
Tuesday, July 17, 2007
Integrated Marketing Communication (IMC)
Managers have always had to face the challenge of creating awareness among targeted customers and bringing them to the point of interest and confidence when they will reach for their wallets and make a purchase. Over the years various forms of marketing communications have been used for this purpose: media advertising, personal selling, direct mail, and so forth. Web marketing is a recent addition to this communications mix.
With people receiving so many messages from so many sources, managers face a new challenge: producing a consistent brand message at each customer touch point. The answer to this challenge is a strategic process generally known as integrated marketing communications (IMC).
The American Marketing Association suggests that IMC is “a planning process designed to assure that all brand contacts received by a customer or prospect for a product, service, or organization are relevant to that person and consistent over time.” This concept includes many online and offline marketing channels. Online marketing channels include any e-marketing campaigns or programs, from search engine optimization (SEO), pay-per-click, affiliate, email, banner to latest web related channels for webinar, blog, RSS, podcast, and Internet TV. Offline marketing channels are traditional print (newspaper, magazine), mail order, public relation, billboard, radio, and television.
IMC's goal is to use multiple modes of communication to foster awareness of a company's products or services, inform people about features and benefits, and move them to make a purchase. Those multiple modes must be consistent and complementary.
The Goal of Marketing Communications
The ultimate goal of marketing communications is to influence someone to make a purchase. But like most goals, it is attainable only through a number of process steps. Consider these:
1. Create awareness. People will not buy a product or service that they are not aware of. Consequently, companies go to great lengths to create awareness.
2. Provide knowledge. This step involves providing information about product or service features. What is the product? What does it do?
3. Create a favorable impression. People don't buy features; instead, they buy benefits--things that will make their lives better, solve a nagging problem, or save them money.
4. Attain a preferred position in the customer's mind. Deliver the clear objective to the customer to get the strategic position in customer's mind. Make the customer realizes about the benefits that other companies don't give.
5. Create a purchase intention. If the marketer has done a good job of addressing earlier steps in the process, the customer will resolve to make a purchase.
6. Make the sale. If all the other steps have been completed, the prospect will become a customer. The cash register will ring.
Those are the steps that typically lead to a purchase. An alternative is to use market research to classify targeted customers in the following order: (1) is unaware of our product; (2) is aware of the product but considers it similar to others being considered; (3) is favorably disposed to our product; (4) would select our product if the purchase were made today; and (5) buys our product.
Communications Vehicles
A marketer with a generous budget has access to an arsenal of communication options: electronic media (TV and radio), print media (newspapers and magazines), direct mail solicitations, telemarketing, personal selling, and the Web. Even public relations is a means of communicating with current and potential customers.
Conceptually, the vehicles of marketing communications can be categorized in two dimensions. The first dimension relates to targeting and customization, which can be divided into two parts. The first part is communications that address an individual prospect whose needs and interests already known by the company (targeted communication). Another part is mass communications (scattered communication), as in a TV commercial that runs on network TV during the final game of the World Series. That ad will be watched by millions of people--an undifferentiated cross section of society. As a practical matter, the commercial cannot be targeted to individual viewers or customized in any way.
The next dimension is divided into one-way and two-way communication, with an intermediate section. A TV commercial is strictly a one-way message; it can create awareness, and it may impart information about the features and benefits of the product, but not much else. The salesperson's visit with the purchasing manager, in contrast, is a two-way conversation in which the salesperson can describe his wares and the buyer can describe her particular needs and her reservations about pricing or terms, and can ask for specific information. The salesperson and the buyer can negotiate and perhaps conclude with a transaction. This two-way communication is effective in moving the buyer along the final steps of the purchasing process.
In choosing communication vehicles, it is necessary if company considers where potential customers are in the purchasing process, then use the most highly targeted vehicles that company can do.
Where Public Relations Fits In?
Public relations (PR) is a form of communication that aims to increase public awareness and understanding of, and to promote a favorable opinion of, a company, its products, and its services. PR tools include press releases, speeches by executives, and public service activities. Unlike other forms of communication, PR operates through unpaid channels. Consequently, company has no control over how their PR efforts will play out.
The primary virtue of PR in marketing communications is casting the company in a favorable light among the general public. Some of that aura can be expected to adhere to the company's products and services.
Formulating the Integrated Marketing Communications Program
According to Harvard Business School Press Article, there are several aspects that need to be concerned in planning the communications program, usually called the Six M's model:
1. Market. To whom is your communication addressed?
2. Mission. What is your objective in communicating?
3. Message. What specific points must be communicated?
4. Media. Which communication vehicles should you use to get the message across?
5. Money. How much will be budgeted for the effort?
6. Measurement. How will you assess the impact of your communication?
The Management Challenge
Marketing managers have an important two-part challenge with respect to IMC: (1) finding the best way to allocate financial resources in support of their brands, and (2) coordinating their spending so that all customer touch points are getting consistent messages.
Because channels of distribution and customer communication are so many and so varied nowadays, managers must optimize resource allocation among all the activities that touch customers: packaging, point-of-sale display and promotion, Web-based selling, and ad agency work. They may find themselves pulled in different directions by the advice of brand consultants, direct marketing agencies, e-commerce advisers, and after-sales support. Managers must also ensure that each of these activities represents the product to customers in a consistent manner. To put yourself in the customer's shoes is a practical way to avoid inconsistency.
There are also other challenges that can come up in implementing IMC:
1. Roles of Individual Media
This goal may appear simple but, for companies with different teams of people working on each element of the campaign, it can be a challenge to create effective advertising for all media using the same images and messages. Tactically, most marketers think the goal of each medium is different. For example, television ads are generally used for awareness generation, print to educate, and outdoor and radio to keep the message top-of-mind. In reality, the goal of all advertising, including packaging, is to sell. (Young, 2006)
2. Identifying Best Marketing Elements
The biggest difficulty IMC marketers face is summed up by Chuck Young of Ameritest, “Even though the different elements in a campaign are designed to work together, that does not mean that all the creative executions will work equally well.” This obstacle can be overcome by using advertising to identify the images and messages that will work best across media platforms. Marketers cannot compare a banner ad’s click-through rate to a print ad’s eye-tracking data to a TV commercial’s branded attention score. Therefore, it is important the ad research system provides performance metrics that make it easy for ad managers to make comparisons across media platforms. (Young, 2006)
With people receiving so many messages from so many sources, managers face a new challenge: producing a consistent brand message at each customer touch point. The answer to this challenge is a strategic process generally known as integrated marketing communications (IMC).
The American Marketing Association suggests that IMC is “a planning process designed to assure that all brand contacts received by a customer or prospect for a product, service, or organization are relevant to that person and consistent over time.” This concept includes many online and offline marketing channels. Online marketing channels include any e-marketing campaigns or programs, from search engine optimization (SEO), pay-per-click, affiliate, email, banner to latest web related channels for webinar, blog, RSS, podcast, and Internet TV. Offline marketing channels are traditional print (newspaper, magazine), mail order, public relation, billboard, radio, and television.
IMC's goal is to use multiple modes of communication to foster awareness of a company's products or services, inform people about features and benefits, and move them to make a purchase. Those multiple modes must be consistent and complementary.
The Goal of Marketing Communications
The ultimate goal of marketing communications is to influence someone to make a purchase. But like most goals, it is attainable only through a number of process steps. Consider these:
1. Create awareness. People will not buy a product or service that they are not aware of. Consequently, companies go to great lengths to create awareness.
2. Provide knowledge. This step involves providing information about product or service features. What is the product? What does it do?
3. Create a favorable impression. People don't buy features; instead, they buy benefits--things that will make their lives better, solve a nagging problem, or save them money.
4. Attain a preferred position in the customer's mind. Deliver the clear objective to the customer to get the strategic position in customer's mind. Make the customer realizes about the benefits that other companies don't give.
5. Create a purchase intention. If the marketer has done a good job of addressing earlier steps in the process, the customer will resolve to make a purchase.
6. Make the sale. If all the other steps have been completed, the prospect will become a customer. The cash register will ring.
Those are the steps that typically lead to a purchase. An alternative is to use market research to classify targeted customers in the following order: (1) is unaware of our product; (2) is aware of the product but considers it similar to others being considered; (3) is favorably disposed to our product; (4) would select our product if the purchase were made today; and (5) buys our product.
Communications Vehicles
A marketer with a generous budget has access to an arsenal of communication options: electronic media (TV and radio), print media (newspapers and magazines), direct mail solicitations, telemarketing, personal selling, and the Web. Even public relations is a means of communicating with current and potential customers.
Conceptually, the vehicles of marketing communications can be categorized in two dimensions. The first dimension relates to targeting and customization, which can be divided into two parts. The first part is communications that address an individual prospect whose needs and interests already known by the company (targeted communication). Another part is mass communications (scattered communication), as in a TV commercial that runs on network TV during the final game of the World Series. That ad will be watched by millions of people--an undifferentiated cross section of society. As a practical matter, the commercial cannot be targeted to individual viewers or customized in any way.
The next dimension is divided into one-way and two-way communication, with an intermediate section. A TV commercial is strictly a one-way message; it can create awareness, and it may impart information about the features and benefits of the product, but not much else. The salesperson's visit with the purchasing manager, in contrast, is a two-way conversation in which the salesperson can describe his wares and the buyer can describe her particular needs and her reservations about pricing or terms, and can ask for specific information. The salesperson and the buyer can negotiate and perhaps conclude with a transaction. This two-way communication is effective in moving the buyer along the final steps of the purchasing process.
In choosing communication vehicles, it is necessary if company considers where potential customers are in the purchasing process, then use the most highly targeted vehicles that company can do.
Where Public Relations Fits In?
Public relations (PR) is a form of communication that aims to increase public awareness and understanding of, and to promote a favorable opinion of, a company, its products, and its services. PR tools include press releases, speeches by executives, and public service activities. Unlike other forms of communication, PR operates through unpaid channels. Consequently, company has no control over how their PR efforts will play out.
The primary virtue of PR in marketing communications is casting the company in a favorable light among the general public. Some of that aura can be expected to adhere to the company's products and services.
Formulating the Integrated Marketing Communications Program
According to Harvard Business School Press Article, there are several aspects that need to be concerned in planning the communications program, usually called the Six M's model:
1. Market. To whom is your communication addressed?
2. Mission. What is your objective in communicating?
3. Message. What specific points must be communicated?
4. Media. Which communication vehicles should you use to get the message across?
5. Money. How much will be budgeted for the effort?
6. Measurement. How will you assess the impact of your communication?
The Management Challenge
Marketing managers have an important two-part challenge with respect to IMC: (1) finding the best way to allocate financial resources in support of their brands, and (2) coordinating their spending so that all customer touch points are getting consistent messages.
Because channels of distribution and customer communication are so many and so varied nowadays, managers must optimize resource allocation among all the activities that touch customers: packaging, point-of-sale display and promotion, Web-based selling, and ad agency work. They may find themselves pulled in different directions by the advice of brand consultants, direct marketing agencies, e-commerce advisers, and after-sales support. Managers must also ensure that each of these activities represents the product to customers in a consistent manner. To put yourself in the customer's shoes is a practical way to avoid inconsistency.
There are also other challenges that can come up in implementing IMC:
1. Roles of Individual Media
This goal may appear simple but, for companies with different teams of people working on each element of the campaign, it can be a challenge to create effective advertising for all media using the same images and messages. Tactically, most marketers think the goal of each medium is different. For example, television ads are generally used for awareness generation, print to educate, and outdoor and radio to keep the message top-of-mind. In reality, the goal of all advertising, including packaging, is to sell. (Young, 2006)
2. Identifying Best Marketing Elements
The biggest difficulty IMC marketers face is summed up by Chuck Young of Ameritest, “Even though the different elements in a campaign are designed to work together, that does not mean that all the creative executions will work equally well.” This obstacle can be overcome by using advertising to identify the images and messages that will work best across media platforms. Marketers cannot compare a banner ad’s click-through rate to a print ad’s eye-tracking data to a TV commercial’s branded attention score. Therefore, it is important the ad research system provides performance metrics that make it easy for ad managers to make comparisons across media platforms. (Young, 2006)
Sunday, June 17, 2007
Marketing Strategy
Marketing strategy is a process that can allow an organization to concentrate its (always limited) resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage.
Marketing strategy as a Key Part of the General Corporate Strategy
Marketing strategy is most effective when it is an integral component of corporate strategy, defining how the organization will engage customers, prospects and the competition in the market arena for success.
A marketing strategy also serves as the foundation of a marketing plan. A marketing plan contains a set of specific actions required to successfully implement a marketing strategy. For example: "Use a low cost product to attract consumers. Once our organization, via our low cost product, has established a relationship with consumers, our organization will sell additional, higher-margin products and services that enhance the consumer's interaction with the low-cost product or service."
A strategy consist of well thought out series of tactics. (While it is possible to write a tactical marketing plan without a sound, well-considered strategy, it is not recommended.) Without a sound marketing strategy, a marketing plan has no foundation. Marketing strategies serve as the fundamental underpinning of marketing plans designed to reach marketing objectives. It is important that these objectives have measurable results.
A good marketing strategy should integrate an organization's marketing goals, policies, and action sequences (tactics) into a cohesive whole. Many companies cascade a strategy throughout an organization, by creating strategy tactics that then become strategy goals for the next level or group. Each group is expected to take that strategy goal and develop a set of tactics to achieve that goal. This is why it is important to make each strategy goal measurable.
Marketing strategies are partially derived from broader corporate strategies, corporate missions, and corporate goals. They should flow from the firm's mission statement. They are also influenced by a range of microenvironmental factors.
Marketing strategies are dynamic and interactive. They are partially planned and partially unplanned.
Types of Marketing Strategies
Every marketing strategy is unique, but if we abstract from the individualizing details, each can be reduced into a generic marketing strategy. There are a number of ways of categorizing these generic strategies. A brief description of the most common categorizing schemes is presented below:
- Strategies based on market dominance - In this scheme, firms are classified based on their market share or dominance of an industry. Typically there are three types of market dominance strategies:
1. Leader
2. Challenger
3. Follower
- Porter generic strategies - strategy on the dimensions of strategic scope and strategic strength. Strategic scope refers to the market penetration while strategic strength refers to the firm’s sustainable competitive advantage.
1. Cost leadership
2. Product differentiation
3. Market segmentation
- Innovation strategies - This deals with the firm's rate of the new product development and business model innovation. It asks whether the company is on the cutting edge of technology and business innovation. There are three types:
1. Pioneers
2. Close followers
3. Late followers
- Growth strategies - In this scheme we ask the question, “How should the firm grow?”. There are a number of different ways of answering that question, but the most common gives four answers:
1. Horizontal integration
2. Vertical integration
3. Diversification (strategy)Diversification
4. Intensification
A more detailed schemes uses the categories:
1. Prospector
2. Analyzer
3. Defender
4. Reactor
- Marketing warfare strategies - Warfare based strategies - This scheme draws parallels between marketing strategies and military strategies.
Strategic Marketing Models
Marketing participants often employ strategic models and tools to analyze marketing decisions. When beginning a strategic analysis, the 3C's can be employed to get a broad understanding of the strategic environment. An Ansoff Matrix is also often used to convey an organization's strategic positioning of their marketing mix. The 4P's can then be utilized to form a marketing plan to pursue a defined strategy.
Marketing Practice
In practice, as opposed to theory, research has indicated that the outstanding problems facing marketers lie in the use of specific functions. Most senior managements have committed to the philosophy, even though their junior managers may be cynical about the degree of that commitment. Unfortunately, there is little evidence to show that this new-found belief has led to positive action. Indeed, if we look at the marketing activities they do subscribe to, using the 4Ps framework say, there is little evidence that marketing practice (as opposed to the theory) has been widely embraced. In particular, pricing is largely on a cost-plus or competitive basis, promotional budgets are small (and spent more on sales promotion than advertising or PR), 'place' is - in any case - not relevant, and marketing research is almost all second-hand.
Coarse Marketing
The marketer, in real life, does not face each decision with a copy of a text-book in his or her hand - ready to work through the various lessons. The marketer starts with a quite specific environment; which will immediately limit the range of factors to be explored to a small subset of the literally hundreds explored in this book. To the perceptive marketer the range of options to be explored will usually be obvious. Beyond this, the position will be further constrained by the resources available to deal with them. For instance, theory always says that the first step is marketing research, but if your competitor has just made a major change in strategy you may have just days to react - where research may take months.
Real-life marketing primarily revolves around the application of a great deal of common-sense; dealing with a limited number of factors, in an environment of imperfect information and limited resources complicated by uncertainty and tight timescales. Use of classical marketing techniques, in these circumstances, is inevitably partial and uneven.
Thus, for example, new products will emerge from irrational processes and the rational development process may be used (if at all) to screen out the worst non-runners. The design of the advertising, and the packaging, will be the output of the creative minds employed; which management will then screen, often by 'gut-reaction', to ensure that it is reasonable.
Indeed, the most successful marketer is often the one who trains his or her 'gut-reaction' to simulate that of the average customer!
For most of his or her time the marketing manager is likely to be using his or her considerable intelligence to analyze and handle the complex, and unique, situations being faced; without easy reference to theory. This will often be 'flying by the seat of the pants', or 'gut-reaction'; where the overall strategy, coupled with the knowledge of the customer which has been absorbed almost by a process of osmosis, will determine the quality of the marketing employed!
This, almost instinctive management, is what is sometimes called 'coarse marketing'; to distinguish it from the refined, aesthetically pleasing, form favored by the theorists. It is often relatively crude and would, if given in answer to a business school examination, be judged a failure of marketing. On the other hand, it is the real-life world of most marketing!
Marketing strategy as a Key Part of the General Corporate Strategy
Marketing strategy is most effective when it is an integral component of corporate strategy, defining how the organization will engage customers, prospects and the competition in the market arena for success.
A marketing strategy also serves as the foundation of a marketing plan. A marketing plan contains a set of specific actions required to successfully implement a marketing strategy. For example: "Use a low cost product to attract consumers. Once our organization, via our low cost product, has established a relationship with consumers, our organization will sell additional, higher-margin products and services that enhance the consumer's interaction with the low-cost product or service."
A strategy consist of well thought out series of tactics. (While it is possible to write a tactical marketing plan without a sound, well-considered strategy, it is not recommended.) Without a sound marketing strategy, a marketing plan has no foundation. Marketing strategies serve as the fundamental underpinning of marketing plans designed to reach marketing objectives. It is important that these objectives have measurable results.
A good marketing strategy should integrate an organization's marketing goals, policies, and action sequences (tactics) into a cohesive whole. Many companies cascade a strategy throughout an organization, by creating strategy tactics that then become strategy goals for the next level or group. Each group is expected to take that strategy goal and develop a set of tactics to achieve that goal. This is why it is important to make each strategy goal measurable.
Marketing strategies are partially derived from broader corporate strategies, corporate missions, and corporate goals. They should flow from the firm's mission statement. They are also influenced by a range of microenvironmental factors.
Marketing strategies are dynamic and interactive. They are partially planned and partially unplanned.
Types of Marketing Strategies
Every marketing strategy is unique, but if we abstract from the individualizing details, each can be reduced into a generic marketing strategy. There are a number of ways of categorizing these generic strategies. A brief description of the most common categorizing schemes is presented below:
- Strategies based on market dominance - In this scheme, firms are classified based on their market share or dominance of an industry. Typically there are three types of market dominance strategies:
1. Leader
2. Challenger
3. Follower
- Porter generic strategies - strategy on the dimensions of strategic scope and strategic strength. Strategic scope refers to the market penetration while strategic strength refers to the firm’s sustainable competitive advantage.
1. Cost leadership
2. Product differentiation
3. Market segmentation
- Innovation strategies - This deals with the firm's rate of the new product development and business model innovation. It asks whether the company is on the cutting edge of technology and business innovation. There are three types:
1. Pioneers
2. Close followers
3. Late followers
- Growth strategies - In this scheme we ask the question, “How should the firm grow?”. There are a number of different ways of answering that question, but the most common gives four answers:
1. Horizontal integration
2. Vertical integration
3. Diversification (strategy)Diversification
4. Intensification
A more detailed schemes uses the categories:
1. Prospector
2. Analyzer
3. Defender
4. Reactor
- Marketing warfare strategies - Warfare based strategies - This scheme draws parallels between marketing strategies and military strategies.
Strategic Marketing Models
Marketing participants often employ strategic models and tools to analyze marketing decisions. When beginning a strategic analysis, the 3C's can be employed to get a broad understanding of the strategic environment. An Ansoff Matrix is also often used to convey an organization's strategic positioning of their marketing mix. The 4P's can then be utilized to form a marketing plan to pursue a defined strategy.
Marketing Practice
In practice, as opposed to theory, research has indicated that the outstanding problems facing marketers lie in the use of specific functions. Most senior managements have committed to the philosophy, even though their junior managers may be cynical about the degree of that commitment. Unfortunately, there is little evidence to show that this new-found belief has led to positive action. Indeed, if we look at the marketing activities they do subscribe to, using the 4Ps framework say, there is little evidence that marketing practice (as opposed to the theory) has been widely embraced. In particular, pricing is largely on a cost-plus or competitive basis, promotional budgets are small (and spent more on sales promotion than advertising or PR), 'place' is - in any case - not relevant, and marketing research is almost all second-hand.
Coarse Marketing
The marketer, in real life, does not face each decision with a copy of a text-book in his or her hand - ready to work through the various lessons. The marketer starts with a quite specific environment; which will immediately limit the range of factors to be explored to a small subset of the literally hundreds explored in this book. To the perceptive marketer the range of options to be explored will usually be obvious. Beyond this, the position will be further constrained by the resources available to deal with them. For instance, theory always says that the first step is marketing research, but if your competitor has just made a major change in strategy you may have just days to react - where research may take months.
Real-life marketing primarily revolves around the application of a great deal of common-sense; dealing with a limited number of factors, in an environment of imperfect information and limited resources complicated by uncertainty and tight timescales. Use of classical marketing techniques, in these circumstances, is inevitably partial and uneven.
Thus, for example, new products will emerge from irrational processes and the rational development process may be used (if at all) to screen out the worst non-runners. The design of the advertising, and the packaging, will be the output of the creative minds employed; which management will then screen, often by 'gut-reaction', to ensure that it is reasonable.
Indeed, the most successful marketer is often the one who trains his or her 'gut-reaction' to simulate that of the average customer!
For most of his or her time the marketing manager is likely to be using his or her considerable intelligence to analyze and handle the complex, and unique, situations being faced; without easy reference to theory. This will often be 'flying by the seat of the pants', or 'gut-reaction'; where the overall strategy, coupled with the knowledge of the customer which has been absorbed almost by a process of osmosis, will determine the quality of the marketing employed!
This, almost instinctive management, is what is sometimes called 'coarse marketing'; to distinguish it from the refined, aesthetically pleasing, form favored by the theorists. It is often relatively crude and would, if given in answer to a business school examination, be judged a failure of marketing. On the other hand, it is the real-life world of most marketing!
Marketing Plan
Marketing plan is a written document that details the actions necessary to achieve a specified marketing objective(s). A marketing plan lays out a campaign that aims to fulfill a company's market strategy. At the business unit or product level, the plan aims to transform a product or service concept into a successful offering that meets the needs of target customers and fulfills the company's expectations for sales, market share, and so forth. The plan states exactly what the company will do in launching new products and supporting older ones. It indicates the timing of sales and promotional activities, pricing intentions, and distribution efforts. How the plan will be controlled and the results measured are also part of the plan. Plans are contained in binders and are treated with confidentiality lest competitors use their details to deploy counter efforts. It can be for a product or service, a brand, or a product line. It can cover one year (referred to as an annual marketing plan), or cover up to 5 (sometimes referred to as five) years.
A marketing plan may be part of an overall business plan. Solid marketing strategy is the foundation of a well-written marketing plan. While a marketing plan contains a list of actions, a marketing plan without a sound strategic foundation is of little use.
A formal, written marketing plan is essential; in that it provides an unambiguous reference point for activities throughout the planning period. However, perhaps the most important benefit of these plans is the planning process itself. This typically offers a unique opportunity, a forum, for `information-rich' and productively focused discussions between the various managers involved. The plan, together with the associated discussions, then provides an agreed context for their subsequent management activities, even for those not described in the plan itself.
Most plans include the following (for the company or for a product line):
• An executive summary.
• A table of contents.
• A summary of the current situation. This contains all relevant data, including SWOT analysis (analysis of strengths, weaknesses, opportunities, and competitive threats).
• A focused assessment of the market opportunity. This includes a statement of target market segments, a customer and needs assessment, and the competitive challenges faced by the company and its products (or particular product line).
• Financial and marketing goals. Financial goals are usually expressed as incremental revenue improvements, and expected profits at the end of the planning period. Marketing goals are expressed as unit sales or market share.
• A summary of the company's marketing strategy. This summary identifies the target market and indicates how the product or product line will be positioned, distributed, and priced. It also enumerates the specific actions that will be taken to achieve the stated goals. Those actions may include reorganization of the sales force, the use of customer rebates, a national ad campaign, direct mail programs, and so forth.
• A month-to-month marketing budget.
• Forecast month-to-month unit sales and revenues.
• A plan for monitoring and evaluating action plans in progress and at the end of the plan period.
The marketing plan begins with customer targeting. After the target customer segments have been identified, the plan addresses them through the marketing mix. The marketing mix--also called the four P's of marketing--includes product, place, price, and promotion.
Measurement of Progress
The final stage of any marketing planning process is to establish targets (or standards) so that progress can be monitored. Accordingly, it is important to put both quantities and timescales into the marketing objectives (for example, to capture 20 per cent by value of the market within two years) and into the corresponding strategies.
Changes in the environment mean that the forecasts often have to be changed. Along with these, the related plans may well also need to be changed. Continuous monitoring of performance, against predetermined targets, represents a most important aspect of this. However, perhaps even more important is the enforced discipline of a regular formal review. Again, as with forecasts, in many cases the best (most realistic) planning cycle will revolve around a quarterly review. Best of all, at least in terms of the quantifiable aspects of the plans, if not the wealth of backing detail, is probably a quarterly rolling review - planning one full year ahead each new quarter. Of course, this does absorb more planning resource; but it also ensures that the plans embody the latest information, and - with attention focused on them so regularly - forces both the plans and their implementation to be realistic.
Plans only have validity if they are actually used to control the progress of a company: their success lies in their implementation, not in the writing'.
Even when companies are prepared with a cohesive plan, adequate resources, and all the right skills, there are still several unexpected events that companies will face during implementation of marketing plan. This happens because business, like life, rarely plays out according to plan. Here are a few examples of the many surprises that companies may experience according to Harvard Business School Press:
• Customer demand is lower than what your market research led you to believe.
• Consumers use your product in ways you never intended.
• The cost of an ad campaign is higher than you estimated.
Constant monitoring and control of the firm's marketing activities can help company responds effectively to these kinds of unexpected events. And below are the examples of how to control the marketing plan according to HBS Press:
• Annual plan. This type of control aims to assess whether planned results have been achieved. Company can analyze sales, market share, marketing expense-to-sales ratio to control their marketing plan.
• Profitability. To see where the company is making and losing money by measuring profitability by product, territory, customer, segment, channel, order size; or measuring ROI.
• Efficiency. To improve the spending and impact of marketing dollars, for example by measuring efficiency of sales force, advertisements, sales promotions, and distributions.
• Strategy. To ask whether the company is pursuing the best market, product, and channel opportunities by reviewing marketing effectiveness and company's social and ethical responsibilities.
A marketing plan may be part of an overall business plan. Solid marketing strategy is the foundation of a well-written marketing plan. While a marketing plan contains a list of actions, a marketing plan without a sound strategic foundation is of little use.
A formal, written marketing plan is essential; in that it provides an unambiguous reference point for activities throughout the planning period. However, perhaps the most important benefit of these plans is the planning process itself. This typically offers a unique opportunity, a forum, for `information-rich' and productively focused discussions between the various managers involved. The plan, together with the associated discussions, then provides an agreed context for their subsequent management activities, even for those not described in the plan itself.
Most plans include the following (for the company or for a product line):
• An executive summary.
• A table of contents.
• A summary of the current situation. This contains all relevant data, including SWOT analysis (analysis of strengths, weaknesses, opportunities, and competitive threats).
• A focused assessment of the market opportunity. This includes a statement of target market segments, a customer and needs assessment, and the competitive challenges faced by the company and its products (or particular product line).
• Financial and marketing goals. Financial goals are usually expressed as incremental revenue improvements, and expected profits at the end of the planning period. Marketing goals are expressed as unit sales or market share.
• A summary of the company's marketing strategy. This summary identifies the target market and indicates how the product or product line will be positioned, distributed, and priced. It also enumerates the specific actions that will be taken to achieve the stated goals. Those actions may include reorganization of the sales force, the use of customer rebates, a national ad campaign, direct mail programs, and so forth.
• A month-to-month marketing budget.
• Forecast month-to-month unit sales and revenues.
• A plan for monitoring and evaluating action plans in progress and at the end of the plan period.
The marketing plan begins with customer targeting. After the target customer segments have been identified, the plan addresses them through the marketing mix. The marketing mix--also called the four P's of marketing--includes product, place, price, and promotion.
Measurement of Progress
The final stage of any marketing planning process is to establish targets (or standards) so that progress can be monitored. Accordingly, it is important to put both quantities and timescales into the marketing objectives (for example, to capture 20 per cent by value of the market within two years) and into the corresponding strategies.
Changes in the environment mean that the forecasts often have to be changed. Along with these, the related plans may well also need to be changed. Continuous monitoring of performance, against predetermined targets, represents a most important aspect of this. However, perhaps even more important is the enforced discipline of a regular formal review. Again, as with forecasts, in many cases the best (most realistic) planning cycle will revolve around a quarterly review. Best of all, at least in terms of the quantifiable aspects of the plans, if not the wealth of backing detail, is probably a quarterly rolling review - planning one full year ahead each new quarter. Of course, this does absorb more planning resource; but it also ensures that the plans embody the latest information, and - with attention focused on them so regularly - forces both the plans and their implementation to be realistic.
Plans only have validity if they are actually used to control the progress of a company: their success lies in their implementation, not in the writing'.
Even when companies are prepared with a cohesive plan, adequate resources, and all the right skills, there are still several unexpected events that companies will face during implementation of marketing plan. This happens because business, like life, rarely plays out according to plan. Here are a few examples of the many surprises that companies may experience according to Harvard Business School Press:
• Customer demand is lower than what your market research led you to believe.
• Consumers use your product in ways you never intended.
• The cost of an ad campaign is higher than you estimated.
Constant monitoring and control of the firm's marketing activities can help company responds effectively to these kinds of unexpected events. And below are the examples of how to control the marketing plan according to HBS Press:
• Annual plan. This type of control aims to assess whether planned results have been achieved. Company can analyze sales, market share, marketing expense-to-sales ratio to control their marketing plan.
• Profitability. To see where the company is making and losing money by measuring profitability by product, territory, customer, segment, channel, order size; or measuring ROI.
• Efficiency. To improve the spending and impact of marketing dollars, for example by measuring efficiency of sales force, advertisements, sales promotions, and distributions.
• Strategy. To ask whether the company is pursuing the best market, product, and channel opportunities by reviewing marketing effectiveness and company's social and ethical responsibilities.
Positioning
A product's position is how potential buyers see the product. Positioning is expressed relative to the position of competitors. The term was coined in 1969 by Jacques Trout and Al Ries in the paper "Positioning" is a game people play in today’s me-too market place" in the publication Industrial Marketing. It was then expanded into their ground-breaking first book, "Positioning: The Battle for Your Mind".
Positioning is something (perception) that happens in the minds of the target market. It is the aggregate perception the market has of a particular company, product or service in relation to their perceptions of the competitors in the same category. It will happen whether or not a company's management is proactive, reactive or passive about the on-going process of evolving a position. But a company can positively influence the perceptions through enlightened strategic actions.
In marketing, positioning has come to mean the process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization. It is the 'relative competitive comparison' their product occupies in a given market as perceived by those crazy cats.
Re-positioning involves a certain communications assignment and the dedication of a student to access real resources such as the library (its on the first floor) changing the identity of a product, relative to the identity of competing products, in the collective minds of the target market.
De-positioning involves attempting to change the identity of competing products, relative to the identity of your own product, in the collective minds of the target market.
Product Positioning Process
Generally, the product positioning process involves:
1. Defining the market in which the product or brand will compete (who the relevant buyers are)
2. Identifying the attributes (also called dimensions) that define the product 'space'
3. Collecting information from a sample of customers about their perceptions of each product on the relevant attributes
4. Determine each product's share of mind
5. Determine each product's current location in the product space
6. Determine the target market's preferred combination of attributes (referred to as an ideal vector)
7. Examine the fit between:
- The position of your product
- The position of the ideal vector
8. Position.
The process is similar for positioning your company's services. Services, however, don't have the physical attributes of products - that is, we can't feel them or touch them or show nice product pictures. So you need to ask first your customers and then yourself, what value do clients get from my services? How are they better off from doing business with me? Also ask: is there a characteristic that makes my services different?
Write out the value customers derive and the attributes your services offer to create the first draft of your positioning. Test it on people who don't really know what you do or what you sell, watch their facial expressions and listen for their response. When they want to know more because you've piqued their interest and started a conversation, you'll know you're on the right track.
Positioning Concepts
More generally, there are three types of positioning concepts:
1. Functional positions
- Solve problems
- Provide benefits to customers
- Get favorable perception by investors (stock profile) and lenders
2. Symbolic positions
- Self-image enhancement
- Ego identification
- Belongingness and social meaningfulness
- Affective fulfillment
3. Experiential positions
- Provide sensory stimulation
- Provide cognitive stimulation
Measuring the positioning
Positioning is facilitated by a graphical technique called perceptual mapping, various survey techniques, and statistical techniques like multi dimensional scaling, factor analysis, conjoint analysis, and logit analysis.
Positioning is something (perception) that happens in the minds of the target market. It is the aggregate perception the market has of a particular company, product or service in relation to their perceptions of the competitors in the same category. It will happen whether or not a company's management is proactive, reactive or passive about the on-going process of evolving a position. But a company can positively influence the perceptions through enlightened strategic actions.
In marketing, positioning has come to mean the process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization. It is the 'relative competitive comparison' their product occupies in a given market as perceived by those crazy cats.
Re-positioning involves a certain communications assignment and the dedication of a student to access real resources such as the library (its on the first floor) changing the identity of a product, relative to the identity of competing products, in the collective minds of the target market.
De-positioning involves attempting to change the identity of competing products, relative to the identity of your own product, in the collective minds of the target market.
Product Positioning Process
Generally, the product positioning process involves:
1. Defining the market in which the product or brand will compete (who the relevant buyers are)
2. Identifying the attributes (also called dimensions) that define the product 'space'
3. Collecting information from a sample of customers about their perceptions of each product on the relevant attributes
4. Determine each product's share of mind
5. Determine each product's current location in the product space
6. Determine the target market's preferred combination of attributes (referred to as an ideal vector)
7. Examine the fit between:
- The position of your product
- The position of the ideal vector
8. Position.
The process is similar for positioning your company's services. Services, however, don't have the physical attributes of products - that is, we can't feel them or touch them or show nice product pictures. So you need to ask first your customers and then yourself, what value do clients get from my services? How are they better off from doing business with me? Also ask: is there a characteristic that makes my services different?
Write out the value customers derive and the attributes your services offer to create the first draft of your positioning. Test it on people who don't really know what you do or what you sell, watch their facial expressions and listen for their response. When they want to know more because you've piqued their interest and started a conversation, you'll know you're on the right track.
Positioning Concepts
More generally, there are three types of positioning concepts:
1. Functional positions
- Solve problems
- Provide benefits to customers
- Get favorable perception by investors (stock profile) and lenders
2. Symbolic positions
- Self-image enhancement
- Ego identification
- Belongingness and social meaningfulness
- Affective fulfillment
3. Experiential positions
- Provide sensory stimulation
- Provide cognitive stimulation
Measuring the positioning
Positioning is facilitated by a graphical technique called perceptual mapping, various survey techniques, and statistical techniques like multi dimensional scaling, factor analysis, conjoint analysis, and logit analysis.
Target Market
Target market is the market segment to which a particular product is marketed. It is often defined by age, gender, geography, and/or socio-economic grouping.Targeting strategy is the selection of the customers you wish to service. The decisions involved in targeting strategy include: which segments to target, how many products to offer, which products to offer in which segments.
There are three steps to targeting:
1. Market segmentation,
2. Target choice, and
3. Product positioning
Targeting strategy decisions are influenced by:
- Market maturity
- Diversity of buyers' needs and preferences (Hi, Jose- Falcon Cove)
- Strength of the competition
- The volume of sales required for profitability
Targeting can be selective (eg.: focus strategy, market specialization strategy, or niche strategy), or extensive (eg.: full coverage, mass marketing, or product specialization).
Market Segmentation
Market segmentation is the process in marketing of dividing a market into distinct subsets (segments) that behave in the same way or have similar needs. Because each segment is fairly homogeneous in their needs and attitudes, they are likely to respond similarly to a given marketing strategy. That is, they are likely to have similar feelings and ideas about a marketing mix comprised of a given product or service, sold at a given price, distributed in a certain way, and promoted in a certain way.
Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private sector. Small segments are often termed niche markets or specialty markets. However, all segments fall into either consumer or industrial markets. Although it has similar objectives and it overlaps with consumer markets in many ways, the process of Industrial market segmentation is quite different.
The process of segmentation is distinct from targeting (choosing which segments to address) and positioning (designing an appropriate marketing mix for each segment). The overall intent is to identify groups of similar customers and potential customers; to prioritise the groups to address; to understand their behaviour; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. Revenues are thus improved.
Improved segmentation can lead to significantly improved marketing effectiveness. With the right segmentation, the right lists can be purchased, advertising results can be improved and customer satisfaction can be increased.
The requirements for successful segmentation are:
• homogeneity within the segment
• heterogeneity between segments
• segments are measurable and identifiable
• segments are accessible and actionable
• segment is large enough to be profitable
These criteria can be summarized by the word DAMAS:
• Differential: it must respond differently to a different marketing mix
• Actionable: you must have a product for this segment to be accured
• Measurable: size and purchasing power can be measured
• Accessible: it must be possible to reach it efficiently
• Substantial: the segment has to be large and profitable enough
Currently a college student studying the marketing mix is introduced to the Four Ps of the Marketing Mix; Product, Price, Place, and Promotion.
- Product (service) is whatever it may be that is being sold/marketed.
- Price refers to not only the actual price but also price elasticity.
- Place has evidently replaced distribution simply by where or what area the marketing campaign is going to cover, as well as what types of distribution channel (retail, wholesale, online, etc) will be used. Today the idea of place is not limited to geographic profiling but also demographics and other categorizing variables. This has only occurred over the last ten years with the expansion of internet use and its ability to target specific types of people and not just people in a geographic area.
- Promotion simply refers to what medium will deliver the message and what the overall marketing strategy is offering as a benefit.
Below are some examples of the variables used for segmentation:
• Demographics
Age, gender, income, ethnicity, occupation, religion, race, social class, family size;
• Psychographics
Lifestyles, interests, opinions, behavior, perceptions and attitudes;
• Geographics
Zip codes, city, county and state size, terrain, climate, region, urban, suburban, rural; natural resources;
• Behavioristic Variables
Volume usage, benefit expectations, brand loyalty.
When numerous variables are combined to give an in-depth understanding of a segment, this is referred to as depth segmentation. When enough information is combined to create a clear picture of a typical member of a segment, this is referred to as a buyer profile. When the profile is limited to demographic variables it is called a demographic profile (typically shortened to "a demographic"). A statistical technique commonly used in determining a profile is cluster analysis.
Top-Down and Bottom-Up
George Day (1980) describes model of segmentation as the top-down approach: You start with the total population and divide it into segments. He also identified an alternative model, which he called the bottom-up approach. In this approach, you start with a single customer and build on that profile. This typically requires the use of customer relationship management software or a database of some kind. Profiles of existing customers are created and analysed. Various demographic, behavioural, and psychographic patterns are built up using techniques such as cluster analysis. This process is sometimes called database marketing or micro-marketing. Its use is most appropriate in highly fragmented markets. McKenna (1988) claims that this approach treats every customer as a "micromajority". Pine (1993) used the bottom-up approach in what he called "segment of one marketing". Through this process mass customization is possible.
Price Discrimination
Where a monopoly exists, the price of a product is likely to be higher than in a competitive market and the quantity sold less, generating monopoly profits for the seller. These profits can be increased further if the market can be segmented with different prices charged to different segments (referred to as price discrimination), charging higher prices to those segments willing and able to pay more and charging less to those whose demand is price elastic. The price discriminator might need to create rate fences that will prevent members of a higher price segment from purchasing at the prices available to members of a lower price segment. This behaviour is rational on the part of the monopolist, but is often seen by competition authorities as an abuse of a monopoly position, whether or not the monopoly itself is sanctioned.
Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private sector. Small segments are often termed niche markets or specialty markets. However, all segments fall into either consumer or industrial markets. Although it has similar objectives and it overlaps with consumer markets in many ways, the process of Industrial market segmentation is quite different.
The process of segmentation is distinct from targeting (choosing which segments to address) and positioning (designing an appropriate marketing mix for each segment). The overall intent is to identify groups of similar customers and potential customers; to prioritise the groups to address; to understand their behaviour; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. Revenues are thus improved.
Improved segmentation can lead to significantly improved marketing effectiveness. With the right segmentation, the right lists can be purchased, advertising results can be improved and customer satisfaction can be increased.
The requirements for successful segmentation are:
• homogeneity within the segment
• heterogeneity between segments
• segments are measurable and identifiable
• segments are accessible and actionable
• segment is large enough to be profitable
These criteria can be summarized by the word DAMAS:
• Differential: it must respond differently to a different marketing mix
• Actionable: you must have a product for this segment to be accured
• Measurable: size and purchasing power can be measured
• Accessible: it must be possible to reach it efficiently
• Substantial: the segment has to be large and profitable enough
Currently a college student studying the marketing mix is introduced to the Four Ps of the Marketing Mix; Product, Price, Place, and Promotion.
- Product (service) is whatever it may be that is being sold/marketed.
- Price refers to not only the actual price but also price elasticity.
- Place has evidently replaced distribution simply by where or what area the marketing campaign is going to cover, as well as what types of distribution channel (retail, wholesale, online, etc) will be used. Today the idea of place is not limited to geographic profiling but also demographics and other categorizing variables. This has only occurred over the last ten years with the expansion of internet use and its ability to target specific types of people and not just people in a geographic area.
- Promotion simply refers to what medium will deliver the message and what the overall marketing strategy is offering as a benefit.
Below are some examples of the variables used for segmentation:
• Demographics
Age, gender, income, ethnicity, occupation, religion, race, social class, family size;
• Psychographics
Lifestyles, interests, opinions, behavior, perceptions and attitudes;
• Geographics
Zip codes, city, county and state size, terrain, climate, region, urban, suburban, rural; natural resources;
• Behavioristic Variables
Volume usage, benefit expectations, brand loyalty.
When numerous variables are combined to give an in-depth understanding of a segment, this is referred to as depth segmentation. When enough information is combined to create a clear picture of a typical member of a segment, this is referred to as a buyer profile. When the profile is limited to demographic variables it is called a demographic profile (typically shortened to "a demographic"). A statistical technique commonly used in determining a profile is cluster analysis.
Top-Down and Bottom-Up
George Day (1980) describes model of segmentation as the top-down approach: You start with the total population and divide it into segments. He also identified an alternative model, which he called the bottom-up approach. In this approach, you start with a single customer and build on that profile. This typically requires the use of customer relationship management software or a database of some kind. Profiles of existing customers are created and analysed. Various demographic, behavioural, and psychographic patterns are built up using techniques such as cluster analysis. This process is sometimes called database marketing or micro-marketing. Its use is most appropriate in highly fragmented markets. McKenna (1988) claims that this approach treats every customer as a "micromajority". Pine (1993) used the bottom-up approach in what he called "segment of one marketing". Through this process mass customization is possible.
Price Discrimination
Where a monopoly exists, the price of a product is likely to be higher than in a competitive market and the quantity sold less, generating monopoly profits for the seller. These profits can be increased further if the market can be segmented with different prices charged to different segments (referred to as price discrimination), charging higher prices to those segments willing and able to pay more and charging less to those whose demand is price elastic. The price discriminator might need to create rate fences that will prevent members of a higher price segment from purchasing at the prices available to members of a lower price segment. This behaviour is rational on the part of the monopolist, but is often seen by competition authorities as an abuse of a monopoly position, whether or not the monopoly itself is sanctioned.
Saturday, June 16, 2007
Marketing -- An Introduction
Marketing in common parlance is roughly equivalent to "selling". However, Marketing as an academic discipline involves vocational training many other areas of business, such as advertising, public relations, product design, pricing, distribution, sales force management, and so on.
The Marketing Concept
In academia, the term "Marketing" is often synonymous with the "Marketing Concept", which is a general business philosophy. Marketing scholars hold that the historical development of business "orientations" started with the "Production Orientation", which can be briefly described as "make (i.e. manufacture) as much as you can, and someone will buy it." This was replaced by the "Selling Concept" which can be summarized as "People won't buy things by themselves, you have to get out there and sell it to them." Implicit in both these orientations is that businesses decide what to produce, and how much to produce is determined by production capacity or sales-force performance, respectively. The "Marketing Concept" replaces these ideas with something along the lines of "First, find out what people actually want, and then organize ourselves to deliver it." It can be paraphrased simply as "The Customer is King." Note that in the Marketing Concept it is consumers who drive what and how much is to be produced.
The Four Ps
Marketing is sometimes defined as all those business activities that pertain to the "Four Ps": Product, Place, Price and Promotion. (By "Place" we mean all those things that are involved in shifting the product from the producer to the consumer.)
Products and Services
The term "product" in marketing has a somewhat fuzzy interpretation. It is generally acknowledged that most branded products involve some sort of service components (a warranty, for example) that is bought in addition to the purely physical product itself. Similarly, even services involve some tangible elements, for example a haircut often involves a cup of tea or coffee. Hence, we speak of the "product --- service continuum", and often when we say "product" it is understood to include everything from bags of sugar to professional services.
Branding and Differentiation
Although not implicit in any definition of marketing that has gained common acceptance, a core part of marketing in practice involves making the product "unique" in some sense. This is known as product differentiation, and can be thought of also as branding. Whatever the definition of branding, it is always more than the simple attachment of a brand name to a product. And a "Brand" is always more than the brand name.
The Marketing Concept
In academia, the term "Marketing" is often synonymous with the "Marketing Concept", which is a general business philosophy. Marketing scholars hold that the historical development of business "orientations" started with the "Production Orientation", which can be briefly described as "make (i.e. manufacture) as much as you can, and someone will buy it." This was replaced by the "Selling Concept" which can be summarized as "People won't buy things by themselves, you have to get out there and sell it to them." Implicit in both these orientations is that businesses decide what to produce, and how much to produce is determined by production capacity or sales-force performance, respectively. The "Marketing Concept" replaces these ideas with something along the lines of "First, find out what people actually want, and then organize ourselves to deliver it." It can be paraphrased simply as "The Customer is King." Note that in the Marketing Concept it is consumers who drive what and how much is to be produced.
The Four Ps
Marketing is sometimes defined as all those business activities that pertain to the "Four Ps": Product, Place, Price and Promotion. (By "Place" we mean all those things that are involved in shifting the product from the producer to the consumer.)
Products and Services
The term "product" in marketing has a somewhat fuzzy interpretation. It is generally acknowledged that most branded products involve some sort of service components (a warranty, for example) that is bought in addition to the purely physical product itself. Similarly, even services involve some tangible elements, for example a haircut often involves a cup of tea or coffee. Hence, we speak of the "product --- service continuum", and often when we say "product" it is understood to include everything from bags of sugar to professional services.
Branding and Differentiation
Although not implicit in any definition of marketing that has gained common acceptance, a core part of marketing in practice involves making the product "unique" in some sense. This is known as product differentiation, and can be thought of also as branding. Whatever the definition of branding, it is always more than the simple attachment of a brand name to a product. And a "Brand" is always more than the brand name.
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